Document:

EXHIBIT 10.10

EXHIBIT 10.10 

SUBORDINATED
CONVERTIBLE NOTE
AND WARRANT PURCHASE AGREEMENT 

by and among 

A4S TECHNOLOGIES, INC.,
AS
THE COMPANY 
and 

GREGORY PUSEY,
AS AGENT 

and 

THE PURCHASERS
IDENTIFIED ON 
ANNEX A ATTACHED HERETO  

February 20, 2004 

TABLE OF CONTENTS  

		
	ARTICLE 1   DEFINITIONS                                                      

         1.1          Certain Definitions                                      

         1.2           Accounting Principles                                    

         1.3           Other Definitional Provisions; Construction              

ARTICLE 2   ISSUE AND SALE OF NOTES AND WARRANTS                             

         2.1           Authorization and Issuance of the Notes and Warrants     

         2.2           Sale and Purchase                                        

         2.3           The Closing                                              

         2.4           Subsequent Sales of Notes and Warrants                   

ARTICLE 3   REPAYMENT OF THE NOTES                                           

         3.1           Interest Rates and Interest Payments                     

         3.2           Repayment of the Notes                                   

         3.3           Optional Prepayment of Notes                             

         3.4           Notice of Optional Prepayment                            

         3.5           Mandatory Prepayment                                     

         3.6           Payment                                                  

         3.7           Maximum Lawful Rate                                      

         3.8           Certain Waivers                                          

ARTICLE 4   CONDITIONS                                                       

         4.1           Conditions to Purchase of Securities                     

ARTICLE 5   REPRESENTATIONS AND WARRANTIES OF THE COMPANY                    

         5.1           Representations and Warranties of the Company            

         5.2           Absolute Reliance on the Representations and Warranties  

ARTICLE 6   TRANSFER OF SECURITIES                                           

         6.1           Purchase Entirely for His Own Account                    

         6.2           Disclosure of Information                                

         6.3           Investment Experience                                    

         6.4           Restricted Securities                                    

         6.5           Legends                                                  

         6.6           Transfer of Notes                                        

         6.7           Replacement of Lost Notes                                

         6.8           No Other Representations Affected                        

         6.9           Advice of Counsel                                        

         6.10          No Other Representations Affected                        

ARTICLE 7   COVENANTS                                                        

         7.1           Affirmative Covenants                                    

         7.2           Negative Covenants                                       

ARTICLE 8   EVENTS OF DEFAULT                                                

         8.1           Events of Default
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	         8.2          Consequences of Event of Default                         

ARTICLE 9   THE AGENT                                                        

         9.1          Authorization and Action                                 

         9.2          Delegation of Duties                                     

         9.3          Exculpatory Provisions                                   

         9.4          Reliance                                                 

         9.5          Non-Reliance on Agent and Other Purchasers               

         9.6          Agent in its Individual Capacity                         

         9.7          Successor Agent                                          

         9.8          Consent of Purchasers                                    

         9.9          This Article Not Applicable to the Company               

ARTICLE 10   REGISTRATION RIGHTS                                             

         10.1         Piggyback Registrations                                  

         10.2         Registration Procedures                                  

         10.3         Registration Expenses                                    

         10.4         Indemnification                                          

         10.5         Participation in Underwritten Registrations              

         10.6         Termination of Registration Rights                       

ARTICLE 11   MISCELLANEOUS                                                   

         11.1         Successors and Assigns                                   

         11.2         Modifications and Amendments                             

         11.3         No Implied Waivers; Cumulative Remedies; Writing Required

         11.4         Reimbursement of Expenses                                

         11.5         Holidays                                                 

         11.6         Notices                                                  

         11.7         Survival                                                 

         11.8         Governing Law                                            

         11.9         Jury Trial Waiver                                        

         11.10        Severability                                             

         11.11        Headings                                                 

         11.12        Counterparts                                             

         11.13        Integration
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SUBORDINATED
CONVERTIBLE NOTE 
AND WARRANT PURCHASE AGREEMENT  

$500,000 Aggregate
Principal Amount of
Notes of the Company 
Due December 31, 2005 
And Warrants to
Purchase An Aggregate of 1,000,000 Shares of Common Stock 

        THIS
SUBORDINATED COVERTIBLE NOTE AND WARRANT PURCHASE AGREEMENT (this
“Agreement”), dated as of February 20, 2004, is by and among A4S
Technologies, Inc., a Montana corporation (the “Company”), the securities
purchasers that are now and hereafter at any time parties hereto and are listed in
Annex A (or any amendment or supplement thereto) attached hereto (each a
“Purchaser” and collectively, “Purchasers”), and GREGORY
PUSEY, as administrative agent for Purchasers (in such capacity “Agent”).
Capitalized terms used and not defined elsewhere in this Agreement are defined in
Article 1 hereof. 

        The
parties hereto, in consideration of the premises and their mutual covenants and agreements
herein set forth and intending to be legally bound hereby, covenant and agree as follows: 

ARTICLE 1 

DEFINITIONS 

        1.1  
Certain Definitions. In addition to other words and terms defined elsewhere in this
Agreement, the following words and terms have the meanings set forth below (and such
meanings shall be equally applicable to both the singular and plural form of the terms
defined, as the context may require): 

        “Affiliate”
shall mean with respect to any Person, any other Person that is directly or indirectly
controlling, controlled by or under common control with such Person or entity or any of
its Subsidiaries, and the term “control” (including the terms “controlled
by” and “under common control with”) shall mean having, directly or
indirectly, the power to direct or cause the direction of the management and policies of a
Person, whether through ownership of voting securities or by contract or otherwise.
Without limiting the foregoing, the ownership of ten percent (10%) or more of the voting
securities of a Person shall be deemed to constitute control and notwithstanding anything
to the contrary herein, neither Purchasers nor any of their respective Affiliates shall be
deemed to be Affiliates of the Company by virtue of the transactions contemplated in this
Agreement. 

        “Agent”
shall have the meaning assigned to such term in the preamble hereto and any successor
agent provided for hereunder. 

        “Agreement”
shall mean this Subordinated Convertible Note and Warrant Purchase Agreement, as the same
may be amended, restated, supplemented or otherwise modified from time to time. 

- 1 - 

        “Business”
shall mean the principal business of the Company as set forth in
Section 5.1(b) hereof and as such shall continue to be conducted following the
purchase and sale of the Securities. 

        “Business
Day” shall mean any day other than a Saturday, Sunday or other day on which
banking institutions in Kalispell, Montana, are authorized or required by law to close. 

        “By-laws”
shall mean the by-laws or analogous instrument governing the operations of the Company,
including all amendments and supplements thereto. 

        “Capitalized
Lease” shall mean any lease of Property which in accordance with GAAP is required
to be capitalized on the balance sheet of the lessee. 

        “Change
of Control” shall mean the occurrence of any of the following: 

         
          (a)       
          any transaction or series of related transactions resulting in the sale or
          issuance of securities or any rights to securities of Company by Company
          representing in the aggregate more than 50% of its issued and outstanding voting
          securities, on a fully diluted basis, or any transaction or series of
          related transactions resulting in the sale, transfer, assignment or other
          conveyance or disposition of any securities or any rights to securities of
          Company by any holder or holders thereof representing in the aggregate more than
          50% of the issued and outstanding voting securities of Company on a fully
          diluted basis and the receipt of any consideration in connection therewith; 

         
          (b)       
          a merger, consolidation, reorganization, recapitalization or share exchange in
          which the stockholders of Company immediately prior to such transaction receive,
          in exchange for securities of Company owned by them, cash, property or
          securities of the resulting or surviving entity and as a result thereof Persons
          who were holders of voting securities of Company and Underlying Common Stock
          hold less than 50% of the capital stock, calculated on a fully diluted basis, of
          the resulting corporation entitled to vote in the election of directors; 

         
          (c)       
          a sale, transfer or other disposition of 50% or more of the assets of the
          Company; or 

         
          (d)       
          any sale or issuance or series of sales or issuances of the Common Stock or any
          other voting security (or security convertible into, exchangeable for, or
          exercisable for any other voting security) of the Company within a 12-month
          period that results in a transfer of more than 50% of the issued and outstanding
          shares of voting stock of the Company or a transfer of more than 50% of the
          voting power of the Company. 

        Provided,
that, no effect shall be given to the conversion of any of the Notes in these
calculations. 

- 2 - 

        “Charter
Documents” shall mean the articles of incorporation, certificate of
incorporation, certificate of limited partnership, certificate of limited liability the
Company, articles of organization, certificate of organization, charter or analogous
organic instrument filed with the appropriate Governmental Authorities of the Company,
including all amendments and supplements thereto. 

        “Closing”
shall mean the closing of the purchase and sale of the Securities pursuant to this
Agreement. 

        “Closing
Date” shall mean the date and time for delivery and payment of the Notes and
Warrants as finally determined pursuant to Section 2.3 hereof. 

        “Code”
shall mean the Internal Revenue Code of 1986, as amended. 

        “Common
Stock” shall mean the common stock, without par value, of the Company. 

        “Company”
shall have the meaning assigned to such term in the introductory paragraph hereto. 

        “Controlled
Group” shall mean the “controlled group of corporations” as that term
is defined in Section 1563 of the Internal Revenue Code of 1986, as amended, of which
the Company is a part from time to time. 

        “Default”
shall mean any event or condition that, but for the giving of notice or the lapse of time,
or both, would constitute an Event of Default. 

        “Environmental
Laws” shall mean any Laws which address, are related to or are otherwise
concerned with environmental, health or safety issues, including any Laws relating to any
emissions, releases or discharges of Pollutants into ambient air, surface water, ground
water or land, or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, handling, clean-up or control of Pollutants or
any exposure or impact on worker health and safety. 

        “ERISA”
shall mean the Employee Retirement Income Security Act of 1974, as the same may from time
to time be amended, and the rules and regulations of any governmental agency or authority,
as from time to time in effect, promulgated thereunder. 

        “Event
of Default” shall mean any of the events of default described in
Section 8.1 hereof. 

        “Fiscal
Year” or “fiscal year” shall mean each 12-month period ending on
December 31 of each year. 

        “Governmental
Authorities” shall mean any federal, state or municipal court or other
governmental department, commission, board, bureau, agency or instrumentality,
governmental or quasi-governmental, domestic or foreign. 

- 3 - 

        “Investment”
as applied to any Person shall mean the amount paid or agreed to be paid or loaned,
advanced or contributed to other Persons, and in any event shall include (i) any direct or
indirect purchase or other acquisition of any notes, obligations, instruments, stock,
securities or ownership interest (including partnership interests and joint venture
interests) and (ii) any capital contribution to any other Person. 

        “IRS”
shall mean the Internal Revenue Service and any governmental body or agency succeeding to
the functions thereof. 

        “Laws”
shall mean all U.S. and foreign federal, state or local statutes, laws, rules,
regulations, ordinances, codes, policies, rules of common law, and the like, now or
hereafter in effect, including any judicial or administrative interpretations thereof, and
any judicial or administrative orders, consents, decrees or judgments. 

        “Lien”
shall mean any security interest, pledge, bailment, mortgage, hypothecation, deed of
trust, conditional sales and title retention agreement (including any lease in the nature
thereof), charge, encumbrance or other similar arrangement or interest in real or personal
property, whether such interest is based on common law, statute or contract. 

        “Life
Insurance” shall have the meaning assigned to such term in
Section 4.1(c) hereof. 

        “Material
Adverse Effect” shall mean a material adverse effect on the business, properties,
assets, liabilities or condition (financial or otherwise) of the Company, individually
and/or taken as a whole. 

        “Notes”
shall have the meaning assigned to such term in Section 2.1 hereof. 

        “Options”
shall mean options issued pursuant to the Company’s 2001 Stock Plan, subject to the
restriction set forth in Section 7.2(c). 

        “Other
Taxes” shall have the meaning assigned to such term in Section 3.7
hereof. 

        “Person”
shall mean any individual, partnership, limited partnership, corporation, limited
liability Company, association, joint stock company, trust, joint venture, unincorporated
organization or governmental entity or department, agency or political subdivision
thereof. 

        “Piggyback
Registration” shall have the meaning assigned to such term in
Section 10.1 hereof. 

        “Plan”
shall mean any employee benefit plan (within the meaning of Section 3(3) of ERISA),
established or maintained by the Company or any member of the Controlled Group. 

        “Properties
and Facilities” shall have the meaning assigned to such term in
Section 5.1(q) hereof. 

        “Property”
shall mean, as to any Person, all types of real, personal, tangible, intangible or mixed
property owned by such Person whether or not included in the most recent balance sheet of
such Person and its subsidiaries under GAAP. 

- 4 - 

        “Proprietary
Rights” shall mean all patents, trademarks, trade names, service marks,
copyrights, inventions, production methods, licenses, formulas, know-how, trade secrets
and good will related to any of the foregoing, regardless of whether such are registered
with any Governmental Authorities, including applications therefor. 

        “Purchase
Documents” shall mean this Agreement, the Notes, the Warrants and all other
agreements, instruments and documents delivered in connection herewith or therewith as any
or all of the foregoing may be supplemented or amended from time to time. 

        “Purchaser”
shall have the meaning assigned to such term in the introductory paragraph hereto. 

        “Qualified
IPO” means the consummation of a public offering of Common Stock to the general
public under the Securities Act completed by the Company at a price per share of Common
Stock of not less than $3.00 and in which the net proceeds to the Company are not less
than $2,500,000, or any other public offering approved by the Required Purchasers. 

        “Registrable
Securities” shall mean any shares of Common Stock purchased upon the conversion
of any Note and the exercise of any Warrant (it being understood that exercise of the
Warrant shall include exercise pursuant to either Section 1.1 of the Warrant or exercise
of the conversion right pursuant to Section 1.2 of the Warrant). 

        “Required
Purchasers” shall mean, at any time, Purchasers holding a pro rata percentage of
the outstanding principal amount of the Notes aggregating at least 50% at such time. 

        “SEC”
shall mean the Securities and Exchange Commission and any governmental body or agency
succeeding to the functions thereof. 

        “Securities
Act” shall mean the Securities Act of 1933, as amended. 

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

        “Subsidiary”
of any corporation shall mean any other corporation or limited liability company of which
the outstanding capital stock possessing a majority of voting power in the election of
directors (otherwise than as the result of a default) is owned or controlled by such
corporation directly or indirectly through Subsidiaries. 

        “Transaction
Documents” shall have the meaning assigned to such term in
Section 5.1(f) hereof. 

        “Transactions”
shall mean the incurrence of debt as contemplated by this Agreement, the Notes and all
other agreements contemplated hereby and thereby. 

        “Underlying
Common Stock” shall mean (a) the Common Stock issued or issuable upon conversion
of the Notes, (b) the Common Stock issued or issuable upon exercise of the Warrants (it
being understood that exercise of the Warrant shall include exercise pursuant to either
Section 1.1 of the Warrant or exercise of the conversion right pursuant to Section 1.2 of
the Warrant), and (c) any equity securities issued or issuable with respect to the
securities referred to in clauses (a) and (b) above by way of stock dividend or stock
split or in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization. 

- 5 - 

        “Warrants”
shall have the meaning assigned to such term in Section 2.1 hereof. 

        1.2  
Accounting Principles. The character or amount of any asset, liability, capital
account or reserve and of any item of income or expense to be determined, and any
consolidation or other accounting computation to be made, and the construction of any
definition containing a financial term, pursuant to this Agreement shall be determined or
made in accordance with generally accepted accounting principles in the United States of
America consistently applied (“GAAP”), unless such principles are
inconsistent with the express requirements of this Agreement. 

        1.3  
Other Definitional Provisions; Construction. Whenever the context so requires,
neuter gender includes the masculine and feminine, the singular number includes the plural
and vice versa. The words “hereof” “herein” and “hereunder”
and words of similar import when used in this Agreement shall refer to this Agreement as a
whole and not in any particular provision of this agreement, and references to section,
article, annex, schedule, exhibit and like references are references to this Agreement
unless otherwise specified. A Default or Event of Default shall “continue” or be
“continuing” until such Default or Event of Default has been cured or waived by
Agent and Purchasers. References in this Agreement to any Persons shall include such
Persons’ successors and permitted assigns. Other terms contained in this Agreement
(which are not otherwise specifically defined herein) shall have meanings provided in
Article 9 of the Montana Uniform Commercial Code on the date hereof to the extent the
same are used or defined therein. 

ARTICLE 2 

ISSUE AND SALE OF NOTES
AND WARRANTS 

        2.1  
Authorization and Issuance of the Notes and Warrants. The Company has duly
authorized the issuance and sale to Purchasers of up to $500,000 in aggregate principal
amount of the Company’s Subordinated Convertible Promissory Notes Due
December 31, 2005 (including any Notes issued in substitution therefor pursuant to
Sections 6.6 and 6.7 hereof, the “Notes”), to be
substantially in the form of the Note attached hereto as Exhibit A, and Warrants to
purchase up to 1,000,000 shares of Common Stock at $.50 per share (the
“Warrants”), to be substantially in the form of the Warrant attached hereto as
Exhibit B. 

        2.2  
Sale and Purchase. Subject to the terms and conditions and in reliance upon the
representations, warranties and agreements set forth herein, (a) the Company shall
sell to Purchasers for an aggregate amount of $500,500, and Purchasers shall purchase from
the Company, in an amount equal to the pro rata portion of the Notes as set forth on
Annex A, the Notes in the aggregate principal amount of $500,000 and, for
$500, in the amounts set forth on Annex A, the Warrants to purchase up to an aggregate of
1,000,000 shares of Common Stock. 

        2.3  
The Closing. Delivery of and payment for the Notes (the “Closing”)
shall be made at the offices of Patton Boggs LLP, 1660 Lincoln Street, Ste. 1900, Denver,
Colorado, commencing at 10:00 a.m., local time, on March 5, 2004, or at such place or on
such other date on or before March 31, 2004 as may be mutually agreeable to the Company
and Purchasers. The date and time of the Closing as finally determined pursuant to this
Section 2.3 are referred to herein as the “Closing Date.”
Delivery of the Notes and Warrants shall be made to Purchasers against payment of the
purchase price therefor, by check or by wire transfer of immediately available funds in
the manner agreed to by the Company and Purchasers. The Notes and the Warrants shall be
issued in such name or names and in such permitted denomination or denominations as set
forth in Annex A or as Purchasers may request prior to the Closing Date. 

- 6 - 

      2.4  
Subsequent Sales of Notes and Warrants. 

        At
any time on or before the 30th day following the Closing Date, the Company may
sell up to the balance of the total offering of $500,500, consisting of $500,000 aggregate
principal amount of the Notes and Warrants to purchase up to an aggregate of 500,000
shares of Common Stock not sold at the Closing to such persons (the “Additional
Purchasers”) as may be approved by the Board of Directors of the Company. The Company
may also make subsequent sales of the Notes and Warrants up to the balance of the total
offering of an aggregate principal amount of $500,500 of the Notes and Warrants at such
later time as may be approved by the Board of Directors of the Company and the Required
Purchasers. All such sales made at any additional closings (each an “Additional
Closing”), (a) shall be made on the terms and conditions set forth in this Agreement
(b) the representations and warranties of the Company set forth in Article 5 shall speak
as of the Closing and the Company shall have no obligation to update any such disclosure,
and (c) the representations and warranties of the Additional Purchasers in Article 6
hereof shall speak as of such Additional Closing. This Agreement may be amended by the
Company without the consent of the Purchasers to revise Annex A to include information
relating to Additional Purchasers. Any Notes and Warrants sold pursuant to this Section
2.4 shall be deemed to be “Notes” and “Warrants” for all purposes
under this Agreement, and any Additional Purchasers thereof shall be deemed to be
“Purchasers” for all purposes under this Agreement. 

ARTICLE 3 

REPAYMENT OF THE NOTES 

        3.1  
Interest Rates and Interest Payments. The Company covenants and agrees to make
payments to the Purchasers of accrued interest on the Notes on December 31, 2005. The
Notes will bear interest on the outstanding principal amount thereof at a fixed rate equal
to 6% per annum. Interest on the Notes will be computed on the basis of a year of 360
days, composed of 12, 30-day months, and the actual number of days elapsed. 

