Exhibit
10.1

AGREEMENT
 
THIS AGREEMENT (“Agreement”) is made as of this the 30th day of March, 2007 by
and between BIOMETRICS INVESTORS, L.L.C., a Delaware limited liability company
(“Lender”), and SEQUIAM CORPORATION, a California corporation (“Borrower”).
 
W I T N E S S E T H
 
WHEREAS, Lender is the holder of the Prior Note (as defined below), which was
made by Borrower and which has an outstanding balance as of the date of this
Agreement, including principal and accrued interest, of $3,965,119.00. Subject
to the terms and conditions of this Agreement, Lender has agreed to extend a
Term Loan (as defined below) to Borrower in the total aggregate amount of
$2,500,000 which Term Loan would be consolidated with the indebtedness evidenced
by the Prior Note and evidenced by a new Term Note in the face amount of
$6,500,000. Subject to the terms and conditions of this Agreement, Lender has
agreed to extend a separate Term Loan to Borrower in the amount of $5,000,000.
In connection with extending credits to Borrower, Borrower shall also issue
Warrants to Lender which, if both Term Loans are funded, would allow Lender to
purchase up to 40% of Borrower’s Fully Diluted Common Shares, subject to
adjustments as set forth in the Warrants.
 
NOW, THEREFORE, in consideration of the Warrants and any Loans made for the
account of Borrower, and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged by Borrower, the parties agree
as follows:
 

1.  
DEFINITIONS.

 
“Account” shall have meaning assigned to such term in the UCC.
 
“Account Debtor” shall have the meaning assigned to such term in the UCC.
 
“Additional Warrants” means the Common Share purchase warrants, in the form of
Exhibit A delivered to Lender in accordance with Paragraph 4(c)(iv) hereof,
which Warrants shall be exercisable immediately for 39,431,424 Common Shares at
an exercise price of $0.01 per share and have a term of exercise equal to 5
years.
 
“Advance Conditions” shall have the meaning specified in Paragraph 4 hereof.
 
“Affiliate” shall mean any Person directly or indirectly controlling, controlled
by or under common control with another Person.
 
“Agreement” shall mean this Agreement, any exhibits or schedules hereto, any
concurrent or subsequent rider hereto and any extensions, supplements,
amendments or modifications hereto.
 
“Base Rate” shall have the meaning specified in Paragraph 3(a) hereof.
 
“Borrowing Base Certificate” shall have the meaning specified in Paragraph
4(a)(i) hereof.
 
“Chattel Paper” shall have the meaning assigned to such term in the UCC.
 
“Collateral” shall mean all of the property of Borrower described in paragraph 5
hereof, together with all other real or personal property of Borrower now or
hereafter pledged to Lender to secure repayment of any of the Liabilities.
 
“Commercial Tort Claims” shall have the meaning assigned to such term in the
UCC.
 
“Common Shares” means the common shares of Borrower, par value $.001 per share,
and any other class of securities into which such securities may hereafter be
reclassified or changed into.
 
“Common Shares Equivalents” means any securities of the Company or the
Subsidiaries which would entitle the holder thereof to acquire at any time
Common Shares, including, without limitation, any debt, preferred shares,
rights, options, warrants or other instrument that is at any time convertible
into or exercisable or exchangeable for, or otherwise entitles the holder
thereof to receive, Common Shares.
 
“Cost of Goods Sold” shall have the meaning assigned to that term in GAAP.
 
“Default Rate” shall have the meaning specified in Paragraph 3(a) hereof.
 
“Deposit Accounts” shall have the meaning assigned to such term in the UCC.
 
“Disclosure Schedule” shall have the meaning specified in Paragraph 11.
 
“Documents” shall have the meaning assigned to such term in the UCC.
 
“EBITDA” shall mean, with respect to any period, Borrower’s and its
Subsidiaries’ Net Income After Taxes for such period, plus interest expense,
income tax expense, depreciation and amortization for such period, plus or minus
any other non-cash charges or gains which have been subtracted or added in
calculating Net Income After Taxes for such period, all on a consolidated basis.
As used herein, the term "Net Income After Taxes" for any period shall mean
Borrower’s and its Subsidiaries net income after taxes for that period, subject
to the following requirements: (i) any net operating loss carryforwards which
would otherwise be available as deductions against Borrower’s gross income shall
be disregarded for purposes of this calculation; (ii) any after-tax gains or
losses on the sale of assets, other than the sale of Inventory in the ordinary
course of business, shall be disregarded for purposes of this calculation; and
(iii) any other after-tax extraordinary gains or losses shall be disregarded for
purposes of this calculation.
 
“EBITDA Projections” shall have the meaning specified in Paragraph 12(b) hereof.
 
“EBITDA Shortfall” shall have the meaning specified in Paragraph 8(a) hereof.
 
“Electronic Chattel Paper” shall have the meaning assigned to such term in the
UCC.
 
“Eligible Accounts” shall mean those Accounts of Borrower which are unpaid no
more than ninety (90) days from invoice date, and which Lender, in its sole
discretion, determines to be eligible. Without limiting Lender’s discretion,
unless otherwise agreed by Lender, the following Accounts of Borrower are not
Eligible Accounts:
 
(i)  all Accounts owing by a single Account Debtor, if ten percent (10%) or more
of the balance owing by such Account Debtor to Borrower is unpaid more than
ninety (90) days after the invoice date;
 
(ii)  Accounts with respect to which the Account Debtor is an officer, director,
employee, Subsidiary or Affiliate of Borrower;
 
(iii)  Accounts with respect to which the Account Debtor is the United States of
America or any department, agency or instrumentality thereof, unless Borrower
assigns its right to payment of such Accounts to Lender pursuant to, and in full
compliance with, the Assignment of Claims Act of 1940, as amended;
 
(iv)  Accounts with respect to which the Account Debtor is not a resident of the
continental United States, although Accounts with respect to which the Account
Debtor is Fujitsu Microelectronics of America will not be disqualified as
“Eligible Accounts” under this clause;
 
(v)  Accounts in dispute or with respect to which the Account Debtor has
asserted or may assert a counterclaim or has asserted or may assert a right of
setoff;
 
(vi)  Accounts with respect to which the prospect of payment or performance by
the Account Debtor is or will be impaired, as determined by Lender in the
exercise of its sole discretion;
 
(vii)  Accounts with respect to which Lender does not have a first and valid
fully perfected security interest;
 
(viii)  Accounts with respect to which the Account Debtor is the subject of
bankruptcy or a similar insolvency proceeding or has made an assignment for the
benefit of creditors or whose assets have been conveyed to a receiver or
trustee;
 
(ix)  Accounts with respect to which the Account Debtor’s obligation to pay the
Account is conditional upon the Account Debtor’s approval or is otherwise
subject to any repurchase obligation or return right, as with sales made on a
bill-and-hold, guaranteed sale, sale-and-return, sale on approval or consignment
basis;
 
(x)  Accounts to the extent that the Account Debtor’s indebtedness to Borrower
exceeds a credit limit determined by Lender in Lender’s sole discretion;
 
(xi)  Accounts with respect to which the Account Debtor is located in a state
which requires Borrower, as a precondition to commencing or maintaining an
action in the courts of that state, either to (a) receive a certificate of
authority to do business and be in good standing in such state, or (b) file a
notice of business activities report with such state’s taxing authority for the
then current year unless Borrower has taken one of the actions described in
clauses (a) or (b) or Borrower has proven to Lender’s satisfaction that it is
exempt from such requirement;
 
(xii)  Accounts which arise out of sales (a) not made in the ordinary course of
Borrower’s business, (b) which are not valid or legally enforceable, (c) which
do not meet the Account Debtor’s specifications (if any) or (d) which have not
been shipped;
 
(xiii)  Accounts with respect to which the Account Debtor has refused to accept
or returned to Borrower any portion of the Inventory the sale of which gave rise
to such Accounts; and
 
(xiv)  Accounts with respect to which any document or agreement executed or
delivered in connection therewith, or any procedure used in connection with any
such document or agreement, fails in any material respect to comply with the
requirements of applicable law.
 
"Eligible Inventory" shall mean Inventory of Borrower consisting of raw
materials and finished goods which Lender, in its sole discretion, determines to
be eligible. Without limiting Lender’s discretion, unless otherwise agreed by
Lender, the following Inventory of Borrower is not Eligible Inventory:
 
(i) Inventory which is in transit;
 
(ii) Inventory which is not in good condition, or not currently usable or
currently saleable in the ordinary course of Borrower’s business;
 
(iii) Inventory which is obsolete;
 
(iv) Inventory which Lender determines, in the exercise of its sole discretion,
to be unacceptable due to age, type, category and/or quantity;
 
(v) Inventory with respect to which Lender does not have a first and valid fully
perfected security interest;
 
(vi) Inventory consisting of work-in-progress, packaging materials or supplies;
or
 
(vii) Inventory which is stored with or located on the premises of a bailee,
consignee, warehouseman, processor or other third party.
 
“Eligible Orders” shall mean those Orders of Borrower which Lender, in its sole
discretion, determines to be eligible. Without limiting Lender’s discretion,
unless otherwise agreed by Lender, the following Orders of Borrower are not
Eligible Orders:
 
(i)  Any Order from a single Customer which is received at a time at which the
amount of the outstanding Orders and Accounts from that Customer exceeds One
Million Dollars ($1,000,000);
 
(ii)  Orders with respect to which the Customer is an officer, director,
employee, Subsidiary or Affiliate of Borrower;
 
(iii)  Orders with respect to which the Customer is the United States of America
or any department, agency or instrumentality thereof, unless Borrower assigns
its right to payment for the Accounts arising from such Orders to Lender
pursuant to, and in full compliance with, the Assignment of Claims Act of 1940,
as amended;
 
(iv)  Orders where the Customer is in dispute regarding Accounts in excess of
Fifty Thousand Dollars ($50,000) or more, or where the Customer has asserted or
may assert a counterclaim or has asserted or may assert a right of setoff with
regard to Accounts in excess of Fifty Thousand Dollars ($50,000) or more;
 
(v)  Orders with respect to which the prospect of payment or performance by the
Customer is or will be impaired, as determined by Lender in the exercise of its
sole discretion;
 
(vi)  Orders having a Gross Profit Margin that does not satisfy the gross profit
requirements set forth in Exhibit B;
 
(vii)  Orders with respect to which the Customer is the subject of bankruptcy or
a similar insolvency proceeding or has made an assignment for the benefit of
creditors or whose assets have been conveyed to a receiver or trustee;
 
(viii)  Orders with respect to which the Customer’s obligation to pay the
Account for the Order is conditional upon the Customer’s approval or is
otherwise subject to any repurchase obligation or return right, as with sales
made on a bill-and-hold, guaranteed sale, sale-and-return, sale on approval or
consignment basis;
 
(ix)  Orders with respect to which the Customer is located in a state which
requires Borrower, as a precondition to commencing or maintaining an action in
the courts of that state, either to (a) receive a certificate of authority to do
business and be in good standing in such state, or (b) file a notice of business
activities report with such state’s taxing authority for the then current year
unless Borrower has taken one of the actions described in clauses (a) or (b) or
Borrower has proven to Lender’s satisfaction that it is exempt from such
requirement;
 
(x)  Orders which arise out of sales (a) not made in the ordinary course of
Borrower’s business, or (b) which are not valid or legally enforceable; and
 
(xi)  Orders with respect to which any document or agreement executed or
delivered in connection therewith, or any procedure used in connection with any
such document or agreement, fails in any material respect to comply with the
requirements of applicable law.
 
“Equipment” shall have the meaning assigned to such term in the UCC.
 
“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as
amended.
 
“Event of Default” shall have the meaning specified in Paragraph 13 hereof.
 
“Finished Goods” shall mean equipment fabricated by or on behalf of Borrower
which conforms to the purchase requirements of an identified customer of
Borrower.
 
“Fixtures” shall have the meaning assigned to such term in the UCC.
 
“Fully Diluted” shall mean the amount of Common Shares that would be outstanding
if all options, warrants and other rights exercisable for the issuance of Common
Shares and all conversion rights convertible for Common Shares were exercised,
including the exercise of the Warrants herein.
 
“GAAP” shall mean generally accepted United States accounting principles,
consistently applied.
 
“General Advance Conditions” shall have the meaning specified in Paragraph 4(a)
hereof.
 
“General Intangibles” shall have the meaning assigned to such term in the UCC.
 
“Governmental Authority” means:
 
(a) the government of:
 
(i) the United States of America or any State or other political subdivision
thereof, or
 
(ii) any jurisdiction in which the Borrower or any Subsidiary conducts all or
any part of its business, or which asserts jurisdiction over any properties of
the Borrower or any Subsidiary; or
 
(b) any entity exercising executive, legislative, judicial, regulatory or
administrative functions of, or pertaining to, any such government.
 
“Gross Profit Margin” shall mean, with respect to any Order, the result obtained
by dividing (a) the result of subtracting the Cost of Goods Sold for the
Inventory which is the subject of the Order from the gross sales price for that
Inventory by (b) the gross sales price for that Inventory.
 
“Indemnified Party” shall have the meaning specified in Paragraph 15 hereof.
 
“Information” shall have the meaning specified in Paragraph 16 hereof.
 
“Initial Warrants” means the Common Share purchase warrants, in the form of
Exhibit C delivered to Lender in accordance with Paragraph 4(b)(ii) hereof,
which Warrants shall be exercisable immediately for 65,719,041 Common Shares at
an exercise price of $0.01 per share and have a term of exercise equal to 5
years.
 
“Instruments” shall have the meaning assigned to such term in the UCC.
 
“Intellectual Property” shall mean collectively, all worldwide:
 
(i) inventions, designs, algorithms and other industrial property, and all
enhancements and improvements thereto, whether patentable or unpatentable and
whether or not reduced to practice, and all patent rights in connection
therewith (including all U.S. and foreign patents, patent applications, patent
disclosures, mask works, and all divisions, continuations,
continuations-in-part, reissues, re-examinations and extensions thereof),
whether or not any of the foregoing are registered;
 
(ii) trademarks, trade names and service marks, trade dress, logos, Internet
domain names, and other commercial product or service designations, together
with all translations, adaptations, derivations and combinations thereof, and
all goodwill and similar value associated with any of the foregoing, and all
applications, registrations, and renewals in connection therewith;
 
(iii) copyrights (whether or not registered), moral rights, and all
registrations and applications for registration thereof, as well as rights to
renew copyrights;
 
(iv) trade secrets (as such are determined under applicable law), know-how and
other confidential business information, including technical information,
marketing plans, research, designs, plans, methods, techniques, and processes,
any and all technology, supplier lists, computer software programs or
applications, in both source and object code form, technical documentation of
such software programs, statistical models, supplier lists, e-mail lists,
inventions, sui generis database rights, databases, and data, whether in
tangible or intangible form and whether or not stored, compiled or memorialized
physically, electronically, graphically, photographically or in writing;
 
(v) any and all other rights to existing and future registrations and
applications for any of the foregoing and all other proprietary rights in, or
relating to, any of the foregoing, including remedies against and rights to sue
for past infringements, and rights to damages and profits due or accrued in or
relating to any of the foregoing; and
 
(vi) any and all other tangible or intangible proprietary property, information
and materials that are or have been used (including in the development of) the
Borrower’s business and/or in any product, technology or process (a) currently
being or formerly manufactured, published, marketed or used by Seller, or (b)
previously or currently under development for possible future manufacturing,
publication, marketing or other use by Seller.
 
“Inventory” shall have the meaning assigned to such term in the UCC.
 
“Investment Property” shall have the meaning assigned to such term in the UCC.
 
