Document:

SECURELOGIC
      CORP.

    FORM
      OF
      STOCK OPTION AGREEMENT

    

    THIS
      AGREEMENT is entered into as of the ___________ (the "Grant Date"), between
      SecureLogic Corp., a Nevada corporation (the "Corporation") and _______ (the
      "Optionee").

    

    R
      E C I T
      A L S

    

    A.
      The
      Board of Directors of the Corporation (the "Board") has established the 2005
      Stock Option/Stock Issuance Plan (the "Plan") in order to provide key employees,
      directors, advisors and consultants of the Corporation with a favorable
      opportunity to acquire shares of the Corporation's common stock
      ("Stock").

    

    B.
      The
      Board regards the Optionee service as a director as key to the Corporation
      and
      has determined that it would be in the best interests of the Corporation and
      its
      shareholders to grant the option described in this Agreement to the Optionee
      as
      an inducement to remain in the service of the Corporation, and as an incentive
      for promoting Optionee's efforts during such service.

    

    NOW,
      THEREFORE, it is agreed as follows:

    

    1.
      DEFINITIONS AND INCORPORATION. Unless otherwise defined herein or the context
      otherwise requires, the capitalized terms used in this Agreement shall have
      the
      meanings given to such terms in the Plan. The terms, conditions and limitations
      set forth in the Plan are hereby incorporated in and made a part of this
      Agreement as if fully set forth herein. The Optionee hereby acknowledges that
      he
      or she has received a copy of the Plan.

    

    2.
      GRANT
      OF OPTION. Pursuant to the Plan, the Corporation hereby grants to the Optionee
      as of the date hereof, the option to purchase all or any part of an aggregate
      of
      _________ (___________) shares of Stock (the "Option"), subject to adjustment
      in
      accordance with Section 10 of the Plan.

    

    3.
      OPTION
      PRICE. The option shall have an exercise price of $______ per
      share.

    

    4.
      RIGHT
      TO EXERCISE. Subject to the conditions set forth in this Agreement and in the
      Plan, the Option shall be exercisable immediately upon grant.

    

    5.
      SECURITIES LAW REQUIREMENTS. In the event that the sale of Shares under the
      Plan
      is not registered under the Securities Act of 1933 but an exemption is available
      which requires an investment representation or other representation, you shall
      represent and agree at the time of exercise that the Shares being acquired
      upon
      exercising this option are being acquired for investment, and not with a view
      to
      the sale or distribution thereof, and shall make such other representations
      as
      are deemed necessary or appropriate by the Company and its counsel.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    6.
      TRANSFERABILITY. The Option shall be exercisable during the Optionee's lifetime
      only by the Optionee or by the Optionee's guardian or legal representative
      and
      shall be nontransferable, except that the Optionee may transfer all or any
      part
      of the Option by will or by the laws of descent and distribution. Except as
      otherwise provided herein, any attempted alienation, assignment, pledge,
      hypothecation, attachment, execution or similar process, whether voluntary
      or
      involuntary, with respect to all or any part of the Option or any right
      thereunder, shall be null and void and, at the Corporation's option, shall
      cause
      all of the Optionee's rights under this Agreement to terminate. 

    

    7.
      EFFECT
      OF EXERCISE. Upon exercise of all or any part of the Option, the number of
      shares of Stock subject to the Option under this Agreement shall be reduced
      by
      the number of shares with respect to which such exercise is made.

    

    8.
      EXERCISE OF OPTION. The Option may be exercised by delivering to the Corporation
      (a) a written notice of exercise in substantially the form prescribed from
      time
      to time by the Administrator, and (b) full payment of the Exercise Price for
      each share of Stock purchased under the Option. Such notice shall specify the
      number of shares of Stock with respect to which the Option is exercised and
      shall be signed by the person exercising the Option. If the Option is exercised
      by a person other than the Optionee, such notice shall be accompanied by proof,
      satisfactory to the Corporation, of such person's right to exercise the Option.
      The Exercise Price shall be payable (i) in U.S. dollars in cash (by check)
      or
      (ii) by delivery of shares of Stock registered in the name of the Optionee
      having a Fair Market Value at the time of exercise equal to the amount of the
      Exercise Price.

    

    9.
      WITHHOLDING TAXES. The Company may require the Optionee to deliver payment,
      upon
      exercise of the Option, of all withholding taxes (in addition to the Exercise
      Price) with respect to the difference between the Exercise Price and the Fair
      Market Value of the Stock acquired upon exercise. 

    

    10.
      ISSUANCE OF SHARES. Subject to the foregoing conditions, the Corporation, as
      soon as reasonably practicable after receipt of a proper notice of exercise
      and
      payment of the Exercise Price, shall deliver to the person exercising the
      Option, at the principal office of the Corporation or such other location as
      may
      be acceptable to the Corporation and such person, one or more certificates
      for
      the shares of Stock with respect to which the Option is exercised. Such shares
      shall be fully paid and non-assessable and shall be issued in the name of such
      person.

    

    11.
      RIGHTS AS SHAREHOLDER. Neither the Optionee nor any other person entitled to
      exercise the Option shall have any rights as a shareholder of the Corporation
      with respect to the Stock subject to the Option until a certificate for such
      shares has been issued to him or her following the exercise of the
      Option.

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    

    12.
      PERIODS OF NONEXERCISABILITY. Any other provision of this Agreement
      notwithstanding, the Corporation shall have the right to designate one or more
      periods of time, each of which shall not exceed 180 days in length, during
      which
      this option shall not be exercisable if the Corporation determines (in its
      sole
      discretion) that such limitation on exercise could in any way facilitate a
      lessening of any restriction on transfer pursuant to the Securities Act or
      any
      state securities laws with respect to any issuance of securities by the
      Corporation, facilitate the registration or qualification of any securities
      by
      the Corporation under the Securities Act or any state securities laws, or
      facilitate the perfection of any exemption from the registration or
      qualification requirements of the Securities Act or any applicable state
      securities laws for the issuance or transfer of any securities. Such limitation
      on exercise shall not alter the vesting schedule set forth in this Agreement
      other than to limit the periods during which this option shall be
      exercisable.

    

    13.
      INTERPRETATION. The interpretation, construction, performance and enforcement
      of
      this Agreement and of the Plan shall lie within the sole discretion of the
      Administrator, and the Administrator's determinations shall be conclusive and
      binding on all interested persons. 

    

    14.
      CHOICE OF LAW. This Agreement shall be governed by and construed in accordance
      with the laws of the State of Nevada.

    

    IN
      WITNESS WHEREOF, each of the parties hereto has executed this Agreement as
      of
      the day and year first above written.

    

    
      	 	 	 
	 	
              SECURELOGIC
                CORP.

            
	 
 	 
 	 
 
	
            	By: 	
            
	 	
              

            
	 	Title 
	 	 
	 	
              OPTIONEE

               

              
                

              

            

    
      
         

      

      
        3Exhibit
      10.32

    

    Execution
      Version

    
      

      

    

    
       

      CREDIT
        AND SECURITY AGREEMENT

       

      BY
        AND BETWEEN

       

      AIRGATE
        INTERNATIONAL CORPORATION,

      AIRGATE
        INTERNATIONAL CORPORATION (CHICAGO)

      PARADIGM
        INTERNATIONAL, INC.

       

      AND

       

      WELLS
        FARGO BANK,
        NATIONAL ASSOCIATION

       

       

      Acting
        through its Wells Fargo Business Credit operating division

       

      
        April
          6, 2007

         

      

    

     

    
      

      

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    TABLE
      OF CONTENTS

     

    
      	
              ARTICLE
                I DEFINITIONS

            	 	
              1

            
	 	 	 	 
	
              Section
                1.1

            	
              Definitions

            	 	
              1

            
	
              Section
                1.2

            	
              Other
                Definitional Terms; Rules of Interpretation

            	 	
              10

            
	 	 	 
	
              ARTICLE
                II AMOUNT AND TERMS OF THE CREDIT FACILITY

            	 	
              11

            
	 	 	 
	
              Section
                2.1

            	
              Revolving
                Advances

            	 	
              11

            
	
              Section
                2.2

            	
              Procedures
                for Requesting Advances

            	 	
              11

            
	
              Section
                2.3

            	
              Reserved

            	 	
              12

            
	
              Section
                2.4

            	
              Reserved

            	 	
              12

            
	
              Section
                2.5

            	
              Joint
                and Several Liability of Borrowers

            	 	
              12

            
	
              Section
                2.6

            	
              Interest;
                Default Interest Rate; Application of Payments; Participations;
                Usury

            	 	
              14

            
	
              Section
                2.7

            	
              Fees

            	 	
              15

            
	
              Section
                2.8

            	
              Time
                for Interest Payments; Payment on Non-Business Days; Computation
                of
                Interest and Fees

            	 	
              16

            
	
              Section
                2.9

            	
              Lockbox
                and Collateral Account; Sweep of Funds

            	 	
              17

            
	
              Section
                2.10

            	
              Discretionary
                Nature of this Facility; Termination by the Lender; Automatic
                Renewal

            	 	
              17

            
	
              Section
                2.11

            	
              Voluntary
                Prepayment; Termination of the Credit Facility by the
                Borrowers

            	 	
              17

            
	
              Section
                2.12

            	
              Mandatory
                Prepayment

            	 	
              18

            
	
              Section
                2.13

            	
              Revolving
                Advances to Pay Indebtedness

            	 	
              18

            
	
              Section
                2.14

            	
              Use
                of Proceeds

            	 	
              18

            
	
              Section
                2.15

            	
              Liability
                Records

            	 	
              29

            
	 	 	 
	
              ARTICLE
                III SECURITY INTEREST; OCCUPANCY; SETOFF

            	 	
              19

            
	 	 	 
	
              Section
                3.1

            	
              Grant
                of Security Interest

            	 	
              19

            
	
              Section
                3.2

            	
              Notification
                of Account Debtors and Other Obligors

            	 	
              19

            
	
              Section
                3.3

            	
              Assignment
                of Insurance

            	 	
              19

            
	
              Section
                3.4

            	
              Occupancy

            	 	
              20

            
	
              Section
                3.5

            	
              License

            	 	
              20

            
	
              Section
                3.6

            	
              Financing
                Statement

            	 	
              20

            
	
              Section
                3.7

            	
              Setoff

            	 	
              21

            
	
              Section
                3.8

            	
              Collateral

            	 	
              21

            
	 	 	 
	
              ARTICLE
                IV CONDITIONS OF WILLINGNESS TO CONSIDER LENDING

            	 	
              22

            
	 	 	 
	
              Section
                4.1

            	
              Conditions
                Precedent to Lender's Willingness to Consider Making the Initial
                Advances

            	 	
              22

            
	
              Section
                4.2

            	
              Conditions
                Precedent to All Advances

            	 	
              24

            

    

     

    
      
        
        

      

      
        -i-

        
          

        

      

      
        
        

      

    

     

    
      	
              ARTICLE
                V REPRESENTATIONS AND WARRANTIES

            	 	
              24

            
	 	 	 
	
              Section
                5.1

            	
              Existence
                and Power; Name; Chief Executive Office; Inventory and Equipment
                Locations; Federal Employer Identification Number and Organizational
                Identification Number

            	 	
              24

            
	
              Section
                5.2

            	
              Capitalization

            	 	
              25

            
	
              Section
                5.3

            	
              Authorization
                of Borrowing; No Conflict as to Law or Agreements

            	 	
              25

            
	
              Section
                5.4

            	
              Legal
                Agreements

            	 	
              25

            
	
              Section
                5.5

            	
              Subsidiaries

            	 	
              25

            
	
              Section
                5.6

            	
              Financial
                Condition; No Adverse Change

            	 	
              25

            
	
              Section
                5.7

            	
              Litigation

            	 	
              25

            
	
              Section
                5.8

            	
              Regulation U

            	 	
              26

            
	
              Section
                5.9

            	
              Taxes

            	 	
              26

            
	
              Section
                5.10

            	
              Titles
                and Liens

            	 	
              26

            
	
              Section
                5.11

            	
              Intellectual
                Property Rights

            	 	
              26

            
	
              Section
                5.12

            	
              Plans

            	 	
              27

            
	
              Section
                5.13

            	
              Default

            	 	
              27

            
	
              Section
                5.14

            	
              Environmental
                Matters

            	 	
              28

            
	
              Section
                5.15

            	
              Submissions
                to Lender

            	 	
              28

            
	
              Section
                5.16

            	
              Financing
                Statements

            	 	
              28

            
	
              Section
                5.17

            	
              Rights
                to Payment

            	 	
              29

            
	
              Section
                5.18

            	
              [_Financial
                Solvency_]

            	 	
              29

            
	 	 	 
	
              ARTICLE
                VI COVENANTS

            	 	
              29

            
	 	 	 
	
              Section
                6.1

            	
              Reporting
                Requirements

            	 	
              29

            
	
              Section
                6.2

            	
              Financial
                Covenants

            	 	
              32

            
	
              Section
                6.3

            	
              Permitted
                Liens; Financing Statements

            	 	
              34

            
	
              Section
                6.4

            	
              Indebtedness

            	 	
              34

            
	
              Section
                6.5

            	
              Guaranties

            	 	
              35

            
	
              Section
                6.6

            	
              Investments
                and Subsidiaries

            	 	
              35

            
	
              Section
                6.7

            	
              Dividends
                and Distributions

            	 	
              35

            
	
              Section
                6.8

            	
              Salaries

            	 	
              36

            
	
              Section
                6.9

            	
              Reserved.

            	 	
              36

            
	
              Section
                6.10

            	
              Books
                and Records; Collateral Examination; Inspection and
                Appraisals

            	 	
              36

            
	
              Section
                6.11

            	
              Account
                Verification

            	 	
              36

            
	
              Section
                6.12

            	
              Compliance
                with Laws

            	 	
              36

            
	
              Section
                6.13

            	
              Payment
                of Taxes and Other Claims

            	 	
              37

            
	
              Section
                6.14

            	
              Maintenance
                of Properties

            	 	
              37

            
	
              Section
                6.15

            	
              Insurance

            	 	
              38

            
	
              Section
                6.16

            	
              Preservation
                of Existence

            	 	
              38

            
	
              Section
                6.17

            	
              Delivery
                of Instruments, etc.

            	 	
              38

            
	
              Section
                6.18

            	
              Sale
                or Transfer of Assets; Suspension of Business Operations

            	 	
              38

            
	
              Section
                6.19

            	
              Consolidation
                and Merger; Asset Acquisitions

            	 	
              38

            
	
              Section
                6.20

            	
              Sale
                and Leaseback

            	 	
              38

            
	
              Section
                6.21

            	
              Restrictions
                on Nature of Business

            	 	
              39

            
	
              Section
                6.22

            	
              Accounting

            	 	
              39

            
	
              Section
                6.23

            	
              Discounts,
                etc.

            	 	
              39

            
	
              Section
                6.24

            	
              Plans

            	 	
              39

            
	
              Section
                6.25

            	
              Place
                of Business; Name

            	 	
              39

            
	
              Section
                6.26

            	
              Constituent
                Documents; S Corporation Status

            	 	
              39

            
	
              Section
                6.27

            	
              Affiliate
                Transactions

            	 	
              39

            
	
              Section
                6.28

            	
              Performance
                by the Lender

            	 	
              39

            

    

     

    
      
        
        

      

      
        -ii-

        
          

        

      

      
        
        

      

    

     

    
      	
              ARTICLE
                VII EVENTS OF DEFAULT, RIGHTS AND REMEDIES

            	 	
              40

            
	 	 	 
	
              Section
                7.1

            	
              Events
                of Default

            	 	
              40

            
	
              Section
                7.2

            	
              Rights
                and Remedies

            	 	
              42

            
	
              Section
                7.3

            	
              Certain
                Notices

            	 	
              43

            
	 	 	 
	
              ARTICLE
                VIII MISCELLANEOUS

            	 	
              43

            
	 	 	 
	
              Section
                8.1

            	
              No
                Waiver; Cumulative Remedies; Compliance with Laws

            	 	
              43

            
	
              Section
                8.2

            	
              Amendments,
                Etc.

            	 	
              43

            
	
              Section
                8.3

            	
              Notices;
                Communication of Confidential Information; Requests for
                Accounting

            	 	
              44

            
	
              Section
                8.4

            	
              Further
                Documents

            	 	
              44

            
	
              Section
                8.5

            	
              Costs
                and Expenses

            	 	
              44

            
	
              Section
                8.6

            	
              Indemnity

            	 	
              45

            
	
              Section
                8.7

            	
              Participants

            	 	
              45

            
	
              Section
                8.8

            	
              Execution
                in Counterparts; Telefacsimile Execution

            	 	
              45

            
	
              Section
                8.9

            	
              Retention
                of Borrowers’ Records

            	 	
              46

            
	
              Section
                8.10

            	
              Binding
                Effect; Assignment; Complete Agreement; Sharing
                Information

            	 	
              46

            
	
              Section
                8.11

            	
              Severability
                of Provisions

            	 	
              46

            
	
              Section
                8.12

            	
              Headings

            	 	
              46

            
	
              Section
                8.13

            	
              Governing
                Law; Jurisdiction, Venue; Waiver of Jury Trial

            	 	
              46

            

    

    

    
      
        
        

      

      
        -iii-

        
          

        

      

      
        
        

      

    

    CREDIT
      AND SECURITY AGREEMENT

     

    Dated
      as
      of April 6, 2007

     

    AIRGATE
      INTERNATIONAL CORPORATION, a New York corporation (“Airgate NY”), AIRGATE
      INTERNATIONAL CORPORATION (CHICAGO), an Illinois corporation (“Airgate
      Chicago”), PARADIGM INTERNATIONAL, INC., a Florida corporation (“Paradigm”)
      (Airgate NY, Airgate Chicago and Paradigm are each individually a “Borrower” and
      collectively and individually the “Borrowers”), and WELLS FARGO BANK, NATIONAL
      ASSOCIATION (as more fully defined in Article I herein, the “Lender”) through
      its Wells Fargo Business Credit operating division, hereby agree as
      follows:

     

    ARTICLE
      I

     

    DEFINITIONS

     

    Section
      1.1 Definitions.
      Except
      as otherwise expressly provided in this Agreement, the following terms shall
      have the meanings given them in this Section:

     

    “Accounts”
      shall have the meaning given it under the UCC.

     

    “Accounts
      Advance Rate” means up to eighty-five percent (85%), or such lesser rate as the
      Lender in its sole discretion may deem appropriate from time to time; provided
      that, as of any date of determination, the Accounts Advance Rate shall be
      reduced by one (1) percentage point for each percentage by which Dilution is
      in
      excess of five percent (5%). 

     

    “Advance”
      means a Revolving Advance.

     

    “Affiliate”
      or “Affiliates” means Parent, Pacific CMA, and any other Person controlled by,
      controlling or under common control with the Borrowers, including any Subsidiary
      of the Borrowers. For purposes of this definition, “control,” when used with
      respect to any specified Person, means the power to direct the management and
      policies of such Person, directly or indirectly, whether through the ownership
      of voting securities, by contract or otherwise.

     

    “Agreement”
      means this Credit and Security Agreement.

     

    “Availability”
      means the amount, if any, by which the Borrowing Base exceeds the outstanding
      principal balance of the Revolving Note.

     

    “Book
      Net
      Worth” means the aggregate of the Owners’ equity in the Borrowers, determined in
      accordance with GAAP.

     

    “Borrowing
      Base” means at any time the lesser of:

     

    (a) The
      Maximum Line Amount; or

     

    (b) Subject
      to change from time to time in the Lender’s sole discretion, the sum
      of:

     

    (i) The
      product of the Accounts Advance Rate times Eligible Accounts,
      less

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (ii) The
      Borrowing Base Reserve, less 

     

    (iii) Indebtedness
      that the Borrowers owe to the Lender that has not yet been advanced on the
      Revolving Note, including, without limitation, the dollar amount that the Lender
      in its discretion believes is a reasonable determination of the Borrowers’
credit exposure with respect to any swap, derivative, foreign exchange, hedge,
      deposit, treasury management or other similar transaction or arrangement offered
      to Borrowers by Lender that is not described in Article II of this Agreement
      obligations owed to Wells Fargo Merchant Services, LLC. 

     

    “Borrowing
      Base Reserve” means, as of any date of determination, such amounts (expressed as
      either a specified amount or as a percentage of a specified category or item)
      as
      the Lender may from time to time establish and adjust in reducing Availability
      (a) to reflect events, conditions, contingencies or risks which, as determined
      by the Lender, do or may affect (i) the Collateral or its value, (ii) the
      assets, business or prospects of the Borrowers, or (iii) the security interests
      and other rights of the Lender in the Collateral (including the enforceability,
      perfection and priority thereof), or (b) to reflect the Lender’s judgment that
      any collateral report or financial information furnished by or on behalf of
      the
      Borrowers to the Lender is or may have been incomplete, inaccurate or misleading
      in any material respect, or (c) in respect of any state of facts that the Lender
      determines constitutes a Default or an Event of Default. 

     

    "Business
      Day" means a day on which the Federal Reserve Bank of New York is open for
      business.

    

    “Capital
      Expenditures” means for a period, any expenditure of money during such period
      for the lease, purchase or other acquisition of any capital asset, or for the
      lease of any other asset whether payable currently or in the
      future.

     

    “Change
      of Control” means the occurrence of any of the following events:

     

    (a) Any
      Person or “group” (as such term is used in Sections 13(d) and 14(d) of the
      Securities Exchange Act of 1934) who is not an Owner on the Funding Date is
      or
      becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the
      Securities Exchange Act of 1934, except that a Person will be deemed to have
      “beneficial ownership” of all securities that such Person has the right to
      acquire, whether such right is exercisable immediately or only after the passage
      of time), directly or indirectly, of more than ten percent (10%) of the voting
      power of all classes of Owners of the Borrowers;

     

    (b) Any
      Person or “group” (as such term is used in Sections 13(d) and 14(d) of the
      Securities Exchange Act of 1934) is or becomes the “beneficial owner” (as
      defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934,
      except that a Person will be deemed to have “beneficial ownership” of all
      securities that such Person has the right to acquire, whether such right is
      exercisable immediately or only after the passage of time), directly or
      indirectly, of more than ten percent (10%) of the voting power of all classes
      of
      Owners of Parent;

     

    
      
        
        

      

      
        -2-

        
          

        

      

      
        
        

      

    

     

    (c) Any
      Person or “group” (as such term is used in Sections 13(d) and 14(d) of the
      Securities Exchange Act of 1934) is or becomes the “beneficial owner” (as
      defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934,
      except that a Person will be deemed to have “beneficial ownership” of all
      securities that such Person has the right to acquire, whether such right is
      exercisable immediately or only after the passage of time), directly or
      indirectly, of more than [fifty-one percent (51%)] of the voting power of all
      classes of Owners of Pacific CMA;

     

    (d) During
      any consecutive two-year period, individuals who at the beginning of such period
      constituted the board of Directors of the Borrowers (together with any new
      Directors whose election to such board of Directors, was approved by a vote
      of
      the Owners;

     

    (e) During
      any consecutive two-year period, any change in the manager; or 

     

    (f) During
      any consecutive two-year period, individuals who at the beginning of such period
      constituted the board of Directors of Pacific CMA (together with any new
      Directors whose election to such board of Directors, or whose nomination for
      election by the Owners of Pacific CMA, was approved by a vote of two thirds
      of
      the Directors then still in office who were either Directors at the beginning
      of
      such period or whose election or nomination for election was previously so
      approved) cease for any reason to constitute a majority of the board of
      Directors of Pacific CMA then in office; or 

     

     (g) Any
      one
      or more of Arthur Lam, Scott Turner, Ling Kwok, or Kim Hung Lee shall cease
      to
      actively manage the Borrowers’ day-to-day business activities.

