DRIFTWOOD VENTURES, INC.
 
 

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NOTE PURCHASE AGREEMENT

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JULY 7, 2008
 
 

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DRIFTWOOD VENTURES, INC.

NOTE PURCHASE AGREEMENT

This Note Purchase Agreement (the “Agreement”) is made as of July 7, 2008 (the
“Effective Date”) by and among DRIFTWOOD VENTURES, Inc., a Delaware corporation
(the “Company”), and the persons and entities named on the Schedule of
Purchasers attached hereto (individually, a “Purchaser” and collectively, the
“Purchasers”).

RECITAL

WHEREAS, the Company has requested that the Purchasers make loans to the Company
in the aggregate principal amount of at least $7,000,000.00;

WHEREAS, the Purchasers are willing to make such loans to the Company pursuant
to the terms and conditions set forth in this Agreement;

WHEREAS, as a condition to making such loans to the Company, the Company has
agreed to grant a security interest in all of its assets to secure the Company’s
obligations under the Notes (as defined below); and

WHEREAS, certain capitalized terms have the meaning ascribed to such terms in
Section 10 below.

AGREEMENT

NOW THEREFORE, in consideration of the foregoing, and the representations,
warranties, covenants and conditions set forth below, the Company and each
Purchaser, severally and not jointly, intending to be legally bound, hereby
agree as follows:

1. Amount and Terms of the Loans; Warrants. Subject to the terms of this
Agreement, each Purchaser, severally and not jointly, agrees to lend to the
Company up to that amount (the “Total Loan Amount”) set forth opposite each such
Purchaser’s name under the heading “Total Loan Amount” on the Schedule of
Purchasers attached hereto against the issuance and delivery by the Company of a
senior secured convertible promissory note or notes in substantially the form
attached hereto as Exhibit A (each, a “Note” and collectively, the “Notes”). The
Purchasers will also receive common stock purchase warrants in the form attached
hereto as Exhibit B (each, a “Warrant” and collectively, the “Warrants”), which
Warrants when exercised will result in the issuance of common stock of the
Company as set forth therein (the “Warrant Shares”). Subject to the terms and
conditions of this Agreement, the Company agrees to issue and sell to each
Purchaser at Closing (as defined below), as partial inducement to purchase the
Notes purchased by such Purchaser at Closing and against payment by such
Purchaser of the amount set forth on the Schedule of Purchasers, a Warrant
entitling such Lender to purchase capital stock as set forth in such Warrant.
 
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2. The Closing

(a) Initial Closing. The initial closing of the sale and purchase of the Notes
(the “Initial Closing”) shall be held on the Effective Date or at such other
date and time (the “Initial Closing Date”) as the Company and holders
representing at least a majority of the aggregate principal amount of Notes
outstanding or, if no amounts are outstanding, Purchasers representing at least
a majority of the aggregate principal amount of Notes outstanding (the “Majority
Purchasers”) shall agree. At the Initial Closing, (i) each Purchaser shall
deliver to the Company by check or wire transfer of immediately available funds
such Purchaser’s Drawdown Amount (such Purchaser’s “Drawdown Amount”) and (ii)
the Company shall issue and deliver to each Purchaser a Note in favor of such
Purchaser in the corresponding principal amount equal to such Purchaser’s
Drawdown Amount, and the Company agrees to issue to each Purchaser a Warrant in
accordance with Section 1.

(b) Subsequent Closing(s). At any time and from time to time on or before July
15, 2008, the Company may issue additional Notes to one or more additional
persons or entities (an “Additional Purchaser”) at one or more subsequent
closings (each a “Subsequent Closing” and the date of closing of any Subsequent
Closing, a “Subsequent Closing Date”). At each Subsequent Closing, (i) each
Additional Purchaser shall deliver to the Company by check or wire transfer of
immediately available funds such Purchaser’s Drawdown Amount and (ii) the
Company shall issue and deliver to each Purchaser a Note in favor of such
Purchaser in the corresponding principal amount equal to such Purchaser’s
Drawdown Amount, and the Company agrees to issue to each Purchaser a Warrant in
accordance with Section 1. Each Subsequent Closing shall be made on the terms
and conditions set forth in this Agreement. At each Subsequent Closing, the
representations and warranties of the Company in Section 3 hereof (and the
Schedule of Exceptions delivered to the Purchasers in the Initial Closing (the
“Schedule of Exceptions”)) shall be deemed to speak as of the Initial Closing
Date and the Company shall have no obligation to update any such disclosure and
the representations and warranties of the Additional Purchasers in Section 4
hereof shall speak as of such Subsequent Closing.
 
