FIFTH AMENDED AND RESTATED NOTE AND WARRANT PURCHASE AGREEMENT

EXHIBIT 4(10)

FIFTH AMENDED AND RESTATED
NOTE AND WARRANT PURCHASE AGREEMENT

          This Fifth Amended and Restated Note and Warrant Purchase Agreement (“Fifth Amended Agreement”) amends and completely replaces the prior version of this Fifth Amended Agreement. It remains effective as of the dates originally signed as to each Purchaser (under previous versions of this Fifth Amended Agreement).

          This Fifth Amended Agreement, dated effective as of the date noted by their signature as to each Purchaser, by and among Integral Vision, Inc., a Michigan corporation (the “Company”), those purchasers listed on Exhibit A (each individually a “Purchaser “ and collectively, the “Purchasers”, which term shall include Class 2 Purchasers and Class 3 Purchasers, as defined below, successors and assigns and any permitted transferees of the Notes or the Warrants) and J. M. Warren Law Offices, P.C., as Agent.

          NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

SECTION 1. SALE AND PURCHASE OF NOTES AND WARRANTS

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SECTION 2. THE CLOSING

          (a) Subject to the terms and conditions hereof, the closing (the “Closing”) of the purchase and sale of the Notes and Warrants will take place at the offices of J.M. Warren Law Offices, P.C. at such time and date as shall be mutually agreed to by the Company and the Purchasers. Such times and dates are herein referred to as the “Closing Dates” and individually as a “Closing Date.”

          (b) Subject to the terms and conditions hereof, on each Closing Date (i) the Company will deliver to each Purchaser a Note or Notes, substantially in the form of Exhibit B for Class 2 Notes and Exhibit F for New Class 3 Notes, payable to such Purchaser (or its nominee as notified to the Company), and dated the Closing Date, in the aggregate principal amount set forth opposite such Purchaser’s name on Exhibit A, and (ii) upon such Purchaser’s receipt thereof, such Purchaser will deliver to the Company by wire transfer an amount equal to the purchase price for such Notes (as specified in Section 1(a) hereof) payable to the order of the Company in immediately available funds (the Company is also allowed to exchange outstanding Notes for another class of Notes).

          (c) As an alternative to Section 2(b), upon receipt of a Purchaser’s signed copy of this Agreement, the Company will sign the Agreement, the Note and the Warrants, as applicable, and will instruct the Agent to communicate to the Purchaser that such documents have been signed and the Agent has obtained a perfected interest in the Collateral. Thereafter, upon the Company’s receipt by wire transfer of the purchase price for the Note and Warrants, the Company will deliver the signed Agreement, Note and Warrants, as applicable, to the Purchaser.

          (d) The Purchasers acknowledge that the Notes and the Warrants constitute an “investment unit” within the meaning of Section 1273(c)(2) of the Code and that the Company will allocate the “issue price” (within the meaning of Section 1273(b) of the Code) of such investment unit, for all Income Tax purposes, between the Notes and Warrants as required by applicable tax law. Each Purchaser agrees to abide by Treasury Regulation § 1. 1273-2(h)(2) with respect to such allocation of the issue price. For all Notes and Warrants issued under this Agreement after December 31, 2001, the Company and its tax advisors have determined that the limited marketability of the Company’s Common Stock does not provide a reasonable basis for the Company and its advisors to determine a value for the Warrants issued or the conversion

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rights. Therefore, all warrants issued by the Company pursuant to this Agreement, shall have only a minimal or negligible value ascribed to them. It is understood, however, that in the event market conditions change such that the warrants again have value, the Company and its tax advisors will determine an appropriate value for warrants issued thereafter with no need to amend this Agreement.

SECTION 3. DEFINITIONS

          (a) For purposes of the Loan Documents, the following definitions shall apply (such definitions to be equally applicable to both the singular and plural forms of the terms defined):

          “Accountants” means Rehmann Robson or another independent certified public accounting firm selected by the Company and reasonably satisfactory to the Majority Noteholders.

          “Affiliate”, when used with respect to any Person, means (i) if such Person is a corporation, any officer or director thereof (other than a director nominated by one of the Purchasers) and any Person (other than one of the Purchasers) which is, directly or indirectly, the beneficial owner of more than ten percent (10%) of the Voting Stock thereof, and, if such beneficial owner is a partnership, any partner thereof, or if such beneficial owner is a corporation, any Person, directly or indirectly through one or more intermediaries, controlling, controlled by or under common control with such beneficial owner, or any officer or director of such beneficial owner or of any corporation occupying any such control relationship, (ii) if such Person is a partnership, any partner thereof, (iii) in all cases, any Person (other than one of the Purchasers) which, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with such Person, and (iv) in all cases, any Person 10% or more of whose Voting Stock is beneficially owned, directly or indirectly through one or more intermediaries, by such Person. For purposes of this definition, “control” (including the correlative terms “controlling”, “controlled by” and “under common control with”), with respect to any Person, shall mean possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities or by contract or otherwise.

          “Agent” means J.M. Warren Law Offices, P.C. or any successor agent appointed pursuant to Section 21.7 hereof

          “Agreement” means this Fifth Amended Agreement (together with exhibits and schedules) as from time to time assigned, supplemented or amended or as the terms hereof may be waived.

          “Bankruptcy Code” means the United States Bankruptcy Code and any successor thereto, and the rules and regulations issued thereunder.

          “Board” or “Board of Directors” means, with respect to any Person which is a

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corporation, a business trust or other entity, the board of directors or other group, however designated, which is charged with legal responsibility for the management of such Person, or any committee of such board of directors or group, however designated, which is authorized to exercise the power of such board or group in respect of the matter in question.

          “Business” means the business conducted by the Company in the vision industry and all other activities ancillary or related thereto.

          “Business Day” means any day other than a Saturday, Sunday or other day on the New York Stock Exchange is required to close.

          “Capital Expenditures” means for any period, the amount of all payments made by the Company during such period for the lease, purchase, improvement, construction or use of any Property, the value or cost of which under GAAP is required to be capitalized and appears on the Company’s balance sheet in the category of property, plant or equipment, without regard to the manner in which such payments or the instrument pursuant to which they are made is characterized by the Company or any other Person, and shall include, without limitation, the principal components of payments for the installment purchase of Property and payments under Capitalized Leases.

          “Capitalized Leases” means any lease to which the Company or any Subsidiary is party as lessee, or by which it is bound, under which it leases any property (real, personal or mixed) from any lessor other than the Company or any Subsidiary, and which is required to be capitalized in accordance with GAAP, but also including any such lease, whether or not so capitalized, where the Company or a Subsidiary is treated as the owner of the leased property under the Code.

          “Claims” has the meaning set forth in the definition of “Environmental Claim.”

          “Class 2 Note” has the meaning set forth in Section 1(b)(ii) hereof.

          “Class 3 Note” has the meaning set forth in Section 1(b)(iii) hereof.

          “Class 2 Purchaser” means a purchaser of Class 2 Notes and Class 2 Warrants, if elected.

          “Class 3 Purchaser” means a purchaser of Class 3 Notes.

          “Class 2 Warrants” has the meaning set forth in Section 1(d) hereof.

          “Closing” has the meaning set forth in Section 2(a) hereof.

          “Closing Date” has the meaning set forth in Section 2(a) hereof.

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          “Code” means the Internal Revenue Code of 1986, as amended from time to time, and the regulations and interpretations thereunder.

          “Collateral” when used in the form of Class 2 Note attached hereto as Exhibit B is hereby defined to mean both IP Collateral and WP Collateral (both terms defined below).

          “Collateral Assignment” means the Collateral Assignment of Proprietary Rights and Security Agreement dated March 29, 2001 by the Company and the Agent as amended March    , 2008.

          “Commission” means the Securities and Exchange Commission and any other similar or successor agency of the federal government administering the Securities Act or the Securities Exchange Act.

          “Common Stock” means that class of stock or other equivalent evidences of ownership of the Company, the holders of which are entitled to vote generally to elect the Board of Directors.

          “ Common Stock Equivalents ” means any securities of the Company or any Subsidiary which would entitle the holder thereof to acquire at any time Common Stock, including without limitation, any debt, preferred stock, rights, options, warrants or other instrument that is at any time convertible into or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.

          “Company” means Integral Vision, Inc., a Michigan corporation, its successors and permitted assigns.

