10-12G

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10

GENERAL FORM FOR REGISTRATION OF SECURITIES

Pursuant to Section 12(b) or (g) of the Securities Exchange Act of 1934

LIFELOC TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)

Colorado	84-1053680
(State or other jurisdiction of	(I.R.S. Employer Identification No.)
incorporation or organization)

12441 West 49th Ave., Unit 4, Wheat Ridge, Colorado 80033

(Address of principal executive offices and zip code)

(303) 431-9500

(Registrant’s telephone number, including area code)

with copies to:

Lester R. Woodward

Davis Graham & Stubbs LLP

1550 17th Street, Suite 500

Denver, Colorado 80202

Telephone: (303) 892-9400

Securities to be registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which
to be so registered	each class is to be registered
None	None

Securities to be registered pursuant to Section 12(g) of the Act:

Common Stock

(Title of Class)

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company.  See definitions of “large accelerated filer,” “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check one):

Large accelerated filer o	Accelerated filer o
Non-accelerated filer o	Smaller reporting company x
(Do not check if a smaller reporting company)

TABLE OF CONTENTS

Item 1.	Business	3
Item 1A.	Risk Factors	8
Item 2.	Financial Information	13
Item 3.	Properties	17
Item 4.	Security Ownership of Certain Beneficial Owners and Management	17
Item 5.	Directors and Executive Officers	18
Item 6.	Executive Compensation	19
Item 7.	Certain Relationships and Related Transactions, Director Independence	21
Item 8.	Legal Proceedings	21
Item 9.	Market Price of and Dividends on the Registrant’s Equity and Related Stockholder Matters	21
Item 10.	Recent Sales of Unregistered Securities	22
Item 11.	Description of Registrant’s Securities to be Registered	23
Item 12	Indemnification of Directors and Officers	23
Item 13.	Financial Statements and Supplementary Data	23
Item 14.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	24
Item 15.	Financial Statements and Exhibits	24
Item 16.	Undertakings	24

FORWARD-LOOKING AND CAUTIONARY STATEMENTS

 This registration on Form 10 contains forward-looking statements that involve risks and uncertainties.  In some cases, you can identify forward-looking statements by the following words: “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “ongoing,” “plan,” “potential,” “predict,” “project,” “should,” “will,” “would,” or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words.  These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements.  Forward-looking statements are only predictions and are not guarantees of performance.  These statements are based on our management’s beliefs and assumptions, which in turn are based on their interpretation of currently available information.

 These important factors that may cause actual results to differ from our forward-looking statements include those that we discuss under the heading “Risk Factors.” You should read these risk factors and the other cautionary statements made in this registration statement on Form 10 as being applicable to all related forward-looking statements wherever they appear.  We cannot assure you that the forward-looking statements in this registration statement on Form 10 will prove to be accurate.  Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material.  You should read this registration statement completely.  Other than as required by law, we undertake no obligation to update these forward-looking statements, even though our situation may change in the future.

 Except as otherwise indicated or where the context otherwise requires, the terms “Lifeloc,” “we,” “our,” “ours,” “us,” and the “Company” as used in this registration statement refer to Lifeloc Technologies, Inc.

WHERE YOU CAN FIND MORE INFORMATION ABOUT US

 When this registration statement becomes effective, we will begin to file reports, proxy statements, information statements and other information with the United States Securities and Exchange Commission (the “SEC”). You may read and copy this information, for a copying fee, at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for more information on its Public Reference Room. Our SEC filings will also be available to the public from commercial document retrieval services, and at the Web site maintained by the SEC at http://www.sec.gov.

 Our Internet website address is http://www.lifeloc.com. Information contained in our website does not constitute part of this registration statement. When this registration statement is effective, we will make available, through a link to the SEC’s Web site, electronic copies of the materials we file with the SEC (including our annual reports on Form 10-K, our quarterly reports on Form 10-Q, our current reports on Form 8-K, the Section 16 reports filed by our executive officers, directors and 10% stockholders and amendments to those reports). To receive paper copies of our SEC filings, please contact us by mail at 12441 West 49th Avenue, Unit 4, Wheat Ridge, Colorado 80033-3338 or by telephone at (303) 431-9500. 

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Item 1.  Business

Overview

 Lifeloc is a Wheat Ridge, Colorado based  developer, manufacturer and marketer of portable hand-held breathalyzers and related supplies and education.  We design, produce and sell fuel-cell based breath alcohol testing equipment.  We compete in all major segments of the portable breath alcohol testing instrument market, including law enforcement, workplace, corrections, original equipment manufacturing (“OEM”) and consumer markets. In addition, we offer a line of supplies, accessories, services, and training to support customers’ alcohol testing programs. We sell globally through distributors and sales agents, as well as directly to users.

 In 2001, we completed and released for sale the FC Series, designed for the law enforcement and corrections markets.  The FC Series is approved by the U.S. Department of Transportation (“DOT”) as an evidential roadside breath tester, making it suitable for sale to state law enforcement agencies for preliminary roadside breath alcohol testing. The FC Series offers users a precision instrument which is easy to use, reliable and accurate. It is readily adaptable to the specific requirements and regulations of domestic and international markets. The FC Series is currently sold worldwide.

 In 2005 and 2006, we introduced two new models for the workplace market: the EV30 and Phoenix 6.0. Like their predecessor, the Phoenix Classic, these instruments are also DOT approved.

 We also sell breath alcohol equipment components that we manufacture for other original equipment manufacturers for inclusion as subassemblies or components in their breath alcohol testing devices.

 In late 2009, Lifeloc released the LifeGuard Personal Breathalyzer,  a personal alcohol breath tester that incorporates the same fuel-cell technology used in our professional devices. LifeGuard is one of the first fuel-cell based personal breathalyzers available. Intended for the global consumer breathalyzer market, LifeGuard is sold direct to consumers in the U.S. and marketed through distributors worldwide.  Prior to sale in the U.S., all consumer breathalyzers, such as LifeGuard, are required by law to be tested and to receive 510(k) clearance from the Food and Drug Administration (“FDA”) as Class I medical devices, which means the device is substantially equivalent in performance and safety to other currently marketed consumer breathalyzers.  LifeGuard received this FDA clearance in 2009.

 Lifeloc incorporated in Colorado in December 1983 and has been privately owned since that time.  Our fiscal year end is December 31.  Our principal executive offices are located at 12441 West 49th Avenue, Unit 4, Wheat Ridge, Colorado 80033-3338.  Our telephone number is (303) 431-9500.  Our websites are www.lifeloc.com and www.lifeguardbreathtester.com. Information contained on our websites does not constitute part of this registration statement.

Principal Products and Services and Methods of Distribution

 In 1989, we introduced our first breath alcohol tester, the PBA3000. Our Phoenix Classic was completed and released for sale in 1998, superseding the PBA3000. In turn, the Phoenix Classic has been superseded by our FC Series and Workplace Series of portable breath alcohol testers. Neither the PBA3000 nor the Phoenix Classic is actively sold today.

 In 2001, we completed and released for sale an additional product line, our new FC Series, designed specifically for the law enforcement and corrections markets. The FC Series of portable breath alcohol testers are currently being sold worldwide, having contributed to our growth since their introduction. The FC Series is designed to meet the needs of domestic and international law enforcement for roadside drink/drive testing and post-arrest parolee testing.

 In 2005 and 2006, we introduced two new models, the EV30 and Phoenix 6.0, which constitute our Workplace Series of testing devices.  We also sell supplies used in alcohol testing, such as mouthpieces used by our breathalyzers, as well as forms and labels used for record keeping, and calibration products for user re-calibration of our devices.  We offer optional service agreements on our equipment, re-calibration services, and spare parts, and we sell supporting instrument training and user certification training to our workplace customers.

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 In 2006, we commenced selling breath alcohol equipment components that we manufacture to other original equipment manufacturers (“OEMs”) for inclusion as subassemblies or components in their breath alcohol testing devices.

 In 2009, we released for sale LifeGuard, a personal breath tester that incorporates the fuel-cell based technology employed in our FC series.  LifeGuard is sold direct to consumers in the U.S. via our web site (www.lifeguardbreathtester.com), and through distributors worldwide.

Competition and Markets

 We sell our products in a highly competitive market and we compete for business with both foreign and domestic manufacturers.  Most of our current competitors are larger and have substantially greater resources than we do.  In addition, there is an ongoing risk that other domestic or foreign companies who do not currently service or manufacture products for our target markets may seek to produce products or services that compete directly with ours.

 We believe that competition for sales of our alcohol monitoring products and services is based on product performance, product delivery, quality, service, training, price, device reliability, ease of use and speed.  We sell certain of our components to customers for incorporation into their own product lines and for resale under their own name.  We believe that, while our resources are more limited than those of our competitors, we will continue to compete successfully on the basis of product innovation, quality, reputation and continued customer service excellence.

 Workplace testing represented approximately 39% of our sales in 2010; we believe this sales mix will continue approximately as it has in the past.  The other large markets for us in 2010 comprised approximately 20% each:  law enforcement and corrections, international sales, and OEM.  We are unable to estimate our market penetration as there is little market size information available.

 One leading competitor is Intoximeters, Inc. of St. Louis, Missouri, a long-established company with strong name recognition in the field of alcohol testing.  It has well established sales channels, a large customer base, and a broad product line.  CMI of Owensboro, Kentucky, another major competitor, also has a well established name, strong position in stationary units used in police work, and international market coverage.  Draegerwerk AG & Co. KGaA (“Draeger”), based in Germany, manufactures safety and gas testing equipment.  Its breath alcohol testers are respected for their quality and performance.  

 In addition, other technologies for the measurement of breath alcohol exist and are employed in other market and application segments where the technology may be more suitable or developed to the specific requirements. These include:

•   Infrared devices – use infrared light absorption to detect breath alcohol.  These devices generally lack portability, and are usually found in fixed locations, such as police stations, where subjects are brought for testing.  This technology has the advantage of being mandated by law in most states for evidential use in breath testing.

•   Semi-conductor breath testing technology – used primarily in consumer breathalyzers.  Its primary advantage is low cost, but the technology is not widely accepted by professional users as being as accurate as fuel cell technology.

•   Chemical tests – based on urine testing.  This approach to alcohol testing is more intrusive, less convenient than breath testing, and requires subsequent analysis by trained technicians for results.

•   Blood alcohol tests – require blood samples.  These tests are widely believed to be the most accurate form of alcohol testing because they measure blood alcohol content directly from a sample of the subject’s blood.  However, the results are not instantaneous and the tests are more intrusive than breath alcohol testing.

Marketing

 Marketing activities associated with our business include the communication of our value proposition through direct mail, direct and indirect sales channels, trade shows and an information-rich online presence.  We sell our products to the workplace and law enforcement markets primarily through distributors and sales agents, while we sell our corrections and consumer products directly to the end user and our OEM products directly to manufacturers. Leveraging our installed base is important, as is maintaining a well trained distributor network.  In 2009, we revised our workplace distributor program to place additional emphasis on joint demand generation programs and additional volume incentives for growth.

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Domestic Distribution

 We rely on one manufacturers’ representative agency for the law enforcement market in the western U.S., which covers Washington, Oregon, California, Nevada, Wyoming, Utah, Colorado, Arizona, New Mexico, Alaska, and Hawaii (the “Western Region”).  In 2010, these states generated approximately 25% of our total law enforcement business.  In the rest of the U.S., we sell directly to law enforcement consumers, and in 2010, modest unit sales were made in nearly every state outside of the Western Region.

 Sales made into the corrections market are most often made directly to customers.

 The majority of sales made into the workplace market are made through distributors located in various locations in the U.S.  Sales are made by these distributors pursuant to agreements that renew automatically each year unless terminated by either party with advance notice, and such agreements typically grant protected lead generation areas.

International Distribution

 Alcohol enforcement has long been a major concern, primarily in North America and northern Europe.  Reflecting a strong recent trend, however, countries around the world are instituting tougher alcohol abuse prevention laws, strengthening the enforcement of current laws, or both.  These laws set limits on the amount of alcohol an individual may have in the blood at specific times (e.g., while driving or during safety-sensitive work activities), or at any time for certain parolees and probationers.  Over 90% of our international sales for all product lines are made by local distributors, who are given territories pursuant to agreements that renew automatically each year unless terminated by either party with advance notice.  Lifeloc has sold instruments to customers in 39 countries on six continents worldwide.

Research and Development

 We believe that our future success depends to a large degree on our ability to conceive and develop new alcohol detection and measurement products and related services that (1) open new markets to Lifeloc, (2) enhance the performance of our current  products and (3) lower our costs or otherwise improve our methods of manufacture. Accordingly, we expect to continue to invest in research and development. We spent $375,683 and $256,361 during 2010 and 2009, respectively, on research and development. The amount spent in 2010 was higher than the amount spent in 2009 because we updated our core workplace and law enforcement product lines as well as customized certain of our devices to meet specific in-country language and procedural requirements.

Raw Materials and Principal Suppliers

 A basic component of our instrument product line is the fuel cell, which we obtain from only a few suppliers.  We believe that our demand for this component is small relative to the total supply, and that the materials and services required for the production of our products are currently available in sufficient production quantities and will be available for the foreseeable future.  However, there are relatively few suppliers of the high-quality fuel cell which our breathalyzers require.  Any sudden disruption to the supply of our fuel cells would pose a significant risk to our business. New sources of fuel cells are uncertain at this time and changes to our fuel cells would require approval by the DOT, which could have a material effect on our revenues in the law enforcement and workplace areas.  We purchase most of our fuel cells from Draeger; we have no master agreement with Draeger, and purchase fuel cells as needed pursuant to individual purchase orders.

 To address this concern, on July 1, 2010 we entered into a technology transfer agreement with Fuel-Cell Sensors (“FCS”), an unrelated third-party manufacturer with an established reputation for manufacturing fuel cells.  Pursuant to the technology transfer agreement, we acquired a perpetual-term license to technology that will allow us to manufacture our own fuel cells. We have made three equal lump-sum payments totaling $120,000 to FCS based on achievement of certain milestones in our establishment of successful production facilities. Going forward, we will pay a royalty to FCS based on the year in which the units are sold and the number sold. The agreement can be terminated by either party for cause, or by Lifeloc after three years from the effective date and upon payment of a termination fee. Pursuant to the technology transfer agreement, our goal is to be able to manufacture our own fuel cells commencing in 2011.  The agreement is included as Exhibit 10.5 of this registration statement.

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Patents and Trademarks

 We rely, in part, upon patents, trade secrets and proprietary knowledge as well as personnel policies and employee confidentiality agreements concerning inventions and other creative efforts (collectively, “Lifeloc IP”) to develop and to maintain our competitive position. We do not believe that our business is dependent upon any patent, patent pending or license, although we believe that trade secrets and confidential know-how may be important to our commercial success.  No individuals, governmental entities or other companies share ownership or have any rights to any Lifeloc IP.

 We plan to file for patents, copyrights and trademarks in the United States to protect our intellectual property rights to the extent practicable.  We hold the rights to several United States patents and have one patent application pending.  These patents have expiration dates ranging from June 2020 to March 2029.  We are not aware of any infringements of our patents.  We plan to protect our patents from infringement in each instance where we determine that doing so would be economical in light of the expense involved and the level and availability of our financial resources.   While we believe that our pending application relates to a patentable device or concept, the patent may not be issued.

Employees

 As of March 31, 2011, we had 27 full-time employees and one part-time employee.  There were eleven employees in manufacturing, four in engineering/research and development, nine in sales and marketing and four in finance and administration.  We are not a party to any collective bargaining agreements.  We believe our relations with our employees are good.

Customers

 Revenues from our largest customers, as a percentage of total revenues, for fiscal years 2010 and 2009 were as follows:

	2010			2009
Customer A		16	%		10	%
Customer B		6	%		8	%
Customer C		4	%		4	%
All Others		74	%		78	%
		100	%		100	%

No other customer accounted for more than 10% of our revenues in fiscal years 2010 and 2009.  At December 31, 2010, receivables included $106,958 (27%) from one customer, and no more than 7% from any other single customer.

Environmental Matters

 Our operations are subject to a variety of federal, state and local laws and regulations relating to the discharge of materials into the environment or otherwise relative to the protection of the environment.  Lifeloc provides cylinders of ethanol in nitrogen (UN1956, Class 2.2) to customers that are considered hazardous materials when shipped.  We provide a Material Safety Data Sheet (“MSDS”) with every tank, and all employees involved in shipping hazardous materials are required to have appropriate certification.  The DOT governs hazardous material shipments pursuant to Title 49 of the Code of Federal Regulations, and we comply with these shipping requirements as well as any other state or local laws governing the transportation of hazardous materials.  We believe that we comply with all applicable environmental laws and regulations.

Government Regulation of the Business

 All breath testers sold in the United States explicitly for personal use are regulated as Class I medical devices by the Food and Drug Administration (“FDA”). These devices require premarket clearance by the FDA under Section 510(k) of the Food, Drug and Cosmetic Act (21 U.S.C. § 301 et seq.) before a manufacturer can market them. Specifically, medical device manufacturers are required to submit a premarket notification if they intend to introduce a device into commercial distribution for the first time or reintroduce a device that will be significantly changed or modified to the extent that its safety or effectiveness could be affected. Such change or modification could relate to the design, material, chemical composition, energy source, manufacturing process, or intended use. Lifeloc currently sells one model for personal use, the LifeGuard, and we received FDA 510(k) clearance in 2009, prior to market introduction.  There have been no material changes or modifications in LifeGuard since its initial clearance. All of Lifeloc’s other products are designated for professional use and do not require FDA clearance.  The FDA provides regulations governing the manufacture and sale of our LifeGuard product, and we are subject to inspections by the FDA to determine our compliance with these regulations.  FDA inspections are conducted periodically at the discretion of the FDA.  As of December 31, 2010, we had not been inspected by the FDA; however, we believe we were in substantial compliance with all known regulations.

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 We are also subject to regulation by the United States Department of Transportation and by various state departments of transportation so far as our other products are concerned.  The Omnibus Transportation Employee Testing Act of 1991 requires drug and alcohol testing of safety-sensitive transportation employees in aviation, trucking, railroads, mass transit, pipelines, and other transportation industries. The DOT Office of Drug & Alcohol Policy & Compliance (ODAPC) publishes, implements, and provides authoritative interpretations of these rules.  These regulations cover all transportation employers, safety-sensitive transportation employees, and service agents.  Manufacturers submit devices to the DOT for testing and approval.  Instruments are tested according to their model specifications and, if passed, included on the Conforming Products List of Evidential Devices published periodically in the Federal Register.  Law enforcement applications also require that portable breath testing instruments be included on the DOT Conforming Products List.  Lifeloc’s FC10, FC20, EV30, Phoenix and Phoenix 6.0 are included on the conforming products list.  We believe that we were in substantial compliance with all known regulations as of December 31, 2010 for our products sold into these markets and states.

International Regulations

 Many countries select a breath testing device for use in the law enforcement context based upon an in-country developed bid specification.  Many countries into which our products are sold recognize the United States DOT Conforming Product list in their selection criteria or have no regulations applicable to the sale of our products.   Australia follows Australian Standard 3547-1997 – Breath Alcohol Testing Devices for Personal Use for law-enforcement uses, and Europe is in the process of adopting and revising British Standard EN 15964 Breath Alcohol Testing Devices Other Than Single Use, also for use in the law enforcement context.  We are not presently certified to Australian or European standards for law-enforcement uses, but may decide at a future date to pursue such certification.

State and Local Regulations

 Portable fuel-cell based technology has been used to show probable cause in the following jurisdictions, based on the individual device’s DOT approval:   Alaska, Arkansas, California, Colorado, Delaware, District of Columbia, Florida, Hawaii, Iowa, Illinois, Indiana, Iowa, Kansas, Kentucky, Maryland, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Mexico, New York, North Carolina, North Dakota, Pennsylvania, Puerto Rico, Rhode Island, South Dakota, Vermont, Virginia, West Virginia, and Wisconsin.  Courts in Georgia, Maine and Wyoming have also accepted preliminary breath test results from fuel-cell based breathalyzers for probable cause purposes.

 In California, Illinois and Idaho, results of portable fuel cell breath testers are admissible as evidence of intoxication in DUI prosecution. In other states, infra-red technology is considered the standard for evidence of intoxication, because of its ability to perform real-time analysis of the entire breath exhalation thereby giving it the ability to detect interference from mouth alcohol. In those states, portable fuel cell based breath testers are not admissible as evidence of intoxication, although they may still be used to establish probable cause.

Reports to Security Holders

 Upon effectiveness of this registration statement, we intend to comply with the reporting requirements of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), pursuant to Section 12(g) of the Exchange Act.  We will file annual, quarterly and other reports with the SEC and, accordingly, will furnish an annual report with audited financial statements to our stockholders.  Copies of this registration statement and all subsequent filings we make with the SEC may be inspected, without charge, at the SEC’s Public Reference Room at 100 F Street N.E., Washington, D.C. 20549, on official business days during the hours of 10 a.m. and 3 p.m.  The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.  Copies of this material also should be available through the Internet by using the SEC’s EDGAR Archive, which is located at http://www.sec.gov.  We will also make such material available on our own website, which is located at http://www.lifeloc.com.

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Item 1A.   Risk Factors

 The risks described below together with all of the other information included in this registration statement on Form 10 should be considered carefully.  The risks and uncertainties described below and elsewhere in this registration statement are not the only ones we face.  If any of the following risks actually occur, our business, financial condition or results of operations would likely suffer.  In that case the value of our shares could fall and a shareholder could lose all or part of his, her or its investment.

Risks Related to Our Business

The current worldwide economic downturn could have a negative impact on our business, operating results and financial condition.

 If the economic downturn continues, our customers may delay, reduce or cancel their purchases of our products, particularly if they or their customers have reduced capital budgets or have difficulty obtaining credit, and this would reduce our revenues.  The economic downturn could also increase competition, which could have the effect of forcing us to reduce our prices.  We could incur losses if a customer’s business fails and is unable to pay us, or pay us on a timely basis. Likewise, if our suppliers have difficulty in obtaining credit or in operating their businesses, they may not be able to provide us with the materials we use to manufacture our products.  These actions could result in reduced revenues and higher operating costs, and have an adverse effect on our results of operations and financial condition.

We rely on customers who may not consistently purchase our products in the future and if we lose any one of these customers, our revenues may decline.

 Sixteen percent of our total sales in 2010 were attributable to one customer, with whom we do not have a long-term contract.  If orders from that customer were to decline or cease entirely, our revenues would be adversely affected.  Furthermore, at December 31, 2010, our accounts receivable balance included approximately 27% from one customer.

 In the future, a small number of customers may continue to represent a significant portion of our total revenues in any given period. These customers may not consistently purchase our products at a particular rate over any subsequent period.  A loss of any of these customers could adversely affect our revenues.

We rely heavily upon the talents of our Chief Executive Officer, the loss of whom could severely damage our business.

 Our performance depends to a large extent on a small number of key managerial personnel. In particular, we believe our success is highly dependent upon the services and reputation of our Chief Executive Officer, Mr. Barry R. Knott.  Loss of Mr. Knott’s services could severely damage our business. 

We must continue to be able to attract employees with the scientific and technical skills that our business requires, and if we are unable to attract and retain such individuals, our business could be severely damaged.

 Our ability to attract employees with a high degree of scientific and technical talent is crucial to the success of our business. There is intense competition for the services of such persons, and we cannot guarantee that we will continue to be able to attract and retain individuals possessing the necessary qualifications.  If we cannot attract such individuals, we may not be able to keep our products current, bring new innovation to market or produce our products. As a result, our business could be damaged.

We are subject to a high degree of regulatory oversight and, if we do not continue to receive the necessary regulatory approvals, our revenues may decline.

 The FDA and the Department of Transportation have cleared us to market the alcohol monitoring products we currently sell in the United States.  However, further FDA or DOT approval will be required before we can domestically market additional alcohol monitoring products that we may develop in the future.  We may also seek to sell current or future medical or drug-related products that require us to obtain FDA or DOT clearance to market such products.  We may also be required to obtain regulatory approvals or licenses from other federal, state or local agencies or comparable agencies in other countries.

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 We may not continue to receive FDA or DOT clearance to market our current products or we may not obtain the necessary regulatory clearance, approvals or licenses for the marketing of any of our future products.  Also, we cannot predict the impact on our business of FDA or DOT regulations or determinations arising from future legislation or administrative action.  If we lose FDA or DOT permission to market our current products or we do not obtain regulatory permission to market our future products, our revenues may decline and our business may be harmed.

Our business in the domestic law enforcement area is susceptible to changes in state policies and DUI laws.

 Portable breath testers (“PBTs”) are not used to the same degree in each state. Usage is determined by a complex combination of individual state DUI laws, historical practice, and individual state directions for alcohol testing. Some states, like New Hampshire, do not accept breath alcohol testing as evidence. Other states may prefer different breath alcohol testing technology, such as infrared. Lifeloc cannot control the direction or timing of changes to individual state DUI laws, public and political sentiment toward the use of PBTs, or individual state preferences for a specific breath alcohol testing technology. These factors may threaten current state contracts and future state contracts and our revenues may decline, harming our business.

Our business relies on state contracts, governed by state contracting polices that are beyond our control.

 Many state purchases of PBTs are governed by state contracts with competitive price bids, multiple year terms and without guarantees of purchases. Other states prefer to share PBT usage across several vendors, also without guarantees of volume. These state practices limit Lifeloc’s ability to retain current business, forecast volumes and win new business. Furthermore, a significant amount of our law enforcement business is concentrated in five states (California, Michigan, Idaho, Colorado, and Nevada). Loss of this business, or delays or cancellations in purchasing by these states, could seriously impact our law enforcement business.

We are reliant on our sales representative group for access to the channels of distribution.

 Lifeloc uses sales representatives to market and sell to the law enforcement markets in an 11-state region, consisting of Washington, Oregon, California, Nevada, Wyoming, Utah, Colorado, Arizona, New Mexico, Alaska, and Hawaii. Our sales representatives also represent other companies’ law enforcement products. The cancellation of the agreement with our sales representative group, or shift in its focus to products made by companies other than Lifeloc, could negatively impact our current and future sales in these states. Currently, Lifeloc is not well known or well represented in other states outside of those in which we currently have state contracts or are represented by sales representatives. New business development in states where we have no significant installed base, sales representation or current business is uncertain.

Third parties may infringe on our patents, and as a result, we could incur significant expense in protecting our patents or not have sufficient resources to protect them.

 We hold several patents that are important to our business. Although we are not currently aware of any past or present infringements of our patents, we plan to protect these patents from infringement and obtain additional patents whenever feasible. To this end, we have obtained confidentiality agreements from our employees and consultants and others who have access to the design of our products and other proprietary information.  Protecting and obtaining patents, however, is both time consuming and expensive. We therefore may not have the resources necessary to assert all potential patent infringement claims or pursue all patents that might be available to us.  If our competitors or other third parties infringe on our patents, our business may be harmed.

Third parties may claim that we have infringed on their patents and as a result, we could be prohibited from using all or part of any technology used in our products.

 Should third parties claim a proprietary right to all or part of any technology that we use in our products, such a claim, regardless of its merit, could involve us in costly litigation.  If successful, such a claim could also result in us being unable to freely use the technology that was the subject of the claim, or sell products embodying such technology.  If we engage in litigation, our expenses may increase and our business may be harmed.  If we are prohibited from using a particular technology in our products, our revenues may decline and our business may be harmed.

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We depend on the availability of certain key supplies and services that are available from only a few sources, and if we experience difficulty with a supplier, we may have difficulty finding alternative sources of supply.

 We require certain key supplies for our products, particularly fuel cells, that are available from only a few sources.  Based upon our ordering experience to date, we believe the materials and services required for the production of our products are currently available in sufficient quantities. However, this does not mean that we will continue to have timely access to adequate supplies of essential materials and services in the future or that supplies of these materials and services will be available on satisfactory terms when the need arises. Our business could be severely damaged if we become unable to procure essential materials and services in adequate quantities and at acceptable prices.

 From time to time, subcontractors may produce certain of our products for us, and our business is subject to the risk that these subcontractors fail to make timely delivery.  Our products and services are also from time to time used as components in the products of other manufacturers. We are therefore subject to the risk that manufacturers that integrate our products or services into their own products may change their source of supply to other vendors, may change their product designs in a way that eliminates our components, may choose to have their components manufactured by other means, and/or become unable to acquire essential supplies and services from third parties in a timely fashion.  If this occurs, we may not be able to deliver our products on a timely basis and our revenues may decline.

Our customers may claim that the products we sold them were defective, and if our insurance is not sufficient to cover a claim, we would be liable for the excess.

 Like any manufacturer, we are and always have been exposed to liability claims resulting from the use of our products.  We maintain product liability insurance to cover us in the event of liability claims, and as of March 31, 2011, no such claims have been asserted or threatened against us.  However, our insurance may not be sufficient to cover all possible future product liabilities.

We could be liable if our business operations harmed the environment, and a failure to maintain compliance with environmental laws could severely damage our business.

 Our operations are subject to a variety of federal, state and local laws and regulations relating to the protection of the environment.  From time to time, we use hazardous materials in our operations.  Although we believe that we are in material compliance with all applicable environmental laws and regulations, our business could be severely damaged by any failure to maintain such compliance.

Our quarterly financial results vary quarter to quarter, which may adversely affect our stock price. We cannot predict with any certainty our operating results in any particular fiscal quarter.

 Our quarterly operating results may vary significantly depending upon factors such as:

▪ the timing of completion of significant orders;

▪ the timing and amount of our research and development expenditures;

▪ the costs of initial production in connection with new products;

▪ the availability, quality and cost of key components that go into the assembly of our products;

▪ the timing of new product introductions — both by us and by our competitors;

▪ changes in the regulatory environment and regulations under which we operate;

▪ the loss of a major customer;

▪ the timing and level of market acceptance of new products or enhanced versions of our existing products;

▪ our ability to retain existing employees, customers and our customers’ continued demand for our products and services;

▪ our customers’ inventory levels, and levels of demand for our customers’ products and services; and

▪ competitive pricing pressures.

 We may not be able to grow or sustain revenues or achieve or maintain profitability on a quarterly or annual basis, and levels of revenue and/or profitability may vary from one such period to another.

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We have a number of large, well-financed competitors who have research and marketing capabilities that are superior to ours.

 The industry in which we compete is highly competitive. Many of our existing and potential competitors have greater financial resources and manufacturing capabilities, more established and larger marketing and sales organizations and larger technical staffs than we have.  Other companies, some with greater experience in the alcohol monitoring industry, produce products and services that compete with our products and services. If any of our competitors are successful in developing products that are superior to our products, or competing products that sell for lower prices, this may cause a reduction in the demand for our products and a reduction in our revenue and our profits.

Our products rely on technology that may become outdated or out of favor.

 All of Lifeloc’s products use fuel cell technology for the measurement of breath alcohol results. This technology has been developed and refined over many years by Lifeloc and our major competitors. While we expect it to remain as the dominant technology in breath testing devices, other technologies for the measurement of breath alcohol exist and are employed in other market and application segments where the technology is more suitable or developed to the specific requirements. It is possible that future development of these technologies could pose a risk to Lifeloc’s business. See “Item 1. Business – Competition and Markets” for more information about these other technologies.

Risks Related to Our Stock

Shares of our common stock lack a significant trading market.

 Shares of our common stock are not yet eligible for trading on any national securities exchange. Our common stock may be quoted in the over-the-counter market on the OTC Bulletin Board or in what are commonly referred to as “pink sheets.” However, these markets are highly illiquid. There is no assurance that an active trading market in our common stock will develop, or if such a market develops, that it will be sustained. In addition, there is a greater chance for market volatility for securities quoted on the OTC Bulletin Board as compared with securities traded on a national exchange. This volatility may be caused by a variety of factors, including the lack of readily available quotations, the absence of consistent administrative supervision of “bid” and “ask” quotations and generally lower trading volume. As a result, an investor may find it more difficult to dispose of, or to obtain accurate quotations as to the market value of, our common stock, or to obtain coverage for significant news events concerning us, and the common stock could become substantially less attractive for margin loans, for investment by financial institutions, as collateral for borrowing, as consideration in future capital raising transactions or for other purposes.

 Under Exchange Act Rule 144, a person who has beneficially owned restricted shares of our common stock for at least one year is entitled to sell their securities provided that such person is not deemed to have been one of our affiliates at the time of, or at any time during the three months preceding a sale. Persons who have beneficially owned restricted shares of our common stock for at least one year but who are our affiliates at the time of, or at any time during the three months preceding a sale, would be subject to additional restrictions, by which such person would be entitled to sell within any three-month period only a number of securities that does not exceed the greater of either of the following: 1% of the total number of securities of the same class then outstanding; or the average weekly trading volume of such securities during the four calendar weeks preceding the filing of a notice on Form 144 with respect to the sale. Such sales by affiliates must also comply with the manner of sale, current public information and notice provisions of Rule 144.  A sale under Rule 144 or under any other exemption from the Securities Act of 1933, as amended (the “Securities Act”), if available, or pursuant to registration of shares of common stock of present stockholders, may have a depressive effect upon the price of the common stock in any market that may develop.

 Additionally, the price of our securities may be volatile as a result of a number of factors, including, but not limited to, the following:

·   our ability to successfully conceive and to develop new products and services to enhance the performance characteristics and methods of manufacture of existing products;

·   our ability to retain existing customers and customers’ continued demand for our products and services;

·   the timing of our research and development expenditures and of new product introductions;

·   the timing and level of acceptance of new products or enhanced versions of our existing products; and

·   price and volume fluctuations in the stock market at large which do not relate to our operating performance.

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Our principal stockholder has significant voting power and may take actions that may not be in the best interests of other stockholders.

 Vern D. Kornelsen, Chairman of the Board of Directors, secretary, and Chief Financial Officer, beneficially owned approximately 78% of our outstanding common stock as of March 31, 2011. Through this ownership, Mr. Kornelsen is able to control the composition of our board of directors and direct our management and policies. Accordingly, Mr. Kornelsen has the direct or indirect power to:

·   elect all of our directors and thereby control our policies and operations;

·   amend our bylaws and some provisions of our certificate of incorporation; and

·   prevent mergers, consolidations, sales of all or substantially all our assets or other extraordinary transactions.

 Mr. Kornelsen's significant ownership interest could adversely affect investors' perceptions of our corporate governance. In addition, Mr. Kornelsen may have an interest in pursuing acquisitions, divestitures and other transactions that involve risks to us and you. For example, Mr. Kornelsen could cause us to make acquisitions that increase our indebtedness or to sell revenue generating assets. Mr. Kornelsen may from time to time acquire and hold interests in businesses that compete directly or indirectly with us.

“Penny stock” rules may make buying or selling our securities difficult, which may make our stock less liquid and make it harder for investors to buy and sell our securities.

 Trading in our securities is subject to the SEC’s “penny stock” rules and it is anticipated that trading in our securities will continue to be subject to the penny stock rules for the foreseeable future.  The SEC has adopted regulations that generally define a penny stock to be any equity security that has a market price of less than $5.00 per share, subject to certain exceptions.  These rules require that any broker-dealer who recommends our securities to persons other than prior customers and accredited investors must, prior to the sale, make a special written suitability determination for the purchaser and receive the purchaser’s written agreement to execute the transaction.  Unless an exception is available, the regulations require the delivery, prior to any transaction involving a penny stock, of a disclosure schedule explaining the penny stock market and the risks associated with trading in the penny stock market.  In addition, broker-dealers must disclose commissions payable to both the broker-dealer and the registered representative and current quotations for the securities they offer.  The additional burdens imposed upon broker-dealers by these requirements may discourage broker-dealers from recommending transactions in our securities, which could severely limit the liquidity of our securities and consequently adversely affect the market price for our securities.

Blue Sky considerations may limit sales in certain states.

 The holders of our securities and persons who desire to purchase them in any trading market that might develop in the future should be aware that there may be significant state law restrictions upon the ability of investors to resell our securities. Investors should consider any secondary market for our securities to be a limited one. We intend to seek coverage and publication of information regarding the company in an accepted publication which permits a “manual exemption.” This manual exemption permits a security to be distributed in a particular state without being registered if the company issuing the security has a listing for that security in a securities manual recognized by the state. However, it is not enough for the security to be listed in a recognized manual. The listing entry must contain (1) the names of issuers, officers, and directors, (2) an issuer's balance sheet, and (3) a profit and loss statement for either the fiscal year preceding the balance sheet or for the most recent fiscal year of operations. There is no guarantee that we will be able to secure a listing containing all of this information or how long it might take to secure such a listing. Until a listing is published, trading in our securities will be subject to significant state law restrictions. Most of the accepted manuals are those published in Standard and Poor's, Moody's Investor Service, Fitch's Investment Service, and Best's Insurance Reports. While many states expressly recognize these manuals, a smaller number of states declare that they “recognize securities manuals” but do not specify the recognized manuals, making applicability of the manual exemption uncertain in those states. The following states do not have provisions expressly recognizing the manual exemption: Alabama, Georgia, Illinois, Kentucky, Louisiana, Montana, South Dakota, Tennessee, Vermont and Wisconsin. While we may, in our discretion, cause our securities to be registered under the state securities laws of these or other states, there is no guarantee that we will do so.

We may issue shares in the future, diluting your interest in us.

 An additional 44,000 shares of our common stock are reserved for issuance under our 2002 Stock Option Plan as of March 31, 2011.  Moreover, we expect to issue additional shares and options to purchase shares of our common stock to compensate employees, consultants and directors, and we may issue additional shares to raise capital.  Any such issuances will have the effect of further diluting the interest of the holders of our securities.

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Stockholders should not anticipate receiving cash dividends on our stock.

 We have never declared or paid any cash dividends or distributions on our capital stock. We currently intend to retain future earnings to support operations and to finance expansion and therefore do not anticipate paying any cash dividends on our common stock in the foreseeable future.

Item 2.   Financial Information

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 The following is a discussion of our financial condition and results of operations, and should be read in conjunction with our financial statements and the related notes included elsewhere in this registration statement.  Certain statements contained in this section are not historical facts, including statements about our strategies and expectations about new and existing products, market demand, acceptance of new and existing products, technologies and opportunities, market and industry segment growth, and return on investments in products and markets.  These statements are forward looking statements and involve substantial risks and uncertainties that may cause actual results to differ materially from those indicated by the forward-looking statements.  All forward-looking statements in this section are based on information available to us on the date of this document, and we assume no obligation to update such forward looking statements.  Readers of this registration statement are strongly encouraged to review the section titled “Risk Factors.”

Overview

 We have been a developer and manufacturer of advanced portable breath alcohol testing  instruments since 1986.  We design and produce high-quality, high precision and fast recovery portable alcohol testers for use in the workplace, clinics, schools, law enforcement, corrections, and other applications.  We offer accessories, support, training and supplies for our instruments.  Our internet websites are www.lifeloc.com and www.lifeguardbreathtester.com.  Information contained on our websites does not constitute part of this prospectus.

 The areas in which we do business are highly competitive and include both foreign and domestic competitors. Most of our competitors are larger and have substantially greater resources than we do. Furthermore, other domestic or foreign companies, some with greater financial resources than we have, may seek to produce products or services that compete with ours. We routinely outsource certain sub-assemblies both domestic and offshore, to obtain cost effective production. We maintain all final assembly in the United States to ensure our products are rigorously tested and meet regulatory requirements and customer expectations.

 We believe that competition for sales of our products and services is based on product performance, reliability, ease of use and price.  Barriers to entry include the regulatory requirements, quality distribution, and expertise in the design, manufacture, calibration and refinement of our products.

 We believe that our future success depends to a large degree on our ability to continue to conceive and to develop new products and services, develop and penetrate our markets and continually lower  our manufacturing costs.  Accordingly, we expect to continue investing in research and development, to the extent funds are available.

Outlook

 Installed Base of Breathalyzers.  We believe that the installed base of our breathalyzers will increase as the inherent risks associated with drinking while driving, and while working in sensitive jobs, become more widely acknowledged and as our network of direct and independent sales representatives grows.  We expect the replacement sales of our instruments and accessories to increase as additional workplace environments, law enforcement agencies, schools, clinics, and other venues become better penetrated.  We believe that increased marketing efforts, the introduction of new products and the expansion of our distribution channels may provide the basis for increased sales and continuing profitable operations.  However, these measures, or any others that we may adopt, may not result in either increased sales or continuing profitable operations.

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 Possibility of Operating Losses.  We achieved profitable operations in 2003, and have operated profitably each year since then.  Previously, we had incurred losses since our inception.  At December 31, 2010 we have an accumulated deficit of $1,821,746.  There is no assurance that we will not incur operating losses in any given quarter or year in the future.

 Sales Growth.  We expect to increase sales in the U.S. and internationally. We believe that improved economic conditions, our new products and increased market penetration will contribute to sales growth in  2011.  International markets are growing more quickly than  the more mature U.S. market due to increased awareness by government, consumers and business of the negative consequences and social costs of alcohol abuse on productivity, health and safety.

 Sales and Marketing Expenses.  We continue to focus our efforts on expanding  our domestic and international sales. Internationally we are concentrating on improving the caliber of our distributors and adding new distributors in previously unrepresented countries. We are also undertaking the process of obtaining certification for our devices from various international government certification agencies. Domestically we will continue to support our workplace distributors with new products, such as drug screening products, and greater lead generation activities. Sales and marketing expenses are expected to increase as we intensify these activities.

 Research and Development Expenses.  Research and development expenses are expected to increase in support of refinements to our breathalyzer product line, and to support the development of new products.

Results of Operations

 Net sales. Our sales for the year ended December 31, 2010 (“FY 10”) were $6,118,960, an increase of 43% from $4,287,597 in the fiscal year ended December 31, 2009 (“FY 09”). Our international business grew significantly from the penetration of new markets and our entry into the consumer market with the Lifeguard  personal breath alcohol tester. Domestically our OEM business, which is tied to the growth of ignition interlocks, saw rapid growth. In the workplace, growth was fueled by improvements in the economy and customers upgrading from older generation Lifeloc equipment to our latest models.

 Gross profit.   Gross profit in FY 10 and FY 09 remained consistent at 48%.

 Research and development expenses.   Research and development expenses were $375,683 in FY 10, an increase of $119,322 or 47% from $256,361 in FY 09.  The increase was primarily a result of increases in compensation and in outside services related to new product development. It was driven by updates made to our core workplace and law enforcement product lines as well as by customization of our devices to meet specific in-country language and procedural requirements.

 Sales and marketing expenses.   Sales and marketing expenses were $934,955 in FY 10, an increase of $149,929, or 19% from $785,026 in FY 09.  The increase resulted from an increase in staffing and an increase in compensation due to increased sales volume, and increased spending on such items as public relations, sales supplies, and rebate expense.

 General and administrative expenses.   General and administrative expenses were $877,288 in FY 10, an increase of $177,188, or 25%, from $700,100 in FY 09.  The increase consisted primarily of increased compensation and in professional fees as a result of registering our warrant distribution with the SEC, which was abandoned in 2010, offset in part by a reduction in regulatory compliance expense from FY 09.

 Loss on currency exchange.  The loss on currency exchange increased from $75,502 in FY 09 to $117,773 in FY 10, an increase of $42,271, or 56%, as a result of additional purchases of components from foreign vendors, as well as from an increase in the exchange rate.

 Net income.   Net income in FY 10 of $406,794 represented an increase of $229,173 compared to FY 09 net income of $177,621.  The increase of 129% is a result of an increase in sales, offset in part by an increase in the loss on currency exchange and by a higher provision for federal and state income taxes.

Trends and Uncertainties That May Affect Future Results

 We believe sales of our products will continue to increase as we experience sales growth  We expect our quarter-to-quarter revenue fluctuations to continue due the unpredictable timing of large orders from both new and repeat customers. Going forward, we intend to focus our development efforts on products we believe offer the best prospects to increase our intermediate and near-term revenues.

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 Our property and equipment expenditures, and patents, during FY 10 were $154,791, compared to $36,600 for 2009.  We also purchased technology for $120,000 to assist us with manufacturing a component of our product. We expect to begin amortizing this cost in 2011, using the straight-line method and a three-year life.

 We believe that the performance of our fuel cell based breathalyzer technology provides an opportunity for continued market share growth.  We believe that the market awareness of fuel cell technology is improving and that this will benefit sales efforts in FY 11 and beyond.   Our FY 11 operating plan is focused on growing sales, increasing gross profit, with proportional increases in research and development costs while advancing profits and positive cash flows.  We cannot predict with certainty the expected sales, gross profit, net income or loss and usage of cash and cash equivalents for FY 11.  However, we believe that cash resources and borrowing capacity will be sufficient to fund our operations for at least the next twelve months under our current operating plan.  If we are unable to manage the business operations in line with our budget expectations, it could have a material adverse effect on business viability, financial position, results of operations and cash flows. Further, if we are not successful in sustaining profitability and remaining at least cash flow break-even, additional capital may be required to maintain ongoing operations.

Critical Accounting Policies and Estimates

 Our financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis. The preparation of financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.

 We regularly evaluate the accounting policies and estimates that we use to prepare our financial statements. In general, management’s estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management.

 We believe the following critical accounting policies affect the more significant judgments and estimates used in the preparation of our financial statements.

 Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States.  The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, sales and expenses, and related disclosure of contingent assets and liabilities.  On an on-going basis, we evaluate our estimates, including those related to bad debts, inventories, sales returns, warranty, contingencies and litigation.  We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.  Actual results may differ from these estimates under different assumptions or conditions.  We believe the following critical accounting policies affect the more significant judgments and estimates used in the preparation of our financial statements.

 We maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments.  If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances would be required, which would increase our expenses during the periods in which any such allowances were made.  The amount recorded as a provision for bad debts in each period is based upon our assessment of the likelihood that we will be paid on our outstanding receivables, based on customer-specific as well as general considerations.  To the extent that our estimates prove to be too high, and we ultimately collect a receivable previously determined to be impaired, we may record a reversal of the provision in the period of such determination.

 We provide for the estimated cost of product warranties at the time sales are recognized.  While we engage in extensive product quality programs and processes, including actively monitoring and evaluating the quality of our component suppliers, we have experienced some costs related to warranty liability.  The warranty accrual is based upon historical experience and is adjusted based on current experience.  Should actual warranty experience differ from our estimates, revisions to the estimated warranty liability would be required.

15

 We reduce inventory for estimated obsolete or unmarketable inventory equal to the difference between the cost of inventory and the estimated market value based upon assumptions about future demand and market conditions.  If actual market conditions are less favorable than those projected by management, additional inventory write-downs may be required.  Any write-downs of inventory would reduce our reported net income during the period in which such write-downs were applied.

 We recognize deferred income tax assets and liabilities for the expected future income tax consequences, based on enacted tax laws, of temporary differences between the financial reporting and tax bases of assets and liabilities.  Deferred tax assets are then reduced, if deemed necessary, by a valuation allowance for the amount of any tax benefits which, more likely than not based on current circumstances, are not expected to be realized.

 Property and equipment are stated at cost, with depreciation computed over the estimated useful lives of the assets, generally five years (three years for software).  We mostly use the double declining method of depreciation for property and equipment, and the straight line method for software.  Maintenance and repairs are expensed as incurred and major additions, replacements and improvements are capitalized.

