<SUBMISSION>
<ACCESSION-NUMBER>0001079973-10-000811
<TYPE>8-K
<PUBLIC-DOCUMENT-COUNT>4
<PERIOD>20100727
<ITEMS>1.01
<ITEMS>2.03
<ITEMS>9.01
<FILING-DATE>20100803
<DATE-OF-FILING-DATE-CHANGE>20100803
<FILER>
<COMPANY-DATA>
<CONFORMED-NAME>PepperBall Technologies, Inc.
<CIK>0001216199
<ASSIGNED-SIC>3480
<IRS-NUMBER>201978398
<STATE-OF-INCORPORATION>CO
<FISCAL-YEAR-END>1231
</COMPANY-DATA>
<FILING-VALUES>
<FORM-TYPE>8-K
<ACT>34
<FILE-NUMBER>001-32566
<FILM-NUMBER>10987084
</FILING-VALUES>
<BUSINESS-ADDRESS>
<STREET1>6142 NANCY RIDGE DRIVE
<STREET2>SUITE 101
<CITY>SAN DIEGO
<STATE>CA
<ZIP>92121
<PHONE>858-638-0236
</BUSINESS-ADDRESS>
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<STREET1>6142 NANCY RIDGE DRIVE
<STREET2>SUITE 101
<CITY>SAN DIEGO
<STATE>CA
<ZIP>92121
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<FORMER-COMPANY>
<FORMER-CONFORMED-NAME>Security With Advanced Technology, Inc.
<DATE-CHANGED>20061010
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<FORMER-COMPANY>
<FORMER-CONFORMED-NAME>A4S SECURITY, INC.
<DATE-CHANGED>20050602
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<DOCUMENT>
<TYPE>8-K
<SEQUENCE>1
<FILENAME>pbal_8k.htm
<DESCRIPTION>FORM 8-K
<TEXT>
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REPORT</font></div>
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to Section&#160;13 or 15(d)&#160;of the</font></div>
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Exchange Act of 1934</font></div>
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of Report (Date of earliest event reported): July 27, 2010</font></div>
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Nancy Ridge Drive, Suite 101</font></div>
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1.01&#160;&#160;&#160;Entry into a Material Definitive Agreement</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">&#160;</font></div>
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Agreement</font></div>
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    <div style="DISPLAY: block; TEXT-INDENT: 9pt"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">On July 9,
2010, a wholly owned subsidiary of the Registrant, PepperBall Technologies - CA,
Inc., a Delaware corporation (the &#8220;Company&#8221;) entered into a Security Agreement
(the &#8220;Security Agreement&#8221;) with<font style="DISPLAY: inline; FONT-SIZE: 9pt">
PRIMARY FUNDING CORPORATION , A California Corporation (&#8220;PFC&#8221;)</font> for a
short term financing agreement.&#160;&#160;The Agreement provides for up to
$500,000 in factoring financing with a discount fee charged of 1% for each
fifteen days an advance under the Agreement associated with an invoice is
outstanding. The financing is collateralized by the Company&#8217;s assets, including
accounts receivable, inventory and equipment.&#160;&#160;The initial Agreement
is for a term of six months and automatically renews for successive six months
periods unless terminated by either party.&#160;&#160;The Agreement contains
customary provisions for reporting, defaults, etc.</font></div>
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    <div style="DISPLAY: block; TEXT-INDENT: 9pt"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">As a
condition of the Agreement becoming effective, the Company was required to
obtain executed Inter-Creditor Agreements with its existing secured
lenders.&#160;&#160;As of July 27, 2010 those Inter-Creditor Agreements were
obtained.</font></div>
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    <div style="DISPLAY: block; TEXT-INDENT: 9pt"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">The
description of the transaction set forth above is qualified in its entirety by
reference to the Securities Purchase Agreement and Convertible Promissory Note,
forms of which are filed with this current report as Exhibits 10.1, 10.2 and
10.3, respectively.</font></div>
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2.03&#160;&#160;&#160;&#160;&#160;Creation of a Direct Financial Obligation or
an Obligation under an Off-Balance Sheet<font id="TAB1" style="MARGIN-LEFT: 12pt"></font>Arrangement of a Registrant</font></div>
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information set forth above under <font style="DISPLAY: inline; FONT-STYLE: italic">Item 1.01, Entry into a Material
Definitive Agreement</font>, is hereby incorporated by reference into this Item
2.03.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">Item
9.01&#160;&#160;&#160;&#160;&#160;Financial Statements and
Exhibits.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">(d) <font style="DISPLAY: inline; FONT-STYLE: italic">Exhibits</font>.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%" style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">
<tr>
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman"><a href="ex10x1.htm">10.1</a></font></div>
            </td>
            <td valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td align="left" valign="top" width="70%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman"><a href="ex10x1.htm">Security Agreement dated July 9, 2010, between
      PEPPERBALL TECHNOLOGIES - CA, INC., and PRIMARY FUNDING
      CORPORATION.</a></font></div>
            </td>
            <td valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
          </tr><tr>
            <td align="right" valign="top" width="4%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman"><a href="ex10x2.htm">10.2</a></font></div>
            </td>
            <td valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td align="left" valign="top" width="70%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman"><a href="ex10x2.htm">Intercreditor Agreement entered into between James A.