          “Company’s Obligations” means all loans, debts, principal, interest (including any interest that, but for the provisions of the Bankruptcy Code, would have accrued), premiums, liabilities, obligations (including the performance of the covenants of the Company contained herein or in the Loan Documents), fees, lease payments, guaranties, covenants, and duties owing by the Company to the Purchasers or the Agent of any kind and description (whether pursuant to or evidenced by this Agreement, any of the other Loan Documents, or any other note or other instrument, or by any other agreement between the Purchasers or the Agent and the Company, and whether or not for the payment of money), whether direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, and including any debt, liability, or obligation owing from the Company to others that the Purchasers or the Agent may have obtained by assignment or otherwise, and further including all interest not paid when due.

          “Consolidated,” when used with reference to any financial term in this Agreement, means the aggregate for the Company and any Subsidiary of the amounts signified by such term for all such Persons, with intercompany items eliminated, and, with respect to earnings, after eliminating the portion of earnings properly attributable to minority interests, if any, in the capital of any such Person (other than in the capital of the Company) and otherwise as determined in accordance with GAAP.

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           “Consolidated Net Income” means, for any period for which the amount thereof is to be determined, the net income (net of any losses or expenses) or loss of the Company and any Subsidiary on a Consolidated basis, during such period (such net income to be determined in accordance with GAAP) after Income Taxes actually paid, but excluding:

           “Consolidated Assets” means, at any time, the total assets of the Company and its Subsidiaries determined in accordance with GAAP.

           “Contingent Liabilities” of any person means, as of any date, all obligations of such person or of others for which such person is contingently liable, as obligor, guarantor, surety or in any other capacity, or in respect of which obligations such person assures a creditor against loss or agrees to take any action to prevent any such loss (other than endorsements of negotiable instruments for collection in the ordinary course of business), including all reimbursement obligations of such person in respect of any letters of credit, surety bonds or similar obligations and all obligations of such person to advance funds to, or to purchase assets, property or services from, any other person in order to maintain the financial condition of such other person.

           “Default Rate” means a per annum rate equal to the interest rate on the Notes plus four percent (4%).

           “Earnings Available for Dividends” means the excess of (A) the sum of (x) 50% of aggregate Consolidated Net Income, if positive, for each fiscal year commencing on or after January 1, 2001 less 100% of aggregate Consolidated Net Income, if negative, for each fiscal year commencing on or after January 1, 2001 plus (y) net proceeds from the sale by the Company of Common Stock (other than pursuant to the Warrants) minus (B) all Restricted Payments and Restricted Investments made since the Closing Date.

           “Environment” means all air, surface water, groundwater, or land, including land surface

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or subsurface, including all fish, wildlife, biota and all other natural resources.

           “Environmental Claim” means any and all administrative or judicial actions, suits, orders, claims, liens, notices, notices of violations, investigations, complaints, requests for information, proceedings, or other communication (written or oral), whether criminal or civil, (collectively, “Claims”) pursuant to or relating to any applicable Environmental Law by any person (including but not limited to any Governmental or Regulatory Authority, private person and citizens’ group) based upon, alleging, asserting, or claiming any actual or potential (i) violation of or liability under any Environmental Law, (ii) violation of any Environmental Permit, or (iii) liability for investigatory costs, cleanup costs, removal costs, remedial costs, response costs, natural resource damages, property damage, personal injury, fines, or penalties arising out of, based on, resulting from, or related to the presence, or Release into the Environment, of any Hazardous Materials at any location, including but not limited to any off-site location to which Hazardous Materials or materials containing Hazardous Materials were sent forth for handling, storage, treatment or disposal.

           “Environmental Law” means any and all current and future, federal, state, local, provincial and foreign, civil and criminal laws, statutes, ordinances, orders, codes, rules, regulations, Environmental Permits, policies, guidance documents, judgments, decrees, injunctions, or agreements with any Governmental or Regulatory Authority, relating to the protection of health and the Environment, worker health and safety, and/or governing the handling, use, generation, treatment, storage, transportation, disposal, manufacture, distribution, formulation, packaging, labeling, or Release of Hazardous Materials, whether now existing or subsequently amended or enacted, including but not limited to: the Clean Air Act, 42 U.S.C. § 7401 et seq.; the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (“CERCLA”), 42 U.S.C. § 9601 et seq.; the Federal Water Pollution Control Act, 33 U.S.C. § 1251 et seq; the Hazardous Material Transportation Act 49 U.S.C. § 1801 et seq.; the Federal Insecticide, Fungicide and Rodenticide Act 7 U.S.C. § 136 et seq.; the Resource Conservation and Recovery Act of 1976 (“RCRA”), 42 U.S.C. § 6901 et seq.; the Toxic Substances Control Act, 15 U.S.C. § 2601 et seq.; the Occupational Safety & Health Act of 1970, 29 U.S.C. § 651 et seq.; the Oil Pollution Act of 1990, 33 U.S.C. § 2701 et seq.; and the state analogies thereto, all as amended or superseded from time to time; and any common law doctrine, including but not limited to, negligence, nuisance, trespass, personal injury, or property damage related to or arising out of the presence, Release, or exposure to a Hazardous Material.

           “Environmental Permit” means any federal, state, local, provincial, or foreign permits, licenses, approvals, consents or authorizations required by any Governmental or Regulatory Authority under or in connection with any Environmental Law and includes any and all orders, consent orders or binding agreements issued or entered into by a Governmental or Regulatory Authority under any applicable Environmental Law.

           “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended, or any successor statute.

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           “ERISA Affiliate” means each “person” (as defined in Section 3(9) of ERISA) which is under “common control” with the Company or any of its Subsidiaries (within the meaning of Section 414(b), (c), (m) or (o) of the Code).

           “Event of Default” has the meaning set forth in Section 14 hereof.

           “Fair Market Value” of any property means the fair market sale value which a willing buyer at retail would pay a willing seller, each under no compulsion to buy or sell and in full possession of all relevant facts.

           “GAAP” means generally accepted accounting principles, as in effect from time to time, which shall include the official interpretations thereof by the Financial Accounting Standards Board or any successor thereto, consistently applied.

           “Governmental Regulations” means any and all laws, statutes, ordinances, rules, regulations, judgments, writs, injunctions, decrees, orders, awards and standards, or any similar requirement, of the government of the United States or any foreign government or any state, province, municipality or other political subdivision thereof or therein or any court, agency, instrumentality, regulatory authority or commission of any of the foregoing.

           “Governmental or Regulatory Authority” means any court, tribunal, arbitrator, authority, agency, commission, official or other instrumentality of the United States, any foreign country or any domestic or foreign state, county, city or other political subdivision.

           “Hazardous Materials” means petroleum, petroleum hydrocarbons or petroleum products, petroleum by-products, radioactive materials, underground storage tanks, asbestos or asbestos-containing materials, gasoline, diesel fuel, pesticides, radon, urea formaldehyde, lead or lead-containing materials, polychlorinated biphenyls, ionizing and non-ionizing radiation including radon and electromagnetic frequency radiation; and any other chemicals, materials, substances or wastes in any amount or concentration which are now or hereafter become defined as or included in the definition of “hazardous substances,” “hazardous materials,” “hazardous wastes,” “extremely hazardous waste,” “restricted hazardous wastes,” “toxic substances,” “toxic pollutants “pollutants”“regulated substances,” “solid wastes,” or “contaminants” or words of similar import, under any Environmental Law.

           “Income Taxes” means all federal, state, local or foreign income, taxes, assessments, duties, fees, levies or other governmental charges, whether disputed or not, together with any interest, penalties, additions to tax or additional amounts with respect thereto.

           “Indebtedness” means all liabilities, obligations and reserves, contingent or otherwise, which in accordance with GAAP, would be reflected as a liability on a balance sheet or would be required to be disclosed in a financial statement, including, without duplication: (i) all Indebtedness for Borrowed Money, (ii) all obligations secured by any Lien upon Property owned by the Company, irrespective of whether such obligation or liability is assumed; (iii) any

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obligation of the Company guaranteeing or intended to guarantee (whether guaranteed, endorsed, co-made, discounted, or sold with recourse to the Company, but exclusive of obligations arising as the result of the endorsement by the Company of checks or other negotiable instruments in the ordinary course of the Company’s business for purposes of depositing such items) any indebtedness, lease, dividend, letter of credit, or other obligation of any other Person; and (iv) liabilities in respect of unfunded vested benefits under any Single Employer Plan or in respect of withdrawal liabilities incurred under ERISA by the Company or any ERISA Affiliate to any Multiemployer Plan.

