Document:

EXHIBIT
A

    

    NEITHER
THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE HAVE
BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY,
MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM,
OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS
EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE
SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY.  THIS SECURITY AND THE SECURITIES ISSUABLE UPON CONVERSION OF
THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR
OTHER LOAN SECURED BY SUCH SECURITIES.

    

    Original
Issue Date: January 6, 2009

    Original
Conversion Price (subject to adjustment herein): $0.10

    

    $100,000

    

    

    10%
SECURED CONVERTIBLE PROMISSORY NOTE

    DUE
JANUARY 6, 2010

    

    THIS 10% SECURED CONVERTIBLE
PROMISSORY NOTE of VALCOM, INC. a Delaware corporation, having a principal place
of business at 2113 A Gulf Boulevard, Indian Rocks Beach, Florida 33785 (the
“Company”),
designated this its 10% Secured Convertible Promissory Note due January 6, 2010
(the “Note”).

    

    FOR VALUE
RECEIVED, the Company promises to pay to Omnireliant Holdings, Inc. or its
registered assigns (the “Holder”), or shall
have paid pursuant to the terms hereunder, the principal sum of $100,000 by
January 6, 2010, or such earlier date as this Note is required or permitted to
be repaid as provided hereunder (the “Maturity Date”), and
to pay interest to the Holder on the aggregate unconverted and then outstanding
principal amount of this Note in accordance with the provisions
hereof.  This Note is subject to the following additional
provisions:

    

    Section
1.             
Definitions.  For
the purposes hereof, in addition to the terms defined elsewhere in this Note:
(a) capitalized terms not otherwise defined herein have the meanings given to
such terms in the Purchase Agreement, and (b) the following terms shall have the
following meanings:

    

    “Alternate
Consideration” shall have the meaning set forth in Section
5(d).

    

    “Base Conversion
Price” shall have the meaning set forth in Section 5(b).

    

    “Business Day” means
any day except Saturday, Sunday and any day which shall be a federal legal
holiday in the United States or a day on which banking institutions in the State
of New York are authorized or required by law or other government action to
close.

    

    “Buy-In” shall have
the meaning set forth in Section 4(d)(v).

    

    “Change of Control
Transaction” means the occurrence after the date hereof of any of (i) an
acquisition after the date hereof by an individual or legal entity or “group”
(as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of
effective control (whether through legal or beneficial ownership of capital
stock of the Company, by contract or otherwise) of in excess of 33% of the
voting securities of the Company, or (ii) the Company merges into or
consolidates with any other Person, or any Person merges into or consolidates
with the Company and, after giving effect to such transaction, the stockholders
of the Company immediately prior to such transaction own less than 66% of the
aggregate voting power of the Company or the successor entity of such
transaction, or (iii) the Company sells or transfers its assets, as an entirety
or substantially as an entirety, to another Person and the stockholders of the
Company immediately prior to such transaction own less than 66% of the aggregate
voting power of the acquiring entity immediately after the transaction, (iv) a
replacement at one time or within a three year period of more than one-half of
the members of the Company’s board of directors which is not approved by a
majority of those individuals who are members of the board of directors on the
date hereof (or by those individuals who are serving as members of the board of
directors on any date whose nomination to the board of directors was approved by
a majority of the members of the board of directors who are members on the date
hereof), or (v) the execution by the Company of an agreement to which the
Company  is a party or by which it is bound, providing for any of the
events set forth above in (i) through (iv).

    

    
      
         

      

      
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    “Common Stock” means
the common stock, par value $0.001 per share, of the Company and stock of any
other class of securities into which such securities may hereafter have been
reclassified or changed into.

    

    “Conversion Date”
shall have the meaning set forth in Section 4(a).

    

    “Conversion Price”
shall have the meaning set forth in Section 4(b).

    

    “Conversion Shares”
means the shares of Common Stock issuable upon conversion of this Note or as
payment of interest in accordance with the terms.

    

    “Note Register” shall
have the meaning set forth in Section 2(c).

    

    “Dilutive Issuance”
shall have the meaning set forth in Section 5(b).

    

    “Dilutive Issuance
Notice” shall have the meaning set forth in Section 5(b).

    

    “Equity Conditions”
shall mean, during the period in question, (i) the Company shall have duly
honored all conversions and redemptions scheduled to occur or occurring by
virtue of one or more Notice of Conversions of the Holder, if any, (ii) all
liquidated damages and other amounts owing to the Holder in respect of this Note
shall have been paid, (iii) there is an effective Registration Statement
pursuant to which the Holder is permitted to utilize the prospectus thereunder
to resell all of the shares issuable pursuant to the Transaction Documents (and
the Company believes, in good faith, that such effectiveness will continue
uninterrupted for the foreseeable future), (iv) the Common Stock is trading on
the Trading Market and all of the shares issuable pursuant to the Transaction
Documents are listed for trading on a Trading Market (and the Company believes,
in good faith, that trading of the Common Stock on a Trading Market will
continue uninterrupted for the foreseeable future), (v) there is a sufficient
number of authorized but unissued and otherwise unreserved shares of Common
Stock for the issuance of all of the shares issuable pursuant to the Transaction
Documents, (vi) there is then existing no Event of Default or event which, with
the passage of time or the giving of notice, would constitute an Event of
Default, (vii) the issuance of the shares in question (or, in the case of a
redemption, the shares issuable upon conversion in full of the redemption
amount) to the Holder would not violate the limitations set forth in Section
4(c)(i) and Section 4(c)(ii) and (viii) no public announcement of a pending or
proposed Fundamental Transaction, Change of Control Transaction or acquisition
transaction has occurred that has not been consummated.

    

    “Event of Default”
shall have the meaning set forth in Section 8.

    

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

     

    “Fundamental
Transaction” shall have the meaning set forth in Section
5(d).

    

    
      
         

      

      
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    “Interest Conversion
Rate” means the lesser of (a) the Conversion Price and (b) the 90% of the
lesser of (i) the average of the 20 VWAPs immediately prior to the applicable
Interest Payment Date or (ii) the average of the 20 VWAPs immediately prior to
the date the applicable interest payment shares are issued and delivered if
after the Interest Payment Date.

    

    “Interest Conversion
Shares” shall have the meaning set forth in Section 2(a).

    

    “Interest Notice
Period” shall have the meaning set forth in Section 2(a).

    

    “Interest Payment
Date” shall have the meaning set forth in Section 2(a).

    

    “Interest Share
Amount” shall have the meaning set forth in Section 2(a).

    

    “Late Fees” shall have
the meaning set forth in Section 2(d).

    

    “Mandatory Default
Amount”  shall equal the sum of (i) the greater of: (A) 130% of
the principal amount of this Note to be prepaid, plus all accrued and unpaid
interest thereon, or (B) the principal amount of this Note to be prepaid, plus
all other accrued and unpaid interest hereon, divided by the Conversion Price on
(x) the date the Mandatory Default Amount is demanded or otherwise due or (y)
the date the Mandatory Default Amount is paid in full, whichever is less,
multiplied by the VWAP on (x) the date the Mandatory Default Amount is demanded
or otherwise due or (y) the date the Mandatory Default Amount is paid in full,
whichever is greater, and (ii) all other amounts, costs, expenses and liquidated
damages due in respect of this Note.

    

    “New York Courts”
shall have the meaning set forth in Section 9(d).

    

    “Notice of Conversion”
shall have the meaning set forth in Section 4(a).

    

    “Optional Redemption”
shall have the meaning set forth in Section 6(a).

    

    “Optional Redemption
Amount” shall mean the sum of (i) 115% of the principal amount of the
Note then outstanding, (ii) accrued but unpaid interest and (iii) all liquidated
damages and other amounts due in respect of the Note.

    

    “Optional Redemption
Date” shall have the meaning set forth in Section 6(a).

    

    “Optional Redemption
Notice” shall have the meaning set forth in Section 6(a).

    

    “Optional Redemption Notice
Date” shall have the meaning set forth in Section 6(a).

    

    “Original Issue Date”
shall mean the date of the first issuance of the Notes regardless of the number
of transfers of any Note and regardless of the number of instruments which may
be issued to evidence such Note.

    

    “Permitted
Indebtedness” shall mean (a) the Indebtedness existing on the Original
Issue Date and (b) lease obligations and purchase money Indebtedness of up to
$1,000,000, in the aggregate, incurred in connection with the acquisition of
capital assets and lease obligations with respect to newly acquired or leased
assets.

    

    “Permitted Lien” shall
mean the individual and collective reference to the following: (a) Liens for
taxes, assessments and other governmental charges or levies not yet due or Liens
for taxes, assessments and other governmental charges or levies being contested
in good faith and by appropriate proceedings for which adequate reserves (in the
good faith judgment of the management of the Company) have been established in
accordance with GAAP, (b) Liens imposed by law which were incurred in the
ordinary course of business, such as carriers’, warehousemen’s and mechanics’
Liens, statutory landlords’ Liens, and other similar Liens arising in the
ordinary course of business, and (x) which do not individually or in the
aggregate materially detract from the value of such property or assets or
materially impair the use thereof in the operation of the business of the
Company and its consolidated Subsidiaries or (y) which are being contested in
good faith by appropriate proceedings, which proceedings have the effect of
preventing the forfeiture or sale of the property or asset subject to such Lien
and (c) Liens incurred in connection with Permitted Indebtedness under clause
(b) thereunder provided that such Liens are not secured by assets of the Company
or its Subsidiaries other than the assets so acquired or leased.

    

    
      
         

      

      
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    “Person” means a
corporation, an association, a partnership, organization, a business, an
individual, a government or political subdivision thereof or a governmental
agency.

    

    “Purchase Agreement”
means the Note Purchase Agreement, dated as of January 6, 2009 to which the
Company and the original Holder are parties, as amended, modified or
supplemented from time to time in accordance with its terms.

    

    “Securities Act” means
the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.

    

    “Shareholder Approval”
shall have the meaning given to such term in the Purchase
Agreement.

    

    “Subsidiary” shall
have the meaning given to such term in the Purchase Agreement.

    

    “Threshold Period”
shall have the meaning given to such term in Section 6(d).

    

    “Trading Day” means a
day on which the Common Stock is traded on a Trading Market.

    

    “Trading Market” means
the following markets or exchanges on which the Common Stock is listed or quoted
for trading on the date in question: the Nasdaq SmallCap Market, the American
Stock Exchange, the New York Stock Exchange or the Nasdaq National
Market.

    

    “Transaction
Documents” shall have the meaning set forth in the Purchase
Agreement.

    

    “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 Trading Market, the daily
volume weighted average price of the Common Stock for such date (or the nearest
preceding date) on the Trading 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 Trading 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 Holder and reasonably acceptable to the
Company.

    

    Section
2.            
Interest.

