Exhibit
      4.11

    


    LOAN
      AND SECURITY AGREEMENT

    


    LOAN
      AND
      SECURITY AGREEMENT, dated as of July 10, 2007 (this “Agreement”),
      by
      and among Brendan Technologies, Inc.,
      a
      Nevada corporation (the
      “Company”)
      and
      all of the subsidiaries of the Company (such subsidiaries, the “Guarantors”)
      (the
      Company and Guarantors are collectively
      referred to as the “Debtors”)
      and
      the holder or holders of the Company’s 15% Secured Promissory Notes due April
      10, 2008 in the original aggregate principal amount of $600,000 (the
“Notes”)
      that
      are signatory hereto and their respective endorsees, transferees and assigns
      (collectively, the “Secured
      Parties”
and
      each, a “Secured
      Party”).

    


    WITNESSETH:

    


    WHEREAS,
      pursuant to this Agreement, the Secured Parties have severally agreed to extend
      the loans to the Company evidenced by the Notes;

    


    WHEREAS,
      pursuant to a certain Subsidiary Guarantee, dated as of the date hereof, the
      Guarantors
      have
      jointly and severally agreed to guaranty and act as surety for payment of such
      loans; and

    


    WHEREAS,
      in order to induce the Secured Parties to extend the loans evidenced by the
      Notes, each Debtor has agreed to execute and deliver to the Secured Parties
      this
      Agreement and to grant the Secured Parties, pari passu
      with
      each other Secured Party, a perfected security interest in certain property
      of
      such Debtor to secure the prompt payment, performance and discharge in full
      of
      all of the Company’s obligations under the Notes and the other Debtors’
obligations under the Subsidiary Guarantee.

    


    NOW,
      THEREFORE, in consideration of the agreements herein contained and for other
      good and valuable consideration, the receipt and sufficiency of which is hereby
      acknowledged, the parties hereto hereby agree as follows:

    


    1.
       Certain
      Definitions.
      As used
      in this Agreement, the following terms shall have the meanings set forth in
      this
      Section 1. Terms used but not otherwise defined in this Agreement that are
      defined in Article 9 of the UCC (such as “account”, “chattel paper”, “commercial
      tort claim”, “deposit account”, “document”, “equipment”, “fixtures”, “general
      intangibles”, “goods”, “instruments”, “inventory”, “investment property”,
“letter-of-credit rights”, “proceeds” and “supporting obligations”) shall have
      the respective meanings given such terms in Article 9 of the UCC. All
      initially capitalized, undefined terms used herein shall have the meanings
      ascribed to such terms in the Notes, the Warrants and the other agreements
      entered into in connection therewith.

    


    (a)
       “Affiliate”
means
      any Person that, directly or indirectly through one or more intermediaries,
      controls or is controlled by or is under common control with a Person, as such
      terms are used in and construed under Rule 405 under the Securities Act. With
      respect to a Secured Party, any investment fund or managed account that is
      managed on a discretionary basis by the same investment manager as such Secured
      Party will be deemed to be an Affiliate of such Purchaser.

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

    (b) “Collateral”
means
      the collateral in which the Secured Parties are granted a security interest
      by
      this Agreement and which shall include the following personal property of the
      Debtors, whether presently owned or existing or hereafter acquired or coming
      into existence, wherever situated, and all additions and accessions thereto
      and
      all substitutions and replacements thereof, and all proceeds, products and
      accounts thereof, including, without limitation, all proceeds from the sale
      or
      transfer of the Collateral and of insurance covering the same and of any tort
      claims in connection therewith,
      and all
      dividends, interest, cash, notes, securities, equity interest or other property
      at any time and from time to time acquired, receivable or otherwise distributed
      in respect of, or in exchange for, any or all of the Pledged Securities (as
      defined below):

    


    (i)
      All
      goods, including, without limitations, (A) all machinery, equipment, computers,
      motor vehicles, trucks, tanks, boats, ships, appliances, furniture, special
      and
      general tools, fixtures, test and quality control devices and other equipment
      of
      every kind and nature and wherever situated, together with all documents of
      title and documents representing the same, all additions and accessions thereto,
      replacements therefor, all parts therefor, and all substitutes for any of the
      foregoing and all other items used and useful in connection with any Debtor’s
      businesses and all improvements thereto; and (B) all inventory;

    


    (ii)
       All
      contract rights and other general intangibles, including, without limitation,
      all Intellectual Property, partnership interests, membership interests, stock
      or
      other securities, rights
      under any of the Organizational Documents, agreements related to the Pledged
      Securities, licenses,
      distribution and other agreements, computer software (whether “off-the-shelf”,
      licensed from any third party or developed by any Debtor), computer software
      development rights, leases, franchises, customer lists, quality control
      procedures, grants and rights, goodwill and income tax refunds; 

     

    (iii)
       All
      accounts, together with all instruments, all documents of title representing
      any
      of the foregoing, all rights in any merchandising, goods, equipment, motor
      vehicles and trucks which any of the same may represent, and all right, title,
      security and guaranties with respect to each account, including any right of
      stoppage in transit; 

    


    (iv)
       All
      documents, letter-of-credit rights, instruments and chattel paper;

    


    (v) All
      commercial tort claims;

    


    (vi) All
      deposit accounts and all cash (whether or not deposited in such deposit
      accounts);

    


    (vii) All
      investment property;

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    


    (viii) All
      supporting obligations; and

    


    (ix) All
      files, records, books of account, business papers, and computer programs;
      and

    


    (x) the
      products and proceeds of all of the foregoing Collateral set forth in clauses
      (i)-(ix) above.

    


    Without
      limiting the generality of the foregoing, the “Collateral”
shall
      include all investment property and general intangibles respecting ownership
      and/or other equity interests in each Guarantor, including, without limitation,
      the shares of capital stock and the other equity interests listed on
Schedule
      H
      hereto
      (as the same may be modified from time to time pursuant to the terms hereof),
      and any other shares of capital stock and/or other equity interests of any
      other
      direct or indirect subsidiary of any Debtor obtained in the future, and, in
      each
      case, all certificates representing such shares and/or equity interests and,
      in
      each case, all rights, options, warrants, stock, other securities and/or equity
      interests that may hereafter be received, receivable or distributed in respect
      of, or exchanged for, any of the foregoing (all of the foregoing being referred
      to herein as the “Pledged
      Securities”)
      and
      all rights arising under or in connection with the Pledged Securities,
      including, but not limited to, all dividends, interest and cash.

     

    Notwithstanding
      the foregoing, nothing herein shall be deemed to constitute an assignment of
      any
      asset which, in the event of an assignment, becomes void by operation of
      applicable law or the assignment of which is otherwise prohibited by applicable
      law (in each case to the extent that such applicable law is not overridden
      by
      Sections 9-406, 9-407 and/or 9-408 of the UCC or other similar applicable law);
      provided,
      however,
      that,
      to the extent permitted by applicable law, this Agreement shall create a valid
      security interest in such asset and, to the extent permitted by applicable
      law,
      this Agreement shall create a valid security interest in the proceeds of such
      asset.

    


    (c)
       “Common
      Stock”
means
      the common stock of the Company, par value $0.004995 per share, and any other
      class of securities into which such securities may hereafter be reclassified
      or
      changed into.

     

    (d) “Company
      Counsel”
means
      Troy & Gould LLP, with offices located at 1801 Century Park East, Suite
      1600, Los Angeles, CA 90067.

     

    (e)
       “Exchange
      Act”
means
      the Securities
      Exchange Act of 1934, as amended, and the rules and regulations promulgated
      thereunder.

     

    (f) “FWS”
means
      Feldman Weinstein & Smith LLP with offices located at 420 Lexington Avenue,
      Suite 2620, New York, New York 10170-0002.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    (g) “Intellectual
      Property”
means
      the collective reference to all rights, priorities and privileges relating
      to
      intellectual property, whether arising under United States, multinational or
      foreign laws or otherwise, including, without limitation, (i) all copyrights
      arising under the laws of the United States, any other country or any political
      subdivision thereof, whether registered or unregistered and whether published
      or
      unpublished, all registrations and recordings thereof, and all applications
      in
      connection therewith, including, without limitation, all registrations,
      recordings and applications in the United States Copyright Office, (ii) all
      letters patent of the United States, any other country or any political
      subdivision thereof, all reissues and extensions thereof, and all applications
      for letters patent of the United States or any other country and all divisions,
      continuations and continuations-in-part thereof, (iii) all trademarks, trade
      names, corporate names, company names, business names, fictitious business
      names, trade dress, service marks, logos, domain names and other source or
      business identifiers, and all goodwill associated therewith, now existing or
      hereafter adopted or acquired, all registrations and recordings thereof, and
      all
      applications in connection therewith, whether in the United States Patent and
      Trademark Office or in any similar office or agency of the United States, any
      State thereof or any other country or any political subdivision thereof, or
      otherwise, and all common law rights related thereto, (iv) all trade secrets
      arising under the laws of the United States, any other country or any political
      subdivision thereof, (v) all rights to obtain any reissues, renewals or
      extensions of the foregoing, (vi) all licenses for any of the foregoing, and
      (vii) all causes of action for infringement of the foregoing.

    


    (h) “Majority
      in Interest”
shall
      mean, at any time of determination, the majority in interest (based on
      then-outstanding principal amounts of Notes at the time of such determination)
      of the Secured Parties.

    


    (i) “Necessary
      Endorsement”
shall
      mean undated stock powers endorsed in blank or other proper instruments of
      assignment duly executed and such other instruments or documents as the Agent
      (as defined below) may reasonably request.

    


    (j) “Obligations”
means
      all of the liabilities
      and obligations (primary, secondary, direct, contingent, sole, joint or several)
      due or to become due, or that are now or may be hereafter contracted or
      acquired, or owing to, of any Debtor to the Secured Parties, including, without
      limitation, all
      obligations under this Agreement, the Notes, the Subsidiary Guarantee and any
      other instruments, agreements or other documents executed and/or delivered
      in
      connection herewith or therewith, in each case, whether now or hereafter
      existing, voluntary or involuntary, direct or indirect, absolute or contingent,
      liquidated or unliquidated, whether or not jointly owed with others, and whether
      or not from time to time decreased or extinguished and later increased, created
      or incurred, and all or any portion of such obligations or liabilities that
      are
      paid, to the extent all or any part of such payment is avoided or recovered
      directly or indirectly from any of the Secured Parties as a preference,
      fraudulent transfer or otherwise as such obligations may be amended,
      supplemented, converted, extended or modified from time to time. Without
      limiting the generality of the foregoing, the term “Obligations” shall include,
      without limitation: (i) principal of, and interest on the Notes and the loans
      extended pursuant thereto; (ii) any and all other fees, indemnities, costs,
      obligations and liabilities of the Debtors from time to time under or in
      connection with this Agreement, the Notes, the Subsidiary Guarantee and any
      other instruments, agreements or other documents executed and/or delivered
      in
      connection herewith or therewith; and (iii) all amounts (including but not
      limited to post-petition interest) in respect of the foregoing that would be
      payable but for the fact that the obligations to pay such amounts are
      unenforceable or not allowable due to the existence of a bankruptcy,
      reorganization or similar proceeding involving any Debtor.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    


    (k) “Organizational
      Documents”
means
      with respect to any Debtor, the documents by which such Debtor was organized
      (such as a certificate of incorporation, certificate of limited partnership
      or
      articles of organization, and including, without limitation, any certificates
      of
      designation for preferred stock or other forms of preferred equity) and which
      relate to the internal governance of such Debtor (such as bylaws, a partnership
      agreement or an operating, limited liability or members agreement).

    


    (l) “Person”
means
      an individual or corporation, partnership, trust, incorporated or unincorporated
      association, joint venture, limited liability company, joint stock company,
      government (or an agency or subdivision thereof) or other entity of any
      kind.

     

    (m) “Required
      Minimum”
means,
      as
      of any
      date, the maximum aggregate number of shares of Common Stock then issued or
      potentially issuable in the future pursuant to the Warrants, including any
      Warrant Shares issuable upon exercise or conversion in full of all Warrants,
      ignoring any exercise limits set forth therein.

