Exhibit 10.1


 


SECURITIES PURCHASE AGREEMENT


 


This Securities Purchase
Agreement (this “Agreement”) is dated as of June 17, 2008, between
Southwest Casino Corporation, a Nevada corporation (the “Company”), and
each purchaser identified on the signature pages hereto (each, including
its successors and assigns, a “Purchaser” and collectively, the “Purchasers”).


 


WHEREAS, subject to the
terms and conditions set forth in this Agreement and pursuant to Section 4(2) of
the Securities Act of 1933, as amended (the “Securities Act”), and Rule 506
promulgated thereunder, the Company desires to issue and sell to each
Purchaser, and each Purchaser, severally and not jointly, desires to purchase
from the Company, securities of the Company as more fully described in this Agreement.


 


NOW, THEREFORE, IN
CONSIDERATION of the mutual covenants contained in this Agreement, and for
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the Company and each Purchaser agree as follows:


 


ARTICLE I.

DEFINITIONS


 


1.1           Definitions. In
addition to the terms defined elsewhere in this Agreement, for all purposes of
this Agreement, the following terms have the meanings set forth in this Section 1.1:


 


“Acquiring Person” shall have the meaning ascribed to such term
in Section 4.5.


 


“Action”
shall have the meaning ascribed to such term in Section 3.1(j).


 


“Adverse
Effect” shall have the meaning ascribed to such term in Section 4.20.


 


“Affiliate”
means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with a
Person, as such terms are used in and construed under Rule 405 under the
Securities Act.


 


“Article XI”
means Article XI of the Articles of Incorporation.


 


“Articles
of Incorporation” means the Articles of Incorporation of the Company as
initially filed with the Secretary of State of the State of Nevada on November 28,
2001 and as amended on May 27, 2004, July 22, 2004 and July 14,
2005.


 


“Board of
Directors” means the board of directors of the Company.


 


“Business
Day” means any day except Saturday, Sunday, any day which is a federal
legal holiday in the United States or any day on which banking institutions in
the State of New York are authorized or required by law or other governmental
action to close.


 


“Closing”
means the closing of the purchase and sale of the Securities pursuant to Section 2.1.


 

















 


“Closing
Date” means the Trading Day when all of the Transaction Documents have been
executed and delivered by the applicable parties thereto, and all conditions
precedent to (i) the Purchasers’ obligations to pay the Subscription
Amount and (ii) the Company’s obligations to deliver the Securities have
been satisfied or waived.


 


 “Commission” means the United States
Securities and Exchange Commission.


 


“Common
Stock” means the common stock of the Company, par value $0.001 per share,
and any other class of securities into which such securities may hereafter be
reclassified or changed into.


 


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


 


“Company
Counsel” means Oppenheimer Wolff & Donnelly LLP with offices
located at Plaza VII, Suite 3300, 45 South Seventh Street, Minneapolis, MN
55402.


 


“Disclosure
Schedules” means the Disclosure Schedules of the Company delivered
concurrently herewith.


 


“Discounted Purchase Price” shall have
the meaning ascribed to such term in Section 4.18.


 


“Discussion Time” shall have the
meaning ascribed to such term in Section 3.2(f).


 


“Effective
Date” means the earlier of (a) the effective date of a Registration
Statement registering all the Shares and Warrant Shares and (b) the date
that all of Shares or Warrant Shares (assuming issuance upon cashless exercise)
are eligible for resale under Rule 144, without volume or manner-of-sale
restrictions; provided that if thereafter the requirement for the Company to be
in compliance with the current public information required under Rule 144
in order to sell the Shares and Warrant Shares (assuming issuance upon cashless
exercise) is not met, the Effective Date shall be tolled until such date that
such requirements are no longer required or met.


 


“Escrow Agent” means Crown Bank, a
Minnesota State bank, having an office at 601 Marquette Avenue, Minneapolis, MN
55402.


 


“Escrow Agreement” means the escrow
agreement entered into prior to the date hereof, by and among the Company and
the Escrow Agent pursuant to which the Purchasers, shall deposit Subscription
Amounts with the Escrow Agent to be applied to the transactions contemplated
hereunder.