(c) Additional Purchaser(s). This Agreement, including without limitation, the
Schedule of Purchasers, may be amended by the Company to include any Additional
Purchasers upon the execution by such Additional Purchaser of a counterpart
signature page hereto. Any Notes or Warrants issued pursuant to Section 2(c)
shall be deemed to be “Notes” or “Warrants” for all purposes under this
Agreement and any Additional Purchasers thereof shall be deemed to be
“Purchasers” for all purposes under this Agreement and the Security Agreement
(as hereinafter defined).
 
3. Representations, Warranties and Covenants of the Company

Except as set forth on the Schedule of Exceptions, the Company hereby represents
and warrants to each Purchaser as follows:

3.1 Organization, Good Standing and Qualification. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware. The Company has the requisite corporate power to own and
operate its properties and assets and to carry on its business as now conducted
and as proposed to be conducted. The Company is duly qualified and is authorized
to do business and is in good standing as a foreign corporation in all
jurisdictions in which the nature of its activities and of its properties (both
owned and leased) makes such qualification necessary, except for those
jurisdictions in which failure to do so would not have a Material Adverse Effect
(as defined below).
 
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3.2 Subsidiaries. The Company (i) has no subsidiaries, (ii) does not own,
directly or indirectly, any securities issued by any other corporation, business
organization or governmental authority and (iii) is not a partner or participant
in any joint venture or partnership of any kind.

3.3 Corporate Power. The Company has all requisite corporate power and authority
to execute and deliver this Agreement and the other Loan Documents (as defined
below) and to carry out and perform its obligations under the terms of this
Agreement and the other Loan Documents.

3.4 Authorization. All corporate action on the part of the Company, its
directors, officers and stockholders necessary for the authorization, execution,
delivery and performance of this Agreement and each other Loan Document by the
Company and the performance of the Company’s obligations hereunder and
thereunder, including the issuance and delivery of the Notes and the Warrant
Shares, and the reservation of the equity securities issuable upon conversion of
the Notes (the “Note Securities”) and upon conversion of the Note Securities or
exercise of the Warrants has been taken or will be taken prior to the issuance
of such equity securities. This Agreement and each of the other Loan Documents,
when executed and delivered by the Company, shall constitute valid and binding
obligations of the Company enforceable in accordance with their terms, subject
to laws of general application relating to bankruptcy, insolvency, the relief of
debtors and, with respect to rights to indemnity, subject to federal and state
securities laws.

3.5 Governmental Consents. All consents, approvals, orders, or authorizations
of, or registrations, qualifications, designations, declarations, or filings
with, any governmental authority, required on the part of the Company in
connection with the valid execution and delivery of this Agreement, the offer,
sale or issuance of the Notes, the Note Securities, the Warrants, the Warrant
Shares and the securities issuable upon conversion of the Note Securities, or
the consummation of any other transaction contemplated hereby or by any other
Loan Document have been obtained and will be effective at the Closing, other
than filings required to be made after the Closing under applicable federal and
state securities laws and as required to perfect the security interest granted
under the Security Agreement.

3.6 Compliance with Laws. The Company has complied with all laws, statutes,
rules, regulations, orders or restrictions of any domestic or foreign government
or any instrumentality or agency thereof applicable to the Company or its
operations, properties, assets, products or services, or to the conduct of its
business, and is not in violation or default (or with due notice or lapse of
time or both would be in violation or default) of any of the foregoing, the
non-compliance or violation of which would, either individually or in the
aggregate, have a material adverse effect on the business, assets, liabilities,
financial condition, operations or prospects of the Company (a “Material Adverse
Effect”). The Company has not received any notice of any violation of any laws,
governmental rules, regulations or orders, judgment, decrees, injunctions or
awards.
 