      Simpson Foundation, J.A. &amp; G.L. Simpson Trust, dtd May 18, 1988
      (Bridge Lender) and Primary Funding Corporation.</a></font></div>
            </td>
            <td valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
          </tr><tr>
            <td align="right" valign="top" width="4%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman"><a href="ex10x3.htm">10.3</a></font></div>
            </td>
            <td valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td align="left" valign="top" width="70%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman"><a href="ex10x3.htm">Form of Intercreditor Agreement entered into between
      __________ (Investor) and Primary Funding Corporation.</a></font></div>
            </td>
            <td valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
          </tr></table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt; TEXT-ALIGN: center">2<br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
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    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">SIGNATURES</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 216pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%" style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">
<tr>
            <td valign="top" width="39%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td valign="top" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td align="left" valign="top" width="36%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman">PepperBall
      Technologies, Inc.</font></div>
            </td>
          </tr><tr>
            <td align="left" valign="top" width="39%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td align="left" valign="top" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td align="left" valign="top" width="36%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
          </tr><tr>
            <td align="left" valign="top" width="39%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman">Date:
      August 3, 2010</font></div>
            </td>
            <td valign="top" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td align="left" valign="top" width="36%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman">/s/
      Jeffrey G. McGonegal</font></div>
            </td>
          </tr><tr>
            <td valign="top" width="39%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td valign="top" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td align="left" valign="top" width="36%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman">Jeffrey
      G. McGonegal</font></div>
            </td>
          </tr><tr>
            <td valign="top" width="39%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td valign="top" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td align="left" valign="top" width="36%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman">Chief
      Financial Officer</font></div>
            </td>
          </tr><tr>
            <td align="left" valign="top" width="39%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td align="left" valign="top" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td align="left" valign="top" width="36%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
          </tr></table>
    </div>
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    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
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    <div style="DISPLAY: block; TEXT-INDENT: 0pt; TEXT-ALIGN: center">3<br></div>
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</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>2
<FILENAME>ex10x1.htm
<DESCRIPTION>EXHIBIT 10.1
<TEXT>
<html>
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    <title>ex10x1.htm</title>
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    <div style="DISPLAY: block; TEXT-INDENT: 0pt; TEXT-ALIGN: right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">Exhibit
10.1</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><br>&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman">SECURITY
AGREEMENT</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">This
Security Agreement dated July 9, 2010, hereinafter Agreement, is between the
undersigned PEPPERBALL TECHNOLOGIES - CA, INC., A Delaware Corporation,
hereinafter called "SELLER", and <font style="DISPLAY: inline; FONT-WEIGHT: bold">PRIMARY FUNDING CORPORATION </font>,
A California Corporation, hereinafter " <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font>," hereinafter collectively
referred to as the Parties. Said parties, for good and valuable consideration,
agree to be bound by the terms and conditions herein.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">
      <table border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="FONT-SIZE: 10pt; FONT-FAMILY: ; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">
<tr valign="top">
            <td align="right" style="WIDTH: 27pt">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">1.&#160;</font></div>
            </td>
            <td align="left">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">PURPOSE
      OF AGREEMENT</font></div>
            </td>
          </tr></table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">SELLER
desires to obtain short-term financing by factoring, selling and assigning
accounts receivable to <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font>, and <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font> desires to purchase such
Accounts as are acceptable to it, in its sole discretion, at a discount below
face value.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">
      <table border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="FONT-SIZE: 10pt; FONT-FAMILY: ; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">
<tr valign="top">
            <td align="right" style="WIDTH: 27pt">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">2.</font></div>
            </td>
            <td align="left">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">DEFINITIONS</font></div>
            </td>
          </tr></table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">A</font>. <font style="DISPLAY: inline; FONT-WEIGHT: bold">"ACCOUNT"</font> means any right to
payment for goods sold, and delivered, or services rendered which is not
evidenced by an instrument or chattel paper.</font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</font></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">B</font>. <font style="DISPLAY: inline; FONT-WEIGHT: bold">"ACCEPTABLE ACCOUNT</font>" means an
account conforming to the warranties and terms set forth herein that is approved
for purchase by <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font>.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">C. "CUSTOMER</font>" means SELLER's
Customer, the account debtor.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">D</font>. <font style="DISPLAY: inline; FONT-WEIGHT: bold">"SELLER"</font> means the seller and
assignor of the accounts.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">E. "COLLATERAL</font>" means the
intangible or tangible property given as security (as further defined by
Paragraph 4) to <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font> by
SELLER for any obligations and liabilities of SELLER to <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font> under this
Agreement.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">F. "WARRANT"</font> means to
guarantee, as a material element of this Agreement.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">G. "CREDIT PROBLEM"</font> means an
account debtor is unable to pay trade debts due to the filing of a Judicial
Bankruptcy under the terms and conditions of the US Bankruptcy
Codes.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">H. "CUSTOMER DISPUTE</font>" means
any claim by Customer against SELLER, of any kind whatsoever, valid or invalid,
that reduces the amount collectible from Customer by<font style="DISPLAY: inline; FONT-WEIGHT: bold"> PFC</font>.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">I. "ADVANCE"</font> shall be
determined by the actual amount funded against any given collateral. In the
event an account is offered to PFC for funding, the funding formula would be the
gross amount of said invoice, less the Discount. The Advance percentage shall be
Eighty-five Percent (85%).</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">
      <table border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="FONT-SIZE: 10pt; FONT-FAMILY: ; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">
<tr valign="top">
            <td align="right" style="WIDTH: 27pt">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">3.</font></div>
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            <td align="left">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">WARRANTIES</font></div>
            </td>
          </tr></table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">As an
inducement for<font style="DISPLAY: inline; FONT-WEIGHT: bold"> PFC</font> to
enter into this Agreement, and with full knowledge that the truth and accuracy
of the warranties in this Agreement are being relied upon by <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font>, SELLER warrants and
covenants that:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">A.</font> SELLER is properly licensed
and authorized to operate the business of <font style="DISPLAY: inline; TEXT-DECORATION: underline">Security Products</font> ,
under the trade name(s) of <font style="DISPLAY: inline; TEXT-DECORATION: underline">PEPPERBALL TECHNOLOGIES -
CA, INC.</font> and SELLER's trade name(s) has been properly filed and published
as required by the laws of the applicable County/State.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">B. </font>SELLER's business is
solvent, and all the SELLER's obligations to the government for all Federal,
state and/or local taxes including employee withholding taxes are paid in full
and will continue to be paid in full on a timely basis.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">C.</font> Each of SELLER's account
debtors is solvent to the best of SELLER's current information and
knowledge.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">D. </font>SELLER is the lawful owner
of, and has good and undisputed title to, the Accounts purchased by <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC.</font></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">E.</font> Each account offered for
sale to <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font> is an
accurate and undisputed statement of indebtedness by customer to SELLER for a
sum certain which is due and payable in thirty days or less or other trade terms
pre-approved in writing by <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font>.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">F. </font>Each account offered for
sale to <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font> is an
accurate statement of a bonafide sale, delivery and acceptance of merchandise or
performance of service by SELLER to Customer</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">G.</font> SELLER does not own,
control or exercise dominion over, in any part or way whatsoever, the business
of any account debtor which Accounts are factored by SELLER to <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font>.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">H.</font> All financial records,
statements, books or other documents shown to <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font> by SELLER at any time,
either before or after the signing of this Agreement are true and
accurate.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">I.</font> SELLER will not, in any
manner whatsoever interfere with any of <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC's</font> rights under this
Agreement.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">1</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">__<font style="DISPLAY: inline; TEXT-DECORATION: underline">jcs</font>__&#160;&#160;&#160;&#160;&#160;&#160;__<font style="DISPLAY: inline; TEXT-DECORATION: underline">jgm</font>_&#160;&#160;&#160;&#160;_______&#160;&#160;&#160;&#160;_________</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">(Initial)&#160;&#160;&#160;&#160;&#160;&#160;&#160;(Initial)&#160;&#160;&#160;&#160;&#160;&#160;(Initial)&#160;&#160;&#160;&#160;&#160;(Initial)</font></div>
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        </div>
      </div>
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    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">J.</font> SELLER will not factor or
sell Accounts except to <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font> for the period of this
Agreement, and for so long as any indebtedness whatsoever remains owing by
SELLER to <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font>.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">K.</font> SELLER has not transferred,
pledged or granted a security interest in SELLER's Accounts or other personal
property further defined as Collateral by Paragraph 4, to any third person,
which SELLER has not fully disclosed in writing to <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font>, and SELLER will not
transfer, pledge or grant a security interest to any other party in said
personal property of the business for the term of this Agreement and for so long
as SELLER is indebted to <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font>.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">4.&#160;&#160; SECURITY
INTEREST/COLLATERAL:</font> As a further inducement for <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font> to enter into this
Agreement and as Collateral for the repayment of any indebtedness by SELLER to
<font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font>, SELLER hereby
grants to <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font> a
continuing security interest in the following described personal property of
SELLER, hereinafter called "Collateral":</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">A. </font>All presently existing or
hereafter arising, now owned or hereafter acquired, Accounts, returned,
reclaimed or repossessed goods with respect thereto; contract rights; purchase
orders; chattel paper; general intangibles; intellectual property; reserves;
credit balances; documents; instruments; deposit accounts; inventory, wherever
located, including raw materials, work-in-process, finished goods, and all names
or marks affixed to or to be affixed thereto for purposes of selling same;
equipment and fixtures, including without limitation, all motor vehicles,
furniture and any and all additions, substitutions or replacement; books and
records relating to any of the above including, without limitation, all computer
programs, optical data, electronically, magnetically or compressed, or any
combination thereof, on-site or off-site, pertaining to the foregoing, in the
possession of debtor, or any computer service bureau or other third person.