 


“Evaluation
Date” shall have the meaning ascribed to such term in Section 3.1(r).


 

















 


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


 


“Exempt Issuance” means the issuance
of (a) shares of Common Stock or options to employees, officers or
directors of the Company pursuant to any stock or option plan duly adopted for
such purpose, by a majority of the members of the Board of Directors or a
majority of the members of a committee of non-employee directors established
for such purpose, (b) securities upon the exercise or exchange of or
conversion of any Securities issued hereunder and/or other securities
exercisable or exchangeable for or convertible into shares of Common Stock
issued and outstanding on the date of this Agreement, provided that such
securities have not been amended since the date of this Agreement to increase
the number of such securities or to decrease the exercise, exchange or
conversion price of such securities, (c) the Placement Agent Warrant and
the Placement Agent Shares as described and set forth on Schedule 3.1(s),
provided such securities are not amended or modified after the date hereof, (d) securities
issued pursuant to acquisitions or strategic transactions approved by a
majority of the disinterested directors of the Company, provided that any such
issuance shall only be to a Person which is, itself or through its
subsidiaries, an operating company or the owner of an operating company in a
business synergistic with the business of the Company and in which the Company
receives benefits in addition to the investment of funds, but shall not include
a transaction in which the Company is issuing securities primarily for the
purpose of raising capital or to an entity whose primary business is investing
in securities and (e) up to an amount of Common Stock and warrants equal
to the difference between $3.5 million and the aggregate Subscription Amounts
hereunder, on the same terms, conditions and prices as hereunder, with
investors executing definitive agreements for the purchase of such securities
and such transactions closing on or before the earlier of (i) July 15,
2008 or (ii) the date that a Registration Statement is filed with the
Commission.


 


“FWS”
means Feldman Weinstein & Smith LLP with offices located at 420
Lexington Avenue, Suite 2620, New York, New York 10170-0002.


 


“GAAP”
shall have the meaning ascribed to such term in Section 3.1(h).


 


“Gaming
Authorities” means the Colorado Limited Gaming Control Commission (“CLGCC”),
the Minnesota Racing Commission (“MRC”) and any other tribal, state or
other domestic or foreign governmental authority that regulates any form of
gaming and has jurisdiction over the Company or the Subsidiaries.


 


“Indebtedness”
shall have the meaning ascribed to such term in Section 3.1(aa).


 


 “Intellectual Property Rights” shall
have the meaning ascribed to such term in Section 3.1(o).


 


“Legend
Removal Date” shall have the meaning ascribed to such term in Section 4.1(c).


 

















 


“Liens”
means a lien, charge, security interest, encumbrance, right of first refusal,
preemptive right or other restriction.


 


 “Lock-Up
Agreement” means the Lock-Up Agreement, dated as of the date hereof, by and
among the Company and the directors and officers, in the form of Exhibit C
attached hereto.


 


“Losses”
shall have the meaning assigned to such term in Section 4.20.


 


“Material
Adverse Effect” shall have the meaning assigned to such term in Section 3.1(b).


 


“Material
Permits” shall have the meaning ascribed to such term in Section 3.1(m).


 


“Per Share
Purchase Price” equals $0.65, subject
to adjustment for reverse and forward stock splits, stock dividends, stock
combinations and other similar transactions of the Common Stock that occur
after the date of this Agreement.


 


“Person”
means 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.


 


“Placement
Agent” shall mean the placement agent(s) to the Company in respect of
the transactions contemplated hereunder as disclosed and set forth on Schedule
3.1(s) attached hereto.


 


“Placement
Agent Agreement” means the Placement Agent Agreement(s) entered into
between the Company and each Placement Agent.


 


“Proceeding”
means an action, claim, suit, investigation or proceeding (including, without
limitation, an informal investigation or partial proceeding, such as a
deposition), whether commenced or threatened.


 


“Public Information Failure” shall
have the meaning ascribed to such term in Section 4.2(b).


 


“Public Information Failure Payments”
shall have the meaning ascribed to such term in Section 4.2(b).


 


“Purchaser
Party” shall have the meaning ascribed to such term in Section 4.8.


