Document:

Exhibit
10.b

 

 

REPURCHASE AGREEMENT

 

This Repurchase Agreement (this “Agreement”) is
entered into between the undersigned Manufacturer and/or Distributor
(“Mfg/Dist”) and Textron Financial Corporation (“TFC”).

 

RECITALS

 

A.         Mfg/Dist sells various
goods (“Goods”) to retail dealers or wholesale distributors (in either case
“Dealers”) who frequently desire to finance such purchases; and

B.           TFC is in the business
of financing the acquisition of various goods by dealers generally.

 

AGREEMENT

 

In order to induce TFC to finance the
acquisition of Goods by a Dealer and/or to induce TFC to refinance Goods
already in the possession of a Dealer, Mfg/Dist agrees with TFC as follows:

 

1.   Sale of Goods;
Warranties of Mfg/Dist.  When a
Dealer orders Goods from Mfg/Dist and requests that TFC finance the acquisition
of such Goods (“New Goods”), Mfg/Dist shall deliver to TFC an invoice
identifying such Goods (the “Invoice”) and the cost thereof to the purchasing
Dealer (the “Invoice Cost”).  By
delivery of such Invoice to TFC, Mfg/Dist shall represent and warrant to TFC
that:

 

(a)          Mfg/Dist has good title
to such Goods and will, upon payment by TFC of the Net Invoice Cost therefor
(as hereinafter defined), transfer title to such Goods to such Dealer free and
clear of liens and encumbrances;

(b)         Such Goods are current
models, are in unused condition and are free of defects;

(c)          The Invoice Cost of such
Goods reflects a reduction for any applicable rebate or discount to such Dealer
and represents the true cost of such Goods to such Dealer;

(d)         Such Goods were ordered
by such Dealer from Mfg/Dist (the “Order”), the Order was accepted by Mfg/Dist
and such Dealer requested that TFC finance its acquisition of such Goods;

(e)          Such Goods conform in
all respects to the Order and will not be shipped to such Dealer prior to TFC’s
approval of such Invoice for payment.

(f)            The Invoice complies
with all applicable federal, state and local laws; and

(g)         The sale of the Goods
pursuant to the Order is a bona fide new sale of the Goods, and the Goods have
not been previously sold or financed by another lender.

 

In the event that TFC, with the approval of Mfg/Dist,  refinances Goods already in the possession
of a Dealer (“Existing Goods”), Mfg/Dist shall reinvoice such Dealer for such
Goods.  Each such reissued invoice shall
be considered an “Invoice” for purposes of this Agreement.  By delivery of such an Invoice to TFC,
Mfg/Dist shall make to TFC the representations and warranties set forth in
Subparagraphs (b) and (c) of this Paragraph with respect to the Goods
identified thereon, and shall further represent and warrant to TFC that such
Goods, as of the time of the reissuance of such Invoice, are free and clear of
liens and encumbrances of all parties other than TFC.  Mfg/Dist. acknowledges and agrees that it has requested TFC to
provide refinancing for its Dealers in respect of Existing Goods pursuant to
that certain Program Agreement (the “Program Agreement”) between TFC and
Mfg/Dist of even date herewith, as the same may be amended from time to
time.  Accordingly, in connection with
the programs under the Program Agreement, Mfg/Dist hereby gives its approval of
any refinancing of Dealers with respect to Existing Goods financed or
refinanced by Deutsche Financial Services Corp., or its affilate(s), 

 

 

immediately prior to such refinancing by TFC and such Existing Goods
shall be covered by Mfg/Dist’s repurchase obligations under this
Agreement.  With respect to certain
Goods that are being used by Dealers as “demos,” Mfg/Dist agrees that, for all
purposes of this Agreement, such “demos” shall be treated as New Goods to the
extent that TFC financed the acquisition of the same or as “Existing Goods” to
the extent that TFC refinanced such Goods, provided that, in either case, such
“demos” are being used by the Dealers in respect thereof in accordance with
Mfg/Dist’s published program for demos (any such demo Goods are referred to
herein as “Demo Goods”).   To the extent
that any Existing Goods are also Demo Goods, the representations of Mfg/Dist under
Subparagraph (b) above shall be appropriately qualified and Mfg/Dist shall be
deemed to have further represented to TFC that said Demo Goods are being used
by the applicable Dealer in accordance with Mfg/Dist’s published program for
demos.