           “Indebtedness for Borrowed Money” means without duplication, all Indebtedness (i) in respect of money borrowed, (ii) evidenced by a note, debenture or other like written obligation to pay money (including, without limitation, all of the Company’s Obligations and the Permitted Senior Indebtedness, and all reimbursement or other obligations of the Company in respect of letters of credit (except for commercial letters of credit up to $500,000), letter of credit guaranties, bankers acceptances, interest rate swaps, controlled disbursement accounts, or other financial products (except hedging transactions); (iii) in respect of Capitalized Leases or for the deferred purchase price of Property (other than trade payables arising in the ordinary course of business that are not represented by promissory notes or by other written evidence other than invoices); or (iv) in respect of obligations under conditional sales or other title retention agreements, and all guaranties of any or all of the foregoing.

           “Indemnified Persons” has the meaning set forth in Section 18.1 hereof.

           “Investment” means, with respect to any Person:

           “Issue Date” means the date on which Notes or Warrants are issued pursuant to the Fifth Amended Agreement (or under previous versions of this Agreement).

          “IP Collateral” means the Property upon which the Agent is granted the IP Security Interests, pursuant to the terms of the Collateral Assignment.

          “IP Security Interest” means the Liens granted to the Agent for the benefit of the

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Noteholders pursuant to this Agreement and the Loan Documents.

           “Joint Venture” means a corporation, limited partnership or other limited liability business entity, formed in the ordinary course of business by the Company or any Subsidiary with Persons other than Affiliates.

           “Lien” means any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), or preference, priority or other security interest of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement and any financing lease or Capitalized Lease having substantially the same effect as any of the foregoing and any assignment or other conveyance of any right to receive income).

           “Loan Documents” mean, collectively, the

          and individually any one of them.

          As to each of the foregoing, together with all alterations, amendments, changes, extensions, modifications, refinancings, refundings, renewals, replacements, restatements or supplements thereto.

           “Losses” have the meaning set forth in Section 18.1 hereof.

           “Majority Noteholders” means the holders of Notes evidencing more than 50% of the principal amount of all Notes then outstanding.

           “Market Price” per share of the Company’s Common Stock means the average of the daily closing prices for the period specified. The closing price for each day shall be the last reported sale price or, in case no such sale takes place on such day, the average of the closing bid

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and asked prices, in either case on the principal national United States securities exchange on which the Company’s Common Stock is listed or admitted to trading, or if the Company’s Common Stock is not listed or admitted to trading on any such national securities exchange, the average of the highest reported bid and lowest reported asked prices as furnished by the National Association of Securities Dealers Inc., Automated Quotation System Level I, the Over-the-Counter Bulletin Board or comparable system. If the closing price cannot be so determined, the Market Price shall be determined:

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           “Material Adverse Effect” means (i) a material adverse effect on the assets, properties, liabilities, business, affairs, results of operations, condition (financial or otherwise) or prospects of the Company and any Subsidiary on a Consolidated basis, (ii) an effect which is prejudicial in any material respect to the holders of the Notes or the Warrants or (iii) an effect on the ability of the Company or any Subsidiary to perform its obligations under this Agreement, any Loan Document, the Notes or the Warrants.

           “Multiemployer Plan” shall mean any multiemployer plan (within the meaning of section 3(37) of ERISA) to which either the Company, the Subsidiary, or any ERISA Affiliate has an obligation to contribute.

           “Note” or “Notes” has the meaning set forth in Section l(b) hereof.

           “Noteholder” or “Noteholders” shall mean the holder of an outstanding Note or Notes or holders of outstanding Notes.

           “Note and Warrant Purchase Agreement” as used in the Exhibits attached hereto, in the Collateral Assignment, and in the Agreement of Appointment of Representative appointing The Klonoff Company, Inc. as Representative of the Class 2 Purchasers is defined to mean this Agreement.

           “Outstanding” or “outstanding” means, when used with reference to the Notes or Warrants as of a particular time, all Notes or Warrants, as the case may be, theretofore duly issued except (i) Notes or Warrants theretofore reported as lost, stolen, mutilated or destroyed or surrendered for transfer, exchange or replacement, in respect of which new or replacement Notes or Warrants have been issued by the Company, (ii) Notes theretofore paid in full, (iii) Warrants theretofore fully exercised and (iv) Notes theretofore canceled by the Company, whether upon exercise of a Warrant in whole or in part or otherwise; except that for

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          “Permitted Senior Indebtedness” means the interests of the lessor under any Capitalized Leases permitted to exist hereunder.

          “Person” means an individual, corporation, partnership, firm, limited liability company, association, trust, unincorporated organization, government, governmental body or political subdivision thereof.

          “Plan” shall mean any employee benefit plan (within the meaning of section 3(3) of ERISA) maintained or contributed to by the Company, any Subsidiary, or any ERISA Affiliate, other than a Multiemployer Plan.

          “Potential Default” means a condition or event which, with notice or lapse of time or both, would constitute an Event of Default.

          “Principal Market” means the principal securities exchange or market on which the Common Stock is listed or traded.

          “Prohibited Transaction” means any transaction involving any Plan which is proscribed by Section 406 of ERISA or Section 4975 of the Code.

          “Property” means all types of real, personal or mixed property and all types of tangible or intangible property.

          “Purchase Agreement” when used in any of the Exhibits attached hereto and in the Collateral Assignment and WC Security Agreement shall have the same meaning as Agreement herein.

          “Purchase Money Liens” means Liens securing purchase money Indebtedness incurred in connection with the acquisition of capital assets by the Company in the ordinary course of business; provided that (a) such Liens do not extend to or cover assets or properties other than those purchased in connection with the purchase in which such Indebtedness was incurred and (b) the obligation secured by any such Lien so created shall not exceed 100% of the cost of the property including transportation and installation costs, covered thereby.

          “Purchaser(s)” has the meaning set forth in the second paragraph hereof.

          “Real Estate” means all real estate and improvements located thereon owned by the Company.

          “Registration Demand” has the meaning set forth in Section 17 hereof.

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          “Release” means any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, or disposing of a Hazardous Material into the Environment.

          “Representative” means The Klonoff Company, Inc. or any successor Representative in its capacity as agent for the Class 2 Purchasers as Secured Party under the Security Agreement.

          “Reportable Event” shall mean, with respect to any Single Employer Plan, an event described in section 4043(b) of ERISA, other than an event as to which the notice requirement is waived under applicable PBGC regulations.

          “Restricted Investment” means any Investment other than (1) obligations of the United States government due within one year, (2) certificates of deposit and bankers acceptances due within one year of a United States domiciled commercial bank having capital funds of at least $100 million and whose long-term unsecured debt obligations have been given a rating of at least A by Standard & Poor’s or A2 by Moody’s, (3) commercial paper rated P-1 by Moody’s or A-1 by Standard & Poor’s and maturing not more than 270 days from the date of creation thereof, (4) debt of any state or political subdivision that is rated AA or better by Moody’s or Aa2 or better by Standard and Poor’s and maturing in less than one year, (5) investments in, and loans and advances to, Subsidiaries or entities that will, concurrently with such investment become Subsidiaries, (6) trade credit extended in the ordinary course of the Company’s business, (7) loans and advances made in the ordinary course of business to officers and employees of Company for relocation expenses, travel advances and similar expenses relating to their employment, (8) endorsements of instruments or items of payment for deposit to the Company’s bank accounts, and (9) additional Investments not to exceed $500,000 in the aggregate.