     

    “Collateral”
      means all of the Borrowers’ Accounts, chattel paper and electronic chattel
      paper, deposit accounts, documents, Equipment, General Intangibles, goods,
      instruments, Inventory, Investment Property, letter-of-credit rights, letters
      of
      credit, all sums on deposit in any Collateral Account, and any items in any
      Lockbox; together with (i) all substitutions and replacements for and
      products of any of the foregoing; (ii) in the case of all goods, all
      accessions; (iii) all accessories, attachments, parts, equipment and
      repairs now or hereafter attached or affixed to or used in connection with
      any
      goods; (iv) all warehouse receipts, bills of lading and other documents of
      title now or hereafter covering such goods; (v) all collateral subject to
      the Lien of any Security Document; (vi) any money, or other assets of the
      Borrowers that now or hereafter come into the possession, custody, or control
      of
      the Lender; (vii) proceeds of any and all of the foregoing; (viii) books
      and records of the Borrowers, including all mail or electronic mail addressed
      to
      the Borrowers; and (ix) all of the foregoing, whether now owned or existing
      or
      hereafter acquired or arising or in which the Borrowers now have or hereafter
      acquire any rights.

     

    “Collateral
      Account” means, collectively and individually, (a) the “Lender Account” as
      defined in the Wholesale Lockbox and Collection Account Agreement, and (b)
      the
“Collection Accounts” as defined in the Collection Account
      Agreements.

     

    “Collection
      Account Agreement” means collectively and individually, (a) the Collection
      Account Agreement by and between Airgate NY, JPMorgan Chase Bank and the Lender,
      dated the same date as this Agreement, and (b) the Collection Account Agreement
      by and between Airgate Chicago, JPMorgan Chase Bank and the Lender.

     

    
      
        
        

      

      
        -3-

        
          

        

      

      
        
        

      

    

     

    “Constituent
      Documents” means with respect to any Person, as applicable, such Person’s
      certificate of incorporation, articles of incorporation, by-laws, certificate
      of
      formation, articles of organization, limited liability company agreement,
      management agreement, operating agreement, shareholder agreement, partnership
      agreement or similar document or agreement governing such Person’s existence,
      organization or management or concerning disposition of ownership interests
      of
      such Person or voting rights among such Person’s owners.

     

    “Credit
      Facility” means the discretionary credit facility under which Revolving Advances
      may be made available to the Borrowers by the Lender under Article
      II.

     

    “Cut-off
      Time” means 12:00 p.m. New York, New York time.

    

    “Debt”
      means of a Person as of a given date, all items of indebtedness or liability
      which in accordance with GAAP would be included in determining total liabilities
      as shown on the liabilities side of a balance sheet for such Person and shall
      also include the aggregate payments required to be made by such Person at any
      time under any lease that is considered a capitalized lease under
      GAAP.

     

    “Default”
      means an event that, with giving of notice or passage of time or both, would
      constitute an Event of Default.

     

    “Default
      Period” means any period of time beginning on the day a Default or Event of
      Default occurs and ending on the date identified by the Lender in writing as
      the
      date that such Default or Event of Default has been cured or
      waived.

     

    “Default
      Rate” means an annual interest rate in effect during a Default Period or
      following the Termination Date, which interest rate shall be equal to three
      percent (3%) over the applicable Floating Rate, as such rate may change from
      time to time.

    

    “Dilution”
      means, as of any date of determination, a percentage, based upon the experience
      of the trailing six (6) month period ending on the date of determination, which
      is the result of dividing (a) actual bad debt write-downs, discounts,
      advertising allowances, credits, or other dilutive items with respect to the
      Accounts as determined by Lender in its sole discretion during such period,
      by
      (b) the Borrowers’ net sales during such period (excluding extraordinary items)
      plus the amount of clause (a).

    

    “Director”
      means a director if the applicable Borrower is a corporation, a governor or
      manager if the applicable Borrower is a limited liability company, or a general
      partner if the applicable Borrower is a partnership.

     

     “ERISA”
      means the Employee Retirement Income Security Act of 1974, as amended from
      time
      to time.

     

    “ERISA
      Affiliate” means any trade or business (whether or not incorporated) that is a
      member of a group which includes the Borrowers and which is treated as a single
      employer under Section 414 of the IRC.

     

    
      
        
        

      

      
        -4-

        
          

        

      

      
        
        

      

    

     

    “Eligible
      Accounts” means all unpaid Accounts of the Borrowers arising from the sale or
      lease of goods or the performance of services, net of any credits, but excluding
      any such Accounts having any of the following characteristics:

     

    (i) That
      portion of Accounts unpaid 90 days or more after the invoice date or more
      than 60 days past the invoice date;

     

    (ii) That
      portion of Accounts related to goods or services with respect to which the
      Borrowers have received notice of a claim or dispute, which are subject to
      a
      claim of offset or a contra account, or which reflect a reasonable reserve
      for
      warranty claims or returns;

     

    (iii) That
      portion of Accounts not yet earned by the final delivery of goods or rendition
      of services, as applicable, by the Borrowers to the customer, including progress
      billings, and that portion of Accounts for which an invoice has not been sent
      to
      the applicable account debtor;

     

    (iv) Accounts
      constituting (i) proceeds of copyrightable material unless such copyrightable
      material shall have been registered with the United States Copyright Office,
      or
      (ii) proceeds of patentable inventions unless such patentable inventions have
      been registered with the United States Patent and Trademark Office;

     

    (v) Accounts
      owed by any unit of government, whether foreign or domestic (provided,
      however,
      that
      there shall be included in Eligible Accounts that portion of Accounts owed
      by
      such units of government for which the Borrowers have provided evidence
      satisfactory to the Lender that (A) the Lender has a first priority
      perfected security interest and (B) such Accounts may be enforced by the
      Lender directly against such unit of government under all applicable
      laws);

     

    (vi) Accounts
      denominated in any currency other than United States dollars;

     

    (vii) Accounts
      owed by an account debtor located outside the United States which are not
      (A) backed by a bank letter of credit naming the Lender as beneficiary or
      assigned to the Lender, in the Lender’s possession or control, and with respect
      to which a control agreement concerning the letter-of-credit rights is in
      effect, and acceptable to the Lender in all respects, in its sole discretion,
      or
      (B) covered by a foreign receivables insurance policy acceptable to the
      Lender in its sole discretion;

     

    (viii) Accounts
      owed by an account debtor that is insolvent, the subject of bankruptcy
      proceedings or has gone out of business;

     

    (ix) Accounts
      owed by an Owner, Subsidiary, Affiliate, Officer or employee of the
      Borrowers;

     

    (x) Accounts
      not subject to a duly perfected security interest in the Lender’s favor or which
      are subject to any Lien in favor of any Person other than the
      Lender;

     

    
      
        
        

      

      
        -5-

        
          

        

      

      
        
        

      

    

     

    (xi) That
      portion of Accounts that has been restructured, extended, amended or
      modified;

     

    (xii) That
      portion of Accounts that constitutes advertising, finance charges, service
      charges or sales or excise taxes;

     

    (xiii) Accounts
      owed by an account debtor, regardless of whether otherwise eligible, to the
      extent that the aggregate balance of such Accounts exceeds 15% of the aggregate
      amount of all Accounts; 

     

    (xiv) Accounts
      owed by an account debtor, regardless of whether otherwise eligible, if
      twenty-five percent (25%) or more of the total amount of Accounts due from
      such
      debtor is ineligible under clauses (i), (ii), or (xi) above;
      and

     

    (xv) Accounts,
      or portions thereof, otherwise deemed ineligible by the Lender in its sole
      discretion. 

    

    “Equipment”
      shall have the meaning given it under the UCC.

     

    “Event
      of
      Default” is defined in Section 7.1.

     

    “Financial
      Covenants” means the covenants set forth in Section 6.2. 

     

    “Floating
      Rate” means an annual interest rate equal to the sum of the Prime Rate plus
      three quarters of one percent (0.75%), which interest rate shall change when
      and
      as the Prime Rate changes.

     

    “Floating
      Rate Advance” means an Advance bearing interest at the Floating Rate.

     

    “Funding
      Date” is defined in Section 2.1.

     

    “GAAP”
      means generally accepted accounting principles, applied on a basis consistent
      with the accounting practices applied in the financial statements described
      in
      Section 5.6.

     

    “General
      Intangibles” shall have the meaning given it under the UCC.

     

    “Guarantor”
      means (a) Pacific CMA, (b) Parent, (c) Alfred Lam and
      (d)
      every other Person now or in the future who agrees to guaranty the
      Indebtedness.

     

    “Guaranty”
      means each unconditional continuing guaranty executed by a Guarantor in favor
      of
      the Lender.

     

    “Hazardous
      Substances” means pollutants, contaminants, hazardous substances, hazardous
      wastes, petroleum and fractions thereof, and all other chemicals, wastes,
      substances and materials listed in, regulated by or identified in any
      Environmental Law.

     

    “Indebtedness”
      is used herein in its most comprehensive sense and means any and all advances,
      debts, obligations and liabilities of the Borrowers to the Lender, heretofore,
      now or hereafter made, incurred or created, whether voluntary or involuntary
      and
      however arising, whether due or not due, absolute or contingent, liquidated
      or
      unliquidated, determined or undetermined, including under any swap, derivative,
      foreign exchange, hedge, deposit, treasury management or other similar
      transaction or arrangement at any time entered into by the Borrowers with the
      Lender or with Wells Fargo Merchant Services, L.L.C., and whether the Borrowers
      may be liable individually or jointly with others, or whether recovery upon
      such
      Indebtedness may be or hereafter becomes unenforceable. 

     

    
      
        
        

      

      
        -6-

        
          

        

      

      
        
        

      

    

     

    “Indemnified
      Liabilities” is defined in Section 8.6

     

    “Indemnitees”
      is defined in Section 8.6. 

     

    “IRC”
      means the Internal Revenue Code of 1986, as amended from time to
      time.

     

    “Infringement”
      or “Infringing” when used with respect to Intellectual Property Rights means any
      infringement or other violation of Intellectual Property Rights.

     

     “Intellectual
      Property Rights” means all actual or prospective rights arising in connection
      with any intellectual property or other proprietary rights, including all rights
      arising in connection with copyrights, patents, service marks, trade dress,
      trade secrets, trademarks, trade names or mask works.

     

    “Interest
      Payment Date” is defined in Section 2. 8(a).

    

    “Inventory”
      shall have the meaning given it under the UCC.

     

    “Investment
      Property” shall have the meaning given it under the UCC.

     

    “Lender”
      means Wells Fargo Bank, National Association in its broadest and most
      comprehensive sense as a legal entity, and is not limited in its meaning to
      Lender’s Wells Fargo Business Credit operating division, or to any other
      operating division of Lender.

    

    “Licensed
      Intellectual Property” is defined in Section 5.11(c) .

     

    “Lien”
      means any security interest, mortgage, deed of trust, pledge, lien, charge,
      encumbrance, title retention agreement or analogous instrument or device,
      including the interest of each lessor under any capitalized lease and the
      interest of any bondsman under any payment or performance bond, in, of or on
      any
      assets or properties of a Person, whether now owned or subsequently acquired
      and
      whether arising by agreement or operation of law.

     

    “Loan
      Documents” means this Agreement, the Revolving Note, each Guaranty, each
      Subordination Agreement, and the other Security Documents, together with every
      other agreement, note, document, contract or instrument to which the Borrowers
      now or in the future may be a party and which is required by the
      Lender.

     

    “Loan
      Year” is defined in Section 2.6(c).

     

    
      
        
        

      

      
        -7-

        
          

        

      

      
        
        

      

    

     

    “Lockbox”
      means, collectively and individually, the “Lockbox” as defined in the (a)
      Wholesale Lockbox and Collection Account Agreement and (b) the Collection
      Account Agreement.

     

    “Material
      Adverse Effect” means any of the following:

     

    (i) A
      material adverse effect on the business, operations, results of operations,
      prospects, assets, liabilities or financial condition of the
      Borrowers;

     

    (ii) A
      material adverse effect on the ability of the Borrowers to perform their
      obligations under the Loan Documents;

     

    (iii) A
      material adverse effect on the ability of the Lender to enforce the Indebtedness
      or to realize the intended benefits of the Security Documents, including a
      material adverse effect on the validity or enforceability of any Loan Document
      or of any rights against any Guarantor, or on the status, existence, perfection,
      priority (subject to Permitted Liens) or enforceability of any Lien securing
      payment or performance of the Indebtedness; or

     

    (iv) Any
      claim
      against the Borrowers or threat of litigation which if determined adversely
      to
      the Borrowers would cause the Borrowers to be liable to pay an amount exceeding
      $100,000 or would result in the occurrence of an event described in
      clauses (i), (ii) and (iii) above.

     

    “Maturity
      Date” is defined in Section 2.10.

     

    “Maximum
      Line Amount” means $10,000,000 unless this amount is reduced pursuant to Section
      2.11, in which event it means such lower amount.

     

    “Multiemployer
      Plan” means a multiemployer plan (as defined in Section 4001(a)(3) of ERISA) to
      which the Borrowers or any ERISA Affiliate contributes or is obligated to
      contribute.

     

    “Net
      Cash
      Proceeds” means in connection with any asset sale, the cash proceeds (including
      any cash payments received by way of deferred payment whether pursuant to a
      note, installment receivable or otherwise, but only as and when actually
      received) from such asset sale, net of (i) attorneys’ fees, accountants’ fees,
      investment banking fees, brokerage commissions and amounts required to be
      applied to the repayment of any portion of the Debt secured by a Lien not
      prohibited hereunder on the asset which is the subject of such sale, and (ii)
      taxes paid or reasonably estimated to be payable as a result of such asset
      sale.

     

    “Net
      Income” means fiscal year-to-date after-tax net
      income from continuing operations, including
      extraordinary losses but excluding extraordinary gains, all as determined in
      accordance with GAAP. 

    

    “Net
      Loss” means fiscal year-to-date after-tax net loss from continuing operations as
      determined in accordance with GAAP. 

     

    
      
        
        

      

      
        -8-

        
          

        

      

      
        
        

      

    

    

    “Net
      Orderly Liquidation Value” means a professional opinion of the estimated most
      probable Net Cash Proceeds which could typically be realized at a properly
      advertised and professionally managed liquidation sale, conducted under orderly
      sale conditions for an extended period of time (usually six to nine months),
      under the economic trends existing at the time of the appraisal. 

     

    “Officer”
      means with respect to the Borrowers, an officer if the applicable Borrower
      is a
      corporation, a manager if the applicable Borrower is a limited liability
      company, or a partner if the applicable Borrower is a partnership.

     

    “OFAC”
is
      defined in Section 6.12(c).

     

    “Original
      Maturity Date” means April ___, 2009.

     

    "Overadvance"
      means the amount, if any, by which the outstanding principal balance of the
      Revolving Note is in excess of the then-existing Borrowing Base. 

    

    “Owned
      Intellectual Property” is defined in Section 5.11(a).

     

    “Owner”
      means with respect to the Borrowers, each Person having legal or beneficial
      title to an ownership interest in the Borrowers or a right to acquire such
      an
      interest.

     

    “Pacific
      CMA” means Pacific CMA, Inc., a Delaware corporation.

     

    “Parent”
      means Pacific CMA International, LLC, a Colorado limited liability
      company.

     

    “Pension
      Plan” means a pension plan (as defined in Section 3(2) of ERISA) maintained for
      employees of the Borrowers or any ERISA Affiliate and covered by Title IV of
      ERISA.

     

    “Permitted
      Lien” and “Permitted Liens” are defined in Section 6.3(a) .

     

    “Person”
      means any individual, corporation, partnership, joint venture, limited liability
      company, association, joint-stock company, trust, unincorporated organization
      or
      government or any agency or political subdivision thereof.

     

    “Plan”
      means an employee benefit plan (as defined in Section 3(3) of ERISA) maintained
      for employees of the Borrowers or any ERISA Affiliate.

     

    “Premises”
      means all locations where the Borrowers conduct their business or have any
      rights of possession, including the locations legally described in Exhibit
      C
      attached hereto.

     

    “Prime
      Rate” means at any time the rate of interest most recently announced by the
      Lender at its principal office as its Prime Rate, with the understanding that
      the Prime Rate is one of the Lender’s base rates, and serves as the basis upon
      which effective rates of interest are calculated for those loans making
      reference thereto, and is evidenced by the recording thereof in such internal
      publication or publications as the Lender may designate. Each change in the
      rate
      of interest shall become effective on the date each Prime Rate change is
      announced by the Lender. 

     

    
      
        
        

      

      
        -9-

        
          

        

      

      
        
        

      

    

    

    “Reportable
      Event” means a reportable event (as defined in Section 4043 of ERISA), other
      than an event for which the 30-day notice requirement under ERISA has been
      waived in regulations issued by the Pension Benefit Guaranty
      Corporation.

     

    “Revolving
      Advance” is defined in Section 2.1.

     

    “Revolving
      Note” means the Borrowers’ revolving promissory note, payable to the order of
      the Lender in substantially the form of Exhibit A hereto, as same may be renewed
      and amended from time to time, and all replacements thereto.

     

    “Security
      Documents” means this Agreement, the Wholesale Lockbox and Collection Account
      Agreement, and any other document delivered to the Lender from time to time
      to
      secure the Indebtedness.

     

    “Security
      Interest” is defined in Section 3.1.

     

    “Subordinated
      Creditor” means (a) BHC Interim Funding, L.P. and (b) every other Person now or
      in the future who agrees to subordinate indebtedness of the Borrowers held
      by
      that Person to the payment of the Indebtedness.

     

    “Subordination
      Agreement” means a subordination agreement executed by a Subordinated Creditor
      in favor of the Lender and acknowledged by the Borrowers.

     

    “Subsidiary”
      means any Person of which more than fifty percent (50%) of the outstanding
      ownership interests having general voting power under ordinary circumstances
      to
      elect a majority of the board of directors or the equivalent of such Person,
      regardless of whether or not at the time ownership interests of any other class
      or classes shall have or might have voting power by reason of the happening
      of
      any contingency, is at the time directly or indirectly owned by the Borrowers,
      by the Borrowers and one or more other Subsidiaries, or by one or more other
      Subsidiaries.

     

    “Termination
      Date” means the earliest of (i) the Maturity Date, (ii) the date the Borrowers
      terminate the Credit Facility, or (iii) the date the Lender demands payment
      of
      the Indebtedness.

     

    “UCC”
      means the Uniform Commercial Code as in effect in the state designated in this
      Agreement as the state whose laws shall govern this Agreement, or in any other
      state whose laws are held to govern this Agreement or any portion of this
      Agreement.

     

    “Wholesale
      Lockbox and Collection Account Agreement” means the Wholesale Lockbox and
      Collection Account Agreement by and between the Borrowers and the Lender, dated
      the same date as this Agreement.

     

    Section
      1.2 Other
      Definitional Terms; Rules of Interpretation.
      The
      words “hereof”, “herein” and “hereunder” and words of similar import when used
      in this Agreement shall refer to this Agreement as a whole and not to any
      particular provision of this Agreement. All accounting terms not otherwise
      defined herein have the meanings assigned to them in accordance with GAAP.
      All
      terms defined in the UCC and not otherwise defined herein have the meanings
      assigned to them in the UCC. References to Articles, Sections, subsections,
      Exhibits, Schedules and the like, are to Articles, Sections and subsections
      of,
      or Exhibits or Schedules attached to, this Agreement unless otherwise expressly
      provided. The words “include”, “includes” and “including” shall be deemed to be
      followed by the phrase “without limitation”. Unless the context in which used
      herein otherwise clearly requires, “or” has the inclusive meaning represented by
      the phrase “and/or”. Defined terms include in the singular number the plural and
      in the plural number the singular. Reference to any agreement (including the
      Loan Documents), document or instrument means such agreement, document or
      instrument as amended or modified and in effect from time to time in accordance
      with the terms thereof (and, if applicable, in accordance with the terms hereof
      and the other Loan Documents), except where otherwise explicitly provided,
      and
      reference to any promissory note includes any promissory note which is an
      extension or renewal thereof or a substitute or replacement therefor. Reference
      to any law, rule, regulation, order, decree, requirement, policy, guideline,
      directive or interpretation means as amended, modified, codified, replaced
      or
      reenacted, in whole or in part, and in effect on the determination date,
      including rules and regulations promulgated thereunder.

     

    
      
        
        

      

      
        -10-

        
          

        

      

      
        
        

      

    

     

    ARTICLE
      II

     

    AMOUNT
      AND TERMS OF THE CREDIT FACILITY

     

    Section
      2.1 Revolving
      Advances.
      The
      Lender may, in its sole discretion, subject to the terms and conditions of
      this
      Agreement, make advances (“Revolving Advances”) to the Borrowers from time to
      time from the date that all of the conditions set forth in 4.1 are satisfied
      (the “Funding Date”) to and until (but not including) the Termination Date in an
      amount not in excess of the Maximum Line Amount. The Lender shall not consider
      any request for a Revolving Advance to the extent that the amount of the
      requested Revolving Advance exceeds Availability. The Borrowers’ obligation to
      repay the Revolving Advances shall be the joint and several liability of
      Borrowers (as set forth in more detail in Section 2.5), shall be evidenced
      by
      the Revolving Note and shall be secured by the Collateral. Within the limits
      set
      forth in this Section 2.1, the Borrowers may request Revolving Advances, prepay
      pursuant to Section 2.11, and request additional Revolving
      Advances.

     

    Section
      2.2 Procedures
      for Requesting Advances.
      The
      Borrowers shall comply with the following procedures in requesting Revolving
      Advances:

     

    (a) Advances.
      Each
      Advance shall be funded as a Floating Rate Advance.

     

    (b) Time
      for Requests.
      The
      Borrowers shall request each Advance not later than the Cut-off Time on the
      Business Day on which the
      Advance is to be made.
      Each
      request that conforms to the terms of this Agreement shall be effective upon
      receipt by the Lender, shall be in writing or by telephone or telecopy
      transmission, and shall be confirmed in writing by the Borrowers if so requested
      by the Lender,
      by
      (i) an Officer of the Borrowers; or (ii) a Person designated as the
      Borrowers’ agent by an Officer of the Borrowers in a writing delivered to the
      Lender; or (iii) a Person whom the Lender reasonably believes to be an
      Officer of the Borrowers or such a designated agent.
      The
      Borrowers shall repay all Advances even if the Lender does not receive such
      confirmation and even if the Person requesting an Advance was not in fact
      authorized to do so. Any request for an Advance, whether written or telephonic,
      shall be deemed to be a representation by the Borrowers that the conditions
      set
      forth in Section 4.2 have been satisfied as of the time of the
      request.

     

    
      
        
        

      

      
        -11-

        
          

        

      

      
        
        

      

    

     

    (c) Disbursement.
      Upon
      fulfillment of the applicable conditions set forth in Article IV and the
      Lender’s determination to make the Advance, the Lender shall disburse the
      proceeds of the requested Advance by crediting the same to the Borrowers’ demand
      deposit account maintained with the Lender unless the Lender and the Borrowers
      shall agree in writing to another manner of disbursement.

     

    Section
      2.3 Reserved.

     

    Section
      2.4 Reserved.

     

    Section
      2.5 Joint
      and Several Liability of Borrowers.

     

    (a) Each
      Borrower is accepting joint and several liability hereunder and under the other
      Loan Documents in consideration of the financial accommodations to be provided
      by the Lender under this Agreement, for the mutual benefit, directly and
      indirectly, of each Borrower and in consideration of the undertakings of the
      other Borrower to accept joint and several liability for the
      Indebtedness.

     

    (b) Each
      Borrower, jointly and severally, hereby irrevocably and unconditionally accepts,
      not merely as a surety but also as a co-debtor, joint and several liability
      with
      the other Borrower, with respect to the payment and performance of all of the
      Indebtedness (including any Indebtedness arising under this Section 2.5), it
      being the intention of the parties hereto that all of the Indebtedness shall
      be
      the joint and several obligations of each Borrower without preferences or
      distinction among them.