    

    a)           Payment of Interest in Cash
or Kind. The Company shall pay interest to the Holder on the aggregate
unconverted and then outstanding principal amount of this Note at the rate of 10
% per annum, payable quarterly on January 5, April 5, July 5 and October 5,
beginning on the first such date after the Original Issue Date, (each such date,
an “Interest Payment
Date”), in cash or shares of Common Stock at the Interest Conversion
Rate, or a combination thereof  (the amount to be paid in shares, the
“Interest Share
Amount”); provided, however, (i) payment
in shares of Common Stock may only occur if during the 20 Trading Days
immediately prior to the applicable Interest Payment Date  (the “Interest Notice
Period”) and through and including the date such shares of Common Stock
are issued to the Holder all of the Equity Conditions, unless waived by the
Holder in writing, have been met and the Company shall have given the Holder
notice in accordance with the notice requirements set forth below and (ii) as to
such Interest Payment Date, prior to the such Interest Notice Period (but not
more 5 Trading Days prior to the commencement of the Interest Notice Period),
the Company shall have delivered to the Holder’s account with The Depository
Trust Company a number of shares of Common Stock to be applied against such
Interest Share Amount equal to the quotient of (x) the applicable Interest Share
Amount divided by (y) the then Conversion Price (the “Interest Conversion
Shares”).

    

    
      
         

      

      
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    b)           Company’s Election to Pay
Interest in Kind.  Subject to the terms and conditions herein,
the decision whether to pay interest hereunder in shares of Common Stock or cash
shall be at the discretion of the Company.  Prior to the commencement
of an Interest Notice Period, the Company shall provide the Holder with written
notice of its election to pay interest hereunder on the applicable Interest
Payment Date either in cash, shares of Common Stock or a combination thereof
(the Company may indicate in such notice that the election contained in such
notice shall continue for later periods until revised) and the Interest Share
Amount as to the applicable Interest Payment Date.  During any
Interest Notice Period, the Company’s election (whether specific to an Interest
Payment Date or continuous) shall be irrevocable as to such Interest Payment
Date.  Subject to the aforementioned conditions, failure to timely
provide such written notice shall be deemed an election by the Company to pay
the interest on such Interest Payment Date in cash.  At any time the
Company delivers a notice to the Holder of its election to pay the interest in
shares of Common Stock, the Company shall file a prospectus supplement pursuant
to Rule 424 disclosing such election.  The aggregate number of shares
of Common Stock otherwise issuable to the Holder on an Interest Payment Date
shall be reduced by the number of Interest Conversion Shares previously issued
to the Holder in connection with such Interest Payment Date.

    

    c)           Interest
Calculations. Interest shall be calculated on the basis of a 360-day year
and shall accrue daily commencing on the Original Issue Date until payment in
full of the principal sum, together with all accrued and unpaid interest and
other amounts which may become due hereunder, has been made.  Payment
of interest in shares of Common Stock (other than the Interest Conversion Shares
issued prior to an Interest Notice Period) shall otherwise occur pursuant to
Section 4(d)(ii) and only for purposes of the payment of interest in shares, the
Interest Payment Date shall be deemed the Conversion Date.  Interest
shall cease to accrue with respect to any principal amount converted, provided
that the Company in fact delivers the Conversion Shares within the time period
required by Section 4(d)(ii).  Interest hereunder will be paid to the
Person in whose name this Note is registered on the records of the Company
regarding registration and transfers of this Note (the “Note Register”).
Except as otherwise provided herein, if at any time the Company pays interest
partially in cash and partially in shares of Common Stock to the holders of the
Notes, then such payment shall be distributed ratably among the holders of the
Notes based on their (or their predecessor’s initial purchases of Notes pursuant
to the Purchase Agreement.

    

    d)           Late
Fee.  All overdue accrued and unpaid interest to be paid
hereunder shall entail a late fee at the rate of 18% per annum (or such lower
maximum amount of interest permitted to be charged under applicable law) (“Late Fees”) which
will accrue daily, from the date such interest is due hereunder through and
including the date of payment. Notwithstanding anything to the contrary
contained herein, if on any Interest Payment Date the Company has elected to pay
interest in Common Stock and is not able to pay accrued interest in the form of
Common Stock because it does not then satisfy the conditions for payment in the
form of Common Stock set forth above, then, at the option of the Holder, the
Company, in lieu of delivering either shares of Common Stock pursuant to this
Section 2 or paying the regularly scheduled cash interest payment, shall
deliver, within three Trading Days of each applicable Interest Payment Date, an
amount in cash equal to the product of the number of shares of Common Stock
otherwise deliverable to the Holder in connection with the payment of interest
due on such Interest Payment Date and the highest VWAP during the period
commencing on the Interest Payment Date and ending on the Trading Day prior to
the date such payment is made.  If any Interest Conversion Shares are
issued to the Holder in connection with an Interest Payment Date and are not
applied against an Interest Share Amount, then the Holder shall promptly return
such excess shares to the Company.

    

    
      
         

      

      
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    e)           Prepayment.  Except
as otherwise set forth in this Note, the Company may not prepay any portion of
the principal amount of this Note without the prior written consent of the
Holder.

    

    Section
3.             Registration of Transfers
and Exchanges.

    

    a)           Different
Denominations. This Note is exchangeable for an equal aggregate principal
amount of Notes of different authorized denominations, as requested by the
Holder surrendering the same.  No service charge will be made for such
registration of transfer or exchange.

    

    b)           Investment
Representations. This Note has been issued subject to certain investment
representations of the original Holder set forth in the Purchase Agreement and
may be transferred or exchanged only in compliance with the Purchase Agreement
and applicable federal and state securities laws and regulations.

    

    c)           Reliance on Note
Register. Prior to due presentment to the Company for transfer of this
Note, the Company and any agent of the Company may treat the Person in whose
name this Note is duly registered on the Note Register as the owner hereof for
the purpose of receiving payment as herein provided and for all other purposes,
whether or not this Note is overdue, and neither the Company nor any such agent
shall be affected by notice to the contrary.

    

    Section
4.             Conversion.

    

    a)           Voluntary Conversion.
At any time after the Original Issue Date until this Note is no longer
outstanding, this Note shall be convertible into (i) shares of Common Stock at
the option of the Holder, in whole or in part at any time and from time to time
(subject to the limitations on conversion set forth in Section 4(c) hereof)
or (ii) by the purchase by the Investor from the Company or its subsidiaries
broadcast airtime or commercial slots at a forty percent discount (40%) to the
standard published rate card for such airtime or commercial slots discounted for
any volume purchase appropriate to the gross value of the purchase before
discount ..  The Holder shall effect conversion in part by delivering
to the Company the form of Notice of Conversion attached hereto as Annex A (a “Notice of
Conversion”), specifying therein the principal amount of this Note to be
converted and the date on which such conversion is to be effected (a “Conversion
Date”).  If no Conversion Date is specified in a Notice of
Conversion, the Conversion Date shall be the date that such Notice of Conversion
is provided hereunder.  To effect conversion in part hereunder, the
Holder shall not be required to physically surrender this Note to the Company
unless the entire principal amount of this Note plus all accrued and unpaid
interest thereon has been so converted. Conversions hereunder shall have the
effect of lowering the outstanding principal amount of this Note in an amount
equal to the applicable conversion.  The Holder and the Company shall
maintain records showing the principal amount converted and the date of such
conversions.  The Company shall deliver any objection to any Notice of
Conversion within 1 Business Day of receipt of such notice.  In the
event of any dispute or discrepancy, the records of the Holder shall be
controlling and determinative in the absence of manifest error. The Holder and
any assignee, by acceptance of this Note, acknowledge and agree that, by reason
of the provisions of this paragraph, following conversion of a portion of this
Note, the unpaid and unconverted principal amount of this Note may be less than
the amount stated on the face hereof.

    

    b)           Conversion
Price.  The conversion price in effect on any Conversion Date
shall be equal to $0.10
(subject to adjustment herein)(the “Conversion
Price”).

    

    c)           Conversion
Limitations.

    

    i.           Reserved.

    

    
      
         

      

      
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    ii.           Holder’s Restriction on
Conversion. The Company shall not effect any conversion of this Note, and
the Holder shall not have the right to convert any portion of this Note,
pursuant to Section 4(a) or otherwise, to the extent that after giving effect to
such conversion, the Holder (together with the Holder’s Affiliates), as set
forth on the applicable Notice of Conversion, would beneficially own in excess
of 4.99% of the number of shares of the Common Stock outstanding immediately
after giving effect to such conversion.  For purposes of the foregoing
sentence, the number of shares of Common Stock beneficially owned by the Holder
and its Affiliates shall include the number of shares of Common Stock issuable
upon conversion of this Note with respect to which the determination of such
sentence is being made, but shall exclude the number of shares of Common Stock
which would be issuable upon (A) conversion of the remaining, nonconverted
portion of this Note beneficially owned by the Holder or any of its Affiliates
and (B) exercise or conversion of the unexercised or nonconverted portion of any
other securities of the Company (including, without limitation, any other Notes
or the Warrants) subject to a limitation on conversion or exercise analogous to
the limitation contained herein beneficially owned by the Holder or any of its
Affiliates.  Except as set forth in the preceding sentence, for purposes of
this Section 4(c)(ii), beneficial ownership shall be calculated in accordance
with Section 13(d) of the Exchange Act and the rules and regulations promulgated
thereunder.  To the extent that the limitation contained in this
section applies, the determination of whether this Note is convertible (in
relation to other securities owned by the Holder) and of which a portion of this
Note is convertible shall be in the sole discretion of such Holder. To ensure
compliance with this restriction, the Holder will be deemed to represent to the
Company each time it delivers a Notice of Conversion that such Notice of
Conversion has not violated the restrictions set forth in this paragraph and the
Company shall have no obligation to verify or confirm the accuracy of such
determination.  In addition, a determination as to any group status as
contemplated above shall be determined in accordance with Section 13(d) of the
Exchange Act and the rules and regulations promulgated thereunder. For purposes
of this Section 4(c)(ii), in determining the number of outstanding shares of
Common Stock, the Holder may rely on the number of outstanding shares of Common
Stock as reflected in (x) the Company’s most recent Form 10-Q or Form 10-K, as
the case may be, (y) a more recent public announcement by the Company or (z) any
other notice by the Company or the Company’s Transfer Agent setting forth the
number of shares of Common Stock outstanding.  Upon the written or oral
request of the Holder, the Company shall within two Trading Days confirm orally
and in writing to the Holder the number of shares of Common Stock then
outstanding.  In any case, the number of outstanding shares of Common Stock
shall be determined after giving effect to the conversion or exercise of
securities of the Company, including this Note, by the Holder or its Affiliates
since the date as of which such number of outstanding shares of Common Stock was
reported.  The provisions of this Section 4(c) may be waived by the
Holder, at the election of the Holder, upon not less than 61 days’ prior notice
to the Company, and the provisions of this Section 4(c) shall continue to apply
until such 61st day (or such later date, as determined by the Holder, as may be
specified in such notice of waiver).  The provisions of this paragraph
shall be implemented in a manner otherwise than in strict conformity with the
terms of this Section 4(c) to correct this paragraph (or any portion hereof)
which may be defective or inconsistent with the intended 4.99% beneficial
ownership limitation herein contained or to make changes or supplements
necessary or desirable to properly give effect to such 4.99% limitation. The
limitations contained in this paragraph shall apply to a successor holder of
this Note. The holders of Common Stock of the Company shall be third party
beneficiaries of this Section 4(c) and the Company may not waive this Section
4(c) without the consent of holders of a majority of its Common
Stock.