Debtor is not authorized to sell, transfer, or otherwise convey or dispose of
the foregoing property except finished inventory held for sale and sold in the
debtor's usual course of business.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">5.&#160; &#160;FUNDING:
</font>Funding shall occur in the following manner and amounts.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">A. ASSIGNMENT:</font> At SELLER's
option SELLER may from time to time sell, transfer and assign Accounts to <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font>. Such assigned Accounts
shall be identified by separate and subsequent written agreements on a form
entitled "Schedule of Accounts". <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font> may in its sole and
absolute discretion purchase any specific Account from SELLER regardless of
credit rating of customer.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">B. APPROVAL: PFC</font> will not
purchase an Account unless such Account is first submitted to <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font> by SELLER for approval and
said Account is approved. <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font> is not obligated to buy
any Account from SELLER notwithstanding the fact that the aggregate sum of
factored Accounts remaining unpaid/outstanding may be less than the Maximum
Account stated in Paragraph 5H below. <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font> shall have no liability
whatsoever to SELLER of any Customer of SELLER for <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC's</font> failure or refusal to
purchase an Account. <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font>
may rescind any approval prior to any shipment of the goods, inventory, services
rendered or equipment generating the Account.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">C. REQUIRED FORMS:</font> When SELLER
offers a Schedule of Accounts to <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font> for factoring, <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font> shall receive (I) a copy
of the original invoice with <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC's</font> assignment stamp affixed
to said invoice as evidence that SELLER is factoring the Account with <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font>, (ii) evidence of delivery
of product or services, or time card, or signature of acceptance by customer, or
proof of completion, and (iii) a copy of the Bill of Lading or tracking number,
Contract or Purchase Order, and/or a Purchase Order number which corresponds
with said invoice(s), as appropriate to the business of SELLER or as required by
<font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font>.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">D. DISCOUNT: </font>SELLER shall pay
to <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font> as earned a
Factoring Discount fee of One Percent (1%) of the gross face value of each
Account Purchased for each additional 15 day period or fraction thereof ("Fee
Period") until the date Account purchased is paid in full or charged back to
SELLER.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">E.&#160;&#160;MINIMUM MONTHLY
FEE:&#160;&#160;</font>None.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">F. RESERVE: </font>Upon the purchase
by<font style="DISPLAY: inline; FONT-WEIGHT: bold"> PFC </font>of each
Account<font style="DISPLAY: inline; FONT-WEIGHT: bold">, PFC </font>shall,
unless waived by <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC </font>in
its sole discretion, establish a Reserve. The Reserve shall be the amount by
which the face amount of the purchased Account exceeds the Advance, less all
accrued fees and Adjustments on that purchased Account and any and all
remittances received for the benefit of SELLER that <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font> comes into possession of
and may be deemed non-factored ("the Reserve"). Said Reserve Account may be held
by <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font> and applied
against any obligations of SELLER to <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font>. <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font> reserves the right to
initiate at any time and/or adjust the Reserve Account as deemed necessary by
<font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font>.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">2</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">_<font style="DISPLAY: inline; TEXT-DECORATION: underline">&#160;&#160;jcs
</font>_&#160;&#160;&#160;&#160;&#160;&#160;&#160;__<font style="DISPLAY: inline; TEXT-DECORATION: underline">jgm</font>_&#160;&#160;&#160;&#160;&#160;_______&#160;&#160;&#160;&#160;________</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">(Initial)&#160;&#160;&#160;&#160;&#160;&#160;(Initial)&#160;&#160;&#160;&#160;&#160;&#160;(Initial)&#160;&#160;&#160;&#160;&#160;&#160;(Initial)</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
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      </div>
      <div id="HDR">
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      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">G. RESERVE RELEASE:</font> As <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font> collects Customer payments
from or on behalf of account debtors, <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font> shall credit the Customer
Payments as funds clear to those Accounts purchased. In the event<font style="DISPLAY: inline; FONT-WEIGHT: bold"> PFC </font>receives electronic funds
as payment for Accounts purchased, the funds will be credited when <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC's</font> lender notifies same and
proper identification/remittance of payments can be established. Any
non-factored payments received by <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC </font>shall be credited to the
reserve and held by <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font>
for three business days from the receipt of said funds to allow said funds to
clear. The Reserve portion as described in paragraph 5F. shall be released less
the discount or minimum Fee from the proceeds received less any offsets,
charge-backs or other obligations that SELLER may have to <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font>. The Reserve Release
generally takes place weekly. However, <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font> reserves the right to
withhold the Reserve Release to offset pending Charge-Backs.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">H. MAXIMUM ACCOUNT:</font> The
outstanding amount in SELLER's Accounts with <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font> (that is, Accounts
Purchased by <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font> from
SELLER and not yet paid by Customer) shall not exceed the sum of <font style="DISPLAY: inline; TEXT-DECORATION: underline">$500,000.00</font>. SELLER
acknowledges that this stated amount is intended as a guideline only, and it
does not obligate<font style="DISPLAY: inline; FONT-WEIGHT: bold"> PFC</font> to
purchase Accounts in an aggregate sum equivalent to said stated Maximum
Account.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">I. TIMING: PFC</font> will make a
good faith effort to fund accepted SELLER Accounts within 24 hours of the
submission of all Schedules of Accounts, excepting the initial Schedule and new
customers, provided that SELLER has fully complied with this Agreement in every
respect.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">J.&#160;&#160;LINE RESERVATION
FEE:&#160;&#160;</font>None</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">6.&#160;&#160;
PROTECTION OF COLLATERAL/SECURITY INTEREST</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">A. </font>SELLER will not change or
modify the terms of sale on any Account purchased by <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font>.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">B.</font> SELLER will not permit any
lien, security interest or other encumbrance of any nature whatsoever to be
created upon the Collateral except with prompt and written notice thereof to
<font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font>, and its express
written consent.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">C.</font> SELLER shall maintain
adequate casualty insurance covering SELLER's business premises as is customary
for similar businesses and, at the request of <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font>, name <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font> as loss payee of said
insurance. Additionally, SELLER shall maintain adequate liability and workers
compensation insurance and shall provide PFC with evidence of said insurance.
Seller shall also maintain insurance that is appropriate by the licensing
authorities that govern their industry and shall upon request provide evidence
to PFC.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">D.</font> SELLER will immediately
notify <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font> in writing of
any proposed or actual change of SELLER's name, identity, legal entity,
corporate structure, use of additional trade name(s) and/or any proposed change
in any executive officers, partners and/or owners of SELLER.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">E. NOTICE OF LEVY: </font>SELLER will
promptly notify <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font> of
any attachment, levy or lien against SELLER. In addition, SELLER shall notify
<font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font> of any legal action
claiming money damages from SELLER in which SELLER is named as a
Defendant.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">F. NOTIFICATION TO CUSTOMER:
PFC</font> may any time and at its sole discretion notify any account debtor of
SELLER of the assignment herein and/or the security interest of <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font> and request that payments
be made directly to <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font>.