 We amortize our patent costs over their estimated useful lives, which is typically the remaining statutory life.  From time to time, we may be required to adjust these lives based on advances in technology, competitor actions, and the like.  We review the recorded amounts of patents at each period end to determine if their carrying amount is still recoverable based on our expectations regarding sales of related products.  Such an assessment, in the future, may result in a conclusion that the assets are impaired, with a corresponding charge against earnings.

 Stock-based compensation is presented in accordance with the guidance of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718, Compensation — Stock Compensation (“ASC 718”).  Under the provisions of ASC 718, companies are required to estimate the fair value of share-based payment awards made to employees and directors including employee stock options based on estimated fair values on the date of grant using an option-pricing model.  The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods in our statement of operations.

Liquidity and Capital Resources

 We compete in highly technical, and very competitive segments of the alcohol testing  marketplace. Products can take several years to develop and introduce to distributors and end users.  Furthermore, many of our instruments are regulated by the either the FDA, the DOT, and/or other regulatory bodies to ensure the ultimate quality and functionality of our products.  Regulatory compliance can contribute to the significant cost and time needed to maintain existing products and develop and introduce product enhancements and new product innovations.

 We have traditionally funded working capital needs through product sales, management of working capital components of our business, and by cash received from private offerings of our common stock, warrants to purchase shares of our common stock and notes.  In our earlier years, we incurred quarter to quarter operating losses to develop current product applications, utilizing a number of proprietary and patent-pending technologies.  Although we have been profitable during the last several years, operating losses may occur in the future.  Should that situation arise, we may not be able to obtain working capital funds necessary in the time frame needed and at satisfactory terms or at all.

 On May 11, 2004, we entered into a credit facility agreement with Citywide Bank, which was renewed for one year on May 11, 2010.  The terms of the credit facility include a line of credit for $150,000 for one year at an interest rate calculated at prime rate plus 1%.  Our borrowing under the credit facility is limited by our eligible receivables and inventory at the time of borrowing.  At December 31, 2010 and 2009, we had not borrowed any amounts from the credit facility.  The credit facility requires us to meet certain financial covenants.  At December 31, 2010 we were in compliance with the financial covenants.

 As of December 31, 2010, cash and cash equivalents were $1,461,900, accounts receivable were $393,118 and current liabilities were $792,037 resulting in a net liquid asset amount of $1,062,981.  We believe that the introduction of several new products during the last several fiscal years, along with new and on-going customer relationships, will continue to generate sufficient revenues, required to maintain profitability.  If these revenues are not achieved on a timely basis, we will be required to implement cost reduction measures.

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 We generally provide a standard one-year warranty on materials and workmanship to our customers.  We provide for estimated warranty costs at the time product revenue is recognized.  Warranty costs are included as a component of cost of goods sold in the accompanying statements of operations.  For the years ended December 31, 2010 and 2009, warranty costs were not deemed significant.

 As of December 31, 2010, we have no material commitments for capital expenditures.

Off-Balance Sheet Transactions

 We currently have no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Item 3.   Properties

 We conduct all of our operations at a leased facility at 12441 West 49th Avenue, Unit 4, Wheat Ridge, Colorado under lease agreements that run through April 30, 2015.   Rent expense for our facility for the fiscal years ended December 31, 2010 and 2009 was $103,544 and $96,039, respectively.  On May 1, 2010, we amended and extended our lease, which, when added to our existing space, provides us with 11,655 square feet of office and manufacturing/warehouse space at an average monthly cost of $8,866 over the life of the lease.  We believe this facility is adequate for our current operations and adequately covered by insurance.  Significant increases in production or the addition of significant equipment additions or manufacturing capabilities in connection with the production of our line of breathalyzers and other products may, however, require the acquisition or lease of additional facilities.  We may establish production facilities domestically or overseas to produce key assemblies or components for our products.  Overseas facilities, if established, may subject us to the political and economic risks associated with overseas operations.  The loss of or inability to establish or maintain such additional domestic or overseas facilities, if acquired, could materially adversely affect our competitive position and profitability.

Item 4.  Security Ownership of Certain Beneficial Owners and Management

 The following table sets forth information regarding our common stock owned as of the close of business on March 31, 2011 by the following persons: (i) each person who is known by us to own beneficially more than 5% of our common stock; (ii) each of our directors who beneficially own our common stock; (iii) each of our Named Executive Officers who beneficially own our common stock; and (iv) all executive officers and directors, as a group, who beneficially own our common stock. The information on beneficial ownership in the table and footnotes thereto is based upon data furnished to us by, or on behalf of, the persons listed in the table.  All shares give effect to the 1:2 reverse stock split completed on May 3, 2010.

Name and Address of Beneficial Owner	Amount and Nature of Beneficial Ownership (1)			Percent of Class (2)
Vern D. Kornelsen c/o Lifeloc Technologies, Inc. 12441 West 49th Ave., Unit 4, Wheat Ridge, CO 80033		1,889,445	(3)		78	%
Directors and Named Executive Officers
Alan C. Castrodale c/o Lifeloc Technologies, Inc. 12441 West 49th Ave., Unit 4, Wheat Ridge, CO 80033		50,000			2.1	%
Robert D. Greenlee c/o Lifeloc Technologies, Inc. 12441 West 49th Ave., Unit 4, Wheat Ridge, CO 80033		184,979			7.6	%
Robert H. Summers, PhD c/o Lifeloc Technologies, Inc. 12441 West 49th Ave., Unit 4, Wheat Ridge, CO 80033		11,500			.5	%
Barry R. Knott c/o Lifeloc Technologies, Inc. 12441 West 49th Ave., Unit 4, Wheat Ridge, CO 80033		64,125			2.6	%
Mark A. Lary c/o Lifeloc Technologies, Inc. 12441 West 49th Ave., Unit 4, Wheat Ridge, CO 80033		50,000			2.1	%
Kristie L. LaRose c/o Lifeloc Technologies, Inc. 12441 West 49th Ave., Unit 4, Wheat Ridge, CO 80033		7,500			.3	%
All executive officers and directors as a group, including those named above (7 persons)		2,257,549			93.2	%

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(1)	Represents shares with respect to which each beneficial owner listed has or will have, upon acquisition of such shares pursuant to the exercise or conversion of options, warrants, conversion privileges or other rights exercisable within sixty days, sole voting and investment power. Amounts listed have been adjusted to reflect a 1 for 2 reverse split, effective May 3, 2010.
(2)	As of March 31, 2011, we had 2,422,416 shares of our common stock issued and outstanding.  Percentages are calculated on the basis of the amount of issued and outstanding common stock.  No person or group has the right to acquire, within 60 days following the filing of this registration statement, any shares pursuant to options, warrants, conversion privileges or other rights.
(3)	Holdings as of March 31, 2011.  Includes 1,855,319 shares owned by EDCO Partners LLLP, of which Mr. Kornelsen is the General Partner.  Excludes 3,000 shares owned by M. Elaine Kornelsen, as to which Vern D. Kornelsen disclaims any beneficial ownership.

Item 5.   Directors and Executive Officers

The following table sets forth the name, age, positions, and offices as of March 31, 2011, of our directors and executive officers:

NAME	AGE	POSITION
Barry R. Knott	55	President, Chief Executive Officer, Treasurer and Director
Mark A. Lary	50	Vice President, Operations
Kristie L. LaRose	38	Vice President, Finance
Vern D. Kornelsen	78	Director, Chairman, Secretary and Chief Financial Officer
Alan C. Castrodale	67	Director
Robert D. Greenlee	69	Director
Robert H. Summers, PhD	87	Director

BIOGRAPHIES OF EXECUTIVE OFFICERS AND DIRECTORS

Barry R. Knott joined the Company on February 1, 2009 as its Marketing Director, was appointed to the board of directors on June 11, 2009 and became Chief Operating Officer on July 1, 2009.  He became our President on October 1, 2009, and assumed the role of President and Chief Executive Officer on January 1, 2010.  He has extensive experience in general management, and particularly sales and marketing.  Previous experience includes positions as the President and CEO of Cognitive Solutions, Inc.; Vice President of sales and marketing for Wide Format Printing (Nashua Corporation); Vice President and General Manager of Zebra Technologies Corporation; and several other similar positions.  He holds a MBA degree from Queens University, Ontario, Canada, and a BA degree from the University of New Brunswick, New Brunswick, Canada.

Mark A. Lary has been employed by the Company since 1994, was appointed Director of Operations in early 1997, and became a Vice President on November 13, 2006.  Mr. Lary has been instrumental in implementing Lifeloc’s continuous flow of product innovation and improvement.  From 1994 until 1997 he served as Products and Services Manager.  Prior to 1994 Mr. Lary was employed by Siemens Medical Systems as a Senior Electronic Technician and by International Medical Corporation as a Field Technical Representative.

18

Kristie L. LaRose joined Lifeloc as its accountant and office manager in August, 2004.  Ms. LaRose has extensive experience in accounting and administrative positions with other companies, and holds a BS degree in Business Administration from Worcester State College, and was named as Vice President, Finance on July 1, 2009.  Prior to 2004, Ms. LaRose was employed by University of Advancing Technology as the Senior Accountant and has held various positions in an accounting and administrative function at B. J.’s Wholesale Club’s corporate office.

Vern D. Kornelsen joined the Company as a director in 1991 and served as secretary and treasurer in 1992 and 1993.  He is currently Chairman of the Board of Directors, secretary, Chief Financial Officer, and a director.  Mr. Kornelsen continues with certain of his other business activities to the extent that they do not interfere with his responsibilities as an officer of the Company.  He formerly practiced as a Certified Public Accountant in Denver, CO and is a financial consultant to several early stage companies.  He was a director of Valleylab for 10 years, and led an investor group that provided a portion of its initial funding.  Mr. Kornelsen has been a director and participated in the capitalizing of a number of early stage companies, and is currently a director of one publicly-held company, Encision, Inc. of Boulder, CO.  He received a BS degree in business from the University of Kansas.  In determining Mr. Kornelsen’s qualifications to serve on our board of directors, the board considered, among other things, his experience and expertise in finance, accounting and management.

Alan C. Castrodale joined the Company in October 2000 as its General Manager and served as its President and Chief Executive Officer from January, 2001 until October 1, 2009 when he resigned as President.  On December 31, 2009 Mr. Castrodale resigned as an officer, but remains as a director.  He has extensive experience in general management, marketing and particularly product development, start-ups and turnarounds, and in building sales channels.  Previous experience includes positions as the general manager of the Aftermarket Division of Velvac, Inc., a $39 million manufacturer of vehicle components and accessories; Vice President of sales and marketing at Windsor Industries, Inc., a $55 million manufacturer of high-end commercial floor maintenance machines; and Executive Vice President of marketing and sales for the Mercury Marine division of Brunswick Corp.  He holds a BA degree in Biology from St. Olaf College in Minnesota.  In determining Mr. Castrodale’s qualifications to serve on our board of directors, the board considered, among other things, his extensive management and marketing experience.

Robert D. Greenlee has been a director of the Company since August 1989.  He has more than thirty years of experience in broadcast management and also has extensive marketing and advertising expertise.  Since 1987, Mr. Greenlee has had controlling equity positions in, and serves as a board member and consultant to, radio stations in Omaha, NE and Denver, CO.  He is also President of Centennial Investment & Management Company, a closely held investment organization and is chairman of Black Hawk Gaming, Inc., a public company developing limited stakes gaming in Black Hawk and Central City, CO.  From 1975 through 1987, Mr. Greenlee was President of Centennial Wireless, Inc., licensee of KBCO AM/FM in Boulder, CO.  This successful radio station was sold in January 1988.  Mr. Greenlee has graduate and undergraduate degrees in communications from Iowa State University.  In determining Mr. Greenlee’s qualifications to serve on our board of directors, the board considered, among other things, his marketing and communications experience as well as his management skills.

Robert H. Summers, Ph.D., was elected as a director at the annual meeting of shareholders in August, 2004.  Dr. Summers holds a Bachelor of Education degree from Southeast Missouri State University, a Master in Psychology degree from Vanderbilt University, and a Doctorate in Education and Psychology from the University of Northern Colorado.  He has a broad background in training and management, having worked most recently as a Senior Configuration Management Specialist and Training Specialist at Geodynamics Corporation, Englewood, CO.  He has also published extensively on management and training.  In determining Dr. Summers' qualifications to serve on our board of directors, the board considered, among other things, his extensive management training and experience.

Item 6.   Executive Compensation

Summary Compensation

The following table sets forth all compensation paid to our Named Executive Officers who were employed by us during the year ended December 31, 2010 for the fiscal years ended December 31, 2010 and 2009.  No other executive officer or employee earned over $100,000 in the last completed fiscal year.

19

Summary Compensation Table for the Years Ended December 31, 2010 and 2009

Name and principal position (a)	Year Ended December  31, (b)	Salary ($) (c)		Bonus ($) (d)		Stock awards ($) (e)		Option awards ($) (f)		Non-equity incentive plan compensation ($) (g)		Non-qualified deferred compensation earnings ($) (h)		All other compensation ($) (i)(1)		Total ($) (j)
Barry R. Knott
CEO 1/1/10, President	2010		150,924		48,485		0		0		0		0		3,620		203,029
10/1/09	2009		58,212		8,079		0		0		0		0		968		66,291
Mark A. Lary	2010		100,385		36,364		0		0		0		0		3,000		139,749
Vice President	2009		99,000		12,865		0		0		0		0		3,439		115,304
Kristie L. LaRose
Vice President	2010		90,344		24,243		0		0		0		0		2,700		117,287
7/1/09	2009		42,711		7,120		0		0		0		0		1,498		51,329
Vern D. Kornelsen	2010		50,000		0		0		0		0		0		0		50,000
Chairman, Secretary,	2009		50,000		0		0		0		0		0		0		50,000
Chief Financial Officer

(1)  Represents our matching contribution to the 401(k) Plan. We have not paid any automobile allowances, although business mileage, business travel, and other business expenses supported by appropriate receipts have been reimbursed.  All such amounts are minor, and do not include any compensation element.

Narrative to Summary Compensation Table

Employment Contracts and Termination of Employment Arrangements

 We have no employment contracts in place with any Named Executive Officer, nor do we have any equity-incentive plans covering such Named Executive Officers.  We have no compensatory plan or arrangement with respect to any Named Executive Officer where such plan or arrangement will result in payments to such Named Executive Officer upon or following his resignation, or other termination of employment with the Company and its subsidiaries, or as a result of a change in control of the Company or a change in the Named Executive Officers’ responsibilities following a change in control.

 Our board of directors has approved the contribution of 15% of pre-bonus, pre-tax profits to a bonus pool, which has been paid out to our executive officers, excluding our Chief Financial Officer, Vern D. Kornelsen.  The allocation of such payments is made at the discretion of the President with approval by the board of directors. In 2010, we paid bonuses equaling $109,092 to our executive officers, including $48,485 to Mr. Knott, $36,364 to Mr. Lary, and $24,243 to Ms. LaRose. No bonus was paid to Mr. Kornelsen.

Outstanding Equity Awards at Fiscal Year-End

 There were no outstanding equity awards at December 31, 2010. We made no individual grants of stock options to our Named Executive Officers during the years ended December 31, 2010 and 2009.

Long Term Incentive Plans; Awards in Last Fiscal Year

 We made no awards under any long-term incentive plan to our Named Executive Officers during the fiscal year ended December 31, 2010.

Profit Sharing and 401(k) Plan

 We have adopted a 401(k) Defined Contribution Plan which covers all full-time employees who have completed three months of full-time continuous service and are age eighteen or older. Participants may defer up to 100% of their gross pay up to plan limits.  Participants are immediately vested in their contributions.  We may make discretionary contributions based on corporate financial results for the fiscal year, which were 3% of the total payroll of the participating employees in 2010 and 2009.  In 2010 and 2009 we contributed $21,158 and $19,534 respectively.  Vesting in a contribution account (our contribution) is based on years of service, with a participant fully vested after six years of credited service.

20

Director Compensation

 We did not pay any compensation to our directors during the fiscal years ended December 31, 2010 and 2009.

 Compensation Committee Interlocks and Insider Participation

 During the fiscal year ended December 31, 2010, all members of our board of directors served as members of our Compensation Committee. No member of our Compensation Committee at any time during the last fiscal year, or prior to the last fiscal year, was an officer or employee of the Company except Barry R. Knott and Vern D. Kornelsen.  Additionally, no member of our Compensation Committee had any relationship with us that would be required to be disclosed as a related person transaction except as set forth herein.  During the fiscal year ended December 31, 2010, none of our executive officers or employees except Barry R. Knott and Vern D. Kornelsen participated in deliberations of our board of directors concerning executive officer compensation.

 During the fiscal year ended December 31, 2010, none of our executive officers:

•   served as a member of the compensation committee (or other board committee performing equivalent functions or, in the absence of any such committee, the board of directors) of another entity, one of whose executive officers served as a member of our Compensation Committee;

•   as a director of another entity, one of whose executive officers served as a member of our Compensation Committee; or

•   as a member of the compensation committee (or other board committee performing equivalent functions or, in the absence of any such committee, the board of directors) of another entity, one of whose executive officers served as a member of our board of directors.

Item 7.    Certain Relationships and Related Transactions, Director Independence

 We have not participated in any transactions since the beginning of our last two fiscal years in which a person deemed to be a related person pursuant to Item 404 of SEC Regulation S-K had or will have a direct or indirect material interest. Lifeloc is not a subsidiary of any parent company.

 As of March 31, 2011, Alan C. Castrodale, Robert D. Greenlee, Barry R. Knott, Vern D. Kornelsen, and Dr. Robert H. Summers serve as our directors.  Currently, Mr. Castrodale, Mr. Greenlee and Dr. Summers are independent directors, as defined under the standards of independence set forth in the NASDAQ Marketplace Rules.  Our securities have not been traded previously.

Item 8.    Legal Proceedings

 We may be involved from time to time in litigation, negotiation and settlement matters that may have a material effect on our operations or finances.  We are not aware of any pending or threatened litigation against us or our officers or directors in their capacity as such that could have a material impact on our operations or finances.

Item 9.    Market Price of and Dividends on the Registrant’s Equity and Related Stockholder Matters

Shares Eligible for Future Sale

 Historically, there has not been a public market for our securities, and we cannot predict what effect, if any, market sales of shares of our securities or the availability of our securities for sale will have on the market price of our securities prevailing from time to time. Nevertheless, sales of substantial amounts of our securities, including the warrants and/or shares issued upon the exercise of the warrants, in the public market, or the perception that such sales could occur, could materially and adversely affect the market price of our securities and could impair our future ability to raise capital through the sale of our equity or equity-related securities at a time and price that we deem appropriate.

 21

 The restricted shares held by our affiliates and non-affiliates will be available for sale in the public market at various times after we have begun filing reports under the Exchange Act pursuant to Rule 144. In general, under Rule 144 as in effect on the date of this registration statement, a person who has not been an affiliate at any time during the three months preceding a sale, and who has beneficially owned shares of our common stock for at least six months, would be entitled to sell an unlimited number of shares of our common stock provided current public information about us is available and, after owning such shares for at least one year, would be entitled to sell an unlimited number of shares of our common stock without restriction. Our affiliates who have beneficially owned shares of our common stock for at least six months are entitled to sell within any three-month period a number of shares that does not exceed the greater of:

▪ 1% of the number of shares of our common stock then outstanding; or

▪ the average weekly trading volume of our common stock during the four calendar weeks preceding the filing of a notice on Form 144 with respect to the sale.

 Sales under Rule 144 by our affiliates are also subject to manner of sale provisions and notice requirements and to the availability of current public information about us.

Holders

 As of March 31, 2011, we had approximately 85 holders of record of our common stock. Holders of record include nominees who may hold shares on behalf of multiple owners.

Dividends

 We have not declared any dividends since our inception in 1983, and at present have no plans to do so.  We intend to retain our earnings, if any, to finance research and development and working capital for expansion of our business.

Equity Compensation Plan Information

 We adopted our 2002 Stock Option Plan (the “Plan”) to promote our and our stockholders’ interests by helping us to attract, retain and motivate our key employees and associates. Under the terms of the Plan, the Board of Directors may grant either “nonqualified” or “incentive” stock options, as defined by the Internal Revenue Code and related regulations. The purchase price of the shares subject to a stock option will be the fair market value of our common stock on the date the stock option is granted.  Generally, vesting of stock options occurs immediately at the time of the grant of such option and all stock options must be exercised within five years from the date granted. All outstanding key employee stock options were exercised or had lapsed as of May 5, 2010, and none are outstanding as of March 31, 2011.  The number of common shares reserved for issuance under the Plan as of March 31, 2011 is 44,000, subject to adjustment for dividends, stock splits or other relevant changes in our capitalization. Information set forth herein gives effect to the 1 for 2 reverse stock split that took place on May 3, 2010.

Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)	Weighted-average exercise price of outstanding options, warrants and rights (b)		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)
Equity compensation plans approved by security holders	—	$	—	44,000
Equity compensation plans not approved by security holders	—	—		—
Total	—	$	—	44,000

Item 10.   Recent Sales of Unregistered Securities

 We have had no sales of unregistered securities in the last 5 years, except key employee stock option exercises. The sales pursuant to employee stock option exercises are exempt from registration pursuant to Section 4(2) of the Securities Act.

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Item 11.  Description of Registrant’s Securities to be Registered

 The following description of our capital stock and provisions of our Articles of Incorporation and By-laws, each as amended, is only a summary. You should also refer to our Articles of Incorporation and our By-laws, copies of which are included as exhibits to this registration statement and are hereby incorporated by reference.  Our authorized capital stock consists of 50,000,000 shares of common stock, no par value per share.

 Holders of our common stock are entitled to one vote for each share held on all matters submitted to a vote of our stockholders.  Holders of our common stock have no rights under our Articles of Incorporation or our By-laws regarding dividends unless and until dividends are declared by the board of directors, nor do they have any rights under our Articles of Incorporation or our By-laws regarding preemptive rights.  The outstanding shares of common stock are fully paid and non-assessable.

Item 12. Indemnification of Directors and Officers

 We are organized under the laws of the State of Colorado.  Our officers and directors are indemnified as provided by the Colorado Business Corporation Act (“CBCA”), our Articles of Incorporation, and our By-laws. The General Laws of Colorado provide that we must indemnify a director who was wholly successful, on the merits or otherwise, in the defense of any proceeding to which he was a party because he was a director of our Company against reasonable expenses incurred by him in connection with the proceeding.

 In addition, we may indemnify a director against liability incurred in a proceeding if:

(1)(i) he conducted himself in good faith; (ii) he reasonably believed that his conduct was in the best interests of our Company or that his conduct was at least not opposed to the best interests of our Company; and (iii) in the case of any criminal proceeding, he had no reasonable cause to believe his conduct was unlawful; or

(2) he engaged in conduct for which he shall not be liable as provided in our Articles of Incorporation which may limit personal liability of a director as provided in the CBCA.

 Under the CBCA, a director’s conduct with respect to an employee benefit plan for a purpose he reasonably believed to be in the interests of the participants in, and the beneficiaries of, the plan is conduct that satisfies the requirement that his conduct was at least not opposed to the best interests of the corporation. Unless ordered by a court as provided in the statute, we may not indemnify a director if his conduct did not satisfy the standards set forth above.

 The termination of a proceeding by judgment, order, settlement, or conviction, or upon a plea of nolo contendere or its equivalent, is not, of itself, determinative that the director did not meet the relevant standard of conduct described the CBCA.

 Our Articles of Incorporation, as amended, provide that our directors shall not be liable to us or our stockholders for monetary damages for breach of fiduciary duty as a director, except to the extent that the exculpation from liabilities is not permitted under the CBCA as in effect at the time such liability is determined. Our By-laws provide that we shall indemnify our directors and officers to the full extent permitted by the laws of the State of Colorado against all liabilities and expenses except with respect to any matter as to which he or she shall have been adjudicated in any proceeding not to have acted in good faith in the reasonable belief that his or her action was in the best interest of our Company or in the best interests of the participants or beneficiaries of an employee benefit plan. In addition, we hold a Director and Officer Liability and Corporate Indemnification Policy.

Item 13.   Financial Statements and Supplementary Data

 See our financial statements beginning on page F-1 of this registration statement on SEC Form 10.

23
 

Item 14.   Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

 None.

Item 15.  Financial Statements and Exhibits

(a)Our financial statements for the years 2010 and 2009, including the report of our independent registered public accounting firm, are attached hereto beginning at page F-1 immediately following the signature page of this registration statement.

(b)Exhibits

 See “Exhibit Index” below

Item 16.  Undertakings

 None.

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SIGNATURES

Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunder duly authorized in the City of Wheat Ridge, State of Colorado, on March 31, 2011.

LIFELOC TECHNOLOGIES, INC.
By:	/s/ Barry R. Knott
	Barry R. Knott
	Chief Executive Officer, President and Treasurer

25

EXHIBIT INDEX

Exhibit No.	Description of Exhibit
3.1	Articles of Incorporation, dated as of December 29, 1983
3.2	Articles of Amendment to the Articles of Incorporation, dated as of July 10, 1986
3.3	Articles of Amendment to the Articles of Incorporation, dated as of August 18, 1986
3.4	Articles of Amendment to the Articles of Incorporation, dated as of April 18, 1988
3.5	Articles of Amendment to the Articles of Incorporation, dated as of April 1, 1991
3.6	Articles of Amendment to the Articles of Incorporation, dated as of  May 10, 1993
3.7	Articles of Amendment to the Articles of Incorporation, dated as of  May 11, 1992
3.8	Articles of Amendment to the Articles of Incorporation, dated as of  November 17, 1997
3.9	Articles of Amendment to the Articles of Incorporation, dated as of  July 15, 1998
3.10	Articles of Amendment to the Articles of Incorporation, dated as of  April 1, 1994
3.11	Bylaws
4.1	Form of Certificate representing Common Stock
10.1	2002 Stock Option Plan
10.2	Lease by and between Lifeloc Technologies, Inc. and Ward West Properties LLC, dated December 12, 2006
10.3	First Lease Amendment and Extension, dated May 1, 2010, to the Lease by and between Lifeloc Technologies, Inc. and Ward West Properties LLC, dated December 12, 2006
10.4	Contract No. 071B0200005 between the State of Michigan and Lifeloc Technologies, Inc., dated October 5, 2009
10.5	Technology Transfer Agreement
10.6	Form of Standard Distribution Agreement
10.7	Business Loan Agreement between Lifeloc Technologies, Inc. and Citywide Banks, dated May 11, 2010, as amended.

 26

FINANCIAL STATEMENTS OF LIFELOC TECHNOLOGIES, INC.

INDEX

Report of Independent Registered Public Accounting Firm	F-2
Balance Sheets as of December 31, 2010 and 2009	F-3
Statements of Income for the Years Ended December 31, 2010 and 2009	F-4
Statement of Stockholders’ Equity as of December 31, 2010 and 2009	F-5
Statements of Cash Flows for the Years Ended December 31, 2010 and 2009	F-6
Notes to Financial Statements as of December 31, 2010 and 2009	F-7

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and

Stockholders of Lifeloc Technologies, Inc.

Wheat Ridge, Colorado

We have audited the accompanying balance sheets of Lifeloc Technologies, Inc. as of December 31, 2010 and 2009, and the related statements of income, stockholders' equity and cash flows for the years then ended. Lifeloc Technologies, Inc's management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Lifeloc Technologies, Inc. as of December 31, 2010 and 2009, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

/s/ Eide Bailly LLP

Greenwood Village, Colorado

March 30, 2011

F-2

LIFELOC TECHNOLOGIES, INC.

Balance Sheets

December 31, 2010 and 2009

ASSETS
CURRENT ASSETS:	2010			2009
Cash	$	1,461,900		$	1,021,135
Accounts receivable, net		393,118			329,701
Inventories, net		936,463			767,048
Deferred taxes		48,400			55,069
Prepaid expenses and other		74,644			21,253
Total current assets		2,914,525			2,194,206
PROPERTY AND EQUIPMENT, at cost:
Production equipment		212,880			160,318
Office equipment		105,989			92,893
Sales and marketing equipment		118,400			36,555
Purchased software		36,336			29,048
Less accumulated depreciation		(268,933	)		(205,359	)
Total property and equipment, net		204,672			113,455
OTHER ASSETS:
Technology license		120,000			-
Patents, net		14,351			17,415
Deferred taxes, long term		6,130			-
Deposits		4,242			4,242
Total other assets		144,723			21,657
Total assets	$	3,263,920		$	2,329,318
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable	$	303,528		$	57,425
Notes payable		-			8,000
Customer deposits		126,503			9,709
Accrued expenses		263,667			161,216
Deferred income, current portion		83,339			84,966
Reserve for warranty expense		15,000			12,000
Total current liabilities		792,037			333,316
DEFERRED INCOME, net of current portion		16,132			8,878
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, no par value; 50,000,000 shares
authorized, 2,422,416 shares outstanding
in 2010 (2,318,416 in 2009)		4,277,497			4,215,664
Accumulated (deficit)		(1,821,746	)		(2,228,540	)
Total stockholders' equity		2,455,751			1,987,124
Total liabilities and stockholders'  equity	$	3,263,920		$	2,329,318

See accompanying notes.

F-3

LIFELOC TECHNOLOGIES, INC.

Statements of Income

Years Ended December 31, 2010 and 2009

	2010			2009
SALES	$	6,118,960		$	4,287,597
COST OF SALES		3,202,562			2,215,192
GROSS PROFIT		2,916,398			2,072,405
OPERATING EXPENSES:
Research and development		375,683			256,361
Sales and marketing		934,955			785,026
General and administrative		877,288			700,100
Total		2,187,926			1,741,487
OPERATING INCOME		728,472			330,918
OTHER INCOME (EXPENSE):
Loss on currency exchange		(117,773	)		(75,502	)
Interest income		7,528			8,279
Interest expense		(37	)		-
Total		(110,282	)		(67,223	)
NET INCOME BEFORE PROVISION FOR TAXES		618,190			263,695
PROVISION FOR FEDERAL AND STATE INCOME TAXES		(211,396	)		(86,074	)
NET INCOME	$	406,794		$	177,621
NET INCOME PER SHARE, BASIC	$	0.17		$	0.08
NET INCOME PER SHARE, DILUTED	$	0.17		$	0.07
WEIGHTED AVERAGE SHARES, BASIC		2,360,186			2,318,416
WEIGHTED AVERAGE SHARES, DILUTED		2,400,501			2,371,060

See accompanying notes.

F-4

LIFELOC TECHNOLOGIES, INC.

Statement of Stockholders' Equity

Years Ended December 31, 2010 and 2009

	Common Stock				Accumulated
		Shares		Amount		(Deficit)			Total
BALANCES, DECEMBER 31, 2008		2,318,416	$	4,215,664	$	(2,406,161	)	$	1,809,503
Net income		-		-		177,621			177,621
BALANCES, DECEMBER 31, 2009		2,318,416		4,215,664		(2,228,540	)		1,987,124
Contribution of stockholder note and accrued interest		-		20,233		-			20,233
Exercise of stock options		104,000		41,600		-			41,600
Net income		-		-		406,794			406,794
BALANCES, DECEMBER 31, 2010		2,422,416	$	4,277,497	$	(1,821,746	)	$	2,455,751

See accompanying notes.

F-5

LIFELOC TECHNOLOGIES, INC.

Statements of Cash Flows

Years Ended December 31, 2010 and 2009

CASH FLOWS FROM OPERATING ACTIVITIES:	2010			2009
Net income	$	406,794		$	177,621
Adjustments to reconcile net income to net cash
provided by operating activities-
Depreciation and amortization		66,638			64,298
Changes in operating assets and liabilities-
Accounts receivable		(63,417	)		(12,455	)
Inventories		(169,415	)		36,941
Deferred taxes		539			82,787
Prepaid expenses and other		(53,391	)		(8,634	)
Accounts payable		246,103			(167,857	)
Notes payable		(8,000	)		-
Customer deposits		116,794			9,709
Accrued expenses		122,684			62,802
Reserve for warranty expense		3,000			-
Deferred income		5,627			21,476
Net cash provided from operating activities		673,956			266,688
CASH FLOWS FROM INVESTING ACTIVITIES:
Patent costs		-			(2,821	)
Purchases of property and equipment		(154,791	)		(33,779	)
Purchase of technology license		(120,000	)		-
Net cash (used in) investing activities		(274,791	)		(36,600	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options		41,600			-
Net cash from financing activities		41,600			-
NET INCREASE IN CASH		440,765			230,088
CASH, BEGINNING OF PERIOD		1,021,135			791,047
CASH, END OF PERIOD	$	1,461,900		$	1,021,135
SUPPLEMENTAL INFORMATION:
Cash paid for interest	$	37		$	-
Cash paid for income tax	$	210,857		$	3,287

See accompanying notes.

F-6

LIFELOC TECHNOLOGIES, INC.

Notes to Financial Statements

December 31, 2010 and 2009

1.   ORGANIZATION AND NATURE OF BUSINESS

Lifeloc Technologies, Inc. (the "Company" or “Lifeloc”) was incorporated in Colorado in December 1983 and has, since 1986, developed, manufactured and sold proprietary, fuel-cell based, breath alcohol testing equipment.  In 2001, we completed and released for sale an additional product line, the FC Series, also approved by NHSTA and designed specifically for the law enforcement and corrections markets.  Since release, FC breath testers have established a reputation of innovation, highest quality and durability. They are currently being sold worldwide and have contributed to our steady growth since their introduction.  In 2005 and 2006, we introduced two new models, the EV30 and Phoenix 6.0.  These two devices are also approved by the U.S. Department of Transportation as an evidential breath tester for use in regulated transportation industries. These two new models form a family of state-of-the-art evidential workplace devices.  In addition, we sell a comprehensive line of supplies, accessories, services, and training to support customers' alcohol testing programs.  In 2006, Lifeloc also commenced the selective marketing of its proprietary designs and componentry on an OEM basis.  In 2009 we released LifeGuard, a personal breath tester that incorporates the fuel-cell based technology employed in the FC series.  Lifeloc constantly enhances and upgrades its products in order to maintain a competitive advantage in its marketplace.

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates in the Preparation of Financial Statements.   The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions. Such estimates and assumptions affect the reported amounts of assets and liabilities as well as disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of sales and expense during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents.   For purposes of reporting cash flows, we consider all cash and highly liquid investments with an original maturity of three months or less to be cash equivalents.  There were no cash equivalents as of December 31, 2010 and 2009.

Fair Value of Financial Instruments.   Our financial instruments consist of cash and cash equivalents, short-term trade receivables and payables, and notes payable.  The carrying values of cash and cash equivalents, short-term receivables and payables, and notes payable approximate their fair value due to their short term maturities.

Concentration of Credit Risk.   Financial instruments with significant credit risk include cash and accounts receivable.

The amount of cash on deposit with one financial institution exceeded the $250,000 federally insured limit at December 31, 2010 by $510,177.  However, we believe that the financial institution is financially sound and the risk of loss is minimal.

We have no significant off-balance sheet concentrations of credit risk such as foreign exchange contracts, options contracts or other foreign hedging arrangements. We maintain the majority of our cash balances with two financial institutions in the form of demand deposits.

Accounts receivable are typically unsecured and are derived from transactions with and from entities primarily located in the United States, as we require pre-payment or letters of credit for international orders.  Accordingly, we may be exposed to credit risks generally associated with the alcohol monitoring industry.  Our credit policy calls for payment in accordance with prevailing industry standards, generally 30 days.  We maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments.  A summary of the activity in our allowance for doubtful accounts is as follows:

Years Ended December 31	2010			2009
Balance, beginning of year	$	4,100		$	3,083
Provision for estimated losses		7,236			2,808
Write-off of uncollectible accounts		(5,436	)		(1,791	)
Balance, end of year	$	5,900		$	4,100

F-7

The net accounts receivable balance at December 31, 2010 of  $393,118 included an account from one customer of $106,958 (27%), and no more than 7% from any one other customer. The net accounts receivable balance at December 31, 2009 of $329,701 included no more than 15% from any one customer.

Inventories.   Inventories are stated at the lower of cost (first-in, first-out basis) or market. We reduce inventory for estimated obsolete or unmarketable inventory equal to the difference between the cost of inventory and the estimated market value based upon assumptions about future demand and market conditions. If actual market conditions are less favorable than those projected by management, additional inventory write-downs may be required.  At December 31, 2010 and 2009, inventory consisted of the following:

	2010			2009
Raw materials & deposits	$	342,101		$	216,380
Work-in process		189,235			152,823
Finished goods		425,127			418,143
Total gross inventories		956,463			787,346
Less reserve for obsolescence		(20,000	)		(20,298	)
Total net inventories	$	936,463		$	767,048

A summary of the activity in our inventory reserve for obsolescence is as follows:

Years Ended December 31	2010			2009
Balance, beginning of year	$	20,298		$	21,747
Provision for estimated obsolescence		40,672			22,532
Write-off of obsolete inventory		(40,970	)		(23,981	)
Balance, end of year	$	20,000		$	20,298

Property and Equipment. Property and equipment are stated at cost, with depreciation computed over the estimated useful lives of the assets, generally three to five years. We utilize the double-declining method of depreciation for property and equipment due to the expected usage of the property and equipment over time. This method is expected to continue throughout the life of the equipment.  Maintenance and repairs are expensed as incurred and major additions, replacements and improvements are capitalized. Depreciation expense for the years ended December 31, 2010 and 2009 was $63,574 and $63,002 respectively.

Long-Lived Assets.   Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. A long-lived asset is considered impaired when estimated future cash flows related to the asset, undiscounted and without interest, are insufficient to recover the carrying amount of the asset. If deemed impaired, the long-lived asset is reduced to its estimated fair value. Long-lived assets to be disposed of are reported at the lower of their carrying amount or estimated fair value less cost to sell.  No impairments were recorded for the years ended December 31, 2010 and 2009.

Technology License.  In 2010 we entered into a technology license agreement with an unrelated third-party manufacturer, pursuant to which we acquired a perpetual-term license to technology that will allow us to manufacture our own fuel cells.  We have made three equal lump-sum payments, based on achievement of milestones related to our establishment of successful production facilities.  The total, $120,000, will be amortized over three years commencing in 2011, using the straight line method.  We are required to make varying royalty payments based on the year in which the units are sold and the number sold.  The agreement may be terminated for cause and other events, including the payment by us after 3 years of an amount equal to 3 times the preceding year’s royalties.

Patents.   The costs of applying for patents are capitalized and amortized on a straight-line basis over the lesser of the patent’s economic or legal life (20 years in the United States, except design patents which are 14 years).  Amortization expense for the years ended December 31, 2010 and 2009 was $3,064 and $1,296 respectively.  Capitalized costs are expensed if patents are not granted.  We review the carrying value of our patents periodically to determine whether the patents have continuing value and such reviews could result in the conclusion that the recorded amounts have been impaired.  A summary of our patents at December 31, 2010 and 2009 is as follows:

F-8

	2010			2009
Patents issued	$	22,775		$	22,775
Patent applications		-			-
Accumulated amortization		(8,424	)		(5,360	)
Total net patents	$	14,351		$	17,415

Accrued Expenses.  We have accrued various expenses in our December 31 balance sheets, as follows:

	2010		2009
Compensation	$	158,353	$	102,281
Rebates		67,627		19,725
401(k) plan		21,158		13,451
Property and other taxes		12,399		13,526
Interest		-		12,233
Lease normalization		4,130		-
Total accrued expenses	$	263,667	$	161,216

Product Warranty Reserve.  We provide for the estimated cost of product warranties at the time sales are recognized.  While we engage in extensive product quality programs and processes, including actively monitoring and evaluating the quality of our component suppliers, our warranty obligation is based upon historical experience and will be affected by product failure rates and material usage incurred in correcting a product failure. Should actual product failure rates or material usage costs differ from our estimates, revisions to the estimated warranty liability would be required.  A summary of the activity in our product warranty reserve is as follows:

Years Ended December 31	2010			2009
Balance, beginning of year	$	12,000		$	12,000
Provision for estimated warranty claims		17,090			14,715
Claims made		(14,090	)		(14,715	)
Balance, end of year	$	15,000		$	12,000

Income Taxes.  We account for income taxes under the provisions of Accounting Standards Codification Topic 740, “Accounting for Income Taxes” (“ASC 740”). ASC 740 requires recognition of deferred income tax assets and liabilities for the expected future income tax consequences, based on enacted tax laws, of temporary differences between the financial reporting and tax bases of assets and liabilities. ASC 740 also requires recognition of deferred tax assets for the expected future tax effects of all deductible temporary differences, loss carryforwards and tax credit carryforwards. Deferred tax assets are then reduced, if deemed necessary, by a valuation allowance for the amount of any tax benefits which, more likely than not based on current circumstances, are not expected to be realized.

We adopted the provisions of ASC 740-10 (previously Financial Interpretation No. 48, Accounting for Uncertainty in Income Taxes), on January 1, 2008.  The implementation of this standard had no impact on our financial statements.  As of both the date of adoption, and as of December 31, 2010 and 2009, the unrecognized tax benefit accrual was zero.

Revenue Recognition.   Revenue from product sales is recorded when we ship the product and title has passed to the customer, provided that we have evidence of a customer arrangement and can conclude that collection is probable.  The prices at which we sell our products are fixed and determinable at the time we accept a customer's order, and revenue is recognized at the time the order is shipped.  We recognize revenue from sales to stocking distributors when there is no right of return, other than for normal warranty claims, and generally have no ongoing obligations related to product sales, except for normal warranty.

Service and extended warranty contracts are booked as sales over their life on a straight-line basis. Supplies are recognized as sales when they are shipped.  Training revenues are recognized at the time the training occurs.  On occasion we arrange for customer financing and leasing through unrelated third parties.  We recognize as revenue a fee from this arrangement at the time of the transaction.  Occasionally, we rent used breathalyzers to customers, and in those cases, we recognize the revenues as they are collected. 

F-9

Our shipping policy is FOB shipping point.  We recognize revenue from sales to stocking distributors when there is no right of return, other than for normal warranty claims. We have no ongoing obligations related to product sales, except for normal warranty.

Deferred Revenue.  Deferred revenues only arise from service contracts and from extended warranty contracts.  Those revenues are recognized on a straight-line basis over the life of the contract, which generally are written for one year.  However, there are occasions when they are written for two and sometimes three years.  In those cases, the revenues from that portion of the contract that extend beyond one year are shown in our balance sheet as long term.

Distributor Agreements.  The material provisions of our standard distribution agreement are as follows: The distributor agrees to represent Lifeloc to the exclusion of directly competitive products unless Lifeloc has been notified and expressly agreed to such representation of competitive products. To effect this representation, the distributor agrees to (i) use its best efforts to professionally promote, market, and sell all Lifeloc’s evidential models; (ii) maintain mutually acceptable sales volume reasonably representative of market potential; (iii) qualify for and act as a trainer or instructor for Lifeloc products; (iv) consult with Lifeloc for technical and marketing information as necessary; (v) participate in an annual distributor training and certification renewal meeting and otherwise stay informed of Lifeloc’s products, policies, and applicable alcohol testing regulations and practices; (vi) purchase and maintain current demonstration units for sales and training purposes, which shall consist of one of each model for each sales or training individual on staff; (vii) to the maximum extent possible, ensure end-users are registered for warranty on all Portable Breath Testers sold, and, for purposes of product traceability, maintain serial number records of units sold, and provide to Lifeloc upon request; (viii) actively pursue all equipment and training leads that Lifeloc provides, and work actively and cooperatively with Lifeloc to close sales and conduct training regardless of whether the sale is initiated or consummated by the distributor or Lifeloc; (ix) take responsibility for conducting in-person equipment demonstration and on-site training within its designated service area; and (x) at all times maintain the confidentiality of the company’s proprietary information and integrity of its trademarks and abide by specific quality and use guidelines for trademarks.  Lifeloc agrees to (i) support the sales efforts of the distributor by providing timely shipments, technical advice, training, and communications regarding pricing, product, sales programs, and deliveries; (ii) maintain an active training and certification program designed by Lifeloc for its products; (iii) make available information and materials Lifeloc deems useful for the promotion of its products; (iv) provide warranty and service support for equipment sold; (v) provide timely advance notice of any price increase or product line changes; and (vi) maintain an active lead generation program.  The term of the standard distribution agreement is one year, but can be terminated by either party with or without cause, upon thirty days’ written notice.

Rebates.  Our rebate program is available to all distributors in good standing who are responsible for sales equaling at least $25,000 in one calendar year.  All distributors who meet the required sales threshold automatically earn a rebate, paid in January of the following year, equal to between 3 and 10 percent of that distributor’s total sales of the Company’s products.  We accrue for these rebates monthly, and they are shown in the Company’s balance sheets as accrued expenses.

Rent Expense.  We recognize rent expense on a straight-line basis over the reasonably assured lease term as defined in ASC Topic 840, Leases (“ASC 840”).  In addition, our building lease agreement provides for scheduled rent increases during the lease term.  We include any rent escalations in its determination of straight-line rent expense.

Research and Development Expenses.  We expense research and development costs for products and processes as incurred.

Stock-Based Compensation.  Stock-based compensation is presented in accordance with the guidance of ASC Topic 718, Compensation – Stock Compensation (“ASC 718”).  Under the provisions of ASC 718, companies are required to estimate the fair value of share-based payment awards on the date of grant using an option-pricing model.  The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods in our statement of income.

ASC 718 requires companies to estimate the fair value of share-based payment awards on the date of grant using an option-pricing model.  The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods in the accompanying statement of income.

Stock-based compensation expense recognized during the period is based on the value of the portion of share-based payment awards that is ultimately expected to vest during the period.

We had no stock based compensation in 2010 and 2009.

Segment Reporting.   We have concluded that we have one operating segment.

F-10

Basic and Diluted Income and Loss per Common Share.  Net income or loss per share is calculated in accordance with ASC Topic 260, Earnings Per Share.  Under the provisions of ASC Topic 260, basic net income or loss per common share is computed by dividing net income or loss for the period by the weighted average number of common shares outstanding for the period.  Diluted net income or loss per share is computed by dividing the net income or loss for the period by the weighted average number of common and potential common shares outstanding during the period if the effect of the potential common shares is dilutive.

Recent Accounting Pronouncements.  In May 2009, the FASB issued ASC 855-10, Subsequent Events.  ASC 855-10 provides guidance on management’s assessment of subsequent events and incorporates this guidance into accounting literature.  ASC 855-10 is effective prospectively for interim and annual periods ending after June 15, 2009.  The adoption of this Statement did not have an impact on our financial position or results of operations.  Effective February 24, 2010, the FASB modified its guidance related to subsequent events and the Company has adopted the change.  This guidance continues to require entities that file or furnish financial statements with the SEC to evaluate subsequent events through the date the financial statements are issued; however, this guidance removed the requirement for these entities to disclose the date through which events have been evaluated.  The adoption of this guidance did not have an effect on the results of operations or financial position of the Company.

We have reviewed all recently issued, but not yet effective, accounting pronouncements and do not believe the future adoption of any such pronouncements may be expected to cause a material impact on our financial condition or the results of our operations.

3.  STOCKHOLDERS’ EQUITY

Stock Option Plan.   We adopted our 2002 Stock Option Plan (the “Plan,” as summarized below) to promote our and our stockholders’ interests by helping us to attract, retain and motivate our key employees and associates. Under the terms of the Plan, the Board of Directors may grant either “nonqualified” or “incentive” stock options, as defined by the Internal Revenue Code and related regulations. The purchase price of the shares subject to a stock option will be the fair market value of our common stock on the date the stock option is granted.  Generally, vesting of stock options occurs immediately at the time of the grant of such option and all stock options must be exercised within five years from the date granted. The number of common shares reserved for issuance under the Plan is 375,000 shares of common stock, subject to adjustment for dividend, stock split or other relevant changes in our capitalization.

