REVOLVING CREDIT AND TERM LOAN AGREEMENT

EXHIBIT 10.35

REVOLVING CREDIT AND TERM LOAN AGREEMENT

AGREEMENT (this "AGREEMENT") is made and entered into as of the 27th

day of June, 2007, by and between BLUEFIN CAPITAL, LLC, a Delaware limited

liability company (the "LENDER"), and TAG-IT PACIFIC, INC., a Delaware

corporation (the "BORROWER").

W I T N E S S E T H :

WHEREAS, the Borrower is engaged in the business of distributing a full

range of apparel, zipper and trim products to manufacturers of fashion apparel,

specialty retailers and mass merchandisers (collectively, the "BUSINESS

OPERATIONS"); and

WHEREAS, in order to provide funds for (a) the repayment and retirement

of the Convertible Debentures (as such term is hereinafter defined), and (b) the

Borrower's working capital and other general corporate purposes, the Borrower

has requested the Lender to extend to the Borrower a revolving credit facility

and a term loan on the terms and conditions of this Agreement; and

WHEREAS, the Lender is willing and able to provide such revolving

credit facility and make such term loan to the Borrower on the terms and

conditions of this Agreement;

NOW, THEREFORE, in consideration of the premises and the mutual

covenants herein contained, the parties hereby agree as follows:

I. DEFINITIONS

SECTION 1.01. DEFINED TERMS. In addition to the other terms defined

elsewhere in this Agreement, as used herein, the following terms shall have the

following meanings:

"ACCOUNTS" shall mean "accounts" (as defined in the UCC) of

the Borrower and its Subsidiaries from time to time.

"ACCOUNT DEBTOR" shall mean any Person who is obligated on an

Account.

"ACT" shall mean the Securities Act of 1933, as amended, and

the rules and regulations thereunder.

"ADVANCES" shall mean the principal amounts loaned to the

Borrower from time to time pursuant to Section 2.01 below.

"AFFILIATE" shall mean, with respect to any Person, any other

Person in Control of, Controlled by, or under common Control with the first

Person, and any other Person who has a substantial interest, direct or indirect,

in the first Person or any of its Affiliates, including, without limitation, any

officer or director of the first Person or any of its Affiliates; PROVIDED,

HOWEVER, that neither the Lender nor any of its Affiliates shall be deemed an

"Affiliate" of the

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Borrower for any purposes of this Agreement. For the purpose of this definition,

a "substantial interest" shall mean the direct or indirect legal or beneficial

ownership of more than ten (10%) percent of any class of stock or similar

interest.

"AGREEMENT" shall mean this Revolving Credit and Term Loan

Agreement as it may from time to time be amended, modified, supplemented and/or

restated.

"APPLICABLE LAW" shall mean all applicable provisions of all

(a) constitutions, statutes, ordinances, rules, regulations and orders of all

governmental and/or quasi-governmental bodies, (b) Government Approvals, and (c)

order, judgments and decrees of all courts and arbitrators.

"AVAILABILITY" shall mean the amount (if any) by which, at the

time of determination, (a) the Revolving Credit Commitment exceeds (b) the

outstanding principal amount of Advances.

"BORROWING BASE" shall mean an amount, determined in

accordance with the most recent borrowing base report theretofore provided to

the Lender under Section 5.04(d) below, equal to (a) 75% of Eligible Accounts,

PLUS (b) 55% of Eligible Inventory, PLUS (c)(i) $1,200,000 at all times from the

Closing Date through and including June 30, 2007, (ii) $750,000 at all times

from July 1, 2007 through and including September 30, 2007, and (iii) $500,000

at all times from October 1, 2007 through and including March 31, 2008, MINUS

(d) the amount (if any) of the Debenture Reserve at the date of determination,

MINUS (e) such other reserves as the Lender may establish from time to time in

its Permitted Discretion (including, without limitation, to account for Account

concentration and other risks of collection, and for obsolete, slow-moving or

otherwise problematic inventory). In the event that the Borrower has not timely

delivered a current Borrowing Base report in accordance with Section 5.04(d)

below, then the applicable Borrowing Base shall be such amount as is established

by the Lender, until such time as the Borrower has delivered a current Borrowing

Base report.

"BORROWING DATE" means the Business Day on which the Lender

makes a Loan hereunder.

"BUSINESS DAY" shall mean a day other than (a) a Saturday, (b)

a Sunday, or (c) a day on which banking institutions in either the State of

Florida or the State of California are authorized or required by law or

executive order to close.

"CAPITAL EXPENDITURES" shall mean with respect to any Person,

all expenditures of such Person for tangible assets which are capitalized, and

the fair value of any tangible assets leased by such Person under any lease

which would be a Capitalized Lease, determined in accordance with GAAP,

including all amounts paid or accrued by such Person in connection with the

purchase (whether on a cash or deferred payment basis) or lease (including

Capitalized Lease Obligations) of any machinery, equipment, real property,

improvements to real property (including leasehold improvements), or any other

tangible asset of such Person which is required, in accordance with GAAP, to be

treated as a fixed asset on the consolidated balance sheet of such Person.

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"CAPITALIZED LEASE" shall mean any lease which is or should be

capitalized on the balance sheet of the lessee thereunder in accordance with

GAAP.

"CAPITALIZED LEASE OBLIGATION" shall mean with respect to any

Person, the amount of the liability which reflects the amount of future payments

under all Capitalized Leases of such Person as at any date, determined in

accordance with GAAP.

"CASH EQUIVALENTS" shall mean (a) marketable securities

issued, or directly and fully guaranteed or insured, by the United States of

America or any agency or instrumentality thereof (provided that the full faith

and credit of the United States of America is pledged in support thereof) having

maturities of not more than twelve (12) months from the date of acquisition; (b)

time deposits, demand deposits, certificates of deposit, acceptances or prime

commercial paper issued by, or repurchase obligations for underlying securities

of the types described in clause (a) entered into with any commercial bank

having a short-term deposit rating of at least A-2 or the equivalent thereof by

Standard & Poor's Corporation or at least P-2 or the equivalent thereof by

Moody's Investors Service, Inc.; (c) commercial paper with a rating of A-I or

A-2 or the equivalent thereof by Standard & Poor's Corporation or P-1 or P-2 or

the equivalent thereof by Moody's Investors Service, Inc. and in each case

maturing within twelve (12) months after the date of acquisition; (d) marketable

direct obligations issued by any state in the United States or any agency or

instrumentality thereof maturing within twelve (12) months from the date of

acquisition thereof and, at the time of acquisition, have one of the two highest

ratings generally obtainable from either Standard & Poor's Corporation or

Moody's Investors Services, Inc.; (e) tax-exempt commercial paper of United

States municipal, state or local governments rated at least A-2 or the

equivalent thereof by Standard & Poor's Corporation or at least P-2 or the

equivalent thereof by Moody's Investors Services, Inc. and maturing within

twelve (12) months after the date of acquisition thereof; (f) any other items

selected by the Borrower and approved by the Lender (which approval shall not be

unreasonably withheld or delayed); or (g) any mutual fund or other pooled

investment vehicle which invests principally in the foregoing obligations.

"CLOSING DATE" shall mean the date on which the Term Loan is

funded.

"CLOSING FEE" shall mean the sum of $250,000 with respect to

the Term Loan, which shall be payable in accordance with Section 2.03(a) below.