<font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font> may at its sole
discretion require the account debtor prior to funding to acknowledge in
writting an assignment of payment to <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font> for Accounts purchased
from SELLER.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">G. BOOK ENTRY:</font> SELLER will,
immediately upon sale of Accounts to <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font> make proper entries on its
books and records disclosing the absolute sale of said Accounts to <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font>.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">H. SOLE PROPERTY:</font> Once <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font> has purchased an Account,
the payment from customer as to that Account is the sole property of <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font>. Any interference by
SELLER with this payment may result in civil and/or criminal
liability.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">I. HOLD IN TRUST:</font> SELLER will
promptly notify <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font> of
any payment received by it on an Account that has been factored to <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font>, and will hold in trust
and safekeeping, as the property of <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font> and immediately surrender
to <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font> said same check,
or other form of payment received by SELLER. Should SELLER come into possession
of a check, or other payment, comprising payment(s) owing to both SELLER and
<font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font>, SELLER shall
surrender said same check or payment <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font> prior to negotiation,
whereupon <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font> will
refund to SELLER its portion of such payment. <font style="DISPLAY: inline; TEXT-DECORATION: underline">If any such "check" is
deposited, cashed, or negotiated by SELLER, or any agent or employee of SELLER,
a minimum charge of $50.00 will be charged for each occurrence, in addition to
the ordinary Discount Fees owed on the Account to </font><font style="DISPLAY: inline; FONT-WEIGHT: bold; TEXT-DECORATION: underline">PFC.
</font><font style="DISPLAY: inline; TEXT-DECORATION: underline">An additional
fee of 1% of the gross amount of the Account will be charged SELLER for each
five days SELLER fails to reimbursed </font><font style="DISPLAY: inline; FONT-WEIGHT: bold; TEXT-DECORATION: underline">PFC</font><font style="DISPLAY: inline; TEXT-DECORATION: underline"> for funds SELLER received.
In</font></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 270pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;3</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">__<font style="DISPLAY: inline; TEXT-DECORATION: underline">jcs</font>__&#160;&#160;&#160;&#160;___<font style="DISPLAY: inline; TEXT-DECORATION: underline">jgm&#160;&#160;&#160;</font>&#160;&#160;&#160;_________&#160;&#160;&#160;_______</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">(Initial)&#160;&#160;&#160;&#160;&#160;&#160;(Initial)&#160;&#160;&#160;&#160;&#160;&#160;(Initial)&#160;&#160;&#160;&#160;&#160;&#160;(Initial)</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">&#160;</div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always; WIDTH: 100%">
        <div style="WIDTH: 100%; TEXT-ALIGN: center">&#160;</div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">&#160;</div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">addition to repayment of the
amount owed together with the fees, any such interference could also result in
further civil and/or criminal liability. In the event funds on Accounts
purchased are electronically transferred to SELLER, SELLER must immediately
transfer said funds to </font><font style="DISPLAY: inline; FONT-WEIGHT: bold; TEXT-DECORATION: underline">PFC</font><font style="DISPLAY: inline; TEXT-DECORATION: underline"> or be subject to the
formula of fees described above.</font></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">7.&#160;&#160;RECOURSE:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">PFC will
have the right to charge-back to Seller any invoice remaining unpaid regardless
as to the reason for nonpayment after a period of ninety days from the time the
invoice was first originated. An account or invoice deemed as a recourse
charge-back will be considered in dispute for failure to pay within the payment
or credit terms established under the Warranties provided by Seller in paragraph
3E of this Agreement. The administration of the rights of Charge-Back are
defined below in paragraph 8A.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">8.&#160;
CHARGE-BACKS:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">A. RIGHT OF CHARGE-BACK:</font> All
Accounts subject to Customer Dispute as defined in Section 2H hereinabove will
be immediately paid in full by SELLER to <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font> by either SELLER (I)
submitting "approved and acceptable" new Accounts, (ii) <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font> requiring payment thereof,
or (iii) <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font> debiting
SELLER's reserve account. All charge-backs are at the gross amount of said
Account without any offset for fees, or reductions of any nature
whatsoever.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">B. NOTICE OF DISPUTE:</font> SELLER
must immediately notify <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font> of any disputes between
Customer and SELLER.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">C. INVOICING ERROR:</font> Mistaken,
incorrect, and/or erroneous invoicing submitted by SELLER to<font style="DISPLAY: inline; FONT-WEIGHT: bold"> PFC</font> may at <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC's</font> discretion be deemed a
disputed Account and be charged back to SELLER.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">D. DISPUTE SETTLEMENT: PFC</font> may
settle any dispute directly with Customer, however any remaining unpaid balance
becomes the responsibility of the SELLER.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">E. STATEMENT OF CHARGE-BACK (ACCOUNT
STATED): PFC</font> shall identify in writing all charge-backs and provide to
SELLER a written statement thereof, which statement shall be deemed an "Account
Stated" between SELLER and <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font>, except for any errors of
which SELLER has notified <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font> in writing within fifteen
(15) days after the date of receipt by SELLER of said statement. Any errors
which <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font> is timely
notified of by the SELLER and<font style="DISPLAY: inline; FONT-WEIGHT: bold">
PFC</font> determines are not charge-backs as defined in this Agreement, shall
be immediately credited to SELLER.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">9.
TERM AND TERMINATION:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">A. TERM:</font> This Agreement shall
continue in effect until <font style="DISPLAY: inline; FONT-WEIGHT: bold">January 31, 2010</font> and shall be
automatically renewed for successive periods of six months <font style="DISPLAY: inline; TEXT-DECORATION: underline">,</font> so long as the
accounts are in good standing. <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font> may terminate this
Agreement at any time. SELLER shall give <font style="DISPLAY: inline; TEXT-DECORATION: underline">sixty ( 60 )</font> days
written notice of intent to terminate to <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC.</font></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">B. TERMINATION UPON DEFAULT:
</font>Notwithstanding the foregoing, upon the occurrence of Default by SELLER,
this Agreement shall terminate automatically.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">C. INDEBTEDNESS DUE AND
PAYABLE:</font> Upon the effective date of any termination, whether such
termination is pursuant to the occurrence of a Default or otherwise, any
indebtedness owing by SELLER shall become immediately due and payable without
notice or demand. The gross outstanding Accounts in addition to all reservation,
commitment, Line Fee, Discount Fees, Minimum Monthly Fee, Interest or other
accrued Fees as provided for in this Agreement or subsequent Agreements, Notes
or Addendum's between the parties, shall become immediately due and
payable.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">D. POST TERMINATION:</font> After
termination SELLER remains fully responsible to PFC in connection with any
indebtedness existing or which may yet arise in connection with
outstanding/factored Accounts. <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC's</font> security interest shall
continue until all indebtedness has been paid in full.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">E.&#160;&#160;EARLY
TERMINATION:&#160;&#160;</font>Not applicable.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 270pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;4</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">__<font style="DISPLAY: inline; TEXT-DECORATION: underline">jcs</font>_&#160;&#160;&#160;&#160;&#160;___<font style="DISPLAY: inline; TEXT-DECORATION: underline">jgm</font>__&#160;&#160;&#160;&#160;________&#160;&#160;&#160;________</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">(Initial)&#160;&#160;&#160;&#160;&#160;&#160;(Initial)&#160;&#160;&#160;&#160;&#160;&#160;(Initial)&#160;&#160;&#160;&#160;&#160;&#160;(Initial)</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
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        <div style="WIDTH: 100%; TEXT-ALIGN: center">&#160;</div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">&#160;</div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">10.
