Document:

ex10-24.htm

    Exhibit 10.24

     

    
 

     

    WARRANT

     

    THE
SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS.  THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE
OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL IN A FORM
REASONABLY SATISFACTORY TO THE ISSUER THAT REGISTRATION IS NOT REQUIRED UNDER
SAID ACT OR APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144
UNDER SAID ACT.  NOTWITHSTANDING THE FOREGOING, THIS WARRANT MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT.

     

     

    IVOICE
TECHNOLOGY, INC.

     

     

    Warrant
To Purchase Common Stock

     

    Warrant
No.1

    Dollar
Value of
Warrant:                                                      $144,444
(the “Initial Warrant Value”)

    

    Date of
Issuance: March 11, 2008

    

    IVOICE
TECHNOLOGY, INC., a New Jersey corporation (the “Company”), hereby
certifies that, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, iVoice, Inc.(the “Holder”), the
registered holder hereof or its permitted assigns, is entitled, subject to the
terms set forth below, to purchase from the Company upon surrender of this
Warrant, at any time or times on or after the date hereof, but not after
11:59 P.M. Eastern Time on the Expiration Date (as defined herein) purchase
at the Warrant Exercise Price, as may be amended herein, that number of Class A
Common Stock shares of the Company (the “Warrant Shares”)
calculated by dividing One Hundred Forty-four Thousand and Four Hundred and
Forty-four Dollars ($144,444) (the “Initial Warrant Value”) by the lowest price
that the Company had ever issued its Class A Common Stock (the “Warrant Exercise
Price”), provided, however, that in no event shall the holder be entitled to
exercise this Warrant for a number of Warrant Shares in excess of that number of
Warrant Shares which, upon giving effect to such exercise, would cause the
aggregate number of shares of Common Stock beneficially owned by the holder and
its affiliates to exceed 9.99% of the outstanding shares of the Common Stock
following such exercise, except within sixty (60) days of the Expiration Date
(however, such restriction may be waived by Holder (but only as to itself and
not to any other holder) upon not less than 65 days prior notice to the
Company).  For purposes of the foregoing proviso, the aggregate 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 exercise of
this Warrant with respect to which the determination of such proviso is being
made, but shall exclude shares of Common Stock which would be issuable upon
(i) exercise of the remaining, unexercised Warrants beneficially owned by
the holder and its affiliates and (ii) exercise or conversion of the
unexercised or unconverted portion of any other securities of the Company
beneficially owned by the holder and its affiliates (including, without
limitation, any convertible notes or preferred stock) subject to a limitation on
conversion or exercise analogous to the limitation contained
herein.  Except as set forth in the preceding sentence, for purposes
of this paragraph, beneficial ownership shall be calculated in accordance with
Section 13(d) of the Securities Exchange Act of 1934, as amended.  For
purposes of this Warrant, in determining the number of outstanding shares of
Common Stock a holder may rely on the number of outstanding shares of Common
Stock as reflected in (1) the Company’s most recent Form 10-QSB or Form 10-KSB,
as the case may be, (2) a more recent public announcement by the Company or (3)
any other notice by the Company or its transfer agent setting forth the number
of shares of Common Stock outstanding.  Upon the written request of
any holder, the Company shall promptly, but in no event later than one (1)
Business Day following the receipt of such notice, confirm in writing to any
such 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 exercise of Warrants (as defined below) by such
holder and its affiliates since the date as of which such number of outstanding
shares of Common Stock was reported.

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Section
1. 

     

    (a) This
Warrant is the common stock purchase warrant (the “Warrant”) issued
pursuant to the Stock Purchase Agreement (the “Agreement”) dated the
date hereof between the Company and the Holder.

     

    (b) Definitions.  The
following words and terms as used in this Warrant shall have the following
meanings:

     

    (i) “Approved Stock Plan”
means any employee benefit plan which has been approved by the Board of
Directors of the Company, pursuant to which the Company’s securities may be
issued to any consultant, employee, officer or director for services provided to
the Company.

     

    (ii) “Business Day” means
any day other than Saturday, Sunday or other day on which commercial banks in
the City of New York are authorized or required by law to remain
closed.

     

    (iii) “Closing Bid Price”
means the closing bid price of Common Stock as quoted on the Principal Market
(as reported by Bloomberg Financial Markets (“Bloomberg”) through
its “Volume at Price” function).

     

    (iv) “Common Stock” means
(i) the Company’s Class A common stock, no par value per share, and
(ii) any capital stock into which such Common Stock shall have been changed
or any capital stock resulting from a reclassification of such Common
Stock.

     

    (v) “Event of Default”
means an event of default under the Convertible Debentures issued in connection
with the Agreement.

     

    “Excluded Securities”
means, provided such security is issued at a price which is greater than or
equal to the arithmetic average of the Closing Bid Prices of the Common Stock
for the ten (10) consecutive trading days immediately preceding the date of
issuance, any of the following: (a) any issuance by the Company of securities in
connection with a strategic partnership or a joint venture (the primary purpose
of which is not to raise equity capital), (b) any issuance by the Company of
securities as consideration for a merger or consolidation or the acquisition of
a business, product, license, or other assets of another person or entity and
(c) options to purchase shares of Common Stock, provided (I) such options are
issued after the date of this Warrant to employees of the Company within thirty
(30) days of such employee’s starting his employment with the Company, and (II)
the exercise price of such options is not less than the Closing Bid Price of the
Common Stock on the date of issuance of such option, (d) the issuance of an
equity security pursuant to an agreement to acquire another entity or merge with
another entity into the Company or a subsidiary of the Company whereby (provided
the Buyer is given at least ten (10) days written notice of the same): (A) the
shareholders of the Company immediately prior to the consummation of the
contemplated transaction continue to hold a majority of the outstanding Common
Stock shares of the Company immediately subsequent to the consummation of the
transaction or (B) the Company holds a majority of the outstanding Common Stock
shares of the subsidiary company immediately subsequent to the consummation of
the transaction, (e) issue any preferred stock, warrant, option, right,
contract, call, or other security or instrument granting the holder thereof the
right to acquire Common Stock without consideration or for a consideration less
than such Common Stock’s Bid Price determined immediately prior to it’s
issuance, (f) the issuance of Common Stock issuable pursuant to the Company’s
obligations upon the conversion of stock options, convertible debt or Class B
Common Stock or the payment of legal fees to Lawrence A. Muenz,
Esq.

     

    (vi) “Expiration Date”
means the date five (5) years from the Issuance Date of this Warrant or, if such
date falls on a Saturday, Sunday or other day on which banks are required or
authorized to be closed in the City of New York or the State of New York or on
which trading does not take place on the Principal Exchange or automated
quotation system on which the Common Stock is traded (a “Holiday”), the next
date that is not a Holiday.

     

    (vii) “Issuance Date” means
the date hereof.

     

    (viii) “Options” means any
rights, warrants or options to subscribe for or purchase Common Stock or
Convertible Securities.

     

    (ix) “Other Securities”
means (i) those options and warrants of the Company issued prior to, and
outstanding on, the Issuance Date of this Warrant, (ii) the shares of Common
Stock issuable on exercise of such options and warrants, provided such options
and warrants are not amended after the Issuance Date of this Warrant,
(iii) the shares of Common Stock issuable upon exercise of this Warrant and
(iv) the shares of Common Stock issuable upon the conversion, in whole or in
part, of the Series A 10% Secured Convertible Preferred Stock issued by the
Company and held by iVoice, Inc..

     

    (x) “Person” means an
individual, a limited liability company, a partnership, a joint venture, a
corporation, a trust, an unincorporated organization and a government or any
department or agency thereof.

     

    (xi) “Principal Market”
means the New York Stock Exchange, the American Stock Exchange, the Nasdaq
National Market, the Nasdaq SmallCap Market, whichever is at the time the
principal trading exchange or market for such security, or the over-the-counter
market on the electronic bulletin board for such security as reported by
Bloomberg or, if no bid or sale information is reported for such security by
Bloomberg, then the average of the bid prices of each of the market makers for
such security as reported in the “pink sheets” by the National Quotation Bureau,
Inc.

     

    (xii) “Securities Act” means
the Securities Act of 1933, as amended.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (xiii) “Warrant” means this
Warrant and all Warrants issued in exchange, transfer or replacement
thereof.

     

    (xiv) “Warrant Exercise
Price” shall be the lowest price that the Company had ever issued its
Class A Common Stock or as subsequently adjusted as provided in Section 8
hereof.

     

    (xv) “Warrant Shares” means
the shares of Common Stock issuable at any time upon exercise of this
Warrant.

     

    (c) Other
Definitional Provisions.

     

    (i) Except as
otherwise specified herein, all references herein (A) to the Company shall
be deemed to include the Company’s successors and (B) to any applicable law
defined or referred to herein shall be deemed references to such applicable law
as the same may have been or may be amended or supplemented from time to
time.

     

    (ii) When used
in this Warrant, the words “herein”, “hereof”, and “hereunder” and words of similar import,
shall refer to this Warrant as a whole and not to any provision of this Warrant,
and the words “Section”, “Schedule”, and “Exhibit” shall refer
to Sections of, and Schedules and Exhibits to, this Warrant unless otherwise
specified.

     

    (iii) Whenever
the context so requires, the neuter gender includes the masculine or feminine,
and the singular number includes the plural, and vice versa.

     

    Section
2. Exercise of
Warrant.

     

    (a) Subject
to the terms and conditions hereof, this Warrant may be exercised by the holder
hereof then registered on the books of the Company, pro rata as hereinafter
provided, at any time on any Business Day on or after the opening of business on
such Business Day, commencing with the first day after the date hereof, and
prior to 11:59 P.M. Eastern Time on the Expiration Date (i) by delivery of
a written notice, in the form of the subscription notice attached as Exhibit A hereto (the
“Exercise
Notice”), of such holder’s election to exercise this Warrant, which
notice shall specify the number of Warrant Shares to be purchased, payment
to the Company of an amount equal to the Warrant Exercise Price(s) applicable to
the Warrant Shares being purchased, multiplied by the number of Warrant
Shares (at the applicable Warrant Exercise Price) as to which this Warrant
is being exercised (plus any applicable issue or transfer taxes) (the
“Aggregate Exercise
Price”) in cash or wire transfer of immediately available funds and the
surrender of this Warrant (or an indemnification undertaking with respect to
this Warrant in the case of its loss, theft or destruction) to a common carrier
for overnight delivery to the Company as soon as practicable following such date
(“Cash Basis”)
or (ii) if at the time of exercise, the Warrant Shares are not subject to an
effective registration statement or if an Event of Default has occurred, by
delivering an Exercise Notice and in lieu of making payment of the Aggregate
Exercise Price in cash or wire transfer, elect instead to receive upon such
exercise the “Net Number” of shares of Common Stock determined according to the
following formula (the “Cashless
Exercise”):

     

    Net
Number = (A x B) – (A
x C)

                                          B

    

    For purposes of the foregoing
formula:

    

    A = the
total number of Warrant Shares with respect to which this Warrant is then being
exercised.

    

    B = the
Closing Bid Price of the Common Stock on the date of exercise of the
Warrant.

    

    C = the
Warrant Exercise Price then in effect for the applicable Warrant Shares at the
time of such exercise.

    

    In the
event of any exercise of the rights represented by this Warrant in compliance
with this Section 2, the Company shall on or before the fifth (5th)
Business Day following the date of receipt of the Exercise Notice, the Aggregate
Exercise Price and this Warrant (or an indemnification undertaking with respect
to this Warrant in the case of its loss, theft or destruction) and the receipt
of the representations of the holder specified in Section 6 hereof, if requested
by the Company (the “Exercise Delivery
Documents”), and if the Common Stock is DTC eligible, credit such
aggregate number of shares of Common Stock to which the holder shall be entitled
to the holder’s or its designee’s balance account with The Depository Trust
Company; provided, however, if the holder who submitted the Exercise Notice
requested physical delivery of any or all of the Warrant Shares, or, if the
Common Stock is not DTC eligible  then the Company shall, on or before
the fifth (5th)
Business Day following receipt of the Exercise Delivery Documents, issue and
surrender to a common carrier for overnight delivery to the address specified in
the Exercise Notice, a certificate, registered in the name of the holder, for
the number of shares of Common Stock to which the holder shall be entitled
pursuant to such request.  Upon delivery of the Exercise Notice and
Aggregate Exercise Price referred to in clause (i) or (ii) above the holder
of this Warrant shall be deemed for all corporate purposes to have become the
holder of record of the Warrant Shares with respect to which this Warrant has
been exercised.  In the case of a dispute as to the determination of
the Warrant Exercise Price, the Closing Bid Price or the arithmetic calculation
of the Warrant Shares, the Company shall promptly issue to the holder the number
of Warrant Shares that is not disputed and shall submit the disputed
determinations or arithmetic calculations to the holder via facsimile within one
(1) Business Day of receipt of the holder’s Exercise Notice.

     

    (b) If the
holder and the Company are unable to agree upon the determination of the Warrant
Exercise Price or arithmetic calculation of the Warrant Shares within one (1)
day of such disputed determination or arithmetic calculation being submitted to
the holder, then the Company shall immediately submit via facsimile (i) the
disputed determination of the Warrant Exercise Price or the Closing Bid Price to
an independent, reputable investment banking firm or (ii) the disputed
arithmetic calculation of the Warrant Shares to its independent, outside
accountant.  The Company shall cause the investment banking firm or
the accountant, as the case may be, to perform the determinations or
calculations and notify the Company and the holder of the results no later than
forty-eight (48) hours from the time it receives the disputed determinations or
calculations.  Such investment banking firm’s or accountant’s
determination or calculation, as the case may be, shall be deemed conclusive
absent manifest error.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (c) Unless
the rights represented by this Warrant shall have expired or shall have been
fully exercised, the Company shall, as soon as practicable and in no event later
than five (5) Business Days after any exercise and at its own expense, issue a
new Warrant identical in all respects to this Warrant exercised except it shall
represent rights to purchase the number of Warrant Shares purchasable
immediately prior to such exercise under this Warrant exercised, less the number
of Warrant Shares with respect to which such Warrant is exercised.

     

    (d) No
fractional Warrant Shares are to be issued upon any pro rata exercise of this
Warrant, but rather the number of Warrant Shares issued upon such exercise of
this Warrant shall be rounded up or down to the nearest whole
number.

     

    (e) If the
Company or its Transfer Agent shall fail for any reason or for no reason to
issue to the holder within ten (10) days of receipt of the Exercise
Delivery Documents, a certificate for the number of Warrant Shares to which the
holder is entitled or to credit the holder’s balance account with The Depository
Trust Company for such number of Warrant Shares to which the holder is entitled
upon the holder’s exercise of this Warrant, the Company shall, in addition to
any other remedies under this Warrant or the Placement Agent Agreement or
otherwise available to such holder, pay as additional damages in cash to such
holder on each day the issuance of such certificate for Warrant Shares is not
timely effected an amount equal to 0.025% of the product of (A) the sum of the
number of Warrant Shares not issued to the holder on a timely basis and to which
the holder is entitled, and (B) the Closing Bid Price of the Common Stock for
the trading day immediately preceding the last possible date which the Company
could have issued such Common Stock to the holder without violating this
Section 2.

     

    (f) If within
ten (10) days after the Company’s receipt of the Exercise Delivery Documents,
the Company fails to deliver a new Warrant to the holder for the number of
Warrant Shares to which such holder is entitled pursuant to Section 2 hereof,
then, in addition to any other available remedies under this Warrant, or
otherwise available to such holder, the Company shall pay as additional damages
in cash to such holder on each day after such tenth (10th) day
that such delivery of such new Warrant is not timely effected in an amount equal
to 0.025% of the product of (A) the number of Warrant Shares represented by
the portion of this Warrant which is not being exercised and (B) the
Closing Bid Price of the Common Stock for the trading day immediately preceding
the last possible date which the Company could have issued such Warrant to the
holder without violating this Section 2.

     

    Section
3. Covenants as to Common
Stock.  The Company hereby covenants and agrees as
follows:

     

    (a) This
Warrant is, and any Warrants issued in substitution for or replacement of this
Warrant will upon issuance be, duly authorized and validly issued.

     

    (b) All
Warrant Shares which may be issued upon the exercise of the rights represented
by this Warrant will, upon issuance, be validly issued, fully paid and
nonassessable and free from all taxes, liens and charges with respect to the
issue thereof.

     

    (c) During
the period within which the rights represented by this Warrant may be exercised,
the Company will at all times have authorized and reserved at least one hundred
percent (100%) of the number of shares of Common Stock needed to provide for the
exercise of the rights then represented by this Warrant and the par value of
said shares will at all times be less than or equal to the applicable Warrant
Exercise Price.  If at any time the Company does not have a sufficient
number of shares of Common Stock authorized and available, then the Company
shall call and hold a special meeting of its stockholders within sixty (60)
days of that time for the sole purpose of increasing the number of authorized
shares of Common Stock.

     

    (d) If at any
time after the date hereof the Company shall file a registration statement, the
Company shall include the Warrant Shares issuable to the holder, pursuant to the
terms of this Warrant and shall maintain, so long as any other shares of Common
Stock shall be so listed, such listing of all Warrant Shares from time to time
issuable upon the exercise of this Warrant; and the Company shall so list on
each national securities exchange or automated quotation system, as the case may
be, and shall maintain such listing of, any other shares of capital stock of the
Company issuable upon the exercise of this Warrant if and so long as any shares
of the same class shall be listed on such national securities exchange or
automated quotation system.

     

    (e) The
Company will not, by amendment of its Articles of Incorporation or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities, or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed by it
hereunder, but will at all times in good faith assist in the carrying out of all
the provisions of this Warrant and in the taking of all such action as may
reasonably be requested by the holder of this Warrant in order to protect the
exercise privilege of the holder of this Warrant against dilution or other
impairment, consistent with the tenor and purpose of this
Warrant.  The Company will not increase the par value of any shares of
Common Stock receivable upon the exercise of this Warrant above the Warrant
Exercise Price then in effect, and (ii) will take all such actions as may
be necessary or appropriate in order that the Company may validly and legally
issue fully paid and nonassessable shares of Common Stock upon the exercise of
this Warrant.

     

    (f) This
Warrant will be binding upon any entity succeeding to the Company by merger,
consolidation or acquisition of all or substantially all of the Company’s
assets.

     

    Section
4. Taxes.  The
Company shall pay any and all taxes, except any applicable withholding, which
may be payable with respect to the issuance and delivery of Warrant Shares upon
exercise of this Warrant.

     

    Section
5. Warrant Holder Not Deemed a
Stockholder.  Except as otherwise specifically provided herein,
no holder, as such, of this Warrant shall be entitled to vote or receive
dividends or be deemed the holder of shares of capital stock of the Company for
any purpose, nor shall anything contained in this Warrant be construed to confer
upon the holder hereof, as such, any of the rights of a stockholder of the
Company or any right to vote, give or withhold consent to any corporate action
(whether any reorganization, issue of stock, reclassification of stock,
consolidation, merger, conveyance or otherwise), receive notice of meetings,
receive dividends or subscription rights, or otherwise, prior to the issuance to
the holder of this Warrant of the Warrant Shares which he or she is then
entitled to receive upon the due exercise of this Warrant.  In
addition, nothing contained in this Warrant shall be construed as imposing any
liabilities on such holder to purchase any securities (upon exercise of this
Warrant or otherwise) or as a stockholder of the Company, whether such
liabilities are asserted by the Company or by creditors of the
Company.  Notwithstanding this Section 5, the Company will provide the
holder of this Warrant with copies of the same notices and other information
given to the stockholders of the Company generally, contemporaneously with the
giving thereof to the stockholders.

     

    Section
6. Representations of
Holder.  The holder of this Warrant, by the acceptance hereof,
represents that it is acquiring this Warrant and the Warrant Shares for its own
account for investment only and not with a view towards, or for resale in
connection with, the public sale or distribution of this Warrant or the Warrant
Shares, except pursuant to sales registered or exempted under the Securities
Act; provided, however, that by making the representations herein, the holder
does not agree to hold this Warrant or any of the Warrant Shares for any minimum
or other specific term and reserves the right to dispose of this Warrant and the
Warrant Shares at any time in accordance with or pursuant to a registration
statement or an exemption under the Securities Act.  The holder of
this Warrant further represents, by acceptance hereof, that, as of this date,
such holder is an “accredited investor” as such term is defined in
Rule 501(a)(1) of Regulation D promulgated by the Securities and Exchange
Commission under the Securities Act (an “Accredited
Investor”).  Upon exercise of this Warrant  the
holder shall, if requested by the Company, confirm in writing, in a form
satisfactory to the Company, that the Warrant Shares so purchased are being
acquired solely for the holder’s own account and not as a nominee for any other
party, for investment, and not with a view toward distribution or resale and
that such holder is an Accredited Investor.  If such holder cannot
make such representations because they would be factually incorrect, it shall be
a condition to such holder’s exercise of this Warrant that the Company receive
such other representations as the Company considers reasonably necessary to
assure the Company that the issuance of its securities upon exercise of this
Warrant shall not violate any United States or state securities
laws.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Section
7. Ownership and
Transfer.

     

    (a) The
Company shall maintain at its principal executive offices (or such other office
or agency of the Company as it may designate by notice to the holder hereof), a
register for this Warrant, in which the Company shall record the name and
address of the person in whose name this Warrant has been issued, as well as the
name and address of each transferee.  The Company may treat the person
in whose name any Warrant is registered on the register as the owner and holder
thereof for all purposes, notwithstanding any notice to the contrary, but in all
events recognizing any transfers made in accordance with the terms of this
Warrant.

     

    Section
8. Adjustment of Warrant
Exercise Price and Number of Shares.  The Warrant Exercise
Price and the number of shares of Common Stock issuable upon exercise of this
Warrant shall be adjusted from time to time as follows:

     

    (a) Adjustment of Warrant
Exercise Price and Number of Shares upon Issuance of Common
Stock.  If and whenever on or after the Issuance Date of this
Warrant, the Company issues or sells, or is deemed to have issued or sold, any
shares of Common Stock (other than (i) Excluded Securities, (ii) shares of
Common Stock which are issued or deemed to have been issued by the Company in
connection with an Approved Stock Plan, or (iii) the Other Securities) for a
consideration per share less than a price (the “Applicable Price”)
equal to the Warrant Exercise Price in effect immediately prior to such issuance
or sale, then immediately after such issue or sale the Warrant Exercise Price
then in effect shall be reduced to an amount equal to such consideration per
share.  Upon each such adjustment of the Warrant Exercise Price
hereunder, the number of Warrant Shares issuable upon exercise of this Warrant
shall be adjusted to the number of shares determined by multiplying the Warrant
Exercise Price in effect immediately prior to such adjustment by the number of
Warrant Shares issuable upon exercise of this Warrant immediately prior to such
adjustment and dividing the product thereof by the Warrant Exercise Price
resulting from such adjustment.

     

    (b) Effect on Warrant Exercise
Price of Certain Events.  For purposes of determining the
adjusted Warrant Exercise Price under Section 8(a) above, the following shall be
applicable:

     

    (i) Issuance of
Options.  If after the date hereof, the Company in any manner
grants any Options and the lowest price per share for which one share of Common
Stock is issuable upon the exercise of any such Option or upon conversion or
exchange of any convertible securities issuable upon exercise of any such Option
is less than the Applicable Price, then such share of Common Stock shall be
deemed to be outstanding and to have been issued and sold by the Company at the
time of the granting or sale of such Option for such price per
share.  For purposes of this Section 8(b)(i), the lowest price per
share for which one share of Common Stock is issuable upon exercise of such
Options or upon conversion or exchange of such Convertible Securities shall be
equal to the sum of the lowest amounts of consideration (if any) received or
receivable by the Company with respect to any one share of Common Stock upon the
granting or sale of the Option, upon exercise of the Option or upon conversion
or exchange of any convertible security issuable upon exercise of such
Option.  No further adjustment of the Warrant Exercise Price shall be
made upon the actual issuance of such Common Stock or of such convertible
securities upon the exercise of such Options or upon the actual issuance of such
Common Stock upon conversion or exchange of such convertible
securities.