        3.2  
Repayment of the Notes. The Company covenants and agrees to repay to Purchasers the
unpaid principal balance of the Notes in full, together with all accrued and unpaid
interest, fees and other amounts due hereunder on December 31, 2005. Upon the
agreement of the Company and the Required Purchasers, the maturity date may be extended,
but to no later than December 31, 2006. 

- 7 - 

        3.3  
Optional Prepayment of Notes. Upon the agreement of the Company and the Required
Purchasers, the Company may prepay to Purchasers, the outstanding principal amount of the
Notes in whole or in part in multiples of $5,000, or such lesser amount as is then
outstanding, plus the accrued interest to the date set for prepayment: 

        3.4  
Notice of Optional Prepayment. If the Company, with the agreement of the Required
Purchasers, shall elect to prepay any Notes pursuant to Section 3.3 hereof,
the Company shall give notice of such prepayment to Purchasers and each holder of the
Notes to be prepaid not less than 30 days or more than 90 days prior to the date fixed for
prepayment, specifying (a) the date on which such prepayment is to be made,
(b) the principal amount of such Notes to be prepaid on such date, and (c) accrued
interest applicable to the prepayment. Such notice shall be accompanied by a certificate
of the president of the Company that such prepayment is being made in compliance with
Section 3.3 hereof. Notice of prepayment having been so given, the aggregate
principal amount of the Notes specified in such notice, together with accrued interest
thereon shall become due and payable on the prepayment date set forth in such notice. 

        3.5  
Mandatory Prepayment. The Notes shall be prepaid in full, together with all
interest and expenses, as if such prepayment were a voluntary prepayment, in the event
of a Change of Control, unless, in each case, the Required Purchasers agree
otherwise. 

        3.6  
Payment. The Company will pay all sums becoming due on such Note for principal and
interest to Purchasers and at the addresses specified on the signature page to this
Agreement or at such other addresses as Purchasers shall have from time to time specified
to the Company in writing for such purpose, without the presentation or surrender of such
Note or the making of any notation thereon, except that upon written request of the
Company made concurrently with or reasonably promptly after payment or prepayment in full
of any Note, each holder of a Note shall surrender such Note for cancellation, reasonably
promptly after such request, to the Company at its principal executive office. 

        3.7  
Maximum Lawful Rate. This Agreement, the Notes, the Warrants and the other Purchase
Documents are hereby limited by this Section 3.7. In no event, whether by
reason of acceleration of the maturity of the amounts due hereunder or otherwise, shall
interest and fees contracted for, charged, received, paid or agreed to be paid to
Purchasers exceed the maximum amount permissible under such applicable law. If, from any
circumstance whatsoever, interest and fees would otherwise be payable to Purchasers in
excess of the maximum amount permissible under such applicable law, the interest and fees
shall be reduced to the maximum amount permitted under applicable law. If from any
circumstance, Agent or Purchasers shall have received anything of value deemed interest by
applicable law in excess of the maximum lawful amount, an amount equal to any excess of
interest shall be applied to the reduction of the principal amount of the Notes, in such
manner as may be determined by Purchasers, and not to the payment of fees or interest, or
if such excessive interest exceeds the unpaid balance of the principal amount of the
Notes, such excess shall be refunded to the Company. 

        3.8  
Certain Waivers. The Company unconditionally waives (a) any rights to
presentment, demand, protest or (except as expressly required hereby) notice of any kind,
and (b) any rights of rescission, setoff, counterclaim or defense to payment under
the Notes. 

- 8 - 

ARTICLE 4 

CONDITIONS 

        4.1  
Conditions to Purchase of Securities. The obligation of Purchasers to purchase and
pay for the Notes and Warrants is subject to the satisfaction, prior to or at the Closing,
of the following conditions: 

         
          (a)       
          Representations and Warranties True. The representations and warranties
          contained in Article 5 hereof shall be true and correct in all
          material respects at and as of the Closing Date as though then made, except to
          the extent of changes caused by the transactions expressly contemplated herein. 

         
          (b)       
          Material Adverse Change. There will have been no material adverse change
          in the business of the Company since December 31, 2003. 

         
          (c)       
          Life Insurance. The Company shall have delivered to Agent a copy of the
          policy or communication from the insurance agent or insurance company in form
          and substance satisfactory to the Agent that a paid life insurance policy by a
          carrier reasonably acceptable to Agent insuring the life of Michael Siemens in
          the amount of $500,000 naming the Company as the beneficiary has been issued and
          is in effect (the “Life Insurance”). 

         
          (d)       
          Closing Documents. The Company shall have delivered or caused to be
          delivered to Agent all of the following documents in form and substance
          satisfactory to Agent: 

	 	        (i)
                           one or more Notes (as
designated by Agent and Purchasers pursuant to Section 2.1 and Annex A hereof)
in aggregate original           principal amounts as set forth herein, duly completed and
executed by the           Company;  

	 	        (ii)
                           one or more Warrants (as
designated by Agent and Purchasers pursuant to Section           2.1 and Annex A hereof)
in aggregate original amounts as set forth herein, duly           completed and executed
by the Company;  

	 	        (iii)
                           a copy of the Charter
Documents and Bylaws of the Company, certified by the           President of the Company
as of the Closing Date;  

	 	        (iv)
                           copies of the resolutions
duly adopted by the Company’s board of directors           authorizing the
execution, delivery and performance by the Company of this           Agreement and each
of the other agreements, instruments and documents           contemplated hereby to which
the Company is a party, and the consummation of all           of the other Transactions,
certified as of the Closing Date by the president or           secretary of the Company;  

- 9 - 

	 	        (v)
                           a certificate dated as of
the Closing Date from an officer of the Company           stating that the conditions
specified in this Section 4.1 have been           fully satisfied or waived
by Agent; and  

	 	        (vi)
                           such other documents
relating to the Transactions contemplated by this           Agreement as Agent may
reasonably request.  

         
          (e)       
          Proceedings. All proceedings taken or required to be taken in connection
          with the transactions contemplated hereby to be consummated at or prior to the
          Closing and all documents incident thereto will be satisfactory in form and
          substance to Agent and to Purchasers. 

         
          (f)       
          Waiver. Any condition specified in this Section 4.1 may be
          waived by Agent; provided that no such waiver will be effective
          against Agent unless it is set forth in a writing executed by Agent. 

ARTICLE 5 

REPRESENTATIONS AND
WARRANTIES OF THE COMPANY 

        5.1  
Representations and Warranties of the Company. As a material inducement to Agent
and Purchasers to enter into this Agreement and purchase the Notes, the Company hereby
represents and warrants to Agent and Purchasers as follows: 

         
          (a)       
          Organization and Power. The Company is duly organized, validly existing
          and in good standing under the laws of its state of organization. The Company
          has all requisite corporate or other organizational power and authority and all
          material licenses, permits, approvals and authorizations necessary to own and
          operate its properties, to carry on its businesses as now conducted and
          presently proposed to be conducted and to carry out the Transactions, and is
          qualified to do business in every jurisdiction where the failure to so qualify
          might reasonably be expected to have a Material Adverse Effect. The Company has
          its principal place of business in Kalispell, Montana. The copies of the Charter
          Documents and By-Laws of the Company that have been furnished to Agent reflect
          all amendments made thereto at any time prior to the date of this Agreement and
          are correct and complete. 

         
          (b)       
          Principal Business. The Company is primarily engaged in the business of
          software development and hardware integration specializing in real-time audio
          and video streaming, compression, storage and management technologies for
          surveillance applications (the “Business”). 

         
          (c)       
          Financial Statements and Financial Projections. 

	 	        (i)
       Financial Statements. The Company has
delivered to Agent copies of its           audited year-end financial statements for and
as of the end of the fiscal year           ended December 31, 2000 and unaudited
financial statements for and as of the           fiscal years ended December 31, 2001 and
December 31, 2002 and December 31, 2003           (the “Annual Statements”).
The Annual Statements were compiled           from the books and records maintained by
the Company’s management, are           correct and complete and fairly represent
the financial condition of the Company           as of their dates and the results of
operations for the periods then ended.  

- 10 - 

	 	        (ii)
       Financial Projections. The Company
delivered to Agent on December 22,           2003 financial projections of the Company
for the period January 1, 2004           through December 31, 2006 derived from
various assumptions of the           Company’s management (the “Financial
Projections”). The           Financial Projections represent reasonable possible
results in light of the           history of the Business and the Company, present and
foreseeable conditions and           the intentions of the Company’s management. The
Financial Projections           accurately reflect the liabilities of the Company upon
consummation of the           transactions contemplated hereby as of the Closing Date.  

	 	        (iii)
       Accuracy of Financial Statements. Except
as a result of the Transactions           and liabilities incurred in the ordinary course
of business since December 31,           2003, the Company does not have any liabilities,
contingent or otherwise, or           forward or long-term commitments that are not
disclosed in the Annual Statements           or in the notes thereto, and except as
disclosed therein there are no unrealized           or anticipated losses from any
commitments of the Company, which may cause a           Material Adverse Effect.  

         
          (d)       
          Capitalization and Related Matters. As of the Closing Date and
          immediately thereafter, the authorized capital stock of the Company and the
          shares of stock that are issued, outstanding and reserved for issuance upon
          exercise of warrants and Options and conversion of the Notes (without giving
          effect to anti-dilution adjustments) are as set forth on Schedule A. As
          of the Closing Date, the Company will not have outstanding any capital stock or
          securities convertible or exchangeable for any shares of its capital stock other
          than the warrants, Options and Notes as set forth in Schedule A, and will not
          have outstanding any rights or options to subscribe for or to purchase its
          capital stock or any stock or securities convertible into or exchangeable for
          its capital stock, other than the warrants and Options as set forth in Schedule
          A. As of the Closing Date, the Company will not be subject to any obligation
          (contingent or otherwise) to repurchase or otherwise acquire or retire any
          shares of its capital stock, except as set forth herein and the Charter
          Documents, respectively, as in effect on the date hereof. As of the Closing, all
          of the outstanding shares of the Company’s capital stock will be validly
          issued, fully paid and nonassessable. There are no statutory or contractual
          stockholders’ preemptive rights with respect to the issuance of the Notes
          and Warrants hereunder. The Company has not violated any applicable federal or
          state securities laws in connection with the offer, sale or issuance of any of
          its capital stock, and the offer, sale and issuance of the Notes hereunder do
          not require registration under the Securities Act or any applicable state
          securities laws. 

         
          (e)       
          Subsidiaries. The Company does not own, or hold any rights to acquire,
          any shares of stock or any other security or interest in any other Person, and
          the Company has no Subsidiaries. 

- 11 - 

         
          (f)       
          Authorization; No Breach. The execution, delivery and performance of this
          Agreement, the other Purchase Documents and all other agreements, instruments,
          certificates and documents contemplated hereby and thereby to which the Company
          is a party (collectively, the “Transaction Documents”), and the
          consummation of the Transactions have been duly authorized by the Company. The
          execution and delivery by the Company of the Transaction Documents and the
          consummation of the Transactions do not and will not (i) conflict with or
          result in a breach of the terms, conditions or provisions of, (ii) constitute a
          default under, (iii) result in the creation of any Lien upon any of the
          Company’s capital stock or assets pursuant to, (iv) give any third
          party the right to accelerate any obligation under, (v) result in a violation
          of, or (vi) require any authorization, consent, approval, exemption or
          other action by or notice to any Governmental Authority pursuant to, the Charter
          Documents of the Company, or any law, statute, rule or regulation to which the
          Company is subject, or any agreement, instrument, order, judgment or decree to
          which the Company is a party or to which it or its assets are subject. 

         
          (g)       
          Governmental Approvals. Except as specifically provided by the
          Transaction Documents, no registration with or consent or approval of, or other
          action by, any Governmental Authority is or will be required in connection with
          the consummation of the Transactions by the Company. 

         
          (h)       
          Enforceability. This Agreement constitutes, and each of the other
          Transaction Documents when duly executed and delivered by the Company will
          constitute, legal, valid and binding obligations of the Company enforceable in
          accordance with their respective terms. 

         
          (i)       
          No Material Adverse Change. Since December 31, 2003, there has been no
          event or occurrence that is likely to have a Material Adverse Effect. 

         
          (j)       
          Litigation. Except as disclosed herein, there are no actions, suits or
          proceedings at law or in equity or by or before any arbitrator or any
          Governmental Authority now pending or, to the best knowledge of the
          Company’s management after due inquiry, threatened against or filed by or
          affecting the Company or any of its directors or officers or the businesses,
          assets or rights of the Company. The Company has certain past due trade accounts
          payable and has received and continues to receive collection calls from a number
          of vendors pursuing collection of these amounts. The Company anticipates that a
          portion of the proceeds of this offering will satisfy the required past due
          trade payables. The Company and its directors or officers shall promptly provide
          Agent with a copy of all pleadings of all lawsuits filed against others and, in
          the case of other actions, a letter stating the nature of such suits and a copy
          of all pleadings. 

         
          (k)       
          Compliance with Laws. The Company is not in violation of any applicable
          Law in any material respect. The Company is not in default with respect to any
          judgment, order, writ, injunction, decree, rule or regulation of any
          Governmental Authority. The Company is not in, and the consummation of the
          Transactions will not cause any, default concerning any judgment, order, writ,
          injunction or decree of any Governmental Authority, and there is no
          investigation, enforcement action or regulatory action pending or threatened
          against or affecting the Company by any Governmental Authority. There is no
          remedial or other corrective action that the Company is required to take to
          remain in compliance with any judgment, order, writ, injunction or decree of any
          Governmental Authority or to maintain any material permits, approvals or
          licenses granted by any Governmental Authority in full force and effect. During
          the past ten (10) years, none of the officers, directors or management of the
          Company have been arrested or convicted of any material crime nor have any of
          them been bankrupt or an officer or director of a bankrupt the Company. 

- 12 - 

         
          (l)       
          Environmental Protection. The business of the Company, the methods and
          means employed by the Company in the operation thereof (including all operations
          and conditions at or in the properties of the Company), and the assets owned,
          leased, managed, used, controlled, held or operated by the Company, comply in
          all material respects with all applicable Environmental Laws; (ii) with
          respect to the Properties and Facilities, and except as disclosed in the
          Environmental Schedule, the Company has obtained, possess, and is in full
          compliance with all permits, licenses, reviews, certifications, approvals,
          registrations, consents, and any other authorizations required under any
          Environmental Laws 

         
          (m)       
          Taxes. The Company has filed or caused to be filed all Federal, state and
          local tax returns that are required to be filed by it, and has paid or caused to
          be paid all taxes shown to be due and payable on such returns or on any
          assessments received by it, including payroll taxes. 

         
          (n)       
          Labor and Employment. The Company is and each of its Plans are in
          compliance in all material respects with those provisions of ERISA, the Code,
          the Age Discrimination in Employment Act, and the regulations and published
          interpretations thereunder which are applicable to the Company or any such Plan.
          The Company is in compliance in all material respects with all labor and
          employment laws, rules, regulations and requirements of all applicable domestic
          and foreign jurisdictions. There are no pending or threatened labor disputes,
          work stoppages or strikes. 

         
          (o)       
          Properties; Security Interests. The Company has good and marketable title
          to, or valid leasehold interests in, all of the material assets and properties
          used or useful by the Company in the Business (collectively, the
          “Properties and Facilities”), subject to no Liens, except for
          liens in favor of First Interstate Bank, Kalispell, Montana, to secure repayment
          of a note with a total remaining balance of approximately $19,400 to purchase an
          automobile and funds which may be advanced not to exceed $36,612 pursuant to a
          letter of credit. All of the Properties and Facilities are in good repair,
          working order and condition and all such assets and properties are owned by the
          Company free and clear of all Liens, except as noted in the immediately
          preceding sentence. The Properties and Facilities constitute all of the material
          assets, properties and rights of any type used in or necessary for the conduct
          of the Business. 

         
          (p)       
          Intellectual Property; Licenses. The Company possesses all Proprietary
          Rights necessary to conduct the Business as heretofore conducted or as proposed
          to be conducted by it. All Proprietary Rights registered in the name of the
          Company and applications therefor filed by the Company are listed on the
          “Intellectual Property Schedule,” attached hereto as Schedule
          B. No event has occurred that permits, or after notice or lapse of time or
          both would permit, the revocation or termination of any of the foregoing, which
          taken in isolation or when considered with all other such revocations or
          terminations could have a Material Adverse Effect. The Company does not have
          notice or knowledge of any facts or any past, present or threatened occurrence
          that could preclude or impair the Company’s ability to retain or obtain any
          authorization necessary for the operation of the Business. 

- 13 - 

         
          (q)       
          Solvency. After giving effect to the Transactions, (i) the fair value of
          the assets of the Company, at a fair valuation, will exceed its debts and
          liabilities, subordinated, contingent or otherwise, (ii) the present fair
          saleable value of the property of the Company will be greater than the amount
          that will be required to pay the probable liability of its debts and other
          liabilities, subordinated, contingent or otherwise, as such debts and other
          liabilities become absolute and matured, (iii) the Company will be able to pay
          its debts and liabilities, whether subordinated, contingent or otherwise, as
          such debts and liabilities become absolute and matured, and (iv) the Company
          will not have unreasonably small capital with which to conduct the Business in
          which it is engaged as such Business is now conducted and is proposed to be
          conducted following the Closing Date. 

         
          (r)       
          Complete Disclosure. All factual information furnished by or on behalf of
          the Company to Agent for purposes of or in connection with this Agreement or the
          Transactions is, and all other such factual information hereafter furnished by
          or on behalf of the Company will be, true and accurate in all material respects
          on the date as of which such information is furnished and not incomplete by
          omitting to state any fact necessary to make such information not misleading at
          such time in light of the circumstances under which such information was
          provided. 

         
          (s)       
          Side Agreements. Neither the Company nor any Affiliate of the Company nor
          any director, officer or employee of the Company or any of its Affiliates has
          entered into, as of the date hereof, any side agreement, either oral or written,
          with any individual or business, pursuant to which the director, officer,
          employee, Company or Affiliate agreed to do anything beyond the requirements of
          the formal, written contracts executed by the Company and disclosed to
          Purchasers and Agent herein. 

         
          (w)       
          Product Liabilities. There are no product recalls, trade disputes,
          product liabilities or product tampering claims now pending, threatened against
          or made by or affecting the Company or any of its directors, officers or
          employees or the businesses, assets or rights of the Company. 

        5.2  
Absolute Reliance on the Representations and Warranties. All representations and
warranties contained in this Agreement and any financial statements, instruments,
certificates, schedules or other documents delivered in connection herewith, shall survive
the execution and delivery of this Agreement, regardless of any investigation made by
Agent or Purchasers or on Agent’s or Purchasers’ behalf. 

ARTICLE 6 

TRANSFER OF SECURITIES 

        6.1  
Purchase Entirely for His Own Account. This Agreement is made with the Purchasers
in reliance upon each Purchaser’s representation to the Company that the Notes and
the Warrants will be acquired for investment for the Purchaser’s own account, not as
a nominee or agent, and not with the view to the resale or distribution of any part
thereof, and the Purchaser has no present intention of selling, granting any participation
in, or otherwise distributing the Notes or the Underlying Common Stock. The Purchaser has
no contract, undertaking, agreement or arrangement with any person to sell, transfer or
grant participations to such person with respect to any of the Notes, any of theWarrants
or the Underlying Common Stock. 

- 14 - 

        6.2  
Disclosure of Information. Each of the Purchasers has had the opportunity to ask
questions of, and receive answers from officers and directors of the Company to obtain
additional information regarding the Company and this Offering. The Purchaser has been
given access to full and complete information regarding the Company and has utilized such
access to the Purchaser’s satisfaction for the purpose of obtaining such information
regarding the Company as the Purchaser has reasonably requested. Such information includes
the terms and conditions of the offering of the Notes and Warrants to the Purchasers, and
the plan of operations of the Company’s business and financial condition of the
Company. 

