Exhibit 10.12
 
SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
 
This SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT (the “Agreement”)
is dated as of June __, 2011 by and among Options Media Group Holdings, Inc., a
Nevada corporation (the “Company”), and each of the purchasers of shares of
Series A Convertible Preferred Stock of the Company identified on the signature
pages hereto (individually, a “Purchaser” and collectively, the “Purchasers”).
 
The parties hereto agree as follows:
 
ARTICLE I.
 
PURCHASE AND SALE OF PREFERRED STOCK
 
Section 1.01 Purchase and Sale of Stock. Upon the following terms and
conditions, the Company shall issue and sell to the Purchasers and each of the
Purchasers shall purchase from the Company, the number of shares of the
Company’s Series A Convertible Preferred Stock, par value $0.001 per share, at a
purchase price equal to $100 per share (the “Preferred Shares”), convertible
into shares of the Company’s common stock, par value $0.001 per share (the
“Common Stock”), in the amounts set forth on the signature pages hereto. The
designation, rights, preferences and other terms and provisions of the Series A
Convertible Preferred Stock are set forth in the Certificate of Designation
attached hereto as Exhibit A (the “Certificate of Designation”). The Company and
the Purchasers are executing and delivering this Agreement in accordance with
and in reliance upon the exemption from securities registration afforded by Rule
506 of Regulation D (“Regulation D”) as promulgated by the United States
Securities and Exchange Commission (the “Commission”) under the Securities Act
of 1933, as amended (the “Securities Act”), or Section 4(2) of the Securities
Act.  All funds shall be deposited and held in escrow with Grushko & Mittman,
P.C., 515 Rockaway Avenue, Valley Stream, NY 11581, and promptly refunded
without interest or deduction unless at least $1,000,000 of Preferred Shares and
Warrants have been sold and paid for by June 30, 2011.
 
Section 1.02 Warrants. The Company agrees to issue to each of the Purchasers a
warrant in substantially the form attached hereto as Exhibit B (the
“Warrants”),  to purchase a number of shares of Common Stock equal to one
hundred percent (100%) of the number of Conversion Shares (as defined in Section
1.03 hereof) initially issuable upon conversion of such Purchaser’s Preferred
Shares purchased. The number of Warrants each Purchaser shall be issued pursuant
to this Agreement is set forth on the signature pages hereto. The Warrants shall
have an initial term of five (5) years from the Closing Date and shall have an
exercise price per share equal to the Warrant Price (as defined in the
applicable Warrant), subject to adjustment pursuant to the terms of the
Warrants.
 
Section 1.03 Conversion Shares. The Company has authorized, and has reserved and
covenants to continue to reserve, free of preemptive rights and other similar
contractual rights of shareholders, a number of shares of Common Stock equal to
one hundred twenty-five percent (125%) of the number of shares of Common Stock
as shall from time to time be sufficient to effect the conversion of all of the
Preferred Shares and exercise of the Warrants then outstanding. Any shares of
Common Stock issuable upon conversion of the Preferred Shares and exercise of
the Warrants (and such shares when issued) are herein referred to as the
“Conversion Shares” and the “Warrant Shares,” respectively. The Preferred
Shares, the Conversion Shares and the Warrant Shares are sometimes collectively
referred to as the “Shares”.
 
 
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Section 1.04 Purchase Price and Closing. Subject to the terms and conditions
hereof, the Company agrees to issue and sell to the Purchasers and, in
consideration of and in express reliance upon the representations, warranties,
covenants, terms and conditions of this Agreement, each Purchaser, severally but
not jointly with respect to the amounts set forth on such Purchaser’s signature
page hereto, agrees to purchase the Preferred Shares and the Warrants for an
aggregate purchase price of up to $1,900,000 (the “Purchase Price”). The closing
of the purchase and sale of the Preferred Shares and the Warrants to be acquired
by the Purchasers from the Company under this Agreement shall take place at the
offices of Grushko & Mittman, P.C., 515 Rockaway Avenue, Valley Stream, New York
11581 (the “Closing”) at 10:00 a.m., New York time (i) on or before June 30,
2011; provided, that all of the conditions set forth in Article IV hereof and
applicable to the Closing shall have been fulfilled or waived in accordance
herewith, or (ii) at such other time and place or on such date as the Purchasers
and the Company may agree upon (the “Closing Date”). Subject to the terms and
conditions of this Agreement, the Company shall deliver or cause to be delivered
to the Escrow Agent (as hereinafter defined) prior to the Closing (x) a
certificate for the number of Preferred Shares set forth on such Purchaser’s
signature page hereto, (y) a Warrant to purchase such number of shares of Common
Stock as is set forth on such Purchaser’s signature page hereto and (z) any
other documents required to be delivered pursuant to Article IV hereof.
 
Section 1.05 Escrow.  Pending the Closing, all funds paid hereunder shall be
deposited by the Purchasers in a separate account maintained by Grushko &
Mittman, P.C. (the “Escrow Agent”) for the benefit of Purchasers (the “Escrow
Account”). At the Closing, the Purchase Price shall be paid by the Purchasers to
the Company by wire transfer pursuant to the release of the funds held in the
Escrow Account to an account designated in writing by the Company prior to the
Closing.
 
ARTICLE II.
 
REPRESENTATIONS AND WARRANTIES
 
Section 2.01 Representations and Warranties of the Company. The Company hereby
represents and warrants to the Purchasers, as of the date hereof and the Closing
Date (except as set forth on the Schedule of Exceptions attached hereto with
each numbered Schedule corresponding to the section number herein), as follows:
 
(a) Organization, Good Standing and Power. The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Nevada and has the requisite corporate power to own, lease and operate its
properties and assets and to conduct its business as it is now being conducted.
The Company does not have any subsidiaries except as set forth in the Company’s
Annual Report on Form 10-K for the year ended December 31, 2010, including the
accompanying financial statements filed with the Commission on May 17, 2011 (the
“Form 10-K”), or on Schedule 2.01(g) hereto. The Company and each such
subsidiary is duly qualified as a foreign corporation to do business and is in
good standing in every jurisdiction in which the nature of the business
conducted or property owned by it makes such qualification necessary except for
any jurisdiction(s) (alone or in the aggregate) in which the failure to be so
qualified will not have a Material Adverse Effect (as defined in Section 2.01(c)
hereof) on the Company’s financial condition.
 
(b) Authorization; Enforcement. The Company has the requisite corporate power
and authority to enter into and perform this Agreement, the Escrow Agreement by
and among the Company, the Purchasers and the Escrow Agent, dated as of the date
hereof, substantially in the form of Exhibit C attached hereto (the “Escrow
Agreement”), the Certificate of Designation and the Warrants (collectively, the
“Transaction Documents”), to issue and sell the Shares and the Warrants in
accordance with the terms hereof and otherwise carry out its obligations
thereunder. The execution, delivery and performance of the Transaction Documents
by the Company and the consummation by it of the transactions contemplated
hereby and thereby have been duly and validly authorized by all necessary
corporate action, and no further consent or authorization of the Company or its
Board of Directors or shareholders is required. This Agreement has been duly
executed and delivered by the Company. The other Transaction Documents will have
been duly executed and delivered by the Company at the Closing. Each of the
Transaction Documents constitutes, or shall constitute when executed and
delivered, a valid and binding obligation of the Company enforceable against the
Company in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation, conservatorship, receivership or similar laws relating to, or
affecting generally the enforcement of, creditor’s rights and remedies or by
other equitable principles of general application.
 
 
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(c) Capitalization. The authorized capital stock of the Company, the number of
shares of such capital stock issued and outstanding, and the number of shares of
capital stock reserved for issuance upon the exercise or conversion of all
outstanding warrants, stock options, and other securities issued by the Company
are set forth on Schedule 2.01(c) hereto. All of the outstanding shares of the
Common Stock and any other outstanding security of the Company have been duly
and validly authorized, are validly issued, fully paid and nonassessable and
were issued in accordance with the registration or qualification provisions of
the Securities Act, or pursuant to valid exemptions therefrom. Except as set
forth in this Agreement and as set forth on Schedule 2.01(c) hereto, no shares
of Common Stock or any other security of the Company are entitled to preemptive
rights, registration rights, rights of first refusal or similar rights and there
are no outstanding options, warrants, scrip, rights to subscribe to, call or
commitments of any character whatsoever granted by the Company or existing
pursuant to agreements to which the Company is a party and relating to, or
securities or rights convertible into, any shares of capital stock of the
Company. Furthermore, except as set forth in this Agreement and as set forth on
Schedule 2.01(c) hereto, there are no contracts, commitments, understandings, or
arrangements by which the Company is or may become bound to issue additional
shares of the capital stock of the Company or options, securities or rights
convertible into shares of capital stock of the Company. Except as set forth on
Schedule 2.01(c) hereto, the Company is not a party to or bound by any agreement
or understanding granting registration or anti-dilution rights to any person
with respect to any of its equity or debt securities. Except as set forth on
Schedule 2.01(c) hereto, the Company is not a party to, and it has no knowledge
of, any agreement or understanding restricting the voting or transfer of any
shares of the capital stock of the Company. Except as disclosed on Schedule
2.01(c) or 2.01(k) hereto, (i) there are no outstanding debt securities, or
other form of material debt of the Company or any of its subsidiaries, (ii)
there are no outstanding securities of the Company or any of its subsidiaries
that contain any redemption or similar provisions, and there are no contracts,
commitments, understandings, agreements or arrangements by which the Company or
any of its subsidiaries is or may become bound to redeem a security of the
Company or any of its subsidiaries, (iii) the Company does not have any stock
appreciation rights or “phantom stock” plans or agreements, or any similar plan
or agreement and (iv) as of the date of this Agreement, except as disclosed on
Schedule 2.01(c) hereto, to the Company’s and each of its subsidiaries’
knowledge, no Person (as defined below) or group of related Persons beneficially
owns or has the right to acquire by agreement with or by obligation binding upon
the Company, beneficial ownership of in excess of 5% of the Common Stock. Except
as set forth on Schedule 2.01(c), any Person with any right to purchase
securities of the Company that would be triggered as a result of the
transactions contemplated hereby or by any of the other Transaction Documents
has waived such rights or the time for the exercise of such rights has passed.
Except as set forth on Schedule 2.01(c) hereto, there are no options, warrants
or other outstanding securities of the Company, the vesting of which will be
accelerated by the transactions contemplated hereby or by any of the other
Transaction Documents. The Company has furnished or made available to the
Purchasers true and correct copies of the Company’s Articles of Incorporation as
in effect on the date hereof (the “Articles”), and the Company’s Bylaws as in
effect on the date hereof (the “Bylaws”). For purposes of this Agreement,
“Person” shall mean an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision thereof)
or other entity of any kind. For the purposes of this Agreement, “Material
Adverse Effect” means any material adverse effect on the business, operations,
assets, properties, prospects or financial condition of the Company and its
subsidiaries, taken as a whole, and/or any condition, circumstance, or situation
that would prohibit or otherwise interfere with the ability of the Company to
perform any of its obligations under the Transaction Documents in any material
respect.
 