    


    (n) “Securities
      Act”
means
      the Securities Act of 1933, as amended, and the rules and regulations
      promulgated hereunder. 

    


    (o) “Security
      Documents”
shall
      mean any documents and filing required thereunder in order to grant the Secured
      Parties a first priority security interest in the assets of the Company and
      the
      Subsidiaries as provided in this Agreement, including all UCC-1 filing
      receipts.

    


    (p) “Subscription
      Amount”
      means,
      as
      to each Secured Party, the aggregate amount to be paid for the Notes and
      Warrants purchased hereunder as specified below such Secured Party’s name on the
      signature page of this Agreement and next to the heading “Subscription Amount,”
in United States dollars and in immediately available funds.

    


    (q) “Subsidiary”
means
      any subsidiary of the Company.

    


    (r) “Subsidiary
      Guarantee”
means
      the Subsidiary Guarantee, dated the date hereof, by each Subsidiary in favor
      of
      the Secured Parties, in the form of Exhibit
      C
      attached
      hereto.

    


    (s) “Trading
      Market”
means
      the following markets or exchanges on which the Common Stock is listed or quoted
      for trading on the date in question: the American Stock Exchange, the Nasdaq
      Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market,
      the
      New York Stock Exchange or the OTC Bulletin Board.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    


    (t) “Transaction
      Documents”
means
      this Agreement, the Notes, the Warrants and the Subsidiary
      Guarantee.

    


    (u)  “UCC”
means
      the Uniform Commercial Code of the applicable jurisdiction and or any other
      applicable law of any state or states which has jurisdiction with respect to
      all, or any portion of, the Collateral or this Agreement, from time to time.
      It
      is the intent of the parties that defined terms in the UCC should be construed
      in their broadest sense so that the term “Collateral” will be construed in its
      broadest sense. Accordingly if there are, from time to time, changes to defined
      terms in the UCC that broaden the definitions, they are incorporated herein
      and
      if existing definitions in the UCC are broader than the amended definitions,
      the
      existing ones shall be controlling.

    


    (v) “Warrants”
means,
      collectively, the Common Stock purchase warrants, which shall be exercisable
      immediately and have a term of exercise equal to five years, in the form of
      Exhibit D attached hereto.

    


    (w) “Warrant
      Shares”
means
      the shares of Common Stock issuable upon exercise of the Warrants.

    


    2.
      Loan.
      Upon
      the
      terms and subject to the conditions set forth herein, substantially concurrent
      with the execution and delivery of this Agreement by the parties hereto, the
      Secured Parties, severally and not jointly, agree to advance an aggregate of
      $600,000 in principal amount of Notes to the Company. Each Secured Party shall
      deliver to the Company, via wire transfer or a certified check, immediately
      available funds equal to such Secured Party’s Subscription Amount and the
      Company shall deliver to each Secured Party its respective Note and Warrant,
      and
      the Company and each Secured Party shall deliver the other items set forth
      below. Upon satisfaction of the conditions set forth in this Section 2, the
      closing (the “Closing”)
      shall
      occur at the offices of FWS or such other location as the parties shall mutually
      agree.

     

    (a) Deliveries.

    


    (i) On
      or
      prior to the Closing, the Company shall deliver or cause to be delivered to
      each
      Secured Party the following:

     

    (A) this
      Agreement duly executed by the Company;

     

    (B) a
      Note,
      in the form of Exhibit
      A
      attached
      hereto, with a principal amount equal to such Secured Party’s Subscription
      Amount, registered in the name of such Secured Party;

     

    (C) a
      legal
      opinion of Company Counsel, in the form of Exhibit
      B
      attached
      hereto;

     

    (D) the
      Subsidiary Guarantee duly executed by each of the Subsidiaries;

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    (E) all
      of
      the Security Documents duly executed by the parties thereto;

     

    (F) evidence
      of the written consent of each existing holder of the Company’s Convertible
      Debentures issued at various times, to the transactions contemplated hereby,
      and
      waiving any prior events of default under each thereof and an Officer’s
      Certificate from the Company’s Chief Financial Officer in respect thereof in
      form and substance reasonably satisfactory to each Secured Party;
      and

     

    (G) a
      Warrant
      registered in the name of such Secured Party to purchase up to 1 share of Common
      Stock for each $1 of Subscription Amount, with an exercise price equal to $0.60,
      subject to adjustment therein.

     

    (ii) On
      the
      Closing Date, each Secured Party shall deliver or cause to be delivered to
      the
      Company the following:

     

    (A) this
      Agreement duly executed by such Secured Party; and

     

    (B) such
      Secured Party’s Subscription Amount by wire transfer to the account as specified
      in writing by the Company.

     

    (b)
      Closing
      Conditions. 

     

    (i) The
      obligations of the Company hereunder in connection with the Closing are subject
      to the following conditions being met:

     

    (A) the
      accuracy in all material respects when made and on the Closing Date of the
      representations and warranties of the Secured Parties contained
      herein;

     

    (B) all
      obligations, covenants and agreements of the Secured Parties required to be
      performed at or prior to the Closing shall have been performed; and

     

    (C) the
      delivery by the Secured Parties of the items set forth in Section 2(a)(ii)
      of
      this Agreement.

     

    (ii) The
      respective obligations of the Secured Parties hereunder in connection with
      the
      Closing are subject to the following conditions being met:

     

    (A) the
      accuracy in all material respects when made and on the Closing Date of the
      representations and warranties of the Company contained herein;

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    (B) all
      obligations, covenants and agreements of the Company required to be performed
      at
      or prior to the Closing Date shall have been performed; 

     

    (C) the
      delivery by the Company of the items set forth in Section 2(a)(i) of this
      Agreement; 

     

    (D) there
      shall have been no occurrence which could
      have or reasonably be expected to result in (i) a material adverse effect on
      the
      legality, validity or enforceability of any Transaction Document, (ii) a
      material adverse effect on the results of operations, assets, business,
      prospects or condition (financial or otherwise) of the Company and the
      Subsidiaries, taken as a whole, or (iii) a material adverse effect on the
      Company’s or any Subsidiary’s ability to perform in any material respect on a
      timely basis its obligations under any Transaction Document (any of (i), (ii)
      or
      (iii), a “Material
      Adverse Effect”)
      with
      respect to the Company since the date hereof; and

     

    (E) from
      the
      date hereof to the Closing Date, trading in the Common Stock shall not have
      been
      suspended by the Commission or the Company’s principal Trading Market (except
      for any suspension of trading of limited duration agreed to by the Company,
      which suspension shall be terminated prior to the Closing), and, at any time
      prior to the Closing Date, trading in securities generally as reported by
      Bloomberg L.P. shall not have been suspended or limited, or minimum prices
      shall
      not have been established on securities whose trades are reported by such
      service, or on any Trading Market, nor shall a banking moratorium have been
      declared either by the United States or New York State authorities nor shall
      there have occurred any material outbreak or escalation of hostilities or other
      national or international calamity of such magnitude in its effect on, or any
      material adverse change in, any financial market which, in each case, in the
      reasonable judgment of each Secured Party, makes it impracticable or inadvisable
      to purchase the Notes at the Closing.

     

    3. Grant
      of Perfected First Priority Security Interest.
      As an
      inducement for the Secured Parties to extend the loans as evidenced by the
      Notes
      and to secure the complete and timely payment, performance and discharge in
      full, as the case may be, of all of the Obligations, each Debtor hereby
      unconditionally and irrevocably pledges, grants and hypothecates to the Secured
      Parties a continuing and perfected security interest in and to, a lien upon
      and
      a right of set-off against all of their respective right, title and interest
      of
      whatsoever kind and nature in and to, the Collateral (the “Security
      Interest”).

    


    4. Delivery
      of Certain Collateral.
      Contemporaneously or prior to the execution of this Agreement, each Debtor
      shall
      deliver or cause to be delivered to the Agent (as defiend in Section 18) (a)
      any
      and all certificates and other instruments representing or evidencing the
      Pledged Securities and (b) any and all certificates and other instruments or
      documents representing any of the other Collateral which can only be perfected
      by possession, in each case, together with all Necessary Endorsements. The
      Debtors are, contemporaneously with the execution hereof, delivering to the
      Agent, or have previously delivered to Agent, a true and correct copy of each
      Organizational Document governing any of the Pledged Securities.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

    


     5.  Representations,
      Warranties, Covenants and Agreements of the Debtors.
      Each
      Debtor represents and warrants to, and covenants and agrees with, the Secured
      Parties as follows:

    


    (a)
      Each
      Debtor has the requisite corporate, partnership, limited liability company
      or
      other power and authority to enter into this Agreement and otherwise to carry
      out its obligations hereunder. The execution, delivery and performance by each
      Debtor of this Agreement and the filings contemplated therein have been duly
      authorized by all necessary action on the part of such Debtor and no further
      action is required by such Debtor. This Agreement has been duly executed by
      each
      Debtor. This Agreement constitutes the legal, valid and binding obligation
      of
      each Debtor, enforceable against each Debtor in accordance with its terms except
      as such enforceability may be limited by applicable bankruptcy, insolvency,
      reorganization and similar laws of general application relating to or affecting
      the rights and remedies of creditors and by general principles of
      equity.

    


    (b)
       The
      Debtors have no place of business or offices where their respective books of
      account and records are kept (other than temporarily at the offices of its
      attorneys or accountants) or places where Collateral is stored or located,
      except as set forth on Schedule
      A
      attached
      hereto. Except as specifically set forth on Schedule
      A,
      each
      Debtor is the record owner of the real property where such Collateral is
      located, and there exist no mortgages or other liens on any such real property
      except for Permitted Liens (as defined in the Notes). Except as disclosed on
      Schedule
      A,
      none of
      such Collateral is in the possession of any consignee, bailee, warehouseman,
      agent or processor.

    


    (c)
       Except
      as
      set forth on Schedule
      B
      attached
      hereto, the Debtors are the sole owners of the Collateral (except for
      non-exclusive licenses granted by any Debtor in the ordinary course of
      business), free and clear of any liens, security interests, encumbrances, rights
      or claims, and are fully authorized to grant the Security Interest. There is
      not
      on file in any governmental or regulatory authority, agency or recording office
      an effective financing statement, security agreement, license or transfer or
      any
      notice of any of the foregoing (other than those that will be filed in favor
      of
      the Secured Parties pursuant to this Agreement) covering or affecting any of
      the
      Collateral. So long as this Agreement shall be in effect, the Debtors shall
      not
      execute and shall not knowingly permit to be on file in any such office or
      agency any such financing statement or other document or instrument (except
      to
      the extent filed or recorded in favor of the Secured Parties pursuant to the
      terms of this Agreement).

    


    (d)
       No
      written claim has been received that any Collateral or Debtor’s use of any
      Collateral violates the rights of any third party. There has been no adverse
      decision to any Debtor's claim of ownership rights in or exclusive rights to
      use
      the Collateral in any jurisdiction or to any Debtor's right to keep and maintain
      such Collateral in full force and effect, and there is no proceeding involving
      said rights pending or, to the best knowledge of any Debtor, threatened before
      any court, judicial body, administrative or regulatory agency, arbitrator or
      other governmental authority.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    


    (e)
       Each
      Debtor shall at all times maintain its books of account and records relating
      to
      the Collateral at its principal place of business and its Collateral at the
      locations set forth on Schedule
      A
      attached
      hereto and may not relocate such books of account and records or tangible
      Collateral unless it delivers to the Secured Parties at least 30 days prior
      to
      such relocation (i) written notice of such relocation and the new location
      thereof (which must be within the United States) and (ii) evidence that
      appropriate financing statements under the UCC and other necessary documents
      have been filed and recorded and other steps have been taken to perfect the
      Security Interest to create in favor of the Secured Parties a valid, perfected
      and continuing perfected first priority lien in the Collateral.