 


 “Registration Statement” means a
registration statement filed pursuant to Section 4.20, registering the
resale, by the Purchasers, of all of the Shares and the Warrant Shares.


 


“Required
Approvals” shall have the meaning ascribed to such term in Section 3.1(e).


 

















 


“Rule 144”
means Rule 144 promulgated by the Commission pursuant to the Securities
Act, as such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the Commission having substantially the same
effect as such Rule.


 


“SEC
Reports” shall have the meaning ascribed to such term in Section 3.1(h).


 


“Securities”
means the Shares, the Warrants and the Warrant Shares.


 


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


 


“Shares”
means the shares of Common Stock issued or issuable to each Purchaser pursuant
to this Agreement.


 


“Short
Sales” means all “short sales” as defined in Rule 200 of Regulation
SHO under the Exchange Act (but shall not be deemed to include the location
and/or reservation of borrowable shares of Common Stock).


 


 “Subscription Amount” means, as to each
Purchaser, the aggregate amount to be paid for Shares and Warrants purchased
hereunder as specified below such Purchaser’s name on the signature page of
this Agreement and next to the heading “Subscription Amount,” in United States
dollars and in immediately available funds; provided, however,
that up to, in the aggregate among all of the Purchasers, not more than
$150,000 may be in the form of accrued but unpaid bonuses or other employment
compensation.


 


“Subsidiary”
means any subsidiary of the Company as set forth on Schedule 3.1(a) and
shall, where applicable, also include any direct or indirect subsidiary of the
Company formed or acquired after the date hereof.


 


 “Trading Day” means a day on which the
principal Trading Market is open for trading.


 


 “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 American Stock Exchange, the Nasdaq Capital Market, the
Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock
Exchange or the OTC Bulletin Board.


 


“Transaction
Documents” means this Agreement, the Warrants, the Lock-Up Agreement, the
Escrow Agreement and any other documents or agreements executed in connection
with the transactions contemplated hereunder.


 


“Transfer
Agent” means Interwest Transfer Co., Inc., with a mailing address of
1981 East Murray Holladay Road, Suite 100, P.O. Box 17136, Salt Lake
City, Utah 84117 and a facsimile number of (801) 277-3147, and any successor
transfer agent of the Company.


 

















 


“Variable
Rate Transaction” shall have the meaning ascribed to such term in Section 4.13(b).


 


“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, 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 for trading 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)); (b)  if the OTC Bulletin Board is not a Trading
Market, the volume weighted average price of the Common Stock for such date (or
the nearest preceding date) on the OTC Bulletin Board; (c) if the Common
Stock is not then listed or quoted for trading on the OTC Bulletin Board and if
prices for the Common Stock are then reported in the “Pink Sheets” published by
Pink Sheets, LLC (or a similar organization or agency succeeding to its
functions of reporting prices), the most recent bid price per share of the
Common Stock so reported; or (d) 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 Purchasers of a majority in interest of the Shares then
outstanding and reasonably acceptable to the Company, the fees and expenses of
which shall be paid by the Company.


 


“Warrants”
means, collectively, the Common Stock purchase warrants delivered to the
Purchasers at the Closing in accordance with Section 2.2(a) hereof,
which Warrants shall be exercisable immediately and have a term of exercise
equal to five years, in the form of Exhibit A attached hereto.


 


“Warrant
Shares” means the shares of Common Stock issuable upon exercise of the
Warrants.


 


ARTICLE II.

PURCHASE AND SALE


 


2.1           Closing.  On the Closing Date, upon the terms and
subject to the conditions set forth herein, substantially concurrent with the
execution and delivery of this Agreement by the parties hereto, the Company
agrees to sell, and the Purchasers, severally and not jointly,  agree to purchase, up to an aggregate of
$3,500,000 of Shares and Warrants.  Each
Purchaser shall deliver to the Escrow Agent via wire transfer or a certified
check immediately available funds equal to its Subscription Amount and the
Company shall deliver to each Purchaser its respective Shares and a Warrant, as
determined pursuant to Section 2.2(a), and the Company and each Purchaser
shall deliver the other items set forth in Section 2.2 deliverable at the
Closing.  Upon satisfaction of the
covenants and conditions set forth in Sections 2.2 and 2.3, the Closing shall
occur at the offices of FWS or such other location as the parties shall
mutually agree.


