Document:

Exhibit 10.06

 

Amended and Restated

As of January 1, 2005

PRAXAIR, INC.

DIRECTOR’S FEES DEFERRAL
PLAN

 

THIS
DOCUMENT CONSTITUTES PART OF A PROSPECTUS COVERING SECURITIES THAT HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933.

 

Section
1.  Purpose, Participation

 

(a)           Purpose: The purpose of this
Director’s Fees Deferral Plan (the “Plan”) is to enable Praxair, Inc. (the “Corporation”)
to attract and retain Directors of outstanding ability by providing them with a
mechanism to defer and accumulate Director’s fees, meaning (1) the retainer,
(2) fees for attendance at meetings of the Board of Directors and Board
committees of the Corporation, (3) fees for additional or special services as
Directors and (4) other compensatory payments made to Directors by the Corporation
in connection with their service as Directors.

 

(b)           Participation:  This Plan extends to Directors of the
Corporation not employed by the Corporation or any subsidiary.

 

Section
2.  Payment of Deferred Amounts

 

(a)           Deferral Election:  At any time prior to the beginning of a
calendar year, a Director may elect that all or any specified portion of the
Director’s fees to be earned during such calendar year be credited to a
Director’s Cash Account and/or a Director’s Stock Unit Account maintained on
such Director’s behalf in lieu of payment (a “Deferral Election”).  A Director may also make a Deferral Election
during the 30 days following the date on which a Director first becomes
eligible to receive Director’s fees, although any Deferral Election made
pursuant to this sentence will apply only to all or any specified portion of
the Director’s fees earned thereafter. 
Each Deferral Election must be submitted to the Secretary of the
Corporation in writing, and will be deemed to authorize deferral to only a
Director’s Cash Account except to the extent deferral to a Director’s Stock
Unit Account is expressly specified.

 

(b)           Effect of Deferral Election:  Pursuant to such Deferral Election, the
Corporation (i) will not pay the Director’s fees covered thereby and (ii) will
make payments in accordance with the Deferral Election and this Section 2.

 

(c)           Payment Commencement Event.  At the time of making the Deferral Election,
a Director will designate as a “Payment Commencement Event” either (1) the termination of the Director’s service as a Director
of the Corporation (or any successor) or (2) the Director’s

 

1

 

attainment of an age, not to exceed 75, specified by the
Director. A Director may also elect that, notwithstanding any other election
made by him pursuant to this Section 2, in the event that the Director
terminates service as a Director of the Corporation within one year following a
“Change of Control” (as defined in Section 5(h)), the Payment Commencement Event
for payments from a deferral 
account will be the termination of the Director’s service as a
Director.

 

(d)           Payment.  Payment of amounts deferred pursuant to the
Deferral Election will commence on the last business day of the calendar
quarter in which the Payment Commencement Event (either as originally
designated or as deferred pursuant to clause (1)
of Section 2(e)) occurs.  Payments from a
deferral account will be made in a lump sum (in cash or stock as provided in
this Plan) unless a timely election of an installment payment schedule pursuant
to clause (2) of Section 2(e) has been made.

 

(e)           Additional Deferrals.  A Director may also (1) elect to defer the
Payment Commencement Event to a later date specified by the Director (but not
later than attainment of age 75), and/or (2), for Payment
Commencement Events other than a Change of Control, elect that (i) payment from
the Director’s Cash Account be made in a number of approximately equal annual
cash installments, and/or (ii) payment from the Director’s Stock Unit Account
be made in a number of annual installments, each of an approximately equal
number of Stock Units. Such installment payments shall be made over a period of
time specified by the Director, but not to exceed 15 years.  Such elections may be made at any time until
12 months before the Payment Commencement Event designated pursuant to Section
2(c) and must provide for an additional deferral period of at least five years
from the previous Payment Commencement Event. Each such election must be
submitted to the Secretary of the Corporation in writing.  A Director may make no more than one election
pursuant to clause (1) in any
calendar year.  An election of an
installment payment schedule pursuant to clause (2)
is irrevocable except as provided in Section 2(g).

 

(f)            Renewal of Elections.  Once a Deferral Election and designation of a
Payment Commencement Event has been made, it will be automatically applied to
Director’s fees earned in all subsequent calendar years unless the Director
changes or revokes either such election or designation.  Each such change or revocation must be
submitted to the Secretary of the Corporation in writing.  However, except as provided in Section 2(e),
each Deferral Election and

 

2

 

designation of Payment Commencement Event is irrevocable as
to Director’s fees earned prior to the calendar year next following any change
or revocation.

 

(g)           Renewal of Installment Election.  An election of an installment payment
schedule will automatically apply to amounts credited to a deferral account in
each succeeding calendar year unless, prior to the commencement of such
calendar year, the Director elects to change or revoke such installment payment
schedule election, in which case his/her new election will control only with
respect to amounts credited during calendar years following such new election.

 

(h)           Disability.  In the event a Director becomes disabled, the
payment commencement date and/or payment schedule with respect to a balance in
a deferral account may be accelerated by the Plan Committee, in its sole
discretion.  ‘Disabled’ means unable to
engage in any substantial gainful activity because of any medically
determinable physical or mental impairment which can be expected to result in
death or which has lasted, or can be expected to last, for a continuous period
of twelve (12) months or longer.