          “Restricted Payment” means (i) every direct or indirect dividend or other distribution paid, made or declared by the Company on or in respect of any class of its capital stock or in respect of any partnership or Joint Venture, in all cases whether now or hereafter outstanding, interests and any payment under or with respect to anti-dilution provisions of any capital stock of the Company, (ii) every payment in connection with the redemption, purchase, retirement or other acquisition, direct or indirect, by or on behalf of the Company of any shares of the Company’s capital stock, whether or not owned by the Company or any partnership or Joint Venture interests of the Company, or any warrants, rights or options to acquire such stock or partnership interests, (iii) every payment by or on behalf of the Company (whether as repayment or prepayment of principal or as interest or otherwise) on or with respect to any obligation to any Person, of any Affiliate of the Company or of any other holder of shares of the Company’s Common Stock, which obligation is assumed or guaranteed by the Company; provided, however, (a) that the restrictions of the foregoing clauses (i) and (ii) shall not apply to any dividend, distribution, or other payment to the extent payable in shares of the Common Stock of the Company or in options, warrants or other rights to purchase such Common Stock, (b) that none of the foregoing clauses shall apply to any payments from a Subsidiary to the Company, (c) that none of the foregoing clauses shall apply to any purchases by the Company from a Wholly-

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Owned Subsidiary of additional capital stock of such Subsidiary and (d) that none of the foregoing clauses shall apply to any payments, distributions or other transfers or actions on or with respect to the Notes or Warrants. For purposes of this definition, “capital stock” shall also include warrants (other than the Warrants) and other rights and options to acquire shares of capital stock.

          “Securities Act” means the Securities Act of 1933, as amended, and the rules, regulations and interpretations thereunder.

          “Securities Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules, regulations and interpretations thereunder.

          “Share” or “Shares” means shares of the Company’s Common Stock, or other securities, which can be obtained or have been obtained by an exercise in whole or in part of any Warrant or Class 3 Note or the exchange of a Warrant or Class 3 Note for shares of the Company’s Common Stock pursuant to the terms of the Warrants, including, without limitation, shares of the Company’s Common Stock received by the exercise of Class 1 Warrants in 2004 and 2005 under previous versions of this note and warrant purchase agreement. In the event that any Shares are sold either in a public offering pursuant to an effective registration statement under Section 6 of the Securities Act or pursuant to Rule 144 (but if sold under Rule 144, only if sold in “brokers’ transactions” within the meaning of Rule 144), then the transferees of such Shares shall not be entitled to any benefits under this Agreement with respect to such Shares and such Shares shall no longer be considered to be “Shares” for purposes of this Agreement.

          “Single Employer Plan” shall mean any Plan that is subject to Title IV of ERISA.

          “Subordinated Debt” means debt of the Company issued in a capital raising transaction which meets each of the following requirements: (a) such debt is wholly unsecured; (b) such debt is contractually fully subordinated (including, without limitation, interest payments due thereon), as to payment and liquidation, to the payment in full of the Notes on terms, and pursuant to written agreements in form and substance, that restrict the subordinated creditor from pre-paying any amounts in respect of the principal of such debt (upon acceleration or otherwise) or commencing any judicial or other collection efforts or exercising any other remedies in respect of the principal of such debt prior to the date that is ninety-one (91) days following the payment in full of the Notes outstanding at the time of the issuance of said Subordinated Debt; and (c) such debt does not mature prior to the date that is ninety one (91) days following the latest maturity date (as defined in the Notes) of the Notes outstanding at the time of the issuance of said Subordinated Debt. Interest payments payable on Subordinated Debt cannot be required to be paid until after April 1, 2009.

          “Subsidiary” means any corporation in which at least a majority of the shares (other than any directors’ qualifying shares required by law) of each class of the capital stock (other than preferred stock), at the time as of which any determination is being made, is owned, beneficially and of record, directly or indirectly, by the Company or its Subsidiary, or both.

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          “Trading Day” means any day on which the Common Stock is purchased and sold on the Principal Market.

          “UCC” means the Uniform Commercial Code as in effect on the date hereof in the State of Michigan, as amended, or as in effect in any jurisdiction in which IP Collateral or WC Collateral is located.

          “Voting Stock” means capital stock or a partnership or membership of any class or classes of a corporation, partnership or other limited liability entity, respectively, the holders of which are ordinarily entitled to elect the directors, or persons performing similar functions, of such corporation, partnership or entity.

          “Warrant” or “Warrants” has the meaning set forth in Section l(d) hereof.

          “WC Collateral” means all of the following assets and rights of the Company, wherever located, whether now owned or hereafter acquired or arising: Accounts; Letters of Credit; Letter-of-credit rights; Inventory, including Work in Progress; Supporting obligations; and all Cash Proceeds and products of the foregoing [said terms having the respective meanings given such terms in Article 9 of the Uniform Commercial Code (“UCC”) (or absent definition in Article 9 of the UCC, as defined in any other article of the UCC) as enacted in the State of Michigan as of the date of this Agreement, and as amended thereafter].

          “WC Security Agreement” means the Security Agreement dated May 1, 2002 between the Representative and the Company as amended March   , 2008.

          “WC Security Interest” means Liens granted to the Representative of the Purchasers pursuant to this Agreement and the Loan Documents.

          “Wholly-Owned Subsidiary” means any Subsidiary, all of the equity securities of which (other than directors’ qualifying shares) are owned by the Company or one or more other Wholly-Owned Subsidiary of the Company.

          (e) For all purposes of the Loan Documents, except as otherwise expressly provided or unless the context otherwise requires:

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SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY

          The Company represents and warrants as follows as of the date hereof and as of the Closing Date:

          4.1. Corporate Existence and Power . The Company is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, and is duly qualified to do business, and is in good standing, in all additional jurisdictions where such qualification is necessary under applicable law. The Company has all requisite corporate power to own or lease the properties used in its business and to carry on its business as now being conducted and as proposed to be conducted, and to execute and deliver this Agreement and the other Loan Documents to be executed and to engage in the transactions contemplated hereby and thereby.

          4.2. Corporate Authority . The execution, delivery and performance by the Company of this Agreement and the other Loan Documents have been duly authorized by all necessary corporate action and are not in contravention of any applicable Governmental Regulation, or of the terms of the Company’s charter or by-laws, or of any contract or undertaking to which the Company is a party or by which the Company or its property may be bound or affected and do not result in the imposition of any Lien, except for Permitted Liens.

          4.3. Binding Effect . This Agreement is, and each of the Loan Documents to which the Company is a party when delivered hereunder will be, legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their respective terms.

          4.4. Subsidiaries . The Company has no active Subsidiaries.

          4.5. Financial Condition . The financial statements included in the documents delivered pursuant to Section 10.6, copies of which have been furnished to the Purchasers, fairly present, and the financial statements delivered pursuant to Section 7.4 will fairly present, the financial position of the Company and any Subsidiary as at the respective dates thereof, and the results of operations of the Company and any Subsidiary for the respective periods indicated, all on a Consolidated basis in accordance with GAAP (subject, in the case of interim statements, to normal, immaterial year-end audit adjustments). There is no material Contingent Liability of the Company or any Subsidiary that is not reflected in such Consolidated statements or in the notes thereto.

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          4.6. Use of Loans . The Company will use the proceeds of the sale of the Notes and the Warrants for working capital and other general corporate purposes. The Company does not extend or maintain, in the ordinary course of business, credit for the purpose, whether immediate, incidental, or ultimate, of buying or carrying margin stock (within the meaning of Regulation U of the Board of Governors of the Federal Reserve System), and no part of the proceeds of any Note will be used for the purpose, whether immediate, incidental, or ultimate, of buying or carrying any such margin stock or maintaining or extending credit to others for such purpose.

          4.7. Consents, Etc . Except for such consents, approvals, authorizations, declarations, registrations or filings delivered by the Company at or prior to the Closing pursuant to Section 10.4, if any, each of which is in full force and effect, no consent, approval or authorization of or declaration, registration or filing with any governmental authority or any nongovernmental person, including any creditor, lessor or shareholder of the Company or any Subsidiary, is required on the part of the Company or any Subsidiary in connection with the execution, delivery and performance of this Agreement and the other Loan Documents or the transactions contemplated hereby or thereby or as a condition to the legality, validity or enforceability of this Agreement and the other Loan Documents.

          4.8. Taxes . Each of the Company and any Subsidiary has filed all tax returns (federal, state and local) required to be filed and have paid all taxes shown thereon to be due, including interest and penalties, or has established adequate financial reserves on its books and records for payment thereof. The Company does not know of any actual or proposed tax assessment or any basis therefor, and no extension of time for the assessment of deficiencies in any federal or state tax has been granted to the Company.