     

    (c) If
      and to
      the extent that any Borrower shall fail to make any payment with respect to
      any
      of the Indebtedness as and when due or to fully repay and satisfy any of the
      Indebtedness in accordance with the terms of this Agreement, then in each such
      event the other Borrower shall make such payment with respect to, such
      Indebtedness.

     

    (d) The
      Indebtedness of each Borrower under the provisions of this Section 2.5
      constitute the absolute and unconditional, full recourse Indebtedness of each
      Borrower enforceable against each Borrower to the full extent of its properties
      and assets, irrespective of the validity, regularity or enforceability of this
      Agreement or any other circumstances whatsoever.

     

    (e) Except
      as
      otherwise expressly provided in this Agreement, each Borrower hereby waives
      notice of acceptance of its joint and several liability, notice of the
      occurrence of any Default, Event of Default, or of any demand for any payment
      under this Agreement, notice of any action at any time taken or omitted by
      Lender under or in respect of the Indebtedness, any requirement of diligence
      or
      to mitigate damages and, generally, to the extent permitted by applicable law,
      all demands, notices and other formalities of every kind in connection with
      this
      Agreement (except as otherwise provided in this Agreement). Each Borrower hereby
      assents to, and waives notice of, any extension or postponement of the time
      for
      the payment of the Indebtedness, the acceptance of any payment of the
      Indebtedness, the acceptance of any partial payment thereon, any waiver, consent
      or other action or acquiescence by Lender at any time or times in respect of
      any
      default by any Borrower in the performance or satisfaction of any term,
      covenant, condition or provision of this Agreement, any and all other
      indulgences whatsoever by Lender in respect of any of the Indebtedness, and
      the
      taking, addition, substitution or release, in whole or in part, at any time
      or
      times, of any security for any of the Indebtedness or the addition, substitution
      or release, in whole or in part, of any Borrower. Without limiting the
      generality of the foregoing, each Borrower assents to any other action or delay
      in acting or failure to act on the part of Lender with respect to the failure
      by
      any Borrower to comply with any of its respective Indebtedness, including any
      failure strictly or diligently to assert any right or to pursue any remedy
      or to
      comply fully with applicable laws or regulations thereunder, which might, but
      for the provisions of this Section 2.5 afford grounds for terminating,
      discharging or relieving any Borrower, in whole or in part, from any of its
      Indebtedness under this Section 2.5, it being the intention of each Borrower
      that, so long as any of the Indebtedness hereunder remain unsatisfied, the
      Indebtedness of each Borrower under this Section 2.5 shall not be discharged
      except by performance and then only to the extent of such performance. The
      Indebtedness of each Borrower under this Section 2.5 shall not be diminished
      or
      rendered unenforceable by any winding up, reorganization, arrangement,
      liquidation, reconstruction or similar proceeding with respect to any Borrower
      or Lender.

     

    
      
        
        

      

      
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    (f) Each
      Borrower represents and warrants to Lender that such Borrower is currently
      informed of the financial condition of itself and the other Borrowers and of
      all
      other circumstances which a diligent inquiry would reveal and which bear upon
      the risk of nonpayment of the Indebtedness. Each Borrower further represents
      and
      warrants to Lender that such Borrower has read and understands the terms and
      conditions of the Loan Documents. Each Borrower hereby covenants that such
      Borrower will continue to keep informed of Borrower's financial condition,
      the
      financial condition of other guarantors, if any, and of all other circumstances
      which bear upon the risk of nonpayment or nonperformance of the
      Indebtedness.

     

    (g) Each
      Borrower waives all rights and defenses arising out of an election of remedies
      by Lender, even though that election of remedies, such as a nonjudicial
      foreclosure with respect to security for a guaranteed obligation, has destroyed
      Lender's rights of subrogation and reimbursement against such
      Borrower.

     

    (h) The
      provisions of this Section 2.5 are made for the benefit of Lender and its
      respective successors and assigns, and may be enforced by it or them from time
      to time against each Borrower as often as occasion therefor may arise and
      without requirement on the part of Lender, successors or assigns first to
      marshal any of its or their claims or to exercise any of its or their rights
      against any Borrower or to exhaust any remedies available to it or them against
      any Borrower or to resort to any other source or means of obtaining payment
      of
      any of the Indebtedness hereunder or to elect any other remedy. The provisions
      of this Section 2.5 shall remain in effect until the Indebtedness shall have
      been paid in full or otherwise fully satisfied. If at any time, any payment,
      or
      any part thereof, made in respect of the Indebtedness, is rescinded or must
      otherwise be restored or returned by Lender upon the insolvency, bankruptcy
      or
      reorganization of any Borrower, or otherwise, the provisions of this Section
      2.5
      will forthwith be reinstated in effect, as though such payment had not been
      made.

     

    
      
        
        

      

      
        -13-

        
          

        

      

      
        
        

      

    

     

    (i) Each
      Borrower hereby agrees that it will not enforce any of its rights of
      contribution or subrogation against any other Borrower with respect to any
      liability incurred by it hereunder or under any of the other Loan Documents,
      any
      payments made by it to Lender with respect to any of the Indebtedness or any
      collateral security therefor until such time as all of the Indebtedness has
      been
      paid in full in cash. Any claim which any Borrower may have against any other
      Borrower with respect to any payments to any Lender hereunder or under any
      other
      Loan Documents are hereby expressly made subordinate and junior in right of
      payment, without limitation as to any increases in the Indebtedness arising
      hereunder or thereunder, to the prior payment in full in cash of the
      Indebtedness and, in the event of any insolvency, bankruptcy, receivership,
      liquidation, reorganization or other similar proceeding under the laws of any
      jurisdiction relating to any Borrower, its debts or its assets, whether
      voluntary or involuntary, the Indebtedness shall be paid in full in cash before
      any payment or distribution of any character, whether in cash, securities or
      other property, shall be made to any other Borrower therefor.

     

    Section
      2.6 Interest;
      Default Interest Rate; Application of Payments; Participations;
      Usury.

     

    (a) Interest.
      Except
      as provided in Section 2.6(d) and Section 2.6(g), the principal amount of each
      Advance shall bear interest as a Floating Rate Advance.

     

    (b) Reserved.

     

    (c) Reserved.

    

    (d) Default
      Interest Rate.
      At any
      time during any Default Period or following the Termination Date, in the
      Lender’s sole discretion and without waiving any of its other rights or
      remedies, the principal of the Revolving Note shall bear interest at the Default
      Rate or such lesser rate as the Lender may determine, effective as of the first
      day of the month in which any Default Period begins through the last day of
      such
      Default Period, or any shorter time period that the Lender may determine. The
      decision of the Lender to impose a rate that is less than the Default Rate
      or to
      not impose the Default Rate for the entire duration of the Default Period shall
      be made by the Lender in its sole discretion and shall not be a waiver of any
      of
      its other rights and remedies, including its right to retroactively impose
      the
      full Default Rate for the entirety of any such Default Period or following
      the
      Termination Date. 

    

    (e) Application
      of Payments. Payments
      shall be applied to the Indebtedness on the Business Day of receipt by the
      Lender in the Lender’s general account, but the amount of principal paid shall
      continue to accrue interest at the interest rate applicable under the terms
      of
      this Agreement from the calendar day the Lender receives the payment, and
      continuing through the end of the second Business Day following receipt of
      the
      payment.

    

    (f) Participations.
      If any
      Person shall acquire a participation in the Advances the Borrowers shall be
      obligated to the Lender to pay the full amount of all interest calculated under
      this Section 2.6, along with all other fees, charges and other amounts due
      under
      this Agreement, regardless if such Person elects to accept interest with respect
      to its participation at a lower rate than that calculated under this Section
      2.6, or otherwise elects to accept less than its prorata share of such fees,
      charges and other amounts due under this Agreement.

     

    
      
        
        

      

      
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    (g) Usury.
      In any
      event no rate change shall be put into effect which would result in a rate
      greater than the highest rate permitted by law. Notwithstanding anything to
      the
      contrary contained in any Loan Document, all agreements which either now are
      or
      which shall become agreements between the Borrowers and the Lender are hereby
      limited so that in no contingency or event whatsoever shall the total liability
      for payments in the nature of interest, additional interest and other charges
      exceed the applicable limits imposed by any applicable usury laws. If any
      payments in the nature of interest, additional interest and other charges made
      under any Loan Document are held to be in excess of the limits imposed by any
      applicable usury laws, it is agreed that any such amount held to be in excess
      shall be considered payment of principal hereunder, and the indebtedness
      evidenced hereby shall be reduced by such amount so that the total liability
      for
      payments in the nature of interest, additional interest and other charges shall
      not exceed the applicable limits imposed by any applicable usury laws, in
      compliance with the desires of the Borrowers and the Lender. This provision
      shall never be superseded or waived and shall control every other provision
      of
      the Loan Documents and all agreements between the Borrowers and the Lender,
      or
      their successors and assigns. 

     

    Section
      2.7  Fees.

     

    (a) Origination
      Fee.
      The
      Borrowers shall pay the Lender a fully earned and non-refundable origination
      fee
      of $50,000, due and payable upon the execution of this Agreement.

     

    (b) Unused
      Line Fee.
      For the
      purposes of this Section 2.7(b), “Unused Amount” means the Maximum Line Amount
      reduced by outstanding Revolving Advances. The Borrowers agree to pay to the
      Lender an unused line fee at the rate of three-eighths of one percent (0.375%)
      per annum on the average daily Unused Amount from the date of this Agreement
      to
      and including the Termination Date, due and payable monthly in arrears on the
      first day of the month and on the Termination Date.

     

    (c) Collateral
      Monitoring Service.
      The
      Lender may, from time to time, engage a third party to calculate ineligible
      collateral for the purposes of the Borrowing Base and to perform certain other
      collateral monitoring services. The Lender currently utilizes Collateral
      Services, Inc. for such purpose. The Borrowers shall pay the Lender an initial
      set-up fee of $1,000 for such service and shall, in addition, pay the Lender
      a
      monthly fee at the rates established from time to time by Collateral Services,
      Inc. to cover the cost thereof (which
      fees are currently $100).
      

     

    (d) Monthly
      Monitoring Fee.
      The
      Borrowers shall pay the Lender a monthly monitoring fee in the amount of $750
      each month, due and payable in arrears on the first day of each month and on
      the
      Termination Date.

     

    (e) Collateral
      Exam Fees.
      The
      Borrowers shall pay the Lender fees in connection with any collateral exams,
      audits or inspections conducted by or on behalf of the Lender of any Collateral
      or the Borrowers’ operations or business at the rates established from time to
      time by the Lender as its collateral exam fees (which fees are currently $950
      per day per collateral examiner), together with all actual out-of-pocket costs
      and expenses incurred in conducting any such collateral examination or
      inspection. 

     

    
      
        
        

      

      
        -15-

        
          

        

      

      
        
        

      

    

    

    (f) Termination
      and Line Reduction Fees.
      If (i)
      the Lender terminates the Credit Facility during a Default Period, or if (ii)
      the Borrowers terminate or reduce the Credit Facility on a date prior to the
      Maturity Date, then the Borrowers shall pay the Lender as liquidated damages
      and
      not as a penalty a termination fee in an amount equal to a percentage of the
      Maximum Line Amount (or the reduction of the Maximum Line Amount, as the case
      may be) calculated as follows: (A) two percent (2%) if the termination or
      reduction occurs on or before the first anniversary of the Funding Date;
      (B) one percent (1%) if the termination or reduction occurs after the first
      anniversary of the Funding Date.

    

    The
      Borrowers acknowledge that termination or reduction of the Credit Facility
      may
      result in the Lender incurring additional costs, expenses or liabilities, and
      that it is difficult to ascertain the full extent of such costs, expenses or
      liabilities. The Borrowers therefore agree to pay the above-described
      termination and line reduction fees and agree that said amounts represent a
      reasonable estimate of the expenses and/or liabilities of the
      Lender.

     

    (g) Overadvance
      Fees.
      The
      Borrowers shall pay an Overadvance fee in the amount of $500.00 for each day
      or
      portion thereof during which an Overadvance exists, regardless of how the
      Overadvance arises or whether or not the Overadvance has been agreed to in
      advance by the Lender. The acceptance of payment of an Overadvance fee by the
      Lender shall not be deemed to constitute either consent to the Overadvance
      or a
      waiver of the resulting Event of Default, unless the Lender specifically
      consents to the Overadvance in writing and waives the Event of Default on
      whatever conditions the Lender deems appropriate.

    

    (h) Other
      Fees and Charges.
      The
      Lender may from time to time impose additional fees and charges as consideration
      for Advances made in excess of Availability or for other events that constitute
      an Event of Default or a Default hereunder, including fees and charges for
      the
      administration of Collateral by the Lender, and fees and charges for the late
      delivery of reports, which may be assessed in the Lender’s sole discretion on
      either an hourly, periodic, or flat fee basis, and in lieu of or in addition
      to
      imposing interest at the Default Rate. 

     

    Section
      2.8 Time
      for Interest Payments; Payment on Non-Business Days; Computation of Interest
      and
      Fees.

     

    (a) Time
      For Interest Payments.
      Accrued
      and unpaid interest shall be due and payable on the first day of each month
      and
      on the Termination Date (each an "Interest Payment Date"), or if any such day
      is
      not a Business Day, on the next succeeding Business Day. Interest will accrue
      from the most recent date to which interest has been paid or, if no interest
      has
      been paid, from the date of advance to the Interest Payment Date. If an Interest
      Payment Date is not a Business Day, payment shall be made on the next succeeding
      Business Day.

    

    (b) Payment
      on Non-Business Days.
      Whenever any payment to be made hereunder shall be stated to be due on a day
      which is not a Business Day, such payment may be made on the next succeeding
      Business Day, and such extension of time shall in such case be included in
      the
      computation of interest on the Advances or the fees hereunder, as the case
      may
      be.

     

    
      
        
        

      

      
        -16-

        
          

        

      

      
        
        

      

    

     

    (c) Computation
      of Interest and Fees.
      Interest accruing on the outstanding principal balance of the Advances and
      fees
      hereunder outstanding from time to time shall be computed on the basis of actual
      number of days elapsed in a year of 360 days.

     

    Section
      2.9 Lockbox
      and Collateral Account; Sweep
      of Funds. 

     

    (a) Lockbox
      and Collateral Account.

     

    (i) The
      Borrowers shall instruct all account debtors to pay all Accounts directly to
      the
      Lockbox. If, notwithstanding such instructions, the Borrowers receive any
      payments on Accounts, the Borrowers shall deposit such payments into the
      Collateral Account. The Borrowers shall also deposit all other cash proceeds
      of
      Collateral regardless of source or nature directly into the Collateral Account.
      Until so deposited, the Borrowers shall hold all such payments and cash proceeds
      in trust for and as the property of the Lender and shall not commingle such
      property with any of its other funds or property. All deposits in the Collateral
      Account shall constitute proceeds of Collateral and shall not constitute payment
      of the Indebtedness.

     

    (ii) All
      items
      deposited in the Collateral Account shall be subject to final payment. If any
      such item is returned uncollected, the Borrowers will immediately pay the
      Lender, or, for items deposited in the Collateral Account, the bank maintaining
      such account, the amount of that item, or such bank at its discretion may charge
      any uncollected item to the Borrowers’ commercial account or other account. The
      Borrowers shall be liable as an endorser on all items deposited in the
      Collateral Account, whether or not in fact endorsed by the
      Borrowers.

     

    (b) Sweep
      of Funds.
      The
      Lender shall from time to time, in accordance with the Wholesale Lockbox and
      Collection Account Agreement, cause funds in the Collateral Account to be
      transferred to the Lender’s general account for payment of the Indebtedness.
      Amounts deposited in the Collateral Account shall not be subject to withdrawal
      by the Borrowers, except after payment in full and discharge of all
      Indebtedness. 

     

    Section
      2.10  Discretionary
      Nature of this Facility; Termination by the Lender; Automatic
      Renewal.
      This
      Agreement contains the terms and conditions upon which the Lender presently
      expects to make Advances to the Borrowers. Each Advance shall be in the Lender’s
      sole discretion, and the Lender need not show that an adverse change has
      occurred in the Borrowers’ condition, financial or otherwise, or that any of the
      conditions of Article IV have not been met, in order to refuse to make any
      requested Advance or to demand payment of the Indebtedness. The Lender may
      at
      any time terminate the Credit Facility whereupon the Lender shall no longer
      consider requests for Advances under this Agreement. Unless terminated by the
      Lender at any time or by the Borrowers pursuant to Section 2.11, the Credit
      Facility shall remain in effect until the Original Maturity Date and,
      thereafter, shall automatically renew for successive one year periods (the
      Original Maturity Date and each anniversary date thereof to which the Credit
      Facility has been automatically renewed, is herein referred to as a “Maturity
      Date”).

     

    
      
        
        

      

      
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    Section
      2.11  Voluntary
      Prepayment; Termination of the Credit Facility by the Borrowers. Except as
      otherwise provided herein, the Borrowers may prepay the Advances in whole at
      any
      time or from time to time in part. The Borrowers may terminate the Credit
      Facility or reduce the Maximum Line Amount at any time if it (i) gives the
      Lender at least 90 days advance written notice prior to the proposed Termination
      Date, and (ii) pays the Lender applicable termination and Maximum Line
      Amount reduction fees in accordance with the terms of this Agreement. Any
      reduction in the Maximum Line Amount shall be in multiples of $100,000, and
      with
      a minimum reduction of at least $500,000. If the Borrowers terminate the Credit
      Facility or reduce the Maximum Line Amount to zero, all Indebtedness shall
      be
      immediately due and payable, and if the Borrowers give the Lender less than
      the
      required 90 days advance written notice, then the interest rate applicable
      to
      borrowings evidenced by Revolving Note shall be the Default Rate for the period
      of time commencing 90 days prior to the proposed Termination Date through the
      date that the Lender actually receives such written notice. If the Borrowers
      do
      not wish the Lender to consider renewal of the Credit Facility on the next
      Maturity Date, then the Borrowers shall give the Lender at least 90 days written
      notice prior to the Maturity Date that it will not be requesting renewal. If
      the
      Borrowers fail to give the Lender such timely notice, then the interest rate
      applicable to borrowings evidenced by the Revolving Note shall be the Default
      Rate for the period of time commencing 90 days prior to the Maturity Date
      through the date that the Lender actually receives such written
      notice.

     

    Section
      2.12 Mandatory
      Prepayment.
      Without
      notice or demand, if the sum of the outstanding principal balance of the
      Revolving Advances shall at any time exceed the Borrowing Base, the Borrowers
      shall immediately prepay the Revolving Advances to the extent necessary to
      eliminate such excess. Any voluntary or mandatory prepayment received by the
      Lender under this Agreement may be applied to the Indebtedness, in such order
      and in such amounts as the Lender in its sole discretion may determine from
      time
      to time.

     

    Section
      2.13 Revolving
      Advances to Pay Indebtedness.
      Notwithstanding the terms of Section 2.1, the Lender may, in its discretion
      at
      any time or from time to time, without the Borrowers’ request and even if the
      conditions set forth in Section 4.2 would not be satisfied, make a Revolving
      Advance in an amount equal to the portion of the Indebtedness from time to
      time
      due and payable,
      and may
      deliver the proceeds of any such Revolving Advance to Wells Fargo Merchant
      Services, L.L.C. in satisfaction of any unpaid obligations due to Wells Fargo
      Merchant Services, L.L.C. 

     

    Section
      2.14 Use
      of
      Proceeds.
      The
      Borrowers shall use the proceeds of Advances to repay its obligations to Laurus
      Master Fund and to redeem stock held by certain Series A Preferred stock holders
      and for costs of closing and shall thereafter use the proceeds of Advances
      for
      ordinary working capital purposes.

     

    Section
      2.15  Liability
      Records.
      The
      Lender may maintain from time to time, at its discretion, records as to the
      Indebtedness. All entries made on any such record shall be presumed correct
      until the Borrowers establish the contrary. Upon the Lender’s demand, the
      Borrowers will admit and certify in writing the exact principal balance of
      the
      Indebtedness that the Borrowers then assert to be outstanding. Any billing
      statement or accounting rendered by the Lender shall be conclusive and fully
      binding on the Borrowers unless the Borrowers give the Lender specific written
      notice of exception within 30 days after receipt.

     

    
      
        
        

      

      
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    ARTICLE
      III

     

    SECURITY
      INTEREST; OCCUPANCY; SETOFF

     

    Section
      3.1 Grant
      of Security Interest.
      The
      Borrowers hereby pledge, assign and grant to the Lender for the benefit of
      itself and as agent for Wells Fargo Merchant Services, L.L.C., a lien and
      security interest (collectively referred to as the “Security Interest”) in the
      Collateral, as security for the payment and performance of (a) all present
      and
      future Indebtedness of the Borrowers to the Lender; (b) all obligations of
      the
      Borrowers and rights of the Lender under this Agreement; and (c) all present
      and
      future obligations of the Borrowers to the Lender of other kinds. Upon request
      by the Lender, the Borrowers will grant to the Lender, for the benefit of itself
      and as agent for Wells Fargo Merchant Services, L.L.C., a security interest
      in
      all commercial tort claims that the Borrowers may have against any
      Person. 

     

    Section
      3.2 Notification
      of Account Debtors and Other Obligors.
      The
      Lender may at any time (whether or not a Default Period then exists) notify
      any
      account debtor or other Person obligated to pay the amount due that such right
      to payment has been assigned or transferred to the Lender for security and
      shall
      be paid directly to the Lender. The Borrowers will join in giving such notice
      if
      the Lender so requests. At any time after the Borrowers or the Lender give
      such
      notice to an account debtor or other obligor, the Lender may, but need not,
      in
      the Lender’s name or in the Borrowers’ name, demand, sue for, collect or receive
      any money or property at any time payable or receivable on account of, or
      securing, any such right to payment, or grant any extension to, make any
      compromise or settlement with or otherwise agree to waive, modify, amend or
      change the obligations (including collateral obligations) of any such account
      debtor or other obligor. The Lender may, in the Lender’s name or in the
      Borrowers’ name, as the Borrowers’ agent and attorney-in-fact, notify the United
      States Postal Service to change the address for delivery of the Borrowers’ mail
      to any address designated by the Lender, otherwise intercept the Borrowers’
mail, and receive, open and dispose of the Borrowers’ mail, applying all
      Collateral as permitted under this Agreement and holding all other mail for
      the
      Borrowers’ account or forwarding such mail to the Borrowers’ last known
      address.

     

    Section
      3.3 Assignment
      of Insurance.
      As
      additional security for the payment and performance of the Indebtedness, the
      Borrowers hereby assign to the Lender any and all monies (including proceeds
      of
      insurance and refunds of unearned premiums) due or to become due under, and
      all
      other rights of the Borrowers with respect to, any and all policies of insurance
      now or at any time hereafter covering the Collateral or any evidence thereof
      or
      any business records or valuable papers pertaining thereto, and the Borrowers
      hereby direct the issuer of any such policy to pay all such monies directly
      to
      the Lender. At any time, whether or not a Default Period then exists, the Lender
      may (but need not), in the Lender’s name or in the Borrowers’ name, execute and
      deliver proof of claim, receive all such monies, endorse checks and other
      instruments representing payment of such monies, and adjust, litigate,
      compromise or release any claim against the issuer of any such
      policy.
      Any
      monies received as payment for any loss under any insurance policy mentioned
      above (other than liability insurance policies) or as payment of any award
      or
      compensation for condemnation or taking by eminent domain, shall be paid over
      to
      the Lender to be applied, at the option of the Lender, either to the prepayment
      of the Indebtedness or shall be disbursed to the Borrowers under staged payment
      terms reasonably satisfactory to the Lender for application to the cost of
      repairs, replacements, or restorations. Any such repairs, replacements, or
      restorations shall be effected with reasonable promptness and shall be of a
      value at least equal to the value of the items or property destroyed prior
      to
      such damage or destruction.