A summary of our stock option activity and related information for each of the fiscal years ended December 31, 2010 and 2009 is as follows:

	STOCK OPTIONS OUTSTANDING
	Number Outstanding	Weighted-Average Exercise Price per Share
BALANCE AT DECEMBER 31, 2008	104,000	$0.40
Granted	-	-
Exercised	-	-
Forfeited/expired	-	-
BALANCE AT DECEMBER 31, 2009	104,000	$0.40
Granted	-	-
Exercised	(104,000)	$0.40
Forfeited/expired	-	-
BALANCE AT DECEMBER 31, 2010	-	-

The following table summarizes information about employee stock options outstanding and exercisable at December 31, 2010:

	STOCK OPTIONS OUTSTANDING			STOCK OPTIONS EXERCISABLE
Range of Exercise Prices	Number  Outstanding	Weighted-Average Remaining Contractual Life (in Years)	Weighted-Average Exercise Price  per Share	Number  Exercisable	Weighted-Average Exercise Price  per Share
$0.40	0	-	-	0	-

Of the 104,000 options exercisable as of December 31, 2009, 15,000 are nonqualified stock options and 89,000 are incentive stock options. The exercise price of all options granted through December 31, 2009 has been equal to or greater than the fair market value, using a composite of peer entities since there were no publicly quoted market values of our common stock on the date of the grant.  As of December 31, 2010, options for 44,000 shares of our common stock remain available for grant under the Plan.

F-11

At their annual meeting on May 3, 2010, our stockholders approved a reverse stock split of our no par value common stock.  Every two shares of common stock were combined into one share.  No fractional shares were issued as a result of the reverse stock split.  Instead, each resulting fractional share of common stock was rounded to the nearest whole share.  The reverse stock split reduced the number of shares of common stock outstanding from 4,636,832 to 2,318,416 (which does not give effect to the options exercised on May 1, 2010 as described above).  The total number of authorized shares of common stock continues to be 50,000,000, with no change in the par value per share of $0.  All shares and per share data in the accompanying financial statements reflect the effects of the 1-for-2 reverse stock split that became effective on May 3, 2010.

The stockholders also approved a warrant distribution consisting of 1 warrant for each then outstanding share of common stock, or a total of 2,422,416 warrants.  However, the distribution was subject to  final approval by the board of directors, based on the board's evaluation of the regulatory hurdles involved and the likelihood of successful registration of the warrants and underlying shares of common stock.  As a result of subsequent filings of a registration statement with the Securities and Exchange Commission, the board determined that the regulatory challenges involving these warrants were excessively burdensome and  the warrant distribution was canceled.

4.  NOTES PAYABLE, RELATED PARTY

Notes payable as of December 31, 2009 consist of an unsecured demand note payable to a shareholder with a principal balance of $8,000, and interest accrued thereon at a rate of 10% per annum with a total balance due of $12,233 at December 31, 2009.  The principal balance has been outstanding since 1987 and efforts to locate heirs of the Estate have not been successful.  Based on discussions with legal counsel, the note and accrued interest were contributed as capital to the Company as of January 1, 2010.

5.  COMMITMENTS AND CONTINGENCIES

We currently lease our facilities in Wheat Ridge, Colorado under a lease agreement containing cancellation terms of 180 days written notice on or after April 15, 2015 and upon remittance of any unamortized tenant improvements made by the landlord in excess of $16,000.  The minimum future lease payments by year are as follows:

Fiscal Year	Amount
2011	$	102,204
2012		105,270
2013		108,428
2014		111,681
2015		37,592
Total	$	465,175

Rent expense for our facilities for the years ended December 31, 2010 and 2009 was $103,544 and $96,039 respectively.

Our obligation with respect to employee severance benefits is minimized by the “at will” nature of the employee relationships.  As of December 31, 2010 we had no obligation with respect to contingent severance benefit obligations.

Aside from the operating lease and credit facility commitments, we do not have any material contractual commitments requiring settlement in the future.

We are subject to regulation by the United States Food and Drug Administration (“FDA”) so far as our LifeGuard product is concerned.  The FDA provides regulations governing the manufacture and sale of our LifeGuard product, and we are subject to inspections by the FDA to determine our compliance with these regulations.  FDA inspections are conducted periodically at the discretion of the FDA.  As of December 31, 2010, we had not been inspected by the FDA; however, we believe we are in substantial compliance with all known regulations.

We are also subject to regulation by the United States Department of Transportation and by various state departments of transportation so far as our other products are concerned.  We believe that we are in substantial compliance with all known regulations.

F-12

6.  LINE OF CREDIT

On May 11, 2004, we entered into a credit facility agreement with Citywide Bank.  The terms of the credit facility, which matures on May 11, 2011 include a line of credit for $150,000 at an interest rate calculated at the prime rate plus 1%, or 4.25% at December 31, 2010 and 2009.  Our borrowing under the credit facility is limited to the amount of eligible receivables and inventory at the time of borrowing.  At December 31, 2010 and 2009, we had not borrowed funds from the credit facility and, under our eligible receivables and inventory limit, had $150,000 available to borrow.  The credit facility requires us to meet certain financial covenants, which we met as of December 31, 2010.  The credit facility is secured by cash and deposit accounts, accounts receivable, equipment, inventory and general intangibles.

7.  INCOME TAXES

We account for income taxes under ASC 740, which requires the use of the liability method.  ASC 740 provides that deferred tax assets and liabilities are recorded based on the differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes, referred to as temporary differences.  Deferred tax assets and liabilities at the end of each period are determined using the currently enacted tax rates applied to taxable income in the periods in which the deferred tax assets and liabilities are expected to be settled or realized.

Our income tax provision is summarized below:

Years Ended	December 31, 2010		December 31, 2009
Current:
Federal	$	180,828	$	-
State		30,029		3,287
Total current		210,857		3,287
Deferred:
Federal		473		76,251
State		66		6,536
Total deferred		539		82,787
Total	$	211,396	$	86,074

During 2010 and 2009, we used our tax loss carryforwards as well as tax credits to reduce our taxable income.  As a result, the provisions for income taxes reflected in the accompanying statements of income for 2010 and 2009 are $211,396 and $86,074 respectively.  We do not have any remaining tax loss carryforwards or tax credits for use in future years; however, we had $3,501 of tax credit carryovers available for use in 2010.

We will recognize future accrued interest and penalties related to unrecognized tax benefits in income tax expense if incurred.  Our income tax returns are no longer subject to Federal tax examinations by tax authorities for years before 2007 and state examinations for years before 2006.

The items accounting for the difference between income taxes computed at the federal statutory rate and the provision for income taxes consists of the following:

Years Ended	December 31, 2010			December 31, 2009
Federal statutory rate	$	210,185		$	92,293
Effect of:
State taxes, net of federal tax benefit		19,863			8,093
Other		(18,652	)		(14,312	)
Total	$	211,396		$	86,074

F-13

The components of the deferred tax asset are as follows:

Years Ended	December 31, 2010		December 31, 2009
Current Deferred Tax Assets:   Credits and net operating loss carryforwards	$	-	$	-
Deferred service income		31,680		35,661
Reserve provisions and other		16,720		19,408
Total current deferred tax assets		48,400		55,069
Long Term Deferred Tax Assets:
Deferred service income		6,130		-
	$	54,530	$	55,069

8.  LEGAL PROCEEDINGS

We are not involved in any legal proceeding as of the date of these financial statements.  We may become involved in litigation in the future in the normal course of business.

9.  MAJOR CUSTOMERS/SUPPLIERS

We depend on sales that are generated from our customers’ ongoing usage of alcohol monitoring instruments.    Except for one customer who contributed 16% ($987,635) to our total sales in 2010, no other customer contributed more than 6% ($371,446).  One customer contributed 10.4% to our total sales in 2009 ($445,617).  In making this determination, we considered the federal government, state governments, local governments, and foreign governments each as a single customer.  In 2010, we depended upon two vendors for approximately 20% of our purchases (21% in 2009).

10.  DEFINED CONTRIBUTION EMPLOYEE BENEFIT PLAN

We have adopted a 401(k) Profit Sharing Plan which covers all full-time employees who have completed 3 months of full-time continuous service and are age eighteen or older. Participants may defer up to 100% of their gross pay up to Plan limits.  Participants are immediately vested in their contributions.  We may make discretionary contributions based on corporate financial results for the year, which was determined to be 3% of the total payroll of the participating employees in 2010 and 2009.  In 2010 and 2009 we contributed $21,158 and $19,534 respectively.  The participants vest in Company contributions based on years of service, with a participant fully vested after six years of credited service.

11.  SUBSEQUENT EVENTS

Except for the disclosure that follows, we evaluated subsequent events through the date the financial statements were issued.

On March 8, 2011, our Board of Directors approved the execution of a letter of intent which provides for a $125,000 loan to Tipping Point, Inc., a company to be formed for the purpose of selling breathalyzer tests at the retail level.

F-14

EX-3.1

Exhibit 3.1

ARTICLES OF INCORPORATION

OF

EVERGREEN INVESTOR SERVICES, INC.

 KNOW ALL MEN BY THESE PRESENTS, that the undersigned natural person, more than twenty-one years of age, acting as incorporator in order to organize and establish a corporation under the Colorado Corporation Code, does hereby adopt the following Articles of Incorporation, to-wit:

ARTICLE I

NAME

 The name of the Corporation is Evergreen Investor Services, Inc.

ARTICLE II

REGISTERED OFFICE AND REGISTERED AGENT

 The initial registered office of the corporation is 3103 Highway 74, Suite 220, Evergreen, Colorado and the name of the initial registered agent of the corporation at such address is Kirby Phillips.

ARTICLE III

DURATION

 The corporation shall have perpetual existence.

ARTICLE IV

PURPOSES AND OBJECTIVES

 The purpose and objectives for which this corporation is organized is:

 Section 1.   To engage in all brokerage business and investment consultation services permissible for corporations under the- laws of the State of Colorado and specifically set forth under Article Three of the Colorado Corporation Code.

 Section 2.   To engage in any lawful business permissible for corporations under the laws of the State of Colorado and specifically set forth under Article Three of the Colorado Corporation Code.

ARTICLE V

POWERS

 The powers of the corporation shall be those powers presently granted by Article Three of the Colorado Corporation Code under which this corporation is formed, and those powers which may subsequently be granted by amendment to the Colorado Corporation Code. In addition, the corporation shall have the following specific powers:

 Section 1.  Officers.  The corporation shall have the power to elect or appoint officers and agents of the Corporation and to fix their compensation.

 Section 2.  Capacity.  The corporation shall have the power to act as an agent for any individual, association, partnership, corporation or other legal entity.

 Section 3.  Acquisitions.  The corporation shall have the power to receive, acquire, hold, exercise rights arising out of the ownership or possession thereof, sell, or otherwise dispose of, shares or other interest in, or obligations of, individuals, associations, partnerships, corporations or government.

 Section 4.  Earned Surplus.  The corporation shall have the power to receive, acquire, hold, pledge, transfer, or otherwise dispose of shares of the corporation, but such shares may only be purchased, directly or indirectly, out of earned surplus.

 Section 5.  Gifts.  The corporation shall have the power to make gifts or contributions for the public welfare or for charitable, scientific or educational purposes.

ARTICLE VI

QUORUM TOR SHAREHOLDER MEETINGS

 A quorum for purposes of shareholder meetings shall consist of the holders of a majority of the outstanding shares of stock, represented in person or by proxy, or, by holders of a lesser proportion of the shares entitled to vote thereon, represented in person or by proxy as the directors shall provide in the Bylaws, but in no case shall a quorum of shareholders consist of holders of less than one-third of the shares entitled to vote thereon.

ARTICIE VII

CAPITAL STOCK

 Section 1.  Authorized Shares.  The total number of shares Which this corporation is authorized to issue is 10,000 shares of common stock par value of fifty cents each ($.50).

 Section 2.  Voting Rights of Shareholders.   Each holder of the common stock shall be entitled to one vote for each share of stock standing in his name on the books of the corporation.  Cumulative voting shall not be permitted.

 Section 3.  Consideration for Shares.  The common stock shall be issued for such consideration as shall be fixed from time to time by the Board of Directors. In the absence of fraud, the judgment of the Directors as to the value of any property or services received in full or partial payment "or shares shall be conclusive.  When shares are issued upon payment of the consideration fixed by the Board of Directors, such shares shall be taken to be fully paid stock and shall be non-assessable.

 Section 4.  Pre-Emptive Rights.   Before publicly selling or offering to sell any additional shares of its common stock or any stock, bonds, debentures or other securities, convertible into common stock, the corporation shall first offer to all of the holdersof its common stock the right to purchase a pro rata proportion of such common stock or such securities convertible into common stock.  This section shall apply only to sales or offerings in exchange for cash. Specifically excluded are transfers in exchange for specific goods or personal services.

 Section 5.   Transfer Restrictions.  The Corporation shall have a right to impose restrictions upon the transfer of any shares of its common stock, or any interest therein, provided that such restrictions as may be so imposed or notice of the substance thereof shall be set forth upon the face or back of the certificates representing such shares of common stock.

ARTICLE VIII

MANAGEMENT

 For the management of the business, and for the conduct of the affairs of the corporation and for the further definition, limitation, and regulation of the powers of the corporation and its directors and shareholders, it is further provided:

 Section 1.   Size of Board.   The number of Directors shall be fixed in accordance with the Bylaws.  So long as the number of Directors shall be less than three, no shares of this corporation may be issued and held of record by more shareholders than there are Directors.  Any shares issued in violation of this paragraph shall be null and void.  This provision shall also constitute a restriction on the transfer of shares and a legend shall be conspicuously placed on each certificate respecting shares preventing transfer of the shares to more shareholders than there are Directors.  The initial Board of Directors of the Corporation shall consist of two (2) members, their names and addresses are as follows:

Kirby Phillips, 3103 Hwy 74, #220, Evergreen, Colorado

Dean Davis, 3103 Hwy 74, #220, Evergreen, Colorado

 Section 2. Powers of Board.  In furtherance and not in limitation of the powers conferred by the State of Colorado, the board of Directors is expressly authorized and empowered:

A.   Bylaws.   To make, alter, amend and repeal the Bylaws, subject to the power of the shareholders to alter or repeal the Bylaws made by the Board of Directors.

B.  Books and Records.    Subject to the applicable provisions of the Bylaws then in effect, to determine, from time to time, whether and to what extent, and at what times and places, and under what conditions and regulations, the accounts and books of the corporation or any of them, shall be open to shareholder inspection.  No shareholder shall have any right to inspect any of the accounts, books, or documents of the corporation, except as permitted by law, unless and until authorized to do so by resolution of the Board of Directors or of the shareholders of the corporation.

C.   Power to Borrow.  To authorize and issue, without shareholder consent, obligations of the corporation, secured and unsecured, under such terms and conditions as the Board, in its sole discretion, may determine, and to pledge, or mortgage, as security therefore, any real or personal property of the corporation, including after-acquired property.

D.  Dividends.  To determine Whether any and, if so, what part, of the earned surplus of the corporation shall be paid in dividends to the shareholders, and to direct and determine otherwise use and disposition of any such earned surplus.

E.  Profits.  To fix, from time to time, the amount of the profits of the corporation to be reserved as working capital or for any other lawful purpose.

F.   Fringe Benefits. To establish bonus, profit- sharing, stock option or other types of incentive compensation plans for the employees, including officers and directors of the corporation, and to fix the amount of profits to be shared, or distributed, and to determine the persons to participate in any such plans and the amount of their respective participations.

G.   Compensation.   To provide for the reasonable compensation of its own members by Bylaws, and to fix the terms and conditions upon which such compensation will be paid.

H.   Not in Limitation.  In addition to the powers and authority hereinabove, or by statute, expressly conferred upon it, the Board of Directors may exercise all such powers and do all such acts and things as may be exercised or done by the corporation, subject, nevertheless, to the provisions of the laws of the State of Colorado, of these Articles of Incorporation, and of the Bylaws of the corporation.

 Section 3.  Interested Directors.  No contract or transaction between this corporation and any of its directors, or between this corporation and any other corporation, firm, association or other legal entity shall be invalidated by reason of the fact that the director of the corporation has a direct or indirect interest, pecuniary or otherwise, in such corporation, firm, association or legal entity, or because the interested director was present at the meeting of the Board of Directors which acted upon or in reference to such contract or transaction.

 Section 4.   Incorporator.  The name and address of the incorporator is as follows:

Kirby Phillips, 3103 Hwy 74, #220, Evergreen, Colorado

Section 5. Indemnification.   The corporation shall indemnify any person who is or was a director, officer, employee or agent of the corporation to the full extent which presently is or may in the future be permitted under Colorado Statutes as contained in Article Three of the Colorado Corporation Code.

ARTICLE IX

AMENDMENT OF ARTICLES

 The provisions of these Articles of Incorporation may be amended, altered or repealed from time to time in the manner prescribed by the laws of the State of Colorado, and with a majority vote of the shareholders.  All rights herein conferred on the directors, officers and shareholders are granted and subject to this reservation.

ARTICLE X

PLACE OF MEETING, CORPORATE BOOKS

 Subject to the laws of the State of Colorado, the shareholders and the directors shall have power to hold their meetings, and the directors shall have power to have an office or offices and to maintain the books of the corporation outside the State of Colorado, at such place or places as may from time to time be designated in the Bylaws or by appropriate resolution.

IN WITNESS WHEREOF, I, the undersigned, being the incorporator of the annexed and foregoing Articles of Incorporation, for the purposes of organizing and establishing a corporation under the Colorado Corporation Code, execute these Articles of Incorporation aforesaid and declare that the statements therein contained are true and accordingly have hereunto set my hand and seal this 29th day of December, 1983.

/s/ Kirby Phillips

Kirby Phillips

STATE OF COLORADO	)
	)  ss.
COUNTY OF JEFFERSON	)

I, Connie Janelle Fields, a Notary Public hereby certify that on the 29th day of December, 1983 personally appeared before me Kirby Phillips, being by me first duly sworn, severally declared that he is the person who signed the foregoing document as Incorporator, and that the statements therein contained are true.

IN WITNESS WHEREOF, I have hereunto set my hand and seal this 29th day of December, 1983.

/s/ Connie Janelle Fields

Notary Public

My Commission Expires:  9-26-87

Address:  3103 Hwy 74 #120

                   Evergreen, CO  80339

EX-3.2

Exhibit 3.2

Submit in Duplicate   Filing fee $22.50   This document must be typewritten MAIL TO: Colorado Secretary of State Corporations Office 1560 Broadway. Suite 200 Denver. Colorado 80202 (303) 866 2361   ARTICLES OF AMENDMENT to the
ARTICLES OF INCORPORATION

Pursuant to the provisions of thc Colorado Corporation Code. the undersigned corporation adopts the following Articles of Amendments to its Articles of Incorporation:

FIRST The name the corporation is (note 1)Evergreen Investor Services, Inc.

SECOND: The following amendment to the Articles of Incorporation was adopted on July 10 1986   as prescribed by the Colorado Corporation Code, in the manner marked with an X below:

Such amendment was adopted by the board of directors where no shares have been issued

X Such amendment was adopted by a vote of the shareholders.  The number of shares voted for the amendment was sufficient for approval.

That the number of authorized shares shall be increased from 10,000 to 1,000,000. The remaining 990,000 shares will have a reduced par value of $0.01.

THIRD:  The manner, if not set forth in such amendment, in which any exchange, reclassification. orcancellationof issued shares provided for in the amendment shall be effected, as follows:No change

EX-3.3

Exhibit 3.3

Submit in Duplicate   Filing fee $22.50   This document must be typewritten MAIL TO: Colorado Secretary of State Corporations Office 1560 Broadway. Suite 200 Denver. Colorado 80202 (303) 866 2361   ARTICLES OF AMENDMENT to the
ARTICLES OF INCORPORATION

Pursuant to the provisions of the Colorado Corporation Code, the undersigned corporation adopts the following Articles of Amendments to its Articles of Incorporation:

FIRST The name of the corporation is (note 1). Evergreen Investor Services, Inc.

SECOND: The following amendment to the Articles of Incorporation was adopted onAugust 18 1986 as prescribed by the Colorado Corporation Code, in the manner marked with an X below:

Such amendment was adopted by the board of directors where no shares have been issued

X Such amendment was adopted by a vote of the shareholders.  The number of shares voted for the amendment was sufficient for approval.

It was resolved that the Articles of Incorporation shall be amended to change the name of the corporation from Evergreen Investor Services, Inc., to Life Loc, Inc.

THIRD: The manner, if not set forth in such amendment, in which any exchange, reclassification, or cancellation of issued shares provided for in the amendment shall be effected as follows:   No Change

    FOURTH: The manner in which such amendment effects a change in the amount of stated capital, and the amount of stated capital as changed by such amendment, are as follows: No Change

Evergreen Investor Services, Inc.		(Note 1)
By:	/s/ Kirby Phillips
	Its Corporate President

		(Note 2)
and	/s/ Mary Phillips
	Its Corporate Secretary

	(Note 3)
Its __________ Director

NOTES:  1.  Exact current name of coporporation adopting the Articles of Amendmeents. (If this is a change of name amendment, the name before the amendment is filed).

2.  Signatures and title of officers signing for the corporation.

3. Where no shares have been issued, signature of a director.

EX-3.4

Exhibit 3.4

ARTICLES OF AMENDMENT

TO THE

ARTICLES OF INCORPORATION

LIFE-LOC, INC.

04-22-91    14:00

911027957   $30.00

Pursuant to the provisions of the Colorado Corporation Act, the undersigned corporation adopts the following Articles of Amendment to the Articles of Incorporation:

FIRST:  The name of the corporation is: LIFE-LOC, INC.

SECOND:  The following amendment was adopted by the shareholders on April 18, 1988, the number of shares voted being sufficient for approval and in the manner prescribed by the Colorado Corporation Act:

I.           Section 4, of ARTICLE VII of the Articles of Incorporation is hereby deleted in its entirety.

LIFE-LOC, INC.
By:	/s/ Thomas Hoekelman
	Thomas Hoekelman

ATTEST:

/s/  Mary Phillips                                

Mary Phillips, Secretary

STATE OF COLORADO	)
	)  ss.
COUNTY OF BOULDER	)

SUBSCRIBED AND SWORN to before me, a Notary Public, this   28   day of March 1991, by Thomas Hoekelman, President of LIFE-LOC, INC., a Colorado corporation, who acknowledged that he signed the foregoing Articles of Amendment as his free and voluntary act and deed for the uses and purposes therein set forth, and that the facts contained therein are true.

10/7/91	/s/ Margaret H. Setzmann
	NOTARY

COMPUTER UPDATE COMPLETE

JAT

EX-3.5

Exhibit 3.5

ARTICLES OF AMENDMENT

TO THE

ARTICLES OF INCORPORATION

LIFE-LOC, INC.

04-22-91 

911027956  $30.00

Pursuant to the provisions of the Colorado Corporation Act, the undersigned corporation adopts the following Articles of Amendment to the Articles of Incorporation:

FIRST:     The name of the corporation is: LIFE-LOC, INC.

SECOND:      The following amendments were adopted by the shareholders on April 1, 1991, the number of shares voted being sufficient for approval and in the manner prescribed by the Colorado Corporation Act:

I.Section 1, of ARTICLE VII of the Articles of Incorporation is hereby amended in its entirety to read as follows:

The total number of shares of capital stock which this corporation shall have authority to issue is 20,000,000 shares, no par value per share, and shall be designated as common stock.

II.    A new ARTICLE XI will be added to the Articles of Incorporation of the Corporation, as follows:

ARTICLE XI

Limitation of Liability

To the fullest extent permitted by the Colorado Corporation Code, as the same exists or may hereafter be amended, a director of this corporation shall not be liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director.

III.Each share of the Corporation's common stock which is currently issued and outstanding is changed into two (2) shares of such common stock.

LIFE-LOC, INC.
By:	/s/ Thomas Hoekelman
	Thomas Hoekelman, Pres.

ATTEST:

/s/  Mary Phillips                                

Mary Phillips, Secretary

COMPUTER UPDATE COMPLETE

JAT

STATE OF COLORADO	)
	)  ss.
COUNTY OF BOULDER	)

 

SUBSCRIBED AND SWORN to before me, a Notary Public, 19 this day of April, 1991, by Thomas Hoekelman, President of LIFE-LOC, INC., a Colorado corporation, who acknowledged that he signed the foregoing Articles of Amendment as his free and voluntary act and deed for the uses and purposes therein set forth, and that the facts contained therein are true.

WITNESS my hand and official seal.

My commission expires:  10-19-91

/s/ Joan Bachman

Notary Public

EX-3.6

Exhibit 3.6

SS. Form D-4 (Rev. 8/92) Submit in Duplicate   Filing Fee $25.00   This document must be typewritten MAIL TO: Colorado Secretary of State Corporations Office 1560 Broadway. Suite 200 Denver. Colorado 80202 (303) 866 2361   ARTICLES OF AMENDMENT to the
ARTICLES OF INCORPORATION  931054953   $25.00 SOS 05-26-93   10:49

CHANGE OF NAME

Pursuant to the provisions ofthc Colorado Corporation Code. the undersigned corporation adopts the following Articles of Amendments to its Articles of Incorporation:

FIRST The name the corporation is (note 1)Life Loc, Inc.

SECOND: The following amendment to the Articles of Incorporation was adopted on May 10, 1993 as prescribed by the Colorado Corporation Code, in the manner marked with an X below:

Such amendment was adopted by the board of directors where no shares have been issued

XX Such amendment was adopted by a vote of the shareholders.  The number of shares voted for the amendment was sufficient for approval.

1.  Issuance of 10 million shares of series preferred stock, with terms to be established by Board of Directors.

2.  Name of corporation was changed to Alcor Systems, Inc.

THIRD:  The manner, if not set forth in such amendment, in which any exchange, reclassification. orcancellationof issued shares provided for in the amendment shall be effected, as follows:N/A

FOURTH: The manner in which such amendment effects a change in the amount of stated capital, and the amount of stated capital as changed by such amendment, are as follows: N/A

Life Loc, Inc.		(Note 1)
	Thomas Hoekelman
By:	/s/ Thomas Hoekelman
	Its  President

		(Note 2)
	Vern D. Kornelson
and	/s/ Vern D. Kornelson
	Its  Secretary

	(Note 3)
Its __________ Director

NOTES:  1.  Exact current name of coporporation adopting the Articles of Amendmeents. (If this is a change of name amendment, the name before the amendment is filed).

2.  Signatures and title of officers signing for the corporation.

3.  Where no shares have been issued, signature of a director.

EX-3.7

Exhibit 3.7

Submit in Duplicate   Filing Fee $30.00*   Must be Typewritten (Black) MAIL TO: Colorado Secretary of State Corporations Office 1560 Broadway. Suite 200 Denver. Colorado 80202 (303) 866 2361   ARTICLES OF AMENDMENT to the
ARTICLES OF INCORPORATION For Office Use Only 941046718  $25.00 SOS 03-07-94   09:54

Pursuant to the provisions ofthe Colorado Corporation Code, the undersigned corporation adopts the following Articles of Amendments to its Articles of Incorporation:

FIRST: The name the corporation is (note 1)ALCOR SYSTEMS, INC.

SECOND: The following amendment to the Articles of Incorporation was adopted on May 11, 1992 as prescribed by the Colorado Corporation Code, in the manner marked with an X below:

Such amendment was adopted by the board of directors where no shares have been issued

X Such amendment was adopted by a vote of the shareholders.  The number of shares voted for the amendment was sufficient for approval.

A new ARTICLE XII will be added to the Articles of Incorporation of the corporation, as follows:

ARTICLE XII

Pursuant to Section 7-4-118(2), C.R.S., any action to be taken by the shareholders of the corporation for which the Colorado Corporation Code requires the vote or concurrence of the holders of two-thirds of the outstanding shares entitled to vote thereon, or any class or series, shall only require the vote or concurrence of the holders of a majority of such shares or class or series thereof.

THIRD:  The manner, if not set forth in such amendment, in which any exchange, reclassification. orcancellationof issued shares provided for in the amendment shall be effected, as follows:No Change

FOURTH: The manner in which such amendment effects a change in the amount of stated capital, and the amount of stated capital as changed by such amendment, are as follows: No Change

ALCOR SYSTEMS, INC.		(Note 1)
By:	//signed//
	Its     Vice            President

		(Note 2)
and	/s/ Vern D. Kornelson
	Its  Secretary

	(Note 3)
Its __________ Director

NOTES:  1.  Exact current name of coporporation adopting the Articles of Amendmeents. (If this is a change of name amendment, the name before the amendment is filed).

2.  Signatures and title of officers signing for the corporation.

3.  Where no shares have been issued, signature of a director.

EX-3.8

Exhibit 3.8

MUST BE TYPED FILING FEE:  $25.00 MUST SUBMIT TWO COPIES Mail to:  Secretary of State   Corporations Section 1560 Broadway. Suite 200 Denver. Colorado 80202 (303) 894-2251 Fax (303) 894-2242   ARTICLES OF AMENDMENT to the
ARTICLES OF INCORPORATION For Office Use Only 19971202176    M $25.00 SECRETARY OF STATE 12-16-97   15:09:24  

Pursuant to the provisions of the Colorado Business Corporation Act, the undersigned corporation adopts the following Articles of Amendment to its Articles of Incorporation:

FIRST: The name of the corporation is ALCOR SYSTEMS. INC.

SECOND: The following amendment to the Articles of Incorporation was adopted on November 17, 1997, as prescribed by the Colorado Business Corporation Act, in the manner marked with an X below:

No shares have been issued or Directors Elected - Action by Incorporators

No shares have been issued but Directors Elected - Action by Directors

Such amendment was adopted by the board of directors where no shares have been issued

X Such amendment was adopted by a vote of the shareholders.  The number of shares voted for the amendment was sufficient for approval.

ARTICLE XII is hereby added to the Articles of Incorporation, as follows:

ARTICLE XII

Stock Split

Each share of the Corporation's Common Stock issued at the time these Articles of Amendment to Articles of Incorporation are filed and accepted by the Colorado Secretary of State shall be and hereby is automatically changed and reclassified without further action into 1/10th of one share of the Corporation's Common Stock.

THIRD: N/A

	ALCOR SYSTEMS. INC.
Dated:  December 10, 1997	By:	/s/ Frank Traylor
	Frank Traylor
	Its:	President
		Title

EX-3.9

Exhibit 3.9

          MUST BE TYPED Fax (303) 894-242 FILING FEE:  $25.00 MUST SUBMIT TWO COPIES Mail to:  Secretary of State Corporations Section 1560 Broadway. Suite 200 Denver. Colorado 80202 (303) 894-2251     ARTICLES OF AMENDMENT to the
ARTICLES OF INCORPORATION For Office Use Only 002 FILED   VICTORIA BUCKLEY COLORADO SECRETARY OF STATE 19981129313   C $25.00 SECRETARY OF STATE 07-15-1998  14:14:01  

Pursuant to the provisions of the Colorado Business Corporation Act, the undersigned corporation adopts the following Articles of Amendment to its Articles of Incorporation:

FIRST: The name of the corporation is ALCOR SYSTEMS. INC.

SECOND: The following amendment to the Articles of Incorporation was adopted on July 15, 1998, as prescribed by the Colorado Business Corporation Act, in the manner marked with an X below:

No shares have been issued or Directors Elected - Action by Incorporators

No shares have been issued but Directors Elected - Action by Directors

Such amendment was adopted by the board of directors where no shares have been issued and shareholder action was not required.

X Such amendment was adopted by a vote of the shareholders.  The number of shares voted for the amendment was sufficient for approval.

THIRD: If changing corporate name, the new name of the corporation is Lifeloc Technologies, Inc.

FOURTH: The manner in which such amendment effects a change in the amount of stated capital, and the amount of stated capital as changed by such amendment, are as follows:

If these amendments are to have a delayed effective date, please list that date:  _____________________

(Not to exceed ninety (90) days from the date of filing)

ALCOR SYSTEMS. INC.
Signature	/s/ Vern D. Kornelson
Title	Secretary
	COMPUTER UDATE COMPLETE BJS

EX-3.10

Exhibit 3.10

            MUST BE TYPED Fax (303) 894-242 FILING FEE:  $25.00 MUST SUBMIT TWO COPIES     Please include a typed self-addressed envelope Mail to:  Secretary of State Corporations Section 1560 Broadway. Suite 200 Denver. Colorado 80202 (303) 894-2251         ARTICLES OF AMENDMENT to the
ARTICLES OF INCORPORATION For Office Use Only 002     FILED   VICTORIA BUCKLEY COLORADO SECRETARY OF STATE 19991079667  M $25.00 SECRETARY OF STATE 04-27-1999  15:04:08  

STOCK CHANGE

Pursuant to the provisions of the Colorado Business Corporation Act, the undersigned corporation adopts the following Articles of Amendment to its Articles of Incorporation:

FIRST: The name of the corporation is  Lifeloc Technologies Inc.

SECOND: The following amendment to the Articles of Incorporation was adopted on April 1, 1994, as prescribed by the Colorado Business Corporation Act, in the manner marked with an X below:

No shares have been issued or Directors Elected - Action by Incorporators

No shares have been issued but Directors Elected - Action by Directors

Such amendment was adopted by the board of directors where no shares have been issued and shareholder action was not required.

X Such amendment was adopted by a vote of the shareholders.  The number of shares voted for the amendment was sufficient for approval.

ARTICLE VII, Section 1 is hereby amended as follows:

ARTICLE VII

CAPITAL STOCK

Section 1. Authorized Shares. The total number of common shares which this corporation is authorized to issue is 50 million, no par value. The total number of series preferred stock, with terms to be established by the Board of Directors, which this corporation is authorized to issue is 10 million.

THIRD: If changing corporate name, the new name of the corporation is ________________

FOURTH: The manner in which such amendment effects a change in the amount of stated capital, and the amount of stated capital as changed by such amendment, are as follows:

If these amendments are to have a delayed effective date, please list that date:  _____________________

(Not to exceed ninety (90) days from the date of filing)

ALCOR SYSTEMS. INC.
Signature	/s/ Vern D. Kornelson
Title	Secretary

EX-3.11

Exhibit 3.11

LIFELOC TECHNOLOGIES, INC.

BY-LAWS

ARTICLE I. - Offices

The principal offices of the corporation shall initially be at Wheat Ridge, Colorado, but the board of directors, in its discretion, may keep and maintain offices wherever the business of the corporation may require.

ARTICLE II. - Meeting of Shareholders

1.Time and Place: Any meeting of the shareholders, other than the annual meeting, may be held at such time and place, within or outside of the State of Colorado, as may be fixed by the board of directors or as shall be specified in the notice of the meeting or waiver of notice of the meeting.

2.Annual Meeting: The annual meeting of the shareholders shall be held at the offices of the corporation or at such other place and at such date as the board of directors may determine.

3.Special Meetings: Special meetings of the shareholders, for any purpose or purposes, may be called by the president, the board of directors, or the holders of not less than one tenth of all of the shares entitled to vote at the meeting.

4.Record Date: For the purpose of determining shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or entitled to receive payment of any dividend, or in order to make a determination of shareholders for any other proper purpose, the board of directors may fix in advance a date as the record date for any such determination of shareholders. The record date may not be fixed more than fifty and, in the case of a meeting of the shareholders, not less than ten days before the date of the proposed action, except when it is proposed that the authorized shares be increased, in which case the record date shall be set not less than thirty days before the date of such action.

5.Voting List: At least ten days before each meeting of shareholders, the secretary of the corporation shall make a complete list of the shareholders entitled to vote at such meeting, or any adjournment of such meeting, which list shall be arranged in alphabetical order and shall contain the address of and number of shares held by each shareholder. This list shall be kept on file at the principal office of the corporation for a period of ten days prior to such meeting, shall be produced and kept open at the meeting, and shall be subject to inspection by any shareholder during usual business hours of the corporation and during the whole time of the meeting.

6.Notices: Written notice stating the place, day and hour of the meeting and, in case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered not less than ten nor more than fifty days before the date of the meeting unless it is proposed that the authorized shares be increased in which case at least thirty days notice shall be given. Notice shall be given either personally or by mail, by or at the direction of the president, the secretary, or the officer or persons calling the meeting, to each shareholder of record entitled to vote at such meeting. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail, postage prepaid, addressed to the shareholder at his address as it appears on the stock transfer books of the corporation. If delivered personally, such notice shall be deemed to be delivered when handed to the shareholder or deposited at his address as it appears on the stock transfer books of the corporation.

7.Quorum: Except as otherwise provided by law, a majority of the shares present in person or by proxy, shall constitute a quorum at any meeting of the shareholders. If a quorum shall not be present or represented, the shareholders present in person or by proxy may adjourn the meeting from time to time, without notice other than announcement at the meeting, for a period not to exceed sixty days at any one adjournment, until the number of shares required for a quorum shall be present. At any such adjourned meeting at which a quorum is represented, any business may be transacted which might have been transacted at the meeting originally called. The shareholders present or represented at a duly organized meeting may continue to transact business until adjournment, notwithstanding the withdrawal of enough shareholders to leave less than a quorum.

8.Voting: Except as otherwise provided by law, all matters shall be decided by a vote of the majority of the shares represented at the meeting and entitled to vote on the subject matter. Each outstanding share shall be entitled to one vote on each matter submitted to a vote of the shareholders. A shareholder may vote either in person or by proxy executed in writing by the shareholder or by his duly authorized attorney-in-fact. Such proxy shall be filed with the secretary of the corporation before or at the time of the meeting. No proxy shall be valid after eleven months from the date of its execution, unless otherwise provided in the proxy. Voting shall be oral, except as otherwise provided by law, but shall be by written ballot if such written vote is demanded by any shareholder present in person or by proxy and entitled to vote.

9.Waiver: Whenever law or these bylaws require a notice of a meeting to be given, a written waiver of notice signed by a shareholder entitled to notice, whether before, at, or after the time stated in the notice, shall be equivalent to the giving of notice. Attendance of a shareholder in person or by proxy at a meeting shall constitute a waiver of notice of a meeting, except where a shareholder attends a meeting for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened.

10.Action by Shareholders Without a Meeting: Any action required to or which may be taken at a meeting of the shareholders may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all of the shareholders entitled to vote with respect to such action. Such consent may be executed in counterparts and shall be effective as of the date of the last signature thereon.

ARTICLE III.-Directors

The business and affairs of the corporation shall be managed by a board of directors which shall exercise all the powers of the corporation, except as otherwise provided by Colorado law or the articles of incorporation of the corporation.

1.Number: The number of directors of this corporation shall be a minimum of three and not more than nine.

2.Election: The board of directors shall be elected at the annual meeting of the shareholders or at a special meeting called for that purpose.

3.Term: Each director shall be elected to hold office until the next annual meeting of shareholders and until his successor shall have been elected and qualified.

4.Removal and Resignation: Any director may be removed at a meeting expressly called for that purpose, with or without cause, by a vote of the holders of the majority of shares entitled to vote at an election of directors. Any director may resign at any time by giving written notice to the president or to the secretary, and acceptance of such resignation shall not be necessary to make it effective unless the notice so provides.

5.Vacancies: Any vacancy occurring on the board of directors and any directorship to be filled by reason of an increase in the size of the board of directors shall be filled by the affirmative vote of a majority, though less than a quorum, of the remaining directors. A director elected to fill a vacancy shall hold office during the unexpired term of his predecessor in office. A director elected to fill a position resulting from an increase in the board of directors shall hold office until the next annual meeting of shareholders and until his successor shall have been elected and qualified.

6.Meetings: A regular meeting of the board of directors shall be held immediately after, and at the same place as, the annual meeting of shareholders. No notice of this meeting of the board of directors need be given. The board of directors may, by resolution, establish a time and place for additional regular meetings which may thereafter be held without further notice. Special meetings of the board of directors may be called by the president or by any member of the board of directors.

7.Notices: Notice of a special meeting stating the date, hour and place of such meeting shall be given to each member of the board of directors by the secretary, the president or the member of the board calling the meeting. The notice may be deposited in the United States mail at least seven days before the meeting addressed to the director at the last address he has furnished to the corporation for this purpose, and any notice so mailed shall be deemed to have been given at the time it is mailed. Notice may also be given at least two days before the meeting in person, or by telephone, prepaid telegram, telex, cablegram, facsimile, or radiogram, and such notice shall be deemed to have been given at the time when the personal or telephone conversation occurs, or when the telegram, telex, cablegram, facsimile, or radiogram is either personally delivered to the director or delivered to the last address of the director furnished to the corporation by him for this purpose.

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8.Quorum: Except as provided in subsection 5 of this Article III, a majority of the number of directors fixed by these bylaws shall constitute a quorum for the transaction of business at aii meetings of the board of directors. The act of a majority of the directors present at any meeting at which a quorum is present shall be the act of the board of directors, except as otherwise specifically required by law.

9.Waiver: A written waiver of notice signed by a director entitled to notice, whether before, at, or after the time stated therein, shall be equivalent to the giving of notice. Attendance of a director at a meeting shall constitute a waiver of notice of such meeting, except where a director attends a meeting for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened.

10.Attendance by Telephone: Any director shall be deemed present at a meeting of directors if that director is present by conference telephone or similar communications equipment which allows all participants to hear and be heard by each other or otherwise participate immediately, fully and continuously during the meeting.

11.Action by Directors Without a Meeting: Any action required to or which may be taken at a meeting of the board of directors may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all of the directors entitled to vote with respect to the proposed action. Such consent may be executed in counterparts and shall be effective as of the date of the last signature thereon.

ARTICLE IV. - Committees

The board of directors may establish committees for the performance of delegated or designated functions to the extent permitted by law. The board of directors may provide, by resolution or amendment to the bylaws, such powers, limitations, and procedures for committees as the board deems advisable.

ARTICLE V. - Officers

1.Number and Election: The officers of the corporation shall be a president, one or more vice presidents, a secretary and a treasurer, who shall be elected by the board of directors. Any two or more offices may be held by the same person, except the offices of president and secretary. In addition, the president may appoint one or more assistant secretaries or assistant treasurers, and such other subordinate officers as he shall deem necessary, who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the president.

2.President: The president shall be the chief executive officer of the corporation and shall preside at all meetings of shareholders and of the board of directors. Subject to the direction and control of the board of directors, he shall have general and active management of the business of the corporation and shall see that all orders and resolutions of the board of directors are carried into effect. He may execute contracts, deeds and other instruments on behalf of the corporation as is necessary and appropriate. He shall perform such additional functions and duties as are appropriate and customary for the office of president and as the board of directors may prescribe from time to time.

3.Vice President: The vice president, or, if there shall be more than one, the vice presidents in the order determined by the board of directors, shall be the officer(s) next in seniority after the president. Each vice president shall also perform such duties and exercise such powers as are appropriate and as are prescribed by the board of directors or president. Upon the death, absence or disability of the president, the vice president, or, if there shall be more than one, the vice presidents in the order determined by the board of directors, shall perform the duties and exercise the powers of the president.

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4.Secretary: The secretary shall give, or cause to be given, notice of all meetings of the shareholders and special meetings of the board of directors, keep the minutes of such meetings, have charge of the corporate seal and stock records, be responsible for the maintenance of all corporate records and files and the preparation and filing of reports to governmental agencies, other than tax returns, have authority to affix the corporate seal to any instrument requiring it (and, when so affixed, it may be attested by his signature), and perform such other functions and duties as are appropriate and customary for the office of secretary as the board of directors or the president may prescribe from time to time.

5.Assistant Secretary: The assistant secretary, or, if there shall be more than one, the assistant secretaries in the order determined by the board of directors or the president, shall, in the death, absence or disability of the secretary or in case such duties are specifically delegated to him by the board of directors, president or secretary, perform the duties and exercise the powers of the secretary and shall, under the supervision of the secretary, perform such other duties and have such other powers as may be prescribed from time to time by the board of directors or the president.

6.Treasurer: The treasurer shall have control of the funds and the care and custody of all stocks, bonds and other securities owned by the corporation and shall be responsible for the preparation and filing of tax returns. He shall receive all moneys paid to the corporation and shall have authority to give receipts and vouchers, to sign and endorse checks and warrants in its name and on its behalf, and give full discharge for the same. He shall also have charge of disbursement of the funds of the corporation, shall keep full and accurate records of the receipts and disbursements, and shall deposit all moneys and other valuable effects in the name and to the credit of the corporation in such depositories as shall be designated by the board of directors. He shall perform such other duties and have such other powers as are appropriate and customary for the office of treasurer as the board of directors or president may prescribe from time to time.

7.Assistant Treasurer: The assistant treasurer, or, if there shall be more than one, the assistant treasurers in the order determined by the board of directors or the president, shall, in the death, absence or disability of the treasurer or in case such duties are specifically delegated to him by the board of directors, president or treasurer, perform the duties and exercise the powers of the treasurer, and shall, under the supervision of the treasurer, perform such other duties and have such other powers as the board of directors or the president may prescribe from time to time.

8.Removal and Resignation: Any officer elected or appointed by the board of directors may be removed at any time by the affirmative vote of a majority of the board of directors. Any officer appointed by the president may be removed at any time by the board of directors or the president. Any officer may resign at any time by giving written notice of his resignation to the president or to the secretary, and acceptance of such resignation shall not be necessary to make it effective, unless the notice so provides. Any vacancy occurring in any office, the election or appointment to which is made by the board of directors, shall be filled by the board of directors. Any vacancy occurring in any other office of the corporation may be filled by the president for the unexpired portion of the term.

9.Compensation: Officers shall receive such compensation for their services as may be authorized or ratified by the board of directors. Election or appointment of an officer shall not of itself create a contract right to compensation for services performed as such officer.

ARTICLE VI. - Indemnification

1.      To the fullest extent permitted or provided by the Colorado Business Corporation Act, as amended from time to time, the corporation shall indemnify any person against all liability and expense incurred by reason of the fact that he is or was a director or officer of the corporation or, while serving as a director or officer of the corporation, he is or was serving at the request of the corporation as a director, officer, partner, or trustee of, or in any similar managerial or fiduciary position of, or as an employee or agent of, another corporation, partnership, joint venture, trust, association, or other entity. In addition to the foregoing obligation of indemnification, and with a view to giving the person covered by these provisions the broadest possible indemnity, the corporation shall also indemnify persons as provided in the succeeding paragraphs of this Article VI.

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2.The corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative (other than an action by or in the right of the corporation), by reason of the fact that he is or was a director or officer of the corporation or, while serving as a director or officer of the corporation, he is or was serving at the request of the corporation as a director, officer, partner, or trustee of, or in any similar managerial or fiduciary position of, or as an employee or agent of, another corporation, partnership, joint venture, trust, association, or other entity, against expenses (including attorneys' fees), judgments, fines, and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit, or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit, or proceeding by judgment, order, settlement, or conviction or upon a plea of nolo contendere or its equivalent shall not of itself create a presumption that the person did not act in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful.