          4.9. Title to Properties . Except as otherwise disclosed in the latest Consolidated balance sheet delivered pursuant to Section 4.5, the Company and any Subsidiary have a valid and indefeasible ownership interest in all of the properties and assets reflected in the Consolidated balance sheet of the Company and any Subsidiary or subsequently acquired by the Company or any Subsidiary. All of such properties and assets are free and clear of any Lien, except for Permitted Liens.

          4.10. Compliance with Governmental Relations . To the best of the Company’s knowledge, the Company and any Subsidiary is in compliance in all material respects with all Governmental Regulations (including Environmental Laws) applicable to such person or its business or properties. Without limiting the generality of the foregoing, all licenses, permits, orders or approvals which are required under any Governmental Regulation in connection with any of the businesses or properties of the Company or any Subsidiary (“Permits”) are in full force and effect, no notice of any violation has been received in respect of any such Permits and no proceeding is pending or, to the knowledge of the Company, threatened to terminate, revoke or limit any such Permits.

          4.11. ERISA . To the best of the Company’s knowledge, the Company and its Plans are in

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compliance in all material respects with those provisions of ERISA and of the Code which are applicable with respect to any Plan. No Prohibited Transaction and no Reportable Event has occurred with respect to any such Plan. The Company is not an employer with respect to any Multiemployer Plan. The Company has met the minimum funding requirements under ERISA and the Code with respect to its Plans, if any, and has not incurred any liability to the PBGC or any Plan. There is no material unfunded benefit liability, determined in accordance with Section 400 1 (a)(1 8) of ERISA, with respect to any Plan of the Company.

          4.12. Environmental Matters. Without limiting the generality of Section 4.10:

          4.13. Investment Company Act . Neither Company nor any Subsidiary is an “investment company” or a company “controlled” by an “investment company,” within the meaning of the Investment Company Act of 1940, as amended.

          4.14. Disclosure . No report or other information furnished in writing by or on behalf of the Company to any Purchaser in connection with the negotiation or administration of this Agreement contains any material misstatement of fact or omits to state any material fact or any fact necessary to make the statements contained therein not misleading. Neither this Agreement, the other Loan Documents, nor any other document, certificate, or report or statement or other information furnished to any Purchaser by or on behalf of the Company in connection with the

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transactions contemplated hereby contains any untrue statement of a material fact or omits to state a material fact in order to make the statements contained herein and therein not misleading. There is no fact known to the Company which materially and adversely affects, or which in the future may (so far as the Company can now foresee) materially and adversely affect, the business, properties, operations, condition, financial or otherwise, or prospects of the Company or any Subsidiary, which has not been set forth in this Agreement or in the other documents, certificates, statements, reports or other information furnished in writing to any Purchaser by or on behalf of the Company in connection with the transactions contemplated hereby.

          4.15. Stock Ownership . The authorized capital stock of the Company consists of (i) 50,000,000 shares of Common Stock, without par value, of which 29,566,409 shares are outstanding, and (ii) 400,000 shares of Preferred Stock (though 7,000 shares of preferred stock are retired), without par value, none of which are outstanding. Such outstanding shares of Common Stock are duly authorized, validly issued and outstanding and fully paid and nonassessable. Except for the Warrants, the warrants to purchase 3.5 million shares of the Company issued to investors who purchased 7 million shares of the Company in April 2005 [“PIPE Investors”] (said warrants include provisions requiring the Company to issue additional warrants to purchase shares of the Company to said warrant holders when the Company issues any equity securities below said warrants’ initial exercise price of $1.60 per share) the Class 3 Notes and options to purchase shares of Common Stock granted to employees, directors or agents of the Company pursuant to the Company’s stock option plans.

          4.16. No Defaults or Conflicts.

          (a) No Event of Default or Potential Default has occurred and is continuing.

          (b) The execution, delivery and performance by the Company of this Agreement and of the Loan Documents to which it is a party and any of the transactions contemplated hereby or thereby (including, without limitation, the issuance of the Notes, the Warrants and the Shares as contemplated herein or therein) do not and will not (i) violate or conflict with, with or without the giving of notice or the passage of time or both, any provision of (A) the Articles of Incorporation or By-Laws of the Company or (B) any law, rule, regulation, order, judgment, writ, injunction, decree, agreement, indenture or other instrument applicable to the Company or any Subsidiary or any of their respective properties (or to which the Company of the Subsidiary is a party or by which any of their respective properties may be bound), (ii) other than pursuant to this Agreement or the Loan Documents, result in the creation of any Lien upon any of the Company’s or any Subsidiary’s Properties, (iii) require the consent, waiver, approval, order or authorization of, or declaration, registration, qualification or filing with, any Person (whether or not a governmental authority and including, without limitation any shareholder approval) other than (A) the consent of the Senior Lender (B) any registration, qualification or filing with the Securities and Exchange Commission or any state securities commission necessary in connection with the Company’s obligations under Section 17 hereof and (C) the Company’s routine filing obligations under the Securities Exchange Act or (iv) cause anti-dilution clauses of any outstanding securities to become operative or give rise to any preemptive rights. No such

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provision referred to in the preceding clause (i) will have a Material Adverse Effect.

          4.17. Offering of Notes . Neither the Company nor any agent nor any other Person acting on their behalf, directly or indirectly, (i) offered any of the Notes, Warrants or any similar security of the Company (A) by any form of general solicitation or general advertising (within the meaning of Regulation D under the Securities Act) or (B) for sale to or solicited offer to buy any thereof from, or otherwise approached or negotiated with respect thereto with, any Person other than the Purchasers and additional potential investors who, either alone or with their Purchaser Representatives(s) (as defined in Regulation D under the Securities Act) have such knowledge and experience in financial and business matters that they are capable of evaluation the merits and risks of the prospective investment and who are able to bear the economic risks of the investment or (ii) has done, or caused to be done (or has omitted to do or to cause to be done) any act which act (or which omission) would result in bringing the issuance or sale of the Notes, Warrants or Shares within the provisions of Section 5 of the Securities Act.

          4.18. Outstanding Securities . All securities (as defined in the Securities Act) of the Company have been offered, issued, sold and delivered in compliance with, or pursuant to exemptions from, all applicable federal and state laws, and the rules and regulations of federal and state regulatory bodies governing the offering, issuance, sale and delivery of securities. The Company’s common stock is currently traded on the the OTC Bulletin Board®.

                    4.19. Intellectual Property .

                    (a) The Company owns, free and clear of claims or rights of any other Person, except as provided under this Agreement, with full right to use, sell, license, sublicense, dispose of, and bring actions for infringement of, or, to the knowledge of the Company, has acquired licenses or other rights to use, all Intellectual Property necessary for the conduct of its business as presently conducted (other than with respect to software which is generally commercially available and not used or incorporated into the Company’s products and open source software which may be subject to one or more “general public” licenses). All works that are used or incorporated into the Company’s services, products or services or products actively under development and which is proprietary to the Company was developed by or for the Company by the current or former employees, consultants or independent contractors of the Company or purchased or licensed by the Company.

                    (b) The business of the Company as presently conducted and the production, marketing, licensing, use and servicing of any products or services of the Company do not, to the knowledge of the Company, infringe or conflict with any patent, trademark, copyright, or trade secret rights of any third parties or any other Intellectual Property of any third parties in any material respect. The Company has not received written notice from any third party asserting that any Intellectual Property owned or licensed by the Company, or which the Company otherwise has the right to use, is invalid or unenforceable by the Company and, to the Company’s knowledge, there is no valid basis for any such claim (whether or not pending or threatened).

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                    (c) No claim is pending or, to the Company’s knowledge, threatened against the Company nor has the Company received any written notice or other written claim from any Person asserting that the Company’s present or contemplated activities infringe or may infringe in any material respect any Intellectual Property of such Person.

                    (d) All licenses or other agreements under which the Company is granted Intellectual Property (excluding licenses to use software utilized in the Company’s internal operations and which is generally commercially available) are in full force and effect and, to the Company’s knowledge, there is no material default by any party thereto. The Company has no reason to believe that the licensors under such licenses and other agreements do not have and did not have all requisite power and authority to grant the rights to the Intellectual Property purported to be granted thereby.

                    (e) All licenses or other agreements under which the Company has granted rights to Intellectual Property to others (including all end-user agreements) are in full force and effect, there has been no material default by the Company or any Company Subsidiary thereunder and, to the Company’s knowledge, there is no material default of any provision thereof relating to Intellectual Property by any other party thereto.