(d) Issuance of Shares and Warrants. The Preferred Shares and the Warrants to be
issued at the Closing have been duly authorized by all necessary corporate
action and the Preferred Shares, when paid for or issued in accordance with the
terms hereof, shall be validly issued and outstanding, fully paid and
nonassessable and entitled to the rights and preferences set forth in the
Certificate of Designation. When the Conversion Shares and the Warrant Shares
are issued in accordance with the terms of the Certificate of Amendment and the
Warrants, respectively, such shares will be duly authorized by all necessary
corporate action and validly issued and outstanding, fully paid and
nonassessable, and the holders shall be entitled to all rights accorded to a
holder of Common Stock.
 
 
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(e) No Conflicts. The execution, delivery and performance of the Transaction
Documents by the Company, the performance by the Company of its obligations
under the Certificate of Designation, and the consummation by the Company of the
transactions contemplated herein and therein do not and will not (i) conflict
with or violate any provision of the Company’s Articles or Bylaws or the
organizational documents of any subsidiary of the Company, (ii) conflict with,
or constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, mortgage, deed of
trust, indenture, note, bond, license, lease agreement, instrument or obligation
to which the Company or any subsidiary of the Company is a party or by which it
or its properties or assets are bound, (iii) create or impose a lien, mortgage,
security interest, charge or encumbrance of any nature on any property of the
Company or any subsidiary of the Company under any agreement or any commitment
to which the Company or any subsidiary of the Company is a party or by which the
Company is bound or by which any of its respective properties or assets are
bound or (iv) result in a violation of any federal, state, local or foreign
statute, rule, regulation, order, judgment or decree (including federal and
state securities laws and regulations) applicable to the Company or any of its
subsidiaries or by which any property or asset of the Company or any of its
subsidiaries are bound or affected, except, in all cases other than violations
pursuant to clauses (i) and (iv) above, for such conflicts, defaults,
terminations, amendments, accelerations, cancellations and violations as would
not, individually or in the aggregate, have or reasonably be expected to have a
Material Adverse Effect.
 
(f) Commission Documents, Financial Statements.  The Company is required to file
Forms 10-K, 10-Q and 8-K under Section 15(d) of the Securities Exchange Act of
1934, as amended (the “Exchange Act”), and the Company has filed all reports,
schedules, forms, statements and other documents required to be filed by it with
the Commission pursuant to the reporting requirements of the Exchange Act,
including material filed pursuant to Section 15(d) of the Exchange Act from
January 1, 2010 through the date hereof (all of the foregoing including filings
incorporated by reference therein being referred to herein as the “Commission
Documents”).  The Company has delivered or made available to each of the
Purchasers true and complete copies of the Commission Documents.  The Company
has not provided to the Purchasers any material non-public information or other
information which, according to applicable law, rule or regulation, was required
to have been disclosed publicly by the Company but which has not been so
disclosed, other than with respect to the transaction contemplated by this
Agreement.  At the times of their respective filings, the Commission Documents
complied in all material respects with the requirements of the Exchange Act and
the rules and regulations of the Commission promulgated thereunder and other
federal, state and local laws, rules and regulations applicable to such
documents and, as for their respective dates, none of the Commission Documents
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.  The financial statements of the Company included in the Commission
Documents comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the Commission or other
applicable rules and regulations with respect thereto.  Such financial
statements have been prepared in accordance with United States generally
accepted accounting principles (“GAAP”) applied on a consistent basis during the
periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto or (ii) in the case of unaudited interim
statements, to the extent they may not include footnotes or may be condensed or
summary statements), and fairly present in all material respects the financial
position of the Company and its subsidiaries as of the dates thereof and the
results of operations and cash flows for the periods then ended (subject, in the
case of unaudited statements, to normal year-end audit adjustments).
 
 
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(g) Subsidiaries.  Schedule 2.01(g) hereto sets forth each subsidiary of the
Company, showing the jurisdiction of its incorporation or organization and
showing the percentage of each Person’s ownership. For the purposes of this
Agreement, “subsidiary” shall mean any corporation or other entity of which at
least a majority of the securities or other ownership interest having ordinary
voting power (absolutely or contingently) for the election of directors or other
persons performing similar functions are at the time owned directly or
indirectly by the Company and/or any of its other subsidiaries. All of the
outstanding shares of capital stock of each subsidiary have been duly authorized
and validly issued, and are fully paid and nonassessable. There are no
outstanding preemptive, conversion or other rights, options, warrants or
agreements granted or issued by or binding upon any subsidiary for the purchase
or acquisition of any shares of capital stock of any subsidiary or any other
securities convertible into, exchangeable for or evidencing the rights to
subscribe for any shares of such capital stock. Neither the Company nor any
subsidiary is subject to any obligation (contingent or otherwise) to repurchase
or otherwise acquire or retire any shares of the capital stock of any subsidiary
or any convertible securities, rights, warrants or options of the type described
in the preceding sentence. Neither the Company nor any subsidiary is party to,
nor has any knowledge of, any agreement restricting the voting or transfer of
any shares of the capital stock of any subsidiary.
 
(h) No Material Adverse Change. Since December 31, 2010, neither the Company nor
any subsidiary has experienced or suffered any Material Adverse Effect or any
event, occurrence or development that could reasonably be expected to result in
a Material Adverse Effect.
 
(i) No Undisclosed Liabilities. Neither the Company nor any of its subsidiaries
has any liabilities, obligations, claims or losses (whether liquidated or
unliquidated, secured or unsecured, absolute, accrued, contingent or otherwise)
other than those incurred in the ordinary course of the Company’s or its
subsidiaries respective businesses since December 31, 2010 and which,
individually or in the aggregate, do not or would not have a Material Adverse
Effect on the Company or its subsidiaries.
 
(j) No Undisclosed Events or Circumstances. No event or circumstance has
occurred or exists with respect to the Company or its subsidiaries or their
respective businesses, properties, prospects, operations or financial condition,
which, under applicable law, rule or regulation, requires public disclosure or
announcement by the Company but which has not been so publicly announced or
disclosed.
 
 
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(k) Indebtedness. Schedule 2.01(k) hereto sets forth as of a recent date all
outstanding secured and unsecured Indebtedness of the Company or any subsidiary,
or for which the Company or any subsidiary has commitments. For the purposes of
this Agreement, “Indebtedness” shall mean (a) any liabilities for borrowed money
or amounts owed in excess of $50,000 (other than trade accounts payable incurred
in the ordinary course of business), (b) all guaranties, endorsements and other
contingent obligations in respect of Indebtedness of others, whether or not the
same are or should be reflected in the Company’s balance sheet (or the notes
thereto), except guaranties by endorsement of negotiable instruments for deposit
or collection or similar transactions in the ordinary course of business; and
(c) the present value of any lease payments in excess of $50,000 due under
leases required to be capitalized in accordance with GAAP. Neither the Company
nor any subsidiary is in default with respect to any Indebtedness.
 
(l) Title to Assets. Each of the Company and its subsidiaries has good and
marketable title to all of its real and personal property reflected in the Form
10-K, free and clear of any mortgages, pledges, charges, liens, security
interests or other encumbrances, except for those that, individually or in the
aggregate, do not cause and are not reasonably likely to cause a Material
Adverse Effect. All leases of the Company and each of its subsidiaries are valid
and subsisting and in full force and effect.
 
(m) Actions Pending. Except as disclosed in the Commission Documents, there is
no action, suit, claim, investigation, arbitration, alternate dispute resolution
proceeding or any other proceeding pending or, to the knowledge of the Company,
threatened, against or involving the Company, any subsidiary or any of their
respective properties or assets. There are no outstanding orders, judgments,
injunctions, awards or decrees of any court, arbitrator or governmental or
regulatory body against the Company or any subsidiary.
 
(n) Compliance with Law. The business of the Company and its subsidiaries has
been and is presently being conducted in accordance with all applicable federal,
state, local and foreign governmental laws, rules, regulations and ordinances,
except for such noncompliance that, individually or in the aggregate, would not
cause a Material Adverse Effect. The Company and each of its subsidiaries have
all franchises, permits, licenses, consents and other governmental or regulatory
authorizations and approvals necessary for the conduct of its business as now
being conducted by it unless the failure to possess such franchises, permits,
licenses, consents and other governmental or regulatory authorizations and
approvals, individually or in the aggregate, could not reasonably be expected to
have a Material Adverse Effect.
 
(o) Taxes. The Company and each of its subsidiaries has accurately prepared and
filed all federal, state, foreign and other tax returns required by law to be
filed by it, has paid or made provisions for the payment of all taxes shown to
be due and all additional assessments, and adequate provisions have been and are
reflected in the financial statements of the Company and its subsidiaries for
all current taxes and other charges to which the Company or any subsidiary is
subject and that are not currently due and payable. None of the federal income
tax returns of the Company or any subsidiary have been audited by the Internal
Revenue Service (the “IRS”). The Company has no knowledge of any additional
assessments, adjustments or contingent tax liability (whether federal or state)
of any nature whatsoever, whether pending or threatened against the Company or
any subsidiary for any completed tax period, nor of any basis for any such
assessment, adjustment or contingency.
 
 
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(p) Certain Fees. Except as set forth on Schedule 2.01(p) hereto, no brokers,
finders or financial advisory fees or commissions will be payable by the Company
or any subsidiary or any Purchaser with respect to the transactions contemplated
by this Agreement. The Purchasers shall have no obligation with respect to any
fees or with respect to any claims (other than such fees or commissions owed by
a Purchaser pursuant to written agreements executed by such Purchaser which fees
or commissions shall be the sole responsibility of such Purchaser) made by or on
behalf of other Persons for fees of a type contemplated in this Section that may
be due in connection with the transactions contemplated by this Agreement.
 
(q) Disclosure. Neither this Agreement or the Schedules hereto nor any other
documents, certificates or instruments furnished to the Purchasers by or on
behalf of the Company or any subsidiary in connection with the transactions
contemplated by this Agreement (the “Disclosure Materials”) contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements made herein or therein, in the light of the circumstances
under which they were made herein or therein, not misleading.
 
(r) Intellectual Property. Except as disclosed on Schedule 2.01(r), the Company
and each of the subsidiaries owns or possesses all patents, trademarks, domain
names (whether or not registered) and any patentable improvements or
copyrightable derivative works thereof, websites and intellectual property
rights relating thereto, service marks, trade names, copyrights, licenses and
authorizations as set forth in the Form 10-K, and all rights with respect to the
foregoing, which are necessary for the conduct of its business as now conducted
without any conflict with the rights of others.
 