 

2.  Payment
Obligations.  TFC will establish a
credit limit for each Dealer approved by TFC for the extension of credit.  Such credit limit shall not
constitute a committed line of credit and TFC shall not be bound to finance or
refinance any particular Goods of such Dealer. 
TFC shall be obligated to pay the Invoice Cost, less any discount
applicable to TFC from time to time (the “Net Invoice Cost”), in respect of New
Goods only for Invoices which TFC approves for payment.  As and to the extent provided for in the Program
Agreement, TFC has agreed, in connection with its refinancing of any “active”
Dealer with Deutsche Financial Services Corp. or any of its affiliates, to
provide through April 1, 2004 credit limits for such Dealer’s floorplan
financing (subject always to TFC’s not being bound to finance or refinance any
particular Goods of such Dealer) not less than the floorplan financing credit
limits of such Dealer in place with Deutsche Financial Services Corp. or any of
its affiliates as of the date of the Program Agreement.  TFC reserves the right to redocument all
such credit lines on forms acceptable to it, as provided for in the Program
Agreement, and to require Deutsche Financial Services Corp. and its affiliates
to release all liens and security interests with respect to any Existing Goods
of such Dealer being so refinanced and to otherwise subordinate and make junior
its liens and security interests with respect to such Dealer to the liens and
security interests of TFC with respect to such Dealer.

 

3.  Repurchase
Obligations of Mfg/Dist.  Should TFC
at any time repossess or otherwise come into possession of any New Goods
financed by TFC for any Dealer or any Existing Goods refinanced by TFC for any
Dealer (whether acquired, in either case, by such Dealer from Mfg/Dist or from
a distributor of such Goods or from another Dealer), with or without notice to
or approval of Mfg/Dist,  Mfg/Dist shall
repurchase such Goods from TFC upon the following terms and conditions:

 

(a)          Mfg/Dist shall
repurchase such Goods from TFC within fourteen (14) calendar days upon receipt
of notice from TFC that such Goods are in TFC’s possession, wherever located
and in whatever condition, without any express or implied warranties as to
merchantability or fitness for a particular purpose;

(b)         The repurchase price for
such Goods (the “Repurchase Price”) shall be equal to:  (i) the outstanding principal owing to TFC
by the applicable Dealer with respect to such Goods, plus (ii) all reasonable
expenses incurred by TFC in connection with the repossession and/or storage of
such Goods (including legal fees), 
minus  (iii) amounts incurred by
Mfg/Dist, if any, to restore such Goods to the reasonable equivalent of unused
condition (excluding normal wear and tear incident to display or demonstration),
provided that no amounts under this clause (iii) shall be so deducted with
respect to any Demo Goods that have been used in accordance with Mfg/Dist’s
published demo program;

(c)          The Repurchase Price
shall be determined as of the date that Mfg/Dist pays to TFC the Repurchase
Price in full; and

(d)         In the event that a
purported sale from Mfg/Dist to Dealer is not a bona fide sale of Goods, or if
the Goods, at the time of delivery to Dealer, is subject to a lien in favor of
Mfg/Dist or anyone claiming under or through Mfg/Dist, or it is determined by
TFC that the Goods were shipped prior to TFC’s approval of an invoice relating
to the Goods (collectively “Non-conforming Goods”), then upon written demand by
TFC, Mfg/Dist shall pay TFC the Repurchase Price with respect to such item(s)
of Non-conforming Goods regardless of whether TFC comes into possession of such
Non-conforming Goods.