DEFAULT AND REMEDIES:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">A. DEFAULT: </font>Any one or more of
the following shall constitute a default of this Agreement:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">(a) SELLER
fails to pay any indebtedness or obligation to<font style="DISPLAY: inline; FONT-WEIGHT: bold"> PFC</font> when due,</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">(b) SELLER
breaches any term, provision, covenant, warranty or representation under this
Agreement, any Amendment hereto, or any other agreements or contracts between
SELLER and <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font> or
obligation of SELLER to <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC,</font></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">(c) A
receiver or trustee is appointed for any or all of the assets of
SELLER,</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">(d) SELLER
becomes insolvent, ceases business operations, or unable to pay debts as they
mature, makes a general assignment for the benefit of creditors or voluntarily
files under bankruptcy or similar law(s),</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">(e) Any
involuntary petition in bankruptcy is filed against SELLER and is not dismissed
within 60 days,</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">(f) Any
levies of attachment, executions, tax assessment or similar process is issued
against the SELLER or the Collateral and shall not be released within ten (10)
days thereof, and/or</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">(g) Any
document, statement, writing, warranty, representation, report, certificate,
financial statement made or delivered to <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font> by SELLER or any of
SELLER's officers, employees or agents, now or hereafter, is incorrect, false,
untrue or misleading in any material respect whatever, and/or</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">(h) The
death or insolvency or incompetency of any guarantor of SELLER; revocation or
termination of, invalidity or claim of invalidity of, or limitation of liability
upon, any guarantee of any or all of SELLER's obligations and/or indebtedness,
or commencement of proceedings against any guarantor or surety for SELLER under
any bankruptcy or insolvency law, and/or</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">( i) <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font> at any time, acting in
good faith and in a commercially reasonable manner, deems itself
insecure.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">B. REMEDIES AFTER DEFAULT:</font> In
the event of any default <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font> may do any one or more of
the following:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">(a)
Declare any indebtedness secured hereby immediately due and
payable,</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">(b)
Directly notify any account debtor/Customers and effect collections of
Accounts/take possession of Collateral and collect such Accounts without
judicial process whether said Account(s) is specifically assigned or
not,</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">(c)
Require SELLER to assemble the Collateral and the records pertaining to Accounts
and any other Collateral and deliver it to <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font>,</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">(d) Enter
the premises of SELLER and take possession of the Collateral and of the records
pertaining to the Accounts and any other Collateral,</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">(e) Grant
extensions, compromise claims and settle Accounts for less than face value, all
without prior notice to SELLER,</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">(f) Use in
connection with any assembly or disposition of the Collateral, any trademark,
trade name, trade style, copyright or technical process used or utilized by
SELLER,</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">(g) Return
any surplus realized to SELLER after deducting the reasonable expenses, costs,
attorney's fees incurred by <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font> in resolving said
default</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">(l)
Exercise any other rights and/or remedies available to<font style="DISPLAY: inline; FONT-WEIGHT: bold"> PFC</font> under law or
equity.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt">
      <div style="TEXT-INDENT: 45pt"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">(h) Hold
SELLER liable for any deficiency, and/or</font></div>
      <div style="TEXT-INDENT: 45pt"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">( i) Sell,
lease or otherwise dispose of all or any portion of the Collateral in its
condition at the time <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font> took possession, or after
further manufacturing, processing or repair, at any one or more public and/or
private sale(s), and to adjourn any such sale from time-to-time without notice
other than oral announcement at time scheduled for sale. <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font> may directly or through
any affiliated company purchase or lease any Collateral at any such public
disposition and, if permissible under applicable law, at any private
disposition. Any sale or other disposition shall not relieve SELLER of any
liability SELLER may have if any Collateral is defective as to title or physical
condition at the time of sale, or such sale results in a deficiency,
and/or</font></div>
      <div style="TEXT-INDENT: 45pt"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">(j) <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font> may charge and SELLER
shall pay interest on all unpaid indebtedness at the rate of one and one-half
percent (1 &#189;%) per month, and/or</font></div>
      <div style="TEXT-INDENT: 45pt"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">(k) PFC
may withhold all Reserves until said default is remedied, and/or</font></div>
      <div style="TEXT-INDENT: 45pt">(l) Exercise any other rights and/or remedies
available to <font style="FONT-WEIGHT: bold">PFC</font>
under law or equity.</div>
      <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br><br>&#160;</div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">__<font style="DISPLAY: inline; TEXT-DECORATION: underline">jcs</font>__&#160;&#160;&#160;__<font style="DISPLAY: inline; TEXT-DECORATION: underline">jgm</font>__&#160;&#160;&#160;_______&#160;&#160;&#160;&#160;_______</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">(Initial)&#160;&#160;&#160;&#160;&#160;(Initial)&#160;&#160;&#160;&#160;&#160;(Initial)&#160;&#160;&#160;&#160;&#160;(Initial)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;5</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">&#160;</div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always; WIDTH: 100%">
        <div style="WIDTH: 100%; TEXT-ALIGN: center">&#160;</div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div>
        <div id="GLHDR" style="WIDTH: 100%" align="right">&#160;</div>
      </div>
      <div><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
      <div style="TEXT-INDENT: 45pt"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">C. CUMULATIVE RIGHTS:</font> All
rights, remedies and powers granted to <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font> in this Agreement, or in
any note or other agreement given by SELLER to <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font>, are cumulative and may be
exercised singularly or concurrently with such other rights as <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font> may have. These rights may
be exercised from time to time as to any part of the pledged Collateral as PFC
in its discretion may determine.</font></div>
      <div style="TEXT-INDENT: 45pt">&#160;</div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">11.
OTHER PROVISIONS:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">A. FINANCIAL RECORDS: </font>SELLER
will furnish to<font style="DISPLAY: inline; FONT-WEIGHT: bold"> PFC</font>
financial statements and information as reasonably requested by PFC from time to
time.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">B. TAX COMPLIANCE: </font>SELLER will
furnish <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font>, upon
reasonable request satisfactory proof of payment and/or compliance with all
Federal, State and/or local tax requirements.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">C. NO PLEDGE:</font> SELLER has no
authority to, and will not, pledge, or claim to pledge, the credit of <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font> to any person or business
for any purpose whatsoever.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">D. POWER OF ATTORNEY:</font> In order
to carry out this Agreement, SELLER grants to <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC, </font>an irrevocable power of
attorney, coupled with an interest, authorizing and permitting <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font> (acting through any of its
employees, attorney's or agents) at any time, at <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC's</font> option, with or without
notice to SELLER, and at SELLER's sole expense, to do any or all of the
following in SELLER's name or otherwise: its special attorney in fact, or agent,
with power to:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">(a) Insert
<font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC's</font> remittance address
on all Accounts of SELLER mailed by <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC,</font></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">(b)
Receive, open, and dispose of all mail addressed to SELLER and in the event of a
Default to notify the United States Postal Service to change the address for
delivery of SELLER's mail to any address designated by <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font>, including but not limited
to, <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC's</font> own address.