     

    (ii) Issuance of Convertible
Securities.  If the Company in any manner issues or sells any
convertible securities and the lowest price per share for which one share of
Common Stock is issuable upon the conversion or exchange thereof is less than
the Applicable Price, then such share of Common Stock shall be deemed to be
outstanding and to have been issued and sold by the Company at the time of the
issuance or sale of such convertible securities for such price per
share.  For the purposes of this Section 8(b)(ii), the lowest
price per share for which one share of Common Stock is issuable upon such
conversion or exchange shall be equal to the sum of the lowest amounts of
consideration (if any) received or receivable by the Company with respect to one
share of Common Stock upon the issuance or sale of the convertible security and
upon conversion or exchange of such convertible security.  No further
adjustment of the Warrant Exercise Price shall be made upon the actual issuance
of such Common Stock upon conversion or exchange of such convertible securities,
and if any such issue or sale of such convertible securities is made upon
exercise of any Options for which adjustment of the Warrant Exercise Price had
been or are to be made pursuant to other provisions of this Section 8(b), no
further adjustment of the Warrant Exercise Price shall be made by reason of such
issue or sale.

     

    (iii) Change in Option Price or
Rate of Conversion.  If the purchase price provided for in any
Options, the additional consideration, if any, payable upon the issue,
conversion or exchange of any convertible securities, or the rate at which any
convertible securities are convertible into or exchangeable for Common Stock
changes at any time, the Warrant Exercise Price in effect at the time of such
change shall be adjusted to the Warrant Exercise Price which would have been in
effect at such time had such Options or convertible securities provided for such
changed purchase price, additional consideration or changed conversion rate, as
the case may be, at the time initially granted, issued or sold and the number of
Warrant Shares issuable upon exercise of this Warrant shall be correspondingly
readjusted.  For purposes of this Section 8(b)(iii), if the terms of
any Option or convertible security that was outstanding as of the Issuance Date
of this Warrant are changed in the manner described in the immediately preceding
sentence, then such Option or convertible security and the Common Stock deemed
issuable upon exercise, conversion or exchange thereof shall be deemed to have
been issued as of the date of such change.  No adjustment pursuant to
this Section 8(b) shall be made if such adjustment would result in an
increase of the Warrant Exercise Price then in effect.

     

    (c) Effect on Warrant Exercise
Price of Certain Events.  For purposes of determining the
adjusted Warrant Exercise Price under Sections 8(a) and 8(b), the following
shall be applicable:

     

    (i) Calculation of Consideration
Received.  If any Common Stock, Options or convertible
securities are issued or sold or deemed to have been issued or sold for cash,
the consideration received therefore will be deemed to be the net amount
received by the Company therefore.  If any Common Stock, Options or
convertible securities are issued or sold for a consideration other than cash,
the amount of such consideration received by the Company will be the fair value
of such consideration, except where such consideration consists of marketable
securities, in which case the amount of consideration received by the Company
will be the market price of such securities on the date of receipt of such
securities.  If any Common Stock, Options or convertible securities
are issued to the owners of the non-surviving entity in connection with any
merger in which the Company is the surviving entity, the amount of consideration
therefore will be deemed to be the fair value of such portion of the net assets
and business of the non-surviving entity as is attributable to such Common
Stock, Options or convertible securities, as the case may be.  The
fair value of any consideration other than cash or securities will be determined
jointly by the Company and the holders of Warrants representing at least
two-thirds (b) of the Warrant Shares issuable upon exercise of the Warrants then
outstanding.  If such parties are unable to reach agreement within
ten (10) days after the occurrence of an event requiring valuation (the
“Valuation
Event”), the fair value of such consideration will be determined within
five (5) Business Days after the tenth (10th) day
following the Valuation Event by an independent, reputable appraiser jointly
selected by the Company and the holders of Warrants representing at least
two-thirds (b) of the Warrant Shares issuable upon exercise of the Warrants then
outstanding.  The determination of such appraiser shall be final and
binding upon all parties and the fees and expenses of such appraiser shall be
borne jointly by the Company and the holders of Warrants.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (ii) Integrated
Transactions.  In case any Option is issued in connection with
the issue or sale of other securities of the Company, together comprising one
integrated transaction in which no specific consideration is allocated to such
Options by the parties thereto, the Options will be deemed to have been issued
for a consideration of $.01.

     

    (iii) Treasury
Shares.  The number of shares of Common Stock outstanding at
any given time does not include shares owned or held by or for the account of
the Company, and the disposition of any shares so owned or held will be
considered an issue or sale of Common Stock.

     

    (iv) Record
Date.  If the Company takes a record of the holders of Common
Stock for the purpose of entitling them (1) to receive a dividend or other
distribution payable in Common Stock, Options or in convertible securities or
(2) to subscribe for or purchase Common Stock, Options or convertible
securities, then such record date will be deemed to be the date of the issue or
sale of the shares of Common Stock deemed to have been issued or sold upon the
declaration of such dividend or the making of such other distribution or the
date of the granting of such right of subscription or purchase, as the case may
be.

     

    (d) Adjustment of Warrant
Exercise Price upon Subdivision or Combination of Common
Stock.  If the Company at any time after the date of issuance
of this Warrant subdivides (by any stock split, stock dividend, recapitalization
or otherwise) one or more classes of its outstanding shares of Common Stock into
a greater number of shares, any Warrant Exercise Price in effect immediately
prior to such subdivision will be proportionately reduced and the number of
shares of Common Stock obtainable upon exercise of this Warrant will be
proportionately increased.  If the Company at any time after the date
of issuance of this Warrant combines (by combination, reverse stock split or
otherwise) one or more classes of its outstanding shares of Common Stock into a
smaller number of shares, any Warrant Exercise Price in effect immediately prior
to such combination will be proportionately increased and the number of Warrant
Shares issuable upon exercise of this Warrant will be proportionately
decreased.  Any adjustment under this Section 8(d) shall become
effective at the close of business on the date the subdivision or combination
becomes effective.

     

    (e) Distribution of
Assets.  If the Company shall declare or make any dividend or
other distribution of its assets (or rights to acquire its assets) to holders of
Common Stock, by way of return of capital or otherwise (including, without
limitation, any distribution of cash, stock or other securities, property or
options by way of a dividend, spin off, reclassification, corporate
rearrangement or other similar transaction) (a “Distribution”), at
any time after the issuance of this Warrant, then, in each such
case:

     

    (i) any
Warrant Exercise Price in effect immediately prior to the close of business on
the record date fixed for the determination of holders of Common Stock
entitled to receive the
Distribution shall be reduced, effective as of the close of business on such
record date, to a price determined by multiplying such Warrant Exercise Price by
a fraction of which (A) the numerator shall be the Closing Sale Price of the
Common Stock on the trading day immediately preceding such record date minus the
value of the Distribution (as determined in good faith by the Company’s Board of
Directors) applicable to one share of Common Stock, and (B) the denominator
shall be the Closing Sale Price of the Common Stock on the trading day
immediately preceding such record date; and

     

    (ii) either
(A) the number of Warrant Shares obtainable upon exercise of this Warrant shall
be increased to a number of shares equal to the number of shares of Common Stock
obtainable immediately prior to the close of business on the record date fixed
for the determination of holders of Common Stock entitled to receive the
Distribution multiplied by the reciprocal of the fraction set forth in the
immediately preceding clause (i), or (B) in the event that the Distribution is
of common stock of a company whose common stock is traded on a national
securities exchange or a national automated quotation system, then the holder of
this Warrant shall receive an additional warrant to purchase Common Stock, the
terms of which shall be identical to those of this Warrant, except that such
warrant shall be exercisable into the amount of the assets that would have been
payable to the holder of this Warrant pursuant to the Distribution had the
holder exercised this Warrant immediately prior to such record date and with an
exercise price equal to the amount by which the exercise price of this Warrant
was decreased with respect to the Distribution pursuant to the terms of the
immediately preceding clause (i).

     

    (f) Certain
Events.  If any event occurs of the type contemplated by the
provisions of this Section 8 but not expressly provided for by such
provisions (including, without limitation, the granting of stock appreciation
rights, phantom stock rights or other rights with equity features), then the
Company’s Board of Directors will make an appropriate adjustment in the Warrant
Exercise Price and the number of shares of Common Stock obtainable upon exercise
of this Warrant so as to protect the rights of the holders of the Warrants;
provided, except as set forth in section 8(d),that no such adjustment pursuant
to this Section 8(f) will increase the Warrant Exercise Price or decrease the
number of shares of Common Stock obtainable as otherwise determined pursuant to
this Section 8.

     

    (g) Notices.

     

    (i) Immediately
upon any adjustment of the Warrant Exercise Price, the Company will give written
notice thereof to the holder of this Warrant, setting forth in reasonable
detail, and certifying, the calculation of such adjustment.

     

    (ii) The
Company will give written notice to the holder of this Warrant at least ten (10)
days prior to the date on which the Company closes its books or takes a record
(A) with respect to any dividend or distribution upon the Common Stock,
(B) with respect to any pro rata subscription offer to holders of Common
Stock or (C) for determining rights to vote with respect to any Organic
Change (as defined below), dissolution or liquidation, provided that such
information shall be made known to the public prior to or in conjunction with
such notice being provided to such holder.

     

    (iii) The
Company will also give written notice to the holder of this Warrant at least ten
(10) days prior to the date on which any Organic Change, dissolution or
liquidation will take place, provided that such information shall be made known
to the public prior to or in conjunction with such notice being provided to such
holder.

     

    Section
9. Purchase Rights;
Reorganization, Reclassification, Consolidation, Merger or
Sale.

     

    (a) In
addition to any adjustments pursuant to Section 8 above, if at any time the
Company grants, issues or sells any Options, Convertible Securities or rights to
purchase stock, warrants, securities or other property pro rata to the record
holders of any class of Common Stock (the “Purchase Rights”),
then the holder of this Warrant will be entitled to acquire, upon the terms
applicable to such Purchase Rights, the aggregate Purchase Rights which such
holder could have acquired if such holder had held the number of shares of
Common Stock acquirable upon complete exercise of this Warrant immediately
before the date on which a record is taken for the grant, issuance or sale of
such Purchase Rights, or, if no such record is taken, the date as of which the
record holders of Common Stock are to be determined for the grant, issue or sale
of such Purchase Rights.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (b) Any
recapitalization, reorganization, reclassification, consolidation, merger, sale
of all or substantially all of the Company’s assets to another Person or other
transaction in each case which is effected in such a way that holders of Common
Stock are entitled to receive (either directly or upon subsequent liquidation)
stock, securities or assets with respect to or in exchange for Common Stock is
referred to herein as an “Organic
Change.”  Prior to the consummation of any (i) sale of all or
substantially all of the Company’s assets to an acquiring Person or (ii) other
Organic Change following which the Company is not a surviving entity, the
Company will secure from the Person purchasing such assets or the successor
resulting from such Organic Change (in each case, the “Acquiring Entity”) a
written agreement (in form and substance satisfactory to the holders of Warrants
representing at least two-thirds (iii) of the Warrant Shares issuable upon
exercise of the Warrants then outstanding) to deliver to each holder of Warrants
in exchange for such Warrants, a security of the Acquiring Entity evidenced by a
written instrument substantially similar in form and substance to this Warrant
and satisfactory to the holders of the Warrants (including an adjusted warrant
exercise price equal to the value for the Common Stock reflected by the terms of
such consolidation, merger or sale, and exercisable for a corresponding number
of shares of Common Stock acquirable and receivable upon exercise of the
Warrants without regard to any limitations on exercise, if the value so
reflected is less than any Applicable Warrant Exercise Price immediately prior
to such consolidation, merger or sale).  Prior to the consummation of
any other Organic Change, the Company shall make appropriate provision (in form
and substance satisfactory to the holders of Warrants representing a
majority of the
Warrant Shares issuable upon exercise of the Warrants then outstanding) to
insure that each of the holders of the Warrants will thereafter have the right
to acquire and receive in lieu of or in addition to (as the case may be) the
Warrant Shares immediately theretofore issuable and receivable upon the exercise
of such holder’s Warrants (without regard to any limitations on exercise),
such shares of stock, securities or assets that would have been issued or
payable in such Organic Change with respect to or in exchange for the number of
Warrant Shares which would have been issuable and receivable upon the exercise
of such holder’s Warrant as of the date of such Organic Change (without taking
into account any limitations or restrictions on the exercisability of this
Warrant).

     

    Section
10. Lost, Stolen, Mutilated or
Destroyed Warrant.  If this Warrant is lost, stolen, mutilated
or destroyed, the Company shall promptly, on receipt of an indemnification
undertaking (or, in the case of a mutilated Warrant, the Warrant), issue a new
Warrant of like denomination and tenor as this Warrant so lost, stolen,
mutilated or destroyed.

     

    Section
11. Notice.  Any
notices, consents, waivers or other communications required or permitted to be
given under the terms of this Warrant must be in writing and will be deemed to
have been delivered:  (i) upon receipt, when delivered
personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of receipt is received by the sending party transmission is
mechanically or electronically generated and kept on file by the sending party);
or (iii) one Business Day after deposit with a nationally recognized
overnight delivery service, in each case properly addressed to the party to
receive the same.  The addresses and facsimile numbers for such
communications shall be:

     

    
      	
              If
      to Holder:

            	
              iVoice,
      Inc.

            
	 
      	
              750
      Route 34

            
	 
      	
              Matawan,
      NJ  07747

            
	 
      	
              Attn:  Jerome
      Mahoney

            
	 
      	
              Facsimile
      No.:   732-441-9895

            
	 
      	 
      
	
              With
      Copy to:

            	
              Meritz
      & Muenz LLP

            
	 
      	
              2021
      O Street, NW

            
	 
      	
              Washington,
      D.C.  20036

            
	 
      	
              Attn:   Lawrence
      A. Muenz, Esq.

            
	 
      	
              Facsimile
      No.:   202-728-2910

            
	 
      	 
      
	 
      	 
      
	
              If
      to the Company, to:

            	
              iVoice
      Technology, Inc.

            
	 
      	
              750
      Route 34

            
	 
      	
              Matawan,
      NJ  07747

            
	 
      	
              Attn:  Jerome
      Mahoney

            
	 
      	
              Facsimile
      No.:   732-441-9895

            
	 
      	 
      
	
              With
      a copy to:

            	
              Meritz
      & Muenz LLP

            
	 
      	
              2021
      O Street, NW

            
	 
      	
              Washington,
      DC 20036

            
	 
      	
              Attention:  Lawrence
      A. Muenz, Esq.

            
	 
      	
              Telephone: (202)
      728-2909

            
	 
      	
              Facsimile:   
      (202) 728-2910

            

    

    

    If to a
holder of this Warrant, to it at the address and facsimile number set forth on
Exhibit C
hereto, with copies to such holder’s representatives as set forth on Exhibit C, or at
such other address and facsimile as shall be delivered to the Company upon the
issuance or transfer of this Warrant.  Each party shall provide five
days’ prior written notice to the other party of any change in address or
facsimile number.  Written confirmation of receipt (A) given by
the recipient of such notice, consent, facsimile, waiver or other communication,
(or (B) provided by a nationally recognized overnight delivery service
shall be rebuttable evidence of personal service, receipt by facsimile or
receipt from a nationally recognized overnight delivery service in accordance
with clause (i), (ii) or (iii) above, respectively.

     

    Section
12. Date.  The
date of this Warrant is set forth on page 1 hereof.  This Warrant,
in all events, shall be wholly void and of no effect after the close of
business on the Expiration Date, except that notwithstanding any other
provisions hereof, the provisions of Section 8(b) shall continue in full
force and effect after such date as to any Warrant Shares or other securities
issued upon the exercise of this Warrant.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Section
13. Amendment and
Waiver.  Except as otherwise provided herein, the provisions of
the Warrants may be amended and the Company may take any action herein
prohibited, or omit to perform any act herein required to be performed by it,
only if the Company has obtained the written consent of the holders of Warrants
representing at least two-thirds of the Warrant Shares issuable upon exercise of
the Warrants then outstanding; provided that, except for Section 8(d), no such
action may increase the Warrant Exercise Price or decrease the number of shares
or class of stock obtainable upon exercise of any Warrant without the written
consent of the holder of such Warrant.

     

    Section
14. Descriptive Headings;
Governing Law.  The descriptive headings of the several
sections and paragraphs of this Warrant are inserted for convenience only and do
not constitute a part of this Warrant.  The corporate laws of the
State of Nevada shall govern all issues concerning the relative rights of the
Company and its stockholders.  All other questions concerning the
construction, validity, enforcement and interpretation of this Agreement shall
be governed by the internal laws of the State of New Jersey, without giving
effect to any choice of law or conflict of law provision or rule (whether of the
State of New Jersey or any other jurisdictions) that would cause the application
of the laws of any jurisdictions other than the State of New
Jersey.  Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in Hudson County and the
United States District Court for the District of New Jersey, for the
adjudication of any dispute hereunder or in connection herewith or therewith, or
with any transaction contemplated hereby or discussed herein, 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, that such suit, action or proceeding is brought in an inconvenient forum
or that the venue of such suit, action or proceeding is
improper.  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 to such party at the address for such
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.

     

    Section
15. Waiver of Jury
Trial.  AS A
MATERIAL INDUCEMENT FOR EACH PARTY HERETO TO ENTER INTO THIS WARRANT, THE
PARTIES HERETO HEREBY WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
RELATED IN ANY WAY TO THIS WARRANT AND/OR ANY AND ALL OF THE OTHER DOCUMENTS
ASSOCIATED WITH THIS TRANSACTION.

     

    

    REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    IN WITNESS WHEREOF, the
Company has caused this Amended and Restated Warrant to be signed as of the date
first set forth above.

     

    
      	 
      	
              IVOICE
      TECHNOLOGY, INC.

            
	 
      	 
      
	 
      	
              By: ___________________________                                                               

            
	 
      	
              Name:  Jerome
      Mahoney

            
	 
      	
              Title:    President
      & CEO

            

    

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    EXHIBIT A TO
WARRANT

     

     

    EXERCISE
NOTICE

     

     

    TO
BE EXECUTED

     

     

    BY
THE REGISTERED HOLDER TO EXERCISE THIS WARRANT

     

     

    IVOICE
TECHNOLOGY, INC.

     

    The
undersigned holder hereby exercises the right to purchase ______________ of the
shares of Common Stock (“Warrant Shares”) of
IVOICE TECHNOLOGY, INC. (the “Company”), evidenced
by the attached Warrant (the “Warrant”).  Capitalized
terms used herein and not otherwise defined shall have the respective meanings
set forth in the Warrant.

     

    Specify
Method of exercise by check mark:

     

    1.  ___    Cash
Exercise

     

    (a) Payment of Warrant Exercise
Price. The holder shall pay the Aggregate Exercise Price of
$______________ to the Company in accordance with the terms of the
Warrant.

     

    (b) Delivery of Warrant
Shares.  The Company shall deliver to the holder _________ Warrant
Shares in accordance with the terms of the Warrant.

     

    

     

    2.  ___    Cashless
Exercise

     

    (a) Payment of Warrant Exercise
Price.  In lieu of making payment of the Aggregate Exercise
Price, the holder elects to receive upon such exercise the Net Number of shares
of Common Stock determined in accordance with the terms of the
Warrant.

     

    (b) Delivery of Warrant
Shares.  The Company shall deliver to the holder _________ Warrant
Shares in accordance with the terms of the Warrant.

     

    

    Date:
_______________ __, ______

    

    Name of
Registered Holder

    

    By: __________________________                                                     

    Name:                                                                

    Title:                                                                

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    EXHIBIT B TO
WARRANT

     

    FORM OF WARRANT
POWER

     

    FOR VALUE RECEIVED, the
undersigned does hereby assign and transfer to ________________, Federal
Identification No. __________, a warrant to purchase ____________ shares of
the capital stock of IVOICE TECHNOLOGY, INC. represented by warrant certificate
no. _____, standing in the name of the undersigned on the books of said
corporation.  The undersigned does hereby irrevocably constitute and
appoint ______________, attorney to transfer the warrants of said corporation,
with full power of substitution in the premises.

     

    
      	
              Dated:

            	 
      
	 
      	 
      
	 
      	
              By:  ________________                                                              

            
	 
      	
              Name:_______________

            
	 
      	
              Title:________________ex10-14.htm

    Exhibit
10.14

     

    

    LOAN
AND SECURITY AGREEMENT

    

    by and
between

    

    MORIAH
CAPITAL, L.P.,

    

    as
Lender,

    

    and

    

    INTERMETRO
COMMUNICATIONS, INC. (NEVADA),

    

    INTERMETRO
COMMUNICATIONS, INC. (DELAWARE)

    

    and

    

    ADVANCED
TEL, INC.

    

    as
Borrowers

    

    Dated: As
of April 30, 2008

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    LOAN AND SECURITY
AGREEMENT

    

    

    
      LOAN AND SECURITY AGREEMENT,
dated as of April 30, 2008, by and among INTERMETRO COMMUNICATIONS, INC.,
a Nevada corporation, with its principal place of business located at
2685 Park Center Drive, Building A, Simi Valley, California
93065  (“Holdings”), INTERMETRO COMMUNICATIONS, INC.,
a Delaware corporation, with its principal place of business located at
2685 Park Center Drive, Building A, Simi Valley, California 93065 (“InterMetro”), ADVANCED TEL, INC., a
California corporation with its principal place of business at 30575 Trabuco
Canyon Road, Suite 200, Trabuco Canyon, CA 92679 (“Advanced” and, together with
Holdings and InterMetro, and as further defined below, "Borrower"), and MORIAH CAPITAL, L.P., a
Delaware limited partnership with offices at 685 Fifth Avenue, New York, New
York 10022 (as further defined below, the "Lender").

      

      R E C I T A L
S:

      

      WHEREAS, Borrower desires to
enter into an accounts receivable-based revolving loan credit facility with
Lender pursuant to which Lender may make loans to Borrower; and

      

      WHEREAS, Lender is willing to
make such loans on the terms and conditions hereinafter set forth;
and

      

      WHEREAS, Borrower is willing
to agree to the terms and conditions hereinafter set forth;

      

      NOW, THEREFORE, in
consideration of the foregoing, the mutual covenants and agreements herein
contained and other good and valuable consideration, Lender and Borrower
mutually covenant, warrant and agree as follows:

      

      SECTION
1. DEFINITIONS
AND RULES OF INTERPRETATION AND CONSTRUCTION

      

      Specific Terms
Defined.  The following terms (including both the singular and
plurals thereof) shall have the following meanings unless the context indicates
otherwise:

      

      1.1 "Account Debtor" or "account debtor" shall have
the meaning ascribed to such term in the UCC and shall also include a Person
obligated for payment of an Account.

       

      1.2 "Accounts" shall mean all
"accounts" as defined in the UCC, and, in addition, any and all obligations of
any kind at any time due and/or owing to Borrower, whether now existing or
hereafter arising, and all rights of Borrower to receive payment or any other
consideration (whether classified under the UCC of the State of New York or any other state as
accounts, accounts receivable, contract rights, chattel paper, general
intangibles or otherwise) including, without limitation, invoices, contract
rights, accounts receivable, general intangibles, choses-in-action, notes,
drafts, acceptances, instruments and all other debts, obligations and
liabilities in whatever form owing to Borrower from any person, firm,
governmental authority, corporation or any other entity, all security therefor,
and all Borrower's rights to goods sold (whether delivered, undelivered, in
transit or returned), which may be represented thereby, or with respect thereto,
including, but not limited to, all rights as an unpaid vendor (including
stoppage in transit, replevin or reclamation), all additional amounts due from
any Account Debtor together with all Proceeds and products of any and all of the
foregoing.