3.The corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending, or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was a director or officer of the corporation or, while serving as a director or officer of the corporation, he is or was serving at the request of the corporation as a director, officer, partner, or trustee of, or in any similar managerial or fiduciary position of, or as an employee or agent of, another corporation, partnership, joint venture, trust, association or other entity against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith in a manner he reasonably believed to be in or not opposed to the best interests of the corporation; but no such indemnification shall be made in respect of any claim, issue, or matter as to which such person has been adjudged to be liable for negligence or misconduct in the performance of his duty to the corporation unless, and then only to the extent that, the court in which such action or suit was brought determines upon application that, despite the adjudication of liability, but in view of all circumstances of the case, such person is fairly and reasonably entitled to indemnification for such expenses that such court deems proper.

4.To the extent that a person entitled to indemnity under paragraph 2 or 3 of this Article VI has been successful on the merits in defense of any action, suit, or proceeding referred to in paragraph 2 or 3 of this Article VI or in defense of any claim, issue, or matter therein, he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith.

5.Any indemnification under paragraph 2 or 3 of this Article VI (unless ordered by a court) shall be made by the corporation only as authorized in the specific case upon a determination that indemnification of the person seeking indemnification is proper in the circumstances because he has met the applicable standard of conduct set forth in paragraph 2 or 3. Such determination shall be made by the board of directors by a majority vote of a quorum consisting of directors who were not parties to such action, suit, or proceeding, or, if such a quorum is not obtainable or even if obtainable a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or by the shareholders.

6.Expenses (including attorneys' fees) incurred in defending a civil or criminal action, suit, or proceeding may be paid by the corporation in advance of the final disposition of such action, suit, or proceeding as authorized in paragraph 5 of this Article VI upon receipt of an undertaking by or on behalf of the person seeking the advance to repay such amount unless it is ultimately determined that he is entitled to be indemnified by the corporation against such expenses pursuant to this Article VI.

7.The indemnification provided by this Article VI shall not be deemed exclusive of any other rights to which those indemnified may be entitled under these articles of incorporation, any bylaw, agreement, vote of shareholders or disinterested directors, or otherwise, and any procedure provided for by any of the foregoing, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be in the position that entitled him to such indemnification and shall inure to the benefit of heirs, executors, and administrators of such a person. The provisions of this Article VI shall not be deemed to preclude the corporation from indemnifying other persons from similar or other expenses and liabilities as the board of directors or the shareholders may determine in a specific instance or by resolution of general application.

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 8.      The corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee, fiduciary, or agent of the corporation or who is or was serving at the request of the corporation as a director, officer, partner, or trustee, or in any similar managerial or fiduciary position, or as an employee or agent of another corporation, partnership, joint venture, trust, or other entity, or any other person against any liability asserted against him and incurred by him in any such capacity or arising out of his status as such, whether or not he would be entitled to indemnification under the provisions of this Article VI.

ARTICLE VII. - Stock

 1.Certificates: Certificates representing shares of the capital stock of the corporation shall be in such form as may be approved by the board of directors and shall be signed by the president or any vice president and by the secretary or an assistant secretary, or by any member of the board of directors. All certificates shall be consecutively numbered and the names of the owners, the number of the shares and the date of issue shall be entered on the books of the corporation. Each certificate representing shares shall state upon its face (a) that the corporation is organized under the laws of the State of Colorado, (b) the name of the person to whom issued, (c) the number of shares which the certificate represents (d) the par value of each share represented by the certificate, and (e) any restrictions placed upon the transfer of the shares represented by the certificate.

 2.Facsimile Signatures: Where a certificate is signed (1) by a transfer agent other than the corporation or its employee, or (2) by a registrar other than the corporation or its employee, any other signature on the certificate may be facsimile. In case any officer, transfer agent or registrar who has signed, or whose facsimile signature or signatures have been placed upon, any certificate, shall cease to be such officer, transfer agent, or registrar, whether because of death, resignation or otherwise, before the certificate is issued by the corporation, it may nevertheless be issued by the corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue.

 3.Transfers of Stock: Transfers of shares shall be made on the books of the corporation only upon presentation of the certificate or certificates representing such shares properly endorsed by the person or persons appearing upon the face of such certificate to be the owner, or accompanied by a proper transfer or assignment separate from the certificate, except as may otherwise be expressly provided by the statutes of the State of Colorado or by order of a court of competent jurisdiction. The officers or transfer agents of the corporation may, in their discretion, require a signature guaranty before making any transfer. The corporation shall be entitled to treat the person in whose name any shares of stock are registered on its books as the owner of those shares for all purposes, and shall not be bound to recognize any equitable or other claim or interest in the shares on the part of any other person, whether or not the corporation shall have notice of such claim or interest.

ARTICLE VIII. - Seal

 The board of directors may adopt a seal which shall be circular in form and shall bear the name of the corporation and the words "SEAL" AND "COLORADO" which, when adopted, shall constitute the corporate seal of the corporation. The seal may be used by causing it or a facsimile thereof to be impressed or affixed or manually reproduced.

ARTICLE IX. - Fiscal Year

 The board of directors may, by resolution, adopt a fiscal year for this corporation.

ARTICLE X. - Amendment

 These bylaws may at any time and from time to time be amended, supplemented or repealed by the board of directors.

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EX-4.1

Exhibit 4.1

EX-10.1

Exhibit 10.1

LIFELOC TECHNOLOGIES, INC.

STOCK OPTION PLAN

I.  Purpose

The LIFELOC TECHNOLOGIES, INC. Stock Option Plan (the "Plan") provides for the grant of Stock Options, Stock Appreciation Rights and Supplemental Bonuses to Employees of Lifeloc Technologies, Inc. (the "Company"), and such of its subsidiaries (as defined in Section 424(f) of the Internal Revenue Code of 1986, as amended (the "Code")) as the Board of Directors of the Company (the "Board") shall from time to time designate ("Participating Subsidiaries"), in order to advance the interests of the Company and its Participating Subsidiaries through the motivation, attraction and retention of their respective Employees.

II.  Incentive Stock Options and Non-Incentive Stock Options

The Stock Options granted under the Plan may be either:

(a)  Incentive Stock Options ("ISOs") which are intended to be "Incentive Stock Options" as that term is defined in Section 422 of the Code; or

(b)  Nonstatutory Stock Options ("NSOs") which are intended to be options that do not qualify as "Incentive Stock Options" under Section 422 of the Code.

All Stock Options shall be ISOs unless the Option Agreement clearly designates the Stock Options granted thereunder, or a specified portion thereof, as NSOs.  Subject to the other provisions of the Plan, a Participant may receive ISOs and NSOs at the same time, provided that the ISOs and NSOs are clearly designated as such.

Except as otherwise expressly provided herein, all of the provisions and requirements of the Plan relating to Stock Options shall apply to ISOs and NSOs.

III.  Administration

3.1  Committee.  With respect to grants of Stock Options, Stock Appreciation Rights and Supplemental Bonuses to Employees other than officers and directors of the Company, the Plan shall be administered by a committee ("Committee") composed of at least two members of the Board of Directors.  With respect to grants of Stock Options, Stock Appreciation Rights and Supplemental Bonuses to officers and directors, the Plan shall be administered by the Board of Directors, if each director is a Disinterested Person, or by a committee of two or more directors, all of whom are Disinterested Persons.  Such committee may be the Committee if all of the members thereof are Disinterested Persons, or a special committee appointed by the Board of Directors composed of at least two Disinterested Persons.  The Committee or the Board, as the case may be, shall have full authority to administer the Plan, including authority to interpret and construe any provision of the Plan and any Stock Option, Stock Appreciation Right or Supplemental Bonus granted thereunder, and to adopt such rules and regulations for administering the Plan as it may deem necessary in order to comply with the requirements of the Code, in order that Stock Options that are intended to be ISOs will be classified as incentive stock options under the Code, or in order to conform to any regulation or to any change in any law or regulation applicable thereto.  The Committee or the Board may delegate any of its responsibilities under the Plan, other than its responsibility to grant Stock Options, to determine whether the Stock Appreciation Rights or Supplemental Bonuses, if any, payable to a Participant shall be paid in cash, in shares of Common Stock or a combination thereof, or to interpret and construe the Plan.  If the Board of Directors is composed entirely of Disinterested Persons, the Board of Directors may reserve to itself any of the authority granted to the Committee as set forth herein, and it may perform and discharge all of the functions and responsibilities of the Committee at any time that a duly constituted Committee is not appointed and serving.  All references in the Plan to the "Committee" shall be deemed to refer to the Board of Directors whenever the Board is discharging the powers and responsibilities of the Committee, and to any special committee appointed by the Board to administer particular aspects of the Plan.

3.2  Actions of the Committee.  All actions taken and all interpretations and determinations made by the Committee in good faith (including determinations of Fair Market Value) shall be final and binding upon all Participants, the Company and all other interested persons.  No member of the Committee shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan, and all members of the Committee shall, in addition to their rights as directors, be fully protected by the Company with respect to any such action, determination or interpretation.

IV.  Definitions

4.1  "Stock Option".  A Stock Option is the right granted under the Plan to an Employee to purchase, at such time or times and at such price or prices ("Option Price") as are determined by the Committee, the number of shares of Common Stock determined by the Committee.

4.2  "Stock Appreciation Right".  A Stock Appreciation Right is the right to receive payment, in shares of Common Stock, cash or a combination of shares of Common Stock and cash, of the Redemption Value of a specified number of shares of Common Stock then purchasable under a Stock Option.

4.3  "Redemption Value".  The Redemption Value of shares of Common Stock purchasable under a Stock Option shall be the amount, if any, by which the Fair Market Value of one share of Common Stock on the date on which the Stock Option is exercised exceeds the Option Price for such share.

4.4  "Common Stock".  A share of Common Stock means a share of authorized but unissued or reacquired Common Stock (par value $per share) of the Company.

4.5  "Fair Market Value".  If the Common Stock is not traded publicly, the Fair Market Value of a share of Common Stock on any date shall be determined, in good faith, by the Committee after such consultation with outside legal, accounting and other experts as the Committee may deem advisable, and the Committee shall maintain a written record of its method of determining such value.  If the Common Stock is traded publicly, the Fair Market Value of a share of Common Stock on any date shall be the average of the representative closing bid and asked prices, as quoted by the National Association of Securities Dealers through NASDAQ (its automated system for reporting quotes), for the date in question or, if the Common Stock is listed on the NASDAQ National Market System or is listed on a national stock exchange, the officially quoted closing price on NASDAQ or such exchange, as the case may be, on the date in question.

4.6  "Employee".  An Employee is an employee of the Company or any Participating Subsidiary.

4.7  "Participant".  A Participant is an Employee to whom a Stock Option, Stock Appreciation Right or Supplemental Bonus is granted.

4.8  "Disinterested Person."  A Disinterested Person is a director of the Company who, during the shorter of (a) the one year prior to service as an administrator of the Plan, or (b) the period between the date on which the Company's Common Stock is registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended, (the "1934 Act") and the director's service as an administrator of the Plan, has not been granted or awarded equity securities pursuant to the Plan or any other plan of the Company or any of its affiliates except as may be permitted by Rule 16b-3(c)(2) under the 1934 Act or any successor to such rule.

4.9  "Supplemental Bonus".  A Supplemental Bonus is the right to receive payment, in shares of Common Stock, cash or a combination of shares of Common Stock and cash, of an amount determined under Section 7.7.

V.  Eligibility and Participation

Grants of Stock Options, Stock Appreciation Rights and Supplemental Bonuses may be made to Employees of the Company or any Participating Subsidiary, including directors of the Company who are also Employees, but directors who are not Employees shall not be eligible to receive Stock Options, Stock Appreciation Rights or Supplemental Bonuses under the Plan.  The Committee shall from time to time determine the Employees to whom Stock Options shall be granted, the number of shares of Common Stock subject to each Stock Option to be granted to each such Employee, the Option Price of such Stock Options and other terms and provisions of such Stock Options, all as provided in the Plan.  The Option Price of any ISO shall be not less than the Fair Market Value of a share of Common Stock on the date on which the Stock Option is granted, but the Option Price of an NSO may be less than the Fair Market Value on the date the NSO is granted if the Committee so determines.  If an ISO is granted to an Employee who then owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or any parent or subsidiary corporation of the Company, the Option Price of such ISO shall be at least 110% of the Fair Market Value of the Common Stock subject to the ISO at the time such ISO is granted, and such ISO shall not be exercisable after five years after the date on which it was granted.  Each Stock Option shall be evidenced by a written agreement ("Option Agreement") containing such terms and provisions as the Committee may determine, subject to the provisions of the Plan.

VI.  Shares of Common Stock Subject to the Plan

6.1  Maximum Number.  The maximum aggregate number of shares of Common Stock that may be made subject to Stock Options shall be 750,000 authorized but unissued shares.  The aggregate Fair Market Value (determined as of the time the ISO is granted) of the Common Stock as to which all ISOs granted to an Employee may first become exercisable in a particular calendar year may not exceed $100,000.  If any shares of Common Stock subject to Stock Options are not purchased or otherwise paid for before such Stock Options expire, such shares may again be made subject to Stock Options.

6.2  Capital Changes.  In the event any changes are made to the shares of Common Stock (whether by reason of merger, consolidation, reorganization, recapitalization, stock dividend in excess of ten percent (10%) at any single time, stock split, combination of shares, exchange of shares, change in corporate structure or otherwise), appropriate adjustments shall be made in:  (i) the number of shares of Common Stock theretofore made subject to Stock Options, and in the purchase price of said shares; and (ii) the aggregate number of shares which may be made subject to Stock Options.  If any of the foregoing adjustments shall result in a fractional share, the fraction shall be disregarded, and the Company shall have no obligation to make any cash or other payment with respect to such a fractional share.

VII.  Exercise of Stock Options

7.1  Time of Exercise.  Subject to the provisions of the Plan, including without limitation Section 7.5, the Committee, in its discretion, shall determine the time when a Stock Option, or a portion of a Stock Option, shall become exercisable, and the time when a Stock Option, or a portion of a Stock Option, shall expire.  Such time or times shall be set forth in the Option Agreement evidencing such Stock Option.  An ISO shall expire, to the extent not exercised, no later than the tenth anniversary of the date on which it was granted, and an NSO shall expire, to the extent not exercised, no later than ten years after the date on which it was granted.  The Committee may accelerate the vesting of any Participant's Stock Option by giving written notice to the Participant.  Upon receipt of such notice, the Participant and the Company shall amend the Option Agreement to reflect the new vesting schedule.  The acceleration of the exercise period of a Stock Option shall not affect the expiration date of that Stock Option.

7.2  Exchange of Outstanding Stock.  The Committee, in its sole discretion, may permit a Participant to surrender to the Company shares of Common Stock previously acquired by the Participant as part or full payment for the exercise of a Stock Option.  Such surrendered shares shall be valued at their Fair Market Value on the date of exercise.

7.3  Use of Promissory Note; Exercise Loans.  The Committee may, in its sole discretion, impose terms and conditions, including conditions relating to the manner and timing of payments, on the exercise of Stock Options.  Such terms and conditions may include, but are not limited to, permitting a Participant to deliver to the Company his promissory note as full or partial payment for the exercise of a Stock Option; provided that, with respect to any promissory note given as payment or partial payment for the exercise of an ISO, all terms of such note shall be determined at the time a Stock Option is granted and set forth in the Option Agreement.  The Committee, in its sole discretion, may authorize the Company to make a loan to a Participant in connection with the exercise of Stock Options, or authorize the Company to arrange or guarantee loans to a Participant by a third party.

7.4  Stock Restriction Agreement.  The Committee may provide that shares of Common Stock issuable upon the exercise of a Stock Option shall, under certain conditions, be subject to restrictions whereby the Company has a right of first refusal with respect to such shares or a right or obligation to repurchase all or a portion of such shares, which restrictions may survive a Participant's term of employment with the Company.  The acceleration of time or times at which a Stock Option becomes exercisable may be conditioned upon the Participant's agreement to such restrictions.

7.5  Termination of Employment Before Exercise.  If a Participant's employment with the Company or a Participating Subsidiary shall terminate for any reason other than the Participant's disability, any Stock Option then held by the Participant, to the extent then exercisable under the applicable Option Agreement(s), shall remain exercisable after the termination of his employment for a period of 30 days (but, in the case of an ISO, in no event beyond ten years from the date of grant of the ISO).  If the Participant's employment is terminated because the Participant is disabled within the meaning of Section 22(e)(3) of the Code, any Stock Option then held by the Participant, to the extent then exercisable under the applicable Option Agreement(s), shall remain exercisable after the termination of his employment for a period of three months (but, in the case of an ISO, in no event beyond ten years from the date of grant of the ISO).  If the Stock Option is not exercised during the applicable period, it shall be deemed to have been forfeited and of no further force or effect.

7.6  Disposition of Forfeited Stock Options.  Any shares of Common Stock subject to Stock Options forfeited by a Participant shall not thereafter be eligible for purchase by the Participant but may be made subject to Stock Options granted to other Participants.

7.7  Grant of Supplemental Bonuses.  The Committee, either at the time of grant or at any time prior to exercise of any Stock Option or Stock Appreciation Right, may provide for a Supplemental Bonus from the Company or Participating Subsidiary in connection with a specified number of shares of Common Stock then purchasable, or which may become purchasable, under a Stock Option, or a specified number of Stock Appreciation Rights which may be or become exercisable.  Such Supplemental Bonus shall be payable upon the exercise of the Stock Option or Stock Appreciation Right with regard to which such Supplemental Bonus was granted.  A Supplemental Bonus shall not exceed the amount necessary to reimburse the Participant for the income tax liability incurred by him upon the exercise of the Stock Option or upon the exercise of such Stock Appreciation Right, calculated using the maximum combined federal and applicable state income tax rates then in effect and taking into account the tax liability arising from the Participant's receipt of the Supplemental Bonus.  The Committee may, in its discretion, elect to pay any part or all of the Supplemental Bonus in:  (i) cash; (ii) shares of Common Stock; or (iii) any combination of cash and shares of Common Stock.  The provisions of Section 8.3 shall apply to the giving of notice, the determination of the number of shares to be delivered, and the time for delivering shares.  In applying Section 8.3, the Supplemental Bonus shall be treated as if it were a Stock Appreciation Right that the Participant exercised on the day the Supplemental Bonus became payable.  Shares of Common Stock issued pursuant to this Section 7.7 shall not be deemed to have been issued upon the exercise of a Stock Option for purposes of the limitations imposed by Section 6.1 of the Plan.

VIII.  Stock Appreciation Rights

8.1  Grant of Stock Appreciation Rights.  The Committee may, from time to time, grant Stock Appreciation Rights to a Participant with respect to not more than the number of shares of Common Stock which are, or may become, purchasable under any Stock Option held by the Participant.  The Committee may, in its sole discretion, specify the terms and conditions of such rights, including without limitation the time period or time periods during which such rights may be exercised and the date or dates upon which such rights shall expire and become void and unexercisable; provided, however, that in no event shall such rights expire and become void and unexercisable later than the time when the related Stock Option is exercised, expires or terminates.  Each Participant to whom Stock Appreciation Rights are granted shall be given written notice advising him of the grant of such rights and specifying the terms and conditions of the rights, which shall be subject to all the provisions of this Plan.

8.2  Exercise of Stock Appreciation Rights.  Subject to Section 8.3, and in lieu of purchasing shares of Common Stock upon the exercise of a Stock Option held by him, a Participant may elect to exercise the Stock Appreciation Rights, if any, he has been granted and receive payment of the Redemption Value of all, or any portion, of the number of shares of Common Stock subject to such Stock Option with respect to which he has been granted Stock Appreciation Rights; provided, however, that the Stock Appreciation Rights may be exercised only when the Fair Market Value of the Common Stock subject to such Stock Option exceeds the exercise price of the Stock Option.  A Participant shall exercise his Stock Appreciation Rights by delivering a written notice to the Committee specifying the number of shares with respect to which he exercises Stock Appreciation Rights and agreeing to surrender the rights to purchase an equivalent number of shares of Common Stock subject to his Stock Option.  If a Participant exercises Stock Appreciation Rights, payment of his Stock Appreciation Rights shall be made in accordance with Section 8.3 on or before the 90th day after the date of exercise of the Stock Appreciation Rights.

8.3  Form of Payment.  If a Participant elects to exercise Stock Appreciation Rights as provided in Section 8.2, the Committee may, in its absolute discretion, elect to pay any part or all of the Redemption Value of the shares with respect to which the Participant has exercised Stock Appreciation Rights in:  (i) cash; (ii) shares of Common Stock; or (iii) any combination of cash and shares of Common Stock.  The Committee's election pursuant to this Section 8.3 shall be made by giving written notice to the Participant within said 90-day period, which notice shall specify the portion which the Committee elects to pay in cash, shares of Common Stock or a combination thereof.  In the event any portion is to be paid in shares of Common Stock, the number of shares to be delivered shall be determined by dividing the amount which the Committee elects to pay in shares of Common Stock by the Fair Market Value of one share of Common Stock on the date of exercise of the Stock Appreciation Rights.  Any fractional share resulting from any such calculation shall be disregarded.  Said shares, together with any cash payable to the Participant, shall be delivered within said 90-day period.

IX.  No Contract of Employment

Nothing in this Plan shall confer upon the Participant the right to continue in the employ of the Company, or any Participating Subsidiary, nor shall it interfere in any way with the right of the Company, or any such Participating Subsidiary, to discharge the Participant at any time for any reason whatsoever, with or without cause.  Nothing in this Article IX shall affect any rights or obligations of the Company or any Participant under any written contract of employment.

X.  No Rights as a Stockholder

A Participant shall have no rights as a stockholder with respect to any shares of Common Stock subject to a Stock Option. Except as provided in Section 6.2, no adjustment shall be made in the number of shares of Common Stock issued to a Participant, or in any other rights of the Participant upon exercise of a Stock Option by reason of any dividend, distribution or other right granted to stockholders for which the record date is prior to the date of exercise of the Participant's Stock Option.

XI.  Assignability

No Stock Option, Stock Appreciation Right or Supplemental Bonus right granted under this Plan, nor any other rights acquired by a Participant under this Plan, shall be assignable or transferable by a Participant, other than by will or the laws of descent and distribution or, in the case of an NSO, pursuant to a qualified domestic relations order as defined by the Code, Title I of the Employee Retirement Income Security Act, or the rules thereunder.  Notwithstanding the preceding sentence, the Committee may, in its sole discretion, permit the assignment or transfer of an NSO by a Participant other than an officer or director, and the exercise thereof by a person other than such Participant, on such terms and conditions as the Committee in its sole discretion may determine.  Any such terms shall be determined at the time the NSO is granted, and shall be set forth in the Option Agreement.  In the event of his death, the Stock Option or any Stock Appreciation Right or Supplemental Bonus right may be exercised by the Personal Representative of the Participant's estate or, if no Personal Representative has been appointed, by the successor or successors in interest determined under the Participant's will or under the applicable laws of descent and distribution.

XII.  Merger or Liquidation of the Company

If the Company or its stockholders enter into an agreement to dispose of all, or substantially all, of the assets or outstanding capital stock of the Company by means of a sale or liquidation, or a merger or reorganization in which the Company is not the surviving corporation, all Stock Options outstanding under the Plan as of the day before the consummation of such sale, liquidation, merger or reorganization, to the extent not exercised, shall for all purposes under this Plan become exercisable in full as of such date even though the dates of exercise established pursuant to Section 7.1 have not yet occurred, unless the Board shall have prescribed other terms and conditions to the exercise of the Stock Option, or otherwise modified the Stock Options.

XIII.  Amendment

The Board may from time to time alter, amend, suspend or discontinue the Plan, including, where applicable, any modifications or amendments as it shall deem advisable in order that ISOs will be classified as incentive stock options under the Code, or in order to conform to any regulation or to any change in any law or regulation applicable thereto; provided, however, that no such action shall adversely affect the rights and obligations with respect to Stock Options at any time outstanding under the Plan; and provided further that no such action shall, without the approval of the stockholders of the Company, (i) increase the maximum number of shares of Common Stock that may be made subject to Stock Options (unless necessary to effect the adjustments required by Section 6.2), (ii) materially increase the benefits accruing to Participants under the Plan, or (iii) materially modify the requirements as to eligibility for participation in the Plan.

XIV.  Registration of Optioned Shares

The Stock Options shall not be exercisable unless the purchase of such optioned shares is pursuant to an applicable effective registration statement under the Securities Act of 1933, as amended (the "1933 Act"), or unless, in the opinion of counsel to the Company, the proposed purchase of such optioned shares would be exempt from the registration requirements of the 1933 Act and from the registration or qualification requirements of applicable state securities laws.

XV.  Withholding Taxes

The Company or Participating Subsidiary may take such steps as it may deem necessary or appropriate for the withholding of any taxes which the Company or the Participating Subsidiary is required by any law or regulation or any governmental authority, whether federal, state or local, domestic or foreign, to withhold in connection with any Stock Option, Stock Appreciation Right or Supplemental Bonus, including, but not limited to, the withholding of all or any portion of any payment or the withholding of issuance of shares of Common Stock to be issued upon the exercise of any Stock Option or Stock Appreciation Right or upon payment of any Supplemental Bonus, until the Participant reimburses the Company or Participating Subsidiary for the amount the Company or Participating Subsidiary is required to withhold with respect to such taxes, or canceling any portion of such payment or issuance in an amount sufficient to reimburse itself for the amount it is required to so withhold.

XVI.  Brokerage Arrangements

The Committee, in its discretion, may enter into arrangements with one or more banks, brokers or other financial institutions to facilitate the disposition of shares acquired upon exercise of Stock Options, Stock Appreciation Rights or Supplemental Bonuses, including, without limitation, arrangements for the simultaneous exercise of Stock Option, Stock Appreciation Rights or Supplemental Bonuses, and sale of the shares acquired upon such exercise.

XVII.  Nonexclusivity of the Plan

Neither the adoption of the Plan by the Board nor the submission of the Plan to stockholders of the Company for approval shall be construed as creating any limitations on the power or authority of the Board to adopt such other or additional incentive or other compensation arrangements of whatever nature as the Board may deem necessary or desirable or preclude or limit the continuation of any other plan, practice or arrangement for the payment of compensation or fringe benefits to employees generally, or to any class or group of employees, which the Company or any Participating Subsidiary now has lawfully put into effect, including, without limitation, any retirement, pension, savings and stock purchase plan, insurance, death and disability benefits and executive short-term incentive plans.

XVIII.  Effective Date

This Plan was adopted by the Board of Directors and became effective on March 4, 2002 and was approved by the Company's stockholders on .  No Stock Options shall be granted subsequent to ten years after the effective date of the Plan.  Stock Options outstanding subsequent to ten years after the effective date of the Plan shall continue to be governed by the provisions of the Plan.

EX-10.2

Exhibit 10.2

OFFICE WAREHOUSE PREMISES LEASE

 THIS LEASE is dated for reference purposes only the 12th day of December, 2006, and is between Ward West Properties, LLC, having a place of business at 8471 Turnpike Drive, Suite 120, Westminster, Colorado 80031 (the "Landlord"), and LIFELOC TECHNOLOGIES, INC., having a place of business at the Premises and at 12441 W. 49th Ave., Unit 4, Wheat Ridge, Colorado 80033 (the "Tenant").

Definitions

Section 1.1 -	Building Location: 12441 W. 49th Avenue, Wheat Ridge, Colorado 80033 Total Building Square Feet: 22,325 Unit Number of Premises: Units 3 and 4 Number of Square Feet in Premises: 8,849 Unless expressly stated to the contrary, all references to square feet in this Lease Shall refer to rentable square feet.
Section 1.2 -	Lease Term: 60 Months (See early termination clause in Special Provisions section below) Commencement: February 1, 2007 Expiration: January 31, 2012
Section 1.3 -	Base Rent: {Including Tenant's Expense Stop defined in Section 2.1)
Period	Monthly Base Rent
February 1, 2007 - January 31,2008	$7,423.00
February 1, 2008 - January 31, 2009	$7,720.00
February 1, 2009 - January 31, 2010	$8,029.00
February 1, 2010 - January 31, 2011	$8,350.00
February 1, 2011 - January 31, 2012	$8,684.00
Section 1.4 -	Use of Premises: office/warehouse
Section 2.1 -	Tenant's Pro Rata Share ( of Building Operating Costs, payable as Additional Rent): 39.64%
	Tenant's Expense Stop: As Defined in Operating Costs: Any increase in Operating Costs above such actual costs for the year 2007.
Section 24.1 -	Brokerage: NONE. No brokers for Tenant are involved in this lease transaction.
Section 25.1 -	Security Deposit: $4,241.97
Special Provisions:	(a) Landlord, at Landlord's expense, agrees: 1) to install access two passageways between units 3 and 4 2) the demising wall within tenant's conference room shall be removed and walls and ceiling repaired to standard 3) Landlord shall re-carpet unit 4 throughout presently carpeted area using best efforts to match carpet presently in unit 3 4) subject to County approval Landlord shall use best efforts to construct a tenant monument sign fronting Ward Road. Tenant is otherwise taking the Premises "as is". Tenant may, at Tenant's sole cost and expense, modify the Premises in accordance with a space plan mutually agreeable to Tenant and Landlord.

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(b) Tenant may, by an election in writing to be delivered to Landlord on or before July 31,2008 and any time thereafter, elect to terminate this lease no earlier than January 31, 2009 or on a month end no less than 180 days after such notice to terminate is then given to Landlord by Tenant. No termination fee shall be due if 180 advance notice per above is given.

(c) Tenant shall be given the opportunity but not the exclusive right to expand into adjacent space should such space become available. Rent shall be at market.

(d) Landlord and Tenant agree that upon signing this lease agreement that effective February 1, 2007 the prior lease and extension amendment between the parties hereto shall be null and void without any further effect.

WITNESSETH:

ARTICLE 1

DESCRIPTION- TERM- RENT- USE

Section 1.1           The Landlord, in consideration of the rents, covenants and agreements does lease unto the Tenant, and the Tenant does hereby take the space {the "premises") described on Exhibit A attached hereto in the building located at the place specified in the Definitions section of this Lease (the "Building"). So Jong as this Lease remains in effect and Tenant is not in default of any if its obligations under the Lease, Tenant shall have the license to non-exclusively use space in any parking area designated for use by tenants of the Building, subject to such parking control program as Landlord, in its sole discretion, may implement from time to time.

Section 1.2           The term of this Lease shall be as specified in the Definition section of this Lease (unless sooner terminated as herein provided).

Section 1.3           Tenant agrees and covenants to pay Landlord during the term of this Lease, at the place specified by Landlord, the Base Rent specified and Additional Rent without deduction or setoff. All amounts owing by Tenant to Landlord under this Lease, other than Base Rent, shall be Additional Rent, and upon Tenant's failure to timely pay, Landlord shall have the same remedies as for Tenant's failure to pay Base Rent. (Base Rent and Additional Rent may collectively be referred to as Rent). Base rent shall be paid in advance on the first day of each calendar month during the term of this Lease, except that the first month's rent shall be due and payable when Tenant executes this Lease. If the term does not commence on the first day of a month, Base Rent shall be prorated and paid on the date of such commencement. Interest at the rate of one and one half (1.5%) percent per month will be charged retroactive to the first day of the month for rents not paid by the fifth (5th) day of the month until all monies are paid.

Section 1.4           The Tenant agrees that it will use and occupy the Premise only for the purposes set forth in the Definitions section of this Lease.

ARTICLE II

OPERATING COSTS

Section 2.1           In addition to Base Rent, Tenant shall pay Tenant's Pro Rata share of Building Operating Costs in excess of Tenant's Expense Stop as defined in Section 2.1 (Definitions section of this Lease.) Building Operating Costs shall mean all expenses, costs and disbursements (in excess of Tenant's Expense Stop defined in the Definition section of this Lease) which Landlord shall pay or become obligated to pay because of, or in connection with, the maintenance, repair and operation of the Building, including, but not limited to: real estate taxes and assessments, use sales, or any other taxes (except income taxes) based on rents, personal property taxes on personal property used in the operation of the Building; Landlord's insurance; maintenance; janitorial services for any common areas of the Building; operating supplies; properly management; Building services; snow removal; landscaping; costs of rubbish removal for any common area of the Building; tools and equipment used for the daily operation of the Building; air conditioning, ventilation and heating; resurfacing and restriping of parking areas, repairs and replacement

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of signage; and security reasonably incurred in the operation of the Building. Notwithstanding the foregoing, Building Costs shall not include monies spent for income tax, interest, depreciation, or expenditures of a capital nature (except to the extent that such expenditures are required due to a change in a law or are reasonably anticipated to cause a reduction in the cost of services, in such case, that part of the capital expense attributes to the (ease year under good accounting practices shall be included in the Building Operation Costs.)

Section 2.2           Landlord's reasonable best estimate as to the amount of Tenant's Pro-Rata Share of Building Operating Costs shall be payable monthly, together with the monthly installment of Base Rent and any other Additional Rent due and payable to Landlord. Within one hundred twenty(120) days after the beginning of each calendar year, commencing with the year immediately following the date of this Lease, Landlord shall give Tenant a statement of Landlord's reasonable estimate of Building Operating Costs for the calendar year just started ("Building Operating Costs Estimate"), which shall be based upon a determination of past and estimated future operating cost data, together with a statement setting forth the Building Operating Costs incurred by the Landlord during the calendar year ended ("Actual Cost Statement"). Landlord's failure to give the Building Operating Costs Estimate or Actual Cost Statement within said one hundred twenty (120) day period shall not release in any manner Tenant's obligations under this Lease, and Landlord may render said Estimate or Statement at any time thereafter. In the event that the date of this Lease is not January 1, then the Base Operating Costs and the Building Operating Costs shown in the first Actual Cost Statement shall both be multiplied by a fraction (the numerator of which is the number of days that this Lease was in effect during its first calendar year and the denominator of which is 365) to determine if Tenant owes Building Operating Costs for the first partial calendar year. The obligation of Tenant for its Pro Rata Share of Operating Expenses for the last partial calendar year of the Lease shall be similarly calculated. Landlord may revise the monthly operating cost payment provided for herein upward of downward to reflect more accurately the newly estimated Building Operating Costs, which revision shall be separately set forth in Landlord's Building Operating Costs Estimate. AH payments due at least thirty (30) days after Landlord gives Building Operating Costs Estimates or Actual Cost Statements shall be made at the monthly rate set forth therein. In addition, if the Actual Cost Statement reveals that Tenant made under payments or overpayments of Building Operating Costs during the calendar year just ended, Tenant shall pay Landlord the amount of any underpaying within thirty (30) days of Landlord's giving the Actual Cost Statement and any overpayment shall be credited against the next payments by Tenant of its Pro Rata Share of Operating Expenses coming due.

Section 2.3           The obligations of Tenant to pay Building Operating Costs and any other Additional Rent for the term or any extended term of this Lease, and to maintain and repair the Premises as required by this Lease, shall survive any termination or expiration of this Lease.

ARTICLE III

INSURANCE

Section 3.1           The Tenant, at its sole cost and expense, shall maintain for the mutual benefit of Landlord and Tenant general public liability insurance against claims for personal injury, death or property damage occurring upon, in or about the Premises or any elevators or escalators therein and on, in or about the adjoining streets and passageways if any, such insurance to afford protection to the limits of not less than the following amounts: two million dollars ($2,000,000.00) in respect of injury or death of a single person, two million dollars ($2,000,000.00) in respect of any one occurrence, and two million dollars ($2,000,000.00) in respect to property damage.

Section 3.2           All policies of insurance shall be in a form and substance satisfactory to the Landlord, shall be written with companies having a rating of not less than A- in Best's Guide, and shall provide that they shall not be cancelable on less than thirty (30) day's notice to the Landlord or holder of any mortgage. Certificates of insurance shall be furnished to the Landlord prior to Tenant's commencing occupancy and at least thirty (30) days prior to the expiration of any policy. Tenant's policies shall name Landlord and its designees as an additional insured. Nothing herein shall preclude Landlord from obtaining such insurance as it deems advisable with respect to the Building, and the cost thereof shall be included in the Operating Costs.

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ARTICLE IV

LANDLORD'S RIGHT TO PERFORM TENANT'S COVENANTS

Section 4.1           If there shall be an Event of Default under this Lease, the Landlord may, but shall not be obligated to, and without further notice or demand and without waiving or releasing the Tenant from any obligation of the Tenant under this Lease, make any payment or perform such other act to the extent the Landlord may deem desirable. All sums so paid by the Landlord and all expenses including reasonable attorneys' fees and costs, together with interest thereon at the rate of one and one half percent (1.5%) per month, shall be Additional Rent and be payable by Tenant to the Landlord on demand.

ARTICLE V

REPAIRS AND MAINTENANCE OF PREMISES-SURRENDER OF PREMISES-WASTE

Section 5.1           Except for obligations of Landlord expressly imposed upon it in this paragraph, Tenant covenants at the Tenant's sole expense to keep the Premises in a clean, orderly condition and free of debris, material and rubbish, and to maintain in good order and condition and to promptly repair the Premises including, but not limited to, light fixtures, ballasts, light bulbs, locks, ceilings, floors, walls, woodwork, counter tops, cabinets, paint, doors and glass. Unless maintenance or repair is required as the result of the conduct of tenant, its agents, representatives, employees or contractors, Landlord shall maintain the plumbing, plumbing fixtures, heating/air conditioning, hot water system, electrical system, mechanical system, Building equipment located in or serving the Premises, and structural elements of the Building and Premises. Landlord shall also be obligated at its expense to maintain and repair (or improve) the portions of the Building not occupied by Tenant in good order and condition. All costs incurred by Landlord in performing its obligations hereunder shall be included in Operating Costs.

Section 5.2           Tenant covenants that upon expiration or termination of this Lease for any reason whatsoever the Tenant will surrender the Premises to the Landlord together with ail improvements, alterations and replacement thereto in good order, condition and repair, expect for reasonable wear and tear, provided that if Landlord requests Tenant to remove any such improvements, alterations or replacements, the Tenant shall remove same and restore the Premises to their prior condition at Tenant's expense. Upon expiration or termination, Tenant shall remove, to Landlord satisfaction, all petroleum, hazardous wastes and substances generated or stored at the Premises by Tenant.

Section 5.3           Tenant covenants not to or suffer any waste, damage or injury to the Premises, or overloading of the Premises' floors.

Section 5.4           Notwithstanding any provision of this Lease to the contrary, Tenant shall be solely responsible for obtaining and paying the costs of janitorial services for the Premises, trash removal services concerning trash generated at the Premises, and all utilities and telephone services other than water. Landlord shall not be obligated to Tenant in any manner whatsoever if any of the utilities and other services to the Premises are disrupted, it being understood and agreed upon by the parties that Tenant shall obtain at its own expense such business interruption insurance as it deems advisable to protect it against all such risks. Nothing in this paragraph shall be constructed to permit Tenant to make any change or alteration to the Premises without complying with the provisions of Article VII of this Lease.

Section 5.5           Tenant acknowledges that it may be doing business with various business entities, which may deliver, or cause to be delivered, various materials to Tenant. Tenant covenants and agrees that it shall, without forty-five (45) days after occurrence, repair damages to foundation, roof, overhead doors, door jambs, entryways, and exterior walls of the Building where the Premises is located, which were caused by the act or omission of Tenant, Tenant's agents, employees, customers, invitees and suppliers, their agents, employees or delivery services.

Section 5.6           Prior to the expiration or termination of the Lease, Tenant shall remove stains or deposits of grease, oil, tar, paint, or any other material used by Tenant such as to restore the Premises to its original condition. Tenant shall not store any motor vehicles on, at, or in the Premises.

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ARTICLE VI

COMPLIANCE WITH LAW AND INSURANCE REQUIREMENTS

Section 6.1           Tenant covenants, at the Tenant's sole expense, to comply with all laws, ordinances and requirements of governmental agencies, legislative bodies and courts of competent jurisdiction, of whatever kind and nature, whether now existing or hereafter enacted, amended or modified (including, but not limited to, any laws, ordinances and requirements as related to protection of the environment policy) which may be applicable to the Premises.

Section 6.2           Tenant shall not permit Premises to be used or operated in any manner such that the Premises may or do become contaminated by any hazardous substance or environmental pollutant in violation of any federal, state or local environmental statute or ordinance, including without limitation, violation of the Comprehensive Environmental Response, Compensation and Liability Act, as amended from time to time ("CERCLA").

Section 6.3          If the presence of hazardous substances on the Premises caused or permitted by tenant results in contamination of the Premises, or if contamination of the Premises by hazardous material otherwise occurs to the extent caused by any act or omission of Tenant, then Tenant shall indemnify, defend and hold Landlord harmless form any and all claims, judgments, damages, penalties, fines, costs, liabilities or losses (including, without limitation, diminution in value of the Premises, damages for the loss or restriction on use of rentable or usable space or of any amenity of the Premises, damages, arising from any adverse impact on marketing of space, and sums paid in settlement of claims, court costs, attorneys' fees. Consultant fees, investigation costs and expert fees) which arise during or after the Lease term as a result of such contamination or unacceptable condition in violation of any federal, state, or location environmental statutes or ordinances, including, but not limited to, violations of CERCLA. This indemnification of Landlord by Tenant includes, without limitation, costs incurred in connection with any investigation of site conditions or any cleanup, remedial, removal, or restoration work required by any federal, state, or local governmental agency or political subdivision because of hazardous material present in the soil or ground water on or under the Premises. Without limiting the foregoing, if the presence of any hazardous material on the Premises caused or permitted by Tenant results in any contamination or unacceptable condition of the Premises, Tenant shall promptly take all actions, at its sole expense, as are necessary to return the Premises to the condition existing prior to the introduction of any such hazardous material to the Premises, provided that Landlord's approval of such actions shall first be obtained, which approval shall not be unreasonably withheld so long as such actions would not potentially have any material adverse effect on the Premises.

ARTICLE VII

CHANGES AND ALTERATIONS BY TENANT

Section 7.1           Tenant shall not make any changes or alterations, structural or otherwise, to the Premises without the Landlord's prior written consent. Structural changes to the Premises may be disapproved by Landlord for any reason or for no reason in the sole and absolute discretion of Landlord. Landlord's consent to nonstructural changes or alterations shall not be unreasonably withheld, but Tenant acknowledges and agrees that among other reasons, Landlord may withhold its consent to such nonstructural changes or alterations if such changes or alterations would adversely affect any insurance policy. In addition, and among other things, Landlord may condition any such consent to Landlord obtaining adequate assurance from the Tenant that the costs of removing the changes or alterations prior to the expiration of the Lease are secured to Landlord's reasonable satisfaction, and that Landlord is protected against liens being filed against the Building.

Section 7.2           Subject to the provisions of Section 5.2, all repairs, improvements, fixtures, changes or alterations made or installed by the Tenant shall become the property of the Landlord immediately upon completion of installation without any payment by or consideration from the Landlord.

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ARTICLE VIII

DAMAGE OR DESTRUCTION

Section 8.1           Tenant covenants and agrees that in case of damage to or destruction of the Premises by fire other casualty, Tenant shall promptly give written notice thereof to Landlord, and the Landlord, to the extent of any insurance proceeds actually received, shall repair and rebuild the same as nearly as possible to the condition the Premises were in immediately prior to such damage or destruction, except that Landlord shall not be required to rebuild, repair or replace any part of the partitions, fixtures, additions or other improvements which may have been placed in, on or about the Premises by Tenant over and above any Tenant finish provided at the inception of this Lease. Provided however, that in the event the damage or destruction is due to Tenant's act, omission or negligence, Tenant shall pay the cost of such repairing and rebuilding. Tenant may repair or rebuild at its expense to the extent not required to be done by Landlord under this paragraph, but subject to Tenant's complying with the provisions of Article VII.

Section 8.2          Rent shall abate proportionately on such part of the Premises as may have been rendered wholly untenantable until such time as such time as such part shall be fit for occupancy, after which time the full amount of Rent shall be payable. Tenant acknowledges that it may obtain business interruption insurance to insure itself in the event of damage or destruction, which insurance shall be the sole expense of Tenant.

Section 8.3          Notwithstanding Section 8.1, if the Premises or Building shall be substantially damaged (substantially is defined as thirty percent (30%) or more of the usable square feet in the Premises or in the Building) or destroyed by fire or otherwise, Landlord and Tenant shall have the option of terminating this Lease as of the date of such damage or destruction by giving Tenant as least thirty (30) days' written notice.

Section 8.4           Waiver of Subrogation. Tenant and Landlord each hereby release and relieve the other and waive their entire right of recovery against their for loss or damage arising out of or incident to the perils insured against which perils occur in, on or abut Premises, whether due to the negligence of Landlord or Tenant or their agents, employees, contractors and/or invitees. Tenant and Landlord shall, upon obtaining the policies of insurance required give notice to the insurance carrier or carriers that the foregoing mutual waiver of subrogation is contained in this Lease.

ARTICLE IX

CONDEMNATION

Section 9.1           If the whole or any part of the Premises shall be taken under the power of eminent domain, or shall be sold by the Landlord under threat of condemnation proceedings (which shall be deemed to exist upon formal or informal notification from any condemning authority), then this Lease shall terminate as to the part so taken or sold on the day when Tenant is required to yield possession thereof. Landlord shall make such repairs and alterations as may be necessary in order to restore the part not taken or sold to useful condition, and Base Rent and Tenant's Pro Rata Share shall be abated as to the portions of the Premises so taken or sold. Provided however, that Landlord shall not be required to expend more on repair of the Premises than it receives on condemnation proceedings. If more than thirty percent (30%) of the Premises is so taken or sold so as to impair substantially the usefulness of the Premises, then Tenant shall have the option to terminate this Lease as of the date when Tenant is required to yield possession. All compensation awarded or paid for any such taking or sale shall belong to and be the property of the Landlord. In the event of any such taking, however, Tenant will have the right to that portion of any award specifically pertaining to Tenant's moving expenses and leasehold improvements owned by Tenant.

Section 9.2           Notwithstanding Section 9.1, if all or any portion of the Premises shall be taken or sold on any proceeding or upon threat of any proceeding, Landlord shall have the option of terminating this Lease upon at least thirty (30) days' written notice to Tenant.

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ARTICLE X

CONDITIONS OF WORK FOR REPAIRS-ALTERATIONS

Section 10.1         All work for repairs as required by Section 5.1, compliance with laws, ordinances, regulations or requirements as required by Section 6.1, and for changes or alterations permitted be Section 7.1, shall be done in all cases subject to reasonable conditions which the Landlord may impose, and in a good and workmanlike manner.

ARTICLE XI

MECHANIC'S LIENS

Section 11.1         Tenant shall not suffer nor permit any mechanics' or other liens to be filed against the Building, the Premises, or against Tenant's leasehold interest in the Premises by reason of work, labor, services or materials supplied or claimed to have been supplied to the Tenant or anyone holding the Premises or any part thereof through or under the Tenant The Landlord shall have the right at all times to post any notice which the Landlord may deem to be necessary or advisable for the protection of the Landlord and the Building from mechanics' liens. If a mechanics' lien shall be filed against the Premises, Tenant shall discharge it within sixty (60) days after the filing date, except that if Tenant desires to contest such lien, it will comply with such statutory procedures as may be available to release the lien within sixty (60) days after filing date. If a final judgement establishing the validity or existence of a lien for any amount is entered, Tenant will pay and satisfy the same at once. If Tenant fails to pay and charge for which a mechanics' lien has been filed, or has not complied with such statutory procedures as may be available to release the lien, then, in addition to any other rights or remedies available, Landlord may, but shall not be obligated to, discharge the amount claimed to be due or cause the lien to be released in any other manner. Any amount paid by Landlord with respect thereto, and all attorneys' fees and costs of the Landlord, with interest at the rate of one and one half percent (1.5%) per month, shall upon demand be paid by the Tenant to the Landlord.