 

 

Anything contained herein to the contrary
notwithstanding, Mfg/Dist shall not be obligated to repurchase any Good (i) if
TFC repossesses or comes into possession of such Good more than 18 months
following the date of the Invoice for such Good (the “Repurchase Period”), (ii)
if such Good is a demo Good and has not been used in accordance with Mfg/Dist’s
published demo program on or after the date on which TFC effected the financing
of the acquisition thereof (if such demo Good was a New Good at the time of
such financing) or on or after the date on which TFC effected the refinancing
of such demo Good (if such demo Good was an Existing Good at the time of such
refinancing) or (iii) if, during the then current calendar year and after
giving effect to any then pending repurchase of such Good, the aggregate amount
of the Repurchase Prices paid by Mfg/Dist to TFC during such year would exceed
10% of the ANR determined at the time of planned consummation of such pending
repurchase.

 

The “ANR” shall be determined, as of any date
in any calendar year, by aggregating the Monthly ADB for each completed
calendar month in such calendar year and dividing such aggregate amount by the
number of such completed calendar months, provided that if, at the time of any
determination of “ANR,” there shall be less than 6 complete consecutive
calendar months in the then current calendar year, then “ANR” shall be
determined as of December 31 of the immediately preceding calendar year by
aggregating the Monthly ADB for each calendar month in such calendar year and
dividing such aggregate amount by “12” (which is the number of complete
calendar months in a calendar year), 
provided further, if the immediately preceding calendar year shall be
2002,   then “ANR” shall be determined
as of December 31, 2002 by aggregating the Monthly DFS ADB for each calendar
month in calendar year 2002 and dividing such aggregate amount by “12” (which
is the number of complete calendar months in a calendar year). “Monthly ADB”
with respect to any calendar month shall be determined by aggregating the total
outstanding principal amount owing to TFC from all of the Dealers in respect of
Program loans extended by TFC to such Dealers to finance outstanding units of
inventory for each day during such calendar month and dividing such aggregate
amount by the number of days in such calendar month.  “Monthly DFS ADB” with respect to any calendar month in 2002
shall be determined by aggregating the total outstanding principal amount owing
to Deutsche Financial Services Corp. and/or its affiliates from all of the
Dealers in respect of floorplan financing loans extended by Deutsche Financial
Services Corp. and/or its affiliates to such Dealers for outstanding units of
inventory for each day during such calendar month and dividing such aggregate
amount by the number of days in such calendar month. For purposes of
determining whether a repurchase will cause the aforesaid 10% of ANR threshold
to be exceeded, TFC and Mfg/Dist agree that any Goods whose repurchase was not
demanded hereunder by TFC but which were sold, assigned or transferred to
another Dealer and the Obligations in respect thereof paid to TFC shall not be
deemed to have been “repurchased” hereunder by Mfg/Dist for purposes of the
aforesaid threshold.

 

For purposes of subclause (i) of the
immediately preceding paragraph, the passage of the Repurchase Period for any
Good will be suspended temporarily as of the date any of the following events
occur, and will not resume until the date TFC obtains possession of such Good
by court order or consent of all relevant parties, and shall be automatically
extended to 30 days after the date TFC obtains such possession:  (i) TFC institutes any type of legal action
to obtain possession of such Good from the applicable Dealer; (ii) any legal
action is instituted as a result of a dispute with another creditor regarding
priority rights in such Good; (iii) a voluntary or involuntary bankruptcy
action is filed by or on behalf of the applicable Dealer; or (iv) any legal
proceeding is filed or any governmental proceedings or order which prevents TFC
from obtaining possession of such Good.