       

      1.3 “Advance” shall have the
meaning as set forth in Section 2.1
hereof.

       

      1.4 "Affiliate" shall mean, means,
with respect to any Person, (a) any other Person that, directly or indirectly,
is in control of, is controlled by, or is under common control with such Person
or (b) any other Person who is a director or officer (i) of such Person, (ii) of
any Subsidiary of such Person or (iii) of any Person described in clause (a)
above.  For the purposes of this definition, control of a Person shall
mean the power (direct or indirect) to direct or cause the direction of the
management or the policies of such Person whether through the ownership of any
class of stock or equity of such person or by contract or
otherwise.

       

      1.5 "Agreement" shall mean this
Loan and Security Agreement (including all Exhibits annexed hereto and the
Borrower’s Disclosure Schedule) as originally executed or, if amended, modified,
supplemented, renewed or extended from time to time, as so amended, modified,
supplemented, renewed or extended.

       

      1.6 “Balance Sheet Date” means
December 31, 2007.

       

      1.7 “Base Rate” shall have the
meaning as set forth in Section 3.1 hereof.

       

      1.8 "Borrower" shall mean,
collectively, Holdings, InterMetro and Advanced and their respective successors,
or each of them, as the context indicates.

       

      1.9 “Borrower’s Disclosure
Schedule” means the Disclosure Schedule prepared by Borrower that is
being delivered to Lender concurrently herewith.

       

      1.10 “Borrowing Base” shall be
calculated at any time as the product obtained by multiplying the outstanding
amount of Eligible Accounts, net of all taxes, discounts, allowances and credits
given or claimed, by eighty percent (80%), which percentage may be increased to
eighty-five percent (85%) by Lender in its sole and absolute discretion
commencing with the sixth month of the Term, provided that Borrower has been in
full compliance with the terms of this Agreement.

       

      1.11 “Borrowing Certificate” shall
have the meaning as set forth in Section 2.1 hereof.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      1.12 "Business Day" shall mean any
day other than a Saturday, Sunday or any other day on which banks located in the
State of New York are authorized or required to close under applicable banking
laws.

       

      1.13 "Capital Assets" shall mean,
in accordance with GAAP, fixed assets, both tangible (such as land, buildings,
fixtures, machinery and equipment) and intangible (such as patents, copyrights,
trademarks, franchises and goodwill); provided, that
Capital Assets shall not include any item depreciated or amortized over a useful
life of twelve (12) months or less.

       

      1.14 “Chattel Paper” shall mean all
“chattel paper,” as such term is defined in the UCC, including electronic
chattel paper

       

      1.15 "Collateral" shall have the
meaning as set forth in Section 5.1 hereof.

       

      1.16 “Closing Date” shall mean the
date of this Agreement.

       

      1.17 “Common Stock” shall mean the
Common Stock, par value $0.001 per share, of Holdings.

       

      1.18 “Default Rate” shall have the
meaning as set forth in Section 3.1 hereof.

       

      1.19 “Deposit Accounts” means all
“deposit accounts” as such term is defined in the UCC.

       

      1.20 “Eligible Accounts” are
accounts created by Borrower in the ordinary course of its business which
satisfy the following criteria:

       

      (1)           such
accounts arise from bona fide completed transactions and have not remained
unpaid for more than ninety (90) days after the invoice date
thereof;

       

      (2)           
the amounts of the accounts reported to Lender are absolutely owing to Borrower
and do not arise from sales on consignment, guaranteed sales or other terms
under which payment by the account debtors may be conditional or
contingent;

       

      (3)           the
account debtor’s chief executive office or principal place of business is
located in the United States, unless payment of any such account debtor’s
accounts is backed by a letter of credit or credit insurance acceptable to, and
approved by, Lender in its sole discretion);

       

      (4)           such
accounts do not arise from progress billings, retainages or bill and hold sales;
but may include certain Unbilled Services acceptable to the lender in its sole
discretion

       

      (5)           
there are no contra relationships, setoffs, counterclaims or disputes existing
with respect thereto;

       

      (6)           the
goods giving rise thereto were not at the time of the sale subject to any Liens
except for Permitted Encumbrances, and such accounts are free and clear of all
Liens except for Permitted Encumbrances;

       

      (7)           such
accounts are not accounts with respect to which the account debtor or any
officer or employee thereof is an officer, employee or agent of or is affiliated
with Borrower, directly or indirectly, whether by virtue of family membership,
ownership, control, management or otherwise;

       

      (8)           such
accounts are not accounts with respect to which the account debtor is the United
States or any state or political subdivision thereof or any department, agency
or instrumentality of the United States, any state or political subdivision,
unless there has been compliance with the Assignment of Claims Act or any
similar state or local law, if applicable;

       

      (9)           Borrower
has delivered to Lender or Lender’s representative such documents as Lender may
have requested in connection with such accounts and Lender shall have received a
verification of such account, satisfactory to it, if sent to the account debtor
or any other obligor or any bailee;

       

      (10)           there
are no facts existing or threatened which might result in any material adverse
change in the account debtor’s financial condition;

       

      (11)           such
accounts owed by a single account debtor or its affiliates do not represent more
than thirty percent
(30%) of all otherwise Eligible Accounts (accounts excluded from Eligible
Accounts solely by reason of this subsection (11) shall nevertheless be
considered Eligible Accounts to the extent of the amount of such accounts which
does not exceed such percentage of all otherwise Eligible
Accounts);

       

      (12)           such
accounts are not owed by an account debtor who is or whose affiliates are past
due upon other accounts owed to Borrower comprising more than fifty percent
(50%) of the accounts of such account debtor or its affiliates owed to
Borrower;

       

      (13)           shipment
of the merchandise or the rendition of services has been completed;

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      (14)           such
accounts continue to be in full conformity with the representations and
warranties made by Borrower to Lender with respect thereto;

       

      (15)           Lender
is, and continues to be, reasonably satisfied with the credit standing of the
Account Debtor in relation to the amount of credit extended;

       

      (16)           such
accounts are not evidenced by chattel paper or an instrument of any kind with
respect to or in payment of the Account unless such instrument is duly endorsed
to and in possession of Lender or represents a check in payment of an
Account;

       

      (17)           such
accounts are net of any returns, discounts, claims, credits and
allowances;

       

      (18)           such
accounts are good and valid accounts representing undisputed bona fide
indebtedness incurred by the Account Debtor therein named, for a fixed sum as
set forth in the invoice relating thereto with respect to an unconditional sale
and delivery upon the stated terms of goods sold by the applicable Borrower or
work, labor and/or services rendered by such Borrower;

       

      (19)            Borrower’s
right to payment is absolute and not contingent upon the fulfillment of any
condition whatsoever;

       

      (20)           the
applicable Borrower is able to bring suit and enforce its remedies against the
Account Debtor through judicial process;

       

      (21)           such
accounts do not represent interest payments, late or finance charges owing to
Borrower, and

       

      (22)           such
accounts are otherwise reasonably satisfactory to Lender.

       

      

      1.21 "Environment" means all air,
surface water, groundwater or land, including, without limitation, land surface
or subsurface, including, without limitation, all fish, wildlife, biota and all
other natural resources.

       

      1.22 "Environmental Law" or "Environmental Laws" shall
mean all federal, state and local laws, statutes, ordinances and regulations now
or hereafter in effect, and in each case as amended or supplemented from time to
time, and any judicial or administrative interpretation thereof, including any
judicial or administrative order, consent decree or judgment relating to the
regulation and protection of human health, safety, the environment and natural
resources (including ambient air, surface water, groundwater, wetlands, land
surface or subsurface strata, wildlife, aquatic species and
vegetation).

       

      1.23 "Environmental Liabilities and
Costs" shall mean, as to any Person, all liabilities, obligations,
responsibilities, remedial actions, losses, damages, punitive damages,
consequential damages, treble damages, costs and expenses (including all fees,
disbursements and expenses of counsel, experts and consultants and costs of
investigation and feasibility studies), fines, penalties, sanctions and interest
incurred as a result of any claim or demand by any other Person, whether based
in contract, tort, implied or express warranty, strict liability, criminal or
civil statute, including any Environmental Law, permit, order or agreement with
any Governmental Authority or other Person, and which arise from any
environmental, health or safety conditions, or a Release or conditions that are
reasonably likely to result in a Release, and result from the past, present or
future operations of such Person or any of its Affiliates.

       

      1.24 "Environmental Lien" shall
mean any Lien in favor of any Governmental Authority for Environmental
Liabilities and Costs.

       

      1.25 "ERISA" shall mean the
Employee Retirement Income Security Act of 1974, as the same now exists or may
from time to time hereafter be amended, modified, recodified or supplemented,
together with all rules, regulations and interpretations thereunder or related
thereto.

       

      1.26 "Equipment" shall mean
"equipment", as such term is defined in the UCC, now owned or hereafter acquired
by Borrower and, wherever located, and shall include, without limitation, all
equipment, machinery, furniture, fixtures, computer equipment, telephone
equipment, molds, tools, dies, partitions, tooling, transportation equipment,
all other tangible assets used in connection with the manufacture, sale or lease
of goods or rendition of services, and Borrower's interests in any leased
equipment, and all repairs, modifications, alterations, additions, controls and
operating accessories thereof or thereto, and all substitutions and replacements
therefor.

       

      1.27 “Equity Interests” shall mean,
with respect to any Person, any and all shares, rights to purchase, options,
warrants, general, limited or limited liability partnership interests, member
interests, units, participations or other equivalents of or interest in
(regardless of how designated) equity of such Person, whether voting or
nonvoting, including common stock, preferred stock, convertible securities or
any other “equity security” (as such term is defined in Rule 3a11-1 of the
General Rules and Regulations promulgated by the SEC (or any successor thereto)
under the Exchange Act).

       

      1.28 "Event of Default" shall mean
the occurrence or existence of any event or condition described in Section 11 of
this Agreement which is not remedied within any applicable grace or cure
period.

       

      1.29 “Financial Statements” shall
have the meaning as set forth in Section 8.9 hereof.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      1.30 "Financing Statements" shall
mean the Uniform Commercial Code UCC-1 Financing Statements to be filed with
applicable Governmental Authorities of each State or Commonwealth or political
subdivisions thereof pursuant to which Lender shall perfect its security
interest in the Collateral.

       

      1.31 "Fiscal Year" shall mean that
twelve (12) month period commencing on January 1 and ending on December
31.

       

      1.32 “GAAP” means generally
accepted accounting principles in effect in the United States of America at the
time of any determination, and which are applied on a consistent
basis.  All accounting terms used in this Agreement which are not
expressly defined in this Agreement shall have the meanings given to those terms
by GAAP, unless the context of this Agreement otherwise requires.

       

      1.33 "Governmental Authority" or
"Governmental
Authorities" shall mean any federal, state, county or municipal
governmental agency, board, commission, officer, official or entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.

       

      1.34 “Indebtedness" shall mean,
with respect to any Person, all of the obligations of such Person which, in
accordance with GAAP, should be classified upon such Person’s balance sheet as
liabilities, or to which reference should be made by footnotes thereto,
including without limitation, with respect to Borrower, in any event and whether
or not so classified:

       

      (a)           all
debt and similar monetary obligations of Borrower, whether direct or indirect,
including, without limitation, Subordinated Debt;

      

      (b)           all
obligations of Borrower arising or incurred under or in respect of any
guaranties (whether direct or indirect) by Borrower of the indebtedness,
obligations or liabilities of any other Person; and

      

      (c)           all
obligations of Borrower arising or incurred under or in respect of any Lien upon
or in any property owned by such Person, even though such Person has not assumed
or become liable for the payment of such obligations.

      

      1.35 “Intellectual Property” shall
mean all franchises, patents, trademarks, service marks, trade names (whether
registered or unregistered), copyrights, corporate names, licenses, trade
secrets, proprietary software or hardware, proprietary technology, technical
information, discoveries, designs and other proprietary rights, whether or not
patentable, and confidential information (including, without limitation,
know-how, processes and technology) used in the conduct of the business of any
Borrower or any of its Subsidiaries.

       

      1.36 “Intercreditor Agreement"
shall have the meaning as set forth in Section 5.1 hereof.

       

      1.37 "Inventory" shall mean any
"inventory," as such term is defined in the UCC, now owned or hereafter acquired
by Borrower, wherever located, and, in any event, shall include, without
limitation, all raw materials, work-in-process, finished and semi-finished
Inventory including, without limitation, all materials, parts, components and
supplies relating to the manufacture or assembly thereof, packaging and shipping
supplies relating thereto, and all other inventory, merchandise, goods and other
personal property now or hereafter owned by Borrower, which are held for sale,
exchange or lease or are furnished or are to be furnished under a contract of
service or an exchange arrangement or which constitute raw materials,
work-in-process or materials used or consumed or to be used or consumed in
Borrower's business, or the processing, packaging, delivery or shipping of the
same, and all finished goods and the products of the foregoing, whatever form
and wherever located; and all names or marks affixed to or to be affixed thereto
for purposes of selling same by the seller, manufacturer, lessor or licensor
thereof and all right, title and interest of Borrower therein and
thereto.

       

      1.38 “Interest” shall have the
meaning as set forth in Section 3.1 hereof.

       

      1.39 “Investment Property” means all
“investment property”, as such term is defined in the UCC, now owned or
hereafter acquired by any Person, wherever located.

       

      1.40  “Letter-of-Credit Rights” means
“letter-of-credit rights” as such term is defined in the UCC, now owned or
hereafter acquired by any Person, including rights to payment or performance
under a letter of credit, whether or not such Person, as beneficiary, has
demanded or is entitled to demand payment or performance.

       

      1.41  "Lien" or "lien" shall mean any
mortgage, deed of trust, pledge, security interest, hypothecation, assignment,
lien (statutory or other), charge, or other encumbrance of any kind or nature
whatsoever (including, without limitation, pursuant to any conditional sale or
other title retention agreement, any financing lease having substantially the
same economic effect as any of the foregoing, and the filing of any financing
statement under the UCC or comparable law of any jurisdiction to evidence any of
the foregoing) on personal or real property or fixtures.

       

      1.42 "Loan" and “Loans” shall respectively
mean the principal amounts outstanding from time to time respecting any and all
Advances.

       

      1.43 “Loan Conversion Agreement”
means that certain Loan Conversion Agreement, dated as of the date
hereof, between Lender and Holdings, in the form annexed hereto as Exhibit K.

       

      1.44 "Loan Documents" shall mean
this Agreement and any and all other agreements, notes, documents, mortgages,
financing statements, guaranties, intercreditor agreements, subordination
agreements,  certificates and instruments executed and/or delivered by
Borrower or any other Person to Lender pursuant to and in connection with the
Loan and this Agreement, including, without limitation the Note,
the  Loan Conversion Agreement, the Intercreditor Agreement, the
Securities Issuance Agreement, the Warrant,  the Registration Rights
Agreement and the Lockbox Agreement.

       

      1.45 “Lockbox” shall have the
meaning assigned to such term in the Lockbox Agreement.

       

      1.46 “Lockbox Agent” means the
person serving from time to time as the Lockbox Agent under the Lockbox
Agreement.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      1.47 “Lockbox Agreement” means that
certain Lockbox Agreement dated as of the date hereof, among Lender, the
Borrower and the Lockbox Agent.

       

      1.48 "Material Adverse Effect" means
a materially adverse effect on (a) the business, assets, liabilities,
financial condition, results of operations or business prospects of any
Borrower, (b) the ability of any Borrower to perform its obligations under
any Loan Document to which it is a party, (c) the value of the Collateral
or the rights of Lender therein, (d) the validity or enforceability of any of
the Loan Documents, (e) the rights and remedies of Lender under any of such
Loan Documents or (f) the timely payment of the principal of or interest on
the Loans or other amounts payable in connection therewith.  Except
with respect to representations made or deemed made by Borrower in any of the
other Loan Documents to which it is a party, all determinations of materiality
shall be made by the Lender in its reasonable judgment unless expressly provided
otherwise.

       

      1.49 "Material Contract" means any
contract or other arrangement (other than Loan Documents), whether written or
oral, to which a Borrower is a party as to which the breach, nonperformance,
cancellation or failure to renew by any party thereto could have a Material
Adverse Effect.

       

      1.50 “Maturity Date” shall mean
April 30, 2009, or such earlier date by which the maturity of the Obligations
shall have been accelerated pursuant to the terms hereof; provided, however, that the
Maturity Date may be extended by the Lender in its sole and absolute discretion
for one (1) additional year to April 30, 2010 in accordance with Section 4.1
hereof.

       

      1.51 "Maximum Credit" shall mean
the amount of One Million Five Hundred Thousand Dollars
($1,500,000.00).

       

      1.52 “1934 Act” shall mean the
Securities Exchange Act of 1934, as amended.

       

      1.53 “Note” shall have the meaning
as set forth in Section 2.1.

       

      1.54 "Obligations" shall mean any
and all Loans and all other obligations, liabilities and indebtedness of every
kind, nature and description owing by Borrower to Lender and/or its Affiliates,
including, without limitation, principal, interest, repurchase obligations,
charges, fees, costs and expenses, however evidenced, whether as principal,
surety, endorser, guarantor or otherwise, whether arising under this Agreement,
the other Loan Documents or otherwise, whether now existing or hereafter
arising, whether arising before, during or after the initial or any renewal term
of this Agreement or after the commencement of any case with respect to Borrower
under the United States Bankruptcy Code or any similar statute (including,
without limitation, the payment of interest and other amounts which would accrue
and become due but for the commencement of such case), whether direct or
indirect, absolute or contingent, joint or several, due or not due, primary or
secondary, liquidated or unliquidated, secured or unsecured, and however
acquired by Lender.

       

      1.55 "Permitted Encumbrances" shall
mean the following:  (a) security interests and Liens granted to
Lender or its Affiliates; (b) purchase money security interests in favor of
equipment vendors upon any Capital Assets hereafter acquired (including, without
limitation, capitalized or finance leases); provided that, (i) no such
purchase money or other mortgage, Lien or security interest (or capitalized or
finance lease, as the case may be) with respect to specific future Capital
Assets or as refinanced shall extend to or cover any other property, other than
the specific Capital Assets so acquired, and the proceeds thereof, (ii) such
mortgage, Lien or security interest only secures the cost or obligation to pay
the purchase price of such specific Capital Assets only (or the obligations
under the capitalized or finance lease) and (iii) the principal amount secured
thereby shall not exceed one hundred (100%) percent of the lesser of the cost or
the fair market value (at the time of the acquisition of the Capital Assets) of
the Capital Assets so acquired; (c) Liens of carriers, warehousemen, artisans,
bailees, mechanics and materialmen incurred in the ordinary course of business
securing sums not overdue; (d) Liens incurred in the ordinary course of business
in connection with worker’s compensation, unemployment insurance or other forms
of governmental insurance or benefits, relating to employees, securing sums (i)
not overdue or (ii) being diligently contested in good faith provided that
adequate reserves with respect thereto are maintained on the books of the
Borrower in conformity with GAAP; (e) Liens for taxes (i) not yet due or (ii)
being diligently contested in good faith by appropriate proceedings, provided
that adequate reserves with respect thereto are maintained on the books of the
Borrower in conformity with GAAP; and which have no effect on the priority of
Liens in favor of Lender or the value of the assets in which Lender has a Lien;
and (f) subject to the terms of the Intercreditor Agreement,
the Liens in favor of the Secured  Noteholders with respect to the
Noteholder  Senior Collateral (as defined therein) and such other
Liens as are set forth on Exhibit
A annexed hereto and made a part hereof.

       

      1.56 "Person" or "person" shall mean, as
applicable, any individual, sole proprietorship, partnership, corporation,
limited liability company, limited liability partnership, business trust,
unincorporated association, joint stock corporation, trust, joint venture or
other entity or any government or any agency or instrumentality or political
subdivision thereof.

       

      1.57  "Proceeds" shall have
the meaning ascribed to such term in the UCC and shall also include, but not be
limited to, (a) any and all proceeds of any and all insurance (including,
without limitation, life insurance, business interruption insurance and credit
insurance), indemnity, warranty or guaranty payable to Borrower from time to
time with respect to any of the Collateral or otherwise, (b) any and all
payments (in any form whatsoever) made or due and payable to Borrower from time
to time in connection with any requisition, confiscation, condemnation, seizure
or forfeiture of all or any part of the Collateral by any governmental body,
authority, bureau or agency or any other Person (whether or not acting under
color of Governmental Authority) and (c) any and all other amounts from time to
time paid or payable under or in connection with any of the
Collateral.

       

      1.58 “Registration Rights
Agreement” means that certain Registration Rights Agreement, dated as of
the date hereof, between Lender and Holdings, in the form of Exhibit H annexed
hereto.

       

      1.59 "Release" means any spilling,
leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping,
leaching, dumping, or disposing of a Hazardous Substance into the
Environment.

       

      1.60 "Reserves" shall mean, as of
any date of determination, such reasonable amounts as Lender may from time to
time establish and revise in good faith reducing the amount of the Maximum
Credit which would otherwise be available to Borrower (a) to reflect events,
conditions, contingencies or risks which, as determined by Lender in good faith,
do or may adversely affect either (i) the Collateral or any other property which
is security for the Obligations or its value, (ii) the assets, business or
prospects of Borrower or any Obligor or (iii) the security interests and other
rights of Lender in the Collateral (including the enforceability, perfection and
priority thereof); or (b) in respect of any state of facts which Lender
determines in good faith constitutes an Event of Default or may, with notice or
passage of time or both, constitute an Event of Default.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      1.61 “Responsible Officer” shall
mean the Chief Executive Officer or the Chief Financial Officer of
Holdings.

       

      1.62 “Revolving Loan Commitment”
shall mean the commitment to make Revolving Loans to Borrower in the
aggregate principal amount outstanding not to exceed the lesser of (a) the
Maximum Credit or (b) the Borrowing Base, as such Revolving Loan Commitment may
be adjusted pursuant to the terms of this Agreement.

       

      1.63 “Revolving Loans” shall have
the meaning as set forth in Section 2.1 hereof.

       

      1.64 “SEC” shall mean the United
States Securities and Exchange Commission.

       

      1.65 “SEC Reports” shall mean the
Borrower’s (1) Annual Report on Form 10-K for the year ended December 31, 2007,
and (2) all other periodic and other reports filed by the Borrower with the SEC
pursuant to the 1934 Act subsequent to December 31, 2007, and prior to the date
hereof, in each case as filed with the SEC and including the information and
documents (other than exhibits) incorporated therein by reference.

       

      1.66 “Secured Noteholders” shall
mean the holders of Secured Notes.

       

      1.67  “Secured  Notes”
shall mean the $1,870,000 aggregate principal amount of10% Secured
Convertible Notes due 2009 issued by the Borrowers to the Secured Noteholders,
in the form annexed hereto as Exhibit I.

       

      1.68 “Secured Notes Documentation”
shall mean all agreements and instruments entered into by the Borrower in
connection with the issuance of the Secured Notes.

       

      1.69 “Securities Issuance
Agreement” shall have the meaning set forth in Section
[6.10].

       

      1.70 "Subordinated Debt" shall
mean, at any particular time, Indebtedness of Borrower that shall be expressly
subordinated upon written terms and conditions, satisfactory to Lender, in right
of payment to the prior payment in full of all of the Obligations.

       

      1.71 "Subsidiary" shall mean, as to
any Person, a corporation, limited liability company or other entity with
respect to which more than fifty (50%) percent of the outstanding Equity
Interests of each class having voting power is at the time owned by such Person
or by one or more Subsidiaries of such Person or by such Person.

       

      1.72 "Term" shall have the meaning
set forth in Section 4.1.

       

      1.73 "UCC" shall mean the Uniform
Commercial Code as presently enacted in New York (or any
successor legislation thereto), and as the same may be amended from time to
time, and the state counterparts thereof as may be enacted in such states or
jurisdictions where any of the Collateral is located or held.