    

    
      	
               
      

            	
              d)

            	
              Mechanics of
      Conversion

            

    

    

    i.           Conversion Shares Issuable
Upon Conversion of Principal Amount.  The number of shares of
Common Stock issuable upon a conversion hereunder shall be determined by the
quotient obtained by dividing (x) the outstanding principal amount of this Note
to be converted by (y) the Conversion Price.

    

    
      
         

      

      
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    ii.           Delivery of Certificate Upon
Conversion. Not later than three Trading Days after any Conversion Date,
the Company will deliver or cause to be delivered to the Holder (A) a
certificate or certificates representing the Conversion Shares which shall be
free of restrictive legends and trading restrictions (other than those required
by the Purchase Agreement) representing the number of shares of Common Stock
being acquired upon the conversion of this Note (including, if the Company has
given continuous notice pursuant to Section 2(b) for payment of interest in
shares of Common Stock at least 20 Trading Days prior to the date on which the
Conversion Notice is delivered to the Company, shares of Common Stock
representing the payment of accrued interest otherwise determined pursuant to
Section 2(a) but assuming that the Interest Payment Period is the 20 Trading
Days period immediately prior to the date on which the Conversion Notice is
delivered to the Company and excluding for such issuance the condition that the
Company deliver Interest Conversion Shares as to such interest payment) and (B)
a bank check in the amount of accrued and unpaid interest (if the Company is
required to pay accrued interest in cash). The Company shall, if available and
if allowed under applicable securities laws, use its best efforts to deliver any
certificate or certificates required to be delivered by the Company under this
Section electronically through the Depository Trust Corporation or another
established clearing corporation performing similar functions.

    

    iii.          Failure to Deliver
Certificates.  If in the case of any Notice of Conversion such
certificate or certificates are not delivered to or as directed by the
applicable Holder by the third Trading Day after a Conversion Date, the Holder
shall be entitled by written notice to the Company at any time on or before its
receipt of such certificate or certificates thereafter, to rescind such
conversion, in which event the Company shall immediately return the certificates
representing the principal amount of this Note tendered for
conversion.

    

    iv.          Obligation Absolute; Partial
Liquidated Damages.  If the Company fails for any reason to
deliver to the Holder such certificate or certificates pursuant to Section
4(d)(ii) by the third Trading Day after the Conversion Date, the Company shall
pay to such Holder, in cash, as liquidated damages and not as a penalty, for
each $1000 of principal amount being converted, $10 per Trading Day (increasing
to $20 per Trading Day after 5 Trading Days after such damages begin to accrue)
for each Trading Day after such third Trading Day until such certificates are
delivered.  The Company’s obligations to issue and deliver the
Conversion Shares upon conversion of this Note in accordance with the terms
hereof are absolute and unconditional, irrespective of any action or inaction by
the Holder to enforce the same, any waiver or consent with respect to any
provision hereof, the recovery of any judgment against any Person or any action
to enforce the same, or any setoff, counterclaim, recoupment, limitation or
termination, or any breach or alleged breach by the Holder or any other Person
of any obligation to the Company or any violation or alleged violation of law by
the Holder or any other person, and irrespective of any other circumstance which
might otherwise limit such obligation of the Company to the Holder in connection
with the issuance of such Conversion Shares; provided, however, such
delivery shall not operate as a waiver by the Company of any such action the
Company may have against the Holder.  In the event the Holder of this
Note shall elect to convert any or all of the outstanding principal amount
hereof, the Company may not refuse conversion based on any claim that the Holder
or any one associated or affiliated with the Holder has been engaged in any
violation of law, agreement or for any other reason, unless, an injunction from
a court, on notice, restraining and or enjoining conversion of all or part of
this Note shall have been sought and obtained and the Company posts a surety
bond for the benefit of the Holder in the amount of 150% of the principal amount
of this Note outstanding, which is subject to the injunction, which bond shall
remain in effect until the completion of arbitration/litigation of the dispute
and the proceeds of which shall be payable to such Holder to the extent it
obtains judgment.  In the absence of an injunction precluding the
same, the Company shall issue Conversion Shares or, if applicable, cash, upon a
properly noticed conversion.  Nothing herein shall limit a Holder’s
right to pursue actual damages or declare an Event of Default pursuant to
Section 8 herein for the Company’s failure to deliver Conversion Shares within
the period specified herein and such Holder shall have the right to pursue all
remedies available to it at law or in equity including, without limitation, a
decree of specific performance and/or injunctive relief.  The exercise
of any such rights shall not prohibit the Holder from seeking to enforce damages
pursuant to any other Section hereof or under applicable law.

    

    
      
         

      

      
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    v.           Compensation for Buy-In on
Failure to Timely Deliver Certificates Upon Conversion. In addition to
any other rights available to the Holder, if the Company fails for any reason to
deliver to the Holder such certificate or certificates pursuant to Section
4(d)(ii) by the third Trading Day after the Conversion Date, and if after such
third Trading Day the Holder is required by its brokerage firm to purchase (in
an open market transaction or otherwise) Common Stock to deliver in satisfaction
of a sale by such Holder of the Conversion Shares which the Holder anticipated
receiving upon such conversion (a “Buy-In”), then the
Company shall (A) pay in cash to the Holder (in addition to any remedies
available to or elected by the Holder) the amount by which (x) the Holder’s
total purchase price (including brokerage commissions, if any) for the Common
Stock so purchased exceeds (y) the product of (1) the aggregate number of shares
of Common Stock that such Holder anticipated receiving from the conversion at
issue multiplied by (2) the actual sale price of the Common Stock at the time of
the sale (including brokerage commissions, if any) giving rise to such purchase
obligation and (B) at the option of the Holder, either reissue (if surrendered)
this Note in a principal amount equal to the principal amount of the attempted
conversion or deliver to the Holder the number of shares of Common Stock that
would have been issued had the Company timely complied with its delivery
requirements under Section 4(d)(ii).  For example, if the Holder
purchases Common Stock having a total purchase price of $11,000 to cover a
Buy-In with respect to an attempted conversion of this Note with respect to
which the actual sale price of the Conversion Shares at the time of the sale
(including brokerage commissions, if any) giving rise to such purchase
obligation was a total of $10,000 under clause (A) of the immediately preceding
sentence, the Company shall be required to pay the Holder $1,000.  The
Holder shall provide the Company written notice indicating the amounts payable
to the Holder in respect of the Buy-In.

    

    vi.          Reservation of Shares
Issuable Upon Conversion. The Company covenants that it will at all times
reserve and keep available out of its authorized and unissued shares of Common
Stock solely for the purpose of issuance upon conversion of this Note and
payment of interest on this Note, each as herein provided, free from preemptive
rights or any other actual contingent purchase rights of persons other than the
Holder (and the other holders of the Notes), not less than such number of shares
of the Common Stock as shall (subject to the terms and conditions set forth in
the Purchase Agreement) be issuable (taking into account the adjustments and
restrictions of Section 5) upon the conversion of the outstanding principal
amount of this Note and payment of interest hereunder.  The Company
covenants that all shares of Common Stock that shall be so issuable shall, upon
issue, be duly and validly authorized, issued and fully paid, nonassessable and,
if the Registration Statement is then effective under the Securities Act,
registered for public sale in accordance with such Registration
Statement.

    

    vii.         Fractional Shares.
Upon a conversion hereunder the Company shall not be required to issue stock
certificates representing fractions of shares of the Common Stock, but may if
otherwise permitted, make a cash payment in respect of any final fraction of a
share based on the VWAP at such time.  If the Company elects not, or
is unable, to make such a cash payment, the Holder shall be entitled to receive,
in lieu of the final fraction of a share, one whole share of Common
Stock.

    

    viii.        Transfer
Taxes.  The issuance of certificates for shares of the Common
Stock on conversion of this Note shall be made without charge to the Holder
hereof for any documentary stamp or similar taxes that may be payable in respect
of the issue or delivery of such certificate, provided that the Company shall
not be required to pay any tax that may be payable in respect of any transfer
involved in the issuance and delivery of any such certificate upon conversion in
a name other than that of the Holder of this Note so converted and the Company
shall not be required to issue or deliver such certificates unless or until the
person or persons requesting the issuance thereof shall have paid to the Company
the amount of such tax or shall have established to the satisfaction of the
Company that such tax has been paid.

    

    
      
         

      