(s) Environmental Compliance. The Company and each of its subsidiaries have
obtained all approvals, authorization, certificates, consents, licenses, orders
and permits or other similar authorizations of all governmental authorities, or
from any other person, that are required under any Environmental Laws and used
in its business or in the business of any of its subsidiaries, unless the
failure to possess such approvals, authorizations, certificates, consents,
licenses, orders or permits, individually or in the aggregate could not
reasonably be expected to have a Material Adverse Effect. “Environmental Laws”
shall mean all applicable laws relating to the protection of the environment,
including, without limitation, all requirements pertaining to reporting,
licensing, permitting, controlling, investigating or remediating emissions,
discharges, releases or threatened releases of hazardous substances, chemical
substances, pollutants, contaminants or toxic substances, materials or wastes,
whether solid, liquid or gaseous in nature, into the air, surface water,
groundwater or land, or relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of hazardous
substances, chemical substances, pollutants, contaminants or toxic substances,
material or wastes, whether solid, liquid or gaseous in nature. Except for such
instances as would not individually or in the aggregate have a Material Adverse
Effect, the Company and each of its subsidiaries are also in compliance with all
other limitations, restrictions, conditions, standards, requirements, schedules
and timetables required or imposed under all Environmental Laws and there are no
past or present events, conditions, circumstances, incidents, actions or
omissions relating to or in any way affecting the Company or its subsidiaries
that violate or may violate any Environmental Law after the Closing Date or that
may give rise to any environmental liability, or otherwise form the basis of any
claim, action, demand, suit, proceeding, hearing, study or investigation (i)
under any Environmental Law, or (ii) based on or related to the manufacture,
processing, distribution, use, treatment, storage (including without limitation
underground storage tanks), disposal, transport or handling, or the emission,
discharge, release or threatened release of any hazardous substance.
 
 
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(t) Books and Record Internal Accounting Controls. The books and records of the
Company and its subsidiaries accurately reflect in all material respects the
information relating to the business of the Company and its subsidiaries, the
location and collection of their assets, and the nature of all transactions
giving rise to the obligations or accounts receivable of the Company or any
subsidiary. The Company and each of its subsidiaries maintain a system of
internal accounting controls sufficient, in the judgment of the Company, to
provide reasonable assurance that (i) transactions are executed in accordance
with management’s general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with GAAP and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management’s general or specific
authorization and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate actions are taken
with respect to any differences. The Company has established disclosure controls
and procedures for the Company and designed such disclosure controls and
procedures to ensure that material information relating to the Company,
including its subsidiaries, is made known to the certifying officers by others
within those entities.
 
(u) Material Agreements. Except as disclosed on Schedule 2.01(u), neither the
Company nor any subsidiary is a party to any written or oral contract,
instrument, agreement, commitment, obligation, plan or arrangement, a copy of
which would be required to be filed with the Commission as an exhibit to a
registration statement on Form S-1 or applicable form (collectively, “Material
Agreements”) if the Company or any subsidiary were registering securities under
the Securities Act that has not been so filed with the Commission and publicly
available at the Commission’s EDGAR website. The Company and each of its
subsidiaries have in all material respects performed all the obligations
required to be performed by them to date under the foregoing agreements, have
received no notice of default and are not in default under any Material
Agreement now in effect, the result of which could cause a Material Adverse
Effect. No written or oral contract, instrument, agreement, commitment,
obligation, plan or arrangement of the Company or of any subsidiary limits or
shall limit the payment of dividends on the Company’s Preferred Shares, other
preferred stock, if any, or its Common Stock.
 
(v) Transactions with Affiliates. Except as set forth in the Form 10-K, or a
Form 10-Q or a Form 8-K filed with the Commission after the filing date of the
Form 10-K or as contemplated by Schedule 3.16(a), there are no loans, leases,
agreements, contracts, royalty agreements, management contracts or arrangements
or other continuing transactions between (i) the Company or any subsidiary on
the one hand, and (ii) on the other hand, any officer or director of the
Company, or any of its subsidiaries, or any person owning 5% or more of any
class of the Company’s voting securities or any member of the immediate family
of such officer, director or shareholder or any corporation or other entity
controlled by such officer, director or shareholder, or a member of the
immediate family of such officer, director or shareholder (each an “Affiliate”).
 
(w) Securities Act of 1933. Based in material part upon the representations
herein of the Purchasers, the Company has complied and will comply with all
applicable federal and state securities laws in connection with the offer,
issuance and sale of the Preferred Shares and the Warrants hereunder. Neither
the Company nor anyone acting on its behalf, directly or indirectly, has sold,
offered to sell or solicited offers to buy any of the Preferred Shares, the
Warrants or similar securities to, or solicited offers with respect thereto
from, or entered into any preliminary conversations or negotiations relating
thereto with, any person, or has taken or will take any action so as to bring
the issuance and sale of any of the Preferred Shares and the Warrants under the
registration provisions of the Securities Act and applicable state securities
laws, and neither the Company nor any of its affiliates, nor any person acting
on its or their behalf, has engaged in any form of general solicitation or
general advertising (within the meaning of Regulation D under the Securities
Act) in connection with the offer or sale of any of the Preferred Shares and the
Warrants.
 
 
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(x) Governmental Approvals. Except for the filing of any notice subsequent to
the Closing Date that may be required under applicable state and/or federal
securities laws (which if required, shall be filed on a timely basis), including
the filing of a Form D and the filing of the Certificate of Designation with the
Secretary of State for the State of Nevada, no authorization, consent, approval,
license, exemption of, filing or registration with any court or governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, is or will be necessary for, or in connection with, the execution or
delivery of the Preferred Shares and the Warrants, or for the performance by the
Company of its obligations under the Transaction Documents.
 
(y) Employees. Neither the Company nor any subsidiary has any collective
bargaining arrangements or agreements covering any of its employees. Except as
set forth on Schedule 2.01(y) hereto, neither the Company nor any subsidiary has
any employment contract, agreement regarding proprietary information,
non-competition agreement, non-solicitation agreement, confidentiality
agreement, or any other similar contract or restrictive covenant, relating to
the right of any officer, employee or consultant to be employed or engaged by
the Company or such subsidiary. No officer, consultant or key employee of the
Company or any subsidiary whose termination, either individually or in the
aggregate, could have a Material Adverse Effect, has terminated or, to the
knowledge of the Company, has any present intention of terminating his or her
employment or engagement with the Company or any subsidiary.
 
(z) Absence of Certain Developments. Except as set forth on Schedule 2.01(z)
hereto, since December 31, 2010 except as disclosed in the Form 10-K or Form
10-Q filed for the three months ended March 31, 2011, neither the Company nor
any subsidiary has:
 
(i) issued any stock, bonds or other corporate securities or any rights, options
or warrants with respect thereto;
 
(ii) borrowed any amount or incurred or become subject to any liabilities
(absolute or contingent) in excess of $50,000, except current liabilities
incurred in the ordinary course of business that are comparable in nature and
amount to the current liabilities incurred in the ordinary course of business
during the comparable portion of its prior fiscal year, as adjusted to reflect
the current nature and volume of the Company’s or such subsidiary’s business;
 
(iii) discharged or satisfied any material lien or encumbrance or paid any
material obligation or liability (absolute or contingent), other than current
liabilities paid in the ordinary course of business;
 
(iv) declared or made any payment or distribution of cash or other property to
shareholders with respect to its stock, or purchased or redeemed, or made any
agreements so to purchase or redeem, any shares of its capital stock;
 
(v) sold, assigned or transferred any other tangible assets, or canceled any
material debts or claims, except in the ordinary course of business;
 
 
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(vi) sold, assigned or transferred any material patent rights, trademarks, trade
names, copyrights, trade secrets or other intangible assets or intellectual
property rights, or disclosed any proprietary confidential information to any
person except to customers in the ordinary course of business or to the
Purchasers or their representatives;
 
(vii) suffered any substantial losses or waived any rights of material value,
whether or not in the ordinary course of business, or suffered the loss of any
material amount of prospective business from an existing customer;
 
(viii) made any changes in employee compensation except in the ordinary course
of business and consistent with past practices;
 
(ix) made capital expenditures or commitments therefor that aggregate in excess
of $100,000;
 
(x) entered into any other contract or agreement involving payment obligations
of more than $100,000 other than in the ordinary course of business, or entered
into any other material contract or agreement involving payment obligations of
more than $100,000 or performable over a period of more than one year, whether
or not in the ordinary course of business;
 
(xi) made charitable contributions or pledges;
 
(xii) suffered any material damage, destruction or casualty loss, whether or not
covered by insurance;
 
(xiii) experienced any material problems with labor or management in connection
with the terms and conditions of their employment; or
 
(xiv) entered into an agreement, written or otherwise, to take any of the
foregoing actions.
 
(aa) Investment Company Act Status. The Company is not, and as a result of and
immediately upon the Closing will not be, an “investment company” or a company
“controlled” by an “investment company,” within the meaning of the Investment
Company Act of 1940, as amended.
 
(bb) ERISA. No liability to the Pension Benefit Guaranty Corporation has been
incurred with respect to any Plan (as defined below) by the Company or any of
its subsidiaries that is or would be materially adverse to the Company and its
subsidiaries. The execution and delivery of this Agreement and the issuance and
sale of the Preferred Shares and Warrants will not involve any transaction that
is subject to the prohibitions of Section 406 of ERISA or in connection with
which a tax could be imposed pursuant to Section 4975 of the Internal Revenue
Code of 1986, as amended (the “Code”), provided that, if any of the Purchasers,
or any Person that owns a beneficial interest in any of the Purchasers, is an
“employee pension benefit plan” (within the meaning of Section 3(2) of ERISA)
with respect to which the Company is a “party in interest” (within the meaning
of Section 3(14) of ERISA), the requirements of Sections 407(d)(5) and 408(e) of
ERISA, if applicable, are met. As used in this Section 2.01(bb), the term “Plan”
shall mean an “employee pension benefit plan” (as defined in Section 3 of ERISA)
that is or has been established or maintained, or to which contributions are or
have been made, by the Company or any subsidiary or by any trade or business,
whether or not incorporated, which, together with the Company or any subsidiary,
is under common control, as described in Section 414(b) or (c) of the Code.
 
 
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(cc) Dilutive Effect. The Company understands and acknowledges that its
obligation to issue Conversion Shares upon conversion of the Preferred Shares in
accordance with this Agreement and the Certificate of Designation and its
obligation to issue the Warrant Shares upon the exercise of the Warrants in
accordance with this Agreement and the Warrants, is, in each case, absolute and
unconditional regardless of the dilutive effect that such issuance may have on
the ownership interest of other shareholders of the Company.
 