ARTICLE XII

LANDLORD'S RIGHT TO ENTER PREMISES

Section 12.1         Tenant agrees to permit the Landlord and its representatives, upon reasonable notice, to enter the Premises at all times during usual business hours or at any other time in case of emergency, to inspect the same and the Landlord may, but shall not be obligated to, make repairs deemed necessary or desirable by the Landlord and to perform any work in the premises deemed necessary by the Landlord to comply with any laws, ordinances, regulations or requirements of any governmental authority or the recommendations of any insurer. During the progress of any such work, the Landlord may keep and store upon the Premises all necessary materials, tools and equipment. The Landlord shall not in any event be liable for inconvenience, annoyance, disturbance, and loss of business or other damage to Tenant.

Section 12.2         Tenant agrees to permit the Landlord and its representatives, upon reasonable notice, to enter the Premises during usual business hours to exhibit the same for the purposes of sale, mortgage or lease. During the final six (6) months of the term of this Lease, or in the case of default, Landlord may display "For Sale" or "For Lease" signs.

ARTICLE X111

ASSIGNMENT AND SUBLETTING

Section 13.1         Tenant shall not, without Landlord's prior written consent, which will not be unreasonably withheld: (a) assign convey, mortgage, pledge, encumber or otherwise transfer (whether voluntarily or otherwise) this Lease or any interest under it (in the event Tenant is a corporation, any transfer, sale, pledge, or other disposition cumulatively of more than fifty (50%) of the corporate stock or voting securities of Tenant shall not be deemed as assignment); (b) allow any transfer thereof or any lien upon the Tenant's interest by operation of law; (c) sublet the Premises or any part thereof, or (d) permit the use of occupancy of the Premises or any part thereof by anyone other than the Tenant, if no event shall Landlord be held responsible for monetary damages for the withholding of consent. Notwithstanding any provision of this Lease on the contrary, Tenant shall not be released from any of its obligations hereunder as a result of any assignment or subletting, the acceptance of rent from any unapproved assignee or subtenant shall not constitute Landlord's consent to any such assignment or subletting, the consent to any

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assignment or subletting shall not be deemed a consent to any subsequent assignment or subletting, and no option to renew or extend this Lease or any other option that nay be granted to Tenant in this Lease shall be exercisable by any assignee or subtenant, as Tenant agrees that all of such options to Tenant are personal to Tenant and may not be exercised by any other party. Landlord's consent to any assignment or subletting may be conditioned upon, among other things, the financial capabilities of the proposed assignee or subtenant. Under no circumstances shall Landlord be required to consent to the assignment or subletting to any party whose business Landlord determines is more likely to utilize hazardous substances or is more likely to adversely effect any insurance policy respecting the property.

Section 13.2         Tenant agrees to pay Landlord, on demand, reasonable fees incurred by Landlord in connection with any request by Tenant for Landlord to consent to any assignment or subletting by Tenant.

Section 13.3         If this Lease is assigned, or if the Premises or any part thereof by sublet to otherwise is occupied by anyone other than Tenant, Landlord may collect Rent from any such assignee, subtenant or occupant and apply net amount collected to the Rent herein reserved, but such assignment, subletting, occupancy or collection of Rent shall be deemed a waiver of any of Tenant's covenants contained in this Lease, or a release of Tenant from further performance of Tenant's covenants including, but not limited to, Tenant's covenants to pay Rent.

Section 13.4        Upon assignment, subletting or other occupancy of the Premises, Tenant shall pay to Landlord monthly as Additional Rent, the excess of consideration received or to be received during such month over Rental reserved for such month in this Lease which is applicable to such portion of the Premises so assigned, sublet or occupied.

Section 13.5        In the event Tenant, with Landlord's prior written consent, subleases to a third party, the subtenant shall be subject to and comply with all requirements of this Lease or Tenant shall remain liable on remaining provisions.

ARTICLE XIV

RIGHTS OF MORTGAGEE

Section 14.1         The rights of Tenant hereunder are and shall be, at the election of any mortgages, subject and subordinate to the lien of any deeds of trust, mortgages, the encumbrance of any leasehold financing, or the lien resulting form any other method of financing or refinancing, now or hereafter in force against the Building, and to all advances made or hereafter to be made upon the security thereof (the "Superior Instruments"). With respect to any Superior instrument filed of record after the execution of this Lease, Landlord will request in writing that the holder thereof give a nondisturbance agreement to the Tenant. Tenant acknowledges and agrees that any such nondisturbance agreement may be on a standard form utilized by the holder. Tenant shall be solely responsible for seeking to negotiate satisfactory terms of such nondisturbance agreement. However, if the holder refuses to propose any nondisturbance agreement or a proposed nondisturbance agreement contains terms and conditions not satisfactory to Tenant, such circumstances shall not constitute a default by Landlord under this Lease. Rather, Landlord's sole obligation with respect to any such nondisturbance agreement shall be to request the same in writing as described above.

ARTICLE XV

INDEMNIFICATION OF LANDLORD-NO REPRESENTATION BY LANDLORD

Section 15.1         Landlord shall not be liable to Tenant or to Tenant's employees, agents or visitors, or to any other person or entity, for any injury to person or damage to or loss of property in or about the Premises or the Building caused by the act, omission or negligence of Tenant, its employees, subtenants, licensees or concessionaires, or of any other person entering the Building under the express or implied invitation of Tenant, to arising out of the use of the Premises by Tenant and the conduct of its business therein, or arising out of any breach or default by Tenant in the performance of its obligations hereunder or resulting from any other cause except Landlord's negligence, and Tenant hereby agrees to indemnify Landlord and hold it harmless from any loss, expenses or claims arising out of such damage or injury.

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Section 15.2        Landlord has made no representations in connection with the condition of thePremises, and Tenant's commencement of occupancy of the Premises shall constitute Tenant's agreement that the Premises are in good condition.

ARTICLE XVI

DEFAULT PROVISIONS-REMEDIES OF LANDLORD-WAIVER OF JURY TRAIL

Section 16.1		The following events shall be deemed to be Events of Default by Tenant under this Lease:
	(a)	Tenant shall fail to pay any installment of Base Rent or amount of Additional Rent when due.
	(2)	Tenant shall (i) apply for or consent to the appointment of a receiver, trustee or liquidator of the Tenant or of all or a substantial part of its assets, (ii) becomes insolvent or admit in writing its inability to pay its debts as they come due, (iii) make a general assignment for the benefit of creditors, (iv) file a petition or answer seeking reorganization or arrangement with creditors or to take advantage of any insolvency law, or otherwise become the subject of any proceeding under any such law, or (v) make a transfer in fraud of creditors.
	(3)	Tenant shall abandon or vacate for more than thirty (30) days any substantial portion of the Premises.
	(4)	Tenant shall fail to comply with any term, provision or covenant of this Lease (other than the forgoing provisions of this Section 16.1) and shall not cure such failure within twenty (20) days after written notice thereof to Tenant.
	(5)	Tenant shall fail to comply with the requirements of Section 11.1 of this Lease.
Section 16.2		If an Event of Default occurs, then Landlord may either:
	(6)	Give Tenant written notice of Landlord's intention to terminate Tenant's right of possession under this Lease, in which event Landlord may proceed to recover possession of the Premises by any lawful means. The obligation of Tenant to pay and the right of Landlord to recover all Rent, including accrued rent and all future rent and other charges owed for what would have been the remaining the term of the Lease, together with the costs of collection, including attorneys' fees, shall survive termination of Tenant's right of possession.
	(b)	Unless required by law, without further notice, reenter and take possession of the Premises, or any part thereof, and repossess the same as landlord's former estate, and expel Tenant and those claiming through or under Tenant and remove the effects of either or both without being deemed guilty of any manner of trespass, without being deemed to have elected to terminate this Lease, and without prejudice to any remedies for arrears of Rent and preceding breaches of covenants. After reentering and repossessing the Premises without terminating this Lease, Landlord may, from time to time, without terminating this Lease, relet the Premises or any part thereof on behalf of Tenant for such term or terms and at such rent or rents, and upon such other terms and conditions as Landlord may deem advisable in its sole discretion (including concessions, free rent and payment of commissions), with the right to make alterations and repairs to the Premises.

In the event Landlord does not elect to terminate this Lease, but on the contrary elects to take possession, then such repossession shall not relieve tenant of its obligations and liability under this Lease, all of which shall survive such repossession. In the event of such repossession, Tenant shall pay Landlord as Rent all Rent which would be payable hereunder if such repossession had not occurred, less the net proceed, if any, of any reletting of the Premises after deducting all of Landlord's expenses in connection with reletting, including, but not limited to, all repossession costs, brokerage commissions, legal expenses, expenses of

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employees, costs of alterations, expenses of preparation for reletting, rental concessions and free rent Tenant shall pay such Rent to Landlord on the days on which the Rent would have been payable hereunder if possession had not been retaken.

Any damage or loss sustained by Landlord following Landlord's election to reenter and repossess the Premises without terminating this Lease may be recovered by Landlord, at such time and from time to time as Landlord determines.

In the event this Lease is terminated, Tenant shall in all events remain liable to Landlord for damages in an amount equal to the Rent and other sums which would have been owing by Tenant hereunder for the balance of the Term had this Lease not been terminated, plus all amounts incurred by Landlord in order to obtain possession of the Premises and relet the same, including attorney's fees, reletting expenses, alterations and repair costs, brokerage commissions, and all other like amounts. Landlord shall be entitled to collect such damages from Tenant monthly on the days on which the Rent and other amounts would have been payable hereunder if this Lease had not been terminated, and Landlord shall be entitled to receive the same from Tenant on each such day. Alternatively, at the option of Landlord, in the event this Lease is terminated, Landlord shall be entitled to recover forthwith against Tenant in addition to damages owing to Landlord for any period prior to the termination date, as damages for loss of the bargain and not as a penalty, an amount equal to the worth, at the time of award by the court having jurisdiction thereof, of the amount by which the unpaid Rend for the balance of the Term after the time of such award exceeds the amount of such Rental loss for the same period that Tenant proves could be reasonably avoided, plus all amounts incurred by Landlord in order to obtain possession of the Premises and relet the same, including attorneys' fees, reletting expenses, alterations and repair costs, brokerage commissions and all other like amounts.

All rights and remedies of Landlord under this Lease shall be cumulative and shall not be exclusive of any other rights and remedies provided to Landlord under applicable law.

Section 16.3         Landlord and Tenant hereby waive trial by jury in any action, proceeding or counterclaim brought by either party against the other on any matters arising out of or in connection with this Lease, the relationship of Landlord and Tenant thereunder, the Premises or Tenant's use or occupancy thereof. The terms "enter" or "entry" as used in this Lease are not restricted to their technical legal meaning. In the event of litigation under this Lease, the prevailing party shall be awarded its costs incurred therewith, including reasonable attorney's fees. Notwithstanding any provision of this Lease to the contrary, in no event shall Landlord be deemed to terminate this Lease unless Landlord expressly declares such termination in writing. Specifically, but not by way of limitation, Landlord's service of any paper under the applicable forcible entry and detainer statute shall not constitute a termination of the Lease unless Landlord expressly states therein that it Is terminating the Lease.

ARTICLE XVII

HOLDING OVER

Section 17.1         Tenant covenants that it shall vacate the Premises immediately upon the expiration or sooner termination of this Lease. If the Tenant retains possession of the Premises or any part thereof after the termination of the term, the Tenant shall pay the Landlord rent at 150% monthly rate specified in Section 1 for the time the Tenant thus remains in possession and, in addition thereto, shall pay the Landlord for all damages, consequential as well as direct, sustained by reason of the Tenant's retention of possession. The provisions of this Section do not exclude the Landlord's rights of re-entry or any other right hereunder, including without limitation, the right to refuse double the monthly rent and instead to remove Tenant through proceedings pursuant to Colorado statutes for holding over beyond the expiration of the term of this Lease.

ARTICLE XVIII

INVALIDITY OF PARTICULAR PROVISIONS

Section 18.1        If any covenant, agreement or condition of this Lease shall to any extent be invalid or unenforceable, the remainder of this Lease shall not be affected thereby. Each covenant, agreement or condition of this Lease shall be valid and enforceable to the fullest extent permitted by law.

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ARTICLE XIX

NOTICES

Section 19.1         Notices, demands and requests which may or are required to be given by either party to the other shall be in writing and shall be deemed given when hand delivered, or one business day after delivery to an overnight delivery carrier that gives receipts for delivery, or two business days after being deposited with the United States Postal Service for delivery by United States Certified Mail, return receipt requested, postage prepaid, (a) if for the Tenant, addressed to the Tenant at the Premises or at such other place as the Tenant may from time to time designate by written notice to the Landlord, or (b) if for the Landlord, addressed to the Landlord at 8601 Turnpike Drive, Suite 201, Westminster, Colorado 80031, or at such other place as the Landlord may from time to time designate by written notice to the Tenant. "Business day" means Monday through Friday, excluding days on which national banks are closed in Colorado.

Section 19.2         Tenant shall promptly deliver to the Landlord, (i) copies of any documents received from the United States Environmental Protection Agency and/or any state, county or municipal environmental or health agency concerning the Tenant's operations upon the Premises; and (ii) copies of any documents submitted by the Tenant to the United States Environmental Protection Agency and/or any state, county or municipal environmental or health agency concerning its operations of the Premises.

ARTICLE XX

QUIET ENJOYMENT

Section 20.1         The Landlord covenants and agrees that the Tenant, upon paying the Base Rent and Additional Rent required under this Lease and performing the covenants, agreements and conditions of this Lease on the Tenant's part to be performed and fulfilled, shall lawfully and quietly hold, occupy and enjoy the premises during the term of this Lease, subject, however, to the provisions of this Lease.

ARTICLE XXI

LIMITATION OF LANDLORD'S LIABILITY

Section 21.1         The term "Landlord" as used in this Lease shall be limited to the owner or owners of the Landlord's interest in this Lease at the time in question, and in the event of any transfer or transfers of such interest, the Landlord herein named (and in case of any subsequent transfer, the then transferor) shall be automatically relieved from and after the date of such transfer of all liability on the part of Landlord contained in this Lease thereafter to be preformed, provided that any funds in the hands of such Landlord then transferor at the time of such transfer, including but not limited to the security deposit, in which the Tenant had and interest shall be turned over to the transferee and upon any such transfer, the Landlord shall be released from any liability for such funds. The transferee shall be deemed to have assumed, subject to the limitations of this Section, all of the covenants, agreements and conditions on this Lease contained to be preformed on the part of the Landlord, it being intended hereby that the covenants and agreements contained in this Lease on the part of the Landlord to be preformed shall be binding on the Landlord, its successors and assigns, only during and in respect of their respective periods of ownership. Notwithstanding any provisions of this Lease to the contrary, the liability of Landlord for Landlord's obligations under this Lease shall not exceed and shall be limited to Landlords interest in the Building and Tenant shall not look to any other property or assets of Landlord either to enforce Landlord's obligations under this Lease or to satisfy a judgment for Landlord's failure to perform such obligations. Neither the shareholder, directors, officers, partners, or any other individual's representatives of the Landlord or any individual owing an interest in the Landlord shall be liable for the performance of any obligation of Landlord under this Lease.

ARTICLE XXII

ESTOPPEL CERTIFICATE BY TENANT

Section 22.1         At any time and from time to tome upon not less than ten (10) days' prior request by the Landlord, Tenant agrees to execute, acknowledge and deliver to Landlord a statement on writing certifying (a) that this Lease is unmodified and in full force and effect or of there have been modifications, that the same is in full force and effect as modified and identifying the modifications, (b) the dates to which the Base Rent and Additional Rent have been paid, and (c) that the Landlord is not in default under any provisions of this Lease, or if Tenant claims a default by Landlord, then Tenant shall so state and specify

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the claimed default. If Tenant fails to provide an estoppel certificate in a timely manner, then Tenant shall be deemed to have admitted all of the matters specified above as may be stated in an estoppel certificate prepared by Landlord on behalf of Tenant. It is intended that any such statement may be relied upon by any person proposing to acquire the Landlord's interest in this Lease or any prospective mortgagee of, or assignee of any mortgage upon, such interest.

ARTICLE XXIII

CUMULATIVE REMEDIES-NO WAIVER-NO ORAL CHANGE

Section 23.1         The specified remedies to which the Landlord may resort under the terms of this Lease are cumulative and are not intended to be exclusive of any other remedies or means of redress to which the Landlord may be entitles, either at law or in equity, in case of any Event or Default. The failure of the Landlord to insist in any one or more cases upon the strict performance or observance of any covenants, agreements or conditions of this Lease or to exercise any option herein contained shall be construed as a future waiver of such covenant, agreement, condition or option. A receipt by the Landlord of Rent with knowledge of the breach of any covenant, agreement or condition hereof shall not be deemed a wavier of such breach, and no waiver by the Landlord of any covenant, agreement or condition of this Lease shall be deemed to have been made unless expressed in writing and signed by the Landlord. In addition to the other remedies in this Lease, the Landlord shall be entitled to the restraint by injunction of the violation, or attempted or threatened violation, of any of the covenants, agreements or conditions of this Lease. No receipt of monies by Landlord from Tenant after the termination or cancellation of this Lease shall reinstate, continue or extend the term hereof, or affect any notice given to Tenant, or operate as a wavier of the right of Landlord to enforce the payment of Rent then due or thereafter falling due, or operate as a waiver of the right of Landlord to recover possession of the Premises by proper suit, action, proceedings or other remedy. It is agreed that after the service of notice to terminate or cancel this Lease, or after the commencement of suit, action or summary proceedings or of any other remedy, or after final order or judgment for the possession of the Premises, Landlord may demand, receive and collect any monies then due, or thereafter becoming due, without in any manner affecting such notice, proceeding, suit, action, order or judgment, and any and all such monies so collected shall be deemed to be payments on account for the use and occupancy of the Premises, or at the election of Landlord, on account of Tenant's liability hereunder. Acceptance of the keys of the Premises or any similar act by Landlord or any agent or employee of landlord shall not be deemed to be an acceptance of a surrender of the Premises unless Landlord has expressly consented on Writing.

Section 23.2        This Lease constitutes the entire agreement between the parties. This Lease shall not be amended or modified except in writing signed by the party against whom enforcement of the amendment or modification is sought.

ARTICLE XXIV

BROKERAGE

Section 24.1        Tenant represents and warrants that it has dealt with no broker, agent or other person concerning this transaction, and Tenant agrees to indemnify and hold Landlord harmless from and against any claims, (including attorneys' fees incurred by Landlord in defending such claims) by any other broker, agent or person claiming a commission or other form of compensation by virtue of having dealt with tenant with regard to this leasing transaction. The provisions if this Article shall survive the termination or expiration of this Lease.

ARTICLE XXV

SECURITY DEPOSIT

Section 25.1                                  Tenant has deposited with Landlord the sum specified in the Definition section of this Lease as security for the return of the Premises in good order and condition and the full performance of every provision of this Lease to be performed by Tenant. The security deposit shall not be applied to the payment of Rent, provided however, that if Tenant defaults with respect to any provision of this Lease, Landlord any use, apply or retain all or any part of this security deposit for the payment of any base Rent and Additional Rent in default, or for the payment of any other amount which Landlord may spend or become obligated to spend by reason of Tenant's default, or to compensate Landlord for any other less, cost or damage which Landlord may suffer by reason of Tenant's default. If any portion of said deposit is so used or applied, Tenant shall, within ten (10) days after written demand, deposit cash with Landlord in an

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amount sufficient to restore the security deposit to its original amount. For full security deposit reimbursement the following conditions must be met:

1)  All walls must be clean and free of holes.

2)  Any overhead door must be free of any broken panels, cracked lumber or dented panels. The overhead door springs, rollers, tracks, motorized door operator, and all other items pertaining to the overhead door must also be in good working condition.

3)  All floors must be clean and free of excessive dust, dirt, grease, oil and stains.

4)  No ceiling tiles shall be missing or damaged.

5)  All trash must be removed from both inside and outside of the Building.

6)  All lights bulbs and ballast's must be working.

7)  The Premises must otherwise be in good conditions, reasonable wear and tear excepted.

In the event tenant has complied with the above conditions, Landlord shall return the security deposit (without interest) to Tenant within sixty (60) days after either the termination or expiration of this Lease, or the surrender and acceptance by Landlord of the Premises. Notwithstanding the foregoing, Landlord may retain the security deposit for non-payment of Base Rent or Additional Rent, utility charges, costs incurred relating to abandonment of the Premises, repairs, work contracted for by the Tenant or any other charge due under this Lease by Tenant to Landlord.

ARTICLE XXVI

MISCELLANEOUS PROVISIONS

Section 26.1        Tenant shall not place on the outside of the Building any sign, advertisement, illumination or projection without Landlord's prior written consent. In multi-tenant buildings, Tenant shall pay for and comply with Landlord's uniform signage requirements.

Section 26.2        This Lease shall be constructed and enforced in accordance with the laws of the State of Colorado. Time is of the essence with respect to Tenant's performance of its obligations under this Lease.

Section 26.3         The parties hereto agree that the covenants and agreements herein contained shall bind and inure to the benefit of the Landlord, the Tenant, and their respective successors and assigns.

Section 26.4        If any of Tenant's checks fail to clear the bank, Landlord may demand all future Rent payments to be either in the form of cash, certified check, money order, wire transfer or cash equivalent funds. Additionally, Tenant shall pay a $150.00 return check fee for each check or other payment returned to Landlord unpaid.

Section 26.5        "Reasonable wear and tear" is hereby defined as that degree of wear and tear which would normally occur in the permitted use of the Premises, but notwithstanding the foregoing or any other provision of this Lease, it shall not include any physical damage to the floors, floor coverings, walls, or ceiling of the Premises, nor any damage caused thereto through operation of machinery, office equipment or other equipment or furniture used in the operation of Tenant's business. Additionally, if Tenant's use, by reason of fumes discharged or liquids used by Tenant, shoufd cause damage to the Premises, either interior or exterior, said damages shall not be deemed "reasonable wear and tear", and Tenant shall be liable for the complete restoration of the Premises to the condition existing at Tenant's Lease commencement. Damage which does not come within the scope of "reasonable wear and tear" shall include, but not be limited to damaged, rusting or corroded walls, floors, floor coverings, ceilings, doors, windows, metal bar joists, steel decks, or roof vents or stacks.

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Section 26.6         Any form of smoking of any substance in the Premises and in any common

areas in the building in which the Premises is situate by Tenant, Tenant's employees, agents, customers, contractors and any other person or persons whatsoever in or about the Premises and common areas at the request, invitation, or sufferance of the Tenant, or any of the foregoing, is strictly prohibited.

In Witness Whereof, the Landlord and the Tenant have executed this Lease on the dates specified below.

WARD WEST PROPERTIES LLC		LIFELOC TECHNOLOGIES, INC.
By:	//SIGNED//	By:	//SIGNED//
Title:	Member/Mgr	Officers Title:	President
Date:	12/12/06	Date:	12/12/06

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RULES AND REGULATIONS

1. The sidewalks and driveways will not be obstructed by any of the Tenants or used by then for any purpose other than for the ingress and egress to and from their respective premises.

2. All Tenants shall adhere to and obey ail such parking control measures as may be placed onto effect by the Landlord through the use of signs, identifying decals or other instructions.

3. Any electric wiring that the Tenant desires to introduce into his premises must be connected as directed by the Landlord. No boring or cutting for wires will be allowed except with a specific consent of the Landlord. The location of telephones, electrical appliances, call boxes, intercoms and so forth shall be prescribed by the Landlord.

4. The Tenant shall not change locks or install other locks on doors without the written consent of the Landlord. Tenant shall provide Landlord with two keys for each lock set so changed.

5. The Tenant shall give prompt notice to the building of any accidents to or defects in plumbing, electrical fixtures or heating apparatus so that the same may be attended to properly.

6. The Tenant shall not permit or suffer the demised premises to be occupied or used in a manner offensive or objectionable to the Landlord or other occupants of the building by reason of noise, odors, or vibrations or interfere in any way with other Tenants or those having business therein, nor shall any animals or birds be kept in or about the building.

7. No cooking shall be done or permitted by Tenant on the demised premise nor shall offices of the building be used, nor any part thereof permitted to be used for lodging.

8. Each Tenant upon the termination of the tenancy shall deliver to the Landlord all keys of the offices, rooms and toilet rooms, which shall have been furnished to the Tenant.

9. Tenant shall see that doors of the premises are closed and securely locked before leaving the building and must observe strict care not to leave such doors and so forth open and exposed to the weather or other elements, and each Tenant shall exercise extraordinary care and caution that all water faucets or water apparatus are entirely shut off before Tenant of Tenant's employees leave the building, and that all electricity, gas and air conditioning shall likewise be carefully shut off, so as to prevent waste or damage, where controlled by Tenant.

10. The Landlord reserves the right, at any time, to rescind any one or more of these rules and regulations as in the Landlord's judgment may from time to time be necessary for the safety, care, and cleanliness of the premises, and for the preservation of order therein.

ACCEPTED, this 12thof Dec., 2006

By:

  //SIGNED//   

Tenant

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EX-10.3

Exhibit 10.3

Reference: 12441 W. 49th Ave. Units 4,5,6 & 7 Wheat Ridge, CO

FIRST LEASE AMENDMENT AND EXTENSION

This Lease Amendment and Extension is effective this 1st day of May, 2010, by and between Ward West Properties LLC, as Landlord, and Lifeloc Technologies, Inc. as Tenant, and is made part of and incorporated into that certain Lease by and between Tenant and Ward West Properties LLC dated December 12, 2006, The parties agree as follows:

1)       Revision of lease premises. The parties hereby revise the lease premises to additionally include Unit 7, 12441 W. 49th Ave comprised of approximately 2,806 sq. ft. Total premises square footage then leased is approximately 11,655 which is 52.23% of the entire 12441 W. 49th Ave building.

2)       Revision of lease term. The parties hereby revise the term of the Lease to commence anew on May 1, 2010 and extend forward for a period of sixty months through April 30, 2015, at the following rental amounts per month for the extended term:

May 1, 2010 - April 30, 2011$8,350.00

May 1, 2011 - April 30, 2012$8,600.50

May 1, 2012 - April 30, 2013$8,858.52

May 1, 2013 - April 30, 2014$9,124.28

May 1, 2014 - April 30, 2015$9,398.00

Tenant may terminate the lease tenancy anytime on or after October 31, 2012 upon 180 days prior written notice to Landlord and upon remittance of payment in the amount of the unamortized cost of tenant improvements made by Landlord in excess of $16,000.00 paid by Landlord that has not previously been paid by tenant pursuant to 3) below. Excess Tenant improvement costs over $16,000.00 paid by Landlord shall be amortized over the sixty month period of this lease extension pursuant to 3) below. No other early termination fee or other penalty or payment related to early termination shall apply.

3)       Condition of Premises. The parties further agree that Landlord shall make interior modifications as may be mutually agreed upon per the attached Exhibit A at Landlord cost not to exceed $26,000.00 - twenty six thousand dollars. Tenant shall, upon completion of such modifications, timely reimburse Landlord for the cost of such agreed upon modifications that exceeds $26,000.00. Additionally, tenant shall reimburse Landlord for the unamortized cost over $16,000.00 of such improvements in the event of an early lease termination as provided for in 2) above as provided in the following sentence. The reimbursement is to be calculated by dividing the total of such excess tenant finish cost over $16,000.00 the unreimbursed excess of which shall not exceed $10,000.00 by the lease term of 60 months times the remaining term of the lease. Landlord shall use best efforts in causing all work to be completed in a timely and good workmanlike manner.

4)       Option to purchase. The parties further agree that Tenant, or related ownership affiliate of Tenant, shall have the right to purchase the 12441 W. 49th Ave. building comprised of Units 1 through 8 (approximately 22,315 total sq. ft.). If the option to purchase is exercised Tenant must purchase a

minimum of 11,655 sq. ft. comprised of Units 4,5,6 and 7 but may also elect to additionally purchase any of the then remaining Units 1,2,3 and 8 comprised of approximately 10,660 sq. ft. The option to purchase Units 1,2,3 and 8 shall be subject to availability and prior sale and may be subject to outstanding and existing lease encumbrances. The option to purchase may be exercised by Tenant at any time up to the last day of the lease term provided that notice of such exercise shall be given to Landlord in the form of a standard Colorado approved real estate purchase contract no later than 6 months prior to lease termination. The option price shall be set at $85 per sq. ft. on an "as is" basis for the period up to and ending on October 31, 2012 at which time the price shall increase over the $85 per sq. ft. by a factor of 3% per annum or fractionally by month up to and including the date of closing no later than the last day of April, 2015 at which time this option to purchase shall automatically terminate unless extended in writing by mutual agreement of the parties hereto. The parties hereto agree that Landlord / Seller shall not be liable for any Tenant / Buyer brokerage commissions related to such sale. This option to purchase is not assignable by Tenant to any successor or unrelated party and shall terminate upon the earlier event of Tenant bankruptcy, lease termination, or uncured lease default. In the event of Tenant exercise of this purchase option Landlord and Tenant shall mutually and reasonably negotiate agreement to unit condominium formation and operating documents, joint usage and maintenance of common parking and common driveway areas including access and egress within the office/warehouse premises. Additionally, Landlord and Tenant shall utilize the State of Colorado Real Estate Commission approved standard form purchase contract the terms of which shall be reasonable and standard in the industry and further shall be negotiated and agreed upon in good faith or this option to purchase shall terminate.

5)           Effectiveness of Lease. Except as revised and set forth in this Lease Amendment and Extension, all the provisions of the Lease as previously executed shall remain in full force and effect.

6)           Successors. This Lease Amendment and Extension shall be binding on and inure to the benefit of the parties and their successors except as may be specifically limited herein.

Landlord:    Ward West Properties LLC

//SIGNED//          Date     5/1/10   

Tenant:   Lifeloc Technologies, Inc.

//SIGNED//          Date     May 1, 2010   

EX-10.4

Exhibit 10.4

State of Michigan

JENNIFER M.GRANHOLM	DEPARTMENT OF MANAGEMENT & BUDGET	LISA WEBB SHARPE
GOVERNOR	Lansing	DIRECTOR

October 2, 2009

Lifeloc Technologies, Inc.

Attn: Aaron Baumert

12441 E. 49th Avenue, #4

Wheat Reidge, CO 80033

Dear Vendor:

Please find enclosed an executed copy of Contract #071B0200005 between your company and the State of Michigan. Should you have any questions regarding this Contract, please feel free to contact me at (517) 373-7374.

We appreciate your participation in the State's purchasing process and look forward to your continued business.

Sincerely,

/s/ Joan Bosheff

Joan Bosheff, Buyer Specialist

Commodities Division

Purchasing Operations

JB/bss

Enclosures

530 W. ALLEGAN ¡ 2ND FLOOR MASON BUILDING — P.O. BOX 30026 — LANSING, MICHIGAN 48909

www.michigan.gov — (517) 335-0230

Printed by members of:

Form No. BMB 234 (Rev. 1/96)

AUTHORITY: Act 431 of 1984

COMPLETION: Required

PENALTY: Contract will not be executed unless form is filed

STATE OF MICHIGAN

DEPARTMENT OF MANAGEMENT AND BUDGET

PURCHASING OPERATIONS

P.O. BOX 30026, LANSING, Ml 48909

OR

530 W. ALLEGAN, LANSING, Ml 48933

CONTRACT MO. 071B0200005

Between

THE STATE OF MICHIGAN

and

NAME & ADDRESS OF CONTRACTOR	TELEPHONE Aaron Baumert
Lifeloc Technologies, Inc. 12441 W. 49th Avenue, #4 Wheat Ridge, CO. 80033	CONTRACTOR NUMBER/MAIL CODE (2) 841053680 (003)
Email: aaron@lifeloc.com	BUYER/CA  (517)373-7374 Joan Bosheff

Contract Compliance Inspector: Sgt. Perry Curtis

Preliminary Breath Testers - MSP, DNR

CONTRACT PERIOD:  3 yrs. + 2 one-year options   From: October 1, 2009     To: September 30, 2012

TERMS Net 30 Days	SHIPMENT 7-14 Calendar Days ARO
F.O.B. Delivered	SHIPPED FROM N/A

MINIMUM DELIVERY REQUIREMENTS

                                          One PBT

MISCELLANEOUS INFORMATION.

THIS CONTRACT IS EXTENDED TO LOCAL UNITS OF GOVERNMENT.

The terms and conditions of this Contract are those of ITB #07119200242, this Contract Agreement and the vendor's quote dated July 24, 2009. In the event of any conflicts between the specifications, and terms and conditions, indicated by the State and those indicated by the vendor, those of the State take precedence.

Estimated Contract Value:     $616,840.00

THIS IS NOT AN ORDER: This Contract Agreement is awarded on the basis of our inquiry bearing the ITB No. 07119200242. Orders for delivery will be issued directly by the Department of Michigan State Police through the issuance of a Purchase Order Form.

All terms and conditions of the invitation to bid are made a part hereof.

FOR THE CONTRACTOR:	FOR THE STATE:
Lifeloc Technologies, Inc.	/s/ Joan Bosheff
Firm name	Signature
/s/ Barry Knott	Joan Bosheff, Buyer Specialist
Authorized Agent Signature	Name/Title
Barry Knott   8/24/09	Commodities Division, Purchasing Operations
Authorized Agent (Print or Type)	Division
8/24/09	10-5-09
Date	Date

STATE OF MICHIGAN

Department of Management and Budget

Purchasing Operations

Contract No. 071B0200005

Preliminary Breath Testers

Buyer Name: Joan Bosheff

Telephone Number: (517) 373-7374

E-Mail Address: bosheffj@michigan.gov

TABLE OF CONTENTS

DEFINITIONS		8
Article I - Statement of Work (SOW)		10
1.010	Project Identification	10
1.011	Project	10
1.012	Background	10
1.020	Scope of Work and Deliverables	10
1.21	In Scope	10
1.022	Work and Deliverable	10
1.030	Roles and Responsibilities	10
1.031	Contractor Staff, Roles, and Responsibilities	10
1.040	Project Plan	11
1.041	Project Plan Management	11
1.042	Reports	11
1.050	Acceptance	11
1.051	Criteria	11
1.052	Final Acceptance—Deleted, Not Applicable	11
1.060	Proposal Pricing	11
1.061	Proposal Pricing	11
1.062	Price Term	12
1.063	Tax Excluded from Price	12
1.064	Holdback—Deleted, Not Applicable	13
1 070           Commodity Requirements and Terms		13
Product Quality		13
1.0701	Specifications	13
1.0702	Alternate Bids—Deleted, Not Applicable	15
1.0703	Research and Development—Deleted, Not Applicable	15
1.0704	Quality Assurance Program,	15
1.0705	Warranty for Products or Services	15
1.0706	Training	15
1.0707	Special Programs	15
1.0708	Security—Deleted, Not Applicable	15
Delivery Capabilities		15
1.0709	Time Frames	15
1.0710	Minimum Order	15
1.0711	Packaging	16
1.0712	Palletizing—Deleted, Not Applicable	16
1.0713	Delivery Term	16
1.0714	Contract Performance	16
1.0715	Place of Performance	16
1.0716	Environmental Requirements	17
1.0717	Subcontractors	19
1.0718	Reports and Meetings	20
1.0719	Samples/Models—Deleted, Not Applicable	20
1.080           Additional Requirements—Deleted, Not Applicable		20
Article 2, Terms and Conditions		21
2.000	Contract Structure and Term	21
2.001	Contract Term	21
2.002	Options to Renew	23

2.003	Legal Effect	21
2.004	Attachments & Exhibits	21
2.005	Ordering	21
2.006	Order of Precedence	21
2.007	Headings	22
2.008	Form, Function & Utility	22
2.009	Reformation and Severability	22
2.010	Consents and Approvals	22
2.011	No Waiver of Default	22
2.012	Survival	22
2.020	Contract Administration	22
2.021	Issuing Office	22
2.022	Contract Compliance Inspector (CC1)	23
2.023	Project Manager	23
2.024	Change Requests	23
2.025	Notices	24
2.026	Binding Commitments	24
2.027	Relationship of the Parties	24
2.028	Covenant of Good Faith	24
2.029	Assignments	24
2.030	General Provisions	25
2.031	Media Releases	25
2.032	Contract Distribution	25
2.033	Permits	25
2.034	Website Incorporation	25
2.035	Future Bidding Preclusion	25
2.036	Freedom of Information	25
2.037	Disaster Recovery	25
2.040	Financial Provisions	26
2.041	Fixed Prices for Services/Deliverables	26
2.042	Adjustments for Reductions in Scope of Services/Deliverables	26
2.043	Services/Deliverables Covered	26
2.044	Invoicing and Payment - In General	26
2.045	Pro-ration	27
2.046	Antitrust Assignment	27
2.047	Final Payment	27
2.048	Electronic Payment Requirement	27
2.050	Taxes	27
2.051	Employment Taxes	27
2.052	Sales and Use Taxes	27
2.060	Contract Management	27
2.061	Contractor Personnel Qualifications	27
2.062	Contractor Key Personnel	28
2.063	Re-assignment of Personnel at the State's Request	28
2.064	Contractor Personnel Location	28
2.065	Contractor Identification	29
2.066	Cooperation with Third Parties	29
2.067	Contract Management Responsibilities	29
2.068	Contractor Return of State Equipment/Resources	29
2.070	Subcontracting by Contractor	29
2.071	Contractor Full Responsibility	29
2.072	State Consent to Delegation	29
2.073	Subcontractor Bound to Contract	30
2.074	Flow Down	30
2.075	Competitive Selection	30

2.080	State Responsibilities	30
2.081	Equipment	30
2.082	Facilities	30
2.090	Security	30
2.091	Background Checks	30
2.092	Security Breach Notification	31
2.093	PCI Data Security Requirements—Deleted, Not Applicable	31
2.100	Confidentiality	31
2.101	Confidentiality	31
2.102	Protection and Destruction of Confidential Information	31
2.103	Exclusions	32
2.104	No Implied Rights	32
2.105	Respective Obligations	32
2.110	Records and Inspections	32
2.111	Inspection of Work Performed	32
2.112	Examination of Records	32
2.113	Retention of Records	33
2.114	Audit Resolution	33
2.115	Errors	33
2.120	Warranties	33
2.121	Warranties and Representations	33
2.122	Warranty of Merchantability	34
2.123	Warranty of Fitness for a Particular Purpose	35
2.124	Warranty of Title	35
2.125	Equipment Warranty	35
2.126	Equipment to be New	35
2.127	Prohibited Products	35
2.128	Consequences For Breach	36
2.130	Insurance	36
2.131	Liability Insurance	36
2.132	Subcontractor Insurance Coverage	37
2.133	Certificates of Insurance and Other Requirements	38
2.140	Indemnification	38
2.141	General Indemnification	38
2.142	Code Indemnification	38
2.143	Employee Indemnification	38
2.144	Patent/Copyright Infringement Indemnification	39
2.145	Continuation of Indemnification Obligations	39
2.146	Indemnification Procedures	39
2.150	Termination/Cancellation	40
2.151	Notice and Right to Cure	40
2.152	Termination for Cause	40
2.153	Termination for Convenience	41
2.154	Termination for Non-Appropriation	41
2.155	Termination for Criminal Conviction	41
2.156	Termination for Approvals Rescinded	41
2.157	Rights and Obligations upon Termination	42
2.158	Reservation of Rights	42
2.160	Termination by Contractor	42
2.161	Termination by Contractor	42
2.170	Transition Responsibilities	42
2.171	Contractor Transition Responsibilities	43
2.172	Contractor Personnel Transition	43

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2.173	Contractor Information Transition	43
2.174	Contractor Software Transition	43
2.175	Transition Payments	43
2.176	State Transition Responsibilities	43
2.180	Stop Work—Deleted, Not Applicable	43
2.190	Dispute Resolution	44
2.191	In General	44
2.192	Informal Dispute Resolution	44
2.193	Injunctive Relief	44
2.194	Continued Performance	44
2.200	Federal and State Contract Requirements	45
2.201	Nondiscrimination	45
2.202	Unfair Labor Practices	45
2.203	Workplace Safety and Discriminatory Harassment	45
2.204	Prevailing Wage	45
2.210	Governing Law	46
2.211	Governing Law	46
2.212	Compliance with Laws	46
2.213	Jurisdiction	46
2.220	Limitation of Liability	46
2.221	Limitation of Liability	46
2.230	Disclosure Responsibilities	46
2.231	Disclosure of Litigation	46
2.232	Call Center Disclosure	47
2.233	Bankruptcy	47
2.240	Performance	47
2.241	Time of Performance	48
2.242	Service Level Agreements (SLAs—Deleted, Not Applicable)	48
2.243	Liquidated Damages—Deleted, Not Applicable	48
2.244	Excusable Failure	48
2.250	Approval of Deliverables	49
2.251	Delivery Responsibilities	49
2.252	Delivery of Deliverables	49
2.253	Testing	49
2.254	Approval of Deliverables, In General	49
2.255	Process For Approval of Written Deliverables	50
2.256	Process for Approval of Services	51
2.257	Process for Approval of Physical Deliverables	51
2.258	Final Acceptance	51
2.260	Ownership	51
2.261	Ownership of Work Product by State	51
2.262	Vesting of Rights	51
2.263	Rights in Data	52
2.264	Ownership of Materials	52
2.270	State Standards	52
2.271	Existing Technology Standards	52
2.272	Acceptable Use Policy	52
2.273	Systems Changes	52
2.280	Extended Purchasing	52
2.281	MiDEAL	52
2.282	State Employee Purchases—Deleted, Not Applicable	53

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2.290	Environmental Provision	53
2.291	Environmental Provision	53
2.300	Other Provisions	54
2.311	Forced Labor, Convict Labor, Forced or Indentured Child Labor, or Indentured Servitude Made Materials	54

Attachment A, Item Listing/Pricing

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CONTRACT No. 071B0200005 [Missing Graphic Reference]

DEFINITIONS

"Days" means calendar days unless otherwise specified.

"24x7x365" means 24 hours a day, seven days a week, and 365 days a year (including the 366th day in a leap year).

"Additional Service" means any Services/Deliverables within the scope of the Contract, but not specifically provided under any Statement of Work, that once added will result in the need to provide the Contractor with additional consideration.

"Audit Period" has the meaning given in Section 2.093.

"Business Day," whether capitalized or not, shall mean any day other than a Saturday, Sunday or State-recognized legal holiday (as identified in the Collective Bargaining Agreement for State employees) from 8:00am EST through 5:00pm EST unless otherwise stated.

"Blanket Purchase Order" is an alternate term for Contract and is used in the States computer system.

"Business Critical" means any function identified in any Statement of Work as Business Critical. "Chronic Failure" is defined in any applicable Service Level Agreements.

"Deleted - Not Applicable" means that section is not applicable or included in this RFP. This is used as a placeholder to maintain consistent numbering.

"Deliverable" means physical goods and/or commodities as required or identified by a Statement of Work

"DMB" means the Michigan Department of Management and Budget

"Environmentally preferable products" means a product or service that has a lesser or reduced effect on human health and the environment when compared with competing products or services that serve the same purpose. Such products or services may include, but are not limited to, those which contain recycled content, minimize waste, conserve energy or water, and reduce the amount of toxics either disposed of or consumed.

"Excusable Failure" has the meaning given in Section 2.214.

"Hazardous material" means any material defined as hazardous under the latest version of federal Emergency Planning and Community Right-to-Know Act of 1986 (including revisions adopted during the term of the Contract).

"Incident" means any interruption in Services.

"ITB" is a generic term used to describe an Invitation to Bid. The ITB serves as the document for transmitting the RFP to potential bidders

"Key Personnel" means any Personnel designated in Section 1.031 as Key Personnel.

"New Work" means any Services/Deliverables outside the scope of the Contract and not specifically provided under any Statement of Work, that once added will result in the need to provide the Contractor with additional consideration.

8

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CONTRACT No. 071B0200005 [Missing Graphic Reference]

"Ozone-depleting substance" means any substance the Environmental Protection Agency designates in 40 CFR part 82 as: (1) Class I, including, but not limited to, chlorofluorocarbons, halons, carbon tetrachloride, and methyl chloroform; or (2) Class II, including, but not limited to, hydrochlorofluorocarbons.

"Post-Consumer Waste" means any product generated by a business or consumer which has served its intended end use, and which has been separated or diverted from solid waste for the purpose of recycling into a usable commodity or product, and which does not include post-industrial waste.

"Post-Industrial Waste" means industrial by-products which would otherwise go to disposal and wastes generated after completion of a manufacturing process, but does not include internally generated scrap commonly returned to industrial or manufacturing processes.

"Recycling" means the series of activities by which materials that are no longer useful to the generator are collected, sorted, processed, and converted into raw materials and used in the production of new products. This definition excludes the use of these materials as a fuel substitute or for energy production.

"Reuse" means using a product or component of municipal solid waste in its original form more than once.

"RFP" means a Request for Proposal designed to solicit proposals for services. "Services" means any function performed for the benefit of the State.

"Source reduction" means any practice that reduces the amount of any hazardous substance, pollutant, or contaminant entering any waste stream or otherwise released into the environment prior to recycling, energy recovery, treatment, or disposal.

"State Location" means any physical location where the State performs work. State Location may include state-owned, leased, or rented space.

"Subcontractor" means a company Contractor delegates performance of a portion of the Services to, but does not include independent contractors engaged by Contractor solely in a staff augmentation role.

"Unauthorized Removal" means the Contractor's removal of Key Personnel without the prior written consent of the State.

"Waste prevention" means source reduction and reuse, but not recycling.

"Waste reduction", or "pollution prevention" means the practice of minimizing the generation of waste at the source and, when wastes cannot be prevented, utilizing environmentally sound on-site or off-site reuse and recycling. The term includes equipment or technology modifications, process or procedure modifications, product reformulation or redesign, and raw material substitutions. Waste treatment, control, management, and disposal are not considered pollution prevention, per the definitions under Part 143, Waste Minimization, of the Natural Resources and Environmental Protection Act (NREPA), 1994 PA 451, as amended.

"Work in Progress" means a Deliverable that has been partially prepared, but has not been presented to the State for Approval.

"Work Product" refers to any data compilations, reports, and other media, materials, or other objects or works of authorship created or produced by the Contractor as a result of an in furtherance of performing the services required by this Contract.

9

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CONTRACT No. 071B0200005 [Missing Graphic Reference]

Article 1 - Statement of Work (SOW)

1.010      Project Identification

1.011    Project

This is a contract for Preliminary Breath Testers (PBT) for the Michigan State Police (MSP) and Department of Natural Resources (DNR).

1.012   Background

The PBT has been used in Michigan since 1982. The PBT is an extremely important tool for the police officer on the road. It gives the officer a preliminary blood alcohol level for a suspected drunk driver. A driver showing signs of impairment may have a low blood alcohol level based on the PBT reading and will prompt the officer to look to drugs as the cause of impairment.

1.020      Scope of Work and Deliverables

1.21      In Scope

The PBT contract must fulfill the bid specifications as written and including the cost of some common repairs such as fuel cell replacement, pump replacement, battery covers, broken case replacement. The manufacturer shall also allow the State the ability to perform software updates, when feasible.