    


    (f)
       This
      Agreement creates in favor of the Secured Parties a valid, security interest
      in
      the Collateral, securing the payment and performance of the Obligations. Upon
      making the filings described in the immediately following paragraph, all
      security interests created hereunder in any Collateral which may be perfected
      by
      filing UCC financing statements shall have been duly perfected. Except for
      the
      filing of the UCC financing statements referred to in the immediately following
      paragraph, the execution and delivery of deposit account control agreements
      satisfying the requirements of Section 9-104(a)(2) of the UCC with respect
      to
      each deposit account of the Debtors,
      and the
      delivery of the certificates and other instruments provided in Section
      4,
      no
      action is necessary to create, perfect or protect the security interests created
      hereunder. Without limiting the generality of the foregoing, except for the
      filing of said financing statements, and the execution and delivery of said
      deposit account control agreements, no consent of any third parties and no
      authorization, approval or other action by, and no notice to or filing with,
      any
      governmental authority or regulatory body is required for (i) the execution,
      delivery and performance of this Agreement, (ii) the creation or perfection
      of
      the Security Interests created hereunder in the Collateral or (iii) the
      enforcement of the rights of the Secured Parties hereunder.

    


    (g)
       Each
      Debtor hereby authorizes the Secured Parties, or any of them, to file one or
      more financing statements under the UCC, with respect to the Security Interest
      with the proper filing and recording agencies in any jurisdiction deemed proper
      by them.

    


    (h)
       The
      execution, delivery and performance of this Agreement by the Debtors does not
      (i) violate any of the provisions of any Organizational Documents of any Debtor
      or any judgment, decree, order or award of any court, governmental body or
      arbitrator or any applicable law, rule or regulation applicable to any Debtor
      or
      (ii) conflict with, or constitute a default (or an event that with notice or
      lapse of time or both would become a default) under, or give to others any
      rights of termination, amendment, acceleration or cancellation (with or without
      notice, lapse of time or both) of, any agreement, credit facility, debt or
      other
      instrument (evidencing any Debtor’s debt or otherwise) or other understanding to
      which any Debtor is a party or by which any property or asset of any Debtor
      is
      bound or affected. No consent (including, without limitation, from stockholders
      or creditors of any Debtor) is required for any Debtor to enter into and perform
      its obligations hereunder.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    


    (i)
       The
      capital stock and other equity interests listed on Schedule
      H
      hereto
      represent all of the capital stock and other equity interests of the Guarantors,
      and represent all capital stock and other equity interests owned, directly
      or
      indirectly, by the Company. All of the Pledged Securities are validly issued,
      fully paid and nonassessable, and the Company is the legal and beneficial owner
      of the Pledged Securities, free and clear of any lien, security interest or
      other encumbrance except for the security interests created by this Agreement
      and other Permitted Liens (as defined in the Note). The
      issuance and sale of the Notes will not obligate the Company to issue shares
      of
      Common Stock or other securities to any Person (other than the Secured Parties)
      and will not result in a right of any holder of Company securities to adjust
      the
      exercise, conversion, exchange or reset price under any of such
      securities.

    


    (j)
       Each
      Debtor shall at all times maintain the liens and Security Interest provided
      for
      hereunder as valid and perfected first priority liens and security interests
      in
      the Collateral in favor of the Secured Parties until this Agreement and the
      Security Interest hereunder shall be terminated pursuant to Section 14 hereof.
      Each Debtor hereby agrees to defend the same against the claims of any and
      all
      persons and entities. Each Debtor shall safeguard and protect all Collateral
      for
      the account of the Secured Parties. At the request of the Secured Parties,
      each
      Debtor will sign and deliver to the Secured Parties at any time or from time
      to
      time one or more financing statements pursuant to the UCC in form reasonably
      satisfactory to the Secured Parties and will pay the cost of filing the same
      in
      all public offices wherever filing is, or is deemed by the Secured Parties
      to
      be, necessary or desirable to effect the rights and obligations provided for
      herein. Without limiting the generality of the foregoing, each Debtor shall
      pay
      all fees, taxes and other amounts necessary to maintain the Collateral and
      the
      Security Interest hereunder, and each Debtor shall obtain and furnish to the
      Secured Parties from time to time, upon demand, such releases and/or
      subordinations of claims and liens which may be required to maintain the
      priority of the Security Interest hereunder.

    


    (k)
       No
      Debtor
      will transfer, pledge, hypothecate, encumber, license, sell or otherwise dispose
      of any of the Collateral (except for non-exclusive licenses granted by a Debtor
      in its ordinary course of business and sales of inventory by a Debtor in its
      ordinary course of business) without the prior written consent of a Majority
      in Interest.

    


    (l) Each
      Debtor shall keep and preserve its equipment, inventory and other tangible
      Collateral in good condition, repair and order and shall not operate or locate
      any such Collateral (or cause to be operated or located) in any area excluded
      from insurance coverage.

    


    (m) Each
      Debtor shall maintain with financially sound and reputable insurers, insurance
      with respect to the Collateral against loss or damage of the kinds and in the
      amounts customarily insured against by entities of established reputation having
      similar properties similarly situated and in such amounts as are customarily
      carried under similar circumstances by other such entities and otherwise as
      is
      prudent for entities engaged in similar businesses but in any event sufficient
      to cover the full replacement cost thereof. Each Debtor shall cause each
      insurance policy issued in connection herewith to provide, and the insurer
      issuing such policy to certify to the Agent that (a) the Agent will be named
      as
      lender loss payee and additional insured under each such insurance policy;
      (b)
      if such insurance be proposed to be cancelled or materially changed for any
      reason whatsoever, such insurer will promptly notify the Agent and such
      cancellation or change shall not be effective as to the Agent for at least
      thirty (30) days after receipt by the Agent of such notice, unless the effect
      of
      such change is to extend or increase coverage under the policy; and (c) the
      Agent will have the right (but no obligation) at its election to remedy any
      default in the payment of premiums within thirty (30) days of notice from the
      insurer of such default. If no Event of Default (as defined in the Note) exists
      and if the proceeds arising out of any claim or series of related claims do
      not
      exceed $100,000, loss payments in each instance will be applied by the
      applicable Debtor to the repair and/or replacement of property with respect
      to
      which the loss was incurred to the extent reasonably feasible, and any loss
      payments or the balance thereof remaining, to the extent not so applied, shall
      be payable to the applicable Debtor, provided, however, that payments received
      by any Debtor after an Event of Default occurs and is continuing or in excess
      of
      $100,000 for any occurrence or series of related occurrences shall be paid
      to
      the Agent and, if received by such Debtor, shall be held in trust for and
      immediately paid over to the Agent unless otherwise directed in writing by
      the
      Agent. Copies of such policies or the related certificates, in each case, naming
      the Agent as lender loss payee and additional insured shall be delivered to
      the
      Agent at least annually and at the time any new policy of insurance is
      issued.

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    


    (n)
       Each
      Debtor shall, within ten (10) days of obtaining knowledge thereof, advise the
      Secured Parties promptly, in sufficient detail, of any substantial change in
      the
      Collateral, and of the occurrence of any event which would have a Material
      Adverse Effect on the value of the Collateral or on the Secured Parties’
security interest therein.

    


    (o)
       Each
      Debtor shall promptly execute and deliver to the Secured Parties such further
      deeds, mortgages, assignments, security agreements, financing statements or
      other instruments, documents, certificates and assurances and take such further
      action as the Secured Parties may from time to time request and may in its
      sole
      discretion deem necessary to perfect, protect or enforce its security interest
      in the Collateral.

    


    (p)
       Each
      Debtor shall take all steps reasonably necessary to diligently pursue and seek
      to preserve, enforce and collect any rights, claims, causes of action and
      accounts receivable in respect of the Collateral.

    


    (q)
       Each
      Debtor shall promptly notify the Secured Parties in sufficient detail upon
      becoming aware of any attachment, garnishment, execution or other legal process
      levied against any Collateral and of any other information received by such
      Debtor that may materially affect the value of the Collateral, the Security
      Interest or the rights and remedies of the Secured Parties
      hereunder.

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    


    (r)
       All
      information heretofore, herein or hereafter supplied to the Secured Parties
      by
      or on behalf of any Debtor with respect to the Collateral is accurate and
      complete in all material respects as of the date furnished.

    


    (s)
       No
      Debtor
      will change its name, type of organization, jurisdiction of organization,
      organizational identification number (if it has one), legal or corporate
      structure, or identity, or add any new fictitious name unless it provides at
      least 30 days prior written notice to the Secured Parties of such change and,
      at
      the time of such written notification, such Debtor provides any financing
      statements or fixture filings necessary to perfect and continue perfected the
      perfected security Interest granted and evidenced by this
      Agreement.

    


    (t)
       No
      Debtor
      may relocate its chief executive office to a new location without providing
      30
      days prior written notification thereof to the Secured Parties and so long
      as,
      at the time of such written notification, such Debtor provides any financing
      statements or fixture filings necessary to perfect and continue perfected the
      perfected security Interest granted and evidenced by this
      Agreement.

    


    (u) Each
      Debtor was organized and remains organized solely under the laws of the state
      set forth next to such Debtor’s name in the first paragraph of this Agreement.
Schedule
      D
      attached
      hereto sets forth each Debtor’s organizational identification number or, if any
      Debtor does not have one, states that one does not exist.

    


    (v) 
      (i) The
      actual name of each Debtor is the name set forth on the signature pages hereto;
      (ii) no Debtor has any trade names except as set forth on Schedule
      E
      attached
      hereto; (iii) no Debtor has used any name other than that stated in the
      signature pages hereto or as set forth on Schedule
      E
      for the
      preceding five years; and (iv) no entity has merged into any Debtor or been
      acquired by any Debtor within the past five years except as set forth on
Schedule
      E
      or as
      previously disclosed in the periodic reports filed on EDGAR with the Securities
      and Exchange Commission.

    


    (w) At
      any
      time and from time to time that any Collateral consists of instruments,
      certificated securities or other items that require or permit possession by
      the
      secured party to perfect the security interest created hereby, the applicable
      Debtor shall deliver such Collateral to the Agent.

    


    (x) If
      there
      is any investment property or deposit account included as Collateral that can
      be
      perfected by “control” through an account control agreement, the applicable
      Debtor shall cause such an account control agreement, in form and substance
      in
      each case satisfactory to the Secured Parties, to be entered into and delivered
      to the Secured Parties at the request of the Agent.

    


    (y)
       To
      the
      extent that any Collateral is in the possession of any third party, the
      applicable Debtor shall join with the Secured Parties in notifying such third
      party of the Secured Parties’ security interest in such Collateral and shall use
      its best efforts to obtain an acknowledgement and agreement from such third
      party with respect to the Collateral, in form and substance satisfactory to
      the
      Secured Parties.

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    


    (z) Each
      Debtor shall cause each subsidiary
      of such
      Debtor to immediately become a party hereto (an “Additional
      Debtor”),
      by
      executing and delivering an Additional Debtor Joinder in substantially the
      form
      of Annex
      A
      attached
      hereto and comply with the provisions hereof applicable to the Debtors.
      Concurrent therewith, the Additional Debtor shall deliver replacement schedules
      for, or supplements to all other Schedules to (or referred to in) this
      Agreement, as applicable, which replacement schedules shall supersede, or
      supplements shall modify, the Schedules then in effect. The Additional Debtor
      shall also deliver such opinions of counsel, authorizing resolutions, good
      standing certificates, incumbency certificates, organizational documents,
      financing statements and other information and documentation as the Secured
      Parties may reasonably request. Upon delivery of the foregoing to the Secured
      Parties, the Additional Debtor shall be and become a party to this Agreement
      with the same rights and obligations as the Debtors, for all purposes hereof
      as
      fully and to the same extent as if it were an original signatory hereto and
      shall be deemed to have made the representations, warranties and covenants
      set
      forth herein as of the date of execution and delivery of such Additional Debtor
      Joinder, and all references herein to the “Debtors” shall be deemed to include
      each Additional Debtor.

    


    (aa)
       Each
      Debtor shall vote the Pledged Securities to comply with the covenants and
      agreements set forth herein and in the Notes.