“IP Diligence Issue” shall have the meaning specified in Paragraph 4(b)(i).
 
“Knowledge” shall mean the actual knowledge, after reasonable investigation, of
Mark Mroczkowski, Nicholas Vandenbrekel, Alan McGinn, Kevin Henderson, or
Phil Dumas.
 
“Lender's IP Due Diligence” shall have the meaning specified in Paragraph
4(b)(i).
 
“Letter-of-Credit Right” shall have the meaning assigned to such term in the
UCC.
 
“Liabilities” shall mean any and all obligations, liabilities and indebtedness
of Borrower to Lender or to any Affiliate of Lender of any and every kind and
nature, howsoever created, arising or evidenced and howsoever owned, held or
acquired, whether now or hereafter existing, whether now due or to become due,
whether primary, secondary, direct, indirect, absolute, contingent or otherwise
(including without limitation obligations of performance), whether several,
joint or joint and several, and whether arising or existing under written or
oral agreement or by operation of law, including without limitation all
obligations, liabilities and indebtedness of Borrower under this Agreement.
 
“Loan” or “Loans” shall mean Term Loan A and Term Loan B made by Lender to
Borrower pursuant to Paragraph 2 hereof.
 
“Lock Box,” “Lock Box Account” and “Lock Box Event” shall have the meanings
specified in Paragraph 8(a) hereof.
 
“Material Adverse Effect” shall have the meaning specified in Paragraph 11(b)
hereof.
 
“Maturity Date” shall mean April 15, 2009.
 
“Obligor” shall mean Borrower and each Person who is or shall become primarily
or secondarily liable for any of the Liabilities.
 
“Order” shall mean a written purchase order from a third party for one or more
items of Inventory sold or offered for sale by the Borrower in the ordinary
course of business.
 
“Other Agreements” shall mean all agreements, instruments and documents,
including without limitation the Registration Rights Agreement, the Warrants,
the Shareholders Agreement, guaranties, mortgages, trust deeds, pledges, powers
of attorney, consents, assignments, security agreements, intercreditor
agreements, financing statements and all other writings heretofore, now or from
time to time hereafter executed by or on behalf of Borrower or any other Person
and delivered to Lender or to any Affiliate of Lender in connection with the
Liabilities or the transactions contemplated hereby, including the Pledge
Agreements, the Subsidiary Guarantees and the Subordination Agreements.
 
“Permitted Liens” shall mean (i) statutory liens of landlords, carriers,
warehousemen, mechanics, materialmen or suppliers incurred in the ordinary
course of business and securing amounts not yet due, (ii) liens or security
interests in favor of Lender, (iii) zoning restrictions and easements, licenses,
covenants and other restrictions affecting the use of real property that do not
individually or in the aggregate have a material adverse effect on Borrower’s
ability to use such real property for its intended purpose in connection with
Borrower’s business, and (iv) the liens set forth on Exhibit D.
 
“Person” shall mean any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation,
institution, entity, party or foreign or United States government (whether
federal, state, county, city, municipal or otherwise), including without
limitation any instrumentality, division, agency, body or department thereof.
 
“Plan” shall mean any employee benefit plan defined in Section 3(3) of ERISA,
including any multiemployer plan or any employee welfare benefit plan which is
maintained or has been maintained pursuant to a collective bargaining agreement
to which two or more unrelated employers contribute and in respect of which
Borrower is an “employer” as defined in Section 3(5) of ERISA.
 
“Pledge Agreements” shall have the meaning specified in Paragraph 5(a) hereof.
 
“Prior Indebtedness” shall mean the indebtedness from Borrower to the holder of
the Prior Note which is evidenced by the Prior Note.
 
“Prior Note” shall mean that Second Amended, Restated and Consolidated Senior
Secured Term Note dated November 1, 2005 made by Borrower to Lee Harrison
Corbin, Attorney In Fact for the Trust under the Will of John Svenningson.
 
“Proceeds” shall have the meaning assigned to such term in the UCC.
 
“Related Parties” means, with respect to any specified Person, such Person’s
Affiliates and the respective directors, officers, employees, agents and
advisors of such Person and such Person’s Affiliates.
 
“Registration Rights Agreement” means the Registration Rights Agreement, dated
the date hereof, between Borrower and Lender, in the form of Exhibit E delivered
to Lender in accordance with Paragraph 4(b)(iii) hereof.
 
“Registration Statement” means a registration statement meeting the requirements
set forth in the Registration Rights Agreement and covering the resale of the
Underlying Shares by Lender as provided for in the Registration Rights
Agreement.
 
“Securities” means the Warrants and the Underlying Shares.
 
“Securities Act” means the Securities Act of 1933, as amended from time to time.
 
“Securities Exchange Act” means the Securities Exchange Act of 1934, as amended.
 
“Shareholders Agreement” shall have the meaning specified in Paragraph 4(b)(v).
 
“Subsidiary” shall mean any corporation of which more than fifty percent (50%)
of the outstanding capital stock having ordinary voting power to elect a
majority of the board of directors of such corporation (irrespective of whether
at the time shares of any other class of such corporation shall have or might
have voting power by reason of the happening of any contingency) is at the time,
directly or indirectly, owned by Borrower or by any partnership or joint venture
of which more than fifty percent (50%) of the outstanding equity interests are
at the time, directly or indirectly, owned by Borrower.
 
“Subsidiary Guarantees” shall have the meaning specified in Paragraph 5(b)
hereof.
 
“Subordination Agreements” shall have the meaning specified in Paragraph 5(c)
hereof.
 
“Tangible Chattel Paper” shall have the meaning assigned to such term in the
UCC.
 
“Term Loan A” shall have the meaning specified in Paragraph 2(a) hereof.
 
“Term Loan B” shall have the meaning specified in Paragraph 2(c) hereof.
 
“Term Loan B Cash Flow Advances” shall have the meaning specified in Paragraph
2(d) hereof.
 
“Term Note A” shall mean the Term Note in the principal amount of $6,500,000
executed by Borrower in favor of Lender pursuant to Paragraph 2(a) hereof, and
any extensions, supplements, amendments or modifications thereto.
 
“Term Note B” shall mean the Term Note in the principal amount of $5,000,000
executed by Borrower in favor of Lender pursuant to Paragraph 2(c) hereof, and
any extensions, supplements, amendments or modifications thereto.
 
“Termination Date” shall mean the earliest to occur of the following: (i) the
Maturity Date; and (ii) the date the Liabilities are accelerated pursuant to
Paragraph 14 hereof.
 
“UCC” shall mean the Uniform Commercial Code as in effect form time to time in
the state of Illinois.
 
“Underlying Shares” means the Common Shares issued and issuable upon exercise of
the Warrants in accordance with the terms of the Warrants.
 
“Warrants” means collectively the Initial Warrants and the Additional Warrants.
 
2.  LOANS.
 
(a)  Subject to the terms and conditions of this Agreement and the Other
Agreements, Lender agrees to make a term loan to Borrower in the principal
amount of Two Million Five Hundred Thousand Dollars ($2,500,000) (“Term Loan
A”). Term Loan A shall be further evidenced by and payable in accordance with
Term Note A, which is a consolidation, amendment and restatement of the Prior
Note, and which has a face amount of Six Million Five Hundred Thousand Dollars
($6,500,000), reflecting the sum of the amounts previously advanced under the
Prior Note (the “Prior Indebtedness”), plus the amount of Term Loan A. Borrower
agrees that Term Loan A includes the Prior Indebtedness, and that repayment in
full of Term Loan A shall include repayment in full not only of the $2,500,000
which may be advanced by Lender under this Agreement, but also repayment in full
of the Prior Indebtedness. Payments of principal of Term Loan A may not be
reborrowed. Principal of and all accrued and unpaid interest on Term Loan A
shall be payable in full on the Termination Date.
 
(b)  Term Loan A shall be disbursed by Lender to Borrower in a series of 10
disbursements, each in the amount of Two Hundred Fifty Thousand Dollars
($250,000), each payable every other week, which shall be disbursed based on the
Borrower’s satisfaction of the Advance Conditions stated in Paragraphs 4(a) and
(b) of this Agreement, including the issuance by Borrower to Lender of the
Initial Warrants for twenty five percent (25%) of Borrower’s Fully Diluted
Common Shares. Lender, in its sole discretion, may elect to advance Term Loan A
in greater amounts or on an accelerated funding schedule.
 
(c)  Subject to the terms and conditions of this Agreement and the Other
Agreements, Lender agrees to make a term loan to Borrower in the principal
amount of Five Million Dollars ($5,000,000) (“Term Loan B”). Term Loan B shall
be evidenced by and payable in accordance with Term Note B, which has a face
amount of Five Million Dollars ($5,000,000). Payments of principal of Term Loan
B may not be reborrowed. Principal of and all accrued and unpaid interest on
Term Loan B shall be payable in full on the Termination Date.
 
(d)  Term Loan B shall consist of a series of advances not to exceed, in the
aggregate, Five Million Dollars ($5,000,000) (“Term Loan B Cash Flow Advances”),
which shall be disbursed to Borrower based on Borrower’s satisfaction of the
Advance Conditions stated in Paragraphs 4(a) and (c) of this Agreement,
including the issuance by Borrower to Lender of the Additional Warrants for
fifteen percent (15%) of Borrower’s Fully Diluted Common Shares..
 
3.  INTEREST, FEES AND CHARGES. Borrower shall pay to Lender the following:
 
(a)  Borrower shall pay to Lender interest on the outstanding principal balance
of the Loans monthly in arrears on the first day of each month beginning on May
1, 2007 at the per annum rate of twelve percent (12%) (the “Base Rate”).
Following the occurrence of an Event of Default, Borrower shall pay to Lender
interest on the outstanding principal balance of the Loans at the per annum rate
of four percent (4%) plus the Base Rate (the “Default Rate”). Interest shall be
computed on the basis of a year of three hundred sixty (360) days for the actual
number of days elapsed.
 
(b)  It is the intent of the parties that the rate of interest and the other
fees and charges to Borrower under this Agreement shall be lawful; therefore, if
for any reason the interest or other fees and charges payable under this
Agreement are found by a court of competent jurisdiction, in a final
determination, to exceed the limit which Lender may lawfully charge Borrower,
then the obligation to pay interest and other charges shall automatically be
reduced to such limit and, if any amount in excess of such limit shall have been
paid, then such amount shall be refunded to Borrower.
 
4.  CONDITIONS OF ADVANCES. Without limiting Lender’s discretion to make
advances hereunder, the making of any advance provided for in this Agreement
shall be conditioned upon the following conditions (“Advance Conditions”):
 
(a)  The following conditions (the “General Advance Conditions”) must be
satisfied for any advance of the Loan:
 
(i)  Lender shall have received, by at least twelve o’clock noon (12:00 noon)
Chicago time on the day on which an advance is requested to be made hereunder, a
telephonic request from an officer of Borrower (or any Person authorized by
Borrower pursuant to a written list provided to Lender), for an advance in a
specific amount. In addition, Lender shall also have received all of the
schedules, reports, and the Borrowing Base Certificate, in the form of Exhibit
F, required to have been delivered by Borrower pursuant to Paragraph 9 hereof
(the “Borrowing Base Certificate”);
 
(ii)  No Event of Default shall have occurred and be continuing or be caused by
the making of such advance;
 
(iii)  All of the representations and warranties contained in this Agreement and
the Other Agreements, including the representations and warranties regarding
Borrower’s Intellectual Property, shall be true and correct in all material
respects as if made on the date the request for an advance is made;
 
(iv)  Borrower’s employment agreements with Nicholas H. VandenBrekel and Mark L.
Mroczowski provide for termination payments to Nicholas H. VandenBrekel and Mark
L. Mroczowski in the event a change of control (as defined therein) occurs
without the approval of the Borrower’s Board of Directors; it shall be a General
Advance Condition Lender shall have received waivers of the application of those
provisions of the employment agreements to the issuance of the Warrants, the
issuance of shares to Lender pursuant to the Warrants and the exercise of
Lender’s rights as a shareholder of Borrower, and those waivers must be in full
force and effect at any time that an advance of the Loans is requested;
 
(v)  Lender shall have received, in form and substance satisfactory to Lender,
the Pledge Agreements, the Subsidiary Guarantees and the Subordination
Agreements, and those agreements must be in full force and effect at any time
that an advance of the Loans is requested;
 
(vi) Lender shall have received a Waiver and Consent in a form satisfactory to
Lender from each of the Series A Preferred Shareholders and Series B Preferred
Shareholders identified on Exhibit S; and
 
(vii) Lender shall have received, in form and substance satisfactory to Lender,
all certificates, orders, authorities, consents, affidavits, schedules,
instruments, security agreements, financing statements, mortgages and other
documents which are provided for hereunder, or which Lender may at any time
request in a commercially reasonable manner.
 
(b)  The following conditions must be satisfied before Lender will make any
advance from the Term Loan A:
 
(i)  Following the execution of this Agreement, Lender shall conduct due
diligence with respect to Borrower’s Intellectual Property and Borrower’s rights
to use Borrower’s Intellectual Property to commercialize technology (“Lender's
IP Due Diligence”). On or before that date which will occur forty five (45) days
after the date of this Agreement, Lender shall advise Borrower in writing as to
whether Lender's IP Due Diligence has disclosed a condition or facts which
Lender, in its sole discretion, regards as having the potential to result in a
material adverse effect on the financial condition of Borrower (an "IP Diligence
Issue"). Lender's notice to Borrower of the existence of an IP Diligence Issue
shall constitute evidence that a condition precedent to the funding of Term Loan
A related to IP Due Diligence has not been satisfied and no further advance of
either Term Loan A or Term Loan B shall be made unless and until the IP
Diligence Issue is resolved to Lender's satisfaction. In the event that Lender
determines, in Lender's sole discretion, that Lender and Borrower have not
reached a satisfactory resolution of the IP Diligence Issue or in the event that
Lender and Borrower have not agreed upon a plan for the protection of Borrower's
IP within a period of thirty (30) days following the date of Lender's notice to
Borrower regarding the IP Diligence Issue, then Lender may declare an Event of
Default under this Agreement.
 
(ii)  Lender shall have received the Initial Warrants registered in the name of
Lender;
 
(iii)  Lender shall have received the Registration Rights Agreement duly
executed by Borrower;
 
(iv)  Lender shall have received evidence of an amendment to the Borrower’s
Articles of Incorporation to increase the amount of Borrower’s authorized Common
Shares to cover all Fully Diluted Common Shares, including those exercisable
under the Warrants;
 
(v)  Lender shall have received a shareholders agreement providing for the
election of 2 additional directors to Borrower’s Board of Directors designated
by Lender, in the form attached hereto as Exhibit G (the “Shareholders
Agreement”), executed by the holders of a sufficient number of Fully Diluted
Common Shares; and
 
(vi)  The General Advance Conditions must be satisfied as of the time of the
proposed advance.
 
(c)  The following conditions must be satisfied for any Term Loan B Cash Flow
Advance:
 
(i)  Lender must have received from Borrower and approved Borrower’s annual
budget and EBITDA Projections (as defined below) for the calendar year during
which the advance is requested, and Borrower’s cumulative EBITDA for the
portions of that calendar year occurring before the month in which the advance
is requested must be equal to or in excess of Borrower’s projected EBITDA for
those months;
 
(ii)  Lender shall have received the Additional Warrants registered in the name
of Lender;
 
(iii)  The General Advance Conditions must be satisfied as of the time of the
Term Loan B Working Capital Advance; and
 
(iv)  at least one of the following conditions must be satisfied; either:
 
(A) Advances from the Term Loan B Cash Flow Facility may be requested for the
purpose of obtaining Inventory for sale; for such advances, the Borrower must
have one or more Eligible Orders for that Inventory, and no Order will be an
Eligible Order unless fulfillment of that Order will produce a Gross Profit
Margin in accordance with Exhibit B;
 
(B) Advances from the Term Loan B Cash Flow Facility may be requested for the
purpose of obtaining working capital by advancing against royalty payments or
other forms of income; in each such case, Borrower and Lender shall agree upon a
formula to advance against such royalty payments or other forms of income; or
 
(C) Lender has, in its sole discretion, agreed to make an advance from the Term
Loan B Cash Flow Facility.
 