     

    
      
        
        

      

      
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    Section
      3.4 Occupancy.

     

    (a) The
      Borrowers hereby irrevocably grant to the Lender the right to take exclusive
      possession of the Premises at any time during a Default Period without notice
      or
      consent.

     

    (b) The
      Lender may use the Premises only to hold, process, manufacture, sell, use,
      store, liquidate, realize upon or otherwise dispose of goods that are Collateral
      and for other purposes that the Lender may in good faith deem to be related
      or
      incidental purposes.

     

    (c) The
      Lender’s right to hold the Premises shall cease and terminate upon the earlier
      of (i) payment in full and discharge of all Indebtedness and termination of
      the Credit Facility, and (ii) final sale or disposition of all goods
      constituting Collateral and delivery of all such goods to
      purchasers.

     

    (d) The
      Lender shall not be obligated to pay or account for any rent or other
      compensation for the possession, occupancy or use of any of the Premises;
provided,
      however,
      that if
      the Lender does pay or account for any rent or other compensation for the
      possession, occupancy or use of any of the Premises, the Borrowers shall
      reimburse the Lender promptly for the full amount thereof. In addition, the
      Borrowers will pay, or reimburse the Lender for, all taxes, fees, duties,
      imposts, charges and expenses at any time incurred by or imposed upon the Lender
      by reason of the execution, delivery, existence, recordation, performance or
      enforcement of this Agreement or the provisions of this Section
      3.4.

     

    Section
      3.5 License.
      Without
      limiting the generality of any other Security Document, the Borrowers hereby
      grant to the Lender a non-exclusive, worldwide and royalty-free license to
      use
      or otherwise exploit all Intellectual Property Rights of the Borrowers for
      the
      purpose of: (a) completing the manufacture of any in-process materials during
      any Default Period so that such materials become saleable Inventory, all in
      accordance with the same quality standards previously adopted by the Borrowers
      for their own manufacturing and subject to the Borrowers’ reasonable exercise of
      quality control; and (b) selling, leasing or otherwise disposing of any or
      all Collateral during any Default Period.

     

    
      
        
        

      

      
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    Section
      3.6 Financing
      Statement.
      The
      Borrowers authorize the Lender to file from time to time, such financing
      statements against collateral described as “all personal property” or “all
      assets” or describing specific items of collateral including commercial tort
      claims as the Lender deems necessary or useful to perfect the Security Interest.
      All financing statements filed before the date hereof to perfect the Security
      Interest were authorized by the Borrowers and are hereby re-authorized. A
      carbon, photographic or other reproduction of this Agreement or of any financing
      statements signed by the Borrowers is sufficient as a financing statement and
      may be filed as a financing statement in any state to perfect the security
      interests granted hereby. For this purpose, the Borrowers represent and warrant
      that the following information is true and correct:

     

    Name
      and
      address of Debtors:

     

    Airgate
      International Corporation

    153-04
      Rockaway Boulevard

    Jamaica,
      New York 11434

    Federal
      Employer Identification No. 10-5674422

    Organizational
      Identification No. None

     

    Airgate
      International Corporation (Chicago)

    2249
      Windsor Court

    Addison,
      Illinois

    Federal
      Employer Identification No. 03-0424023

    Organizational
      Identification No. 6214-207-3

     

    Paradigm
      International, Inc.

    11200
      S.
      Hindry Avenue, 2nd
      Floor

    Los
      Angeles, California 90045

    Federal
      Employer Identification No. 65-0961495

    Organizational
      Identification No. P99000093272

     

    Name
      and
      address of Secured Party:

     

    Wells
      Fargo Bank, National Association

    119
      West
      40th
      Street,
      16th
      Floor

    New
      York,
      New York 10018-2500

     

    Section
      3.7 Setoff.
      The
      Lender may at any time or from time to time, at its sole discretion and without
      demand and without notice to anyone, setoff any liability owed to the Borrowers
      by the Lender, whether or not due, against any Obligation, whether or not due.
      In addition, each other Person holding a participating interest in any
      Indebtedness shall have the right to appropriate or setoff any deposit or other
      liability then owed by such Person to the Borrowers, whether or not due, and
      apply the same to the payment of said participating interest, as fully as if
      such Person had lent directly to the Borrowers the amount of such participating
      interest.

     

    Section
      3.8 Collateral.
      This
      Agreement does not contemplate a sale of accounts, contract rights or chattel
      paper, and, as provided by law, the Borrowers are entitled to any surplus and
      shall remain liable for any deficiency. The Lender’s duty of care with respect
      to Collateral in its possession (as imposed by law) shall be deemed fulfilled
      if
      it exercises reasonable care in physically keeping such Collateral, or in the
      case of Collateral in the custody or possession of a bailee or other third
      Person, exercises reasonable care in the selection of the bailee or other third
      Person, and the Lender need not otherwise preserve, protect, insure or care
      for
      any Collateral. The Lender shall not be obligated to preserve any rights the
      Borrowers may have against prior parties, to realize on the Collateral at all
      or
      in any particular manner or order or to apply any cash proceeds of the
      Collateral in any particular order of application. The Lender has no obligation
      to clean-up or otherwise prepare the Collateral for sale. The Borrowers waive
      any right they may have to require the Lender to pursue any third Person for
      any
      of the Indebtedness.

     

    
      
        
        

      

      
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    ARTICLE
      IV

     

    CONDITIONS
      OF WILLINGNESS TO CONSIDER LENDING

     

    Section
      4.1 Conditions
      Precedent to Lender’s Willingness to Consider Making the Initial
      Advances.
      The
      Lender’s willingness to consider making the initial Advances shall be subject to
      the condition precedent that the Lender shall have received all of the
      following, each properly executed by the appropriate party and in form and
      substance satisfactory to the Lender:

     

    (a) This
      Agreement.

     

    (b) The
      Revolving Note.

     

    (c) A
      true
      and correct copy of any and all leases pursuant to which the Borrowers are
      leasing the Premises, together with a landlord’s disclaimer and consent with
      respect to each such lease.

     

    (d) A
      true
      and correct copy of any and all mortgages pursuant to which the Borrowers have
      mortgaged the Premises, together with a mortgagee’s disclaimer and consent with
      respect to each such mortgage.

     

    (e) A
      true
      and correct copy of any and all agreements pursuant to which the Borrowers’
property is in the possession of any Person other than the Borrowers, together
      with, in the case of any goods held by such Person for resale, (i) a
      consignee’s acknowledgment and waiver of Liens, (ii) UCC financing
      statements sufficient to protect the Borrowers’ and the Lender’s interests in
      such goods, and (iii) UCC searches showing that no other secured party has
      filed a financing statement against such Person and covering property similar
      to
      the Borrowers’ other than the Borrowers, or if there exists any such secured
      party, evidence that each such secured party has received notice from the
      Borrowers and the Lender sufficient to protect the Borrowers’ and the Lender’s
      interests in the Borrowers’ goods from any claim by such secured
      party.

     

    (f) An
      acknowledgment and waiver of Liens from each warehouse in which the Borrowers
      are storing Inventory.

     

    (g) A
      true
      and correct copy of any and all agreements pursuant to which the Borrowers’
property is in the possession of any Person other than the Borrowers, together
      with, (i) an acknowledgment and waiver of Liens from each subcontractor who
      has possession of the Borrowers’ goods from time to time, (ii) UCC
      financing statements sufficient to protect the Borrowers’ and the Lender’s
      interests in such goods, and (iii) UCC searches showing that no other
      secured party has filed a financing statement covering such Person’s property
      other than the Borrowers, or if there exists any such secured party, evidence
      that each such secured party has received notice from the Borrowers and the
      Lender sufficient to protect the Borrowers’ and the Lender’s interests in the
      Borrowers’ goods from any claim by such secured party.

     

    
      
        
        

      

      
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    [(h) An
      acknowledgment and agreement from each licensor in favor of the Lender, together
      with a true, correct and complete copy of all license agreements.]

     

    (i) The
      Wholesale Lockbox and Collection Account Agreement.

     

    (j) The
      Collection Account Agreements. 

     

    (k) Control
      agreements with each bank at which the Borrowers maintain deposit
      accounts.

     

    (l) The
      Subordination Agreements.

     

    (m) Current
      searches of appropriate filing offices showing that (i) no Liens have been
      filed and remain in effect against the Borrowers except Permitted Liens or
      Liens
      held by Persons who have agreed in writing that upon receipt of proceeds of
      the
      initial Advances, they will satisfy, release or terminate such Liens in a manner
      satisfactory to the Lender, and (ii) the Lender has duly filed all
      financing statements necessary to perfect the Security Interest, to the extent
      the Security Interest is capable of being perfected by filing.

     

    (n) A
      certificate of the Borrowers’ Secretary or Assistant Secretary certifying that
      attached to such certificate are (i) the resolutions of the Borrowers’
Directors and, if required, Owners, authorizing the execution, delivery and
      performance of the Loan Documents, (ii) true, correct and complete copies
      of the Borrowers’ Constituent Documents, and (iii) examples of the
      signatures of the Borrowers’ Officers or agents authorized to execute and
      deliver the Loan Documents and other instruments, agreements and certificates,
      including Advance requests, on the Borrowers’ behalf.

     

    (o) A
      current
      certificate issued by the Secretary of State of each jurisdiction where the
      Borrower are organized, certifying that the Borrowers are in compliance with
      all
      applicable organizational requirements of that State.

     

    (p) Evidence
      that the Borrowers are duly licensed or qualified to transact business in all
      jurisdictions where the character of the property owned or leased or the nature
      of the business transacted by it makes such licensing or qualification
      necessary.

     

    (q) A
      certificate of an Officer of the Borrowers confirming, in his personal capacity,
      the representations and warranties set forth in Article V.

     

    (r) Certificates
      of the insurance required hereunder, with all hazard insurance containing a
      lender’s loss payable endorsement in the Lender’s favor and with all liability
      insurance naming the Lender as an additional insured.

     

    (s) The
      separate Guaranty of each Guarantor, pursuant to which each Guarantor
      unconditionally guarantees the full and prompt payment of all
      Indebtedness.

     

    (t) A
      waiver
      of interest issued by the spouse of each individual Guarantor, waiving any
      and
      all interest he or she may have in the assets disclosed to the Lender in the
      financial statements of that Guarantor and in any future earnings or assets
      acquired by that Guarantor.

     

    
      
        
        

      

      
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    (u) An
      opinion of counsel of Borrowers and each Guarantor that is an entity, addressed
      to the Lender.

     

    (v) Payment
      of all fees due under the terms of this Agreement through the date of the
      initial Advance hereunder, and payment of all expenses incurred by the Lender
      through such date and that are required to be paid by the Borrowers under this
      Agreement.

     

    (w) Evidence
      that after making the initial Revolving Advance, satisfying all obligations
      owed
      to the Borrowers’ prior lender, satisfying all trade payables older than
      60 days from invoice date, book overdrafts and closing costs, Availability
      shall be not less than $1,500,000.

     

    (x) A
      Customer Identification Information form and such other forms and verification
      as the Lender may need to comply with the U.S.A. Patriot Act. 

    

    (y) Such
      other documents as the Lender in its sole discretion may require.

     

    Section
      4.2 Conditions
      Precedent to All Advances. The Lender will not consider any request for an
      Advance unless:

     

    (a) the
      representations and warranties contained in Article V are correct on and as
      of the date of such Advance as though made on and as of such date, except to
      the
      extent that such representations and warranties relate solely to an earlier
      date; and

     

    (b) no
      event
      has occurred and is continuing, or would result from such Advance which
      constitutes a Default or an Event of Default.

     

    ARTICLE
      V

     

    REPRESENTATIONS
      AND WARRANTIES

     

    The
      Borrowers represent and warrant to the Lender as follows:

     

    Section
      5.1 Existence
      and Power; Name; Chief Executive Office; Inventory and Equipment Locations;
      Federal Employer Identification Number and Organizational Identification
      Number.
      Each
      Borrower is a corporation, duly organized, validly existing and in good standing
      under the laws of the State of its organization as set forth on Schedule 5.1
      and
      is duly licensed or qualified to transact business in all jurisdictions where
      the character of the property owned or leased or the nature of the business
      transacted by it makes such licensing or qualification necessary. The Borrowers
      have all requisite power and authority to conduct their business, to own their
      properties and to execute and deliver, and to perform all of their obligations
      under, the Loan Documents. During their existence, the Borrowers have done
      business solely under the names set forth in Schedule 5.1. The Borrowers’ chief
      executive office and principal place of business is located at the address
      set
      forth in Schedule 5.1, and all of the Borrowers’ records relating to their
      business or the Collateral are kept at that location. All Inventory and
      Equipment is located at that location or at one of the other locations listed
      in
      Schedule 5.1. The Borrowers’ federal employer identification numbers and
      organization identification numbers are correctly set forth in Section
      3.6.

     

    
      
        
        

      

      
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    Section
      5.2 Capitalization.
      Schedule
      5.2 constitutes a correct and complete list of all ownership interests of the
      Borrowers and rights to acquire ownership interests including the record holder,
      number of interests and percentage interests on a fully diluted basis, and
      an
      organizational chart showing the ownership structure of all Subsidiaries of
      the
      Borrowers.

     

    Section
      5.3 Authorization
      of Borrowing; No Conflict as to Law or Agreements.
      The
      execution, delivery and performance by the Borrowers of the Loan Documents
      and
      the borrowings from time to time hereunder have been duly authorized by all
      necessary corporate action and do not and will not (i) require any consent
      or approval of the Borrowers’ Owners; (ii) require any authorization,
      consent or approval by, or registration, declaration or filing with, or notice
      to, any governmental department, commission, board, bureau, agency or
      instrumentality, domestic or foreign, or any third party, except such
      authorization, consent, approval, registration, declaration, filing or notice
      as
      has been obtained, accomplished or given prior to the date hereof;
      (iii) violate any provision of any law, rule or regulation (including
      Regulation X of the Board of Governors of the Federal Reserve System) or of
      any order, writ, injunction or decree presently in effect having applicability
      to the Borrowers or of the Borrowers’ Constituent Documents; (iv) result in
      a breach of or constitute a default under any indenture or loan or credit
      agreement or any other material agreement, lease or instrument to which the
      Borrowers are a party or by which they or their properties may be bound or
      affected; or (v) result in, or require, the creation or imposition of any
      Lien (other than the Security Interest) upon or with respect to any of the
      properties now owned or hereafter acquired by the Borrowers.

     

    Section
      5.4 Legal
      Agreements.
      This
      Agreement constitutes and, upon due execution by the Borrowers, the other Loan
      Documents will constitute the legal, valid and binding obligations of the
      Borrowers, enforceable against the Borrowers in accordance with their respective
      terms.

     

    Section
      5.5 Subsidiaries.
      Except
      as set forth in Schedule 5.5 hereto, the Borrowers have no
      Subsidiaries.

     

    Section
      5.6 Financial
      Condition; No Adverse Change.
      The
      Borrowers have furnished to the Lender their unaudited financial statements
      for
      the fiscal year ended December 31, 2005 and those statements fairly present
      the
      Borrowers’ financial condition on the dates thereof and the results of their
      operations and cash flows for the periods then ended and were prepared in
      accordance with GAAP. Since the date of the most recent financial statements,
      there has been no change in the Borrowers’ business, properties or condition
      (financial or otherwise) which has had a Material Adverse Effect.

     

    Section
      5.7 Litigation.
      Except
      as set forth in Schedule 5,7 to the Borrower’s knowledge, after due inquiry and
      diligence, there are no actions, suits or proceedings pending or, to the
      Borrowers’ knowledge, threatened against or affecting the Borrowers or any of
      their Affiliates or the properties of the Borrowers or any of their Affiliates
      before any court or governmental department, commission, board, bureau, agency
      or instrumentality, domestic or foreign, which, if determined adversely to
      the
      Borrowers or any of their Affiliates, would have a Material Adverse Effect
      on
      the financial condition, properties or operations of the Borrowers or any of
      their Affiliates.

     

    
      
        
        

      

      
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    Section
      5.8 Regulation U.
      The
      Borrowers are not engaged in the business of extending credit for the purpose
      of
      purchasing or carrying margin stock (within the meaning of Regulation U of
      the
      Board of Governors of the Federal Reserve System), and no part of the proceeds
      of any Advance will be used to purchase or carry any margin stock or to extend
      credit to others for the purpose of purchasing or carrying any margin
      stock.

     

    Section
      5.9 Taxes.
      The
      Borrowers and their Affiliates have paid or caused to be paid to the proper
      authorities when due all federal, state and local taxes required to be withheld
      by each of them. The Borrowers and their Affiliates have filed all federal,
      state and local tax returns which to the knowledge of the Officers of the
      Borrowers or any Affiliate, as the case may be, are required to be filed, and
      the Borrowers and their Affiliates have paid or caused to be paid to the
      respective taxing authorities all taxes as shown on said returns or on any
      assessment received by any of them to the extent such taxes have become
      due.

     

    Section
      5.10 Titles
      and Liens.
      The
      Borrowers have good and absolute title to all Collateral free and clear of
      all
      Liens other than Permitted Liens. No financing statement naming the Borrowers
      as
      debtor is on file in any office except to perfect only Permitted
      Liens.

     

    Section
      5.11 Intellectual
      Property Rights.

     

    (a) Owned
      Intellectual Property.
      Schedule 5.11 is a complete list of all patents, applications for patents,
      trademarks, applications to register trademarks, service marks, applications
      to
      register service marks, mask works, trade dress and copyrights for which the
      Borrowers are the owner of record (the “Owned Intellectual Property”). Except as
      disclosed on Schedule 5.11, (i) the Borrowers own the Owned Intellectual
      Property free and clear of all restrictions (including covenants not to sue
      a
      third party), court orders, injunctions, decrees, writs or Liens, whether by
      written agreement or otherwise, (ii) no Person other than the Borrowers
      owns or has been granted any right in the Owned Intellectual Property,
      (iii) all Owned Intellectual Property is valid, subsisting and enforceable
      and (iv) the Borrowers have taken all commercially reasonable action
      necessary to maintain and protect the Owned Intellectual Property.

     

    (b) Agreements
      with Employees and Contractors.
      The
      Borrowers have entered into a legally enforceable agreement with each of their
      employees and subcontractors obligating each such Person to assign to the
      Borrowers, without any additional compensation, any Intellectual Property Rights
      created, discovered or invented by such Person in the course of such Person’s
      employment or engagement with the Borrowers (except to the extent prohibited
      by
      law), and further requiring such Person to cooperate with the Borrowers, without
      any additional compensation, in connection with securing and enforcing any
      Intellectual Property Rights therein; provided,
      however,
      that
      the foregoing shall not apply with respect to employees and subcontractors
      whose
      job descriptions are of the type such that no such assignments are reasonably
      foreseeable.

     

    (c) Intellectual
      Property Rights Licensed from Others.
      Schedule 5.11 is a complete list of all agreements under which the Borrowers
      have licensed Intellectual Property Rights from another Person (“Licensed
      Intellectual Property”) other than readily available, non-negotiated licenses of
      computer software and other intellectual property used solely for performing
      accounting, word processing and similar administrative tasks (“Off-the-shelf
      Software”) and a summary of any ongoing payments the Borrowers are obligated to
      make with respect thereto. Except as disclosed on Schedule 5.11 and in written
      agreements, copies of which have been given to the Lender, the Borrowers’
licenses to use the Licensed Intellectual Property are free and clear of all
      restrictions, Liens, court orders, injunctions, decrees, or writs, whether
      by
      written agreement or otherwise. Except as disclosed on Schedule 5.11, the
      Borrowers are not obligated or under any liability whatsoever to make any
      payments of a material nature by way of royalties, fees or otherwise to any
      owner of, licensor of, or other claimant to, any Intellectual Property
      Rights.

     

    
      
        
        

      

      
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    (d) Other
      Intellectual Property Needed for Business.
      Except
      for Off-the-shelf Software and as disclosed on Schedule 5.11, the Owned
      Intellectual Property and the Licensed Intellectual Property constitute all
      Intellectual Property Rights used or necessary to conduct the Borrowers’
business as it is presently conducted or as the Borrowers reasonably foresee
      conducting it.

     

    (e) Infringement.
      Except
      as disclosed on Schedule 5.11, the Borrowers have no knowledge of, and has
      not
      received any written claim or notice alleging, any Infringement of another
      Person’s Intellectual Property Rights (including any written claim that the
      Borrowers must license or refrain from using the Intellectual Property Rights
      of
      any third party) nor, to the Borrowers’ knowledge, is there any threatened claim
      or any reasonable basis for any such claim.

     

    Section
      5.12 Plans.
      Except
      as disclosed to the Lender in writing prior to the date hereof, neither the
      Borrowers nor any ERISA Affiliate (a) maintains or has maintained any Pension
      Plan, (b) contributes or has contributed to any Multiemployer Plan or (c)
      provides or has provided post-retirement medical or insurance benefits with
      respect to employees or former employees (other than benefits required under
      Section 601 of ERISA, Section 4980B of the IRC or applicable state law). Neither
      the Borrowers nor any ERISA Affiliate has received any notice or has any
      knowledge to the effect that it is not in full compliance with any of the
      requirements of ERISA, the IRC or applicable state law with respect to any
      Plan.
      No Reportable Event exists in connection with any Pension Plan. Each Plan which
      is intended to qualify under the IRC is so qualified, and no fact or
      circumstance exists which may have an adverse effect on the Plan’s tax-qualified
      status. Neither the Borrowers nor any ERISA Affiliate has (i) any
      accumulated funding deficiency (as defined in Section 302 of ERISA and Section
      412 of the IRC) under any Plan, whether or not waived, (ii) any liability
      under Section 4201 or 4243 of ERISA for any withdrawal, partial withdrawal,
      reorganization or other event under any Multiemployer Plan or (iii) any
      liability or knowledge of any facts or circumstances which could result in
      any
      liability to the Pension Benefit Guaranty Corporation, the Internal Revenue
      Service, the Department of Labor or any participant in connection with any
      Plan
      (other than routine claims for benefits under the Plan).

     

    Section
      5.13 Default.
      The
      Borrowers are in compliance with all provisions of all agreements, instruments,
      decrees and orders to which it is a party or by which it or its property is
      bound or affected, the breach or default of which could have a Material Adverse
      Effect.

     

    
      
        
        

      

      
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    Section
      5.14 Environmental
      Matters.

     

    (a) Except
      as
      disclosed on Schedule 5.14, there are not present in, on or under the Premises
      any Hazardous Substances in such form or quantity as to create any material
      liability or obligation for either the Borrowers or the Lender under the common
      law of any jurisdiction or under any Environmental Law, and no Hazardous
      Substances have ever been stored, buried, spilled, leaked, discharged, emitted
      or released in, on or under the Premises in such a way as to create any such
      material liability. 

    

    (b) Except
      as
      disclosed on Schedule 5.14, the Borrowers have not disposed of Hazardous
      Substances in such a manner as to create any material liability under any
      Environmental Law.

     

    (c) Except
      as
      disclosed on Schedule 5.14, there have not existed in the past, nor are there
      any threatened or impending requests, claims, notices, investigations, demands,
      administrative proceedings, hearings or litigation relating in any way to the
      Premises or the Borrowers, alleging material liability under, violation of,
      or
      noncompliance with any Environmental Law or any license, permit or other
      authorization issued pursuant thereto. 

     

    (d) Except
      as
      disclosed on Schedule 5.14, the Borrowers’ businesses are and have in the past
      always been conducted in accordance with all Environmental Laws and all
      licenses, permits and other authorizations required pursuant to any
      Environmental Law and necessary for the lawful and efficient operation of such
      businesses are in the Borrowers’ possession and are in full force and effect,
      nor have the Borrowers been denied insurance on grounds related to potential
      environmental liability. No permit required under any Environmental Law is
      scheduled to expire within 12 months and there is no threat that any such permit
      will be withdrawn, terminated, limited or materially changed.