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3.7 Compliance with Other Instruments. The Company is not in violation or
default of any term of (1) its certificate of incorporation or by-laws or (ii)
any judgment, decree, order or writ binding upon the Company. Neither the
execution, delivery and performance of this Agreement or any of other Loan
Document, the consummation of the transactions contemplated hereby or thereby,
or the issuance and delivery of the Notes, the Warrants, the Note Securities,
the Warrant Shares or any other securities of the Company upon conversion of the
Note Securities will conflict with or result in a breach of or default under (or
with due notice or lapse of time or both would result in a breach or default
under) the Company’s certificate of incorporation or by-laws, or any statute,
law, rule, regulation, judgment, decree, writ, injunction, order or award of any
arbitrator, court or governmental authority, material agreement or instrument
which is applicable to the Company or by which the Company or any of its assets
is bound, or result in the creation or imposition of any Lien upon any of the
assets of the Company (other than Liens pursuant to the Security Agreement), or
the suspension, revocation, impairment, forfeiture, or nonrenewal of any
material permit, license, authorization or approval applicable to the Company,
its business or operations or any of its assets or properties. Without limiting
the foregoing, the Company has obtained all waivers necessary with respect to
any preemptive rights, rights of first refusal or similar rights, including any
notice or offering periods provided for as part of any such rights, in order for
the Company to consummate the transactions contemplated hereunder without any
third party obtaining any rights to cause the Company to offer or issue any
securities of the Company as a result of the consummation of the transactions
contemplated hereunder.

3.8 Offering. The Company and its representatives have complied and will comply
with all applicable federal and state securities laws in connection with the
offer, issuance and sale of the Notes, Warrants, Note Securities, Warrant Shares
and securities issuable upon conversion of the Note Securities. Assuming the
accuracy of the representations and warranties of the Purchasers contained in
Section 4 hereof, the offer, issue, and sale of the Notes, Warrants, Note
Securities, Warrant Shares and securities issuable upon conversion of the Note
Securities are and will be exempt from the registration and prospectus delivery
requirements of the Securities Act of 1933, as amended (the “Act”), and have
been registered or qualified (or are exempt from registration and qualification)
under the registration, permit, or qualification requirements of all applicable
state securities laws.

3.9 Litigation. There is no action, suit, claim, litigation, proceeding,
arbitration, investigation or governmental inquiry, at law or in equity, or
before or by any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, or
arbitration involving private parties (collectively, a “Proceeding”) pending or,
to the knowledge of the Company, threatened against the Company or affecting any
of its properties or assets, or, to the knowledge of the Company, against any
officer, employee, consultant or holder of any of the securities of the Company
relating to the Company or its business, which might result in a Material
Adverse Effect. There are no Proceedings pending or, or to the Company’s
knowledge, threatened (or any basis therefor known to the Company) which might
call into question the validity of this Agreement or any of the other Loan
Documents or any action taken or to be taken pursuant hereto or thereto.
 
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3.10 Bankruptcy. The Company has not admitted in writing its inability to pay
its debts generally as they become due, filed or consented to the filing against
it of a petition in bankruptcy or a petition to take advantage of any insolvency
act, made an assignment for the benefit of creditors, consented to the
appointment of a receiver for itself or for the whole or any substantial part of
its property, or had a petition in bankruptcy filed against it, been adjudicated
a bankrupt, or filed a petition or answer seeking reorganization or arrangement
under the federal bankruptcy laws or any other law or statute of the United
States of America or any other jurisdiction.

3.11 Agreements. Each material written or oral contract, instrument, agreement,
commitment, obligation, plan and arrangement to which the Company is a party or
by which it or any of its assets is bound (the “Material Agreements”) is in full
force and effect, and neither the Company nor, to the knowledge of the Company,
any other party thereto, is in breach or violation of, or default under, nor is
the Company aware of any reasonable basis for a claim of such breach or
violation of, or default under, the terms of any Material Agreement, and no
event has occurred which constitutes or, with the lapse of time or the giving of
notice or both, would constitute a breach or violation of, or default under, any
Material Agreement by the Company, or to the knowledge of the Company, any other
party thereto, in any case, which breach, violation or default could, either
individually or in the aggregate, have a Material Adverse Effect. There is no
anticipated or threatened default or material failure of performance or
observance of any obligations or conditions contained in the Company Agreements
by the Company, or, to the knowledge of the Company, by any other party thereto
which could, either individually or in the aggregate, have a Material Adverse
Effect. Except as contemplated in connection with the Initial Closing, the
Company has not provided to, or received from, any other party to any Company
Agreement, any notice of default or notice of its intention to terminate any of
the Company Agreements, and, to the knowledge of the Company, does any party to
any Company Agreement intend to terminate such Company Agreement prior to the
scheduled expiration of term of such Company Agreement.