"CODE" shall mean the Internal Revenue Code of 1986, and the

rules and regulations promulgated thereunder, as in effect from time to time.

"COLLATERAL" shall mean all collateral pledged by the Borrower

and/or any of the Subsidiaries as security for the payment and performance of

the Obligations, whether pursuant to the Collateral Agreement or any other

Security Document.

"COLLATERAL AGREEMENT" shall mean the Collateral Agreement,

dated as of the Closing Date, by and between the Borrower and the Lender, as

same may be amended, modified, supplemented and/or restated from time to time.

"COMMITMENT FEES" shall mean the annual fees payable to the

Lender pursuant to Section 2.03(b)(ii) below.

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"COMMON STOCK" shall mean the authorized common stock of the

Company, $.001 par value per share.

"CONFIDENTIAL INFORMATION" shall mean information that the

Borrower furnishes to the Lender which is not generally available to the public

or available to the Lender from a source other than the Borrower which is not,

to the Lender's knowledge, bound by any confidentiality agreement in respect

thereof.

"CONTRACT" shall mean any indenture, agreement (other than

this Agreement), other contractual restriction, lease in which the Borrower or

any Subsidiary is a lessor or lessee, license or instrument.

"CONTROL" shall mean the possession, directly or indirectly,

of the power to direct or cause the direction of the management or policies of a

Person, whether through the ownership of voting securities, by contract or

otherwise, and the terms "CONTROLLING" and "CONTROLLED" shall have meanings

correlative thereto.

"CONTROL AGREEMENT" shall mean, with respect to each bank

account (including, without limitation, the Escrow Account) and/or securities

account maintained by or in the name of the Borrower or any Subsidiary from time

to time, an agreement executed and delivered by the Borrower (or the subject

Subsidiary, as applicable) and the account intermediary, whereby the account

intermediary acknowledges the Lender's Lien on such account and all funds or

property therein, and "control" (within the meaning of the UCC) over such

account is established in favor of the Lender.

"CONVERTIBLE DEBENTURES" shall mean the Convertible Promissory

Notes of the Borrower dated November 9, 2004 in the aggregate principal amount

of $12,500,000, which by their terms mature on November 9, 2007.

"DEBENTURE RESERVE" shall mean, at any time, an amount equal

to the positive difference (if any) of (a) the aggregate outstanding principal

amount and unpaid accrued interest of the Convertible Debentures at such time,

MINUS (b) the amount of funds then on deposit in the Escrow Account.

"DEFAULT" shall mean any of the events specified in Article

VII hereof, whether or not any requirement for the giving of notice, the lapse

of time, or both, or any other condition, has been satisfied.

"DISCLOSURE SCHEDULE" shall mean the disclosure schedule,

dated as of the Closing Date, executed and delivered by the Borrower to the

Lender, the section numbers of which correspond to the Section numbers of this

Agreement.

"DOLLARS" or "$" shall mean United States Dollars, lawful

currency for the payment of public and private debts.

"DOMESTIC SUBSIDIARY" shall mean any Subsidiary which is

incorporated or formed under the laws of the United States, any State or

Commonwealth in the United States, or the District of Columbia.

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"EBITDA" shall mean, for the subject period, for the Borrower

and its Subsidiaries on a consolidated basis, the sum of (a) Net Income, MINUS

(b) net income attributable to any Subsidiary to the extent, but only to the

extent, that such net income is (A) not available for distribution to the

Borrower for more than six (6) months, or (B) required by the Borrower's

auditors to be reserved in whole or in part as a result of restrictions on

distribution (PROVIDED, HOWEVER, that this clause (B) shall not apply if such

reserve(s) is included in Net Income), PLUS (c) Interest Expense deducted in the

calculation of such Net Income, PLUS (d) taxes on income, whether payable or

accrued, deducted in the calculation of such Net Income (except that taxes

actually paid in cash shall not be added back pursuant to this clause (d)), PLUS

(e) depreciation expense deducted in the calculation of such Net Income, PLUS

(f) amortization expense deducted in the calculation of such Net Income, PLUS

(g) all other non-cash charges and expenses (including equity incentive plan

expenses) deducted in the calculation of such Net Income, excluding accruals for

cash expenses made in the ordinary course of business, MINUS (h) any non-cash

gains included in the calculation of such Net Income, PLUS (i) losses deducted

in the calculation of such Net Income from any sales of assets, other than sales

in the ordinary course of business, MINUS (j) gains added in the calculation of

such Net Income from any sales of assets, other than sales in the ordinary

course of business, PLUS (k) other extraordinary or non-recurring non-cash

losses deducted in the calculation of such Net Income, MINUS (l) other

extraordinary or non-recurring non-cash gains added in the calculation of such

Net Income, all determined in accordance with GAAP.

"ELIGIBLE ACCOUNT" shall mean the face amount of each trade

Account of the Borrower or a Subsidiary (if same has executed a Guaranty

Agreement and become a party to the Collateral Agreement) for services rendered

or goods and products sold in the ordinary course of the Business Operations

which the Lender, in its Permitted Discretion, deems to be an Eligible Account;

PROVIDED, HOWEVER, that an Account shall not be deemed an Eligible Account

unless it meets all of the following conditions:

(a) the subject services or products and goods have been

rendered, shipped or delivered on an absolute sale basis to an Account Debtor

which is not an Affiliate, vendor or supplier of the Borrower or a Subsidiary,

with an invoice date contemporaneous with or within thirty (30) calendar days

after the date of shipment or service, and which does not constitute a

consignment sale, bill-and-hold sale, sale-and-return or other such arrangement

and is not subject to any other repurchase, return or offset agreement binding

upon the Borrower or a Subsidiary; the subject services or products and goods

have been rendered, shipped and delivered (or shipped f.o.b.) to such Account

Debtor on an open account basis (or with payment guaranteed by a letter of

credit, drawn on or by a domestic financial institution, acceptable to the

Lender in all respects), and no part of the subject services, products or goods

has been returned, rejected, lost or damaged; the Account is not evidenced by

chattel paper or an instrument of any kind; and such Account Debtor, unless

pre-approved in writing by the Lender, is not insolvent or the subject of any

bankruptcy or insolvency proceeding of any kind in any jurisdiction;

(b) if the Account Debtor is located outside the continental

United States, either (i) payment for the subject services or goods shall be

secured by an irrevocable letter of credit, which letter of credit shall have

been confirmed by a financial institutional reasonably acceptable to the Lender

payable in the full amount of the face value of the Account in Dollars or

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other currency reasonably acceptable to the Lender, or (ii) such Account and

Account Debtor are reasonably satisfactory to the Lender in its Permitted

Discretion;

(c) it is a valid, legally enforceable obligation of the

Account Debtor thereunder payable in Dollars or other currency reasonably

satisfactory to the Lender, and is not subject to any recoupment, offset or

other defense or any discount or chargeback on the part of such Account Debtor

(provided that prompt payment discounts granted in the ordinary course of

business shall not cause an Account to be disqualified hereunder, so long as

only the discounted amount of such Account, if not otherwise disqualified, is

included in the calculation of the Borrowing Base) or to any claim on the part

of such Account Debtor denying liability thereunder (provided that the

undisputed portion may be considered to be an Eligible Account);

(d) it is subject to no Lien whatsoever, except for the Lien

of the Lender;