 


2.2           Deliveries.


 


(a)           On
or prior to the Closing Date, the Company shall deliver or cause to be
delivered to each Purchaser the following:


 


(i)            this Agreement duly executed by the
Company;


 

















 


(ii)           a legal opinion of Company Counsel,
substantially in the form of Exhibit B attached hereto;


 


(iii)          a copy of the irrevocable instructions to the
Transfer Agent instructing the Transfer Agent to deliver, on an expedited
basis, a certificate evidencing a number of Shares equal to such Purchaser’s
Subscription Amount divided by the Per Share Purchase Price, registered in the
name of such Purchaser;


 


(iv)          a Warrant registered in the name of such
Purchaser to purchase up to a number of shares of Common Stock equal to 80% of
such Purchaser’s Shares, with an exercise price equal to $0.85, subject
to adjustment therein; and


 


(v)           the Lock-Up Agreements.


 


(b)           On or prior to the Closing Date, each
Purchaser shall deliver or cause to be delivered to the Company the following:


 


(i)            this Agreement duly executed by such
Purchaser; and


 


(ii)           such Purchaser’s Subscription Amount by wire
transfer to the Escrow Agent.


 


2.3           Closing Conditions.


 


(a)           The Company has the right, for any reason or for no
reason, to reject the signature page to this Agreement and the
Subscription Amount from any Purchaser. 
The obligations of the Company hereunder in connection with the Closing
are subject to the following conditions being met:


 


(i)            the
accuracy in all material respects on the Closing Date of the representations
and warranties of the Purchasers contained herein;


 


(ii)           all obligations, covenants and agreements of
each Purchaser required to be performed at or prior to the Closing Date shall
have been performed; and


 


(iii)          the delivery
by each Purchaser of the items set forth in Section 2.2(b) of this
Agreement.


 


(b)           The respective obligations of the Purchasers
hereunder in connection with the Closing are subject to the following
conditions being met:


 


(i)            the
accuracy in all material respects when made and on the Closing Date of the
representations and warranties of the Company contained herein;


 


(ii)           all obligations, covenants and agreements of
the Company required to be performed at or prior to the Closing Date shall have
been performed;


 

















 


(iii)          the delivery
by the Company of the items set forth in Section 2.2(a) of this
Agreement;


 


(iv)          there shall
have been no Material Adverse Effect with respect to the Company since the date
hereof;


 


(v)           the Company
shall have received cash Subscription Amounts of at least $150,000, in
the aggregate, from officers, directors, employees and/or friends or family thereof;  and


 


(vi)          from the date hereof to the Closing Date,
trading in the Common Stock shall not have been suspended by the Commission or
the Company’s principal Trading Market (except for any suspension of trading of
limited duration agreed to by the Company, which suspension shall be terminated
prior to the Closing), and, at any time prior to the Closing Date, trading in
securities generally as reported by Bloomberg L.P. shall not have been
suspended or limited, or minimum prices shall not have been established on
securities whose trades are reported by such service, or on any Trading Market,
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 of such magnitude in its effect on, or any material adverse change in,
any financial market which, in each case, in the reasonable judgment of each
Purchaser, makes it impracticable or inadvisable to purchase the Securities at
the Closing.


 


ARTICLE III.

REPRESENTATIONS AND WARRANTIES


 


3.1           Representations and
Warranties of the Company. Except as set forth in the Disclosure Schedules,
which Disclosure Schedules shall be deemed a part hereof and shall qualify any
representation or warranty made herein to the extent of the disclosure
contained in the corresponding section of the Disclosure Schedules, the Company
hereby makes the following representations and warranties to each Purchaser:


 


(a)           Subsidiaries.  All of the direct and indirect subsidiaries
of the Company are set forth on Schedule 3.1(a).  The Company owns, directly or indirectly, all
of the capital stock or other equity interests of each Subsidiary free and
clear of any Liens, and all of the issued and outstanding shares of capital
stock of each Subsidiary are validly issued and are fully paid, non-assessable
and free of preemptive and similar rights to subscribe for or purchase
securities.  If the Company has no
subsidiaries, all other references to the Subsidiaries or any of them in the
Transaction Documents shall be disregarded.