        6.3  
Investment Experience. Each of the Purchaser represents as to himself, that he is
an investor in securities with companies in the development stage and acknowledges that he
is able to fend for himself, can bear the economic risk of his investment, and has such
knowledge and experience in financial or business matters that he is capable of evaluating
the merits and risks of the investment in the Notes and Warrants. 

        6.4  
Restricted Securities. Purchasers acknowledge that the Notes, the Warrants and the
Underlying Common Stock have not been registered under the Securities Act and may be
resold only if registered pursuant to the provisions of the Securities Act or if an
exemption from registration is available. 

        6.5  
Legends. The Company may place an appropriate legend on the Notes and the Warrants
owned by Purchasers or the Underlying Common Stock concerning the restrictions set forth
in this Article 6. Upon the assignment or transfer by Purchasers or any of its
successors or assignees of all or any part of the Notes or Warrants, the term
“Purchaser” as used herein shall thereafter mean, to the extent thereof,
the then holder or holders of such Notes or Warrants, or portion thereof. 

        6.6  
Transfer of Notes. Subject to Sections 6.4 and 6.5 hereof, a holder of a
Note may transfer such Note to a new holder, or may exchange such Note for Notes of
different denominations (but in no event of denominations of less than $10,000 in original
principal amount), by surrendering such Note to the Company duly endorsed for transfer or
accompanied by a duly executed instrument of transfer naming the new holder (or the
current holder if submitted for exchange only), together with written instructions for the
issuance of one or more new Notes specifying the respective principal amounts of each new
Note and the name of each new holder and each address therefor. The Company shall
simultaneously deliver to such holder or its designee such new Notes, shall mark the
surrendered Notes as canceled and shall provide notice of such transfer to Agent. In lieu
of the foregoing procedures, a holder may assign a Note (in whole but not in part) to a
new holder by sending written notice to the Company and Agent of such assignment
specifying the new holder’s name and address; in such case, the Company shall
promptly acknowledge such assignment in writing to both the old and new holder. The
Company shall not be required to recognize any subsequent holder of a Note unless and
until the Company has received reasonable assurance that all applicable transfer taxes
have been paid. 

- 15 - 

        6.7  
Replacement of Lost Notes. Upon receipt of evidence reasonably satisfactory to the
Company of the mutilation, destruction, loss or theft of any Notes and the ownership
thereof, the Company shall, upon the written request of the holder of such Notes, execute
and deliver in replacement thereof new Notes in the same form, in the same original
principal amount and dated the same date as the Notes so mutilated, destroyed, lost or
stolen; and such Notes so mutilated, destroyed, lost or stolen shall then be deemed no
longer outstanding hereunder. If the Notes being replaced have been mutilated, they shall
be surrendered to the Company; and if such replaced Notes have been destroyed, lost or
stolen, such holder shall furnish the Company with an indemnity in writing to save it
harmless in respect of such replaced Note. 

        6.8  
No Other Representations Affected. Nothing contained in this Article 6
shall limit the full force or effect of any representation, agreement or warranty made
herein or in connection herewith to Purchaser. 

        6.9  
Advice of Counsel. Purchaser acknowledges that he has obtained advice from
independent counsel and his own investment advisors with respect to this Agreement and his
investment in the Notes and the Warrants to the extent that he desires to do so. Purchaser
is not relying on any representations, except those set forth in this Agreement, or any
advice from the Company, the Company’s counsel (the Crowley Law Firm and Patton
Boggs, LLP) or any of the Company’s officers, directors, attorneys or other
representatives regarding this Agreement, its content or effect. 

        6.10  
No Other Representations Affected. Nothing contained in this Article 6
shall limit the full force or effect of any representation, agreement or warranty made
herein or in connection herewith to Purchaser. 

ARTICLE 7 

COVENANTS 

        7.1  
Affirmative Covenants. The Company covenants that, so long as all or any of the
principal amount of the Notes or any interest thereon shall remain outstanding, and,
thereafter, so long as any of the Purchasers own any Underlying Common Stock, the Company
shall: 

         
          (a)       
          Existence. Do or cause to be done all things necessary to preserve, renew
          and keep in full force and effect its legal existence. 

         
          (b)       
          Businesses and Properties; Compliance with Laws. At all times (i) do
          or cause to be done all things necessary to preserve, renew and keep in full
          force and effect the rights, licenses, registrations, permits, certifications,
          approvals, consents, franchises, patents, copyrights, trademarks and trade
          names, and any other trade names which may be material to the conduct of its
          businesses; (ii) comply in all material respects with all laws and
          regulations applicable to the operation of such business, including but not
          limited to, all Environmental Laws, whether now in effect or hereafter enacted
          and with all other applicable laws and regulations, (iii) take all action
          which may be required to obtain, preserve, renew and extend all rights, patents,
          copyrights, trademarks, trade names, franchises, registrations, certifications,
          approvals, consents, licenses, permits and any other authorizations which may be
          material to the operation of such business, (iv) maintain, preserve and
          protect all property material to the conduct of such business, and
          (v) except for obsolete or worn out equipment, keep their property in good
          repair, working order and condition, normal wear and tear excepted, and from
          time to time make, or cause to be made, all needful and proper repairs,
          renewals, additions, improvements and replacements thereto necessary in order
          that the business carried on in connection therewith may be properly conducted
          at all times. 

- 16 - 

         
          (c)       
          Obligations and Taxes. Pay and discharge promptly when due all taxes,
          assessments and governmental charges or levies imposed upon it or upon its
          income or profits or in respect of its properties before the same shall become
          delinquent or in default, as well as all lawful claims for labor, materials and
          supplies or otherwise, which, if unpaid, might give rise to Liens or charges
          upon such properties or any part thereof; provided, however, that
          the Company shall not be required to pay and discharge or to cause to be paid
          and discharged any such tax, assessment, charge, levy or claim so long as the
          validity or amount thereof shall be contested in good faith by appropriate
          proceedings and the Company shall have set aside on its books adequate reserves
          with respect thereto. 

         
          (d)       
          Financial Statements; Reports. Furnish to Agent: 

	 	        (i)
       Quarterly Statements. Within 45 calendar
days after the end of each           fiscal quarter, financial statements (including a
balance sheet and income           statements) showing the financial condition and
results of operations of the           Company as of the end of each such quarter and for
the then elapsed portion of           the current fiscal year, accompanied by a
certificate of the President that no           Default or Event of Default has occurred
during the period covered by such           statements or, if any such Default or Event
of Default has occurred during such           period, setting forth a description of such
Default or Event of Default and           specifying the action, if any, taken by the
Company to remedy the same,  

	 	        (ii)
       Additional Information. Promptly, from
time to time, such other           information regarding the compliance by the Company
with the terms of this           Agreement, and the affairs, operations or condition
(financial or otherwise) of           the Company as Agent may reasonably request and
that is capable of being           obtained, produced or generated by the Company or of
which the Company has           knowledge.  

         
          (e)       
          Litigation and Other Notices. Give Agent prompt written notice of the
          following: 

	 	        (i)
       Orders; Injunctions. The issuance by any
court or Governmental           Authorities of any injunction, order, decision or other
restraint prohibiting,           or having the effect of prohibiting, the making of any
loan or the initiation of           any litigation or similar proceeding seeking any such
injunction, order or other           restraint.  

- 17 - 

	 	        (ii)
       Litigation. The notice, filing or
commencement of any action, suit or           proceeding against the Company whether at
law or in equity or by or before any           court or any Governmental Authorities and
that, if adversely determined against           the Company, could result in uninsured
liability in excess of $50,000 in the           aggregate.  

	 	        (iii)
       Default. Any Default or Event of
Default, specifying the nature and           extent thereof and the action (if any) that
is proposed to be taken with respect           thereto.  

	 	        (iv)
       Material Adverse Effect. Any development
in the business or affairs of           the Company that could reasonably be expected to
have a Material Adverse Effect.  

	 	        (v)
       Board Meetings. Written notice of each
regular meeting of the           Company’s board of directors at least 30 days in
advance of such meeting           and prior written notice of each special meeting of the
Company’s board of           directors at least seven (7) days in advance of such
meeting, but in any case           such notice shall be delivered no later than the date
on which the members of           the board of directors are notified of such meeting. In
addition, the Company           will send Agent copies of all reports and materials
provided to members of the           board of directors at meetings or otherwise.  

	 	        (vii)
       Product Liabilities. The notice, filing
or commencement of any product           recall, trade dispute, product liability or
product tampering claim threatened           against or made by or affecting the Company
or any of its directors, officers or           employees or the businesses, assets or
rights of the Company, which recall,           dispute, liability or tampering claim, if
adversely determined against the           Company, could result in liability in excess
of $50,000 in the aggregate.  

         
          (f)       
          Board of Directors. 

	 	        (i)                 The
Company’s board of directors shall meet at least once per calendar
          quarter.  

	 	        (ii)
                           Agent shall be elected as a
member of the Board of Directors of the Company as           of the Closing Date and
shall so serve as a member of the Board of Directors of           the Company until
payment in full of the Notes.  

         
          (g)       
          Common Stock Reserve. Maintain in reserve, at all times that the Notes
          are unpaid, Common Stock for issuance upon conversion of the Notes. 

         
          (h)       
          Use of Proceeds. The proceeds from the sale of the Notes and Warrants
          substantially in accordance with the Use of Proceeds set forth in Schedule C. 

- 18 - 

         
          (i)       
          Further Assurances. The Company will with reasonable promptness, execute
          and deliver to each Purchaser, from time to time, upon the reasonable request of
          such Purchaser, such supplemental agreements, statements, assignments and
          transfers, or instructions on documents as any Purchaser may request in order
          that the full intent of this Agreement and the other Transaction Documents may
          be carried into effect. 

        7.2  
Negative Covenants. The Company covenants that, so long as all or any part of the
principal amount of the Notes or any interest thereon shall remain outstanding: 

         
          (a)       
          Affiliate Transactions. The Company shall not make any loan or advance to
          any director, officer or employee of the Company or any Affiliate, or enter into
          or be a party to any transaction or arrangement with any Affiliate of the
          Company, except pursuant to the reasonable requirements of the Company’s
          business and upon fair and reasonable terms no less favorable to the Company
          than would be obtained in a comparable arm’s-length transaction with a
          Person other than an Affiliate. 

         
          (b)       
          Dividends and Stock Purchases. The Company shall not, directly or
          indirectly, declare or pay any dividends or make any distribution of any kind on
          its outstanding capital stock or any other payment of any kind to any of its
          stockholders or its Affiliates without first obtaining the consent of the
          Required Purchasers. 

         
          (c)       
          Stock Issuances. Subsequent to the Closing Date, the Company shall not
          issue to employees or consultants shares of Common Stock (except pursuant to
          exercises of options granted prior to the Closing Date) or Options in excess of
          500,000 shares without first obtaining the consent of the Required Purchasers. 

         
          (d)       
          Business. The Company shall not engage, directly or indirectly, in any
          business other than the Business without first obtaining the consent of the
          Required Purchasers. 

ARTICLE 8 

EVENTS OF DEFAULT 

         8.1   
Events of Default. An "Event of Default" means the occurrence of one or more of the following described events:  

         
          (a)       
          the Company shall default in the payment of interest or principal on any Note
          when due, whether at maturity, upon notice of prepayment in accordance with
          Sections 3.3 or 3.4 hereof, upon any scheduled payment date
          or by acceleration or otherwise; 

         
          (b)       
          the Company shall default under any agreement under which any Indebtedness in an
          aggregate principal amount of $50,000 or more is created in a manner entitling
          the holder of such Indebtedness to accelerate the maturity of such Indebtedness; 

         
          (c)       
          any material representation or warranty herein made by the Company, or any
          certificate or financial statement furnished pursuant to the provisions hereof,
          shall prove to have been false or misleading in any material respect as of the
          time made or furnished or deemed made or furnished; 

- 19 - 

         
          (d)       
          a default or event of default shall occur under any of the other Purchase
          Documents, beyond any applicable notice or cure periods; 

         
          (e)       
          the Company shall default in the performance of any covenant, condition or
          provision of this Agreement, the Notes or the other Purchase Documents, and such
          default shall not be remedied to Required Purchasers’ reasonable
          satisfaction for a period of 20 days of the earlier of (i) written notice
          from a Agent of such default or (ii) actual knowledge by the Company of
          such default; 

         
          (f)       
          a proceeding shall have been instituted in a court having jurisdiction in the
          premises seeking a decree or order for relief in respect of the Company in an
          involuntary case under any applicable bankruptcy, insolvency or other similar
          law now or hereafter in effect, or for the appointment of a receiver,
          liquidator, assignee, custodian, trustee, sequestrator (or similar official) of
          the Company or for any substantial part of its property, or for the winding-up
          or liquidation of their affairs, and such proceeding shall remain undismissed or
          unstayed and in effect for a period of 60 days; 

         
          (g)       
          the Company shall commence a voluntary case under any applicable bankruptcy,
          insolvency or other similar law now or hereafter in effect, shall consent to the
          entry of an order for relief in an involuntary case under any such law, or shall
          consent to the appointment of or taking possession by a receiver, liquidator,
          assignee, trustee, custodian, sequestrator (or other similar official) of the
          Company or for any substantial part of its property, or shall make a general
          assignment for the benefit of creditors, or shall fail generally to pay its
          debts as they become due, or shall take any action in furtherance of any of the
          foregoing; 

         
          (h)       
          a final judgment which, with other undischarged final judgments against the
          Company, exceeds an aggregate of $50,000 (excluding judgments to the extent the
          Company is fully insured or the deductible or retention limit does not exceed
          $50,000 and with respect to which the insurer has assumed responsibility in
          writing), shall have been entered against the Company if, within 30 days after
          the entry thereof, such judgment shall not have been discharged or execution
          thereof stayed pending appeal, or if, within 30 days after the expiration of any
          such stay, such judgment shall not have been discharged; and/or 

         
          (i)       
          a Change of Control shall have occurred. 

        8.2  
Consequences of Event of Default (a) Bankruptcy. If an Event of Default
specified in paragraphs (f) or (g) of Section 8.1 hereof
shall occur, the unpaid balance of the Notes and interest accrued thereon and all other
liabilities of the Company to the holders thereof hereunder and thereunder shall be
immediately due and payable, without presentment, demand, protest or (except as expressly
required hereby) notice of any kind, all of which are hereby expressly waived. 

         
          (b)       
          Other Defaults. If any other Event of Default shall occur, Required
          Purchasers may at their option, by written notice to the Company, declare the
          entire unpaid balance of the Notes, and interest accrued thereon and all other
          liabilities of the Company hereunder and thereunder to be forthwith due and
          payable, and the same shall thereupon become immediately due and payable,
          without presentment, demand, protest or (except as expressly required hereby)
          notice of any kind, all of which are hereby expressly waived. 

- 20 - 

ARTICLE 9 

THE AGENT 

        9.1  
Authorization and Action. Each Purchaser and each subsequent holder of any Note by
its acceptance thereof, hereby designates and appoints Gregory Pusey as Agent hereunder
and authorizes Gregory Pusey to take such actions as agent on its behalf and to exercise
such powers as are delegated to Agent by the terms of this Agreement and the other
Purchase Documents, together with such powers as are reasonably incidental thereto. Agent
shall not have any duties or responsibilities, except those expressly set forth herein, or
any fiduciary relationship with any Purchaser, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities on the part of Agent shall be read
into this Agreement or otherwise exist for Agent. In performing his functions and duties
hereunder, Agent shall act solely as agent for Purchasers and does not assume, nor shall
be deemed to have assumed, any obligation or relationship of trust or agency with or for
the Company or any of its successors or assigns. Agent shall not be required to take any
action that exposes Agent to personal liability or that is contrary to this Agreement or
applicable Laws. The appointment and authority of Agent hereunder shall terminate at the
indefeasible payment in full of the Notes and related obligations. 

        9.2  
Delegation of Duties. Agent may execute any of its duties under this Agreement by
or through agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. Agent shall not be responsible for the
negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable
care. 

        9.3  
Exculpatory Provisions. Agent shall not be liable for any action lawfully taken or
omitted to be taken by it or him under or in connection with this Agreement (except for
his own gross negligence or willful misconduct or, the breach of his obligations expressly
set forth in this Agreement). Provided, however, the Agent shall not be liable for a
breach of his obligations if such action was taken or omitted to be taken by Agent at the
direction of the Required Purchasers. Agent shall not be responsible in any manner to any
Purchaser for any recitals, statements, representations or warranties made by the Company
contained in this Agreement or in any certificate, report, statement or other document
referred to or provided for in, or received under or in connection with, this Agreement
for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this
Agreement or any other document furnished in connection herewith, or for any failure of
the Company to perform its obligations hereunder, or for the satisfaction of any condition
specified in Article 4 hereof. Agent shall not be under any obligation to any
Purchaser to ascertain or to inquire as to the observance or performance of any of the
agreements or covenants contained in, or conditions of, this Agreement, or to inspect the
properties, books or records of the Company. 

        9.4  
Reliance. Agent shall in all cases be entitled to rely, and shall be fully
protected in relying, upon any document or conversation believed by him to be genuine and
correct and to have been signed, sent or made by the proper Person or Persons and upon
advice and statements of legal counsel (including, without limitation, counsel to the
Company), independent accountants and other experts selected by Agent. Agent shall in all
cases be fully justified in failing or refusing to take any action under this Agreement or
any other document furnished in connection herewith unless he shall first receive such
advice or concurrence of the Required Purchasers or all of Purchasers, as applicable, as
he deems appropriate or he shall first be indemnified to his satisfaction by Purchasers;
provided, that, unless and until Agent shall have received such advice, Agent may take or
refrain from taking any action, as Agent shall deem advisable and in the interests of
Purchasers. Agent shall in all cases be fully protected in acting, or in refraining from
acting, in accordance with a request of the Required Purchasers or all of Purchasers, as
applicable, and such request and any action taken or failure to act pursuant thereto shall
be binding upon all Purchasers. 

- 21 - 

        9.5  
Non-Reliance on Agent and Other Purchasers. Each Purchaser expressly acknowledges
that Agent has not made any representations or warranties to it and that no act by Agent
or hereafter taken, including, without limitation, any review of the affairs of the
Company, shall be deemed to constitute any representation or warranty by Agent. Each
Purchaser represents and warrants to Agent that it has and will, independently and without
reliance upon Agent or any other Purchaser and based on such documents and information as
it has deemed appropriate, made its own appraisal of and investigation into the business,
operations, property, prospects, financial and other conditions and creditworthiness of
the Company and made its own decision to enter into this Agreement. 

        9.6  
Agent in its Individual Capacity. Agent, and each of his Affiliates, may make loans
to, purchase securities from, provide services to, and generally engage in any kind of
business with the Company or any Affiliate of the Company as though Agent were not Agent
hereunder. 

        9.7  
Successor Agent. Agent may, upon 15 days’ notice to the Company and
Purchasers, and Agent will, upon the direction of the Required Purchasers (other than
Agent, in its individual capacity), resign as Agent. If Agent shall resign, then the
Required Purchasers during such 15-day period shall appoint a successor Agent and if the
Required Purchasers direct Agent to resign, such direction shall include an appointment of
a successor Agent. If for any reason no successor Agent is appointed by the Required
Purchasers during such 15-day period, then effective upon the expiration of such 15-day
period, Purchasers shall perform all of the duties of Agent hereunder and the Company for
all purposes shall deal directly with Purchasers. After any retiring Agent’s
resignation hereunder as Agent, the provisions of Article 9 shall inure to his
benefit as to any actions taken or omitted to be taken by him while he was Agent under
this Agreement. 

      9.8  
Consent of Purchasers 

         
          (a)       
          Except as expressly provided herein, Agent shall have the sole and exclusive
          right to monitor the Notes and the Purchase Documents related thereto,
          including, without limitation, the right to exercise all rights, remedies,
          privileges and options under this Agreement and under the other Purchase
          Documents. 