     

    (e) Except
      as
      disclosed on Schedule 5.14, the Premises are not and never have been listed
      on
      the National Priorities List, the Comprehensive Environmental Response,
      Compensation and Liability Information System or any similar federal, state
      or
      local list, schedule, log, inventory or database.

     

    (f) The
      Borrowers have delivered to the Lender all environmental assessments, audits,
      reports, permits, licenses and other documents describing or relating in any
      way
      to the Premises or the Borrowers’ businesses.

     

    Section
      5.15 Submissions
      to Lender.
      All
      financial and other information provided to the Lender by or on behalf of the
      Borrowers in connection with the Borrowers’ request for the credit facilities
      contemplated hereby (i) is true and correct in all material respects,
      (ii) does not omit any material fact necessary to make such information not
      misleading and, (iii) as to projections, valuations or proforma financial
      statements, present a good faith opinion as to such projections, valuations
      and
      proforma condition and results.

     

    Section
      5.16 Financing
      Statements.
      The
      Borrowers have authorized the filing of financing statements sufficient when
      filed to perfect the Security Interest and the other security interests created
      by the Security Documents. When such financing statements are filed in the
      offices noted therein, the Lender will have a valid and perfected security
      interest in all Collateral which is capable of being perfected by filing
      financing statements. None of the Collateral is or will become a fixture on
      real
      estate, unless a sufficient fixture filing is in effect with respect
      thereto. 

     

    
      
        
        

      

      
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    Section
      5.17 Rights
      to Payment.
      Each
      right to payment and each instrument, document, chattel paper and other
      agreement constituting or evidencing Collateral is (or, in the case of all
      future Collateral, will be when arising or issued) the valid, genuine and
      legally enforceable obligation, subject to no defense, setoff or counterclaim,
      of the account debtor or other obligor named therein or in the Borrowers’
records pertaining thereto as being obligated to pay such
      obligation.

     

    Section
      5.18 Financial
      Solvency.
      Both
      before and after giving effect to the and all of the transactions contemplated
      in the Loan Documents, none of the Borrowers or their Affiliates:

     

    (a) Was
      or
      will be “insolvent”, as that term is used and defined in Section 101(32) of the
      United States Bankruptcy Code and Section 2 of the Uniform Fraudulent Transfer
      Act;

     

    (b) Has
      unreasonably small capital or is engaged or about to engage in a business or
      a
      transaction for which any remaining assets of the Borrowers or such Affiliate
      are unreasonably small;

     

    (c) By
      executing, delivering or performing its obligations under the Loan Documents
      or
      other documents to which it is a party or by taking any action with respect
      thereto, intends to, nor believes that it will, incur debts beyond its ability
      to pay them as they mature;

     

    (d) By
      executing, delivering or performing its obligations under the Loan Documents
      or
      other documents to which it is a party or by taking any action with respect
      thereto, intends to hinder, delay or defraud either its present or future
      creditors; and

     

    (e) At
      this
      time contemplates filing a petition in bankruptcy or for an arrangement or
      reorganization or similar proceeding under any law of any jurisdiction, nor,
      to
      the best knowledge of the Borrowers, is the subject of any actual, pending
      or
      threatened bankruptcy, insolvency or similar proceedings under any law of any
      jurisdiction.

     

    ARTICLE
      VI

     

    COVENANTS

     

    So
      long
      as the Indebtedness shall remain unpaid, or the Credit Facility shall remain
      outstanding, the Borrowers will comply with the following requirements, unless
      the Lender shall otherwise consent in writing:

     

    Section
      6.1 Reporting
      Requirements.
      The
      Borrowers will deliver, or cause to be delivered, to the Lender each of the
      following, which shall be in form and detail acceptable to the
      Lender:

     

    (a) Annual
      Financial Statements.
      As soon
      as available, and in any event within 90 days after the end of each fiscal
      year of Pacific CMA, Pacific CMA’s audited financial statements with the
      unqualified opinion of independent certified public accountants selected by
      Pacific CMA and acceptable to the Lender, which annual financial statements
      shall include Pacific CMA’s balance sheet as at the end of such fiscal year and
      the related statements of Pacific CMA’s income, retained earnings and cash flows
      for the fiscal year then ended, prepared on a consolidating and consolidated
      basis to include the Borrowers and any Affiliates, all in reasonable detail
      and
      prepared in accordance with GAAP, together with (i) copies of all
      management letters prepared by such accountants; (ii) a report signed by
      such accountants stating that in making the investigations necessary for said
      opinion they obtained no knowledge, except as specifically stated, of any
      Default or Event of Default and all relevant facts in reasonable detail to
      evidence, and the computations as to, whether or not the Borrowers are in
      compliance with the Financial Covenants; and (iii) a certificate of the
      Borrowers’ chief financial officer stating that such financial statements have
      been prepared in accordance with GAAP, fairly represent the Borrowers’ financial
      position and the results of its operations, and whether or not such Officer
      has
      knowledge of the occurrence of any Default or Event of Default and, if so,
      stating in reasonable detail the facts with respect thereto.

     

    
      
        
        

      

      
        -29-

        
          

        

      

      
        
        

      

    

     

    (b) Monthly
      Financial Statements.
      As soon
      as available and in any event within 30 days after the end of each month,
      the unaudited/internal balance sheet and statements of income and retained
      earnings of the Borrowers as at the end of and for such month and for the year
      to date period then ended, prepared on a consolidating and consolidated basis
      to
      include any Affiliates, in reasonable detail and stating in comparative form
      the
      figures for the corresponding date and periods in the previous year, all
      prepared in accordance with GAAP, subject to year-end audit adjustments and
      which fairly represent the Borrowers’ financial position and the results of its
      operations; and accompanied by a certificate of the Borrowers’ chief financial
      officer, substantially in the form of Exhibit B hereto stating (i) that
      such financial statements have been prepared in accordance with GAAP, subject
      to
      year-end audit adjustments, and fairly represent the Borrowers’ financial
      position and the results of its operations, (ii) whether or not such
      Officer has knowledge of the occurrence of any Default or Event of Default
      not
      theretofore reported and remedied and, if so, stating in reasonable detail
      the
      facts with respect thereto, and (iii) all relevant facts in reasonable
      detail to evidence, and the computations as to, whether or not the Borrowers
      are
      in compliance with the Financial Covenants.

     

    (c) Collateral
      Reports.
      Within
      15 days after the end of each month or more frequently if the Lender so
      requires, the Borrowers’ accounts receivable and its accounts payable, and a
      calculation of the Borrowers’ Accounts and Eligible Accounts as at the end of
      such month or shorter time period.

     

    (d) Projections.
      No
      later than 30 days prior to the last day of each fiscal year, the Borrowers’
projected balance sheets, income statements, statements of cash flow and
      projected Availability for each month of the succeeding fiscal year, each in
      reasonable detail. Such items will be certified by the Officer who is the
      Borrowers’ chief financial officer as being the most accurate projections
      available and identical to the projections used by the Borrowers for internal
      planning purposes and be delivered with a statement of underlying assumptions
      and such supporting schedules and information as the Lender may in its
      discretion require.

     

    
      
        
        

      

      
        -30-

        
          

        

      

      
        
        

      

    

     

    (e) Supplemental
      Reports.
      Daily,
      the Borrowers’ “daily collateral reports”, receivables schedules, collection
      reports, copies of invoices to account debtors in excess of $20,000, signed
      and
      dated shipment documents and delivery receipts for goods sold to said account
      debtors in excess of $20,000.

    

    (f) Litigation.
      Immediately after the commencement thereof, notice in writing of all litigation
      and of all proceedings before any governmental or regulatory agency affecting
      the Borrowers (i) of the type described in Section 5.14(c), or
      (ii) which seek a monetary recovery against the Borrowers in excess of
      $10,000.

     

    (g) Defaults.
      When
      any Officer of the Borrowers becomes aware of the probable occurrence of any
      Default or Event of Default, and no later than 3 days after such Officer becomes
      aware of such Default or Event of Default, notice of such occurrence, together
      with a detailed statement by a responsible Officer of the Borrowers of the
      steps
      being taken by the Borrowers to cure the effect thereof.

     

    (h) Plans.
      As soon
      as possible, and in any event within 30 days after the Borrowers know or
      have reason to know that any Reportable Event with respect to any Pension Plan
      has occurred, a statement signed by the Officer who is the Borrowers’ chief
      financial officer setting forth details as to such Reportable Event and the
      action which the Borrowers propose to take with respect thereto, together with
      a
      copy of the notice of such Reportable Event to the Pension Benefit Guaranty
      Corporation. As soon as possible, and in any event within 10 days after the
      Borrowers fail to make any quarterly contribution required with respect to
      any
      Pension Plan under Section 412(m) of the IRC, the Borrowers will deliver to
      the
      Lender a statement signed by the Officer who is the Borrowers’ chief financial
      officer setting forth details as to such failure and the action which the
      Borrowers propose to take with respect thereto, together with a copy of any
      notice of such failure required to be provided to the Pension Benefit Guaranty
      Corporation. As soon as possible, and in any event within ten days after the
      Borrowers know or have reason to know that they have or are reasonably expected
      to have any liability under Sections 4201 or 4243 of ERISA for any withdrawal,
      partial withdrawal, reorganization or other event under any Multiemployer Plan,
      the Borrowers will deliver to the Lender a statement of the Borrowers’ chief
      financial officer setting forth details as to such liability and the action
      which the Borrowers propose to take with respect thereto.

     

    (i) Disputes.
      Promptly upon knowledge thereof, notice of (i) any disputes or claims by
      the Borrowers’ customers exceeding $5,000 individually or $10,000 in the
      aggregate during any fiscal year; (ii) credit memos; and (iii) any
      goods returned to or recovered by the Borrowers.

     

    (j) Officers
      and Directors.
      Promptly upon knowledge thereof, notice of any change in the persons
      constituting the Borrowers’ Officers and Directors.

     

    (k) Collateral.
      Promptly upon knowledge thereof, notice of any loss of or material damage to
      any
      Collateral or of any substantial adverse change in any Collateral or the
      prospect of payment thereof.

     

    (l) Commercial
      Tort Claims.
      Promptly upon knowledge thereof, notice of any commercial tort claims it may
      bring against any Person, including the name and address of each defendant,
      a
      summary of the facts, an estimate of the Borrowers’ damages, copies of any
      complaint or demand letter submitted by the Borrowers, and such other
      information as the Lender may request.

     

    
      
        
        

      

      
        -31-

        
          

        

      

      
        
        

      

    

     

    (m) Intellectual
      Property.

     

    (i) 30
      days
      prior written notice of Borrowers’ intent to acquire material Intellectual
      Property Rights; except for transfers permitted under Section 6.18, the
      Borrowers will give the Lender 30 days prior written notice of its intent to
      dispose of material Intellectual Property Rights and upon request shall provide
      the Lender with copies of all proposed documents and agreements concerning
      such
      rights.

     

    (ii) Promptly
      upon knowledge thereof, notice of (A) any Infringement of its Intellectual
      Property Rights by others, (B) claims that the Borrowers are Infringing
      another Person’s Intellectual Property Rights and (C) any threatened
      cancellation, termination or material limitation of its Intellectual Property
      Rights.

     

    (iii) Promptly
      upon receipt, copies of all registrations and filings with respect to its
      Intellectual Property Rights.

     

    (n) Reports
      to Owners.
      Promptly upon their distribution, copies of all financial statements, reports
      and proxy statements which the Borrowers shall have sent to their
      Owners.

     

    (o) SEC
      Filings.
      Promptly after the sending or filing thereof, copies of all regular and periodic
      reports which Pacific CMA shall file with the Securities and Exchange Commission
      or any national securities exchange.

     

    (p) Tax
      Returns.
      As soon
      as possible, and in any event no later than five days after they are due to
      be filed, copies of the state and federal income tax returns and all schedules
      thereto of Pacific CMA. 

    

    (q) Tax
      Returns and Personal Financial Statements of individual
      Guarantor.
      As soon
      as possible and in any event no later than April 30th
      of each
      year, the current personal financial statement and state and federal income
      tax
      returns and all schedules thereto of Alfred Lam. 

    

    (r) Violations
      of Law.
      Promptly upon knowledge thereof, notice of the Borrowers’ violation of any law,
      rule or regulation, the non-compliance with which could have a Material Adverse
      Effect on the Borrowers.

     

    (s)
       Other
      Reports.
      From
      time to time, with reasonable promptness, any and all receivables schedules,
      collection reports, deposit records, equipment schedules, copies of invoices
      to
      account debtors, and such other material, reports, records or information as
      the
      Lender may request. 

     

    
      
        
        

      

      
        -32-

        
          

        

      

      
        
        

      

    

     

    Section
      6.2 Financial
      Covenants.

     

    (a) Minimum
      Book Net Worth (Borrowers).
      The
      Borrowers, on a consolidated basis, will maintain, during each period described
      below, Book Net Worth, determined as of the end of each month, in an amount
      not
      less than the amount set forth for each such period (numbers appearing between
      “< >” are negative):

     

    
      	
              Period
                Ending

            	 	
              Minimum
                Book Net Worth

            	 
	
              Funding
                Date through March 31, 2007

            	 	
              $

            	
              435,000

            	 
	
              April
                1, 2007 through June 30, 2007

            	 	
              $

            	
              600,000

            	 
	
              July
                1, 2007 through September 30, 2007

            	 	
              $

            	
              1,000,000

            	 
	
              October
                1, 2007 through December 31, 2007

            	 	
              $

            	
              1,635,000

            	 

    

    

    (b) Minimum
      Book Net Worth (Consolidated with Pacific CMA).
      The
      Borrowers and Pacific CMA, on a consolidated basis, will maintain, during each
      period described below, Book Net Worth, determined as of the end of each month,
      in an amount not less than the amount set forth for each such period (numbers
      appearing between “< >” are negative):

     

    
      	
              Period
                Ending

            	 	
              Minimum
                Book Net Worth

            	 
	
              Funding
                Date through March 31, 2007

            	 	
              $

            	
              5,538,500

            	 
	
              April
                1, 2007 through June 30, 2007

            	 	
              $

            	
              7,090,000

            	 
	
              July
                1, 2007 through September 30, 2007

            	 	
              $

            	
              9,750,000

            	 
	
              October
                1, 2007 through December 31, 2007

            	 	
              $

            	
              10,850,000

            	 

    

    

     

    (c) Minimum
      Net Income (Borrowers).
      The
      Borrowers, on a consolidated basis, will achieve, for each period described
      below, Net Income of not less than the amount set forth for each such period
      (numbers appearing between “< >” are negative):

     

    
      	
              Quarter
                Ending

            	 	
              Minimum
                Net Income

            	 
	
              Three
                months ending March 31, 2007

            	 	
              $

            	
              155,000

            	 
	
              Six
                months ending June 30, 2007

            	 	
              $

            	
              315,000

            	 
	
              Nine
                months ending September 30, 2007

            	 	
              $

            	
              725,000

            	 
	
              Twelve
                months ending December 31, 2007

            	 	
              $

            	
              1,350,000

            	 

    

     

    
      
        
        

      

      
        -33-

        
          

        

      

      
        
        

      

    

    

    (d) Minimum
      Net Income (Consolidated with Pacific CMA).
      The
      Borrowers and Pacific CMA, on a consolidated basis, will achieve, for each
      period described below, Net Income of not less than the amount set forth for
      each such period (numbers appearing between “< >” are
      negative):

     

    
      	
              Quarter
                Ending

            	 	
              Minimum
                Net Income

            	 
	
              Six
                months ending June 30, 2007

            	 	
              $

            	
              765,000

            	 
	
              Nine
                months ending September 30, 2007

            	 	
              $

            	
              1,875,000

            	 
	
              Twelve
                months ending December 31, 2007

            	 	
              $

            	
              3,000,000

            	 

    

     

    (e) Establishing
      Future Financial Covenants.
      The
      Borrowers acknowledge and agree that, upon Lender’s receipt of projections,
      satisfactory to Lender in its discretion, for the fiscal year ending December
      31, 2008 and each fiscal year thereafter from Borrowers, Lender shall reset
      the
      foregoing Financial Covenants in its reasonable discretion. Borrowers agree
      to
      comply with such Financial Covenants, as reset.

     

    Section
      6.3 Permitted
      Liens; Financing Statements.

     

    (a) The
      Borrowers will not create, incur or suffer to exist any Lien upon or of any
      of
      their assets, now owned or hereafter acquired, to secure any indebtedness;
      excluding,
      however,
      from
      the operation of the foregoing, the following (each a “Permitted Lien”;
      collectively, “Permitted Liens”):

     

    (i) In
      the
      case of any of the Borrowers’ property which is not Collateral, covenants,
      restrictions, rights, easements and minor irregularities in title which do
      not
      materially interfere with the Borrowers’ business or operations as presently
      conducted;

     

    (ii) Liens
      in
      existence on the date hereof and listed in Schedule 6.3 hereto, securing
      indebtedness for borrowed money permitted under this Agreement;

     

    (iii) The
      Security Interest and Liens created by the Security Documents; and

     

    (iv) Purchase
      money Liens relating to the acquisition of machinery and equipment of the
      Borrowers not exceeding the lesser of cost or fair market value thereof[, not
      exceeding $20,000 for any one purchase or $30,000 in the aggregate during any
      fiscal year, and so long as no Default Period is then in existence and none
      would exist immediately after such acquisition.

     

    (b) The
      Borrowers will not amend any financing statements in favor of the Lender except
      as permitted by law.
      Any
      authorization by the Lender to any Person to amend financing statements in
      favor
      of the Lender shall be in writing.

     

    Section
      6.4 Indebtedness.
      The
      Borrowers will not incur, create, assume or permit to exist any indebtedness
      or
      liability on account of deposits or advances or any indebtedness for borrowed
      money or letters of credit issued on the Borrowers’ behalf, or any other
      indebtedness or liability evidenced by notes, bonds, debentures or similar
      obligations, except:

     

    (a) Any
      existing or future Indebtedness or any other obligations of the Borrowers to
      the
      Lender;

     

    
      
        
        

      

      
        -34-

        
          

        

      

      
        
        

      

    

     

    (b) Any
      indebtedness of the Borrowers in existence on the date hereof and listed in
      Schedule 6.4 hereto; and

     

    (c) Any
      indebtedness relating to Permitted Liens.

     

    Section
      6.5 Guaranties.
      The
      Borrowers will not assume, guarantee, endorse or otherwise become directly
      or
      contingently liable in connection with any obligations of any other Person,
      except:

     

    (a) The
      endorsement of negotiable instruments by the Borrowers for deposit or collection
      or similar transactions in the ordinary course of business; and

     

    (b) Guaranties,
      endorsements and other direct or contingent liabilities in connection with
      the
      obligations of other Persons, in existence on the date hereof and listed in
      Schedule 6.4 hereto.

     

    Section
      6.6 Investments
      and Subsidiaries.
      The
      Borrowers will not make or permit to exist any loans or advances to, or make
      any
      investment or acquire any interest whatsoever in, any other Person or Affiliate,
      including any partnership or joint venture, nor purchase or hold beneficially
      any stock or other securities or evidence of indebtedness of any other Person
      or
      Affiliate, except:

     

    (a) Investments
      in direct obligations of the United States of America or any agency or
      instrumentality thereof whose obligations constitute full faith and credit
      obligations of the United States of America having a maturity of one year or
      less, commercial paper issued by U.S. corporations rated “A-1” or “A-2” by
      Standard & Poor’s Ratings Services or “P-1” or “P-2” by Moody’s
      Investors Service or certificates of deposit or bankers’ acceptances having a
      maturity of one year or less issued by members of the Federal Reserve System
      having deposits in excess of $100,000,000 (which certificates of deposit or
      bankers’ acceptances are fully insured by the Federal Deposit Insurance
      Corporation);

     

    (b) Travel
      advances or loans to the Borrowers’ Officers and employees not exceeding at any
      one time an aggregate of $15,000;

     

    (c) Prepaid
      rent not exceeding one month or security deposits; and

     

    (d) Current
      investments in the Subsidiaries in existence on the date hereof and listed
      in
      Schedule 5.5 hereto.

     

    Section
      6.7 Dividends
      and Distributions.
      The
      Borrowers will not declare or pay any dividends (other than dividends payable
      solely in stock of the Borrowers) on any class of its stock, or, except as
      permitted by Section 2.14 hereof, make any payment on account of the purchase,
      redemption or other retirement of any shares of such stock, or other securities
      or evidence of its indebtedness or make any distribution in respect thereof,
      either directly or indirectly.

     

    
      
        
        

      

      
        -35-

        
          

        

      

      
        
        

      

    

     

    Section
      6.8 Reserved.

     

    Section
      6.9 Reserved.

     

    Section
      6.10 Books
      and Records; Collateral
      Examination, Inspection and Appraisals. 

     

    (a) The
      Borrowers will keep accurate books of record and account for themselves
      pertaining to the Collateral and pertaining to the Borrowers’ business and
      financial condition and such other matters as the Lender may from time to time
      request in which true and complete entries will be made in accordance with
      GAAP
      and, upon the Lender’s request, will permit any officer, employee, attorney,
      accountant or other agent of the Lender to audit, review, make extracts from
      or
      copy any and all company and financial books and records of the Borrowers at
      all
      times during ordinary business hours, to send and discuss with account debtors
      and other obligors requests for verification of amounts owed to the Borrowers,
      and to discuss the Borrowers’ affairs with any of its Directors, Officers,
      employees or agents. 

     

    (b) The
      Borrowers hereby irrevocably authorize all accountants and third parties to
      disclose and deliver to the Lender or its designated agent, at the Borrowers’
expense, all financial information, books and records, work papers, management
      reports and other information in their possession regarding the Borrowers.
      

     

    (c) The
      Borrowers will permit the Lender or its employees, accountants, attorneys or
      agents, to examine and inspect any Collateral or any other property of the
      Borrowers at any time during ordinary business hours. 

     

    (d) The
      Lender may also, from time to time, obtain at the Borrowers’ expense an
      appraisal of Collateral by an appraiser acceptable to the Lender in its sole
      discretion._] 

     

    Section
      6.11 Account
      Verification. 

     

    (a) The
      Lender or its agent may at any time and from time to time send or require the
      Borrowers to send requests for verification of accounts or notices of assignment
      to account debtors and other obligors. The Lender or its agent may also at
      any
      time and from time to time telephone account debtors and other obligors to
      verify accounts.

     

    (b) The
      Borrowers shall pay when due each account payable due to a Person holding a
      Permitted Lien (as a result of such payable) on any Collateral. 

     

    Section
      6.12 Compliance
      with Laws.

     

    (a) The
      Borrowers shall (i) comply, and cause each Subsidiary to comply, with the
      requirements of applicable laws and regulations, the non-compliance with which
      would materially and adversely affect its business or its financial condition
      and (ii) use and keep the Collateral, and require that others use and keep
      the Collateral, only for lawful purposes, without violation of any federal,
      state or local law, statute or ordinance.

     

    
      
        
        

      

      
        -36-

        
          

        

      

      
        
        

      

    

     

    (b) Without
      limiting the foregoing undertakings, the Borrowers specifically agree that
      they
      will comply, and cause each Subsidiary to comply, with all applicable
      Environmental Laws and obtain and comply with all permits, licenses and similar
      approvals required by any Environmental Laws, and will not generate, use,
      transport, treat, store or dispose of any Hazardous Substances in such a manner
      as to create any material liability or obligation under the common law of any
      jurisdiction or any Environmental Law.