(dd) No Integrated Offering. Except as disclosed on Schedule 2.01(dd), neither
the Company, nor any subsidiary nor any of its or their affiliates, nor any
person acting on its or their behalf, has directly or indirectly made any offers
or sales of any security or solicited any offers to buy any security under
circumstances that would cause the offering of the Preferred Shares and Warrants
pursuant to this Agreement to be integrated with prior offerings by the Company
for purposes of the Securities Act that would prevent the Company from selling
the Preferred Shares and Warrants pursuant to Rule 506 under the Securities Act,
or any applicable exchange-related shareholder approval provisions, nor will the
Company or any of its affiliates or subsidiaries take any action or steps that
would cause the offering of the Preferred Shares and Warrants to be integrated
with other offerings. The Company does not have any registration statement
pending or effective before the Commission or currently under the Commission’s
review.
 
(ee) Sarbanes-Oxley Act. The Company is in compliance with the provisions of the
Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), if applicable, and the
rules and regulations promulgated thereunder that are effective, and intends to
comply with other applicable provisions of the Sarbanes-Oxley Act and the rules
and regulations promulgated thereunder upon the effectiveness of such
provisions.
 
(ff) Independent Nature of Purchasers. The Company acknowledges that the
obligations of each Purchaser under the Transaction Documents are several and
not joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under the Transaction Documents. The Company acknowledges that to the
best of its knowledge, the decision of each Purchaser to purchase securities
pursuant to this Agreement has been made by such Purchaser independently of any
other purchase and independently of any information, materials, statements or
opinions as to the business, affairs, operations, assets, properties,
liabilities, results of operations, condition (financial or otherwise) or
prospects of the Company or of its subsidiaries that may have been made or given
by any other Purchaser or by any agent or employee of any other Purchaser, and
no Purchaser or any of its agents or employees shall have any liability to any
Purchaser (or any other person) relating to or arising from any such
information, materials, statements or opinions. The Company acknowledges that
nothing contained herein, or in any Transaction Document, and no action taken by
any Purchaser pursuant hereto or thereto, shall be deemed to constitute the
Purchasers as a partnership, an association, a joint venture or any other kind
of entity, or create a presumption that the Purchasers are in any way acting in
concert or as a group with respect to such obligations or the transactions
contemplated by the Transaction Documents. The Company acknowledges that each
Purchaser shall be entitled to independently protect and enforce its rights,
including without limitation, the rights arising out of this Agreement or out of
the other Transaction Documents, and it shall not be necessary for any other
Purchaser to be joined as an additional party in any proceeding for such
purpose. The Company acknowledges that it has elected to provide all Purchasers
with the same terms and Transaction Documents for the convenience of the Company
and not because it was required or requested to do so by the Purchasers.
 
 
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(gg) Insurance. The Company and its subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as are prudent and customary in the businesses in which the Company and
its subsidiaries are engaged. To the best of Company’s knowledge, such insurance
contracts and policies are valid and in full force and effect. Neither the
Company nor any subsidiary has any reason to believe that it will not be able to
renew its existing insurance coverage as and when such coverage expires or to
obtain similar coverage from similar insurers as may be necessary to continue
its business without a significant increase in cost.
 
(hh) Application Of Takeover Protections. The Company and its Board of Directors
have taken all necessary action, if any, in order to render inapplicable any
control share acquisition, business combination, poison pill (including any
distribution under a rights agreement) or other similar anti-takeover provision
under the Company’s Articles (or similar charter documents) or the laws of its
state of incorporation that is or could become applicable to the Purchasers as a
result of the Purchasers and the Company fulfilling their obligations or
exercising their rights under the Transaction Documents, including without
limitation the Company’s issuance of the Shares and the Purchasers’ ownership of
the Shares.
 
(ii) Foreign Corrupt Practices. Neither the Company nor any subsidiary, nor to
the knowledge of the Company, any agent or other person acting on behalf of the
Company or any subsidiary, has (i) directly or indirectly, used any corporate
funds for unlawful contributions, gifts, entertainment or other unlawful
expenses related to foreign or domestic political activity, (ii) made any
unlawful payment to foreign or domestic government officials or employees or to
any foreign or domestic political parties or campaigns from corporate funds,
(iii) failed to disclose fully any contribution made by the Company (or made by
any person acting on its behalf of which the Company is aware) which is in
violation of law or (iv) violated in any material respect any provision of the
Foreign Corrupt Practices Act of 1977, as amended.
 
(jj) Off-Balance Sheet Arrangements. There is no transaction, arrangement, or
other relationship between the Company or any subsidiary of the Company and an
unconsolidated or other off balance sheet entity that is not disclosed in its
financial statements that should be disclosed in accordance with GAAP and that
would be reasonably likely to have a Material Adverse Effect.
 
(kk) Manipulation of Price. The Company has not, and to its knowledge no one
acting on its behalf has, (i) taken, directly or indirectly, any action designed
to cause or to result or that could reasonably be expected to cause or result,
in the stabilization or manipulation of the price of any security of the Company
to facilitate the sale or resale of any of the Shares or (ii) other than any
placement agent, sold, bid for, purchased, or paid any compensation for
soliciting purchases of, any of the Shares and Warrants.
 
(ll) No Disagreements with Accountants and Lawyers. There are no disagreements
of any kind presently existing, or reasonably anticipated by the Company to
arise, between the Company and the accountants and lawyers formerly or presently
employed by the Company and the Company is current with respect to any fees owed
to its accountants and lawyers which could affect the Company’s ability to
perform any of its obligations under any of the Transaction Documents. The
Company’s accountants are set forth in the Form 10-K. To the Company’s
knowledge, such accountants are an independent registered public accounting firm
as required by the Securities Act.
 
 
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(mm) Material Non-Public Information. Except with respect to the transactions
contemplated hereby that will be publicly disclosed pursuant to Section 3.13
hereto, the Company has not provided any Purchaser or its agents or counsel with
any information that the Company believes constitutes material non-public
information.
 
(nn) Solvency.  Based on the financial condition of the Company as of the
Closing Date (and assuming that the Closing shall have occurred), (i) the
Company’s fair saleable value of its assets exceeds the amount that will be
required to be paid on or in respect of the Company’s existing debts and other
liabilities (including known contingent liabilities) as they mature, (ii) the
Company’s assets do not constitute unreasonably small capital to carry on its
business for the current fiscal year as now conducted and as proposed to be
conducted including its capital needs taking into account the particular capital
requirements of the business conducted by the Company, and projected capital
requirements and capital availability thereof, and (iii) the current cash flow
of the Company, together with the proceeds the Company would receive, were it to
liquidate all of its assets, after taking into account all anticipated uses of
the cash, would be sufficient to pay all amounts on or in respect of its debt
when such amounts are required to be paid.  The Company does not intend to incur
debts beyond its ability to pay such debts as they mature (taking into account
the timing and amounts of cash to be payable on or in respect of its debt).
 
(oo) Listing.  The Company’s common stock is quoted on the OTC QB Markets
(“OTCQB”) under the symbol OPMG.  The Company has not received any oral or
written notice that its common stock is not eligible nor will become ineligible
for quotation on the OTCQB nor that its common stock does not meet all
requirements for the continuation of such quotation.  The Company satisfies all
the requirements for the continued quotation of its common stock on the OTCQB.
 
(pp) DTC Status.  The Company’s transfer agent is a participant in, and the
Common Stock is eligible for transfer pursuant to the Depository Trust Company
Automated Securities Transfer Program
 
(qq) Survival. The foregoing representations and warranties shall survive the
Closing Date.
 
Section 2.02 Representations and Warranties of the Purchasers. Each of the
Purchasers hereby makes the following representations and warranties to the
Company with respect solely to itself and not with respect to any other
Purchaser:
 
(a) Organization and Standing of the Purchasers. If the Purchaser is an entity,
such Purchaser is a corporation, limited liability company or partnership duly
incorporated or organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation or organization.
 
(b) Authorization and Power. Each Purchaser has the requisite power and
authority to enter into and perform this Agreement and to purchase the Preferred
Shares and Warrants being sold to it hereunder. The execution, delivery and
performance of this Agreement by such Purchaser and the consummation by it of
the transactions contemplated hereby have been duly authorized by all necessary
corporate or partnership action, and no further consent or authorization of such
Purchaser or its Board of Directors, shareholders, or partners, as the case may
be, is required. This Agreement has been duly authorized, executed and delivered
by such Purchaser and constitutes, or shall constitute when executed and
delivered, a valid and binding obligation of the Purchaser enforceable against
the Purchaser in accordance with the terms thereof.
 
 
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(c) Purchase For Own Account. Each Purchaser is acquiring the Preferred Shares
and the Warrants solely for its own account and not with a view to or for sale
in connection with distribution of such Preferred Shares or Warrants in
violation of the Securities Act. Each Purchaser does not have a present
intention to sell the Preferred Shares or the Warrants, nor a present
arrangement (whether or not legally binding) or intention to effect any
distribution of the Preferred Shares or the Warrants to or through any Person;
provided, however, that by making the representations herein and subject to
Section 2.02(g) below, such Purchaser does not agree to hold the Shares or the
Warrants for any minimum or other specific term and reserves the right to
dispose of the Shares or the Warrants at any time in accordance with federal and
state securities laws applicable to such disposition. Each Purchaser
acknowledges that it is able to bear the financial risks associated with an
investment in the Preferred Shares and the Warrants and that it has been given
full access to such records of the Company and its subsidiaries and to the
officers of the Company and its subsidiaries and received such information as it
has deemed necessary or appropriate to conduct its due diligence investigation
and has sufficient knowledge and experience in investing in companies similar to
the Company in terms of the Company’s stage of development so as to be able to
evaluate the risks and merits of its investment in the Company.
 
(d) Status of Purchasers. Such Purchaser is an “accredited investor” as defined
in Regulation D promulgated under the Securities Act. Such Purchaser is not
required to be registered as a broker-dealer under Section 15 of the Exchange
Act and such Purchaser is not a broker-dealer.
 
(e) Opportunities for Additional Information. Each Purchaser acknowledges that
such Purchaser has had the opportunity to ask questions of and receive answers
from, or obtain additional information from, the executive officers of the
Company concerning the financial and other affairs of the Company, and to the
extent deemed necessary in light of such Purchaser’s personal knowledge of the
Company’s affairs, such Purchaser has asked such questions and received answers
to the full satisfaction of such Purchaser, and such Purchaser desires to invest
in the Company. Neither such inquiries nor any other investigation conducted by
or on behalf of such Purchaser or its representatives or counsel shall modify,
amend or affect such Purchaser’s right to rely on the truth, accuracy and
completeness of the Schedule of Exceptions and the Company’s representations and
warranties contained in the Transaction Documents.
 