       

      1.74 “Unbilled Services” shall mean
amounts due arising from services that have been rendered to an Account Debtor
but for which an invoice has not been sent.

       

      1.75 “Warrant” shall mean a
seven-year warrant to purchase 2,000,000 shares of Holdings’ Common Stock at an
exercise price of $1.00 per share and containing such other terms as are set
forth in the form of warrant annexed hereto as Exhibit J.

       

      1.76 Rules of Interpretation and
Construction.  In this Agreement unless the context otherwise
requires:

       

      (a) All terms
used herein which are defined in the UCC (as presently in effect in the State of
New York) shall have the meanings given therein unless otherwise defined in this
Agreement;

       

      (b) Sections
mentioned by number only are the respective Sections of this Agreement as so
numbered;

       

      (c) Words
importing a particular gender shall mean and include the other gender and words
importing the singular number mean and include the plural number and vice
versa;

       

      (d) Words
importing persons shall mean and include firms, associations, partnerships
(including limited partnerships), societies, trusts, corporations or other legal
entities, including public or governmental bodies, as well as natural
persons;

       

      (e) Each
reference in this Agreement to a particular person shall be deemed to include a
reference to such person's successors and permitted assigns;

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      (f) Any
headings preceding the texts of any Section of this Agreement, and any table of
contents or marginal notes appended to copies hereof are intended, solely for
convenience of reference and shall not constitute a part of this Agreement, nor
shall they affect its meaning, construction or effect;

       

      (g) If any
clause, provision or section of this Agreement shall be ruled invalid or
unenforceable by any court of competent jurisdiction, such holding shall not
invalidate or render unenforceable any of the remaining provisions
thereof;

       

      (h) The terms
"herein", "hereunder", "hereby", "hereto", and any similar terms as used in this
Agreement refer to this Agreement; the term "heretofore: means before the date
of execution of this Agreement; and the term "hereafter" shall mean after the
date of execution of this Agreement;

       

      (i) If any
clause, provision or section of this Agreement shall be determined to be
apparently contrary to or conflicting with any other clause, provision or
section of this Agreement, then the clause, provision or section containing the
more specific provisions shall control and govern with respect to such apparent
conflict;

       

      (j) Unless
otherwise specified, (i) all accounting terms used herein or in any Loan
Document shall be interpreted in accordance with GAAP, (ii) all accounting
determinations and computations hereunder or thereunder shall be made in
accordance with GAAP, and (iii) all financial statements required to be
delivered hereunder or thereunder shall be prepared in accordance with
GAAP;

       

      (k) An Event
of Default that occurs shall exist or continue or be continuing unless such
Event of Default is waived by Lender in accordance with the terms of this
Agreement; and

       

      (l) The word
"and" when used from time to time herein shall mean "or" or "and/or" if such
meaning is expansive of the rights or interests of Lender in the given
context.

       

      SECTION
2. REVOLVING
LOANS

      

      2.1 Revolving Loans.

       

      (a)     Lender
shall, subject to the terms and conditions contained herein and the satisfaction
of the closing and funding conditions set forth herein, make revolving loans to
Borrower (“Revolving
Loans”) during the Term in amounts requested by Borrower from time to
time, provided
that the requested Revolving Loan would not cause the outstanding Revolving
Loans to exceed the lesser of the Maximum Credit or the Borrowing
Base  existing immediately prior to the making of the requested
Revolving Loan.  Subject to the terms and conditions hereof,
Borrower  may borrow, repay and reborrow Revolving Loans, as set forth
in this Agreement.

       

      (b)       Revolving
Loans may be drawn in tranches of not less than Twenty-Five Thousand Dollars
($25,000) (each drawing, an “Advance” and collectively, the
“Advances”). The
obligation of Borrower to repay the Advances shall be evidenced by a note (the
"Note") in the form of
Exhibit
B hereto and
dated the date hereof.

       

                              (c)      Subject
to mandatory payment of Advances as set forth in Section 2.1(d)
below,  the principal amount of the Revolving Loans shall be payable
on the Maturity Date.

       

                              (d)      Notwithstanding
any provision herein to the contrary, Borrower shall repay the Advances
immediately at any time and from time to time in an amount by which the
outstanding principal balance of the Advances exceeds the Maximum Credit, as
determined by Lender, based on the most recent bi-monthly accounts receivable
report delivered by Borrower to Lender in accordance with Section 9.5
hereof.

       

                              (e)       Whenever
Borrower desires an Advance, but no more frequently than five (5) times in any
calendar month, Borrower will notify Lender by delivery of a borrowing
certificate certified by a Responsible Officer (“Borrowing Certificate”)
setting forth in reasonable detail a schedule of Eligible Accounts, and the
calculation of the Advance requested in connection therewith, which shall in all
respects be subject to Lender’s review and approval. Lender shall be entitled to
rely on any facsimile transmission of a Borrowing Certificate given by a person
who Lender reasonably believes to be a Responsible Officer, and Borrower shall
indemnify and hold Lender harmless for any damages or loss suffered by Lender as
a result of such reliance. The funding of each Advance shall be made in
accordance with the applicable Borrowing Certificate as approved by
Lender.

       

                                (f)      Remittances
and all other proceeds of Accounts and other Collateral shall be sent to a
lockbox designated by and/or maintained in the name of Lender, and deposited
into a bank account now or hereafter selected by Lender and maintained in the
name of Lender under arrangements with the depository bank under which all funds
deposited to such bank account are required to be transferred solely to
Lender.  Once instituted, such lockbox system shall remain in effect
unless Lender directs otherwise.  Borrower shall bear all risk of loss
of any funds deposited into such account except to the extent such loss is
covered by the gross negligence or the willful misconduct of
Lender.  In connection therewith, Borrower shall execute such lockbox
and bank account agreements as Lender shall specify, including the Lockbox
Agreement.  Any collections or other Collateral proceeds received by
Borrower shall be held in trust for Lender and immediately remitted to Lender in
kind.

       

      2.2 Maximum Credit.  The
aggregate principal amount of the Revolving Loans shall not exceed the Maximum
Credit.

      

      2.3 Reserves.  Without
limiting any other rights and remedies of Lender hereunder or under the other
Loan Documents, the Maximum Credit shall be subject to Lender's continuing
right, in its sole discretion, to withhold a Reserve from Borrower's
availability under the Maximum Credit.

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      2.4 Use of
Proceeds.  Borrower shall use the proceeds of each Advance
solely for ordinary course working capital purposes, or as otherwise agreed in
writing by Lender prior to the release of such Advance under Section 2.1
hereunder.

      

      2.5 Repayment; Optional Conversion of
Loans.

      

      (a)           Except
as otherwise set forth herein, Borrower shall repay the aggregate outstanding
principal amount of the Loans and all accrued and unpaid Interest, as calculated
in Section 3.1, on or prior to the Maturity Date.

      

      (b)           Lender,
at any time and from time to time, at its sole option, shall be entitled, during
the term of this Agreement, to convert all or any portion of the outstanding
principal and interest of the Loans, whether or not then due and payable, into
common stock of Holdings in accordance with the terms of the  Loan
Conversion Agreement.

       

      2.6 Borrowing
Agency Provisions.

      

      (a)           Holdings,
InterMetro and Advanced are co-borrowers (and collectively sometimes referred to
collectively as “Borrower” and each individually as a “Borrower”) under this
Agreement. Each of InterMetro and Advanced hereby irrevocably designates
Holdings, acting through Holdings’ duly authorized officers, to be InterMetro’s
and Advanced’s attorney and agent and in such capacity to borrow, sign and
endorse notes, and execute and deliver all instruments, documents, writings and
further assurances now or hereafter required hereunder, on behalf of InterMetro
and Advanced, and hereby authorizes Lender to pay over or credit all loan
proceeds hereunder in accordance with the request of Holdings.

      

      (b)           The
handling of this credit facility as a co-borrowing facility with a borrowing
agent in the manner set forth in this Agreement is solely as an accommodation to
Holdings, InterMetro and Advanced and at their request.  Lender shall
not incur any liability to any Borrower as a result thereof.  To
induce Lender to do so and in consideration thereof, each Borrower hereby
indemnifies Lender and holds Lender harmless from and against any and all
liabilities, expenses, losses, damages and claims of damage or injury asserted
against Lender by any Person arising from or incurred by reason of the handling
of the financing arrangements of the Borrowers as provided herein, reliance by
Lender on any request or instruction from Holdings or any other action taken by
Lender with respect to this Section 2.6.

      

      (c)           All
Obligations shall be the joint and several obligations of the Borrowers. The
Borrowers shall make payment upon the maturity of the Obligations by
acceleration or otherwise, and such obligation and liability on the part of the
Borrowers shall in no way be affected by the failure of Lender to pursue to
preserve its rights against any Borrower or the release by Lender of any
Collateral now or thereafter acquired from any Borrower.

      

      (d)           Each
Borrower expressly waives any and all rights of subrogation, reimbursement,
indemnity, exoneration, contribution or any other claim which such Borrower may
now or hereafter have against the other Borrower or against any other Person
directly or contingently liable for the Obligations until all Obligations have
been indefeasibly paid in full and this Agreement has been irrevocably
terminated.

      

      (e)           Each
Borrower represents and warrants to Lender that (i) the Borrowers have one or
more common shareholders, directors and officers, (ii) the businesses and
corporate activities of the Borrowers are closely related to, and substantially
benefit, the business and corporate activities of the consolidated group of
which the Borrowers are members, (iii) each Borrower will receive a substantial
economic benefit from entering into this Agreement and will receive a
substantial economic benefit from the application of each Loan hereunder, in
each case, whether or not such amount is used directly by such Borrower and (iv)
all requests for Loans hereunder by Holdings are for the exclusive and
indivisible benefit of the Borrowers as though, for purposes of this Agreement,
the Borrowers constituted a single entity.

      

      SECTION
3. INTEREST,
FEES AND CHARGES

      

      3.1 Interest.

      

      (a)             Interest
(“Interest”) on all
Loans shall be computed on the basis of the actual number of days elapsed and a
year of 360 days. Interest shall accrue at a rate per annum equal to the greater
of (i) the sum of (A) the Base Rate plus (B) Four Percent (4.0%), or (ii) Ten
Percent (10%), and shall be payable by Borrower in arrears (x) prior to the
Maturity Date, on the first Business Day of each calendar month, (y) in full on
the Maturity Date and (z) on demand after the Maturity Date. At Lender’s option,
Lender may charge the Borrowers’ account for said interest. Following and during
the continuation of an Event of Default, interest on all outstanding Loans,
including principal and Interest, shall accrue at the Default Rate, compounded
quarterly.

      

      (b)             For
the purposes of this Section 3.1,

      

      (i)             “Base Rate” means a rate per
annum equal to the “Prime Rate” as reported  in the “Money Rates”
column of The Wall
Street Journal, adjusted as and when such Prime Rate
changes.

      

      (ii)             “Default Rate” means a rate
per annum equal to eighteen percent (18%).

      

      3.2 Fees.  Borrower
shall pay  Lender or Lender’s designee  the fees set forth
in Section 3.2
of the Borrower’s Disclosure Schedule. Such fees shall be deemed fully earned on
the date hereof and shall not be subject to rebate or proration for any
reason.

      

      3.3 Late Charges. If the
payment of any Obligation due hereunder is more than  ten (10) days
overdue, then, in addition to any interest charges payable by
Borrower  in connection therewith, Lender may charge Borrow a late fee
of  three percent (3%) of such overdue payment.

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      3.4 Fees and
Expenses.  Borrower shall pay, on Lender's demand, all costs,
expenses, filing fees and taxes payable in connection with the preparation,
execution, delivery, recording, administration, collection, liquidation,
enforcement and defense of the Obligations, Lender's rights in the Collateral,
this Agreement, the other Loan Documents, and all other existing and future
agreements or documents contemplated herein or related hereto, including any
amendments, waivers, supplements or consents which may now or hereafter be made
or entered into in respect hereof, or in any way involving claims or defenses
asserted by Lender or claims or defenses against Lender asserted by Borrower or
any third party directly or indirectly arising out of or related to the
relationship between Borrower and Lender, including, but not limited to the
following, whether incurred before, during or after the Term or after the
commencement of any case with respect to Borrower under the United States
Bankruptcy Code or any similar or successor statute: (a) all costs and expenses
of filing or recording (including UCC Financing Statement and mortgage filing
fees; (b) all title insurance and other insurance premiums, appraisal fees, fees
incurred in connection with any environmental report and audit, survey and
search fees and charges; (c) all fees relating to the wire transfer of loan
proceeds and other funds and fees for returned checks; (d) all out-of-pocket
expenses and costs heretofore and from time to time hereafter incurred by Lender
during the course of periodic field examinations of the Collateral and
Borrower's operations; and (e) all costs, fees and disbursements of counsel to
Lender.If any fees, costs or charges payable to Lender hereunder are not paid
when due, Borrower shall thereby be deemed to have requested, and Lender is
hereby authorized at its discretion to make and charge to Borrower’s account, a
Loan as of such date in an amount equal to such unpaid fees, costs or
charges.

      

      3.5 Savings Clause.  The
Notes and the obligations of Borrower hereunder are subject to the express
condition that at no time shall Borrower be obligated or required to pay
interest on the principal balance due hereunder at a rate which could subject
Lender to either civil or criminal liability as a result of being in excess of
the maximum interest rate which Borrower is permitted by applicable law to
contract or agree to pay.  If by the terms hereof, Borrower is at any
time required or obligated to pay interest on the principal balance due
hereunder at a rate in excess of such maximum rate, the Interest Rate or the
Default Rate, as the case may be, shall be deemed to be immediately reduced to
such maximum rate and all previous payments in excess of the maximum rate shall
be deemed to have been payments in reduction of principal and not on account of
the interest due hereunder.  All sums paid or agreed to be paid to
Lender for the use or forbearance of the Loans, shall, to the extent permitted
by applicable law, be amortized, prorated, allocated, and spread throughout the
full stated term of the Note until payment in full so that the rate or amount of
interest on account of the Loans does not exceed the maximum lawful rate of
interest from time to time in effect and applicable to the Loans for so long as
any Loan is outstanding.

      

      SECTION
4. TERM.

      

      4.1       Term.  This
Agreement shall continue in full force and effect for a term (as the same may
hereafter be extended, the “Term”) from the Closing Date
through and until April 30, 2009, or such earlier date by which the maturity of
the Obligations shall have been accelerated pursuant to the terms hereof. The
Term may be extended at Lender’s sole and absolute discretion on terms mutually
acceptable to Lender and Borrower, it being acknowledged and agreed that Lender
may decline to extend the Term for any reason or no reason.

       

      4.2 Early
Termination.

      

      (a)              Lender
shall have the right to terminate this Agreement at any time upon or after the
occurrence of an Event of Default.

      

      (b)              Borrower
shall have the right to terminate this Agreement at any time if there are no
Loans outstanding or other Obligations owed to the Lender, subject to compliance
with this Section 4.2(b). If Borrower terminates this Agreement pursuant to this
Section 4.2(b), at the time of the termination, and as an express condition to
the effectiveness thereof, Borrower (i) will pay to Lender a cash fee equal
to  4% of the Maximum Credit and (ii) will cause
Holdings to issue and deliver to Lender warrants to acquire a number of shares
of Common Stock equal to 200,000 times the number of months remaining until the
end of the initial Term, rounded up to the nearest whole month, divided by 12,
with an exercise price equal to the Current Fair Market Value (as defined in the
Warrant) of the Common Stock determined as of such termination date, with a
5-year exercise period and otherwise containing such terms as are set forth in
the Warrant, which warrants shall be Registrable Securities (as defined in the
Registration Rights Agreement) and shall be in form and substance satisfactory
to Lender.

      

      4.3 Effect of
Termination.  Upon termination of this Agreement by Lender upon
or after the occurrence of an Event of Default, in addition to payment of all
Obligations which are not contingent, Borrower shall deposit such amount of cash
collateral as Lender determines is necessary to secure Lender from loss, cost,
damage or expense, including reasonable attorneys' fees, in connection with any
remittance items or other payments provisionally credited to the Obligations
and/or to which Lender has not yet received final and indefeasible
payment.

      

      SECTION
5. COLLATERAL.

      

      5.1 Security Interests in Borrower's
Assets.  As collateral security for the payment and performance
of the Obligations, subject to the last paragraph of this Section 5.1, Borrower
hereby grants and conveys to Lender a first priority continuing security
interest in and Lien upon all now owned and hereafter acquired property
(including, without limitation, real property) and assets of Borrower and the
Proceeds and products thereof (which property, assets together with all other
collateral security for the Obligations now or hereafter granted to or otherwise
acquired by Lender, are referred to herein collectively as the "Collateral"), including,
without limitation, all property of Borrower now or hereafter held or possessed
by Lender and including the following:

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      (a) All now
owned and hereafter acquired:  Accounts; contract rights; chattel
paper (including, but not limited to, rentals and other amounts payable under
leases of equipment to customers pursuant to which Borrower is the lessor or
assignee of any lessor); general intangibles (including, but not limited to, tax
and duty refunds, patents, patent applications, trademarks, trademark
applications, tradenames and tradestyles, copyrights, copyright applications,
trade rights (whether or not registered), discoveries, improvements, processes,
know-how, formulas, trade secrets, service marks, other rights in intellectual
property (whether patentable or not), goodwill, customer and mailing lists, life
insurance policies, licenses (whether as licensor or licensee), franchises and
permits); documents (including, without limitation, all warehouse receipts);
instruments; all guaranties, letters of credit, steamship guaranties, airway
releases or other similar guaranties, agreements or property securing or
relating to any of the items referred to above (including, but not limited to,
purchase money security interests granted by Account Debtors in connection with
installment sales); all cash monies, investment properties, deposits,
securities, bank accounts, deposit accounts, credits and other property now or
hereafter held in any capacity by Lender;

       

      (b) Inventory;

       

      (c) Equipment
and fixtures;

       

      (d) All now
owned and hereafter acquired right, title and interests of Borrower in, to and
in respect of any real or other personal property in or upon which Lender has or
may hereafter have a security interest, Lien or right of setoff;

       

      (e) All of
Borrower's existing and future leasehold interests in premises or facilities
leased from third parties by Borrower;

       

      (f) All
present and future books and records relating to any of the above including,
without limitation, all present and future books of account of every kind or
nature, purchase and sale agreements, invoices, ledger cards, bills of lading
and other shipping evidence, statements, correspondence, memoranda, credit files
and other data relating to the Collateral or any account debtor, together with
the tapes, disks, diskettes and other data and software storage media and
devices, file cabinets or containers in or on which the foregoing are stored
(including any rights of Borrower with respect to any of the foregoing
maintained with or by any other Person); and

       

      (g) Any and
all products and Proceeds of the foregoing in any form including, without
limitation, all insurance claims, warranty claims and proceeds and claims
against third parties for loss or destruction of or damage to any or the
foregoing.

       

      Notwithstanding
the foregoing, Lender’s Lien upon all Collateral other than Accounts shall be
subject to the prior Lien of the Secured Noteholders in accordance with the
terms of, and subject to the conditions set forth in, that certain Intercreditor
Agreement, of even date herewith, between Lender and Glenhaven Corporation, as
agent for the Secured Noteholders (“Intercreditor Agreement”) in
the form annexed hereto as Exhibit
C.

       

      5.2 Financing
Statements.  Borrower hereby authorizes Lender to file
Financing Statements with respect to the Collateral in form acceptable to Lender
and its counsel, and hereby ratifies any actions taken by Lender prior to the
date hereof to file such Financing Statements.  Borrower shall, at all
times, do, make, execute, deliver and record, register or file all Financing
Statements and other instruments, acts, pledges, leasehold or other mortgages,
amendments, modifications, assignments and transfers (or cause the same to be
done), and will deliver to Lender such instruments and/or documentation
evidencing items of Collateral, as may be requested by Lender to better secure
or perfect Lender's security interest in the Collateral or any security
interest, mortgage or Lien with respect thereto. Borrower acknowledges
that it is not authorized to file any financing statement or amendment or
termination statement with respect to any Financing Statement without the prior
written consent of Lender and agrees that it will not do so without the prior
written consent of Lender, subject to Borrower’s rights under Section
9-509(d)(2) of the UCC.

       

      5.3       License
Grant.  Subject in all respects to the rights of the Secured
Noteholders,  each Borrower hereby grants to Lender an irrevocable,
non-exclusive, worldwide license without payment of royalty or other
compensation to such Borrower, upon the occurrence and during the continuance of
an Event of Default, to use or otherwise exploit in any manner as to which
authorization of the holder of such Intellectual Property would be required, and
to license or sublicense such rights in to and under any Intellectual Property
now or hereafter owned by or licensed to, such Borrower, and wherever the same
may be located, and including in such license access to all media in which any
of such Intellectual Property may be recorded or stored and to all software and
hardware used for the compilation or printout thereof, and represents, promises
and agrees that any such license or sublicense is not and will not be in
conflict with the contractual or commercial rights of any third Person and
subject, in the case of trademarks and service marks, to sufficient rights to
quality control and inspection in favor of such Borrower to avoid the risk of
invalidation of said trademarks and service marks.  The foregoing
license will terminate on the termination of this Agreement and the payment in
full of all Obligations; provided, however, that any
license, sublicense, or other rights granted by Lender pursuant to such license
during its term shall remain in effect in accordance with its
terms.

      

      5.4    Representations,
Warranties and Covenants Concerning the Collateral.  Each
Borrower represents, warrants (each of which such representations and warranties
shall be deemed repeated upon the making of each request for a Revolving Loan
and made as of the time of each and every Revolving Loan hereunder) and
covenants as follows:

       

      (a)           all
of the Collateral (i) is owned by it free and clear of all
Liens  (including any claim of infringement) except those in Lender’s
favor and Permitted Encumbrances and (ii) is not subject to any agreement
prohibiting the granting of a Lien or requiring notice of or consent to the
granting of a Lien.

       

      (b)       it
shall not encumber, mortgage, pledge, assign or grant any security interest in
or Lien upon any Collateral or any other assets to anyone other than the Lender
and except for Permitted Liens.

       

      (c)           the
Liens granted pursuant to this Agreement, upon the filing of UCC-1 financing
statements in respect of each Borrower  in favor of the Lender in the
applicable filing office of the state of organization of such Borrower, the
recording of the Liens in favor of the Lender in the U.S. Patent and Trademark
Office and the U.S. Copyright Office, as applicable, the taking of any actions
required under the laws of jurisdictions outside the United States with respect
to Intellectual Property included in the Collateral which is created under such
laws, and the completion of the other filings and actions listed on Section 5.4(c) of the
Disclosure Schedule (which, in the case of all filings and other documents
referred to in said Schedule, have been delivered to the Lender in duly executed
form) constitute valid perfected security interests in all of the Collateral in
favor of the Lender, as security for the prompt and complete payment and
performance of the Obligations, enforceable in accordance with the terms hereof
against any and all of its creditors and purchasers and such security interest
is prior to all other Liens in existence on the date hereof.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      (d)           no
effective security agreement, mortgage, deed of trust, financing statement,
equivalent security or Lien instrument or continuation statement covering all or
any part of the Collateral is or will be on file or of record in any public
office, except those relating to Permitted Encumbrances.

       

      (e)           it
shall not dispose of any of the Collateral whether by sale, lease or otherwise
except for the disposition or transfer in the ordinary course of
business  of Equipment only to the extent that (i) the proceeds of any
such disposition are used to acquire replacement Equipment which is subject to
the Lender’s security interest or are used to repay Loans or to pay general
corporate expenses, or (ii) following the occurrence of an Event of Default
which continues to exist the proceeds of which are remitted to the Lender to be
held as cash collateral for the Obligations.