5.  GRANT OF SECURITY INTEREST TO LENDER. As security for the payment or other
satisfaction of all Liabilities, Borrower hereby assigns to Lender and grants to
Lender a continuing security interest in the following property of Borrower,
whether now or hereafter owned, existing, acquired or arising and wherever now
or hereafter located: (a) all Accounts and all Goods whose sale, lease or other
disposition by Borrower has given rise to Accounts and have been returned to or
repossessed or stopped in transit by Borrower; (b) all Chattel Paper,
Instruments, Documents and General Intangibles (including without limitation all
patents, patent applications, trademarks, trademark applications, tradenames,
trade secrets, goodwill, copyrights, rights in Intellectual Property,
registrations, licenses, software, franchises, customer lists, tax refund
claims, claims against carriers and shippers, guarantee claims, contracts
rights, payment intangibles, security interests, security deposits and any
rights to indemnification); (c) all Inventory and other Goods, including without
limitation Equipment, vehicles and Fixtures; (d) all Investment Property,
including all shares of Borrower’s Subsidiaries; (e) all Deposit Accounts, bank
accounts, deposits and cash; (f) all Letter-of-Credit Rights; (g) Commercial
Tort Claims listed on Exhibit H hereto; (h) any other property of Borrower now
or hereafter in the possession, custody or control of Lender or any agent or any
Affiliate of Lender or any participant with Lender in the Loans for any purpose
(whether for safekeeping, deposit, collection, custody, pledge, transmission or
otherwise); and (f) all additions and accessions to, substitutions for, and
replacements, products and proceeds of the foregoing property, including without
limitation proceeds of all insurance policies insuring the foregoing property,
and all of Borrower’s books and records relating to any of the foregoing and to
Borrower’s business.
 
(a)  To further evidence the foregoing security interests, as a General Advance
Condition, Borrower shall execute and deliver to Lender in a form satisfactory
to Lender a pledge of Borrower’s shares in the Subsidiaries and a pledge of
Borrower’s Intellectual Property, plus such additional security agreements and
UCC financing statements as Lender may request to evidence and document the
foregoing grant of security interests (collectively, the “Pledge Agreements”),
which Pledge Agreements shall include provisions recognizing that the security
agreements and pledges which secured the Prior Note have been assigned to Lender
and confirming that those security agreements and pledges remain in full force
and effect, subject to no defenses of any kind. The Pledge Agreements shall
include an agreement creating a security interest for Lender in the Deposit
Accounts, which agreement shall be in the form of a control agreement.
 
(b)  As a General Advance Condition, Borrower shall also cause the Subsidiaries
to enter into guarantees of the Loans in a form satisfactory to Lender (the
“Subsidiary Guarantees”), which Subsidiary Guarantees shall include provisions
recognizing that the guarantees of the Prior Note made by the Subsidiaries have
been assigned to Lender and confirming that those guarantees remain in full
force and effect, subject as of the date hereof to no defenses of any kind.
 
(c)  As a General Advance Condition, Borrower shall cause Nicholas H.
VandenBrekel and Mark Mroczowski, as existing creditors of Lender, to enter into
Subordination Agreements with Lender in a form satisfactory to Lender (the
“Subordination Agreements”) which Subordination Agreements shall include
provisions recognizing that the Subordination Agreements made with respect to
the Prior Note have been assigned to Lender and confirming that those
subordination agreements remain in full force and effect, subject to no defenses
of any kind.
 
(d) Lender shall have the right now, and at any time in the future in his sole
and absolute discretion, without notice to Borrower, to prepare, file and sign
the Borrower’s name on any financing statement, notice of lien, assignment or
satisfaction of lien or similar document in connection with the any and all
security interests granted by Borrower to Lender under this Agreement. The
Borrower hereby authorizes Lender to file financing statements containing the
collateral description "All of the Debtor’s assets whether now owned or
hereafter acquired." or such lesser amount of assets as Lender may determine, or
Lender may, at his option, file financing statements containing any collateral
description which reasonably describes the collateral in which a security
interest is granted under this Agreement;

6.  PRESERVATION OF COLLATERAL AND PERFECTION OF SECURITY INTERESTS THEREIN.
 
(a)  Borrower shall, at Lender’s request, at any time and from time to time,
authenticate, execute and deliver to Lender such financing statements, documents
and other agreements and instruments (and pay the cost of filing or recording
the same in all public offices deemed necessary or desirable by Lender) and do
such other acts and things or cause third parties to do such other acts and
things as Lender may deem necessary or desirable in order to establish and
maintain a valid, attached and perfected security interest in the Collateral in
favor of Lender (free and clear of all other liens, claims and rights of third
parties whatsoever, whether voluntarily or involuntarily created, except
Permitted Liens) to secure payment of the Liabilities, and in order to
facilitate the collection of the Collateral. Borrower irrevocably hereby makes,
constitutes and appoints Lender (and all Persons designated by Lender for that
purpose) as Borrower’s true and lawful attorney and agent-in-fact to execute
such financing statements, documents and other agreements and instruments and do
such other acts and things as may be necessary to preserve and perfect Lender’s
security interest in the Collateral.
 
(b)  Immediately upon Borrower’s receipt of any portion of the Collateral
evidenced by an Agreement, Instrument of Document including, without limitation,
any Tangible Chattel Paper and any Investment Property consisting of
certificated securities, Borrower shall deliver the original thereof to Lender
together with an appropriate endorsement or other specific evidence of
assignment thereof to Lender (in form and substance acceptable to Lender). If
any endorsement or assignment of any such items shall not be made for any
reason, Lender is hereby irrevocably authorized as Borrower’s attorney and
agent-in-fact, to endorse or assign the same on Borrower’s behalf.
 
(c)  To the extent Borrower obtains or maintains any Electronic Chattel Paper,
Deposit Accounts or Letter-of-Credit Rights, Borrower shall do such acts and
things or cause third parties to do such acts and things to establish control in
favor of Lender as control for such type of Collateral is defined in the UCC.
 
7.  COVENANTS REGARDING THE WARRANTS. Borrower shall maintain a reserve from its
duly authorized Common Shares for issuance pursuant to the Warrants and the
Other Agreements in such amount as may be required to fulfill its obligations in
full under the Warrants and the Other Agreements.
 
8.  COLLECTIONS.
 
(a)  As used herein, the term “EBITDA Shortfall” shall mean that for any month,
Borrower’s actual EBITDA is less than the EBITDA shown in Borrower's EBITDA
Projections for that month by a percentage factor of fifteen percent (15%) or
more. Upon occurrence of an EBITDA Shortfall for any month which continues for a
second consecutive month, Lender shall have the right to declare that a cash
management event (a “Lock Box Event”) has occurred, and unless and until a Lock
Box Reset Event (as defined below) occurs, Lender shall have the following
rights to collect Borrower's cash payments. Following occurrence of a Lock Box
Event, Lender shall have the right to direct Borrower to cause all of its
Account Debtors to make all payments on the Accounts to a post office box (the
“Lock Box”) designated by, and under the exclusive control of Lender or another
financial institution acceptable to Lender. Upon direction by Lender, Borrower
shall establish an account (the “Lock Box Account”) in Borrower’s name with a
financial institution acceptable to Lender, into which all payments received in
the Lock Box shall be deposited, and into which Borrower will immediately
deposit all payments received by Borrower with respect to Accounts of Borrower
and other Collateral in the identical form in which such payments were made,
whether by cash or check. Following occurrence of a Lock Box Event, if Borrower,
any Affiliate or Subsidiary of Borrower, or any shareholder, officer, director,
employee or agent of Borrower or any Affiliate or Subsidiary of Borrower, or any
other Person acting for or in concert with Borrower shall receive any monies,
checks, notes, drafts or other payments relating to or as Proceeds of Accounts
of Borrower or other Collateral, Borrower and each such Person shall receive all
such items in trust for, and as the sole and exclusive property of, Lender and,
immediately upon receipt thereof, shall remit the same (or cause the same to be
remitted) in kind to the Lock Box Account. The financial institution with which
the Lock Box Account is established shall acknowledge and agree, in a manner
satisfactory to Lender, that the amounts on deposit in such Lock Box Account are
the sole and exclusive property of Lender, that such financial institution will
follow the instructions of Lender with respect to disposition of funds in the
Lock Box and Lock Box Account without further consent from Borrower, that such
financial institution has no right to setoff against the Lock Box Account or
against any other account maintained by such financial institution into which
the contents of the Lock Box Account are transferred, and that such financial
institution shall wire to Lender, or otherwise transfer to Lender in immediately
available funds in a manner satisfactory to Lender, funds deposited in the Lock
Box Account on a daily basis as such funds are collected. For purposes of
calculating interest on the Liabilities, three (3) business days after receipt
by Lender of good Funds), Lender shall apply (conditional upon final collection)
the whole or any part of such collections or Proceeds against the Liabilities in
such order as Lender shall determine in its sole discretion. Borrower agrees
that all payments deposited to such Lock Box Account or otherwise received by
Lender, whether in respect of the Accounts of Borrower or as Proceeds of other
Collateral or otherwise, will be applied on account of the Liabilities in
accordance with the terms of this Agreement. Borrower agrees to pay all fees,
costs and expenses which Lender incurs in connection with opening and
maintaining the Lock Box Account and depositing for collection by Lender any
check or other item of payment received by Lender on account of the Liabilities.
All checks, drafts, instruments and other items of payment or Proceeds of
Collateral shall be endorsed by Borrower to Lender, and, if that endorsement of
any such item shall not be made for any reason, Lender is hereby irrevocably
authorized to endorse the same on Borrower’s behalf. For the purpose of this
Paragraph, Borrower irrevocably hereby makes, constitutes and appoints Lender
(and all Persons designated by Lender for that purpose) as Borrower’s true and
lawful attorney and agent-in-fact (i) to endorse Borrower’s name upon said items
of payment and/or Proceeds of Collateral and upon any Tangible Chattel Paper of
Borrower, document, instrument, invoice or similar document or agreement
relating to any Account of Borrower or goods pertaining thereto; (ii) to take
control in any manner of any item of payment or proceeds thereof; and (iii) to
have access to any lock box or postal box into which any of Borrower’s mail is
deposited, and open and process all mail addressed to Borrower and deposited
therein.
 
(b)  As used herein, the term "Lock Box Reset Event" shall mean that following
the occurrence of a Lock Box Event, Borrower's actual EBITDA for two consecutive
months has equaled or exceeded the amount of EBITDA shown in Borrower's EBITDA
Projections for those two months.
 
(c)  After the occurrence of a Lock Box Event, Lender may, at any time and from
time to time, whether before or after notification to any Account Debtor and
whether before or after the maturity of any of the Liabilities, (i) enforce
collection of any of Borrower’s Accounts or contract rights by suit or
otherwise; (ii) exercise all of Borrower’s rights and remedies with respect to
proceedings brought to collect any Accounts of Borrower; (iii) surrender,
release or exchange all or any part of any Accounts of Borrower, or compromise
or extend or renew for any period (whether or not longer than the original
period) any indebtedness thereunder; (iv) sell or assign any Account of Borrower
upon such terms, for such amount and at such time or times as Lender deems
advisable; (v) prepare, file and sign Borrower’s name on any proof of claim in
bankruptcy or other similar document against any Account Debtor; and (vi) do all
other acts and things which are necessary, in Lender’s sole discretion, to
fulfill Borrower’s obligations under this Agreement and to allow Lender to
collect the Accounts of Borrower. In addition to any other provision hereof,
Lender may at any time, whether before or after the occurrence of an Event of
Default, at Borrower’s expense, notify any parties obligated on any of the
Accounts to make payment directly to Lender of any amounts due or to become due
thereunder.
 
(d)  Lender, in its sole discretion, without waiving or releasing any
obligation, liability or duty of Borrower under this Agreement or the Other
Agreements or any Event of Default, may at any time or times hereafter, but
shall not be obligated to, pay, acquire or accept an assignment of any security
interest, lien, encumbrance or claim asserted by any Person in, upon or against
the Collateral. All sums paid by Lender in respect thereof and all costs, fees
and expenses, including without limitation reasonable attorney fees, all court
costs and all other charges relating thereto incurred by Lender shall constitute
a loan, payable by Borrower to Lender on demand and, until paid, shall bear
interest at the rate then applicable to the Loans.
 
(e)  Immediately upon Borrower’s receipt of any portion of the Collateral
evidenced by an agreement, Instrument or Document, including without limitation
any Chattel Paper, Borrower shall deliver the original thereof to Lender
together with an appropriate endorsement or other specific evidence of
assignment thereof to Lender (in form and substance acceptable to Lender). If an
endorsement or assignment of any such items shall not be made for any reason,
Lender is hereby irrevocably authorized, as Borrower’s attorney and
agent-in-fact, to endorse or assign the same on Borrower’s behalf.
 
9.  SCHEDULES AND REPORTS.
 
(a)  At the end of each month, upon each request for a Loan hereunder and at
such other times as may be requested by Lender from time to time hereafter,
Borrower shall deliver to Lender (i) a Borrowing Base Certificate certified by
an authorized officer of Borrower, which certificate includes a schedule
identifying each Eligible Order together with copies of the invoices, if
requested by Lender (with evidence of shipment attached) pertaining to each such
Eligible Order as well as daily sales, collections, cash receipts, credit and
adjustment reports and all appropriate supporting documentation; and (ii) such
additional schedules, certificates, reports and information with respect to the
Collateral as Lender may from time to time require. Lender, through its
officers, employees or agents, shall have the right, at any time and from time
to time in Lender’s name, in the name of a nominee of Lender or in Borrower’s
name, to verify the validity, amount or any other matter relating to any of
Borrower’s Accounts, by mail, telephone, telegraph or otherwise. Borrower shall
reimburse Lender, on demand, for all costs, fees and expenses incurred by Lender
in this regard. Borrower shall immediately notify Lender of any event causing
loss or depreciation in value of Borrower’s Inventory (other than normal
depreciation occurring in the ordinary course of business). Such monthly reports
may be submitted by telecopy, with originals to follow by U.S. Mail.
 
(b)  Without limiting the generality of the foregoing, Borrower shall deliver to
Lender, at least once a month, not later than the tenth (10th) day of each month
(or more frequently when requested by Lender), a month-end EBITDA certificate,
certified by an authorized officer of Borrower which reconciles to all month-end
financial reports and which states the amount of EBITDA for the prior month.
 
(c)  Without limiting the generality of the foregoing, Borrower shall deliver to
Lender, at least once a month, not later than the tenth (10th) day of each month
(or more frequently when requested by Lender), a month-end Borrowing Base
Certificate, certified by an authorized officer of Borrower which reconciles to
all month-end financial reports, an accounts receivable aging report (aged by
invoice date), an accounts payable aging report (aged by invoice date) and all
appropriate supporting documentation.
 
(d)  All schedules, certificates, reports, and assignments and other items
delivered by Borrower to Lender hereunder shall be executed by an authorized
representative of Borrower and shall be in such form and contain such
information as Lender shall specify.
 