(e) it has not remained unpaid in whole or in part for a

period exceeding ninety (90) days after the original invoice date;

(f) it does not arise out of a transaction (whether direct or

indirect) with an employee, officer, agent, director or Affiliate of the

Borrower or any Subsidiary or with any entity controlled by any employee,

officer, agent or director of the Borrower or any Subsidiary (unless, in any

such case, a majority of the disinterested members of the Board of Directors of

the Borrower has approved the subject transaction and such transaction is on an

arms'-length basis);

(g) it is not subject to any contract retainage or other

withholding of any portion of payments on amounts invoiced, whether to secure

the Borrower's or any Subsidiary's performance or otherwise;

(h) it does not represent the unpaid portion of an Account any

portion of which was previously paid or agreed to be paid through the issuance

or delivery of equity securities or other non-cash consideration;

(i) if the Account Debtor is the United States, any State or

Commonwealth therein, or any department, agency or instrumentality thereof, or

any foreign government or agency of a foreign government, the Borrower or the

applicable Domestic Subsidiary has duly assigned its rights to payment of such

Account to the Lender pursuant to the federal Assignment of Claims Act, any

comparable state statutes or any comparable foreign statutes (as applicable);

(j) the Lender has a perfected first priority Lien in such

Account;

(k) such Account is not payable by any person other than the

Account Debtor (such as a beneficiary, recipient or subscriber individually),

provided that the portion thereof which is payable by the Account Debtor may be

considered to be an Eligible Account;

(l) at least sixty (60%) percent in dollar amount of the total

Accounts owed by such Account Debtor and/or its Affiliates constitute Eligible

Accounts;

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(m) the total Accounts owed by the subject Account Debtor

and/or its Affiliates constitute less than ten (10%) percent of the net

collectible dollar value of all Eligible Accounts (provided that only the excess

over ten (10%) percent shall be disqualified under this clause (m), unless the

Lender has otherwise consented in writing to the inclusion of all or any portion

of such excess);

(n) such Account is payable solely to the Borrower or a

Subsidiary, and the Borrower or such Subsidiary is not aware of any dispute by

the Account Debtor with respect to such Account; and

(o) it is not otherwise determined by the Lender, in the

Lender's Permitted Discretion, to be difficult to collect, uncollectible or

otherwise unacceptable for any reason.

"ELIGIBLE INVENTORY" shall mean the lower of the cost (on a

[first in-first out] basis) or fair market value of that inventory consisting of

raw materials or finished goods (but excluding work in process and product

models or samples) of Borrower or any Subsidiary which is party to the

Collateral Agreement which (a) is in good and merchantable condition, (b) was

manufactured in accordance with and meets all standards imposed by any

governmental agency having regulatory authority over such goods and/or their

use, manufacture and/or sale, (c) is in the physical possession of the Borrower

or the subject Subsidiary, or has been shipped to the Borrower or the subject

Subsidiary with title thereto having passed to the Borrower or such Subsidiary

(provided that up to $100,000 in value of inventory held by a vendor/supplier

for drop shipment to a customer for the benefit of the Borrower or the subject

Subsidiary may be considered to be Eligible Inventory if it otherwise meets all

other criteria set forth in this definition), (d) is currently usable or

currently saleable in the normal course of the Business Operations, (e) is not

on consignment to or from any Person, (f) is not subject to any Lien whatsoever,

except for the Lien of the Lender, which shall be perfected with respect to such

inventory, (g) has not been sold to any Person, and (h) is otherwise

satisfactory to the Lender in its Permitted Discretion.

"ERISA" shall mean the Employee Retirement Income Security Act

of 1974, as in effect from time to time.

"ERISA AFFILIATE" shall mean, with respect to any Person, any

other Person which is under common control with the first Person within the

meaning of Section 414(b) or 414(c) of the Code; PROVIDED, HOWEVER, that with

respect to the Borrower, no Person which is an Affiliate of the Lender (other

than the Borrower and its Subsidiaries) shall be deemed an ERISA Affiliate for

purposes of this Agreement

"ESCROW ACCOUNT" shall mean the bank account contemplated by

Section 2.04(b)(i) below.

"EVENT OF DEFAULT" has the meaning set forth in Article VII

below.

"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934,

as amended.

"FACTORING AGREEMENT" shall mean the factoring agreement dated

July 19, 2004 by and between the Borrower and East Asia GE Commercial Finance

Limited, as amended.

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"FINANCIAL STATEMENTS" has the meaning set forth in Section

3.01(a) below.

"FISCAL YEAR" shall mean the fiscal year of the Borrower which

ends on December 31 of each year.

"FOREIGN INVESTMENT LIMITATION" has the meaning set forth in

Section 6.01(g) below.

"FOREIGN SUBSIDIARY" shall mean any Subsidiary which is not a

Domestic Subsidiary.

"FREE CASH FLOW" shall mean, for any Fiscal Year in question,

an amount equal to (a) EBITDA for the immediately preceding Fiscal Year, MINUS

(b) taxes paid or payable in cash by or in respect of the Borrower and its

Subsidiaries during or in respect of such immediately preceding Fiscal Year,

MINUS (c) principal and interest payments made or required to be made by the

Borrower and its Subsidiaries during such immediately preceding Fiscal Year,

MINUS (d) Capital Expenditures paid by the Borrower and its Subsidiaries in cash

during such immediately preceding Fiscal Year, MINUS (e) scheduled principal and

interest payments made or required to be made by the Borrower and its

Subsidiaries during the subject Fiscal Year.

"GAAP" shall mean generally accepted accounting principles in

the United States of America, consistently applied, unless the context otherwise

requires, with respect to any financial terms contained herein, as then in

effect with respect to the preparation of financial statements.

"GOVERNMENT APPROVAL" shall mean an authorization, consent,

non-action, approval, license or exemption of, registration or filing with, or

report to, any governmental or quasi-governmental department, agency, body or

other unit.

"GUARANTY", "GUARANTEED" or to "GUARANTEE", as applied to any

Indebtedness, liability or other obligation, shall mean (a) a guaranty, directly

or indirectly, in any manner, including by way of endorsement (other than

endorsements of negotiable instruments for collection in the ordinary course of

business), of any part or all of such obligation, and (b) an agreement,

contingent or otherwise, and whether or not constituting a guaranty, assuring,

or intended to assure, the payment or performance (or payment of damages in the

event of non-performance) of any part or all of such obligation by any means

(including, without limitation, the purchase of securities or obligations, the

purchase or sale of property or services, or the supplying of funds).

"GUARANTY AGREEMENT" shall mean a guaranty agreement, in form

and substance satisfactory to the Lender, to be executed by each Subsidiary in

favor of the Lender, pursuant to which such Subsidiary will guaranty the full

and timely payment and performance of all of the Obligations.

"INDEBTEDNESS" shall mean (without duplication), with respect

to any Person, (a) all obligations or liabilities, contingent or otherwise, for

borrowed money, (b) any and all obligations represented by promissory notes,

bonds, debentures or the like, or on which interest charges are customarily

paid, (c) any liability secured by any mortgage, pledge, lien or security

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interest on property owned or acquired, whether or not such liability shall have

been assumed, (d) obligations of such Person under conditional sale or other

title retention agreements relating to property or assets purchased by such

Person, (e) all obligations of such Person issued or assumed as the deferred

purchase price of property or services (excluding trade payables and accrued

obligations incurred in the ordinary course of business), (f) any obligations

(contingent or otherwise) of such Person as an account party or applicant in

respect of letters of credit and/or bankers' acceptances, or in respect of

interest rate swaps, interest rate caps, hedging agreements or other financial

or hedging obligations, and (g) Guarantees, endorsements (other than for

collection in the ordinary course of business) and other contingent obligations

in respect of the obligations of others.