 


(b)           Organization
and Qualification.  The Company and
each of the Subsidiaries is an entity duly incorporated or otherwise organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation or organization, with the requisite power and authority to own
and use its properties and assets and to carry on 


 

















 


its business
as currently conducted.  Neither the
Company nor any Subsidiary is in violation nor default of any of the provisions
of its respective certificate or articles of incorporation, bylaws or other
organizational or charter documents. 
Each of the Company and the Subsidiaries is duly qualified to conduct
business and is in good standing as a foreign corporation or other entity in
each jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, except where the failure to be
so qualified or in good standing, as the case may be, could not have or
reasonably be expected to result in: (i) a material adverse effect on the
legality, validity or enforceability of any Transaction Document, (ii) a
material adverse effect on the results of operations, assets, business,
prospects or condition (financial or otherwise) of the Company and the
Subsidiaries, taken as a whole, or (iii) a material adverse effect on the
Company’s ability to perform in any material respect on a timely basis its
obligations under any Transaction Document (any of (i), (ii) or (iii), a “Material
Adverse Effect”) and no Proceeding has been instituted in any such
jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or
curtail such power and authority or qualification.


 


(c)           Authorization;
Enforcement.  The Company has the
requisite corporate power and authority to enter into and to consummate the
transactions contemplated by each of the Transaction Documents and otherwise to
carry out its obligations hereunder and thereunder.  The execution and delivery of each of the
Transaction Documents by the Company and the consummation by it of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary action on the part of the Company and no further action is required
by the Company, the Board of Directors or the Company’s stockholders in
connection therewith other than in connection with the Required Approvals.  Each Transaction Document to which it is a
party has been (or upon delivery will have been) duly executed by the Company
and, when delivered in accordance with the terms hereof and thereof, will
constitute the valid and binding obligation of the Company enforceable against
the Company in accordance with its terms, except: (i) as limited by
general equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors’ rights generally, (ii) as limited by laws
relating to the availability of specific performance, injunctive relief or
other equitable remedies and (iii) insofar as indemnification and
contribution provisions may be limited by applicable law.


 


(d)           No Conflicts.  The execution, delivery and performance by
the Company of the Transaction Documents, the issuance and sale of the
Securities and the consummation by it of the other transactions to which it is
a party contemplated hereby and thereby do not and will not: (i) conflict
with or violate any provision of the Company’s or any Subsidiary’s certificate
or articles of incorporation, bylaws or other organizational or charter
documents, (ii) conflict with, or constitute a default (or an event that
with notice or lapse of time or both would become a default) under, result in
the creation of any Lien upon any of the properties or assets of the Company or
any Subsidiary, or give to others any rights of termination, amendment,
acceleration or cancellation (with or without notice, lapse of time or both)
of, any agreement, credit facility, debt or other instrument (evidencing a
Company or Subsidiary debt or otherwise) or other understanding to which the
Company or any Subsidiary is a party or by which 


 

















 


any property or asset of the Company or any Subsidiary is bound or
affected or (iii) subject to the Required Approvals, conflict with or
result in a violation of any law, rule, regulation, order, judgment,
injunction, decree or other restriction of any court or governmental authority
to which the Company or a Subsidiary is subject (including federal and state
securities laws and regulations), or by which any property or asset of the
Company or a Subsidiary is bound or affected; except in the case of each of
clauses (ii) and (iii), such as could not have or reasonably be expected
to result in a Material Adverse Effect.


 


(e)           Filings,
Consents and Approvals.  The Company
is not required to obtain any consent, waiver, authorization or order of, give
any notice to, or make any filing or registration with, any court or other
federal, state, local or other governmental authority or other Person in
connection with the execution, delivery and performance by the Company of the
Transaction Documents, other than: (i) the filings required pursuant to Section 4.4
of this Agreement, (ii) the notice and/or application(s), if any, to each
applicable Trading Market for the issuance and sale of the Securities and the
listing of the Securities for trading thereon in the time and manner required
thereby, (iii) the filing of Form D with the Commission and such
filings as are required to be made under applicable state securities laws and (iv) notice
to, and approvals, if any, of, MRC and CLGCC (collectively, the “Required
Approvals”).