Bidder Response:

Lifeloc agrees to allow the purchaser the ability to perform software updates, when feasible, in the field at no additional cost.

1.022   Work and Deliverable

Contractor must provide Deliverables/Services and staff, and otherwise do all things necessary for or incidental to the performance of work, as set forth below:

Contractor shall provide the Preliminary Breath Testers as specified in the Specifications (Section 1.0701), Attachment A, Price, and deliver in the time frame specified below.

Bidder Response:

Meets or exceeds.

1.030      Roles and Responsibilities

1.031   Contractor Staff, Roles, and Responsibilities

The Contractor shall have the capacity to receive orders electronically, by phone, facsimile, and by written order. Contractor shall have internal controls, approved by Purchasing Operations, to insure that authorized individuals with the State place orders. The Contractor shall verify orders that have quantities that appear to be abnormal or excessive.

It is the preference of the State of Michigan that the Contractor have an accessible customer service department with an individual specifically assigned to State of Michigan accounts. It is the preference of the State of Michigan that the Contractor has experienced sales representatives make timely personal visits to State accounts. The Contractor's customer service must respond to State agency inquiries promptly. It is the preference of the State of Michigan that the Contractor provides a statewide toll-free number for customer service calls.

Any supplies and services to be furnished under the contract shall be ordered by issuance of a purchase order. Unless otherwise defined within the contract, orders will be issued by the MSP.

10

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CONTRACT No. 071B0200005 [Missing Graphic Reference]

All purchase orders are subject to the terms and conditions of the contract. In the event of a conflict between a purchase order and the contract, the contract shall control.

If mailed, a purchase order is considered "issued" when the State deposits the order in the mail. Orders may be issued orally, by facsimile, or by electronic commerce methods.

Bidder Response:

Lifeloc has the capability to receive orders electronically, by phone, fax, and in writing. Lifeloc shall have internal controls to ensure that only authorized individuals within the state may place orders. Lifeloc will provide a toll free number and a dedicated customer service representative. Lifeloc will respond to all state agency inquires with in 1 business day from date of request.

1.040      Project Plan

1.041   Project Plan Management

The contractor will carry out this project under the direction and control of the Michigan State Police.

Bidder Response:

Agreed.

1.042   Reports

The Contractor shall be able to provide various reports when requested by Michigan State Police. Reports should include status of delivery, production, material test data, performance investigations and remedial actions, and any and all developments that may be vital to appropriate execution and application of all contract terms. Reports should be submitted electronically to MSP and DNR.

Contracts that are available for purchases by MiDEAL program members (authorized local units of government) must submit reports of purchasing activities to Purchasing Operations, DMB on a quarterly basis. Reports shall include, at a minimum, an itemized listing of purchasing activities by each agency, with the agency name, and the total value of purchases for each agency, and a grand total of all purchases.

Bidder Response:

Lifeloc has the ability to create and proved reports as outlined

1.050      Acceptance

1.051   Criteria

The following criteria will be used by the State to determine Acceptance of the Services or Deliverables provided under this SOW:

The MSP/DNR representatives, or their designee, will review and inspect Preliminary Breath Testers and approve acceptance of goods upon delivery.

1.052   Final Acceptance—Deleted, Not Applicable

1.060      Proposal Pricing

1.061    Proposal Pricing

For authorized Services and Price List, see Attachment A.

Contractor's out-of-pocket expenses are not separately reimbursable by the State unless, on a case-by-case basis for unusual expenses, the State has agreed in advance and in writing to reimburse Contractor for the expense at the State's current travel reimbursement rates. See www.michigan.gov/dmbfor current rates.

11

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CONTRACT No. 071B0200005 [Missing Graphic Reference]

State Administrative Fee

The Contractor must collect an Administrative Fee on the sales transacted under this Contract. The Contractor must remit the Administrative Fee in U.S. dollars within 30 days after the end of the quarterly sales reporting period. The Administrative Fee equals two (2) percent of the total quarterly sales reported. Contractor must include the Administrative Fee in their prices.

The Contractor must remit any monies due as a result of the close-out report at the time the close-out report is submitted to Purchasing Operations.

The Contractor must pay the Administrative Fee by check. To ensure the payment is credited properly, the Contractor must identify the check as an "Administrative Fee" and include the following information with the payment: Applicable State BPO Number, report amount(s), and reporting period covered.

Contractor must forward the check to the following address:

Department of Management and Budget

Financial Services - Cashier Unit

Lewis Cass Building

320 South Walnut St.

P.O. Box 30681

Lansing, MI 48909

Please make check payable to: State of Michigan

1.062   Price Term

Prices are the maximum for a period of 365 days from the date the Contract becomes effective.

Prices are subject to change at the end of each 365-day period. Such changes shall be based on changes in actual costs incurred. Documentation of such changes must be provided with the request for price change in order to substantiate any requested change. Purchasing Operations reserves the right to consider various pertinent information sources to evaluate price increase requests (such as the CPI and PPI, US City Average, as published by the US Department of Labor, Bureau of Labor Statistics). Purchasing Operations also reserves the right to consider other information related to special economic and/or industry circumstances, when evaluating a price change request. Changes may be either increases or decreases, and may be requested by either party. Approved changes shall be firm for the remainder of the contract period unless further revised at the end of the next 365-day period. Requests for price changes shall be RECEIVED IN WRITING AT LEAST THIRTY (30) DAYS PRIOR TO THEIR EFFECTIVE DATE, and are subject to written acceptance before becoming effective. In the event new prices are not acceptable, the CONTRACT may be cancelled. The Contractor remains responsible for performing according to the contract terms at the contract price for all orders received before price revisions are approved or before the contract is cancelled.

1.063   Tax Excluded from Price

(a)           Sales Tax: For purchases made directly by the State, the State is exempt from State and Local Sales Tax. Prices must not include the taxes. Exemption Certificates for State Sales Tax will be furnished upon request.

(b)           Federal Excise Tax: The State may be exempt from Federal Excise Tax, or the taxes may be reimbursable, if articles purchased under any resulting Contract are used for the State's exclusive use.

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CONTRACT No. 071B0200005 [Missing Graphic Reference]

Certificates showing exclusive use for the purposes of substantiating a tax-free, or tax-reimbursable sale will be sent upon request. If a sale is tax exempt or tax reimbursable under the Internal Revenue Code, prices must not include the Federal Excise Tax.

1.064   Holdback—Deleted. Not Applicable

1.070      Commodity Requirements and Terms

Product Quality

1.0701 Specifications

Definite Specifications - All commodities and/or services to be furnished hereunder shall conform to the specifications as noted in the Contract and/or copies of specifications attached.

All instruments to be proposed to the State of Michigan shall conform to the following:

A. The instrument shall conform to the USDOT "Model Specifications for Evidential Breath Testing Devices," 49 F.R. p. 48855 et seq (December 14, 1984), as amended by 65 F.R. p. 45419 et seq (July 21, 2000). Prior to award recommendation, the instrument shall be approved by the USDOT. A letter from USDOT confirming acceptability of the instrument or appearance of the instrument on the "Conforming Products List of Evidential Breath Measurement Devices" published in the Federal Register by the USDOT are both considered as acceptable documentation of approval by USDOT.

B. The instrument shall pass accuracy, precision, and reliability testing as performed by State Police. Ten tests each at 0.020, 0.040, 0.080, 0.200, and 0.300 alcohol concentrations shall conform to the federal testing guidelines indicated above. The instrument shall measure the alcohol content of a vapor mixture with an average systematic variation of no more than +/- 10% or 0.010%, whichever is greater. The instrument shall also conform to any other tests as performed by the State Police in accordance with the federal testing guidelines indicated above.

C. The contractor shall guarantee that the instrument will adhere to all Frye-Davis requirements and criteria, proving the reliability and accuracy of the instrument's technology in order to be scientifically acceptable within the State of Michigan.

D. The instrument shall be specific for alcohols and inactive to acetone.

E. The instrument shall be a handheld, lightweight, portable, stand alone instrument.

F. The instrument shall be battery operated with a battery life for at least 1000 tests. The instrument must have a battery status icon,and have a warning capability for low battery strength indicating battery replacement.

G. The instrument shall have a one inch or larger electrochemical fuel cell sensor, which is capable of detecting breath alcohol levels between 0.000 and 0.600 grams per 210 liters of breath.

H. The instrument shall conduct a blank reading or check before allowing a test.

I. The instrument shall be capable of being calibrated in the field by certified operators and shall accept either dry gas canister with a 1.5 to 2 liter regulator, or a wet bath simulator for performing calibration and calibration checks against a standard alcohol solution. Calibration procedures shall be password protected.

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J. The instrument shall express the subject test results as BrAC, and the results shall be displayed on the instrument in three (3) digits.

K. Each instrument shall be supplied with an operator's training manual. The training manual shall indicate all displays that may appear on the panel along with an explanation as to what each means. The manual shall also show a step-by-step procedure on how the instrument is programmed to perform.

L. Each instrument shall be supplied with a protective carrying case and twenty-five (25) individually wrapped mouthpieces. All mouthpieces required after the initial supplies delivered with each instrument have been used will be available for purchase to all law enforcement agencies.

M. The instrument shall conform to all State Police operating protocol, policies and administrative rules.

N. The contractor will be required to perform any service work on the instruments that may be necessary throughout the contract period. The contractor must provide any necessary repairs that the instruments may require within five (5) business days.

O. The contractor must include in the bid the cost of fuel cell replacement, software upgrades not able to be completed in the field by the purchaser, pump replacement, plastic case replacement, and must continue to provide repair cost estimates for the instruments at no cost after the contract expires. This only applies to instruments purchased through the contract.

P. The instrument shall do automatic subject breath sampling, but must also allow for manual subject breath sampling.

Q. The instrument shall must provide an automatic check of fuel cell temperature and require the instrument to be at the proper temperature or to display an error message in plain English and not allow a test.

R. The instrument shall display an error message in plain English if external interference is detected and not allow a test.

S. The instrument must have a graphic LCD display capable of numbers, letters, and text messages. It must provide plain English prompts for all operations, and have an automatic sensing backlight for nighttime use.

T. The instrument shall register positive results within 10 seconds, and be capable of recovering to run another subject test within 20 seconds after a prior subject test.

U. The instrument must be able to be upgraded to the latest software or model in the field at low cost.

V. The instrument must come with a minimum two-year warranty on the fuel cell. Fuel cell replacement costs shall be bid as part of the contract.

W. Please note that the State of Michigan reserves the right to modify these specifications based on information received throughout the Approved Brands List process. Additional features, etc., may be added to the specifications, if it is determined that the changes are desired by the State Police.

The State reserves the right, during or after, the initial bid evaluation to request complete specifications.

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1.0702 Alternate Bids—Deleted, Not Applicable

1.0703 Research and Development—Deleted, Not Applicable

1.0704 Quality Assurance Program

Below is the Contractor's Quality Assurance Program that is currently in place within their organization.

Bidder Response:

Lifeloc maintains an active Quality Assurance Program to ensure our products and services conform to customer requirements

1.0705 Warranty for Products or Services

Below is the Contractor's warranty information.

Bidder Response:

Lifeloc will provide a warranty of 2 YEARS on the FC Series from date of purchase. In addition, Lifeloc will warranty the fuel cell for 4 YEARSfrom date of purchase.

1.0706 Training

The Contractor shall provide training to individual agencies, when necessary, on aspects of ordering, shipping, billing, and receiving. At the request of the Contract Administrator, the Contractor shall provide in-service training to agency personnel on products, installation, and product safety issues. The Contractor shall also provide agency training jointly with the State as needed during the period covered by the contract at no additional charge.

Bidder Response:

Requested training can he provided by phone, operations manual, digital media and email.

1.0707 Special Programs

Below is Contractor's special program.

Bidder Response:

Lifeloc will allow a trade in allowance of $40 on a competitor's comparable fuel cell tester on a one to one basis. Lifeloc allows returns at customer's expense on proposed product as long as product is in new and unused condition.

1.0708 Security—Deleted, Not Applicable

Delivery Capabilities

1.0709 Time Frames

All orders shall be delivered within 7-14 calendar days after receipt of order.

Bidder Response:

Lifeloc Technologies, Inc will deliver all orders under 100 quantities in 5 business days or less. Lifeloc will deliver all quantities of 100+ in 10 business days or less.

1.0710 Minimum Order

The minimum order is one (1) PBT.

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Bidder Response:

Agreed.

1.0711 Packaging

The Contractor is requested to provide packaging that most closely meets these packaging sizes. However, the Contractor can submit alternates. The State reserves the right of final approval on packaging offered by the Contractor.

Packaging and containers, etc., shall be in accordance with supplier's commercial practice and shall meet the requirements of Department of Transportation (D.O.T.) and rail and motor carrier freight classifications in effect at time of shipment, which will permit application of the lowest freight rate.

Bidder Response:

Agreed.

1.0 712 Palletizing—Deleted. Not Applicable

1.0713 Delivery Term

x          F.O.B. MSP, 714 South Harrison Road, East Lansing, MI 48823

x          F.O.B. DNR, 530 West Allegan Street, 4th Floor, Mason Building, Lansing, MI 48933

Prices are "F.O.B. Delivered" with transportation charges prepaid on all orders to the State.,

1.0714 Contract Performance

Indicate if the Contractor has had a contract terminated for default in the last three years. Termination for default is defined as notice to stop performance which was delivered to the Contractor due to the Contractor's non-performance or poor performance and the issue of performance was either (a) not litigated due to inaction on the part of the Contractor, or (b) litigated and determined that the Contractor was in default. If the Contractor has not had a contract terminated for default, the Contractor must affirmatively state this under "Reason" below.

If no terminations exist, the Contractor must affirmatively state this.

Note:   If the Contractor has had a contract terminated for default in this period, the Contractor must submit full details including the other party's name, address, and phone number Purchasing Operations will evaluate the facts and may, at its sole discretion, reject the proposal on the grounds of past experience.

Termination:	NONE
Reason:

1.0715 Place of Performance

The Contractor, in the performance of the contract, must state if they intend to use one or more plants or facilities located at a different address from the address indicated in section 4.011. The following information must be provided for these plants or facilities:

Place of Performance Full address	Owner/Operator of facility to be used	Percent (%) of Contract value to be Performed at listed Location
N/A

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1.0716 Environmental Requirements

Energy Efficiency Purchasing Policy - The State shall seek wherever possible to purchase energy efficient products. This may include giving preference to U.S. Environmental Protection Agency (EPA) certified 'Energy Star' products for any category of products for which EPA has established Energy Star certification. For other purchases, the State may include energy efficiency as one of the priority factors to consider when choosing among comparable bids.

Environmental Purchasing Policy - The State of Michigan has committed to encourage the use of products and services that impact the environment less than competing products. This can be best accomplished by including environmental considerations in purchasing decisions, while remaining fiscally responsible, to promote practices that improve worker health, conserve natural resources, and prevent pollution. Environmental components that may be considered in Best Value Purchasing evaluation include: recycled content and recyclability; energy efficiency; and the presence of undesirable materials in the products, especially those toxic chemicals which are persistent and bio-accumulative. Bidders able to supply products containing recycled and environmentally preferable materials that meet performance requirements are encouraged to offer them in bids and proposals. Information on any relevant third party certification (such as Green Seal, Energy Star, etc.) should also be provided.

I. Recycled Content and Recyclability

A. Recycled Packaging. Bidders may offer some or all of the following items listed below or provide alternative proposal as to how packaging materials can be reduced, eliminated or otherwise made more environmentally preferable. It is desirable that Bidders offer packaging which:

a.	is made from recycled content which meets or exceeds all federal and state recycled content guidelines
	(currently 35% post-consumer for all corrugated cardboard)

b. minimizes or eliminates the use of polystyrene or other difficult to recycle materials

c.	minimizes or eliminates the use packaging and containers and, in the alternative, minimizes or
	eliminates the use of non-recyclable packaging and containers

d. provides for a return program where packaging can be returned to a specific location for recycling

e. contains materials which are easily recyclable in Michigan.

All Bidders are requested to indicate below an estimate of the percentage of recycled materials, if any, contained in each item bid. Higher percentages of recycled materials are preferred. Product performance is paramount, whether containing recycled material or not; however, preference will be given to products that perform up to specification and are environmentally preferable without compromising quality.

0	% (Total estimated percentage of recovered material)
0	% (Estimated percentage of post-consumer material)
0	% (Estimated percentage of post-industrial waste)

Certification

I,              n/a           (name of certifier), am an officer or employee responsible for the

performance of this contract and hereby certify that the percentage of recovered material content for EPA-designated products met the applicable contract specifications.     BK     (Initial)

A. Hazardous Material Identification. 'Hazardous material', as used in this clause, includes any material defined as hazardous under the latest version of federal Emergency Planning and Community Right-to-Know Act of 1986 (including revisions adopted during the term of the contract).

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(1) The bidder must list any hazardous material, as defined in §370.20 (a) of 40 CFR, to be delivered under this contract. The hazardous material shall be properly identified and include any applicable identification number, such as National Stock Number or Special Item Number. This information shall also be included on the Material Safety Data Sheet submitted under this contract.

Material (if none, enter 'None') Identification Number

(2)

This list must be updated during performance of the contract whenever the Contractor determines that any other material to be delivered under this contract is hazardous.

(3)

The apparently successful bidder agrees to submit, for each item as required prior to award, a Material Safety Data Sheet for each hazardous material identified in paragraph (1) of this clause. Data shall be submitted in accordance with Section 312 of the federal Emergency Planning and Community Right-to-Know Act, whether or not the apparently successful bidder is the actual manufacturer of these items. Failure to submit the Material Safety Data Sheet prior to award may result in the apparently successful bidder being considered non-responsive and ineligible for award.

B.     Mercury Content. It is the clear intent of state agencies to avoid purchasing products that contain intentionally-added mercury whenever possible. Bidders shall offer mercury-free product alternatives whenever available. Should mercury-free alternatives not exist, as presently is the case with a few select products and devices such as fluorescent lamps or where the alternative is not yet cost competitive, such as dental amalgam, bidders shall offer the lowest mercury content available for a given application. Bidders shall disclose whenever products contain added-mercury by using the following format.

o Product contains added-Mercury (attach an explanation that includes: the amount or concentration of mercury and justification as to why this particular product is essential).

In addition, the Bidder shall also ensure that all products to be purchased containing intentionally added-mercury shall be labeled as: "product contains mercury/recycle or dispose of properly." For instances where space constraints limit the amount or size of print, the chemical symbol "Hg" followed by a picture of a trash container with a diagonal line through it shall suffice for labeling requirements. BIDDERS PLEASE NOTE: Michigan Law Prohibits the sale of mercury-containing thermostats, thermometers, sphygmomanometers (blood pressure monitors) and other types of medical devices. For specific details visit: http://www.michigan.gov/deq/0,1607,7-135-3307_29693_4175-160230--,00.htm1

C.     Brominated Flame Retardants (BFR). Bidders shall disclose whether the products being offered contain toxic flame retardants. Bidders are encouraged to provide BFR-free alternatives when available.

x    Product does not contain BFR's

o    Product does contain BFR's (attach an explanation)

D.    Ozone Depleting Substances

"Ozone-depleting substance', as used in this clause, means any substance the Environmental Protection Agency designates in 40 CFR part 82 as:

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(1)    Class I, including, but not limited to, chlorofluorocarbons, halons, carbon tetrachloride, and methyl chloroform; or

(2)    Class II, including, but not limited to, hydrochlorofluorocarbons.

The Contractor shall label products which contain or are manufactured with ozone-depleting substances in the manner and to the extent required by 42 U.S.C. 7671j (b), (c), and (d) and 40 CFR part 82, Subpart E, as follows:

'Warning: Contains (or manufactured with, if applicable)  ____________________  (insert the name of the substance(s).), a substance(s) which harm(s) public health and environment by destroying ozone in the upper atmosphere.'

A.    Clean Air and Water

Vendor certifies that any facility to be used in the performance of this contract has all the necessary environmental permits and is in consistent compliance with all applicable environmental requirements and has no outstanding unresolved violations.

The vendor will immediately notify the state, before award, of the receipt of any communication from the Environmental Protection Agency or any state environmental agency, of civil or criminal enforcement for any facility that the vendor proposes to use in the performance of this contract.     BK        (Initial)

B.     Emergency Planning and Community Right-to-Know Reporting - By signing this offer, the bidder certifies that:

(1)    The owner or operator of each facility that will be used in the performance of this contract is in compliance with the filing and reporting requirements described in sections 302, 304, 311, 312 and 313 of the Emergency Planning and Community Right-to-Know Act of 1986 (EPCRA) (42 U.S.C. 11001, et. seq.) and section 6607 of the Pollution Prevention Act of 1990 (PPA) (42 U.S.C. 13101, et seq.). EPCRA filing and reporting requirements include emergency planning notification, release reporting, hazardous chemical inventory reporting, and toxic chemical release inventory (TRI) reporting.

(2)   The owner or operator of each facility that will be used in the performance of this contract will maintain compliance with the filing and reporting requirements described in sections 302, 304, 311, 312 and 313 of the Emergency Planning and Community Right-to-Know Act of 1986 (EPCRA) (42 U.S.C. 11001, et. seq.) and section 6607 of the Pollution Prevention Act of 1990 (PPA) (42 U.S.C. 13101, et. seq.) for the life of the contract.    BK    (Initial)

1.0717 Subcontractors

Indicate below ALL work to be subcontracted under the Contract (use additional attachment if necessary; estimates are acceptable):

Description of Work to be sub-contracted	Percent (%) of total contract value to be sub­contracted	Sub-contractor's name and principal place of business (City and State)
NA

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1.0718Reports and Meetings

(a) Reports.

Within thirty (30) days after the Effective Date, the parties shall determine an appropriate set of periodic reports to be issued by Contractor to the State. Such reports may include:

(i)	separately address Contractor's performance in each area of the Services;
(ii)	for each area of the Services, assess the degree to which Contractor has attained or failed to attain the pertinent objectives in that area, including on-time completion and delivery of Deliverables;

(iii)	explain the reasons for any failure to achieve on-time completion and delivery of Deliverables and include a plan for corrective action where appropriate;
(iv)	describe any circumstances that Contractor anticipates will impair or prevent on-time completion and delivery of Deliverables in upcoming reporting periods;

(v)	include plans for corrective action or risk mitigation where appropriate and describe the status of ongoing problem resolution efforts;
(vi)	provide reports setting forth a comparison of actual hours spent by Contractor (including its augmented personnel and Subcontractors) in performing the Project versus hours budgeted by Contractor.

(vii)	set forth a record of the material personnel changes that pertain to the Services and describe planned changes during the upcoming month that may affect the Services.
(viii)	include such documentation and other information may be mutually agreed to verify compliance with, and meeting the objectives of, this Contract.

(ix)	set forth an updated schedule that provides information on the status of upcoming Deliverables, expected dates of delivery (or redelivery) of such Deliverables and estimates on timing for completion of the Project.
(b)	Meetings.

Within thirty (30) days after the Effective Date, the parties shall determine an appropriate set of meetings to be held between representatives of the State and Contractor. Contractor shall prepare and circulate an agenda sufficiently in advance of each such meeting to give participants an opportunity to prepare for the meeting. Contractor shall incorporate into such agenda items that the State desires to discuss. At the State's request, Contractor shall prepare and circulate minutes promptly after a meeting.

1.0719Samples/Models—Deleted. Not Applicable

1.080    Additional Requirements—Deleted, Not Applicable

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Article 2, Terms and Conditions

2.000     Contract Structure and Term

2.001Contract Term

This Contract is for a period of three (3) years beginning October 1, 2009, through September 30, 2012. All outstanding Purchase Orders must also expire upon the termination (cancellation for any of the reasons listed in Section 2.150) of the Contract, unless otherwise extended under the Contract. Absent an early termination for any reason, Purchase Orders issued but not expired, by the end of the Contract's stated term, will remain in effect for the balance of the fiscal year for which they were issued.

2.002Options to Renew

This Contract may be renewed in writing by mutual agreement of the parties not less than 30 days before its expiration. The Contract may be renewed for up to two additional one-year periods.

2.003Legal Effect

Contractor shall show acceptance of this Contract by signing two copies of the Contract and returning them to the Contract Administrator. The Contractor shall not proceed with the performance of the work to be done under the Contract, including the purchase of necessary materials, until both parties have signed the Contract to show acceptance of its terms, and the Contractor receives a contract release/purchase order that authorizes and defines specific performance requirements.

Except as otherwise agreed in writing by the parties, the State assumes no liability for costs incurred by Contractor or payment under this Contract, until Contractor is notified in writing that this Contract (or Change Order) has been approved by the State Administrative Board (if required), approved and signed by all the parties, and a Purchase Order against the Contract has been issued.

2.004Attachments & Exhibits

All Attachments and Exhibits affixed to any and all Statements) of Work, or appended to or referencing this Contract, are incorporated in their entirety and form part of this Contract.

2.005Ordering

The State will issue a written Purchase Order, Blanket Purchase Order, Direct Voucher or Procurement Card Order, which must be approved by the Contract Administrator or the Contract Administrator's designee, to order any Services/Deliverables under this Contract. All orders are subject to the terms and conditions of this Contract. No additional terms and conditions contained on either a Purchase Order or Blanket Purchase Order apply unless they are also specifically contained in that Purchase Order's or Blanket Purchase Order's accompanying Statement of Work. Exact quantities to be purchased are unknown, however, the Contractor will be required to furnish all such materials and services as may be ordered during the CONTRACT period. Quantities specified, if any, are estimates based on prior purchases, and the State is not obligated to purchase in these or any other quantities.

2.006Order of Precedence

(a)           The Contract, including any Statements of Work and Exhibits, to the extent not contrary to the Contract, each of which is incorporated for all purposes, constitutes the entire agreement between the parties with respect to the subject matter and supersedes all prior agreements, whether written or oral, with respect to the subject matter and as additional terms and conditions on the purchase order must apply as limited by Section 2.005.

(b)           In the event of any inconsistency between the terms of the Contract and a Statement of Work, the terms of the Statement of Work will take precedence (as to that Statement of Work only); provided, however, that a Statement of Work may not modify or amend the terms of the Contract, which may be modified or amended only by a formal Contract amendment.

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2.007Headings

Captions and headings used in the Contract are for information and organization purposes. Captions and headings, including inaccurate references, do not, in any way, define or limit the requirements or terms and conditions of the Contract.

2.008Form. Function & Utility

If the Contract is for use of more than one State agency and if the Deliverable/Service does not the meet the form, function, and utility required by that State agency, that agency may, subject to State purchasing policies, procure the Deliverable/Service from another source.

2.009Reformation and Severability

Each provision of the Contract is severable from all other provisions of the Contract and, if one or more of the provisions of the Contract is declared invalid, the remaining provisions of the Contract remain in full force and effect.

2.010Consents and Approvals

Except as expressly provided otherwise in the Contract, if either party requires the consent or approval of the other party for the taking of any action under the Contract, the consent or approval must be in writing and must not be unreasonably withheld or delayed.

2.011No Waiver of Default

If a party fails to insist upon strict adherence to any term of the Contract then the party has not waived the right to later insist upon strict adherence to that term, or any other term, of the Contract.

2.012  Survival

Any provisions of the Contract that impose continuing obligations on the parties, including without limitation the parties' respective warranty, indemnity and confidentiality obligations, survive the expiration or termination of the Contract for any reason. Specific references to survival in the Contract are solely for identification purposes and not meant to limit or prevent the survival of any other section.

2.020     Contract Administration

2.021   Issuing Office

This Contract is issued by the Department of Management and Budget, Purchasing Operations and Michigan State Police and the Department of Natural Resources (collectively, including all other relevant State of Michigan departments and agencies, the "State"). Purchasing Operations is the sole point of contact in the State with regard to all procurement and contractual matters relating to the Contract. Purchasing Operations is the only State office authorized to change, modify, amend, alter or clarify the prices, specifications, terms and conditions of this Contract.The Contractor Administrator within Purchasing Operations for this Contract is:

Joan Bosheff, Buyer Specialist

Purchasing Operations

Department of Management and Budget

Mason Bldg, 2nd Floor

PO Box 30026

Lansing, MI 48909

Email: bosheffi@michigan.gov

Phone: (517)373-7374

Fax: (517)335-0046

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2.022Contract Compliance Inspector (CCD

After DMB-PurchOps receives the properly executed Contract, it is anticipated that the Director of Purchasing Operations, in consultation with MSP and DNR, will direct the person named below, or any other person so designated, to monitor and coordinate the activities for the Contract on a day-to-day basis during its term. However, monitoring of this Contract implies no authority to change, modify, clarify, amend, or otherwise alter the prices, terms, conditions and specifications of the Contract as that authority is retained by DMB Purchasing Operations. The Contract Compliance Inspector for this Contract is:

Sgt. Perry Curtis

Michigan State Police

714 S. Harrison Road

East Lansing, MI 48823

Email: CurtisPD@Michigan.gov

Phone: 517-336-6338

Fax: 517-336-6465

2.023Project Manager

The following individual will oversee the project:

Sgt. Perry Curtis

Michigan State Police

714 S. Harrison Road

East Lansing, MI 48823

Email: CurtisPD@Michigan.gov

Phone: 517-336-6338

Fax: 517-336-6465

2.024Change Requests

The State reserves the right to request from time to time any changes to the requirements and specifications of the Contract and the work to be performed by the Contractor under the Contract. During the course of ordinary business, it may become necessary for the State to discontinue certain business practices or create Additional Services/Deliverables. At a minimum, to the extent applicable, the State would like the Contractor to provide a detailed outline of all work to be done, including tasks necessary to accomplish the services/deliverables, timeframes, listing of key personnel assigned, estimated hours for each individual per task, and a complete and detailed cost justification.

If the Contractor does not so notify the State, the Contractor has no right to claim thereafter that it is entitled to additional compensation for performing that service or providing that deliverable.

Change Requests:

(a) By giving Contractor written notice within a reasonable time, the State must be entitled to accept a Contractor proposal for Change, to reject it, or to reach another agreement with Contractor. Should the parties agree on carrying out a Change, a written Contract Change Notice must be prepared and issued under this Contract, describing the Change and its effects on the Services and any affected components of this Contract (a "Contract Change Notice").

(b) No proposed Change must be performed until the proposed Change has been specified in a duly executed Contract Change Notice issued by the Department of Management and Budget, Purchasing Operations.

(c) If the State requests or directs the Contractor to perform any activities that Contractor believes constitute a Change, the Contractor must notify the State that it believes the requested activities are a Change before beginning to work on the requested activities. If the Contractor fails to notify the State before beginning to work on the requested activities, then the Contractor waives any right to assert any claim for additional compensation or time for performing the requested activities. If the Contractor commences performing work outside the scope of this Contract and then ceases performing that work, the Contractor must, at the request of the State, retract any out-of-scope work that would adversely affect the Contract.

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2.025Notices

Any notice given to a party under the Contract must be deemed effective, if addressed to the party as addressed below, upon: (i) delivery, if hand delivered; (ii) receipt of a confirmed transmission by facsimile if a copy of the notice is sent by another means specified in this Section; (iii) the third Business Day after being sent by U.S. mail, postage pre-paid, return receipt requested; or (iv) the next Business Day after being sent by a nationally recognized overnight express courier with a reliable tracking system.

State:

State of Michigan

Purchasing Operations

Attention: Joan Bosheff

P.O. Box 30026

530 West Allegan

Lansing, Michigan 48909

Contractor:

Name: Lifeloc Technologies, Inc.

12441 West 49th Avenue, #4

Wheat Ridge, CO 80033

Attention: Aaron Baumert

Either party may change its address where notices are to be sent by giving notice according to this Section.

2.026Binding Commitments

Representatives of Contractor must have the authority to make binding commitments on Contractor's behalf within the bounds set forth in the table. Contractor may change the representatives from time to time upon written notice.

2.027Relationship of the Parties

The relationship between the State and Contractor is that of client and independent contractor. No agent, employee, or servant of Contractor or any of its Subcontractors must be or must be deemed to be an employee, agent or servant of the State for any reason. Contractor will be solely and entirely responsible for its acts and the acts of its agents, employees, servants and Subcontractors during the performance of the Contract.

2.028Covenant of Good Faith

Each party must act reasonably and in good faith. Unless stated otherwise in the Contract, the parties will not unreasonably delay, condition or withhold the giving of any consent, decision or approval that is either requested or reasonably required of them in order for the other party to perform its responsibilities under the Contract.

2.029Assignments

(a) Neither party may assign the Contract, or assign or delegate any of its duties or obligations under the Contract, to any other party (whether by operation of law or otherwise), without the prior written consent of the other party; provided, however, that the State may assign the Contract to any other State agency, department, division or department without the prior consent of Contractor and Contractor may assign the Contract to an affiliate so long as the affiliate is adequately capitalized and can provide adequate assurances that the affiliate can perform the Contract. The State may withhold consent from proposed assignments, subcontracts, or novations when the transfer of responsibility would operate to decrease the State's likelihood of receiving performance on the Contract or the State's ability to recover damages.

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(b) Contractor may not, without the prior written approval of the State, assign its right to receive payments due under the Contract. If the State permits an assignment, the Contractor is not relieved of its responsibility to perform any of its contractual duties, and the requirement under the Contract that all payments must be made to one entity continues.

(c) If the Contractor intends to assign the contract or any of the Contractor's rights or duties under the Contract, the Contractor must notify the State in writing at least 90 days before the assignment. The Contractor also must provide the State with adequate information about the assignee within a reasonable amount of time before the assignment for the State to determine whether to approve the assignment.

2.030      General Provisions

2.031Media Releases

News releases (including promotional literature and commercial advertisements) pertaining to the RFP and Contract or project to which it relates shall not be made without prior written State approval, and then only in accordance with the explicit written instructions from the State. No results of the activities associated with the RFP and Contract are to be released without prior written approval of the State and then only to persons designated.

2.032Contract Distribution

Purchasing Operations retains the sole right of Contract distribution to all State agencies and local units of government unless other arrangements are authorized by Purchasing Operations.

2.033Permits

Contractor must obtain and pay any associated costs for all required governmental permits, licenses and approvals for the delivery, installation and performance of the Services. The State must pay for all costs and expenses incurred in obtaining and maintaining any necessary easements or right of way.

2.034Website Incorporation

The State is not bound by any content on the Contractor's website, even if the Contractor's documentation specifically referenced that content and attempts to incorporate it into any other communication, unless the State has actual knowledge of the content and has expressly agreed to be bound by it in a writing that has been manually signed by an authorized representative of the State.

2.035  Future Bidding Preclusion

Contractor acknowledges that, to the extent this Contract involves the creation, research, investigation or generation of a future RFP, it may be precluded from bidding on the subsequent RFP. The State reserves the right to disqualify any bidder if the State determines that the bidder has used its position (whether as an incumbent Contractor, or as a Contractor hired to assist with the RFP development, or as a Vendor offering free assistance) to gain a competitive advantage on the RFP.

2.036Freedom of Information

All information in any proposal submitted to the State by Contractor and this Contract is subject to the provisions of the Michigan Freedom of Information Act, 1976 Public Act No. 442, as amended, MCL 15.231, et seq (the "FOIA").

2.03 7   Disaster Recovery

Contractor and the State recognize that the State provides essential services in times of natural or man-made disasters. Therefore, except as so mandated by Federal disaster response requirements, Contractor personnel dedicated to providing Services/Deliverables under this Contract will provide the State with priority service for repair and work around in the event of a natural or man-made disaster.

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2.040     Financial Provisions

2.041Fixed Prices for Services/Deliverables

Each Statement of Work or Purchase Order issued under this Contract shall specify (or indicate by reference to the appropriate Contract Exhibit) the firm, fixed prices for all Services/Deliverables, and the associated payment milestones and payment amounts. The State may make progress payments to the Contractor when requested as work progresses, but not more frequently than monthly, in amounts approved by the Contract Administrator, after negotiation. Contractor must show verification of measurable progress at the time of requesting progress payments.

2.042Adjustments for Reductions in Scope of Services/Deliverables

If the scope of the Services/Deliverables under any Statement of Work issued under this Contract is subsequently reduced by the State, the parties shall negotiate an equitable reduction in Contractor's charges under such Statement of Work commensurate with the reduction in scope.

2.043Services/Deliverables Covered

For all Services/Deliverables to be provided by Contractor (and its Subcontractors, if any) under this Contract, the State shall not be obligated to pay any amounts in addition to the charges specified in this Contract.

2.044Invoicing and Payment - In General

(a)           Each Statement of Work issued under this Contract shall list (or indicate by reference to the appropriate Contract Exhibit) the prices for all Services/Deliverables, equipment and commodities to be provided, and the associated payment milestones and payment amounts.

(b)           Each Contractor invoice will show details as to charges by Service/Deliverable component and location at a level of detail reasonably necessary to satisfy the State's accounting and charge-back requirements. Invoices for Services performed on a time and materials basis will show, for each individual, the number of hours of Services performed during the billing period, the billable skill/labor category for such person and the applicable hourly billing rate. Prompt payment by the State is contingent on the Contractor's invoices showing the amount owed by the State minus any holdback amount to be retained by the State in accordance with Section 1.064.

(c)            Correct invoices will be due and payable by the State, in accordance with the State's standard payment procedure as specified in 1984 Public Act No. 279, MCL 17.51 et seq., within 45 days after receipt, provided the State determines that the invoice was properly rendered.

(d)           All invoices should reflect actual work done. Specific details of invoices and payments will be agreed upon between the Contract Administrator and the Contractor after the proposed Contract Agreement has been signed and accepted by both the Contractor and the Director of Purchasing Operations, Department of Management & Budget. This activity will occur only upon the specific written direction from Purchasing Operations.

The specific payment schedule for any Contracts) entered into, as the State and the Contractor(s) will mutually agree upon. The schedule should show payment amount and should reflect actual work done by the payment dates, less any penalty cost charges accrued by those dates. As a general policy statements shall be forwarded to the designated representative by the 15th day of the following month.

The Government may make progress payments to the Contractor when requested as work progresses, but not more frequently than monthly, in amounts approved by the Contract Administrator, after negotiation. Contractor must show verification of measurable progress at the time of requesting progress payments.

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2.045  Pro-ration

To the extent there are any Services that are to be paid for on a monthly basis, the cost of such Services shall be pro-rated for any partial month.

2.046Antitrust Assignment

The Contractor assigns to the State any claim for overcharges resulting from antitrust violations to the extent that those violations concern materials or services supplied by third parties to the Contractor, toward fulfillment of this Contract

2.047  Final Payment

The making of final payment by the State to Contractor does not constitute a waiver by either party of any rights or other claims as to the other party's continuing obligations under the Contract, nor will it constitute a waiver of any claims by one party against the other arising from unsettled claims or failure by a party to comply with this Contract, including claims for Services and Deliverables not reasonably known until after acceptance to be defective or substandard. Contractor's acceptance of final payment by the State under this Contract shall constitute a waiver of all claims by Contractor against the State for payment under this Contract, other than those claims previously filed in writing on a timely basis and still unsettled.

2.048Electronic Payment Requirement

Electronic transfer of funds is required for payments on State Contracts. Contractors are required to register with the State electronically at http://www.cpexpress.state.mi.us. As stated in Public Act 431 of 1984, all contracts that the State enters into for the purchase of goods and services shall provide that payment will be made by electronic fund transfer (EFT).

2.050     Taxes

2.051Employment Taxes

Contractors are expected to collect and pay all applicable federal, state, and local employment taxes, including the taxes.

2.052  Sales and Use Taxes

Contractors are required to be registered and to remit sales and use taxes on taxable sales of tangible personal property or services delivered into the State. Contractors that lack sufficient presence in Michigan to be required to register and pay tax must do so as a volunteer. This requirement extends to: (1) all members of any controlled group as defined in § 1563(a) of the Internal Revenue Code and applicable regulations of which the company is a member, and (2) all organizations under common control as defined in § 414(c) of the Internal Revenue Code and applicable regulations of which the company is a member that make sales at retail for delivery into the State are registered with the State for the collection and remittance of sales and use taxes. In applying treasury regulations defining "two or more trades or businesses under common control" the term "organization" means sole proprietorship, a partnership (as defined in § 701(a)(2) of the Internal Revenue Code), a trust, an estate, a corporation, or a limited liability company.

2.060     Contract Management

2.061   Contractor Personnel Qualifications

All persons assigned by Contractor to the performance of Services under this Contract must be employees of Contractor or its majority-owned (directly or indirectly, at any tier) subsidiaries (or a State-approved Subcontractor) and must be fully qualified to perform the work assigned to them. Contractor must include a similar provision in any subcontract entered into with a Subcontractor. For the purposes of this Contract, independent contractors engaged by Contractor solely in a staff augmentation role must be treated by the State as if they were employees of Contractor for this Contract only; however, the State understands that the relationship between Contractor and Subcontractor is an independent contractor relationship.

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2.062Contractor Key Personnel

(a)           The Contractor must provide the Contract Compliance Inspector with the names of the Key Personnel.

(b)           Key Personnel must be dedicated as defined in the Statement of Work to the Project for its duration in the applicable Statement of Work with respect to other individuals designated as Key Personnel for that Statement of Work.

(c)           The State will have the right to recommend and approve in writing the initial assignment, as well as any proposed reassignment or replacement, of any Key Personnel. Before assigning an individual to any Key Personnel position, Contractor will notify the State of the proposed assignment, will introduce the individual to the appropriate State representatives, and will provide the State with a resume and any other information about the individual reasonably requested by the State. The State reserves the right to interview the individual before granting written approval. In the event the State finds a proposed individual unacceptable, the State will provide a written explanation including reasonable detail outlining the reasons for the rejection.

(d)            Contractor must not remove any Key Personnel from their assigned roles on the Contract without the prior written consent of the State. The Contractor's removal of Key Personnel without the prior written consent of the State is an unauthorized removal ("Unauthorized Removal"). Unauthorized Removals does not include replacing Key Personnel for reasons beyond the reasonable control of Contractor, including illness, disability, leave of absence, personal emergency circumstances, resignation or for cause termination of the Key Personnel's employment. Unauthorized Removals does not include replacing Key Personnel because of promotions or other job movements allowed by Contractor personnel policies or Collective Bargaining Agreements) as long as the State receives prior written notice before shadowing occurs and Contractor provides 30 days of shadowing unless parties agree to a different time period. The Contractor with the State must review any Key Personnel replacements, and appropriate transition planning will be established. Any Unauthorized Removal may be considered by the State to be a material breach of the Contract, in respect of which the State may elect to exercise its termination and cancellation rights.

(e)           The Contractor must notify the Contract Compliance Inspector and the Contract Administrator at least 10 business days before redeploying non-Key Personnel, who are dedicated to primarily to the Project, to other projects. If the State does not object to the redeployment by its scheduled date, the Contractor may then redeploy the non-Key Personnel.

2.063Re-assignment of Personnel at the State's Request

The State reserves the right to require the removal from the Project of Contractor personnel found, in the judgment of the State, to be unacceptable. The State's request must be written with reasonable detail outlining the reasons for the removal request. Additionally, the State's request must be based on legitimate, good-faith reasons. Replacement personnel for the removed person must be fully qualified for the position. If the State exercises this right, and the Contractor cannot immediately replace the removed personnel, the State agrees to an equitable adjustment in schedule or other terms that may be affected by the State's required removal. If any incident with removed personnel results in delay not reasonably anticipatable under the circumstances and which is attributable to the State, the applicable SLAs for the affected Service will not be counted for a time as agreed to by the parties.

2.064Contractor Personnel Location

All staff assigned by Contractor to work on the Contract will perform their duties either primarily at Contractor's offices and facilities or at State facilities. Without limiting the generality of the foregoing, Key Personnel will, at a minimum, spend at least the amount of time on-site at State facilities as indicated in the applicable Statement of Work. Subject to availability, selected Contractor personnel may be assigned office space to be shared with State personnel.

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2.065Contractor Identification

Contractor employees must be clearly identifiable while on State property by wearing a State-issued badge, as required. Contractor employees are required to clearly identify themselves and the company they work for whenever making contact with State personnel by telephone or other means.

2.066Cooperation with Third Parties

Contractor agrees to cause its personnel and the personnel of any Subcontractors to cooperate with the State and its agents and other contractors including the State's Quality Assurance personnel. As reasonably requested by the State in writing, the Contractor will provide to the State's agents and other contractors reasonable access to Contractor's Project personnel, systems and facilities to the extent the access relates to activities specifically associated with this Contract and will not interfere or jeopardize the safety or operation of the systems or facilities. The State acknowledges that Contractor's time schedule for the Contract is very specific and agrees not to unnecessarily or unreasonably interfere with, delay or otherwise impeded Contractor's performance under this Contract with the requests for access.

2.067Contract Management Responsibilities

The Contractor will be required to assume responsibility for all contractual activities, whether or not that Contractor performs them. Further, the State will consider the Contractor to be the sole point of contact with regard to contractual matters, including payment of any and all charges resulting from the anticipated Contract. If any part of the work is to be subcontracted, the Contract must include a list of subcontractors, including firm name and address, contact person and a complete description of work to be subcontracted. The State reserves the right to approve subcontractors and to require the Contractor to replace subcontractors found to be unacceptable. The Contractor is totally responsible for adherence by the subcontractor to all provisions of the Contract. Any change in subcontractors must be approved by the State, in writing, prior to such change.

2.068  Contractor Return of State Equipment/Resources

The Contractor must return to the State any State-furnished equipment, facilities and other resources when no longer required for the Contract in the same condition as when provided by the State, reasonable wear and tear excepted.

2.070     Subcontracting by Contractor

2.071Contractor Full Responsibility

Contractor shall have full responsibility for the successful performance and completion of all of the Services and Deliverables. The State will consider Contractor to be the sole point of contact with regard to all contractual matters under this Contract, including payment of any and all charges for Services and Deliverables.

2.072State Consent to Delegation

Contractor shall not delegate any duties under this Contract to a Subcontractor unless the Department of Management and Budget, Purchasing Operations has given written consent to such delegation. The State shall have the right of prior written approval of all Subcontractors and to require Contractor to replace any Subcontractors found, in the reasonable judgment of the State, to be unacceptable. The State's request shall be written with reasonable detail outlining the reasons for the removal request. Additionally, the State's request shall be based on legitimate, good-faith reasons. Replacement Subcontractor(s) for the removed Subcontractor shall be fully qualified for the position. If the State exercises this right, and the Contractor cannot immediately replace the removed Subcontractor, the State will agree to an equitable adjustment in schedule or other terms that may be affected by the State's required removal. If any such incident with a removed Subcontractor results in delay not reasonable anticipatable under the circumstances and which is attributable to the State, the applicable SLA for the affected Work will not be counted in time agreed upon by the parties.

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2.073   Subcontractor Bound to Contract

In any subcontracts entered into by Contractor for the performance of the Services, Contractor shall require the Subcontractor, to the extent of the Services to be performed by the Subcontractor, to be bound to Contractor by the terms of this Contract and to assume toward Contractor all of the obligations and responsibilities that Contractor, by this Contract, assumes toward the State. The State reserves the right to receive copies of and review all subcontracts, although Contractor may delete or mask any proprietary information, including pricing, contained in such contracts before providing them to the State. The management of any Subcontractor will be the responsibility of Contractor, and Contractor shall remain responsible for the performance of its Subcontractors to the same extent as if Contractor had not subcontracted such performance. Contractor shall make all payments to Subcontractors or suppliers of Contractor. Except as otherwise agreed in writing by the State and Contractor, the State will not be obligated to direct payments for the Services other than to Contractor. The State's written approval of any Subcontractor engaged by Contractor to perform any obligation under this Contract shall not relieve Contractor of any obligations or performance required under this Contract. Attached as Exhibit A is a list of the Subcontractors, if any, approved by the State as of the execution of this Contract, together with a copy of the applicable subcontract.