3.12 No Undisclosed Liabilities. Except as set forth in Schedule 3.12 of the
Schedule of Exceptions or in the Company’s filings with the Securities and
Exchange Commission, the Company does not have any liabilities or obligations of
any nature whatsoever, contingent or otherwise, other than liabilities incurred
in the ordinary course of the Company’s business, which liabilities are not,
individually or in the aggregate, material.

3.13 No Liens. There are no Liens on any of the Company’s assets, properties,
interests or rights, other than the Liens contemplated by the Security
Agreement.
 
4. Representations and Warranties of the Purchasers

Each Purchaser severally, but not jointly, represents and warrants to the
Company solely to itself as follows:

4.1 Purchase for Own Account. Each Purchaser is acquiring the Notes, Warrants,
Warrant Shares and the Note Securities issuable upon conversion of the Notes
(collectively, the “Securities”) solely for its own account and beneficial
interest for investment and not for sale or with a view to distribution of the
Securities or any part thereof, and has no present intention of selling (in
connection with a distribution or otherwise), granting any participation in, or
otherwise distributing the same.
 
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4.2 Experience and Sophistication. Each Purchaser hereby represents that it has
such knowledge and experience in financial and business matters that it is
capable of evaluating the merits and risk of this investment.

4.3 Ability to Bear Economic Risk. Each Purchaser acknowledges that investment
in the Securities involves a high degree of risk, and represents that it is
able, without materially impairing its financial condition, to hold the
Securities for an indefinite period of time and to suffer a complete loss of its
investment.

4.4 Accredited Investor Status. Each Purchaser is an “accredited investor” as
such term is defined in Rule 501 under the Act.

4.5 Transfer Restrictions Imposed By Securities Laws. Each Purchaser understands
that none of the Securities have been registered under the Act or any other
applicable securities laws, and, therefore, cannot be resold unless they are
subsequently registered under the Act and other applicable securities laws or
unless an exemption from such registration is available. Each Purchaser agrees
not to sell or otherwise dispose of all or any part of the Securities except as
permitted by law, including, without limitation, any regulations under the Act
and other applicable securities laws; the Company does not have any present
intention and is under no obligation to register the Securities under the
Securities Act and other applicable securities laws.

4.6 Authorization. This Agreement and each of the other Loan Documents, when
executed and delivered by each Purchaser, shall constitute valid and binding
obligations of such Purchaser enforceable in accordance with their terms,
subject to laws of general application relating to bankruptcy, insolvency, the
relief of debtors and, with respect to rights to indemnity, subject to federal
and state securities laws. Each Purchaser has full power and authority to enter
into this Agreement and each of the other Loan Documents to which such Purchaser
shall be a Party.

5. Conditions to Purchasers’ Obligations at Initial Closing

Each Purchaser’s obligation to purchase and pay for the Notes to be purchased by
such Purchaser at the Initial Closing is subject to the complete satisfaction by
the Company (or waiver by such Purchaser), on or before the Initial Closing
Date, of the following conditions:

(a) Representations, Warranties and Agreements. At the Closing, the
representations and warranties of the Company contained herein shall be true and
correct and the Company shall have performed and complied with all conditions
and agreements required to be performed or complied with by it on or prior to
the Closing Date.

(b) Security Agreement. The Security Agreement attached hereto as Exhibit C (the
“Security Agreement”) shall have been executed and delivered by each of the
other Purchasers, the Company and the other parties thereto required to execute
the Security Agreement at or prior to the Initial Closing Date.
 
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(c) Issuance of Notes and Warrants. Each Purchaser shall have received from the
Company duly executed Notes and Warrants as required by this Agreement.

(l) General. All instruments and legal, governmental, administrative, corporate
and partnership proceedings in connection with the transactions contemplated by
Loan Documents shall be reasonably satisfactory in form and substance to each
Purchaser, and such Purchaser shall have received copies of all documents,
including, without limitation, records of corporate or other proceedings, and
any consents, licenses, approvals, permits and orders required to be secured by
the Company in connection with the transactions contemplated herein or which
such Purchaser may have reasonably requested in connection therewith.
 
6. Conditions to Purchasers’ Obligations at Each Subsequent Closing

Each Purchaser’s obligation to purchase and pay for the Notes to be purchased by
it at a Subsequent Closing is subject to the complete satisfaction by the
Company (or waiver by such Purchaser), on or before the date of such Subsequent
Closing Date, of the following conditions:

(a) Representations, Warranties and Agreements. The representations and
warranties of the Company contained herein shall be true and correct in all
material respects as of such Subsequent Closing Date and the Company shall have
performed and complied with all conditions and agreements required to be
performed or complied with by it on or prior to the Subsequent Closing Date.