"INTELLECTUAL PROPERTY" shall have the meaning ascribed

thereto in the Collateral Agreement.

"INTEREST EXPENSE" shall mean, for the relevant period, total

interest expense (including interest attributable to Capitalized Leases in

accordance with GAAP) and fees with respect to outstanding Indebtedness.

"INVESTMENT", as applied to the Borrower or any Subsidiary,

shall mean: (a) any shares of capital stock, evidence of Indebtedness or other

security issued by any other Person to the Borrower or any Subsidiary, (b) any

loan, advance or extension of credit to, or contribution to the capital of, any

other Person, other than credit terms extended to customers in the ordinary

course of business, (c) any other investment by the Borrower or any Subsidiary

in any assets or securities of any other Person, and (d) any commitment to make

any Investment.

"KNOWLEDGE" OR "KNOWN" or words of similar import shall mean,

with respect to the Borrower and/or any Subsidiary, the actual knowledge of

Steve Forte, Lonnie Schnell and/or Wouter van Biene (and/or their respective

successors as officers of the Borrower) after reasonable inquiry of the

appropriate employees of the Borrower and the Subsidiaries.

"LANDLORD WAIVER" shall mean a landlord waiver, subordination

and/or access agreement, in form and substance reasonably satisfactory to the

Lender, executed in favor of the Lender by the landlord of a Leased Real

Property.

"LEASED REAL PROPERTY" shall mean any and all Real Properties

leased or occupied by the Borrower or any Subsidiary from time to time.

"LENDER SHARES" shall mean the shares of Common Stock to be

purchased by and issued to the Lender as contemplated by Section 2.03(d) below.

"LIABILITIES AND CONTINGENCIES" has the meaning set forth in

Section 3.01(c) below.

"LIEN", as applied to the property or assets (or the income or

profits therefrom) of the Borrower or any Subsidiary, shall mean (in each case,

whether the same is consensual or non-consensual or arises by contract,

operation of law, legal process or otherwise): (a) any mortgage, lien, pledge,

hypothecation, attachment, assignment, deposit arrangement, encumbrance, charge,

lease constituting a Capitalized Lease Obligation, conditional sale or other

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title retention agreement, or other security interest or encumbrance of any kind

in respect of any property (including, without limitation, stock of any

Subsidiary) of the Borrower or any Subsidiary, or upon the income or profits

therefrom; (b) any arrangement under which any property of the Borrower or any

Subsidiary is transferred, sequestered or otherwise identified for the purpose

of subjecting or making available the same for the payment of Indebtedness or

the performance of any other liability in priority to the payment of the

general, unsecured creditors of the Borrower or any Subsidiary; (c) any

Indebtedness or liability which remains unpaid after the same shall become due

and payable and which, if unpaid, by law or otherwise is given any priority

whatsoever over the general unsecured creditors of the Borrower or any

Subsidiary; and (d) any agreement (other than this Agreement) or other

arrangement which, directly or indirectly, prohibits the Borrower or any

Subsidiary from creating or incurring any lien on any of its properties or

assets or which conditions the ability to do so on the security, on a PRO RATA

or other basis, of Indebtedness other than Indebtedness outstanding under this

Agreement.

"LOAN DOCUMENTS" shall mean the collective reference to this

Agreement, the Notes, the Security Documents, the Warrants, the Registration

Rights Agreement, and any and all other agreements, instruments, certificates

and other documents as may be executed and delivered by the Borrower and/or any

of the Subsidiaries pursuant hereto or thereto.

"LOANS" shall mean, collectively, the Advances and the Term

Loan.

"MATERIAL ADVERSE EFFECT" shall mean any event, act, omission,

condition or circumstance which has or would reasonably be expected to have a

material adverse effect on (a) the business, operations, properties, assets or

condition, financial or otherwise, of the Borrower and the Subsidiaries, taken

as a whole, (b) the ability of the Borrower or any Subsidiary to perform any of

its obligations under any of the Loan Documents, or (c) the validity or

enforceability of, or the Lender's rights and remedies under, any of the Loan

Documents, other than due to the acts or omissions of the Lender or any of its

Affiliates.

"MATURITY DATE" shall mean June 30, 2010.

"MAXIMUM REVOLVER AMOUNT" shall mean, at any date, (a)

$5,000,000 MINUS (b) the amount of the Debenture Reserve (if any) at the date of

determination, MINUS (c) an amount equal to 50% of all Qualified Proceeds

received by the Borrower from and after the repayment (or required repayment) in

full of the Term Loan.

"MONITORING FEE" shall mean the fees payable to the Lender

pursuant to Section 2.03(b)(i) below.

"NET INCOME" shall mean the consolidated net income (or loss)

of the Borrower and its Subsidiaries for the period in question, after giving

effect to deduction of or provision for all operating expenses, all taxes and

reserves (including reserves for deferred taxes) and all other proper

deductions, all determined in accordance with GAAP and (for so long as the

Borrower is subject thereto) Regulation S-X promulgated under the Act.

"NOTES" shall mean, collectively, the Revolving Credit Note

and the Term Note.

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"OBLIGATIONS" shall mean the collective reference to all

Indebtedness and other liabilities and obligations of every kind and description

owed by the Borrower to the Lender from time to time under or pursuant to this

Agreement, the Notes, the Security Documents and the other Loan Documents

(excluding the Warrant and Registration Rights Agreement, other than amounts

payable from time to time pursuant to Section 2(c) of the Registration Rights

Agreement), and/or otherwise in respect of the Loans, however evidenced, created

or incurred, fixed or contingent, now or hereafter existing, due or to become

due.

"ORGANIC DOCUMENTS" shall mean, with respect to any Person,

the certificate of incorporation, articles of incorporation, certificate of

formation, certificate of limited partnership, by-laws, operating agreement,

limited partnership agreement or other such document of such Person.

"OWNED REAL PROPERTY" shall mean each Real Property in which

the Borrower or any Subsidiary holds an ownership or fee interest from time to

time.

"PERMITTED DISCRETION" shall mean a determination or judgment

made by the Lender in good faith in the exercise of reasonable business judgment

from the perspective of a secured lender.

"PERMITTED INDEBTEDNESS" shall mean any and all Indebtedness

expressly permitted pursuant to Section 6.01 below.

"PERMITTED LIENS" shall mean those Liens expressly permitted

pursuant to Section 6.02 below.

"PERSON" shall mean any individual, partnership, corporation,

limited liability company, banking association, business trust, joint stock

company, trust, unincorporated association, joint venture, governmental

authority or other entity of whatever nature.