    


    (bb) Each
      Debtor shall register the pledge of the applicable Pledged Securities on the
      books of such Debtor. Each Debtor shall notify each issuer of Pledged Securities
      to register the pledge of the applicable Pledged Securities in the name of
      the
      Secured Parties on the books of such issuer. Further, except with respect to
      certificated securities delivered to the Agent, the applicable Debtor shall
      deliver to Agent an acknowledgement of pledge (which, where appropriate, shall
      comply with the requirements of the relevant UCC with respect to perfection
      by
      registration) signed by the issuer of the applicable Pledged Securities, which
      acknowledgement shall confirm that: (a) it has registered the pledge on its
      books and records; and (b) at any time directed by Agent during the continuation
      of an Event of Default, such issuer will transfer the record ownership of such
      Pledged Securities into the name of any designee of Agent, will take such steps
      as may be necessary to effect the transfer, and will comply with all other
      instructions of Agent regarding such Pledged Securities without the further
      consent of the applicable Debtor.

    


    (cc)
      In
      the
      event that, upon an occurrence of an Event of Default, Agent shall sell all
      or
      any of the Pledged Securities to another party or parties (herein called the
      “Transferee”)
      or
      shall purchase or retain all or any of the Pledged Securities, each Debtor
      shall, to the extent applicable: (i) deliver to Agent or the Transferee, as
      the
      case may be, the articles of incorporation, bylaws, minute books, stock
      certificate books, corporate seals, deeds, leases, indentures, agreements,
      evidences of indebtedness, books of account, financial records and all other
      Organizational Documents and records of the Debtors and their direct and
      indirect subsidiaries; (ii) use its best efforts to obtain resignations of
      the
      persons then serving as officers and directors of the Debtors and their direct
      and indirect subsidiaries, if so requested; and (iii) use its best efforts
      to
      obtain any approvals that are required by any governmental or regulatory body
      in
      order to permit the sale of the Pledged Securities to the Transferee or the
      purchase or retention of the Pledged Securities by Agent and allow the
      Transferee or Agent to continue the business of the Debtors and their direct
      and
      indirect subsidiaries.

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

    (dd) Each
      Debtor will from time to time, at the joint and several expense of the Debtors,
      promptly execute and deliver all such further instruments and documents, and
      take all such further action as may be necessary or desirable, or as the Secured
      Parties may reasonably request, in order to perfect and protect any security
      interest granted or purported to be granted hereby or to enable the Secured
      Parties to exercise and enforce their rights and remedies hereunder and with
      respect to any Collateral or to otherwise carry out the purposes of this
      Agreement.

    


    (ee) Schedule
      F
      attached
      hereto lists all of the patents, patent applications, trademarks, trademark
      applications, registered copyrights, and domain names owned by any of the
      Debtors as of the date hereof. Schedule
      F
      lists
      all material licenses in favor of any Debtor for the use of any patents,
      trademarks, copyrights and domain names as of the date hereof. All material
      patents and trademarks of the Debtors have been duly recorded at the United
      States Patent and Trademark Office and all material copyrights of the Debtors
      have been duly recorded at the United States Copyright Office. The Debtors
      own
      or possess sufficient legal rights to (i) all trademarks, service marks, trade
      names, copyrights, trade secrets, licenses, information and proprietary rights
      and processes and (ii) to their knowledge, all such rights, in each instance
      as
      used by any of them in connection with the Debtors’ business, which represent
      all intellectual property rights necessary to the conduct of the Debtors’
business as now conducted and as presently contemplated to be conducted, without
      any known conflict with, or infringement of, the rights of others. No Debtor
      has
      received any communications alleging that such Debtor has violated or, by
      conducting its business, would violate any of the patents, trademarks, service
      marks, trade names, copyrights, trade secrets or other proprietary rights or
      processes of any other Person.

    


    (ff) Except
      as
      set forth on Schedule
      G
      attached
      hereto, none of the account debtors or other persons or entities obligated
      on
      any of the Collateral is a governmental authority covered by the Federal
      Assignment of Claims Act or any similar federal, state or local statute or
      rule
      in respect of such Collateral.

    


    (gg) Based
      on
      the financial condition of the Company and the Guarantors on a consolidated
      basis as of the issuance date of the Notes and giving effect to the Company’s
      receipt of the proceeds thereof, (i) the Company's fair saleable value of its
      assets exceeds the amount that will be required to be paid on or in respect
      of
      the Company's existing debts and other liabilities (including known contingent
      liabilities) as they mature; (ii) the Company's assets do not constitute
      unreasonably small capital to carry on its business for the current fiscal
      year
      as now conducted and as proposed to be conducted including its capital needs
      taking into account the particular capital requirements of the business
      conducted by the Company, and projected capital requirements and capital
      availability thereof; and (iii) the current cash flow of the Company, together
      with the proceeds the Company would receive, were it to liquidate all of its
      assets, after taking into account all anticipated uses of the cash, would be
      sufficient to pay all amounts on or in respect of its debt when such amounts
      are
      required to be paid. The Company does not intend to incur debts beyond its
      ability to pay such debts as they mature (taking into account the timing and
      amounts of cash to be payable on or in respect of its debt).

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

    


    (hh) The
      Company and the Guarantors maintain a system of internal accounting controls
      sufficient to provide reasonable assurance that (i) transactions are executed
      in
      accordance with management's general or specific authorizations, (ii)
      transactions are recorded as necessary to permit preparation of financial
      statements in conformity with generally accepted accounting principles and
      to
      maintain asset accountability, (iii) access to assets is permitted only in
      accordance with management's general or specific authorization, and (iv) the
      recorded accountability for assets is compared with the existing assets at
      reasonable intervals and appropriate action is taken with respect to any
      differences.

    


    (ii) Except
      as
      set forth in reports filed with Securities and Exchange Commission and available
      on the EDGAR system at least ten days prior to the date hereof, none of the
      officers or directors of the Company and, to the knowledge of the Company,
      none
      of the employees of the Company is presently a party to any transaction with
      the
      Company or any Guarantor (other than for services as employees, officers and
      directors), including any contract, agreement or other arrangement providing
      for
      the furnishing of services to or by, providing for rental of real or personal
      property to or from, or otherwise requiring payments to or from any officer,
      director or such employee or, to the knowledge of the Company, any entity in
      which any officer, director, or any such employee has a substantial interest
      or
      is an officer, director, trustee or partner. 

    


    (jj) The
      Debtors acknowledge and agree that each of the Secured Parties is acting solely
      in the capacity of an arm's length purchaser with respect to the Debtors and
      the
      transactions contemplated hereby. The Debtors further acknowledge that no
      Secured Party is acting as a financial advisor or fiduciary of the Debtors
      (or
      in any similar capacity) with respect to this Agreement and the transactions
      contemplated hereby and any advice given by any Secured Party or any of their
      respective representatives or agents in connection with this Agreement and
      the
      transactions contemplated hereby is merely incidental to the Secured Parties’
purchase of the Notes and Warrants. The Debtors further represent to each
      Secured Party that the Debtors’ decision to enter into this Agreement has been
      based solely on the independent evaluation of the transactions contemplated
      hereby by the Debtors and their representatives.

    


    (kk) The
      Company has filed all reports required to be filed by it under the Securities
      Act of 1933 and the Exchange Act of 1934, including pursuant to Sections 13(a)
      or 15(d) thereof, during the two (2) years preceding the date hereof (the
      foregoing materials, including the exhibits thereto, being collectively referred
      to herein as the " SEC Reports") on a timely basis or has received a valid
      extension of such time of filing and has filed any such SEC Reports prior to
      the
      expiration of any such extension. The
      Company has made the SEC Reports available to the Secured Parties through the
      EDGAR System. As
      of
      their respective dates, the SEC Reports complied in all material respects with
      the requirements of the Securities Act and the Exchange Act and the rules and
      regulations of the Commission promulgated thereunder, and none of the SEC
      Reports, when filed, contained any untrue statement of a material fact or
      omitted to state a material fact required to be stated therein or necessary
      in
      order to make the statements therein, in light of the circumstances under which
      they were made, not misleading. The financial statements of the Company included
      in the SEC Reports comply in all material respects with applicable accounting
      requirements and the rules and regulations of the Securities and Exchange
      Commission with respect thereto as in effect at the time of filing. Such
      financial statements have been prepared in accordance with generally accepted
      accounting principals applied on a consistent basis during the periods involved
      ("GAAP"), except as may be otherwise specified in such financial statements
      or
      the notes thereto in accepted unaudited financial statements may not have
      contained all footnotes required by GAAP, and fairly present an all material
      respects the financial position of the Company as of the dates thereof and
      the
      results of operations and cash flows for the periods then ended, subject, in
      the
      case of unaudited statements, to normal, immaterial, year-end audit adjustments.
      All
      material agreements to which the Company or any Guarantor is a party or to
      which
      the property or assets of the Company or any Guarantor are subject are included
      as part of or specifically identified in the SEC Reports.

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

    


    (ll) Schedule
      H
      hereto
      sets forth the expected use of proceeds from this financing.

    


    (mm) The
      Company shall, by 8:30 a.m. (New York City time) on or before the 4th
      business
      day following the date hereof, issue a Current Report on Form 8-K disclosing
      the
      material terms of the transactions contemplated hereby. The Company and each
      Secured Party shall consult with each other in issuing any other press releases
      with respect to the transactions contemplated hereby, and neither the Company
      nor any Secured Party shall issue any such press release or otherwise make
      any
      such public statement without the prior consent of the Company, with respect
      to
      any press release of any Secured Party, or without the prior consent of each
      Secured Party, with respect to any press release of the Company, which consent
      shall not unreasonably be withheld or delayed, except if such disclosure is
      required by law, in which case the disclosing party shall promptly provide
      the
      other party with prior notice of such public statement or
      communication.

    


    (nn) The
      Company and the Subsidiaries, severally and jointly, will indemnify and hold
      each Secured Party and its directors, officers, shareholders, members, partners,
      employees and agents (and any other Persons with a functionally equivalent
      role
      of a Person holding such titles notwithstanding a lack of such title or any
      other title), each Person who controls such Secured Party (within the meaning
      of
      Section 15 of the Securities Act and Section 20 of the Exchange Act), and the
      directors, officers, shareholders, agents, members, partners or employees (and
      any other Persons with a functionally equivalent role of a Person holding such
      titles notwithstanding a lack of such title or any other title) of such
      controlling person (each, a “Indemnified
      Party”)
      harmless from any and all losses, liabilities, obligations, claims,
      contingencies, damages, costs and expenses, including all judgments, amounts
      paid in settlements, court costs and reasonable attorneys’ fees and costs of
      investigation that any such Indemnified Party may suffer or incur as a result
      of
      or relating to (a) any breach of any of the representations, warranties,
      covenants or agreements made by the Company in this Agreement or in the other
      Transaction Documents or (b) any action instituted against a Secured Party,
      or
      any of them or their respective Affiliates, by any stockholder of the Company
      who is not an Affiliate of such Secured Party, with respect to any of the
      transactions contemplated by the Transaction Documents (unless such action
      is
      based upon a breach of such Secured Party’s representations, warranties or
      covenants under the Transaction Documents or any agreements or understandings
      such Secured Party may have with any such stockholder or any violations by
      the
      Secured Party of state or federal securities laws or any conduct by such Secured
      Party which constitutes fraud, gross negligence, willful misconduct or
      malfeasance). If any action shall be brought against any Indemnified Party
      in
      respect of which indemnity may be sought pursuant to this Agreement, such
      Indemnified Party shall promptly notify the Company in writing, and the Company
      shall have the right to assume the defense thereof with counsel of its own
      choosing reasonably acceptable to the Indemnified Party. Any Indemnified Party
      shall have the right to employ separate counsel in any such action and
      participate in the defense thereof, but the fees and expenses of such counsel
      shall be at the expense of such Indemnified Party except to the extent that
      (i)
      the employment thereof has been specifically authorized by the Company in
      writing, (ii) the Company has failed after a reasonable period of time to assume
      such defense and to employ counsel or (iii) in such action there is, in the
      reasonable opinion of such separate counsel, a material conflict on any material
      issue between the position of the Company and the position of such Indemnified
      Party, in which case the Company shall be responsible for the reasonable fees
      and expenses of no more than one such separate counsel. The Company will not
      be
      liable to any Indemnified Party under this Agreement (i) for any settlement
      by a
      Indemnified Party effected without the Company’s prior written consent, which
      shall not be unreasonably withheld or delayed or (ii) to the extent, but only
      to
      the extent, that a loss, claim, damage or liability is attributable to any
      Indemnified Party’s breach of any of the representations, warranties, covenants
      or agreements made by such Indemnified Party in this Agreement or in the other
      Transaction Documents.