 

(i)            Death.  A Director may designate a beneficiary (and
change such beneficiary, from time to time) for payment of any balance of the
deferral account at the Director’s death. 
Upon a Director’s death, any balance in the deferral account (including
amounts credited to such account as specified in Section 3(b) and
Section 4(b)) will be paid to the deceased Director’s beneficiary at the end of
the first calendar quarter which ends at least 30 days after the Director dies.
If no beneficiary has been designated, the Director’s estate will be deemed the
beneficiary, and any payments pursuant to this Section 2(i) will be paid,
either at the end of the first calendar quarter which ends at least 30 days
after appointment of the deceased Director’s legal representative, or such
earlier date as may be determined by the Plan Committee, in its sole
discretion.

 

(j)            Mandatory Deferrals.   The Board of Directors may, from time to
time, determine that certain payments made to Directors shall be mandatorily
deferred under this Plan.  If, in
conjunction with such determination, the Board specifies the deferral account(s)
to which such payment shall be credited or the Payment Commencement Event
applicable to such deferral, then such specifications shall be applied to the
deferral as if the recipient Director had made a timely Deferral Election with
respect to such payment under Section 2(a) and had designated a Payment
Commencement Event under Section 2(c). 
With respect to any such mandatory deferral, the

 

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Board
may also specify restrictions on changes or revocations of Deferral Elections
(or deemed Deferral Elections) and Payment Commencement Event designations
under Section 2(f), in which event Section 2(f) shall be inoperative as to such
mandatory deferral to the extent of the specified restrictions.

 

Section 3.  Credits and Debits to Director’s Cash Account

 

(a)           Principal.  The Corporation will create and maintain on
its books a Director’s Cash Account for each Director who has made a Deferral
Election to such an account under Section 2(a). 
The Corporation will credit to such account the amount of any Director’s
fee which would have been paid to the Director but for such Deferral Election,
as of the date the fee would have otherwise been payable.

 

(b)           Interest.  At the end of each calendar quarter,
regardless of whether any other credits are then made to the Director’s Cash
Account or whether the Director is then a Director,  the Corporation will also credit to the
Director’s Cash Account a sum which is equal to the product of (i) the average daily balance in the Director’s Cash Account
for the quarter (without regard to any debits made at the end of such quarter),
times (ii) one-fourth of the annual Base Rate
(prime rate) for corporate borrowers quoted by J. P. Morgan Chase (or
any successor thereto) of New York  as of
the first business day of the quarter.

 

(c)           Debits.  At the end of each calendar quarter, the
Corporation will make a payment if required under the payment schedule for such
Director’s Cash Account and will debit the Director’s Cash Account for the
amount thereof.  Payment with respect to
a Director’s Cash Account will be in cash only.

 

(d)           Mid-quarter Payments.  If Payment is to be made other than at the
end of a calendar quarter in accordance with a determination pursuant to
Section 2(h) or to Section 2(i), prior to such payment, the Corporation will
credit to the Director’s Cash Account an amount equal to the product of (i) the average daily balance In the Director’s Cash Account
for the period from the beginning of the calendar quarter to the date of
payment (without regard to any debits to be made upon such payment), times (ii) a fraction of the annual Base Rate (prime rate)  for corporate borrowers quoted by J. P.
Morgan Chase (or any successor thereto) as of the first business day of the
quarter, the numerator of which is the number of days in the period described
in clause (i), and the denominator of which is 365.

 

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Section 4.  Credits and Debits to Director’s Stock Unit
Account

 

(a)           Stock Units.  The Corporation will create and maintain on
its books a Director’s Stock Unit Account for each Director who has made a
Deferral Election under Section 2(a) and expressly specifies deferral to such
an account.  The Corporation will credit
to such account the number of Stock Units equal to the number of shares of the
Corporation’s common stock that could be purchased with the amount of any
Director’s fee which would have been paid to the Director but for such Deferral
Election, as of the date the fee would have otherwise been payable.  The number of Stock Units will be calculated
to three decimals by dividing the amount of the Director’s fee as to which a
Director’s Stock Unit Account Deferral Election was made by the closing price
of the Corporation’s common stock as reported on the New York Stock Exchange as
of the date the fee would have otherwise been payable.

 

(b)           Dividends.  As of the date any dividend is paid to
holders of shares of the Corporation’s common stock, each Director’s Stock Unit
Account, regardless of whether the Director is then a Director, will be
credited with additional Stock Units equal to the number of shares of the
Corporation’s common stock that could have been purchased with the amount which
would have been paid as dividends on that number of shares (including fractions
of a share to three decimals) of the Corporation’s common stock equal to the
number of Stock Units attributed to such Director’s Stock Account as of the
record date applicable to such dividend. 
The number of additional Stock Units to be credited will be calculated
to three decimals by dividing the amount which would have been paid as
dividends by the closing price of the Corporation’s common stock as reported on
the New York Stock Exchange as of the date the dividend would have been
paid.  In the case of dividends paid in
property other than cash, the amount of the dividend shall be deemed to be the
fair market value of the property at the time of the payment of the dividend,
as determined in good faith by the Plan Committee.

 

(c)           Debits and Calculation of Payments.  The Corporation will debit the Director’s
Stock Unit Account for Stock Units as required under the payment schedule for
such Director’s Stock Unit Account. 
Payment with respect to whole Stock Units will be in shares of the
Corporation’s common stock only, at the rate of one share of common stock per
Stock Unit.  Until such time as shares
have been listed on The New York Stock Exchange for issuance under this Plan,
only Treasury shares shall be used for such payment.  With respect to fractional Stock Units,
payment will be made in cash only, and calculated by multiplying the fractional
number of

 

5

 

the
Stock Unit to be debited by the closing price of the Corporation’s common stock
as reported on the New York Stock Exchange as of the last business day of the
week preceding the week of the date the Stock Units are payable.  Should payment with respect to Stock Units be
made after the record date, but before the payment date applicable to a
dividend paid to holders of shares of the Corporation’s common stock, Stock
Units credited a Director’s Stock Unit Account in consequence of such dividend
payment will be calculated as cash payments and paid within thirty days of such
credit.