10.  TERMINATION. This Agreement shall be in effect until the Termination Date.
The security interests and liens created under this Agreement and the Other
Agreements shall survive such termination until the payment of the Liabilities
has become indefeasible. In addition, the Covenants contained in Paragraphs
12(a), (b), (k), (l), (m), (n), (o), (p), (q), (r), and (s) shall survive the
Termination Date for so long as Lender holds the Initial Warrants, the
Additional Warrants or the Underlying Shares representing 25% of the Fully
Diluted Common Shares. At such time as Borrower has repaid all of the
Liabilities and this Agreement has terminated, Borrower shall deliver to Lender
a release, in form and substance satisfactory to Lender, of all obligations and
liabilities of Lender and its officers, directors, employees, agents and
Affiliates to Borrower.
 
11.  REPRESENTATIONS, WARRANTIES AND COVENANTS. Except as set forth in the
disclosure schedules provided by the Borrower to the Lender on the date hereof,
which may be supplemented with Lender’s approval from time to time after the
date hereof should any fact or condition require a change thereto (the
“Disclosure Schedule”), Borrower hereby represents, warrants and covenants that:
 
(a)  all of the direct and indirect Subsidiaries of Borrower are set forth on
Exhibit I. Except as set forth on Exhibit G, Borrower owns, directly or
indirectly, all of the capital stock or other equity interests of each
Subsidiary free and clear of any Liens, and all the issued and outstanding
shares of capital stock of each Subsidiary are validly issued and are fully
paid, non-assessable and free of preemptive and similar rights to subscribe for
or purchase securities;
 
(b)  Borrower and each of its Subsidiaries is an entity duly incorporated or
otherwise organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization (as applicable), with the
requisite power and authority to own and use its properties and assets and to
carry on its business as currently conducted. Neither Borrower nor any
Subsidiary is in violation or default of any of the provisions of its respective
certificate or articles of incorporation, bylaws or other organizational or
charter documents. Each of Borrower and its Subsidiaries is duly qualified to
conduct business and is in good standing as a foreign corporation or other
entity in each jurisdiction in which the nature of the business conducted or
property owned by it makes such qualification necessary, except where the
failure to be so qualified or in good standing, as the case may be, could not
have or reasonably be expected to result in (i) a material adverse effect on the
legality, validity or enforceability of this Agreement and/or the Other
Agreements, (ii) a material adverse effect on the results of operations, assets,
business, prospects or condition (financial or otherwise) of Borrower and its
Subsidiaries, taken as a whole, or (iii) a material adverse effect on Borrower’s
ability to perform in any material respect on a timely basis its obligations
under this Agreement and/or the Other Agreements (any of (i), (ii) or (iii), a
“Material Adverse Effect”) and no Proceeding has been instituted in any such
jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or
curtail such power and authority or qualification;
 
(c)  the execution, delivery and performance of this Agreement and the Other
Agreements by Borrower and the consummation by Borrower of the transactions
contemplated hereby and thereby do not and will not: (i) conflict with or
violate any provision of Borrower’s or any Subsidiary’s certificate or articles
of incorporation, bylaws or other organizational or charter documents, or (ii)
conflict with, or constitute a default (or an event that with notice or lapse of
time or both would become a default) under, result in the creation of any Lien
upon any of the properties or assets of Borrower or any Subsidiary, or give to
others any rights of termination, amendment, acceleration or cancellation (with
or without notice, lapse of time or both) of, any material agreement, credit
facility, debt or other instrument (evidencing a Company or Subsidiary debt or
otherwise) or other understanding to which Borrower or any Subsidiary is a party
or by which any property or asset of Borrower or any Subsidiary is bound or
affected, or (iii) subject to the Required Approvals, conflict with or result in
a violation of any material law, rule, regulation, order, judgment, injunction,
decree or other restriction of any court or governmental authority to which
Borrower or a Subsidiary is subject (including federal and state securities laws
and regulations), or by which any property or asset of Borrower or a Subsidiary
is bound or affected; except in the case of each of clauses (ii) and (iii), such
as could not have or reasonably be expected to result in a Material Adverse
Effect;
 
(d)  the financial statements delivered or to be delivered by Borrower to Lender
at or prior to the date of this Agreement and at all times subsequent thereto
fairly reflect the financial condition of Borrower in accordance with GAAP, and
there has been no adverse change in the financial condition, the operations or
any other status of Borrower since the date of the financial statements
delivered to Lender most recently prior to the date of this Agreement;
 
(e)  the office where Borrower keeps its books, records and accounts (or copies
thereof) concerning the Collateral, Borrower’s principal place of business and
all of Borrower’s other places of business, locations of Collateral and post
office boxes are as set forth in Exhibit J; Borrower shall promptly (but in no
event less than ten (10) days prior thereto) advise Lender in writing of the
proposed opening of any new place of business, the closing of any existing place
of business, any change in the location of Borrower’s books, records and
accounts (or copies thereof) or the opening or closing of any post office box of
Borrower;
 
(f)  the Collateral, including without limitation the Equipment (except any part
thereof which prior to the date of this Agreement Borrower shall have advised
Lender in writing consists of Collateral normally used in more than one state)
is and shall be kept, or, in the case of vehicles, based, only at the addresses
set forth on the first page of this Agreement or on Exhibit J;
 
(g)  if any of the Collateral consists of Goods of a type normally used in more
than one state, whether or not actually so used, Borrower shall immediately give
written notice to Lender of any use of any such Goods in any state other than a
state in which Borrower has previously advised Lender such Goods shall be used,
and such Goods shall not, unless Lender shall otherwise consent in writing, be
used outside of the continental United States;
 
(h)  Borrower is and shall at all times be the lawful owner of its property now
purportedly owned or hereafter purportedly acquired by Borrower, free from all
liens, claims, security interests and encumbrances whatsoever, whether
voluntarily or involuntarily created and whether or not perfected, other than
the Permitted Liens and except for sales of Inventory in the ordinary course of
business;
 
(i)  Borrower has the right and power and is duly authorized and empowered to
enter into, execute and deliver this Agreement and the Other Agreements and
perform its obligations hereunder and thereunder; Borrower’s execution, delivery
and performance of this Agreement and the Other Agreements does not and shall
not conflict with the provisions of any statute, regulation, ordinance or rule
of law, or any agreement, contract or other document which may now or hereafter
be binding on Borrower, and Borrower’s execution, delivery and performance of
this Agreement and the Other Agreements shall not result in the imposition of
any lien or other encumbrance which might result in any Materially Adversely
Effect upon any of Borrower’s property under any existing indenture, mortgage,
deed of trust, loan or credit agreement or other agreement or instrument by
which Borrower or any of its property may be bound or affected;
 
(j)  Borrower shall, and shall cause each of its Subsidiaries to comply in all
material respects with all applicable laws, rules and regulations of all
governmental authorities, the violation of which would reasonably be expected to
have a Material Adverse Effect upon the financial condition, operating results,
assets, operations or business prospects of Borrower and its Subsidiaries taken
as a whole, and pay and discharge when payable all taxes, assessments and
governmental charges (except to the extent the same are being contested in good
faith and adequate reserves therefor have been established);
 
(k)  there are no actions or proceedings which are pending or threatened against
Borrower which might result in any Materially Adversely Effect with respect to
Borrower’s property and Borrower shall, promptly upon becoming aware of any such
pending or threatened action or proceeding, give written notice thereof to
Lender;
 
(l)  Borrower has obtained all material licenses, authorizations, approvals and
permits, the lack of which would have a Material Adverse Effect on the operation
of its business, and Borrower is and shall remain in compliance in all material
respects with all applicable federal, state, local and foreign statutes, orders,
regulations, rules and ordinances (including, without limitation, statutes,
orders, regulations, rules, and ordinances relating to taxes, securities,
employee health and safety and environmental matters), the failure to comply
with which would have a Material Adverse Effect on its business, property,
assets, operations or condition, financial or otherwise;
 
(m)  other than Lender and those entities listed in Exhibit K, no Person has any
right to cause Borrower to effect the registration under the Securities Act of
any securities of Borrower;
 
(n)  the Securities are duly authorized and, when issued and paid for in
accordance with this Agreement and/or the Other Agreements, will be duly and
validly issued, fully paid and nonassessable, free and clear of all Liens
imposed by Borrower other than restrictions on transfer provided for in this
Agreement and/or the Other Agreements. The Underlying Shares, when issued in
accordance with the terms of this Agreement and/or the Other Agreements, will be
validly issued, fully paid and nonassessable, free and clear of all Liens
imposed by Borrower. The Initial Warrants shall be exercisable for 25% of
Borrower’s Fully Diluted Common Shares and the Additional Warrants shall be
exercisable for 15% of Borrower’s Fully Diluted Common Shares, therefore,
Borrower has reserved from its duly authorized capital stock a number of Common
Shares for issuance of the Underlying Shares at least equal to 40% of the
Borrower’s Fully Diluted Common Shares on the date hereof;
 
(o)  the capitalization of Borrower is as set forth on Exhibit L. Borrower has
not issued any capital stock since its most recently filed periodic report under
the Securities Exchange Act, except as set forth on Exhibit K, other than
pursuant to the exercise of employee stock options under Borrower’s stock option
plans, the issuance of Common Shares to employees pursuant to Borrower’s
employee stock purchase plan and pursuant to the conversion or exercise of
Common Shares Equivalents outstanding as of the date of the most recently filed
periodic report under the Securities Exchange Act. No Person has any right of
first refusal, preemptive right, right of participation, or any similar right to
participate in the transactions contemplated by this Agreement and/or the Other
Agreements. Except as a result of the purchase and sale of the Securities, or as
set forth in Schedule 11(o), there are no outstanding options, warrants, script
rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities, rights or obligations convertible into or
exercisable or exchangeable for, or giving any Person any right to subscribe for
or acquire, any Common Shares, or contracts, commitments, understandings or
arrangements by which Borrower or any Subsidiary is or may become bound to issue
additional Common Shares or Common Shares Equivalents. The issuance and sale of
the Securities will not obligate Borrower to issue Common Shares or other
securities to any Person (other than the Purchasers) and will not result in a
right of any holder of Company securities to adjust the exercise, conversion,
exchange or reset price under any of such securities. All of the outstanding
shares of capital stock of Borrower are validly issued, fully paid and
nonassessable, have been issued in compliance with all federal and state
securities laws, and none of such outstanding shares was issued in violation of
any preemptive rights or similar rights to subscribe for or purchase securities.
No further approval or authorization of any shareholder, the Board of Directors
of Borrower or others is required for the issuance and sale of the Securities.
There are no shareholders agreements, voting agreements or other similar
agreements with respect to Borrower’s capital stock to which Borrower is a party
or, to the Knowledge of Borrower, between or among any of Borrower’s
shareholders;
 
(p)  all written information now, heretofore or hereafter furnished by Borrower
to Lender is and shall be materially true and correct as of the date with
respect to which such information was or is furnished, except to the extent the
failure of such information being true and correct would not result in a
Material Adverse Effect on the Borrower;
 
(q)  Borrower is not conducting, permitting or suffering to be conducted, nor
shall it conduct, permit or suffer to be conducted, any activities or
transactions with any Affiliate of Borrower; provided, however, that Borrower
may enter into transactions with Affiliates of Borrower in the ordinary course
of business pursuant to terms that are no less favorable to Borrower than the
terms upon which such transfers or transactions would have been made had they
been made to or with a Person that is not an Affiliate of Borrower and, in
connection therewith, may transfer cash or property to Affiliates of Borrower
for fair value;
 
(r)  Except as set forth on Exhibit M, Borrower’s name has always been as set
forth on the first page of this Agreement and Borrower uses no tradenames or
division names in the operation of its business; Borrower shall notify Lender in
writing within ten (10) days of the change of its name or the use of any
tradenames or division names not previously disclosed to Lender in writing;
 
(s)  with respect to Borrower’s Equipment: (i) Borrower has good and
indefeasible and merchantable title to and ownership of all Equipment, including
without limitation the Equipment described on Exhibit N; (ii) Borrower shall
keep and maintain the Equipment in good operating condition and repair and shall
make all necessary replacements thereof and renewals thereto so that the value
and operating efficiency thereof shall at all times be preserved and maintained;
(iii) Borrower shall not permit any such items to become a Fixture to real
estate or an accession to other personal property; and (iv) Borrower,
immediately on demand by Lender, shall deliver to Lender any and all evidence of
ownership of, including without limitation, if applicable, certificates of title
and applications of title to, any of the Equipment;
 
(t)  this Agreement and the Other Agreements to which Borrower is a party are
the legal, valid and binding obligations of Borrower and are enforceable against
Borrower in accordance with their respective terms except as may be limited by
bankruptcy, insolvency, reorganization or other similar laws affecting the
enforcement of creditors’ rights generally and by general principles of equity;
 
(u)  Except as set forth on Schedule 11(u), Borrower is not now obligated, nor
shall it create, incur, assume or become obligated (directly or indirectly), for
any loans or other indebtedness for borrowed money other than the Loans, except
that Borrower may (i) borrow money from a Person other than Lender on an
unsecured and subordinated basis if a subordination agreement in favor of Lender
and in form and substance satisfactory to Lender is executed and delivered to
Lender relative thereto; (ii) maintain any present indebtedness to any Person
which is set forth on Exhibit O; and (iii) incur unsecured indebtedness to trade
creditors in the ordinary course of Borrower’s business;
 
(v)  Borrower does not own any margin securities, and none of the proceeds of
the Loans hereunder shall be used for the purpose of purchasing or carrying any
margin securities or for the purpose of reducing or retiring any indebtedness
which was originally incurred to purchase any margin securities or for any other
purpose not permitted by Regulation U of the Board of Governors of the Federal
Reserve System as in effect from time to time;
 
(w)  Exhibit H sets forth the names of all of the Subsidiaries of Borrower and
except as set forth on Exhibit H, Borrower has no subsidiaries or divisions, nor
is Borrower engaged in any joint venture or partnership with any other Person;
 
(x)  Borrower has not received written notice that it is in default under any
material contract, lease or commitment to which it is a party or by which it is
bound, nor does Borrower know of any dispute regarding any contract, lease or
commitment which is material to the continued financial success and well-being
of Borrower;
 
(y)  there are no controversies pending or to the Borrower’s Knowledge,
threatened between Borrower and any of its employees, other than employee
grievances arising in the ordinary course of business which would not, in the
aggregate, have a Material Adverse Effect on Borrower, and Borrower is in
compliance with all federal and state laws respecting employment and employment
terms, conditions and practices, except to the extent the Borrower’s failure to
be in compliance with all such laws would not result in a Material Adverse
Effect on Borrower;
 
(z)  Exhibit P, Schedule 1 contains a true and complete list of the Intellectual
Property, and includes details of all due dates for further filings, maintenance
and other payments or other actions falling due in respect of the Intellectual
Property within twelve (12) months following the date of this Agreement, and the
current status of the corresponding registrations, filings, applications and
payments;
 
(aa)  Borrower has not received written notice that it has infringed upon or
misappropriated any Intellectual Property rights of any person in Borrower’s
conduct of the Business. No written notice (i) challenging the validity,
effectiveness or ownership by Borrower of any of the Intellectual Property, or
(ii) to the effect that the use, distribution, licensing, sublicensing, sale or
any other exercise of rights in any product, service, work, technology or
process as now used or offered or proposed for use, licensing, sublicensing,
sale or other manner of commercial exploitation by Borrower infringes or will
infringe on any Intellectual Property rights or personal right of any Person
have been asserted or, to Borrower’s Knowledge, are threatened by any Person,
nor are there, to Borrower’s knowledge, any valid grounds for any bona fide
claim of any such kind. To Borrower’s knowledge, there is and has been no
unauthorized use, infringement or misappropriation of any Intellectual Property
by any third party, employee or former employee;
 
(bb)  Except as set forth on Exhibit P, Borrower does not owe any royalties or
other payments to third parties in respect of the Intellectual Property. All
royalties or other payments set forth on Exhibit P, Schedule 2 that have accrued
prior to the date of this Agreement have been paid; and
 
(cc)  Borrower represents, warrants and covenants to Lender that all
representations and warranties of Borrower contained in this Agreement (whether
appearing in Paragraph 11 or 12 hereof or elsewhere) shall be true at the time
of Borrower’s execution of this Agreement, shall survive the execution, delivery
and acceptance hereof by the parties hereto and the closing of the transactions
described herein or related hereto, shall be remade by Borrower at the time each
Loan is made pursuant to this Agreement.
 
