Document:

EX-10.6

EXHIBIT 10.6

PMC MANAGEMENT AND PROXY AGREEMENT

This PMC MANAGEMENT AND PROXY AGREEMENT (this “Agreement”), is made as of this 7th day of
November, 2005, by and among PAXSON COMMUNICATIONS CORPORATION, a Delaware corporation (the
“Company”), PAXSON MANAGEMENT CORPORATION, a Nevada corporation (“PMC”), Lowell W. Paxson,
including any successor of Lowell W. Paxson appointed pursuant to Section 11 (the “Executive”), and
certain direct and indirect wholly-owned subsidiaries of the Company listed on the signature pages
hereto (collectively, the “Parties”, and individually, a “Party”).

WHEREAS, the Executive is the controlling shareholder of the Company and owns and votes 99% of
the voting stock of PMC;

WHEREAS, the Executive’s wife and beneficiary of his estate, Marla Paxson, owns and votes 1%
of the voting stock of PMC;

WHEREAS, the Company, PMC, the Executive and certain other parties have, as of the date
hereof, entered into a Master Transaction Agreement (the “Master Transaction Agreement”) which
contemplates the execution and delivery of this Agreement and certain other documents specified
therein;

WHEREAS, the Company wishes to retain PMC to perform certain services relating to the
management, operation and control of the analog and digital full power and low power television
broadcast stations (individually, a “Station”, and collectively, the “Stations”) owned by certain
of the Company’s subsidiaries (each such subsidiary and its respective Station is identified on
Schedule A attached hereto and is referred to here individually as a “Station Subsidiary”
and collectively as the “Station Subsidiaries”);

WHEREAS, the Company and PMC have requested, and the Federal Communications Commission (“FCC”)
has approved, the pro forma transfer of voting control to PMC, acting through the Executive, of the
Station Subsidiaries that hold assets and authorizations issued by the FCC for the Stations (the
“FCC Authorizations”); and

WHEREAS, to comply with the FCC’s grant of the pro forma transfer of control of the Station
Subsidiaries, the Company wishes to grant to PMC, acting through the Executive, certain rights and
powers to vote the issued and outstanding capital stock of each Station Subsidiary that is a
corporation and to appoint the managing member or partner of each Station Subsidiary that is a
limited liability company or limited partnership;

NOW THEREFORE, in exchange for the mutual promises contained herein, the Parties agree as
follows:

1

SECTION 1. DEFINITIONS

1.1 Definitions. All capitalized terms in this Agreement not defined herein shall have the
meaning ascribed to them in the Master Transaction Agreement or in the other documents to be
executed and delivered pursuant thereto.

SECTION 2. TERM

2.1 Term of Agreement. The term of this Agreement (the “Term”) shall commence as of the date
hereof (the “Effective Date”) and, subject to Section 2.2 below, shall continue in full force and
effect until the first to occur of (a) the consummation of the transfer of control of the Station
Subsidiaries in connection with the sale of the Call Shares to the Investor or its Permitted
Transferee, (b) the consummation of the transfer of control of the Station Subsidiaries in
connection with the sale of the Call Shares to the Company pursuant to the Company Stock Purchase
Agreement dated as of the date hereof, among the Paxson Stockholders and the Company (the “Company
Stock Purchase Agreement”) following the termination of the Call Right pursuant to the Call
Agreement or (c) the consummation of the transfer of control of the Station Subsidiaries in
connection with the termination of the Company Stock Purchase Agreement. The date this Agreement
terminates pursuant to this Section shall be the “Termination Date.”

2.2 Station Sales. Notwithstanding Section 2.1, this Agreement shall terminate with respect
to any Station upon (a) the consummation of the sale to a third party of substantially all the
assets, including the FCC Authorizations, of such Station or (b) the consummation of the sale of
the capital stock of the Station Subsidiaries that own the assets of such Station, whereupon this
Agreement shall terminate only with respect to such Station and shall remain in full force and
effect in accordance with its terms with respect to the remaining Stations.

2.3 FCC Approval. PMC and the Company shall file promptly with the FCC, but in no event later
than ten business days following notice by one Party to the other, such applications, and take such
other actions as may be reasonably required, to obtain the consent of the FCC to (i) any transfer
of control of each Station’s FCC Authorizations from PMC to the Company, the Investor or a
Permitted Transferee in connection with a termination of this Agreement as provided in Section 2.1
hereof or (ii) any assignment of a Station’s FCC Authorizations or the transfer of control of a
Station Subsidiary to a third party in connection with any sale to such third party of a Station’s
assets, including its FCC Authorizations, or the capital stock of a Station Subsidiary as provided
in Section 2.2 hereof.

SECTION 3. MANAGEMENT AND RELATED FUNCTIONS

3.1 Management Functions. During the Term, the Parties agree that the sole Director of each
of the Station Subsidiaries shall have sole responsibility for the management functions set forth
in this Section 3.1 for each of the Stations and the Station Subsidiaries, and that each such
Director shall delegate such management functions to PMC in accordance with the terms hereof. All
management functions relating to the business or operations of the Stations that are not set forth
in this Section 3.1 are expressly reserved to the Company (including, without limitation, the
matters set forth in Section 4.3 below), and the Company shall have the right to rescind any action
taken by PMC that is inconsistent with or in contravention of any of such rights reserved to the
Company.

(a) Personnel

(i) Hiring, firing, promoting, disciplining and exercising day-to-day control
over no less than two employees (at least one of whom shall be a management-level
employee) who shall staff each Station’s main studio facility in accordance with the
rules, regulations and policies of the FCC (such employees and any replacements for
such employees, are collectively the “Station Employees”). The Station Employees as
of the date hereof and the Station Subsidiary that employs the Station Employees are
listed on Schedule 3.1(a)(i) hereto; and

(ii) Subject to the requirements of Section 3.2 below, managing and directing
certain other employees of the Company and its subsidiaries (such employees and any
replacements for such employees are collectively the “Corporate Employees”) as are
necessary to enable PMC to control the operations of the Stations as contemplated by
this Agreement. The Corporate Employees as of the date hereof are listed on
Schedule 3.1(a)(ii) hereto.

(b) Finances

(i) Establishing and administering the Stations’ operating budgets; and

(ii) Causing the payment of financial obligations involving the Stations’
operations, including, without limitation, utility payments, payments of rent under
the Station’s studio and transmitter site leases, salaries and benefits of the
Station Employees, payments due to contract employees, legal fees and expenses,
travel expenses, communications expenses, insurance costs, equipment rent and such
other obligations that arise from time to time and concern the business or
operations of the Stations; provided that, it is understood and agreed that
neither PMC nor any of its officers, directors, stockholders or employees shall have
liability for any such financial obligations.

(c) Programming

(i) Ascertaining important community issues and ensuring that no less than two
hours per week of public affairs programming responsive to such issues is aired on
the Stations; one hour of which responsive programming shall be provided by the
Stations (Schedule 3.1(c)(i) hereto describes such programming provided by the
Stations as of the date hereof) and one hour of which shall be provided by the
Company, in each case as provided in the Affiliation Agreements for the Stations
between the Company and each applicable Station subsidiary (any changes to the
amount or schedule of such programming shall be subject to the consent of the
Company and PMC).

(ii) Ensuring the broadcast by each Station of the programming supplied by the
Company pursuant to the Affiliation Agreement for such Station between the Company
and the applicable Station Subsidiary, subject to the terms and conditions contained
in such Affiliation Agreement; and

(iii) Using commercially reasonable efforts to comply in all material respects
with all FCC program requirements, including children’s programming, which
programming shall be provided to each Station by the Company pursuant to the
Affiliation Agreement for such Station, and which programming shall be broadcast on
each Station by PMC, as provided in such Affiliation Agreement (any changes to the
amount or schedule of such programming shall be subject to the consent of the
Company and PMC), political broadcasts, sponsorship identifications, station
identifications, and public affairs programming and public service announcements, it
being understood and agreed that the Stations shall broadcast each day between 6:00
a.m. and Midnight, local time, no less than five public service announcements of at
least 10 seconds in duration to be supplied by the Company as provided in such
Affiliation Agreements (any changes to the amount or schedule of such announcements
shall be subject to the consent of the Company and PMC).

(d) Facilities

(i) Maintaining a main studio for each Station as required, in all material
respects, by the FCC’s rules, regulations and policies (unless and to the extent the
FCC has granted, or in the future grants, a waiver of such rules, regulations or
policies with respect to a Station);

(ii) Maintaining a public inspection file for each Station in accordance, in
all material respects, with the FCC’s rules, regulations and policies by reviewing
(A) the public file materials provided to each Station by the Company’s Associate
General Counsel, copies of which shall be provided promptly by the Company to PMC
and (B) such reports, memoranda and other documents prepared by any other Corporate
Employee or any consultant or independent contractor who may from time to time be
retained to audit the Stations’ public inspection files, copies of which shall be
provided promptly by the Company to PMC;

(iii) Ensuring the Stations’ compliance, in all material respects, with FCC
technical and engineering requirements by reviewing the system monitoring reports
prepared by and for the Company for each Station (copies of which reports shall be
provided promptly to PMC), and ensuring that appropriate actions are taken by one or
more responsible Corporate Employees to address any repair or maintenance issues
identified in such reports;

(iv) Directing and monitoring the Stations’ implementation of their respective
DTV build-out schedules by attending periodic meetings or telephone conferences with
appropriate Corporate Employees; and

(v) In all material respects, preparing, completing and timely filing with the
FCC and/or placing in the Stations’ public inspection files all FCC-required reports
and applications received from the Company’s Associate General Counsel or such other
Corporate Employee that the Company may designate to provide such reports and
applications.