(f) No General Solicitation. Each Purchaser acknowledges that the Preferred
Shares and the Warrants were not offered to such Purchaser by means of any form
of general or public solicitation or general advertising, or publicly
disseminated advertisements or sales literature, including (i) any
advertisement, article, notice or other communication published in any
newspaper, magazine, or similar media, or broadcast over television or radio or
(ii) any seminar or meeting to which such Purchaser was invited by any of the
foregoing means of communications.
 
(g) Rule 144. Such Purchaser understands that the Preferred Shares and Warrants
must be held indefinitely unless such Shares and Warrants are registered under
the Securities Act or an exemption from registration is available. Such
Purchaser acknowledges that such Purchaser is familiar with Rule 144 of the
rules and regulations of the Commission, as amended, promulgated pursuant to the
Securities Act (“Rule 144”), and that such person has been advised that Rule 144
permits resales only under certain circumstances. Such Purchaser understands
that to the extent that Rule 144 is not available, such Purchaser will be unable
to sell any Preferred Shares and Warrants without either registration under the
Securities Act or the existence of another exemption from such registration
requirement.
 
 
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(h) General. Such Purchaser understands that the Preferred Shares and Warrants
are being offered and sold in reliance on a transactional exemption from the
registration requirement of federal and state securities laws and the Company is
relying upon the truth and accuracy of the representations, warranties,
agreements, acknowledgments and understandings of such Purchaser set forth
herein in order to determine the applicability of such exemptions and the
suitability of such Purchaser to acquire the Preferred Shares and Warrants.
 
(i) Survival. The foregoing representations and warranties shall survive the
Closing Date.
 
ARTICLE III.
 
COVENANTS
 
The Company covenants with the Purchasers as follows (subject to the provisions
of Section 6.03 hereof), which covenants are for the benefit of the Purchasers
and their permitted assignees.
 
Section 3.01 Legend. Each certificate representing the Preferred Shares and the
Warrants, and, if appropriate, securities issued upon conversion thereof, shall
be stamped or otherwise imprinted with a legend substantially in the following
form (in addition to any legend required by applicable state securities or “blue
sky” laws):
 
THE SECURITIES REPRESENTED BY THIS CERTIFICATE (THE “SECURITIES”) HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”)
OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE
STATE SECURITIES LAWS OR THE COMPANY SHALL HAVE RECEIVED AN OPINION OF COUNSEL
THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT AND UNDER THE
PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.
 
The Company agrees to reissue certificates representing any of the Conversion
Shares and the Warrant Shares without the legend set forth above if at such
time, prior to making any transfer of any such securities, such holder thereof
shall give written notice to the Company describing the manner and terms of such
transfer and removal as the Company may reasonably request. Such proposed
transfer and removal will not be effected until: (a) either (i) a registration
statement under the Securities Act covering such proposed disposition has been
filed by the Company with the Commission and has become effective under the
Securities Act, or (ii) registration and qualification under the Securities Act
and state securities laws are not required (in which event the Company shall
provide its transfer agent with any required legal opinions) or (iii) such
security can be sold pursuant to Rule 144 under the Securities Act (in which
event the Company shall provide its transfer agent with any required legal
opinions); and (b) compliance with applicable state securities or “blue sky”
laws has been effected or a valid exemption exists with respect thereto.  The
Company will reserve such shares without any legend within three (3) Trading
Days (the “Legend Removal Date”) of request by the holder.  In the case of any
proposed transfer under this Section 3.01, the Company will comply with any such
applicable state securities or “blue sky” laws, but shall in no event be
required (x) to qualify to do business in any state where it is not then
qualified, or (y) to take any action that would subject it to tax or to the
general service of process in any state where it is not then subject.  Whenever
a certificate representing the Conversion Shares or the Warrant Shares is
required to be issued to a Purchaser without a legend, in lieu of delivering
physical certificates representing the Conversion Shares or the Warrant Shares
(provided that a registration statement under the Securities Act providing for
the resale of the Conversion Shares or the Warrant Shares is then in effect, as
the case may be, or the Conversion Shares or the Warrant Shares may be sold
pursuant to Rule 144 of the Securities Act without restriction), the Company
shall cause its transfer agent to electronically transmit the Conversion Shares
or the Warrant Shares, as the case may be, to a Purchaser by crediting the
account of such Purchaser’s Prime Broker with the Depository Trust Company
(“DTC”) through its Deposit Withdrawal Agent Commission (“DWAC”) system (to the
extent not inconsistent with any provisions of this Agreement).
 
 
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Section 3.02 Liquidated Damages. In addition to such Purchasers’ other available
remedies, the Company shall pay to a Purchaser, in cash, as partial liquidated
damages and not as a penalty, for each $2,000 of Conversion Shares or the
Warrant Shares (based on the greater of (i) the purchase price of such
Commission Shares or Warrant Shares, or (ii) the VWAP (as defined hereinafter)
of the Common Stock on the date (a) such securities are submitted to the
transfer agent, or (b) are delivered for removal of the restrictive legend, or
(c) if the Commission Shares or Warrant Shares are not required to be delivered
or have not yet been issued on the date request for legend removal is made, $10
per Trading Day (increasing to $20 per Trading Day five (5) Trading Days after
such damages have begun to accrue) for each Trading Day after the fourth (4th)
Trading Day following the Legend Removal Date until such certificate is
delivered without a legend. Nothing herein shall limit such Purchasers’ rights
to pursue actual damages for the Company’s failure to deliver certificates
representing any securities as required by the Transaction Documents, and such
Purchaser shall have the right to pursue all remedies available to it at law or
in equity including, without limitation, a decree of specific performance and/or
injunctive relief.
 
For purposes hereof, “VWAP” means, for any date, the price determined by the
first of the following clauses that applies: (a) if the Common Stock is then
listed or quoted on a Trading Market (as defined hereinafter), the daily volume
weighted average price of the Common Stock for such date (or the nearest
preceding date) on the Trading Market on which the Common Stock is then listed
or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m.
(New York City time) to 4:02 p.m. (New York City time); or (b) in all other
cases, the fair market value of a share of Common Stock as determined by an
independent appraiser selected in good faith by the holder and reasonably
acceptable to the Company.
 
 For purposes hereof, “Trading Market” means the following markets or exchanges
on which the Common Stock is listed or quoted for trading on the date in
question: the NYSE Amex Equities, the Nasdaq Capital Market, the Nasdaq Global
Market, the Nasdaq Global Select Market, the New York Stock Exchange, the OTC
Bulletin Board, or OTCQB or any successor market succeeding to its functions of
reporting prices, whichever is the principal such market or exchange.
 
Section 3.03 Securities Compliance. The Company shall notify the Commission in
accordance with its rules and regulations, of the transactions contemplated by
any of the Transaction Documents, including filing a Form D with respect to the
Preferred Shares, Warrants, Conversion Shares and Warrant Shares as required
under Regulation D, and shall take all other necessary action and proceedings as
may be required and permitted by applicable law, rule and regulation, for the
legal and valid issuance of the Preferred Shares, the Warrants, the Conversion
Shares and the Warrant Shares to the Purchasers or subsequent holders. The
Company shall take such action as the Company shall reasonably determine is
necessary to be taken in order to obtain an exemption for or to qualify the
Preferred Shares, Warrants, Conversion Shares and Warrant Shares for sale to the
Purchasers at the Closing pursuant to this Agreement under applicable securities
or “Blue Sky” laws of the states of the United States (or to obtain an exemption
from such qualification). The Company shall make all filings and reports
relating to the offer and sale of the Preferred Shares, Warrants, Conversion
Shares and Warrant Shares required under applicable securities or “Blue Sky”
laws of the states of the United States following the Closing Date. In addition,
the Company shall take all such actions and make any filings as may be required
under applicable law in connection with the offer and sale of any Preferred
Shares and Warrants in any foreign jurisdictions, along with the subsequent
issuances of any Conversion Shares and Warrant Shares in such foreign
jurisdictions.
 
 
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Section 3.04 Reporting Obligations and Sales of Unregistered Securities.
 
(a) So long as any Purchaser holds any Preferred Shares or Warrants (the “Public
Reporting Period”), the Company shall comply in all respects with its reporting
and filing obligations under the Exchange Act and shall not take any action or
file any document (whether or not permitted by the Securities Act or the rules
promulgated thereunder) to terminate or suspend its reporting and filing
obligations under the Exchange Act or Securities Act, except as permitted
herein. The Company further covenants that it will take such further action as
the Purchasers may reasonably request, all to the extent required from time to
time to enable the Purchasers to sell the Preferred Shares and Warrants, without
registration under the Securities Act within the limitation of the exemptions
provided by Rule 144 promulgated under the Securities Act. Upon the request of
the Purchasers, the Company shall deliver to the Purchasers a written
certification of a duly authorized officer as to whether it has complied with
such requirements.
 
(b) At any time during the Public Reporting Period, if the Company shall fail
for any reason to satisfy the current public information requirement under Rule
144(c) (a “Public Information Failure”) then, in addition to such Purchaser’s
other available remedies, the Company shall pay to a Purchaser, in cash, as
partial liquidated damages and not as a penalty, by reason of any such delay in
or reduction of its ability to sell the Securities, an amount in cash equal to
two percent (2.0%) of the aggregate Purchase Price of such Purchaser’s Preferred
Shares, Warrants, Conversion Shares and Warrant Shares on the day of a Public
Information Failure and on every thirtieth (30th) day (prorated for periods
totaling less than thirty days) thereafter until the earlier of (a) the date
such Public Information Failure is cured and (b) such time that such public
information is no longer required for the Purchasers to transfer the Shares and
Warrant Shares pursuant to Rule 144, without transfer restrictions. Nothing
herein shall limit such Purchaser’s right to pursue actual damages for the
Public Information Failure, and such Purchaser shall have the right to pursue
all remedies available to it at law or in equity including, without limitation,
a decree of specific performance and/or injunctive relief.
 
Section 3.05 Compliance with Laws. The Company shall comply, and cause each
subsidiary to comply, with all applicable laws, rules, regulations and orders,
noncompliance with which could have a Material Adverse Effect.
 
Section 3.06 Keeping of Records and Books of Account. The Company shall keep and
cause each subsidiary to keep adequate records and books of account, in which
complete entries will be made in accordance with GAAP consistently applied,
reflecting all financial transactions of the Company and its subsidiaries, and
in which, for each fiscal year, all proper reserves for depreciation, depletion,
obsolescence, amortization, taxes, bad debts and other purposes in connection
with its business shall be made.
 
Section 3.07 Amendments. The Company shall not amend or waive any provision of
the Certificate or Bylaws of the Company in any way that would adversely affect
the liquidation preferences, dividends rights, conversion rights or voting
rights of the Preferred Shares; provided, however, that (i) any other class or
series of equity securities which by its terms shall rank senior to the
Preferred Shares may be created and issued with the prior written consent of the
holders of a majority of the Preferred Shares then outstanding and (ii) any
creation and issuance of another series of Junior Stock (as defined in the
Certificate of Designation) or any other class or series of equity securities
which by its terms shall rank junior or pasi passu to the Preferred Shares shall
not be deemed to materially and adversely affect such rights, preferences or
privileges.
 