 

(d)           Adjustment.  If at any time the number of outstanding
shares of the Corporation’s common stock is increased as the result of any
stock dividend, stock split, subdivision or reclassification of shares, the
number of Stock Units with which each Director’s Stock Unit Account is credited
will be increased in the same proportion as the outstanding number of shares of
the Corporation’s common stock is increased. 
If the number of outstanding shares of common stock is decreased as the
result of any combination, reverse stock split or reclassification of shares,
the number of Stock Units with which each Director’s Stock Unit Account is
credited will be decreased in the same proportion as the outstanding number of
shares of the Corporation’s common stock is decreased.  In the event the Corporation is consolidated
with or merged into any other corporation and holders of shares of the
Corporation’s common stock receive shares of the capital stock of the resulting
or surviving corporation, there shall be credited to each Director’s Stock Unit
Account, in lieu of the extant Stock Units, new Stock Units in an amount equal
to the product of the number of shares of capital stock exchanged for one share
of the Corporation’s common stock upon such consolidation or merger, and the
number of Stock Units with which such account then is credited.  If, in such a consolidation or merger,
holders of shares of the Corporation’s common stock receive any consideration
other than shares of the capital stock of the resulting or surviving
corporation or its parent corporation, the Plan Committee will determine any
appropriate change in Director’s Stock Unit Accounts.

 

Section 5.  Unfunded Arrangement

 

(a)           Neither this Plan nor any deferral
account will be funded; a deferral account and all entries thereto constitute bookkeeping
records only and do not relate to any specific funds or shares of the
Corporation.  Payments due with respect
to balances in a deferral account will be made from the general assets of the
Corporation, and the right of any participant to receive future payments under
this Plan’s provisions will be an unsecured claim against such assets.

 

6

 

Section 6.  Administration

 

(a)           Plan Committee.  The Plan will be administered by a Plan
Committee, which will be the Governance and Nominating Committee of the Board
of Directors of the Corporation, or such other Committee as may be appointed by
the Board of Directors of the Corporation, and may include Directors who have
elected to participate in the Plan.  No
member of the Plan Committee will be liable for any act done or determination
made in good faith.

 

(b)           Committee Determination Final.  The construction and interpretation of any
provision of the Plan by the Plan Committee, and a determination by the Plan
Committee of the amount of any deferral account, will be final and conclusive.

 

(c)           Amendments.  The Corporation, subject to approval of its
Board of Directors, reserves the right to terminate, modify or amend this Plan,
effective prospectively as of the first day of any calendar quarter; provided,
however, that the Plan will not be subject to termination, modification or
amendment with respect to any balance of a deferral account and rights therein,
including the right to future interest pursuant to Section 3(b) and future
dividends pursuant to Section 4(b), unless the affected Director consents.

 

(d)           Non-Alienation.  No Director (or estate of a Director) will
have power to transfer, assign, anticipate, mortgage or otherwise encumber any
rights or any amounts payable hereunder; nor will any such rights or payments
be subject to seizure for the payment of any debts, judgments, alimony, or
separate maintenance, or be transferable by operation of law in the event of
bankruptcy, insolvency, or otherwise.

 

(e)           Expenses.  The expenses of administering the Plan will
be borne by the Corporation and not be charged against any deferral account.

 

(f)            Withholding.  The Corporation may deduct from all cash
payments any taxes required to be withheld with respect to such payments.  In order to enable the Corporation to meet
any applicable federal, state or local withholding tax requirements arising as
a result of payments made hereunder in the form of stock, a Director shall pay
the Corporation the amount of tax to be withheld or may elect to satisfy such
obligation by having the Corporation withhold shares that otherwise would be
delivered to the Director pursuant to the deferral account payment for which
the tax is being withheld, by delivering to the Corporation other shares of
common

 

7

 

stock of the Corporation owned by the Director prior
to the payment date, or by making a payment to the Corporation consisting of a
combination of cash and such shares of common stock.  Such an election shall be made prior to the
date to be used to determine the tax to be withheld.  The value of any share of common stock to be
withheld by, or delivered to, the Corporation pursuant to this Section 6(f)
shall be the closing price of the Corporation’s common stock as reported on the
New York Stock Exchange on the date to be used to determine the amount of tax
to be withheld.

 

(g)           Effect of IRS Determination.  If any amounts deferred pursuant to the Plan
are found in a “determination” (within the meaning of Section 1313(a) of the
Internal Revenue Code of 1986, as amended) to have been includible in gross
income by a Director prior to payment of such amounts from his/her deferral
account, such amounts will be immediately paid to such Director, notwithstanding
elections pursuant to Section 2.