"QUALIFIED PROCEEDS" shall mean any and all net proceeds

received by the Borrower from time to time after the date of this Agreement from

the issuance and/or sale of any capital stock of the Borrower or any security

(including any Indebtedness incurred subsequent to the Closing Date) convertible

into or exchangeable for capital stock of the Borrower, except to the extent

that (a) such proceeds are received from the exercise of warrants or options

that are outstanding on the date of this Agreement, or (b) such proceeds are,

within thirty (30) days after the receipt thereof, applied to pay the purchase

price and/or directly associated expenses of the Borrower's acquisition

(directly or through a Wholly-Owned Subsidiary which is a Domestic Subsidiary)

of another business (whether through merger, consolidation, share exchange,

stock purchase, or purchase of all or substantially all of the assets of the

target company or an operating division or unit thereof), in each case effected

subject to and in accordance with the requirements of this Agreement and the

Collateral Agreement (including, without limitation the pledge to the Lender of

the capital stock and/or assets (as applicable) of the acquired business). In

determining the amount of net proceeds for purposes of this definition, there

shall be deducted from gross proceeds only those reasonable expenses incurred by

the Borrower directly related to the subject issuance or sale, exclusive of any

fees or commissions paid to any officer, director or other Affiliate of the

Borrower or any Affiliate of any of the foregoing.

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"REAL PROPERTIES" shall mean, collectively, any real

properties (land, buildings and/or improvements) now owned or leased or occupied

by the Borrower or any of the Subsidiaries, and, during the period of the

Borrower's and/or Subsidiary's occupancy thereof, any other real properties

heretofore owned or leased by the Borrower or any Subsidiary (provided that,

with respect to leased properties, the "Real Property" shall refer only to the

portion of the subject property (excluding common areas) leased by the Borrower

or a Subsidiary).

"REGISTRATION RIGHTS AGREEMENT" shall mean the Registration

Rights Agreement, to be dated as of the Closing Date, made by the Borrower for

the benefit of the Lender and any subsequent Holders (as such term is defined in

the Registration Rights Agreement), as same may be amended, modified,

supplemented and/or restated from time to time.

"REVOLVING CREDIT COMMITMENT" shall mean the Lender's

agreement to make Advances to the Borrower within the limitations set forth in

Section 2.01 below.

"REVOLVING CREDIT NOTE" shall mean the promissory note of the

Borrower issued to the Lender to represent the Advances and interest thereon, as

described in Section 2.01(f) below.

"SALE" shall mean any transaction or series of related

transactions (a) whereby Control of the Borrower is held by a Person (or group

of Persons acting in concert) other than the management of the Borrower on the

date of this Agreement (or Affiliates of such management), provided that a

"Sale" shall not be deemed to have occurred solely by reason of normal market

trading in the Common Stock which does not result in the acquisition by a single

Person or "group" (within the meaning of Section 13(d)(3) of the Exchange Act)

of a majority of the outstanding voting stock of the Borrower, (b) in which the

Borrower is a constituent party to any merger, consolidation or share exchange

and as a result thereof (i) the holders of the outstanding capital stock of the

Borrower which ordinarily has voting power for the election of directors

(including preferred stock counted on an "as converted" basis into common stock)

immediately prior to such merger or consolidation cease to own a majority of the

outstanding capital stock of the Borrower which ordinarily has voting power for

the election of directors (including preferred stock counted on an "as

converted" basis into common stock), or (ii) the Borrower is not the surviving

corporation, or (c) whereby all or any material portion of the assets of the

Borrower or any Subsidiary are sold, assigned or transferred.

"SEC" shall mean the United States Securities and Exchange

Commission, and any successor agency performing the functions thereof.

"SEC REPORTS" shall mean the periodic and current reports,

registration statements, proxy statements and other reports filed or required to

be filed by the Borrower with the SEC pursuant to the Act and/or the Exchange

Act, and any amendments or supplements thereto filed with the SEC.

"SECURITY DOCUMENTS" shall mean the Guaranty Agreement, the

Collateral Agreement, any Collateral Assignments, Landlord Waivers, Control

Agreements, financing

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statements or other such agreements or documents pursuant thereto, and any other

agreements or instruments securing or creating or evidencing Liens securing the

Obligations.

"SUBORDINATED DEBT" shall mean all Indebtedness for money

borrowed and other liabilities of the Borrower or any Subsidiary, whether or not

evidenced by promissory notes, which is contractually subordinated in right of

payment, in a manner satisfactory to the Lender (as evidenced by the Lender's

prior written approval thereof), to all Obligations of the Borrower and/or the

subject Subsidiary to the Lender.

"SUBSCRIPTION AGREEMENTS" shall mean those Subscription

Agreements dated November 9, 2004, by and between the Borrower and the original

purchasers of the Convertible Debentures.

"SUBSIDIARY" or "SUBSIDIARIES" shall mean the individual or

collective reference to any corporation, limited liability company or other

entity of which 50% or more of the outstanding shares of stock or other equity

interests of each class having ordinary voting power and/or rights to profits

(other than stock having such power only by reason of the happening of a

contingency) is at the time owned by the Borrower, directly or indirectly

through one or more Subsidiaries of the Borrower.

"TERM LOAN" shall mean the term loan in the principal amount

of $9,500,000 to be made pursuant to Section 2.02(a) below.

"TERM NOTE" shall mean the promissory note of the Borrower

issued to the Lender as described in Section 2.02(d) below.

"UCC" means the Uniform Commercial Code as in effect in the

State of New York on the date hereof and hereafter from time to time.

"WARRANTS" shall mean the warrants to purchase shares of

Common Stock (such warrants covering an aggregate of 2,100,000 shares of Common

Stock, subject to adjustment) to be issued by the Borrower to the Lender on the

Closing Date.

"WHOLLY-OWNED SUBSIDIARY" shall mean each Subsidiary of which

all of the outstanding equity securities (other than directors' qualifying

shares) are owned by the Borrower or another such Wholly-Owned Subsidiary.

"WHOLLY-OWNED DOMESTIC SUBSIDIARY" shall mean each

Wholly-Owned Subsidiary which is a Domestic Subsidiary.

SECTION 1.02. USE OF DEFINED TERMS. All terms defined in this Agreement

shall have their defined meanings when used in the Notes, the Security

Documents, the other Loan Documents, and all certificates, reports or other

documents made or delivered pursuant to this Agreement, unless otherwise defined

therein or unless the specific context shall otherwise require.

SECTION 1.03. ACCOUNTING TERMS. All accounting terms not specifically

defined herein shall be construed in accordance with GAAP.

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SECTION 1.04. OTHER DEFINITIONAL PROVISIONS. The words "hereof,"

"herein", "hereto" and "hereunder" and words of similar import when used in this

Agreement shall refer to this Agreement as a whole and not to any particular

provision of this Agreement, and Section references are to this Agreement unless

otherwise specified. The meanings given to terms defined herein shall be equally

applicable to both the singular and plural forms of such terms. The word

"including" and words of similar import when used in this Agreement shall mean

"including, without limitation," unless otherwise specified.

II. GENERAL TERMS

SECTION 2.01. REVOLVING CREDIT LOANS.

(a) Subject at all times to all of the terms and conditions of

this Agreement, the Lender hereby agrees to extend to the Borrower a secured

revolving credit facility, from the Closing Date to the Maturity Date, in an

aggregate principal amount not to exceed, at any time outstanding, the lesser of

(i) the Borrowing Base at the subject time, or (ii) the Maximum Revolver Amount

(the "REVOLVING CREDIT COMMITMENT"); PROVIDED, HOWEVER, that following the

application of all funds in the Escrow Account to the repayment of Convertible

Debentures, accrued interest thereon and/or accrued interest on the Term Loan,

the amount of the Debenture Reserve shall be disregarded in the calculation of

the Borrowing Base and the Maximum Revolver Amount to the extent that Advances

then being borrowed hereunder shall immediately be applied to repayment of

remaining Convertible Debentures.