      
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    ix.          Piggy-Back Registration
Rights.  If at any time after the date hereof until such the
date that the Conversion Shares may be sold pursuant to Rule 144 without volume
or manner of sale restrictions, the Company shall determine to prepare and file
with the Commission a registration statement relating to an offering for its own
account or the account of others of any of its equity securities, other than on
Form S-4 or Form S-8 (each as promulgated under the Securities Act), or their
then equivalents (a “Registration
Statement”), relating to equity securities to be issued solely in
connection with any acquisition of any entity or business or equity securities
issuable in connection with stock option or other employee benefit plans, then
the Company shall send a written notice of such determination to the Holder and,
if within ten calendar days after the date of delivery of such notice, any such
Holder shall so request in writing, the Company shall include in such
Registration Statement all or any part of the Conversion Shares as the Holder
requests to be registered so long as such Conversion Shares are proposed to be
disposed in the same manner as those securities set forth in the Registration
Statement; provided, however, if the
inclusion of Conversion Shares requested to be included in the Registration
Statement would cause an adverse effect on the success of any such offering,
based on market conditions or otherwise (an “Adverse Effect”),
then the Company shall be required to include in such Registration Statement
only that number of Conversion Shares to the extent that such inclusion shall
not cause and Adverse Effect; provided, further, if such
number of Conversion Shares is limited hereunder, any cutbacks of a Holder’s
Conversion Shares shall be done on a pro rata basis among all Holders based on
their respective number of shares to be registered hereunder.  To the
extent that all of the Conversion Shares are not included in the initial
Registration Statement, the Holders shall have the right to request the
inclusion of its Conversion Shares in subsequent Registration Statements until
all such Conversion Shares have been registered in accordance with the terms
hereof.  If the offering in which the Conversion Shares is being
included in a Registration Statement is a firm commitment underwritten offering,
unless otherwise agreed by the Company, the Holder shall sell its Conversion
Shares in such offering using the same underwriters and, subject to the
provisions hereof, on the same terms and conditions as the other shares of
Common Stock that are included in such underwritten offering.  The
Company shall use its best efforts to cause any Registration Statement to be
declared effective by the Commission as promptly as is possible following it
being filed with the Commission and to remain effective until all Conversion
Shares subject thereto have been sold or may be sold without volume or manner of
sale restrictions.  All fees and expenses incident to the performance
of or compliance with this Section by the Company shall be borne by the Company
whether or not any Conversion Shares are sold pursuant to the Registration
Statement.  The Company shall indemnify and hold harmless the Holder,
the officers, directors, members, partners, agents, brokers, investment advisors
and employees of each of them, each person who controls the Holder (within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act),
and the officers, directors, members, shareholders, partners, agents and
employees of each such controlling person, to the fullest extent permitted by
applicable law, from and against any and all losses, claims, damages,
liabilities, costs (including, without limitation, reasonable attorneys’ fees)
and expenses (collectively, the “Losses”), as
incurred, arising out of or relating to (i) any untrue or alleged untrue
statement of a material fact contained in the Registration Statement, any
prospectus included therein or any form of prospectus or in any amendment or
supplement thereto or in any preliminary prospectus, or arising out of or
relating to any omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein (in the case of any
prospectus or form of prospectus or supplement thereto, in light of the
circumstances under which they were made) not misleading or (ii) any violation
or alleged violation by the Company of the Securities Act, the Exchange Act or
any state securities law, or any rule or regulation thereunder, in connection
with the performance of its obligations under this Section, except to the
extent, but only to the extent, that such untrue statements or omissions
referred to in (i) above are based solely upon information regarding the Holder
furnished in writing to the Company by the Holder expressly for use therein, or
(ii) to the extent that such information relates to such Holder’s proposed
method of distribution of Conversion Shares and was reviewed and expressly
approved in writing by such Holder expressly for use in a Registration
Statement, the prospectus included therein or in any amendment or supplement
thereto.  The rights of the Holder under this Section 1.4 shall
survive until all Conversion Shares have been either registered under a
Registration Statement or been sold pursuant to an exemption to the registration
requirements of the Securities Act.  Each Holder shall, severally and
not jointly, indemnify and hold harmless the Company, its directors, officers,
agents and employees, each Person who controls the Company (within the meaning
of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the
directors, officers, agents or employees of such controlling Persons, to the
fullest extent permitted by applicable law, from and against all Losses, as
incurred, to the extent arising out of or based solely upon: (x) such Holder’s
failure to comply with the prospectus delivery requirements of the Securities
Act or (y) any untrue or alleged untrue statement of a material fact contained
in any Registration Statement, any prospectus included therein, or in any
amendment or supplement thereto or in any preliminary prospectus, or arising out
of or relating to any omission or alleged omission of a material fact required
to be stated therein or necessary to make the statements therein not misleading
(i) to the extent, but only to the extent, that such untrue statement or
omission is contained in any information so furnished in writing by such Holder
to the Company specifically for inclusion in such Registration Statement or (ii)
to the extent that such information relates to such Holder’s proposed method of
distribution of Conversion Shares and was reviewed and expressly approved in
writing by such Holder expressly for use in a Registration Statement, the
prospectus included therein or in any amendment or supplement
thereto.  In no event shall the liability of any selling Holder
hereunder be greater in amount than the dollar amount of the net proceeds
received by such Holder upon the sale of the Conversion Shares giving rise to
such indemnification obligation

    

    
      
         

      

      
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    Section
5.           
 Certain
Adjustments.

    

    a)           Stock Dividends and Stock
Splits.  If the Company, at any time while this Note is
outstanding: (A) pays a stock dividend or otherwise makes a distribution or
distributions on shares of its Common Stock or any other equity or equity
equivalent securities payable in shares of Common Stock (which, for avoidance of
doubt, shall not include any shares of Common Stock issued by the Company
pursuant to this Note, including as interest thereon), (B) subdivides
outstanding shares of Common Stock into a larger number of shares, (C) combines
(including by way of reverse stock split) outstanding shares of Common Stock
into a smaller number of shares, or (D) issues by reclassification of shares of
the Common Stock any shares of capital stock of the Company, then the Conversion
Price shall be multiplied by a fraction of which the numerator shall be the
number of shares of Common Stock (excluding treasury shares, if any) outstanding
immediately before such event and of which the denominator shall be the number
of shares of Common Stock outstanding immediately after such
event.  Any adjustment made pursuant to this Section shall become
effective immediately after the record date for the determination of
stockholders entitled to receive such dividend or distribution and shall become
effective immediately after the effective date in the case of a subdivision,
combination or re-classification.

    

    b)           Subsequent Equity
Sales.  If the Company or any Subsidiary thereof, as
applicable, at any time while this Note is outstanding, shall offer, sell, grant
any option to purchase or offer, sell or grant any right to reprice its
securities, or otherwise dispose of or issue (or announce any offer, sale, grant
or any option to purchase or other disposition) any Common Stock or Common Stock
Equivalents entitling any Person to acquire shares of Common Stock, at an
effective price per share less than the then Conversion Price (such lower price,
the “Base Conversion
Price” and such issuances collectively, a “Dilutive Issuance”),
as adjusted hereunder (if the holder of the Common Stock or Common Stock
Equivalents so issued shall at any time, whether by operation of purchase price
adjustments, reset provisions, floating conversion, exercise or exchange prices
or otherwise, or due to warrants, options or rights per share which is issued in
connection with such issuance, be entitled to receive shares of Common Stock at
an effective price per share which is less than the Conversion Price, such
issuance shall be deemed to have occurred for less than the Conversion Price on
such date of the Dilutive Issuance), then the Conversion Price shall be reduced
to equal the Base Conversion Price.  Such adjustment shall be made
whenever such Common Stock or Common Stock Equivalents are
issued.  Notwithstanding the foregoing, no adjustment will be made
under this Section 5(b) in respect of an Exempt Issuance.  The Company
shall notify the Holder in writing, no later than the Business Day following the
issuance of any Common Stock or Common Stock Equivalents subject to this
section, indicating therein the applicable issuance price, or of applicable
reset price, exchange price, conversion price and other pricing terms (such
notice the “Dilutive
Issuance Notice”).  For purposes of clarification, whether or
not the Company provides a Dilutive Issuance Notice pursuant to this Section
5(b), upon the occurrence of any Dilutive Issuance, after the date of such
Dilutive Issuance the Holder is entitled to receive a number of Conversion
Shares based upon the Base Conversion Price regardless of whether the Holder
accurately refers to the Base Conversion Price in the Notice of
Conversion.

    

    
      
         

      

      
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    c)           Pro Rata
Distributions. If the Company, at any time while this Note is
outstanding, shall distribute to all holders of Common Stock (and not to the
holders of the Note) evidences of its indebtedness or assets (including cash and
cash dividends) or rights or warrants to subscribe for or purchase any security,
then in each such case the Conversion Price shall be adjusted by multiplying
such Conversion Price in effect immediately prior to the record date fixed for
determination of stockholders entitled to receive such distribution by a
fraction of which the denominator shall be the VWAP determined as of the record
date mentioned above, and of which the numerator shall be such VWAP on such
record date less the then fair market value at such record date of the portion
of such assets or evidence of indebtedness so distributed applicable to one
outstanding share of the Common Stock as determined by the Board of Directors in
good faith.  In either case the adjustments shall be described in a
statement provided to the Holder of the portion of assets or evidences of
indebtedness so distributed or such subscription rights applicable to one share
of Common Stock.  Such adjustment shall be made whenever any such
distribution is made and shall become effective immediately after the record
date mentioned above.

    

    d)           Fundamental
Transaction. If, at any time while this Note is outstanding, (A) the
Company effects any merger or consolidation of the Company with or into another
Person, (B) the Company effects any sale of all or substantially all of its
assets in one or a series of related transactions, (C) any tender offer or
exchange offer (whether by the Company or another Person) is completed pursuant
to which holders of Common Stock are permitted to tender or exchange their
shares for other securities, cash or property, or (D) the Company effects any
reclassification of the Common Stock or any compulsory share exchange pursuant
to which the Common Stock is effectively converted into or exchanged for other
securities, cash or property (in any such case, a “Fundamental
Transaction”), then upon any subsequent conversion of this Note, the
Holder shall have the right to receive, for each Conversion Share that would
have been issuable upon such conversion immediately prior to the occurrence of
such Fundamental Transaction, the same kind and amount of securities, cash or
property as it would have been entitled to receive upon the occurrence of such
Fundamental Transaction if it had been, immediately prior to such Fundamental
Transaction, the holder of one share of Common Stock (the “Alternate
Consideration”).  For purposes of any such conversion, the
determination of the Conversion Price shall be appropriately adjusted to apply
to such Alternate Consideration based on the amount of Alternate Consideration
issuable in respect of one share of Common Stock in such Fundamental
Transaction, and the Company shall apportion the Conversion Price among the
Alternate Consideration in a reasonable manner reflecting the relative value of
any different components of the Alternate Consideration.  If holders
of Common Stock are given any choice as to the securities, cash or property to
be received in a Fundamental Transaction, then the Holder shall be given the
same choice as to the Alternate Consideration it receives upon any conversion of
this Note following such Fundamental Transaction.  To the extent
necessary to effectuate the foregoing provisions, any successor to the Company
or surviving entity in such Fundamental Transaction shall issue to the Holder a
new Note consistent with the foregoing provisions and evidencing the Holder’s
right to convert such Note into Alternate Consideration. The terms of any
agreement pursuant to which a Fundamental Transaction is effected shall include
terms requiring any such successor or surviving entity to comply with the
provisions of this paragraph (d) and insuring that this Note (or any such
replacement security) will be similarly adjusted upon any subsequent transaction
analogous to a Fundamental Transaction.

    

    
      
         

      

      
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    e)           Calculations.  All
calculations under this Section 5 shall be made to the nearest cent or the
nearest 1/100th of a share, as the case may be.  For purposes of this
Section 5, the number of shares of Common Stock deemed to be issued and
outstanding as of a given date shall be the sum of the number of shares of
Common Stock (excluding treasury shares, if any) issued and
outstanding.

    

    f)           Notice to the
Holder.