3.2 Employees. In order to perform the services contemplated hereby, PMC will require, from
time to time, the assistance and services of the Corporate Employees. The Company shall make
available to PMC the Corporate Employees on an as needed basis for the purpose of assisting PMC in
the performance of the management services set forth in this Section 3. When providing such
assistance to PMC, the Corporate Employees shall be subject to the instruction and direction of
PMC. PMC shall cooperate in good faith with the Company and use commercially reasonable efforts to
ensure that PMC’s use of the services of the Corporate Employees does not unreasonably interfere
with the services the Corporate Employees are required to provide to the Company. The Company (and
not PMC) shall remain the sole employer of the Corporate Employees and shall be responsible for
providing all compensation and benefits to be provided to the Corporate Employees.

3.3 Access and Office Space. To carry out the services set forth in this Section 3, the
Executive and those he supervises will have unfettered access to the Stations’ physical facilities
and space. Without cost or expense to PMC, the Company shall provide suitable office space for the
Executive at the Company’s offices located at 10880 Wilshire Boulevard, Suite 1200, Los Angeles,
California; and 601 Clearwater Park Road, West Palm Beach, Florida; or such other location as PMC
and the Company may agree upon from time to time, together with all reasonable support staff and
secretarial assistance, equipment, stationary, books and supplies. Without limiting the generality
of the foregoing, PMC shall employ an executive assistant and an executive secretary and the cost
of such employees shall be reimbursed pursuant to Section 5.1(c). During the Term, the Company
shall not, without the prior written consent of PMC, which consent may be withheld in PMC’s sole
discretion, change the location or operations of the Company’s headquarters from West Palm Beach,
Florida, or its National Operations Center from St. Petersburg, Florida.

3.4 Policies. PMC will cause its employees and the Station Employees to execute on an annual
basis the payola/plugola and conflict of interest/business opportunity statements that the
Company’s employees are required to execute and deliver to the Company.

3.5 Information and Communications. The Company shall provide PMC with access to such
information, statements, ledgers, reports and communications as PMC reasonably requires for the
performance of the services contemplated hereby. Without limiting the generality of the foregoing,
the Company shall provide to PMC and PMC shall monitor the periodic reports prepared for the
Company regarding the Stations’ public inspection files, PMC shall receive copies of all documents
prepared for or by the Company that are required to be placed in the Stations’ public inspection
files and PMC shall have access to all email communications and other correspondence from and to
the Company’s Regional Vice Presidents and the Station Employees to the extent such communications
and correspondence relate to the operation of the Stations. In the event PMC and the Company
determine that any Station shall broadcast coverage of events of local or national importance in
lieu of regularly scheduled network programming, upon the request of PMC, the Company shall provide
to PMC its written consent to the preemption by PMC of such network programming.

3.6 Control of Station Subsidiaries. During the Term, the Company shall not, directly or
indirectly, control, supervise, direct, or attempt to control, supervise, or direct, the operations
of any Station; such operations, including complete control and supervision of all of the programs,
employees, and policies of the Stations, shall, in accordance with the delegation of authority set
forth in Section 3.1, be the sole responsibility of PMC.

	 	 	 
	SECTION 4.	 	VOTING RIGHTS.
	4.1

	 	Proxies.

(a) Subject to the limitations in Section 4.3 below, the Company and each other Party
that owns the capital stock of a Station Subsidiary that is a corporation (a “Grantor”),
hereby appoints PMC, acting through the Executive, as its attorney-in-fact and proxy, with
full power of substitution, to vote all shares of the common stock of each such Station
Subsidiary owned by a Grantor (each, a “Corporate Subsidiary”) standing in the name of the
Grantor on the books of such Corporate Subsidiary, and any and all other voting securities
of such Corporate Subsidiary that may be issued with respect to such shares, as PMC, acting
through the Executive shall in his sole discretion determine, with full power to represent
the Grantor at any and all meetings, regular or special, of the shareholders of such
Corporate Subsidiary, or at any adjournment or adjournments thereof, in person or by proxy,
with all power which the Grantor would have if personally present, and with full power to
act without a meeting pursuant to Section 607.0704 of the Florida Statutes.

(b) Each proxy granted by a Grantor pursuant to this Section 4.1 is irrevocable, having
been granted pursuant to Section 607.0722(5) of the Florida Business Corporation Act, and is
coupled with an interest; provided, however, that any proxy may be revoked
or terminated if it would conflict with the valid exercise by any holder of debt of the
Company of its rights as a creditor of the Company (a “Lender Revocation”);
provided, further, however, that any Lender Revocation that would
result in a transfer of control of any FCC Authorization of a Station shall be subject to
compliance with applicable FCC requirements. Each Grantor understands and hereby
acknowledges that, pursuant to Section 607.0722(5) of the Florida Business Corporation Act,
except as provided in the preceding sentence, this proxy may not be revoked, amended or
altered by such Grantor at any time prior to its termination in accordance with the terms
hereof. Each Corporate Subsidiary is fully and irrevocably authorized and instructed by its
respective Grantor to rely on this proxy for all purposes. In the event that any proxy
granted pursuant to this Section 4.1 is held to be revocable, other than as a result of a
Lender Revocation, the Grantor granting such proxy hereby agrees not to revoke it.

(c) This proxy shall be valid and in full force and effect from the date hereof until
the termination or expiration of this Agreement or the date on which this Agreement
otherwise ceases to be in full force and effect; provided that this proxy shall not
terminate until the approval of the FCC has been obtained, to the extent required by Section
310 of the Communications Act of 1934, as amended, for any transfer of control of any
Station Subsidiary resulting from such termination.

(d) Each Grantor is hereby advised by the Executive that, upon the death or disability
of the Executive, ownership and control of PMC shall be transferred to the Executive’s wife,
Marla Paxson or a Paxson Estate Planning Affiliate (as defined in the Call Agreement dated
as of the date hereof among the Executive, Second Crystal Diamond Limited Partnership,
Paxson Enterprises, Inc. NBC Palm Beach Investment II, Inc. and the Company (the “Call
Agreement”)). Each Grantor acknowledges that any such transfer of ownership and control
shall not affect the validity or enforceability of the proxy granted by such Grantor. Each
Grantor agrees to use its commercially reasonable efforts to obtain any approval of the FCC
as may be required under the Act as a result of any transfer of ownership and control of PMC
from the Executive to Marla Paxson or a Paxson Estate Planning Affiliate.

4.2 Other Entities. With respect to each Station Subsidiary that is a limited liability
company or limited partnership, the Company has caused the operating agreement or limited
partnership agreement of each such Station Subsidiary to be amended, effective as of the date
hereof, to designate PMC as the manager of such Station Subsidiary, subject to the terms and
limitations set forth in such operating agreements and limited partnership agreement. No such
amendment shall be construed as or have the effect of admitting PMC as a member or partner, whether
general or limited, of any such Station Subsidiary.

4.3 Limitations on Authority. Without limiting the reservation of powers to the Company, as
provided in Section 3.1 above, in exercising the voting rights granted pursuant to Section 4.1, or
in acting as manager of any Station Subsidiary pursuant to Section 4.2, each of PMC and the
Executive shall not vote for or take any of the following actions or permit any Station
Subsidiary’s officers or directors to authorize or take any of the following actions without the
prior consent of the Company:

(a) Any amendment of the articles or certificate of incorporation or by-laws of any of
the Station Subsidiaries;

(b) Any amendment or modification of the terms or provisions of the operating agreement
of any Station Subsidiary that is a limited liability company or the partnership agreement
of any Station Subsidiary that is a partnership that, in either case, concern limitations on
PMC’s authority to manage such company or partnership;

(c) Sale, lease, assignment, transfer or other divestiture by any of the Station
Subsidiaries of the operating assets, including any FCC license, of a Station (other than
any such sale, lease, assignment, transfer or other divestiture that is approved by the
Company);

(d) Any acquisition of assets by any Station Subsidiary, including pursuant to a
merger, consolidation or other business combination, or any merger or business combination
transaction involving a Station Subsidiary;

(e) Issuance or sale of any capital stock of any of the Station Subsidiaries or any
option, warrants or other rights to acquire capital stock of any of the Station Subsidiaries
(including instruments convertible into capital stock);

(f) Any split, combination, or reclassification of the capital stock of any of the
Station Subsidiaries in any manner;

(g) Cause any of the assets of any of the Station Subsidiaries to be subject to any
lien or encumbrance (other than any lien or encumbrance approved by the Company);

(h) Any increase in the size of the board of directors of any of the Station
Subsidiaries, or the election and removal of any member of the board of directors of any of
the Station Subsidiaries;

(i) Any voluntary bankruptcy or winding up of any of the Station Subsidiaries or filing
for protection under any bankruptcy or insolvency laws with respect to any of the Station
Subsidiaries;

(j) Entering into any joint sales, joint services, time brokerage, local marketing or
similar agreement or arrangement;

(k) Change the location of the principal business office of any of the Station
Subsidiaries;

(l) Incur, create, assume or permit to exist any indebtedness of PMC or any lien on any
asset of PMC;

(m) Engage in any business or enterprise, other than in connection with the activities
and services contemplated by the terms of this Agreement;

(n) Enter into any transactions or agreements, except as contemplated by the
Affiliation Agreements for the Stations, that will render the digital spectrum of the
Stations unavailable for use by the Company’s programming network during the Restricted
Period;

(o) Cause any Station Subsidiary to violate, require the consent or waiver of the
holders of, or trigger voting rights under, any debt or preferred stock of the Company;

(p) Cause any Station Subsidiary to make any loan or otherwise extend credit to any
party; or

(q) Cause any Station Subsidiary to issue any dividend or other distribution with
respect to the capital stock of such Station Subsidiary.

	 	 	 
	SECTION 5.	 	PAYMENTS TO PMC
	5.1

	 	Payment of Expenses.