                    (f) The Company has taken all steps required in accordance with commercially reasonable business practice to establish and preserve their ownership in its owned Intellectual Property and to keep confidential all material technical information developed by or belonging to the Company which has not been patented or copyrighted. To the Company’s knowledge, the Company is not making any unlawful use of any Intellectual Property of any other Person, including, without limitation, any former employer of any past or present employees of the Company. To the Company’s knowledge, neither the Company nor any of its employees has any agreements or arrangements with former employers of such employees relating to any Intellectual Property of such employers, which materially interfere or conflict with the performance of such employee’s duties for the Company or result in any former employers of such employees having any rights in, or claims on, the Company’s Intellectual Property. Each current employee of the Company has executed agreements regarding confidentiality, proprietary information and assignment of inventions and copyrights to the Company, as the case may be, each independent contractor or consultant of the Company has executed agreements regarding confidentiality and proprietary information, and the Company has not received written notice that any employee, consultant or independent contractor is in violation of any agreement or in breach of any agreement or arrangement with former or present employers relating to proprietary information or assignment of inventions. Without limiting the foregoing: (i) the Company has taken reasonable security measures to guard against unauthorized disclosure or use of any of its Intellectual Property that is confidential or proprietary; and (ii) the Company has no reason to believe that any Person (including, without limitation, any former employee or consultant of the Company) has unauthorized possession of any of its Intellectual Property, or any part thereof, or that any Person has obtained unauthorized access to any of its Intellectual Property. The Company has complied in all material respects with its respective obligations pursuant to all agreements relating to Intellectual Property rights that are the subject of licenses granted by third parties, except for any non-

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compliance that has not had or would not reasonably be expected to have a Material.

          4.20. Chief Executive Office . The chief executive office of the Company and its records with respect to the IP Collateral and WC Collateral are located at Wixom, Michigan.

SECTION 5. REPRESENTATIONS OF THE PURCHASERS

          Each Purchaser severally represents and warrants, but only as to itself, to the Company that:

          5.1. Power and Authority . Such Purchaser has all requisite power, authority and legal right to execute, deliver, enter into, consummate and perform this Agreement and the Loan Documents to which it is a party. The execution, delivery and performance of this Agreement and the Loan Documents to which it is a party by such Purchaser have been duly authorized by all required corporate and other actions. Such Purchaser has duly executed and delivered this Agreement and the Loan Documents to which it is a party, and this Agreement and the Loan Documents to which it is a party constitute the legal, valid and binding obligation of such Purchaser enforceable against such Purchaser in accordance with their respective terms, subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws relating to the rights of creditors generally and subject to the availability of equitable remedies and the application of equitable principles.

          5.2. Purchase for Investment . Such Purchaser is capable of evaluating the risk of its investment in the Notes and Warrants being purchased by it and is able to bear the economic risk of such investment. Such Purchaser is purchasing the Notes and Warrants to be purchased by it for its own account, and the Notes and Warrants are being purchased by it for investment and not with a present view to any distribution thereof.

          It is understood that the disposition of such Purchaser’s property shall, subject to the terms of this Agreement, at all times be within such Purchaser’s control. If such Purchaser should in the future decide to dispose of any of its Notes, Warrants or Shares, it is understood that it may do so only in compliance with the Securities Act and this Agreement.

SECTION 6. PREPAYMENTS

           6.1. Optional Prepayments of Class 2 Notes .

          Class 2 Notes must be paid at such times as the Company receives payment on the specified order(s) associated with such Notes, with payment being applied first to accrued interest and then to principal. In addition, the Company may make prepayment in full or part on the Class 2 Notes at any time.

          6.2. Optional Prepayments of Class 3 Notes .

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          (a) The Company may at its option (subject to the other provisions of this Section 6.2) prepay all or part of the principal amount of Class 3 Notes, at a price equal to the aggregate principal amount of the Notes to be prepaid plus accrued interest thereon to the date of prepayment.

          (b) The aggregate amount of each prepayment of the principal amount of affected Class 3 Notes pursuant to this Section 6.2 shall be allocated among all affected Class 3 Notes, in proportion, as nearly as practicable, to the respective unpaid principal amounts of such Class 3 Notes.

          (c) The right of the Company to prepay Class 3 Notes pursuant to this Section 6.2 shall be conditioned upon its giving notice of prepayment, signed by an officer, to the holders of Class 3 Notes not less than thirty (30) days and not more than sixty (60) days prior to the date upon which the prepayment is to be made specifying (i) the registered holder of each Class 3 Note to be prepaid, (ii) the aggregate principal amount being prepaid, (iii) the date of such prepayment (which must be a Business Day), (iv) the accrued and unpaid interest (to but not including the date upon which the prepayment is to be made) and (v) that the prepayment of Class 3 Notes is being made pursuant to this Section 6.2. Notice of prepayment having been so given, the aggregate principal amount of the Class 3 Notes so specified in such notice, and all accrued and unpaid interest thereon, shall become due and payable on the specified prepayment date, but the right to convert any or all of the Class 3 Notes to Common Stock shall continue to, but not including, the date of such prepayment.

          (d) The right of the Company to prepay Old Class 3 Notes pursuant to this Section 6.2 shall be further conditioned upon either of the following being met:

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          (e) Notwithstanding any of the other provisions in this Agreement (including, without limitation, other provision in this Section 6.2), the Company shall have the right to prepay $100,000 of Old Class 3 Notes prior to April 1, 2008 without being required to prepay any New Class 3 Notes.

          (f) The right of the Company to prepay New Class 3 Notes pursuant to this Section 6.2 shall be further conditioned upon the satisfaction of the following conditions:

          (g) The right of the Company to prepay Class 3 Notes (other than notes specified in 6.2.(e) above) pursuant to the terms in 6.2 (d) and (f) shall be further conditioned that the Company has no Class 2 Notes outstanding at the prepayment date.

          (h) The right of the Company to prepay New Class 3 Notes outstanding that are “blocked” from being converted pursuant to Section 2 of said notes shall be subject to additional terms and conditions in this section as follows:

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          6.3. Obligations Unconditional . The Company hereby agrees and confirms that its obligations under the Notes shall be deemed to constitute for all purposes obligations for the payment of Indebtedness for Borrowed Money and shall accordingly be absolute and unconditional in accordance with the terms of the Notes and this Agreement and shall not be affected by (and the Company agrees not to assert) any right the Company may now or at any time hereafter have, including any right to terminate, cancel, quit or surrender this Agreement or any Note except in accordance with the express terms thereof.

SECTION 7. AFFIRMATIVE COVENANTS

          The Company covenants and agrees that, until payment in full of the principal of and accrued interest on the Notes and the payment or performance of all other obligations under the Loan Documents, the Company shall:

          7.1. Preservation of Corporate Existence; Etc . Do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence and its qualification as a foreign corporation in good standing in each jurisdiction in which such qualification is necessary under applicable law, and the rights, licenses, permits (including those required under Environmental Laws), franchises, patents, copyrights, trademarks and trade names material to the conduct of its businesses; and defend all of the foregoing against all claims, actions, demands, suits or proceedings at law or in equity or by or before any governmental instrumentality or other agency or regulatory authority.

          7.2. Maintenance of Properties; Insurance . Maintain, preserve and protect all property that is material to the conduct of its business and keep such property in good repair, working order and condition and from time to time make, or cause to be made, all needful and proper repairs, renewals, additions, improvements and replacements thereto necessary in order that the business carried on in connection therewith may be properly conducted at all times in accordance with customary and prudent business practices for similar businesses; and maintain in full force and effect insurance with responsible and reputable insurance companies or associations in such amounts, on such terms and covering such risks, including fire and other risks insured against by extended coverage, as is usually carried by companies engaged in similar businesses and owning similar properties similarly situated and maintain in full force and effect public liability insurance, business interruption insurance, insurance against claims for personal injury or death or property damage occurring in connection with any of its activities or any properties owned, occupied or controlled by it, in such amounts as it shall reasonably deem necessary, and maintain such other insurance as may be required by Governmental Regulations or as may be reasonably

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requested by the Majority Noteholders. Upon request, the Company shall deliver to each Purchaser copies of all or any of such insurance policies or the related certificates of insurance.