         
          (b)       
          Notwithstanding anything to the contrary contained in Section 9.8(a)
          hereof, Agent shall not without the prior written consent of the Required
          Purchasers then holding Notes: (i) extend any payment date under the Notes,
          (ii) reduce any interest rate applicable to any of the Notes,
          (iii) waive any Event of Default, (iv) compromise or settle all or a
          portion of the Indebtedness under the Notes, (v) release any obligor from
          the Indebtedness under the Notes except in connection with full payment and
          satisfaction of all Indebtedness under the Notes, (vi) amend the definition
          of Required Purchasers, or (vii) amend this Section 9.8(b). 

- 22 - 

         
          (c)       
          Notwithstanding anything to the contrary contained in Section 9.8(a)
          hereof, and subject to any applicable limitation set forth in
          Section 9.8(b) hereof, Agent shall not, without the prior written
          consent of Required Purchasers: (i) consent to the Company taking any
          action that, if taken, would constitute an Event of Default under this Agreement
          or under any of the other Purchase Documents or (ii) amend or modify or
          agree to an amendment or modification of this Agreement or other Purchase
          Documents. 

         
          (d)       
          After an acceleration of the debt owed pursuant to the Notes, Agent shall have
          the sole and exclusive right, after consultation (to the extent reasonably
          practicable under the circumstances) with all Purchasers and, unless otherwise
          directed in writing by Required Purchasers, to exercise or refrain from
          exercising any and all rights, remedies, privileges and options under this
          Agreement or the other Purchase Documents and available at law or in equity to
          protect the rights of Agent and Purchasers and collect the debt owed pursuant to
          the Notes, including, without limitation, instituting and pursuing all legal
          actions brought against the Company or to collect the debt owed pursuant to the
          Notes, or defending any and all actions brought by the Company or other Person;
          or incurring expenses or otherwise making expenditures to protect the
          collateral, the Notes or Agent’s or any Purchaser’s rights or
          remedies. 

        9.9
This Article Not Applicable to the Company. This Article 9 is included
in this Agreement solely for the purpose of determining certain rights as between Agent
and Purchasers and does not create, nor shall it give rise to, any rights in or
obligations on the part of the Company and all rights and obligations of the Company
(other than as specifically set forth herein) under this Agreement shall be determined by
reference to the provisions of this Agreement other than this Article 9. 

- 23 - 

ARTICLE 10 

REGISTRATION RIGHTS 

      10.1  
Piggyback Registrations.

         
          (a)       
          Whenever the Company proposes to register any of its securities under the
          Securities Act and the registration form to be used may be used for the
          registration of Registrable Securities (a “Piggyback
          Registration”), the Company will give prompt written notice (in any
          event within three (3) Business Days after its receipt of notice of any exercise
          of demand registration rights other than under this Agreement) to all holders of
          Registrable Securities with respect of the proposed offering at least 15 days
          before the initial filing with the SEC of such registration statement, and offer
          to include in such filing such Registrable Securities as any such holder may
          request. Each such holder of Registrable Securities desiring to have Registrable
          Securities registered under this Section 10.1 shall advise the
          Company in writing within 15 days after the date of receipt of such notice from
          the Company, setting forth the amount of such Registrable Securities for which
          registration is requested. The Company shall thereupon include in such filing
          the number of Registrable Securities for which registration is so requested, and
          shall use its best efforts to effect registration under the Securities Act of
          such Registrable Securities. 

         
          (b)       
          The registration expenses of the holders of Registrable Securities will be paid
          by the Company in all Piggyback Registrations to the extent provided in
          Section 10.3 hereof. 

         
          (c)       
          If a Piggyback Registration is an underwritten primary registration on behalf of
          holders of the Company’s securities, and the managing underwriters advise
          the Company in writing that in their opinion the number of securities requested
          to be included in such registration exceeds the number which can be sold in an
          orderly manner in such offering within a price range acceptable to the Company,
          the Company will include in such registration: (i) first, the securities
          the Company proposes to sell, and (ii) second, the Registrable Securities
          requested to be included in such registration, pro rata among the holders of the
          securities requested to be included in such registration. 

         
          (d)       
          If a Piggyback Registration is an underwritten secondary registration on behalf
          of holders of the Company’s securities, and the managing underwriters
          advise the Company in writing that in their opinion the number of securities
          requested to be included in such registration exceeds the number that can be
          sold in an orderly manner in such offering within a price range acceptable to
          the holders initially requesting such registration, the Company will include in
          such registration, the Registrable Securities requested to be included in such
          registration, pro rata among the holders of other securities requested to be
          included in such registration. 

      10.2  
Demand Registration Rights .

         
 (a)       
          If, at any time 180 days or more after a Qualified IPO, the Company receives a
          written request by the holders of a majority of the Registrable Securities to
          effect the registration under the Securities Act of the Registrable Securities,
          the Company shall follow the procedures described in this
          Section 10.2. Within five (5) days of its receipt of such request,
          the Company shall give written notice of such proposed registration (a
          “Demand Registration”) to all holders of Registrable
          Securities, and thereupon, the Company shall, as expeditiously as possible, use
          its best efforts to effect the registration on a form of general use under the
          Securities Act of the shares it has been requested to register in such initial
          request and in any response to such notice given to the Company within 20 days
          after the Company’s giving of such notice; provided, however,
          that the Company shall not be required to effect more than one Demand
          Registrations pursuant to this Section 10.2. 

- 24 - 

         
          (b)       
          The Company may not be required to effect a registration pursuant to this
          Section 10.2 during the first 180 days after the effective date of
          any registration statement filed by the Company under Section 10.1
          hereof if the holders of Registrable Securities requesting registration have
          been afforded the opportunity to register in such registration all or a majority
          of their Registrable Securities. 

         
          (c)       
          The Company may include in any registration under this Section 10.2
          any other shares of Common Stock (including issued and outstanding shares of
          stock as to which the holders thereof have contracted with the Company for
          “piggyback” registration rights) so long as the inclusion in such
          registration of such shares will not, in the opinion of the managing underwriter
          of the shares of the stockholder or stockholders first demanding registration
          (if the offering is underwritten), interfere with the successful marketing in
          accordance with the intended method of sale or other disposition of all the
          stock sought to be registered by such demanding stockholder or stockholders
          pursuant to this Section 10.2. 

        10.3  
Registration Procedures. Whenever the holders of Registrable Securities have
requested that any Registrable Securities be registered pursuant to this Agreement, the
Company will use reasonable efforts to effect the registration and the sale of such
Registrable Securities in accordance with the intended method of disposition thereof, and
pursuant thereto the Company will as expeditiously as possible: 

         
          (a)       
          prepare and file with the SEC a registration statement with respect to such
          Registrable Securities and use reasonable efforts to cause such registration
          statement to become effective; 

         
          (b)       
          prepare and file with the SEC such amendments and supplements to such
          registration statement and the prospectus used in connection therewith as may be
          reasonably necessary to keep such registration statement effective for a period
          equal to the shorter of (i) one year and (ii) the time by which all securities
          covered by such registration statement have been sold; 

         
          (c)       
          furnish to each seller of Registrable Securities such number of copies of such
          registration statement, each amendment and supplement thereto, the prospectus
          included in such registration statement (including each preliminary prospectus)
          and such other documents as such seller may reasonably request in order to
          facilitate the disposition of the Registrable Securities owned by such seller; 

- 25 - 

         
          (d)       
          use reasonable efforts to register or qualify such Registrable Securities under
          such other securities or blue sky laws of such jurisdictions as any seller of
          Registrable Securities reasonably requests and do any and all other acts and
          things which may be reasonably necessary or advisable to enable such seller to
          consummate the disposition in such jurisdictions of the Registrable Securities
          owned by such seller (provided that the Company will not be
          required to (i) qualify generally to do business in any jurisdiction where it
          would not otherwise be required to qualify but for this subparagraph, (ii)
          subject itself to taxation in any such jurisdictions, (iii) consent to general
          service of process in each such jurisdiction or (iv) undertake such actions in
          any jurisdiction other than the states of the United States of America and the
          District of Columbia); 

         
          (e)       
          notify each seller of such Registrable Securities, at any time when a prospectus
          relating thereto is required to be delivered under the Securities Act, of the
          happening of any event as a result of which the prospectus included in such
          registration statement contains an untrue statement of a material fact or omits
          any fact necessary to make the statements therein not misleading, and, at the
          request of any such seller, the Company will prepare a supplement or amendment
          to such prospectus so that, as thereafter delivered to purchasers of such
          Registrable Securities, such prospectus will not contain an untrue statement of
          a material fact or omit to state any fact necessary to make the statements
          therein not misleading; 

         
          (f)       
          provide a transfer agent and registrar for all such Registrable Securities not
          later than the effective date of such registration statement; 

         
          (g)       
          enter into such customary agreements (including underwriting agreements in
          customary form) and take all such other actions as the holders of a majority of
          the Registrable Securities being sold or the underwriters, if any, reasonably
          request in order to expedite or facilitate the disposition of such Registrable
          Securities (including, without limitation, effecting a stock split or a
          combination of shares); 

         
          (h)       
          make available for inspection by any seller of Registrable Securities, any
          underwriter participating in any disposition pursuant to such registration
          statement and any attorney, accountant or other agent retained by any such
          seller or underwriter, all financial and other records, pertinent corporate
          documents and properties of the Company, and cause the Company’s officers,
          directors, employees and independent accountants to supply all information
          reasonably requested by any such seller, underwriter, attorney, accountant or
          agent in connection with such registration statement; 

         
          (i)       
          otherwise use its best efforts to comply with all applicable rules and
          regulations of the SEC, and make available to its security holders, as soon as
          reasonably practicable, an earnings statement covering the period of at least
          twelve months beginning with the first day of the Company’s first full
          calendar quarter after the effective date of the registration statement, which
          earnings statement shall satisfy the provisions of Section 11(a) of the
          Securities Act and Rule 158 thereunder; 

         
          (j)       
          permit any holder of Registrable Securities which holder, in its sole and
          exclusive judgment, might be deemed to be an underwriter or a controlling person
          of the Company, to participate in the preparation of such registration or
          comparable statement and to require the insertion therein of material, furnished
          to the Company in writing, which in the reasonable judgment of such holder and
          its counsel should be included; and 

- 26 - 

         
          (k)       
          in the event of the issuance of any stop order suspending the effectiveness of a
          registration statement, or of any order suspending or preventing the use of any
          related prospectus or suspending the qualification of any Common Stock included
          in such registration statement for sale in any jurisdiction, the Company will
          use its best efforts promptly to obtain the withdrawal of such order. If any
          such registration or comparable statement refers to any holder by name or
          otherwise as the holder of any securities of the Company and if in its sole and
          exclusive judgment such holder is or might be deemed to be a controlling person
          of the Company, such holder shall have the right to require (i) the insertion
          therein of language, in form and substance satisfactory to such holder and
          presented to the Company in writing, to the effect that the holding by such
          holder of such securities is not to be construed as a recommendation by such
          holder of the investment quality of the Company’s securities covered
          thereby and that such holding does not imply that such holder will assist in
          meeting any future financial requirements of the Company, (ii) in the event
          that such reference to such holder by name or otherwise is not required by the
          Securities Act or any similar federal statute then in force, the deletion of the
          reference to such holder; provided that with respect to this
          clause (ii) such holder shall furnish to the Company an opinion of counsel to
          such effect, which opinion and counsel shall be reasonably satisfactory to the
          Company. 

        10.4  
Registration Expenses. All expenses incident to the Company’s performance of
or compliance with this Article 10, including without limitation all
registration and filing fees, fees and expenses of compliance with securities or blue sky
laws, printing expenses, messenger and delivery expenses, and fees and disbursements of
counsel for the Company and all independent certified public accountants, and other
Persons retained by the Company (all such expenses, other than discounts and commissions
related to sales by the Purchasers, being herein called “Registration
Expenses”), will be borne by the Company. 

      10.5  
Indemnification.

         
          (a)       
          The Company agrees to indemnify, to the extent permitted by law, each holder of
          Registrable Securities, its officers and directors and each Person who controls
          such holder (within the meaning of the Securities Act) against all losses,
          claims, damages, liabilities and expenses caused by any untrue or alleged untrue
          statement of material fact contained in any registration statement, prospectus
          or preliminary prospectus or any amendment thereof or supplement thereto or any
          omission or alleged omission of a material fact required to be stated therein or
          necessary to make the statements therein not misleading, except insofar as the
          same are caused by or contained in any information furnished in writing to the
          Company by such holder expressly for use therein or by such holder’s
          failure to deliver a copy of the registration statement or prospectus or any
          amendments or supplements thereto after the Company has furnished such holder
          with a sufficient number of copies of the same. In connection with an
          underwritten offering, the Company will indemnify such underwriters, their
          officers and directors and each Person who controls such underwriters (within
          the meaning of the Securities Act) to the same extent as provided above with
          respect to the indemnification of the holders of Registrable Securities. 

- 27 - 

         
          (b)       
          In connection with any registration statement in which a holder of Registrable
          Securities is participating, each such holder will furnish to the Company in
          writing such information and affidavits as the Company reasonably requests for
          use in connection with any such registration statement or prospectus and, to the
          extent permitted by law, will indemnify the Company, its directors and officers
          and each Person who controls the Company (within the meaning of the Securities
          Act) against any losses, claims, damages, liabilities and expenses resulting
          from any untrue or alleged untrue statement of material fact contained in the
          registration statement, prospectus or preliminary prospectus or any amendment
          thereof or supplement thereto or any omission or alleged omission of a material
          fact required to be stated therein or necessary to make the statements therein
          not misleading but only to the extent that such untrue statement or omission is
          contained in any information or affidavit so furnished in writing by such
          holder; 

         
          (c)       
          Any Person entitled to indemnification hereunder will (i) give prompt written
          notice to the indemnifying party of any claim with respect to which it seeks
          indemnification and (ii) unless in such indemnified party’s reasonable
          judgment a conflict of interest between such indemnified and indemnifying
          parties may exist with respect to such claim, permit such indemnifying party to
          assume the defense of such claim with counsel reasonably satisfactory to the
          indemnified party. If such defense is assumed, the indemnifying party will not
          be subject to any liability for any settlement made by the indemnified party
          without its consent (but such consent will not be unreasonably withheld). An
          indemnifying party who is not entitled to, or elects not to, assume the defense
          of a claim will not be obligated to pay the fees and expenses of more than one
          counsel for all parties indemnified by such indemnifying party with respect to
          such claim, unless in the reasonable judgment of any indemnified party a
          conflict of interest may exist between such indemnified party and any other of
          such indemnified parties with respect to such claim. 

         
          (d)       
          The indemnification provided for under this Agreement will remain in full force
          and effect regardless of any investigation made by or on behalf of the
          indemnified party or any officer, director or controlling Person of such
          indemnified party and will survive the transfer of securities. The Company also
          agrees to make such provisions, as are reasonably requested by any indemnified
          party, for contribution to such party in the event the Company’s
          indemnification is unavailable for any reason. 

        10.6  
Participation in Underwritten Registrations. No Person may participate in any
registration hereunder which is underwritten unless such Person (a) agrees to sell such
Person’s securities on the basis provided in any underwriting arrangements approved
by the Person or Persons entitled hereunder to approve such arrangements and (b) completes
and executes all questionnaires, powers of attorney, indemnities, underwriting agreements
and other documents required under the terms of such underwriting arrangements;
provided that no holder of Registrable Securities included in any
underwritten registration shall be required to make any representations or warranties to
the Company or the underwriters other than representations and warranties regarding such
holder and such holder’s intended method of distribution. 

        10.7  
Termination of Registration Rights. All registration rights granted under this
Article 10 shall terminate two years after a Qualified IPO. In addition, the registration
rights of a holder of Registrable Securities will expire if the Company is subject to the
provisions of the Securities Exchange Act and all of the holder’s Registrable
Securities may be sold under SEC Rule 144 during any ninety-day period. 

- 28 - 

ARTICLE 11 

MISCELLANEOUS 

        11.1  
Successors and Assigns. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns, except that
(a) the Company may not assign or transfer its rights hereunder or any interest
herein or delegate its duties hereunder and (b) Purchasers shall have the right to
assign their rights hereunder and under the Securities in accordance with
Article 6 hereof. 

        11.2  
Modifications and Amendments. The provisions of this Agreement may be modified,
waived or amended, but only by a written instrument signed by the Company, and to the
extent such modification, amendment or waiver relates (a) to the Notes, such
instrument must be executed by Agent on behalf of Purchasers upon satisfaction of the
conditions set forth in Section 9.8 hereof, (b) to the Warrants, such
instrument must be executed by the Holders of at least 50% of the Warrants, and
(c) to the Underlying Common Stock, such instrument must be executed by the holders
of at least 50% of the Underlying Common Stock. 

        11.3  
No Implied Waivers; Cumulative Remedies; Writing Required. No delay or failure in
exercising any right, power or remedy hereunder shall affect or operate as a waiver
thereof; nor shall any single or partial exercise thereof or any abandonment or
discontinuance of steps to enforce such a right, power or remedy preclude any further
exercise thereof or of any other right, power or remedy. The rights and remedies hereunder
are cumulative and not exclusive of any rights or remedies that Agent or Purchasers or any
holder of Notes, Warrants or Underlying Common Stock would otherwise have. Any waiver,
permit, consent or approval of any kind or character of any breach or default under this
Agreement or any such waiver of any provision or condition of this Agreement must be in
writing, satisfy the conditions set forth in Section 9.8 hereof and shall be
effective only to the extent in such writing specifically set forth. 

        11.4  
Reimbursement of Expenses. The Company upon demand shall pay or reimburse Agent and
Purchasers for all fees and expenses incurred or payable by Agent or Purchasers
(including, without limitation, reasonable fees and expenses of special counsel for Agent
and Purchasers), from time to time arising in connection with the enforcement of this
Agreement or collection of the Notes. 

        11.5  
Holidays. Whenever any payment or action to be made or taken hereunder or under the
Notes shall be stated to be due on a day which is not a Business Day, such payment or
action shall be made or taken on the next following Business Day, and such extension of
time shall be included in computing interest or fees, if any, in connection with such
payment or action. 

        11.6  
Notices. All notices and other communications given to or made upon any party
hereto in connection with this Agreement shall, except as otherwise expressly herein
provided, be in writing (including telecopy, but in such case, a confirming copy will be
sent by another permitted means) and mailed via certified mail, telecopied or delivered by
guaranteed overnight parcel express service or courier to the respective parties, as
follows: 

- 29 - 

		
		to the Company:

A4S Technologies, Inc.

3973 MT Hwy 35

Kalispell, MT 59901

Attn: President

Fax: (406) 756-5174

with a copy to:

Crowley Law Firm

431 1st Avenue West

Kalispell, MT 59901

Attn: John Dudis, Esq.

Fax: 406-752-5108

           and

Patton Boggs, LLP

1660 Lincoln Street, Suite 1900

Denver, CO 80264

Attn: Robert M. Bearman, Esq.

Fax: (303) 894-9239

To Agent:

Gregory Pusey

106 S. University Blvd., #14

Denver, CO 80209

Fax: (303) 722-4011

to Purchasers:

As set forth on the signature page to this Agreement. 

or in accordance with any subsequent
written direction from the recipient party to the sending party. All such notices and
other communications shall, except as otherwise expressly herein provided, be effective
upon delivery if delivered by courier or overnight parcel express service; in the case of
certified mail, three (3) Business Days after the date sent; or in the case of telecopy,
when received. 

        11.7  
Survival. All representations, warranties, covenants and agreements of the Company
contained herein or made in writing in connection herewith shall survive the execution and
delivery of this Agreement and the purchase of the Notes and shall continue in full force
and effect so long as any Note is outstanding and until payment in full of all of the
Company’s obligations hereunder or thereunder. All obligations relating to
indemnification hereunder shall survive any termination of this Agreement and shall
continue for the length of any applicable statute of limitations. 

- 30 - 

        11.8  
Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF MONTANA, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES.  