    

    i.           Adjustment to Conversion
Price.  Whenever the Conversion Price is adjusted pursuant to
any of this Section 5, the Company shall promptly mail to each Holder a notice
setting forth the Conversion Price after such adjustment and setting forth a
brief statement of the facts requiring such adjustment. If the Company issues a
variable rate security, despite the prohibition thereon in the Purchase
Agreement, the Company shall be deemed to have issued Common Stock or Common
Stock Equivalents at the lowest possible conversion or exercise price at which
such securities may be converted or exercised in the case of a Variable Rate
Transaction (as defined in the Purchase Agreement).

    

    ii.           Notice to Allow Conversion
by Holder.  If (A) the Company shall declare a dividend (or any
other distribution) on the Common Stock; (B) the Company shall declare a special
nonrecurring cash dividend on or a redemption of the Common Stock; (C) the
Company shall authorize the granting to all holders of the Common Stock rights
or warrants to subscribe for or purchase any shares of capital stock of any
class or of any rights; (D) the approval of any stockholders of the Company
shall be required in connection with any reclassification of the Common Stock,
any consolidation or merger to which the Company is a party, any sale or
transfer of all or substantially all of the assets of the Company, of any
compulsory share exchange whereby the Common Stock is converted into other
securities, cash or property; (E) the Company shall authorize the voluntary or
involuntary dissolution, liquidation or winding up of the affairs of the
Company; then, in each case, the Company shall cause to be filed at each office
or agency maintained for the purpose of conversion of this Note, and shall cause
to be mailed to the Holder at its last addresses as it shall appear upon
the  stock books of the Company, at least 20 calendar days prior to
the applicable record or effective date hereinafter specified, a notice stating
(x) the date on which a record is to be taken for the purpose of such dividend,
distribution, redemption, rights or warrants, or if a record is not to be taken,
the date as of which the holders of the Common Stock of record to be entitled to
such dividend, distributions, redemption, rights or warrants are to be
determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of the Common Stock
of record shall be entitled to exchange their shares of the Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer or share exchange; provided, that the
failure to mail such notice or any defect therein or in the mailing thereof
shall not affect the validity of the corporate action required to be specified
in such notice.  The Holder is entitled to convert this Note during
the 20-day period commencing the date of such notice to the effective date of
the event triggering such notice.

    

    Section
6.             Negative Covenants.
So long as any portion of this Note is outstanding, the Company will not and
will not permit any of its Subsidiaries to directly or indirectly

    

    a)           other
than Permitted Liens, enter into, create, incur, assume or suffer to exist any
liens of any kind, on or with respect to any of its property or assets now owned
or hereafter acquired or any interest therein or any income or profits
therefrom;

    

    b)           amend
its certificate of incorporation, bylaws or other charter documents so as to
materially and adversely affect any rights of the Holder;

    

    
      
         

      

      
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    c)           repay,
repurchase or offer to repay, repurchase or otherwise acquire more than a de minimis number of
shares of its Common Stock or Common Stock Equivalents other than as to the
Conversion Shares to the extent permitted or required under the Transaction
Documents or as otherwise permitted by the Transaction Documents;

    

    d)           enter
into any agreement with respect to any of the foregoing; or

    

    e)           pay
cash dividends or distributions on any equity securities of the
Company.

    

    Section
7.             Events of
Default.

    

    a)           “Event of Default”,
wherever used herein, means any one of the following events (whatever the reason
and whether it shall be voluntary or involuntary or effected by operation of law
or pursuant to any judgment, decree or order of any court, or any order, rule or
regulation of any administrative or governmental body):

    

    i.           any
default in the payment of (A) the principal amount of any Note, or (B) interest
(including Late Fees) on, or liquidated damages in respect of, any Note, as and
when the same shall become due and payable (whether on a Conversion Date or the
Maturity Date or by acceleration or otherwise) which default, solely in the case
of an interest payment or other default under clause (B) above, is not cured,
within 3 Trading Days;

    

    ii.           the
Company shall fail to observe or perform any other covenant or agreement
contained in this Note or any other Note which failure is not cured, if possible
to cure, within the earlier to occur of (A) 5 Trading Days after notice of such
default sent by the Holder or by any other Holder and (B)10 Trading Days after
the Company shall become or should have become aware of such
failure;

    

    iii.          a
default or event of default (subject to any grace or cure period provided for in
the applicable agreement, document or instrument) shall occur under (A) any of
the Transaction Documents, or (B) any other material agreement, lease, document
or instrument to which the Company or any Subsidiary is bound;

    

    iv.          any
representation or warranty made herein, in any other Transaction Documents, in
any written statement pursuant hereto or thereto, or in any other report,
financial statement or certificate made or delivered to the Holder or any other
holder of Notes shall be untrue or incorrect in any material respect as of the
date when made or deemed made;

    

    v.           (i)
the Company or any of its Subsidiaries shall commence a case, as debtor, a case
under any applicable bankruptcy or insolvency laws as now or hereafter in effect
or any successor thereto, or the Company or any Subsidiary commences any other
proceeding under any reorganization, arrangement, adjustment of debt, relief of
debtors, dissolution, insolvency or liquidation or similar law of any
jurisdiction whether now or hereafter in effect relating to the Company or any
Subsidiary thereof or (ii) there is commenced a case against the Company or any
Subsidiary thereof, under any applicable bankruptcy or insolvency laws, as now
or hereafter in effect or any successor thereto which remains undismissed for a
period of 60 days; or (iii) the Company or any Subsidiary thereof is adjudicated
by a court of competent jurisdiction insolvent or bankrupt; or any order of
relief or other order approving any such case or proceeding is entered; or (iv)
the Company or any Subsidiary thereof suffers any appointment of any custodian
or the like for it or any substantial part of its property which continues
undischarged or unstayed for a period of 60 days; or (v) the Company or any
Subsidiary thereof makes a general assignment for the benefit of creditors; or
(vi) the Company shall fail to pay, or shall state that it is unable to pay, or
shall be unable to pay, its debts generally as they become due; or (vii) the
Company or any Subsidiary thereof shall call a meeting of its creditors with a
view to arranging a composition, adjustment or restructuring of its debts; or
(viii) the Company or any Subsidiary thereof shall by any act or failure to act
expressly indicate its consent to, approval of or acquiescence in any of the
foregoing; or (ix) any corporate or other action is taken by the Company or any
Subsidiary thereof for the purpose of effecting any of the
foregoing;

    

    
      
         

      

      
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    vi.          the
Company or any Subsidiary shall default in any of its obligations under any
mortgage, credit agreement or other facility, indenture agreement, factoring
agreement or other instrument under which there may be issued, or by which there
may be secured or evidenced any indebtedness for borrowed money or money due
under any long term leasing or factoring arrangement of the Company in an amount
exceeding $1,000,000, whether such indebtedness now exists or shall hereafter be
created and such default shall result in such indebtedness becoming or being
declared due and payable prior to the date on which it would otherwise become
due and payable;

    

    vii.         the
Common Stock shall not be eligible for quotation on or quoted for trading on a
Trading Market and shall not again be eligible for and quoted or listed for
trading thereon within five Trading Days;

    

    viii.        the
Company shall be a party to any Change of Control Transaction or Fundamental
Transaction, shall agree to sell or dispose of all or in excess of 33% of its
assets in one or more transactions (whether or not such sale would constitute a
Change of Control Transaction) or shall redeem or repurchase more than a de
minimis number of its outstanding shares of Common Stock or other equity
securities of the Company (other than redemptions of Conversion Shares and
repurchases of shares of Common Stock or other equity securities of departing
officers and directors of the Company; provided such repurchases shall not
exceed $100,000, in the aggregate, for all officers and directors during the
term of this Note).  The Company’s acquisition of the American Auction
Network shall not be considered an Event of Default under this Section
7;

    

    

    b)           Remedies Upon Event of
Default. If any Event of Default occurs, the full principal amount of
this Note, together with interest and other amounts owing in respect thereof, to
the date of acceleration shall become, at the Holder’s election, immediately due
and payable in cash.   The aggregate amount payable upon an Event
of Default shall be equal to the Mandatory Default Amount.  Commencing
5 days after the occurrence of any Event of Default that results in the eventual
acceleration of this Note, the interest rate on this Note shall accrue at the
rate of 18% per annum, or such lower maximum amount of interest permitted to be
charged under applicable law.  Upon the payment in full of the
Mandatory Default Amount on this entire Note the Holder shall promptly surrender
this Note to or as directed by the Company.  The Holder need not
provide and the Company hereby waives any presentment, demand, protest or other
notice of any kind, and the Holder may immediately and without expiration of any
grace period enforce any and all of its rights and remedies hereunder and all
other remedies available to it under applicable law.  Such declaration
may be rescinded and annulled by Holder at any time prior to payment hereunder
and the Holder shall have all rights as a Note holder until such time, if any,
as the full payment under this Section shall have been received by
it.  No such rescission or annulment shall affect any subsequent Event
of Default or impair any right consequent thereon.

    

    Section
9.             Miscellaneous.

    

    a)           Notices.  Any
and all notices or other communications or deliveries to be provided by the
Holder hereunder, including, without limitation, any Notice of Conversion, shall
be in writing and delivered personally, by facsimile, sent by a nationally
recognized overnight courier service, addressed to the Company, at the address
set forth above, Attn: Vince
Vellardita or such other address or facsimile number as the Company may
specify for such purposes by notice to the Holder delivered in accordance with
this Section.  Any and all notices or other communications or
deliveries to be provided by the Company hereunder shall be in writing and
delivered personally, by facsimile, sent by a nationally recognized overnight
courier service addressed to each Holder at the facsimile telephone number or
address of such Holder appearing on the books of the Company, or if no such
facsimile telephone number or address appears, at the principal place of
business of the Holder.  Any notice or other communication or
deliveries hereunder shall be deemed given and effective on the earliest of (i)
the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile telephone number specified in this Section prior to
5:30 p.m. (New York City time), (ii) the date after the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section later than 5:30 p.m. (New York City
time) on any date and earlier than 11:59 p.m. (New York City time) on such date,
(iii) the second Business Day following the date of mailing, if sent by
nationally recognized overnight courier service, or (iv) upon actual receipt by
the party to whom such notice is required to be given.

    

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

    b)           Absolute Obligation.
Except as expressly provided herein, no provision of this Note shall alter or
impair the obligation of the Company, which is absolute and unconditional, to
pay the principal of, interest and liquidated damages (if any) on, this Note at
the time, place, and rate, and in the coin or currency, herein
prescribed.  This Note is a direct debt obligation of the
Company.  This Note ranks pari passu with all other
Notes now or hereafter issued under the terms set forth herein.

    

    c)           Lost or Mutilated
Note.  If this Note shall be mutilated, lost, stolen or
destroyed, the Company shall execute and deliver, in exchange and substitution
for and upon cancellation of a mutilated Note, or in lieu of or in substitution
for a lost, stolen or destroyed Note, a new Note for the principal amount of
this Note so mutilated, lost, stolen or destroyed but only upon receipt of
evidence of such loss, theft or destruction of such Note, and of the ownership
hereof, and indemnity, if requested, all reasonably satisfactory to the
Company.