          The requirement that information under Sections 7.3.(b), (c), (d), and (e) be furnished to each Purchaser shall be met by the Company filing such documents with the Commission. Additionally, the Company will also provide copies of such documents to any Purchaser upon

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written request of such Purchaser.

          Each holder of Notes and Warrants hereby acknowledges that it is aware of the restrictions imposed by federal and state securities laws on a person possessing material nonpublic information about a company. In this regard, each such holder hereby agrees that (i) while it is in possession of material nonpublic information with respect to the Company and its Subsidiaries, such holder will not purchase or sell any securities of the Company, or communicate such information to any third party, in violation of any such laws and (ii) it will keep all such nonpublic information confidential.

          7.4. Accounting; Access to Records, Books; Etc . Maintain a system of accounting established and administered in accordance with sound business practices to permit preparation of financial statements in accordance with GAAP and to comply with the requirements of this Agreement and, at any reasonable time and from time to time, (i) permit the Agent to examine and make copies of and abstracts from the records and books of account of, and visit the properties of, such person and to discuss the affairs, finances and accounts of such person with their respective directors, officers, employees and independent auditors, and by this provision the Company does hereby authorize the same, and (ii) permit the Agent to conduct a comprehensive field audit of its books, records, properties and assets, if there is no Event of Default or Potential Default continuing, at the Purchasers’ expense, otherwise at the Company’s expense.

          7.5. Further Assurances . Execute and deliver promptly after request therefor by any Purchaser, all further instruments and documents and take all further action that may be necessary or desirable, or that any Purchaser may request, in order to give effect to, and to aid in the exercise and enforcement of the rights and remedies of any Purchaser under, this Agreement and the other Loan Documents.

          7.6. Use of Proceeds . The Company will use the net proceeds realized from the sale of the Notes for working capital and other general corporate purposes and to repay up to $100,000 of Old Class 3 Notes. No portion of such proceeds will be used for the purpose, whether immediate, incidental or ultimate, of purchasing or carrying, within the meaning of Regulation U of the Board of Governors of the Federal Reserve System, as amended from time to time, any “margin stock” as defined in said Regulation U, or any “margin stock” as defined in Regulation G of the Board of Governors of the Federal Reserve System, as amended from time to time, or for the purpose of purchasing, carrying or trading in securities within the meaning of Regulation T of the Board of Governors of the Federal Reserve System, as amended from time to time, or for the purpose of reducing or retiring any indebtedness which was originally incurred to purchase any such margin stock or other securities.

          7.7. Office for Payment, Exchange and Registration . So long as any of the Notes or Warrants are outstanding, the Company will maintain an office or agency where Notes or Warrants may be presented for payment, exchange, exercise or registration of transfer as provided in this Agreement or in the Warrants. Such office or agency initially shall be the office of the Company set forth in Section 22 hereof, which place may from time to time be changed by

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notice to the holders of all Notes and Warrants then outstanding.

          7.8. Notices . The Company will give notice to each holder of a Note or Warrant promptly after it learns (other than by notice from all of such holders) of the existence of any default under any Permitted Senior Indebtedness or any material default under any other evidence of Indebtedness or under any indenture, mortgage or other agreement relating to any evidence of Indebtedness in respect of which the Company or any Subsidiary is liable.

          7.9. Fiscal Year . The fiscal year of the Company for tax, accounting and any other purposes shall end on December 31 of each calendar year.

          7.10. Communication with Accountants . The Company hereby authorizes the Agent or Representative (on behalf of the Purchasers) to communicate directly with the independent certified public Accountants for the Company and authorizes such Accountants to disclose to the Agent any and all financial statements and any other information of any kind that they may have with respect to the assets, Properties, liabilities, business, affairs, results of operations, condition (financial or otherwise) or prospects of the Company; provided, that the Company be informed of any such disclosures and participate in any conversations between such Accountants and the Agent (and the Company agrees that it will not fail to cooperate in arranging or unreasonably delay any such conversations); and further provided that the Agent or Representative shall not incur charges from such Accountants in exercise of such rights for more than ten (10) hours per calendar year without the Company’s prior written consent. The Company shall deliver a letter addressed to such Accountants instructing them to comply with the provisions of this Section 7.10.

          7.11. Environmental Matters . The Company agrees to indemnify, defend, protect and hold harmless Purchasers, their officers, directors, shareholders, employees, and agents from and against any and all liability, loss, damage, cost and expense, including, but not limited to, attorneys’ and consultants fees and disbursements arising from any breach of representations and warranties set forth in Section 4.12 or covenants set forth in Section 7.2 herein, the Release or presence of Hazardous Materials on, under, about, adjacent to, from or at any properties or facilities currently or previously owned, operated or leased by the Company or any Subsidiary, any predecessors of the Company or any Subsidiary or any entities previously owned by the Company or any Subsidiary, or at any off-site location to which Hazardous Materials generated by the Company or any Subsidiary, any predecessors of the Company or any Subsidiary or any entities previously owned by the Company or any Subsidiary were sent for handling, treatment, storage, or disposal or any violation of any Environmental Law or Environmental Permit by the Company or any Subsidiary or any entity previously owned by the Company or any Subsidiary. The obligations of the Company under this Section shall survive the Closing indefinitely.

          7.12. Taxes . All payments to a holder of Notes or to a partner of a holder (or to a partner of such a partner) (any of the foregoing referred to herein as a “recipient”) of principal of, and interest on, the Notes and all other amounts payable under this Agreement and any other Loan Document shall be made free and clear of, and without deduction for, any present or future

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income, stamp or other taxes, fees, duties, withholding or other charges of any nature whatsoever imposed by any taxing authority, other than taxes imposed on or measured by the net income of such recipient (such non-excluded items being herein called “Taxes”). In the event that any withholding or deduction from any payment to be made hereunder is required in respect of any Taxes pursuant to any applicable law, rule or regulation, then the Company will:

          7.13. Delivery of Information for Rule 144A Transactions . If a holder of Notes proposes to transfer any such Notes pursuant to Rule 144A under the Securities Act (as in effect from time to time), the Company agrees to provide (upon the request of such holder or the prospective transferee) to such holder and (if requested) to the prospective transferee any financial or other information concerning the Company which is required to be delivered by such holder to any transferee of such Notes pursuant to such Rule 144A.

          7.14. Amending Articles of Incorporation to increase authorized shares outstanding . The Company agrees to request that shareholders amend its Articles of Incorporation to increase its authorized shares outstanding to Seventy (70) million shares at the next regularly scheduled annual meeting of shareholders. If the Company does not obtain approval of the shareholders for this increase in authorized shares outstanding at said annual meeting, the Company shall call a meeting every fiscal quarter thereafter to seek approval of the shareholders until such approval is obtained.

SECTION 8. NEGATIVE COVENANTS

          The Company further covenants and agrees that it will not and will not permit any Subsidiary to:

          8.1. Liens . Create, incur, assume or suffer to exist any Lien upon any of its Property, whether now owned or hereafter acquired, except Permitted Liens.

          8.2. Contingent Liabilities . Assume, guarantee, endorse, contingently agree to purchase, become liable in respect of any letter of credit, or otherwise become liable upon the obligation of any Person, except (i) liabilities arising from the endorsement of letters of credit, notes, drafts, instruments or documents for deposit or collection or similar transactions in the ordinary course of business and (ii) other Contingent Liabilities not in excess of $500,000 in the aggregate.

          8.3. Restricted Payments . Make any Restricted Payment or Restricted Investment, except from Earnings Available for Dividends.

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          8.4. Sale or Transfer of Assets . Sell, lease, assign, transfer or otherwise dispose of any IP Collateral except in the ordinary course of business or except upon payment to the Noteholders and holders of notes issued pursuant to Other Note Purchase Agreements (as defined in Section 23 below) of 90% of the net proceeds received by the Company from the sale of such IP Collateral, up to the full amount of the Company’s Obligations to the Noteholders and holders of notes issued pursuant to Other Note Purchase Agreements, except that Class 3 Note holders and holders of notes issued pursuant to Other Note Purchase Agreements would have the option instead to convert the portion of their Class 3 Notes or notes issued pursuant to Other Note Purchase Agreements which is proposed to be repaid into the common stock of the Company with the Company retaining that portion of the proposed payment. It is agreed that the Company may place source code for software in escrow at the request of purchasers of its products without violating this Agreement.