       

      (f)           it
shall defend the right, title and interest of the Lender in and to the
Collateral against the claims and demands of all Persons whomsoever, and take
such actions, including (i) all actions necessary to grant the Lender “control”
of any Investment Property, Deposit Accounts, Letter-of-Credit Rights or
electronic Chattel Paper owned by it, with any agreements establishing control
to be in form and substance satisfactory to the Lender, (ii) the prompt (but in
no event later than five (5) Business Days following the Lender’s request
therefor) delivery to the Lender of all original Instruments, Chattel Paper,
negotiable Documents and certificated Equity Interests owned by it (in each
case, accompanied by stock powers, allonges or other instruments of transfer
executed in blank), (iii) notification to third parties of the Lender’s interest
in Collateral at the Lender’s request, and (iv) the institution of litigation
against third parties as shall be prudent in order to protect and preserve its
and/or the Lender’s respective and several interests in the
Collateral.

       

      (g)           it
shall promptly, and in any event within five (5) Business Days after the same is
acquired by it, notify the Lender of any commercial tort claim (as defined in
the UCC) acquired by it and unless otherwise consented to by the Lender, it
shall enter into a supplement to this Agreement granting to the Lender a Lien in
such commercial tort claim for the ratable benefit of the Creditor
Parties.

       

      (h)     
    [RESERVED]

       

      (i)           [RESERVED]

       

      (j)           it
shall perform in a reasonable time all other steps requested by the Lender to
create and maintain in the Lender’s favor a valid perfected first Lien in all
Collateral subject only to Permitted Encumbrances.

       

      (k)           it
shall notify the Lender promptly and in any event within three (3) Business Days
after obtaining knowledge thereof (i) of any event or circumstance that, to its
knowledge, would cause the Lender to consider any then existing Account as no
longer constituting an Eligible Account; (ii) of any material delay in its
performance of any of its obligations to any Account Debtor; (iii) of any
assertion by any Account Debtor of any material claims, offsets or
counterclaims; (iv) of any allowances, credits and/or monies granted by it to
any Account Debtor; (v) of all material adverse information relating to the
financial condition of an Account Debtor; (vi) of any material return of goods;
and (vii) of any loss, damage or destruction of any of the
Collateral.

       

      (l)           all
Eligible Accounts (i) represent complete bona fide transactions which require no
further act under any circumstances on its part to make such Accounts payable by
the Account Debtors, (ii) are not subject to any present, future contingent
offsets or counterclaims, and (iii) do not represent bill and hold sales,
consignment sales, guaranteed sales, sale or return or other similar
understandings or obligations of any Affiliate or Subsidiary of the applicable
Borrower.  It has not made, nor will it make, any agreement with any
Account Debtor for any extension of time for the payment of any Account, any
compromise or settlement for less than the full amount thereof, any release of
any Account Debtor from liability therefor, or any deduction therefrom except a
discount or allowance for prompt or early payment allowed by it in the ordinary
course of its business consistent with historical practice and as previously
disclosed to the Lender in writing.

       

      (m)           it
shall keep and maintain its Equipment in good operating condition, except for
ordinary wear and tear, and shall make all necessary repairs and replacements
thereof so that the value and operating efficiency shall at all times be
maintained and preserved.  It shall not permit any such items to
become a Fixture to real estate or accessions to other personal
property.

       

      (n)           it
shall maintain and keep all of its Books and Records concerning the Collateral
at its executive offices listed in Exhibit E.

       

      (o)           [RESERVED]

       

      (p)           Section 5.4(p) of the
Disclosure Schedule lists all banks and other financial institutions at which it
maintains deposits and/or other accounts, and such Schedule correctly identifies
the name, address and telephone number of each such depository, the name in
which the account is held, a description of the purpose of the account, and the
complete account number.  It shall not establish any depository or
other bank account with any financial institution (other than the accounts set
forth on Section
5.4(p) of the Disclosure Schedule) without providing the Lender with
written notification thereof and providing similar information related
thereto.

       

      (q)           On
the date hereof, its exact legal name (as indicated in the public record of its
jurisdiction of organization), jurisdiction of organization, organizational
identification number, if any, from the jurisdiction of organization, and the
location of its chief executive office or sole place of business or principal
residence, as the case may be, are specified on Section 5.4(q) of the
Disclosure Schedule.  It has furnished to the Lender a certified
charter, certificate of incorporation or other organization document and
long-form good standing certificate as of a date which is recent to the date
hereof.  It is organized solely under the law of the jurisdiction so
specified and has not filed any certificates of domestication, transfer or
continuance in any other jurisdiction.  Except as otherwise indicated
on Section
5.4(q) of the Disclosure Schedule, the jurisdiction of its organization
of formation is required to maintain a public record showing it to have been
organized or formed.  Except as specified on Section 5.4(q) of the
Disclosure Schedule, it has not changed its name, jurisdiction of organization,
chief executive office or sole place of business or its corporate structure in
any way (e.g., by merger, consolidation, change in corporate form or otherwise)
within the past five years and has not within the last five years become bound
(whether as a result of merger or otherwise) as a grantor under a security
agreement entered into by another Person, which has not heretofore been
terminated.

       

      (r)           It
will not, except upon 30 days’ prior written notice to the Lender and delivery
to the Lender of  all additional financing statements and other
documents reasonably requested by the Lender to maintain the validity,
perfection and priority of the security interests provided for
herein:  (i) change its jurisdiction of organization or the location
of its chief executive office or sole place of business or principal residence
from that referred to in Section 5.4(q) of the
Disclosure Schedule; or (ii) change its name, identity or organizational
structure.

      

      (s)           None
of the Collateral, except such Collateral as has been pledged to the Secured
Noteholders, is subject to any prohibition against encumbering, pledging,
hypothecating or assigning the same or requires notice or consent to Borrower's
doing of the same.

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      SECTION
6. CONDITIONS
TO EXTENSION OF CREDIT

      

      The
obligation of Lender to make the initial Loans under this Agreement shall be
subject to the satisfaction or waiver by Lender, prior thereto or concurrently
therewith, of each of the following conditions precedent:

      

      6.1 Loan
Documents.  Each of the Loan Documents shall have been duly and
properly authorized, executed and delivered by Borrower and the other parties
thereto and shall be in full force and effect as of the date hereof and on the
date of the initial Loans.

      

      6.2 Representations and
Warranties.  Each of the representations and warranties made by
or on behalf of Borrower to Lender in this Agreement or in other Loan Documents
shall be true and correct in all material respects as of the date hereof and on
the date of the initial Loans, provided that any such representation or warranty
that is qualified by materiality shall be true and correct in all respects as of
the date hereof and on the date of the initial Loans.

      

      6.3 Certified Copies of Corporate
Documents.  Lender shall have received from Borrower, certified
by a duly authorized officer to be true and complete on and as of a date which
is not more than ten (10) Business Days prior to the date hereof, a copy of each
of (a) the certificate of incorporation or such other formation documents of
Borrower in effect on such date of certification, and (b) the by-laws of
Borrower in effect on such date.

      

      6.4 Proof of Corporate
Action.  Lender shall have received from Borrower a copy,
certified by a duly authorized officer to be true and complete on and as of the
date which is not more than ten (10) Business Days prior to the date hereof, of
the records of all corporate action taken by Borrower to authorize (a) its
execution and delivery of each of the Loan Documents to which it is or is to
become a party as contemplated or required by this Agreement, (b) its
performance of all of its agreements and obligations under each of such
documents, and (c) the incurring of the Obligations contemplated by this
Agreement.

      

      6.5 Legal
Opinion.  Lender shall have received a written legal opinion,
addressed to Lender, dated the date hereof, from counsel for
Borrower.  Such legal opinion shall be acceptable to Lender and its
counsel.

      

      6.6 Collateral.

      

      (a)           All
of the Obligations of Borrower to Lender under or in respect of this Agreement
shall be entitled to all of the benefits of and be secured by this Agreement and
the Loan Documents, and Lender shall have obtained a first, perfected security
interest in the Collateral of Borrower, subject only to the Permitted
Encumbrances.

      

      (b)           The
Loan Documents and all other documents in respect thereto, which shall create
and maintain a first perfected security interest in favor of Lender and the
appropriate Financing Statements in respect thereto and necessary to enable
Lender to perfect its security interests thereunder, shall have been duly
executed and delivered by Borrower to Lender.

      

      6.7 Insurance.  Lender
shall have received evidence of insurance, additional insured and loss payee
endorsements required hereunder and under the other Loan Documents, in form and
substance satisfactory to Lender, and certificates of insurance policies and/or
endorsements naming Lender as loss payee as required hereunder.

      

      6.8 Intercreditor
Agreement.  Lender shall have received the Intercreditor
Agreement, duly
executed by or on behalf of the Convertible Noteholders.

      

      

      6.9 Warrant.  The
Borrower shall have issued to Lender the Warrant on the terms set forth in the
Securities Issuance Agreement, of even date herewith, between the Borrower and
Lender (the “Securities
Issuance Agreement”) in substantially the form annexed hereto as Exhibit
D.

      

      6.10 Loan Conversion
Agreement.  Lender shall have received the Loan Conversion
Agreement, duly
executed by Holdings.

      

      6.11 Pay Proceeds Letter. Borrower
shall have delivered to Lender a pay proceeds letter with respect to the
disbursement of the proceeds of the initial Loans in form and substance
satisfactory to Lender, which letter shall provide for, among other things, the
payment or reimbursement of all costs and expenses incurred by Lender in
connection with this Agreement and the other Loan Documents.

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      SECTION
7. CONDITIONS
TO MAKING FURTHER LOANS.

      

      The
obligations of Lender to make further Loans to Borrower shall be subject to the
satisfaction or waiver by Lender, prior thereto or concurrently therewith, of
each of the following conditions precedent:

      

      7.1 Applications and
Compliance.  The application for such Loans shall have been
made by Borrower to Lender in accordance with the applicable provisions of this
Agreement and in compliance with all provisions of this Agreement.

      

      7.2 Representations and
Warranties.  Each of the representations and warranties made by
or on behalf of Borrower to Lender in this Agreement or in other Loan Documents
shall have been true and correct in all material respects when made (provided
that any such representation or warranty that is qualified as to materiality
shall be true and correct in all respects), shall, for all purposes of this
Agreement, be deemed to be repeated on and as of the date of each Loan by Lender
hereunder and shall be true and correct in all respects on and as of each such
date, except to the extent that any of such representations and warranties
relate, by the express terms thereof, solely to a date prior to the date of each
Loan by Lender hereunder, and Lender shall have received a certification from a
Responsible Officer with respect to the foregoing  in form and
substance satisfactory to Lender.

      

      7.3 Performance,
etc.  Borrower shall have duly and properly performed, complied
with and observed each of its covenants, agreements and obligations contained in
this Agreement, and shall have duly and properly performed, complied with and
observed in all respects its covenants, agreements and obligations in all other
articles of this Agreement and any of the Loan Documents to which it is a party
or by which it is bound on the date of each Loan by Lender hereunder, and Lender
shall have received a certification from a Responsible Officer with respect to
the foregoing  in form and substance satisfactory to
Lender.  No event shall have occurred on or prior to the date of each
Loan by Lender hereunder and be continuing on the date of each Loan by Lender
hereunder, and no condition shall exist on the date of each Loan by Lender
hereunder, which constitutes an Event of Default or which would, with notice or
the lapse of time, or both, constitute an Event of Default under this Agreement
or any of the Loan Documents, and Lender shall have received a certification
from a Responsible Officer with respect to the foregoing  in form and
substance satisfactory to Lender.

      

      SECTION
8.  REPRESENTATIONS
AND WARRANTIES.

      

      Borrower
hereby represents and warrants to Lender, knowing and intending that Lender
shall rely thereon in making the Loan contemplated hereby (each of which
representations and warranties shall be continuing unless expressly made in
relation only to a specific date), that:

      

      8.1 Corporate Existence: Good
Standing.

      

      (a) Each
Borrower (i) is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of it organization, (ii) is in good
standing in all other jurisdictions in which it is required to be qualified to
do business as a foreign corporation, and (iii) has all requisite corporate
power and authority and full legal right to own or to hold under lease its
properties and to carry on the business as presently engaged.

       

      (b) Each
Borrower has corporate power and authority and has full legal rights to enter
into each of the Loan Documents to which it is a party, to perform, observe and
comply with all of its agreements and obligations under each of such documents,
and to obtain all of the Loans contemplated by this Agreement.

       

      8.2 Corporate Authority,
etc.  The execution and delivery by each Borrower of the Loan
Documents to which it is a party, the performance by each Borrower of all of its
agreements and obligations under each of such documents, and the incurring by
each Borrower of all of the Obligations contemplated by this Agreement, have
been duly authorized by all necessary corporate actions on the part of such
Borrower and, if required, its shareholders, and  do not and will not
(a) contravene any provision of any Borrower's charter, bylaws or other
governing documents or this Agreement (each as from time to time in effect), (b)
conflict with, or result in a breach of the terms, conditions, or provisions of,
or constitute a default under, or result in the creation of any mortgage, Lien,
pledge, charge, security interest or other encumbrance upon any of the property
of any Borrower under, any agreement, mortgage or other instrument to which such
Borrower is or may become a party, (c) violate or contravene any provision of
any law, regulation, order, ruling or interpretation thereunder or any decree,
order or judgment or any court or governmental or regulatory authority, bureau,
agency or official (all as from time to time in effect and applicable to such
entity), (d) other than waivers required from the Borrowers’ landlords and the
consents required from the Secured Convertible Noteholders, require any waivers,
consents or approvals by any of third party, including any creditors or trustees
for creditors of Borrower, or (e) require any approval, consent, order,
authorization, or license by, or giving notice to, or taking any other action
with respect to, any Governmental Authority.

      

      8.3 Binding Effect of Documents,
etc.  Each Borrower has duly executed and delivered each of the
Loan Documents to which such Borrower is a party, and each of the Loan Documents
is valid, binding and in full force and effect. The agreements and obligations
of each Borrower as contained in each of the Loan Documents constitutes, or upon
execution and delivery thereof will constitute, legal, valid and binding
obligations of such Borrower, enforceable against such Borrower in accordance
with their respective terms, subject, as to the enforcement of remedies only, to
limitations imposed by federal and state laws regarding bankruptcy, insolvency,
reorganization, moratorium and other laws affecting creditors' rights and
remedies generally, and by general principles of law and equity.

      

      8.4 No Events of
Default.

      

      (a) No Event
of Default has occurred and is continuing and no event has occurred and is
continuing and no condition exists that would, with notice or the lapse of time,
or both, constitute an Event of Default.

       

      (b) Borrower
is not in default under any material contract, agreement or instrument to which
Borrower is a party or by which Borrower or any of property of Borrower is
bound, except as disclosed in Section 8.4(b) of Borrower’s Disclosure
Schedule.

       

      (c) The
execution, delivery and performance of and compliance with this Agreement and
the other Loan Documents  will not, with or without the passage of
time or giving of notice, result in any such material violation, or be in
conflict with or constitute a default under any such term or provision, or
result in the creation of any Lien upon any of Borrower’s  properties
or assets or the suspension, revocation, impairment, forfeiture or nonrenewal of
any permit, license, authorization or approval applicable to Borrower, or any of
its businesses or operations or any of its assets or properties.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      8.5 No Governmental Consent
Necessary.  No consent or approval of, giving of notice to,
registration with or taking of any other action in respect of, any Governmental
Authority is required with respect to the execution, delivery and performance by
Borrower of this Agreement and the other Loan Documents to which it is a
party.

      

      8.6 No
Proceedings.  There are no actions, suits, or proceedings
pending or, to the best of Borrower's knowledge, threatened against or affecting
Borrower in any court or before any Governmental Authority which, if adversely
determined, would have an adverse effect on the ability of Borrower to perform
its obligations under this Agreement or the other Loan Documents to which it is
a party, except as disclosed in Section 8.6 of Borrower’s Disclosure
Schedule.

      

      8.7 No Violations of
Laws.  Borrower has conducted, and is conducting, its business,
so as to comply in all material respects with all applicable federal, state,
county and municipal statutes and regulations.  Borrower or any
officer, director or shareholder of Borrower is not charged with, or so far as
is known by Borrower, is not under investigation with respect to, any violation
of any such statutes, regulations or orders, which could have a Material Adverse
Effect.

      

      8.8 Use of Proceeds of the
Loan.  Proceeds from the Loan shall be used only for those
purposes set forth in this Agreement.  No part of the proceeds of the
Loan shall be used, directly or indirectly, for the purpose of purchasing or
carrying any margin stock or for the purpose of purchasing or carrying or
trading in any stock under such circumstances as to involve Borrower in a
violation of any statute or regulation.  In particular, without
limitation of the foregoing, no part of the proceeds from the Loans are intended
to be used to acquire any publicly-held stock of any kind.

      

      8.9 Financial Statements;
Indebtedness.

      

      (a)           The
audited and unaudited financial statements contained in the SEC Reports
(collectively, the “Financial
Statements”) (x) fairly present as of the respective dates
thereof  the financial position of the Borrower and the results of its
operations, cash flows and stockholders’ equity for each of the periods then
ended in all material aspects; and (y) except for the fact that the unaudited
financial statements omit notes to such statements and year-end adjustments
thereto, have been prepared in accordance with GAAP in conformity with the rules
and regulations of the SEC.

      

      (b)           Except
as shown on the most recent Financial Statements, (i) Borrower has no other
Indebtedness as of the date hereof which would adversely affect the financial
condition of Borrower or the Collateral, and (ii) neither the Borrower nor any
Subsidiary has any liabilities, contingent or otherwise, except those which
individually or in the aggregate are not material to the financial condition or
operating results of the Borrower and the Subsidiaries, taken as a
whole.

      

      (c)           Set
forth in Section
8.9 of Borrower’s Disclosure Schedule is a description of all
Indebtedness of each Borrower as of the date hereof, indicating the amount of
the indebtedness, the Borrower liable for such Indebtedness, and a description
of the nature thereof, including relevant maturity date(s).

      

      8.10 Changes in Financial
Condition. Except as disclosed in the SEC Reports, since December 31,
2007, there has been no material adverse change and no material adverse
development in the business, properties, operations, condition (financial or
otherwise), results of operations or prospects of the
Borrower.  Except as disclosed in the SEC Reports, since December 31,
2007, neither the Borrower nor any Subsidiary has (i) declared or paid any
dividends, (ii) sold any assets, individually or in the aggregate, outside of
the ordinary course of business, (iii) had capital expenditures outside of the
ordinary course of business, (iv) engaged in any transaction with any Affiliate
except as set forth in the SEC Reports or (v) engaged in any other transaction
outside of the ordinary course of business.

       

      8.11 Equipment.  Borrower
shall keep its Equipment in good order and repair, and in running and marketable
condition, ordinary wear and tear excepted.

      

      8.12 Taxes and
Assessments.

      

      (a)           Except  for
outstanding taxes not exceeding $3,000 in the aggregate,  Borrower has
paid and discharged when due all taxes, assessments and other governmental
charges which may lawfully be levied or assessed upon its income and profits, or
upon all or any portion of any property belonging to it, whether real, personal
or mixed, to the extent that such taxes, assessment and other charges have
become due.  Borrower has filed all tax returns, federal, state and
local, and all related information, required to be filed by it.

      

      (b)           Borrower
shall make all payments to be made by it hereunder without any Tax Deduction,
unless a Tax Deduction (as defined below) is required by law. If Borrower is
aware that Borrower must make a Tax Deduction (or
that there is a change in the rate or the basis of a Tax Deduction), it must
promptly notify Lender.  If a Tax Deduction is required by law to be
made by Borrower, the amount of the payment due from Borrower will be increased
to an amount which (after making the Tax Deduction) leaves an amount equal to
the payment which would have been due if no Tax Deduction had been required. If
Borrower is required to make a Tax Deduction, that Borrower must make the
minimum Tax Deduction allowed by law and must make any payment required in
connection with that Tax Deduction within the time allowed by law. Within 30
days of making either a Tax Deduction or a payment required in connection with a
Tax Deduction, Borrower making that Tax Deduction must deliver to Lender
evidence satisfactory to Lender that the Tax Deduction has been made or (as
applicable) the appropriate payment has been paid to the relevant taxing
authority.

      

      (c)           “Tax Deduction” means a
deduction or withholding for or on account of Tax from a payment under a Loan
Document. “Tax” means
any tax, levy, impost, duty or other charge or withholding of a similar nature,
including any income, franchise, stamp, documentary, excise or property tax,
charge or levy (in each case, including any related penalty or
interest).

      

      (d)           It
is the Lender's intention that the transactions contemplated by
this  Agreement and the other Loan Documents not result in the
recognition of income by any non-U.S. member or partner of
Lender which is effectively connected with the conduct of a trade or
business within the United States ("Effectively Connected Income")
within the meaning of Sections 864, 871 and 882 of the Internal Revenue
Code of 1986, as amended (the "Code"), or income which is
treated as Effectively Connected Income under another Code provision, such as
Code Section 897. On Lender's request and at the Borrower's sole cost and
expense, each Borrower will take such actions as may be requested by Lender from
time to time to effectuate the foregoing, and the amount of payments
due from Borrower will be increased as necessary to provide Lender with the
rate of return that would have been received hereunder by Lender if no such
actions had been required.

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      

      8.13 ERISA. Borrower is in
compliance in all material respects with the applicable provisions of ERISA and
all regulations issued thereunder by the United States Treasury Department, the
Department of Labor and the Pension Benefit Guaranty Corporation.

      

      8.14 Environmental
Matters.

      

      (a)           To
the best of its knowledge, Borrower has duly complied with, and its facilities,
business assets, property, leaseholds and equipment are in compliance in all
respects with, the provisions of all laws, regulations and orders of all
Governmental Authorities.

      

      (b)           To
the best of its knowledge, Borrower has been issued all required federal, state
and local licenses, certificates or permits relating to the operation of its
business; and Borrower and its facilities, business, assets, property and
equipment are in compliance in all material respects with all applicable
federal, state and local laws, rules and regulations relating to air emissions,
water discharge, noise emissions, solid or liquid waste disposal, hazardous
waste or materials, or other environmental, health or safety
matters.

      

      8.15 United
States Anti-Terrorism Laws

      

      (a)           In
this Section 8.16:

      

      “Anti-Terrorism Law” means each
of:  (i) Executive Order No. 13224 of September 23,
2001  Blocking Property and Prohibiting Transactions With Persons Who
Commit, Threaten To Commit, or Support Terrorism (the “Executive Order”); (ii) the
Uniting and Strengthening America by Providing Appropriate Tools Required to
Intercept and Obstruct Terrorism Act of 2001, Public Law 107-56 (commonly known
as the USA Patriot Act); (iii) the Money Laundering Control Act of 1986, Public
Law 99-570; and (iv) any similar law enacted in the United States of America
subsequent to December 31, 2004.

      

      “holding company” has the
meaning given to it in the United States Public Utility Holding Company Act of
1935, and any successor legislation and rules and regulations promulgated
thereunder.

      

      “investment company” has the
meaning given to it in the United States Investment Company Act of
1940.

      

      “public utility” has the
meaning given to it in the United States Federal Power Act of 1920.

      

      “Restricted Party” means any
person listed: (i) in the Annex to the Executive Order; (ii) on the Specially
Designated Nationals and Blocked Persons list maintained by the Office of
Foreign Assets Control of the United States Department of the Treasury; or (iii)
in any successor list to either of the foregoing.

      

      (b)           Borrower
is not (i) a holding company or subject to regulation under the United States
Public Utility Holding Company Act of 1935; (ii) public utility or subject to
regulation under the United States Federal Power Act of 1920; (iii) required to
be registered as an investment company or subject to regulation under the United
States Investment Company Act of 1940; or (iv) subject to regulation under any
United States Federal or State law or regulation that limits his/its ability to
incur or guarantee indebtedness.