12.  ADDITIONAL COVENANTS OF BORROWER. Except as otherwise contemplated in this
Agreement or necessary to comply with this Agreement or the Other Agreements,
unless Borrower obtains Lender’s prior written consent waiving or modifying any
of Borrower’s covenants hereunder in any specific instance, Borrower agrees as
follows:
 
(a)  Borrower shall at all times keep accurate and complete books, records and
accounts with respect to all of Borrower’s business activities, in accordance
with sound accounting practices and generally accepted accounting principles
consistently applied, and shall keep such books, records and accounts, and any
copies thereof, only at the addresses indicated for such purpose on Exhibit J;
 
(b)  Borrower agrees to deliver to Lender the following financial information,
all of which shall be prepared in accordance with generally accepted accounting
principles consistently applied: (i) no later than thirty (30) days after each
calendar month, copies of internally prepared financial statements, including
without limitation balance sheets and statements of income, retained earnings
and cash flow of Borrower, with a Compliance Certificate in the form of Exhibit
Q hereto, acknowledged by the Chief Financial Officer of Borrower to be true and
correct and free from material error, as well as detailed accounts payable and
accounts receivable agings; (ii) no later than ninety (90) days after the end of
each of Borrower’s fiscal years, annual financial statements audited by
independent certified public accountants selected by Borrower and satisfactory
to Lender, which financial statements shall be accompanied by a letter from such
accountants acknowledging that they are aware that Lender is relying upon such
financial statements in connection with the exercise of its rights hereunder and
a Compliance Certificate acknowledged by the Chief Financial Officer of Borrower
to be true and correct and free from material error; (iii) no later than the end
of each fiscal year of Borrower, Borrower shall deliver to Lender projected
balance sheets, income statements and projections of EBITDA (“EBITDA
Projections”) for the succeeding fiscal year, such projections to be prepared
showing monthly calculations; (iv) within ten (10) days after the filing
thereof, copies of Borrower’s United States corporate income tax returns; and
(v) such other financial information as Lender shall reasonably request;
 
(c)  Borrower shall promptly advise Lender in writing of any event that has had
a Material Adverse Effect, the occurrence of any Event of Default hereunder or
the occurrence of any event which, if uncured, will become an Event of Default
hereunder after notice or lapse of time (or both), and such written advise under
this Paragraph 12(c) shall not be deemed to cure or waive and an Event of
Default;
 
(d)  Lender, or any Persons designated by it, shall have the right, upon
providing the Borrower or its Subsidiaries, as the case may be, with no less
than one day prior written notice, to call at Borrower’s places of business at
any reasonable times, and, without hindrance or delay, to inspect the Collateral
and to inspect, audit, check and make extracts from Borrower’s books, records,
journals, orders, receipts and any correspondence and other data relating to
Borrower’s business, the Collateral or any transactions between the parties
hereto, and shall have the right to make such verification concerning Borrower’s
business as Lender may consider reasonable under the circumstances. Borrower
shall furnish to Lender such information relevant to Lender’s rights under this
Agreement as Lender shall at any time and from time to time request. Borrower
authorizes Lender to discuss the affairs, finances and business of Borrower with
any officers, employees or directors of Borrower or with any Affiliate or the
officers, employees or directors of any Affiliate, and to discuss the financial
condition of Borrower with Borrower’s independent public accountants;
 
(e)  Borrower shall:
 
(i)  keep the Collateral properly housed and shall keep the Collateral insured
for the full insurable value thereof against loss or damage by fire, theft,
explosion, sprinklers, collision (in the case of motor vehicles) and such other
risks as are customarily insured against by Persons engaged in businesses
similar to that of Borrower with such companies, in such amounts and under
policies in such form as shall be reasonably satisfactory to Lender. At the
request of Lender, original (or certified) copies of such policies of insurance
shall be delivered to Lender, together with evidence of payment of all premiums
therefor, and shall contain an endorsement, in form and substance acceptable to
Lender, showing loss under such insurance policies payable to Lender. Such
endorsement, or an independent instrument furnished to Lender, shall provide
that the insurance company shall give Lender at least thirty (30) days written
notice before any such policy of insurance is altered or cancelled and that no
act, whether willful or negligent, or default of Borrower or any other Person
shall affect the right of Lender to recover under such policy of insurance in
case of loss or damage. In addition, Borrower shall cause to be executed and
delivered to Lender an assignment of proceeds of its business interruption
insurance policies. Borrower hereby directs all insurers under such policies of
insurance to pay all proceeds payable thereunder directly to Lender; and
 
(ii)  maintain, at its expense, such public liability and third party property
damage insurance as is customary for Persons engaged in businesses similar to
that of Borrower with such companies and in such amounts, with such deductibles
and under policies in such form as shall be satisfactory to Lender and, at the
request of Lender, original (or certified) copies of such policies shall be
delivered to Lender, together with evidence of payment of all premiums therefor;
each such policy shall contain an endorsement showing Lender as additional
insured thereunder and providing that the insurance company shall give Lender at
least thirty (30) days written notice before any such policy shall be altered or
cancelled.
 
If Borrower at any time or times hereafter shall fail to obtain or maintain any
of the policies of insurance required above or to pay any premium in whole or in
part relating thereto, then Lender, without waiving or releasing any obligation
or default by Borrower hereunder, may (but shall be under no obligation to)
obtain and maintain such policies of insurance and pay such premiums and take
such other actions with respect thereto as Lender deems advisable. Such
insurance, if obtained by Lender, may, but need not protect Borrower’s interests
or pay any claim made by or against Borrower with respect to the Collateral.
Such insurance may be more expensive than the cost of insurance Borrower may be
able to obtain on its own and may be cancelled only upon Borrower providing
evidence that it has obtained the insurance as required above. All sums
disbursed by Lender in connection with any such actions, including without
limitation court costs, expenses, other charges relating thereto and reasonable
attorneys’ fees, shall be payable on demand by Borrower to Lender and, until
paid, shall bear interest at the highest rate then applicable to the Term Loans
hereunder;
 
(f)  Borrower shall not use its property, or any part thereof, in any unlawful
business or for any unlawful purpose or use or maintain any of its property in
any manner that does or could result in material damage to the environment or a
violation of any applicable environmental laws, rules or regulations; shall keep
its property in good condition, repair and order; shall permit Lender to examine
any of its property at any time; shall not permit its property, or any part
thereof, to be levied upon under execution, attachment, distraint or other legal
process; shall not grant a security interest in or suffer to exist a lien on any
of its property; shall not sell, lease, transfer or otherwise dispose of any of
its property except for the sale of Inventory in the ordinary course of its
business; and shall not secrete or abandon any of its property, or remove or
permit removal of any of its property from any of the locations listed on
Exhibit J or in any written notice to Lender pursuant to Paragraph 11(b) hereof,
except for the removal of Inventory sold in the ordinary course of Borrower’s
business;
 
(g)  all monies and other property obtained by Borrower from Lender pursuant to
this Agreement will be used solely for business purposes of Borrower as set
forth in its Securities Exchange Act reports;
 
(h)  Borrower shall, at the request of Lender, indicate on its records
concerning the Collateral a notation, in form satisfactory to Lender, of the
security interest of Lender hereunder, and Borrower shall not maintain
duplicates or copies of such records at any address other than Borrower’s
principal place of business set forth on the first page of this Agreement;
 
(i)  Borrower shall file all required tax returns and pay all of its taxes when
due, including without limitation taxes imposed by federal, state or municipal
agencies, and shall cause any liens for taxes to be promptly released; provided,
that Borrower shall have the right to contest the payment of such taxes in good
faith by appropriate proceedings so long as (i) the amount so contested is shown
on Borrower’s financial statements, (ii) the contesting of any such payment does
not give rise to a lien for taxes, (iii) Borrower keeps on deposit with Lender
an amount of money which, in the sole judgment of Lender, is sufficient to pay
such taxes and any interest or penalties that may accrue thereon, and (iv) if
Borrower fails to prosecute such contest with reasonable diligence, Lender may
apply the money so deposited in payment of such taxes. If Borrower fails to pay
any such taxes and in the absence of any such contest by Borrower, Lender may
(but shall be under no obligation to) advance and pay any sums required to pay
any such taxes and/or to secure the release of any lien therefor, and any sums
so advanced by Lender shall be payable by Borrower to Lender on demand, and,
until paid, shall bear interest at the highest rate then applicable to the Term
Loans hereunder;
 
(j)  Borrower shall not assume, guarantee or endorse, or otherwise become liable
in connection with, the obligations of any Person, except by endorsement of
instruments for deposit or collection or similar transactions in the ordinary
course of business;
 
(k)  Except for the payment of dividends to the holders of the Borrower’s Series
A or Series B Preferred Stock, Borrower shall not, except as expressly
contemplated by this Agreement, directly or indirectly declare or pay any
dividends or make any distributions upon any of its Common Shares;
 
(l)  Except in accordance with the rights and preferences of the Series A and
Series B Preferred Stock, Borrower shall not, directly or indirectly redeem,
purchase or otherwise acquire, or permit any Subsidiary to redeem, purchase or
otherwise acquire, any of Borrower’s Common Shares (including, without
limitation, warrants, options and other rights to acquire Common Shares);
 
(m)  Borrower shall not, except as expressly contemplated by this Agreement,
authorize, issue, sell or enter into any agreement providing for the issuance
(contingent or otherwise), or permit any Subsidiary to authorize, issue, sell or
enter into any agreement providing for the issuance (contingent or otherwise)
of, (i) any notes or debt securities containing equity features (including,
without limitation, any notes or debt securities convertible into or
exchangeable for Common Shares, issued in connection with the issuance of Common
Shares or containing profit participation features), (ii) any Common Shares (or
any securities convertible into or exchangeable for any Common Shares) or rights
to acquire any Common Shares, except in connection with any existing obligations
or issued and outstanding securities as of the date hereof that may be
convertible or exchangeable into Common Shares of the Borrower, in accordance
with their terms, or (iii) any Preferred Shares or rights to acquire any
Preferred Shares;
 
(n)  Borrower shall not merge or consolidate with any Person or permit any
Subsidiary to merge or consolidate with any Person (other than a wholly-owned
Subsidiary);
 
(o)  Borrower shall not sell, lease or otherwise dispose of, or permit any
Subsidiary to sell, lease or otherwise dispose of, more than 5% of the
consolidated assets of Borrower and its Subsidiaries (computed on the basis of
book value, determined in accordance with GAAP or fair market value, determined
by the Board in its reasonable good faith judgment) in any transaction or series
of related transactions (other than sales of inventory in the ordinary course of
business);
 
(p)  Borrower shall not liquidate, dissolve or effect a recapitalization or
reorganization in any form of transaction (including, without limitation, any
reorganization into partnership form);
 
(q)  Borrower shall not enter into, or permit any Subsidiary to enter into, the
ownership, active management or operation of any business other than the
business of Borrower as set forth in its Securities Exchange Act reports;
 
(r)  Borrower shall not enter into, or permit any Subsidiary to enter into, any
transaction with any of its or any of its Subsidiary’s officers, directors,
employees or Affiliates except in the ordinary course of its business;
 
(s)  Borrower shall not create, incur, assume or suffer to exist, or permit any
Subsidiary to create, incur, assume or suffer to exist, indebtedness for
borrowed money except as contemplated in this Agreement;
 
(t)  Borrower shall (i) keep in full force and effect any and all Plans which
may, from time to time, come into existence under ERISA, unless such Plans can
be terminated without liability to Borrower; (ii) make contributions to all of
the Plans in a timely manner and in a sufficient amount to comply with the
requirements of ERISA; (iii) comply with all material requirements of ERISA
which relate to Plans (including without limitation the minimum funding
standards of Section 302 of ERISA); and (iv) notify Lender immediately upon
receipt by Borrower of any notice of the institution of any proceeding or other
action which may result in the termination of any Plans;
 
(u)  Borrower shall reimburse Lender for all costs and expenses, including
without limitation legal expenses and reasonable attorneys’ fees, incurred by
Lender in connection with documentation and consummation of this transaction and
any other future transactions between Borrower and Lender, including without
limitation Uniform Commercial Code and other public record searches, lien
filings, Federal Express or similar express or messenger delivery, appraisal
costs, surveys, title insurance and environmental audit or review costs, and in
seeking to administer, collect, protect or enforce any rights in or to the
Collateral or incurred by Lender in seeking to collect any Liabilities and to
administer and/or enforce any of Lender’s rights under this Agreement and the
Other Agreements. All such costs, expenses and charges shall be payable by
Borrower to Lender on demand, and, until paid, shall bear interest at the
highest rate then applicable to the Term Loans hereunder;
 
(v)  Borrower shall not purchase or otherwise acquire (including without
limitation acquisition by way of capitalized lease), or commit to purchase or
otherwise acquire, any fixed asset, if, after giving affect to such purchase or
other acquisition, the aggregate costs of all fixed assets purchased or
otherwise acquired by Borrower would exceed Two Hundred Fifty Thousand Dollars
($250,000) during any fiscal year of Borrower;
 
(w)  As required by federal law and the Lender’s policies and practices, the
Lender may need to obtain, verify and record certain customer identification
information and documentation in connection with opening or maintaining
accounts, or establishing or continuing to provide services and Borrower agrees
to provide such information. In addition, and without limiting the foregoing
sentence, the Borrower shall (a) ensure, and cause each Subsidiary to ensure,
that no Person who owns a controlling interest in or otherwise controls the
Borrower or any Subsidiary is or shall be listed on the Specially Designated
Nationals and Blocked Person List or other similar lists maintained by the
Office of Foreign Assets Control (“OFAC”), the Department of the Treasury or
included in any Executive Orders, (b) not use or permit the use of the proceeds
of the Loans to violate any of the foreign asset control regulations of OFAC or
any enabling statute or Executive Order relating thereto, and (c) comply, and
cause each Subsidiary to comply, with all applicable Bank Secrecy Act (“BSA”)
laws and regulations, as amended; and
 
(x)  Borrower will propose to Lender procedures to protect the secrecy,
confidentiality, and value of all trade secrets and Intellectual Property Rights
included in the Intellectual Property; and, following Lender's reasonable
approval of such procedures, Borrower will implement and adhere to those
procedures in a commercially reasonable manner.
 