(b) Such revolving credit loans are herein sometimes referred

to individually as an "ADVANCE" and collectively as the "ADVANCES." Subject at

all times to all of the terms and conditions of this Agreement, from the Closing

Date to the Maturity Date and within the limits of the Revolving Credit

Commitment, the Lender shall lend, and the Borrower may borrow, prepay (without

premium or penalty) and reborrow under this Section 2.01. Each request for an

Advance (i) shall be irrevocable, (ii) shall be deemed to constitute an express

affirmation that all conditions precedent set forth in part B of Article IV

hereof are satisfied on the date of such request and will be satisfied on the

requested Borrowing Date, and (iii) shall be made to the Lender in writing, not

later than three (3) Business Days prior to the requested Borrowing Date, by an

authorized officer of the Borrower or by telephonic communication by such

authorized officer to the Lender, which shall be confirmed by written notice to

the Lender to be delivered to the Lender by the Business Day next following the

subject request. In no event shall the Borrower request, or shall the Lender be

required to honor, (A) any request for an Advance in an amount greater than the

Availability at such time, (B) any request for an Advance in an amount less than

$100,000, or (C) more than one request for the borrowing of Advances in any

seven (7) calendar day period.

(c) The Borrower shall pay the Lender interest on all Advances

at the rate(s) per annum as in effect from time to time in accordance with the

Revolving Credit Note. Such interest shall be payable monthly in arrears on the

last day of each calendar month commencing June 30, 2007 and on the Maturity

Date, and shall be computed on the daily unpaid balance of all Advances made

under the Borrower's revolving credit loan accounts with the Lender, based on a

three hundred sixty (360) day year, counting the actual number of days elapsed.

The Borrower hereby authorizes the Lender to charge the Borrower's revolving

credit loan accounts for all such

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interest; PROVIDED, HOWEVER, that the Lender shall be under no obligation to

make any such charge to the Borrower's revolving credit loan accounts

(including, without limitation, if there is insufficient Availability at the

time such interest is due and payable).

(d) In the event and to the extent that, at any time, the

outstanding principal amount of Advances exceeds the Revolving Credit Commitment

then in effect, then the Borrower shall immediately, without notice or demand,

make a payment to the Lender in respect of the Advances in an amount sufficient

to cause the outstanding principal amount of Advances to be equal to or less

than the Revolving Credit Commitment then in effect.

(e) Unless sooner due and payable by reason of an Event of

Default or Sale having occurred, the Borrower shall pay in full all of the

Obligations to the Lender in respect of all Advances on or prior to the Maturity

Date.

(f) All Advances shall be evidenced by a secured Revolving

Credit Note of the Borrower payable to the order of the Lender.

(g) The Borrower may, at its option, terminate the Revolving

Credit Commitment at any time upon ten (10) Business Days' prior written notice,

and paying to the Lender, on the date fixed for termination, an amount equal to

the sum of (i) all outstanding principal and accrued interest of the Advances,

and (ii) prorated accrued Commitment Fees. In the event that, simultaneously

with such termination and payment, the Borrower enters into a replacement

revolving credit facility, the Lender shall, upon request of the Borrower,

subordinate its liens and security interests in the Borrower's and the

Subsidiaries' Accounts and inventory pursuant to a subordination agreement in

form and substance reasonably satisfactory to the Lender.

SECTION 2.02. TERM LOAN.

(a) Subject at all times to all of the terms and conditions of

this Agreement, the Lender hereby agrees to extend to the Borrower a Term Loan

in the principal amount of $9,500,000. The Term Loan shall be borrowed in a

single borrowing on the Closing Date, and any principal amounts repaid in

respect of the Term Loan may not be reborrowed.

(b) The Term Loan shall be repayable in full on the Maturity

Date. The Borrower shall be required to prepay the Term Loan (i) in full

simultaneously with the consummation of any Sale, and (ii) in whole or in part

from time to time (A) in the event and to the extent of 50% of any and all

Qualified Proceeds received by the Borrower from time to time, and (B) as

provided in Section 2.04 below. Any prepayment required under the foregoing

clause (A) shall be due and payable as and when the amount of Qualified Proceeds

is determined (i.e., upon receipt of such Qualified Proceeds in the event that

no acquisition transaction is then pending, or thirty (30) days after receipt of

such Qualified Proceeds to the extent that such Qualified Proceeds have not been

applied to the purchase price and/or related expenses of a consummated business

acquisition).

(c) The Borrower shall pay the Lender interest on the

principal balance of the Term Loan at the rate(s) per annum as in effect from

time to time in accordance with the Term Note. Such interest shall be payable

quarterly in arrears commencing June 30, 2007, on the last

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day of each calendar quarter thereafter, and on the Maturity Date, and shall be

computed on the daily unpaid balance of the Term Loan, based on a three hundred

sixty (360) day year, counting the actual number of days elapsed. The Borrower

hereby authorizes the Lender to charge the Borrower's revolving credit loan

accounts for all such interest and/or for any or all principal amounts due and

payable in respect of the Term Loans; PROVIDED, HOWEVER, that the Lender shall

be under no obligation to make any such charge to the Borrower's revolving

credit loan accounts (including, without limitation, if there is insufficient

Availability at the time such interest and/or principal is due and payable).

(d) The Term Loan shall be evidenced by a secured Term Note of

the Borrower payable to the order of the Lender.

SECTION 2.03. FEES AND PREMIUMS; LENDER SHARES.

(a) The Borrower shall pay the Closing Fee to the Lender on

the Closing Date. The Closing Fee shall be deemed fully earned on the Closing

Date and shall not be refundable in whole or in part and shall not be subject to

reduction or set-off under any circumstances.

(b) The Borrower shall further pay to the Lender, in respect

of the Revolving Credit Commitment:

(i) in advance on the Closing Date and on the first

(1st) Business Day of each calendar month prior to (A) the Maturity

Date, or (B) the earlier termination of the Revolving Credit Commitment

and payment of the Obligations thereon in accordance with this

Agreement, a collateral monitoring and unused commitment/administrative

fee in the amount of $5,000 per month or portion thereof; and

(ii) on May 31 of each year commencing May 31, 2008,

and upon any early termination of the Revolving Credit Commitment

(appropriately prorated in such latter case), an annual Commitment Fee

in the amount of $50,000.

(c) In the event of any prepayment of all or any portion of

the Term Loan other than pursuant to Sections 2.04(b)(i) or 2.04(b)(iii) below,

in addition to the payment of the subject principal amount and all unpaid

accrued interest thereon, the Borrower shall be required to pay to the Lender a

prepayment premium in an amount equal to one (1%) percent of the principal

amount being prepaid.

(d) On the Closing Date, the Lender shall purchase, and the

Borrower shall sell and issue to the Lender, an aggregate of 1,500,000 fully

paid and nonassessable shares of Common Stock for aggregate purchase price of

$1,500. The Lender hereby acknowledges that such Lender Shares constitute

"restricted securities" under the Act, and represents and warrants that it is

acquiring such Lender Shares for its own account for investment, and not with a

view to the resale or distribution thereof in violation of any applicable

securities laws.