 


(f)            Issuance
of the Securities.  The Securities
are duly authorized and, when issued and paid for in accordance with the
applicable Transaction Documents, will be duly and validly issued, fully paid
and nonassessable, free and clear of all Liens imposed by the Company other
than restrictions on transfer provided for in the Transaction Documents.  The Warrant Shares, when issued in accordance
with the terms of the Transaction Documents, will be validly issued, fully paid
and nonassessable, free and clear of all Liens imposed by the Company other
than restrictions on transfer provided for in the Transaction Documents.  The Company has reserved from its duly
authorized capital stock the maximum number of shares of Common Stock issuable
pursuant to this Agreement and the Warrants.


 


(g)           Capitalization.  The capitalization of the Company is as set
forth on Schedule 3.1(g), which Schedule 3.1(g) shall also
include the number of shares of Common Stock owned beneficially, and of record,
by Affiliates of the Company as of the date hereof. The Company has not issued
any capital stock since its most recently filed
periodic report under the Exchange Act, other than pursuant to the
exercise of employee stock options under the Company’s stock option plans, the
issuance of shares of Common Stock to employees pursuant to the Company’s
employee stock purchase plans and pursuant to the conversion and/or exercise of
Common Stock Equivalents outstanding as of the date of the most recently filed
periodic report under the Exchange Act. 
No Person has any right of first refusal, preemptive right, right of
participation, or any similar right to participate in the transactions
contemplated by the Transaction Documents. 
Except as a result of the purchase and sale of the Securities, there are
no outstanding options, warrants, scrip rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities, rights or
obligations convertible into or exercisable or exchangeable for, or giving any
Person any right to subscribe for or acquire any shares of 


 

















 


Common Stock,
or contracts, commitments, understandings or arrangements by which the Company
or any Subsidiary is or may become bound to issue additional shares of Common
Stock or Common Stock Equivalents.  The
issuance and sale of the Securities will not obligate the Company to issue
shares of Common Stock or other securities to any Person (other than the
Purchasers) and will not result in a right of any holder of Company securities
to adjust the exercise, conversion, exchange or reset price under any of such
securities. All of the outstanding shares of capital stock of the Company are
validly issued, fully paid and nonassessable, have been issued in compliance
with all federal and state securities laws, and none of such outstanding shares
was issued in violation of any preemptive rights or similar rights to subscribe
for or purchase securities.  No further
approval or authorization of any stockholder, the Board of Directors or others
is required for the issuance and sale of the Securities.  There are no stockholders agreements, voting
agreements or other similar agreements with respect to the Company’s capital
stock to which the Company is a party or, to the knowledge of the Company,
between or among any of the Company’s stockholders.


 


(h)           SEC
Reports; Financial Statements.  The
Company has filed all reports, schedules, forms, statements and other documents
required to be filed by the Company under the Securities Act and the Exchange
Act, including pursuant to Section 13(a) or 15(d) thereof, for
the two years preceding the date hereof (or such shorter period as the Company
was required by law or regulation to file such material) (the foregoing
materials, including the exhibits thereto and documents incorporated by
reference therein, being collectively referred to herein as the “SEC Reports”)
on a timely basis or has received a valid extension of such time of filing and
has filed any such SEC Reports prior to the expiration of any such
extension.  As of their respective dates,
the SEC Reports complied in all material respects with the requirements of the
Securities Act and the Exchange Act, as applicable, and none of the SEC
Reports, when filed, 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 the light of the circumstances under
which they were made, not misleading. 
The Company has never been an issuer subject to Rule 144(i) under
the Securities Act.  The financial
statements of the Company included in the SEC Reports comply in all material
respects with applicable accounting requirements and the rules and
regulations of the Commission with respect thereto as in effect at the time of
filing.  Such financial statements have
been prepared in accordance with United States generally accepted accounting
principles applied on a consistent basis during the periods involved (“GAAP”),
except as may be otherwise specified in such financial statements or the notes
thereto and except that unaudited financial statements may not contain all
footnotes required by GAAP, and fairly present in all material respects the
financial position of the Company and its consolidated Subsidiaries as of and
for 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,
immaterial, year-end audit adjustments.