13.  INVESTMENT REPRESENTATIONS OF THE LENDER. In connection with its
acquisition of the Initial Warrants, the Additional Warrants and the underlying
shares of common stock of the Borrower, the Lender hereby represents and
warrants to the Borrower as follows:

(a) The Lender is aware that the Initial Warrants, the Additional Warrants and
the underlying shares of common stock of the Borrower are being offered and sold
by means of an exemption under the Securities Act, as well as exemptions under
certain state securities laws for nonpublic offerings, and that they make the
representations, declarations and warranties as contained in this Section 13
with the intent that the same shall be relied upon by the Borrower in
determining the Lender’s suitability as a purchaser of the Initial Warrants, the
Additional Warrants and the underlying shares of common stock of the Borrower;
 
(b) The Lender is, and on each date it exercises either the Initial Warrants or
the Additional Warrants, an “Accredited Investor” as defined in Rule 501 of
Regulation D promulgated under the Securities Act and has such knowledge and
experience in financial and business matters that it is capable of evaluating
the merits and risks of an investment in the Borrower and of making an informed
investment decision;

(c) The Lender is aware that it cannot sell or otherwise transfer the Initial
Warrants, the Additional Warrants or the underlying shares of common stock of
the Borrower without registration under applicable securities laws or without an
exemption therefrom, and is aware that it will be required to bear the financial
risks of its purchase for an indefinite period of time because, among other
reasons, the Initial Warrants, the Additional Warrants and the underlying shares
of common stock of the Borrower have not been registered with any regulatory
authority and, therefore, cannot be transferred or resold unless subsequently
registered under applicable securities laws or an exemption from such
registration is available;
 
(d) The Lender recognizes that no agency has recommended or endorsed the
purchase of the Initial Warrants, the Additional Warrants or the underlying
shares of common stock of the Borrower or passed upon the adequacy or accuracy
of the information set forth herein, and that the Borrower is relying on the
truth and accuracy of the representations, declarations and warranties made by
the Lender as contained herein in selling the Initial Warrants, the Additional
Warrants and the underlying shares of common stock of the Borrower to the
Lender;

(e) The Lender is not purchasing the Initial Warrants, the Additional Warrants
or the underlying shares of common stock of the Borrower as a result of any
advertisement, article, notice or other communication regarding the Initial
Warrants, the Additional Warrants or the underlying shares of common stock of
the Borrower published in any newspaper, magazine or similar media or broadcast
over television or radio or presented at any seminar or any other general
solicitation or general advertisement; and

(f) The Lender is purchasing the Initial Warrants, the Additional Warrants and
the underlying shares of common stock of the Borrower for investment for its own
account and not with a view to or for sale in connection with any distribution
of the Initial Warrants, the Additional Warrants or the underlying shares of
common stock of the Borrower to or for the accounts of others. The Lender does
not have any agreement or understanding, directly or indirectly, with any Person
to distribute the Initial Warrants, the Additional Warrants or the underlying
shares of common stock of the Borrower. The Lender agrees that it will not
dispose of the Initial Warrants, the Additional Warrants or the underlying
shares of common stock of the Borrower, or any portion thereof or interest
therein, unless and until counsel for the Borrower shall have determined that
the intended disposition is permissible and does not violate applicable
securities laws.

14.  DEFAULT. The occurrence of any one or more of the following events shall
constitute an “Event of Default” by Borrower hereunder:
 
(a)  the failure of any Obligor to pay when due any of the Liabilities, unless
otherwise cured by Borrower within five (5) days after the receipt of written
notice thereof;
 
(b)  the failure of any Obligor to perform, keep or observe any of the
covenants, conditions, promises, agreements or obligations of such Obligor under
this Agreement or any of the Other Agreements, unless otherwise cured by
Borrower within thirty (30) days after the receipt of written notice thereof;
 
(c)  the making or furnishing by any Obligor to Lender of any representation,
warranty, certificate, schedule, report or other communication within or in
connection with this Agreement or the Other Agreements or in connection with any
other agreement between such Obligor and Lender, which is untrue or misleading
in any material respect;
 
(d)  the making or any attempt to make any levy, seizure or attachment of any of
Borrower’s property, unless otherwise cured by Borrower within thirty (30) days
after the receipt of written notice thereof;
 
(e)  the commencement of any proceedings in bankruptcy by or against any Obligor
or for the liquidation or reorganization of any Obligor, or alleging that such
Obligor is insolvent or unable to pay its debts as they mature, or for the
readjustment or arrangement of any Obligor’s debts, whether under the United
States Bankruptcy Code or under any other law, whether state or federal, now or
hereafter existing for the relief of debtors, or the commencement of any
analogous statutory or non-statutory proceedings involving any Obligor;
provided, however, that if such commencement of proceedings against such Obligor
is involuntary and such Obligor is contesting such proceedings in good faith,
such action shall not constitute an Event of Default unless such proceedings are
not dismissed within thirty (30) days after the commencement of such
proceedings;
 
(f)  the appointment of a receiver or trustee for any Obligor, for any of the
Collateral or for any substantial part of any Obligor’s assets or the
institution of any proceedings for the dissolution, or the full or partial
liquidation, of any Obligor which is a corporation or a partnership; provided,
however, that if such appointment or commencement of proceedings against such
Obligor is involuntary and such Obligor is contesting such proceedings in good
faith, such action shall not constitute an Event of Default unless such
appointment is not revoked or such proceedings are not dismissed within thirty
(30) days after the commencement of such proceedings;
 
(g)  the entry of any judgment or order against any Obligor which remains
unsatisfied or undischarged and in effect for thirty (30) days after such entry
without a stay of enforcement or execution;
 
(h)  the dissolution of any Obligor which is a partnership or corporation,
unless otherwise cured by Borrower within thirty (30) days after the receipt of
written notice thereof;
 
(i)  the occurrence of a change of control of Borrower, except as contemplated
in this Agreement;
 
(j)  unless otherwise cured by Borrower within thirty (30) days after the
receipt of written notice thereof, the occurrence of an event of default under,
or the revocation or termination of, any agreement, instrument or document
executed and delivered by any Person to Lender pursuant to which such Person has
guaranteed to Lender the payment of all or any of the Liabilities or has granted
Lender a security interest in or lien upon some or all of such Person’s real
and/or personal property to secure the payment of all or any of the Liabilities;
 
(k)  unless otherwise cured by Borrower within thirty (30) days after the
receipt of written notice thereof, the occurrence of any material adverse change
in the financial condition of Borrower, including a material adverse change
regarding Borrower's Intellectual Property,, as determined by Lender in its sole
judgment or the occurrence of any event which, in Lender’s sole judgment might
have a material adverse effect on the financial condition of Borrower, including
a material adverse change regarding Borrower's Intellectual Property; or
 
(l)  Lender shall have declared an Event of Default with respect to an IP
Diligence Issue under Section 4(b)(i) of this Agreement.
 
15.  REMEDIES UPON AN EVENT OF DEFAULT.
 
(a)  Without limiting Lender’s right to demand payment of the Liabilities at any
time, upon the occurrence of an Event of Default, all of Borrower’s Liabilities
shall immediately and automatically become due and payable, without notice of
any kind and upon the occurrence of any other Event of Default, all Liabilities
may, at the option of Lender, and without demand, notice or legal process of any
kind, be declared, and immediately shall become, due and payable.
 
(b)  Upon the occurrence of an Event of Default, Lender may exercise from time
to time any rights and remedies available to it under the Uniform Commercial
Code and any other applicable law in addition to, and not in lieu of, any rights
and remedies expressly granted in this Agreement or in any of the Other
Agreements and all of Lender’s rights and remedies shall be cumulative and
non-exclusive to the extent permitted by law. In particular, but not by way of
limitation of the foregoing, Lender may, without notice, demand or legal process
of any kind, take possession of any or all of the Collateral (in addition to
Collateral of which it already has possession), wherever it may be found, and
for that purpose may pursue the same wherever it may be found, and may enter
into any of Borrower’s premises where any of the Collateral may be without
disturbing the business of the Borrower in any respect or causing any damage to
the real or personal property of the Borrower, and search for, take possession
of, remove, keep and store any of the Collateral until the same shall be sold or
otherwise disposed of, and Lender shall have the right to store the same at any
of Borrower’s premises without cost to Lender. At Lender’s request, Borrower
shall, at Borrower’s expense, assemble the Collateral and make it available to
Lender at one or more places to be designated by Lender and reasonably
convenient to Lender and Borrower. Borrower recognizes that if Borrower fails to
perform, observe or discharge any of its Liabilities under this Agreement or the
Other Agreements, no remedy at law will provide adequate relief to Lender, and
agrees that Lender shall be entitled to temporary and permanent injunctive
relief in any such case without the necessity of proving actual damages. Any
notification of intended disposition of any of the Collateral required by law
will be deemed to be a reasonable authenticated notification of disposition if
given at least ten (10) days prior to such disposition and such notice shall (i)
describe Lender and Borrower, (ii) describe the Collateral that is the subject
of the intended disposition, (iii) state the method of the intended disposition,
(iv) state that Borrower is entitled to an accounting of the Liabilities and
state the charge, if any, for an accounting and (v) state the time and place of
any public disposition or the time after which any private sale is to be made.
Lender may disclaim any warranties that might arise in connection with the sale,
lease or other disposition of the Collateral and has no obligation to provide
any warranties at such time. Any proceeds of any disposition by Lender of any of
the Collateral may be applied by Lender to the payment of expenses in connection
with the Collateral, including without limitation reasonable legal expenses and
reasonable attorneys’ fees, and any balance of such proceeds may be applied by
Lender toward the payment of such of the Liabilities, and in such order of
application, as Lender may from time to time elect.
 
16.  INDEMNIFICATION. Borrower agrees to defend (with counsel satisfactory to
Lender), protect, indemnify and hold harmless Lender, each Affiliate of Lender,
and each of their respective officers, directors, employees, attorneys and
agents (each an “Indemnified Party”) from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, claims,
costs, expenses and disbursements of any kind or nature (including without
limitation the disbursements and the reasonable fees of counsel for each
Indemnified Party in connection with any investigative, administrative or
judicial proceeding, whether or not the Indemnified Party shall be designated a
party thereto), which may be imposed on, incurred by, or asserted against, any
Indemnified Party (whether direct, indirect or consequential and whether based
on any federal, state or local laws or regulations, including without limitation
securities, environmental and commercial laws and regulations, under common law
or in equity, or based on contract or otherwise) in any manner relating to or
arising out of this Agreement or any Other Agreement, or any act, event or
transaction related or attendant thereto, the making and the management of the
Loans; provided, however, that Borrower shall not have any obligation hereunder
to any Indemnified Party with respect to matters caused by or resulting from the
willful misconduct or gross negligence of such Indemnified Party. To the extent
that the undertaking to indemnify set forth in the preceding sentence may be
unenforceable because it is violative of any law or public policy, Borrower
shall satisfy such undertaking to the maximum extent permitted by applicable
law. Any liability, obligation, loss, damage, penalty, cost or expense covered
by this indemnity shall be paid to each Indemnified Party within 15 days of
receipt of a written demand from an Indemnified Party, and, failing prompt
payment, shall, together with interest thereon at the highest rate then
applicable to the Loans hereunder from the date incurred by each Indemnified
Party until paid by Borrower, be added to the Liabilities of Borrower and be
secured by the Collateral. The provisions of this Paragraph 15 shall survive the
satisfaction and payment of the other Liabilities and the termination of this
Agreement.
 
17.  CONFIDENTIALITY. The Lender agrees to maintain the confidentiality of the
Information (as defined below), except that Information may be disclosed (a) to
its Related Parties, including accountants, legal counsel and other advisors (it
being understood that the Persons to whom such disclosure is made will be
informed of the confidential nature of such Information and instructed to keep
such Information confidential), (b) to the extent requested by any Governmental
Authority or rating agency, (c) to the extent required by applicable laws or
regulations or by any subpoena or similar legal process, (d) to any other party
to this Agreement, (e) in connection with the exercise of any remedies hereunder
or any suit, action or proceeding relating to this Agreement or any other Loan
Document or the enforcement of rights hereunder or thereunder, (f) subject to an
agreement containing provisions substantially the same as those of this
Paragraph, to any assignee of or participant in, or any prospective assignee of
or participant in, any of its rights or obligations under this Agreement, (g) to
any direct or indirect contractual counterparty relating to this Agreement or
such counterparty's professional advisor, (h) with the consent of the Borrower,
and (i) to the extent such Information (i) becomes publicly available other than
as a result of a breach of this Paragraph 16 or (ii) becomes available to the
Lender on a nonconfidential basis from a source other than a Borrower. The
Lender further agrees not to buy or sell Common Shares on the basis of
Information that is material and nonpublic at such time. For the purposes of
this Paragraph, “Information” means all information received from any Borrower
relating to a Borrower or its business, other than any information that (i) is
or becomes publicly known through no wrongful act of the Lender; (ii) is
obtained by the Lender from a third party lawfully in possession of such
information and having the legal right to transmit the same, (iii) is already
known to the Lender free of any restrictions at the time it is obtained from the
Borrower or (iv) is independently developed by the Lender without reference to
any confidential information of the Borrower. Any Person required to maintain
the confidentiality of Information as provided in this Paragraph shall be
considered to have complied with its obligation to do so if such Person has
exercised the same degree of care to maintain the confidentiality of such
Information as such Person would accord to its own confidential information.
 
18.  NOTICE. All notices required or permitted hereunder shall be in writing and
shall be deemed effectively given: (a) upon personal delivery to the party to be
notified; (b) when sent by confirmed facsimile if sent during normal business
hours of the recipient, if not, then on the next business day; (c) three (3)
business days after having been sent by registered or certified mail, return
receipt requested, postage prepaid; or (d) one (1) day after deposit with a
nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt.
 
All communications shall be sent as follows:
 
If to Borrower, to:
 
Sequiam Corporation
 
300 Sunport Lane
 
Orlando, FL 32809
 
Attention: Mark L. Mroczkowski
 
Facsimile: 407-240-1431
 
     
with a copy to:
 
     
Greenberg Traurig, P.A.
 
450 South Orange Avenue, Suite 650
 
Orlando, Florida 32801
 
 
Attention: Randolph Fields, Esq.
 
Facsimile: 407-650-8472
 
   
If to Lender, to:
 
Biometric Investors, L.L.C.
 
5111 Maryland Way, Suite 201
 
Brentwood, TN 37027
 
Attention: Roger Brown
 
Facsimile: (615) 221-1199
 
 
with a copy to:
 
 
Kenneth Hartmann, Esq.
 
330 W. State Street
 
Suite 200
 
Geneva, IL 60134
 
Facsimile: (630) 845-4039
 
 
 
with a copy to:
 
 
 
Stephen Tsoris, Esq.
 
Drinker Biddle Gardner Carton
 
191 N. Wacker Drive
 
Chicago, IL 60601
 
Facsimile: (312) 569-3142
 

 
19.  CHOICE OF GOVERNING LAW; CONSTRUCTION; FORUM SELECTION. This Agreement and
the Other Agreements are submitted by Borrower to Lender for Lender’s acceptance
or rejection at Lender’s principal place of business as an offer by Borrower to
borrow monies from Lender now and from time to time hereafter, and shall not be
binding upon Lender or become effective until accepted by Lender, in writing, at
said place of business. If so accepted by Lender, this Agreement and the Other
Agreements shall be deemed to have been made at said place of business. THIS
AGREEMENT AND THE OTHER AGREEMENTS SHALL BE GOVERNED AND CONTROLLED BY THE
INTERNAL LAWS OF THE STATE OF ILLINOIS AS TO INTERPRETATION, ENFORCEMENT,
VALIDITY, CONSTRUCTION, EFFECT, AND IN ALL OTHER RESPECTS, INCLUDING WITHOUT
LIMITATION THE LEGALITY OF THE INTEREST RATE AND OTHER CHARGES, BUT EXCLUDING
PERFECTION OF THE SECURITY INTERESTS IN THE COLLATERAL, WHICH SHALL BE GOVERNED
AND CONTROLLED BY THE LAWS OF THE RELEVANT JURISDICTION. If any provision of
this Agreement shall be held to be prohibited by or invalid under applicable
law, such provision shall be ineffective only to the extent of such prohibition
or invalidity, without invalidating the remainder of such provision or remaining
provisions of this Agreement.
 