      

      (c)           To
the best of Borrower's knowledge, Borrower (i) is not, and is not controlled by,
a Restricted Party; (ii) has not received funds or other property from a
Restricted Party; and (iii) is not in breach of and is not the subject of any
action or investigation under any Anti-Terrorism Law.

      

      (d)           Borrower
has taken reasonable measures to ensure compliance with the Anti-Terrorism
Laws.

       

      8.16 Customers and
Vendors.  Except as set forth in Section 8.16. of the
Borrower’s Disclosure Schedule, there are no disputes with
any  customers, suppliers, manufacturers, vendors and independent
contractors of each Borrower in  excess of $100,000 in the aggregate
with any such party. 

       

      8.17 Representations, Warranties and
Covenants Concerning the Collateral.  The representations and
warranties of each Borrower set forth in Section 5.4 hereof are incorporated
herein by reference.

      

      8.18 Books and
Records.  Borrower maintains its chief executive office and its
books and records related to its Accounts, Inventory and all other Collateral at
its address set forth in Exhibit
E of this Agreement.

      

      8.19 Location of
Offices.  Exhibit E
hereto sets forth Borrower's chief executive office, and further sets
forth a complete and accurate list of all offices and locations at or out of
which Borrower conducts any of its business or operations.

      

      8.20 SEC Reports.  The
SEC Reports do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements therein, in
the light of the circumstances under which they are made, not
misleading.

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      8.21 Changes.  Since the
Balance Sheet Date, except as disclosed in the Disclosure Schedule to this
Agreement, with respect to each Borrower, there has not been:

       

      (a)           any
change in its or any of its Subsidiaries’ business, assets, liabilities,
condition (financial or otherwise), properties, operations or prospects, which,
individually or in the aggregate, has had, or could reasonably be expected to
have, a Material Adverse Effect;

       

      (b)           any
resignation or termination of any of its or any of its Subsidiaries’ officers,
key employees or groups of employees;

       

      (c)           any
material change, except in the ordinary course of business, in its or any of its
Subsidiaries’ contingent obligations by way of guaranty, endorsement, indemnity,
warranty or otherwise;

       

      (d)           any
damage, destruction or loss, whether or not covered by insurance, which has had,
or could reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect;

       

      (e)           any
waiver by it or any of its Subsidiaries of a valuable right or of a material
debt owed to it;

       

      (f)           any
direct or indirect material loans made by it or any of its Subsidiaries to any
of its or any of its Subsidiaries’ stockholders, employees, officers or
directors, other than advances made in the ordinary course of
business;

       

      (g)           any
material change in any compensation arrangement or agreement with any employee,
officer, director or stockholder;

       

      (h)           any
declaration or payment of any dividend or other distribution of its or any of
its Subsidiaries’ assets;

       

      (i)           any
labor organization activity related to it or any of its
Subsidiaries;

       

      (j)           any
debt, obligation or liability incurred, assumed or guaranteed by it or any of
its Subsidiaries, except those for immaterial amounts and for current
liabilities incurred in the ordinary course of business;

       

      (k)           any
sale, assignment, transfer, abandonment or other disposition of any Intellectual
Property or other intangible assets owned by the Borrower or any of its
Subsidiaries;

       

      (l)           any
change in any material agreement to which it or any of its Subsidiaries is a
party or by which either it or any of its Subsidiaries is bound which, either
individually or in the aggregate, has had, or could reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect;

       

      (m)           any
other event or condition of any character that, either individually or in the
aggregate, has had, or could reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect; or

       

      (n)           any
arrangement or commitment by it or any of its Subsidiaries to do any of the acts
described in subsection (i) through (xiii) of this Section 8.21.

      

      8.22 Intellectual
Property.

      

      (a)              Except
for Permitted Encumbrances,  (1) each Borrower and each of its
Subsidiaries holds all Intellectual Property that it owns free and clear of all
Liens and restrictions on use or transfer, whether or not recorded, and has sole
title to and ownership of or has the full, exclusive (subject to the rights of
its licensees) right to use in its field of business such Intellectual Property;
and each Borrower and each of its Subsidiaries holds all Intellectual Property
that it uses but does not own under valid licenses or sub-licenses from others;
(2) the use of the Intellectual Property by any Borrower or any of its
Subsidiaries does not, to the knowledge of the Borrower, violate or infringe on
the rights of any other Person; (3) neither the Borrower nor any Subsidiary has
received any notice of any conflict between the asserted rights of others and
any Borrower or any of its Subsidiaries with respect to any Intellectual
Property; (4) each Borrower and each of its Subsidiaries has used its
commercially reasonable best efforts to protect its rights in and to all
Intellectual Property; (5) each Borrower and each of its Subsidiaries are in
compliance with all material terms and conditions of its agreements relating to
the Intellectual Property; (6) neither the Borrower nor any Subsidiary is, or
since December 31, 2007 has been, a defendant in any action, suit, investigation
or proceeding relating to infringement or misappropriation by any Borrower or
any of its Subsidiaries of any Intellectual Property nor has any Borrower or any
of its Subsidiaries been notified of any alleged claim of infringement or
misappropriation by any Borrower or any of its Subsidiaries of any Intellectual
Property; (7) to the knowledge of the Borrower, none of the products or services
any Borrower or any of its Subsidiaries are researching, developing, propose to
research and develop, make, have made, use, or sell, infringes or
misappropriates any Intellectual Property right of any third party; (8) none of
the trademarks and service marks used by any Borrower or any of its
Subsidiaries, to the knowledge of the Borrower, infringes the trademark or
service mark rights of any third party; and (9) to the Borrower’s knowledge,
none of the material processes and formulae, research and development results
and other know-how relating to the Borrower's or its Subsidiaries' respective
businesses, the value of which to any Borrower or any of its Subsidiaries is
contingent upon maintenance of the confidentiality thereof, has been disclosed
to any Person other than Persons bound by written confidentiality
agreements.

      

      (b)         Section 8.22 of
Borrower’s Disclosure Schedule sets forth a true and complete list of (i) all
registrations and applications for Intellectual Property owned by each Borrower
or any of its Subsidiaries filed or issued by any Intellectual Property registry
and (ii) all Intellectual Property licenses which are either material to the
business of any Borrower or any of its Subsidiaries or relate to any material
portion of a Borrower’s or any of its Subsidiaries’ Inventory, including
licenses for standard software having a replacement value of more than
$10,000.  None of such Intellectual Property licenses are reasonably
likely to be construed as an assignment of the licensed Intellectual Property to
such Borrower or any of its Subsidiaries.

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      8.23 Employees.  Neither the
Borrower nor any of its Subsidiaries has any collective bargaining agreements
with any of its employees.  There is no labor union organizing
activity pending or, to the Borrower’s knowledge, threatened with respect to the
Borrower or any of its Subsidiaries.  Except as disclosed in the SEC
Reports, neither the Borrower nor any of its Subsidiaries is a party to or bound
by any currently effective employment contract, deferred compensation
arrangement, bonus plan, incentive plan, profit sharing plan, retirement
agreement or other employee compensation plan or agreement.  To the
Borrower’s knowledge, no employee of the Borrower or any of its Subsidiaries,
nor any consultant with whom the Borrower or any of its Subsidiaries has
contracted, is in violation of any material term of any employment contract or
any other contract relating to the right of any such individual to be employed
by, or to contract with, the Borrower or any of its Subsidiaries or to receive
any benefits; and, to the Borrower’s knowledge, the continued employment by the
Borrower or any of its Subsidiaries of its present employees, and the
performance of the Borrower’s and its Subsidiaries’ contracts with its
independent contractors, will not result in any such
violation.  Except for employees who have a current effective
employment agreement with the Borrower or any of its Subsidiaries, no employee
of the Borrower or any of its Subsidiaries has been granted the right to
continued employment by the Borrower or any of its Subsidiaries or to any
material compensation following termination of employment with the Borrower or
any of its Subsidiaries.  The Borrower is not aware that any officer,
director, manager, partner, key employee or group of employees intends to
terminate his, her or their employment with the Borrower or any of its
Subsidiaries, nor does the Borrower or any of its Subsidiaries have a present
intention to terminate any of the same.

       

      8.24 Tax Status.  Except
where the failure to do so would not have a Material Adverse
Effect,  Borrower and each Subsidiary (i) has made or filed all
federal and state income and all other tax returns, reports and declarations
required by any jurisdiction to which it is subject, (ii) has paid all taxes and
other governmental assessments and charges that are shown or determined to be
due on such returns, reports and declarations, except those being contested in
good faith and for which it has set aside on its books a provision in the amount
of such taxes being contested in good faith and (iii) has set aside on its books
provisions reasonably adequate for the payment of all taxes for periods
subsequent to the periods to which such returns, reports or declarations
apply.  There are no unpaid taxes claimed to be due by the taxing
authority of any jurisdiction, and the officers of the Borrower know of no basis
for any such claim.

      

      8.25 Internal Accounting
Controls.

        The
Borrower maintains disclosure controls and procedures (as such term is defined
in Rule 13a-15 under the 1934 Act) that are effective, subject to the disclosure
contained in the SEC Reports, in ensuring that information required to be
disclosed by the Borrower in the reports that it files or submits under the 1934
Act is recorded, processed, summarized and reported, within the time periods
specified in the rules and forms of the SEC, including, without limitation,
controls and procedures designed to ensure that information required to be
disclosed by the Borrower in the reports that it files or submits under the 1934
Act is accumulated and communicated to the Borrower's management, including its
principal executive officer or officers and its principal financial officer or
officers, as appropriate, to allow timely decisions regarding required
disclosure.

      

      8.26 Sarbanes-Oxley
Act.

      To the
Borrower’s knowledge, the Borrower is in compliance with any and all applicable
requirements of the Sarbanes-Oxley Act of 2002 that are effective as of the date
hereof, and any and all applicable rules and regulations promulgated by the SEC
thereunder that are effective as of the date hereof.

      

      8.27 Representations and Warranties: True,
Accurate and Complete.

      

      (a)           None
of the representations, certificates, reports, warranties or statements now or
hereafter made or delivered to Lender pursuant hereto or in connection with this
Agreement or any other Loan Document or the transactions contemplated hereby
contains or will contain any untrue statement of a material fact, or omits or
will omit to state a material fact necessary in order to make the statements
contained herein and therein, in light of the circumstances in which they are
made, not misleading.

      

      (b)           All
warranties and representations made herein or in any the Loan Documents by
Borrower will be true and accurate at the time Borrower requests Lender to make
a Loan to Borrower hereunder.

       

      8.28 Fees;
Brokers; Finders.  Except as set forth in Section  8.28 of
the Borrower’s Disclosure Schedule, there are no fees, commissions or other
compensation due to any third party acting on behalf of or at the direction of
Borrowers in connection with the Loan Documents.  Except as set forth in
Section  8.28 of the Borrower’s Disclosure Schedule, all negotiations
relative to the Loan Documents, and the transactions contemplated thereby, have
been carried on by the Borrowers with the Lender without the intervention of any
other person or entity acting on behalf of the Borrowers, and in such manner as
not to give rise to any claim against the Borrowers or the Lender for any
finder's fee, brokerage commission or like payment due to any third party acting
on behalf of or at the direction of Borrowers, and if any such fee, commission
or payment is payable, it shall be the sole responsibility of the Borrowers and
the Borrowers shall pay, and indemnify the Lender for, the same.

       

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      

      SECTION
9. AFFIRMATIVE
COVENANTS.

      

      Until
payment and satisfaction in full of all Obligations and the termination of this
Agreement, Borrower hereby covenants and agrees as follows:

      

      9.1 Notify
Lender.  Borrower shall promptly, and in any event within three
(3) Business Days,  inform Lender (a) if any one or more of the
representations and warranties made by Borrower in this Agreement or in any
document related hereto shall no longer be entirely true, accurate and complete
in any respect, (b) of any event or circumstance that, to its knowledge, would
cause Lender to consider any then existing Inventory as no longer constituting
Eligible Inventory; (c) of all material adverse information relating to the
financial condition of Borrower; (d) of any material return of goods; and (e) of
any loss, damage or destruction of any of the Collateral.

      

      9.2 Pay Taxes and Liabilities; Comply
with Agreement.  Borrower shall promptly pay, when due, or
otherwise discharge, all indebtedness, sums and liabilities of any kind now or
hereafter owing by Borrower to its employees as wages or salaries or to Lender,
the Secured Noteholders and Governmental Authorities however created, incurred,
evidenced, acquired, arising or payable, including without limitation the
Obligations, income taxes, excise taxes, sales and use taxes, license fees, and
all other taxes with respect to any of the Collateral, or any wages or salaries
paid by Borrower or otherwise, unless the validity of which are being contested
in good faith by Borrower by appropriate proceedings, provided that Borrower
shall have maintained reasonably adequate reserves and accrued the estimated
liability on Borrower's balance sheet for the payment of same.

      

      9.3 Observe Covenants,
etc.  Borrower shall observe, perform and comply with the
covenants, terms and conditions of this Agreement, the Loan Documents and any
other agreement or document entered into between Borrower and
Lender.

      

      9.4 Maintain Corporate Existence and
Qualifications.  Borrower shall maintain and preserve in full
force and effect, its corporate existence and rights, franchises, licenses and
qualifications necessary to continue its business, and comply with all
applicable statutes, rules and regulations pertaining to the operation, conduct
and maintenance of its existence and business including, without limitation, all
federal, state and local laws relating to benefit plans, environmental safety,
or health matters, and hazardous or liquid waste or chemicals or other liquids
(including use, sale, transport and disposal thereof).

      

      9.5 Information and Documents to be
Furnished to Lender.  Borrower shall deliver or cause to be
delivered to Lender, unless such information has been filed with the
SEC:

      

      (a) Annual Financial Statements
and
Projections.  Annual audited Financial Statements of the
Borrower, as soon as available, but in any event within ninety (90) days after
the end of Borrower’s Fiscal Year during the Term.  Such financial
statements will (x) fairly present the financial position of the Borrower as of
the dates thereof and the results of its operations, cash flows and
stockholders’ equity for each of the periods then ended in all material aspects;
and (y) be prepared in accordance with GAAP.

       

      (b) Quarterly Financial
Statements.  Quarterly Financial Statements of the Borrower, as
soon as available but in any event no later than forty-five (45) days after the
close of each calendar quarter, the unaudited balance sheet and the related
statement of income of the Borrower, prepared in accordance with GAAP, subject
to year-end audit adjustments, together with such other information with respect
to the business of Borrower as Lender may request.

       

      (c) Monthly Financial Statements.
Not later than  thirty (30) days after the end of each calendar
month, the unaudited balance sheet and the related statement of income of the
Borrower, subject to year-end audit adjustments, together with such other
information with respect to the business of Borrower as Lender may
request.

       

      (d) Monthly Accounts Receivable Aging
Report. Not later than the last day of each calendar month, an accounts
receivable aging report, in form and substance satisfactory to
Lender.

       

      (e) Notice of Judgments, Environmental,
Health or Safety Complaints.

       

      (i)              Within
ten (10) days thereafter, written notice to Lender of the entry of any judgment
or the institution of any lawsuit or of other legal or equitable proceedings or
the assertion of any crossclaim or counterclaim seeking monetary damages from
Borrower in an amount exceeding $25,000; and

      

      (ii)              Within
ten (10) days thereafter, notice or copies if written of all claims, complaints,
orders, citations or notices, whether formal or informal, written or oral, from
a governmental body or private person or entity, relating to air emissions,
water discharge, noise emission, solid or liquid waste disposal, hazardous waste
or materials, or any other environmental, health or safety matter, which
adversely effect Borrower.  Such notices shall include, among other
information, the name of the party who filed the claim, the potential amount of
the claim, and the nature of the claim.

      

      (f) Other
Information.  Upon demand,

       

      (i)              Certificates
of insurance for all policies of insurance to be maintained by Borrower pursuant
hereto;

      

      (ii)              An
estoppel certificate executed by an authorized officer of Borrower indicating
that there then exists no Event of Default and no event which, with the giving
of notice or lapse of time, or both, would constitute an Event of
Default;

      

      (iii)              All
information received by Borrower affecting the financial status or condition of
any account debtor or the payment of any Account, including but not limited to,
invoices, original orders, shipping and delivery receipts; and

      

      (iv)              Assignments,
in form acceptable to Lender, of all Accounts, and of the monies due or to
become due on specific contracts relating to the same.

      

      (g) Additional
Information.  From time to time, such other information as
Lender may reasonably request, including financial projections and cash flow
analysis.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      (h) Financial Information
Default.  Without affecting Lender’s other rights and remedies,
in the event any Borrower fails to deliver the financial information required by
Section 9.5 on or before the date required by this Agreement, the Borrowers
shall jointly and severally pay Lender a fee in the amount of $500.00 per week
(or portion thereof) for each such failure until such failure is cured to
Lender’s satisfaction or waived in writing by Lender.  All amounts
that are incurred pursuant to this Section 9.5(h) shall constitute Obligations
hereunder and shall be due and payable by the Borrowers monthly, in arrears, on
the first Business Day of each calendar month and upon expiration of the
Term.

       

      9.6 Access to Records and
Property.  At any time and from time to time, upon reasonable
notice and during normal business hours, Borrower shall give any representatives
or designees of Lender reasonable access to its properties, and permit any of
them to, examine, audit, copy or make extracts from, any and all books, records
and documents in the possession of Borrower or any independent contractor
relating to Borrower's affairs and the Collateral, and to inspect any of its
properties wherever located, all at Borrower's expense. Notwithstanding the
foregoing, no such prior notice shall be required to be given in the event
Lender believes such access is necessary to preserve or protect the Collateral,
or following the occurrence and during the continuance of an Event of
Default.

      

      9.7 Comply with
Laws.  Borrower shall comply with the requirements of all
applicable laws, rules, regulations and orders of any Governmental Authority,
compliance with which is necessary to maintain its corporate existence or the
conduct of its business or non-compliance with which would adversely affect in
any respect its ability to perform its obligations or any security given to
secure its obligations.

      

      9.8 Insurance
Required.

      

      (a) Borrower
shall cause to be maintained, in full force and effect on all property of
Borrower including, without limitation, all Inventory and Equipment, insurance
in such amounts against such risks as is reasonably satisfactory to Lender,
including, but without limitation, business interruption, fire, boiler, theft,
burglary, pilferage, vandalism, malicious mischief, loss in transit, and hazard
insurance and, if as of  the date hereof, any of the real property of
Borrower is in an area that has been identified by the Secretary of Housing and
Urban Development as having special flood or mudslide hazards, and on which the
sale of flood insurance has been made available under the National Flood
Insurance Act of 1968, then Borrower shall maintain flood insurance.  Said policy or policies
shall:

       

      (i) Be in a
form and with insurers which are satisfactory to Lender;

      

      (ii) Be for
such risks, and for such insured values as Lender or its assigns may reasonably
require in order to replace the property in the event of actual or constructive
total loss;

      

      (iii) Designate
Lender and its assignees as additional insureds and loss payees as their
interests may from time to time appear;

      

      (iv) Contain a
"breach of warranty clause" whereby the insurer agrees that a breach of the
insuring conditions or any negligence by Borrower or any other person shall not
invalidate the insurance as to Lender and its assignee;

      

      (v) Provide
that they may not be canceled or altered without thirty (30) days prior written
notice to Lender and its assigns; and

      

      (vi) Upon
demand, be delivered to Lender.

      

      (b) Borrower
shall obtain such additional insurance as Lender may reasonably
require.

       

      (c) Borrower
shall, in the event of loss or damage, forthwith notify Lender and file proofs
of loss with the appropriate insurer.  Borrower hereby authorizes
Lender to endorse any checks or drafts constituting insurance
proceeds.

       

      (d) Borrower
shall forthwith upon receipt of insurance proceeds endorse and deliver the same
to Lender.

       

      (e) In no
event shall Lender be required either to (i) ascertain the existence of or
examine any insurance policy or (iiii) advise Borrower in the event such
insurance coverage shall not comply with the requirements of this
Agreement.

       

      9.9 Condition of Collateral; No
Liens.  Borrower shall maintain all Collateral in good
condition and repair at all times, and preserve it against any loss, damage, or
destruction of any nature whatsoever relating to said Collateral or its use, and
keep said Collateral free and clear of any Liens, except for the Permitted
Encumbrances.

      

      9.10 Payment of
Proceeds.  Borrower shall forthwith upon receipt of all
proceeds of Collateral, pay such proceeds (insurance or otherwise) up to the
amount of the then-outstanding Obligations over to Lender for application
against the Obligations in such order and manner as Lender may
elect.

      

      9.11 Records.  Borrower
shall at all times keep accurate and complete records of its operations, of the
Collateral and the status of each Account, which records shall be maintained at
its executive offices as set forth on Exhibit
E.

      

      9.12 Equipment. Borrower shall
maintain is Equipment in good operating condition, subject to ordinary wear and
tear, and shall not permit such Equipment to become a fixture to real estate or
accessions to other personal property.

      

      9.13 Delivery of
Documents.  If any proceeds of Accounts shall include, or any
of the Accounts shall be evidenced by, notes, trade acceptances or instruments
or documents, or if any Inventory is covered by documents of title or chattel
paper, whether or not negotiable, then Borrower waives protest regardless of the
form of the endorsement.  If Borrower fails to endorse any instrument
or document, Lender is authorized to endorse it on Borrower's
behalf.

      

      9.14 United States
Contracts.  If any of the Accounts arise out of contracts with
the United States or any of its departments, agencies or instrumentalities,
Borrower will notify Lender, if requested by Lender, and execute any necessary
instruments in order that all monies due or to become due under such contract
shall be assigned to Lender and proper notice of the assignment given under the
Federal Assignment of Claims Act.

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      9.15 Name Changes; Location
Changes.

      

      (a)           Borrower
shall promptly notify Lender if Borrower is known by or conducting business
under any names other than those set forth in this Agreement; and

      

      (b)           Borrower
shall deliver not less than thirty (30) Business Days prior written notice to
Lender if Borrower intends to conduct any of its business or operations at or
out of offices or locations other than those set forth in this Agreement, or if
it changes the location of its chief executive office or the address at which it
maintains its books and records.

      

      9.16 Further
Assurances.  Borrower shall at any time or from time to time
upon request of Lender take such steps and execute and deliver such Financing
Statements and other documents all in the form of substance satisfactory to
Lender relating to the creation, validity or perfection of the security
interests provided for herein, under the UCC or other laws of the State of New
York or of another
state or states in which the Collateral is located or which are reasonably
necessary to effectuate the purposes and provisions of this Agreement.
Borrower  shall defend the right, title and interest of Lender in and
to the Collateral against the claims and demands of all Persons whomsoever, and
take such actions, including (i) all actions necessary to grant Lender “control”
of any Investment Property, Deposit Accounts, Letter-of-Credit Rights or
electronic Chattel Paper owned by it, with any agreements establishing control
to be in form and substance satisfactory to Lender, (ii) the prompt (but in no
event later than five (5) Business Days following Lender’s request therefor)
delivery to Lender of all original Instruments, Chattel Paper, negotiable
Documents and certificated securities owned by it (in each case, accompanied by
stock powers, allonges or other instruments of transfer executed in blank),
(iii) notification of Lender’s interest in Collateral at Lender’s request, and
(iv) the institution of litigation against third parties as shall be prudent in
order to protect and preserve its and/or Lender’s respective and several
interests in the Collateral.

      

      9.17 SEC Reporting
Status.  Borrower shall timely file all reports required to be
filed with the SEC pursuant to Section 13 or 15(d) of the 1934 Act, and the
Borrower shall not terminate its status as an issuer required to file reports
under the 1934 Act even if the 1934 Act or the rules and regulations thereunder
would permit such termination.