 


(i)            Material
Changes; Undisclosed Events, Liabilities or Developments.  Since the date of the latest audited
financial statements included within the SEC Reports, except as specifically
disclosed in a subsequent SEC Report filed prior to the date hereof: (i) there
has been no event, occurrence or development that has had or that could 


 

















 


reasonably be
expected to result in a Material Adverse Effect, (ii) the Company has not
incurred any liabilities (contingent or otherwise) other than (A) trade
payables and accrued expenses incurred in the ordinary course of business
consistent with past practice and (B) liabilities not required to be
reflected in the Company’s financial statements pursuant to GAAP or disclosed
in filings made with the Commission, (iii) the Company has not altered its
method of accounting, (iv) the Company has not declared or made any
dividend or distribution of cash or other property to its stockholders or
purchased, redeemed or made any agreements to purchase or redeem any shares of
its capital stock and (v) the Company has not issued any equity securities
to any officer, director or Affiliate, except pursuant to existing Company
stock option plans.  The Company does not
have pending before the Commission any request for confidential treatment of
information.  Except for the issuance of
the Securities contemplated by this Agreement or as set forth on Schedule
3.1(i), no event, liability or development has occurred or exists with respect
to the Company or its Subsidiaries or their respective business, properties,
operations or financial condition, that would be required to be disclosed by
the Company under applicable securities laws at the time this representation is
made or deemed made that has not been publicly disclosed at least 1 Trading Day
prior to the date that this representation is made.


 


(j)            Litigation.  There is no action, suit, inquiry, notice of
violation, proceeding or investigation pending or, to the knowledge of the Company,
threatened against or affecting the Company, any Subsidiary or any of their
respective properties before or by any court, arbitrator, governmental or
administrative agency or regulatory authority (federal, state, county, local or
foreign) (collectively, an “Action”) which (i) adversely affects or
challenges the legality, validity or enforceability of any of the Transaction
Documents or the Securities or (ii) could, if there were an unfavorable
decision, have or reasonably be expected to result in a Material Adverse
Effect.  Neither the Company nor any
Subsidiary, nor any director or officer thereof, is or has been the subject of
any Action involving a claim of violation of or liability under federal or
state securities laws or a claim of breach of fiduciary duty.  There has not been, and to the knowledge of
the Company, there is not pending or contemplated, any investigation by the
Commission involving the Company or any current or former director or officer
of the Company.  The Commission has not
issued any stop order or other order suspending the effectiveness of any
registration statement filed by the Company or any Subsidiary under the
Exchange Act or the Securities Act.


 


(k)           Labor
Relations.  No material labor dispute
exists or, to the knowledge of the Company, is imminent with respect to any of
the employees of the Company, which could reasonably be expected to result in a
Material Adverse Effect.  None of the
Company’s or its Subsidiaries’ employees is a member of a union that relates to
such employee’s relationship with the Company or such Subsidiary, and neither
the Company nor any of its Subsidiaries is a party to a collective bargaining
agreement, and the Company and its Subsidiaries believe that their
relationships with their employees are good. 
No executive officer, to the knowledge of the Company, is, or is now
expected to be, in violation of any material term of any employment contract,
confidentiality, disclosure or proprietary information agreement or
non-competition agreement, or any other contract or agreement or any
restrictive covenant in favor of any third party, and the 


 

















 


continued
employment of each such executive officer does not subject the Company or any
of its Subsidiaries to any liability with respect to any of the foregoing matters.  The Company and its Subsidiaries are in
compliance with all U.S. federal, state, local and foreign laws and regulations
relating to employment and employment practices, terms and conditions of
employment and wages and hours, except where the failure to be in compliance
could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.