 

(h)           Change of Control.  A “Change of Control” means the occurrence of
any one of the following events with respect to the Corporation:

 

(i) individuals who, on January 1, 2005, constitute the Board
(the“Incumbent Directors”) cease for any reason to constitute at least a
majority of the Board, provided that any person becoming a director subsequent
to January 1, 2005, whose election or nomination for election was approved by a
vote of at least a majority of the Incumbent Directors then on the Board
(either by a specific vote or by approval of the proxy statement of the
Corporation in which such person is named as a nominee for director, without
objection to such nomination) shall be an Incumbent Director;

 

(ii)           any “person”
(as such term is defined in Section 3(a)(9) of the Securities Exchange Act of
1934 (the “Exchange Act”) and as used in Sections 13(d)(3) and 14(d)(2) of the
Exchange Act) is or becomes owner, as defined in IRS Code Section 318(a), of
securities of the Corporation representing 35% or more of the combined voting
power of the Corporation’s then outstanding securities eligible to vote for the
election of the Board (the “Company Voting Securities”); provided, however,
that the event described in this paragraph (ii) shall not be deemed to be a
Change in Control by virtue of any of the following acquisitions:  (A) by the Corporation or any subsidiary, (B)
by any employee benefit plan sponsored or maintained by the Corporation or
subsidiary, (C) by any underwriter temporarily holding securities  pursuant to an offering of such securities;

 

8

 

(iii)         any person, (as such term is defined in Section 3(a)(9) of
the Securities Exchange Act of 1934 (the “Exchange Act”) and as used in
Sections 13(d)(3) and 14(d)(2) of the Exchange Act), acquires (or has acquired
during the 12-month period ending on the date of the most recent acquisition by
such person) assets from the Corporation that have a total gross fair market
value equal to or more than 40 percent of the total gross fair market value of
all of the assets of the Corporation immediately prior to such acquisition(s);
provided, however, that a transfer of assets by the Corporation is not treated
as a Change in Control if the assets are transferred to (A) a shareholder of
the Corporation (immediately before the asset transfer) in exchange for or with
respect to its stock; (B) an entity, 50 percent or more of the total value or
voting power of which is owned, directly or indirectly, by the Corporation; (C)
a person, or more than one person acting as a group, that owns, directly or
indirectly, 50 percent of more of the total value or voting power of all
outstanding stock of the Corporation; or (D) an entity, at least 50 percent of
the total value or voting power of which is owned, directly or indirectly, by a
person described in the previous subsection (C).  For purposes of this paragraph, (1) gross
fair market value means the value of the assets of the Corporation, or the value
of the assets being disposed of, determined without regard to any liabilities
associated with such assets, and (2) a person’s status is determined
immediately after the transfer of the assets.

 

(i)            Stock Unit Status.  Stock Units are not, and do not constitute,
shares of the Corporation’s common stock, and no right as a holder of shares of
the Corporation’s common stock devolves upon a Director by reason of
participation in this Plan.

 

IN
WITNESS WHEREOF, Praxair, Inc. has caused this document to be executed as of
the 1st day of January, 2005.

 

 

	
   

  	
  PRAXAIR,
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  James T. Breedlove

  	
   

  
	
   

  	
  James
  T. Breedlove

  
	
   

  	
  Vice
  President, General Counsel and

  Secretary

  

 

9<PAGE>

                                                                     EXHIBIT 4.1

THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS WARRANT
AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO SIVAULT SYSTEMS, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.

                                    Right to  Purchase  _______  shares  of
                                    Common  Stock  of  SiVault Systems, Inc.
                                    (subject to adjustment as provided herein)

                  FORM OF CLASS A COMMON STOCK PURCHASE WARRANT

No. 2005-JAN-001                                    Issue Date: January 19, 2005

         SIVAULT SYSTEMS, INC., a corporation organized under the laws of the
State of Nevada (the "Company"), hereby certifies that, for value received,
LONGVIEW EQUITY FUND, LP, 600 Montgomery Street, 44th Floor, San Francisco, CA
94111, Fax: (415) 981-5300, or its assigns (the "Holder"), is entitled, subject
to the terms set forth below, to purchase from the Company at any time after the
Issue Date until 5:00 p.m., E.S.T on the fifth anniversary of the Issue Date
(the "Expiration Date"), up to ________ fully paid and nonassessable shares of
the common stock of the Company (the "Common Stock"), $.001 par value per share
at a per share purchase price of $3.00. The aforedescribed purchase price per
share, as adjusted from time to time as herein provided, is referred to herein
as the "Purchase Price." The number and character of such shares of Common Stock
and the Purchase Price are subject to adjustment as provided herein. The Company
may reduce the Purchase Price without the consent of the Holder. Capitalized
terms used and not otherwise defined herein shall have the meanings set forth in
that certain Subscription Agreement (the "SUBSCRIPTION AGREEMENT"), dated
November 23, 2004, entered into by the Company and the Holder.

         As used herein the following terms, unless the context otherwise
requires, have the following respective meanings:

         (a) The term "Company" shall include SiVault Systems, Inc. and any
corporation which shall succeed to or assume the obligations of SiVault Systems,
Inc. hereunder.

         (b) The term "Common Stock" includes (a) the Company's Common Stock,
$.001 par value per share, as authorized on the date of the Subscription
Agreement, and (b) any other securities into which or for which any of the
securities described in (a) may be converted or exchanged pursuant to a plan of
recapitalization, reorganization, merger, sale of assets or otherwise.

         (c) The term "Other Securities" refers to any stock (other than Common
Stock) and other securities of the Company or any other person (corporate or
otherwise) which the holder of the Warrant at any time shall be entitled to
receive, or shall have received, on the exercise of the Warrant, in lieu of or
in addition to Common Stock, or which at any time shall be issuable or shall
have been issued in exchange for or in replacement of Common Stock or Other
Securities pursuant to Section 4 or otherwise.

<PAGE>

         1. Exercise of Warrant.

            1.1. Number of Shares Issuable upon Exercise. From and after the
Issue Date through and including the Expiration Date, the Holder hereof shall be
entitled to receive, upon exercise of this Warrant in whole in accordance with
the terms of subsection 1.2 or upon exercise of this Warrant in part in
accordance with subsection 1.3, shares of Common Stock of the Company, subject
to adjustment pursuant to Section 4.