    

    d)           Governing
Law.  All questions concerning the construction, validity,
enforcement and interpretation of this Note shall be governed by and construed
and enforced in accordance with the internal laws of the State of New York,
without regard to the principles of conflicts of law thereof.  Each
party agrees that all legal proceedings concerning the interpretations,
enforcement and defense of the transactions contemplated by any of the
Transaction Documents (whether brought against a party hereto or its respective
affiliates, directors, officers, shareholders, employees or agents) shall be
commenced in the state and federal courts sitting in the City of New York,
Borough of Manhattan (the “New York
Courts”).  Each party hereto hereby irrevocably submits to the
exclusive jurisdiction of the New York Courts for the adjudication of any
dispute hereunder or in connection herewith or with any transaction contemplated
hereby or discussed herein (including with respect to the enforcement of any of
the Transaction Documents), and hereby irrevocably waives, and agrees not to
assert in any suit, action or proceeding, any claim that it is not personally
subject to the jurisdiction of any such court, or such New York Courts are
improper or inconvenient venue for such proceeding.  Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof via
registered or certified mail or overnight delivery (with evidence of delivery)
to such party at the address in effect for notices to it under this Note and
agrees that such service shall constitute good and sufficient service of process
and notice thereof.  Nothing contained herein shall be deemed to limit
in any way any right to serve process in any manner permitted by law. Each party
hereto hereby irrevocably waives, to the fullest extent permitted by applicable
law, any and all right to trial by jury in any legal proceeding arising out of
or relating to this Note or the transactions contemplated hereby. If either
party shall commence an action or proceeding to enforce any provisions of this
Note, then the prevailing party in such action or proceeding shall be reimbursed
by the other party for its attorneys fees and other costs and expenses incurred
with the investigation, preparation and prosecution of such action or
proceeding.

    

    e)           Waiver.  Any
waiver by the Company or the Holder of a breach of any provision of this Note
shall not operate as or be construed to be a waiver of any other breach of such
provision or of any breach of any other provision of this Note.  The
failure of the Company or the Holder to insist upon strict adherence to any term
of this Note on one or more occasions shall not be considered a waiver or
deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this Note.  Any waiver must be in
writing.

    

    
      
         

      

      
        16

        
          

        

      

      
         

      

    

    f)           Severability.  If
any provision of this Note is invalid, illegal or unenforceable, the balance of
this Note shall remain in effect, and if any provision is inapplicable to any
person or circumstance, it shall nevertheless remain applicable to all other
persons and circumstances.  If it shall be found that any interest or
other amount deemed interest due hereunder violates applicable laws governing
usury, the applicable rate of interest due hereunder shall automatically be
lowered to equal the maximum permitted rate of interest. The Company covenants
(to the extent that it may lawfully do so) that it shall not at any time insist
upon, plead, or in any manner whatsoever claim or take the benefit or advantage
of, any stay, extension or usury law or other law which would prohibit or
forgive the Company from paying all or any portion of the principal of or
interest on this Note as contemplated herein, wherever enacted, now or at any
time hereafter in force, or which may affect the covenants or the performance of
this indenture, and the Company (to the extent it may lawfully do so) hereby
expressly waives all benefits or advantage of any such law, and covenants that
it will not, by resort to any such law, hinder, delay or impeded the execution
of any power herein granted to the Holder, but will suffer and permit the
execution of every such as though no such law has been enacted.

    

    g)           Next Business
Day.  Whenever any payment or other obligation hereunder shall
be due on a day other than a Business Day, such payment shall be made on the
next succeeding Business Day.

    

    h)           Headings.  The
headings contained herein are for convenience only, do not constitute a part of
this Note and shall not be deemed to limit or affect any of the provisions
hereof.

    

    i)           Assumption.  Any
successor to the Company or surviving entity in a Fundamental Transaction shall
(i) assume in writing all of the obligations of the Company under this Note and
the other Transaction Documents pursuant to written agreements in form and
substance satisfactory to the Holder (such approval not to be unreasonably
withheld or delayed) prior to such Fundamental Transaction and (ii) to issue to
the Holder a new Note of such successor entity evidenced by a written instrument
substantially similar in form and substance to this Note, including, without
limitation, having a principal amount and interest rate equal to the principal
amounts and the interest rates of the Notes held by the Holder and having
similar ranking to this Note, and satisfactory to the Holder (any such approval
not to be unreasonably withheld or delayed).  The provisions of this
Section 9(i) shall apply similarly and equally to successive Fundamental
Transactions and shall be applied without regard to any limitations of this
Note.

    

    *********************

    
      
         

      

      
        17

        
          

        

      

      
         

      

    

    IN
WITNESS WHEREOF, the Company has caused this Note to be duly executed by a duly
authorized officer as of the date first above indicated.

    

    

    
      
        	
                Valcom,
      Inc.

                 

                 

              
	
                By:__________________________________________

                     Name:
      Vince Vellardita

                     Title:
      Chief Executive Officer

              

      

    

    

     

     

    
      
         

      

      
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    ANNEX
A

    

    NOTICE
OF CONVERSION

    

    

    The undersigned hereby elects to
convert principal under the 10% Convertible Note of Valcom, Inc. , a Delaware
corporation (the “Company”), due on
January 6, 2010 , into shares of common stock, par value $0.001 per share (the
“Common
Stock”), of the Company according to the conditions hereof, as of the
date written below.  If shares are to be issued in the name of a
person other than the undersigned, the undersigned will pay all transfer taxes
payable with respect thereto and is delivering herewith such certificates and
opinions as reasonably requested by the Company in accordance
therewith.  No fee will be charged to the holder for any conversion,
except for such transfer taxes, if any.

    

    By the delivery of this Notice of
Conversion the undersigned represents and warrants to the Company that its
ownership of the Common Stock does not exceed the amounts determined in
accordance with Section 13(d) of the Exchange Act, specified under Section 4 of
this Note.

    

    The undersigned agrees to comply with
the prospectus delivery requirements under the applicable securities laws in
connection with any transfer of the aforesaid shares of Common
Stock.

    

    Conversion
calculations:

    Date to
Effect Conversion:

    

    Principal
Amount of Note to be Converted:

    

    Payment
of Interest in Common Stock __ yes  __ no

    If yes,
$_____ of Interest Accrued on Account of Conversion at Issue.

    

    Number of
shares of Common Stock to be issued:

    

    

    Signature:

    

    Name:

    

    Address:

    

    
      
         

      

      
        19

        
          

        

      

      
         

      

    

    

    Schedule
1

    

    CONVERSION
SCHEDULE

    

    The 10%
Convertible Notes due on January 6, 2010, in the aggregate principal amount of
$100,000 issued by Valcom, Inc.  This Conversion Schedule reflects
conversions made under Section 4 of the above referenced Note.

    

    Dated:

    

     

    
      
        	
                Date
      of Conversion

                (or
      for first entry, Original Issue Date)

              	
                Amount
      of Conversion

              	
                Aggregate
      Principal Amount Remaining Subsequent to Conversion

                (or
      original Principal Amount)

              	
                Company
      Attest

              
	 
      	
                 
      

                 

              	 
      	 
      
	 
      	
                 
      

                 

              	 
      	 
      
	 
      	
                 
      

                 

              	 
      	 
      
	 
      	
                 
      

                 

              	 
      	 
      
	 
      	
                 
      

                 

              	 
      	 
      
	 
      	
                 
      

                 

              	 
      	 
      
	 
      	
                 
      

                 

              	 
      	 
      
	 
      	
                 
      

                 

              	 
      	 
      
	 
      	
                 
      

                 

              	 
      	 
      

      

    

    

    

     

    
      
         

      

      
        20EXHIBIT
B

    

    SECURITY
AGREEMENT

    

                SECURITY
AGREEMENT, dated as of January 6, 2009 (this “Agreement”), among
Valcom, Inc., a Delaware corporation (the “Company” or the
“Debtor”) and
the holder of the Company’s 10% Secured Convertible Promissory Note due
January 6, 2010 in the original aggregate principal amount of $100,000 (the
“Note”),
signatory hereto, their endorsees, transferees and assigns (collectively
referred to as, the “Secured
Party”).

    

    WITNESSETH:

    

                WHEREAS,
pursuant to the Note, the Secured Party has agreed to extend the loans to
the Company evidenced by the Note;

    

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

    

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

    

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

    

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

    

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

    

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

     

    
      
         

      

      
        1

        
          

        

      

      
         

      

    

     

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

    

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

    

    (v)           
All commercial tort claims;

    

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

    

    (vii)          All
investment property;

     

    (viii)        
All supporting obligations; and

    

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

    

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

    

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

     

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

    

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

    

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

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

    

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

    

    (e)           “Obligations” means,
without limitation: (i) principal of, and interest on the Notes and the loans
extended pursuant thereto; (ii) any and all other fees, indemnities, costs,
obligations and liabilities of the Debtors from time to time under or in
connection with this Agreement, the Notes, the Guaranty and any other
instruments, agreements or other documents executed and/or delivered in
connection herewith or therewith; and (iii) all amounts (including but not
limited to post-petition interest) in respect of the foregoing that would be
payable but for the fact that the obligations to pay such amounts are
unenforceable or not allowable due to the existence of a bankruptcy,
reorganization or similar proceeding involving any Debtor.

    

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

    

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

    

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

    

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

    

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

    

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

    

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

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

    

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

    

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

    

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

    

    (f)           This
Agreement creates in favor of the Secured Party a valid, security interest in
the Collateral, subject only to Permitted Liens (as defined in the Notes)
securing the payment and performance of the Obligations.  Upon making
the filings described in the immediately following paragraph, all security
interests created hereunder in any Collateral which may be perfected by filing
Uniform Commercial Code financing statements shall have been duly
perfected.  Except for the filing of the Uniform Commercial Code
financing statements referred to in the immediately following paragraph,
the recordation of the Intellectual Property Security Agreement (as defined
below) with respect to copyrights and copyright applications in the United
States Copyright Office referred to in paragraph (m), the execution and delivery
of deposit account control agreements satisfying the requirements of
Section 9-104(a)(2) of the UCC with respect to each deposit account of the
Debtors, and the delivery of the certificates and
other instruments provided in Section 3, no action is necessary to
create, perfect or protect the security interests created
hereunder.  Without limiting the generality of the foregoing, except
for the filing of said financing statements, the recordation of said
Intellectual Property Security Agreement, and the execution and delivery of said
deposit account control agreements, no consent of any third parties and no
authorization, approval or other action by, and no notice to or filing with, any
governmental authority or regulatory body is required for (i) the
execution, delivery and performance of this Agreement, (ii) the creation or
perfection of the Security Interests created hereunder in the Collateral or
(iii) the enforcement of the rights of the Secured Party hereunder.