(a) PMC shall establish one or more bank accounts in PMC’s name for the payment of
financial obligations involving the Stations’ operations. The budget attached hereto as
Schedule 5.1(a) (the “Management Budget”) sets forth the Company’s reasonable estimate, as
of October 10, 2005, of the costs and expenses required for the Stations’ operations for the
period from September 5, 2005 to December 31, 2005. The Company and PMC acknowledge that
actual costs and expenses for such period and subsequent periods are subject to change.
Commencing on the Effective Date and on the first business day of each month thereafter
during the Term, the Company shall provide by wire transfer of immediately available funds
to the account or accounts specified by PMC such amounts as are required to pay the
Stations’ financial obligations substantially in accordance with the Management Budget as
the Management Budget shall be modified from time to time to reflect the actual cost of the
Stations’ operations.

(b) One or more Corporate Employees shall provide such assistance as PMC requires for
the payment by PMC of the Stations’ financial obligations, including without limitation,
receiving and processing bills and invoices for payment, preparing checks to be drawn on
PMC’s accounts for the payment of such bills and invoices and, prior to delivering payment
(except in cases beyond the reasonable control of the Company), providing to PMC on a
periodic basis a statement showing the amount and recipient of each proposed payment and
such other information as PMC may reasonably request. The Corporate Employees shall make
the payments set forth therein following review and confirmation of such statement by PMC.
Such Corporate Employees shall follow any and all instructions that PMC may provide
regarding the payment of the Stations’ financial obligations.

(c) The Company shall reimburse PMC promptly for all reasonable and necessary expenses
incurred by PMC (including the Executive) in performing the management functions set forth
in Section 3 hereof and maintaining such books and records as PMC is required to maintain
pursuant to the terms of this Agreement, including, but not limited to all reasonable
travel, entertainment and other similar business expenses incurred by PMC employees in
connection with the services to be provided hereunder, including such expenses incurred by
PMC employees in connection with business meetings at the Company’s headquarters and visits
by PMC employees to the Stations.

(d) The Parties shall review the Management Budget (to be prepared by the Company and
provided to PMC) prior to the commencement of each calendar year and at such other times as
the Parties deem appropriate and the Management Budget shall be adjusted as agreed by the
Parties to reflect changes, if any, in the Stations’ financial obligations.

5.2 Management Fee. As compensation for the services to be rendered under the terms of this
Agreement, the Management Budget shall include a management fee payable to PMC in the amounts set
forth in (a) below, and PMC shall take such actions as may be necessary to ensure that payments and
distributions to the Executive from PMC do not exceed the amounts of the management fees set forth
below:

(a) Initial Management Fee. The initial management fee shall be paid at an annual rate
of $968,000 for the period from the Effective Date through December 31, 2005. For each
subsequent calendar year during the Term, the annual management fee shall be increased by
ten percent (10%) of the amount of the management fee for the immediately preceding calendar
year (i.e., cumulatively).

(b) PMC Benefits. During the Term, the Company agrees to use its commercially
reasonable efforts to permit the Executive and any other employees of PMC to participate in
employee welfare benefit plans (including, without limitation, group medical, group dental,
life insurance and disability benefits programs) sponsored or maintained by the Company or
its subsidiaries for its or their employees generally or to assist PMC in obtaining
comparable coverage at comparable costs. During the Term, the Executive shall be entitled
to receive such benefits that the Executive receives or is entitled to receive under the
Company’s welfare benefit plans in effect on the date of this Agreement. Without limiting
the generality of the foregoing, the Company shall continue to pay on the Executive’s behalf
such premiums as are payable by the Executive under any group medical, dental and disability
plans. The Management Budget shall include an amount to cover a portion of the cost of such
benefits for PMC employees and such amount shall be equal to the amount that the Company
would have paid for such benefits for similarly situated Company employees. In addition to
the foregoing, during the Term, the Company will make available to PMC its jet aircraft, for
both business and personal use by the Executive; provided that such personal use
does not interfere with the operations of the Company. In the event that the Executive uses
the Company’s jet aircraft for personal reasons, PMC will pay for, or reimburse the Company
for, the fuel and the pilot’s travel expenses for such personal flights.

(c) Station Sales. Except as specifically provided herein, no amount or form of
compensation to PMC or its employees shall be reduced or pro rated as a result of the sale
of one or more Stations or Station Subsidiaries.

5.3 Taxes. PMC shall be responsible for the payment and withholding of any income, employment
or other taxes resulting from or relating to the payment of any amounts or the provision of any
benefits to or for the benefit of PMC or PMC employees under Section 5.2 above. The Company and
PMC acknowledge and agree that the payments and benefits described in Section 5.2 are being
provided by the Company to PMC and shall be treated and reported accordingly, including for tax
purposes, and that no part of such payment and benefit is reportable as being paid to the Executive
on a Form 1099.

SECTION 6. PAYMENTS UPON TERMINATION

Payment of compensation under Section 5 above shall continue until the Termination Date.
Following termination of this Agreement, the Company shall have no further liability to PMC, and no
further payment or benefits shall be provided by the Company to PMC, except as provided herein.
Following any termination of this Agreement, PMC shall refund to the Company any funds advanced by
the Company to PMC pursuant to Section 5.1 that have not been disbursed by PMC, other than any
amounts described in Section 5.2 hereof. In the event of a termination of this Agreement, to the
extent such amounts have not previously been paid by the Company, the Company shall pay to PMC an
amount in cash equivalent to: (i) the accrued but unpaid management fee under Section 5.2 as of
the Termination Date; and (ii) any business expenses incurred as of the Termination Date.

SECTION 7. INTANGIBLES

PMC acknowledges that all rights in the formats, programming, concepts, approaches, copy and
titles embodied in the operation of the Paxson Group, any Station or PAX TV, i or other broadcast
network of the Company, and all changes, additions and amendments thereto which may occur during or
after the Term, belong exclusively to the Company. PMC hereby assigns any and all rights or
interests PMC may have therein to the Company. PMC shall not at any time during the Term of this
Agreement, or after the termination of this Agreement, have or claim any right, title or interest
in any trade name, patent, trademark, copyright or other similar rights belonging to or used by any
member of the Paxson Group and shall not have or claim any right, title or interest in any material
or matter of any sort prepared for or used in connection with the business or promotion of any
member of the Paxson Group, whether produced, prepared or published in whole or in part by PMC, its
employees, or any member of the Paxson Group.

SECTION 8. BOOK AND RECORDS

8.1 Maintenance of Records. PMC shall keep and maintain such books and records as PMC
determines are reasonably required in the ordinary course of business for the conduct by PMC of the
management services contemplated hereby. PCC shall keep and maintain such books and records as PCC
determines are reasonably required in the ordinary course of business for processing the bills and
invoices related to the Stations’ financial obligations.

8.2 Company’s Right of Inspection and Review. The Company and its accountants, attorneys and
agents shall have, at all reasonable times during the Term, the right to examine and copy the books
and records of PMC which the Company, in its reasonable discretion, shall deem necessary or
advisable, but the same shall be done with as little disruption to PMC as possible.

SECTION 9. CONFIDENTIALITY

Each of PMC and the Executive covenants and agrees that both during the Term of this Agreement
and thereafter PMC and the Executive shall not disclose to any third party or use in any way any
confidential information, business secrets, or business opportunity of any member of the Paxson
Group, including, without limitation, advertiser lists, rate cards, programming information,
programming plans, marketing, advertising and promotional ideas and strategies, marketing surveys
and analyses, ratings reports, budgets, research, or financial, purchasing, planning, employment or
personnel data and information. The foregoing notwithstanding, neither PMC nor the Executive shall
be prohibited from disclosing any such information, secrets or opportunity if required by
applicable law or regulation or the order of any court; provided, however, that PMC
or the Executive, as applicable, shall notify the Company prior to any such disclosure so that the
Company may, at its election, seek to contest such disclosure or attempt to obtain a protective
order. Immediately upon termination of this Agreement for any reason, or at any other time upon
the Company’s request, PMC and the Executive, as applicable, will return to the Company or any
subsidiary or affiliate of the Company (the “Paxson Group”) all memoranda, notes, records, names
and addresses, lists or other documents made or compiled by PMC or the Executive or made available
to PMC or the Executive during the Term concerning the business of any member of the Paxson Group,
all other confidential information and all personal property of any member of the Paxson Group,
including, without limitation, all files, audio or video tapes, recordings, records, documents,
drawings, specifications, lists, equipment, supplies, promotional material, scripts, keys, phone or
credit cards and similar items and all copies thereof or extracts therefrom and any and all copies
thereof shall be delivered to the Company upon the termination of this Agreement for whatever
reason or at any other time upon the Company’s reasonable request. Neither PMC nor the Executive
shall at any time during or after the Term use for its own benefit or for the benefit of others, or
divulge to others, any information, trade secrets, knowledge, or data of a secret or confidential
nature that concerns the business or affairs of any member of the Paxson Group.

SECTION 10. DISPUTE RESOLUTION

In the event of any controversy or dispute between PMC or the Executive on the one hand and
the Company on the other relating to or arising out of the interpretation or performance of this
Agreement, PMC or the Executive, as applicable, and the Company shall, upon the request of either
Party, use their reasonable best efforts to resolve such dispute. If the dispute relates in any
way to the Communications Act of 1934, as amended, or any order, rule regulation or policy of the
FCC, the Parties shall submit the dispute to a member of Wiley, Rein & Fielding LLP acceptable to
PMC and the Company (“FCC Counsel”). FCC Counsel, after consultation with PMC’s or the
Executive’s, as applicable, and the Company’s FCC counsel and, to the extent feasible, the FCC,
shall have sole authority to determine the outcome of any such dispute and the determination of FCC
Counsel shall be final and binding on the Parties. Any controversy or dispute that does not relate
to the Communications Act of 1934, as amended, or any order, rule regulation or policy of the FCC,
shall be determined, at the request of either Party, by an independent member of the Board of
Directors of the Company selected by a majority of the Board of Directors of the Company and the
determination of such director shall be final and binding on the Parties. The parties intend that
these provisions regarding dispute resolution are enforceable and irrevocable.