(b) Absence of Defaults. No Default or Event of Default shall have occurred and
be continuing.

(c) Issuance of Notes and Warrants. Such Purchaser shall have received from the
Company a duly executed Note and Warrant as required by this Agreement.

(e) General. All instruments and legal, governmental, administrative, corporate
and partnership proceedings in connection with the transactions contemplated by
Loan Documents shall be reasonably satisfactory in form and substance to such
Purchaser, and such Purchaser shall have received copies of all documents,
including, without limitation, records of corporate or other proceedings, and
any consents, licenses, approvals, permits and orders required to be secured by
the Company in connection with the transactions contemplated herein or which
such Purchaser may have reasonably requested in connection therewith.
 
7.  Conditions to Company’s Obligations

The Company’s obligation to sell and issue the Notes pursuant to this Agreement
at the Initial Closing and at each Subsequent Closing (each, a “Closing”) is
subject to the complete satisfaction by each Purchaser purchasing Notes at such
Closing (or waiver by the Company), on or before the date of such Closing, of
the following conditions:
 
(a) Representations and Warranties. The representations and warranties of such
Purchaser contained herein shall be true and correct as of the Closing Date.
 
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(b) Payment of Purchase Price. Such Purchaser shall have delivered to the
Company, and the Company shall have received, payment in full of the purchase
price relating to the Notes and Warrants being purchased by such Purchaser at
the Closing.
 
8. Affirmative Covenants

Until such time as all Obligations have been paid in full, the Company shall do
all of the following:

(a) Government Compliance. The Company shall maintain its legal existence and
good standing in its jurisdiction of formation and maintain qualification in
each jurisdiction in which the failure to so qualify would reasonably be
expected to constitute a Material Adverse Effect. The Company shall comply in
all material respects with all laws, ordinances and regulations to which it is
subject.

(b) Financial Information; Reports and Inspection. The Company shall:

(i) deliver to the Purchasers such financial information as may be reasonably
requested by the Purchasers from time to time, which may include, but not be
limited to, quarterly financial statements; and

(ii) deliver promptly (and in no event later than 5 business days after the
occurrence thereof) notice of any Default or Event of Default.

(c) Taxes. The Company shall make timely payment of all federal, state, and
local taxes or assessments (other than taxes and assessments which the Company
is contesting in good faith, with adequate reserves maintained in accordance
with U.S. generally accepted accounting principles) and will deliver to the
Purchasers, on demand, appropriate certificates attesting to such payments.

(d) Insurance. The Company will maintain insurance consistent with past
practice.

(e) Use of Proceeds. The Purchasers acknowledge and agree that the Company will
use the proceeds of loans made by the Purchasers hereunder for the purchase of
senior secured convertible notes in Green Screen Interactive Software, Inc. in
accordance with the terms and conditions of the documents governing that
transaction.
 
9. Negative Covenants

Until such time as all Obligations shall have been paid in full, the Company
shall not do any of the following, without the prior written consent of the
Majority Purchasers:
 
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(a) Indebtedness. The Company will not create, incur, assume or suffer to exist
any (nor allow any of its Subsidiaries to create, incur, assume or suffer to
exist) any Indebtedness, except for:

(i) Indebtedness owed to the Purchasers, including, without limitation, the
Indebtedness represented by the Notes;

(ii) Indebtedness of the Company for taxes, assessments and governmental charges
or levies not yet due and payable;

(iii) unsecured current liabilities of the Company (other than for money
borrowed or for purchase money Indebtedness with respect to fixed assets)
incurred upon customary terms in the ordinary course of business; and

(iv)  $750,000 of Indebtedness to Trinad Management, LLC in connection with the
termination of that certain Management Agreement between the Company and Trinad
Management, LLC, which Indebtedness will be on the same terms and pari passu
with the Indebtedness to the Purchasers under the Loan Documents.

(b) Liens. The Company will not create, incur, assume or suffer to exist (nor
allow any of its Subsidiaries to create, incur, assume or suffer to exist) any
Liens upon or with respect to any of its property or assets, now owned or
hereafter acquired, except for the lien of Trinad Management, LLC (which lien
will be pari passu with the lien of the Purchasers) and as permitted by Section
5(f) of the Security Agreement.