 
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Section 3.08 Other Agreements. The Company shall not enter into any agreement in
which the terms of such agreement would restrict or impair the right or ability
to perform of the Company or any subsidiary under any Transaction Document,
including, without limitation, the payment of dividends on the Preferred Shares.
 
Section 3.09 Use of Proceeds. The net proceeds from the sale of the Shares
hereunder shall be used by the Company for the purposes set forth on Schedule
3.09; provided, however, the net proceeds from the sale of the Preferred Shares
and Warrants hereunder shall not be used to redeem any Common Stock or
securities convertible, exercisable or exchangeable into Common Stock.
 
Section 3.10 Reservation of Shares. So long as any of the Preferred Shares or
Warrants remain outstanding, the Company shall take all action necessary to at
all times have authorized, and reserved for the purpose of issuance, no less
than one hundred fifty percent (150%) of the aggregate number of shares of
Common Stock needed to provide for the issuance of the Conversion Shares and the
Warrant Shares.
 
Section 3.11 Disclosure of Material Information. The Company covenants and
agrees that neither it nor any other person acting on its behalf has provided or
will provide any Purchaser or its agents or counsel with any information that
the Company believes constitutes material non-public information, unless prior
thereto such Purchaser shall have executed a written agreement regarding the
confidentiality and use of such information. The Company understands and
confirms that each Purchaser shall be relying on the foregoing representations
in effecting transactions in securities of the Company.
 
Section 3.12 Integration.  The Company shall not, and shall use its best efforts
to ensure that no affiliate of the Company shall, sell, offer for sale or
solicit offers to buy or otherwise negotiate in respect of any security (as
defined in Section 2 of the Securities Act) that would be integrated with the
offer or sale of the Preferred Shares and Warrants in a manner that would
require the registration under the Securities Act of the sale of the Preferred
Shares and Warrants to the Purchasers.
 
Section 3.13 Disclosure of Transaction. The Company shall file with the
Commission a Current Report on Form 8-K (the “Form 8-K”) describing the material
terms of the transactions contemplated hereby (and attaching as exhibits thereto
this Agreement, the Certificate of Designation, the form of Warrant and the
Press Release) as soon as practicable following the Closing Date but in no event
later than four (4) Trading Days following the Closing Date, which Form 8-K
shall be subject to prior review and comment by the Purchasers. The Purchasers
shall be provided with at least two Trading Days to review the Form 8-K prior to
its filing. “Trading Day” means any day during which the New York Stock Exchange
(or other principal exchange on which the Common Stock is traded) shall be open
for trading.
 
Section 3.14 Variable Offering Restriction. Subject to the consent of a Majority
in Interest [as defined in Section 6.11], for so long as Preferred Shares or
Warrants are outstanding, the Company will not enter into or exercise any Equity
Line of Credit or similar agreement, nor issue nor agree to issue any floating
or Variable Priced Equity Linked Instruments nor any of the foregoing or equity
with price reset rights (collectively, the “Variable Rate Restrictions”).   For
purposes hereof, “Equity Line of Credit” shall include any transaction involving
a written agreement between the Company and an investor or underwriter whereby
the Company has the right to “put” its securities to the investor or underwriter
over an agreed period of time and at an agreed price or price formula, and
“Variable Priced Equity Linked Instruments” shall include: (A) any debt or
equity securities which are convertible into, exercisable or exchangeable for,
or carry the right to receive additional shares of Common Stock either (1) at
any conversion, exercise or exchange rate or other price that is based upon
and/or varies with the trading prices of or quotations for Common Stock at any
time after the initial issuance of such debt or equity security, or (2) with a
fixed conversion, exercise or exchange price that is subject to being reset at
some future date at any time after the initial issuance of such debt or equity
security due to a change in the market price of the Company’s Common Stock since
date of initial issuance, and (B) any amortizing convertible security which
amortizes prior to its maturity date, where the Company is required or has the
option to (or any investor in such transaction has the option to require the
Company to) make such amortization payments in shares of Common Stock which are
valued at a price that is based upon and/or varies with the trading prices of or
quotations for Common Stock at any time after the initial issuance of such debt
or equity security (whether or not such payments in stock are subject to certain
equity conditions).
 
 
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Section 3.15 Offering Restrictions.  For so long as any Preferred Shares or
Warrants are outstanding, except for the Excepted Issuances (defined below), the
Company will not enter into an agreement to issue nor issue any equity,
convertible debt or other securities convertible into Common Stock or equity of
the Company nor modify any of the foregoing which may be outstanding at anytime,
without the prior written consent of the Purchasers, if the issue price or
purchase price of any Common Stock or Common Stock component of any of the
foregoing is or could become equal to or less than the conversion price of the
Preferred Shares.
 
“Excepted Issuances” shall mean (i) full or partial consideration in connection
with a bona fide strategic merger, acquisition, consolidation or purchase of
substantially all of the securities or assets of a corporation or other entity
so long as such issuances are not for the purpose of raising capital and which
holders of such securities or debt are not at any time granted registration
rights, and which have been approved by a Majority in Interest, (ii) the
Company’s issuance of securities in connection with bona fide strategic license
agreements and other bona fide partnering arrangements so long as such issuances
are not for the purpose of raising capital and which holders of such securities
or debt are not at any time granted registration rights, and which have been
approved by a Majority in Interest, (iii) the Company’s issuance of Common Stock
or the issuances or grants of options to purchase Common Stock to employees,
directors, and consultants, pursuant to plans described on Schedule 3.15 , (iv)
securities upon the exercise or exchange of or conversion of any securities
exercisable or exchangeable for or convertible into shares of Common Stock
issued and outstanding on the date of this Agreement on the terms disclosed in
the Commission Documents and which securities are also described on Schedule
3.15, (v) as a result of the exercise of Warrants or conversion of Preferred
Shares which are granted or issued pursuant to this Agreement on the unamended
terms in effect on the Closing Date,
 
Section 3.16 Negative Covenants.   So long as at least 500 shares of Preferred
Stock are outstanding, without the consent of the holders of at a majority of
the Preferred Shares then outstanding, the Company will not and will not permit
any of its Subsidiaries to directly or indirectly:
 
(a) create, incur, assume or suffer to exist any pledge, hypothecation,
assignment, deposit arrangement, lien, charge, claim, security interest,
security title, mortgage, security deed or deed of trust, easement or
encumbrance, or preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever (including any lease or title
retention agreement, any financing lease having substantially the same economic
effect as any of the foregoing, and the filing of, or agreement to give, any
financing statement perfecting a security interest under the Uniform Commercial
Code or comparable law of any jurisdiction) (each, a “Lien”) upon any of its
property, whether now owned or hereafter acquired except for: (a) Liens imposed
by law for taxes that are not yet due or are being contested in good faith and
for which adequate reserves have been established in accordance with generally
accepted accounting principles; (b) carriers’, warehousemen’s, mechanic’s,
material men’s, repairmen’s and other like Liens imposed by law, arising in the
ordinary course of business and securing obligations that are not overdue by
more than 30 days or that are being contested in good faith and by appropriate
proceedings; (c) pledges and deposits made in the ordinary course of business in
compliance with workers’ compensation, unemployment insurance and other social
security laws or regulations; (d) deposits to secure the performance of bids,
trade contracts, leases, statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like nature, in each case in the
ordinary course of business; (e) Liens created with respect to the financing of
the purchase of new property in the ordinary course of the Company’s business up
to the amount of the purchase price of such property; (f) easements, zoning
restrictions, rights-of-way and similar encumbrances on real property imposed by
law or arising in the ordinary course of business that do not secure any
monetary obligations and do not materially detract from the value of the
affected property and (g) Liens in existence on the date hereof and set forth on
Schedule 3.16(a) hereto, and (h) Liens otherwise set forth on Schedule 3.16(a)
hereto;
 
 
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(b) amend its articles of incorporation, bylaws or its charter documents so as
to materially and adversely affect any rights of the Purchasers;
 
(c) repay, repurchase or offer to repay, repurchase or otherwise acquire or make
any cash dividend or cash distribution in respect of any of its Common Stock,
preferred stock, or other equity securities other than to the extent permitted
or required under the Transaction Documents;
 
(d) except as set forth on Schedule 3.16(d) hereto, engage in any transactions
with any officer, director, employee or any Affiliate of the Company, including
any contract, agreement or other arrangement providing for the furnishing of
services to or by, providing for rental of real or personal property to or from,
or otherwise requiring payments to or from any officer, director or such
employee or, to the knowledge of the Company, any entity in which any officer,
director, or any such employee has a substantial interest or is an officer,
director, trustee or partner, in each case in excess of $100,000 (excluding
sales commissions) other than (i) for payment of salary, or fees for services
rendered, pursuant to and on the terms of a written contract in effect at least
five days prior to the Closing Date, a copy of which has been provided to the
Purchaser at least four days prior to the Closing Date, which contracts may be
extended on terms customary and reasonable within the marketplace, (ii)
reimbursement for authorized expenses incurred on behalf of the Company, (iii)
for other employee benefits, including stock option agreements under any stock
option plan of the Company disclosed in the Commission Documents, or (iv) other
transactions disclosed in the Commission Documents; or
 
(e) pay or redeem any financing related debt or past due obligations or
securities outstanding as of the Closing Date, or past due obligations, except
vendor obligations, which in management’s good faith, reasonable judgment must
be paid to avoid disruption of the Company’s businesses, except as set forth on
Schedule 3.16(e) or except any sums owed to Harris Cramer LLP or the Company’s
auditors as of the Closing Date.
 