2.074   Flow Down

Except where specifically approved in writing by the State on a case-by-case basis, Contractor shall flow down the obligations in Sections 2.031,2.060, 2.100,2.110, 2.120,2.130, 2.200 in all of its agreements with any Subcontractors.

2.075    Competitive Selection

The Contractor shall select subcontractors (including suppliers) on a competitive basis to the maximum practical extent consistent with the objectives and requirements of the Contract.

2.080      State Responsibilities

2.081   Equipment

The State will provide only the equipment and resources identified in the Statements of Work and other Contract Exhibits.

2.082   Facilities

The State must designate space as long as it is available and as provided in the Statement of Work, to house the Contractor's personnel whom the parties agree will perform the Services/Deliverables at State facilities (collectively, the "State Facilities"). The Contractor must have reasonable access to, and unless agreed otherwise by the parties in writing must observe and comply with all rules and regulations relating to each of the State Facilities (including hours of operation) used by the Contractor in the course of providing the Services. Contractor agrees that it will not, without the prior written consent of the State, use any State Facilities or access any State information systems provided for the Contractor's use, or to which the Contractor otherwise gains access in the course of performing the Services, for any purpose other than providing the Services to the State.

2.090      Security

2.091   Background Checks

On a case-by-case basis, the State may investigate the Contractor's personnel before they may have access to State facilities and systems. The scope of the background check is at the discretion of the State and the results will be used to determine Contractor personnel eligibility for working within State facilities and systems. The investigations will include Michigan State Police Background checks (ICHAT) and may include the National Crime Information Center (NCIC) Finger Prints. Proposed Contractor personnel may be required to complete and submit an RI-8 Fingerprint Card for the NCIC Finger Print Check. Any request for background checks will be initiated by the State and will be reasonably related to the type of work requested.

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All Contractor personnel will also be expected to comply with the State's security and acceptable use policies for State IT equipment and resources. See http://www.michigan.gov/dit. Furthermore, Contractor personnel will be expected to agree to the State's security and acceptable use policies before the Contractor personnel will be accepted as a resource to perform work for the State. It is expected the Contractor will present these documents to the prospective employee before the Contractor presents the individual to the State as a proposed resource. Contractor staff will be expected to comply with all Physical Security procedures in place within the facilities where they are working.

2.092   Security Breach Notification

If the Contractor breaches this Section, the Contractor must (i) promptly cure any deficiencies and (ii) comply with any applicable federal and state laws and regulations pertaining to unauthorized disclosures. Contractor and the State will cooperate to mitigate, to the extent practicable, the effects of any breach, intrusion, or unauthorized use or disclosure. Contractor must report to the State in writing any use or disclosure of Confidential Information, whether suspected or actual, other than as provided for by the Contract within 10 days of becoming aware of the use or disclosure or the shorter time period as is reasonable under the circumstances.

2.093    PCI Data Security Requirements—Deleted, Not Applicable

2.100      Confidentiality

2.101   Confidentiality

Contractor and the State each acknowledge that the other possesses and will continue to possess confidential information that has been developed or received by it As used in this Section, "Confidential Information" of Contractor must mean all non-public proprietary information of Contractor (other than Confidential Information of the State as defined below) which is marked confidential, restricted, proprietary or with a similar designation. ''Confidential Information" of the State must mean any information which is retained in confidence by the State (or otherwise required to be held in confidence by the State under applicable federal, state and local laws and regulations) or which, in the case of tangible materials provided to Contractor by the State under its performance under this Contract, is marked as confidential, proprietary or with a similar designation by the State. "Confidential Information" excludes any information (including this Contract) that is publicly available under the Michigan FOIA.

2.102   Protection and Destruction of Confidential Information

The State and Contractor will each use at least the same degree of care to prevent disclosing to third parties the Confidential Information of the other as it employs to avoid unauthorized disclosure, publication or dissemination of its own confidential information of like character, but in no event less than reasonable care. Neither Contractor nor the State will (i) make any use of the Confidential Information of the other except as contemplated by this Contract, (ii) acquire any right in or assert any lien against the Confidential Information of the other, or (iii) if requested to do so, refuse for any reason to promptly return the other party's Confidential Information to the other party. Each party will limit disclosure of the other party's Confidential Information to employees and Subcontractors who must have access to fulfill the purposes of this Contract. Disclosure to, and use by, a Subcontractor is permissible where (A) use of a Subcontractor is authorized under this Contract, (B) the disclosure is necessary or otherwise naturally occurs in connection with work that is within the Subcontractor's scope of responsibility, and (C) Contractor obligates the Subcontractor in a written Contract to maintain the State's Confidential Information in confidence. At the State's request, any employee of Contractor and of any Subcontractor having access or continued access to the State's Confidential Information may be required to execute an acknowledgment that the employee has been advised of Contractor's and the Subcontractor's obligations under this Section and of the employee's obligation to Contractor or Subcontractor, as the case may be, to protect the Confidential Information from unauthorized use or disclosure.

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Promptly upon termination or cancellation of the Contract for any reason, Contractor must certify to the State that Contractor has destroyed all State Confidential Information.

2.103   Exclusions

Notwithstanding the foregoing, the provisions of Section 2.080 will not apply to any particular information which the State or Contractor can demonstrate (i) was, at the time of disclosure to it, in the public domain; (ii) after disclosure to it, is published or otherwise becomes part of the public domain through no fault of the receiving party; (iii) was in the possession of the receiving party at the time of disclosure to it without an obligation of confidentiality; (iv) was received after disclosure to it from a third party who had a lawful right to disclose the information to it without any obligation to restrict its further disclosure; or (v) was independently developed by the receiving party without reference to Confidential Information of the furnishing party. Further, the provisions of Section 2.080 will not apply to any particular Confidential Information to the extent the receiving party is required by law to disclose the Confidential Information, provided that the receiving party (i) promptly provides the furnishing party with notice of the legal request, and (ii) assists the furnishing party in resisting or limiting the scope of the disclosure as reasonably requested by the furnishing party.

2.104    No Implied Rights

Nothing contained in this Section must be construed as obligating a party to disclose any particular Confidential Information to the other party, or as granting to or conferring on a party, expressly or impliedly, any right or license to the Confidential Information of the other party.

2.105    Respective Obligations

The parties' respective obligations under this Section must survive the termination or expiration of this Contract for any reason.

2.110      Records and Inspections

2.111    Inspection of Work Performed

The State's authorized representatives must at all reasonable times and with 10 days prior written request, have the right to enter Contractor's premises, or any other places, where the Services are being performed, and must have access, upon reasonable request, to interim drafts of Deliverables or work-in-progress. Upon 10 Days prior written notice and at all reasonable times, the State's representatives must be allowed to inspect, monitor, or otherwise evaluate the work being performed and to the extent that the access will not reasonably interfere or jeopardize the safety or operation of the systems or facilities. Contractor must provide all reasonable facilities and assistance for the State's representatives.

2.112    Examination of Records

For seven years after the Contractor provides any work under this Contract (the 11 Audit Period"), the State may examine and copy any of Contractor's books, records, documents and papers pertinent to establishing Contractor's compliance with the Contract and with applicable laws and rules. The State must notify the Contractor 20 days before examining the Contractor's books and records. The State does not have the right to review any information deemed confidential by the Contractor to the extent access would require the confidential information to become publicly available. This provision also applies to the books, records, accounts, documents and papers, in print or electronic form, of any parent, affiliated or subsidiary organization of Contractor, or any Subcontractor of Contractor performing services in connection with the Contract.

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2.113    Retention of Records

Contractor must maintain at least until the end of the Audit Period all pertinent financial and accounting records (including time sheets and payroll records, and information pertaining to the Contract and to the Services, equipment, and commodities provided under the Contract) pertaining to the Contract according to generally accepted accounting principles and other procedures specified in this Section. Financial and accounting records must be made available, upon request, to the State at any time during the Audit Period. If an audit, litigation, or other action involving Contractor's records is initiated before the end of the Audit Period, the records must be retained until all issues arising out of the audit, litigation, or other action are resolved or until the end of the Audit Period, whichever is later.

2.114    Audit Resolution

If necessary, the Contractor and the State will meet to review each audit report promptly after issuance. The Contractor will respond to each audit report in writing within 30 days from receipt of the report, unless a shorter response time is specified in the report. The Contractor and the State must develop, agree upon and monitor an action plan to promptly address and resolve any deficiencies, concerns, and/or recommendations in the audit report.

2.115    Errors

(a)           If the audit demonstrates any errors in the documents provided to the State, then the amount in error must be reflected as a credit or debit on the next invoice and in subsequent invoices until the amount is paid or refunded in full. However, a credit or debit may not be carried for more than four invoices. If a balance remains after four invoices, then the remaining amount will be due as a payment or refund within 45 days of the last quarterly invoice that the balance appeared on or termination of the contract, whichever is earlier.

(b)           In addition to other available remedies, the difference between the payment received and the correct payment amount is greater than 10%, then the Contractor must pay all of the reasonable costs of the audit.

2.120     Warranties

2.121   Warranties and Representations

The Contractor represents and warrants:

(a)           It is capable in all respects of fulfilling and must fulfill all of its obligations under this Contract. The performance of all obligations under this Contract must be provided in a timely, professional, and workman-like manner and must meet the performance and operational standards required under this Contract.

(b)           The Contract Appendices, Attachments and Exhibits identify the equipment and software and services necessary for the Deliverable(s) to perform and Services to operate in compliance with the Contract's requirements and other standards of performance.

(c)            It is the lawful owner or licensee of any Deliverable licensed or sold to the State by Contractor or developed by Contractor under this Contract, and Contractor has all of the rights necessary to convey to the State the ownership rights or licensed use, as applicable, of any and all Deliverables. None of the Deliverables provided by Contractor to the State under this Contract, nor their use by the State, will infringe the patent, copyright, trade secret, or other proprietary rights of any third party.

(d)           If, under this Contract, Contractor procures any equipment, software or other Deliverable for the State (including equipment, software and other Deliverables manufactured, re-marketed or otherwise sold by Contractor under Contractor's name), then in addition to Contractor's other responsibilities with respect to the items in this Contract, Contractor must assign or otherwise transfer to the State or its designees, or afford the State the benefits of, any manufacturer's warranty for the Deliverable.

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(e)            The contract signatory has the power and authority, including any necessary corporate authorizations, necessary to enter into this Contract, on behalf of Contractor.

(f)             It is qualified and registered to transact business in all locations where required.

(g)           Neither the Contractor nor any Affiliates, nor any employee of either, has, must have, or must acquire, any contractual, financial, business, or other interest, direct or indirect, that would conflict in any manner or degree with Contractor's performance of its duties and responsibilities to the State under this Contract or otherwise create an appearance of impropriety with respect to the award or performance of this Agreement. Contractor must notify the State about the nature of the conflict or appearance of impropriety within two days of learning about it.

(h)            Neither Contractor nor any Affiliates, nor any employee of either has accepted or must accept anything of value based on an understanding that the actions of the Contractor or Affiliates or employee on behalf of the State would be influenced. Contractor must not attempt to influence any State employee by the direct or indirect offer of anything of value.

(i)             Neither Contractor nor any Affiliates, nor any employee of either has paid or agreed to pay any person, other than bona fide employees and consultants working solely for Contractor or the Affiliate, any fee, commission, percentage, brokerage fee, gift, or any other consideration, contingent upon or resulting from the award or making of this Contract.

(j)             The prices proposed by Contractor were arrived at independently, without consultation, communication, or agreement with any other bidder for the purpose of restricting competition; the prices quoted were not knowingly disclosed by Contractor to any other bidder; and no attempt was made by Contractor to induce any other person to submit or not submit a proposal for the purpose of restricting competition.

(k)           All financial statements, reports, and other information furnished by Contractor to the State as part of its response to the RFP or otherwise in connection with the award of this Contract fairly and accurately represent the business, properties, financial condition, and results of operations of Contractor as of the respective dates, or for the respective periods, covered by the financial statements, reports, other information. Since the respective dates or periods covered by the financial statements, reports, or other information, there have been no material adverse change in the business, properties, financial condition, or results of operations of Contractor.

(l)             All written information furnished to the State by or for the Contractor in connection with this Contract, including its bid, is true, accurate, and complete, and contains no untrue statement of material fact or omits any material fact necessary to make the information not misleading.

(m)           It is not in material default or breach of any other contract or agreement that it may have with the State or any of its departments, commissions, boards, or agencies. Contractor further represents and warrants that it has not been a party to any contract with the State or any of its departments that was terminated by the State or the department within the previous five years for the reason that Contractor failed to perform or otherwise breached an obligation of the contract.

(n)           If any of the certifications, representations, or disclosures made in the Contractor's original bid response change after contract award, the Contractor is required to report those changes immediately to the Department of Management and Budget, Purchasing Operations.

2.122   Warranty of Merchantability

Goods provided by Contractor under this agreement shall be merchantable. All goods provided under this Contract shall be of good quality within the description given by the State, shall be fit for their ordinary purpose, shall be adequately contained and packaged within the description given by the State, shall conform to the agreed upon specifications, and shall conform to the affirmations of fact made by the Contractor or on the container or label.

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2.123   Warranty of Fitness for a Particular Purpose

When the Contractor has reason to know or knows any particular purpose for which the goods are required, and the State is relying on the Contractor's skill or judgment to select or furnish suitable goods, there is a warranty that the goods are fit for such purpose.

2.124   Warranty of Title

Contractor shall, in providing goods to the State, convey good title in those goods, whose transfer is right and lawful. All goods provided by Contractor shall be delivered free from any security interest, lien, or encumbrance of which the State, at the time of contracting, has no knowledge. Goods provided by Contractor, under this Contract, shall be delivered free of any rightful claim of any third person by of infringement or the like.

2.125   Equipment Warranty

To the extent Contractor is responsible under this Contract for maintaining equipment/system(s), Contractor represents and warrants that it will maintain the equipment/system(s) in good operating condition and will undertake all repairs and preventive maintenance according to the applicable manufacturer's recommendations for the period specified in this Contract.

The Contractor represents and warrants that the equipment/system(s) are in good operating condition and operate and perform to the requirements and other standards of performance contained in this Contract, when installed, at the time of Final Acceptance by the State, and for a period of one year commencing upon the first day following Final Acceptance.

Within 20 business days of notification from the State, the Contractor must adjust, repair or replace all equipment that is defective or not performing in compliance with the Contract. The Contractor must assume all costs for replacing parts or units and their installation including transportation and delivery fees, if any.

The Contractor must provide a toll-free telephone number to allow the State to report equipment failures and problems to be remedied by the Contractor.

The Contractor agrees that all warranty service it provides under this Contract must be performed by Original Equipment Manufacturer (OEM) trained, certified and authorized technicians.

The Contractor is the sole point of contact for warranty service. The Contractor warrants that it will pass through to the State any warranties obtained or available from the original equipment manufacturer, including any replacement, upgraded, or additional equipment warranties.

All warranty work must be performed on the State of Michigan worksite(s).

2.126   Equipment to be New

If applicable, all equipment provided under this Contract by Contractor shall be new where Contractor has knowledge regarding whether the equipment is new or assembled from new or serviceable used parts that are like new in performance or has the option of selecting one or the other. Equipment that is assembled from new or serviceable used parts that are like new in performance is acceptable where Contractor does not have knowledge or the ability to select one or other, unless specifically agreed otherwise in writing by the State.

2.127    Prohibited Products

The State will not accept salvage, distressed, outdated or discontinued merchandise. Shipping of such merchandise to any State agency, as a result of an order placed against the Contract, shall be considered default by the Contractor of the terms and conditions of the Contract and may result in cancellation of the Contract by the State. The brand and product number offered for all items shall remain consistent for the term of the Contract, unless Purchasing Operations has approved a change order pursuant to Section 2.024.

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2.128   Consequences For Breach

In addition to any remedies available in law, if the Contractor breaches any of the warranties contained in this section, the breach may be considered as a default in the performance of a material obligation of this Contract.

2.130      Insurance

2.131   Liability Insurance

The Contractor must provide proof of the minimum levels of insurance coverage as indicated below. The insurance must protect the State from claims which may arise out of or result from the Contractor's performance of services under the terms of this Contract, whether the services are performed by the Contractor, or by any subcontractor, or by anyone directly or indirectly employed by any of them, or by anyone for whose acts they may be liable.

The Contractor waives all rights against the State of Michigan, its departments, divisions, agencies, offices, commissions, officers, employees and agents for recovery of damages to the extent these damages are covered by the insurance policies the Contractor is required to maintain under this Contract.

All insurance coverages provided relative to this Contract/Purchase Order are PRIMARY and NON-CONTRIBUTING to any comparable liability insurance (including self-insurances) carried by the State.

The insurance must be written for not less than any minimum coverage specified in this Contract or required by law, whichever is greater.

The insurers selected by Contractor must have an A.M. Best rating of A or better, or as otherwise approved in writing by the State, or if the ratings are no longer available, with a comparable rating from a recognized insurance rating agency. All policies of insurance required in this Contract must be issued by companies that have been approved to do business in the State. See www.michigan.gov/dleg.

Where specific limits are shown, they are the minimum acceptable limits. If Contractor's policy contains higher limits, the State must be entitled to coverage to the extent of the higher limits.

The Contractor is required to pay for and provide the type and amount of insurance checked 0 below:

þ             1.            Commercial General Liability with the following minimum coverage:

$2,000,000 General Aggregate Limit other than Products/Completed Operations

$2,000,000 Products/Completed Operations Aggregate Limit

$1,000,000 Personal & Advertising Injury Limit

$1,000,000 Each Occurrence Limit

The Contractor must list the State of Michigan, its departments, divisions, agencies, offices, commissions, officers, employees and agents as ADDITIONAL INSUREDS on the Commercial General Liability certificate. The Contractor also agrees to provide evidence that insurance policies contain a waiver of subrogation by the insurance company.

þ             2.             If a motor vehicle is used to provide services or products under this Contract, the Contractor must have vehicle liability insurance on any auto including owned, hired and non-owned vehicles used in Contractor's business for bodily injury and property damage as required by law.

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The Contractor must list the State of Michigan, its departments, divisions, agencies, offices, commissions, officers, employees and agents as ADDITIONAL INSUREDS on the vehicle liability certificate. The Contractor also agrees to provide evidence that insurance policies contain a waiver of subrogation by the insurance company.

þ             3.            Workers' compensation coverage must be provided according to applicable laws governing the employees and employers work activities in the state of the Contractor's domicile. If the applicable coverage is provided by a self-insurer, proof must be provided of approved self-insured authority by the jurisdiction of domicile. For employees working outside of the state of qualification, Contractor must provide appropriate certificates of insurance proving mandated coverage levels for the jurisdictions where the employees' activities occur.

Any certificates of insurance received must also provide a list of states where the coverage is applicable.

The Contractor also agrees to provide evidence that insurance policies contain a waiver of subrogation by the insurance company. This provision must not be applicable where prohibited or limited by the laws of the jurisdiction in which the work is to be performed.

þ             4.            Employers liability insurance with the following minimum limits:

$100,000 each accident

$100,000 each employee by disease

$500,000 aggregate disease

o             5.            Employee Fidelity, including Computer Crimes, insurance naming the State as a loss payee, providing coverage for direct loss to the State and any legal liability of the State arising out of or related to fraudulent or dishonest acts committed by the employees of Contractor or its Subcontractors, acting alone or in collusion with others, in a minimum amount of one million dollars ($1,000,000.00) with a maximum deductible of fifty thousand dollars ($50,000.00).

o             6.            Umbrella or Excess Liability Insurance in a minimum amount of ten million dollars ($10,000,000.00), which must apply, at a minimum, to the insurance required in Subsection 1 (Commercial General Liability) above.

o             7.            Professional Liability (Errors and Omissions) Insurance with the following minimum coverage: three million dollars ($3,000,000.00) each occurrence and three million dollars ($3,000,000.00) annual aggregate.

o             8.            Fire and Personal Property Insurance covering against any loss or damage to the office space used by Contractor for any reason under this Contract, and the equipment, software and other contents of the office space, including without limitation, those contents used by Contractor to provide the Services to the State, up to its replacement value, where the office space and its contents are under the care, custody and control of Contractor. The policy must cover all risks of direct physical loss or damage, including without limitation, flood and earthquake coverage and coverage for computer hardware and software. The State must be endorsed on the policy as a loss payee as its interests appear.

2.132   Subcontractor Insurance Coverage

Except where the State has approved in writing a Contractor subcontract with other insurance provisions, Contractor must require all of its Subcontractors under this Contract to purchase and maintain the insurance coverage as described in this Section for the Contractor in connection with the performance of work by those Subcontractors. Alternatively, Contractor may include any Subcontractors under Contractor's insurance on the coverage required in this Section. Subcontractor(s) must fully comply with the insurance coverage required in this Section. Failure of Subcontractor(s) to comply with insurance requirements does not limit Contractor's liability or responsibility.

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2.133   Certificates of Insurance and Other Requirements

Contractor must furnish to DMB-PurchOps, certificate(s) of insurance verifying insurance coverage or providing satisfactory evidence of self-insurance as required in this Section (the "Certificates"). The Certificate must be on the standard "accord" form or equivalent. THE CONTRACT OR PURCHASE ORDER NO. MUST BE SHOWN ON THE CERTIFICATE OF INSURANCE TO ASSURE CORRECT FILING. All Certificate(s) are to be prepared and submitted by the Insurance Provider. All Certificate(s) must contain a provision indicating that coverages afforded under the policies WILL NOT BE CANCELLED, MATERIALLY CHANGED, OR NOT RENEWED without 30 days prior written notice, except for 10 days for non-payment of premium, having been given to the Director of Purchasing Operations, Department of Management and Budget. The notice must include the Contract or Purchase Order number affected. Before the Contract is signed, and not less than 20 days before the insurance expiration date every year thereafter, the Contractor must provide evidence that the State and its agents, officers and employees are listed as additional insureds under each commercial general liability and commercial automobile liability policy. In the event the State approves the representation of the State by the insurer's attorney, the attorney may be required to be designated as a Special Assistant Attorney General by the Attorney General of the State of Michigan.

The Contractor must maintain all required insurance coverage throughout the term of the Contract and any extensions and, in the case of claims-made Commercial General Liability policies, must secure tail coverage for at least three years following the expiration or termination for any reason of this Contract. The minimum limits of coverage specified above are not intended, and must not be construed, to limit any liability or indemnity of Contractor under this Contract to any indemnified party or other persons. Contractor is responsible for all deductibles with regard to the insurance. If the Contractor fails to pay any premium for required insurance as specified in this Contract, or if any insurer cancels or significantly reduces any required insurance as specified in this Contract without the State's written consent, then the State may, after the State has given the Contractor at least 30 days written notice, pay the premium or procure similar insurance coverage from another company or companies. The State may deduct any part of the cost from any payment due the Contractor, or the Contractor must pay that cost upon demand by the State.

2.140      Indemnification

2.141   General Indemnification

To the extent permitted by law, the Contractor must indemnify, defend and hold harmless the State from liability, including all claims and losses, and all related costs and expenses (including reasonable attorneys' fees and costs of investigation, litigation, settlement, judgments, interest and penalties), accruing or resulting to any person, firm or corporation that may be injured or damaged by the Contractor in the performance of this Contract and that are attributable to the negligence or tortious acts of the Contractor or any of its subcontractors, or by anyone else for whose acts any of them may be liable.

2.142   Code Indemnification

To the extent permitted by law, the Contractor shall indemnify, defend and hold harmless the State from any claim, loss, or expense arising from Contractor's breach of the No Surreptitious Code Warranty.

2.143   Employee Indemnification

In any claims against the State of Michigan, its departments, divisions, agencies, sections, commissions, officers, employees and agents, by any employee of the Contractor or any of its subcontractors, the indemnification obligation under the Contract must not be limited in any way by the amount or type of damages, compensation or benefits payable by or for the Contractor or any of its subcontractors under worker's disability compensation acts, disability benefit acts or other employee benefit acts. This indemnification clause is intended to be comprehensive. Any overlap in provisions, or the fact that greater specificity is provided as to some categories of risk, is not intended to limit the scope of indemnification under any other provisions.

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2.144   Patent/Copyright Infringement Indemnification

To the extent permitted by law, the Contractor must indemnify, defend and hold harmless the State from and against all losses, liabilities, damages (including taxes), and all related costs and expenses (including reasonable attorneys' fees and costs of investigation, litigation, settlement, judgments, interest and penalties) incurred in connection with any action or proceeding threatened or brought against the State to the extent that the action or proceeding is based on a claim that any piece of equipment, software, commodity or service supplied by the Contractor or its subcontractors, or the operation of the equipment, software, commodity or service, or the use or reproduction of any documentation provided with the equipment, software, commodity or service infringes any United States patent, copyright, trademark or trade secret of any person or entity, which is enforceable under the laws of the United States.

In addition, should the equipment, software, commodity, or service, or its operation, become or in the State's or Contractor's opinion be likely to become the subject of a claim of infringement, the Contractor must at the Contractor's sole expense (i) procure for the State the right to continue using the equipment, software, commodity or service or, if the option is not reasonably available to the Contractor, (ii) replace or modify to the State's satisfaction the same with equipment, software, commodity or service of equivalent function and performance so that it becomes non-infringing, or, if the option is not reasonably available to Contractor, (iii) accept its return by the State with appropriate credits to the State against the Contractor's charges and reimburse the State for any losses or costs incurred as a consequence of the State ceasing its use and returning it.

Notwithstanding the foregoing, the Contractor has no obligation to indemnify or defend the State for, or to pay any costs, damages or attorneys' fees related to, any claim based upon (i) equipment developed based on written specifications of the State; (ii) use of the equipment in a configuration other than implemented or approved in writing by the Contractor, including, but not limited to, any modification of the equipment by the State; or (iii) the combination, operation, or use of the equipment with equipment or software not supplied by the Contractor under this Contract.

2.145   Continuation of Indemnification Obligations

The Contractor's duty to indemnify under this Section continues in full force and effect, notwithstanding the expiration or early cancellation of the Contract, with respect to any claims based on facts or conditions that occurred before expiration or cancellation.

2.146   Indemnification Procedures

The procedures set forth below must apply to all indemnity obligations under this Contract.

(a)           After the State receives notice of the action or proceeding involving a claim for which it will seek indemnification, the State must promptly notify Contractor of the claim in writing and take or assist Contractor in taking, as the case may be, any reasonable action to avoid the imposition of a default judgment against Contractor. No failure to notify the Contractor relieves the Contractor of its indemnification obligations except to the extent that the Contractor can prove damages attributable to the failure. Within 10 days following receipt of written notice from the State relating to any claim, the Contractor must notify the State in writing whether Contractor agrees to assume control of the defense and settlement of that claim (a "Notice of Election"). After notifying Contractor of a claim and before the State receiving Contractor's Notice of Election, the State is entitled to defend against the claim, at the Contractor's expense, and the Contractor will be responsible for any reasonable costs incurred by the State in defending against the claim during that period.

(b)           If Contractor delivers a Notice of Election relating to any claim: (i) the State is entitled to participate in the defense of the claim and to employ counsel at its own expense to assist in the handling of the claim and to monitor and advise the State about the status and progress of the defense; (ii) the Contractor must, at the request of the State, demonstrate to the reasonable satisfaction of the State, the Contractor's financial ability to carry out its defense and indemnity obligations under this Contract; (iii) the Contractor must periodically advise the State about the status and progress of the defense and must

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(c)    If Contractor does not deliver a Notice of Election relating to any claim of which it is notified by the State as provided above, the State may defend the claim in the manner as it may deem appropriate, at the cost and expense of Contractor. If it is determined that the claim was one against which Contractor was required to indemnify the State, upon request of the State, Contractor must promptly reimburse the State for all the reasonable costs and expenses.

2.150   Termination/Cancellation

2.151Notice and Right to Cure

If the Contractor breaches the contract, and the State in its sole discretion determines that the breach is curable, then the State will provide the Contractor with written notice of the breach and a time period (not less than 30 days) to cure the Breach. The notice of breach and opportunity to cure is inapplicable for successive or repeated breaches or if the State determines in its sole discretion that the breach poses a serious and imminent threat to the health or safety of any person or the imminent loss, damage, or destruction of any real or tangible personal property.

2.152   Termination for Cause

(a)    The State may terminate this contract, for cause, by notifying the Contractor in writing, if the Contractor (i) breaches any of its material duties or obligations under this Contract (including a Chronic Failure to meet any particular SLA), or (it) fails to cure a breach within the time period specified in the written notice of breach provided by the State

(b)    If this Contract is terminated for cause, the Contractor must pay all costs incurred by the State in terminating this Contract, including but not limited to, State administrative costs, reasonable attorneys' fees and court costs, and any reasonable additional costs the State may incur to procure the Services/Deliverables required by this Contract from other sources. Re-procurement costs are not consequential, indirect or incidental damages, and cannot be excluded by any other terms otherwise included in this Contract, provided the costs are not in excess of 50% more than the prices for the Service/Deliverables provided under this Contract

(c)    If the State chooses to partially terminate this Contract for cause, charges payable under this Contract will be equitably adjusted to reflect those Services/Deliverables that are terminated and the State must pay for all Services/Deliverables for which Final Acceptance has been granted provided up to the termination date. Services and related provisions of this Contract that are terminated for cause must cease on the effective date of the termination.

(d)    If the State terminates this Contract for cause under this Section, and it is determined, for any reason, that Contractor was not in breach of contract under the provisions of this section, that termination for cause must be deemed to have been a termination for convenience, effective as of the same date, and the rights and obligations of the parties must be limited to that otherwise provided in this Contract for a termination for convenience.

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2.153   Termination for Convenience

The State may terminate this Contract for its convenience, in whole or part, if the State determines that a termination is in the State's best interest. Reasons for the termination must be left to the sole discretion of the State and may include, but not necessarily be limited to (a) the State no longer needs the Services or products specified in the Contract, (b) relocation of office, program changes, changes in laws, rules, or regulations make implementation of the Services no longer practical or feasible, (c) unacceptable prices for Additional Services or New Work requested by the State, or (d) falsification or misrepresentation, by inclusion or non-inclusion, of information material to a response to any RFP issued by the State. The State may terminate this Contract for its convenience, in whole or in part, by giving Contractor written notice at least 30 days before the date of termination. If the State chooses to terminate this Contract in part, the charges payable under this Contract must be equitably adjusted to reflect those Services/Deliverables that are terminated. Services and related provisions of this Contract that are terminated for cause must cease on the effective date of the termination.

2.154   Termination for Non-Appropriation

(a)    Contractor acknowledges that, if this Contract extends for several fiscal years, continuation of this Contract is subject to appropriation or availability of funds for this Contract. If funds to enable the State to effect continued payment under this Contract are not appropriated or otherwise made available, the State must terminate this Contract and all affected Statements of Work, in whole or in part, at the end of the last period for which funds have been appropriated or otherwise made available by giving written notice of termination to Contractor. The State must give Contractor at least 30 days advance written notice of termination for non-appropriation or unavailability (or the time as is available if the State receives notice of the final decision less than 30 days before the funding cutoff).

(b)    If funding for the Contract is reduced by law, or funds to pay Contractor for the agreed-to level of the Services or production of Deliverables to be provided by Contractor are not appropriated or otherwise unavailable, the State may, upon 30 days written notice to Contractor, reduce the level of the Services or the change the production of Deliverables in the manner and for the periods of time as the State may elect. The charges payable under this Contract will be equitably adjusted to reflect any equipment, services or commodities not provided by reason of the reduction.

(c)    If the State terminates this Contract, eliminates certain Deliverables, or reduces the level of Services to be provided by Contractor under this Section, the State must pay Contractor for all Work-in-Process performed through the effective date of the termination or reduction in level, as the case may be and as determined by the State, to the extent funds are available. This Section will not preclude Contractor from reducing or stopping Services/Deliverables or raising against the State in a court of competent jurisdiction, any claim for a shortfall in payment for Services performed or Deliverables finally accepted before the effective date of termination.

2.155   Termination for Criminal Conviction

The State may terminate this Contract immediately and without further liability or penalty in the event Contractor, an officer of Contractor, or an owner of a 25% or greater share of Contractor is convicted of a criminal offense related to a State, public or private Contract or subcontract.

2.156   Termination for Approvals Rescinded

The State may terminate this Contract if any final administrative or judicial decision or adjudication disapproves a previously approved request for purchase of personal services under Constitution 1963, Article 11, § 5, and Civil Service Rule 7-1. In that case, the State will pay the Contractor for only the work completed to that point under the Contract. Termination may be in whole or in part and may be immediate as of the date of the written notice to Contractor or may be effective as of the date stated in the written notice.

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2.157   Rights and Obligations upon Termination

(a)    If the State terminates this Contract for any reason, the Contractor must (a) stop all work as specified in the notice of termination, (b) take any action that may be necessary, or that the State may direct, for preservation and protection of Deliverables or other property derived or resulting from this Contract that may be in Contractor's possession, (c) return all materials and property provided directly or indirectly to Contractor by any entity, agent or employee of the State, (d) transfer title in, and deliver to, the State, unless otherwise directed, all Deliverables intended to be transferred to the State at the termination of the Contract and which are resulting from the Contract (which must be provided to the State on an "As-Is" basis except to the extent the amounts paid by the State in respect of the items included compensation to Contractor for the provision of warranty services in respect of the materials), and (e) take any action to mitigate and limit any potential damages, or requests for Contractor adjustment or termination settlement costs, to the maximum practical extent, including terminating or limiting as otherwise applicable those subcontracts and outstanding orders for material and supplies resulting from the terminated Contract.

(b)    If the State terminates this Contract before its expiration for its own convenience, the State must pay Contractor for all charges due for Services provided before the date of termination and, if applicable, as a separate item of payment under this Contract, for Work In Process, on a percentage of completion basis at the level of completion determined by the State. All completed or partially completed Deliverables prepared by Contractor under this Contract, at the option of the State, becomes the State's property, and Contractor is entitled to receive equitable fair compensation for the Deliverables. Regardless of the basis for the termination, the State is not obligated to pay, or otherwise compensate, Contractor for any lost expected future profits, costs or expenses incurred with respect to Services not actually performed for the State.

(c)    Upon a good faith termination, the State may assume, at its option, any subcontracts and agreements for services and deliverables provided under this Contract, and may further pursue completion of the Services/Deliverables under this Contract by replacement contract or otherwise as the State may in its sole judgment deem expedient.

2.158   Reservation of Rights

Any termination of this Contract or any Statement of Work issued under it by a party must be with full reservation of, and without prejudice to, any rights or remedies otherwise available to the party with respect to any claims arising before or as a result of the termination.

2.160     Termination by Contractor

2.161   Termination by Contractor

If the State breaches the Contract, and the Contractor in its sole discretion determines that the breach is curable, then the Contractor will provide the State with written notice of the breach and a time period (not less than 30 days) to cure the breach. The Notice of Breach and opportunity to cure is inapplicable for successive and repeated breaches.

The Contractor may terminate this Contract if the State (i) materially breaches its obligation to pay the Contractor undisputed amounts due and owing under this Contract, (ii) breaches its other obligations under this Contract to an extent that makes it impossible or commercially impractical for the Contractor to perform the Services, or (iii) does not cure the breach within the time period specified in a written notice of breach. But the Contractor must discharge its obligations under Section 2.160 before it terminates the Contract.

2.170     Transition Responsibilities

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2.171   Contractor Transition Responsibilities

If the State terminates this contract, for convenience or cause, or if the Contract is otherwise dissolved, voided, rescinded, nullified, expires or rendered unenforceable, the Contractor agrees to comply with direction provided by the State to assist in the orderly transition of equipment, services, software, leases, etc. to the State or a third party designated by the State. If this Contract expires or terminates, the Contractor agrees to make all reasonable efforts to effect an orderly transition of services within a reasonable period of time that in no event will exceed 90 days. These efforts must include, but are not limited to, those listed in Sections 2.141, 2.142, 2.143, 2.144, and 2.145.

2.172   Contractor Personnel Transition

The Contractor must work with the State, or a specified third party, to develop a transition plan setting forth the specific tasks and schedule to be accomplished by the parties, to effect an orderly transition. The Contractor must allow as many personnel as practicable to remain on the job to help the State, or a specified third party, maintain the continuity and consistency of the services required by this Contract. In addition, during or following the transition period, in the event the State requires the Services of the Contractor's subcontractors or vendors, as necessary to meet its needs, Contractor agrees to reasonably, and with good-faith, work with the State to use the Services of Contractor's subcontractors or vendors. Contractor will notify all of Contractor's subcontractors of procedures to be followed during transition.

2.173   Contractor Information Transition

The Contractor agrees to provide reasonable detailed specifications for all Services/Deliverables needed by the State, or specified third party, to properly provide the Services/Deliverables required under this Contract. The Contractor will provide the State with asset management data generated from the inception of this Contract through the date on which this Contractor is terminated in a comma-delineated format unless otherwise requested by the State. The Contractor will deliver to the State any remaining owed reports and documentation still in Contractor's possession subject to appropriate payment by the State.

2.174   Contractor Software Transition

The Contractor must reasonably assist the State in the acquisition of any Contractor software required to perform the Services/use the Deliverables under this Contract. This must include any documentation being used by the Contractor to perform the Services under this Contract. If the State transfers any software licenses to the Contractor, those licenses must, upon expiration of the Contract, transfer back to the State at their current revision level. Upon notification by the State, Contractor may be required to freeze all non-critical changes to Deliverables/Services.

2.175   Transition Payments

If the transition results from a termination for any reason, reimbursement must be governed by the termination provisions of this Contract. If the transition results from expiration, the Contractor will be reimbursed for all reasonable transition costs (i.e. costs incurred within the agreed period after contract expiration that result from transition operations) at the rates agreed upon by the State. The Contractor will prepare an accurate accounting from which the State and Contractor may reconcile all outstanding accounts.

2.176   State Transition Responsibilities

In the event that this Contract is terminated, dissolved, voided, rescinded, nullified, or otherwise rendered unenforceable, the State agrees to perform the following obligations, and any others upon which the State and the Contractor agree:

(a)    Reconciling all accounts between the State and the Contractor;

(b)    Completing any pending post-project reviews.

2.180   Stop Work—Deleted. Not Applicable

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2.190   Dispute Resolution

2.191   In General

Any claim, counterclaim, or dispute between the State and Contractor arising out of or relating to the Contract or any Statement of Work must be resolved as follows. For all Contractor claims seeking an increase in the amounts payable to Contractor under the Contract, or the time for Contractor's performance, Contractor must submit a letter, together with all data supporting the claims, executed by Contractor's Contract Administrator or the Contract Administrator's designee certifying that (a) the claim is made in good faith, (b) the amount claimed accurately reflects the adjustments in the amounts payable to Contractor or the time for Contractor's performance for which Contractor believes the State is liable and covers all costs of every type to which Contractor is entitled from the occurrence of the claimed event, and (c) the claim and the supporting data are current and complete to Contractor's best knowledge and belief.

2.192   Informal Dispute Resolution

(a)    All disputes between the parties must be resolved under the Contract Management procedures in this Contract. If the parties are unable to resolve any disputes after compliance with the processes, the parties must meet with the Director of Purchasing Operations, DMB, or designee, for the purpose of attempting to resolve the dispute without the need for formal legal proceedings, as follows:

(i)    The representatives of Contractor and the State must meet as often as the parties reasonably deem necessary to gather and furnish to each other all information with respect to the matter in issue which the parties believe to be appropriate and germane in connection with its resolution. The representatives must discuss the problem and negotiate in good faith in an effort to resolve the dispute without the necessity of any formal proceeding.

(ii)   During the course of negotiations, all reasonable requests made by one party to another for non-privileged information reasonably related to the Contract will be honored in order that each of the parties may be fully advised of the other's position.

(iii)      The specific format for the discussions will be left to the discretion of the designated State and Contractor representatives, but may include the preparation of agreed upon statements of fact or written statements of position.

(iv)      Following the completion of this process within 60 calendar days, the Director of Purchasing Operations, DMB, or designee, must issue a written opinion regarding the issue(s) in dispute within 30 calendar days. The opinion regarding the dispute must be considered the State's final action and the exhaustion of administrative remedies.

(b)   This Section will not be construed to prevent either party from instituting, and a party is authorized to institute, formal proceedings earlier to avoid the expiration of any applicable limitations period, to preserve a superior position with respect to other creditors, or under Section 2,163.

(c)   The State will not mediate disputes between the Contractor and any other entity, except state agencies, concerning responsibility for performance of work under the Contract.

2.193   Injunctive Relief

The only circumstance in which disputes between the State and Contractor will not be subject to the provisions of Section 2.162 is where a party makes a good faith determination that a breach of the terms of the Contract by the other party is the that the damages to the party resulting from the breach will be so immediate, so large or severe and so incapable of adequate redress after the fact that a temporary restraining order or other immediate injunctive relief is the only adequate remedy.

2.194   Continued Performance

Each party agrees to continue performing its obligations under the Contract while a dispute is being resolved except to the extent the issue in dispute precludes performance (dispute over payment must not be deemed to preclude performance) and without limiting either party's right to terminate the Contract as provided in Section 2.150, as the case may be.

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2.200   Federal and State Contract Requirements

2.201   Nondiscrimination

In the performance of the Contract, Contractor agrees not to discriminate against any employee or applicant for employment, with respect to his or her hire, tenure, terms, conditions or privileges of employment, or any matter directly or indirectly related to employment, because of race, color, religion, national origin, ancestry, age, sex, height, weight, marital status, physical or mental disability. Contractor further agrees that every subcontract entered into for the performance of this Contract or any purchase order resulting from this Contract will contain a provision requiring non-discrimination in employment, as specified here, binding upon each Subcontractor. This covenant is required under the Elliot Larsen Civil Rights Act, 1976 PA 453, MCL 37.2101, et seq., and the Persons with Disabilities Civil Rights Act, 1976 PA 220, MCL 37.1101, et seq., and any breach of this provision may be regarded as a material breach of the Contract.

2.202   Unfair Labor Practices

Under 1980 PA 278, MCL 423.321, et seq., the State must not award a Contract or subcontract to an employer whose name appears in the current register of employers failing to correct an unfair labor practice compiled under section 2 of the Act. This information is compiled by the United States National Labor Relations Board. A Contractor of the State, in relation to the Contract, must not enter into a contract with a Subcontractor, manufacturer, or supplier whose name appears in this register. Under section 4 of 1980 PA 278, MCL 423.324, the State may void any Contract if, after award of the Contract, the name of Contractor as an employer or the name of the Subcontractor, manufacturer or supplier of Contractor appears in the register.

2.203   Workplace Safety and Discriminatory Harassment

In performing Services for the State, the Contractor must comply with the Department of Civil Services Rule 2-20 regarding Workplace Safety and Rule 1-8.3 regarding Discriminatory Harassment. In addition, the Contractor must comply with Civil Service regulations and any applicable agency rules provided to the Contractor. For Civil Service Rules, see http://www.mi.gov/mdcs/0,1607,7-147-6877---,00.html.

2.204   Prevailing Wage

The rates of wages and fringe benefits to be paid each class of individuals employed by the Contractor, its subcontractors, their subcontractors, and all persons involved with the performance of this Contract in privity of contract with the Contractor shall not be less than the wage rates and fringe benefits established by the Michigan Department of Labor and Economic Development, Wage and Hour Bureau, schedule of occupational classification and wage rates and fringe benefits for the local where the work is to be performed. The term Contractor shall include all general contractors, prime contractors, project managers, trade contractors, and all of their contractors or subcontractors and persons in privity of contract with them.

The Contractor, its subcontractors, their subcontractors and all persons involved with the performance of this contract in privity of contract with the Contractor shall keep posted on the work site, in a conspicuous place, a copy of all wage rates and fringe benefits as prescribed in the contract. You must also post, in a conspicuous place, the address and telephone number of the Michigan Department of Labor and Economic Development, the office responsible for enforcement of the wage rates and fringe benefits. You shall keep an accurate record showing the name and occupation of the actual wage and benefits paid to each individual employed in connection with this contract. This record shall be available to the State upon request for reasonable inspection.

If any trade is omitted from the list of wage rates and fringe benefits to be paid to each class of individuals by the Contractor, it is understood that the trades omitted shall also be paid not less than the wage rate and fringe benefits prevailing in the local where the work is to be performed.

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2.210   Governing Law

2.211   Governing Law

The Contract must in all respects be governed by, and construed according to, the substantive laws of the State of Michigan without regard to any Michigan choice of law rules that would apply the substantive law of any other jurisdiction to the extent not inconsistent with, or pre-empted by federal law.

2.212   Compliance with Laws

Contractor shall comply with all applicable state, federal and local laws and ordinances in providing the Services/Deliverables.

2.213   Jurisdiction

Any dispute arising from the Contract must be resolved in the State of Michigan. With respect to any claim between the parties, Contractor consents to venue in Ingham County, Michigan, and irrevocably waives any objections it may have to the jurisdiction on the grounds of lack of personal jurisdiction of the court or the laying of venue of the court or on the basis of forum non conveniens or otherwise. Contractor agrees to appoint agents in the State of Michigan to receive service of process.

2.220   Limitation of Liability

2.221   Limitation of Liability

Neither the Contractor nor the State is liable to each other, regardless of the form of action, for consequential, incidental, indirect, or special damages. This limitation of liability does not apply to claims for infringement of United States patent, copyright, trademark or trade secrets; to claims for personal injury or damage to property caused by the gross negligence or willful misconduct of the Contractor; to claims covered by other specific provisions of this Contract calling for liquidated damages; or to court costs or attorney's fees awarded by a court in addition to damages after litigation based on this Contract.

The Contractor's liability for damages to the State is limited to two times the value of the Contract or $500,000 which ever is higher. The foregoing limitation of liability does not apply to claims for infringement of United States patent, copyright, trademarks or trade secrets; to claims for personal injury or damage to property caused by the gross negligence or willful misconduct of the Contractor; to claims covered by other specific provisions of this Contract calling for liquidated damages; or to court costs or attorney's fees awarded by a court in addition to damages after litigation based on this Contract.

The State's liability for damages to the Contractor is limited to the value of the Contract.

2.230   Disclosure Responsibilities

2.231   Disclosure of Litigation

(a)    Disclosure. Contractor must disclose any material criminal litigation, investigations or proceedings involving the Contractor (and each Subcontractor) or any of its officers or directors or any litigation, investigations or proceedings under the Sarbanes-Oxley Act. In addition, each Contractor (and each Subcontractor) must notify the State of any material civil litigation, arbitration or proceeding which arises during the term of the Contract and extensions, to which Contractor (or, to the extent Contractor is aware, any Subcontractor) is a party, and which involves: (i) disputes that might reasonably be expected to adversely affect the viability or financial stability of Contractor or any Subcontractor; or (ii) a claim or written allegation of fraud against Contractor or, to the extent Contractor is aware, any Subcontractor by a governmental or public entity arising out of their business dealings with governmental or public entities. The Contractor must disclose in writing to the Contract Administrator any litigation, investigation, arbitration or other proceeding (collectively, "Proceeding") within 30 days of its occurrence. Details of settlements which are prevented from disclosure by the terms of the settlement may be annotated.