SECTION 11. TRANSFER OF OWNERSHIP

The Executive, as controlling shareholder of PMC, hereby agrees that, during the Term, he will
not offer, sell, transfer, assign, grant a participation in or option with respect to, pledge,
encumber or otherwise dispose of (any such action, a “Transfer”) any shares of stock of PMC except
as expressly permitted under this Section 11. In the event of Executive’s death or permanent
disability, control of PMC may be transferred to Marla Paxson by estate planning directive, the
laws of intestate distribution or otherwise, and an appropriate application shall be filed with the
FCC for the transfer of control of the Stations to Marla Paxson. The Executive may transfer any or
all shares of stock of PMC to or for the benefit of any Paxson Estate Planning Affiliate as such
term is defined in Call Agreement. Any attempt to transfer any shares of stock in a manner that
does not comply with this Agreement shall be ineffective.

SECTION 12. STATION SUBSIDIARIES

Each of the Station Subsidiaries hereby acknowledges the rights and authority of PMC to
control the Station Subsidiaries and agrees to fully cooperate with PMC with respect to the
provision by PMC of the services to be provided hereunder. Each of the Station Subsidiaries agrees
that it will abide by the restrictions of Section 4.3 and shall not engage in any actions described
therein without the prior consent of the Company. Each Station Subsidiary shall enter into and
become a Party to this Agreement solely for purposes of this Section 12 and the enforcement of any
obligations hereunder and shall not otherwise be a Party to or bound by the terms of this
Agreement; provided, however, that each Station Subsidiary that is also a Grantor
shall also enter into and become a Party to this Agreement for the purposes of Section 4 hereof.

SECTION 13. MISCELLANEOUS

13.1 Governing Law and Venue. This Agreement shall be construed in accordance with, and shall
be governed by, the laws of the State of Florida. Each Party hereby submits to the jurisdiction of
any state or U.S. federal court sitting within Palm Beach County, Florida. The parties hereto
waive all right to trial by jury in any action, suit or proceeding brought to enforce or defend any
rights or remedies under this Agreement.

13.2 Standard of Care. PMC will use commercially reasonable efforts in performing services
under this Agreement consistent with industry standards in television broadcasting and in
compliance with applicable law. PMC shall be deemed to have acted in accordance with this
Agreement for so long as PMC has acted in a manner which PMC determined, in the exercise of good
faith and reasonable business judgment, to be in the economic best interests of the Station
Subsidiaries considering those interests in the aggregate and consistent in all material respects
with the requirements of law, including the Communications Act of 1934, as amended, and all rules,
regulations and policies of the FCC. Notwithstanding anything herein stated or implied to the
contrary, any and all liability arising under contract (other than this Agreement), statute or
common law attaching to the Station Subsidiaries for actions or omissions of the Station
Subsidiaries or their agents, including, without limitation, debts, financial obligations,
performance obligations, tort liability, and taxes, withholdings, penalties, fines and similar
payments (“Operational Liabilities”) shall not attach to PMC or to the Executive by operation of
law or by the terms of this Agreement; and the Company shall indemnify, defend and hold PMC and the
Executive harmless from and against any and all Operational Liabilities for the term of this
Agreement and three (3) years thereafter.

13.3 Insurance. During the Term, the Company shall add and maintain PMC and the Executive as
an additional insured on each of the Company’s existing policies of insurance that are applicable
to the business and operations of the Stations. The Company shall maintain appropriate insurance
coverages on such terms and in such amounts as is consistent with industry practices, and as
reasonably satisfactory to PMC. Upon request of PMC, the Company shall promptly provide evidence
of the insurance required hereunder.

13.4 No Third Party Beneficiaries. The terms of this Agreement are not intended to and shall
not confer upon any person or entity other than the Parties hereto any rights or remedies
hereunder.

13.5 Entire Agreement. This instrument (including the Schedules annexed hereto) contains the
entire understanding and agreement between the Parties relating to the subject matter hereof.
Neither this Agreement nor any provision hereof may be waived, modified, amended, changed or
terminated, except by an agreement in writing signed by the Party against whom enforcement of any
waiver, modification, change, amendment or termination is sought.

13.6 Counterparts. This Agreement may be executed in counterparts, each of which shall be
deemed an original, and all such counterparts shall together constitute a single Agreement.

13.7 Provisions Severable. If one or more provisions of this Agreement or the application
thereof to any person or circumstances is determined by a court or agency of competent jurisdiction
to violate any law or regulation, including, without limitation, any rule or policy of the FCC, or
to be invalid, void or unenforceable to any extent (a “Conflicting Provision”), the Conflicting
Provision shall have no further force or effect, but the remainder of this Agreement and the
application of the Conflicting Provision to other persons or circumstances or in jurisdictions
other than that as to which it has been held invalid or unenforceable shall not be affected thereby
and shall be enforced to the greatest extent permitted by law, so long as any such violation,
invalidity or unenforceability does not change the basic economic or legal positions of the
Parties. In such event, the Parties shall negotiate in good faith such changes in other terms as
shall be practicable in order to restore the Parties to effect the original intent of the Parties.

13.8 Headings. The Section headings of this Agreement are for convenience only and shall not
be used in interpreting or construing this Agreement.

13.9 Assignment of Agreement; Successors and Assigns. Neither PMC nor the Company shall
assign this Agreement without the prior written consent of the other Party. Notwithstanding the
foregoing, PMC may, except as otherwise expressly provided herein, engage such persons (including
Affiliates of PMC) as it deems advisable for the purpose of performing or carrying out any of the
obligations of PMC under this Agreement; provided that: (a) overall management
responsibility at all times shall remain with PMC, and (b) the cost of retaining such persons shall
be borne by the Company only if it has been included in the Management Budget or otherwise approved
in advance by the Company. The rights and obligations of the Parties shall inure to the benefit of
and be binding upon their heirs, successors, administrators, and/or permitted assigns.

13.10 Cooperation. PMC agrees that following the termination of this Agreement, PMC will
remain reasonably available to and cooperate fully with the Company with respect to any matters
over which PMC had control, responsibility or knowledge during the term of this Agreement,
including any litigation matters with third parties with respect to any matters over which PMC had
control, responsibility or knowledge during the Term.

13.11 Notices. All notices, demands and requests required or permitted to be given under the
provisions of this Agreement shall be (i) in writing, (ii) delivered by personal delivery,
facsimile or sent by commercial delivery service, registered or certified mail, return receipt
requested, (iii) deemed to have been given on the date of personal delivery, the date that delivery
by facsimile is confirmed by telephone or the date set forth in the records of the delivery service
or on the return receipt, and (iv) addressed as follows:

If to the Company:

Paxson Communications Corporation

601 Clearwater Park Road

West Palm Beach, Florida 33401

Tel: 561-659-4122

Fax: 561-659-4754

with copy to:

Holland & Knight LLP

222 Lakeview Avenue, Suite 1000

West Palm Beach, Florida 33401

Attention: David L. Perry

Tel: 561-650-8314

Fax: 561-650-8399

and

Dow, Lohnes & Albertson, PLLC

1200 New Hampshire Avenue, N.W., Suite 800

Washington, DC 20036

Attention: John R. Feore, Jr.

Tel: 202-776-2000

Fax: 202-776-2222

If to PMC:

	 	 	 	Paxson Management Corporation

	 	 	 	Attn: Lowell W. Paxson

	 	529	 	South Flagler Drive

	 	 	 	Apt. 26H

	 	 	 	West Palm Beach, Florida 33401

	 	 	 	Tel: 561-835-8080

Fax: 561-832-5656

with copy to:

Wiley, Rein & Fielding LLP

1776 K Street NW

Washington, DC 20006

Attention: Fred Fielding

Tel: 202-719-7000

Fax: 202-719-7049

or to any such other or additional persons and addresses as the Parties may from time to time
designate in a writing delivered in accordance with this Section 13.11.

13.12 Survival. The terms of Section 5 shall survive the termination of this Agreement until
payment has been made in full and the terms of Sections 6, 7, 8, 9, and 13 shall survive the
termination of this Agreement.

13.13 Waiver. The waiver by any Party of a breach of any provision of this Agreement by any
other Party, or the failure of any Party to exercise any of the rights set forth herein, shall not
operate or be construed as a waiver of any subsequent breach or be deemed to be a waiver by any
Party of any of its rights hereunder.

13.14 Executive Obligations. The Executive shall enter into and become a Party to this
Agreement solely for the purposes of Sections 5.2(b), 9, 10 and 11, and shall not otherwise be a
party to or bound by the terms of this Agreement.

[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on the date first above
written.

	 	 	 	PAXSON COMMUNICATIONS CORPORATION

	 	 	 	 	 
	By:

	 	/s/ Dean M. Goodman
	 	

	 	 	 

	
 
	 	Name:

Title:
	 	Dean M. Goodman

President and Chief Operating Officer

	 	 	 	PAXSON MANAGEMENT CORPORATION

	 	 	 
	By: /s/ Lowell W. Paxson

	 

	Name:

Title:

	 	Lowell W. Paxson

President

	 	 	 	EXECUTIVE

	 	 	 	/s/ Lowell W. Paxson

	 	 	 	Lowell W. Paxson

2

STATION SUBSIDIARIES SIGNATURE PAGE

Paxson Akron License, Inc.

Paxson Albany License, Inc.

Paxson Atlanta License, Inc.

Paxson Battle Creek License, Inc.

Paxson Boston-68 License, Inc.

Paxson Buffalo License, Inc.

Paxson Charleston License, Inc.

Paxson Chicago License, Inc.

Paxson Communications of Akron-23, Inc.

Paxson Communications of Albany-55, Inc.

Paxson Communications of Atlanta-14, Inc.

Paxson Communications of Battle Creek-43, Inc.

Paxson Communications of Boston-68, Inc.

Paxson Communications of Buffalo-51, Inc.