Section 3.17 Piggy-Back Registrations.   If at any time the Preferred Shares are
outstanding, there is not an effective registration statement covering all of
the Conversion Shares, and Warrant Shares and the Company shall determine to
prepare and file with the Commission a registration statement relating to an
offering for its own account or the account of others under the Securities Act
of any of its equity securities, but excluding Forms S-4 or S-8 and similar
forms which do not permit such registration, then the Company shall send to each
holder of any of the Preferred Shares, Warrants, Conversion Shares or Warrant
Shares written notice of such determination and, if within fifteen calendar days
after receipt of such notice, any such holder shall so request in writing, the
Company shall include in such registration statement all or any part of the
Conversion Shares and Warrant Shares such holder requests to be registered,
subject to customary underwriter cutbacks applicable to all holders of
registration rights and any cutbacks in  accordance with guidance provided by
the Securities and Exchange Commission (including, but not limited to, Rule
415).  The obligations of the Company under this Section may be waived by any
holder of any of such securities entitled to registration rights under this
Section 3.17.  The holders whose Conversion Shares and Warrant Shares are
included or required to be included in such registration statement are granted
the same rights, benefits, liquidated or other damages and indemnification
granted to other holders of securities included in such registration
statement.  Notwithstanding anything to the contrary herein, the registration
rights granted hereunder to the holders of securities shall not be applicable
for such times as all such Conversion Shares and Warrant Shares may be sold by
the holder thereof without restriction pursuant to Section 144(b)(1) of the 1933
Act.  In no event shall the liability of any holder of such securities or
permitted successor in connection with any Conversion Shares and Warrant Shares
included in any such registration statement be greater in amount than the dollar
amount of the net proceeds actually received by such Purchaser upon the sale of
the Conversion Shares and Warrant Shares sold pursuant to such registration or
such lesser amount in proportion to all other holders of Securities included in
such registration statement. All expenses incurred by the Company in complying
with this Section 3.17, including, without limitation, all registration and
filing fees, printing expenses (if required), fees and disbursements of counsel
and independent public accountants for the Company, fees and expenses (including
reasonable counsel fees) incurred in connection with complying with state
securities or “blue sky” laws, fees of the FINRA, transfer taxes, and fees of
transfer agents and registrars, are called “Registration Expenses.” All
underwriting discounts and selling commissions applicable to the sale of
registrable securities are called "Selling Expenses."  The Company will pay all
Registration Expenses in connection with the registration statement under this
Section 3.17.  Selling Expenses in connection with each registration statement
under this Section 3.17 shall be borne by the holder and will be apportioned
among such holders in proportion to the number of Conversion Shares included
therein for a holder relative to all the securities included therein for all
selling holders, or as all holders may agree.
 
 
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Section 3.18 DTC Program.  Until the end of the Public Reporting Period, the
Company will employ as the transfer agent for the Conversion Shares and Warrant
Shares a participant in the Depository Trust Company Automated Securities
Transfer Program.
 
ARTICLE IV.
 
CONDITIONS
 
Section 4.01 Conditions Precedent to the Obligation of the Company to Sell the
Preferred Shares and Warrants. The obligation hereunder of the Company to issue
and sell the Preferred Shares and the Warrants to the Purchasers is subject to
the satisfaction or waiver, at or before the Closing, of each of the conditions
set forth below. These conditions are for the Company’s sole benefit and may be
waived by the Company at any time in its sole discretion.
 
(a) Accuracy of Each Purchaser’s Representations and Warranties. The
representations and warranties of each Purchaser shall be true and correct in
all respects as of the date when made and as of the Closing Date as though made
at that time, except for representations and warranties that are expressly made
as of a particular date, which shall be true and correct in all material
respects as of such date.
 
(b) Performance by the Purchasers. Each Purchaser shall have performed,
satisfied and complied in all respects with all covenants, agreements and
conditions required by this Agreement to be performed, satisfied or complied
with by such Purchaser at or prior to the Closing.
 
(c) No Injunction. No statute, rule, regulation, executive order, decree, ruling
or injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction that prohibits the
consummation of any of the transactions contemplated by this Agreement.
 
 
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(d) Delivery of Purchase Price. The Purchase Price for the Preferred Shares and
Warrants shall have been delivered to the Escrow Agent.
 
(e) Delivery of Transaction Documents. The Transaction Documents shall have been
duly executed and delivered by the Purchasers and, with respect to the Escrow
Agreement, by the Escrow Agent, to the Company.
 
Section 4.02 Conditions Precedent to the Obligation of the Purchasers to
Purchase the Preferred Shares and Warrants. The obligation hereunder of each
Purchaser to acquire and pay for the Preferred Shares and the Warrants is
subject to the satisfaction or waiver, at or before the Closing, of each of the
conditions set forth below. These conditions are for each Purchaser’s sole
benefit and may be waived by such Purchaser at any time in its sole discretion.
 
(a) Accuracy of the Company’s Representations and Warranties. Each of the
representations and warranties of the Company shall be true and correct in all
respects as of the date when made and as of the Closing Date as though made at
that time, except for representations and warranties that are expressly made as
of a particular date, which shall be true and correct in all respects as of such
date.
 
(b) Performance by the Company. The Company shall have performed, satisfied and
complied in all respects with all covenants, agreements and conditions required
by this Agreement to be performed, satisfied or complied with by the Company at
or prior to the Closing.
 
(c) No Suspension, Etc. Trading in the Company’s Common Stock shall not have
been suspended by the Commission or the OTCQB and, at any time prior to the
Closing Date, trading in securities generally as reported by Bloomberg Financial
Markets (“Bloomberg”) shall not have been suspended or limited, or minimum
prices shall not have been established on securities whose trades are reported
by Bloomberg, or on the New York Stock Exchange, nor shall a banking moratorium
have been declared either by the United States or New York State authorities,
nor shall there have occurred any material outbreak or escalation of hostilities
or other national or international calamity or crisis of such magnitude in its
effect on, or any material adverse change in any financial market which, in each
case, in the judgment of such Purchaser, makes it impracticable or inadvisable
to purchase the Preferred Shares.
 
(d) No Injunction. No statute, rule, regulation, executive order, decree, ruling
or injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction that prohibits the
consummation of any of the transactions contemplated by this Agreement.
 
(e) No Proceedings or Litigation. No action, suit or proceeding before any
arbitrator or any governmental authority shall have been commenced, and no
investigation by any governmental authority shall have been threatened, against
the Company or any subsidiary, or any of the officers, directors or affiliates
of the Company or any subsidiary seeking to restrain, prevent or change the
transactions contemplated by this Agreement, or seeking damages in connection
with such transactions.
 
 
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(f) Certificate of Designation. The Certificate of Designation in the form of
Exhibit A attached hereto shall have been accepted for filing with the Secretary
of State of Nevada.
 
(g) Certificates. The Company shall have executed and delivered to the
Purchasers the certificates (in such denominations as such Purchaser shall
request) for the Preferred Shares and the Warrants being acquired by such
Purchaser at the Closing (in such denominations as such Purchaser shall
request).
 
(h) Resolutions. The Board of Directors of the Company shall have adopted
resolutions consistent with Section 2.01(b) hereof in a form reasonably
acceptable to the Purchasers (the “Resolutions”).
 
(i) Reservation of Shares. The Company shall have reserved out of its authorized
and unissued Common Stock, solely for the purpose of effecting the conversion of
the Preferred Shares and the exercise of the Warrants, a number of shares of
Common Stock equal to one hundred fifty percent (150%) of the aggregate number
of Conversion Shares issuable upon conversion of the Preferred Shares
outstanding on the Closing Date and the number of Warrant Shares issuable upon
exercise of the number of Warrants assuming such Warrants were granted on the
Closing Date.
 
(j) Escrow Agreement. The Company and the Escrow Agent shall have executed and
delivered the Escrow Agreement to the Purchasers.
 
(k) Minimum Escrow Deposit.  The Purchasers shall have deposited at least
$1,000,000 into the Escrow Account and shall have delivered executed signature
pages to this Agreement to the Company committing to purchase at least an
aggregate of $1,000,000 of Preferred Shares and Warrants
 
(l) Secretary’s Certificate. The Company shall have delivered to the Purchasers
a secretary’s certificate, dated as of the Closing Date, as to (i) the
Resolutions, (ii) the Articles, (iii) the Bylaws, (iv) the Certificate of
Designation, each as in effect at the Closing, and (v) the authority and
incumbency of the officers of the Company executing the Transaction Documents
and any other documents required to be executed or delivered in connection
therewith.
 
(m) Officer’s Certificate. The Company shall have delivered to the Purchasers a
certificate of an executive officer of the Company, dated as of the Closing
Date, confirming the accuracy of the Company’s representations, warranties and
covenants as of the Closing Date and confirming the compliance by the Company
with the conditions precedent set forth in this Section 4.02 as of the Closing
Date.
 
(n) Material Adverse Effect. Since the date of execution of this Agreement, no
event or series of events shall have occurred that reasonably could have or
result in a Material Adverse Effect.
 
(o) Opinions of Counsel. At the Closing, the Purchasers shall have received an
opinion of counsel to the Company dated the date of the Closing and in such form
as is reasonably acceptable to the Purchasers.
 
 
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ARTICLE V.
 
INDEMNIFICATION
 
Section 5.01 General Indemnity. The Company agrees to indemnify and hold
harmless the Purchasers (and their respective directors, officers, managers,
partners, members, shareholders, affiliates, agents, successors and assigns)
from and against any and all losses, liabilities, deficiencies, costs, damages
and expenses (including, without limitation, reasonable attorneys’ fees, charges
and disbursements) incurred by the Purchasers as a result of any inaccuracy in
or breach of the representations, warranties or covenants made by the Company
herein.
 
Section 5.02 Indemnification Procedure. Any party entitled to indemnification
under this Article V (an “indemnified party”) will give written notice to the
indemnifying party of any matters giving rise to a claim for indemnification;
provided, that the failure of any party entitled to indemnification hereunder to
give notice as provided herein shall not relieve the indemnifying party of its
obligations under this Article V except to the extent that the indemnifying
party is actually prejudiced by such failure to give notice. In case any action,
proceeding or claim is brought against an indemnified party in respect of which
indemnification is sought hereunder, the indemnifying party shall be entitled to
participate in and, unless in the reasonable judgment of the indemnified party a
conflict of interest between it and the indemnifying party may exist with
respect to such action, proceeding or claim, to assume the defense thereof with
counsel reasonably satisfactory to the indemnified party. In the event that the
indemnifying party advises an indemnified party that it will contest such a
claim for indemnification hereunder, or fails, within thirty (30) days of
receipt of any indemnification notice to notify, in writing, such person of its
election to defend, settle or compromise, at its sole cost and expense, any
action, proceeding or claim (or discontinues its defense at any time after it
commences such defense), then the indemnified party may, at its option, defend,
settle or otherwise compromise or pay such action or claim. In any event, unless
and until the indemnifying party elects in writing to assume and does so assume
the defense of any such claim, proceeding or action, the indemnified party’s
costs and expenses arising out of the defense, settlement or compromise of any
such action, claim or proceeding shall be losses subject to indemnification
hereunder. The indemnified party shall cooperate fully with the indemnifying
party in connection with any negotiation or defense of any such action or claim
by the indemnifying party and shall furnish to the indemnifying party all
information reasonably available to the indemnified party which relates to such
action or claim. The indemnifying party shall keep the indemnified party fully
apprised at all times as to the status of the defense or any settlement
negotiations with respect thereto. If the indemnifying party elects to defend
any such action or claim, then the indemnified party shall be entitled to
participate in such defense with counsel of its choice at its sole cost and
expense. The indemnifying party shall not be liable for any settlement of any
action, claim or proceeding effected without its prior written consent, which
consent shall not be unreasonably withheld. Notwithstanding anything in this
Article V to the contrary, the indemnifying party shall not, without the
indemnified party’s prior written consent, settle or compromise any claim or
consent to entry of any judgment in respect thereof which imposes any future
obligation on the indemnified party or which does not include, as an
unconditional term thereof, the giving by the claimant or the plaintiff to the
indemnified party of a release from all liability in respect of such claim. The
indemnification required by this Article V shall be made by periodic payments of
the amount thereof during the course of investigation or defense, as and when
bills are received or expense, loss, damage or liability is incurred, so long as
the indemnified party irrevocably agrees to refund such moneys if it is
ultimately determined by a court of competent jurisdiction that such party was
not entitled to indemnification. The indemnity agreements contained herein shall
be in addition to (a) any cause of action or similar rights of the indemnified
party against the indemnifying party or others, and (b) any liabilities the
indemnifying party may be subject to pursuant to the law. To the extent that the
foregoing undertaking by the Company is unenforceable for any reason, the
Company will make the maximum contribution to the payment and satisfaction of
each of the indemnified liabilities that is permissible under applicable law.
 