 

4.               Events
of Default.  The following are
events of default under this Agreement:

 

(a)          Mfg/Dist fails in the
performance of any obligation when due under this Agreement (and such failure,
if subject to being cured, shall have not been cured by Mfg/Dist within 60 days
after such failure first occurred), which shall include, without limitation the
breach of any representation or warranty contained herein, the Program
Agreement or that certain Indemnification Agreement of even date herewith;

 

(b)         Mfg/Dist sustains a
materially adverse change in its financial condition, assets or business;

 

 

(c)          Mfg/Dist fails to give
TFC at least fourteen (14) days advance written notice of Mfg/Dist’s intentions
to sell, lease, transfer or otherwise dispose of substantially all of
Mfg/Dist’s assets; or consolidate with or merge with any entity, or permit any
other entity to consolidate or merge into Mfg/Dist;

 

(d)         Mfg/Dist or
TFC commences a case or an order of relief is entered under any bankruptcy,
reorganization, insolvency, liquidation or similar law; or

 

(e)          Arctic Cat
Inc. shall have defaulted in respect of any of its obligations under its
Guaranty of even date herewith or shall have terminated the continuing nature
of such Guaranty.

 

5.  Time is of the Essence:   Mfg/Dist and TFC acknowledge that time is
of the essence in this Agreement.

 

6.  TFC’s Remedies After Event of Default.  Upon the occurrence of an event of default
hereunder, and at any time thereafter, any Mfg/Dist obligation herein described
and any other amounts then owing by Mfg/Dist to TFC shall become immediately
due and payable.  In the case of an
event of default as described above in section 4(c), Mfg/Dist will be liable
for all obligations that arise as a result of any funding by TFC to any Dealer
or other person other than Mfg/Dist until such required written notice as
described in 4(c) is received by TFC. 
In addition, TFC shall have all other rights and remedies allowed by
law.

 

7.  Waivers;
Binding Effect; Governing Law.  The
obligations of Mfg/Dist under this Agreement are absolute and
unconditional.  Mfg/Dist shall not be
released from such obligations for any reason, nor shall such obligations be
reduced, diminished or discharged for any reason.    Mfg/Dist waives:  (i)
any right to require TFC to proceed against a Dealer or to pursue any other
remedy prior to exercising TFC’s rights under this Agreement, other than as may
be expressly set forth herein, (ii) notice of the acceptance of this Agreement
by TFC, the non-performance of any Obligation of any Dealer owing to TFC
(individually, an “Obligation” and collectively, the “Obligations”), or the
amount of the Obligations outstanding at any time, (iii) demand and
presentation for payment upon the applicable Dealer, (iv) protest and notice of
protest and diligence of bringing suit against any Dealer, and (v) any other
defense to Mfg/Dist’s obligations under this Agreement.  TFC’s failure to exercise any rights granted
hereunder shall not operate as a waiver of those rights.   This
Agreement shall be binding upon the parties hereto and shall inure to the
benefit of their successors and assigns. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of Minnesota, without
reference to applicable conflict of law principles.  Without limiting the scope of the “arbitration” provisions set
forth below, each of Mfg/Dist and TFC hereby waives its right to trial by jury
of any matter arising out of or relating to this Agreement or the subject
matter hereof.

 

Any controversy or claim arising
out of or related to this Agreement (collectively, the “Disputes”) shall be
settled by arbitration as hereinafter provided. Such arbitration shall be the
sole and exclusive forum for the resolution of Disputes and any arbitral award
in respect thereof shall be final and binding, provided, however, upon the
application of either Mfg/Dist or TFC, as the case may be, and whether or not
an arbitration proceeding has yet been initiated, all courts having
jurisdiction are hereby authorized, and either Mfg/Dist or TFC is hereby
authorized, to so petition any such courts, to (a) issue and enforce in any
lawful manner any temporary restraining orders, preliminary injunctions and
other interim measures of relief as may be necessary to prevent harm to such
applying party’s interests or as otherwise may be appropriate pending the
conclusion of arbitration proceedings pursuant to this paragraph and (b) enter
and enforce in any lawful manner such judgments for permanent equitable relief
as may be necessary to prevent harm to Mfg/Dist’s or TFC’s interests, as the
case may be, provided for in any such arbitral award following the issuance
thereof. All arbitration hereunder will be conducted in accordance with the
Commercial Arbitration Rules of The American Arbitration Association (“AAA”)
(regardless of whether such Rules are still in effect or the AAA is still in
existence, as hereinafter provided).  If
the AAA is dissolved, disbanded or otherwise is unavailable for any such
arbitration, Mfg/Dist and TFC will remain subject to this paragraph and any
arbitration to be conducted hereunder will be conducted by a recognized,
impartial, independent arbitral forum of national standing mutually agreed upon
by Mfg/Dist and TFC using the aforesaid Commercial Arbitration Rules as then
most recently in effect (with such modifications in such Rules as may be
required by such other arbitral forum in order for such Rules to be utilizable
by such other arbitral forum).  Mfg/Dist
and TFC agree 