     

    (c) The
      Borrowers
      shall (i) ensure, and cause Pacific CMA and each Subsidiary to ensure, that
      no
      Owner shall be listed on the Specially Designated Nationals and Blocked Person
      List or other similar lists maintained by the Office of Foreign Assets Control
      ("OFAC"), the Department of the Treasury or included in any Executive Orders,
      (ii) not use or permit the use of the proceeds of the Credit Facility or any
      other financial accommodation from the Lender to violate any of the foreign
      asset control regulations of OFAC or other applicable law, (iii) comply, and
      cause Pacific CMA and each Subsidiary to comply, with all applicable Bank
      Secrecy Act laws and regulations, as amended from time to time, and (iv)
      otherwise comply with the USA Patriot Act as required by federal law and the
      Lender's policies and practices.

     

    Section
      6.13 Payment
      of Taxes and Other Claims.
      The
      Borrowers will pay or discharge, when due, (a) all taxes, assessments and
      governmental charges levied or imposed upon it or upon its income or profits,
      upon any properties belonging to it (including the Collateral) or upon or
      against the creation, perfection or continuance of the Security Interest, prior
      to the date on which penalties attach thereto, (b) all federal, state and
      local taxes required to be withheld by it, and (c) all lawful claims for
      labor, materials and supplies which, if unpaid, might by law become a Lien
      upon
      any properties of the Borrowers; provided, that the Borrowers shall not be
      required to pay any such tax, assessment, charge or claim whose amount,
      applicability or validity is being contested in good faith by appropriate
      proceedings and for which proper reserves have been made.

     

    Section
      6.14 Maintenance
      of Properties.

     

    (a) The
      Borrowers will keep and maintain the Collateral and all of their other
      properties necessary or useful in their business in good condition, repair
      and
      working order (normal wear and tear excepted) and will from time to time replace
      or repair any worn, defective or broken parts; provided,
      however,
      that
      nothing in this covenant shall prevent the Borrowers from discontinuing the
      operation and maintenance of any of their properties if such discontinuance
      is,
      in the Borrowers’ judgment, desirable in the conduct of the Borrowers’ business
      and not disadvantageous in any material respect to the Lender. The Borrowers
      will take all commercially reasonable steps necessary to protect and maintain
      their Intellectual Property Rights.

     

    (b) The
      Borrowers will defend the Collateral against all Liens, claims or demands of
      all
      Persons (other than the Lender) claiming the Collateral or any interest therein.
      The Borrowers will keep all Collateral free and clear of all Liens except
      Permitted Liens. The Borrowers will take all commercially reasonable steps
      necessary to prosecute any Person Infringing its Intellectual Property Rights
      and to defend itself against any Person accusing it of Infringing any Person’s
      Intellectual Property Rights.

     

    
      
        
        

      

      
        -37-

        
          

        

      

      
        
        

      

    

     

    Section
      6.15 Insurance.
      The
      Borrowers will obtain and at all times maintain insurance with insurers
      acceptable to the Lender, in such amounts, on such terms (including any
      deductibles) and against such risks as may from time to time be required by
      the
      Lender, but in all events in such amounts and against such risks as is usually
      carried by companies engaged in similar business and owning similar properties
      in the same general areas in which the Borrowers operate. Without limiting
      the
      generality of the foregoing, the Borrowers will at all times maintain business
      interruption insurance including coverage for force majeure and keep all
      tangible Collateral insured against risks of fire (including so-called extended
      coverage), theft, collision (for Collateral consisting of motor vehicles) and
      such other risks and in such amounts as the Lender may reasonably request,
      with
      any loss payable to the Lender to the extent of its interest, and all policies
      of such insurance shall contain a lender’s loss payable endorsement for the
      Lender’s benefit. All policies of liability insurance required hereunder shall
      name the Lender as an additional insured.

     

    Section
      6.16 Preservation
      of Existence.
      The
      Borrowers will preserve and maintain their existence and all of their rights,
      privileges and franchises necessary or desirable in the normal conduct of their
      business and shall conduct their business in an orderly, efficient and regular
      manner.

     

    Section
      6.17 Delivery
      of Instruments, etc.
      Upon
      request by the Lender, the Borrowers will promptly deliver to the Lender in
      pledge all instruments, documents and chattel paper constituting Collateral,
      duly endorsed or assigned by the Borrowers.

     

    Section
      6.18 Sale
      or Transfer of Assets; Suspension of Business Operations.
      The
      Borrowers will not sell, lease, assign, transfer or otherwise dispose of
      (i) the stock of any Subsidiary, (ii) all or a substantial part of its
      assets, or (iii) any Collateral or any interest therein (whether in one
      transaction or in a series of transactions) to any other Person other than
      the
      sale of Inventory in the ordinary course of business and will not liquidate,
      dissolve or suspend business operations. The Borrowers will not transfer any
      part of their ownership interest in any Intellectual Property Rights and will
      not permit any agreement under which they have licensed Licensed Intellectual
      Property to lapse, except that the Borrowers may transfer such rights or permit
      such agreements to lapse if they shall have reasonably determined that the
      applicable Intellectual Property Rights are no longer useful in their business.
      If the Borrowers transfer any Intellectual Property Rights for value, the
      Borrowers will pay over the proceeds to the Lender for application to the
      Indebtedness. The Borrowers will not license any other Person to use any of
      the
      Borrowers’ Intellectual Property Rights, except that the Borrowers may grant
      licenses in the ordinary course of their business in connection with sales
      of
      Inventory or provision of services to its customers.

     

    Section
      6.19 Consolidation
      and Merger; Asset Acquisitions.
      The
      Borrowers will not consolidate with or merge into any Person, or permit any
      other Person to merge into them, or acquire (in a transaction analogous in
      purpose or effect to a consolidation or merger) all or substantially all the
      assets of any other Person.

     

    Section
      6.20 Sale
      and Leaseback.
      The
      Borrowers will not enter into any arrangement, directly or indirectly, with
      any
      other Person whereby the Borrowers shall sell or transfer any real or personal
      property, whether now owned or hereafter acquired, and then or thereafter rent
      or lease as lessee such property or any part thereof or any other property
      which
      the Borrowers intend to use for substantially the same purpose or purposes
      as
      the property being sold or transferred.

     

    
      
        
        

      

      
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    Section
      6.21 Restrictions
      on Nature of Business.
      The
      Borrowers will not engage in any line of business materially different from
      that
      presently engaged in by the Borrowers and will not purchase, lease or otherwise
      acquire assets not related to their business.

     

    Section
      6.22 Accounting.
      The
      Borrowers will not adopt any material change in accounting principles other
      than
      as required by GAAP. The Borrowers will not adopt, permit or consent to any
      change in their fiscal year.

     

    Section
      6.23 Discounts,
      etc.
      After
      notice from the Lender, the Borrowers will not grant any discount, credit or
      allowance to any customer of the Borrowers or accept any return of goods sold.
      The Borrowers will not at any time modify, amend, subordinate, cancel or
      terminate the obligation of any account debtor or other obligor of the
      Borrowers.

     

    Section
      6.24 Plans.
      Except
      as disclosed to the Lender in writing prior to the date hereof, neither the
      Borrowers nor any ERISA Affiliate will (i) adopt, create, assume or become
      a
      party to any Pension Plan, (ii) incur any obligation to contribute to any
      Multiemployer Plan, (iii) incur any obligation to provide post-retirement
      medical or insurance benefits with respect to employees or former employees
      (other than benefits required by law) or (iv) amend any Plan in a manner that
      would materially increase its funding obligations.

     

    Section
      6.25 Place
      of Business; Name.
      The
      Borrowers will not transfer their chief executive office or principal place
      of
      business, or move, relocate, close or sell any business location. The Borrowers
      will not permit any tangible Collateral or any records pertaining to the
      Collateral to be located in any state or area in which, in the event of such
      location, a financing statement covering such Collateral would be required
      to
      be, but has not in fact been, filed in order to perfect the Security Interest.
      The Borrowers will not change their names or jurisdiction of
      organization.

     

    Section
      6.26 Constituent
      Documents; S Corporation Status.
      The
      Borrowers will not amend their Constituent Documents. The Borrowers will not
      become S Corporations.

     

    Section
      6.27 Affiliate
      Transactions. The Borrowers shall not enter into or be a party to any
      agreement or transaction with any Affiliate except in the ordinary course of,
      and pursuant to the reasonable requirements of, Borrowers’ business and upon
      fair and reasonable terms that are no less favorable to Borrowers than they
      would obtain in a comparable arms length transaction with a Person not an
      Affiliate.

     

    Section
      6.28 Performance
      by the Lender.
      If the
      Borrowers at any time fail to perform or observe any of the foregoing covenants
      contained in this Article VI or elsewhere herein, and if such failure shall
      continue for a period of ten calendar days after the Lender gives the Borrowers
      written notice thereof (or in the case of the agreements contained in Section
      6.13 and Section 6.15, immediately upon the occurrence of such failure, without
      notice or lapse of time), the Lender may, but need not, perform or observe
      such
      covenant on behalf and in the name, place and stead of the Borrowers (or, at
      the
      Lender’s option, in the Lender’s name) and may, but need not, take any and all
      other actions which the Lender may reasonably deem necessary to cure or correct
      such failure (including the payment of taxes, the satisfaction of Liens, the
      performance of obligations owed to account debtors or other obligors, the
      procurement and maintenance of insurance, the execution of assignments, security
      agreements and financing statements, and the endorsement of instruments); and
      the Borrowers shall thereupon pay to the Lender on demand the amount of all
      monies expended and all costs and expenses (including reasonable attorneys’ fees
      and legal expenses) incurred by the Lender in connection with or as a result
      of
      the performance or observance of such agreements or the taking of such action
      by
      the Lender, together with interest thereon from the date expended or incurred
      at
      the Default Rate. To facilitate the Lender’s performance or observance of such
      covenants of the Borrowers, the Borrowers hereby irrevocably appoint the Lender,
      or the Lender’s delegate, acting alone, as the Borrowers’ attorney in fact
      (which appointment is coupled with an interest) with the right (but not the
      duty) from time to time to create, prepare, complete, execute, deliver, endorse
      or file in the name and on behalf of the Borrowers any and all instruments,
      documents, assignments, security agreements, financing statements, applications
      for insurance and other agreements and writings required to be obtained,
      executed, delivered or endorsed by the Borrowers hereunder.

     

    
      
        
        

      

      
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    ARTICLE
      VII

     

    EVENTS
      OF DEFAULT, RIGHTS AND REMEDIES

     

    Section
      7.1. Events
      of Default. Notwithstanding that the Lender may demand immediate payment of
      any Indebtedness at any time, whether or not a Default Period then exists,
      and
      without waiving or limiting in any respect the Lender’s right to so demand
      payment of the Indebtedness at any time, this Agreement sets forth a
      non-exclusive list of certain critical events after the occurrence of which
      the
      Lender expects that it would demand immediate payment of the Indebtedness and
      exercise its remedies. “Event of Default”, wherever used herein, means any one
      of the following events:

     

    (a) Default
      in the payment of the Revolving Note or any default with respect to any other
      Indebtedness due from Borrowers to Lender as such Indebtedness becomes due
      and
      payable;

     

    (b) Default
      in the performance, or breach, of any covenant or agreement of the Borrowers
      contained in this Agreement;

     

    (c) An
      Overadvance arises as the result of any reduction in the Borrowing Base, or
      arises in any manner on terms not otherwise approved of in advance by the Lender
      in writing; 

     

    (d) A
      Change
      of Control shall occur;

     

    (e) Any
      Financial Covenant shall become inapplicable due to the lapse of time and the
      failure of the Lender and the Borrowers to come to an agreement to amend any
      such covenant to cover future periods that is acceptable to the Lender in the
      Lender’s sole discretion;

     

    (f) The
      Borrowers or any Guarantor shall be or become insolvent, or admit in writing
      its
      or his inability to pay its or his debts as they mature, or make an assignment
      for the benefit of creditors; or the Borrowers or any Guarantor shall apply
      for
      or consent to the appointment of any receiver, trustee, or similar officer
      for
      it or him or for all or any substantial part of its or his property; or such
      receiver, trustee or similar officer shall be appointed without the application
      or consent of the Borrowers or such Guarantor, as the case may be; or the
      Borrowers or any Guarantor shall institute (by petition, application, answer,
      consent or otherwise) any bankruptcy, insolvency, reorganization, arrangement,
      readjustment of debt, dissolution, liquidation or similar proceeding relating
      to
      it or him under the laws of any jurisdiction; or any such proceeding shall
      be
      instituted (by petition, application or otherwise) against the Borrowers or
      any
      such Guarantor; or any judgment, writ, warrant of attachment or execution or
      similar process shall be issued or levied against a substantial part of the
      property of the Borrowers or any Guarantor;

     

    
      
        
        

      

      
        -40-

        
          

        

      

      
        
        

      

    

     

    (g) A
      petition shall be filed by or against the Borrowers or any Guarantor under
      the
      United States Bankruptcy Code or the laws of any other jurisdiction naming
      the
      Borrowers or such Guarantor as debtor;

     

    (h) Reserved;

     

    (i) Any
      representation or warranty made by the Borrowers in this Agreement, by any
      Guarantor in any Guaranty delivered to the Lender, or by the Borrowers (or
      any
      of its Officers) or any Guarantor in any agreement, certificate, instrument
      or
      financial statement or other statement contemplated by or made or delivered
      pursuant to or in connection with this Agreement or any such Guaranty shall
      be
      incorrect in any material respect;

     

    (j) The
      rendering against the Borrowers of final judgment, decree or order for the
      payment of money in excess of $50,000 and the continuance of such judgment,
      decree or order unsatisfied and in effect for any period of 30 consecutive
      days without a stay of execution;

     

    (k) A
      default
      under any bond, debenture, note or other evidence of material indebtedness
      of
      the Borrowers owed to any Person other than the Lender, or under any indenture
      or other instrument under which any such evidence of indebtedness has been
      issued or by which it is governed, or under any material lease or other
      contract, and the expiration of the applicable period of grace, if any,
      specified in such evidence of indebtedness, indenture, other instrument, lease
      or contract;

     

    (l) Any
      Reportable Event, which the Lender determines in good faith might constitute
      grounds for the termination of any Pension Plan or for the appointment by the
      appropriate United States District Court of a trustee to administer any Pension
      Plan, shall have occurred and be continuing 30 days after written notice to
      such effect shall have been given to the Borrowers by the Lender; or a trustee
      shall have been appointed by an appropriate United States District Court to
      administer any Pension Plan; or the Pension Benefit Guaranty Corporation shall
      have instituted proceedings to terminate any Pension Plan or to appoint a
      trustee to administer any Pension Plan; or the Borrowers or any ERISA Affiliate
      shall have filed for a distress termination of any Pension Plan under Title
      IV
      of ERISA; or the Borrowers or any ERISA Affiliate shall have failed to make
      any
      quarterly contribution required with respect to any Pension Plan under Section
      412(m) of the IRC, which the Lender determines in good faith may by itself,
      or
      in combination with any such failures that the Lender may determine are likely
      to occur in the future, result in the imposition of a Lien on the Borrowers’
assets in favor of the Pension Plan; or any withdrawal, partial withdrawal,
      reorganization or other event occurs with respect to a Multiemployer Plan which
      results or could reasonably be expected to result in a material liability of
      the
      Borrowers to the Multiemployer Plan under Title IV of ERISA;

     

    
      
        
        

      

      
        -41-

        
          

        

      

      
        
        

      

    

     

    (m) An
      event
      of default shall occur under any Security Document;

     

    (n) Default
      in the payment of any amount owed by the Borrowers to the Lender other than
      any
      Indebtedness arising hereunder;

     

    (o) Any
      Guarantor shall repudiate, purport to revoke or fail to perform any obligation
      under such Guaranty in favor of the Lender, any individual Guarantor shall
      die
      or any other Guarantor shall cease to exist;

     

    (p) The
      Borrowers shall take or participate in any action which would be prohibited
      under the provisions of any Subordination Agreement or make any payment with
      respect to indebtedness that has been subordinated pursuant to any Subordination
      Agreement;

     

    (q) The
      Lender believes in good faith that the prospect of payment in full of any part
      of the Indebtedness, or that full performance by the Borrowers under the Loan
      Documents is impaired, or that there has occurred any material adverse change
      in
      the business or financial condition of the Borrowers; 

     

    (r) There
      has
      occurred any breach, default or event of default by or attributable to, any
      Affiliate under any agreement between the Affiliate and the Lender;
      or

     

    (s) The
      indictment of any Director, Officer, Guarantor, or any Owner of the Borrowers
      for a felony offence under state or federal law. 

     

    (t) The
      Borrowers fail to enter into the $5,000,000 loan from BHC Interim Funding LP,
      on
      terms acceptable to Lender by June _____, 2007.

     

    Section
      7.2 Rights
      and Remedies.
      As
      provided in Section 2.10, the Lender may, at any time, refuse to make any
      requested Advance, demand payment of the Advances or terminate the Credit
      Facility, whether or not a Default Period then exists. In addition, during
      any
      Default Period, the Lender may exercise any or all of the following rights
      and
      remedies:

     

    (a) The
      Lender may, by notice to the Borrowers, declare the Indebtedness to be forthwith
      due and payable, whereupon all Indebtedness shall become and be forthwith due
      and payable, without presentment, notice of dishonor, protest or further notice
      of any kind, all of which the Borrowers hereby expressly waive;

     

    (b) The
      Lender may, without notice to the Borrowers and without further action, apply
      any and all money owing by the Lender to the Borrowers to the payment of the
      Indebtedness;

     

    (c) The
      Lender may exercise and enforce any and all rights and remedies available upon
      default to a secured party under the UCC, including the right to take possession
      of Collateral, or any evidence thereof, proceeding without judicial process
      or
      by judicial process (without a prior hearing or notice thereof, which the
      Borrowers hereby expressly waive) and the right to sell, lease or otherwise
      dispose of any or all of the Collateral (with or without giving any warranties
      as to the Collateral, title to the Collateral or similar warranties), and,
      in
      connection therewith, the Borrowers will on demand assemble the Collateral
      and
      make it available to the Lender at a place to be designated by the Lender which
      is reasonably convenient to both parties;

     

    
      
        
        

      

      
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    (d) Reserved;

     

    (e) The
      Lender may exercise and enforce its rights and remedies under the Loan
      Documents; 

     

    (f) The
      Lender may without regard to any waste, adequacy of the security or solvency
      of
      the Borrowers, apply for the appointment of a receiver of the Collateral, to
      which appointment the Borrowers hereby consent, whether or not foreclosure
      proceedings have been commenced under the Security Documents and whether or
      not
      a foreclosure sale has occurred; and 

    (g) The
      Lender may exercise any other rights and remedies available to it by law or
      agreement.

     

    Notwithstanding
      the foregoing, upon the occurrence of an Event of Default described in Section
      7.1(f) or (g), the Indebtedness shall be immediately due and payable
      automatically without presentment, demand, protest or notice of any kind. If
      the
      Lender sells any of the Collateral on credit, the Indebtedness will be reduced
      only to the extent of payments actually received. If the purchaser fails to
      pay
      for the Collateral, the Lender may resell the Collateral and shall apply any
      proceeds actually received to the Indebtedness.

     

    Section
      7.3 Certain
      Notices.
      If
      notice to the Borrowers of any intended disposition of Collateral or any other
      intended action is required by law in a particular instance, such notice shall
      be deemed commercially reasonable if given (in the manner specified in Section
      8.3) at least ten calendar days before the date of intended disposition or
      other
      action.

     

    ARTICLE
      VIII

     

    MISCELLANEOUS

     

    Section
      8.1 No
      Waiver; Cumulative Remedies; Compliance with Laws.
      No
      failure or delay by the Lender in exercising any right, power or remedy under
      the Loan Documents shall operate as a waiver thereof; nor shall any single
      or
      partial exercise of any such right, power or remedy preclude any other or
      further exercise thereof or the exercise of any other right, power or remedy
      under the Loan Documents. The remedies provided in the Loan Documents are
      cumulative and not exclusive of any remedies provided by law. The Lender may
      comply with any applicable state or federal law requirements in connection
      with
      a disposition of the Collateral and such compliance will not be considered
      adversely to affect the commercial reasonableness of any sale of the
      Collateral.

     

    Section
      8.2 Amendments,
      Etc.
      No
      amendment, modification, termination or waiver of any provision of any Loan
      Document or consent to any departure by the Borrowers therefrom or any release
      of a Security Interest shall be effective unless the same shall be in writing
      and signed by the Lender, and then such waiver or consent shall be effective
      only in the specific instance and for the specific purpose for which given.
      No
      notice to or demand on the Borrowers in any case shall entitle the Borrowers
      to
      any other or further notice or demand in similar or other
      circumstances.

     

    
      
        
        

      

      
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    Section
      8.3 Notices;
      Communication of Confidential Information; Requests for
      Accounting.
      Except
      as otherwise expressly provided herein, all notices, requests, demands and
      other
      communications provided for under the Loan Documents shall be in writing and
      shall be (a) personally delivered, (b) sent by first class United
      States mail, (c) sent by overnight courier of national reputation,
      (d) transmitted by telecopy, or (e) sent as electronic mail, in each case
      delivered or sent to the party to whom notice is being given to the business
      address, telecopier number, or e mail address set forth below next to its
      signature or, as to each party, at such other business address, telecopier
      number, or e mail address as it may hereafter designate in writing to the other
      party pursuant to the terms of this Section. All such notices, requests, demands
      and other communications shall be deemed to be an authenticated record
      communicated or given on (a) the date received if personally delivered,
      (b) when deposited in the mail if delivered by mail, (c) the date
      delivered to the courier if delivered by overnight courier, or (d) the date
      of transmission if sent by telecopy or by e mail, except that notices or
      requests delivered to the Lender pursuant to any of the provisions of
      Article II shall not be effective until received by the Lender. All
      notices, financial information, or other business records sent by either party
      to this Agreement may be transmitted, sent, or otherwise communicated via such
      medium as the sending party may deem appropriate and commercially reasonable;
      provided,
      however,
      that
      the risk that the confidentiality or privacy of such notices, financial
      information, or other business records sent by either party may be compromised
      shall be borne exclusively by the Borrowers. All requests for an accounting
      under Section 9-210 of the UCC (i) shall be made in a writing signed by a
      Person authorized under Section 2.2(b), (ii) shall be personally delivered,
      sent by registered or certified mail, return receipt requested, or by overnight
      courier of national reputation, (iii) shall be deemed to be sent when
      received by the Lender and (iv) shall otherwise comply with the requirements
      of
      Section 9-210. The Borrowers request that the Lender respond to all such
      requests which on their face appear to come from an authorized individual and
      releases the Lender from any liability for so responding. The Borrowers shall
      pay the Lender the maximum amount allowed by law for responding to such
      requests. 

     

    Section
      8.4 Further
      Documents.
      The
      Borrowers will from time to time execute, deliver, endorse and authorize the
      filing of any and all instruments, documents, conveyances, assignments, security
      agreements, financing statements, control agreements and other agreements and
      writings that the Lender may reasonably request in order to secure, protect,
      perfect or enforce the Security Interest or the Lender’s rights under the Loan
      Documents (but any failure to request or assure that the Borrowers execute,
      deliver, endorse or authorize the filing of any such item shall not affect
      or
      impair the validity, sufficiency or enforceability of the Loan Documents and
      the
      Security Interest, regardless of whether any such item was or was not executed,
      delivered or endorsed in a similar context or on a prior occasion).

     

    Section
      8.5 Costs
      and Expenses.
      The
      Borrowers shall pay on demand all costs and expenses, including reasonable
      attorneys’ fees, incurred by the Lender in connection with the Indebtedness,
      this Agreement, the Loan Documents and any other document or agreement related
      hereto or thereto, and the transactions contemplated hereby, including all
      such
      costs, expenses and fees incurred in connection with the negotiation,
      preparation, execution, amendment, administration, performance, collection
      and
      enforcement of the Indebtedness and all such documents and agreements and the
      creation, perfection, protection, satisfaction, foreclosure or enforcement
      of
      the Security Interest.