(c) Guaranties. The Company will not guarantee, endorse or otherwise become
directly or contingently liable for (including, without limitation, liable by
way of agreement, contingent or otherwise, to purchase, to provide funds for
payment, to supply funds to or otherwise invest in any debtor or otherwise to
assure any creditor against loss) (and will not permit any of its Subsidiaries
so to assume, guaranty or become directly or contingently liable for) in
connection with any Indebtedness of any other Person, except guaranties by
endorsement for deposit or collection in the ordinary course of business.

(d) Dividends; Distributions; Redemptions. The Company will not make any
distributions to its stockholders, pay any dividends or distributions or redeem,
purchase, or otherwise acquire directly or indirectly any of its equity
interests; provided, the foregoing not apply to (i) distributions, dividends or
like transactions, paid in equity of the Company, or (ii) repurchases,
redemptions, or similar acquisitions of shares of the Company’s common stock
issued to or held by employees, officers, directors or other service providers
pursuant to agreements providing for such repurchase at the original purchase
price, at a purchase price not exceeding the fair market value of such common
stock, or in connection with the exercise of a contractual right of first
refusal entitling the Company to purchase the shares upon the terms offered by a
third party.

(e) Loans and Advances. Except for the loan to Green Screen Interactive
Software, Inc. as contemplated by Section 8(e) above, in connection with any
Investor Sale (as defined in the Note) or the $750,000 Indebtedness to Trinad
Management, LLC, the Company will not make any loans or advances to any Person,
including, without limitation, the Company's directors, officers and employees,
except advances to directors, officers or employees with respect to expenses
incurred by them in the ordinary course of their duties consistent with past
practice.
 
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(f) Investments. Except in connection with the consummation of the transactions
contemplated by that certain Agreement and Plan of Merger, by and among the
Company, DFTW Merger Sub, Inc., Green Screen Interactive Software, Inc. and Ron
Chaimowitz as the Representative, dated as of July 7, 2008 or in connection with
any Investor Sale, the Company will not invest in, hold or purchase any stock or
securities of any Person except: (i) readily marketable direct obligations of,
or obligations guarantied by, the United States of America or any agency
thereof; (ii) other investment grade debt securities; and (iii) mutual funds,
the assets of which are primarily invested in items of the kind described in the
foregoing clauses (i) and (ii) of this Section 9(f).

(g) No Margin Stock. No proceeds of any loan to the Company shall be used
directly or indirectly to purchase or carry any margin security or margin stock,
as such terms are used in Regulations U and X of the Board of Governors of the
Federal Reserve System, 12 CFR parts 221 and 224.

10. Certain Definitions

In addition to the terms defined above, the following terms used in this
Agreement shall be construed to have the meanings set forth or referenced below.

“Affiliate” means any Person which, directly or indirectly, controls or is
controlled by or is under common control with the Company; any officer or
director of the Company; any Person owning of record or beneficially, directly
or indirectly, 5% or more of the capital stock of the Company; and any member of
the immediate family of any of the foregoing. “Control” means possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies of any Person, whether through ownership of voting
equity, by contract or otherwise.

“Contingent Obligation” means, as applied to the Company, any direct or indirect
liability, contingent or otherwise, of that the Company with respect to (i) any
indebtedness, lease, dividend, letter of credit or other obligation of another,
including, without limitation, any such obligation directly or indirectly
guaranteed, endorsed, co-made or discounted or sold with recourse by that the
Company, or in respect of which that the Company is otherwise directly or
indirectly liable; (ii) any obligations with respect to undrawn letters of
credit, corporate credit cards, or merchant services issued or provided for the
account of that the Company; and (iii) all obligations arising under any
interest rate, currency or commodity swap agreement, interest rate cap
agreement, interest rate collar agreement, or other agreement or arrangement
designed to protect such the Company against fluctuation in interest rates,
currency exchange rates or commodity prices; provided, however, that the term
“Contingent Obligation” shall not include endorsements for collection or deposit
in the ordinary course of business.

“Default” means any event or circumstance which, with the passage of time or the
giving of notice or both, would become an Event of Default.

“Event of Default” has the meaning ascribed to such term in the Notes.
 
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“GAAP” shall mean U.S. generally accepted accounting principles as in effect
from time to time.

“Indebtedness” means (a) indebtedness for borrowed money or the deferred price
of property or services (other than trade and other payables incurred in the
ordinary course of business), such as reimbursement and other obligations for
surety bonds and letters of credit, (b) obligations evidenced by notes, bonds,
debentures or similar instruments, (c) capital lease obligations and (d)
Contingent Obligations.