      

      9.18 Indemnification.  Borrower
shall indemnify, protect, defend and save harmless Lender, as well as Lender's
directors, officers, trustees, employees, agents, attorneys, members and
shareholders (hereinafter referred to collectively as the "Indemnified Parties"
and individually as an "Indemnified Party") from and
against (a) any and all losses, damages, expenses or liabilities of any kind or
nature and from any suits, claims or demands, by third parties (including,
without limitation, claims of brokers and finders), including reasonable counsel
fees incurred in investigating or defending such claim, suffered by any of them
and caused by, relating to, arising out of, resulting from, or in any way
connected with the Loans and the transactions contemplated herein, and (b) any
and all losses, damages, expenses or liabilities sustained by Lender in
connection with any Environmental Liabilities and Costs. In case any action
shall be brought against an Indemnified Party based upon any of the above and in
respect to which indemnity may be sought against Borrower, the Indemnified Party
against whom such action was brought shall promptly notify Borrower in writing,
and Borrower shall assume the defense thereof, including the employment of
counsel selected by Borrower and reasonably satisfactory to the Indemnified
Party, the payment of all costs and expenses and the right to negotiate and
consent to settlement.  Upon reasonable determination made by the
Indemnified Party, the Indemnified Party shall have the right to employ separate
counsel in any such action and to participate in the defense thereof; provided,
however that the Indemnified Party shall pay the costs and expenses incurred in
connection with the employment of separate counsel.  Borrower shall
not be liable for any settlement of any such action effected without its
consent, but if settled with Borrower's consent, or if there be a final judgment
for the claimant in any such action, Borrower agrees to indemnify and save
harmless said Indemnified Party against whom such action was brought from and
against any loss or liability by reason of such settlement or judgment, except
as otherwise provided above. The provisions of this Section shall survive the
termination of this Agreement and the final repayment of the
Obligations.

      

      9.19 Borrower Financial
Covenants.

      

      (a)           Cash
Interest  Coverage
Ratio.  Beginning October 1, 2008, Borrower shall maintain an
Interest Coverage Ratio on a consolidated basis of not less than1.6:1.0 as of
the end of each calendar month for the immediately preceding three-month
period.

      

      “Cash Interest Coverage Ratio”
shall mean the ratio of Borrower’s (i) EBITDA to (ii) total interest charges.
“EBITDA” shall mean
earnings before deduction for interest charges, taxes, depreciation and
amortization.

      

      (b)           Fixed Charge Coverage
Ratio. Beginning October 1, 2008, Borrower shall maintain a Fixed Charge
Coverage Ratio on a consolidated basis of not less than0.8:1.0 as of the end of
each calendar month for the immediately preceding three-month
period.

      

      “Fixed Charge Coverage Ratio”
shall mean the ratio of EBITDA to Fixed Charges. “Fixed Charges” shall mean the
sum of interest payments, principal payments, and rent and other lease
payments.

      

      (c)           Funded Senior Debt to EBITDA
Ratio. Beginning October 1, 2008, Borrower shall maintain a Funded Senior
Debt to EBITDA Ratio on a consolidated basis of not greater than 14:1.0 as of
the end of each calendar month for the immediately preceding three-month
period.

      

      Funded Senior Debt to EBITDA
Ratio” shall mean the ratio of Senior Debt to EBITDA. “Funded Senior Debt” shall mean
all Indebtedness of Borrower to Lender and any secured debt facility expressly
permitted hereunder to which Borrower is a party.

      

      (d)           Funded Total Debt to EBITDA
Ratio. Beginning October 1, 2008, Borrower shall maintain a Funded Total
Debt to EBITDA Ratio on a consolidated basis of not greater than 16:1.0 as of
the end of each calendar month for the immediately preceding three- month
period.

      

      “Funded Total Debt to EBITDA
Ratio” shall mean the ratio of total Indebtedness to EBITDA. “Funded Total Debt” shall mean
all Indebtedness of Borrower and its Subsidiaries.

      

      (e)           Current Ratio.
Borrower shall maintain a ratio of Current Assets to Current Liabilities on a
consolidated basis of not less than 0.2:1.0 as of the last day of each
month.

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      SECTION
10. NEGATIVE
COVENANTS.

      

      Until
payment and satisfaction in full of all Obligations and the termination of this
Agreement, Borrower hereby covenants and agrees as follows:

      

      10.1  Change of Control; No Creation
of Subsidiaries.  Borrower will not consolidate with, merge
with, or acquire the stock or a material portion of the assets of any person,
firm, joint venture, partnership, corporation, or other entity, whether by
merger, consolidation, purchase of stock or otherwise if any such action results
in a Change of Control (as defined below). Borrower will not create or permit to
exist any Subsidiary unless (a) such new Subsidiary is a wholly-owned Subsidiary
and is designated by Lender as either a co-borrower or guarantor hereunder and
such Subsidiary shall have entered into all such documentation required by
Lender, including, without limitation, to grant to Lender a first priority
perfected security interest in substantially all of such Subsidiary’s assets to
secure the Obligations, or (b) such new Subsidiary was formed or acquired solely
to effectuate a transaction to purchase the business or assets of an existing
telecommunications entity unaffiliated with Borrower, provided that such
transaction does not impair Lender’s rights hereunder or in the
Collateral.  In addition, Borrower will not acquire a material portion
of the assets of any entity in a manner that is not addressed by the foregoing
provisions of this Section 10.1 if such action would impair Lender’s rights
hereunder or in the Collateral.

      

      A "Change of Control" shall be
deemed to have occurred if:

      

                          (i)  any
"Person," which shall mean a "person" as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or group of
Persons is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of Holdings representing
50% or more of the combined voting power of Holdings’ then outstanding voting
securities;

      

                          (ii)  individuals,
who at the Closing Date constitute the Board of Directors of Holdings, and any
new director whose election by the Board of Directors of Holdings, or whose
nomination for election by Holdings’ stockholders, was approved by a vote of at
least one-half (1/2) of the directors then in office (other than in connection
with a contested election), cease for any reason to constitute at least a
majority of the Board of Directors;

      

                          (iii)  the
stockholders of Lender approve (I) a plan of complete liquidation of Holdings or
(II) the sale or other disposition by Holdings of all or substantially all of
Holdings’ assets; or

      

                          (iv)  a
merger or consolidation of Holdings with any other entity is consummated, other
than:

      

                               (I)  a
merger or consolidation which results in the voting securities of Holdings
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) more than 50% of the combined voting power of the surviving
entity's outstanding voting securities immediately after such merger or
consolidation; or

      

                               (II)  a
merger or consolidation which would result in the directors of Holdings (who
were directors immediately prior thereto) continuing to constitute more than 50%
of all directors of the surviving entity immediately after such merger or
consolidation.

      

                In
this paragraph (iv), "surviving entity" shall mean only an entity in which all
of Holdings' stockholders immediately before such merger or consolidation
(determined without taking into account any stockholders properly exercising
appraisal or similar rights) become stockholders by the terms of such merger or
consolidation, and the phrase "directors of Holdings (who were directors
immediately prior thereto)" shall include only individuals who were directors of
Holdings at the Closing Date.

      

      10.2 Disposition of Assets or
Collateral.  Borrower will not sell, lease, transfer, convey,
or otherwise dispose of any or all of its assets or Collateral, other than the
disposition or transfer in the ordinary course of business during any fiscal
year of obsolete and worn-out Equipment only to the extent that the proceeds of
any such disposition are used to acquire replacement Equipment which is subject
to Lender’s first priority security interest or are used to repay
Loans.

      

      10.3 Other
Liens.  Borrower will not incur, create or permit to exist any
Lien on any of its property or assets, whether now owned or hereafter acquired,
except (a) those Liens in favor of Lender created by this Agreement and the
other Loan Documents; and (b) for the Permitted Encumbrances.

      

      10.4 Other
Liabilities.  Borrower will not incur, create, assume, or
permit to exist, any Indebtedness or liability on account of either borrowed
money or the deferred purchase price of property, except (a) Obligations to
Lender, (b) the Secured Notes or (c) Indebtedness constituting Subordinated Debt
or incurred in connection with any of the Permitted Encumbrances.

      

      10.5 Loans.  Borrower
will not make any loans to any Person, other than advances to employees of
Borrower in the ordinary course of business, with outstanding advances to any
employee not to exceed  $25,000 at any time.

      

      10.6 Guaranties.  Borrower
will not assume, guaranty, endorse, contingently agree to purchase or otherwise
become liable upon the obligation of any Person, except by the endorsement of
negotiable instruments for deposit or collection or similar transactions in the
ordinary course of business.

      

      10.7 [RESERVED]

      

      10.8 Transfers of Notes or
Accounts.  Borrower will not sell, assign, transfer, discount
or otherwise dispose of any Accounts or any promissory note payable to it, with
or without recourse, except for the Lien of Lender therein.

      

      10.9 Dividends.  Borrower
will not declare or pay any cash dividend, make any distribution on, redeem,
retire or otherwise acquire directly or indirectly, any shares of its stock or
other Equity Interests without the prior written consent of Lender.

      

      10.10 Payments to Affiliates. Except
as set forth in Section 10.10 of the
Borrower’s Disclosure Schedule,  or as otherwise approved by Lender in
writing in advance, Borrower shall not make any payments of cash or other
property to any Affiliate.

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      10.11 Modification of
Documents.  Borrower will not change, alter or modify, or
permit any change, alteration or modification of its certificate of
incorporation, by-laws or other governing documents in any manner that might
adversely affect Lender’s rights hereunder as a secured  lender or its
Collateral without Lender's prior written consent.

      

      10.12 Change Business or
Name.  Borrower will not change or alter the nature of its
business, or change its name as it appears in the official filings of its state
of organization.

      

      10.13 Settlements.  Other
than in the ordinary course of its business, Borrower will not comprise, settle
or adjust any claims in any amount relating to any of the Collateral, without
the prior written consent of Lender.

      

      10.14 Secured Convertible Note
Documentation.  Without the prior written consent of Lender,
Borrower shall not (a) amend, modify or in any way alter the terms of any of the
Secured Convertible Note Documentation, or (b) other than in accordance with
the Intercreditor
Agreement, make any
payments in respect of the indebtedness evidenced by the Secured Convertible
Note Documentation, if any such action in (a) or (b) would impair Lender’s right
hereunder. Borrower shall in all events provide Lender with not less than ten
(10) Business Days’ written notice of any such amendment or payment, describing
such proposed action in reasonable detail.

      

      SECTION
11. EVENTS
OF DEFAULT.

      

      The
occurrence of any of the following shall constitute an event of default
(hereinafter referred to as an "Event of
Default"):

      

      11.1 Failure to Pay.  The
failure by Borrower to pay, when due, (a) any payment of principal, interest or
other charges due and owing to Lender pursuant to any obligations of Borrower to
Lender including, without limitation, those Obligations arising pursuant to this
Agreement or any Loan Document, or under any other agreement for the payment of
monies then due and payable to Lender, or (b) any taxes due to any Governmental
Authority.

      

      11.2 Failure of
Insurance.  Failure of one or more of the insurance policies
required hereunder to remain in full force and effect; failure on the part of
Borrower to pay or cause to be paid all premiums when due on the insurance
policies pursuant to this Agreement; failure on the part of Borrower to take
such other action as may be requested by Lender in order to keep said policies
of insurance in full force and effect until the entire indebtedness represented
by the Loan Documents, and interest thereon, has been paid in full; and failure
on the part of Borrower to execute any and all documentation required by the
insurance companies issuing said policies to effectuate said
assignments.

      

      11.3 Failure to
Perform.  Borrower's failure to perform or observe any
covenant, term or condition of Section 9 of this Agreement (Affirmative
Covenants) to be performed or observed by Borrower, and such failure shall
continue unremedied for a period of ten (10) Business Days from the date of such
failure (irrespective of whether Lender delivers written notice thereof to
Borrower), provided, however, that such
cure period shall not apply to a breach which is incapable of cure within said
10-Business Day period; and provided further, that such
cure period shall be five (5) Business Days for a breach of Section 9.5(c)
(Monthly Financial Statements) and Section 9(d) (Monthly Accounts Receivable
Reconciliation Report); and provided further, that such
cure period shall not apply to any payment of principal, interest or other
charges due and owing to Lender.

      

      11.4 Cross Default. The occurrence
of any Event of Default on any of the Obligations or an Event of Default under
any Loan Document, or an event of default under the  Secured
Notes.

      

      11.5 False Representation or
Warranty.  Borrower shall have made any statement,
representation or warranty in this Agreement or in any of the other Loan
Documents to which it is a party or in a certificate executed by Borrower
incident to this Agreement, which is at any time found to have been false in any
material respect at the time such representation or warranty was
made.

      

      11.6 Liquidation, Voluntary Bankruptcy,
Dissolution, Assignment to Creditors.  Any resolution shall be
passed or any action (including a meeting of creditors) shall be taken by
Borrower for the termination, winding up, liquidation or dissolution of
Borrower, or Borrower shall make an assignment for the benefit of creditors, or
Borrower shall file a petition in voluntary liquidation or bankruptcy, or
Borrower shall file a petition or answer or consent seeking, or consenting to,
the reorganization of Borrower or the readjustment of any of the indebtedness of
Borrower under any applicable insolvency or bankruptcy laws now or hereafter
existing (including the United States Bankruptcy Code), or Borrower shall
consent to the appointment of any receiver, administrator, liquidator, custodian
or trustee of all or any part of the property or assets of Borrower or any
corporate action shall be taken by Borrower for the purposes of effecting any of
the foregoing.

      

      11.7 Involuntary Petition Against Borrower
.  Any petition or application for any relief is filed against
Borrower under applicable insolvency or bankruptcy laws now or hereafter
existing (including the United States Bankruptcy Code) or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at law or
in equity), and is not discharged or stayed within thirty (30) days of the
filing thereof.

      

      11.8 Judgments;
Levies.  Any judgments or attachments aggregating in excess of
$25,000 at any given time is obtained against Borrower which remains unstayed
for a period of  twelve (12) days or is enforced.

      

      11.9 Change in
Condition.  There occurs any event or a change in the condition
or affairs, financial or otherwise, of Borrower which, in the reasonable opinion
of Lender, impairs Lender's security or ability of Borrower to discharge its
obligations hereunder or which impairs the rights of Lender in such
Collateral.

      

      11.10 Environmental
Claims.  At any time Lender determines that any Environmental
Liabilities and Costs or Environmental Lien with respect to Borrower will have a
potentially adverse effect on the financial condition of Borrower or on the
Collateral.

      

      11.11 Failure to
Notify.  If at any time Borrower fails to provide Lender
immediately with notice or copies, if written, of all complaints, orders,
citations or notices with respect to environmental, health or safety
complaints.

      

      11.12 Failure to Deliver
Documentation.  Borrower shall fail to obtain and deliver to
Lender any other documentation required to be signed or obtained as part of this
Agreement, or shall have failed to take any reasonable action requested by
Lender to perfect, protect, preserve and maintain the security interests and
Lien on the Collateral provided for herein.

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      11.13 Change in
Control.  The Borrower undergoes a Change of Control. "Change of Control" shall mean
any Person or group of Persons other than Persons that are shareholders of the
Borrower as of the date of the execution of this Agreement, shall have acquired
beneficial ownership of a majority of the issued and outstanding shares of
capital stock of the Borrower having the right to vote for the election of
directors of the Borrower under ordinary circumstances.

      

      11.14 Reduction in Equity Ownership
Interests.  Any of the following shall occur:

      

      (a)              Holdings
ceases to own of record and beneficially not less than 100% of the issued and
outstanding capital stock of InterMetro.

      

      (b)              InterMetro
ceases to own of record and beneficially not less than 100% of the issued and
outstanding capital stock of Advanced.

      

      

      11.15 Non-Payment of
Debts.  Any default by Borrower under the Secured Notes or the
agreements disclosed in writing by Borrower to Lender prior to the date hereof
with respect to this Section 11.15.

      

      11.16 Dissolution; Maintenance of
Existence.  Borrower is dissolved, or Borrower fails to
maintain its corporate existence in good standing, or the usual business of
Borrower ceases or is suspended in any respect.

      

      11.17 Indictment.  The
indictment of Borrower or any director or Responsible Officer of Borrower under
any criminal statute, or commencement of criminal or civil proceedings against
Borrower, pursuant to which statute or proceedings the penalties or remedies
sought or available include forfeiture of any portion of the property of
Borrower.

      

      11.18 Tax Liens.  The
filing of a Lien for any unpaid taxes filed by any Governmental Authority
against Borrower or any of its assets.

      

      11.19 Challenge to Validity of Loan
Documents.  Borrower attempts to terminate, or challenges the
validity of, or its liability under, this Agreement or any other Loan Document,
or any Secured Noteholder attempts to terminate, or challenges the validity of,
or its obligations under, the Intercreditor Agreement, or any proceeding shall
be brought to challenge the validity, binding effect of Loan Document, or any
Loan Document ceases to be a valid, binding and enforceable obligation of the
Borrower (to the extent such Person is a party thereto).

      

      11.20 Trading of Common Stock; SEC
Reporting.

      

      (a)           The
Common Stock ceases to be included for quotation on the OTC Bulletin
Board.

      

      (b)           Holdings
fails to timely comply with any reporting requirements under the 1934 Act,
including, but not limited to, making available all required current information
regarding Holdings under Rule 144 under the Securities Act of 1933, as
amended.

      

      11.21 Drawdowns on Certain Existing Lines
of Credit. Borrower shall make any additional drawdowns from, or incur
any additional Indebtedness in connection with, its existing unsecured lines of
credit with Walls Fargo and Bank of America, or the Borrower’s $297,000
unsecured promissory note owed to Universal Service Administrative
Company

      

      SECTION
12. REMEDIES.

      

      12.1 Acceleration; Other
Remedies.  Upon the occurrence  and during the
continuation of an Event of Default:

      

      (a) Lender
shall have all rights and remedies provided in this Agreement, any of the other
Loan Documents, the UCC or other applicable law, all of which rights and
remedies may be exercised without notice to Borrower, all such notices being
hereby waived, except such notice as is expressly provided for hereunder or is
not waivable under applicable law.  All rights and remedies of Lender
are cumulative and not exclusive and are enforceable, in Lender's discretion,
alternatively, successively, or concurrently on any one or more occasions and in
any order Lender may determine.  Without limiting the foregoing,
Lender may (i) accelerate the payment of all Obligations and demand immediate
payment thereof to Lender, (ii) with or without judicial process or the aid or
assistance of others, enter upon any premises on or in which any of the
Collateral may be located and take possession of the Collateral or complete
processing, manufacturing and repair of all or any portion of the Collateral,
(iii) require Borrower, at Borrower's expense, to assemble and make
available to Lender any part or all of the Collateral at any place and time
designated by Lender, (iv) collect, foreclose, receive, appropriate, setoff and
realize upon any and all Collateral, subject to the rights of the Secured
Noteholders in accordance with the terms of the Intercreditor Agreement, (v) extend the
time of payment of, compromise or settle for cash, credit, return of
merchandise, and upon any terms or conditions, any and all Accounts or other
Collateral which includes a monetary obligation and discharge or release the
account debtor or other obligor, without affecting any of the Obligations, (vi)
sell, lease, transfer, assign, deliver or otherwise dispose of any and all
Collateral (including, without limitation, entering into contracts with respect
thereto, by public or private sales at any exchange, broker's board, any office
of Lender or elsewhere) at such prices or terms as Lender may deem reasonable,
for cash, upon credit or for future delivery, with Lender having the right to
purchase the whole or any part of the Collateral at any such public sale, all of
the foregoing being free from any right or equity of redemption of Borrower,
which right or equity of redemption is hereby expressly waived and released by
Borrower.  If any of the Collateral or other security the Obligations
is sold or leased by Lender upon credit terms or for future delivery, the
Obligations shall not be reduced as a result thereof until payment therefor is
finally collected by Lender.  If notice of disposition of Collateral
is required by law, ten (10) Business Days prior notice by Lender to Borrower
designating the time and place of any public sale or the time after which any
private sale or other intended disposition of Collateral is to be made, shall be
deemed to be reasonable notice thereof and Borrower waives any other
notice.  In the event Lender institutes an action to recover any
Collateral or seeks recovery of any Collateral by way of prejudgment remedy,
Borrower waives the posting of any bond which might otherwise be
required.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      (b) Lender
may apply the cash proceeds of Collateral or other security for the Obligations
actually received by Lender from any sale, lease, foreclosure or other
disposition of the Collateral to payment of any of the Obligations, in whole or
in part (including attorneys' fees and legal expenses incurred by Lender with
respect thereto or otherwise chargeable to Borrower) and in such order as Lender
may elect, whether or not then due.  Borrower shall remain liable to
Lender for the payment on demand of any deficiency together with interest at the
highest rate provided for herein and all costs and expenses of collection or
enforcement, including reasonable attorneys' fees and legal
expenses.

       

      (c) If
Borrower shall default in the performance of any of the provisions of this
Agreement or any other Loan Document to which it is a party, Lender may (but
without any obligation to do so) perform same for Borrower's account and any
monies expended in doing so shall be chargeable with interest to Borrower,
repayable by Borrower on demand and added to the Obligations.

       

      (d) Lender
may, at its option, cure any default by Borrower under any agreement with a
third party or pay or bond on appeal any judgment entered against Borrower,
discharge taxes, Liens at any time levied on or existing with respect to the
Collateral and pay any amount, incur any expense or perform any act which, in
Lender's sole judgment, is necessary or appropriate to preserve, protect,
insure, maintain, or realize upon the Collateral.  Lender may charge
Borrower's loan account for any amounts so expended, such amounts to be
repayable by Borrower on demand.  Lender shall be under no obligation
to effect such cure, payment, bonding or discharge, and shall not, by doing so,
be deemed to have assumed any obligation or liability of Borrower.

       

      (e) Borrower
hereby grants to Lender an irrevocable, non-exclusive license, exercisable due
to an occurrence and during the continuance of an Event of Default without
payment of royalty or other compensation to Borrower, to use, transfer, license
or sublicense any Intellectual Property now owned, licensed to, or hereafter
acquired by Borrower, 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 and automatic machinery software and
programs used for the compilation or printout thereof, and represents, promises
and agrees that any such license or sublicense is not and will not be in
conflict with the contractual or commercial rights of any third Person;
provided, that such license will terminate upon the payment in full of all
Obligations.

       

      12.2 Set-off.  Lender
shall have the right, immediately and without notice of other action, to set-off
against any of Borrower's liabilities to Lender any money or other liability
owed by Lender or any Affiliate of Lender (and such Affiliate of Lender is
hereby authorized to effect such set-off) in any capacity to Borrower, whether
or not due, and Lender or such Affiliate shall be deemed to have exercised such
right of set-off and to have made a charge against any such money or other
liability immediately upon the occurrence of such Event of Default even though
the actual book entries may be made at a time subsequent thereto.  The
right of set-off granted hereunder shall be effective irrespective of whether
Lender shall have made demand under or in connection with the
Loan.  None of the rights of Lender described in this Section 12.2 are
intended to diminish or limit in any way Lender's or Affiliates of Lender's
common-law set-off rights.

      

      12.3 Costs and
Expenses.  Borrower shall be liable for all costs, charges and
expenses, including attorney's fees and disbursements, incurred by Lender by
reason of the occurrence of any Event of Default or the exercise of Lender's
remedies with respect thereto, each of which shall be repayable by Borrower on
demand with interest, and added to the Obligations.

      

      12.4 No
Marshalling.  Lender shall be under no obligation whatsoever to
proceed first against any of the Collateral or other property which is security
for the Obligations before proceeding against any other of the
Collateral.  It is expressly understood and agreed that all of the
Collateral or other property which is security for the Obligations stands as
equal security for all Obligations, and that Lender shall have the right to
proceed against any or all of the Collateral or other property which is security
for the Obligations in any order, or simultaneously, as in its sole and absolute
discretion it shall determine.  It is further understood and agreed
that Lender shall have the right, subject to the notice provisions in Section
12.1 of this Agreement, as it in its sole and absolute discretion shall
determine, to sell any or all of the Collateral or other property which is
security for the Obligations in any order or simultaneously, as Lender shall
determine in its sole and absolute discretion.