Paxson Communications of Charleston-29, Inc.

Paxson Communications of Chicago-38, Inc.

Paxson Communications of Dallas-68, Inc.

Paxson Communications of Denver-59, Inc.

Paxson Communications of Des Moines-39, Inc.

Paxson Communications of Greensboro-16, Inc.

Paxson Communications of Greenville-38, Inc.

Paxson Communications of Hartford-26, Inc.

Paxson Communications of Honolulu-66, Inc.

Paxson Communications of Houston-49, Inc.

Paxson Communications of Indianapolis-63, Inc.

Paxson Communications of Jacksonville-21, Inc.

Paxson Communications of Jacksonville-35, Inc.

Paxson Communications of Kansas City-50, Inc.

Paxson Communications of Knoxville-54, Inc.

Paxson Communications of Lexington-67, Inc.

Paxson Communications of Los Angeles-30, Inc.

Paxson Communications of Milwaukee-55, Inc.

Paxson Communications of Minneapolis-41, Inc.

Paxson Communications of Oklahoma City-62, Inc.

Paxson Communications of Orlando-56, Inc.

Paxson Communications of Philadelphia-61, Inc.

Paxson Communications of Phoenix-51, Inc.

Paxson Communications of Portland-22, Inc.

Paxson Communications of Providence-69, Inc.

Paxson Communications of Raleigh-47, Inc.

Paxson Communications of Sacramento-29, Inc.

Paxson Communications of Salt Lake City-30, Inc.

Paxson Communications of San Antonio-26, Inc.

Paxson Communications of San Jose-65, Inc.

Paxson Communications of Scranton-64, Inc.

Paxson Communications of Spokane-34, Inc.

Paxson Communications of Syracuse-56, Inc.

Paxson Communications of Tampa-66, Inc.

Paxson Communications of Tulsa-44, Inc.

Paxson Communications of Washington-60, Inc.

Paxson Communications of Washington-66, Inc.

Paxson Communications of Wausau-46, Inc.

Paxson Communications LPTV, Inc.

Paxson Dallas License, Inc.

Paxson Denver License, Inc.

Paxson Des Moines License, Inc.

Paxson Greensboro License, Inc.

Paxson Greenville License, Inc.

Paxson Hartford License, Inc.

Paxson Hawaii License, Inc.

Paxson Houston License, Inc.

Paxson Indianapolis License, Inc.

Paxson Jacksonville License, Inc.

Paxson Jax License, Inc.

Paxson Kansas City License, Inc.

Paxson Knoxville License, Inc.

Paxson Lexington License, Inc.

Paxson Los Angeles License, Inc.

Paxson Milwaukee License, Inc.

Paxson Minneapolis License, Inc.

Paxson Oklahoma City License, Inc.

Paxson Orlando License, Inc.

Paxson Philadelphia License, Inc.

Paxson Raleigh License, Inc.

Paxson Sacramento License, Inc.

Paxson Salem License, Inc.

Paxson Salt Lake City License, Inc.

Paxson San Antonio License, Inc.

Paxson San Jose License, Inc.

Paxson Scranton License, Inc.

Paxson Spokane License, Inc.

Paxson Syracuse License, Inc.

Paxson Tulsa License, Inc.

Paxson Washington License, Inc.

Paxson Washington-60 License, Inc.

Paxson Wausau License, Inc.

Paxson West Palm Beach Holdings, Inc.

Paxson West Palm Beach License, Inc.

	 	 	 
	By: /s/ Dean M. Goodman

	 	

	 

	Name: Dean M. Goodman

Title:

	 	

President of each Station Subsidiary

3

STATION SUBSIDIARIES SIGNATURE PAGE (cont’d)

	 	 	 	PAXSON COMMUNICATIONS LICENSE COMPANY, LLC

By: Paxson Communications Corporation, Its sole Member

	 	 	 	By: /s/ Dean M. Goodman

Name: Dean M. Goodman

Title: President and Chief Operating Officer

	 	 	 	AMERICA 51, L.P.

By: Paxson Communications of Phoenix-51, Inc., Its General Partner

By: /s/ Dean M. Goodman

Name: Dean M. Goodman

Title: President and Chief Operating Officer

	 	 	 	OCEAN STATE TELEVISION, L.L.C.

By: Paxson Communications of Providence-69, Inc., Its sole Member

By: /s/ Dean M. Goodman

Name: Dean M. Goodman

Title: President and Chief Operating Officer

4

GRANTORS SIGNATURE PAGE

Paxson Communications Corporation

Paxson Communications Television, Inc.

Paxson Holdings, Inc.

Paxson Hartford Holdings, Inc.

Paxson Indianapolis Holdings, Inc.

Paxson West Palm Beach Holdings, Inc.

Paxson Communications of Akron-23, Inc.

Paxson Communications of Albany-55, Inc.

Paxson Communications of Atlanta-14, Inc.

Paxson Communications of Battle Creek-43, Inc.

Paxson Communications of Boston-68, Inc.

Paxson Communications of Buffalo-51, Inc.

Paxson Communications of Charleston-29, Inc.

Paxson Communications of Chicago-38, Inc.

Paxson Communications of Dallas-68, Inc.

Paxson Communications of Denver-59, Inc.

Paxson Communications of Des Moines-39, Inc.

Paxson Communications of Greensboro-16, Inc.

Paxson Communications of Greenville-38, Inc.

Paxson Communications of Hartford-26, Inc.

Paxson Communications of Honolulu-66, Inc.

Paxson Communications of Houston-49, Inc.

Paxson Communications of Indianapolis-63, Inc.

Paxson Communications of Jacksonville-21, Inc.

Paxson Communications of Jacksonville-35, Inc.

Paxson Communications of Kansas City-50, Inc.

Paxson Communications of Knoxville-54, Inc.

Paxson Communications of Lexington-67, Inc.

Paxson Communications of Los Angeles-30, Inc.

Paxson Communications of Milwaukee-55, Inc.

Paxson Communications of Minneapolis-41, Inc.

Paxson Communications of Oklahoma City-62, Inc.

Paxson Communications of Orlando-56, Inc.

Paxson Communications of Philadelphia-61, Inc.

Paxson Communications of Phoenix-51, Inc.

Paxson Communications of Portland-22, Inc.

Paxson Communications of Providence-69, Inc.

Paxson Communications of Raleigh-47, Inc.

Paxson Communications of Sacramento-29, Inc.

Paxson Communications of Salt Lake City-30, Inc.

Paxson Communications of San Antonio-26, Inc.

Paxson Communications of San Jose-65, Inc.

Paxson Communications of Scranton-64, Inc.

Paxson Communications of Spokane-34, Inc.

Paxson Communications of Syracuse-56, Inc.

Paxson Communications of Tulsa-44, Inc.

Paxson Communications of Washington-60, Inc.

Paxson Communications of Washington-66, Inc.

Paxson Communications of Wausau-46, Inc.

By: /s/ Dean M. Goodman

Name: Dean M. Goodman

Title: President of each Grantor

5EX-10.1

LOAN AND SECURITY AGREEMENT

This Loan and Security Agreement (this “Agreement”) is entered into as of this 3rd
day of November, 2005 by and between Franklin Funding, Inc., a Utah corporation with its principal
place of business at 6914 South 3000 East #203, Salt Lake City, Utah 84121 (“Lender”), and Pacific
Biometrics, Inc., a Washington corporation with its principal place of business at 220 West
Harrison Street, Seattle, WA 98119 (“Borrower”). The parties agree as follows:

1. Definitions.

“Collateral” shall mean the Equipment and the proceeds of any sale thereof, the assignment,
lease, or sublease thereof, any insurance proceeds with respect thereto, and any other rights of
Borrower, tangible or intangible, in and to the Equipment

“Equipment” shall mean the equipment of Borrower described in Exhibit A hereto,
together with all replacement parts, modifications, improvements, repairs, additions, accessories
and alterations incorporated in the Equipment as now or hereafter affixed thereto.

“Equipment Loss” shall mean the loss, damage, theft or destruction of the Equipment, or any
portion thereof, from any cause whatsoever.

“Event of Default” shall mean those events set forth in Section 6 hereof.

“Obligations” shall mean Borrower’s obligation to repay all Loans, and any extensions,
modifications or renewals of such Loans.

“Permitted Liens” shall mean the following: (i) purchase money security interests in specific
items of Equipment; (ii) leases of specific items of Equipment; (iii) liens for taxes, fees,
assessments or other governmental charges or levies, either not delinquent or being contested in
good faith by appropriate proceedings, provided the same have no priority over any of Lender’s
security interests; (iv) liens of materialmen, mechanics, warehousemen, carriers, or other similar
liens arising in the ordinary course of business and securing obligations that are not delinquent
more than 30 days or are being contested in good faith by appropriate proceedings, (v) any
judgment, attachment or similar lien, that has been discharged or execution on which has been
stayed and that has been bonded against pending appeal within 30 days of the entry thereof; and
(vi) the security interest granted to Lender pursuant to this Agreement.

2. Loans and Payments.

(a) Loans. Lender shall, at Borrower’s request, make one or more loans (each, a “Loan”
and collectively, the “Loans”) to Borrower, from time to time in total principal amount of not more
than $500,000.00. Each Loan shall be in an amount of not more than $50,000.00, or such greater
amount as mutually agreed by Lender and Borrower. All requests for Loans shall be made to Lender
no later than six months from the date of this Agreement, and any Lender shall have no obligation
to make any Loans for any requests received by it after such date. As of the date hereof, Lender
is making an initial Loan to Borrower in the principal sum of $200,000.00. Requests for Loans
shall be in writing and submitted by Borrower to Lender at least three business days prior to the
date the Loan is to be made.

(b) Interest. The Loans shall accrue interest at the rate of 17.64% per annum.
Interest shall be calculated on the basis of a 365/366-day year for the actual number of days
elapsed.