 
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ARTICLE VI.
 
MISCELLANEOUS
 
Section 6.01 Fees and Expenses. Except as otherwise set forth in this Agreement
and the other Transaction Documents, each party shall pay the fees and expenses
of its advisors, counsel, accountants and other experts, if any, and all other
expenses, incurred by such party incident to the negotiation, preparation,
execution, delivery and performance of this Agreement, provided that the Company
shall pay all reasonable attorneys’ and escrow agent fees and expenses
(including disbursements and out-of-pocket expenses) incurred by the Purchasers
in connection with the preparation, negotiation, execution and delivery of this
Agreement and the other Transaction Documents and the transactions contemplated
thereunder, which payment shall be $20,000.  The Company and the Purchasers
hereby agree that the prevailing party in any suit, action or proceeding arising
out of or relating to the Shares, this Agreement or the other Transaction
Documents, shall be entitled to reimbursement for reasonable legal fees from the
non-prevailing party. The Company shall pay all transfer agent fees, stamp or
other similar taxes and duties levied in connection with issuance of the Shares
or the removal of any restrictive legends therefrom in accordance with the terms
of this Agreement and the other Transaction Documents.
 
Section 6.02 Specific Enforcement, Consent to Jurisdiction.
 
(a) The Company and the Purchasers acknowledge and agree that irreparable damage
would occur in the event that any of the provisions of this Agreement or the
other Transaction Documents were not performed in accordance with their specific
terms or were otherwise breached. It is accordingly agreed that the parties
shall be entitled to seek an injunction or injunctions to prevent or cure
breaches of the provisions of this Agreement and to enforce specifically the
terms and provisions hereof or thereof, this being in addition to any other
remedy to which any of them may be entitled by law or equity.
 
(b) Each of the Company and the Purchasers (i) hereby irrevocably submits to the
jurisdiction of the United States District Court sitting in the Southern
District of New York and the courts of the State of New York located in New York
county for the purposes of any suit, action or proceeding arising out of or
relating to this Agreement or any of the other Transaction Documents or the
transactions contemplated hereby or thereby and (ii) hereby waives, and agrees
not to assert in any such suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of such court, that the suit, action or
proceeding is brought in an inconvenient forum or that the venue of the suit,
action or proceeding is improper. Each of the Company and the Purchasers
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address in effect for notices to it
under this Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing in this Section 6.02
shall affect or limit any right to serve process in any other manner permitted
by law.
 
Section 6.03 Entire Agreement; Amendment. This Agreement (including all exhibits
and schedules hereto) and the Transaction Documents contain the entire
understanding and agreement of the parties with respect to the matters covered
hereby and, except as specifically set forth herein or in the Transaction
Documents, neither the Company nor any of the Purchasers makes any
representations, warranty, covenant or undertaking with respect to such matters
and they supersede all prior understandings and agreements with respect to said
subject matter, all of which are merged herein. No provision of this Agreement
may be waived or amended other than by a written instrument signed by the
Company and the holders of at a majority of the Preferred Shares then
outstanding, and no provision hereof may be waived other than by a written
instrument signed by the party against whom enforcement of any such amendment or
waiver is sought. No such amendment shall be effective to the extent that it
applies to less than all of the holders of the Preferred Shares then
outstanding. No consideration shall be offered or paid to any person to amend or
consent to a waiver or modification of any provision of any of the Transaction
Documents unless the same consideration is also offered to all of the parties to
the Transaction Documents or holders of Preferred Shares, as the case may be.
 
 
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Section 6.04 Notices. Any notice, demand, request, waiver or other communication
required or permitted to be given hereunder shall be in writing and shall be
effective (a) upon hand delivery by telex (with correct answer back received),
telecopy, e-mail or facsimile at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the date of mailing
by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be:
 
(a) If to the Company:
 
Options Media Group Holdings, Inc.
123 NW 13th Street, Suite 300
Boca Raton, Florida 33432
Attn:  Scott Frohman, CEO
Fax No.: (954) 208-9862
 
with copies to:

Harris Cramer LLP
3507 Kyoto Gardens Drive, Suite 320
Palm Beach Gardens, FL 33410
Fax No.: (561) 659-0701
 
(b) If to any Purchaser at the address of such Purchaser set forth on the
signature pages hereto, with copies to:
 
Grushko & Mittman, P.C.
515 Rockaway Avenue
Valley Stream, New York 11581
Attention: Edward M. Grushko, Esq.
Fax No.: (212) 697-3575

Any party hereto may from time to time change its address for notices by giving
at least ten (10) days written notice of such changed address to the other party
hereto.
 
Section 6.05 Waivers. No waiver by either party of any default with respect to
any provision, condition or requirement of this Agreement shall be deemed to be
a continuing waiver in the future or a waiver of any other provisions, condition
or requirement hereof, nor shall any delay or omission of any party to exercise
any right hereunder in any manner impair the exercise of any such right accruing
to it thereafter.
 
 
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Section 6.06 Headings. The article, section and subsection headings in this
Agreement are for convenience only and shall not constitute a part of this
Agreement for any other purpose and shall not be deemed to limit or affect any
of the provisions hereof.
 
Section 6.07 Successors and Assigns; Restrictions on Transfer. This Agreement
shall be binding upon and inure to the benefit of the parties and their
successors and assigns. The Company may not assign this Agreement or any rights
or obligations hereunder without the prior written consent of the Purchasers.
 
Section 6.08 No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person.
 
Section 6.09 Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York, without giving
effect to any of the conflicts of law principles which would result in the
application of the substantive law of another jurisdiction. This Agreement shall
not be interpreted or construed with any presumption against the party causing
this Agreement to be drafted. Each party hereby irrevocably waives, to the
fullest extent permitted by applicable law, any and all rights to a trial by
jury in any legal proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby.
 
Section 6.10 Survival. The representations and warranties of the Company and the
Purchasers shall survive the execution and delivery hereof and the Closing
hereunder for the applicable statute of limitations period.
 
Section 6.11 Consent.   As used in this Agreement and the Transaction Documents
and any other agreement delivered in connection herewith, “Consent of the
Purchasers” or similar language means the consent of holders of not less than
seventy-five percent (75%) of the outstanding Preferred Shares, with respect to
the Preferred Shares, or Warrants with respect to the Warrants, on the date
consent is requested (such Purchasers being a “Majority in Interest”).  A
Majority in Interest may consent to take or forebear from any action permitted
under or in connection with the Transaction Documents, modify any Transaction
Documents or waive any default or requirement applicable to the Company,
subsidiaries or Purchasers under the Transaction Documents provided the effect
of such action does not waive any accrued interest or damages and further
provided that the relative rights of the Purchasers to each other remains
unchanged.
 
Section 6.12 Successor Laws.  References in the Transaction Documents to laws,
rules, regulations and forms shall also include successors to and functionally
equivalent replacements of such laws, rules, regulations and forms.
 
Section 6.13 Maximum Liability.   In no event shall the liability of the
Purchasers or permitted successor hereunder or under any Transaction Document or
other agreement delivered in connection herewith be greater in amount than the
dollar amount of the net proceeds actually received by such Purchaser or
successor upon the sale of Conversion Shares.
 
Section 6.14 Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original
and, all of which taken together shall constitute one and the same Agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other parties hereto, it being understood that all parties need
not sign the same counterpart. In the event that any signature is delivered by
facsimile transmission or e-mail, such signature shall create a valid binding
obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile or e-mail
signature were the original thereof.
 
 
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Section 6.15 Publicity. The Company agrees that it will not disclose, and will
not include in any public announcement, the name of the Purchasers without the
consent of the Purchasers unless and until such disclosure is required by law or
applicable regulation, and then only to the extent of such requirement.
 
Section 6.16 Severability. The provisions of this Agreement and the Transaction
Documents are severable and, in the event that any court of competent
jurisdiction shall determine that any one or more of the provisions or part of
the provisions contained in this Agreement or the Transaction Documents shall,
for any reason, be held to be invalid, illegal or unenforceable in any respect,
such invalidity, illegality or unenforceability shall not affect any other
provision or part of a provision of this Agreement or the Transaction Documents
and such provision shall be reformed and construed as if such invalid or illegal
or unenforceable provision, or part of such provision, had never been contained
herein, so that such provisions would be valid, legal and enforceable to the
maximum extent possible.
 
Section 6.17 Further Assurances. From and after the date of this Agreement, upon
the request of any Purchaser or the Company, each of 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, the Preferred
Shares, the Conversion Shares, the Warrants, the Warrant Shares, the Certificate
of Designation and the other Transaction Documents.
 
[SIGNATURE PAGE FOLLOWS]
 
 
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[COMPANY SIGNATURE PAGES TO SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE
AGREEMENT]
 
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officer as of the date first above
written.
 

  OPTIONS MEDIA GROUP HOLDINGS, INC.          
 
By:
/s/ Scott Frohman       Name: Scott Frohman       Title: Chief Executive Officer
         

 
 
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[PURCHASER SIGNATURE PAGES TO
 
SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT]
 
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be duly
executed by their respective authorized signatories as of the date first
indicated above.
 
Name of Purchaser: __________________________________________________________
 
Signature of Authorized Signatory of Purchaser:
____________________________________
 
Name of Authorized Signatory: _________________________________________________
 
Title of Authorized Signatory:
__________________________________________________
 
Email Address of Purchaser: ___________________________________________________
 
Fax Number of Purchaser: _____________________________________________________
 
Address for Notice of Purchaser: _______________________________________________
 
________________________________________________________________________
 
________________________________________________________________________
 
Address for Delivery of Securities for Purchaser (if not same as above):
__________________
 
_________________________________________________________________________
 
_________________________________________________________________________
 
Subscription Amount: $______________________________________________________
 
Preferred Shares:____________________________________________________________
 
Warrant Shares: ____________________________________________________________
 
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