        11.9  
Jury Trial Waiver. THE COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT TO TRIAL BY JURY
IN ANY ACTION OR PROCEEDING (I) TO ENFORCE OR DEFEND ANY RIGHTS UNDER OR IN CONNECTION
WITH THIS AGREEMENT, OR (II) ARISING FROM ANY DISPUTE OR CONTROVERSY IN CONNECTION WITH OR
RELATED TO THIS AGREEMENT AND AGREES THAT ANY SUCH ACTION OR COUNTERCLAIM SHALL BE TRIED
BEFORE A COURT AND NOT BEFORE A JURY. 

        11.10  
Severability. Whenever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law, but if any
provision of this Agreement is held to be prohibited by or invalid under applicable law in
any jurisdiction, such provision shall be ineffective only to the extent of such
prohibition or invalidity, without invalidating any other provision of this Agreement. 

        11.11  
Headings. Article, section and subsection headings in this Agreement are included
for convenience of reference only and shall not constitute a part of this Agreement for
any other purpose. 

        11.12  
Counterparts. This Agreement may be executed in any number of counterparts and by
any party hereto on separate counterparts, each of which, when so executed and delivered,
shall be an original, but all such counterparts shall together constitute one and the same
instrument. 

        11.13  
Integration. This Agreement and the other Purchase Documents set forth the entire
understanding of the parties hereto with respect to all matters contemplated hereby and
supersede all previous agreements and understandings among them concerning such matters.
No statements or agreements, oral or written, made prior to or at the signing hereof,
shall vary, waive or modify the written terms hereof. 

[remainder of page
intentionally left blank; signature page follows] 

- 31 - 

SIGNATURE PAGE TO 

SUBORDINATED
CONVERTIBLE NOTE AND WARRANT PURCHASE AGREEMENT 

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

		
		COMPANY:

A4S TECHNOLOGIES, INC.,

a Montana corporation

By: _________________________________  

Name: _______________________________  

Title: ______________________________  

AGENT:

GREGORY PUSEY

 ____________________________________  

PURCHASERS:

[____________________________________]

By: _________________________________  

Name: _______________________________  

Title:  _____________________________  

Address: ____________________________  

[____________________________________]

By: _________________________________  

Name: _______________________________  

Title:  _____________________________  

Address: ____________________________  

- 32 - 

		
		[____________________________________]

By: _________________________________ 

Name: _______________________________ 

Title:  _____________________________ 

Address: ____________________________ 

[____________________________________]

By: _________________________________ 

Name: _______________________________ 

Title:  _____________________________ 

Address: ____________________________ 

[____________________________________]

By: _________________________________ 

Name: _______________________________ 

Title:  _____________________________ 

Address: ____________________________ 

- 33 -EXHIBIT 10.11

EXHIBIT 10.11 

SUBORDINATED
CONVERTIBLE NOTE
PURCHASE AGREEMENT 

by and among 

A4S TECHNOLOGIES, INC.,
AS
THE COMPANY 
and 

GREGORY PUSEY,
AS AGENT 

and 

THE PURCHASERS
IDENTIFIED ON 
ANNEX A ATTACHED HERETO  

August 24, 2004 

TABLE OF CONTENTS  

		
	ARTICLE 1   DEFINITIONS                                                     

         1.1          Certain Definitions                                     

         1.2           Accounting Principles                                   

         1.3           Other Definitional Provisions; Construction             

ARTICLE 2   ISSUE AND SALE OF NOTES                                         

         2.1           Authorization and Issuance of the Notes                 

         2.2           Sale and Purchase                                       

         2.3           The Closing                                             

         2.4           Subsequent Sales of Notes                               

ARTICLE 3   REPAYMENT OF THE NOTES                                          

         3.1           Interest Rates and Interest Payments                    

         3.2           Repayment of the Notes                                  

         3.3           Optional Prepayment of Notes                            

         3.4           Notice of Optional Prepayment                           

         3.5           Payment                                                 

         3.6           Maximum Lawful Rate                                     

         3.7           Certain Waivers                                         

ARTICLE 4   CONDITIONS                                                      

         4.1           Conditions to Purchase of Notes                         

ARTICLE 5   REPRESENTATIONS AND WARRANTIES OF THE COMPANY                   

         5.1           Representations and Warranties of the Company           

         5.2           Absolute Reliance on the Representations and Warranties 

ARTICLE 6   TRANSFER OF SECURITIES                                          

         6.1           Purchase Entirely for His Own Account                   

         6.2           Disclosure of Information                               

         6.3           Investment Experience                                   

         6.4           Restricted Securities                                   

         6.5           Legends                                                 

         6.6           Transfer of Notes                                       

         6.7           Replacement of Lost Notes                               

         6.8           No Other Representations Affected                       

         6.9           Advice of Counsel                                       

         6.10          No Other Representations Affected                       

ARTICLE 7   COVENANTS                                                       

         7.1           Affirmative Covenants                                   

         7.2           Negative Covenants                                      

ARTICLE 8    EVENTS OF DEFAULT                                               

         8.1           Events of Default                                       

         8.2           Consequences of Event of Default
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- i - 

		
	ARTICLE 9   THE AGENT                                                         

         9.1          Authorization and Action.                                 

         9.2          Delegation of Duties                                      

         9.3          Exculpatory Provisions.                                   

         9.4          Reliance                                                  

         9.5          Non-Reliance on Agent and Other Purchasers                

         9.6          Agent in its Individual Capacity                          

         9.7          Successor Agent                                           

         9.8          Consent of Purchasers                                     

         9.9          This Article Not Applicable to the Company                

ARTICLE 10   REGISTRATION RIGHTS                                              

         10.1         Piggyback Registrations                                   

         10.2         Demand Registration Rights                                

         10.3         Registration Procedures                                   

         10.4         Registration Expenses                                     

         10.5         Indemnification                                           

         10.6         Participation in Underwritten Registrations               

         10.7         Termination of Registration Rights                        

ARTICLE 11   MISCELLANEOUS                                                    

         11.1         Successors and Assigns                                    

         11.2         Modifications and Amendments                              

         11.3         No Implied Waivers; Cumulative Remedies; Writing Required 

         11.4         Reimbursement of Expenses                                 

         11.5         Holidays                                                  

         11.6         Notices                                                   

         11.7         Survival                                                  

         11.8         Governing Law                                             

         11.9         Jury Trial Waiver                                         

         11.10        Severability                                              

         11.11        Headings                                                  

         11.12        Counterparts                                              

         11.13        Integration
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- ii - 

SUBORDINATED
CONVERTIBLE NOTE 
PURCHASE AGREEMENT  

$292,000 Aggregate
Principal Amount of
Notes of the Company
Due December 31, 2005 

        THIS
SUBORDINATED COVERTIBLE NOTE PURCHASE AGREEMENT (this “Agreement”), dated
as of August 24, 2004, is by and among A4S Technologies, Inc., a Montana corporation (the
“Company”), the securities purchasers that are now and hereafter at any
time parties hereto and are listed in Annex A (or any amendment or supplement
thereto) attached hereto (each a “Purchaser” and collectively,
“Purchasers”), and GREGORY PUSEY, as administrative agent for Purchasers
(in such capacity “Agent”). Capitalized terms used and not defined
elsewhere in this Agreement are defined in Article 1 hereof. 

        The
parties hereto, in consideration of the premises and their mutual covenants and agreements
herein set forth and intending to be legally bound hereby, covenant and agree as follows: 

ARTICLE 1 

DEFINITIONS 

        1.1  
Certain Definitions. In addition to other words and terms defined elsewhere in this
Agreement, the following words and terms have the meanings set forth below (and such
meanings shall be equally applicable to both the singular and plural form of the terms
defined, as the context may require): 

        “Affiliate”
shall mean with respect to any Person, any other Person that is directly or indirectly
controlling, controlled by or under common control with such Person or entity or any of
its Subsidiaries, and the term “control” (including the terms “controlled
by” and “under common control with”) shall mean having, directly or
indirectly, the power to direct or cause the direction of the management and policies of a
Person, whether through ownership of voting securities or by contract or otherwise.
Without limiting the foregoing, the ownership of ten percent (10%) or more of the voting
securities of a Person shall be deemed to constitute control and notwithstanding anything
to the contrary herein, neither Purchasers nor any of their respective Affiliates shall be
deemed to be Affiliates of the Company by virtue of the transactions contemplated in this
Agreement. 

        “Agent”
shall have the meaning assigned to such term in the preamble hereto and any successor
agent provided for hereunder. 

        “Agreement”
shall mean this Subordinated Convertible Note Purchase Agreement, as the same may be
amended, restated, supplemented or otherwise modified from time to time. 

- 1 - 

        “Business”
shall mean the principal business of the Company as set forth in
Section 5.1(b) hereof and as such shall continue to be conducted following the
purchase and sale of the Securities. 

        “Business
Day” shall mean any day other than a Saturday, Sunday or other day on which
banking institutions in Kalispell, Montana, are authorized or required by law to close. 

        “By-laws”
shall mean the by-laws or analogous instrument governing the operations of the Company,
including all amendments and supplements thereto. 

        “Capitalized
Lease” shall mean any lease of Property which in accordance with GAAP is required
to be capitalized on the balance sheet of the lessee. 

        “Charter
Documents” shall mean the articles of incorporation, certificate of
incorporation, certificate of limited partnership, certificate of limited liability the
Company, articles of organization, certificate of organization, charter or analogous
organic instrument filed with the appropriate Governmental Authorities of the Company,
including all amendments and supplements thereto. 

        “Closing”
shall mean the closing of the purchase and sale of the Securities pursuant to this
Agreement. 

        “Closing
Date” shall mean the date and time for delivery and payment of the Notes as
finally determined pursuant to Section 2.3 hereof. 

        “Code”
shall mean the Internal Revenue Code of 1986, as amended. 

        “Common
Stock” shall mean the common stock, without par value, of the Company. 

        “Company”
shall have the meaning assigned to such term in the introductory paragraph hereto. 

        “Controlled
Group” shall mean the “controlled group of corporations” as that term
is defined in Section 1563 of the Internal Revenue Code of 1986, as amended, of which
the Company is a part from time to time. 

        “Default”
shall mean any event or condition that, but for the giving of notice or the lapse of time,
or both, would constitute an Event of Default. 

        “Environmental
Laws” shall mean any Laws which address, are related to or are otherwise
concerned with environmental, health or safety issues, including any Laws relating to any
emissions, releases or discharges of Pollutants into ambient air, surface water, ground
water or land, or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, handling, clean-up or control of Pollutants or
any exposure or impact on worker health and safety. 

- 2 - 

        “ERISA”
shall mean the Employee Retirement Income Security Act of 1974, as the same may from time
to time be amended, and the rules and regulations of any governmental agency or authority,
as from time to time in effect, promulgated thereunder. 

        “Event
of Default” shall mean any of the events of default described in
Section 8.1 hereof. 

        “Fiscal
Year” or “fiscal year” shall mean each 12-month period ending on
December 31 of each year. 

        “Governmental
Authorities” shall mean any federal, state or municipal court or other
governmental department, commission, board, bureau, agency or instrumentality,
governmental or quasi-governmental, domestic or foreign. 

        “Investment”
as applied to any Person shall mean the amount paid or agreed to be paid or loaned,
advanced or contributed to other Persons, and in any event shall include (i) any direct or
indirect purchase or other acquisition of any notes, obligations, instruments, stock,
securities or ownership interest (including partnership interests and joint venture
interests) and (ii) any capital contribution to any other Person. 

        “IRS”
shall mean the Internal Revenue Service and any governmental body or agency succeeding to
the functions thereof. 

        “Laws”
shall mean all U.S. and foreign federal, state or local statutes, laws, rules,
regulations, ordinances, codes, policies, rules of common law, and the like, now or
hereafter in effect, including any judicial or administrative interpretations thereof, and
any judicial or administrative orders, consents, decrees or judgments. 

        “Lien”
shall mean any security interest, pledge, bailment, mortgage, hypothecation, deed of
trust, conditional sales and title retention agreement (including any lease in the nature
thereof), charge, encumbrance or other similar arrangement or interest in real or personal
property, whether such interest is based on common law, statute or contract. 

        “Life
Insurance” shall have the meaning assigned to such term in
Section 4.1(c) hereof. 

        “Material
Adverse Effect” shall mean a material adverse effect on the business, properties,
assets, liabilities or condition (financial or otherwise) of the Company, individually
and/or taken as a whole. 

        “Notes”
shall have the meaning assigned to such term in Section 2.1 hereof. 

        “Options”
shall mean options issued pursuant to the Company’s 2001 Stock Plan or other stock
incentive plan authorized by the Company’s Board of Directors, subject to the
restriction set forth in Section 7.2(c). 

        “Other
Taxes” shall have the meaning assigned to such term in Section 3.7
hereof. 

- 3 - 

        “Person”
shall mean any individual, partnership, limited partnership, corporation, limited
liability Company, association, joint stock company, trust, joint venture, unincorporated
organization or governmental entity or department, agency or political subdivision
thereof. 

        “Piggyback
Registration” shall have the meaning assigned to such term in
Section 10.1 hereof. 

        “Plan”
shall mean any employee benefit plan (within the meaning of Section 3(3) of ERISA),
established or maintained by the Company or any member of the Controlled Group. 

        “Properties
and Facilities” shall have the meaning assigned to such term in
Section 5.1(q) hereof. 

        “Property”
shall mean, as to any Person, all types of real, personal, tangible, intangible or mixed
property owned by such Person whether or not included in the most recent balance sheet of
such Person and its subsidiaries under GAAP. 

        “Proprietary
Rights” shall mean all patents, trademarks, trade names, service marks,
copyrights, inventions, production methods, licenses, formulas, know-how, trade secrets
and good will related to any of the foregoing, regardless of whether such are registered
with any Governmental Authorities, including applications therefor. 

        “Purchase
Documents” shall mean this Agreement, the Notes, and all other agreements,
instruments and documents delivered in connection herewith or therewith as any or all of
the foregoing may be supplemented or amended from time to time. 

        “Purchaser”
shall have the meaning assigned to such term in the introductory paragraph hereto. 

        “Qualified
IPO” means the consummation of a public offering of Common Stock to the general
public under the Securities Act completed by the Company in which the gross proceeds to
the Company are not less than $2,500,000 and the pre-offering market capitalization of the
Company is $20,000,000 or higher, or any other public offering approved by the Required
Purchasers. 

        “Registrable
Securities” shall mean any shares of Common Stock purchased upon the conversion
of any Note. 

        “Required
Purchasers” shall mean, at any time, Purchasers holding a pro rata percentage of
the outstanding principal amount of the Notes aggregating at least 50% at such time. 

        “SEC”
shall mean the Securities and Exchange Commission and any governmental body or agency
succeeding to the functions thereof. 

        “Securities
Act” shall mean the Securities Act of 1933, as amended. 

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

- 4 - 

        “Subsidiary”
of any corporation shall mean any other corporation or limited liability company of which
the outstanding capital stock possessing a majority of voting power in the election of
directors (otherwise than as the result of a default) is owned or controlled by such
corporation directly or indirectly through Subsidiaries. 

        “Transaction
Documents” shall have the meaning assigned to such term in
Section 5.1(f) hereof. 

        “Transactions”
shall mean the incurrence of debt as contemplated by this Agreement, the Notes and all
other agreements contemplated hereby and thereby. 

        “Underlying
Common Stock” shall mean the Common Stock issued or issuable upon conversion of
the Notes, and any equity securities issued or issuable with respect to the Common Stock
by way of stock dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization. 

        1.2  
Accounting Principles. The character or amount of any asset, liability, capital
account or reserve and of any item of income or expense to be determined, and any
consolidation or other accounting computation to be made, and the construction of any
definition containing a financial term, pursuant to this Agreement shall be determined or
made in accordance with generally accepted accounting principles in the United States of
America consistently applied (“GAAP”), unless such principles are
inconsistent with the express requirements of this Agreement. 

        1.3  
Other Definitional Provisions; Construction. Whenever the context so requires,
neuter gender includes the masculine and feminine, the singular number includes the plural
and vice versa. The words “hereof” “herein” and “hereunder”
and words of similar import when used in this Agreement shall refer to this Agreement as a
whole and not in any particular provision of this agreement, and references to section,
article, annex, schedule, exhibit and like references are references to this Agreement
unless otherwise specified. A Default or Event of Default shall “continue” or be
“continuing” until such Default or Event of Default has been cured or waived by
Agent and Purchasers. References in this Agreement to any Persons shall include such
Persons’ successors and permitted assigns. Other terms contained in this Agreement
(which are not otherwise specifically defined herein) shall have meanings provided in
Article 9 of the Montana Uniform Commercial Code on the date hereof to the extent the
same are used or defined therein. 

- 5 - 

ARTICLE 2 

ISSUE AND SALE OF NOTES 

        2.1  
Authorization and Issuance of the Notes. The Company has duly authorized the
issuance and sale to Purchasers of up to $292,000 in aggregate principal amount of the
Company’s Subordinated Convertible Promissory Notes Due December 31, 2005
(including any Notes issued in substitution therefor pursuant to Sections 6.6
and 6.7 hereof, the “Notes”), to be substantially in the form of
the Note attached hereto as Exhibit A. 

        2.2  
Sale and Purchase. Subject to the terms and conditions and in reliance upon the
representations, warranties and agreements set forth herein, (a) the Company shall
sell to Purchasers for an aggregate amount of up to $292,000, and Purchasers shall
purchase from the Company, in an amount equal to the pro rata portion of the Notes as set
forth on Annex A, the Notes in the aggregate principal amount of up to
$292,000. 

        2.3  
The Closing. Delivery of and payment for the Notes (the “Closing”)
shall be made at the offices of Patton Boggs LLP, 1660 Lincoln Street, Ste. 1900, Denver,
Colorado, commencing at 10:00 a.m., local time, on August 27, 2004, or at such place or on
such other date on or before September 17, 2004 as may be mutually agreeable to the
Company and Purchasers. The date and time of the Closing as finally determined pursuant to
this Section 2.3 are referred to herein as the “Closing
Date.” Delivery of the Notes shall be made to Purchasers against payment of the
purchase price therefor, by check or by wire transfer of immediately available funds in
the manner agreed to by the Company and Purchasers. The Notes shall be issued in such name
or names and in such permitted denomination or denominations as set forth in
Annex A or as Purchasers may request prior to the Closing Date. 

        2.4  
Subsequent Sales of Notes. At any time on or before the 30th day
following the Closing Date, the Company may sell up to the balance of the total offering
of $292,000, in principal amount of the Notes not sold at the Closing to such persons (the
“Additional Purchasers”) as may be approved by the Board of Directors of the
Company. The Company may also make subsequent sales of the Notes up to the balance of the
total offering of an aggregate principal amount of $292,000 of the Notes at such later
time as may be approved by the Board of Directors of the Company and the Required
Purchasers. All such sales made at any additional closings (each an “Additional
Closing”), (a) shall be made on the terms and conditions set forth in this Agreement
(b) the representations and warranties of the Company set forth in Article 5 shall speak
as of the Closing and the Company shall have no obligation to update any such disclosure,
and (c) the representations and warranties of the Additional Purchasers in Article 6
hereof shall speak as of such Additional Closing. This Agreement may be amended by the
Company without the consent of the Purchasers to revise Annex A to include information
relating to Additional Purchasers. Any Notes sold pursuant to this Section 2.4 shall be
deemed to be “Notes” for all purposes under this Agreement, and any Additional
Purchasers thereof shall be deemed to be “Purchasers” for all purposes under
this Agreement. 

- 6 - 

ARTICLE 3 

REPAYMENT OF THE NOTES 

        3.1  
Interest Rates and Interest Payments. The Company covenants and agrees to make
payments to the Purchasers of accrued interest on the Notes on December 31, 2005. The
Notes will bear interest on the outstanding principal amount thereof at a fixed rate equal
to 6% per annum. Interest on the Notes will be computed on the basis of a year of 360
days, composed of 12, 30-day months, and the actual number of days elapsed. 