            1.2. Full Exercise. This Warrant may be exercised in full by the
Holder hereof by delivery of an original or facsimile copy of the form of
subscription attached as Exhibit A hereto (the "Subscription Form") duly
executed by such Holder and surrender of the original Warrant within five (5)
days of exercise, to the Company at its principal office or at the office of its
Warrant Agent (as provided hereinafter), accompanied by payment, in cash, wire
transfer or by certified or official bank check payable to the order of the
Company, in the amount obtained by multiplying the number of shares of Common
Stock for which this Warrant is then exercisable by the Purchase Price then in
effect.

            1.3. Partial Exercise. This Warrant may be exercised in part (but
not for a fractional share) by surrender of this Warrant in the manner and at
the place provided in subsection 1.2 except that the amount payable by the
Holder on such partial exercise shall be the amount obtained by multiplying (a)
the number of whole shares of Common Stock designated by the Holder in the
Subscription Form by (b) the Purchase Price then in effect. On any such partial
exercise, the Company, at its expense, will forthwith issue and deliver to or
upon the order of the Holder hereof a new Warrant of like tenor, in the name of
the Holder hereof or as such Holder (upon payment by such Holder of any
applicable transfer taxes) may request, the whole number of shares of Common
Stock for which such Warrant may still be exercised.

            1.4. Fair Market Value. Fair Market Value of a share of Common Stock
as of a particular date (the "Determination Date") shall mean:

                 (a) If the Company's Common Stock is traded on an exchange or
is quoted on the National Association of Securities Dealers, Inc. Automated
Quotation ("NASDAQ"), National Market System, the NASDAQ SmallCap Market or the
American Stock Exchange, LLC, then the closing or last sale price, respectively,
reported for the last business day immediately preceding the Determination Date;

                 (b) If the Company's Common Stock is not traded on an exchange
or on the NASDAQ National Market System, the NASDAQ SmallCap Market or the
American Stock Exchange, Inc., but is traded in the over-the-counter market,
then the average of the closing bid and ask prices reported for the five (5)
trading days immediately preceding the Determination Date;

                 (c) Except as provided in clause (d) below, if the Company's
Common Stock is not publicly traded, then as the Holder and the Company agree,
or in the absence of such an agreement, by arbitration in accordance with the
rules then standing of the American Arbitration Association, before a single
arbitrator to be chosen from a panel of persons qualified by education and
training to pass on the matter to be decided; or

                 (d) If the Determination Date is the date of a liquidation,
dissolution or winding up, or any event deemed to be a liquidation, dissolution
or winding up pursuant to the Company's charter, then all amounts to be payable
per share to holders of the Common Stock pursuant to the charter in the event of
such liquidation, dissolution or winding up, plus all other amounts to be
payable per share in respect of the Common Stock in liquidation under the
charter, assuming for the purposes of this clause (d) that all of the shares of
Common Stock then issuable upon exercise of all of the Warrants are outstanding
at the Determination Date.

<PAGE>

            1.5. Company Acknowledgment. The Company will, at the time of the
exercise of the Warrant, upon the request of the Holder hereof acknowledge in
writing its continuing obligation to afford to such Holder any rights to which
such Holder shall continue to be entitled after such exercise in accordance with
the provisions of this Warrant. If the Holder shall fail to make any such
request, such failure shall not affect the continuing obligation of the Company
to afford to such Holder any such rights.

            1.6. Trustee for Warrant Holders. In the event that a bank or trust
company shall have been appointed as trustee for the Holder of the Warrants
pursuant to Subsection 3.2, such bank or trust company shall have all the powers
and duties of a warrant agent (as hereinafter described) and shall accept, in
its own name for the account of the Company or such successor person as may be
entitled thereto, all amounts otherwise payable to the Company or such
successor, as the case may be, on exercise of this Warrant pursuant to this
Section 1.

            1.7 Delivery of Stock Certificates, etc. on Exercise. The Company
agrees that the shares of Common Stock purchased upon exercise of this Warrant
shall be deemed to be issued to the Holder hereof as the record owner of such
shares as of the close of business on the date on which this Warrant shall have
been surrendered and payment made for such shares as aforesaid. As soon as
practicable after the exercise of this Warrant in full or in part, and in any
event within five (5) days thereafter, the Company at its expense (including the
payment by it of any applicable issue taxes) will cause to be issued in the name
of and delivered to the Holder hereof at the address stated above, or as such
Holder (upon payment by such Holder of any applicable transfer taxes) may direct
in compliance with applicable securities laws, a certificate or certificates for
the number of duly and validly issued, fully paid and nonassessable shares of
Common Stock (or Other Securities) to which such Holder shall be entitled on
such exercise, plus, in lieu of any fractional share to which such Holder would
otherwise be entitled, cash equal to such fraction multiplied by the then Fair
Market Value of one full share of Common Stock, together with any other stock or
other securities and property (including cash, where applicable) to which such
Holder is entitled upon such exercise pursuant to Section 1 or otherwise.