To induce Lender to accept this Agreement, Borrower irrevocably agrees that,
subject to Lender’s sole and absolute election, ALL ACTIONS OR PROCEEDINGS IN
ANY WAY, MANNER OR RESPECT, ARISING OUT OF OR FROM OR RELATED TO THIS AGREEMENT,
THE OTHER AGREEMENTS OR THE COLLATERAL SHALL BE LITIGATED IN COURTS HAVING SITUS
WITHIN THE CITY OF CHICAGO, STATE OF ILLINOIS. BORROWER HEREBY CONSENTS AND
SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURTS LOCATED WITHIN
SAID CITY AND STATE. BORROWER HEREBY WAIVES ANY RIGHT IT MAY HAVE TO TRANSFER OR
CHANGE THE VENUE OF ANY LITIGATION BROUGHT AGAINST BORROWER BY LENDER IN
ACCORDANCE WITH THIS PARAGRAPH.
 
20.  PARTICIPATION; ASSIGNMENT. Lender shall have the right to assign all or any
of its rights under this Agreement and the Other Agreements, and/or to offer
participation interests therein, to any Person, without the consent of Borrower.
In such event, Borrower shall execute such agreements, instruments and documents
as Lender shall request in connection therewith, including without limitation
agreements, instruments and documents in favor of each assignee and participant.
 
21.  MODIFICATION AND BENEFIT OF AGREEMENT. This Agreement and the Other
Agreements may not be modified, altered or amended except by an agreement in
writing signed by Borrower and Lender. Borrower may not sell, assign or transfer
this Agreement, or the Other Agreements or any portion thereof, including
without limitation Borrower’s rights, titles, interest, remedies, powers or
duties thereunder.
 
22.  HEADINGS OF SUBDIVISIONS. The headings of subdivisions in this Agreement
are for convenience of reference only, and shall not govern the interpretation
of any of the provisions of this Agreement. As used herein, the term “including”
and its variations shall be construed to mean “including without limitation.”
 
23.  POWER OF ATTORNEY. Borrower acknowledges and agrees that its appointment of
Lender as its attorney and agent-in-fact for the purposes specified in this
Agreement is an appointment coupled with an interest and shall be irrevocable
until all of the Liabilities are paid in full and this Agreement is terminated.
 
24.  WAIVER OF JURY TRIAL; OTHER WAIVERS.
 
(a)  BORROWER HEREBY WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION OR
PROCEEDING WHICH PERTAINS DIRECTLY OR INDIRECTLY TO THIS AGREEMENT, ANY OF THE
OTHER AGREEMENTS, THE LIABILITIES, THE COLLATERAL, ANY ALLEGED TORTIOUS CONDUCT
BY BORROWER OR LENDER OR WHICH, IN ANY WAY, DIRECTLY OR INDIRECTLY, ARISES OUT
OF OR RELATES TO THE RELATIONSHIP BETWEEN BORROWER AND LENDER. IN NO EVENT SHALL
LENDER BE LIABLE FOR LOST PROFITS OR OTHER SPECIAL OR CONSEQUENTIAL DAMAGES.
 
(b)  Except as otherwise set forth herein, Borrower hereby waives demand,
presentment, protest and notice of nonpayment.
 
(c)  Lender’s failure, at any time or times hereafter, to require strict
performance by Borrower of any provision of this Agreement or any of the Other
Agreements shall not waive, affect or diminish any right of Lender thereafter to
demand strict compliance and performance therewith. Any suspension or waiver by
Lender of an Event of Default under this Agreement or any default under any of
the Other Agreements shall not suspend, waive or affect any other Event of
Default under this Agreement or any other default under any of the Other
Agreements, whether the same is prior or subsequent thereto and whether of the
same or of a different kind or character. No delay on the part of Lender in the
exercise of any right or remedy under this Agreement or any Other Agreement
shall preclude other or further exercise thereof or the exercise of any right or
remedy. None of the undertakings, agreements, warranties, covenants and
representations of Borrower contained in this Agreement or any of the Other
Agreements and no Event of Default under this Agreement or default under any of
the Other Agreements shall be deemed to have been suspended or waived by Lender
unless such suspension or waiver is in writing, signed by a duly authorized
officer of Lender and directed to Borrower specifying such suspension or waiver.
 
(Signatures continue on attached page)
 

--

--------------------------------------------------------------------------------

 
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the day and year first above written.
 
BORROWER:
 
SEQUIAM CORPORATION, a California corporation
 
By:  
 
Name:  
 
Title:  
 

 
LENDER:
 
BIOMETRICS INVESTORS, L.L.C., a Delaware limited liability company
 
By:  
 
Name: Roger Brown
 
Title: Manager
 

 

--------------------------------------------------------------------------------

 

LIST OF EXHIBITS
 
A - Additional Warrants
 
B - Gross Profit Margin Requirements
 
C - Initial Warrants
 
D - Permitted Liens
 
E - Registration Rights Agreement
 
F - Form of Borrower’s Base certificate 
 
G - Form of Shareholders Agreement
 
H - Commercial Tort Claims
 
I - Subsidiaries 
 
J - Business and Collateral Locations
 
K
-
Entities Authorized to Cause Borrower to Effect a Registration Under the
Securitieis Exchange Act of any Securities of Borrower

 
L - Borrower’s Capitalization
 
M - Additional Names
 
N - Equipment List
 
O - Indebtedness
 
P - Intellectual Property
 
Q - Certificate of Compliance
 
R - Forms of Notes 
 
S - Series A and Series B preferred Shareholders
 

--------------------------------------------------------------------------------

 
EXHIBIT A
 
Additional Warrants
 

--------------------------------------------------------------------------------

EXHIBIT B
 
Gross Profit Margin Requirements
 

 
For any customer (unless otherwise specified below), the Gross Profit Margin for
items of Inventory sold pursuant to any particular Order shall be greater or
equal to the gross profit margins set forth in the table below, in order to be
considered, in Lender’s sole discretion (unless otherwise agreed by Lender), an
Eligible Order.
 

 

 
Customer
 
Item of Inventory
 
Gross Profit Margin
 
All Customers of Borrower
 
Any Item of Inventory
 
[25%]
 
                 

 

--------------------------------------------------------------------------------

EXHIBIT C
 
Initial Warrants
 

--------------------------------------------------------------------------------

EXHIBIT D
 
Permitted Liens
 
The Company and the Subsidiaries have good and marketable title in fee simple to
all real property owned by them that is material to the business of the Company
and the Subsidiaries and good and marketable title in all personal property
owned by them that is material to the business of the Company and the
Subsidiaries, in each case free and clear of all Liens, except that all
Leasehold improvements are collaterized by the landlord (East Group Properties,
LP) and Biometrics Investors, L.L.C. has a security interest in all assets of
the Company. All the assets of Biometric Security (PTY) LTD are secured as
collateral for a purchase money note payable to AreGee Investments No. 105 (PTY)
LTD. The unpaid balance of that note is $37,500 and 178,000 Sequiam Corporation
restricted common shares. The shares of Sequiam East, Inc. serve as collateral
for a purchase money note of $150,000.

 

--------------------------------------------------------------------------------

EXHIBIT E
 
Registration Rights Agreement
 

--------------------------------------------------------------------------------

EXHIBIT F
 
Form of Borrower’s Base certificate
 

--------------------------------------------------------------------------------

EXHIBIT G
 
Form of Shareholders Agreement
 

--------------------------------------------------------------------------------

EXHIBIT H
 
Commercial Tort Claims
 
None
 

--------------------------------------------------------------------------------

EXHIBIT I
 
Subsidiaries
 
Each direct and indirect Subsidiary of the Company, the direct owner of such
Subsidiary and its percentage ownership thereof, is set forth below:

Subsidiary
Owner
Employer Identification #
Place of Incorporation
Percentage Ownership
Sequiam Software, Inc.
Sequiam Corporation
33-0998899
CA
100.00%
Sequiam Biometrics, Inc.
Sequiam Corporation
06-1691143
FL
100.00%
Sequiam Education, Inc.
Sequiam Corporation
41-2097750
FL
100.00%
Sequiam Sports, Inc.
Sequiam Corporation
59-3650544
DE
99.38%
Fingerprint Detection Technologies, Inc.
Sequiam Corporation
20-1115746
FL
100.00%
Constellation Biometrics
Corporation
Sequiam Corporation
20-1998878
FL
100.00%
Biometric Security (Pty) Ltd.
Constellation Biometrics
Corporation
2005/005066/07
South Africa
100.00%
Sequiam East, Inc. (f/k/a Magstone Innovation, Inc.)
Sequiam Corporation
1164611
China
80.00%

Biometrics Investors, L.L.C. holds the stock of all of the subsidiary companies
shown above as collateral for their loan except for Sequiam East, Inc. whose
ownership documentation is still in process with the Chinese government

 

--------------------------------------------------------------------------------

EXHIBIT J
 
Business and Collateral Locations
 
Corporate Headquarters
Sequiam Corporation
300 Sunport Lane
Orlando, FL 32809

Africa Office
Biometric Security (Pty) Ltd.
Tijger Park 111
No. 4, Ground Floor
Willie van Schoor Avenue
Bellville, South Africa
7535

Asia Office
Sequiam East, Inc.
Room 508, Venture Center
Tianan Hi-Tech Park, No. 730
Yingbin Road
Shiqiao Town
Panyu District
Guangzhou, China 511400
 

 

--------------------------------------------------------------------------------

EXHIBIT K
 
Entities Authorized to Cause Borrower to Effect a Registration Under the
Exchange Act of  Any Securities of Borrower
 

 
Biometrics Investors, L.L.C.
 

--------------------------------------------------------------------------------

EXHIBIT L
 
Borrower’s Capitalization
 
Shares outstanding at December 31., 2006
82,281,212
                           
Shares issued - Litghtmaker LLC (3/7/07)
684,000
shares issued pursuant to pre-existing agreements
                   
Shares issued - Lee Maher (3/14/07)
322,581
shares issued pursuant to pre-existing agreements
                   
Shares outstanding at March 27, 2007
83,287,793
                                                           
Warrants
                             
Warrant Holder
Shares
Price
Amount Due on Exercise
Issue Date
Expiration Date
                   
Walter H. Sullivan, III
-
1.00
-
2/6/2003
2/6/2007
                   
Walter H. Sullivan, III
1,000,000
0.75
750,000
4/22/2003
4/22/2007
                   
Walter H. Sullivan, III
20,000
1.25
25,000
6/1/2003
6/1/2007
                   
Walter H. Sullivan, III
1,000,000
0.75
750,000
6/19/2003
6/19/2007
                   
Walter H. Sullivan, III
2,000,000
0.75
1,500,000
9/15/2003
9/15/2007
                   
Walter H. Sullivan, III
1,000,000
0.50
500,000
10/15/2003
10/15/2007
                   
Walter H. Sullivan, III
2,647,059
0.17
450,000
12/17/2003
12/17/2007
                   
Walter H. Sullivan, III
260,000
0.66
171,600
11/19/2004
11/19/2009
                   
Lee Harrison Corbin, Attorney-in-Fact for the Trust Under the Will of John
Svenningsen
350,000
1.00
350,000
5/13/2003
5/12/2008
                   
Lee Harrison Corbin
100,000
0.25
25,000
12/18/2003
12/18/2008
                   
Lee Harrison Corbin
220,000
0.75
165,000
7/24/2003
7/24/2008
                   
Lee Harrison Corbin, Attorney-in-Fact for the Trust Under the Will of John
Svenningsen
200,000
0.25
50,000
12/18/2003
12/18/2008
                   
Lee Harrison Corbin, Attorney-in-Fact for the Trust Under the Will of John
Svenningsen
1,300,000
0.66
858,000
9/30/2004
9/30/2009
                   
Lee Harrison Corbin, Attorney-in-Fact for the Trust Under the Will of John
Svenningsen
150,000
0.33
49,500
12/16/2004
12/16/2009
                   
Lee Harrison Corbin, Attorney-in-Fact for the Trust Under the Will of John
Svenningsen
600,000
0.33
198,000
3/23/2005
3/23/2010
                   
Lee Harrison Corbin
195,000
0.66
128,700
9/30/2004
9/30/2009
                   
Eagle Funding, LLC
400,000
0.66
264,000
9/7/2004
9/7/2009
                   
Jane P. Trudeau
280,000
0.75
210,000
7/24/2003
7/24/2008
                   
Broad Street Ventures
350,000
0.35
-
11/25/2003
11/25/2008
                   
Broad Street Ventures
350,000
0.35
-
11/25/2003
11/25/2008
                   
Lee Harrison Corbin
525,000
0.32
168,000
1/5/2006
1/5/2011
                   
Series A Pfd Stock Placement Agent Warrants
                             
Vince Calicchia
25,190
0.21
5,290
11/30/2005
11/30/2010
                   
Vince Calicchia
16,031
0.21
3,367
11/30/2005
11/30/2010
                   
Carmelo Troccoli
58,929
0.21
12,375
11/30/2005
11/30/2010
                   
Carmelo Troccoli
37,501
0.21
7,875
11/30/2005
11/30/2010
                   
Harborview Capital Management LLC
344,500
0.21
72,345
11/30/2005
11/30/2010
                   
Harborview Capital Management LLC
-
0.21
-
11/30/2005
11/30/2010
                   
Jonathan Rich
7,990
0.21
1,678
11/30/2005
11/30/2010
                   
Jonathan Rich
5,086
0.21
1,068
11/30/2005
11/30/2010
                   
Jody Giraldo
11,786
0.21
2,475
11/30/2005
11/30/2010
                   
Jody Giraldo
7,500
0.21
1,575
11/30/2005
11/30/2010
                   
Brad Barnard
11,786
0.21
2,475
11/30/2005
11/30/2010
                   
Brad Barnard
7,500
0.21
1,575
11/30/2005
11/30/2010
                   
vFinance Investments, Inc.
518,386
0.21
108,861
11/30/2005
11/30/2010
                   
vFinance Investments, Inc.
-
0.21
-
11/30/2005
11/30/2010
                   
Nico Pronk
589,286
0.21
123,750
11/30/2005
11/30/2010
                   
Nico Pronk
375,000
0.21
78,750
11/30/2005
11/30/2010
                   
Series A Pfd Stockholders Warrants
                             
Harborview Master Fund LP
823,129
0.21
172,857
11/30/2005
11/30/2010
                   
Monarch Capital Fund Ltd.
600,000
0.21
126,000
11/30/2005
11/30/2010
                   
Nite Capital LP
935,376
0.21
196,429
11/30/2005
11/30/2010
                   
Double U Master Fund LP
399,997
0.21
83,999
11/30/2005
11/30/2010
                   
Alpha Capital
3,741,495
0.21
785,714
11/30/2005
11/30/2010
                   
Whalehaven Capital Fund Ltd.
2,164,895
0.21
454,628
11/30/2005
11/30/2010
                   
DKR Soundshire Oasis Holding Fund Ltd.
2,619,048
0.21
550,000
11/30/2005
11/30/2010
                   