        3.2  
Repayment of the Notes. The Company covenants and agrees to repay to Purchasers the
unpaid principal balance of the Notes in full, together with all accrued and unpaid
interest, fees and other amounts due hereunder on December 31, 2005. Upon the
agreement of the Company and the Required Purchasers, the maturity date may be extended,
but to no later than December 31, 2006. 

        3.3  
Optional Prepayment of Notes. Upon the agreement of the Company and the Required
Purchasers, the Company may prepay to Purchasers, the outstanding principal amount of the
Notes in whole or in part in multiples of $5,000, or such lesser amount as is then
outstanding, plus the accrued interest to the date set for prepayment: 

        3.4  
Notice of Optional Prepayment. If the Company, with the agreement of the Required
Purchasers, shall elect to prepay any Notes pursuant to Section 3.3 hereof,
the Company shall give notice of such prepayment to Purchasers and each holder of the
Notes to be prepaid not less than 30 days or more than 90 days prior to the date fixed for
prepayment, specifying (a) the date on which such prepayment is to be made,
(b) the principal amount of such Notes to be prepaid on such date, and (c) accrued
interest applicable to the prepayment. Such notice shall be accompanied by a certificate
of the president of the Company that such prepayment is being made in compliance with
Section 3.3 hereof. Notice of prepayment having been so given, the aggregate
principal amount of the Notes specified in such notice, together with accrued interest
thereon shall become due and payable on the prepayment date set forth in such notice. 

        3.5  
Payment. The Company will pay all sums becoming due on such Note for principal and
interest to Purchasers and at the addresses specified on the signature page to this
Agreement or at such other addresses as Purchasers shall have from time to time specified
to the Company in writing for such purpose, without the presentation or surrender of such
Note or the making of any notation thereon, except that upon written request of the
Company made concurrently with or reasonably promptly after payment or prepayment in full
of any Note, each holder of a Note shall surrender such Note for cancellation, reasonably
promptly after such request, to the Company at its principal executive office. 

        3.6  
Maximum Lawful Rate. This Agreement, the Notes, and the other Purchase Documents
are hereby limited by this Section 3.7. In no event, whether by reason of
acceleration of the maturity of the amounts due hereunder or otherwise, shall interest and
fees contracted for, charged, received, paid or agreed to be paid to Purchasers exceed the
maximum amount permissible under such applicable law. If, from any circumstance
whatsoever, interest and fees would otherwise be payable to Purchasers in excess of the
maximum amount permissible under such applicable law, the interest and fees shall be
reduced to the maximum amount permitted under applicable law. If from any circumstance,
Agent or Purchasers shall have received anything of value deemed interest by applicable
law in excess of the maximum lawful amount, an amount equal to any excess of interest
shall be applied to the reduction of the principal amount of the Notes, in such manner as
may be determined by Purchasers, and not to the payment of fees or interest, or if such
excessive interest exceeds the unpaid balance of the principal amount of the Notes, such
excess shall be refunded to the Company. 

- 7 - 

        3.7  
Certain Waivers. The Company unconditionally waives (a) any rights to
presentment, demand, protest or (except as expressly required hereby) notice of any kind,
and (b) any rights of rescission, setoff, counterclaim or defense to payment under
the Notes. 

ARTICLE 4 

CONDITIONS 

        4.1  
Conditions to Purchase of Notes. The obligation of Purchasers to purchase
and pay for the Notes is subject to the satisfaction, prior to or at the Closing, of the
following conditions:  

         
          (a)       
          Representations and Warranties True. The representations and warranties
          contained in Article 5 hereof shall be true and correct in all
          material respects at and as of the Closing Date as though then made, except to
          the extent of changes caused by the transactions expressly contemplated herein. 

         
          (b)       
          Closing Documents. The Company shall have delivered or caused to be
          delivered to Agent all of the following documents in form and substance
          satisfactory to Agent: 

	 	        (i)
                           one or more Notes (as
designated by Agent and Purchasers pursuant to Section 2.1 and Annex A hereof)
in aggregate original           principal amounts as set forth herein, duly completed and
executed by the           Company;  

	 	        (ii)
                           a copy of the Charter
Documents and Bylaws of the Company, certified by the           President of the Company
as of the Closing Date;  

	 	        (iii)
                           copies of the resolutions
duly adopted by the Company’s board of directors           authorizing the
execution, delivery and performance by the Company of this           Agreement and each
of the other agreements, instruments and documents           contemplated hereby to which
the Company is a party, and the consummation of all           of the other Transactions,
certified as of the Closing Date by the president or           secretary of the Company;  

	 	        (iv)
                           a certificate dated as of
the Closing Date from an officer of the Company           stating that the conditions
specified in this Section 4.1 have been           fully satisfied or waived
by Agent; and  

- 8 - 

	 	        (v)
                          such other documents
relating to the Transactions contemplated by this           Agreement as Agent may
reasonably request.  

         
          (c)       
          Proceedings. All proceedings taken or required to be taken in connection
          with the transactions contemplated hereby to be consummated at or prior to the
          Closing and all documents incident thereto will be satisfactory in form and
          substance to Agent and to Purchasers. 

         
          (d)       
          Waiver. Any condition specified in this Section 4.1 may be
          waived by Agent; provided that no such waiver will be effective
          against Agent unless it is set forth in a writing executed by Agent. 

ARTICLE 5 

REPRESENTATIONS AND
WARRANTIES OF THE COMPANY 

        5.1  
Representations and Warranties of the Company. As a material inducement to Agent
and Purchasers to enter into this Agreement and purchase the Notes, the Company hereby
represents and warrants to Agent and Purchasers as follows: 

    
          (a)              Organization
and Power. The Company is duly organized, validly existing                and in good
standing under the laws of its state of organization. The Company                has all
requisite corporate or other organizational power and authority and all
               material licenses, permits, approvals and authorizations necessary to own
and                operate its properties, to carry on its businesses as now conducted
and                presently proposed to be conducted and to carry out the Transactions,
and is                qualified to do business in every jurisdiction where the failure to
so qualify                might reasonably be expected to have a Material Adverse Effect.
The Company has                its principal place of business in Kalispell, Montana. The
copies of the Charter                Documents and By-Laws of the Company that have been
furnished to Agent reflect                all amendments made thereto at any time prior
to the date of this Agreement and                are correct and complete.  

    
          (b)              Principal
Business. The Company is primarily engaged in the business of                software
development and hardware integration specializing in real-time audio                and
video streaming, compression, storage and management technologies for
               surveillance applications (the “Business”).  

    
          (c)              Financial
Statements and Financial Projections. The Company has delivered                to
Agent copies of its audited year-end financial statements for and as of the
               end of the fiscal year ended December 31, 2000 and unaudited financial
               statements for and as of the fiscal years ended December 31, 2001 and
December                31, 2002 and December 31, 2003 (the “Annual Statements”).
The                Annual Statements were compiled from the books and records maintained
by the                Company’s management, are correct and complete and fairly
represent the                financial condition of the Company as of their dates and the
results of                operations for the periods then ended.  

    
          (d)              Capitalization
and Related Matters. As of the Closing Date and                immediately
thereafter, the authorized capital stock of the Company and the                shares of
stock that are issued, outstanding and reserved for issuance upon                exercise
of warrants and Options and conversion of the Notes (without giving                effect
to anti-dilution adjustments) are as set forth on Schedule A. As                of
the Closing Date, the Company will not have outstanding any capital stock or
               securities convertible or exchangeable for any shares of its capital stock
other                than the warrants, Options and Notes as set forth in Schedule A, and
will not                have outstanding any rights or options to subscribe for or to
purchase its                capital stock or any stock or securities convertible into or
exchangeable for                its capital stock, other than the warrants and Options as
set forth in Schedule                A. As of the Closing Date, the Company will not be
subject to any obligation                (contingent or otherwise) to repurchase or
otherwise acquire or retire any                shares of its capital stock, except as set
forth herein and the Charter                Documents, respectively, as in effect on the
date hereof. As of the Closing, all                of the outstanding shares of the
Company’s capital stock will be validly                issued, fully paid and
nonassessable. There are no statutory or contractual                stockholders’ preemptive
rights with respect to the issuance of the Notes                hereunder. The Company
has not violated any applicable federal or state                securities laws in
connection with the offer, sale or issuance of any of its                capital stock,
and the offer, sale and issuance of the Notes hereunder do not                require
registration under the Securities Act or any applicable state securities
               laws.  

- 9 - 

         
          (e)       
          Subsidiaries. The Company does not own, or hold any rights to acquire,
          any shares of stock or any other security or interest in any other Person, and
          the Company has no Subsidiaries. 

         
          (f)       
          Authorization; No Breach. The execution, delivery and performance of this
          Agreement, the other Purchase Documents and all other agreements, instruments,
          certificates and documents contemplated hereby and thereby to which the Company
          is a party (collectively, the “Transaction Documents”), and the
          consummation of the Transactions have been duly authorized by the Company. The
          execution and delivery by the Company of the Transaction Documents and the
          consummation of the Transactions do not and will not (i) conflict with or
          result in a breach of the terms, conditions or provisions of, (ii) constitute a
          default under, (iii) result in the creation of any Lien upon any of the
          Company’s capital stock or assets pursuant to, (iv) give any third
          party the right to accelerate any obligation under, (v) result in a violation
          of, or (vi) require any authorization, consent, approval, exemption or
          other action by or notice to any Governmental Authority pursuant to, the Charter
          Documents of the Company, or any law, statute, rule or regulation to which the
          Company is subject, or any agreement, instrument, order, judgment or decree to
          which the Company is a party or to which it or its assets are subject. Provided,
          that, the Company will need to amend its Articles of Incorporation to increase
          its authorized common stock in order for the Company to have shares available
          for issuance upon conversion of the Notes. 

         
          (g)       
          Governmental Approvals. Except as specifically provided by the
          Transaction Documents, no registration with or consent or approval of, or other
          action by, any Governmental Authority is or will be required in connection with
          the consummation of the Transactions by the Company. 

         
          (h)       
          Enforceability. This Agreement constitutes, and each of the other
          Transaction Documents when duly executed and delivered by the Company will
          constitute, legal, valid and binding obligations of the Company enforceable in
          accordance with their respective terms. 

- 10 - 

         
          (i)       
          Litigation. Except as disclosed herein, there are no actions, suits or
          proceedings at law or in equity or by or before any arbitrator or any
          Governmental Authority now pending or, to the best knowledge of the
          Company’s management after due inquiry, threatened against or filed by or
          affecting the Company or any of its directors or officers or the businesses,
          assets or rights of the Company. The Company has certain past due trade accounts
          payable and has received and continues to receive collection calls from a number
          of vendors pursuing collection of these amounts. The Company anticipates that a
          portion of the proceeds of this offering will satisfy the required past due
          trade payables. The Company and its directors or officers shall promptly provide
          Agent with a copy of all pleadings of all lawsuits filed against others and, in
          the case of other actions, a letter stating the nature of such suits and a copy
          of all pleadings. 

         
          (j)       
          Compliance with Laws. The Company is not in violation of any applicable
          Law in any material respect. The Company is not in default with respect to any
          judgment, order, writ, injunction, decree, rule or regulation of any
          Governmental Authority. The Company is not in, and the consummation of the
          Transactions will not cause any, default concerning any judgment, order, writ,
          injunction or decree of any Governmental Authority, and there is no
          investigation, enforcement action or regulatory action pending or threatened
          against or affecting the Company by any Governmental Authority. There is no
          remedial or other corrective action that the Company is required to take to
          remain in compliance with any judgment, order, writ, injunction or decree of any
          Governmental Authority or to maintain any material permits, approvals or
          licenses granted by any Governmental Authority in full force and effect. During
          the past ten (10) years, none of the officers, directors or management of the
          Company have been arrested or convicted of any material crime nor have any of
          them been bankrupt or an officer or director of a bankrupt the Company. 

         
          (k)       
          Environmental Protection. The business of the Company, the methods and
          means employed by the Company in the operation thereof (including all operations
          and conditions at or in the properties of the Company), and the assets owned,
          leased, managed, used, controlled, held or operated by the Company, comply in
          all material respects with all applicable Environmental Laws; (ii) with
          respect to the Properties and Facilities, and except as disclosed in the
          Environmental Schedule, the Company has obtained, possess, and is in full
          compliance with all permits, licenses, reviews, certifications, approvals,
          registrations, consents, and any other authorizations required under any
          Environmental Laws 

         
          (l)       
          Taxes. The Company has filed or caused to be filed all Federal, state and
          local tax returns that are required to be filed by it, and has paid or caused to
          be paid all taxes shown to be due and payable on such returns or on any
          assessments received by it, including payroll taxes. 

         
          (m)       
          Labor and Employment. The Company is and each of its Plans are in
          compliance in all material respects with those provisions of ERISA, the Code,
          the Age Discrimination in Employment Act, and the regulations and published
          interpretations thereunder which are applicable to the Company or any such Plan.
          The Company is in compliance in all material respects with all labor and
          employment laws, rules, regulations and requirements of all applicable domestic
          and foreign jurisdictions. There are no pending or threatened labor disputes,
          work stoppages or strikes. 

- 11 - 

         
          (n)       
          Properties; Security Interests. The Company has good and marketable title
          to, or valid leasehold interests in, all of the material assets and properties
          used or useful by the Company in the Business (collectively, the
          “Properties and Facilities”), subject to no Liens, except for
          liens in favor of First Interstate Bank, Kalispell, Montana. All of the
          Properties and Facilities are in good repair, working order and condition and
          all such assets and properties are owned by the Company free and clear of all
          Liens, except as noted in the immediately preceding sentence. The Properties and
          Facilities constitute all of the material assets, properties and rights of any
          type used in or necessary for the conduct of the Business. 

         
          (o)       
          Intellectual Property; Licenses. The Company possesses all Proprietary
          Rights necessary to conduct the Business as heretofore conducted or as proposed
          to be conducted by it. All Proprietary Rights registered in the name of the
          Company and applications therefor filed by the Company are listed on the
          “Intellectual Property Schedule,” attached hereto as Schedule
          B. No event has occurred that permits, or after notice or lapse of time or
          both would permit, the revocation or termination of any of the foregoing, which
          taken in isolation or when considered with all other such revocations or
          terminations could have a Material Adverse Effect. The Company does not have
          notice or knowledge of any facts or any past, present or threatened occurrence
          that could preclude or impair the Company’s ability to retain or obtain any
          authorization necessary for the operation of the Business. 

         
          (p)       
          Solvency. After giving effect to the Transactions, (i) the fair value of
          the assets of the Company, at a fair valuation, will exceed its debts and
          liabilities, subordinated, contingent or otherwise, (ii) the present fair
          saleable value of the property of the Company will be greater than the amount
          that will be required to pay the probable liability of its debts and other
          liabilities, subordinated, contingent or otherwise, as such debts and other
          liabilities become absolute and matured, (iii) the Company will be able to pay
          its debts and liabilities, whether subordinated, contingent or otherwise, as
          such debts and liabilities become absolute and matured, and (iv) the Company
          will not have unreasonably small capital with which to conduct the Business in
          which it is engaged as such Business is now conducted and is proposed to be
          conducted following the Closing Date. 

         
          (q)       
          Complete Disclosure. All factual information furnished by or on behalf of
          the Company to Agent for purposes of or in connection with this Agreement or the
          Transactions is, and all other such factual information hereafter furnished by
          or on behalf of the Company will be, true and accurate in all material respects
          on the date as of which such information is furnished and not incomplete by
          omitting to state any fact necessary to make such information not misleading at
          such time in light of the circumstances under which such information was
          provided. 

         
          (r)       
          Side Agreements. Neither the Company nor any Affiliate of the Company nor
          any director, officer or employee of the Company or any of its Affiliates has
          entered into, as of the date hereof, any side agreement, either oral or written,
          with any individual or business, pursuant to which the director, officer,
          employee, Company or Affiliate agreed to do anything beyond the requirements of
          the formal, written contracts executed by the Company and disclosed to
          Purchasers and Agent herein. 

- 12 - 

         
          (w)       
          Product Liabilities. There are no product recalls, trade disputes,
          product liabilities or product tampering claims now pending, threatened against
          or made by or affecting the Company or any of its directors, officers or
          employees or the businesses, assets or rights of the Company. 

        5.2  
Absolute Reliance on the Representations and Warranties. All representations and
warranties contained in this Agreement and any financial statements, instruments,
certificates, schedules or other documents delivered in connection herewith, shall survive
the execution and delivery of this Agreement, regardless of any investigation made by
Agent or Purchasers or on Agent’s or Purchasers’ behalf. 

ARTICLE 6 

TRANSFER OF SECURITIES 

        6.1  
Purchase Entirely for His Own Account. This Agreement is made with the Purchasers
in reliance upon each Purchaser’s representation to the Company that the Notes will
be acquired for investment for the Purchaser’s own account, not as a nominee or
agent, and not with the view to the resale or distribution of any part thereof, and the
Purchaser has no present intention of selling, granting any participation in, or otherwise
distributing the Notes or the Underlying Common Stock. The Purchaser has no contract,
undertaking, agreement or arrangement with any person to sell, transfer or grant
participations to such person with respect to any of the Notes, or the Underlying Common
Stock. 

        6.2  
Disclosure of Information. Each of the Purchasers has had the opportunity to ask
questions of, and receive answers from officers and directors of the Company to obtain
additional information regarding the Company and this Offering. The Purchaser has been
given access to full and complete information regarding the Company and has utilized such
access to the Purchaser’s satisfaction for the purpose of obtaining such information
regarding the Company as the Purchaser has reasonably requested. Such information includes
the terms and conditions of the offering of the Notes to the Purchasers, and the plan of
operations of the Company’s business and financial condition of the Company. 

        6.3  
Investment Experience. Each of the Purchaser represents as to himself, that he is
an investor in securities with companies in the development stage and acknowledges that he
is able to fend for himself, can bear the economic risk of his investment, and has such
knowledge and experience in financial or business matters that he is capable of evaluating
the merits and risks of the investment in the Notes. 

        6.4  
Restricted Securities. Purchasers acknowledge that the Notes, and the Underlying
Common Stock have not been registered under the Securities Act and may be resold only if
registered pursuant to the provisions of the Securities Act or if an exemption from
registration is available. 

        6.5  
Legends. The Company may place an appropriate legend on the Notes owned by
Purchasers or the Underlying Common Stock concerning the restrictions set forth in this
Article 6. Upon the assignment or transfer by Purchasers or any of its successors
or assignees of all or any part of the Notes, the term “Purchaser” as
used herein shall thereafter mean, to the extent thereof, the then holder or holders of
such Notes, or portion thereof. 

- 13 - 

        6.6  
Transfer of Notes. Subject to Sections 6.4 and 6.5 hereof, a holder of a
Note may transfer such Note to a new holder, or may exchange such Note for Notes of
different denominations (but in no event of denominations of less than $10,000 in original
principal amount), by surrendering such Note to the Company duly endorsed for transfer or
accompanied by a duly executed instrument of transfer naming the new holder (or the
current holder if submitted for exchange only), together with written instructions for the
issuance of one or more new Notes specifying the respective principal amounts of each new
Note and the name of each new holder and each address therefor. The Company shall
simultaneously deliver to such holder or its designee such new Notes, shall mark the
surrendered Notes as canceled and shall provide notice of such transfer to Agent. In lieu
of the foregoing procedures, a holder may assign a Note (in whole but not in part) to a
new holder by sending written notice to the Company and Agent of such assignment
specifying the new holder’s name and address; in such case, the Company shall
promptly acknowledge such assignment in writing to both the old and new holder. The
Company shall not be required to recognize any subsequent holder of a Note unless and
until the Company has received reasonable assurance that all applicable transfer taxes
have been paid. 

        6.7  
Replacement of Lost Notes. Upon receipt of evidence reasonably satisfactory to the
Company of the mutilation, destruction, loss or theft of any Notes and the ownership
thereof, the Company shall, upon the written request of the holder of such Notes, execute
and deliver in replacement thereof new Notes in the same form, in the same original
principal amount and dated the same date as the Notes so mutilated, destroyed, lost or
stolen; and such Notes so mutilated, destroyed, lost or stolen shall then be deemed no
longer outstanding hereunder. If the Notes being replaced have been mutilated, they shall
be surrendered to the Company; and if such replaced Notes have been destroyed, lost or
stolen, such holder shall furnish the Company with an indemnity in writing to save it
harmless in respect of such replaced Note. 