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

    


    (oo) To
      the
      extent that the Company or any Subsidiary makes a payment or payments to any
      Secured Party pursuant to any Transaction Document or a Secured Party enforces
      or exercises its rights thereunder, and such payment or payments or the proceeds
      of such enforcement or exercise or any part thereof are subsequently
      invalidated, declared to be fraudulent or preferential, set aside, recovered
      from, disgorged by or are required to be refunded, repaid or otherwise restored
      to the Company or any Subsidiary, a trustee, receiver or any other person under
      any law (including, without limitation, any bankruptcy law, state or federal
      law, common law or equitable cause of action), then to the extent of any such
      restoration the obligation or part thereof originally intended to be satisfied
      shall be revived and continued in full force and effect as if such payment
      had
      not been made or such enforcement or setoff had not occurred.

    


    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

    


    (pp) To
      the
      extent it may lawfully do so, the Company and the Subsidiaries hereby agrees
      not
      to insist upon or plead or in any manner whatsoever claim, and will resist
      any
      and all efforts to be compelled to take the benefit or advantage of, usury
      laws
      wherever enacted, now or at any time hereafter in force, in connection with
      any
      claim, action or proceeding that may be brought by any Secured Party in order
      to
      enforce any right or remedy under this Agreement or the Note. Notwithstanding
      any provision to the contrary contained in this Agreement or the Note, it is
      expressly agreed and provided that the total liability of the Company under
      this
      Agreement or the Note for payments in the nature of interest shall not exceed
      the maximum lawful rate authorized under applicable law (the “Maximum
      Rate”),
      and,
      without limiting the foregoing, in no event shall any rate of interest or
      default interest, or both of them, when aggregated with any other sums in the
      nature of interest that the Company or any Subsidiary may be obligated to pay
      under this Agreement or the Note exceed such Maximum Rate. It is agreed that
      if
      the maximum contract rate of interest allowed by law and applicable to this
      Agreement or the Note is increased or decreased by statute or any official
      governmental action subsequent to the date hereof, the new maximum contract
      rate
      of interest allowed by law will be the Maximum Rate applicable to this Agreement
      or the Note from the effective date forward, unless such application is
      precluded by applicable law. If under any circumstances whatsoever, interest
      in
      excess of the Maximum Rate is paid by the Company or any Subsidiary to any
      Secured Party with respect to indebtedness evidenced by this Agreement or the
      Note, such excess shall be applied by such Secured Party to the unpaid principal
      balance of any such indebtedness or be refunded to the Company or any
      Subsidiary, the manner of handling such excess to be at such Secured Party’s
      election.

    


    (qq) The
      Warrants are duly authorized and, upon the execution of this Agreement by a
      Secured Party will be duly and validly issued, fully paid and nonassessable,
      free and clear of all liens imposed by the Company other than restrictions
      on
      transfer provided for in the Purchase Agreement. The Warrant Shares, when issued
      in accordance with the terms of the Warrants, will be validly issued, fully
      paid
      and nonassessable, free and clear of all liens imposed by the Company. The
      Company has reserved from its duly authorized capital stock a number of shares
      of Common Stock for issuance of the Warrant Shares at least equal to the
      Required Minimum. 

    


    (rr) At
      the
      Closing, the Company has agreed to reimburse Little Bear Investments LLC
      (“Little
      Bear”)
      the
      non-accountable sum of $5,000, for its due diligence fees and expenses, plus
      all
      reasonable fees of FWS. Accordingly, in lieu of the foregoing payments, the
      aggregate amount that Little Bear is to pay for the Notes at the Closing shall
      be reduced by such amount in lieu thereof. Little Bear acknowledges the prior
      receipt by FWS of $10,000 toward such legal fees and expenses of FWS. Except
      as
      expressly set forth in this Agreement to the contrary, each party shall pay
      the
      fees and expenses of its advisers, counsel, accountants and other experts,
      if
      any, and all other expenses incurred by such party incident to the negotiation,
      preparation, execution, delivery and performance of this Agreement.

     

    
      
        
        

      

      
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    6. Effect
      of Pledge on Certain Rights. If
      any of
      the Collateral subject to this Agreement consists of nonvoting equity or
      ownership interests (regardless of class, designation, preference or rights)
      that may be converted into voting equity or ownership interests upon the
      occurrence of certain events (including, without limitation, upon the transfer
      of all or any of the other stock or assets of the issuer), it is agreed that
      the
      pledge of such equity or ownership interests pursuant to this Agreement or
      the
      enforcement of any of Agent’s rights hereunder shall not be deemed to be the
      type of event which would trigger such conversion rights notwithstanding any
      provisions in the Organizational Documents or agreements to which any Debtor
      is
      subject or to which any Debtor is party.

    


    7.
       Defaults.
      The
      following events shall be “Events
      of Default”:

    


    (a)
      The
      occurrence of an Event of Default (as defined in the Note) under the
      Note;

    


    (b)
      Any
      representation or warranty of any Debtor in this Agreement shall prove to have
      been incorrect in any material respect when made;

    


    (c)
      The
      failure by any Debtor to observe or perform any of its obligations hereunder
      for
      ten (10) days after delivery to such Debtor of notice of such failure by or
      on
      behalf of a Secured Party unless such default is capable of cure but cannot
      be
      cured within such time frame and such Debtor is using best efforts to cure
      same
      in a timely fashion; or

    


    (d)
      If
      any provision of this Agreement shall at any time for any reason be declared
      to
      be null and void, or the validity or enforceability thereof shall be contested
      by any Debtor, or a proceeding shall be commenced by any Debtor, or by any
      governmental authority having jurisdiction over any Debtor, seeking to establish
      the invalidity or unenforceability thereof, or any Debtor shall deny that any
      Debtor has any liability or obligation purported to be created under this
      Agreement.

    


     8.  Duty
      To Hold In Trust.
      

    


    (a) Upon
      the
      occurrence of any Event of Default and at any time thereafter, each Debtor
      shall, upon receipt of any revenue, income,
      dividend, interest
      or other
      sums subject to the Security Interest, whether payable pursuant to the Note
      or
      otherwise, or of any check, draft, note, trade acceptance or other instrument
      evidencing an obligation to pay any such sum, hold the same in trust for the
      Secured Parties and shall forthwith endorse and transfer any such sums or
      instruments, or both, to the Secured Parties, pro-rata in proportion to their
      initial purchases of Notes for application to the satisfaction of the
      Obligations (and if any Note is not outstanding, pro rata
      in
      proportion to the initial purchases of the remaining Notes). 

    


    (b) If
      any
      Debtor shall become entitled to receive or shall receive any securities or
      other
      property (including, without limitation, shares of Pledged Securities or
      instruments representing Pledged Securities acquired after the date hereof,
      or
      any options, warrants, rights or other similar property or certificates
      representing a dividend, or any distribution in connection with any
      recapitalization, reclassification or increase or reduction of capital, or
      issued in connection with any reorganization of such Debtor or any of its direct
      or indirect subsidiaries) in respect of the Pledged Securities (whether as
      an
      addition to, in substitution of, or in exchange for, such Pledged Securities
      or
      otherwise), such Debtor agrees to (i) accept the same as the agent of the
      Secured Parties; (ii) hold the same in trust on behalf of and for the benefit
      of
      the Secured Parties; and (iii) to deliver any and all certificates or
      instruments evidencing the same to Agent on or before the close of business
      on
      the fifth business day following the receipt thereof by such Debtor, in the
      exact form received together with the Necessary Endorsements, to be held by
      Agent subject to the terms of this Agreement as Collateral.

     

    
      
        
        

      

      
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     9.  Rights
      and Remedies Upon Default.
      

    


    (a) Upon
      the
      occurrence of any Event of Default and at any time thereafter, the Secured
      Parties, acting through any agent appointed by them for such purpose, shall
      have
      the right to exercise all of the remedies conferred hereunder and under the
      Notes, and the Secured Parties shall have all the rights and remedies of a
      secured party under the UCC. Without limitation, the Secured Parties shall
      have
      the following rights and powers:

    


    (i)
      The
      Secured Parties shall have the right to take possession of the Collateral and,
      for that purpose, enter, with the aid and assistance of any person, any premises
      where the Collateral, or any part thereof, is or may be placed and remove the
      same, and each Debtor shall assemble the Collateral and make it available to
      the
      Secured Parties at places which the Secured Parties shall reasonably select,
      whether at such Debtor's premises or elsewhere, and make available to the
      Secured Parties, without rent, all of such Debtor’s respective premises and
      facilities for the purpose of the Secured Parties taking possession of, removing
      or putting the Collateral in saleable or disposable form.

    


    (ii) Upon
      notice to the Debtors by Agent, all rights of each Debtor to exercise the voting
      and other consensual rights which it would otherwise be entitled to exercise
      and
      all rights of each Debtor to receive the dividends and interest which it would
      otherwise be authorized to receive and retain, shall cease. Upon such notice,
      Agent shall have the right to receive any interest, cash dividends or other
      payments on the Collateral and, at the option of Agent, to exercise in such
      Agent’s discretion all voting rights pertaining thereto. Without limiting the
      generality of the foregoing, Agent shall have the right (but not the obligation)
      to exercise all rights with respect to the Collateral as it were the sole and
      absolute owners thereof, including, without limitation, to vote and/or to
      exchange, at its sole discretion, any or all of the Collateral in connection
      with a merger, reorganization, consolidation, recapitalization or other
      readjustment concerning or involving the Collateral or any Debtor or any of
      its
      direct or indirect subsidiaries.

     

    
      
        
        

      

      
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    (iii)
      The
      Secured Parties shall have the right to operate the business of each Debtor
      using the Collateral and shall have the right to assign, sell, lease or
      otherwise dispose of and deliver all or any part of the Collateral, at public
      or
      private sale or otherwise, either with or without special conditions or
      stipulations, for cash or on credit or for future delivery, in such parcel
      or
      parcels and at such time or times and at such place or places, and upon such
      terms and conditions as the Secured Parties may deem commercially reasonable,
      all without (except as shall be required by applicable statute and cannot be
      waived) advertisement or demand upon or notice to any Debtor or right of
      redemption of a Debtor, which are hereby expressly waived. Upon each such sale,
      lease, assignment or other transfer of Collateral, the Secured Parties may,
      unless prohibited by applicable law which cannot be waived, purchase all or
      any
      part of the Collateral being sold, free from and discharged of all trusts,
      claims, right of redemption and equities of any Debtor, which are hereby waived
      and released.

    


    (iv) The
      Secured Parties shall have the right (but not the obligation) to notify any
      account debtors and any obligors under instruments or accounts to make payments
      directly to the Secured Parties and to enforce the Debtors’ rights against such
      account debtors and obligors.

    


    (v) The
      Secured Parties may (but are not obligated to) direct any financial intermediary
      or any other person or entity holding any investment property to transfer the
      same to the Secured Parties or their designee.

    


    (vi) The
      Secured Parties may (but are not obligated to) transfer any or all Intellectual
      Property registered in the name of any Debtor at the United States Patent and
      Trademark Office and/or Copyright Office into the name of the Secured Parties
      or
      any designee or any purchaser of any Collateral.