(c) Maturity Date; Extension. All amounts outstanding hereunder are due and payable
on the 36th-month anniversary of the date of this Agreement (the “Maturity Date”).
Lender may extend the Maturity Date in its sole discretion.

(d) Payments; Prepayments. Payments of principal and interest on the Loans shall be
amortized over 36 months, with a balloon payment of $30,000.00 principal due on the Maturity Date.
The amortization schedule for the initial Loan being made hereunder is attached to this Agreement
as Exhibit B. Each time that Lender makes a Loan to Borrower, Lender and Borrower shall
review and update the amortization schedule to include all outstanding Loans. Payments on the
Loans shall be due and payable on the 15th day of each month, provided, that Borrower
will be allowed a five day grace period on payment due. For any payments more than five days past
due, such payment shall also accrue a late fee equal to five percent (5%) of the amount of such
late payment, and such late fee shall be immediately due and payable by Borrower to Lender as
additional Obligations hereunder. Borrower may prepay the Loans in full at any time without
premium or penalty, upon payment of the entire then-remaining principal amount (as reflected on the
amortization schedule) plus any accrued and unpaid interest through the date of repayment.
Borrower shall not make any partial prepayments on the Loans.

(e) Conditions Precedent to Loans. Notwithstanding any provisions herein to the
contrary, Loans will not be made hereunder until the following documents requested by Lender in
connection with this Agreement have been delivered to Lender in form and substance reasonably
acceptable to Lender:

	 	1.	 	Certified copy of Borrower’s Articles of Incorporation and
By-Laws;

	 	2.	 	Certificate of Existence from Borrower’s State of
Incorporation;

	 	3.	 	Certified Copy of Corporate Resolution;

	 	4.	 	Certificate of Incumbency and Authority;

	 	5.	 	UCC Search, Tax Lien Search, and Judgment Lien Search results
satisfactory to Lender;

	 	6.	 	Release or subordination of any prior security interests in the
Equipment including “after acquired” clauses;

	 	7.	 	Current financial statements prepared by Pacific Biometrics
Inc.;

	 	8.	 	Most recent audited financial statements of Pacific Biometrics
Inc. prepared by its independent auditor;

	 	9.	 	UCC-1 financing statements signed by Borrower; and

	 	10.	 	Such other items or documents as Lender may request.

3. Security Interest. Borrower grants Lender a first priority security interest in
the Collateral to secure Borrower’s timely payment and performance of the Obligations. Borrower
agrees to promptly execute and deliver or cause to be executed and delivered to Lender and Lender
is hereby authorized to record or file, any statement and/or instrument requested by Lender for the
purpose of showing Lender’s security interest in the Collateral, including without limitation,
financing statements and security agreements. Borrower hereby appoints Lender as Borrower’s
limited attorney-in-fact to execute and record all documents necessary to perfect or maintain the
perfection of Lender’s security interests hereunder or to make claim for, receive payment of, and
execute and endorse all documents, checks or drafts for loss or damage under any insurance policy.

4. Representations and Warranties. Borrower represents and warrants to Lender that,
except as set forth in periodic reports on Forms 10-KSB, 10-QSB and 8-K filed from time to time
with the U.S. Securities Exchange Commission by Pacific Biometrics Inc.:

(a) Financial Statements. (i) All applications, financial statements and reports
which have been submitted by Borrower to Lender are, and all information hereafter furnished by
Borrower to Lender will be, true and correct in all material respects as of the date submitted;
(ii) as of the date hereof, there has been no material adverse change in any matter stated in such
applications, financial statements and reports except as otherwise disclosed to Lender; (iii) none
of the foregoing omit or omitted to state any material fact necessary to make such statements made
to Lender not misleading at the time made.

(b) Organization. Borrower is a corporation duly organized and validly existing in
the State of Washington, and is duly qualified to do business and is in good standing in each State
in which the Equipment will be located, except where the failure to be qualified or in good
standing would not have a material adverse effect on the business and operations of Borrower.

(c) Authority. Borrower has full power, authority and right to own and/or lease
property and to execute, deliver and perform this Agreement, and the execution, delivery and
performance hereof has been authorized by all necessary action of Borrower.

(d) Enforceability. This Agreement and any other document executed in connection
herewith has been duly executed and delivered by Borrower and constitutes a legal, valid and
binding obligation of Borrower enforceable against it in accordance with its terms.

(e) Consents. The execution, delivery and performance of this Agreement does not
require any approval or consent of any stockholders, partners or proprietors or of any trustee or
holders of any indebtedness or obligations of Borrower, and will not contravene any law,
regulation, judgment or decree applicable to Borrower, or the articles of incorporation, by-laws or
other governing documents of Borrower, or contravene the provisions of, or constitute a default
under, or result in the creation of any lien upon any property of Borrower under any mortgage,
instrument or other agreement to which Borrower is a party or by which Borrower or its assets may
be bound or affected (except for the security interest created hereby). Except as disclosed or
contemplated by this Agreement, no authorization, approval, license, filing or registration with
any court or governmental agency or instrumentality is necessary in connection with the execution,
delivery, performance, validity and enforceability of this Agreement.

(f) Title. Borrower has good and marketable title to the Equipment, free and clear of
all liens other than Permitted Liens. No party has a security interest in the Equipment, other
than Permitted Liens, and the Equipment is and shall at all times remain personal property
regardless of how it may be affixed to any real property.

(g) Litigation. There is no action, suit, investigation or proceeding by or before
any court, arbitrator, agency or governmental authority pending or, to the knowledge of Borrower,
threatened against or affecting Borrower (i) which involves the Equipment or the transactions
contemplated by this Agreement, or (ii) which, if adversely determined, could have a material
adverse effect on the financial condition, business or operation of Borrower.

5. Covenants of Borrower.

(a) Insurance. Until the Loans are paid in full, Borrower shall, at its own expense,
keep the Equipment insured against risks of loss or damage in such amounts (but in no event less
than the remaining outstanding balance due on the Loans and with a deductible amount not to exceed
$10,000.00) and in such form as is reasonably satisfactory to Lender. All such insurance policies
shall name Lender and Lender’s assignee(s) as principal loss payees as their interests may appear.
Borrower shall also, at its own expense, carry public liability insurance, with Lender and Lender’s
assignee(s) named as an additional insured, in such amounts with such companies and in such form as
is reasonably satisfactory to Lender, with respect to injury to person or property resulting from
or based in any way upon or in any way connected with or relating to the installation, use or
alleged use, or operation of any or all of the Equipment, or its location or condition. Not less
than 30 days following the date hereof, Borrower shall deliver to Lender satisfactory evidence of
such insurance and shall further deliver evidence of renewal of each such policy not less than 30
days prior to expiration thereof. Each such policy shall contain an endorsement providing that the
insurer will give Lender and its assignees not less than 30 days’ prior written notice of the
effective date of any alteration, change, cancellation, or modification of such policy or the
failure by Borrower to timely pay all required premiums, costs or charges with respect thereto.
Upon Lender’s request, Borrower shall cause its insurance agent(s) to execute and deliver to Lender
Loss Payable Clause Endorsement and Additional Insured Endorsement (bodily injury and property
damage liability insurance) forms provided to Borrower to Lender and name any assignees of Lender
designated by Lender. Each policy shall be primary without rights of contribution from any other
insurance which is carried by Lender and shall expressly provide that all of the provisions
thereof, except the limits of liability, shall operate in the same manner as if there were a
separate policy covering each insured. Each policy shall provide for payment to Lender and its
assignees notwithstanding any action, inaction or breach of representation or warranty by Borrower
or Lender. In case of the failure to procure or maintain such insurance, Lender shall have the
right, but not the obligation, to obtain such insurance and there shall be no recourse against
Lender or its assignees for payment of such premiums or other amounts with respect thereto. Any
premium paid by Lender shall be immediately due and payable by Borrower to Lender as additional
Obligations hereunder. The maintenance of any policy or policies of insurance pursuant to this
Section shall not limit any obligation or liability of Borrower pursuant to any provision of this
Agreement. Borrower shall, to the extent reasonably possible, obtain liability insurance required
hereunder on an occurrence basis rather than a claims-made basis. To the extent that Borrower must
obtain some or all of this coverage on a claims-made basis, Borrower shall provide Lender with
satisfactory evidence that the retroactive date of the claims-made policy is prior to the date
hereof or the date of the making of the first Loan hereunder, whichever is earlier; that the then
remaining aggregate amount of Borrower’s coverage is and will be sufficient to meet the minimum
amount of coverage required hereunder, and that the policy will either remain in force, be renewed,
or a satisfactory discovery period will be purchased to cover any claims which might arise
hereunder in the future. Borrower’s obligation to keep the Equipment insured as provided herein
shall continue until the Obligations are paid in full.

(b) Care, Transfer and Use of Equipment. Borrower, at its own expense, shall maintain
the Equipment in good operating condition and repair and in compliance with all applicable laws and
regulations, and shall protect the Equipment from deterioration except for reasonable wear and tear
resulting only from proper use thereof. The disrepair or inoperability of the Equipment regardless
of the cause thereof shall not relieve Borrower of its Obligations. WITHOUT LENDER’S PRIOR WRITTEN
CONSENT, BORROWER MAY NOT SELL, CONVEY, TRANSFER, ASSIGN, SUBLEASE, ENCUMBER ANY ITEMS OF EQUIPMENT
OTHER THAN IN THE ORDINARY COURSE OF ITS BUSINESS, AND ANY SUCH PURPORTED TRANSACTION SHALL BE NULL
AND VOID AND OF NO FORCE OR EFFECT. Borrower shall at its expense at all times keep the Equipment
free from any and all liens, encumbrances, attachments, levies, executions, burdens, charges or
legal process of any and every type whatsoever, other than Permitted Liens. Lender shall have the
right during normal hours upon reasonable notice to Borrower, subject to applicable laws and
regulations, to enter Borrower’s premises in order to inspect or observe the Equipment, or to
otherwise protect Lender’s security interest therein.