<font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font> shall turn over to
SELLER all mail not relating to the Collateral or SELLER's payment of any
indebtedness owing,</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">(c)
Endorse the name of SELLER, or SELLER's fictitious trade name, on any checks or
other evidences of payment that may come into the possession of <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font> on Accounts purchased by
PFC or pursuant to default on any other documents relating to any of the
Accounts or to Collateral, and including but not limited to, financing
statements, financing statement amendments, notices to Customers and any other
documents necessary to carry out the purposes of this Agreement,</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">(d) In
SELLER's name, or otherwise, demand, sue for, collect, and give releases for any
and all monies due or to become due on Accounts,</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">(e)
Compromise, prosecute, or defend any action, claim or proceeding as to said
Accounts,</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">(f) From
time to time offer a trade discount to SELLER's Customer exclusive of SELLER's
normal business practice with said Customer,</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">(g) To
direct any financial institution which is a participant with <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font> in making Advances to or
for the benefit of SELLER, or which is the institution with which any deposit
account is maintained by SELLER, to pay to <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font> all monies on deposit by
SELLER, which are payable by said institution to SELLER regardless of any loss
of interest, charge or penalty as a result of payment before
maturity,</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">(h) To
instruct any accountant or third party having custody or control of any books or
records or computer records belonging to, or relating to, SELLER to give <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font> full rights of access,
inspection and opportunity to copy said records as <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font> may require,</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">(i) File
financing statements or financing statement amendments to reflect any change of
SELLER's trade style or fictitious name or legal status, and</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">(j) To do
any and all things <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font>
deems necessary and proper to carry out the purpose(s) of this
Agreement.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">(k) SELLER
authorizers <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font> to file
all necessary financing statements in behalf of the SELLER with the State(s) in
which <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font> deems it
necessary to secure its interest in the "Personal Property" assets as described
in section 4 entitled "Security Interest/Collateral.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">The
authority granted <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font>
shall remain in full force and effect until all assigned Accounts are paid in
full and any indebtedness or obligation of SELLER to <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font> is
discharged.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">E. HOLD HARMLESS:</font> SELLER
agrees to indemnify and hold <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font> harmless against any and
all claims, losses, expenses, costs, obligations, liabilities, and attorneys'
fees <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font> may incur by
reason of: (I) SELLER's breach of or failure to perform any of its warranties,
guarantees, commitments, or covenants in this Agreement; or (ii) <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC's</font> collecting or attempting
to collect any Accounts.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 270pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;6</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">__<font style="DISPLAY: inline; TEXT-DECORATION: underline">jcs</font>__&#160;&#160;&#160;&#160;___<font style="DISPLAY: inline; TEXT-DECORATION: underline">jgm</font>_&#160;&#160;&#160;&#160;________&#160;&#160;&#160;&#160;_______</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">&#160;(Initial)&#160;&#160;&#160;&#160;&#160;&#160;(Initial)&#160;&#160;&#160;&#160;&#160;&#160;(Initial)&#160;&#160;&#160;&#160;&#160;&#160;(Initial)</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">&#160;</div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always; WIDTH: 100%">
        <div style="WIDTH: 100%; TEXT-ALIGN: center">&#160;</div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div>
        <div id="GLHDR" style="WIDTH: 100%" align="right">&#160;</div>
      </div>
      <div><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
      <div style="TEXT-INDENT: 45pt"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">F. BINDING ON FUTURE PARTIES:</font>
This Agreement inures to the benefit of and is binding upon the heirs,
executors, administrators, successors and assigns of the Parties.</font></div>
      <div style="TEXT-INDENT: 45pt"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">G. WRITTEN WAIVER: PFC</font> may not
waive its rights and remedies unless the waiver is in writing and signed by
<font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font>. A waiver by <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font> of any right or remedy
under this Agreement on one occasion is not a wavier of any other right on that
occasion, nor the waiver of that or any other right on any subsequent
occasion.</font></div>
      <div style="TEXT-INDENT: 45pt"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">H. LEGAL FEES:</font> SELLER shall
pay to<font style="DISPLAY: inline; FONT-WEIGHT: bold"> PFC</font> all
attorney's fees, costs and/or expenses ("Legal Fees") incurred by <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font> in connection with <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font> negotiating, preparing,
obtaining legal advise about, or enforcing this Agreement and any documents
prepared in connection herewith, and/or protecting, preserving or enforcing any
lien, security interest or other right granted by SELLER to <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font>, whether or not suit is
brought. In any lawsuit, arbitration or other proceeding, including any and all
appeals therefrom, the prevailing party shall be entitled to recover its Legal
Fees wherever applicable.</font></div>
      <div style="TEXT-INDENT: 45pt"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">I. CALIFORNIA LAW:</font> This
Agreement shall be governed by and construed both as to validity and performance
and enforced in accordance with the laws of the State of California, without
giving effect to the choice of law principles thereof. The venue for any
litigation, arbitration or other proceeding relative to this Agreement shall be
in San Diego County, State of California.</font></div>
      <div style="TEXT-INDENT: 45pt"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">J. INVALID PROVISIONS:</font> If any
provision(s) of this Agreement shall be declared illegal, contrary to law or
policy, or otherwise unenforceable, it is agreed that such provision shall be
disregarded and that all other provisions of this Agreement shall remain in full
force and effect as though such provision(s) had not been incorporated
herein.</font></div>
      <div style="TEXT-INDENT: 45pt"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">K. ENTIRE AGREEMENT:</font> This
Agreement, and any exhibits and schedules attached hereto, constitutes the
entire agreement of the Parties and supersedes all other prior agreements,
understandings, representations and warranties, whether written or oral. This
Agreement may be amended only by written agreement executed by the
Parties.</font></div>
      <div style="TEXT-INDENT: 45pt"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">L. NOTICE: </font>All notices,
requests, demands, and other communications (collectively "Notices") given or
made pursuant to this Agreement shall be given if sent by telex, telecopy,
first-class mail or by registered or certified mail, return receipt requested,
postage and fees prepaid, or equivalent private messenger/delivery service
offering signature acknowledgment by recipient (FEDEX, UPS, etc.), or by
personal delivery to the addresses listed on the original application, new
addresses provided by the parties, or "wherever</font></div>
      <div style="TEXT-INDENT: 45pt; TEXT-ALIGN: left">&#160;</div>
      <div style="TEXT-INDENT: 45pt">
        <div>
          <table border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="FONT-SIZE: 10pt; FONT-FAMILY: ; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">
<tr valign="top">
                <td style="WIDTH: 45pt; TEXT-ALIGN: center">
                  <div style="TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">_______&#160;</font></font></div>
                </td>
                <td align="left">
                  <div><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">M. WAIVER OF JURY TRIAL:</font>
      BOTH SELLER AND PFC ACKNOWLEDGE THE&#160;<font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">&#160;EXTREME
      COST ATTENDANT TO TRIAL BY JURY, AND THEREFOR BOTH&#160;<font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">SELLER
      AND PFC WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR <font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">PROCEEDING
      OR TRANSACTION RELATING TO THIS AGREEMENT OR ANY <font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">AGREEMENT(S)
      RELATED
HERETO.</font></font></font></font></font></div>
                </td>
              </tr></table>
        </div>
        <div style="DISPLAY: block; TEXT-INDENT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
        <div style="DISPLAY: block; TEXT-INDENT: 45pt"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">N. VENUE:</font> SELLER agrees that
all actions or proceedings of any nature whatsoever relating </font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">directly
or indirectly hereto shall be litigated or arbitrated in courts or places
located within the State of California, County of San Diego and if such action
shall be brought in Federal Court then within the Federal District Court located
in said State.</font></div>
      </div>
      <div style="TEXT-INDENT: 72pt">(a) Service of Process: If PFC is not able to
serve process upon SELLER, SELLER hereby irrevocably appoints and designates the
Secretary of State of California whose address is 1230 "J" Street, Sacramento,
CA 95814, or any other person having or maintaining a place of business in such
State, whom SELLER may from time to time hereafter designate having given ten
(10) days written notice thereof to <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC"</font> as SELLER's true and
lawful attorney and duly authorized agent for acceptance of legal process.