     

    
      
        
        

      

      
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    Section
      8.6 Indemnity.
      In
      addition to the payment of expenses pursuant to Section 8.5, the Borrowers
      shall
      indemnify, defend and hold harmless the Lender, and any of its participants,
      parent corporations, subsidiary corporations, affiliated corporations, successor
      corporations, and all present and future officers, directors, employees,
      attorneys and agents of the foregoing (the “Indemnitees”) from and against any
      of the following (collectively, “Indemnified Liabilities”):

     

    (i) Any
      and
      all transfer taxes, documentary taxes, assessments or charges made by any
      governmental authority by reason of the execution and delivery of the Loan
      Documents or the making of the Advances;

     

    (ii) Any
      claims, loss or damage to which any Indemnitee may be subjected if any
      representation or warranty contained in Section 5.14 proves to be incorrect
      in
      any respect or as a result of any violation of the covenant contained in Section
      6.12(b) ; and

     

    (iii) Any
      and
      all other liabilities, losses, damages, penalties, judgments, suits, claims,
      costs and expenses of any kind or nature whatsoever (including the reasonable
      fees and disbursements of counsel) in connection with the foregoing and any
      other investigative, administrative or judicial proceedings, whether or not
      such
      Indemnitee shall be designated a party thereto, which may be imposed on,
      incurred by or asserted against any such Indemnitee, in any manner related
      to or
      arising out of or in connection with the making of the Advances and the Loan
      Documents or the use or intended use of the proceeds of the
      Advances.

     

    If
      any
      investigative, judicial or administrative proceeding arising from any of the
      foregoing is brought against any Indemnitee, upon such Indemnitee’s request, the
      Borrowers, or counsel designated by the Borrowers and satisfactory to the
      Indemnitee, will resist and defend such action, suit or proceeding to the extent
      and in the manner directed by the Indemnitee, at the Borrowers’ sole cost and
      expense. Each Indemnitee will use its best efforts to cooperate in the defense
      of any such action, suit or proceeding. If the foregoing undertaking to
      indemnify, defend and hold harmless may be held to be unenforceable because
      it
      violates any law or public policy, the Borrowers shall nevertheless make the
      maximum contribution to the payment and satisfaction of each of the Indemnified
      Liabilities which is permissible under applicable law. The Borrowers’ obligation
      under this Section 8.6 shall survive the termination of this Agreement and
      the
      discharge of the Borrowers’ other obligations hereunder.

     

    Section
      8.7 Participants.
      The
      Lender and its participants, if any, are not partners or joint venturers, and
      the Lender shall not have any liability or responsibility for any obligation,
      act or omission of any of its participants. All rights and powers specifically
      conferred upon the Lender may be transferred or delegated to any of the Lender’s
      participants, successors or assigns.

     

    Section
      8.8 Execution
      in Counterparts; Telefacsimile Execution.
      This
      Agreement and other Loan Documents may be executed in any number of
      counterparts, each of which when so executed and delivered shall be deemed
      to be
      an original and all of which counterparts, taken together, shall constitute
      but
      one and the same instrument. Delivery of an executed counterpart of this
      Agreement by telefacsimile shall be equally as effective as delivery of an
      original executed counterpart of this Agreement. Any party delivering an
      executed counterpart of this Agreement by telefacsimile also shall deliver
      an
      original executed counterpart of this Agreement but the failure to deliver
      an
      original executed counterpart shall not affect the validity, enforceability,
      and
      binding effect of this Agreement.

     

    
      
        
        

      

      
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    Section
      8.9 Retention
      of Borrowers’ Records.
      The
      Lender shall have no obligation to maintain any electronic records or any
      documents, schedules, invoices, agings, or other papers delivered to the Lender
      by the Borrowers or in connection with the Loan Documents for more than 30
      days
      after receipt by the Lender.
      If there
      is a special need to retain specific records, the Borrowers must inform the
      Lender of their need to retain those records with particularity, which must
      be
      delivered in accordance with the notice provisions of Section 8.3 within 30
      days
      of the Lender taking control of same. 

     

    Section
      8.10 Binding
      Effect; Assignment; Complete Agreement; Sharing Information.
      The Loan
      Documents shall be binding upon and inure to the benefit of the Borrowers and
      the Lender and their respective successors and assigns, except that the
      Borrowers shall not have the right to assign their rights thereunder or any
      interest therein without the Lender’s prior written consent. To the extent
      permitted by law, the Borrowers waive and will not assert against any assignee
      any claims, defenses or set-offs which the Borrowers could assert against the
      Lender. This Agreement shall also bind all Persons who become a party to this
      Agreement as a borrower. This Agreement, together with the Loan Documents,
      comprises the complete and integrated agreement of the parties on the subject
      matter hereof and supersedes all prior agreements, written or oral, on the
      subject matter hereof. To the extent that any provision of this Agreement
      contradicts other provisions of the Loan Documents, this Agreement shall
      control. Without limiting the Lender’s right to share information regarding the
      Borrowers and their Affiliates with the Lender’s participants, accountants,
      lawyers and other advisors, the Lender and Wells Fargo Bank may share any and
      all information they may have in their possession regarding the Borrowers and
      their Affiliates, and the Borrowers waive any right of confidentiality they
      may
      have with respect to such sharing of information.

     

    Section
      8.11 Severability
      of Provisions.
      Any
      provision of this Agreement which is prohibited or unenforceable shall be
      ineffective to the extent of such prohibition or unenforceability without
      invalidating the remaining provisions hereof.

     

    Section
      8.12 Headings.
      Article,
      Section and subsection headings in this Agreement are included herein for
      convenience of reference only and shall not constitute a part of this Agreement
      for any other purpose.

     

    Section
      8.13 Governing
      Law; Jurisdiction, Venue; Waiver of Jury Trial.
      The Loan
      Documents shall be governed by and construed in accordance with the substantive
      laws (other than conflict laws) of the State of New York. The parties hereto
      hereby (i) consent to the personal jurisdiction of the state and federal
      courts located in the State of New York in connection with any controversy
      related to this Agreement; (ii) waive any argument that venue in any such
      forum is not convenient; (iii) agree that any litigation initiated by the
      Lender or the Borrowers in connection with this Agreement or the other Loan
      Documents may be venued in either the state or federal courts located in the
      County of New York, State of New York; and (iv) agree that a final judgment
      in any such suit, action or proceeding shall be conclusive and may be enforced
      in other jurisdictions by suit on the judgment or in any other manner provided
      by law.

     

    
      
        
        

      

      
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    THE
      BORROWERS AND THE LENDER WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION AT
      LAW
      OR IN EQUITY OR IN ANY OTHER PROCEEDING BASED ON OR PERTAINING TO THIS AGREEMENT
      OR ANY OTHER LOAN DOCUMENT.  

    
      

    

     

    IN
      WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
      by
      their respective officers thereunto duly authorized as of the date first above
      written. 

     

    
      	
              Airgate
                International Corporation

              Airgate
                International Corporation (Chicago)

              Paradigm
                International, Inc.

              153-04
                Rockaway Boulevard

              Jamaica,
                New York 11434

              Telecopier:
                _______________________

              Attention:
                ________________________

              e-mail:
                ___________________________

            	 	
              AIRGATE
                INTERNATIONAL CORPORATION

               

              By: 
                /s/
                Scott Turner

              
                

              

              Name: Scott
                Turner

              Title: President

            
	 	 	 
	 	 	
              AIRGATE
                INTERNATIONAL CORPORATION (CHICAGO)

               

              By: 
                /s/
                Scott Turner

              
                

              

              Name: Scott
                Turner

              Title: Vice
                President

               

            
	 	 	 
	 	 	
              PARADIGM
                INTERNATIONAL, INC.

               

              By: 
                /s/
                Scott Turner

              
                

              

              Name: Scott
                Turner

              Title: Vice
                President

               

            
	 	 	 
	
              Wells
                Fargo Bank, National Association

              Wells
                Fargo Business 

              Credit
                119 West 49th
                Street, 16th
                Floor

              New
                York, New York 10018

              Telecopier:
                (646) 728-3279

              Attention:
                Relationship Manager - Airgate International Corporation

              e-mail:
                ______________@wellsfargo.com

            	 	
              WELLS
                FARGO BANK, NATIONAL ASSOCIATION 

               

              By: 
                /s/
                Michelle Tawdeen

              
                

              

              Name: Michelle
                Tawdeen

              Title: Vice
                President

            

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Table
      of Exhibits and Schedules

    

      
        	
                Exhibit
                  A

              	 	
                Form
                  of Revolving Note

              
	 	 	 
	
                Exhibit
                  B

              	 	
                Compliance
                  Certificate

              
	 	 	 
	
                Exhibit
                  C

              	 	
                Premises

              
	 	 	 
	
                Schedule
                  5.1

              	 	
                Trade
                  Names, Chief Executive Office, Principal Place of Business, and
                  Locations
                  of Collateral

              
	 	 	 
	
                Schedule
                  5.2

              	 	
                Capitalization
                  and Organizational Chart

              
	 	 	 
	
                Schedule
                  5.5

              	 	
                Subsidiaries

              
	 	 	 
	
                Schedule
                  5.7

              	 	
                Litigation
                  Matters 

              
	 	 	 
	
                Schedule
                  5.11

              	 	
                Intellectual
                  Property Disclosures

              
	 	 	 
	
                Schedule
                  5.14

              	 	
                Environmental
                  Matters

              
	 	 	 
	
                Schedule
                  6.3

              	 	
                Permitted
                  Liens

              
	 	 	 
	
                Schedule
                  6.4

              	 	
                Permitted
                  Indebtedness and Guaranties

              

      

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Exhibit
      A to Credit and Security Agreement

     

    REVOLVING
      NOTE

     

    
      	$10,000,000	 	 	
              April
                ___,
                2007

            

    

     

    For
      value
      received, the undersigned, AIRGATE INTERNATIONAL CORPORATION, a New York
      corporation, AIRGATE INTERNATIONAL CORPORATION (CHICAGO), an Illinois
      corporation, and PARADIGM INTERNATIONAL, INC., a Florida corporation
      (collectively and individually the “Borrowers”), hereby jointly and severally
      promise to pay ON DEMAND, and if demand is not made, then as provided in the
      Credit Agreement (defined below), to the order of WELLS FARGO BANK, NATIONAL
      ASSOCIATION (the “Lender”), acting through its Wells Fargo Business Credit
      operating division, on the Termination Date referenced in the Credit and
      Security Agreement dated the same date as this Revolving Note that was entered
      into by the Lender and the Borrowers (as amended from time to time, the “Credit
      Agreement”), at Lender’s office located at 119 West 40th
      Street,
      16th
      Floor,
      New York, New York 10018, or at any other place designated at any time by the
      holder hereof, in lawful money of the United States of America and in
      immediately available funds, the principal sum of Ten Million Dollars
      ($10,000,000) or the aggregate unpaid principal amount of all Revolving Advances
      made by the Lender to the Borrowers under the Credit Agreement, together with
      interest on the principal amount hereunder remaining unpaid from time to time,
      computed on the basis of the actual number of days elapsed and a 360-day year,
      from the date hereof until this Revolving Note is fully paid at the rate from
      time to time in effect under the Credit Agreement.

     

    This
      Revolving Note is the Revolving Note referenced in the Credit Agreement, and
      is
      subject to the terms of the Credit Agreement, which provides, among other
      things, for acceleration hereof. Principal and interest due hereunder shall
      be
      payable as provided in the Credit Agreement, and this Revolving Note may be
      prepaid only in accordance with the terms of the Credit Agreement. This
      Revolving Note is secured, among other things, pursuant to the Credit Agreement
      and the Security Documents as therein defined, and may now or hereafter be
      secured by one or more other security agreements, mortgages, deeds of trust,
      assignments or other instruments or agreements.

     

    This
      Note
      is issued pursuant, and is subject, to the Credit Agreement, which provides,
      among other things, for acceleration hereof. This Note is the Revolving Note
      referred to in the Credit Agreement. This Note is secured, among other things,
      pursuant to the Credit Agreement and the Security Documents as therein defined,
      and may now or hereafter be secured by one or more other security agreements,
      mortgages, deeds of trust, assignments or other instruments or
      agreements.

     

    The
      Borrowers shall pay all costs of collection, including reasonable attorneys’
fees and legal expenses if this Revolving Note is not paid when due, whether
      or
      not legal proceedings are commenced.

     

    REMAINDER
      OF THIS PAGE INTENTIONALLY LEFT BLANK

     

    
      
        
        

      

      
        A-1

        
          

        

      

      
        
        

      

    

    Presentment
      or other demand for payment, notice of dishonor and protest are expressly
      waived.

     

    
      	 	
              AIRGATE
                INTERNATIONAL CORPORATION

               

              By:

              
                

              

              Name:

              
                

              

              Title:

              
                

              

            
	 	 
	 	
              AIRGATE
                INTERNATIONAL CORPORATION (CHICAGO)

               

              By:

              
                

              

              Name:

              
                

              

              Title:

              
                

              

            
	 	 
	 	
              PARADIGM
                INTERNATIONAL, INC.

               

              By:

              
                

              

              Name:

              
                

              

              Title:

              
                

              

            

    

    

    
      
        
        

      

      
        A-2

        
          

        

      

      
        
        

      

    

     

    Exhibit
      B to Credit and Security Agreement

     

    COMPLIANCE
      CERTIFICATE

    

      
        	
                To:

              	
                Wells
                  Fargo Bank, National Association

              
	
                Date:

              	
                [___________________,
                  200____]

              
	
                Subject:

              	
                Financial
                  Statements

              

      

       

    

    In
      accordance with our Credit and Security Agreement dated as of Mach ___, 2007
      (as
      amended from time to time, the “Credit Agreement”), attached are the financial
      statements of Airgate International Corporation, a New York corporation, Airgate
      International Corporation (Chicago), an Illinois corporation, and Paradigm
      International, Inc., a Florida corporation (collectively and individually,
      the
“Borrowers”) and of Pacific CMA, Inc., a Delaware corporation (“Pacific CMA”) as
      of and for [_________________,
      200__ _](the
      “Reporting Date”) and the year-to-date period then ended (the “Current
      Financials”). All terms used in this certificate have the meanings given in the
      Credit Agreement.

     

    I
      certify
      that the Current Financials have been prepared in accordance with GAAP, subject
      to year-end audit adjustments, and fairly present the Borrowers’ financial
      condition as of the date thereof.

     

    I
      further
      hereby certify as follows: Events
      of Default.
      (Check
      one):

     

    
      	
            	o	
              The
                undersigned does not have knowledge of the occurrence of a Default
                or
                Event of Default under the Credit Agreement except as previously
                reported
                in writing to the Lender.

            

    

     

    
      	
            	o	
              The
                undersigned has knowledge of the occurrence of a Default or Event
                of
                Default under the Credit Agreement not previously reported in writing
                to
                the Lender and attached hereto is a statement of the facts with respect
                to
                thereto. The Borrowers
                acknowledge that pursuant to Section 2.6(d) of the Credit Agreement,
                the
                Lender may impose the Default Rate at any time during the resulting
                Default Period.

            

    

     

    Material
      Adverse Change in Litigation Matters of the Borrowers.
      I
      further hereby certify as follows (check one):

     

    
      	
            	o	
              The
                undersigned has no knowledge of any material adverse change to the
                litigation exposure of the Borrowers or any of their Affiliates or
                of any
                Guarantor.

            

    

     

    
      	
            	o	
              The
                undersigned has knowledge of material adverse changes to the litigation
                exposure of the Borrowers or any of their Affiliates or of any Guarantor
                not previously disclosed in Schedule 5.7. Attached to this Certificate
                is
                a statement of the facts with respect
                thereto.

            

    

     

    
      
        
        

      

      
        B-1

        
          

        

      

      
        
        

      

    

     

    Financial
      Covenants.
      I
      further hereby certify as follows (check and complete each of the
      following):

     

    1. Minimum
      Book Net Worth (Borrowers).
      Pursuant to Section 6.2(a) of the Credit Agreement, as of the Reporting Date,
      the Borrowers’ Book Net Worth, on a consolidated basis, was $____________ ,
      which osatisfies odoes
      not
      satisfy the requirement that such amount be not less than the applicable amount
      set forth in the table below (numbers appearing between “< >“ are
      negative) on the Reporting Date:

     

    
      	
              Period
                Ending

            	 	
              Minimum
                Book Net Worth

            	 
	
              Funding
                Date through March 31, 2007

            	 	
              $

            	
              435,000

            	 
	
              April
                1, 2007 through June 30, 2007

            	 	
              $

            	
              600,000

            	 
	
              July
                1, 2007 through September 30, 2007

            	 	
              $

            	
              1,000,000

            	 
	
              October
                1, 2007 through December 31, 2007

            	 	
              $

            	
              1,635,000

            	 

    

    

    2. Minimum
      Book Net Worth (Consolidated with Pacific CMA).
      Pursuant to Section 6.2(b) of the Credit Agreement, as of the Reporting Date,
      the Borrowers’ Book Net Worth, on a consolidated basis with Pacific CMA, Inc., a
      Delaware corporation (“Pacific CMA”), was $____________ , which osatisfies
      o does
      not
      satisfy the requirement that such amount be not less than the applicable amount
      set forth in the table below (numbers appearing between “< >” are
      negative) on the Reporting Date:

     

    
      	
              Period
                Ending

            	 	
              Minimum
                Book Net Worth

            	 
	
              Funding
                Date through March 31, 2007

            	 	
              $

            	
              5,538,500

            	 
	
              April
                1, 2007 through June 30, 2007

            	 	
              $

            	
              7,090,000

            	 
	
              July
                1, 2007 through September 30, 2007

            	 	
              $

            	
              9,750,000

            	 
	
              October
                1, 2007 through December 31, 2007

            	 	
              $

            	
              10,850,000

            	 

    

     

    3. Minimum
      Net Income (Borrowers).
      Pursuant to Section 6.2(c) of the Credit Agreement, the Borrowers’ Net Income,
      on a consolidated basis, for the monthly period ending on the Reporting Date,
      was [_$_____________],
      which o satisfies o does
      not satisfy the requirement that such amount be not less than the applicable
      amount set forth in the table below (numbers appearing between “< >” are
      negative) on the Reporting Date:

     

    
      
        
        

      

      
        B-2

        
          

        

      

      
        
        

      

    

    

     

    
      	
              Quarter
                Ending

            	 	
              Minimum
                Net Income

            	 
	
              March
                31, 2007

            	 	
              $

            	
              155,000

            	 
	
              June
                30, 2007

            	 	
              $

            	
              315,000

            	 
	
              September
                30, 2007

            	 	
              $

            	
              725,000

            	 
	
              December
                31, 2007

            	 	
              $

            	
              1,350,000

            	 

    

     

    4. Minimum
      Net Income (Consolidated with Pacific CMA).
      Pursuant to Section 6.2(c) of the Credit Agreement, the Borrowers’ Net Income,
      on a consolidated basis with Pacific CMA, for the monthly period ending on
      the
      Reporting Date, was [_$_____________],
      which
  satisfies
      does
      not
      satisfy the requirement that such amount be not less than the applicable amount
      set forth in the table below (numbers appearing between “< >” are
      negative) on the Reporting Date:

     

    
      	
              Quarter
                Ending

            	 	
              Minimum
                Net Income

            	 
	
              June
                30, 2007

            	 	
              $

            	
              950,000

            	 
	
              September
                30, 2007

            	 	
              $

            	
              1,875,000

            	 
	
              December
                31, 2007

            	 	
              $

            	
              3,000,000

            	 

    

    

    REMAINDER
      OF THIS PAGE INTENTIONALLY LEFT BLANK

     

    
      
        
        

      

      
        B-3

        
          

        

      

      
        
        

      

    

    Attached
      hereto are all relevant facts in reasonable detail to evidence, and the
      computations of the financial covenants referred to above. These computations
      were made in accordance with GAAP.

     

    
      	 	
              AIRGATE
                INTERNATIONAL CORPORATION

               

               

              By:

              
                

              

              Name:

              
                

              

              Title: Chief
                Financial Officer

            
	 	
               

               

            
	 	
              AIRGATE
                INTERNATIONAL CORPORATION
(CHICAGO)

               

               

              By:

              
                

              

              Name:

              
                

              

              Title: Chief
                Financial Officer

            
	 	
               

               

            
	 	
              PARADIGM
                INTERNATIONAL, INC.

               

               

              By:

              
                

              

              Name:

              
                

              

              Title: Chief
                Financial Officer

            

    

     

    
      
        
        

      

      
        B-4

        
          

        

      

       

    

    Exhibit
      C to Credit and Security Agreement

     

    PREMISES

     

    The
      Premises referred to in the Credit and Security Agreement are legally described
      as follows:

     

    

      
        	
                Airgate
                  International Corp

              	 	 	 	 	 
	 	 	
                Landlord
                  name

              	 	
                Property
                  Address

              	 	 	
                Monthly
                  amount

              	 	
                Term

              
	 	 	 	 	 	 	 	 	 	 
	
                1

              	 	
                Rubin
                  Management Inc.

              	 	
                2/F.,
                  153-04 Rockaway Boulevard,

              	 	$	
                6,917.00

              	 	
                June
                  2006 to May 2008

              
	 	 	 	 	
                Jamaica,
                  NY 11434

              	 	 	 	
                 

              	 
	 	 	 	 	 	 	 	
                 

              	 	 
	
                2

              	 	
                Rubin
                  Management Inc.

              	 	
                1/F.,
                  Office and Warehouse of 

              	 	$	
                8,583.00

              	 	
                Dec
                  2003 to Nov 2006

              
	 	 	 	 	
                153-04
                  Rockaway Boulevard,

              	 	$	
                9,417.00

              	 	
                Dec
                  2006 to Nov 2008

              
	 	 	 	 	
                Jamaica,
                  NY 11434

              	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 
	
                3

              	 	
                Rubin
                  Management Inc.

              	 	
                1/F.,
                  Office and Warehouse of 

              	 	$	
                2,000.00

              	 	
                Mar
                  2005 to Feb 2007

              
	 	 	 	 	
                153-04
                  Rockaway Boulevard,

              	 	$	
                2,200.00

              	 	
                Mar
                  2007 to Feb 2010

              
	 	 	 	 	
                Jamaica,
                  NY 11434

              	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 
	
                Airgate
                  International Corp (Chicago)

              	 	 	 	 	 
	
                1

              	 	
                KFS
                  Inc.

              	 	
                2249
                  Windsor Court.

              	 	$	
                3,800.00

              	 	
                Aug
                  1, 2006 to Dec 31, 2006

              
	 	 	 	 	
                Addison,
                  IL 60101

              	 	$	
                4,425.00

              	 	
                Jan
                  1, 2007 to Dec 31, 2007

              
	 	 	 	 	 	 	$	
                5,027.50

              	 	
                Jan
                  1, 2008 to Dec 31, 2008

              
	 	 	 	 	 	 	$	
                5,540.00

              	 	
                Jan
                  1, 2009 to Jun 30, 2009

              
	 	 	 	 	 	 	 	 	 	 
	
                Paradigm
                  International Inc.

              	 	 	 	 	 
	 	 	
                Fair
                  Oak LLC

              	 	
                11200
                  Hindry Avenue, Unit A, Los Angeles, CA

              	 	$	
                12,587.50

              	 	
                Jan
                  1, 2007 - Sep 30, 2007

              
	 	 	 	 	
                Office

              	 	$	
                12,962.92

              	 	
                Oct
                  1, 2007 - Sep 30, 2008

              
	 	 	 	 	 	 	$	
                13,349.38

              	 	
                Oct
                  1, 2008 - Sep 30, 2009

              
	 	 	 	 	 	 	$	
                13,757.92

              	
                 

              	
                Oct
                  1, 2009 - Sep 30, 2010

              
	 	 	 	 	 	 	$	
                14,166.46

              	 	
                Oct
                  1, 2010 - Jun 30, 2011

              
	 	 	 	 	 	 	 	 	 	 
	
                Pacific
                  CMA International LLC

              	 	 	 	 	 
	 	 	
                No
                  lease

              	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 
	
                Pacific
                  CMA Inc.