      

      12.5 No Implied Waivers; Rights
Cumulative.  No delay on the part of Lender in exercising any
right, remedy, power or privilege hereunder or under any of the Loan Documents
or provided by statute or at law or in equity or otherwise shall impair,
prejudice or constitute a waiver of any such right, remedy, power or privilege
or be construed as a waiver of any Event of Default or as an acquiescence
therein.  No right, remedy, power or privilege conferred on or
reserved to Lender hereunder or under any of the Loan Documents or otherwise is
intended to be exclusive of any other right, remedy, power or
privilege.  Each and every right, remedy, power or privilege conferred
on or reserved to Lender under this Agreement or under any of the other Loan
Documents or otherwise shall be cumulative and in addition to each and every
other right, remedy, power or privilege so conferred on or reserved to Lender
and may be exercised by Lender at such time or times and in such order and
manner as Lender shall (in its sole and complete discretion) deem
expedient.

      

      SECTION
13. OTHER
RIGHTS OF LENDER.

      

      13.1 Collections.   Subject to the rights of
the Secured Noteholders under the Secured Note Documents in accordance with the
terms of the Intercreditor Agreement with respect to the Noteholder Senior
Collateral (as defined therein), Borrower is authorized to collect the Accounts
and any other monetary obligations included in, or proceeds of, the Collateral
on behalf of and in trust for Lender, at Borrower's expense, but such authority
shall, at Lender's option, automatically terminate upon the occurrence of an
Event of Default.  Lender may modify or terminate such authority at
any time whether or not an Event of Default has occurred and directly collect
the Accounts and other monetary obligations included in the
Collateral.  Borrower shall, at Borrower's expense and in the manner
requested by Lender from time to time, direct that remittances and all other
proceeds of accounts and other Collateral up to the amount of the then-current
Obligations shall be (a) remitted in kind to Lender,  (b) sent to a
post office box designated by and/or in the name of Lender, or in the name of
Borrower, but as to which access is limited to Lender and/or (c) deposited
into a bank account maintained in the name of Lender and/or a blocked bank
account under arrangements with the depository bank under which all funds
deposited to such blocked bank account are required to be transferred solely to
Lender.  In connection therewith, Borrower shall execute such post
office box and/or blocked bank account agreements as Lender shall
specify.

      

      13.2 Repayment of
Obligations.  All Obligations shall be payable at Lender's
office set forth below or at a bank or such other place as Lender may expressly
designate from time to time for purposes of this Section.  Lender
shall apply all proceeds of Accounts or other Collateral received by Lender and
all other payments in respect of the Obligations to the Loans whether or not
then due or to any other Obligations then due, in whatever order or manner
Lender shall determine.

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      13.3 Lender Appointed
Attorney-in-Fact.

      

      (a)           Borrower
hereby irrevocably constitutes and appoints Lender, with full power of
substitution, as its true and lawful attorney-in-fact, with full irrevocable
power and authority in its place and stead and in its name or otherwise, from
time to time in Lender's discretion, at Borrower's sole cost and expense, to
take any and all appropriate action and to execute and deliver any and all
documents and instruments which Lender may deem reasonably necessary or
advisable to accomplish the purposes of this Agreement, including, without
limiting the generality of the foregoing, (i) at any time any of the Obligations
are outstanding, (A) to transmit to account debtors, other obligors or any
bailees notice of the interest of Lender in the Collateral or request from
account debtors or such other obligors or bailees at any time, in the name of
Borrower or Lender or any designee of Lender, information concerning the
Collateral and any amounts owing with respect thereto; (B) to execute in the
name of Borrower and file against Borrower in favor of Lender Financing
Statements or amendments with respect to the Collateral, or record a copy or an
excerpt hereof in the United States Copyright Office or the United States Patent
and Trademark Office and to take all other steps as are necessary in the
reasonable opinion of Lender under applicable law to perfect the security
interests granted herein; and (C) to pay or discharge taxes, Liens, security
interests or other encumbrances levied or placed on or threatened against the
Collateral; (ii) after and during the continuation of an Event of Default, (A)
to receive, take, endorse, assign, deliver, accept and deposit, in the name of
Lender or Borrower, any and all cash, checks, commercial paper, drafts,
remittances and other instruments and documents relating to the Collateral or
the proceeds thereof, (B) to notify account debtors or other obligors to make
payment directly to Lender, or notify bailees as to the disposition of
Collateral, (C) to change the address for delivery of mail to Borrower and to
receive and open mail addressed to Borrower, (D) take or bring, in the name of
Lender or Borrower, all steps, actions, suits or proceedings deemed by Lender
necessary or desirable to effect collection of or other realization upon the
Collateral; (E) to obtain and adjust insurance required pursuant to this
Agreement and to pay all or any part of the premiums therefor and the costs
thereof, and (F) to extend the time of payment of, compromise or settle for
cash, credit, return of merchandise, and upon any terms or conditions, any and
all accounts or other Collateral which includes a monetary obligation and
discharge or release the account debtor or other obligor, without affecting any
of the Obligations.

      

      (b)           Borrower
hereby ratifies, to the extent permitted by law, all that Lender shall lawfully
and in good faith do or cause to be done by virtue of and in compliance with
this Agreement.  The powers of attorney granted pursuant to this
Agreement are each a power coupled with an interest and shall be irrevocable
until the Obligations are paid indefeasibly in fully.

      

      13.4 Release of
Lender.  Borrower hereby releases and exculpates Lender, its
officers, partners, members, directors, employees, agents, representatives and
designees, from any liability arising from any acts under this Agreement or in
furtherance thereof, whether as attorney-in-fact or otherwise, whether of
omission or commission, and whether based upon any error of judgment or mistake
of law or fact, except for gross negligence or willful misconduct as determined
by a final and non-appealable order from a court of competent
jurisdiction.  In no event will Lender have any liability to Borrower
for lost profits or other special or consequential damages.

      

      13.5 Uniform Commercial
Code.  At all times prior and subsequent to an Event of Default
hereinafter, Lender shall be entitled to all the rights and remedies of a
secured party under the UCC with respect to all Collateral.

      

      13.6 Preservation of
Collateral.  At all times prior and subsequent to an Event of
Default hereinafter, Lender may (but without any obligation to do so) take any
and all action which in its sole and absolute discretion is necessary and proper
to preserve its interest in the Collateral consisting of Accounts , including
without limitation the payment of debts of Borrower which might, in Lender's
sole and absolute discretion, impair the Collateral or Lender's security
interest therein, and the sums so expended by Lender shall be secured by the
Collateral, shall be added to the amount of the Obligations due Lender and shall
be payable on demand with interest at the rate set forth in Section 3.1 hereof
from the date expended by Lender until repaid by Borrower.  After
written notice by Lender to Borrower and automatically, without notice, after an
Event of Default, Borrower shall not, without the prior written consent of
Lender in each instance, (a) grant any extension of time of payment of any
Accounts, (b) compromise or settle any Accounts for less than the full
amount thereof, (c) release in whole or in part any account debtor or other
person liable for the payment of any of the Accounts or any such other
Collateral, or (d) grant any credits, discounts, allowances, deductions,
return authorizations or the like with respect to any of the
Accounts.

      

      13.7 Lender's Right to
Cure.  In the event Borrower shall fail to perform any of its
Obligations hereunder or under any of the Loan Documents, then Lender, in
addition to all of its rights and remedies hereunder, may perform the same, but
shall not be obligated to do so, at the cost and expense of
Borrower.  In any such event, Borrower shall promptly reimburse Lender
together with interest at the rate set forth in
Section 3.1  hereof from the date such sums are expended until
repaid by Borrower.

      

      13.8 Inspection of
Collateral.  From time to time as requested by Lender, at the
sole expense of Borrower, Lender or its designee shall have access, (a) prior to
an Event of Default during reasonable business hours to all of Borrower’s books
and records, and Borrower shall permit Lender or Lender’s designees to make
copies of such books and records or extracts therefrom as Lender may request,
and (b) on or after an Event of Default that remains uncured, at any time, to
all of the premises where Collateral is located for the purposes of inspecting,
disposing and realizing upon the Collateral, and all Borrower's books and
records, and Borrower shall permit Lender or its designee to make such copies of
such books and records or extracts therefrom as Lender may
request.  Without expense to Lender, Lender may use such of Borrower's
personnel, equipment, including computer equipment, programs, printed output and
computer readable media, supplies and premises for the collection of Accounts
and realization on other Collateral as Lender, in its sole discretion, deems
appropriate.  Borrower hereby irrevocably authorizes all accountants
and third parties to disclose and deliver to Lender at Borrower's expense all
financial information, books and records, work papers, management reports and
other information in their possession regarding Borrower.

      

      SECTION
14. PROVISIONS
OF GENERAL APPLICATION.

      

      14.1 Waivers.  Borrower
waives demand, presentment, notice of dishonor  protest and notice of
protest of any instrument either of Borrower or others which may be included in
the Collateral.

      

      14.2 Survival.  All
covenants, agreements, representations and warranties made by Borrower herein or
in any of the Loan Documents or in any certificate, report or instrument
contemplated hereby shall survive any independent investigation made by Lender
and the execution and delivery of this Agreement, and such certificates, reports
or instruments and shall continue so long as any Obligations are outstanding and
unsatisfied, applicable statutes of limitations to the contrary
notwithstanding.

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      14.3 Notices.  All
notices, requests and demands to or upon the respective parties hereto shall be
given in writing and shall be deemed to have been duly given or made upon
receipt by the receiving party.  All notices, requests and demands are
to be given or made to the respective parties at the following addresses (or to
such other addresses as either party may designate by notice in accordance with
the provisions of this paragraph):

      

      If to any
Borrower:               InterMetro
Communications

      2685 Park Center Drive

      Building A

      Simi Valley, CA 93065

      Attention: Chief Executive
Officer

      

      With a copy
to:                     Richardson
& Associates

      233 Wilshire Boulevard

      # 820

      Santa Monica, CA 90401

      Attention:  Mark Richardson,
Esq.

      

      If to
Lender:                           Moriah
Capital, L.P.

      685 Fifth Avenue

      New York, New York 10022

                     
Attention: Greg Zilberstein

      

      With a
copy
to:                     Cohen
Tauber Spievack & Wagner LLP

      420 Lexington Avenue, Suite
2400

      New York, New York 10170

      Attention:  Adam Stein,
Esq.

      

      

      Notwithstanding the foregoing, that
parties expressly acknowledge and agree that foregoing provisions of notice by
Lender to Borrower’s counsel is an accommodation  only, and that
Lender shall have fulfilled its notice obligation hereunder if notice shall have
been received by  Borrower at its address set forth above,
irrespective of whether such notice is received by Borrower’s
counsel.

      

      14.4 Amendments; Waiver of
Defaults.  The terms of this Agreement shall not be amended,
waived, altered, modified, supplemented or terminated in any manner whatsoever
except by a written instrument signed by Lender and Borrower.  Any
default or Event of Default by a party hereto may only be waived by a written
instrument specifically describing such default or Event of Default and signed
by the other party hereto.

      

      14.5 Binding on
Successors.

      

      (a)  This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns, except that, Borrower may
not assign any of its rights under this Agreement or the other Loan Documents to
any Person without the prior written consent of Lender.

      

      (b)  Lender may assign any
or all of the Obligations together with any or all of the security therefor to
any Person and any such assignee shall succeed to all of Lender’s rights with
respect thereto.  Lender shall notify Borrower of any such assignment.
Upon such assignment, Lender shall be released from all responsibility for the
Collateral to the extent same is assigned to any transferee.  Lender
may from time to time sell or otherwise grant participations in any of the
Obligations and the holder of any such participation shall, subject to the terms
of any agreement between Lender and such holder, be entitled to the same
benefits as Lender with respect to any security for the Obligations in which
such holder is a participant.  Borrower agrees that each such holder
may exercise any and all rights of set-off and counterclaim with respect to its
participation in the Obligations as fully as though Borrower were directly
indebted to such holder in the amount of such participation.

      

      14.6 Invalidity.  Any
provision of this Agreement which may be determined by competent authority to be
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.

      

      14.7 Publicity.   Borrowers
hereby authorize Lender to make appropriate announcements of the financial
arrangement entered into by and among Borrowers and Lender, including, without
limitation, announcements which are commonly known as tombstones, in such
publications and to such selected parties as Lender shall in its sole and
absolute discretion deem appropriate, or as required by applicable
law.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      14.8 Financing Right of First
Refusal.

       

      (a)           Each
Borrower hereby grants to the Lender a right of first refusal to provide any
Additional Financing (as defined below) to be issued during the Term by any
Borrower and/or any of its Subsidiaries (the “Additional Financing
Parties”), subject to the following terms and conditions.  From
and after the date hereof, prior to the incurrence of any additional
indebtedness and/or the sale or issuance of any Equity Interests of the
Additional Financing Parties (an “Additional Financing”) in an
aggregate amount of less than Five Million Dollars ($5,000,000), Holdings, as
agent for the Borrowers, shall notify Lender of such Additional
Financing.  In connection therewith, Holdings shall submit a fully
executed term sheet (a “Proposed Term Sheet”) to
Lender setting forth the terms, conditions and pricing of any such Additional
Financing (such financing to be negotiated on “arm’s length” terms and the terms
thereof to be negotiated in good faith) proposed to be entered into by the
Additional Financing Parties.  The Lender shall have the right, but
not the obligation, to deliver to Holdings its own proposed term sheet (the
“Lender Term Sheet”)
setting forth the terms and conditions upon which the Lender would be willing to
provide such Additional Financing to the Additional Financing
Parties.  The Lender Term Sheet shall contain terms no less favorable
to the Additional Financing Parties than those outlined in Proposed Term
Sheet.  The Lender shall deliver to Holdings the Lender Term Sheet
within  seven (7) Business Days of receipt of each such Proposed Term
Sheet.  If the provisions of the Lender Term Sheet are at least as
favorable to the Additional Financing Parties as the provisions of the Proposed
Term Sheet, the Additional Financing Parties shall enter into and consummate the
Additional Financing transaction outlined in the Lender Term Sheet.

       

      (b)           Each
Borrower shall not, and shall not permit its Subsidiaries to, agree, directly or
indirectly, to any restriction with any Person which limits the ability of the
Lender to consummate an Additional Financing with it or any of its
Subsidiaries.

       

      [RESERVED]

      

      14.9 Section or Paragraph Headings.
Section and paragraph headings are for convenience only and shall not be
construed as part of this Agreement.

      

      14.10 Governing Law.  This
Agreement shall be construed in accordance with, and shall be governed by, the
laws of the State of New York including, without limitation, Section 5-1401 of
the New York General Obligations Law (without giving effect to conflict of law
rules).

      

      14.11 Waiver of Jury
Trial.  THE PARTIES HERETO HEREBY WAIVE ANY AND ALL RIGHTS THAT
THEY MAY NOW OR HEREAFTER HAVE UNDER THE LAWS OF THE UNITED STATES OF AMERICA OR
ANY STATE TO A TRIAL BY JURY OF ANY AND ALL ISSUES ARISING EITHER DIRECTLY OR
INDIRECTLY IN ANY ACTION OR PROCEEDING BETWEEN BORROWER, LENDER OR ITS
SUCCESSORS AND ASSIGNS, OUT OF OR IN ANY WAY CONNECTED WITH THIS AGREEMENT, THE
OTHER LOAN DOCUMENTS, THE OBLIGATIONS AND/OR THE COLLATERAL.  IT IS
INTENDED THAT SAID WAIVER SHALL APPLY TO ANY AND ALL DEFENSES, RIGHTS, AND/OR
COUNTERCLAIMS IN ANY ACTION OR PROCEEDINGS BETWEEN BORROWER AND
LENDER.  BORROWER WAIVES ALL RIGHTS TO INTERPOSE ANY CLAIMS,
DEDUCTIONS, SETOFFS OR COUNTERCLAIMS OF ANY KIND, NATURE OR DESCRIPTION IN ANY
ACTION OR PROCEEDING INSTITUTED BY LENDER WITH RESPECT TO THIS AGREEMENT, THE
OTHER LOAN DOCUMENTS, THE OBLIGATIONS, THE COLLATERAL OR ANY MATTER ARISING
THEREFROM OR RELATING THERETO, EXCEPT COMPULSORY COUNTERCLAIMS.

      

      14.12 Consent to
Jurisdiction.  Borrower and Lender each hereby
(a) irrevocably submits and consents to the exclusive jurisdiction of the
Supreme Court for New York County, State of New York, and the United State
District Court for the Southern District of New York with respect to any action
or proceeding arising out of this Agreement, the Note, the other Obligations,
the other Loan Documents, the Collateral or any matter arising therefrom or
relating thereto and (b) waives any objection based on venue or forum non conveniens with
respect thereto.  In any such action or proceeding, Borrower waives
personal service of the summons and complaint or other process and papers
therein and agrees that the service thereof may be made by certified mail,
return receipt requested, directed to Borrower at its chief executive office set
forth herein or other address thereof of which Lender has received notice as
provided herein, service to be deemed complete as permitted under the rules of
either of said Courts.  Any such action or proceeding commenced by
Borrower against Lender will be litigated only in the New York Supreme Court for
New York County, State of New York, and the United States District Court for the
Southern District of New York.

      

      14.13 Entire
Agreement.  This Agreement, the other Loan Documents, any
supplements or amendments hereto or thereto, and any instruments or documents
delivered or to be delivered in connection herewith or therewith represents the
entire agreement and understanding concerning the subject matter hereof and
thereof between the parties hereto, and supersede all other prior agreements,
understandings, negotiations and discussions, representations, warranties,
commitments, proposals, offers and contracts concerning the subject matter
hereof, whether oral or written.  In the event of any inconsistency
between the terms of this Agreement and any schedule or exhibit hereto, the
terms of this Agreement shall govern.

      

      14.14 Counterparts.  This
Agreement may be executed in counterparts, each of which when so executed, shall
be deemed an original, but all of which shall constitute but one and the same
instrument.

      

      

      

      

      [REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      

      IN WITNESS WHEREOF, this
Agreement has been duly executed as of the day and year first above
written.

      

      BORROWERS:

      

      INTERMETRO
COMMUNICATIONS, INC.(DELAWARE)

      

      By:   /s/ Charles
Rice              

      Name:
Charles Rice

      Title:   Chairman
and C.E.O

      

      INTERMETRO
COMMUNICATIONS, INC.(NEVADA)

      

      By:   /s/ Charles
Rice             

      Name:
Charles Rice

      Title:   Chairman
and C.E.O

      

      

      ADVANCED
TEL, INC.

      

      By:   /s/ Charles
Rice           

      Name:
Charles Rice

      Title:   Chairman
and C.E.O

      

      

      LENDER:

      

      MORIAH
CAPITAL L.P.

      

      By:
Moriah Capital Management, L.P., General Partner

      

      By:
Moriah Capital Management, GP, LLC, General Partner

      

      By: /s/ Alexander
Speaker      

      Name:
Alexander Speaker

      Title:
Managing Member

      

      

      [SIGNATURE
PAGE OF LOAN AND SECURITY AGREEMENT]

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      EXHIBITS – LOAN AND SECURITY
AGREEMENT

      

      EXHIBIT
A

      TO

      LOAN
AND SECURITY AGREEMENT

      

      Permitted
Encumbrances

      

      

      

      

      Secured
Notes (Nov 2007 – April 2008)

      

      Equipment
acquired via Vencore (Capital Leases)

      

      Equipment
acquired via Qualitek Strategic Agreement

      

      Equipment
acquired via Cantata Strategic Agreement

      

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      

      EXHIBIT
B

      TO

      LOAN
AND SECURITY AGREEMENT

      

      Form of
Note

      

      [ATTACHED]

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      

      EXHIBIT
C

      TO

      LOAN
AND SECURITY AGREEMENT

      

      Form of Intercreditor
Agreement

      

      [ATTACHED]

      

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      

      EXHIBIT
D

      TO

      LOAN
AND SECURITY AGREEMENT

      

      Form of Securities Issuance
Agreement

      

      [ATTACHED]

      

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      

      EXHIBIT
E

      TO

      LOAN
AND SECURITY AGREEMENT

      

      

      

      Chief Executive
Office

      2685 Park
Center Drive

      Building
A, Simi Valley, CA  93065

       

      Principal Place of
Business

      InterMetro
Communications, Inc. (Nevada and Delaware)

      2685 Park
Center Drive

      Building
A, Simi Valley, CA  93065

      

      Advanced
Tel, Inc.

      30575
Trabuco Canyon Rd

      Suite
200

      Trabuco
Canyon, CA  92679

      

      

      

      Locations of
Collateral

      

      
        
          
            
              
                
                  
                    	
                            Borrower

                          	
                            Address

                          	
                            Activity
      & Assets

                          	
                            Owner,
      Landlord, Processor, Warehouse or Cosignee

                          
	
                            
                               

                            

                            
                               

                              InterMetro
      (Delaware)

                            

                          	
                            
                               

                            

                            
                               

                              New
      York, NY

                            

                          	
                            
                               

                              Colocation
      for switching equipment

                            

                          	
                            
                               

                            

                            
                               

                              Fibernet
      Telecom Group

                            

                          
	
                            
                               

                            

                            
                               

                              InterMetro
      (Delaware)

                            

                          	
                            
                               

                            

                            
                               

                              Los
      Angeles, CA

                            

                          	
                            
                               

                              Colocation
      for switching equipment

                            

                          	
                            
                               

                            

                            
                               

                              IX2
      Wilshire

                            

                          
	
                            
                               

                            

                            
                               

                              InterMetro
      (Delaware)

                            

                          	
                            
                               

                            

                            
                               

                              Atlanta,
      GA

                            

                          	
                            
                               

                              Colocation
      for switching equipment

                            

                          	
                            
                               

                            

                            
                               

                              Colo
      Properties Atlanta

                            

                          
	
                            
                               

                            

                            
                               

                              InterMetro
      (Delaware)

                            

                          	
                            
                               

                            

                            
                               

                              Dallas,
      TX

                            

                          	
                            
                               

                              Colocation
      for switching equipment

                            

                          	
                            
                               

                            

                            
                               

                              Level
      (3)

                            

                          
	
                            
                               

                            

                            
                               

                              InterMetro
      (Delaware)

                            

                          	
                            
                               

                            

                            
                               

                              Chicago,
      IL

                            

                          	
                            
                               

                              Colocation
      for switching equipment

                            

                          	
                            
                               

                            

                            
                               

                              Equinix

                            

                          

                  

                

              

            

          

        

      

      

      Locations of Books and
Records

      InterMetro
Communications, Inc. (Nevada and Delaware)

      2685 Park
Center Drive

      Building
A, Simi Valley, CA  93065

      

      Advanced
Tel, Inc.

      30575
Trabuco Canyon Rd

      Suite
200

      Trabuco
Canyon, CA  92679

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      EXHIBIT
F

      TO

      LOAN
AND SECURITY AGREEMENT

      

      [RESERVED]

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      EXHIBIT
G

      TO

      LOAN
AND SECURITY AGREEMENT

      

      

      [RESERVED]

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      EXHIBIT
H

      TO

      LOAN
AND SECURITY AGREEMENT

      

      

      Form of Registration Rights
Agreement

      

      [ATTACHED]

      

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      

      

      EXHIBIT
I

      TO

      LOAN
AND SECURITY AGREEMENT

      

      

      Form of Glenhaven Secured
Convertible Note

      

      [ATTACHED]

      

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      

      EXHIBIT
J

      TO

      LOAN
AND SECURITY AGREEMENT

      

      

      Form of
Warrant

      

      [ATTACHED]

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      

      EXHIBIT
K

      TO

      LOAN
AND SECURITY AGREEMENT

      

      

      Form of Loan Conversion
Agreement

      

      [ATTACHED]

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00157-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00157-of-00352.parquet"}]]