    

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

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

    

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

    

     (i)             The capital stock and other equity interests listed on
Schedule
H hereto represent all of the capital stock and other equity
interests of the Guarantors, and represent all capital stock and other equity
interests owned, directly or indirectly, by the Company.  All of the
Pledged Securities are validly issued, fully paid and nonassessable, and the
Company is the legal and beneficial owner of the Pledged Securities, free and
clear of any lien, security interest or other encumbrance except for the
security interests created by this Agreement and other Permitted Liens (as
defined in the Note).  

    

    (j)           The ownership and other equity interests in partnerships
and limited liability companies (if any)
included in the Collateral (the
“Pledged
Interests”) by their express terms do not provide that they are
securities governed by Article 8 of the UCC
and are not held in a securities account or by any financial
intermediary.

    

    (k)           Each
Debtor shall at all times maintain the liens and Security Interest provided for
hereunder as valid and perfected first priority liens and security interests in
the Collateral in favor of the Secured Party until this Agreement and the
Security Interest hereunder shall be terminated pursuant to Section 11
hereof.  Each Debtor hereby agrees to defend the same against the
claims of any and all persons and entities. Each Debtor shall safeguard and
protect all Collateral for the account of the Secured Party.   At
the request of the Secured Party, each Debtor will sign and deliver to the
Secured Party at any time or from time to time one or more financing statements
pursuant to the UCC in form reasonably satisfactory to the Secured Party and
will pay the cost of filing the same in all public offices wherever filing is,
or is deemed by the Secured Party to be, necessary or desirable to effect the
rights and obligations provided for herein. Without limiting the generality of
the foregoing, each Debtor shall pay all fees, taxes and other amounts necessary
to maintain the Collateral and the Security Interest hereunder, and each Debtor
shall obtain and furnish to the Secured Party from time to time, upon demand,
such releases and/or subordinations of claims and liens which may be required to
maintain the priority of the Security Interest hereunder.

    

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

    

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

    

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

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

    

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

    

     (p)           Each
Debtor shall promptly execute and deliver to the Secured Party such further
deeds, mortgages, assignments, security agreements, financing statements or
other instruments, documents, certificates and assurances and take such further
action as the Secured Party may from time to time request and may in its sole
discretion deem necessary to perfect, protect or enforce its security interest
in the Collateral including, without limitation, if applicable, the execution
and delivery of a separate security agreement with respect to each Debtor’s
Intellectual Property (“Intellectual Property
Security Agreement”) in which the Secured Party have been granted a
security interest hereunder, substantially in a form acceptable to the Secured
Party, which Intellectual Property Security Agreement, other than as stated
therein, shall be subject to all of the terms and conditions
hereof.

    

    (q)           Each
Debtor shall permit the Secured Party and their representatives and agents to
inspect the Collateral at any time, and to make copies of records pertaining to
the Collateral as may be requested by a Secured Party from time to
time.

    

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

    

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

    

    
      
         

      

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

    

    (u)           The
Debtors shall at all times preserve and keep in full force and effect their
respective valid existence and good standing and any rights and franchises
material to its business.

    

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

    

    (w)           No
Debtor may consign any of its Inventory or sell any of its Inventory on bill and
hold, sale or return, sale on approval, or other conditional terms of sale
without the consent of a Majority in
Interest which shall not be unreasonably withheld, except to the extent
such consignment or sale does not exceed 15% of the total value of all of the
Company’s finished goods in Inventory.

    

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

    

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

    

    (z)           
(i) The actual name of each Debtor is the name set forth in the preamble above;
(ii) no Debtor has any trade names except as set forth on Schedule E attached
hereto; (iii) no Debtor has used any name other than that stated in the preamble
hereto or as set forth on Schedule E for the
preceding five years; and (iv) no entity has merged into any Debtor or been
acquired by any Debtor within the past five years except as set forth on Schedule
E.

    

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

    

    (bb)          Each Debtor, in its capacity as issuer, hereby agrees to
comply with any and all orders and
instructions of Agent regarding the Pledged Interests consistent with the terms
of this Agreement without the further consent of any Debtor as contemplated by
Section 8-106 (or any successor section) of the UCC.  Further, each
Debtor agrees that it shall not enter into a similar agreement (or one
that would confer “control” within the meaning of Article 8 of the UCC) with any
other person or entity.

     

    (cc)          Each
Debtor shall cause all tangible chattel paper constituting Collateral to be
delivered to the Agent, or, if such delivery is not possible, then to cause such
tangible chattel paper to contain a legend noting that it is subject to the
security interest created by this Agreement.  To the extent that any
Collateral consists of electronic chattel paper, the applicable Debtor shall
cause the underlying chattel paper to be “marked” within the meaning of Section
9-105 of the UCC (or successor section thereto).

    

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

    

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

    (ee)          To
the extent that any Collateral consists of letter-of-credit rights, the
applicable Debtor shall cause the issuer of each underlying letter of credit to
consent to an assignment of the proceeds thereof to the Secured
Party.

    

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

    

    (gg)         If
any Debtor shall at any time hold or acquire a commercial tort claim, such
Debtor shall promptly notify the Secured Party in a writing signed by such
Debtor of the particulars thereof and grant to the Secured Party in such writing
a security interest therein and in the proceeds thereof, all upon the terms of
this Agreement, with such writing to be in form and substance satisfactory to
the Secured Party.

    

    (hh)         Each
Debtor shall immediately provide written notice to the Secured Party of any and
all accounts which arise out of contracts with any governmental authority and,
to the extent necessary to perfect or continue the perfected status of the
Security Interest in such accounts and proceeds thereof, shall execute and
deliver to the Secured Party an assignment of claims for such accounts and
cooperate with the Secured Party in taking any other steps required, in their
judgment, under the Federal Assignment of Claims Act or any similar federal,
state or local statute or rule to perfect or continue the perfected status of
the Security Interest in such accounts and proceeds thereof.

    

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

    

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

    

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

    

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

     

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

    (mm)        Without
limiting the generality of the other obligations of the Debtors hereunder, each
Debtor shall promptly (i) cause to be registered at the United States Copyright
Office all of its material copyrights, (ii) cause the security interest
contemplated hereby with respect to all Intellectual Property registered at the
United States Copyright Office or United States Patent and Trademark Office to
be duly recorded at the applicable office, and (iii) give the Agent notice
whenever it acquires (whether absolutely or by license) or creates any
additional material Intellectual Property.

    

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

    

    (oo)         Schedule F attached
hereto lists all of the patents, patent applications, trademarks, trademark
applications, registered copyrights, and domain names owned by any of the
Debtors as of the date hereof.  Schedule F lists all
material licenses in favor of any Debtor for the use of any patents, trademarks,
copyrights and domain names as of the date hereof.  All material
patents and trademarks of the Debtors have been duly recorded at the United
States Patent and Trademark Office and all material copyrights of the Debtors
have been duly recorded at the United States Copyright Office.

    

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

    

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

    

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

    

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

    

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

    

    (c)   The
failure by any Debtor to observe or perform any of its obligations hereunder for
five (5) days after delivery to such Debtor of notice of such failure by or on
behalf of a Secured Party unless such default is capable of cure but cannot be
cured within such time frame and such Debtor is using best efforts to cure same
in a timely fashion; or

    

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

    

    
      
         

      

      
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    7.           Duty To Hold In
Trust.

    

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

    

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

    

    8.           Rights and Remedies Upon
Default.

    

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

    

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

    

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

    

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

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

    

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

    

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

    

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

    

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

     

    (c)           For the purpose of enabling the Agent to further
exercise rights and remedies under this Section 8 or elsewhere provided by agreement or applicable law, each
Debtor hereby grants to the Agent, for the benefit of the Agent and the
Secured Party, an irrevocable, nonexclusive license (exercisable
without payment of royalty or other compensation to such Debtor) to use, license or sublicense following an Event of
Default, any Intellectual Property now owned or hereafter acquired by such
Debtor, and wherever the same may be located, and including in such license
access to all media in which any of the licensed items may be recorded
or stored and to all computer software and programs used for the compilation or
printout thereof.

    

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

    

    
      
         

      

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

     

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

    

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

    

    13.           Security Interest Absolute.
All rights of the Secured Party and all obligations of the Debtors hereunder,
shall be absolute and unconditional, irrespective of: (a) any lack of validity
or enforceability of this Agreement, the Notes or any agreement entered into in
connection with the foregoing, or any portion hereof or thereof; (b) any change
in the time, manner or place of payment or performance of, or in any other term
of, all or any of the Obligations, or any other amendment or waiver of or any
consent to any departure from the Notes or any other agreement entered into in
connection with the foregoing; (c) any exchange, release or nonperfection of any
of the Collateral, or any release or amendment or waiver of or consent to
departure from any other collateral for, or any guaranty, or any other security,
for all or any of the Obligations; (d) any action by the Secured Party to
obtain, adjust, settle and cancel in its sole discretion any insurance claims or
matters made or arising in connection with the Collateral; or (e) any other
circumstance which might otherwise constitute any legal or equitable defense
available to a Debtor, or a discharge of all or any part of the Security
Interest granted hereby.  Until the Obligations shall have been paid
and performed in full, the rights of the Secured Party shall continue even if
the Obligations are barred for any reason, including, without limitation, the
running of the statute of limitations or bankruptcy.  Each Debtor
expressly waives presentment, protest, notice of protest, demand, notice of
nonpayment and demand for performance. In the event that at any time any
transfer of any Collateral or any payment received by the Secured Party
hereunder shall be deemed by final order of a court of competent jurisdiction to
have been a voidable preference or fraudulent conveyance under the bankruptcy or
insolvency laws of the United States, or shall be deemed to be otherwise due to
any party other than the Secured Party, then, in any such event, each Debtor’s
obligations hereunder shall survive cancellation of this Agreement, and shall
not be discharged or satisfied by any prior payment thereof and/or cancellation
of this Agreement, but shall remain a valid and binding obligation enforceable
in accordance with the terms and provisions hereof.  Each Debtor
waives all right to require the Secured Party to proceed against any other
person or entity or to apply any Collateral
which the Secured Party may hold at any time, or to marshal assets, or to pursue
any other remedy. Each Debtor waives any defense arising by reason of the
application of the statute of limitations to any obligation secured
hereby.

    

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

    14.            Term of Agreement. This
Agreement and the Security Interest shall terminate on the date on which all
payments under the Notes have been indefeasibly paid in full and all other
Obligations have been paid or discharged; provided, however, that all
indemnities of the Debtors contained in this Agreement (including, without
limitation, Annex B hereto) shall survive and remain operative and in full force
and effect regardless of the termination of this Agreement.