 

 

that the arbitration shall be
conducted by an arbitrator selected in accordance with the aforesaid Commercial
Arbitration Rules. Any such arbitrator shall be independent and not in any way
affiliated with either Mfg/Dist or TFC or any affiliate thereof, and shall
otherwise be a disinterested and impartial party with respect to the particular
Dispute. Any such arbitrator shall be experienced in dealer floorplan
financing. The arbitrator will decide if any inconsistency exists between the
Commercial Arbitration Rules of the AAA in the relevant arbitral forum and the
arbitration provisions contained herein; if any such inconsistency exists, the
arbitration provisions contained herein will control and supersede such
rules.  The site of all arbitration
proceedings will be in Chicago, Illinois. The arbitrator shall apply only the
law of the State of Minnesota (without giving effect to its principles of
conflicts of law) in reaching his/her determinations in respect of any arbitral
award.  The arbitrator shall make
reasonably detailed findings of fact and law in a writing in support of his/her
decision. The arbitrator will not have the authority to award exemplary,
punitive or consequential damages. All arbitration proceedings, including
testimony or evidence at hearings, will be kept confidential, although any award
or order rendered by the arbitrator pursuant to the terms of this paragraph may
be entered as a judgment or order in any state or federal court and accordingly
enforced (including, without limitation, the federal court in the federal
judicial district which includes the residence or place of business of the
party against whom such award or order was entered).  If either Mfg/Dist or TFC brings any other action for judicial
relief with respect to any Dispute, the party bringing such action will be
liable for and will immediately pay all of the other party’s costs and expenses
(including attorneys’ fees) incurred to stay or dismiss such action and remove
or refer such Dispute to arbitration. 
If either Mfg/Dist or TFC brings or appeals an action to vacate or modify
an arbitration award and such party does not prevail, such party will pay all
costs and expenses, including attorneys’ fees, incurred by the other party in
defending such action.  If either the
Company or TFC, as a recipient of an arbitral award, enforces such award by
obtaining a judgment or order in respect thereof in any state or federal court
against the other party hereto and/or causes any such judgment or order to be
executed or otherwise enforced against such other party, such other party shall
pay all court costs and other expenses and reasonable attorney fees of the
enforcing party in respect thereof. 
This paragraph will survive the termination of this Agreement.

 

8.  Termination
by Mfg/Dist.  (a) Mfg/Dist may
terminate this Agreement by written notice to TFC sent by certified mail,
return receipt requested, to the address specified below, provided that
Mfg/Dist agrees not to terminate this Agreement for so long as the aforesaid
Indemnification Agreement remains in full force and effect.  Subject to the proviso in the immediately
preceding sentence, such termination shall be effective 180 days after receipt
thereof by TFC.  (b) Mfg/Dist
acknowledges that pursuant to paragraph 2 herein, TFC has no obligation to
finance Goods for any Dealer, Mfg/Dist, or otherwise, and, subject to the terms
and provisions of the Program Agreement, TFC has no obligation to notify
Mfg/Dist of TFC’s decision to terminate its relationship with, or stop funding
Mfg/Dist or any of its Dealers.  Such
termination originated by Mfg/Dist or TFC, or any cessation of funding by TFC
shall not affect the liabilities of Mfg/Dist with respect to Invoices paid by
TFC and Invoices and Goods approved for payment and financing by TFC prior to
the effective date of such termination, even though such Invoices are paid by
TFC thereafter.