Service of such process upon either the Secretary of State as aforementioned, or
upon such designated agent shall constitute personal service of such process
upon SELLER.</div>
      <div style="TEXT-INDENT: 45pt"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">O. REIMBURSEMENT FOR PAYMENT OF
JUDGMENTS OR TAXES </font>: In the event any governmental taxing authority or
third party imposes or levies any sales, excise or other tax or other form of
judgment against SELLER in such form that <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font> deems it appropriate or
necessary to pay such taxes, liens or judgments, SELLER will immediately
reimburse <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC </font>the amount
of taxes, liens or judgments paid by <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC.</font></font></div>
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acknowledges and agrees that PFC may seek to or enter into an agreement with a
third party or parties whereby such third parties or parties ("Participant")
participates with <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC </font>in
the transactions that are the subject of this Agreement (the "Participation").
SELLER further acknowledges and agrees that for the Participation, <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font> may provide Participant
with financial and other relevant information that <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font> has obtained from or about
SELLER in connection with this Agreement and/or any anticipated
Participation.</font></div>
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    <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt; TEXT-ALIGN: center">7<br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">__<font style="DISPLAY: inline; TEXT-DECORATION: underline">jcs</font>__&#160;&#160;&#160;&#160;&#160;&#160;__<font style="DISPLAY: inline; TEXT-DECORATION: underline">jgm</font>__&#160;&#160;&#160;&#160;&#160;&#160;________&#160;&#160;&#160;&#160;&#160;&#160;________&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</font></div>
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    <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
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</font>: Any documents, schedules, invoices, accounts or other papers delivered
to <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font> may be destroyed
or otherwise disposed of by <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font> six (6) months after the
same are delivered to <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font> unless SELLER makes
written request therefore and pays all expenses attendant to their return, and
in which event <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC</font> shall
return same when <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC's</font>
actual or anticipated need therefore has terminated.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">R. POST TERMINATION FEE'S: </font>In
the event that this Agreement is terminated, <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC </font>shall issue a UCC
termination financing statement at no cost to Seller or other authorized form of
termination. Seller is responsible for filing this form at the Secretary of
States Office or other such place as is appropriate. In the event that Seller
request PFC to retrieve, recreate or reissue said documentation post
termination, SELLER will be charged $50.00 plus any actual cost paid to a third
party for this service.</font></div>
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RECOVERY FFES: </font>In the event that Seller request copies of factoring
reports or accounting documents sixty days or more post termination, SELLER
shall pay reasonable recovery cost if those documents can be recovered. In some
instances, when an Account becomes dormant information is purged from the system
making recovery of this information unlikely.</font></div>
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acts to be performed under this Agreement are performable at <font style="DISPLAY: inline; FONT-WEIGHT: bold">PFC's</font> chief place of
business.</font></div>
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SELLER HAS FULLY READ THIS AGREEMENT, AND SELLER FULLY UNDERSTANDS THE CONTENTS
HEREOF, PARTICULARLY THE CHARGES, RATES AND/OR COSTS WHICH SELLER WILL/MAY PAY
TO PFC HEREUNDER. SELLER HAS EVALUATED THE CHARGES AT OTHER FINANCIAL
INSTITUTIONS AND AGREES THAT THE CHARGES TO BE PAID HEREUNDER ARE FAIR AND
REASONABLE UNDER THE CIRCUMSTANCES.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">Executed
this ninth day of July 2010, at San Diego, California.</font></div>
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              <td align="left" valign="top" width="35%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">      </font>
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              <td align="left" valign="top" width="35%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">A
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      Patricia J. Burns</font></div>
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      John C. Stiska</font></div>
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              <td valign="top" width="6%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
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              <td align="justify" valign="top" width="35%" style="BORDER-BOTTOM: black 2px solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">/s/
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</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.2
<SEQUENCE>3
<FILENAME>ex10x2.htm
<DESCRIPTION>EXHIBIT 10.2
<TEXT>
<html>
<head>
    <title>ex10x2.htm</title>
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<!-- Copyright 1995 - 2009 Thomson Reuters. All rights reserved. -->
</head>
<body bgcolor="#ffffff" style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">Exhibit
10.2</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">&#160;</font><br>&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">INTERCREDITOR
AGREEMENT</font></font><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">This
Intercreditor Agreement (Agreement) is made this day 9<font style="DISPLAY: inline; FONT-SIZE: 70%; VERTICAL-ALIGN: text-top">th</font> day
of July, and entered into between James A. Simpson Foundation, J.A. &amp; G.L.