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Information provided to the State from Contractor's publicly filed documents referencing its material litigation will be deemed to satisfy the requirements of this Section.

(b)   Assurances. If any Proceeding disclosed to the State under this Section, or of which the State otherwise becomes aware, during the term of this Contract would cause a reasonable party to be concerned about:

(i)    the ability of Contractor (or a Subcontractor) to continue to perform this Contract according to its terms and conditions, or

(ii)   whether Contractor (or a Subcontractor) in performing Services for the State is engaged in conduct which is similar in nature to conduct alleged in the Proceeding, which conduct would constitute a breach of this Contract or a violation of Michigan law, regulations or public policy, then the Contractor must provide the State all reasonable assurances requested by the State to demonstrate that:

(a)    Contractor and its Subcontractors will be able to continue to perform this Contract and any Statements of Work according to its terms and conditions, and

(b)    Contractor and its Subcontractors have not and will not engage in conduct in performing the Services which is similar in nature to the conduct alleged in the Proceeding.

(c)   Contractor must make the following notifications in writing:

(1)    Within 30 days of Contractor becoming aware that a change in its ownership or officers has occurred, or is certain to occur, or a change that could result in changes in the valuation of its capitalized assets in the accounting records, Contractor must notify DMB PurchOps.

(2)    Contractor must also notify DMB PurchOps within 30 days whenever changes to asset valuations or any other cost changes have occurred or are certain to occur as a result of a change in ownership or officers.

(3)    Contractor must also notify DMB PurchOps within 30 days whenever changes to company affiliations occur.

2.232   Call Center Disclosure

Contractor and/or all subcontractors involved in the performance of this Contract providing call or contact center services to the State must disclose the location of its call or contact center services to inbound callers. Failure to disclose this information is a material breach of this Contract.

2.233   Bankruptcy

The State may, without prejudice to any other right or remedy, terminate this Contract, in whole or in part, and, at its option, may take possession of the "Work in Process" and finish the Works in Process by whatever appropriate method the State may deem expedient if:

(a) the Contractor files for protection under the bankruptcy laws;

(b) an involuntary petition is filed against the Contractor and not removed within 30 days;

(c) the Contractor becomes insolvent or if a receiver is appointed due to the Contractor's insolvency;

(d) the Contractor makes a general assignment for the benefit of creditors; or

(e) the Contractor or its affiliates are unable to provide reasonable assurances that the Contractor or its affiliates can deliver the services under this Contract.

Contractor will fix appropriate notices or labels on the Work in Process to indicate ownership by the State. To the extent reasonably possible, materials and Work in Process must be stored separately from other stock and marked conspicuously with labels indicating ownership by the State.

2.240   Performance

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2.241   Time of Performance

(a)    Contractor must use commercially reasonable efforts to provide the resources necessary to complete all Services and Deliverables according to the time schedules contained in the Statements of Work and other Exhibits governing the work, and with professional quality.

(b)    Without limiting the generality of Section 2.211(a), Contractor must notify the State in a timely manner upon becoming aware of any circumstances that may reasonably be expected to jeopardize the timely and successful completion of any Deliverables/Services on the scheduled due dates in the latest State-approved delivery schedule and must inform the State of the projected actual delivery date.

(c)    If the Contractor believes that a delay in performance by the State has caused or will cause the Contractor to be unable to perform its obligations according to specified Contract time periods, the Contractor must notify the State in a timely manner and must use commercially reasonable efforts to perform its obligations according to the Contract time periods notwithstanding the State's failure. Contractor will not be in default for a delay in performance to the extent the delay is caused by the State.

2.242   Service Level Agreements (SLAs—Deleted, Not Applicable)

2.243   Liquidated Damages—Deleted, Not Applicable

2.244   Excusable Failure

Neither party will be liable for any default, damage or delay in the performance of its obligations under the Contract to the extent the default, damage or delay is caused by government regulations or requirements (executive, legislative, judicial, military or otherwise), power failure, electrical surges or current fluctuations, lightning, earthquake, war, water or other forces of nature or acts of God, delays or failures of transportation, equipment shortages, suppliers' failures, or acts or omissions of common carriers, fire; riots, civil disorders; strikes or other labor disputes, embargoes; injunctions (provided the injunction was not issued as a result of any fault or negligence of the party seeking to have its default or delay excused); or any other cause beyond the reasonable control of a party; provided the non-performing party and its Subcontractors are without fault in causing the default or delay, and the default or delay could not have been prevented by reasonable precautions and cannot reasonably be circumvented by the non-performing party through the use of alternate sources, workaround plans or other means, including disaster recovery plans.

If a party does not perform its contractual obligations for any of the reasons listed above, the non-performing party will be excused from any further performance of its affected obligation(s) for as long as the circumstances prevail. But the party must use commercially reasonable efforts to recommence performance whenever and to whatever extent possible without delay. A party must promptly notify the other party in writing immediately after the excusable failure occurs, and also when it abates or ends.

If any of the above-enumerated circumstances substantially prevent, hinder, or delay the Contractor's performance of the Services/provision of Deliverables for more than 10 Business Days, and the State determines that performance is not likely to be resumed within a period of time that is satisfactory to the State in its reasonable discretion, then at the State's option: (a) the State may procure the affected Services/Deliverables from an alternate source, and the State is not be liable for payment for the unperformed Services/ Deliverables not provided under the Contract for so long as the delay in performance continues; (b) the State may terminate any portion of the Contract so affected and the charges payable will be equitably adjusted to reflect those Services/Deliverables terminated; or (c) the State may terminate the affected Statement of Work without liability to Contractor as of a date specified by the State in a written notice of termination to the Contractor, except to the extent that the State must pay for Services/Deliverables provided through the date of termination.

The Contractor will not have the right to any additional payments from the State as a result of any Excusable Failure occurrence or to payments for Services not rendered/Deliverables not provided as a result of the Excusable Failure condition. Defaults or delays in performance by Contractor which are caused by acts or omissions of its Subcontractors will not relieve Contractor of its obligations under the Contract except to the extent that a Subcontractor is itself subject to an Excusable Failure condition described above and Contractor cannot reasonably circumvent the effect of the Subcontractor's default or delay in performance through the use of alternate sources, workaround plans or other means.

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2.250   Approval of Deliverables

2.251   Delivery Responsibilities

Unless otherwise specified by the State within an individual order, the following must be applicable to all orders issued under this Contract.

(a)    Shipment responsibilities - Services performed/Deliverables provided under this Contract must be delivered "F.O.B. Destination, within Government Premises." The Contractor must have complete responsibility for providing all Services/Deliverables to all site(s) unless otherwise stated. Actual delivery dates will be specified on the individual purchase order.

(b)    Delivery locations - Services will be performed/Deliverables will be provided at every State of Michigan location within Michigan unless otherwise stated in the SOW. Specific locations will be provided by the State or upon issuance of individual purchase orders.

(c)    Damage Disputes - At the time of delivery to State Locations, the State must examine all packages. The quantity of packages delivered must be recorded and any obvious visible or suspected damage must be noted at time of delivery using the shipper's delivery document(s) and appropriate procedures to record the damage.

Where there is no obvious or suspected damage, all deliveries to a State Location must be opened by the State and the contents inspected for possible internal damage not visible externally within 14 days of receipt. Any damage must be reported to the Contractor within five days of inspection.

2.252   Delivery of Deliverables

Where applicable, the Statements of Work/POs contain lists of the Deliverables to be prepared and delivered by Contractor including, for each Deliverable, the scheduled delivery date and a designation of whether the Deliverable is a document ("Written Deliverable"), a good ("Physical Deliverable") or a Service. All Deliverables must be completed and delivered for State review and written approval and, where applicable, installed according to the State-approved delivery schedule and any other applicable terms and conditions of the Contract.

2.253   Testing

(a)    Before delivering any of the above-mentioned Statement of Work Physical Deliverables or Services to the State, Contractor will first perform all required quality assurance activities to verify that the Physical Deliverable or Service is complete and conforms with its specifications listed in the applicable Statement of Work or Purchase Order. Before delivering a Physical Deliverable or Service to the State, Contractor must certify to the State that (1) it has performed the quality assurance activities, (2) it has performed any applicable testing, (3) it has corrected all material deficiencies discovered during the quality assurance activities and testing, (4) the Deliverable or Service is in a suitable state of readiness for the State's review and approval, and (5) the Deliverable/Service has all Critical Security patches/updates applied.

(b)    If a Deliverable includes installation at a State Location, then Contractor must (1) perform any applicable testing, (2) correct all material deficiencies discovered during the quality assurance activities and testing, and (3) inform the State that the Deliverable is in a suitable state of readiness for the State's review and approval. To the extent that testing occurs at State Locations, the State is entitled to observe or otherwise participate in testing.

2.254   Approval of Deliverables, In General

(a)    All Deliverables (Physical Deliverables and Written Deliverables) and Services require formal written approval by the State, according to the following procedures. Formal approval by the State requires the State to confirm in writing that the Deliverable meets its specifications. Formal approval may include the successful completion of Testing as applicable in Section 2.253, to be led by the State with the support and assistance of Contractor. The approval process will be facilitated by ongoing consultation between the parties, inspection of interim and intermediate Deliverables and collaboration on key decisions.

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(b)    The State's obligation to comply with any State Review Period is conditioned on the timely delivery of Deliverables/Services being reviewed.

(c)    Before commencement of its review or testing of a Deliverable/Service, the State may inspect the Deliverable/Service to confirm that all components of the Deliverable/Service have been delivered without material deficiencies. If the State determines that the Deliverable/Service has material deficiencies, the State may refuse delivery of the Deliverable/Service without performing any further inspection or testing of the Deliverable/Service. Otherwise, the review period will be deemed to have started on the day the State receives the Deliverable or the Service begins, and the State and Contractor agree that the Deliverable/Service is ready for use and, where applicable, certification by Contractor according to Section 2.223.

(d)    The State will approve in writing a Deliverable/Service after confirming that it conforms to and performs according to its specifications without material deficiency. The State may, but is not be required to, conditionally approve in writing a Deliverable/Service that contains material deficiencies if the State elects to permit Contractor to rectify them post-approval. In any case, Contractor will be responsible for working diligently to correct within a reasonable time at Contractor's expense all deficiencies in the Deliverable/Service that remain outstanding at the time of State approval.

(e)    If, after three opportunities (the original and two repeat efforts), the Contractor is unable to correct all deficiencies preventing Final Acceptance of a Deliverable/Service, the State may: (i) demand that the Contractor cure the failure and give the Contractor additional time to cure the failure at the sole expense of the Contractor; or (ii) keep the Contract in force and do, either itself or through other parties, whatever the Contractor has failed to do, and recover the difference between the cost to cure the deficiency and the contract price plus an additional sum equal to 10% of the cost to cure the deficiency to cover the State's general expenses provided the State can furnish proof of the general expenses; or (in) terminate the particular Statement of Work for default, either in whole or in part by notice to Contractor provided Contractor is unable to cure the breach. Notwithstanding the foregoing, the State cannot use, as a basis for exercising its termination rights under this Section, deficiencies discovered in a repeat State Review Period that could reasonably have been discovered during a prior State Review Period.

(f)    The State, at any time and in its reasonable discretion, may halt the testing or approval process if the process reveals deficiencies in or problems with a Deliverable/Service in a sufficient quantity or of a sufficient severity that renders continuing the process unproductive or unworkable. If that happens, the State may stop using the Service or return the applicable Deliverable to Contractor for correction and re­delivery before resuming the testing or approval process.

2.255   Process For Approval of Written Deliverables

The State Review Period for Written Deliverables will be the number of days set forth in the applicable Statement of Work following delivery of the final version of the Deliverable (and if the Statement of Work does not state the State Review Period, it is by default five Business Days for Written Deliverables of 100 pages or less and 10 Business Days for Written Deliverables of more than 100 pages). The duration of the State Review Periods will be doubled if the State has not had an opportunity to review an interim draft of the Written Deliverable before its submission to the State. The State agrees to notify Contractor in writing by the end of the State Review Period either stating that the Deliverable is approved in the form delivered by Contractor or describing any deficiencies that must be corrected before approval of the Deliverable (or at the State's election, after approval of the Deliverable). If the State notifies the Contractor about deficiencies, the Contractor will correct the described deficiencies and within 30 Business Days resubmit the Deliverable in a form that shows all revisions made to the original version delivered to the State. Contractor's correction efforts will be made at no additional charge. Upon receipt of a corrected Deliverable from Contractor, the State will have a reasonable additional period of time, not to exceed the length of the original State Review Period, to review the corrected Deliverable to confirm that the identified deficiencies have been corrected.

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2.256 Process for Approval of Services

The State Review Period for approval of Services is governed by the applicable Statement of Work (and if the Statement of Work does not state the State Review Period, it is by default 30 Business Days for Services). The State agrees to notify the Contractor in writing by the end of the State Review Period either stating that the Service is approved in the form delivered by the Contractor or describing any deficiencies that must be corrected before approval of the Services (or at the State's election, after approval of the Service). If the State delivers to the Contractor a notice of deficiencies, the Contractor will correct the described deficiencies and within 30 Business Days resubmit the Service in a form that shows all revisions made to the original version delivered to the State. The Contractor's correction efforts will be made at no additional charge. Upon implementation of a corrected Service from Contractor, the State will have a reasonable additional period of time, not to exceed the length of the original State Review Period, to review the corrected Service for conformity and that the identified deficiencies have been corrected.

2.257   Process for Approval of Physical Deliverables

The State Review Period for approval of Physical Deliverables is governed by the applicable Statement of Work (and if the Statement of Work does not state the State Review Period, it is by default 30 continuous Business Days for a Physical Deliverable). The State agrees to notify the Contractor in writing by the end of the State Review Period either stating that the Deliverable is approved in the form delivered by the Contractor or describing any deficiencies that must be corrected before approval of the Deliverable (or at the State's election, after approval of the Deliverable). If the State delivers to the Contractor a notice of deficiencies, the Contractor will correct the described deficiencies and within 30 Business Days resubmit the Deliverable in a form that shows all revisions made to the original version delivered to the State. The Contractor's correction efforts will be made at no additional charge. Upon receipt of a corrected Deliverable from the Contractor, the State will have a reasonable additional period of time, not to exceed the length of the original State Review Period, to review the corrected Deliverable to confirm that the identified deficiencies have been corrected.

2.258   Final Acceptance

Unless otherwise stated in the Article 1, Statement of Work or Purchase Order, "Final Acceptance" of each Deliverable must occur when each Deliverable/Service has been approved by the State following the State Review Periods identified in Sections 2.251-2.257. Payment will be made for Deliverables installed and accepted. Upon acceptance of a Service, the State will pay for all Services provided during the State Review Period that conformed to the acceptance criteria.

2.260   Ownership

2.261   Ownership of Work Product by State

The State owns all Deliverables as they are works made for hire by the Contractor for the State. The State owns all United States and international copyrights, trademarks, patents or other proprietary rights in the Deliverables.

2.262   Vesting of Rights

With the sole exception of any preexisting licensed works identified in the SOW, the Contractor assigns, and upon creation of each Deliverable automatically assigns, to the State, ownership of all United States and international copyrights, trademarks, patents, or other proprietary rights in each and every Deliverable, whether or not registered by the Contractor, insofar as any the Deliverable, by operation of law, may not be considered work made for hire by the Contractor for the State. From time to time upon the State's request, the Contractor must confirm the assignment by execution and delivery of the assignments, confirmations of assignment, or other written instruments as the State may request. The State may obtain and hold in its own name all copyright, trademark, and patent registrations and other evidence of rights that may be available for Deliverables.

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2.263Rights in Data

(a)    The State is the owner of all data made available by the State to the Contractor or its agents, Subcontractors or representatives under the Contract. The Contractor will not use the State's data for any purpose other than providing the Services, nor will any part of the State's data be disclosed, sold, assigned, leased or otherwise disposed of to the general public or to specific third parties or commercially exploited by or on behalf of the Contractor. No employees of the Contractor, other than those on a strictly need-to-know basis, have access to the State's data. Contractor will not possess or assert any lien or other right against the State's data. Without limiting the generality of this Section, the Contractor must only use personally identifiable information as strictly necessary to provide the Services and must disclose the information only to its employees who have a strict need-to-know the information. The Contractor must comply at all times with all laws and regulations applicable to the personally identifiable information.

(b)    The State is the owner of all State-specific data under the Contract. The State may use the data provided by the Contractor for any purpose. The State will not possess or assert any lien or other right against the Contractor's data. Without limiting the generality of this Section, the State may use personally identifiable information only as strictly necessary to utilize the Services and must disclose the information only to its employees who have a strict need to know the information, except as provided by law. The State must comply at all times with all laws and regulations applicable to the personally identifiable information. Other material developed and provided to the State remains the State's sole and exclusive property.

2.264   Ownership of Materials

The State and the Contractor will continue to own their respective proprietary technologies developed before entering into the Contract. Any hardware bought through the Contractor by the State, and paid for by the State, will be owned by the State. Any software licensed through the Contractor and sold to the State, will be licensed directly to the State.

2.270   State Standards

2.271   Existing Technology Standards

The Contractor will adhere to all existing standards as described within the comprehensive listing of the State's existing technology standards at http://www.michigan.gov/dit.

2.272   Acceptable Use Policy

To the extent that Contractor has access to the State computer system, Contractor must comply with the State's Acceptable Use Policy, see http://www.michigan.gov/ditservice. All Contractor employees must be required, in writing, to agree to the State's Acceptable Use Policy before accessing the State system. The State reserves the right to terminate Contractor's access to the State system if a violation occurs.

2.273   Systems Changes

Contractor is not responsible for and not authorized to make changes to any State systems without written authorization from the Project Manager. Any changes Contractor makes to State systems with the State's approval must be done according to applicable State procedures, including security, access and configuration management procedures.

2.280   Extended Purchasing

2.281   MiDEAL

Public Act 431 of 1984 permits DMB to provide purchasing services to any city, village, county, township, school district, intermediate school district, non-profit hospital, institution of higher education, community, or junior college. A current listing of approved program members is available at: www.michigan.gov/buymichiganfirst. Unless otherwise stated, the Contractor must ensure that the non-state agency is an authorized purchaser before extending the Contract pricing.

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The Contractor will supply Contract Services and equipment to these local governmental agencies at the established State of Michigan contract prices and terms to the extent applicable and where available. The Contractor must send its invoices to and pay the local unit of government on a direct and individual basis.

To the extent that authorized local units of government purchase quantities of Services and/or equipment under this Contract, the quantities of Services and/or equipment purchased will be included in determining the appropriate rate wherever tiered pricing based on quantity is provided.

2.282   State Employee Purchases-Deleted, Not Applicable

2.290   Environmental Provision

2.291   Environmental Provision

Energy Efficiency Purchasing Policy - The State seeks wherever possible to purchase energy efficient products. This includes giving preference to U.S. Environmental Protection Agency (EPA) certified 'Energy Star' products for any category of products for which EPA has established Energy Star certification. For other purchases, the State may include energy efficiency as one of the priority factors to consider when choosing among comparable products.

Environmental Purchasing Policy - The State of Michigan is committed to encouraging the use of products and services that impact the environment less than competing products. The State is accomplishing this by including environmental considerations in purchasing decisions, while remaining fiscally responsible, to promote practices that improve worker health, conserve natural resources, and prevent pollution. Environmental components that are to be considered include: recycled content and recyclability; energy efficiency; and the presence of undesirable materials in the products, especially those toxic chemicals which are persistent and bioaccumulative. The Contractor should be able to supply products containing recycled and environmentally preferable materials that meet performance requirements and is encouraged to offer such products throughout the duration of this Contract. Information on any relevant third party certification (such as Green Seal, Energy Star, etc.) should also be provided.

Hazardous Materials:

For the purposes of this Section, "Hazardous Materials" is a generic term used to describe asbestos, ACBMs, PCBs, petroleum products, construction materials including paint thinners, solvents, gasoline, oil, and any other material the manufacture, use, treatment, storage, transportation or disposal of which is regulated by the federal, state or local laws governing the protection of the public health, natural resources or the environment. This includes, but is not limited to, materials the as batteries and circuit packs, and other materials that are regulated as (1) "Hazardous Materials" under the Hazardous Materials Transportation Act, (2) "chemical hazards" under the Occupational Safety and Health Administration standards, (3) "chemical substances or mixtures" under the Toxic Substances Control Act, (4) "pesticides" under the Federal Insecticide Fungicide and Rodenticide Act. and (5) "hazardous wastes" as defined or listed under the Resource Conservation and Recovery Act.

(a)    The Contractor must use, handle, store, dispose of, process, transport and transfer any material considered a Hazardous Material according to all federal, State and local laws. The State must provide a safe and suitable environment for performance of Contractor's Work. Before the commencement of Work, the State must advise the Contractor of the presence at the work site of any Hazardous Material to the extent that the State is aware of the Hazardous Material. If the Contractor encounters material reasonably believed to be a Hazardous Material and which may present a substantial danger, the Contractor must immediately stop all affected Work, notify the State in writing about the conditions encountered, and take appropriate health and safety precautions.

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(b)    Upon receipt of a written notice, the State will investigate the conditions. If (a) the material is a Hazardous Material that may present a substantial danger, and (b) the Hazardous Material was not brought to the site by the Contractor, or does not result in whole or in part from any violation by the Contractor of any laws covering the use, handling, storage, disposal of, processing, transport and transfer of Hazardous Materials, the State must order a suspension of Work in writing. The State must proceed to have the Hazardous Material removed or rendered harmless. In the alternative, the State must terminate the affected Work for the State's convenience.

(c)    Once the Hazardous Material has been removed or rendered harmless by the State, the Contractor must resume Work as directed in writing by the State. Any determination by the Michigan Department of Community Health or the Michigan Department of Environmental Quality that the Hazardous Material has either been removed or rendered harmless is binding upon the State and Contractor for the purposes of resuming the Work. If any incident with Hazardous Material results in delay not reasonable anticipatable under the circumstances and which is attributable to the State, the applicable SLAs for the affected Work will not be counted in time as mutually agreed by the parties.

(d)    If the Hazardous Material was brought to the site by the Contractor, or results in whole or in part from any violation by the Contractor of any laws covering the use, handling, storage, disposal of, processing, transport and transfer of Hazardous Material, or from any other act or omission within the control of the Contractor, the Contractor must bear its proportionate share of the delay and costs involved in cleaning up the site and removing and rendering harmless the Hazardous Material according to Applicable Laws to the condition approved by applicable regulatory agency(ies).

Michigan has a Consumer Products Rule pertaining to labeling of certain products containing volatile organic compounds. For specific details visit http://www.michigan.gov/deq/0,607,7-135-3310_4108-173523-,00.html

Refrigeration and Air Conditioning:

The Contractor shall comply with the applicable requirements of Sections 608 and 609 of the Clean Air Act (42 U.S.C. 7671g and 7671h) as each or both apply to this contract.

Environmental Performance:

Waste Reduction Program - Contractor shall establish a program to promote cost-effective waste reduction in all operations and facilities covered by this contract. The Contractor's programs shall comply with applicable Federal, State, and local requirements, specifically including Section 6002 of the Resource Conservation and Recovery Act (42 U.S.C. 6962. et seq.).

2.300   Other Provisions

2.311   Forced Labor, Convict Labor, Forced or Indentured Child Labor, or Indentured Servitude Made Materials

Equipment, materials, or supplies, that will be furnished to the State under the Contract must not be produced in whole or in part by forced labor, convict labor, forced or indentured child labor, or indentured servitude.

"Forced or indentured child labor" means all work or service: exacted from any person under the age of 18 under the menace of any penalty for its nonperformance and for which the worker does not offer himself voluntarily; or performed by any person under the age of 18 under a contract the enforcement of which can be accomplished by process or penalties.

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ITEM LISTING/PRICING

Item No.	Unit	Description	Unit Price
1.	EA	PRELIMINARY BREATH TESTERS (PBT). Each PBT shall include an initial quantity of 25 mouthpieces. Each PBT shall also include a hard plastic carrying case and four (4) year warranty on fuel cell. BRAND: Lifeloc MODEL #: FC 10	$298.00
2.	EA	MOUTHPIECES, individually wrapped. 100 pieces per bag: 250 pieces per bag	$0.132/piece $13.20/bag $33.00/bag

PBT QUANTITY DISCOUNTS

Ouantity		Cost
1-4	units	$298.00 each
5-19	units	$294.00 each
20-99	units	$290.00 each
100-349	units	$283.00 each
350-749	units	$278.00 each
750+	units	$275.00 each

Fuel Cell Replacement:  $139.00 per unit

Equipment Repair Costs:  $65.00 per hour for technician time

  25% over cost for parts

Cost to re-certify to industry standards:  $129.00 per unit

The following is included in the re-certification cost:

• Comprehensive fuel cell evaluation

• Upgrade older grey case unit with a new pewter and black case including new updated buttons, lens and wrist strap

• Upgrade old pump to our new improved electronically controlled design

• Upgrade software incorporating new features and functionality including:

Improved pump control

Add new "Precise Volume" test mode

Improved RF protection

• Perform a complete Factory Diagnostic Check ensuring the unit meets stringent factory requirements

• Perform any other needed repairs at no additional cost*

• Include a recertification certificate for your records

• Provide a one-year factory warranty from date of recertification

55

[Missing Graphic Reference]

EX-10.5

Exhibit 10.5

TECHNOLOGY TRANSFER AGREEMENT

between

LIFELOC TECHNOLOGIES, INC.

and

FUEL CELL SENSORS

This Technology Transfer Agreement (this "Agreement"), dated June 1, 2010 (the "Effective Date"), is made and entered into by and between Lifeloc Technologies, Inc. ("LIFELOC"), a Colorado corporation, with an address of 12441 West 49th Avenue, Wheat Ridge, CO 80033 USA, and Fuel Cell Sensors ("FCS"), with an address of Hanover House, Hanover Street, Barry, Vale of Glamorgan, CF62 8DH Wales, UK.

WITNESSETH:

WHEREAS, FCS desires to grant to LIFELOC and LIFELOC desires to obtain the right to certain technology described in this Agreement

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

1. DEFINITIONS

As used herein, the terms "Agreement," "LIFELOC," "Effective Date," and "FCS" shall have the meanings indicated above. As used herein, the following terms shall have the following meanings:

1.1 "Affiliate" shall mean any person, corporation, association or other entity which directly or indirectly controls, is controlled by or is under common control with the party in question. As used in this definition of "Affiliate," the term "control" shall mean direct or indirect beneficial ownership of more than 25% of the voting or income interest in such corporation or other business entity.

1.2 "Change in Control" means a merger in which LIFELOC or FCS is not the surviving entity, a sale, transfer or other disposition of all or substantially all of the assets of LIFELOC or FCS, or any equivalent or similar transaction, and shall be deemed to have occurred as a result of a merger or other transaction in which the LIFELOC or FCS is the surviving entity if the beneficial owners of interests in LIFELOC or FCS on the Effective Date do not have sufficient voting power entitling them to make all decisions immediately following the transaction. It is recognized that LIFELOC plans to become a publicly traded company, and that EDCO Partners, which currently owns 80% of LIFELOC, plans to dispose of its interest by the sale of its LIFELOC shares into the market. Such sales shall not be considered a Change in Control.

1.3 "Entities" shall mean any individual person or persons, collection of persons, organization, business, location, environment, laboratory, market, network or thing.

1.4 "FCS Technology" shall mean fuel cell inventions, current and existing know-how, information, processes, formulae, patterns, compilations, programs, devices, methods, techniques, compounds, trade secrets, products, data, preparations and usage information or materials and sources thereof, whether or not patentable, which have been developed or otherwise acquired by FCS prior to the Effective Date or are hereafter developed or acquired by FCS.

1.5 "Initial Phase" shall mean the completion to LIFELOC's reasonable satisfaction of the items listed on Schedule A.

1.6 "Net Sales" shall mean all monies received by LIFELOC from the sale of Royalty-Bearing Products, less any separately identified discounts, customer allowances (actually granted), refunds for returned or damaged goods, excise and sales taxes, customs duties and costs of transportation (including without limitation packing and insurance) actually paid.

1.7 "Products" shall mean all products or instruments using fuel cells employing FCS Technology.

1.8 "Royalty-Bearing Products" shall mean any LIFELOC products which use all or any part of the Subject Technology (other than products purchased directly from FCS or in inventory prior to the date of this Agreement).

1.9 "Subject Technology" shall mean the FCS Technology as described in Section 1.4.

1.10 "Third Party" shall mean any party other than FCS, LIFELOC or any Affiliate of FCS or LIFELOC.

2. GRANT OF LICENSE AND LICENSE FEE

2.1 Grant of License to LIFELOC; Support.

(a) Subject to the terms and conditions hereof, effective as of the Effective Date, FCS hereby grants to LIFELOC a license to use the Subject Technology to develop, make and have made, use, sell, offer for sale, import, export, market and otherwise commercially exploit Products

(b) FCS further agrees to provide technical support to LIFELOC throughout the term of this Agreement and period of Royalty payments, including but not limited to ongoing technical and developmental support and sharing of improvements and advancements in materials, processes and technology.

(c) Each of FCS and LIFELOC shall use its best efforts to hold semi-annual meetings to share information about suppliers, prices, technology improvements, best practices. Where practical, the parties shall also work together to achieve synergies and price efficiencies by combining.

(d) Each of FCS and LIFELOC shall use its best efforts to provide back-up production of fuel cells as requested by either party. Transfer of any such back-up Products shall be at direct material cost plus direct labor cost plus a 30% profit margin unless otherwise agreed. All freight and duty for such back-up Products shall be the responsibility of the respective party requiring the products.

(e) FCS shall not license or grant any rights in the FCS Technology, or provide any other support of any kind whatsoever, directly or indirectly, to the following competitors and/or customers of LIFELOC.

a. Intoximeters

b. Drager

c. CMI

d. Smart Start

e. LifeSafer Interlock

f. Alcohol Detection Systems, Inc

(f) Except as expressly set forth above, FCS reserves all of its rights in the Subject Technology and shall have the absolute right and discretion to use and exploit the Subject Technology in any manner that does not conflict with or diminish the rights granted to LIFELOC in this Agreement.

2.2 Payments and Royalties.

(a) In consideration in part for the grant by FCS of rights and agreements set forth in Section 2.1, LIFELOC agrees to pay FCS US$120,000.00 in three wire transfer installments as follows:

(i) US$40,000.00 within five (5) days of the Effective Date of the executed Agreement;

(ii) US$40,000.00 upon completion of the Initial Phase to the reasonable satisfaction of LIFELOC on or prior to the two months from the date of this Agreement; and

(iii) US$40,000.00 upon completion by LIFELOC of the first successful production build and successful test of both types of fuel cells currently used by LIFELOC on or prior to three months from the date of this Agreement.

(b) LIFELOC agrees to pay FCS royalty payments for sales of Royalty-Bearing Products according to the following schedule:

(i) First year from Effective Date: US$1.00/cell with a non-binding estimate of 6,000 cells.

(ii) Second year from Effective Date: US$0.85 / cell with a non-binding estimate of 10,000 cells.

(iii) Third year from Effective Date and each year thereafter US$0.75/cell.

(c) LIFELOC agrees to pay FCS royalty payments of US$2.50 per fuel cell for sales of fuel cells by LIFELOC to third parties listed in 2.1 (e).

(d) LIFELOC agrees to pay FCS' necessary and reasonable travel expenses to LIFELOC's place of business during the technology transfer period covered by this Agreement.

(e) All payments required to be made pursuant to this Agreement shall be made no later than 30 days after the end of the calendar quarter during which such payments are due.

3. WARRANTIES AND REPRESENTATIONS

3.1 Each of FCS and LIFELOC (as to itself) respectively represents and warrants to the other that:

(a) FCS is validly existing and in good standing under the laws of the United Kingdom. LIFELOC is a corporation duly organized, validly existing and in good standing under the laws of the State of Colorado.

(b) The execution and delivery of this Agreement have been duly authorized by all necessary action on the part of such party.

(c) FCS and LIFELOC have the power and authority to execute and deliver this Agreement and to perform its obligations under this Agreement.

(d) As of the date of this Agreement, neither FCS nor LIFELOC is a party to any agreement or arrangement with any third party or under any obligation or restriction, including pursuant to its governing documents, which in any way limits or conflicts with its ability to fulfill any of its obligations under this Agreement.

(e) FCS is the owner of the entire right, title, and interest in and to the FCS Technology, FCS has the sole right to grant licenses thereunder, and FCS has not granted, and will not grant, licenses thereunder to any other entity that would restrict the rights granted to LIFELOC hereunder.

(f) There is no action, suit, proceeding, or investigation pending or, to FCS's best knowledge, threatened against FCS that questions the validity of this Agreement, the rights of FCS to the Subject Technology or the right of FCS to enter into this Agreement, or to consummate the transactions contemplated hereby.

(g) FCS is not aware of any infringement of the Subject Technology or any claims by any other party in and to the Subject Technology.

4. PROTECTION OF PROPERTY RIGHTS

4.1 Confidentiality. LIFELOC and FCS will each treat as confidential during the term of this Agreement and for a period of 5 years thereafter, all information identified or treated as confidential and pertaining to the fuel cells, testers, pricing, business strategies, suppliers, and any memorandums or e-mails between both parties (collectively, "Confidential Information''). Both parties will use the Confidential Information only to perform their respective duties under this Agreement and will not disclose the Confidential Information to third parties. In carrying out its obligations hereunder each receiving party shall use at least the same degree of care, effort and procedures in protecting the Confidential Information as such party utilizes in connection with protecting its own information of similar character.

4.2 Exemptions. The foregoing provisions of Section 4.1 shall not apply to information which:

(a) was in the public domain at the time of disclosure;

(b) became part of the public domain through no act or omission of the receiving party, its employees, agents, successors or assigns;

(c) was lawfully disclosed to the receiving party by a third party having the right to disclose it;

(d) was already known by the receiving party at the time of disclosure, other than as a result of previous disclosure by the disclosing party;

(e) was independently and lawfully developed by the receiving party; or

(f) is required by court or governmental order, law or regulation to be disclosed, provided, however, that the receiving party required to disclose such information shall provide the other party with reasonable advance notice of any such proposed disclosure to give such party a reasonable period of time in which to object to such disclosure.

4.3 Disclosures. Notwithstanding the foregoing, the parties understand and agree that LIFELOC may, to the extent it deems necessary or appropriate, disclose the Subject Technology and any improvements to potential investors, but LIFELOC agrees to use its reasonable efforts to make such disclosures subject to a confidentiality agreement containing terms substantially similar to those contained in Sections 4.1 and 4.2.

4.4 Advertising and Public Disclosure. Both parties shall use their best efforts to avoid referring to the other party's products, technology, trademarks, trade names, sales marks, or practices, in either a positive association as a sales aid, or a negative comparison as a marketing tactic.

5. INFRINGEMENT BY THIRD PARTIES

5.1 Enforcement of FCS Technology against Third Parties. FCS shall have the right, but not the obligation, to enforce at its expense any patent or intellectual property rights contained in the Subject Technology against infringement by Third Parties and shall be entitled to retain recovery from such enforcement. In the event that FCS does not file suit against a substantial infringer of such patents within six (6) months of knowledge thereof, then LIFELOC shall have the right, but not the obligation, to enforce at its expense any patent or intellectual property rights contained in the FCS Technology against infringement by Third Parties and shall be entitled to retain recovery from such enforcement.

5.2 Cooperation. In any suit or dispute involving an infringer, the parties shall cooperate fully, and upon the request and at the expense of the party bringing suit, the other party shall make available to the party bringing suit at reasonable times and under appropriate conditions all relevant personnel, records, papers, information, samples, specimens, and the like which are in its possession. In the event a party brings suit under Section 5 the other party agrees to be joined as a party plaintiff with respect to such suit, provided that the party bringing suit reimburses such other party for all out-of-pocket costs incurred by such other party in its role as party plaintiff.

6. INFRINGEMENT OF THIRD PARTY INTELLECTUAL PROPERTY

In the event of any infringement or likely or claimed infringement by any of the Subject Technology of any third party's intellectual property, the parties shall cooperate in good faith and on a mutual and reasonable basis, to negotiate and settle any dispute with any such third party concerning the Subject Technology, and otherwise resolve any such infringement and secure FCS' and LIFELOC's continued rights to the Subject Technology.

7. INDEPENDENT CONTRACTOR

It is agreed that the relationship of LIFELOC to FCS in the performance of this Agreement is as an independent licensee and that neither LIFELOC nor FCS is an agent, franchisee, partner or joint venturer of the other party. Neither party nor its agents are authorized to enter into or execute any contract, order, or other commitment and will have no authority to otherwise obligate the other party.

8. OTHER AGREEMENTS

8.1 Customer Accounts. Neither party shall knowingly pursue the customer accounts of the other party. Any questionable accounts shall be discussed between the parties and the parties shall use their best efforts to resolve customer account issues within 1 week. In particular, Smart Start has been designated a LIFELOC account.

8.2 Most Favored Licensee. FCS has not granted any rights to any third party to the FCS Technology containing more favorable terms and conditions than those provided to LIFELOC. If FCS grants any rights to FCS Technology in the future to any third party, then FCS shall promptly provide notice to LIFELOC of the terms and conditions of such grant and provide LIFELOC the option to accept the more favorable terms and conditions provided to any third party.

9. TERM AND TERMINATION

9.1 Term. The term of this Agreement shall continue until terminated in accordance with this Section 9.

9.2 Termination Events. This Agreement may also be terminated by either party:

(a) immediately, if the other party files a petition for bankruptcy or receivership or if such party's business is placed in the hands of a receiver or trustee, whether by voluntary act or otherwise;

(b) immediately, if the other party made an intentional and material misrepresentation in executing this Agreement;

(c) immediately, upon such other party's nonpayment of funds due or non-delivery of manufactured goods;

(d) for "cause," which occurs if the other party has materially breached this Agreement; provided, however, that no such termination shall be effective unless the terminating party provides at least ninety (90) days written notice (the "Termination Notice") to the other party setting forth the facts and circumstances constituting the breach. In the event that the default specified in the Termination Notice cannot be reasonably cured within ninety (90) days following receipt of the Termination Notice, a party shall not be deemed to be in default if such party has, within the ninety (90) day period after notification, presented a reasonable plan to cure the default, obtains the other party's approval of that plan, and proceeds diligently to implement said plan. If the breach specified in the Termination Notice is timely cured, as provided above, the Termination Notice shall be deemed rescinded and the Agreement shall continue in full force and effect; or

(e) by LIFELOC at any time from and after the third anniversary of the Effective Date upon LIFELOC's exercise of the option to terminate and the lump sum payment to FCS of an amount equal to three (3) times the prior years' Royalty payment measured by the immediately preceding 12 months prior to the exercise of the option. LIFELOC may exercise this option by providing written notice to FCS. The lump sum payment shall be made within 90 days of the notice. No royalties shall apply from and after the date of the notice.

9.3 Effect of Termination. Upon termination of all or part of this Agreement, nothing herein shall be construed to release either party of any obligation that matured prior to the effective date of such termination. LIFELOC may, after the effective date of such termination, continue to use all FCS Technology that was developed or otherwise acquired prior to the termination date.

9.4 Survival. The following provisions will survive expiration or termination of this Agreement: Sections 2.1(e), 4.1, 4.2, and this 9.4.

10. ASSIGNMENT AND RIGHT OF FIRST REFUSAL.

10.1 Assignment. Subject to Section 10.2, for the term of three (3) years from the Effective Date, either party may transfer or assign this Agreement, without the prior consent of the other party, in connection with a sale of substantially all of the transferring or assigning party's assets or any other Change in Control so long as the transferee or assignee has at least the same financial strength and good business reputation as the transferring or assigning party. Any transfer or assignment by either party shall not relieve the transferring or assigning party of any obligations owed to the other party under this Agreement as of the date of the transfer or

assignment. Notwithstanding the foregoing, a transferring or assigning party shall provide the other party with not less than ninety (90) days advance written notice of the transfer or assignment, including a Change in Control.

10.2 Right of First Refusal. In the event that FCS receives a bona fide offer for the sale or other transfer (each, a "Transfer") of any or all of the FCS Technology or FCS ownership interests (the "FCS Interests") which FCS intends to accept, FCS shall (i) give written notice to LIFELOC of such offer and of such intention, the name and address of the proposed purchaser ("Offeror"), the terms of the proposed transaction, a copy of any proposed form of letter of intent or contract for the sale, and such other information as LIFELOC may reasonably request ("Offer"), and (ii) shall offer to sell the FCS Interests to LIFELOC on the same terms and conditions as contained in such Offer. The giving of such notice shall constitute a warranty and representation by FCS to LIFELOC that FCS believes the Offer to be bona fide in all respects and that FCS intends to accept it subject to provisions of this Section.

Within ninety (90) days after such receipt of such notice, LIFELOC may elect by notice to FCS to purchase the FCS Interests (the "Election Notice") on the same terms and conditions as are contained in the Offer. In the event LIFELOC so elects to purchase the FCS Interests, on a closing date specified in a written notice given by LIFELOC to FCS, which date shall not be fewer than ten days nor more than sixty days after the date of the Election Notice, FCS shall tender to LIFELOC good and marketable title to the FCS Interests, free and clear of all liens, claims and encumbrances, to be exchanged for the consideration set forth in the Offer.

In the event LIFELOC does not accept the Offer as aforesaid, FCS shall be free to contract to sell and consummate the sale of the FCS Interests to the Offeror within the ninety (90) day period after the expiration of the ninety (90) day period in which LIFELOC could have accepted such Offer, on the same terms and conditions set forth in the Offer. In the event FCS shall not, within such ninety (90) day period, contract to sell and consummate the sale to the Offeror on the same terms and conditions contained in the Offer, then should FCS thereafter elect to sell the FCS Interests, whether on the same or on other terms and conditions, FCS shall be required to again comply with all of the terms and provisions of this Section.

FCS acknowledges and agrees that it will not take any actions, directly or indirectly, that will circumvent the intents and purposes of this Section.

11. MISCELLANEOUS.

11.1 Further Assurances. Without further consideration, FCS hereby agrees to execute and deliver, and to cause its respective officers, trustees, directors, employees, and agents to execute and deliver, such other instruments, and to take such other action as LIFELOC hereunder may reasonably request to more effectively license to LIFECO the rights granted hereunder, and to assist LIFELOC in the recordation of same as necessary, all in such form and substance as LIFELOC may reasonably request and at its expense.

11.2 Entire Agreement. This Agreement contains the entire understanding of the parties with respect to its subject matter and supersedes and incorporates herein all prior agreements, proposals, and understandings. No modification, supplementation, or other change to this Agreement shall be effective unless contained in a written document signed by both parties. If any provision of this Agreement is finally held by a court or arbitration panel of competent jurisdiction to be unlawful, the remaining provisions of this Agreement shall remain in full force and effect to the extent that the parties' intent can be lawfully enforced.

11.3 Notice. All written notices permitted or required to be delivered by the provisions of this Agreement shall be deemed so delivered if delivered by Federal Express, postage prepaid, or another respectable carrier, to the party to be notified at the most current principal business address of which the notifying party has been notified.

11.4 Compliance with Laws. The parties shall comply with all applicable federal, state and local laws and regulations in connection with its activities pursuant to this Agreement.

11.5 Governing Law. This Agreement shall be construed and interpreted in accordance with the laws of the State of Colorado other than those provisions governing conflicts of law.

11.6 No Waiver. Failure of a party to enforce a right under this Agreement shall not act as a waiver of that right or the ability to later assert that right relative to the particular situation involved.

11.7 Headings. Headings included herein are for convenience only and shall not be used to construe this Agreement.

11.8 Severability. If any provision of this Agreement shall be found by a court to be void, invalid or unenforceable, the same shall be reformed to comply with applicable law or stricken if not so conformable, so as not to affect the validity or enforceability of this Agreement.

11.9 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall constitute an original and all of which taken together shall constitute one and the same Agreement. A telecopy of an original signature shall be deemed an original signature.

11.10 Dispute Resolution. Except as provided in the last sentence to this paragraph, any dispute, claim or controversy arising out of this Agreement or the validity, breach, termination, enforcement or interpretation thereof, including the determination of the scope or applicability of this agreement to arbitrate, shall be determined by binding arbitration in Denver, Colorado. The arbitration shall be administered by JAMS (formerly Judicial Arbitration & Mediation Group, Inc.) pursuant to its Comprehensive Arbitration Rule and Procedures effective as of the date of the demand for arbitration, provided, however, that if the dispute at issue is for an amount of One Million Dollars ($1,000,000) or less, the arbitration shall be conducted by one arbitrator in accordance with the then current JAMS Streamlined Arbitration Rules and Procedures. As used in this paragraph, the term "Arbitrator" shall mean the one-member arbitration panel or the three-member arbitration panel, as applicable. If any arbitration or other proceeding is brought concerning this Agreement, the prevailing party will be awarded and paid its actual attorneys' fees and costs, including. at the discretion of the Arbitrator, its obligation to pay any portion of the fees of the Arbitrator. In addition, the prevailing party in any post­arbitration proceeding to collect or enforce the arbitration award shall be entitled to receive from and paid by the losing party the actual attorneys' fees and expenses incurred by the prevailing party in any such proceedings. The provisions in the preceding sentence are separate and several and shall survive the merger of this Agreement (or any document executed in connection with this Agreement) into any award or judgment on this Agreement (or any document executed in connection with this Agreement). Any actions, suits or proceedings to enforce any arbitration award, or as otherwise permitted and arising out of or relating to this Agreement, the transactions contemplated hereby or any document referred to herein shall be brought solely and exclusively in the State and County Courts located in the City and County of Denver, Colorado. Service of any process or summons shall be served on the party's address for notices. The parties waive any objection to the venue of any action, suit or proceeding arising out of this Agreement or the transactions contemplated hereby in the City and County of Denver, Colorado, and shall not plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum. The parties agree that any decisions of the Arbitrator shall be final and binding on the parties. Anything in this paragraph to the contrary notwithstanding. in the event that any person or entity not a party to this Agreement makes FCS or LIFELOC a party to a legal proceeding in any court, arising out of or relating to this Agreement, the party so sued shall have the rights to make the other parties to this Agreement a party to those legal proceedings, in which case, the subject matter in such legal proceedings (including any mandatory counterclaims) shall not be subject to the foregoing provisions requiring arbitration.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement in multiple originals by their duly authorized officers and representatives.

Lifeloc Technologies, Inc. By: /s/Barry Knott Printed Name: B. Knott Title: President & CEO 1st July 2010 Fuel Cell Sensors By: Leigh Wallington Printed Name: Leigh Title: CEO 1st June 2010

SCHEDULE A

INITIAL PHASE

FCS shall have transferred all documentation relating to the FCS Technology to LIFELOC

FCS shall have completed the training of two individuals designated by LIFELOC

LIFELOC, with the assistance of FCS, shall have completed its purchase of all equipment necessary, as provided by FCS, in connection with the production of Products and shall have the equipment set up In production mode

LIFELOC, with the assistance of FCS, shall have made suitable arrangements with all appropriate raw material vendors including substitute vendors from those used by FCS if required.

LIFELOC, with the assistance of FCS, shall have established process requirements, processes, and Quality Control procedures in connection with the production of Products.

EX-10.6

    ex10x6.htm
    
    
    

EX-10.7

Exhibit 10.7