“Lien” means any mortgage, deed of trust, pledge, lien, security interest, or
other charge or encumbrance (including the lien or retained security title of a
conditional vendor) of any nature upon or with respect to any of the property,
assets or rights of the Company, now owned or hereafter acquired, except:

(i) Liens for taxes, assessments or governmental charges or levies on property
of the Company if the same shall not at the time be delinquent or thereafter can
be paid without interest or penalty or which are being contested in good faith
and by appropriate proceedings which serve as a matter of law to stay the
enforcement thereof and as to which adequate reserves have been made and are
maintained;

(ii) Liens imposed by law, such as carriers', warehousemen's and mechanics'
liens and other similar Liens arising in the ordinary course of business for
sums not yet due or which are being contested in good faith and by appropriate
proceedings which serve as a matter of law to stay the enforcement thereof and
as to which adequate reserves have been made and are maintained;

(iii)  pledges or deposits under workmen's compensation laws, unemployment
insurance, social security, retirement benefits or similar legislation; and

(iv) Liens created pursuant to the Loan Documents.

“Loan Documents” shall mean this Agreement and all other agreements and
documents contemplated hereby, including, without limitation, the Notes, the
Warrants, the Security Agreement, and the UCC-1 Financing Statements executed
and filed in connection therewith.

“Obligations” means and includes all principal, interest, costs and expenses and
other amounts the Company owes any Purchaser now or later under the Loan
Documents, and including without limitation, interest accruing on the Notes
after any bankruptcy, insolvency or similar proceeding or action begins.

“Person” means any individual, sole proprietorship, partnership, limited
liability company, joint venture, company, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or government agency.
 
Accounting terms not defined in this Agreement shall be construed in accordance
with GAAP.
 
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11. Miscellaneous

(a) Binding Agreement. The terms and conditions of this Agreement shall inure to
the benefit of and be binding upon the respective successors and assigns of the
parties. Nothing in this Agreement, expressed or implied, is intended to confer
upon any third party any rights, remedies, obligations, or liabilities under or
by reason of this Agreement, except as expressly provided in this Agreement.

(b) Governing Law. This Agreement shall be governed by and construed under the
laws of the State of Delaware as applied to agreements among Delaware residents,
made and to be performed entirely within the State of Delaware, without giving
effect to conflicts of laws principles.

(c) Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.

(d) Titles and Subtitles. The titles and subtitles used in this Agreement are
used for convenience only and are not to be considered in construing or
interpreting this Agreement.

(e) Notices. All notices required or permitted hereunder shall be in writing and
shall be deemed effectively given: (a) upon personal delivery to the party to be
notified, (b) when sent by confirmed telex, electronic mail or facsimile if sent
during normal business hours of the recipient, if not, then on the next business
day, (c) five (5) days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (d) one (1) day after deposit with
a nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications shall be sent to the Company
at Driftwood Ventures, Inc., 2121 Avenue of the Stars, Suite 2550, Los Angeles,
CA 90067, and to Purchasers at the address(es) set forth on the Schedule of
Purchasers attached hereto or at such other address(es) as the Company or
Purchaser may designate by ten (10) days advance written notice to the other
parties hereto.

(f) Modification; Waiver. No modification or waiver of any provision of this
Agreement or consent to departure therefrom shall be effective unless in writing
and approved by the Company and the Majority Purchasers.

(g) Delays or Omissions. It is agreed that no delay or omission to exercise any
right, power or remedy accruing to each Purchaser, upon any breach or default of
the Company under this Agreement or any Note shall impair any such right, power
or remedy, nor shall it be construed to be a waiver of any such breach or
default, or any acquiescence therein, or of or in any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default theretofore or thereafter
occurring. It is further agreed that any waiver, permit, consent or approval of
any kind or character by Purchaser of any breach or default under this
Agreement, or any waiver by any Purchaser of any provisions or conditions of
this Agreement must be in writing and shall be effective only to the extent
specifically set forth in writing and that all remedies, either under this
Agreement, or by law or otherwise afforded to the Purchaser, shall be cumulative
and not alternative.
 
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(h) Entire Agreement. This Agreement and the Exhibits and Schedules hereto
constitute the full and entire understanding and agreement between the parties
with regard to the subjects hereof and thereof and no party shall be liable or
bound to any other party in any manner by any representations, warranties,
covenants and agreements except as specifically set forth herein or therein.