    

    15.
           Power of Attorney; Further
Assurances.

    

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

    

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

    

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

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

    

    16.            Notices. All notices,
requests, demands and other communications hereunder shall be subject to the
notice provision of the Purchase Agreement (as such term is defined in the
Notes).

    

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

    

    18.           Appointment of Agent. The Secured
Party hereby appoints Omnireliant Holdings, Inc. to act as its agent
(“Agent”) for
purposes of exercising any and all rights and remedies of the Secured Party
hereunder. The Agent shall have the rights, responsibilities and immunities set
forth in Annex
B hereto.

    
 

    19.            Miscellaneous.

    

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

    

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

    

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

    

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

    

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

    

    
      
         

      

      
        14

        
          

        

      

      
         

      

    

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

    

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

    

    (h)   All questions
concerning the construction, validity, enforcement and interpretation of this
Agreement shall be governed by and construed and enforced in accordance with the
internal laws of the State of New York, without regard to the principles of
conflicts of law thereof.  Each Debtor agrees that
all proceedings concerning the interpretations, enforcement and defense of
the transactions contemplated by this Agreement and the Note (whether brought
against a party hereto or its respective affiliates, directors, officers,
shareholders, partners, members, employees or agents) shall be commenced
exclusively in the state and federal courts sitting in the City of New York,
Borough of Manhattan. Each Debtor hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the City of New York,
Borough of Manhattan for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein, and hereby irrevocably waives, and agrees not to assert in any
proceeding, any claim that it is not personally subject to the jurisdiction of
any such court, that such proceeding is improper. Each party hereto hereby
irrevocably waives personal service of process and consents to process being
served in any such proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to such party
at the address in effect for notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law.  Each party hereto
hereby irrevocably waives, to the fullest extent permitted by applicable law,
any and all right to trial by jury in any legal proceeding arising out of or
relating to this Agreement or the transactions contemplated hereby. If any party
shall commence a proceeding to enforce any provisions of this Agreement, then
the prevailing party in such proceeding shall be reimbursed by the other party
for its reasonable attorney’s fees and other costs and expenses incurred with
the investigation, preparation and prosecution of such proceeding.

    

    (i)           
This Agreement may be executed in any number of counterparts, each of which when
so executed shall be deemed to be an original and, all of which taken together
shall constitute one and the same Agreement. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid binding
obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
were the original thereof.

    

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

    

    (k)           Each
Debtor shall indemnify, reimburse and hold harmless the Secured Party and their
respective partners, members, shareholders, officers, directors, employees and
agents (collectively, “Indemnitees”) from
and against any and all losses, claims, liabilities, damages, penalties, suits,
costs and expenses, of any kind or nature, (including fees relating to the cost
of investigating and defending any of the foregoing) imposed on, incurred by or
asserted against such Indemnitee in any way related to or arising from or
alleged to arise from this Agreement or the Collateral, except any such losses,
claims, liabilities, damages, penalties, suits, costs and expenses which result
from the gross negligence or willful misconduct of the Indemnitee as determined
by a final, nonappealable decision of a court of competent
jurisdiction.  This indemnification provision is in addition to, and
not in limitation of, any other indemnification provision in the Notes, the
Purchase Agreement (as such term is defined in the Notes) or any other
agreement, instrument or other document executed or delivered in connection
herewith or therewith.

    

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

    

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

     

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

    

    [SIGNATURE
PAGES FOLLOW]

     

    
 

    
      
         

      

      
        16

        
          

        

      

      
         

      

    

    

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

    

    

    
      	
              VALCOM,
      INC.

               

            
	
              By:__________________________________________

                   Name:
      Vince Vellardita

                   Title:
      Chief Executive Officer

            
	 
      
	 
      
	 
      

    

    

    

    

    

    

    

                          [SIGNATURE
PAGE OF HOLDERS FOLLOWS]

    
      
         

      

      
        17

        
          

        

      

      
         

      

    

    [SIGNATURE
PAGE OF HOLDERS TO VALCOM, INC. NOTE]

    

    Name of
Investing Entity: Omnireliant Holdings, Inc.

    Signature of Authorized Signatory of
Investing entity: _________________________

    Name of
Authorized Signatory: _________________________

    Title of
Authorized Signatory: __________________________

    

    [SIGNATURE
PAGE OF HOLDERS FOLLOWS]

    

    

    

    
      
         

      

      
        18

        
          

        

      

      
         

      

    

                          

    

    SCHEDULE
A

    

    

    Principal
Place of Business of Debtor: 2113 A Gulf Boulevard, Indian Rocks Beach, Florida
33785

    

    

    

    Locations
Where Collateral is Located or Stored: 2113 A Gulf Boulevard, Indian Rocks
Beach, Florida 33785

    

    

    

    

     

    
      
         

      

      
        19

        
          

        

      

      
         

      

    

    SCHEDULE
B

    Owners
of Collateral

    

    

    None.

     

     

     

    
      
         

      

      
        20

        
          

        

      

      
         

      

    

    SCHEDULE
C

    

    

    Delaware

     

     

     

    
      
         

      

      
        21

        
          

        

      

      
         

      

    

    SCHEDULE
D

    

    Organizational
Identification Numbers

    

    Federal
ID 581700840

     

     

     

    
      
         

      

      
        22

        
          

        

      

      
         

      

    

    SCHEDULE
E

    

    Names;
Mergers and Acquisitions

    

    None.

     

     

     

     

    
      
         

      

      
        23

        
          

        

      

      
         

      

    

    SCHEDULE
F

    

    Intellectual
Property

    

    
 

    The
Company has no patent rights. It has the following service marks

     

    SATELLITE
BINGO:

     

    International
Class 41 (production and distribution of television game shows) granted
Registration Number 1,473,709 on January 19, 1988 to Satellite Bingo, Inc. 20
years.

     

    "HANGIN
WITH THE BOYZ":

     

    International
Class 25 (Clothing) and 41 (Production and distribution of television game
shows) application filed on March 1, 2000, Serial NO. 75/932,583,

     

    "WHO
CAN YOU TRUST?"

     

    Mark
granted March 9, 1999 for 20 years International Class 41 (production and
distribution of television game shows) serial NO.75/485225,

     

    "FUHGEDABOWDIT":

     

    International
Class 41 (production and distribution of television game shows) Serial NO.
75/784,763 application filed on August 26, 1999.

     

    "ULTIMATE
DRIVER":

     

    The
Company applied for registration of copyright of "Ultimate Driver" in October,
2002.

     

    "FINAL ROUND" FIGHT FILM:
registered under the Writer's Guild of America (WGA). The Company applied for
registration of copyright of "The Final Round-The Gabriel Ruelas Story" on
December 2, 2000.

     

    The
Company obtained an assignment to a copyright for "The Works," copyright
registrations for Globalot Bingo and derivatives: Number PAU 855-931 (June 10,
1986); Number Pau 847-876 (March 11, 1986); Number PAU 788-031 (September 19,
1985); Number PAU 927-410 (November 4, 1986); Number PA 370-721 (February 9,
1988); Number PA 516-494 (January 17, 1991); Number PA 533-697 (January 17,
1991); from Satellite Bingo, Inc. to SBI Communications, Inc., dated September
14, 1993.

     

    The
Company applied for registration of copyright of "The Final Round- The Gabriel
Ruelas Story" on December 2, 2000. The Company obtained an assignment of
copyright of "The Life", Txu 744-678 June 12, 1996. The Company obtained a
copyright by assignment of "PCH" Pau 2-040-426 September 12, 1995.

     

    HEADLIGHTS
AND TAILPIPES

     

    Live
Theater Show Debut and Stardust Casino: Broadcast, merchandise and
food/beverages.

     

    SIN
CITY RECORDS

     

    Record
Studio, Record Label, publishing, music, television, films and
merchandise

     

    MOTOWN
PARTNERS, LLC

     

    Live
Theatre, Production Revenue and Concerts

    
      
         

      

      
        24

        
          

        

      

      
         

      

    

    SCHEDULE
G

    

    Account
Debtors

    

    None.

     

     

     

     

    
      
         

      

      
        25

        
          

        

      

      
         

      

    

    SCHEDULE H

    

    Pledged Securities

    
 

    None.

     

     

    
 

    
      
         

      

      
        26

        
          

        

      

      
         

      

    

    ANNEX
A

    to

    SECURITY

    AGREEMENT

     

    
      
      

      FORM
OF ADDITIONAL DEBTOR JOINDER

    

    

    Security
Agreement dated as of January 6, 2009 made by

    Valcom,
Inc.

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

    to and in
favor of

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

    

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

    

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

    

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

    

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

     

     

     

    
      
         

      

      
        27

        
          

        

      

      
         

      

    

     

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

    

    
      	
               

            	
              [Name
      of Additional Debtor]

            

    

    

    
      	
               

            	
              By:

            

    

     

    
      	
               

            	
              Name:

            

    

    
      	
               

            	
              Title:

            

    

    

    
      	
               

            	
              Address:

            

    

    

    

    

    

    

    
      
      

      Dated:

    

    

    
      
         

      

      
        28

        
          

        

      

      
         

      

    

    ANNEX
B

    to

    SECURITY

    AGREEMENT

    

    THE
AGENT

    

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

    

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

    

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

    

                          4.
Certain Rights of the
Agent.  The Agent shall have the right to take any action with
respect to the Collateral, on behalf of all of the Secured Party.  To
the extent practical, the Agent shall request instructions from the Secured
Party with respect to any material act or action (including failure to act) in
connection with the Agreement or any other Transaction Document, and shall be
entitled to act or refrain from acting in accordance with the instructions of
Secured Party holding a majority in principal amount of Notes (based on
then-outstanding principal amounts of Notes at the time of any such
determination); if such instructions are not provided despite the Agent’s
request therefor, the Agent shall be entitled to refrain from such act or taking
such action, and if such action is taken, shall be entitled to appropriate
indemnification from the Secured Party in respect of actions to be taken by the
Agent; and the Agent shall not incur liability to any person or entity by reason
of so refraining.  Without limiting the foregoing, (a) no Secured
Party shall have any right of action whatsoever against the Agent as a result of
the Agent acting or refraining from acting hereunder in accordance with the
terms of the Agreement or any other Transaction Document, and the Debtors shall
have no right to question or challenge the authority of, or the instructions
given to, the Agent pursuant to the foregoing and (b) the Agent shall not be
required to take any action which the Agent believes (i) could reasonably be
expected to expose it to personal liability or (ii) is contrary to this
Agreement, the Transaction Documents or applicable law.

    

    
      
         

      

      
        29

        
          

        

      

      
         

      

    

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

    

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

    

                          7.  Resignation by the Agent.

    

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

    

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

    

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

    

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

    

      
        
           

        

        
          30

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