              	 	 	 	 	 
	 	 	
                No
                  lease

              	 	 	 	 	 	 	 

      

    

    
      
        
        

      

      
        C-1

        
          

        

      

       

    

     

    SCHEDULE
      5.1

    to

    Credit
      and Security Agreement among

    Airgate
      International Corporation (“Airgate NY),

    Airgate
      International Corporation (Chicago) (“Airgate Chicago”),

    Paradigm
      International, Inc. (“PII”), Pacific CMA International, LLC
      (“LLC”)

    and
      Wells Fargo Bank, National Association.

    
      

    

     

    Tradenames,
      Chief Executive Office, 

    Principal
      Place of Business and Locations of Collateral

     

    
      	
              Name

            	 	
              Tradename

            	 	
              Principal
                Place of Business and Location
                of Collateral

            
	
              Airgate
                International Corporation

            	 	
              None

            	 	
              153-04
                Rockaway Boulevard Jamaica, NY 11434

               

            
	 	 	 	 	 
	
              Airgate
                International Corporation

              (Chicago)

            	 	
              None

            	 	
              2249
                Windsor Court 

              Addison,
                IL 60101

            
	 	 	 	 	 
	
              Paradigm
                International Inc.

            	 	
              “PDA”
                and 

              “Paradigm
                Global Logistics”

            	 	
              11200
                Hindry Avenue, Unit A

              Los
                Angeles, CA

            
	 	 	 	 	 
	
              Pacific
                CMA International LLC

            	 	
              None

            	 	
              153-04
                Rockaway Boulevard Jamaica, NY 11434

            
	 	 	 	 	 
	
              Pacific
                CMA, Inc.

            	 	
              None

            	 	
              153-04
                Rockaway Boulevard Jamaica, NY
                11434

            

    

     

    
      
        
        

      

      
        S-5.1-2

        
          

        

      

       

    

     

    SCHEDULE
      5.2

    to

    Credit
      and Security Agreement among

    Airgate
      International Corporation (“Airgate NY),

    Airgate
      International Corporation (Chicago) (“Airgate Chicago”),

    Paradigm
      International, Inc. (“PII”), Pacific CMA International, LLC
      (“LLC”)

    and
      Wells Fargo Bank, National Association.

    
      

    

     

    Capitalization

    

      
        	
                Name
                  of Company

              	 	
                The
                  Owners

              	 	
                %
                  of Ownership

              
	 	 	 	 	 
	
                Airgate
                  International Corp.

              	 	
                Pacific
                  CMA International LLC

              	 	
                99.11

              
	 	 	 	 	
                 

              
	
                Airgate
                  International Corp. 

              	 	
                Airgate
                  International Corp.

              	 	
                100

              
	
                (Chicago)

              	 	 	 	
                 

              
	 	 	 	 	
                 

              
	
                Paradigm
                  International Inc.

              	 	
                Pacific
                  CMA International LLC

              	 	
                100

              
	 	 	 	 	
                 

              
	
                Pacific
                  CMA International

              	 	
                Pacific
                  CMA Inc.

              	 	
                100

              
	
                LLC

              	 	 	 	
                 

              
	 	 	 	 	
                 

              
	
                Pacific
                  CMA Inc.(“PAM,”

              	 	
                Public

              	 	
                38

              
	
                “we,”
                  or “our”)

              	 	
                Lam
                  King Ko, Alfred*

              	 	
                62

              

      

    

     

    
      
        

      

    

    * Includes
      shares held in his name and in the name of Buller Services Corp., an entity
      in
      which he advises that he is the sole beneficial owner.

     

    At
      the
      close of business on March 15, 2007, there were 28,619,271 issued and
      outstanding shares of common stock which were held by approximately 231
      stockholders of record as of the end of March 2007. 

     

    We
      are
      authorized to issue up to 100,000,000 shares of common stock and 10,000,000
      shares of Preferred Stock. There is currently one series of preferred stock
      issued and outstanding: A Preferred Stock, with 10,000 shares being authorized
      and 3,000 shares being issued and outstanding. 

     

    Description
      of A Preferred Stock. Definitions of certain terms used in this description
      of
      the features of our A Preferred Stock under the subheading "Certain Definitions"
      below.

    

      
        	
                Stated
                  Amount Per Share:

              	 	
                $1,000

              
	 	 	 
	
                Par
                  Value Per Share:

              	 	
                $0.001

              
	 	 	 
	
                Dividends:

              	 	
                Cumulative:
                  6% per annum on the stated value of $1,000 payable in arrears beginning
                  June 1, 2004 payable in cash or in shares of common stock at our
                  election
                  (in the event certain conditions are
                  met).

              

      

       

      
        
          
          

        

        
          S-5.2-1

          
            

          

        

        
          
          

        

      

       

      
        	
                Liquidation
                  Preference:

              	 	
                Prior
                  to common stock; a liquidation payment of $1,000 per share outstanding
                  plus any outstanding unpaid dividends and damages.

              
	 	 	 
	
                Voting
                  Rights:

              	 	
                None,
                  except as required by Delaware law or if we alter or change adversely
                  the
                  powers, preferences or privileges of the A Preferred Stock or alter
                  or
                  amend the Certificate of Designation or similar events

              
	 	 	 
	
                Conversion
                  Price:

              	 	
                $0.88
                  per share, subject to adjustment.

              
	 	 	 
	
                Adjustments
                  to Conversion Price: 

              	 	
                The
                  conversion price is subject to adjustment for stock splits, stock
                  dividends and similar events. In addition, if we sell common stock
                  or
                  securities convertible into or exchangeable for common stock at
                  a price
                  less than the conversion price in effect (the "Lower Price"), the
                  conversion price will be adjusted to equal the Lower
                  Price.

              
	 	 	 
	
                Mandatory
                  Redemption on Fourth Anniversary:

              	 	
                In
                  or about April and May 2008, the Company is required to redeem
                  all
                  outstanding shares of our A Preferred Stock for an amount equal
                  to the
                  stated value of said shares, plus all accrued and unpaid dividends
                  and
                  liquidated damages.

              
	 	 	 
	
                Mandatory
                  Redemption:

              	 	
                Certain
                  events, such as our filing a petition under the federal bankruptcy
                  laws, a
                  change in Control of the Company, our failure to timely deliver
                  shares
                  upon an investor's conversion or maintain our common stock's listing
                  or
                  quotation for more than ten days and other specified events, we
                  will be
                  required to pay an amount equal to the greater of 110% of the Stated
                  Value
                  of the outstanding shares of A Preferred Stock or VWAP at the time,
                  plus
                  all accrued and unpaid dividends and liquidated
                  damages.

              
	
                 

              	 	 
	
                Liquidated
                  Damages for Failure to Meet Registration Deadlines:

              	 	
                If
                  sales of our common stock cannot be made pursuant to a Registration
                  Statement for specified periods of time, a penalty of two (2%)
                  percent per
                  month on the Stated Value of any shares of A Preferred Stock issued
                  and
                  outstanding until any such failure is cured.

              
	 	 	 
	
                Other:

              	 	
                No
                  issuances of common stock that would cause any holder to own more
                  than
                  4.9% of our total common stock at any given
                  time;

              

      

    

     

    
      
        
        

      

      
        S-5.2-2

        
          

        

      

      
        
        

      

    

     

    Certain
      Definitions.

     

    "Change
      of Control" includes the following: (a) a change in ownership of in excess
      of
      40% of our voting securities within a year; (b) the replacement within a year
      of
      more than one-half of the members of the Board of Directors which is not
      approved by a majority of the members of the Board on April 8, 2004; or (c)
      our
      entering into an agreement providing for either (a) or (b).

     

    "Principal
      Market" means the AMEX and shall also include the New York Stock Exchange,
      the
      NASDAQ Small-Cap Market or the NASDAQ National Market, whichever is at the
      time
      the principal trading exchange or market for our common stock, based upon share
      volume.

     

    "Registration
      Statement" means the registration statement covering the shares of common stock
      underlying the shares of A Preferred Stock and the warrants sold to the
      investor.

     

    "VWAP"
      means, for any date, the price determined by the first of the following clauses
      that applies: (a) if the common stock is then listed or quoted on a Principal
      Market, the daily volume weighted average price of the common stock for such
      date (or the nearest preceding date) on the Principal Market on which the common
      stock is then listed or quoted as reported by Bloomberg Financial L.P. (based
      on
      a trading day from 9:30 a.m. Eastern Time to 4:02 p.m. Eastern Time); (b) if
      the
      common stock is not then listed or quoted on a Principal Market and if prices
      for the common stock are then quoted on the OTC Bulletin Board, the volume
      weighted average price of the common stock for such date (or the nearest
      preceding date) on the OTC Bulletin Board; (c) if the common stock is not then
      listed or quoted on the OTC Bulletin Board and if prices for the common stock
      are then reported in the "Pink Sheets" published by the Pink Sheets LLC (or
      a
      similar organization or agency succeeding to its functions of reporting prices),
      the most recent bid price per share of the common stock so reported; or (d)
      in
      all other cases, the fair market value of a share of common stock as determined
      by an independent appraiser selected in good faith by the investors and
      reasonably acceptable to the Company.

     

    OPTIONS,
      OTHER RIGHTS AND WARRANTS

     

    We
      have
      issued to the persons and entities identified below the indicated number of
      warrants set forth opposite their names 

    

    
      	
              Name

            	 	
              Common
                Stock Purchase Warrants

            
	
              1. 
Max
                Communications

            	 	
              31,056
                Warrants1

            
	 	 	 
	
              2. 
Castle
                Creek Technology

               
                Partners, LLC

            	 	
              77,640
                Warrants1

            
	 	 	 
	
              3. 
Stone
                Street, L.P.

            	 	
              62,112
                Warrants1

            

    

     

    
      
        
        

      

      
        S-5.2-3

        
          

        

      

      
        
        

      

    

     

    
      	
              Name

            	 	
              Common
                Stock Purchase Warrants

            
	
              4. 
Gamma
                Opportunity

               
                Capital Partners, LP

            	 	
              31,056
                Warrants1

            
	 	 	 
	
              5. 
Alpha
                Capital A.G.

            	 	
              31,056
                Warrants1

            
	 	 	 
	
              6. 
Otape
                Investments, LLC

            	 	
              62,112
                Warrants1

            
	 	 	 
	
              7. 
Bristol
                Investment Fund, Ltd.

            	 	
              93,168
                Warrants1

            
	 	 	 
	
              8. 
Polaris
                Partners, LP

            	 	
              46,584
                Warrants1

            
	 	 	 
	
              9. 
Insider
                Trend Fund, LP

            	 	
              38,820
                Warrants1

            
	 	 	 
	
              10. 
Leo
                E. Mindel, Non-GST

                
                 Exempt Family Trust II

            	 	
              38,820
                Warrants1

            
	 	 	 
	
              11. 
Cornell
                Capital

            	 	
              31,056
                Warrants1

            
	 	 	 
	
              12. 
Whalehaven
                Fund, Ltd.

            	 	
              31,056
                Warrants1

            
	 	 	 
	
              13. 
Greenwich
                Growth

                
                 Fund, Ltd.

            	 	
              31,056
                Warrants

            
	 	 	 
	
              14. 
Bridges
                & Pipes, LLC

            	 	
              15,528
                Warrants1

            

    

    

    
      	1	
              One-half
                of said Warrants are exercisable at $1.61 per share with the remaining
                one-half of said Warrants exercisable at $2.17 per Share.
                

            

    

     

    In
      connection with the warrants described above, Pacific also issued warrants
      to
      purchase 186,358 shares at an exercise price of $1.93 per share to Rockwood,
      Inc. 

     

    PAM
      has
      issued warrants to purchase 50,000 shares to Duncan Capital LLC ("Duncan").
      One-half of the warrants issued to Duncan are exercisable at $0.80 per share
      and
      one-half are exercisable at $1.20 per share. 

     

    PAM
      has
      issued warrants to purchase 30,000 shares to Strategic Growth International,
      Inc.

     

    We
      had
      sold to Crestview Capital Master, LLC (“Crestview”) and Midsummer Investment,
      Ltd. (“Midsummer”), $3,000,000 in aggregate amount of our A Preferred Stock
      (2,000 and 1,000 shares of A Preferred Stock, respectively). In connection
      with
      that sale, we also issued to these two investors warrants to purchase an
      aggregate of 937,500 shares of common stock at per share exercise price of
      $0.88
      per share. We also issued warrants to purchase 145,833 shares of common stock
      to
      Pacific Summit Capital and/or Pacific Summit Securities. Crestview has converted
      its 2,000 shares of Shares of A Preferred Stock into common stock.

     

    Also,
      we
      later sold to Midsummer $2,000,000 aggregate amount of our A Preferred Stock
      and
      issued to Midsummer warrants to purchase an aggregate of 625,000 shares of
      common stock at per share exercise price of $0.88 and issued warrants to
      purchase 70,000 shares of our common stock to entities also believed to be
      SEC
      and NASD registered broker-dealers or their affiliates.

     

    
      
        
        

      

      
        S-5.2-4

        
          

        

      

      
        
        

      

    

     

    We
      had
      issued 100,000 warrants to a financial services provider’s
      affiliate.

     

    As
      of
      March 15, 2007, there was $3,120,000 outstanding under the Laurus Credit
      Facility.

     

    The
      Laurus Credit Facility includes a secured convertible note (the "Convertible
      Note") in the maximum principal amount of $4 million, which is convertible
      into
      shares of PAM’s common stock (the "Common Stock") at fixed conversion rates of
      $0.88 per share with respect to the first $3,750,000 and $1.05 per share with
      respect to the remaining $250,000.

     

    As
      part
      of the Laurus Credit Facility and restructuring of same, PAM issued warrants
      to
      Laurus providing Laurus the right to purchase up to 1,500,000 shares of common
      stock at an exercise price of $1.00 per share.

     

    PAM
      has
      an equity compensation plan with options to purchase 1,092,450 shares of PAM’s
      common stock available for issuance.

     

    Attached
      hereto are organizational charts for PAM and its affiliates.

     

    If
      all
      outstanding warrants and options were exercised, all shares of our Series A
      Preferred converted and the Laurus note were to be converted in full, we would
      have approximately 41,886,082 shares issued and outstanding.

     

    See
      attached list of recordholders from PAM’s transfer agent.

     

    
      
        
        

      

      
        S-5.2-5

        
          

        

      

       

    

    

    
      
        
        

      

      
        S-5.2-6

        
          

        

      

       

    

    SCHEDULE
      5.5

    to

    Credit
      and Security Agreement among

    Airgate
      International Corporation (“Airgate NY),

    Airgate
      International Corporation (Chicago) (“Airgate Chicago”),

    Paradigm
      International, Inc. (“PII”), Pacific CMA International, LLC
      (“LLC”)

    and
      Wells Fargo Bank, National Association.

    
      
        

      

    

     

    Subsidiaries

    

      
        	
                Name
                  of Company

              	 	
                List
                  of Subsidiaries

              
	
                Airgate
                  International Corp.

              	 	
                Airgate
                  International Corp. (Chicago)

              
	 	 	 
	
                Airgate
                  International Corp. (Chicago)

              	 	
                None

              
	 	 	 
	
                Paradigm
                  International Inc.

              	 	
                None

              
	 	 	 
	
                Pacific
                  CMA International LLC

              	 	
                Airgate
                  International Corp.

              
	 	 	
                Airgate
                  International Corp. (Chicago)

              
	 	 	
                Paradigm
                  International Inc.

              
	 	 	
                AGI
                  Freight Singapore Pte Ltd.

              
	 	 	
                Seabridge
                  International Pte Ltd.

              
	 	 	 
	
                Pacific
                  CMA Inc.

              	 	
                Airgate
                  International Corp.

              
	 	 	
                Airgate
                  International Corp. (Chicago)

              
	 	 	
                Paradigm
                  International Inc.

              
	 	 	
                Pacific
                  CMA International, LLC

              
	 	 	
                (Sole
                  Member)

              
	 	 	
                AGI
                  Freight Singapore Pte Ltd.

              
	 	 	
                Seabridge
                  International Pte Ltd.

              
	 	 	
                AGI
                  Logistics (Hong Kong) Limited

              
	 	 	
                Careship
                  International Transportation Limited

              
	 	 	
                Pacific
                  CMA Limited

              
	 	 	
                WCL
                  Global Logistics Limited

              
	 	 	
                AIO
                  Global Logistics Limited

              
	 	 	
                SDA
                  Forwarding Co. Limited

              
	 	 	
                Parco
                  Shipping Co. Limited

              

      

    

     

    
      
        
        

      

      
        S-5.5-1

        
          

        

      

       

    

     

    SCHEDULE
      5.7

    to

    Credit
      and Security Agreement among

    Airgate
      International Corporation (“Airgate NY),

    Airgate
      International Corporation (Chicago) (“Airgate Chicago”),

    Paradigm
      International, Inc. (“PII”), Pacific CMA International, LLC
      (“LLC”)

    and
      Wells Fargo Bank, National Association.

    
      
        

      

    

     

    Litigation

     

    On
      December 1, 2006, the staff of the American Stock Exchange (the “AMEX”) sent
      Pacific CMA, Inc. (“PAM”) a letter advising that the AMEX staff had determined
      to file an application with the SEC to strike our common stock from listing
      and
      registration on the AMEX, based upon assertions of alleged events that occurred
      in 2003 relating to PAM’s initial listing application. Following our demand, a
      hearing has been scheduled to be heard before a Listing Qualifications Panel
      of
      the AMEX on April 12, 2006. The AMEX staff alleges that PAM’s common stock
      should be delisted because we did not meet the AMEX’s initial listing
      requirements. The AMEX staff alleges that in order to meet the AMEX’s listing
      requirements and obtain approval of PAM’s application to list PAM’s common stock
      on AMEX, PAM’S
      officers
      and/or agents engaged in a scheme, in conjunction with an AMEX specialist’s
      former officer, certain market consultants and others, to interfere with the
      natural forces of supply and demand and artificially increase and/or support
      the
      price of PAM’s common stock and PAM’s issued shares to at least one individual
      which were not irrevocable, fully paid and non-assessable to satisfy the market
      value of public float initial listing requirement of the AMEX. Additionally,
      the
      staff of the AMEX alleges that PAM concealed the alleged scheme from the AMEX
      staff, the stockholders, investors and other market constituents.

     

    In
      the
      matter of Grant,
      Peck and Dean Sessions v. Pacific CMA, Inc.
      Messrs
      Peck and Sessions each currently own 128,438 restricted shares in PAM (the
      “P&S Shares”). This action was commenced by Messrs. Peck and Sessions for
      declaratory judgment seeking a judicial determination of their right to sell
      the
      P&S Shares pursuant to the exemption set forth in Section 4(1) of the
      Securities Act of 1933, as amended (the “Act”). They further contend that they
      are not underwriters within the meaning of Section 4(1) because they have held
      their shares for more than seven years. Messrs. Peck and Sessions have amended
      their Complaint to include a claim for damages as a result of PAM’s refusal to
      honor their alleged right to sell their shares.

     

    PAM
      is
      vigorously defending this action. It is PAM’s position, inter
      alia,
      that
      Messrs. Peck and Sessions used a reverse merger transaction involving PAM,
      originally a “blank check company,” in order to circumvent the registration
      requirements of the Act and to conceal from investors the control over PAM’s
      issued and outstanding common stock allegedly eligible to be included in the
      public float or owned by Messrs. Peck and Sessions. As a result of the unique
      creation of the issued and outstanding shares under common ownership of Messrs.
      Peck and Sessions, all of the outstanding shares of the PAM’s common stock prior
      to the reverse merger remain “underwriters” shares under the Act. PAM believes
      that for it to allow these shares to be treated under SEC Rule 144, such
      treatment would cause PAM to violate the federal securities laws. A trial date
      has been scheduled for May 2007.

     

    
      
        
        

      

      
        S-5.7-1

        
          

        

      

       

    

     

    SCHEDULE
      5.11

    to

    Credit
      and Security Agreement among

    Airgate
      International Corporation (“Airgate NY),

    Airgate
      International Corporation (Chicago) (“Airgate Chicago”),

    Paradigm
      International, Inc. (“PII”), Pacific CMA International, LLC
      (“LLC”)

    and
      Wells Fargo Bank, National Association.

    
      

    

     

    List
      of Intellectual Property

    

      
        	
                Name
                  of Company

              	 	
                Patents,
                  Copyrights, Trademarks, Etc.

              
	
                Airgate
                  International Corp.

              	 	
                None

              
	
                Airgate
                  International Corp. (Chicago)

              	 	
                None

              
	
                Paradigm
                  International Inc.

              	 	
                None

              
	
                Pacific
                  CMA LLC

              	 	
                None

              
	
                Pacific
                  CMA Inc.

              	 	
                None

              

      

    

     

    
      
        
        

      

      
        S-5.11-1

        
          

        

      

       

    

     

    SCHEDULE
      5.14

    to

    Credit
      and Security Agreement among

    Airgate
      International Corporation (“Airgate NY),

    Airgate
      International Corporation (Chicago) (“Airgate Chicago”),

    Paradigm
      International, Inc. (“PII”), Pacific CMA International, LLC
      (“LLC”)

    and
      Wells Fargo Bank, National Association.

    
      

    

     

    Environmental
      Matters

    

      
        	
                Name
                  of Company

              	 	
                Hazardous
                  Substances

              
	
                Airgate
                  International Corp.

              	 	
                None

              
	
                Airgate
                  International Corp. (Chicago)

              	 	
                None

              
	
                Paradigm
                  International Inc.

              	 	
                None

              
	
                Pacific
                  CMA International, LLC

              	 	
                None

              
	
                Pacific
                  CMA Inc.

              	 	
                None

              

      

    

    
      
        
        

      

      
        S-5.14-1

        
          

        

      

       

    

     

    SCHEDULE
      6.3

    to

    Credit
      and Security Agreement among

    Airgate
      International Corporation (“Airgate NY),

    Airgate
      International Corporation (Chicago) (“Airgate Chicago”),

    Paradigm
      International, Inc. (“PII”), Pacific CMA International, LLC
      (“LLC”)

    and
      Wells Fargo Bank, National Association.

    
      

    

     

    Permitted
      Liens

     

    
      	
              Creditor

            	 	
              Collateral

            	 	
              Jurisdiction

            	 	
              Filing
                Date

            	 	
              Filing
                No.

            
	
              Crown
                Credit Company*

            	 	
              Lift
                Truck

            	 	
              Florida

            	 	
              March
                12, 2007

            	 	
              200705017581

            
	
              U.S.
                Bancorp*

            	 	
              Dell
                Server

            	 	
              California

            	 	
              February
                21, 2003

            	 	
              0305660175

            

    

     

    *Debtor:
      Paradigm International Inc.

     

    
      
        
        

      

      
        S-6.3-1

        
          

        

      

       

    

     

     

    SCHEDULE
      6.4

    to

    Credit
      and Security Agreement among

    Airgate
      International Corporation (“Airgate NY),

    Airgate
      International Corporation (Chicago) (“Airgate Chicago”),

    Paradigm
      International, Inc. (“PII”), Pacific CMA International, LLC
      (“LLC”)

    and
      Wells Fargo Bank, National Association.

    
      

    

     

    Permitted
      Indebtedness and Guaranties

     

    See
      the
      discussion of Midsummer’s ownership of the Class A Preferred Stock in Schedule
      5.2.

     

    
      
        
        

      

      
        S-6.4-1

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