 

 

	
  TFC:

  	
   

  	
  MFG/DIST:

  
	
   

  	
   

  	
   

  
	
  TEXTRON FINANCIAL
  CORPORATION

  	
  ARCTIC CAT SALES INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Print Name:

  	
    Dan Radley

  	
   

  	
  Print Name: 

  	
   

  
	
  Print Title:

  	
      Senior Vice President, Private Brands
  Division

  	
   

  	
  Print Title: 

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Date: January 20, 2003

  	
  Date:  January 20, 2003

  	
   

  
	
  Address:

  	
  11575 Great Oaks Way

  	
  Address:

  	
  601 Brooks Avenue South

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Suite 210

  	
  Thief River Falls, MN 56701

  
	
   

  	
  Alpharetta, Georgia 30022EXHIBIT 4.1

                             THE QUANTUM GROUP, INC.

      CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND SENIOR FINANCIAL OFFICERS

I.       INTRODUCTION

         This Code of Ethics for Principal Executive and Senior Financial
Officers (the "Code") helps maintain the standards of business conduct for The
Quantum Group, Inc. (the "Company"), and ensures compliance with legal
requirements, specifically Section 406 of the Sarbanes-Oxley Act of 2002, and
the SEC rules promulgated there under. The purpose of the Code is to deter
wrongdoing and promote ethical conduct. The matters covered in this Code are of
the utmost importance to the Company, our shareholders and our business
partners. Further, these are essential so that we can conduct our business in
accordance with our business values.

         The Code is applicable to the following persons, referred to as
Officers:

             o    Our principal executive officer,

             o    Our principal financial officer,

             o    Our principal accounting officer or controller, and

             o    All professionals serving in the roles of finance, tax,
                  accounting, purchase, treasury, internal audit, financial
                  analyst and investor relations. Further, this includes all
                  members of the senior management, the members of the Audit
                  Committee, and members of the Board of The Quantum Group, Inc.
                  and its subsidiaries.

         Ethical business conduct is critical to our business. Accordingly,
Officers are expected to read and understand this Code, uphold these standards
in day-to-day activities, and comply with: all applicable laws; rules and
regulations; any code of conduct the Company may adopt from time to time; and
all applicable policies and procedures adopted by the Company that govern the
conduct of its employees.

         Because the principles described in this Code are general in nature,
questions about specific matters or issues should be directed to either the
President or Chief Financial Officer of the Company. If the President or Chief
Financial Officer have questions about specific matters or issues, they should
direct their inquiry to the Chairman of the Company's Audit Committee.

         Nothing in this Code, in any Company policies and procedures, or in
other related communications (verbal or written), creates or implies an
employment contract or term of employment.

                                       1
<PAGE>

         Officers should sign the acknowledgment form at the end of this Code
and return the form to the HR department indicating that they have received,
read and understood, and agree to comply with the Code. The signed
acknowledgment form will be located in each Officer's personnel files. Each
year, as part of their annual review, Officers will be asked to sign an
acknowledgment indicating their continued understanding of the Code.

II.      HONEST AND ETHICAL CONDUCT

         We expect all Officers to act in accordance with the highest standards
of personal and professional integrity, honesty and ethical conduct, while
working on the Company's premises, at offsite locations where the Company's
business is being conducted, at Company sponsored business and social events, or
at any other place where Officers are representing the Company.

         We consider honest conduct to be conduct that is free from fraud or
deception. We consider ethical conduct to be conduct conforming to the accepted
professional standards of conduct. Ethical conduct includes the ethical handling
of actual or apparent conflicts of interest between personal and professional
relationships. This is discussed in more detail in Section III below.