(i) Survival. All representations and warranties made by the parties hereto in
this Agreement or in any other agreement, certificate or instrument provided for
or contemplated hereby, shall survive (i) the execution and delivery hereof,
(ii) any investigations made by or on behalf of the parties and (iii) the
Closing, and shall remain in full force and effect thereafter.

(j) Indemnification. The Company hereby agrees to indemnify, exonerate and hold
harmless each Purchaser, its stockholders, officers, directors, employees and
agents and its general and limited partners and their stockholders, officers,
directors, employees and agents, and their respective successors, predecessors
and permitted assigns (each a “Purchaser Indemnitee”) from and against any and
all actions, causes of action, suits, losses, liabilities, damages and expenses,
including, without limitation, reasonable attorneys’ fees and disbursements
(“Damages”), incurred by any of the Purchaser Indemnitees as a result of or
relating to (i) any transaction entered into by the Company with third parties
which are financed or to be financed in whole or in part, directly or
indirectly, with proceeds from the sale of any of the Notes; (ii) the
performance by or enforcement against the Company of the Loan Documents or any
other agreement contemplated hereby or thereby (including, without limitation,
any failure by the Company to comply with any of its covenants) and (iii) the
Company’s breach of any representation, warranty or covenant of the Company in
any of the Loan Documents, or any agreement, instrument, certificate or document
delivered by the Company pursuant hereto or thereto.

(k) Further Assurances. From and after the date of this Agreement, upon the
request of any Purchaser or the Company, the Company and the Purchasers shall
execute and deliver such instruments, documents and other writings as may be
reasonably necessary or desirable to confirm and carry out and to effectuate
fully the intent and purposes of this Agreement.

[Signature Page Follows]
 
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IN WITNESS WHEREOF, each Purchaser and the Company have caused their respective
signature page to this Note Purchase Agreement to be duly executed as of the
date first written above.
 

 
COMPANY:
 
 
DRIFTWOOD VENTURES, INC.
 
 
By:/s/ Charles Bentz
Name: Charles Bentz
Title: Chief Financial Officer

 
 
[Additional Signature Page Follows]

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IN WITNESS WHEREOF, each Purchaser and the Company have caused their respective
signature page to this Note Purchase Agreement to be duly executed as of the
date first written above.
 
 

 
PURCHASERS:
 
 
TRINAD CAPITAL MASTER FUND, LTD.
 
 
By: /s/ Jay Wolf
Name: Jay Wolf
Title: Managing Director of Trinad Management, LLC, its Manager
 
 
 
BACK BAY LLC
 
 
By: /s/ Howard Smuckler 
Name: Howard Smuckler
Title: Chief Financial Officer of Roxbury LLC, its Manager

 

[Additional Signature Page Follows]

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Counterpart Signature Page
to
Note Purchase Agreement

By execution and delivery of this Counterpart Signature Page, the undersigned
does hereby become a party to that certain Note Purchase Agreement by and among
Driftwood Ventures, Inc., a Delaware corporation (the “Company”), and the
Purchasers (as defined therein) dated as of July 7, 2008 (the “Note Purchase
Agreement”), as a Purchaser, and is entitled to all of the benefits under and is
subject to all of the obligations, restrictions and limitations set forth in the
Note Purchase Agreement that are applicable to the Purchasers. This Counterpart
Signature Page shall take effect and shall become a part of said Note Purchase
Agreement immediately upon execution.
 

 
PURCHASER:
 
CIPHER 06 LLC
 
 
 
By: /s/ Jason Adelman
Name: Jason Adelman
Title: Managing Member

[Additional Signature Page Follows]
 
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SCHEDULES AND EXHIBITS

Schedule of Purchasers

Exhibit A:
Form of Senior Secured Convertible Promissory Note

Exhibit B:
Form of Warrant

Exhibit C:
Form of Security Agreement

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SCHEDULE OF PURCHASERS

Name and Address
Total Loan Amount
Warrants
Trinad Capital Master Fund, Ltd.
2121 Avenue of the Stars
Suite 1650
Los Angeles, CA 90067
 
$2,500,000
2,272,727
Back Bay LLC
c/o Roxbury LLC
6355 Topanga Canyon Boulevard
Suite 335
Woodland Hills, CA 61367
 
$2,000,000
1,818,182
Cipher 06 LLC
590 Madison Ave - Fifth Floor
New York, NY 10022
 
$150,000
136,364
 
TOTAL
 
$________
 
__________

 
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