        6.8  
No Other Representations Affected. Nothing contained in this Article 6
shall limit the full force or effect of any representation, agreement or warranty made
herein or in connection herewith to Purchaser. 

        6.9  
Advice of Counsel. Purchaser acknowledges that he has obtained advice from
independent counsel and his own investment advisors with respect to this Agreement and his
investment in the Notes to the extent that he desires to do so. Purchaser is not relying
on any representations, except those set forth in this Agreement, or any advice from the
Company, the Company’s counsel (the Crowley Law Firm and Patton Boggs, LLP) or any of
the Company’s officers, directors, attorneys or other representatives regarding this
Agreement, its content or effect. 

        6.10  
No Other Representations Affected. Nothing contained in this Article 6
shall limit the full force or effect of any representation, agreement or warranty made
herein or in connection herewith to Purchaser. 

- 14 - 

ARTICLE 7 

COVENANTS 

        7.1  
Affirmative Covenants. The Company covenants that, so long as all or any of the
principal amount of the Notes or any interest thereon shall remain outstanding, and,
thereafter, so long as any of the Purchasers own any Underlying Common Stock, the Company
shall: 

         
          (a)       
          Existence. Do or cause to be done all things necessary to preserve, renew
          and keep in full force and effect its legal existence. 

         
          (b)       
          Businesses and Properties; Compliance with Laws. At all times (i) do
          or cause to be done all things necessary to preserve, renew and keep in full
          force and effect the rights, licenses, registrations, permits, certifications,
          approvals, consents, franchises, patents, copyrights, trademarks and trade
          names, and any other trade names which may be material to the conduct of its
          businesses; (ii) comply in all material respects with all laws and
          regulations applicable to the operation of such business, including but not
          limited to, all Environmental Laws, whether now in effect or hereafter enacted
          and with all other applicable laws and regulations, (iii) take all action
          which may be required to obtain, preserve, renew and extend all rights, patents,
          copyrights, trademarks, trade names, franchises, registrations, certifications,
          approvals, consents, licenses, permits and any other authorizations which may be
          material to the operation of such business, (iv) maintain, preserve and
          protect all property material to the conduct of such business, and
          (v) except for obsolete or worn out equipment, keep their property in good
          repair, working order and condition, normal wear and tear excepted, and from
          time to time make, or cause to be made, all needful and proper repairs,
          renewals, additions, improvements and replacements thereto necessary in order
          that the business carried on in connection therewith may be properly conducted
          at all times. 

         
          (c)       
          Obligations and Taxes. Pay and discharge promptly when due all taxes,
          assessments and governmental charges or levies imposed upon it or upon its
          income or profits or in respect of its properties before the same shall become
          delinquent or in default, as well as all lawful claims for labor, materials and
          supplies or otherwise, which, if unpaid, might give rise to Liens or charges
          upon such properties or any part thereof; provided, however, that
          the Company shall not be required to pay and discharge or to cause to be paid
          and discharged any such tax, assessment, charge, levy or claim so long as the
          validity or amount thereof shall be contested in good faith by appropriate
          proceedings and the Company shall have set aside on its books adequate reserves
          with respect thereto. 

         
          (d)       
          Financial Statements; Reports. Furnish to Agent: 

	 	        (i)
       Quarterly Statements. Within 45 calendar
days after the end of each           fiscal quarter, financial statements (including a
balance sheet and income           statements) showing the financial condition and
results of operations of the           Company as of the end of each such quarter and for
the then elapsed portion of           the current fiscal year, accompanied by a
certificate of the President that no           Default or Event of Default has occurred
during the period covered by such           statements or, if any such Default or Event
of Default has occurred during such           period, setting forth a description of such
Default or Event of Default and           specifying the action, if any, taken by the
Company to remedy the same,  

- 15 - 

	 	        (ii)
       Additional Information. Promptly, from
time to time, such other           information regarding the compliance by the Company
with the terms of this           Agreement, and the affairs, operations or condition
(financial or otherwise) of           the Company as Agent may reasonably request and
that is capable of being           obtained, produced or generated by the Company or of
which the Company has           knowledge.  

         
          (e)       
          Litigation and Other Notices. Give Agent prompt written notice of the
          following: 

	 	        (i)
       Orders; Injunctions. The issuance by any
court or Governmental           Authorities of any injunction, order, decision or other
restraint prohibiting,           or having the effect of prohibiting, the making of any
loan or the initiation of           any litigation or similar proceeding seeking any such
injunction, order or other           restraint.  

	 	        (ii)
       Litigation. The notice, filing or
commencement of any action, suit or           proceeding against the Company whether at
law or in equity or by or before any           court or any Governmental Authorities and
that, if adversely determined against           the Company, could result in uninsured
liability in excess of $50,000 in the           aggregate.  

	 	        (iii)
       Default. Any Default or Event of
Default, specifying the nature and           extent thereof and the action (if any) that
is proposed to be taken with respect           thereto.  

	 	        (iv)
       Material Adverse Effect. Any development
in the business or affairs of           the Company that could reasonably be expected to
have a Material Adverse Effect.  

	 	        (v)
       Board Meetings. Written notice of each
regular meeting of the           Company’s board of directors at least 30 days in
advance of such meeting           and prior written notice of each special meeting of the
Company’s board of           directors at least seven (7) days in advance of such
meeting, but in any case           such notice shall be delivered no later than the date
on which the members of           the board of directors are notified of such meeting. In
addition, the Company           will send Agent copies of all reports and materials
provided to members of the           board of directors at meetings or otherwise.  

	 	        (vii)
       Product Liabilities. The notice, filing
or commencement of any product           recall, trade dispute, product liability or
product tampering claim threatened           against or made by or affecting the Company
or any of its directors, officers or           employees or the businesses, assets or
rights of the Company, which recall,           dispute, liability or tampering claim, if
adversely determined against the           Company, could result in liability in excess
of $50,000 in the aggregate.  

- 16 - 

         
          (f)       
          Board of Directors. 

	 	        (i)                 The
Company’s board of directors shall meet at least once per calendar
          quarter.  

	 	        (ii)
                           Agent shall be elected as a
member of the Board of Directors of the Company as           of the Closing Date and
shall so serve as a member of the Board of Directors of           the Company until
payment in full of the Notes.  

         
          (g)       
          Common Stock Reserve. Subject to amendment of its Articles of
          Incorporation, maintain in reserve, at all times that the Notes are unpaid,
          Common Stock for issuance upon conversion of the Notes. 

         
          (h)       
          Use of Proceeds. The proceeds from the sale of the Notes substantially in
          accordance with the Use of Proceeds set forth in Schedule C. 

         
          (i)       
          Further Assurances. The Company will with reasonable promptness, execute
          and deliver to each Purchaser, from time to time, upon the reasonable request of
          such Purchaser, such supplemental agreements, statements, assignments and
          transfers, or instructions on documents as any Purchaser may request in order
          that the full intent of this Agreement and the other Transaction Documents may
          be carried into effect. 

        7.2  
     Negative  Covenants.  The Company  covenants  that, so long as all or any part of
the principal  amount of the Notes or any interest thereon shall remain outstanding: 

         
          (a)       
          Affiliate Transactions. The Company shall not make any loan or advance to
          any director, officer or employee of the Company or any Affiliate, or enter into
          or be a party to any transaction or arrangement with any Affiliate of the
          Company, except pursuant to the reasonable requirements of the Company’s
          business and upon fair and reasonable terms no less favorable to the Company
          than would be obtained in a comparable arm’s-length transaction with a
          Person other than an Affiliate. 

         
          (b)       
          Dividends and Stock Purchases. The Company shall not, directly or
          indirectly, declare or pay any dividends or make any distribution of any kind on
          its outstanding capital stock or any other payment of any kind to any of its
          stockholders or its Affiliates without first obtaining the consent of the
          Required Purchasers. 

         
          (c)       
          Stock Issuances. Subsequent to the Closing Date, the Company shall not
          issue to employees or consultants shares of Common Stock (except pursuant to
          exercises of options granted prior to the Closing Date) or Options in excess of
          20% of the then outstanding Common Stock (on a fully dilated basis assuming
          conversion of all then outstanding Notes and exercise of any outstanding
          warrants, Options or rights to purchase securities of the Company) without first
          obtaining the consent of the Required Purchasers. 

- 17 - 

         
          (d)       
          Business. The Company shall not engage, directly or indirectly, in any
          business other than the Business without first obtaining the consent of the
          Required Purchasers. 

ARTICLE 8 

EVENTS OF DEFAULT 

8.1   Events of Default. 
An "Event of Default" means the occurrence of one or more of the following described events:  

         
          (a)       
          the Company shall default in the payment of interest or principal on any Note
          when due, whether at maturity, upon notice of prepayment in accordance with
          Sections 3.3 or 3.4 hereof, upon any scheduled payment date
          or by acceleration or otherwise; 

         
          (b)       
          the Company shall default under any agreement under which any Indebtedness in an
          aggregate principal amount of $50,000 or more is created in a manner entitling
          the holder of such Indebtedness to accelerate the maturity of such Indebtedness; 

         
          (c)       
          any material representation or warranty herein made by the Company, or any
          certificate or financial statement furnished pursuant to the provisions hereof,
          shall prove to have been false or misleading in any material respect as of the
          time made or furnished or deemed made or furnished; 

         
          (d)       
          a default or event of default shall occur under any of the other Purchase
          Documents, beyond any applicable notice or cure periods; 

         
          (e)       
          the Company shall default in the performance of any covenant, condition or
          provision of this Agreement, the Notes or the other Purchase Documents, and such
          default shall not be remedied to Required Purchasers’ reasonable
          satisfaction for a period of 20 days of the earlier of (i) written notice
          from a Agent of such default or (ii) actual knowledge by the Company of
          such default; 

         
          (f)       
          a proceeding shall have been instituted in a court having jurisdiction in the
          premises seeking a decree or order for relief in respect of the Company in an
          involuntary case under any applicable bankruptcy, insolvency or other similar
          law now or hereafter in effect, or for the appointment of a receiver,
          liquidator, assignee, custodian, trustee, sequestrator (or similar official) of
          the Company or for any substantial part of its property, or for the winding-up
          or liquidation of their affairs, and such proceeding shall remain undismissed or
          unstayed and in effect for a period of 60 days; 

         
          (g)       
          the Company shall commence a voluntary case under any applicable bankruptcy,
          insolvency or other similar law now or hereafter in effect, shall consent to the
          entry of an order for relief in an involuntary case under any such law, or shall
          consent to the appointment of or taking possession by a receiver, liquidator,
          assignee, trustee, custodian, sequestrator (or other similar official) of the
          Company or for any substantial part of its property, or shall make a general
          assignment for the benefit of creditors, or shall fail generally to pay its
          debts as they become due, or shall take any action in furtherance of any of the
          foregoing; and/or 

- 18 - 

         
          (h)       
          a final judgment which, with other undischarged final judgments against the
          Company, exceeds an aggregate of $50,000 (excluding judgments to the extent the
          Company is fully insured or the deductible or retention limit does not exceed
          $50,000 and with respect to which the insurer has assumed responsibility in
          writing), shall have been entered against the Company if, within 30 days after
          the entry thereof, such judgment shall not have been discharged or execution
          thereof stayed pending appeal, or if, within 30 days after the expiration of any
          such stay, such judgment shall not have been discharged. 

        8.2  
Consequences of Event of Default(a)Bankruptcy. If an Event of Default
specified in paragraphs (f) or (g) of Section 8.1 hereof shall
occur, the unpaid balance of the Notes and interest accrued thereon and all other
liabilities of the Company to the holders thereof hereunder and thereunder shall be
immediately due and payable, without presentment, demand, protest or (except as expressly
required hereby) notice of any kind, all of which are hereby expressly waived. 

         
          (b)       
          Other Defaults. If any other Event of Default shall occur, Required
          Purchasers may at their option, by written notice to the Company, declare the
          entire unpaid balance of the Notes, and interest accrued thereon and all other
          liabilities of the Company hereunder and thereunder to be forthwith due and
          payable, and the same shall thereupon become immediately due and payable,
          without presentment, demand, protest or (except as expressly required hereby)
          notice of any kind, all of which are hereby expressly waived. 

ARTICLE 9 

THE AGENT 

        9.1  
Authorization and Action. Each Purchaser and each subsequent holder of any Note by
its acceptance thereof, hereby designates and appoints Gregory Pusey as Agent hereunder
and authorizes Gregory Pusey to take such actions as agent on its behalf and to exercise
such powers as are delegated to Agent by the terms of this Agreement and the other
Purchase Documents, together with such powers as are reasonably incidental thereto. Agent
shall not have any duties or responsibilities, except those expressly set forth herein, or
any fiduciary relationship with any Purchaser, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities on the part of Agent shall be read
into this Agreement or otherwise exist for Agent. In performing his functions and duties
hereunder, Agent shall act solely as agent for Purchasers and does not assume, nor shall
be deemed to have assumed, any obligation or relationship of trust or agency with or for
the Company or any of its successors or assigns. Agent shall not be required to take any
action that exposes Agent to personal liability or that is contrary to this Agreement or
applicable Laws. The appointment and authority of Agent hereunder shall terminate at the
indefeasible payment in full of the Notes and related obligations. 

        9.2  
Delegation of Duties. Agent may execute any of its duties under this Agreement by
or through agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. Agent shall not be responsible for the
negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable
care. 

- 19 - 

        9.3  
Exculpatory Provisions. Agent shall not be liable for any action lawfully taken or
omitted to be taken by it or him under or in connection with this Agreement (except for
his own gross negligence or willful misconduct or, the breach of his obligations expressly
set forth in this Agreement). Provided, however, the Agent shall not be liable for a
breach of his obligations if such action was taken or omitted to be taken by Agent at the
direction of the Required Purchasers. Agent shall not be responsible in any manner to any
Purchaser for any recitals, statements, representations or warranties made by the Company
contained in this Agreement or in any certificate, report, statement or other document
referred to or provided for in, or received under or in connection with, this Agreement
for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this
Agreement or any other document furnished in connection herewith, or for any failure of
the Company to perform its obligations hereunder, or for the satisfaction of any condition
specified in Article 4 hereof. Agent shall not be under any obligation to any
Purchaser to ascertain or to inquire as to the observance or performance of any of the
agreements or covenants contained in, or conditions of, this Agreement, or to inspect the
properties, books or records of the Company. 

        9.4  
Reliance. Agent shall in all cases be entitled to rely, and shall be fully
protected in relying, upon any document or conversation believed by him to be genuine and
correct and to have been signed, sent or made by the proper Person or Persons and upon
advice and statements of legal counsel (including, without limitation, counsel to the
Company), independent accountants and other experts selected by Agent. Agent shall in all
cases be fully justified in failing or refusing to take any action under this Agreement or
any other document furnished in connection herewith unless he shall first receive such
advice or concurrence of the Required Purchasers or all of Purchasers, as applicable, as
he deems appropriate or he shall first be indemnified to his satisfaction by Purchasers;
provided, that, unless and until Agent shall have received such advice, Agent may take or
refrain from taking any action, as Agent shall deem advisable and in the interests of
Purchasers. Agent shall in all cases be fully protected in acting, or in refraining from
acting, in accordance with a request of the Required Purchasers or all of Purchasers, as
applicable, and such request and any action taken or failure to act pursuant thereto shall
be binding upon all Purchasers. 

        9.5  
Non-Reliance on Agent and Other Purchasers. Each Purchaser expressly acknowledges
that Agent has not made any representations or warranties to it and that no act by Agent
or hereafter taken, including, without limitation, any review of the affairs of the
Company, shall be deemed to constitute any representation or warranty by Agent. Each
Purchaser represents and warrants to Agent that it has and will, independently and without
reliance upon Agent or any other Purchaser and based on such documents and information as
it has deemed appropriate, made its own appraisal of and investigation into the business,
operations, property, prospects, financial and other conditions and creditworthiness of
the Company and made its own decision to enter into this Agreement. 

        9.6  
Agent in its Individual Capacity. Agent, and each of his Affiliates, may make loans
to, purchase securities from, provide services to, and generally engage in any kind of
business with the Company or any Affiliate of the Company as though Agent were not Agent
hereunder. 

- 20 - 

        9.7  
Successor Agent. Agent may, upon 15 days’ notice to the Company and
Purchasers, and Agent will, upon the direction of the Required Purchasers (other than
Agent, in its individual capacity), resign as Agent. If Agent shall resign, then the
Required Purchasers during such 15-day period shall appoint a successor Agent and if the
Required Purchasers direct Agent to resign, such direction shall include an appointment of
a successor Agent. If for any reason no successor Agent is appointed by the Required
Purchasers during such 15-day period, then effective upon the expiration of such 15-day
period, Purchasers shall perform all of the duties of Agent hereunder and the Company for
all purposes shall deal directly with Purchasers. After any retiring Agent’s
resignation hereunder as Agent, the provisions of Article 9 shall inure to his
benefit as to any actions taken or omitted to be taken by him while he was Agent under
this Agreement. 

      9.8  
Consent of Purchasers 

         
          (a)       
          Except as expressly provided herein, Agent shall have the sole and exclusive
          right to monitor the Notes and the Purchase Documents related thereto,
          including, without limitation, the right to exercise all rights, remedies,
          privileges and options under this Agreement and under the other Purchase
          Documents. 

         
          (b)       
          Notwithstanding anything to the contrary contained in Section 9.8(a)
          hereof, Agent shall not without the prior written consent of the Required
          Purchasers then holding Notes: (i) extend any payment date under the Notes,
          (ii) reduce any interest rate applicable to any of the Notes,
          (iii) waive any Event of Default, (iv) compromise or settle all or a
          portion of the Indebtedness under the Notes, (v) release any obligor from
          the Indebtedness under the Notes except in connection with full payment and
          satisfaction of all Indebtedness under the Notes, (vi) amend the definition
          of Required Purchasers, or (vii) amend this Section 9.8(b). 

         
          (c)       
          Notwithstanding anything to the contrary contained in Section 9.8(a)
          hereof, and subject to any applicable limitation set forth in
          Section 9.8(b) hereof, Agent shall not, without the prior written
          consent of Required Purchasers: (i) consent to the Company taking any
          action that, if taken, would constitute an Event of Default under this Agreement
          or under any of the other Purchase Documents or (ii) amend or modify or
          agree to an amendment or modification of this Agreement or other Purchase
          Documents. 

         
          (d)       
          After an acceleration of the debt owed pursuant to the Notes, Agent shall have
          the sole and exclusive right, after consultation (to the extent reasonably
          practicable under the circumstances) with all Purchasers and, unless otherwise
          directed in writing by Required Purchasers, to exercise or refrain from
          exercising any and all rights, remedies, privileges and options under this
          Agreement or the other Purchase Documents and available at law or in equity to
          protect the rights of Agent and Purchasers and collect the debt owed pursuant to
          the Notes, including, without limitation, instituting and pursuing all legal
          actions brought against the Company or to collect the debt owed pursuant to the
          Notes, or defending any and all actions brought by the Company or other Person;
          or incurring expenses or otherwise making expenditures to protect the
          collateral, the Notes or Agent’s or any Purchaser’s rights or
          remedies. 

        9.9  
This Article Not Applicable to the Company. This Article 9 is included
in this Agreement solely for the purpose of determining certain rights as between Agent
and Purchasers and does not create, nor shall it give rise to, any rights in or
obligations on the part of the Company and all rights and obligations of the Company
(other than as specifically set forth herein) under this Agreement shall be determined by
reference to the provisions of this Agreement other than this Article 9. 