         In all cases, if you are unsure about the appropriateness of an event
or action, please seek assistance in interpreting the requirements of these
practices.

III.     CONFLICTS OF INTEREST

         An Officer's duty to the Company demands that he or she avoids and
discloses actual and apparent conflicts of interest. A conflict of interest
exists where the interests or benefits of one person or entity conflict with the
interests or benefits of the Company. Examples include:

         A. Employment/ Outside Employment. In consideration of employment with
the Company, Officers who are full time, paid employees, are expected to devote
material attention to the business interests of the Company.1 Such Officers are
prohibited from engaging in any activity that interferes with their performance
or responsibilities to the Company, or is otherwise in conflict with or
prejudicial to the Company.

         Our policy is to prohibit Officers from accepting simultaneous
employment with suppliers, customers, developers or competitors of the Company,
or from taking part in any activity that enhances or supports a competitor's
position. Additionally, Officers must disclose to the Company's Audit Committee,
any interest that they have that may conflict with the business of the Company.

         B. Outside Directorships. It is a conflict of interest to serve as a
director of any company that competes with the Company. Officers must first
obtain approval from the Company's Audit Committee before accepting a
directorship.

                                       2
<PAGE>

         C. Business Interests. If an Officer is considering investing in any
customer, supplier, developer or competitor of the Company, he or she must first
take care to ensure that these investments do not compromise their
responsibilities to the Company. It is our policy that Officers first obtain
approval from the Company's Audit Committee before making such an investment.
Many factors should be considered in determining whether a conflict exists,
including the size and nature of the investment; the Officer's ability to
influence the Company's decisions; his or her access to confidential information
of the Company or of the other company; and the nature of the relationship
between the Company and the other company.

         D. Related Parties. As a general rule, Officers should avoid conducting
Company business with a relative, or with a business in which a relative is
associated in any significant role. Relatives include spouse, siblings,
children, parents, grandparents, grandchildren, aunts, uncles, nieces, nephews,
cousins, step relationships, and in-laws. The Company discourages the employment
of relatives of Officers in positions or assignments within the same department.
Further, the Company prohibits the employment of such individuals in positions
that have a financial dependence or influence (e.g., an auditing or control
relationship, or a supervisor/ subordinate relationship).2

         E. Payments or Gifts From Others. Under no circumstances may Officers
accept any offer, payment, promise to pay, or authorization to pay any money,
gift, or anything of value from customers, vendors, consultants, etc., that is
perceived as intended, directly or indirectly, to influence any business
decision, any act or failure to act, any commitment of fraud, or opportunity for
the commitment of any fraud. Inexpensive gifts, infrequent business meals,
celebratory events and entertainment, provided that they are not excessive or
create an appearance of impropriety, do not violate this policy. Before
accepting anything of value from an employee of a government entity, please
contact the President or Chief Financial Officer or, in the case of the
President or Chief Financial Officer, the Chairman of the Audit Committee.
Questions regarding whether a particular payment or gift violates this policy
are to be directed to President or Chief Financial Officer or, in the case of
the President or Chief Financial Officer, the Chairman of the Audit Committee.
Gifts given by the Company to suppliers or customers, or received from suppliers
or customers, should be appropriate to the circumstances and should never he of
a kind that could create an appearance of impropriety. The nature and cost must
always be accurately recorded in the Company's books and records.

         F. Corporate Opportunities. Officers may not exploit for their own
personal gain, opportunities that are discovered through the use of corporate
property, information or position, unless the opportunity is disclosed fully in
writing to the Company's Board of Directors and the Board declines to pursue
such opportunity.

         G. Other Situations. Because other conflicts of interest may arise, it
would be impractical to attempt to list all possible situations. If a proposed
transaction or situation raises any questions or doubts, Officers must consult
President or Chief Financial Officer or, in the case of the President or Chief
Financial Officer, the Chairman of the Audit Committee. .