         2. Cashless Exercise.

            (a) If a Registration Statement (as defined in the Subscription
Agreement) ("Registration Statement") is effective and the Holder may sell its
shares of Common Stock upon exercise hereof pursuant to the Registration
Statement, this Warrant may be exercisable in whole or in part for cash only as
set forth in Section 1 above. If no such Registration Statement is available,
then payment upon exercise may be made at the option of the Holder either in (i)
cash, wire transfer or by certified or official bank check payable to the order
of the Company equal to the applicable aggregate Purchase Price, (ii) by
delivery of Common Stock issuable upon exercise of the Warrants in accordance
with Section (b) below or (iii) by a combination of any of the foregoing
methods, for the number of Common Stock specified in such form (as such exercise
number shall be adjusted to reflect any adjustment in the total number of shares
of Common Stock issuable to the holder per the terms of this Warrant) and the
holder shall thereupon be entitled to receive the number of duly authorized,
validly issued, fully-paid and non-assessable shares of Common Stock (or Other
Securities) determined as provided herein.

            (b) Subject to the provisions herein to the contrary, if the Fair
Market Value of one share of Common Stock is greater than the Purchase Price (at
the date of calculation as set forth below), in lieu of exercising this Warrant
for cash, the holder may elect to receive shares equal to the value (as
determined below) of this Warrant (or the portion thereof being cancelled) by
surrender of this Warrant at the principal office of the Company together with
the properly endorsed Subscription Form in which event the Company shall issue
to the holder a number of shares of Common Stock computed using the following
formula:

<PAGE>

                      X=Y (A-B)
                        -------
                           A

               Where  X=   the number of shares of Common Stock to be issued to
                           the holder

                      Y=   the number of shares of Common Stock
                           purchasable under the Warrant or, if only a
                           portion of the Warrant is being exercised,
                           the portion of the Warrant being exercised
                           (at the date of such calculation)

                      A=   the Fair Market Value of one share of the
                           Company's Common Stock (at the date of such
                           calculation)

                      B=   Purchase Price (as adjusted to the date of such
                           calculation)

            (c) The Holder may employ the cashless exercise feature described in
Section (b) above only during the pendency of a Non-Registration Event as
described in Section 11 of the Subscription Agreement.

         For purposes of Rule 144 promulgated under the 1933 Act, it is
intended, understood and acknowledged that the Warrant Shares issued in a
cashless exercise transaction shall be deemed to have been acquired by the
Holder, and the holding period for the Warrant Shares shall be deemed to have
commenced, on the date this Warrant was originally issued pursuant to the
Subscription Agreement.

         3. Adjustment for Reorganization, Consolidation, Merger, etc.

            3.1. Reorganization, Consolidation, Merger, etc. In case at any time
or from time to time, the Company shall (a) effect a reorganization, (b)
consolidate with or merge into any other person or (c) transfer all or
substantially all of its properties or assets to any other person under any plan
or arrangement contemplating the dissolution of the Company, then, in each such
case, as a condition to the consummation of such a transaction, proper and
adequate provision shall be made by the Company whereby the Holder of this
Warrant, on the exercise hereof as provided in Section 1, at any time after the
consummation of such reorganization, consolidation or merger or the effective
date of such dissolution, as the case may be, shall receive, in lieu of the
Common Stock (or Other Securities) issuable on such exercise prior to such
consummation or such effective date, the stock and other securities and property
(including cash) to which such Holder would have been entitled upon such
consummation or in connection with such dissolution, as the case may be, if such
Holder had so exercised this Warrant, immediately prior thereto, all subject to
further adjustment thereafter as provided in Section 4.

            3.2. Dissolution. In the event of any dissolution of the Company
following the transfer of all or substantially all of its properties or assets,
the Company, prior to such dissolution, shall at its expense deliver or cause to
be delivered the stock and other securities and property (including cash, where
applicable) receivable by the Holder of the Warrants after the effective date of
such dissolution pursuant to this Section 3 to a bank or trust company (a
"Trustee") having its principal office in New York, NY, as trustee for the
Holder of the Warrants.

<PAGE>

            3.3. Continuation of Terms. Upon any reorganization, consolidation,
merger or transfer (and any dissolution following any transfer) referred to in
this Section 3, this Warrant shall continue in full force and effect and the
terms hereof shall be applicable to the Other Securities and property receivable
on the exercise of this Warrant after the consummation of such reorganization,
consolidation or merger or the effective date of dissolution following any such
transfer, as the case may be, and shall be binding upon the issuer of any Other
Securities, including, in the case of any such transfer, the person acquiring
all or substantially all of the properties or assets of the Company, whether or
not such person shall have expressly assumed the terms of this Warrant as
provided in Section 4. In the event this Warrant does not continue in full force
and effect after the consummation of the transaction described in this Section
3, then only in such event will the Company's securities and property (including
cash, where applicable) receivable by the Holder of the Warrants be delivered to
the Trustee as contemplated by Section 3.2.

            3.4 Share Issuance. Until the Expiration Date, if the Company shall
issue any Common Stock except for the Excepted Issuances (as defined in Section
11(a) of the Subscription Agreement), prior to the complete exercise of this
Warrant for a consideration less than the Purchase Price that would be in effect
at the time of such issue, then, and thereafter successively upon each such
issue, the Purchase Price shall be reduced to such other lower issue price. For
purposes of this adjustment, the issuance of any security or debt instrument of
the Company carrying the right to convert such security or debt instrument into
Common Stock or of any warrant, right or option to purchase Common Stock shall
result in an adjustment to the Purchase Price upon the issuance of the
above-described security, debt instrument, warrant, right, or option and again
at any time upon any subsequent issuances of shares of Common Stock upon
exercise of such conversion or purchase rights if such issuance is at a price
lower than the Purchase Price in effect upon such issuance. The reduction of the
Purchase Price described in this Section 3.4 is in addition to the other rights
of the Holder described in the Subscription Agreement.