(e) Payments received in respect of the Obligations after

12:00 Noon on any day shall be deemed to be received on the next succeeding

Business Day, and if any payment is received other than by wire transfer of

immediately available funds, such payment shall be

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subject to three (3) Business Days' clearance prior to being credited to the

Obligations for interest calculation purposes.

(f) In the event that the Lender notifies the Borrower that

the Lender is ready, willing and able to fund the Loans on substantially the

terms of this Agreement and the Closing Date has not occurred within fifteen

(15) days thereafter other than due to the fault of the Lender, then the Lender

may, at any time thereafter until the Closing Date, terminate this Agreement by

written notice to the Borrower, in which event the Borrower shall immediately

pay to the Lender (i) an amount equal to all out-of-pocket costs, charges and

expenses (up to an aggregate maximum of $75,000) incurred by the Lender in

respect of the transactions contemplated by this Agreement, and (ii) an

additional fee in the amount of $250,000. This Section 2.03(f) shall survive any

termination of this Agreement.

SECTION 2.04. USE OF PROCEEDS.

(a) The Borrower shall utilize the proceeds of the Advances

solely for (i) repaying outstanding principal and accrued interest on

Indebtedness currently owed by the Borrower to Mark Dyne in the aggregate amount

of approximately $1,000,000, (ii) repaying up to $3,000,000 in principal amount

of Convertible Debentures, (iii) paying accrued interest on the Convertible

Debentures, and (iv) working capital and other general corporate purposes of the

Borrower.

(b) The Borrower shall utilize the proceeds of the Term Loan

solely for the purpose of repaying the Convertible Debentures, provided that, if

all holders of the Convertible Debentures have not agreed, prior to and

effective on the Closing Date, to waive the prepayment penalties provided in the

Convertible Debentures, then:

(i) On the Closing Date, the proceeds of the Term

Loan shall be placed in a segregated bank account (the "ESCROW

ACCOUNT") at a commercial bank reasonably satisfactory to the Lender,

which shall have entered into a Control Agreement pursuant to which no

transactions in or withdrawals or other dispositions of funds in the

Escrow Account may be made without the written consent of the Lender.

The funds in the Escrow Account (including any interest earned thereon)

may be withdrawn (and the Lender shall give its written authorization

for such withdrawal) and applied to the payment of interest on the Term

Loan from time to time as and when same becomes due and payable and to

the payment of the Convertible Debentures at the earlier of (A) the

maturity date of the Convertible Debentures, or (B) such time as the

holders of the Convertible Debentures will accept prepayment thereof in

full without any prepayment penalty. To the extent that, on the

maturity date of the Convertible Debentures, the funds in the Escrow

Account are not utilized to pay the Convertible Debentures, or sooner

in the event and to the extent that, at any time or from time to time,

the funds in the Escrow Account shall be greater than the outstanding

principal and unpaid accrued interest of the Convertible Debentures,

funds shall be withdrawn from the Escrow Account and applied to the

prepayment of the Term Loan.

(ii) Anything contained in the Term Note to the

contrary notwithstanding, the interest rate applicable to the portion

of the proceeds of the Term

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Loan held in the Escrow Account from time to time shall be equal to the

interest income earned on the funds on deposit in the Escrow Account

(and, for purposes of this Section 2.04(b)(ii), any withdrawals from

the Escrow Account shall be deemed made from the principal originally

deposited in the Escrow Account, until all such principal has been

withdrawn from the Escrow Account).

(iii) In the event and to the extent that the holders

of the Convertible Debentures hereafter elect to and do convert the

Convertible Debentures (or any portion or portions thereof) into Common

Stock, then (A) an amount equal to the principal amount of Convertible

Debentures that are converted shall, simultaneously with such

conversion, be withdrawn from the Escrow Account and used to prepay a

like portion of the Term Loan, and (B) upon each such prepayment, the

Lender shall return to the Borrower a ratable portion of the Lender

Shares and Warrants based on the principal amount prepaid as a portion

of the aggregate $14,000,000 of maximum lending commitments hereunder.

By way of example, if an aggregate of $4,000,000 in principal amount of

Convertible Debentures were converted, $4,000,000 of the principal of

the Term Loan would thereupon be prepaid out of funds in the Escrow

Account, and simultaneously with such prepayment, four fourteenths

((4)/14th) of the Lender Shares (428,571 Lender Shares) and four

fourteenths ((4)/14th) of each Warrant would be cancelled (and the

Borrower shall promptly (x) if required, issue replacement stock

certificates for the uncancelled portion of any stock certificate

theretofore representing any cancelled Lender Shares, and (y) issue

replacement Warrants for the unexercised and uncancelled portions of

the original Warrants). The Lender hereby agrees that it will not sell,

transfer or dispose of Lender Shares or Warrants, or exercise Warrants,

to such an extent that the Lender ceases to hold a sufficient number of

Lender Shares and Warrants to satisfy any potential future surrender

obligation under this Section 2.04(b)(iii).

(iv) Nothing herein contained shall be deemed to

abrogate or impair the Lender's right to withdraw funds from the Escrow

Account for application to the Obligations upon the occurrence and

during the continuance of any Event of Default.

SECTION 2.05. FURTHER OBLIGATIONS. With respect to all Obligations for

which the interest rate is not otherwise specified herein (whether such

Obligations arise hereunder, pursuant to the Notes or Security Documents, or

otherwise), such Obligations shall bear interest at the rate(s) in effect from

time to time pursuant to the Revolving Credit Note.

SECTION 2.06. APPLICATION OF PAYMENTS. All amounts paid to or received

by the Lender in respect of the Loans from whatever source (whether from the

Borrower, any Subsidiary pursuant to the Guaranty Agreement, any realization

upon any Collateral, or otherwise) shall, unless otherwise directed by the

Borrower with respect to any particular payment (unless an Event of Default

shall then be continuing, in which event the Lender may disregard the Borrower's

direction), be applied (a) first, to reimburse the Lender for all out-of-pocket

costs and expenses incurred by the Lender which are reimbursable to the Lender

in accordance with this Agreement, the Notes and/or any of the other Loan

Documents, (b) next, to any accrued but unpaid fees or prepayment premiums, and

amounts payable under Section 2.2(c) of the Registration Rights Agreement, (c)

next, to unpaid accrued interest on the Term Loan, (d) next, to unpaid accrued

interest on the Advances, (e) next, to the outstanding principal of the Term

Loan, to the extent

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then due and payable, (f) next, to the outstanding principal of the Advances,

and (g) finally, to the payment of any other outstanding Obligations; and after

payment in full of the Obligations, any further amounts paid to or received by

the Lender in respect of the Loans shall be paid over to the Borrower or such

other Person(s) as may be legally entitled thereto.

SECTION 2.07. SALE. Anything elsewhere contained in this Agreement

and/or the Notes to the contrary notwithstanding, the Revolving Credit

Commitment shall terminate and all Obligations shall become immediately due and

payable, without requirement of any notice or demand, upon the consummation of

any Sale.

SECTION 2.08. OBLIGATIONS UNCONDITIONAL.