(c) Equipment Loss. Borrower shall promptly notify Lender in writing of any Equipment
Loss in excess of $10,000.00. In the event of any such Equipment Loss, Borrower shall either, (a)
promptly place, at Borrower’s expense, the Equipment in good repair, condition and working order,
or (b) promptly replace, at Borrower’s expense, the Equipment with like equipment of the same or a
later model as the Equipment, and in good repair, condition and working order. In the event
Borrower is required to repair or replace any such item of Equipment pursuant to this Section, any
insurance proceeds received by Borrower for such Equipment may be applied by Borrower for costs and
expenses of repairing or replacing the Equipment.

(d) Costs of Compliance. Borrower shall promptly pay all costs, expenses and
obligations of every kind and nature incurred in connection with the use or operation of the
Equipment which may arise or become due during the term of this Agreement. In case of failure by
Borrower to comply with any provision of this Agreement, Lender shall have the right, but not the
obligation, to effect such compliance on behalf of Borrower. In such event, all costs and expenses
incurred by Lender in effecting such compliance shall be immediately due and payable by Borrower to
Lender as additional Obligations hereunder.

(e) Reports. So long as this Agreement is in effect, Borrower shall provide Lender
with the following: (a) annual and quarterly financial statements of Parent, prepared in
accordance with generally accepted accounting principles, and (b) prompt written notice of any
material adverse change in Borrower’s financial condition, business or operations. In addition,
Borrower shall provide Lender with not less than 30 days prior written notice of any proposed
change in Borrower’s financial structure or ownership (e.g., merger, consolidation, sale, lease or
other disposition of assets not in the ordinary course).

(f) Obligations; No Set-off. Borrower agrees that its obligations under this
Agreement, including without limitation, the obligation to repay the Loans, are irrevocable and
absolute, shall not abate for any reason whatsoever (including any claims against Lender). In the
event of any alleged claim (including a claim which would otherwise be in the nature of a set-off)
against Lender, Borrower shall fully perform and pay its obligations hereunder without set-off or
defense of any kind, and its only recourse against Lender shall be by a separate action.

6. Events of Default. Any one or more of the following shall constitute an Event of
Default under this Agreement:

(a) Borrower shall fail to pay any principal of or interest on any Loans within five days
after the date due;

(b) Borrower, without the prior consent of Lender, attempts to or does sell, transfer,
encumber, part with possession of, or sublet any item of the Equipment other than in the ordinary
course of its business; or

(c) Borrower shall suffer or have suffered, in the reasonable judgment of Lender, any event
the result of which has caused Lender reasonably to deem itself to be insecure including, but not
limited to, any of the following: (i) a material adverse change in its financial condition or
business prospects; (ii) a material change in structure (e.g., merger, consolidation, sale, lease
or other disposition of assets not in the ordinary course); (iii) a material change in ownership
(other than a change of ownership arising out of any distributions of Borrower stock by Saigene
Corporation to any of its shareholders, employees or creditors); (iv) any of the statements or
other documents or information submitted at any time heretofore or hereafter by Borrower to Lender
has misstated or shall misstate or has failed or shall fail to state a material fact necessary to
make such statements made to Lender not misleading at the time made; or

(d) Borrower shall breach or shall have breached, in any material respect, any representation
or warranty made or given by Borrower in this Agreement or in any other document furnished to
Lender in connection herewith, or any such representation or warranty shall be untrue or, by reason
of failure to state a material fact necessary to make such statements made to Lender not misleading
at the time made, shall be misleading; or

(e) Borrower shall fail to perform or observe any other material covenant, condition or
agreement to be performed or observed by it hereunder, and such failure or breach shall continue
unremedied for a period of ten days after the earlier of (i) the date on which Borrower obtains, or
should have obtained knowledge of such failure or breach, or (ii) the date on which notice thereof
shall be given by Lender to Borrower; or

(f) Borrower shall become insolvent or bankrupt or make an assignment for the benefit of
creditors or consent to the appointment of a trustee or receiver, or a trustee or receiver shall be
appointed for a substantial part of its property without its consent, or bankruptcy or
reorganization or insolvency proceeding shall be instituted by or against Borrower and not
discharged within 60 days; or

(g) Borrower conveys, sells, transfers, subleases or assigns substantially all of Borrower’s
assets or ceases doing business as a going concern, ceases to be in good standing or files a
statement of intent to dissolve, or abandons any or all of the Equipment; or

(h) Borrower shall be in material breach of or default under any other agreement at any time
executed with Lender, or with any other lender to Borrower.

7. Remedies.

(a) Remedies. Upon the occurrence and during the continuance of any Event of Default,
Lender, at its option, may do any one or more of the following, without notice except for such
notices as are required by law: (i) accelerate and declare the Obligations to be immediately due
and payable, notwithstanding any deferred or installment payments allowed by any instrument
evidencing or relating to any Obligation; (ii) take possession of any or all of the Collateral
wherever it may be found, and for that purpose Borrower hereby authorizes Lender to enter
Borrower’s premises without interference to search for, take possession of, keep, store, or remove
any of the Collateral, and remain on the premises or cause a custodian to remain on the premises in
exclusive control thereof, without charge by Borrower for so long as Lender reasonably deems it
necessary in order to complete the enforcement of its rights under this Agreement or any other
agreement; (iii) require Borrower to assemble any or all of the Collateral and make it available to
Lender at places designated by Lender which are reasonably convenient to Lender and Borrower, and
to remove the Collateral to such locations as Lender may reasonably deem advisable; (iv) exercise
any other right or remedy which may be available to it under the Article 9 of the Uniform
Commercial Code as then in effect in the State of Utah. Lender reserves the right, in its sole and
absolute discretion, to release or sell any or all of the Collateral at a public auction or in a
private sale, at such time, on such terms and with such notice as Lender shall in its sole and
absolute discretion deem reasonable. All reasonable attorneys’ fees, expenses, costs, liabilities
and obligations incurred by Lender with respect to the foregoing shall be added to and become part
of the Obligations.

(b) Application of Proceeds. All proceeds realized as the result of any sale or other
disposition of the Collateral shall be applied by Lender first to the reasonable costs, expenses,
liabilities, obligations and attorneys’ fees incurred by Lender in the exercise of its rights under
this Agreement, second to the interest due upon any of the Obligations, and third to the principal
of the Obligations, in such order as Lender shall determine in its sole discretion. Any surplus
shall be paid to Borrower or other persons legally entitled thereto; Borrower shall remain liable
to Lender for any deficiency.

(c) Remedies Cumulative. In addition to the rights and remedies set forth in this
Agreement, Lender shall have all the other rights and remedies accorded a secured party under
Article 9 of the Utah Uniform Commercial Code and under all other applicable laws, and all of such
rights and remedies are cumulative and none is exclusive. Exercise or partial exercise by Lender
of one or more of its rights or remedies shall not be deemed an election, nor bar Lender from
subsequent exercise or partial exercise of any other rights or remedies. The failure or delay of
Lender to exercise any rights or remedies shall not operate as a waiver thereof, but all rights and
remedies shall continue in full force and effect until all of the Obligations have been fully paid.

(d) Limited Power of Attorney. After the occurrence and during the continuance of an
Event of Default, Borrower irrevocably appoints Lender (and any of Lender’s designated employees or
agents) as Borrower’s true and lawful attorney in fact to (i) make, settle and adjust all claims
under and decisions with respect to Borrower’s policies of insurance, (ii) settle and adjust
disputes and claims respecting the Collateral; (iii) execute and deliver all notices, instruments
and agreements in connection with the perfection of the security interest granted in this
Agreement, (iv) sell, lease or otherwise dispose of all or any part of the Collateral, and (v) take
any other action or sign any other documents required to be taken or signed by Borrower, or
reasonably necessary to enforce Lender’s rights or remedies or otherwise carry out the purposes of
this Agreement. The appointment of Lender as Borrower’s attorney in fact, and each of Lender’s
rights and powers, being coupled with an interest, are irrevocable until all Obligations owing to
Lender have been paid in full.

8. Indemnification. Borrower will indemnify and hold harmless Lender and its
officers, employees and agents from and against any and all liability, loss, costs, damage,
penalties, suits, judgments, demands, claims, expenses and disbursements (including without
limitation, reasonable attorneys’ fees) incurred by Lender arising out of, on account of, or in
connection with this Agreement or the Loans.

9. Waivers. The failure of Lender at any time or times to require Borrower to
strictly comply with any of the provisions of this Agreement or any other present or future
agreement between Borrower and Lender shall not waive or diminish any right of Lender later to
demand and receive strict compliance therewith. Any waiver of any default shall not waive or
affect any other default, whether prior or subsequent, and whether or not similar. None of the
provisions of this Agreement or any other agreement shall be deemed to have been waived except by a
specific written waiver signed by an authorized officer of Lender and delivered to Borrower.
Borrower waives demand, protest, notice of protest and notice of default or dishonor, notice of
payment and nonpayment, release, compromise, settlement, and notice of any action taken by Lender,
unless expressly required by this Agreement.