- 21 - 

ARTICLE 10 

REGISTRATION RIGHTS 

      10.1  
Piggyback Registrations. 

         
          (a)       
          Whenever the Company proposes to register any of its securities under the
          Securities Act and the registration form to be used may be used for the
          registration of Registrable Securities (a “Piggyback
          Registration”), the Company will give prompt written notice (in any
          event within three (3) Business Days after its receipt of notice of any exercise
          of demand registration rights other than under this Agreement) to all holders of
          Registrable Securities with respect of the proposed offering at least 15 days
          before the initial filing with the SEC of such registration statement, and offer
          to include in such filing such Registrable Securities as any such holder may
          request. Each such holder of Registrable Securities desiring to have Registrable
          Securities registered under this Section 10.1 shall advise the
          Company in writing within 15 days after the date of receipt of such notice from
          the Company, setting forth the amount of such Registrable Securities for which
          registration is requested. The Company shall thereupon include in such filing
          the number of Registrable Securities for which registration is so requested, and
          shall use its best efforts to effect registration under the Securities Act of
          such Registrable Securities. 

         
          (b)       
          The registration expenses of the holders of Registrable Securities will be paid
          by the Company in all Piggyback Registrations to the extent provided in
          Section 10.3 hereof. 

         
          (c)       
          If a Piggyback Registration is an underwritten primary registration on behalf of
          holders of the Company’s securities, and the managing underwriters advise
          the Company in writing that in their opinion the number of securities requested
          to be included in such registration exceeds the number which can be sold in an
          orderly manner in such offering within a price range acceptable to the Company,
          the Company will include in such registration: (i) first, the securities
          the Company proposes to sell, and (ii) second, the Registrable Securities
          requested to be included in such registration, pro rata among the holders of the
          securities requested to be included in such registration. 

         
          (d)       
          If a Piggyback Registration is an underwritten secondary registration on behalf
          of holders of the Company’s securities, and the managing underwriters
          advise the Company in writing that in their opinion the number of securities
          requested to be included in such registration exceeds the number that can be
          sold in an orderly manner in such offering within a price range acceptable to
          the holders initially requesting such registration, the Company will include in
          such registration, the Registrable Securities requested to be included in such
          registration, pro rata among the holders of other securities requested to be
          included in such registration. 

- 22 - 

      10.2  
Demand Registration Rights. 

         
          (a)       
          If, at any time 180 days or more after a Qualified IPO, the Company receives a
          written request by the holders of a majority of the Registrable Securities to
          effect the registration under the Securities Act of the Registrable Securities,
          the Company shall follow the procedures described in this
          Section 10.2. Within five (5) days of its receipt of such request,
          the Company shall give written notice of such proposed registration (a
          “Demand Registration”) to all holders of Registrable
          Securities, and thereupon, the Company shall, as expeditiously as possible, use
          its best efforts to effect the registration on a form of general use under the
          Securities Act of the shares it has been requested to register in such initial
          request and in any response to such notice given to the Company within 20 days
          after the Company’s giving of such notice; provided, however,
          that the Company shall not be required to effect more than one Demand
          Registrations pursuant to this Section 10.2. 

         
          (b)       
          The Company may not be required to effect a registration pursuant to this
          Section 10.2 during the first 180 days after the effective date of
          any registration statement filed by the Company under Section 10.1
          hereof if the holders of Registrable Securities requesting registration have
          been afforded the opportunity to register in such registration all or a majority
          of their Registrable Securities. 

         
          (c)       
          The Company may include in any registration under this Section 10.2
          any other shares of Common Stock (including issued and outstanding shares of
          stock as to which the holders thereof have contracted with the Company for
          “piggyback” registration rights) so long as the inclusion in such
          registration of such shares will not, in the opinion of the managing underwriter
          of the shares of the stockholder or stockholders first demanding registration
          (if the offering is underwritten), interfere with the successful marketing in
          accordance with the intended method of sale or other disposition of all the
          stock sought to be registered by such demanding stockholder or stockholders
          pursuant to this Section 10.2. 

        10.3  
Registration Procedures. Whenever the holders of Registrable Securities have
requested that any Registrable Securities be registered pursuant to this Agreement, the
Company will use reasonable efforts to effect the registration and the sale of such
Registrable Securities in accordance with the intended method of disposition thereof, and
pursuant thereto the Company will as expeditiously as possible: 

         
          (a)       
          prepare and file with the SEC a registration statement with respect to such
          Registrable Securities and use reasonable efforts to cause such registration
          statement to become effective; 

         
          (b)       
          prepare and file with the SEC such amendments and supplements to such
          registration statement and the prospectus used in connection therewith as may be
          reasonably necessary to keep such registration statement effective for a period
          equal to the shorter of (i) one year and (ii) the time by which all securities
          covered by such registration statement have been sold; 

         
          (c)       
          furnish to each seller of Registrable Securities such number of copies of such
          registration statement, each amendment and supplement thereto, the prospectus
          included in such registration statement (including each preliminary prospectus)
          and such other documents as such seller may reasonably request in order to
          facilitate the disposition of the Registrable Securities owned by such seller; 

- 23 - 

         
          (d)       
          use reasonable efforts to register or qualify such Registrable Securities under
          such other securities or blue sky laws of such jurisdictions as any seller of
          Registrable Securities reasonably requests and do any and all other acts and
          things which may be reasonably necessary or advisable to enable such seller to
          consummate the disposition in such jurisdictions of the Registrable Securities
          owned by such seller (provided that the Company will not be
          required to (i) qualify generally to do business in any jurisdiction where it
          would not otherwise be required to qualify but for this subparagraph, (ii)
          subject itself to taxation in any such jurisdictions, (iii) consent to general
          service of process in each such jurisdiction or (iv) undertake such actions in
          any jurisdiction other than the states of the United States of America and the
          District of Columbia); 

         
          (e)       
          notify each seller of such Registrable Securities, at any time when a prospectus
          relating thereto is required to be delivered under the Securities Act, of the
          happening of any event as a result of which the prospectus included in such
          registration statement contains an untrue statement of a material fact or omits
          any fact necessary to make the statements therein not misleading, and, at the
          request of any such seller, the Company will prepare a supplement or amendment
          to such prospectus so that, as thereafter delivered to purchasers of such
          Registrable Securities, such prospectus will not contain an untrue statement of
          a material fact or omit to state any fact necessary to make the statements
          therein not misleading; 

         
          (f)       
          provide a transfer agent and registrar for all such Registrable Securities not
          later than the effective date of such registration statement; 

         
          (g)       
          enter into such customary agreements (including underwriting agreements in
          customary form) and take all such other actions as the holders of a majority of
          the Registrable Securities being sold or the underwriters, if any, reasonably
          request in order to expedite or facilitate the disposition of such Registrable
          Securities (including, without limitation, effecting a stock split or a
          combination of shares); 

         
          (h)       
          make available for inspection by any seller of Registrable Securities, any
          underwriter participating in any disposition pursuant to such registration
          statement and any attorney, accountant or other agent retained by any such
          seller or underwriter, all financial and other records, pertinent corporate
          documents and properties of the Company, and cause the Company’s officers,
          directors, employees and independent accountants to supply all information
          reasonably requested by any such seller, underwriter, attorney, accountant or
          agent in connection with such registration statement; 

         
          (i)       
          otherwise use its best efforts to comply with all applicable rules and
          regulations of the SEC, and make available to its security holders, as soon as
          reasonably practicable, an earnings statement covering the period of at least
          twelve months beginning with the first day of the Company’s first full
          calendar quarter after the effective date of the registration statement, which
          earnings statement shall satisfy the provisions of Section 11(a) of the
          Securities Act and Rule 158 thereunder; 

- 24 - 

         
          (j)       
          permit any holder of Registrable Securities which holder, in its sole and
          exclusive judgment, might be deemed to be an underwriter or a controlling person
          of the Company, to participate in the preparation of such registration or
          comparable statement and to require the insertion therein of material, furnished
          to the Company in writing, which in the reasonable judgment of such holder and
          its counsel should be included; and 

         
          (k)       
          in the event of the issuance of any stop order suspending the effectiveness of a
          registration statement, or of any order suspending or preventing the use of any
          related prospectus or suspending the qualification of any Common Stock included
          in such registration statement for sale in any jurisdiction, the Company will
          use its best efforts promptly to obtain the withdrawal of such order. If any
          such registration or comparable statement refers to any holder by name or
          otherwise as the holder of any securities of the Company and if in its sole and
          exclusive judgment such holder is or might be deemed to be a controlling person
          of the Company, such holder shall have the right to require (i) the insertion
          therein of language, in form and substance satisfactory to such holder and
          presented to the Company in writing, to the effect that the holding by such
          holder of such securities is not to be construed as a recommendation by such
          holder of the investment quality of the Company’s securities covered
          thereby and that such holding does not imply that such holder will assist in
          meeting any future financial requirements of the Company, (ii) in the event
          that such reference to such holder by name or otherwise is not required by the
          Securities Act or any similar federal statute then in force, the deletion of the
          reference to such holder; provided that with respect to this
          clause (ii) such holder shall furnish to the Company an opinion of counsel to
          such effect, which opinion and counsel shall be reasonably satisfactory to the
          Company. 

        10.4  
Registration Expenses. All expenses incident to the Company’s performance of
or compliance with this Article 10, including without limitation all
registration and filing fees, fees and expenses of compliance with securities or blue sky
laws, printing expenses, messenger and delivery expenses, and fees and disbursements of
counsel for the Company and all independent certified public accountants, and other
Persons retained by the Company (all such expenses, other than discounts and commissions
related to sales by the Purchasers, being herein called “Registration
Expenses”), will be borne by the Company. 

      10.5  
Indemnification. 

         
          (a)       
          The Company agrees to indemnify, to the extent permitted by law, each holder of
          Registrable Securities, its officers and directors and each Person who controls
          such holder (within the meaning of the Securities Act) against all losses,
          claims, damages, liabilities and expenses caused by any untrue or alleged untrue
          statement of material fact contained in any registration statement, prospectus
          or preliminary prospectus or any amendment thereof or supplement thereto or any
          omission or alleged omission of a material fact required to be stated therein or
          necessary to make the statements therein not misleading, except insofar as the
          same are caused by or contained in any information furnished in writing to the
          Company by such holder expressly for use therein or by such holder’s
          failure to deliver a copy of the registration statement or prospectus or any
          amendments or supplements thereto after the Company has furnished such holder
          with a sufficient number of copies of the same. In connection with an
          underwritten offering, the Company will indemnify such underwriters, their
          officers and directors and each Person who controls such underwriters (within
          the meaning of the Securities Act) to the same extent as provided above with
          respect to the indemnification of the holders of Registrable Securities. 

- 25 - 

         
          (b)       
          In connection with any registration statement in which a holder of Registrable
          Securities is participating, each such holder will furnish to the Company in
          writing such information and affidavits as the Company reasonably requests for
          use in connection with any such registration statement or prospectus and, to the
          extent permitted by law, will indemnify the Company, its directors and officers
          and each Person who controls the Company (within the meaning of the Securities
          Act) against any losses, claims, damages, liabilities and expenses resulting
          from any untrue or alleged untrue statement of material fact contained in the
          registration statement, prospectus or preliminary prospectus or any amendment
          thereof or supplement thereto or any omission or alleged omission of a material
          fact required to be stated therein or necessary to make the statements therein
          not misleading but only to the extent that such untrue statement or omission is
          contained in any information or affidavit so furnished in writing by such
          holder; 

         
          (c)       
          Any Person entitled to indemnification hereunder will (i) give prompt written
          notice to the indemnifying party of any claim with respect to which it seeks
          indemnification and (ii) unless in such indemnified party’s reasonable
          judgment a conflict of interest between such indemnified and indemnifying
          parties may exist with respect to such claim, permit such indemnifying party to
          assume the defense of such claim with counsel reasonably satisfactory to the
          indemnified party. If such defense is assumed, the indemnifying party will not
          be subject to any liability for any settlement made by the indemnified party
          without its consent (but such consent will not be unreasonably withheld). An
          indemnifying party who is not entitled to, or elects not to, assume the defense
          of a claim will not be obligated to pay the fees and expenses of more than one
          counsel for all parties indemnified by such indemnifying party with respect to
          such claim, unless in the reasonable judgment of any indemnified party a
          conflict of interest may exist between such indemnified party and any other of
          such indemnified parties with respect to such claim. 

         
          (d)       
          The indemnification provided for under this Agreement will remain in full force
          and effect regardless of any investigation made by or on behalf of the
          indemnified party or any officer, director or controlling Person of such
          indemnified party and will survive the transfer of securities. The Company also
          agrees to make such provisions, as are reasonably requested by any indemnified
          party, for contribution to such party in the event the Company’s
          indemnification is unavailable for any reason. 

        10.6  
Participation in Underwritten Registrations. No Person may participate in any
registration hereunder which is underwritten unless such Person (a) agrees to sell such
Person’s securities on the basis provided in any underwriting arrangements approved
by the Person or Persons entitled hereunder to approve such arrangements and (b) completes
and executes all questionnaires, powers of attorney, indemnities, underwriting agreements
and other documents required under the terms of such underwriting arrangements;
provided that no holder of Registrable Securities included in any
underwritten registration shall be required to make any representations or warranties to
the Company or the underwriters other than representations and warranties regarding such
holder and such holder’s intended method of distribution. 

- 26 - 

        10.7  
Termination of Registration Rights. All registration rights granted under this
Article 10 shall terminate two years after a Qualified IPO. In addition, the registration
rights of a holder of Registrable Securities will expire if the Company is subject to the
provisions of the Securities Exchange Act and all of the holder’s Registrable
Securities may be sold under SEC Rule 144 during any ninety-day period. 

ARTICLE 11 

MISCELLANEOUS 

        11.1  
Successors and Assigns. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns, except that
(a) the Company may not assign or transfer its rights hereunder or any interest
herein or delegate its duties hereunder and (b) Purchasers shall have the right to
assign their rights hereunder and under the Securities in accordance with
Article 6 hereof. 

        11.2  
Modifications and Amendments. The provisions of this Agreement may be modified,
waived or amended, but only by a written instrument signed by the Company, and to the
extent such modification, amendment or waiver relates (a) to the Notes, such
instrument must be executed by Agent on behalf of Purchasers upon satisfaction of the
conditions set forth in Section 9.8 hereof, and (b) to the Underlying
Common Stock, such instrument must be executed by the holders of at least 50% of the
Underlying Common Stock. 

        11.3  
No Implied Waivers; Cumulative Remedies; Writing Required. No delay or failure in
exercising any right, power or remedy hereunder shall affect or operate as a waiver
thereof; nor shall any single or partial exercise thereof or any abandonment or
discontinuance of steps to enforce such a right, power or remedy preclude any further
exercise thereof or of any other right, power or remedy. The rights and remedies hereunder
are cumulative and not exclusive of any rights or remedies that Agent or Purchasers or any
holder of Notes, or Underlying Common Stock would otherwise have. Any waiver, permit,
consent or approval of any kind or character of any breach or default under this Agreement
or any such waiver of any provision or condition of this Agreement must be in writing,
satisfy the conditions set forth in Section 9.8 hereof and shall be effective
only to the extent in such writing specifically set forth. 

        11.4  
Reimbursement of Expenses. The Company upon demand shall pay or reimburse Agent and
Purchasers for all fees and expenses incurred or payable by Agent or Purchasers
(including, without limitation, reasonable fees and expenses of special counsel for Agent
and Purchasers), from time to time arising in connection with the enforcement of this
Agreement or collection of the Notes. 

        11.5  
Holidays. Whenever any payment or action to be made or taken hereunder or under the
Notes shall be stated to be due on a day which is not a Business Day, such payment or
action shall be made or taken on the next following Business Day, and such extension of
time shall be included in computing interest or fees, if any, in connection with such
payment or action. 

- 27 - 

        11.6  
Notices. All notices and other communications given to or made upon any party
hereto in connection with this Agreement shall, except as otherwise expressly herein
provided, be in writing (including telecopy, but in such case, a confirming copy will be
sent by another permitted means) and mailed via certified mail, telecopied or delivered by
guaranteed overnight parcel express service or courier to the respective parties, as
follows: 

		
		to the Company:

A4S Technologies, Inc.

3973 MT Hwy 35

Kalispell, MT 59901

Attn: President

Fax: (406) 756-5174

with a copy to:

Crowley Law Firm

431 1st Avenue West

Kalispell, MT 59901

Attn: John Dudis, Esq.

Fax: 406-752-5108

           and

Patton Boggs, LLP

1660 Lincoln Street, Suite 1900

Denver, CO 80264

Attn: Robert M. Bearman, Esq.

Fax: (303) 894-9239

To Agent:

Gregory Pusey

106 S. University Blvd., #14

Denver, CO 80209

Fax: (303) 722-4011

to Purchasers:

As set forth on the signature page to this Agreement. 

or in accordance with any subsequent
written direction from the recipient party to the sending party. All such notices and
other communications shall, except as otherwise expressly herein provided, be effective
upon delivery if delivered by courier or overnight parcel express service; in the case of
certified mail, three (3) Business Days after the date sent; or in the case of telecopy,
when received. 

        11.7  
Survival. All representations, warranties, covenants and agreements of the Company
contained herein or made in writing in connection herewith shall survive the execution and
delivery of this Agreement and the purchase of the Notes and shall continue in full force
and effect so long as any Note is outstanding and until payment in full of all of the
Company’s obligations hereunder or thereunder. All obligations relating to
indemnification hereunder shall survive any termination of this Agreement and shall
continue for the length of any applicable statute of limitations. 

- 28 - 

        11.8  
Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF MONTANA, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES.  

        11.9  
Jury Trial Waiver. THE COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT TO TRIAL BY JURY
IN ANY ACTION OR PROCEEDING (I) TO ENFORCE OR DEFEND ANY RIGHTS UNDER OR IN CONNECTION
WITH THIS AGREEMENT, OR (II) ARISING FROM ANY DISPUTE OR CONTROVERSY IN CONNECTION WITH OR
RELATED TO THIS AGREEMENT AND AGREES THAT ANY SUCH ACTION OR COUNTERCLAIM SHALL BE TRIED
BEFORE A COURT AND NOT BEFORE A JURY. 

        11.10  
Severability. Whenever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law, but if any
provision of this Agreement is held to be prohibited by or invalid under applicable law in
any jurisdiction, such provision shall be ineffective only to the extent of such
prohibition or invalidity, without invalidating any other provision of this Agreement. 

        11.11  
Headings. Article, section and subsection headings in this Agreement are included
for convenience of reference only and shall not constitute a part of this Agreement for
any other purpose. 

        11.12  
Counterparts. This Agreement may be executed in any number of counterparts and by
any party hereto on separate counterparts, each of which, when so executed and delivered,
shall be an original, but all such counterparts shall together constitute one and the same
instrument. 

        11.13  
Integration. This Agreement and the other Purchase Documents set forth the entire
understanding of the parties hereto with respect to all matters contemplated hereby and
supersede all previous agreements and understandings among them concerning such matters.
No statements or agreements, oral or written, made prior to or at the signing hereof,
shall vary, waive or modify the written terms hereof. 

[remainder of page
intentionally left blank; signature page follows] 

- 29 - 

SIGNATURE PAGE TOSUBORDINATED

CONVERTIBLE NOTE PURCHASE AGREEMENT 

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

		
		COMPANY:

A4S TECHNOLOGIES, INC.,

a Montana corporation

By: _________________________________  

Name: _______________________________  

Title: ______________________________  

AGENT:

GREGORY PUSEY

_____________________________________  

PURCHASERS:

[____________________________________]

By:  ________________________________  

Name: _______________________________  

Title: ______________________________  

Address: ____________________________  

[____________________________________]

By:  ________________________________  

Name: _______________________________  

Title: ______________________________  

Address: ____________________________  

- 30 - 

		
		[____________________________________]

By:  ________________________________  

Name: _______________________________  

Title: ______________________________  

Address: ____________________________  

[____________________________________]

By:  ________________________________  

Name: _______________________________  

Title: ______________________________  

Address: ____________________________  

[____________________________________]

By:  ________________________________  

Name: _______________________________  

Title: ______________________________  

Address: ____________________________

- 31 -

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00083-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00083-of-00352.parquet"}]]