    


    (b) The
      Agent
      may comply with any applicable law in connection with a disposition of
      Collateral and such compliance will not be considered adversely to affect the
      commercial reasonableness of any sale of the Collateral. The Agent may sell
      the
      Collateral without giving any warranties and may specifically disclaim such
      warranties. If the Agent sells any of the Collateral on credit, the Debtors
      will
      only be credited with payments actually made by the purchaser. In addition,
      each
      Debtor waives any and all rights that it may have to a judicial hearing in
      advance of the enforcement of any of the Agent’s rights and remedies hereunder,
      including, without limitation, its right following an Event of Default to take
      immediate possession of the Collateral and to exercise its rights and remedies
      with respect thereto.

     

    (c) For
      the
      purpose of enabling the Agent to further exercise rights and remedies under
      this
      Section 9 or elsewhere provided by agreement or applicable law, each Debtor
      hereby grants to the Agent, for the benefit of the Agent and the Secured
      Parties, an irrevocable, nonexclusive license (exercisable without payment
      of
      royalty or other compensation to such Debtor) to use, license or sublicense
      following an Event of Default, any Intellectual Property now owned or hereafter
      acquired by such Debtor, and wherever the same may be located, and including
      in
      such license access to all media in which any of the licensed items may be
      recorded or stored and to all computer software and programs used for the
      compilation or printout thereof.

     

    
      
        
        

      

      
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     10.  Applications
      of Proceeds.
      The
      proceeds of any such sale, lease or other disposition of the Collateral
      hereunder shall be applied first, to the expenses of retaking, holding, storing,
      processing and preparing for sale, selling, and the like (including, without
      limitation, any taxes, fees and other costs incurred in connection therewith)
      of
      the Collateral, to the reasonable attorneys’ fees and expenses incurred by the
      Secured Parties in enforcing their rights hereunder and in connection with
      collecting, storing and disposing of the Collateral, and then to satisfaction
      of
      the Obligations pro rata among the Secured Parties (based on then outstanding
      principal amounts of Notes at the time of any such determination), and to the
      payment of any other amounts required by applicable law, after which the Secured
      Parties shall pay to the applicable Debtor any surplus proceeds. If, upon the
      sale, license or other disposition of the Collateral, the proceeds thereof
      are
      insufficient to pay all amounts to which the Secured Parties are legally
      entitled, the Debtors will be liable for the deficiency, together with interest
      thereon, at the rate of 15% per annum or the lesser amount permitted by
      applicable law (the “Default
      Rate”),
      and
      the reasonable fees of any attorneys employed by the Secured Parties to collect
      such deficiency. To the extent permitted by applicable law, each Debtor waives
      all claims, damages and demands against the Secured Parties arising out of
      the
      repossession, removal, retention or sale of the Collateral, unless due solely
      to
      the gross negligence or willful misconduct of the Secured Parties as determined
      by a final judgment (not subject to further appeal) of a court of competent
      jurisdiction.

    


    11. Securities
      Law Provision.
      Each
      Debtor recognizes that Agent may be limited in its ability to effect a sale
      to
      the public of all or part of the Pledged Securities by reason of certain
      prohibitions in the Securities Act of 1933, as amended, or other federal or
      state securities laws (collectively, the “Securities
      Laws”),
      and
      may be compelled to resort to one or more sales to a restricted group of Secured
      Parties who may be required to agree to acquire the Pledged Securities for
      their
      own account, for investment and not with a view to the distribution or resale
      thereof. Each Debtor agrees that sales so made may be at prices and on terms
      less favorable than if the Pledged Securities were sold to the public, and
      that
      Agent has no obligation to delay the sale of any Pledged Securities for the
      period of time necessary to register the Pledged Securities for sale to the
      public under the Securities Laws. Each Debtor shall cooperate with Agent in
      its
      attempt to satisfy any requirements under the Securities Laws (including,
      without limitation, registration thereunder if requested by Agent) applicable
      to
      the sale of the Pledged Securities by Agent.

     

     12.  Costs
      and Expenses.
      Each
      Debtor agrees to pay all reasonable out-of-pocket fees, costs and expenses
      incurred in connection with any filing required hereunder, including without
      limitation, any financing statements pursuant to the UCC, continuation
      statements, partial releases and/or termination statements related thereto
      or
      any expenses of any searches reasonably required by the Secured Parties. The
      Debtors shall also pay all other claims and charges which in the reasonable
      opinion of the Secured Parties might prejudice, imperil or otherwise affect
      the
      Collateral or the Security Interest therein. The Debtors will also, upon demand,
      pay to the Secured Parties the amount of any and all reasonable expenses,
      including the reasonable fees and expenses of its counsel and of any experts
      and
      agents, which the Secured Parties may incur in connection with (i) the
      enforcement of this Agreement, (ii) the custody or preservation of, or the
      sale
      of, collection from, or other realization upon, any of the Collateral, or (iii)
      the exercise or enforcement of any of the rights of the Secured Parties under
      the Notes. Until so paid, any fees payable hereunder shall be added to the
      principal amount of the Notes and shall bear interest at the Default
      Rate.

     

    
      
        
        

      

      
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     13.  Responsibility
      for Collateral.
      The
      Debtors assume all liabilities and responsibility in connection with all
      Collateral, and the Obligations shall in no way be affected or diminished by
      reason of the loss, destruction, damage or theft of any of the Collateral or
      its
      unavailability for any reason. Without limiting the generality of the foregoing,
      (a) neither the Agent nor any Secured Party (i) has any duty (either before
      or
      after an Event of Default) to collect any amounts in respect of the Collateral
      or to preserve any rights relating to the Collateral, or (ii) has any obligation
      to clean-up or otherwise prepare the Collateral for sale, and (b) each Debtor
      shall remain obligated and liable under each contract or agreement included
      in
      the Collateral to be observed or performed by such Debtor thereunder. Neither
      the Agent nor any Secured Party shall have any obligation or liability under
      any
      such contract or agreement by reason of or arising out of this Agreement or
      the
      receipt by the Agent or any Secured Party of any payment relating to any of
      the
      Collateral, nor shall the Agent or any Secured Party be obligated in any manner
      to perform any of the obligations of any Debtor under or pursuant to any such
      contract or agreement, to make inquiry as to the nature or sufficiency of any
      payment received by the Agent or any Secured Party in respect of the Collateral
      or as to the sufficiency of any performance by any party under any such contract
      or agreement, to present or file any claim, to take any action to enforce any
      performance or to collect the payment of any amounts which may have been
      assigned to the Agent or to which the Agent or any Secured Party may be entitled
      at any time or times.

    


     14.
       Term
      of Agreement.
      The
      Security Interest shall terminate on the date on which all payments under the
      Notes have been indefeasibly paid in full and all other Obligations have been
      paid or discharged.

    


    15.
       Power
      of Attorney; Further Assurances.

    


    (a)
       Each
      Debtor authorizes the Secured Parties, and does hereby make, constitute and
      appoint the Secured Parties and their respective officers, agents, successors
      or
      assigns with full power of substitution, as such Debtor’s true and lawful
      attorney-in-fact, with power, in the name of the various Secured Parties or
      such
      Debtor, to, after the occurrence and during the continuance of an Event of
      Default, (i) endorse any note, checks, drafts, money orders or other instruments
      of payment (including payments payable under or in respect of any policy of
      insurance) in respect of the Collateral that may come into possession of the
      Secured Parties; (ii) to sign and endorse any financing statement pursuant
      to
      the UCC or any invoice, freight or express bill, bill of lading, storage or
      warehouse receipts, drafts against debtors, assignments, verifications and
      notices in connection with accounts, and other documents relating to the
      Collateral; (iii) to pay or discharge taxes, liens, security interests or other
      encumbrances at any time levied or placed on or threatened against the
      Collateral; (iv) to demand, collect, receipt for, compromise, settle and sue
      for
      monies due in respect of the Collateral; (v) to transfer any Intellectual
      Property or provide licenses respecting any Intellectual Property; and (vi)
      generally, at the option of the Secured Parties, and at the expense of the
      Debtors, at any time, or from time to time, to execute and deliver any and
      all
      documents and instruments and to do all acts and things which the Secured
      Parties deem necessary to protect, preserve and realize upon the Collateral
      and
      the Security Interest granted therein in order to effect the intent of this
      Agreement and the Notes all as fully and effectually as the Debtors might or
      could do; and each Debtor hereby ratifies all that said attorney shall lawfully
      do or cause to be done by virtue hereof. This power of attorney is coupled
      with
      an interest and shall be irrevocable for the term of this Agreement and
      thereafter as long as any of the Obligations shall be outstanding. The
      designation set forth herein shall be deemed to amend and supersede any
      inconsistent provision in the Organizational Documents or other documents or
      agreements to which any Debtor is subject or to which any Debtor is a party.
      Without
      limiting the generality of the foregoing, after the occurrence and during the
      continuance of an Event of Default, each Secured Party is specifically
      authorized to execute and file any applications for or instruments of transfer
      and assignment of any patents, trademarks, copyrights or other Intellectual
      Property with the United States Patent and Trademark Office and the United
      States Copyright Office.

     

    
      
        
        

      

      
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    (b)
       On
      a
      continuing basis, each Debtor will make, execute, acknowledge, deliver, file
      and
      record, as the case may be, with the proper filing and recording agencies in
      any
      jurisdiction, including, without limitation, the jurisdictions indicated on
      Schedule
      C
      attached
      hereto, all such instruments, and take all such action as may reasonably be
      deemed necessary or advisable, or as reasonably requested by the Secured
      Parties, to perfect the Security Interest granted hereunder and otherwise to
      carry out the intent and purposes of this Agreement, or for assuring and
      confirming to the Secured Parties the grant or perfection of a perfected
      security interest in all the Collateral under the UCC.

    


    (c)
       Each
      Debtor hereby irrevocably appoints the Secured Parties as such Debtor’s
      attorney-in-fact, with full authority in the place and instead of such Debtor
      and in the name of such Debtor, from time to time in the Secured Parties’
discretion, to take any action and to execute any instrument which the Secured
      Parties may deem necessary or advisable to accomplish the purposes of this
      Agreement, including the filing, in its sole discretion, of one or more
      financing or continuation statements and amendments thereto, relative to any
      of
      the Collateral without the signature of such Debtor where permitted by law,
      which financing statements may (but need not) describe the Collateral as “all
      assets” or “all personal property” or words of like import, and ratifies all
      such actions taken by the Secured Parties. This power of attorney is coupled
      with an interest and shall be irrevocable for the term of this Agreement and
      thereafter as long as any of the Obligations shall be outstanding.

    


     16.  Notices.
      All
      notices, requests, demands and other communications hereunder shall be subject
      to the notice provision of the Notes.

    


     17.  Other
      Security.
      To the
      extent that the Obligations are now or hereafter secured by property other
      than
      the Collateral or by the guarantee, endorsement or property of any other person,
      firm, corporation or other entity, then the Secured Parties shall have the
      right, in its sole discretion, to pursue, relinquish, subordinate, modify or
      take any other action with respect thereto, without in any way modifying or
      affecting any of the Secured Parties’ rights and remedies
      hereunder.

     

    
      
        
        

      

      
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    18. Appointment
      of Agent.
      The
      Secured Parties hereby appoint Little Bear to act as their agent (“Agent”)
      for
      purposes of exercising any and all rights and remedies of the Secured Parties
      hereunder. Such appointment shall continue until revoked in writing by a
Majority
      in Interest, at which time a Majority in Interest
      shall
      appoint a new Agent, provided that Little Bear may not be removed as Agent
      unless Little Bear shall then hold less than $10,000 in principal amount of
      Notes.
      The
      Agent
      shall have the rights, responsibilities and immunities set forth in Annex
      B
      hereto.