         4. Extraordinary Events Regarding Common Stock. In the event that the
Company shall (a) issue additional shares of the Common Stock as a dividend or
other distribution on outstanding Common Stock, (b) subdivide its outstanding
shares of Common Stock, or (c) combine its outstanding shares of the Common
Stock into a smaller number of shares of the Common Stock, then, in each such
event, the Purchase Price shall, simultaneously with the happening of such
event, be adjusted by multiplying the then Purchase Price by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such event and the denominator of which shall be the number
of shares of Common Stock outstanding immediately after such event, and the
product so obtained shall thereafter be the Purchase Price then in effect. The
Purchase Price, as so adjusted, shall be readjusted in the same manner upon the
happening of any successive event or events described herein in this Section 4.
The number of shares of Common Stock that the Holder of this Warrant shall
thereafter, on the exercise hereof as provided in Section 1, be entitled to
receive shall be adjusted to a number determined by multiplying the number of
shares of Common Stock that would otherwise (but for the provisions of this
Section 4) be issuable on such exercise by a fraction of which (a) the numerator
is the Purchase Price that would otherwise (but for the provisions of this
Section 4) be in effect, and (b) the denominator is the Purchase Price in effect
on the date of such exercise.

         5. Certificate as to Adjustments. In each case of any adjustment or
readjustment in the shares of Common Stock (or Other Securities) issuable on the
exercise of the Warrants, the Company at its expense will promptly cause its
Chief Financial Officer or other appropriate designee to compute such adjustment
or readjustment in accordance with the terms of the Warrant and prepare a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based, including a
statement of (a) the consideration received or receivable by the Company for any
additional shares of Common Stock (or Other Securities) issued or sold or deemed
to have been issued or sold, (b) the number of shares of Common Stock (or Other
Securities) outstanding or deemed to be outstanding, and (c) the Purchase Price
and the number of shares of Common Stock to be received upon exercise of this
Warrant, in effect immediately prior to such adjustment or readjustment and as
adjusted or readjusted as provided in this Warrant. The Company will forthwith
mail a copy of each such certificate to the Holder of the Warrant and any
Warrant Agent of the Company (appointed pursuant to Section 11 hereof).

<PAGE>

         6. Reservation of Stock, etc. Issuable on Exercise of Warrant;
Financial Statements. The Company will at all times reserve and keep available,
solely for issuance and delivery on the exercise of the Warrants, all shares of
Common Stock (or Other Securities) from time to time issuable on the exercise of
the Warrant. This Warrant entitles the Holder hereof to receive copies of all
financial and other information distributed or required to be distributed to the
holders of the Company's Common Stock.

         7. Assignment; Exchange of Warrant. Subject to compliance with
applicable securities laws, this Warrant, and the rights evidenced hereby, may
be transferred by any registered holder hereof (a "Transferor"). On the
surrender for exchange of this Warrant, with the Transferor's endorsement in the
form of Exhibit B attached hereto (the "Transferor Endorsement Form") and
together with an opinion of counsel reasonably satisfactory to the Company that
the transfer of this Warrant will be in compliance with applicable securities
laws, the Company at its expense, twice, only, but with payment by the
Transferor of any applicable transfer taxes, will issue and deliver to or on the
order of the Transferor thereof a new Warrant or Warrants of like tenor, in the
name of the Transferor and/or the transferee(s) specified in such Transferor
Endorsement Form (each a "Transferee"), calling in the aggregate on the face or
faces thereof for the number of shares of Common Stock called for on the face or
faces of the Warrant so surrendered by the Transferor. No such transfers shall
result in a public distribution of the Warrant.

         8. Replacement of Warrant. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction of this
Warrant, on delivery of an indemnity agreement or security or bond reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender and cancellation of this Warrant, the Company at its
expense, twice only, will execute and deliver, in lieu thereof, a new Warrant of
like tenor.

         9. Registration Rights. The Holder of this Warrant has been granted
certain registration rights by the Company. These registration rights are set
forth in the Subscription Agreement. The terms of the Subscription Agreement are
incorporated herein by this reference. Upon the occurrence of a Non-Registration
Event, or in the event the Company is unable to issue Common Stock upon exercise
of this Warrant that has been registered in a Registration Statement described
in Section 11 of the Subscription Agreement, within the time periods described
in the Subscription Agreement, which Registration Statement must be effective
for the periods set forth in the Subscription Agreement, then upon written
demand made by the Holder, the Company will pay to the Holder of this Warrant,
in lieu of delivering Common Stock, a sum equal to the average of the closing
prices of the Company's Common Stock on the principal market or exchange upon
which the Common Stock is listed for trading for the five (5) trading days
immediately preceding the date notice is given by the Holder, less the Purchase
Price, for each share of Common Stock designated in such notice from the Holder.

         10. Maximum Exercise. The Holder shall not be entitled to exercise this
Warrant on an exercise date, in connection with that number of shares of Common
Stock which would be in excess of the sum of (i) the number of shares of Common
Stock beneficially owned by the Holder and its affiliates on an exercise date,
and (ii) the number of shares of Common Stock issuable upon the exercise of this
Warrant with respect to which the determination of this limitation is being made
on an exercise date, which would result in beneficial ownership by the Holder
and its affiliates of more than 4.99% of the outstanding shares of Common Stock
on such date. For the purposes of the immediately preceding sentence, beneficial
ownership shall be determined in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended, and Regulation 13d-3 thereunder. Subject to
the foregoing, the Holder shall not be limited to aggregate exercises which
would result in the issuance of more than 4.99%. The restriction described in
this paragraph may be revoked upon sixty-one (61) days prior notice from the
Holder to the Company. The Holder may allocate which of the equity of the
Company deemed beneficially owned by the Subscriber shall be included in the
4.99% amount described above and which shall be allocated to the excess above
4.99%.