Series B Pfd Stock (1st Issuance) Placement Agent Warrants
                             
Carmelo Troccoli
299,732
0.30
89,920
5/17/2006
5/17/2011
                   
Harborview Capital Management LLC
420,000
0.30
126,000
5/17/2006
5/17/2011
                   
Jonathan Rich
107,904
0.30
32,371
5/17/2006
5/17/2011
                   
Jody Giraldo
16,071
0.30
4,821
5/17/2006
5/17/2011
                   
Brad Barnard
16,071
0.30
4,821
5/17/2006
5/17/2011
                   
vFinance Investments, Inc.
1,155,954
0.30
346,786
5/17/2006
5/17/2011
                   
Nico Pronk
128,571
0.30
38,571
5/17/2006
5/17/2011
                   
Sean Martin
84,268
0.30
25,280
5/17/2006
5/17/2011
                   
Dani Sabo
42,857
0.30
12,857
5/17/2006
5/17/2011
                   
Thomas Suppanz
64,286
0.30
19,286
5/17/2006
5/17/2011
                   
Series B Pfd Stockholders (1st Issuance) Warrants
                             
Ellis International
476,190
0.30
142,857
5/17/2006
5/17/2011
                   
Brio Capital LP
476,190
0.30
142,857
5/17/2006
5/17/2011
                   
Double U Master Fund LP
952,381
0.30
285,714
5/17/2006
5/17/2011
                   
Lee Harrison Corbin
714,286
0.30
214,286
5/17/2006
5/17/2011
                   
Nite Capital LP
714,286
0.30
214,286
5/17/2006
5/17/2011
                   
Sibex Capital Fund Inc.
1,428,571
0.30
428,571
5/17/2006
5/17/2011
                   
Harborview Master Fund LP
714,286
0.30
214,286
5/17/2006
5/17/2011
                   
Monarch Capital Fund Ltd.
952,381
0.30
285,714
5/17/2006
5/17/2011
                   
Alpha Capital AG
2,380,952
0.30
714,286
5/17/2006
5/17/2011
                   
Whalehaven Capital Fund
1,666,667
0.30
500,000
5/17/2006
5/17/2011
                   
Thomas Torelli
714,286
0.30
214,286
5/17/2006
5/17/2011
                   
Martin J. Ferkin
166,667
0.30
50,000
5/17/2006
5/17/2011
                   
David Baum
119,048
0.30
35,714
5/17/2006
5/17/2011
                   
Howard Kent
190,476
0.30
57,143
5/17/2006
5/17/2011
                   
Noble Special Situations Fund LP
357,143
0.30
107,143
5/17/2006
5/17/2011
                   
Greg Silver
476,190
0.30
142,857
5/17/2006
5/17/2011
                   
CMS Capital
476,190
0.30
142,857
5/17/2006
5/17/2011
                   
Series B Pfd Stock (2nd Issuance) Placement Agent Warrants
                             
Nico Pronk
203,571
0.30
61,071
6/21/2006
6/21/2011
                   
Series B Pfd Stockholders (2nd Issuance) Warrants
                             
RFJM Partners LLC
476,190
0.30
142,857
6/21/2006
6/21/2011
                   
Nico Pronk
297,619
0.30
89,286
6/21/2006
6/21/2011
                   
Noble Special Situations Fund LP
357,143
0.30
107,143
6/21/2006
6/21/2011
                     
42,893,897
0.34
14,399,814
                       
Svenningsen Trust refinance of Laurus Funds
                             
Warrants
2,000,000
0.20
400,000
05/18/2005
05/18/2011
                   
Warrants
2,000,000
0.25
500,000
05/18/2005
05/18/2011
                   
Warrants
2,000,000
0.30
600,000
05/18/2005
05/18/2011
                     
6,000,000
0.25
1,500,000
                       
Laurus Debt Financing
                             
Warrants - Original No. 1
-
0.41
-
04/27/2004
04/27/2010
                   
Warrants - Original No. 2
-
0.50
-
04/27/2004
04/27/2010
                   
Warrants - Original No. 3
222,222
0.58
128,889
04/27/2004
04/27/2010
                   
Warrant issued on restructure No. 2
-
0.33
-
10/27/2004
10/27/2010
                   
Warrant issued on payoff No. 3
1,500,000
0.23
345,000
05/18/2005
05/18/2011
                     
1,722,222
0.28
473,889
                                                       
Convertible Preferred Stock
                                                             
Series A Preferred Stock
                             
Harborview Master Fund LP
-
0.21
-
11/30/2005
11/30/2008
                   
Monarch Capital Fund Ltd.
-
0.21
-
11/30/2005
11/30/2008
                   
Nite Capital LP
-
0.21
-
11/30/2005
11/30/2008
                   
Double U Master Fund LP
-
0.21
-
11/30/2005
11/30/2008
                   
Alpha Capital
-
0.21
-
11/30/2005
11/30/2008
                   
Whalehaven Capital Fund Ltd.
-
0.21
-
11/30/2005
11/30/2008
                   
DKR Soundshire Oasis Holding Fund Ltd.
-
0.21
-
11/30/2005
11/30/2008
                   
Series B Preferred Stock - 1st Issuance
                             
Ellis International
476,190
0.21
-
5/17/2006
none
                   
Brio Capital LP
476,190
0.21
-
5/17/2006
none
                   
Double U Master Fund LP
952,381
0.21
-
5/17/2006
none
                   
Lee Harrison Corbin
714,286
0.21
-
5/17/2006
none
                   
Nite Capital LP
714,286
0.21
-
5/17/2006
none
                   
Sibex Capital Fund Inc.
952,381
0.21
-
5/17/2006
none
                   
Harborview Master Fund LP
714,286
0.21
-
5/17/2006
none
                   
Monarch Capital Fund Ltd.
952,381
0.21
-
5/17/2006
none
                   
Alpha Capital AG
2,380,952
0.21
-
5/17/2006
none
                   
Whalehaven Capital Fund
1,666,667
0.21
-
5/17/2006
none
                   
Thomas Torelli
714,286
0.21
-
5/17/2006
none
                   
Martin J. Ferkin
166,667
0.21
-
5/17/2006
none
                   
David Baum
119,048
0.21
-
5/17/2006
none
                   
Howard Kent
190,476
0.21
-
5/17/2006
none
                   
Noble Special Situations Fund LP
357,143
0.21
-
5/17/2006
none
                   
Greg Silver
476,190
0.21
-
5/17/2006
none
                   
CMS Capital
476,190
0.21
-
5/17/2006
none
                   
Series B Preferred Stock - 2nd Issuance
                             
RFJM Partners LLC
476,190
0.21
-
6/21/2006
none
                   
Nico Pronk
297,619
0.21
-
6/21/2006
none
                   
Noble Special Situations Fund LP
357,143
0.21
-
6/21/2006
none
                     
13,630,952
0.21
                                                         
Employee Stock Options
                             
Option Holder
                             
Scott Garron
22,500
0.17
3,825
11/28/2003
11/28/2013
                   
L. Alan McGinn
225,000
0.17
38,250
11/28/2003
11/28/2013
                   
L. Alan McGinn
500,000
1.17
585,000
12/1/2002
9/23/2008
                   
Daniel Merillat
22,500
0.17
3,825
11/28/2003
11/28/2013
                   
Ron Spohn
22,500
0.17
3,825
11/28/2003
11/28/2013
                   
Lisa Wilde
15,000
0.17
2,550
11/28/2003
11/28/2013
                   
Nicholas VandenBrekel
5,000,000
0.187
935,000
11/28/2003
11/28/2013
                   
Mark Mroczkowski
4,000,000
0.187
748,000
11/28/2003
11/28/2013
                   
Peter Scholtz
50,000
0.18
9,000
3/1/2006
3/1/2016
                   
Kevin Henderson
333,334
0.18
60,000
3/1/2006
3/1/2016
                     
10,190,834
0.23
2,389,275
                                                       
Total options, warrants and convertible pfd stock
74,437,905
0.25
18,762,978
                                                       
Fully Diluted
157,725,698
                                                                               
           
Total number of fully diluted shares - subsequent to Biometrics Investors LLC
receiving warrants for an amount of common shares that would represent 40% of
the number of shares of common stock that the Company would have if all warrants
and conversion rights were exercised
262,876,163
                                                           
Warrants issued with the First Additional Advance (25%)
65,719,041
                           
Warrants issued with the Additional Advance (15%)
39,431,424
                           
Total - 40%
105,150,465
                                                           
 
In addition to the foregoing the Company will be obligated to issue stock
options for an additional 166,666 and 1,500,000 shares to Kevin Henderson and
Edward Chen, respectively, when those options vest in accordance with the terms
of their employment agreements all of which are publicly disclosed in SEC
filings.
                             
The Company has an obligation to issue 178,000 shares to Aregee Investments No.
105 (Pty) Ltd. in accordance with the Amended Promissory Note entered into on
December 1, 2006.
                                                                               
                                                                               
                                                                               
             

 

--------------------------------------------------------------------------------

EXHIBIT M
 
Additional Names
 

 
Wedge Net Experts, Inc.
 

--------------------------------------------------------------------------------

EXHIBIT N
 
Equipment List 
 
Equipment consists of the following at December 31, 2006:
 
Leasehold improvements
$1,465,270
Office furniture and fixtures
567,220
Computer equipment
226,526
Purchased software
151,701
 
2,410,717
Less accumulated depreciation
1,490,808
 
$919,909

 

--------------------------------------------------------------------------------

EXHIBIT O
 
Indebtedness
 
Unrelated Parties
Biometrics Investors, L.L.C.  $3,965,119
EastGroup Properties, LP  $1,429,978
Aregee Investments No. 105   $165,000 ($37,500 cash + 178,000 shares of
restricted common stock)
E-Team International Limited   $184,675
Cynthia Mroczkowski    $50,000

Related Parties
Nicholas VandenBrekel    $361,000
Mark Mroczkowski    $50,000
Alan McGinn     $12,000
Edward Chen     $150,000

 

--------------------------------------------------------------------------------

EXHIBIT P
 
Intellectual Property 
 
Schedule 1
 
(a) Sequiam Biometrics, Inc. is a party to that certain Co-operative Development
and Supply Agreement with Kwikset Corporation relating to the Smart Scan
technology.

(b) List of all Intellectual Property owned in whole or in part.
Proprietary Biometric Technologies
Software

1.  
BioTime 4.0. Biometric Time and Attendance Software

2.  
BioPay. Payroll system for use with BioTime. (New)

3.  
BioTools 4.0. Development Tools for creation of stand alone biometric
applications.

4.  
BioTools 4.0 Professional. Advanced development tools for creation of biometric
client server applications.

5.  
BioWeb. 2.0 Development tools for creation of biometrically authenticated web
sites.

6.  
BioDoor. Stand alone access control software.

7.  
BioAccess. (now part of BioTools)

8.  
BioRegister. Software for club/group membership tracking.

9.  
BioMail. Biometric enabling plug-in for Microsoft Outlook.

10.  
CanSecU 4.0. Biometric software suite that is bundled with OEM and ODM USB
fingerprint pods. Includes features like Windows login, biometric screensaver,
biometric file encryption,  one-touch biometric web site login, biometric
encrypted hard disk partitions etc..

11.  
CanSecU 925. Client/Server time and attendance software.

12.  
Shanghai Police Project. Client/Server biometric matching software for the
Shanghai police department.

13.  
Universal Biometric Interface (UBI) software development kit. Allows OEM
customers to modify the functionality of the UBI in real time.

14.  
HCB Development Tools. Software tools for testing and development of software
for the HCB product.

15.  
ScanQ Software Suite. A suite of software similar to CanSecU 4 that is to be
bundled with Authentec, Fujitsu and other sensors.

Hardware
 

1.  
Biovault 2.0. Full features biometric vault.

2.  
BioBox. Smaller version of the Biovault 2.0

3.  
Bank Box. Box designed to hold money for Banks in the Chinese market.

4.  
ScanQ. Fujitsu and CMOS II based PC based biometric pod.

5.  
BioPod. A match-on-device pod for real time authentication. Contains an ISO 7816
smart card reader and an Authentec sensor. We store the fingerprint on a smart
card and the device compares the fingerprints taken from the device to the one
on the card.

6.  
Biolock. Low cost biometric door lock.

7.  
HCB. Client/server time and attendance box that communicates billing data in
real time to Sequiam’s network operations center. The billing data is then made
accessible to clients.

8.  
HDT. Biometric/RFID PDA. This is a wireless Windows CE 5.0 PDA with a removable
RFID/Biometric module. When the device scans a user using its RFID chip the
fingerprint sensor authenticates that user, then the device wirelessly pulls
that users records from the server and displays it on the screen. Can be used
for venue control, ticketing and other portable projects (similar to devices
used by rental car attendants).

9.  
HCT. This device is under development for the US Border Patrol and the US Army.
It records a voice entry and attaches it to a fingerprint record.

10.  
OEM Mini. Inexpensive stripped down version of the UBI. This is used in very low
cost devices such as small safes and inexpensive products.

11.  
OEM 2. Full featured ‘wall-hang’ box used for access control and time and
attendance. Features include wireless access, Power over Ethernet, Data over
Ethernet, Camera, Anti-pass-thru mechanism, smart card interface, match
fingerprints on board and via server.

12.  
UBI. Mid to low range device for allowing manufacturers of products to enable
biometrics. This device can be added to safes, medicine cabinets etc. Can be
used with any product that uses an electric locking mechanism.

13.  
CMOS II. Low cost flat form factor optical biometric sensor. 500 dpi biometric
sensor for use in notebook computers, PDA’s, portable devices etc..

14.  
Fujitsu BioPod. Enclosure and mechanical design for the Fujitsu OEM/ODM sensor.

Test Hardware

1.  
We have various test equipment we have developed for testing BioVaults,
BioLocks  and other products during the manufacturing process. Both hardware and
software.

2.  
Some of the software includes software used to serialize the BioVault etc..

3.  
Sequiam also owns the injection molding tools for most of the products.

Trademarks

1.  
Sequiam BioLock - pending

2.  
Biometrics is the Key - pending

3.  
Consumer Lifestyle Biometrics - pending

4.  
Universal Biometrics Interface - pending

5.  
BioVault - Registration No. 3,182,790

6.  
IRP Internet Remote Print - Registration No. 3,105,889

7.  
QuestPrint - Registration No. 2,620,977

8.  
Sequiam - Registration No. 2,930,720

Patents

1.  
BioVault Patent Pending No. 60/302,154

2.  
BioVault locking Mechanism Patent Pending No. 10/358,013

3.  
Briteprint Patent No. 6,865,285 B1

Although the Company and the Subsidiaries have, or have rights to use, all
patents, patent applications, trademarks, trademark applications, service marks,
trade names, trade secrets, inventions, copyrights, licenses and other similar
intellectual property rights necessary or material for use in connection with
their respective businesses as described in the SEC Reports, the Company granted
a security interest in all of its patents and trademarks to Biometrics
Investors, L.L.C..

 

--------------------------------------------------------------------------------

EXHIBIT P
 
Intellectual Property
 
Schedule 2
 
Tacoma Technology, Inc. (“Tacoma”) shall receive a royalty on Tacoma products
sold by the Company on a per unit basis equal to the sum of 7% of monies
received. This payment shall be calculated and paid by wire transfer to Tacoma
every 30 days.

--------------------------------------------------------------------------------

EXHIBIT Q
 
Certificate of Compliance 
 

--------------------------------------------------------------------------------

EXHIBIT R
 
Forms of Notes 
 
Term Note A
 

--------------------------------------------------------------------------------

EXHIBIT R
 
Forms of Notes 
 
Term Note B
 
 
 

--------------------------------------------------------------------------------

EXHIBIT S
 
Series A Preferred Shareholders
 

--------------------------------------------------------------------------------

EXHIBIT S
 
Series B Preferred Shareholders