10. Assignment by Lender. LENDER MAY (WITH OR WITHOUT NOTICE TO BORROWER) SELL,
TRANSFER, ASSIGN OR GRANT A SECURITY INTEREST IN ALL OR ANY PART OF ITS INTEREST IN THE LOANS AND
ITS RIGHTS AND OBLIGATIONS UNDER THIS AGREEMENT. In such an event, Borrower shall, upon receipt of
notice from Lender, acknowledge any such sale, transfer, assignment or grant of a security interest
and shall pay its obligations hereunder or amounts equal thereto to the respective transferee,
assignee or secured party in the manner specified in any instructions received from Lender.
Borrower shall have no liability for failure to make payments to any such transferee, assignee or
secured party until and unless it has received written notice and instruction from Lender.
Notwithstanding any such sale, transfer, assignment or grant of a security interest by Lender and
so long as no Event of Default shall have occurred and be continuing hereunder, neither Lender nor
any transferee, assignee or secured party of Lender shall interfere with Borrower’s right of use or
quiet enjoyment of the Equipment. In the event of such sale, transfer, assignment or grant of a
security interest in all or any part of the Loans or this Agreement, Borrower agrees to execute
such documents as may be reasonably necessary to evidence, secure and complete such sale, transfer,
assignment or grant of a security interest and to perfect the transferee’s, assignee’s or secured
party’s interest therein; provided, however, that the rights of any transferee, assignee or secured
party shall be subject to any defense, set-off or counterclaim that Borrower may have against
Lender or any other party. Borrower acknowledges that any assignment or transfer by Lender shall
not materially change Borrower’s duties or obligations under this Agreement nor materially increase
the burdens and risks imposed on Borrower.

11. Warrants.

(a) Stock Purchase Warrants. Effective on each date that the Lender funds a Loan
pursuant to Section 2, Pacific Biometrics, Inc., a Delaware corporation (“Parent”), shall issue and
deliver to Lender stock purchase warrants (collectively, the “Warrants”) to purchase shares of
Parent common stock, on the basis of 5,000 shares for each $50,000 in principal amount of Loans
funded by Lender on such date, up to a maximum aggregate number of 50,000 shares (collectively, the
“Shares”) for all Loans. The exercise price for each Warrant shall be equal to the greater of (i)
$1.17 per share and (ii) the fair market value of the common stock as of the respective date of
grant as determined by Parent’s board of directors in its sole discretion. The expiration date for
the Warrants shall be ten years from the respective date of grant. The Warrants shall be subject
to proportionate adjustment in the event of any stock split, stock dividend or similar
recapitalization of Parent capital stock, and shall provide for piggyback registration rights in
connection with a registered public offering of Parent common stock under the Securities Act (other
than a registration statement relating solely to the sale of securities to participants in a
employee benefit plan or a transaction covered by Rule 145 under the Securities Act), to the extent
permitted under any existing registration rights agreements with such shareholders and subject to
customary underwriter cutbacks, if any. The Warrants shall be in form and substance acceptable to
Parent.

(b) Securities Laws Representations by Lender. In connection with the grant of
Warrants and issuance of Shares upon exercise of the Warrants, Lender makes the following
representations and warranties to Borrower and Parent:

	 	1.	 	Lender acknowledges that neither the Warrants nor the Shares
(collectively, the “Securities”) are being registered under the Securities Act
of 1933, as amended (the “Securities Act”), or applicable state securities
laws, but are being issued pursuant to exemptions from such laws. Lender
acknowledges that certificates for the Securities will bear a legend to the
effect that the Securities are “restricted securities,” transfer of the
Securities is restricted pursuant to the Securities Act and applicable state
securities laws, and stop-transfer instructions will be placed with the
transfer agent for the Securities. Lender understands that there will be
securities laws restrictions on its ability to sell, pledge or transfer the
Securities, and there are no assurances of a market for the Securities at such
time Lender wants to sell them.

	 	2.	 	Lender is acquiring the Securities solely for its own account,
for investment purposes only, and not with a view towards their resale or
distribution. Lender has no present intention of selling, granting any
participation in or otherwise distributing any of the Securities in a manner
contrary to the Securities Act or any applicable state securities law.

	 	3.	 	Lender is a sophisticated investor, has sufficient knowledge
and experience in financial and business matters that it is capable of
evaluating the merits and risks of the prospective investment in the
Securities. Lender’s principal place of business is in the State of Utah.

	 	4.	 	Lender has been solely responsible for its due diligence
investigation of Parent and Borrower and its business, operations, financial
condition, assets, liabilities and other relevant matters. Lender has reviewed
Parent’s filings with the U.S. Securities and Exchange Commission, including
the risk factors contained therein. Except as expressly set forth in this
Agreement, neither Parent nor Borrower is making any representations or
warranties to Lender.

12. Costs. Borrower shall reimburse Lender for all reasonable costs (“Costs”) related
to this transaction including due diligence costs, legal costs, costs and fees relating to any
filings hereunder (including, but not limited to, filing fees, searches, document preparation, and
documentary stamps) and on-site document preparation costs (if such service is requested by
Borrower) reasonably incurred by Lender; provided that reimbursement for legal costs shall not
exceed $1,000.00. Lender shall provide an itemized statement of Costs to Borrower, if so requested
by Borrower.

13. Amendments. This Agreement and the Exhibits and Schedules hereto contain the
entire agreement between the parties with respect to the transactions contemplated hereby and there
is no agreement or understanding, oral or written, which is not set forth herein. This Agreement
may not be altered, modified, terminated or discharged except by a writing signed by the party
against whom such alteration, modification, termination or discharge is sought.

14. Law. This Agreement shall be binding only when accepted by Lender at its
principle place of business in Utah and shall in all respects be governed and construed, and the
rights and the liabilities of the parties hereto determined, except for local filing requirements,
in accordance with the laws of the State of Utah. BORROWER SUBMITS TO THE JURISDICTION OF THE
FEDERAL DISTRICT COURTS OF COMPETENT JURISDICTION OR ANY STATE COURT WITHIN THE STATE OF UTAH AND
WAIVES ANY RIGHT TO ASSERT THAT ANY ACTION INSTITUTED BY LENDER IN ANY SUCH COURT IS IN THE
IMPROPER VENUE OR SHOULD BE TRANSFERRED TO A MORE CONVENIENT FORUM.

15. Invalidity. In the event that any provision of this Agreement shall be
unenforceable in whole or in part, such provision shall be limited to the extent necessary to
render the same valid, or shall be excised from this Agreement, as circumstances may require, and
this Agreement shall be construed as if said provision had been incorporated herein as so limited,
or as if said provision had not been included herein, as the case may be without invalidating any
of the remaining provisions hereof.

16. Confidentiality. In handling any confidential or non-public information or
Borrower or any of its customers that may be provided to Lender in connection with this Agreement
and the transactions hereunder, Lender shall exercise the same degree of care that it exercises
with respect to its own proprietary information of the same types to maintain the confidentiality
of the same, except that disclosure of such information may be made (a) to subsidiaries or
affiliates of Lender in connection with their present or prospective business relations with
Borrower, (b) to prospective transferees or purchasers of any interest in the Obligations, provided
that they have entered into a comparable confidentiality agreement with respect thereto, (c) as
required by law, regulations, rule or order, subpoena, judicial order or similar order (provided
Lender first provides Borrower with prompt written notice of any such order timely enough so that
Borrower may seek to oppose such disclosure or seek a protective order or other appropriate
remedy), and (d) as may be required in connection with the examination, audit or similar
investigation of Lender. Confidential information hereunder shall not include information that
either: (i) is in the public domain, or becomes part of the public domain, after disclosure to
Lender through no fault of Lender; or (ii) is disclosed to Lender by a third party, provided Lender
does not have actual knowledge that such third party is prohibited from disclosing such
information. Lender acknowledges and agrees that it is aware (and that it will take commercially
reasonable steps to inform its partners, principals, officers, employees, and agents who are
required to have access to confidential information of Borrower) of the restrictions imposed by the
U.S. federal securities laws on a person possessing material non-public information about a public
company.

17. Miscellaneous. All notices and demands relating hereto shall be in writing and
shall be deemed to have been given (a) upon receipt, when delivered by hand or by electronic
facsimile transmission, or (b) upon actual delivery by overnight courier, or (c) three days after
mailing by regular first-class mail or certified mail return receipt requested, addressed to each
party at the addresses indicated below their signatures below, or at any other address designated
by notice served in accordance herewith. All obligations of Borrower and Lender shall survive the
termination or expiration of this Agreement. Borrower shall, upon reasonable request of Lender
from time to time, perform all acts and execute and deliver to Lender all documents which Lender
deems reasonably necessary to implement this Agreement. This Agreement shall be binding upon the
parties and their successors, legal representatives and assigns. Borrower’s successors and assigns
shall include, without limitation, a receiver, debtor-in-possession, or trustee of or for Borrower.

18. Counterparts. This Agreement may be executed in any number of counterparts, each
of which shall be deemed an original.

[Remainder of Page Intentionally Blank; Signature Page Follows]

1

EXECUTED as of the date first above written by duly authorized representatives of the parties
hereto, intending to be bound hereby.

	 	 	 
	LENDER:

	 	BORROWER:
	FRANKLIN FUNDING, INC.,

a Utah corporation

	 	PACIFIC BIOMETRICS, INC.,

a Washington corporation
	 
	 	 
	By: /s/ Todd Johnson

	 	By: /s/ Mario Ehlers
	 

	 	 
	Title: President

	 	Title: Chief Medical Officer
	Address for notices:

	 	Address for notices:
	 
	 	 
	6914 South 3000 East #203

Salt Lake City, Utah 84121

Attn: Wendy Martin

Fax: (801) 943-9887

	 	220 West Harrison Street

Seattle, WA 98119

Attn: John Jensen

Fax: (206) 298-9838

Solely for purposes of Section 11 above:

	 
	 

	PARENT:

	PACIFIC BIOMETRICS, INC.,

a Delaware corporation

	 

	By: /s/ Mario Ehlers

	 

	 

	Title: Chief Medical Officer

2

EXHIBIT A

Description of Collateral

The Collateral shall consist of all right, title and interest of Borrower in and to the
following:

(a) The equipment listed on Schedule A hereto, together with all replacement parts,
modifications, improvements, repairs, additions, accessories and alterations incorporated in the
Equipment as now or hereafter affixed thereto; and

(b) Any and all claims, rights and interests in any of the above, and all substitutions and
replacements for, additions, accessions, attachments, accessories, and improvements to, and
proceeds and insurance proceeds of, any of the above.

3

EXHIBIT B

Amortization Schedule

4

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