    


    19. Representations
      and Warranties of the Secured Parties.
      Each
      Secured Party hereby, for itself and for no other Secured Party, represents
      and
      warrants as of the date hereof to the Company as follows:

    


    (a) Authority.
      The
      execution, delivery and performance by such Secured Party of the transactions
      contemplated by this Agreement have been duly authorized by all necessary
      corporate or similar action on the part of such Secured Party. This Agreement
      has been duly executed by such Secured Party, and when delivered by such Secured
      Party in accordance with the terms hereof, will constitute the valid and legally
      binding obligation of such Secured Party, enforceable against it in accordance
      with its terms, except (i) as limited by general equitable principles and
      applicable bankruptcy, insolvency, reorganization, moratorium and other laws
      of
      general application affecting enforcement of creditors’ rights generally, (ii)
      as limited by laws relating to the availability of specific performance,
      injunctive relief or other equitable remedies and (iii) insofar as
      indemnification and contribution provisions may be limited by applicable
      law.

     

    (b) Own
      Account.
      Such
      Secured Party understands that the Warrants are “restricted securities” and have
      not been registered under the Securities Act or any applicable state securities
      law and is acquiring the Warrant as principal for its own account and not with
      a
      view to or for distributing or reselling such Warrants or any part thereof
      in
      violation of the Securities Act or any applicable state securities law, has
      no
      present intention of distributing the Warrant in violation of the Securities
      Act
      or any applicable state securities law and has no arrangement or understanding
      with any other persons regarding the distribution of such Warrants (this
      representation and warranty not limiting such Secured Party’s right to sell the
      Warrant Shares pursuant to a registration statement or otherwise in compliance
      with applicable federal and state securities laws) in violation of the
      Securities Act or any applicable state securities law. Such Secured Party is
      acquiring the Warrants hereunder in the ordinary course of its business. Such
      Secured Party does not have any agreement or understanding, directly or
      indirectly, with any person to distribute any of the Warrants or Warrant
      Shares.

     

    (c) Secured
      Party Status.
      Such
      Secured Party is an “accredited investor” as defined in Rule 501(a)(1), (a)(2),
      (a)(3), (a)(7) or (a)(8) under the Securities Act. Such Secured Party is not
      required to be registered as a broker-dealer under Section 15 of the Exchange
      Act.

     

    
      
        
        

      

      
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    (d) General
      Solicitation.
      Such
      Secured Party is not acquiring the Additional Warrants as a result of any
      advertisement, article, notice or other communication regarding the Additional
      Warrants published in any newspaper, magazine or similar media or broadcast
      over
      television or radio or presented at any seminar or any other general
      solicitation or general advertisement.

     

     20.  Miscellaneous.

    


    (a)
       No
      course
      of dealing between the Debtors and the Secured Parties, nor any failure to
      exercise, nor any delay in exercising, on the part of the Secured Parties,
      any
      right, power or privilege hereunder or under the Notes shall operate as a waiver
      thereof; nor shall any single or partial exercise of any right, power or
      privilege hereunder or thereunder preclude any other or further exercise thereof
      or the exercise of any other right, power or privilege.

    


    (b)
       All
      of
      the rights and remedies of the Secured Parties with respect to the Collateral,
      whether established hereby or by the Notes or by any other agreements,
      instruments or documents or by law shall be cumulative and may be exercised
      singly or concurrently.

    


    (c)
       This
      Agreement constitutes the entire agreement of the parties with respect to the
      subject matter hereof and is intended to supersede all prior negotiations,
      understandings and agreements with respect thereto. Except as specifically
      set
      forth in this Agreement, no provision of this Agreement may be modified or
      amended except by a written agreement specifically referring to this Agreement
      and signed by the parties hereto.

    


    (d)
       In
      the
      event any provision of this Agreement is held to be invalid, prohibited or
      unenforceable in any jurisdiction for any reason, unless such provision is
      narrowed by judicial construction, this Agreement shall, as to such
      jurisdiction, be construed as if such invalid, prohibited or unenforceable
      provision had been more narrowly drawn so as not to be invalid, prohibited
      or
      unenforceable. If, notwithstanding the foregoing, any provision of this
      Agreement is held to be invalid, prohibited or unenforceable in any
      jurisdiction, such provision, as to such jurisdiction, shall be ineffective
      to
      the extent of such invalidity, prohibition or unenforceability without
      invalidating the remaining portion of such provision or the other provisions
      of
      this Agreement and without affecting the validity or enforceability of such
      provision or the other provisions of this Agreement in any other
      jurisdiction.

    


    (e)
       No
      waiver
      of any breach or default or any right under this Agreement shall be considered
      valid unless in writing and signed by the party giving such waiver, and no
      such
      waiver shall be deemed a waiver of any subsequent breach or default or right,
      whether of the same or similar nature or otherwise.

    


    (f)
       This
      Agreement shall be binding upon and inure to the benefit of each party hereto
      and its successors and assigns.

     

    
      
        
        

      

      
        27

        
          

        

      

      
        
        

      

    

    


    (g)
       Each
      party shall take such further action and execute and deliver such further
      documents as may be necessary or appropriate in order to carry out the
      provisions and purposes of this Agreement.

    


    (h)
      This
      Agreement shall be governed by and construed in accordance with the internal
      laws of the State of Nevada. Any controversy or claim arising out of or related
      to this Agreement or the Notes or the breach thereof, shall be settled by
      binding arbitration in New York, New York in accordance with the Expedited
      Procedures (Rules 53-57) of the Commercial Arbitration Rules of the American
      Arbitration Association (“AAA”). A proceeding shall be commenced upon written
      demand by any Debtor or Secured Party to the other. The arbitrator(s) shall
      enter a judgment by default against any party, which fails or refuses to appear
      in any properly noticed arbitration proceeding. The proceeding shall be
      conducted by one (1) arbitrator, unless the amount alleged to be in dispute
      exceeds two hundred fifty thousand dollars ($250,000), in which case three
      (3)
      arbitrators shall preside. The arbitrator(s) will be chosen by the parties
      from
      a list provided by the AAA, and if the parties are unable to agree within ten
      (10) days, the AAA shall select the arbitrator(s). The arbitrators must be
      experts in securities law and financial transactions. The arbitrators shall
      assess costs and expenses of the arbitration, including all attorneys’ and
      experts’ fees, as the arbitrators believe is appropriate in light of the merits
      of the parties’ respective positions in the issues in dispute. Each party
      submits irrevocably to the jurisdiction of any state court sitting in New York,
      New York or to the United States District Court sitting in New York, New York
      for purposes of enforcement of any discovery order, judgment or award in
      connection with such arbitration. The award of the arbitrator(s) shall be final
      and binding upon the parties and may be enforced in any court having
      jurisdiction. The arbitration shall be held in such place as set by the
      arbitrator(s) in accordance with Rule 55. With respect to any arbitration
      proceeding in accordance with this section, the prevailing party’s reasonable
      attorney’s fees and expenses shall be borne by the non-prevailing
      party.

    


    Although
      the parties, as expressed above, agree that all claims, including claims that
      are equitable in nature, for example specific performance, shall initially
      be
      prosecuted in the binding arbitration procedure outlined above, if the
      arbitration panel dismisses or otherwise fails to entertain any or all of the
      equitable claims asserted by reason of the fact that it lacks jurisdiction,
      power and/or authority to consider such claims and/or direct the remedy
      requested, then, in only that event, will the parties have the right to initiate
      litigation respecting such equitable claims or remedies. The forum for such
      equitable relief shall be in either a state or federal court sitting in New
      York, New York. Each party waives any right to a trial by jury, assuming such
      right exists in an equitable proceeding, and irrevocably submits to the
      jurisdiction of said New York court. Nevada law shall govern both the proceeding
      as well as the interpretation and construction of this Agreement and the
      transaction as a whole. Notwithstanding the preceding provisions, the parties
      agree to preserve, without diminution, certain remedies that any party may
      exercise before or after an arbitration proceeding is brought. The parties
      shall
      have the right to proceed in any court of proper jurisdiction or by self-help
      to
      exercise or prosecute the following remedies, as applicable: (i) all rights
      to
      foreclose against any real or personal property or other security by exercising
      a power of sale or under applicable law by judicial foreclosure including a
      proceeding to confirm the sale; (ii) all rights of self-help including peaceful
      occupation of real property and collection of rents, set-off, and peaceful
      possession of personal property; (iii) obtaining provisional or ancillary
      remedies including injunctive relief, sequestration, garnishment, attachment,
      appointment of receiver and filing an involuntary bankruptcy proceeding; and
      (iv) when applicable, a judgment by confession of judgment. The parties further
      agree that they shall not have a remedy of punitive or exemplary damages against
      any other party and hereby waive any right or claim to punitive or exemplary
      damages they have now or which may arise in the future in connection with any
      action whether the action is brought by arbitration
      or judicially.

    


    
      
        
        

      

      
        28

        
          

        

      

      
        
        

      

    

    


    (i)
       This
      Agreement may be executed in two or more counterparts, all of which when taken
      together shall be considered one and the same agreement and shall become
      effective when counterparts have been signed by each party and delivered to
      the
      other party, it being understood that both parties need not sign the same
      counterpart. In the event that any signature is delivered by facsimile
      transmission or by e-mail delivery of a “.pdf” format data file, such signature
      shall create a valid and binding obligation of the party executing (or on whose
      behalf such signature is executed) with the same force and effect as if such
      facsimile or “.pdf” signature page were an original thereof.

    


    (j) All
      Debtors shall jointly and severally be liable for the obligations of each Debtor
      to the Secured Parties hereunder.

    


    (k) Nothing
      in this Agreement shall be construed to subject Agent or any Secured Party
      to
      liability as a partner in any Debtor or any if its direct or indirect
      subsidiaries that is a partnership or as a member in any Debtor or any of its
      direct or indirect subsidiaries that is a limited liability company, nor shall
      Agent or any Secured Party be deemed to have assumed any obligations under
      any
      partnership agreement or limited liability company agreement, as applicable,
      of
      any such Debtor or any if its direct or indirect subsidiaries or otherwise,
      unless and until any such Secured Party exercises its right to be substituted
      for such Debtor as a partner or member, as applicable, pursuant
      hereto.

    


    (l) To
      the
      extent that the grant of the security interest in the Collateral and the
      enforcement of the terms hereof require the consent, approval or action of
      any
      partner or member, as applicable, of any Debtor or any direct or indirect
      subsidiary of any Debtor or compliance with any provisions of any of the
      Organizational Documents, the Debtors hereby grant such consent and approval
      and
      waive any such noncompliance with the terms of said documents.

     

    
      
        
        

      

      
        29

        
          

        

      

      
        
        

      

    

    


    (m) The
      obligations of each Secured Party under this Agreement are several and not
      joint
      with the obligations of any other Secured Party, and no Secured Party shall
      be
      responsible in any way for the performance of the obligations of any other
      Secured Party under this Agreement. Nothing contained herein or in this
      Agreement, and no action taken by any Secured Party pursuant thereto, shall
      be
      deemed to constitute the Secured Parties as a partnership, an association,
      a
      joint venture or any other kind of entity, or create a presumption that the
      Secured Parties are in any way acting in concert or as a group with respect
      to
      such obligations or the transactions contemplated by this Agreement. Each
      Secured Party shall be entitled to independently protect and enforce its rights,
      including without limitation the rights arising out of this Agreement, and
      it
      shall not be necessary for any other Secured Party to be joined as an additional
      party in any proceeding for such purpose. Each Secured Party has been
      represented by its own separate legal counsel in their review and negotiation
      of
      this Agreement. For reasons of administrative convenience only, Secured Parties
      and their respective counsel have chosen to communicate with the Company through
      FWS. FWS does not represent all of the Secured Parties but only Little Bear.
      The
      Company has elected to provide all Secured Parties with the same terms under
      this Agreement for the convenience of the Company and not because it was
      required or requested to do so by the Secured Parties.

    


    [SIGNATURE
      PAGES FOLLOW]

     

    
      
        
        

      

      
        30

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF, the parties hereto have caused this Loan and Security Agreement
      to be duly executed on the day and year first above written.