Simpson Trust, dtd May 18, 1988 (Bridge Lender) and Primary Funding Corporation
(Primary Funding).</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Recitals</font></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">WHEREAS,
the Bridge Lender and Primary Funding have entered into an agreement where the
Bridge Lender is subordinating and assigning its priority interest in the
inventory and the accounts of PepperBall Technologies &#8211; CA, Inc. and PepperBall
Technologies, Inc. (CLIENT);</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">WHEREAS,
the parties wish to further clarify their respective rights regarding the
Agreement.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">NOW,
THEREFORE, for good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, and intending to be legally bound hereby, the
Bridge Lender and the Primary Funding hereby agree as follows:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">1.) The
term Accounts shall mean all existing and hereafter arising accounts, contract
rights, instruments, notes, drafts, documents, chattel paper and all other forms
of obligations owing to Client arising out of the sale or lease of goods or the
rendition of services by Client, irrespective of whether earned by performance,
and any and all credit insurance, guarantees and other security therefor, as
well as all merchandise returned to or reclaimed by Client and Clients books
relating to any of the foregoing.</font></div>
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term Inventory shall mean all of Client&#8217;s present and future inventory in which
Client has any interest, including goods which have been leased or held for sale
or lease or to be furnished under a contract of service and all of Client&#8217;s
present and future raw materials, work in process, finished goods, and packing
and shipping materials, wherever located, and any documents of title
representing any of the above.</font></div>
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Bridge Lender and the Primary Funding agree that Primary Funding&#8217;s security
interest in the Accounts and Inventory is to be construed as having priority to
the extent of all indebtedness secured thereby, now existing or hereafter
arising in the Accounts and Inventory over the security interest of the Bridge
Lender.</font></div>
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Notwithstanding any other provisions of this Agreement, it is the intent of the
Bridge Lender and Primary Funding that this Agreement and all prior agreements
shall be construed to be a subordination, subject to the terms and conditions
stated herein, from the Bridge Lender to Primary Funding of its security
interest as well as all rights, title and interest in the Accounts and the
Inventory. If, however, at the time either the Bridge Lender or Primary Funding,
as the case may be, has elected to foreclose upon its secured interest in Client
or otherwise files suit against Client related to the collection of the
obligation Client owes it, and Client is indebted to Primary Funding the parties
agree that the following shall be the order and priority of their respective
security interests in the Accounts and Inventory:</font></div>
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security interest of Primary Funding shall be superior to and entitled to
priority over the security interest of the Bridge Lender but only up to the
amount of $200,000 owed to Primary Funding by Client. Thereafter, Bridge Lender
shall have priority over the security interest of Primary Funding.</font></div>
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the extent of the costs, expenses and attorneys fees incurred by Primary Funding
in conjunction with foreclosure efforts, the security interest of the Primary
Funding shall be superior to and entitled to priority over the security interest
of the Bridge Lender;</font></div>
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thereafter, and to the extent of the indebtedness owed by Client to the Bridge
Lender, the security interest of Bridge Lender shall be superior to and entitled
to priority over the security interest of Primary Funding.</font></div>
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parties each agree that prior to the exercise of any of their rights and
remedies with respect to any security interest they may have in Client, the
party pursuing its rights and remedies will first give the other twenty four
hours written notice before pursuing its claim.</font></div>
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event of any action to enforce or interpret the terms of this agreement, that
the prevailing party in any such action will be entitled to recover reasonable
attorney&#8217;s fees and cost.</font></div>
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parties agree that all actions or proceedings of any nature whatsoever relating
directly or indirectly hereto shall be litigated or arbitrated in courts or
places located within the State of California, County of San Diego and if such
action shall be brought in Federal Court then within the Federal District Court
located in said State.</font></div>
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Intercreditor Agreement constitutes the entire, final and integrated agreement
between the parties hereto pertaining to the subject matter hereof, and
supersedes any and all prior understandings, representations, warranties and
agreements between the parties hereto, or any of them pertaining to the subject
matter hereof.</font></div>
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<DOCUMENT>
<TYPE>EX-10.3
<SEQUENCE>4
<FILENAME>ex10x3.htm
<DESCRIPTION>EXHIBIT 10.3
<TEXT>
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    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt; TEXT-ALIGN: right"><font style="FONT-WEIGHT: bold">Exhibit 10.3</font><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt">
      <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">INTERCREDITOR
AGREEMENT</font></font></div>
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      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">This
Intercreditor Agreement (Agreement) is made this 9<font style="DISPLAY: inline; FONT-SIZE: 70%; VERTICAL-ALIGN: text-top">th</font>
dayof July, 2010, and entered into between __________ (Investor) and Primary
Funding Corporation (Primary Funding).</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Recitals</font></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
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the Investor and Primary Funding have entered into an agreement by the Investor
is subordinating and assigning its priority interest in the inventory and the
accounts of PepperBall Technologies &#8211; CA, Inc. (CLIENT);</font></div>
      <div style="DISPLAY: block; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
      <div style="DISPLAY: block; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman">WHEREAS,
the parties wish to further clarify their respective rights regarding the
Agreement.</font></div>
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THEREFORE, for good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, and intending to be legally bound hereby, the
Investor and the Primary Funding hereby agree as follows:</font></div>
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term Accounts shall mean all existing and hereafter arising accounts, contract
rights, instruments, notes, drafts, documents, chattel paper and all other forms
of obligations owing to Client arising out of the sale or lease of goods or the
rendition of services by Client, irrespective of whether earned by performance,
and any and all credit insurance, guarantees and other security therefor, as
well as all merchandise returned to or reclaimed by Client and Clients books
relating to any of the foregoing.</font></div>
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term Inventory shall mean all of Client&#8217;s present and future inventory in which
Client has any interest, including goods which have been leased or held for sale
or lease or to be furnished under a contract of service and all of Client&#8217;s
present and future raw materials, work in process, finished goods, and packing
and shipping materials, wherever located, and any documents of title
representing any of the above.</font></div>
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Investor and the Primary Funding agree that Primary Funding&#8217;s security interest
in the Accounts and Inventory is to be construed as having priority to the
extent of all indebtedness secured thereby, now existing or hereafter arising in
the Accounts and Inventory over the security interest of the
Investor.</font></div>
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Notwithstanding any other provisions of this Agreement, it is the intent of the
Investor and Primary Funding that this Agreement and all prior agreements shall
be construed to be a subordination, subject to the terms and conditions stated
herein, from the Investor to Primary Funding of its security interest as well as
all rights, title and interest in the Accounts and the Inventory. If, however,
at the time either the Investor or Primary Funding, as the case may be, has
elected to foreclose upon its secured interest in Client or otherwise files suit
against Client related to the collection of the obligation Client owes it, and
Client is indebted to Primary Funding the parties agree that the following shall
be the order and priority of their respective security interests in the Accounts
and Inventory:</font></div>
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security interest of Primary Funding shall be superior to and entitled to
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the extent of the costs, expenses and attorneys fees incurred by Primary Funding
in conjunction with foreclosure efforts, the security interest of the Primary
Funding shall be superior to and entitled to priority over the security interest
of the Investor;</font></div>
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thereafter, and to the extent of the indebtedness owed by Client to the
Investor, the security interest of Investor shall be superior to and entitled to
priority over the security interest of Primary Funding.</font></div>
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parties each agree that prior to the exercise of any of their rights and
remedies with respect to any security interest they may have in Client, the
party pursuing its rights and remedies will first give the other twenty four
hours written notice before pursuing its claim.</font></div>
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event of any action to enforce or interpret the terms of this agreement, that
the prevailing party in any such action will be entitled to recover reasonable
attorney&#8217;s fees and cost.</font></div>
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parties agree that all actions or proceedings of any nature whatsoever relating
directly or indirectly hereto shall be litigated or arbitrated in courts or
places located within the State of California, County of San Diego and if such
action shall be brought in Federal Court then within the Federal District Court
located in said State.</font></div>
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Intercreditor Agreement constitutes the entire, final and integrated agreement
between the parties hereto pertaining to the subject matter hereof, and
supersedes any and all prior understandings, representations, warranties and
agreements between the parties hereto, or any of them pertaining to the subject
matter hereof.</font></div>
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WHEREOF, this Agreement is executed on the day first written above.</font></div>
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<tr>
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                <td valign="top" width="38%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">PRIMARY
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                <td valign="top" width="50%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
                <td valign="top" width="35%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
                <td valign="top" width="12%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
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                <td align="left" nowrap valign="top" width="35%" style="BORDER-BOTTOM: black 2px solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">/s/&#160;Patricia
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                <td valign="top" width="50%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
                <td align="left" nowrap valign="bottom" width="35%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">By:&#160;
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                <td valign="top" width="12%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
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                <td valign="top" width="50%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
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<tr>
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                  <td align="left" nowrap valign="bottom" width="35%" style="BORDER-BOTTOM: black 2px solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">By:&#160;</font></td>
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                  <td valign="top" width="50%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
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