                                       3
<PAGE>

         H. Other Business or Investment Interest. Upon hiring, every employee
will disclose any business or investment interest of over 10% in any company,
public or private, joint venture and/or partnership, as well as any other
company he/she is an officer and/or director in. This disclosure must be updated
annually and disclosed to the President and CFO.

IV.      DISCLOSURE TO THE SEC AND THE PUBLIC

         Our policy is to provide full, fair, accurate, timely, and
understandable disclosure in reports and documents that we file with, or submit
to, the SEC and in our other public communications. Accordingly, our Officers
must ensure that they and others in the Company comply with our disclosure
controls and procedures, and our internal controls for financial reporting.

V.       COMPLIANCE WITH GOVERNMENTAL
         LAWS, RULES AND REGULATIONS

         Officers must comply with all applicable governmental laws, rules and
regulations. Officers must acquire appropriate knowledge of the legal
requirements relating to their duties sufficient to enable them to recognize
potential dangers, and to know when to seek advice from more senior Officers or
the Audit Committee. Violations of applicable governmental laws, rules and
regulations may subject Officers to individual criminal or civil liability, as
well as to disciplinary action by the Company. Such individual violations may
also subject the Company to civil or criminal liability or the loss of business.

VI.      VIOLATIONS OF THE CODE

         Part of an Officer's job, and of his or her ethical responsibility, is
to help enforce this Code. Officers should be alert to possible violations and
report this to President or Chief Financial Officer or, in the case of the
President or Chief Financial Officer, the Chairman of the Audit Committee.
Officers must cooperate in any internal or external investigations of possible
violations. Reprisal, threat, retribution or retaliation against any person who
has, in good faith, reported a violation or a suspected violation of law, this
Code or other Company policies, or against any person who is assisting in any
investigation or process with respect to such a violation, is prohibited.

         Actual violations of law, this Code, or other Company policies or
procedures, should be promptly reported to President or Chief Financial Officer
or, in the case of the President or Chief Financial Officer, the Chairman of the
Audit Committee.

         The Company will take appropriate action against any Officer whose
actions are found to violate the Code or any other policy of the Company.

                                       4
<PAGE>

Disciplinary actions may include immediate termination of employment at the
Company's sole discretion. Where the Company has suffered a loss, it may pursue
its remedies against the individuals or entities responsible. Where laws have
been violated, the Company will cooperate fully with the appropriate
authorities.

VII.     WAIVERS AND AMENDMENTS OF THE CODE

         We are committed to continuously reviewing and updating our policies
and procedures. Therefore, this Code is subject to modification. Any amendment
or waiver of any provision of this Code must be approved in writing by the
Company's Board of Directors and promptly disclosed on the Company's website and
in applicable regulatory filings pursuant to applicable laws and regulations,
together with details about the nature of the amendment or waiver.

                                       5
<PAGE>

VIII.    ACKNOWLEDGMENT OF RECEIPT OF CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND
         SENIOR FINANCIAL OFFICERS

         I have received and read the Company's Code of Ethics for Principal
Executive and Senior Financial Officers (the "Code"). I understand the standards
and policies contained in the Code and understand that there may be additional
policies or laws specific to my job. I agree to comply with the Code.

         If I have questions concerning the meaning or application of the Code,
any Company policies, or the legal and regulatory requirements applicable to my
job, I know I can consult the President or Chief Financial Officer or, in the
case of the President or Chief Financial Officer, the Chairman of the Audit
Committee, and that my questions or reports to these sources will be maintained
in confidence.

_____________________________________
Officer Name

_____________________________________
Signature

_____________________________________
Date

Please sign and return this form to the HR department.

1. As the Company is still unable to provide payment to current officers and
directors (founders), such provisions are waived until adequate compensation is
possible. This will not prevent current founders from engaging in other business
interests that are not competitive with the Company.

2. The Board has acknowledged that Noel J. Guillama and his wife, Susan D.
Guillama, co-founded the Company and as such are exempt from this provision in
perpetuity and as condition of their investment in the Company.

                                       6

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