(a) The payment and performance of all Obligations shall

constitute the absolute and unconditional obligations of the Borrower, and shall

be independent of any defense or rights of set-off, recoupment or counterclaim

which the Borrower might otherwise have against the Lender. All payments

required by this Agreement and/or the Notes shall be paid free of any deductions

or withholdings for any taxes (but only for the original Lender and any

investment funds under common management with such Lender) or other amounts and

without abatement, diminution or set-off. If the Borrower is required by law to

make such a deduction or withholding from a payment hereunder, the Borrower

shall pay to the Lender such additional amount as is necessary to ensure that,

after the making of such deduction or withholding, the Lender receives (free

from any liability in respect of any such deduction or withholding) a net sum

equal to the sum which it would have received and so retained had no such

deduction or withholding been made or required to be made. The Borrower shall

(i) pay the full amount of any deduction or withholding, which it is required to

make by-law, to the relevant authority within the payment period set by the

relevant law, and (ii) promptly after any such payment, deliver to the Lender an

original (or certified copy) official receipt issued by the relevant authority

in respect of the amount withheld or deducted or, if the relevant authority does

not issue such official receipts, such other evidence of payment of the amount

withheld or deducted as is reasonably acceptable to the Lender.

(b) If, at any time and from time to time after the Closing

Date, (i) any change in any existing law, regulation, treaty or directive or in

the interpretation or application thereof, (ii) any new law, regulation, treaty

or directive enacted or application thereof, or (iii) compliance by the Lender

with any request or directive (whether or not having the force of law) from any

governmental authority (A) subjects the Lender to any tax, levy, impost,

deduction, assessment, charge or withholding of any kind whatsoever with respect

to any Loan Document, or changes the basis of taxation of payments to the Lender

of any amount payable thereunder (except for net income taxes, or franchise

taxes imposed in lieu of net income taxes, imposed generally by federal, state

or local taxing authorities with respect to interest or commitment fees or other

fees payable hereunder or changes in the rate of tax on the overall net income

of the Lender or its members), or (B) imposes on the Lender any other condition

or increased cost in connection with the transactions contemplated thereby or

participations therein, and the result of any of the foregoing is to increase

the cost to the Lender of making or continuing any Loan or to reduce any amount

receivable hereunder, then, in any such case, the Borrower shall promptly pay to

the Lender any additional amounts necessary to compensate the Lender, on an

after-tax basis, for such additional cost or reduced amount as determined by the

Lender. If the Lender becomes

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entitled to claim any additional amounts pursuant to this Section 2.08(b), the

Lender shall promptly notify the Borrower of the event by reason of which the

Lender has become so entitled, and each such notice of additional amounts

payable pursuant to this Section 2.08(b) submitted by the Lender to the Borrower

shall, absent manifest error, be final, conclusive and binding for all purposes.

SECTION 2.09. REVERSAL OF PAYMENTS. To the extent that any payment or

payments made to or received by the Lender pursuant to this Agreement or any

other Loan Document are subsequently invalidated, declared to be fraudulent or

preferential, set aside, or required to be repaid to any trustee, receiver or

other person under any state or federal bankruptcy or other such law, then, to

the extent thereof, such amounts shall be revived as Obligations and continue in

full force and effect hereunder as if such payment or payments had not been

received by the Lender.

SECTION 2.10. OFFERING TO HOLDERS OF CONVERTIBLE DEBENTURES. Within the

time periods provided in Section 8 of the Subscription Agreements, the Borrower

shall offer to the holders of the Convertible Debentures the opportunity to

purchase participations in the Loans, the Lender Shares and the Warrants,

pursuant to participation agreements in form and substance satisfactory to the

Lender; PROVIDED, however, that in no event shall such participations offered to

the holders of the Convertible Debentures exceed 49% of the Loans, the Lender

Shares or the Warrants. If any of such holders accepts such offer, the Borrower

shall, upon tender of the certificates representing the Lender Shares and the

Warrants, reissue such Lender Shares and Warrants to the Lender and the subject

participants in the amounts designated by the Lender based upon such

participations. Thereafter, in the event that any of the Lender Shares or the

Warrants are required to be surrendered pursuant to Section 2.04(b)(iii) above,

the Borrower shall look solely to the participants for the return of their

proportionate shares of such to-be-surrendered Lender Shares and Warrants.

III. REPRESENTATIONS AND WARRANTIES

As of the Closing Date and on each Borrowing Date (unless the

representation and warranty refers to a specific date), the Borrower hereby

makes the following representations and warranties to the Lender, all of which

representations and warranties shall survive the Closing Date, the delivery of

the Notes and the making of the Loans, shall be continuing in nature so long as

any Obligations are outstanding or the Revolving Credit Commitment remains in

effect, and are as follows:

SECTION 3.01. FINANCIAL MATTERS.

(a) The Borrower has heretofore furnished to the Lender (i)

the audited consolidated financial statements (including balance sheets,

statements of income and statements of cash flows) of the Borrower and its

Subsidiaries as at December 31, 2005 and 2006, and for the Fiscal Years then

ended, and (ii) the unaudited consolidated financial statements of the Borrower

and its Subsidiaries as of March 31, 2007 and for the three (3) months then

ended (collectively, the "FINANCIAL STATEMENTS").

(b) The Financial Statements (i) have been prepared in

accordance with GAAP and Regulation S-X promulgated under the Act on a

consistent basis for all periods

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(subject, in the case of unaudited statements, to the absence of full footnote

disclosures, and to normal non-material audit adjustments), (ii) are complete

and correct in all material respects, (iii) fairly present the consolidated

financial condition of the Borrower and its Subsidiaries as of said dates, and

the results of their operations for the periods stated, (iv) contain and reflect

all necessary adjustments and accruals for a fair presentation of the Borrower's

and its Subsidiaries' consolidated financial condition and results of operations

as of the dates of and for the periods covered by such Financial Statements, and

(v) make full and adequate provision, subject to and in accordance with GAAP,

for the various assets and liabilities (including, without limitation, deferred

revenues) of the Borrower, fixed or contingent, and the results of their

operations and transactions in their accounts, as of the dates and for the

periods referred to therein.

(c) Except as set forth in SCHEDULE 3.01 of the Disclosure

Schedule, neither the Borrower nor any of its Subsidiaries have any liabilities,

obligations or commitments of any kind or nature whatsoever, whether absolute,

accrued, contingent or otherwise (collectively "LIABILITIES AND CONTINGENCIES"),

including, without limitation, Liabilities and Contingencies under employment

agreements and with respect to any "earn-outs", stock appreciation rights, or

related compensation obligations, except: (i) Liabilities and Contingencies

disclosed in the Financial Statements or footnotes thereto, (ii) Liabilities and

Contingencies incurred in the ordinary course of business and consistent with

past practice since the date of the most recent Financial Statements, or (iii)

those Liabilities and Contingencies which are not required to be disclosed under

GAAP. The reserves, if any, reflected on the balance sheet included in the most

recent Financial Statements are appropriate and reasonable. Neither the Borrower

nor any of its Subsidiaries have any Indebtedness for money borrowed,

outstanding obligations for the purchase price of property, contingent

obligations or liabilities for taxes, or any unusual forward or long-term

commitments, except as specifically set forth in SCHEDULE 3.01 of the Disclosure

Schedule.

(d) Since the date of the most recent Financial Statements,

except as set forth in SCHEDULE 3.01 of the Disclosure Schedule, there has been

no material adverse change in the working capital, condition (financial or

otherwise), assets, liabilities, reserves, business, management, operations or

prospects of the Borrower or any of its Subsidiaries, including, without

limitation, the following:

(i) there has been no material change in any

assumptions underlying,