<PAGE>

         11. Warrant Agent. The Company may, by written notice to the Holder of
the Warrant, appoint an agent (a "Warrant Agent") for the purpose of issuing
Common Stock (or Other Securities) on the exercise of this Warrant pursuant to
Section 1, exchanging this Warrant pursuant to Section 7, and replacing this
Warrant pursuant to Section 8, or any of the foregoing, and thereafter any such
issuance, exchange or replacement, as the case may be, shall be made at such
office by such Warrant Agent.

         12. Transfer on the Company's Books. Until this Warrant is transferred
on the books of the Company, the Company may treat the registered holder hereof
as the absolute owner hereof for all purposes, notwithstanding any notice to the
contrary.

         13. Notices. All notices, demands, requests, consents, approvals, and
other communications required or permitted hereunder shall be in writing and,
unless otherwise specified herein, shall be (i) personally served, (ii)
deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed
as set forth below or to such other address as such party shall have specified
most recently by written notice. Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the date of mailing
by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be: (i) if to the Company to: SiVault Systems, Inc.,
500 Fifth Avenue, Suite 1650, New York, NY 10110, Attn: Emilian Elferatos,
President & CEO, telecopier number: (212) 810-2427, with a copy by telecopier
only to: Thomas G. Amon, Esq., 500 Fifth Avenue, Suite 1650, New York, NY 10110,
telecopier number: (212) 810-2427, and (ii) if to the Holder, to the address and
telecopier number listed on the first paragraph of this Warrant, with a copy by
telecopier only to: Grushko & Mittman, P.C., 551 Fifth Avenue, Suite 1601, New
York, New York 10176, telecopier number: (212) 697-3575.

<PAGE>

         14. Miscellaneous. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought. This Warrant shall be construed and enforced in accordance with and
governed by the laws of New York. Any dispute relating to this Warrant shall be
adjudicated in New York County in the State of New York. The headings in this
Warrant are for purposes of reference only, and shall not limit or otherwise
affect any of the terms hereof. The invalidity or unenforceability of any
provision hereof shall in no way affect the validity or enforceability of any
other provision.

         IN WITNESS WHEREOF, the Company has executed this Warrant as of the
date first written above.

                              SIVAULT SYSTEMS, INC.

                              By:
                                   -------------------------
                                   Name:  Emilian Elferatos
                                   Title:  President and CEO

Witness:

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

<PAGE>

                                    EXHIBIT A

                              FORM OF SUBSCRIPTION
                   (to be signed only on exercise of Warrant)

TO:  SIVAULT SYSTEMS, INC.

The undersigned, pursuant to the provisions set forth in the attached Warrant
(No.____), hereby irrevocably elects to purchase (check applicable box):

___  ________ shares of the Common Stock covered by such Warrant; or

___ the maximum number of shares of Common Stock covered by such Warrant
pursuant to the cashless exercise procedure set forth in Section 2.

The undersigned herewith makes payment of the full purchase price for such
shares at the price per share provided for in such Warrant, which is
$___________. Such payment takes the form of (check applicable box or boxes):

___  $__________ in lawful money of the United States; and/or

___  the  cancellation of such portion of the attached  Warrant as is
exercisable for a total of _______ shares of Common Stock (using a Fair Market
Value of $_______ per share for purposes of this calculation); and/or

___ the cancellation of such number of shares of Common Stock as is necessary,
in accordance with the formula set forth in Section 2, to exercise this Warrant
with respect to the maximum number of shares of Common Stock purchasable
pursuant to the cashless exercise procedure set forth in Section 2.

The undersigned requests that the certificates for such shares be issued in the
name of, and delivered to _____________________________________________________
whose address is ______________________________________________________________
_______________________________________________________________________________.

The undersigned represents and warrants that all offers and sales by the
undersigned of the securities issuable upon exercise of the within Warrant shall
be made pursuant to registration of the Common Stock under the Securities Act of
1933, as amended (the "Securities Act"), or pursuant to an exemption from
registration under the Securities Act.

Dated:___________________              _________________________________________
                                       (Signature must conform to name of holder
                                       as specified on the face of the Warrant)

                                       _________________________________________
                                       _________________________________________
                                       (Address)

<PAGE>

                                    EXHIBIT B

                         FORM OF TRANSFEROR ENDORSEMENT
                   (To be signed only on transfer of Warrant)

         For value received, the undersigned hereby sells, assigns, and
transfers unto the person(s) named below under the heading "Transferees" the
right represented by the within Warrant to purchase the percentage and number of
shares of Common Stock of SIVAULT SYSTEMS, INC. to which the within Warrant
relates specified under the headings "Percentage Transferred" and "Number
Transferred," respectively, opposite the name(s) of such person(s) and appoints
each such person Attorney to transfer its respective right on the books of
SIVAULT SYSTEMS, INC. with full power of substitution in the premises.

--------------------------------------------------------------------------------
Transferees                 Percentage Transferred            Number Transferred
--------------------------------------------------------------------------------

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

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

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

Dated:  ______________, ___________      _______________________________________
                                         (Signature must conform to name of
                                         holder as specified on the face of the
                                         warrant)

Signed in the presence of:

___________________________________      _______________________________________
         (Name)                          _______________________________________
                                               (address)

ACCEPTED AND AGREED:                     _______________________________________
[TRANSFEREE]                             _______________________________________
                                               (address)

___________________________________
         (Name)

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