          8.5. Amendment of Charter . Amend, modify or waive any term or provision of its corporate charter, unless required by law, except as provided herein.

          8.6. Corporate Offices; Corporate Name; Corporate Records . Transfer its executive offices or change its corporate name or maintain records (including computer printouts and programs) with respect to the IP Collateral or WC Collateral at any locations other than those at which the same are presently kept or maintained, except upon giving notice to the Noteholders and the Agent

          8.7. Private Placement Status . Neither the Company nor any agent nor any other Person acting on the Company’s behalf will do or cause to be done (or will omit to do or to cause to be done) any act which act (or which omission) would result in bringing the issuance or sale of the Notes, Warrants or Shares within the provisions of Section 5 of the Securities Act (other than in accordance with a registration and qualification of Shares under Section 17 hereof).

          8.8. Transactions with Affiliates . Enter into, or permit or suffer to exist, any transaction or arrangement with any Affiliate, except on terms which are no less favorable to the Company than could be obtained from persons who are not Affiliates.

          8.9. Limitations of dilution rights on future securities issued . From March 1, 2008 until such time as Purchasers in the aggregate hold less than one million of the Shares and No Purchaser holds any of the Notes, enter into an agreement to effect any “Subsequent Financing” involving a “Dilutive Transaction” or an “MFN Transaction” (each as defined below). The term “Subsequent Financing” shall mean any capital raising financing by the Company or any Subsidiary using Common Stock or Common Stock Equivalents. The term “Dilutive Transaction ” shall mean (A) a transaction in which the Company or any Subsidiary issues or sells any note or other security, including without limitation preferred shares, convertible into Common Stock (“Convertible Securities”) which calls for the conversion price at which such Convertible Securities may be converted into Common Stock to be reduced from the conversion price specified at the time of the issuance of such Convertible Securities below $0.25 per share

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(subject to adjustment for stock splits, stock dividends and similar events after February 25, 2008), or (B) a transaction in which the Company or any Subsidiary issues or sells any warrant or other security exercisable or exchangeable into Common Stock (“Other Exercisable Securities”) which calls for the Company to issue or commit to issue more shares of its Common Stock than was specified at the time of the issuance of said Other Exercisable Securities caused by the future issuance by the Company or any Subsidiary of Common Stock, Convertible Securities, or Other Exercisable Securities convertible, exchangeable, or exercisable into Common Stock below $0.25 per share (subject to adjustment for stock splits, stock dividends and similar events after March 1, 2008). The term “ MFN Transaction ” shall mean a transaction in which the Company or any Subsidiay issues or sells any securities in a capital raising transaction or series of related transactions which grants to an investor the right to receive additional shares based upon future transactions of the Company on terms more favorable than those granted to such investor in such offering. Any Purchaser shall be entitled to obtain injunctive relief against the Company to preclude any such issuance, which remedy shall be in addition to any right to collect damages. The limitations in this section shall not apply to the warrants issued to the PIPE Investors (as defined in Section 4.15 above), including, without limitation, additional warrants issued to said PIPE investors pursuant to the terms or waiver of terms in said PIPE Investors’ warrants.

          8.10. Limitations of future Common Stock issuances . Issue any security which commits it to issue or potentially to issue Common Stock in excess of the limit of authorized shares outstanding at the time of the issuance of any such security. This limitation shall only apply to authorized shares outstanding above Seventy (70) million shares.

          8.11. Limitations on equity securities which may be issued under employee compensation plans . Issue restricted stock bonuses, new stock options, or link other bonus plans to the change in the price of its Common Stock to its current employees, officers, or directors (current employees, officers, or directors being defined as any individuals that were engaged in such capacities at any time from January 1, 2007 to the date at which this Agreement is effective) in the aggregate amount exceeding Two Million Eight Hundred Twenty Eight Thousand (2,828,000) issued or issuable shares of its Common Stock until all Class 2 Notes are repaid (said 2,828,000 issued or issuable share limitation shall be reduced by any such share issuances that were not made pursuant to an existing employee stock option plan since January 1, 2008 and shall also be reduced by any of the options to purchase 128,000 shares of the Company’s Common Stock at $1.065 per share that have been granted to employees pursuant to the Company’s 1995 stock option plan that are outstanding at February 8, 2008 and that are not cancelled by May 5, 2008). (This limitation does not preclude the Company from seeking shareholder approval for employee compensation plans which allow the company to issue over 2,828,000 shares, options, or issuable shares of its Common Stock prior to repaying all of its Class 2 Notes.)

          8.12. Limitations of subordinated debt issuances . Except as otherwise provided in this Agreement and until there are no Notes outstanding, issue any debt securities in a capital raising transaction which do not meet the definition of Subordinated Debt herein.

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SECTION 9.

          Intentionally Omitted

SECTION 10. CONDITIONS TO PURCHASERS’OBLIGATIONS

          The Purchasers’ obligations to purchase a Note or Notes and a Warrant or Warrants hereunder is subject to satisfaction of the following conditions at the Closing (any of which may be waived by the Purchasers):

          10.1. Accuracy of Representations and Warranties . The representations and warranties of the Company in this Agreement and in the Loan Documents or in any certificate or document delivered pursuant hereto or thereto shall be correct and complete on and as of the Closing Date with the same effect as though made on and as of the Closing Date (after giving effect to the transactions contemplated by this Agreement).

          10.2. Compliance with Agreements; No Defaults . Except as disclosed on Exhibit G, the Company performed and complied in all material respects with all agreements, covenants and conditions contained in this Agreement or the Loan Documents and any other document contemplated hereby or thereby which are required to be performed or complied with by the Company on or before the Closing Date. On the Closing Date (after giving effect to the transactions contemplated hereby), there shall be no Event of Default or Potential Default.

          10.3. Proceedings . All corporate and other proceedings in connection with the transactions contemplated by the Loan Documents, and all documents incident thereto, shall be in form and substance satisfactory to the Purchasers and their counsel, and the Purchasers shall have received all such originals or certified or other copies of such documents as the Purchasers or their counsel may reasonably request.

          10.4. Legality; Governmental and Other Authorization . The purchase of and payment for the Notes and Warrants shall not be prohibited by any law or governmental order, rule, ruling, regulation, release, interpretation or opinion applicable to the Purchasers and shall not subject the Purchasers to any penalty, tax (excepting income tax obligations of Purchasers), liability or other onerous condition. Any necessary consents, approvals, licenses, permits, orders and authorizations of, and registrations or qualifications with, any governmental or administrative agency, or other Person, with respect to the transactions contemplated by the Loan Documents shall have been obtained or made and shall be in full force and effect. The Company shall have delivered to the Purchasers, upon their reasonable request setting forth what is required, factual certificates or other evidence, in form and substance satisfactory to the Purchasers and their counsel, to enable the Purchasers to establish compliance with this condition.

          10.5. No Change in Law, etc . No legislation, order, rule, ruling or regulation shall have been proposed, enacted or made by or on behalf of any governmental body, department or

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agency, and no legislation shall have been introduced in either House of Congress, and no investigation by any governmental authority or administrative body shall have been commenced or threatened, and no action, suit or proceeding shall have been commenced before, and no decision shall have been rendered by, any court, other governmental body or arbitrator, which, in any such case, in the Purchasers’ reasonable judgment could adversely affect, restrain, prevent or change the transactions contemplated by this Agreement and the Loan Documents (including without limitation the issuance of the Notes and the Warrants hereunder or the issuance of Shares upon exercise of the Warrants) or materially and adversely affect the business, affairs, assets, properties, liabilities, results of operations, condition (financial or otherwise) or prospects of the Company on a consolidated basis.

          10.6. Delivery of Additional Disclosure Documents . The Company shall have delivered a copy of its most recent Form 10-K and any interim reports, including financial statements, as filed with the Commission.

          10.7 Related Agreements . The Company shall have delivered to the Purchasers executed copies of the Collateral Assignment, and the WC Security Agreement.

          10.8 Security Interests . All filings of UCC financing statements and all other filings and actions necessary to perfect the IP Security Interests and the WC Security Interests as valid and perfected Liens in the Property covered thereby, subject only to Permitted Liens in effect on the date hereof, shall have been filed or taken and confirmation thereof shall have been received by the Agent. All filings of UCC financing statements and all other filings and actions necessary to perfect th