That Warrant holders are entitled to exercise and receive dividends

S&L were prohibited from exercising for 2 reasons. 1st they could not hold >9.9% and

2nd the max number of shares outstanding were limited by teh 400mil

authorized.

Now I am probably the most critical anto-divi poster and got flamed bby Ron and others since I though the divi money was a waste and

unnecessarily enriched S&L at the expenseof the company's long term strategy bit

that is water under the bridge. But I do beleive that teh dividend soaid to

S&L were based on the number of shares held plus the number of shares that

could be held based on a cashless exercise.

The point is it's only illegal/fraud if the convertable contract specificly precludes emtitlement to diviende and

other distributions

Here's a portion of sample contract entitling the warrant holder to divi's anyyime

that the holder converts the warrants

(f) DISTRIBUTION OF ASSETS. In case the Company shall

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declare or make any distribution of its assets (or rights to acquire its assets)

to holders of Common Stock as a partial liquidating dividend, by way of return

of capital or otherwise (including any dividend or distribution to the Company's

shareholders of cash or shares (or rights to acquire shares) of capital stock of

a subsidiary) (a "DISTRIBUTION") at any time after the closing under the

Securities Purchase Agreement, then the holder of this Warrant shall be entitled

upon exercise of this Warrant for the purchase of any or all of the shares of

Common Stock subject hereto, to receive the amount of such assets (or rights)

which would have been payable to the holder had such holder been the holder of

such shares of Common Stock on the record date for the determination of

shareholders entitled to such Distribution.