    
      	 	 	 	 
	
              BRENDAN
                TECHNOLOGIES, INC., 

              a
                Nevada corporation

            	 	 	
            
	 	 	 	 
	
              By: 
                /S/ LOWELL W. GIFFHORN

            	 	 	 
	
              
                

              

              Name:
                Lowell W. Giffhorn

              Title:  
                Chief Financial Officer

            	 	 	
            
	 	 	 	 
	
              Address
                for Notice:

              2236
                Rutherford Rd., Ste. 107

              Carlsbad,
                CA 92008

            	 	 	 
	 	 	 	 
	 	 	 	 
	
              BRENDAN
                TECHNOLOGIES, INC., 

              a
                Michigan corporation

            	 	 	 
	 	 	 	 
	By:  /S/
              LOWELL W. GIFFHORN	 	 	 
	
              
                

              

              Name:
                Lowell W. Giffhorn

              Title:  
                Chief Financial Officer

            	 	 	 
	 	 	 	 
	
              Address
                for Notice:

              2236
                Rutherford Rd., Ste. 107

              Carlsbad,
                CA 92008

            	 	 	 


    

    


    [SIGNATURE
      PAGE OF SECURED PARTIES TO FOLLOW]


    
      
        
        

      

      
        31

        
          

        

      

       

    


    [SIGNATURE
      PAGE OF SECURED PARTIES TO BDTE LSA]

     

    Name
      of
      Investing Entity: __________________________

     

    Signature
      of Authorized Signatory of Investing entity:
      _________________________

     

    Name
      of
      Authorized Signatory: _________________________

     

    Title
      of
      Authorized Signatory: __________________________

     

    Subscription
      Amount: _________________________

    


    Address
      for Notice:


    


    Address
      for Delivery of Note (if different from address for notice):

    


    


    


    Subscription
      Amount: $__________________


    


    Warrants:
      __________________

    


    Please
      check here to receive a Warrant that does NOT include the limitation on exercise
      contained in Section 2(d) of the Warrant /___/ 

     

    [SIGNATURE
      PAGE OF SECURED PARTIES FOLLOWS]

    


    
      
        
        

      

      
        32

        
          

        

      

      
        
        

      

    


    ANNEX
      A

    to

    SECURITY

    AGREEMENT

    


    FORM
      OF ADDITIONAL DEBTOR JOINDER

    


    Loan
      and
      Security Agreement dated as of July 10, 2007 made by

    Brendan
      Technologies, Inc.

    and
      its
      subsidiaries party thereto from time to time, as Debtors

    to
      and in
      favor of

    the
      Secured Parties identified therein (the “Security
      Agreement”)

    


    Reference
      is made to the Security Agreement as defined above; capitalized terms used
      herein and not otherwise defined herein shall have the meanings given to such
      terms in, or by reference in, the Security Agreement.

    


    The
      undersigned hereby agrees that upon delivery of this Additional Debtor Joinder
      to the Secured Parties referred to above, the undersigned shall (a) be an
      Additional Debtor under the Security Agreement, (b) have all the rights and
      obligations of the Debtors under the Security Agreement as fully and to the
      same
      extent as if the undersigned was an original signatory thereto and (c) be deemed
      to have made the representations and warranties set forth therein as of the
      date
      of execution and delivery of this Additional Debtor Joinder. WITHOUT LIMITING
      THE GENERALITY OF THE FOREGOING, THE UNDERSIGNED SPECIFICALLY GRANTS TO THE
      SECURED PARTIES A SECURITY INTEREST IN THE COLLATERAL AS MORE FULLY SET FORTH
      IN
      THE SECURITY AGREEMENT AND ACKNOWLEDGES AND AGREES TO THE WAIVER OF JURY TRIAL
      PROVISIONS SET FORTH THEREIN.

    


    Attached
      hereto are supplemental and/or replacement Schedules to the Security Agreement,
      as applicable.

    


    An
      executed copy of this Joinder shall be delivered to the Secured Parties, and
      the
      Secured Parties may rely on the matters set forth herein on or after the date
      hereof. This Joinder shall not be modified, amended or terminated without the
      prior written consent of the Secured Parties.

    


    
      
        
        

      

      
        33

        
          

        

      

      
        
        

      

    


    IN
      WITNESS WHEREOF, the undersigned has caused this Joinder to be executed in
      the
      name and on behalf of the undersigned.

    
      	 	 	 	 
	
            	 	 	
              [Name
                of Additional Debtor]

              


              By: 

              Name:

              Title:

              


              Address:

            


    

     

    Date:

     

    
      
        
        

      

      
        34

        
          

        

      

      
        
        

      

    


    ANNEX
      B

    to

    LOAN
      AND SECURITY

    AGREEMENT

    


    THE
      AGENT

    


    1.
      Appointment. The
      Secured Parties (all capitalized terms used herein and not otherwise defined
      shall have the respective meanings provided in the Loan and Security Agreement
      to which this Annex B is attached (the "Agreement")),
      by
      their acceptance of the benefits of the Agreement, hereby designate Little
      Bear Investments LLC
      (“Agent”)
      as the
      Agent to act as specified herein and in the Agreement. Each Secured Party shall
      be deemed irrevocably to authorize the Agent to take such action on its behalf
      under the provisions of the Agreement and any other Transaction Document (as
      such term is defined in the Agreement) and to exercise such powers and to
      perform such duties hereunder and thereunder as are specifically delegated
      to or
      required of the Agent by the terms hereof and thereof and such other powers
      as
      are reasonably incidental thereto. The Agent may perform any of its duties
      hereunder by or through its agents or employees.

    


    2.
      Nature
      of Duties.
      The
      Agent shall have no duties or responsibilities except those expressly set forth
      in the Agreement. Neither the Agent nor any of its partners, members,
      shareholders, officers, directors, employees or agents shall be liable for
      any
      action taken or omitted by it as such under the Agreement or hereunder or in
      connection herewith or therewith, be responsible for the consequence of any
      oversight or error of judgment or answerable for any loss, unless caused solely
      by its or their gross negligence or willful conduct as determined by a final
      judgment (not subject to further appeal) of a court of competent jurisdiction.
      The duties of the Agent shall be mechanical and administrative in nature; the
      Agent shall not have by reason of the Agreement or any other Transaction
      Document a fiduciary relationship in respect of any Debtor or any Secured Party;
      and nothing in the Agreement or any other Transaction Document, expressed or
      implied, is intended to or shall be so construed as to impose upon the Agent
      any
      obligations in respect of the Agreement or any other Transaction Document except
      as expressly set forth herein and therein.

    


    3.
      Lack
      of Reliance on the Agent.
      Independently and without reliance upon the Agent, each Secured Party, to the
      extent it deems appropriate, has made and shall continue to make (i) its own
      independent investigation of the financial condition and affairs of the Company
      and its subsidiaries in connection with such Secured Party’s investment in the
      Debtors, the creation and continuance of the Obligations, the transactions
      contemplated by the Transaction Documents, and the taking or not taking of
      any
      action in connection therewith, and (ii) its own appraisal of the
      creditworthiness of the Company and its subsidiaries, and of the value of the
      Collateral from time to time, and the Agent shall have no duty or
      responsibility, either initially or on a continuing basis, to provide any
      Secured Party with any credit, market or other information with respect thereto,
      whether coming into its possession before any Obligations are incurred or at
      any
      time or times thereafter. The Agent shall not be responsible to the Debtors
      or
      any Secured Party for any recitals, statements, information, representations
      or
      warranties herein or in any document, certificate or other writing delivered
      in
      connection herewith, or for the execution, effectiveness, genuineness, validity,
      enforceability, perfection, collectibility, priority or sufficiency of the
      Agreement or any other Transaction Document, or for the financial condition
      of
      the Debtors or the value of any of the Collateral, or be required to make any
      inquiry concerning either the performance or observance of any of the terms,
      provisions or conditions of the Agreement or any other Transaction Document,
      or
      the financial condition of the Debtors, or the value of any of the Collateral,
      or the existence or possible existence of any default or Event of Default under
      the Agreement, the Notes or any of the other Transaction Documents.

    


    4.
      Certain
      Rights of the Agent.
      The
      Agent shall have the right to take any action with respect to the Collateral,
      on
      behalf of all of the Secured Parties. The Agent shall not be obligated to
      consult with or receive any consent from any other Secured Party in connection
      with any action taken by the Agent under the Transaction Documents. Without
      limiting the foregoing, (a) no Secured Party shall have any right of action
      whatsoever against the Agent as a result of the Agent acting or refraining
      from
      acting hereunder in accordance with the terms of the Agreement or any other
      Transaction Document, and the Debtors shall have no right to question or
      challenge the authority of, or the instructions given to, the Agent pursuant
      to
      the foregoing and (b) the Agent shall not be required to take any action which
      the Agent believes (i) could reasonably be expected to expose it to personal
      liability or (ii) is contrary to this Agreement, the Transaction Documents
      or
      applicable law.

     

    
      
        
        

      

      
        35

        
          

        

      

      
        
        

      

    

    


    5.
      Reliance.
      The
      Agent shall be entitled to rely, and shall be fully protected in relying, upon
      any writing, resolution, notice, statement, certificate, telex, teletype or
      telecopier message, cablegram, radiogram, order or other document or telephone
      message signed, sent or made by the proper person or entity, and, with respect
      to all legal matters pertaining to the Agreement and the other Transaction
      Documents and its duties thereunder, upon advice of counsel selected by it
      and
      upon all other matters pertaining to this Agreement and the other Transaction
      Documents and its duties thereunder, upon advice of other experts selected
      by
      it.

    


    6.
      Indemnification.
      To the
      extent that the Agent is not reimbursed and indemnified by the Debtors, the
      Secured Parties will jointly and severally reimburse and indemnify the Agent,
      in
      proportion to their initially purchased respective principal amounts of Notes,
      from and against any and all liabilities, obligations, losses, damages,
      penalties, actions, judgments, suits, costs, expenses or disbursements of any
      kind or nature whatsoever which may be imposed on, incurred by or asserted
      against the Agent in performing its duties hereunder or under the Agreement
      or
      any other Transaction Document, or in any way relating to or arising out of
      the
      Agreement or any other Transaction Document except for those determined by
      a
      final judgment (not subject to further appeal) of a court of competent
      jurisdiction to have resulted solely from the Agent's own gross negligence
      or
      willful misconduct. Prior to taking any action hereunder as Agent, the Agent
      may
      require each Secured Party to deposit with it sufficient sums as it determines
      in good faith is necessary to protect the Agent for costs and expenses
      associated with taking such action.

    


    7.
      Resignation
      by the Agent. 

    


    (a)
      The
      Agent may resign from the performance of all its functions and duties under
      the
      Agreement and the other Transaction Documents at any time by giving 30 days'
      prior written notice (as provided in the Agreement) to the Debtors and the
      Secured Parties. Such resignation shall take effect upon the appointment of
      a
      successor Agent pursuant to clauses (b) and (c) below.

    


    (b)
      Upon
      any such notice of resignation, the Secured Parties, acting by a Majority
      in Interest,
      shall
      appoint a successor Agent hereunder.

    


    (c)
      If a
      successor Agent shall not have been so appointed within said 30-day period,
      the
      Agent shall then appoint a successor Agent who shall serve as Agent until such
      time, if any, as the Secured Parties appoint a successor Agent as provided
      above. If a successor Agent has not been appointed within such 30-day period,
      the Agent may petition any court of competent jurisdiction or may interplead
      the
      Debtors and the Secured Parties in a proceeding for the appointment of a
      successor Agent, and all fees, including, but not limited to, extraordinary
      fees
      associated with the filing of interpleader and expenses associated therewith,
      shall be payable by the Debtors on demand.

    


    8.
      Rights
      with respect to Collateral.
      Each
      Secured Party agrees with all other Secured Parties and the Agent (i) that
      it
      shall not, and shall not attempt to, exercise any rights with respect to its
      security interest in the Collateral, whether pursuant to any other agreement
      or
      otherwise (other than pursuant to this Agreement), or take or institute any
      action against the Agent or any of the other Secured Parties in respect of
      the
      Collateral or its rights hereunder (other than any such action arising from
      the
      breach of this Agreement) and (ii) that such Secured Party has no other rights
      with respect to the Collateral other than as set forth in this Agreement and
      the
      other Transaction Documents.

     

    
      
        
        

      

      
        36