 


(l)            Compliance.  Neither the Company nor any Subsidiary: (i) is
in default under or in violation of (and no event has occurred that has not
been waived that, with notice or lapse of time or both, would result in a
default by the Company or any Subsidiary under), nor has the Company or any
Subsidiary received notice of a claim that it is in default under or that it is
in violation of, any indenture, loan or credit agreement or any other agreement
or instrument to which it is a party or by which it or any of its properties is
bound (whether or not such default or violation has been waived), (ii) is
in violation of any order of any court, arbitrator or governmental body or (iii) is
or has been in violation of any statute, rule or regulation of any
governmental authority, including without limitation all foreign, federal,
state and local laws applicable to its business and all such laws that affect
the environment, except in each case as could not have or reasonably be
expected to result in a Material Adverse Effect.


 


(m)          Regulatory
Permits.  The Company and the
Subsidiaries possess all certificates, authorizations and permits issued by the
appropriate federal, state, local or foreign regulatory authorities necessary
to conduct their respective businesses as described in the SEC Reports, except
where the failure to possess such permits would not reasonably be expected to
result in a Material Adverse Effect (“Material Permits”), and neither
the Company nor any Subsidiary has received any notice of proceedings relating
to the revocation or modification of any Material Permit.


 


(n)           Title
to Assets.  The Company and the
Subsidiaries have good and marketable title in fee simple to all real property
owned by them and good and marketable title in all personal property owned by
them that is material to the business of the Company and the Subsidiaries, in
each case free and clear of all Liens, except for Liens as do not materially
affect the value of such property and do not materially interfere with the use
made and proposed to be made of such property by the Company and the
Subsidiaries and Liens for the payment of federal, state or other taxes, the payment
of which is neither delinquent nor subject to penalties.  Any real property and facilities held under
lease by the Company and the Subsidiaries are held by them under valid,
subsisting and enforceable leases with which the Company and the Subsidiaries
are in compliance.


 


(o)           Patents
and Trademarks.  The Company and the
Subsidiaries have, or have rights to use, all patents, patent applications,
trademarks, trademark applications, service marks, trade names, trade secrets,
inventions, copyrights, licenses and other intellectual property rights and
similar rights as described in the SEC Reports as necessary or material for use
in connection with their respective businesses and which the failure to so have
could have a Material Adverse Effect (collectively, the “Intellectual
Property 


 

















 


Rights”). 
Neither the Company nor any Subsidiary has received a notice (written or
otherwise) that any of the Intellectual Property Rights used by the Company or
any Subsidiary violates or infringes upon the rights of any Person.  To the knowledge of the Company, all such
Intellectual Property Rights are enforceable and there is no existing
infringement by another Person of any of the Intellectual Property Rights.  The Company and its Subsidiaries have taken
reasonable security measures to protect the secrecy, confidentiality and value
of all of their intellectual properties, except where failure to do so could
not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.


 


(p)           Insurance.  The Company and the 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 the Subsidiaries are engaged, including, but not limited
to, directors and officers insurance coverage at least equal to the aggregate
Subscription Amount.  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.


 


(q)           Transactions
With Affiliates and Employees. 
Except as set forth in the SEC Reports, none of the officers or
directors of the Company and, to the knowledge of the Company, none of the
employees of the Company is presently a party to any transaction with the
Company or any Subsidiary (other than for services as employees, officers and
directors), 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 $120,000 other than for: (i) payment of salary or consulting fees for
services rendered, (ii) reimbursement for expenses incurred on behalf of
the Company and (iii) other employee benefits, including stock option
agreements under any stock option plan of the Company.


 


(r)            Sarbanes-Oxley;
Internal Accounting Controls.  The
Company is in material compliance with all provisions of the Sarbanes-Oxley Act
of 2002 that are applicable to it as of the Closing Date.  The Company
and the Subsidiaries maintain a system of internal accounting controls
sufficient 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 action is
taken with respect to any differences. The Company has established disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) for the Company and designed such disclosure controls and procedures
to ensure that information required to be disclosed by 


 

















 


the Company in the reports it files or submits under the Exchange Act
is recorded, processed, summarized and reported, within the time periods
specified in the Commission’s rules and forms.  The Company’s certifying officers have
evaluated the effectiveness of the Company’s disclosure controls and procedures
as of the end of the period covered by the Company’s most recently filed
periodic report under the Exchange Act (such date, the “Evaluation Date”).  The Company presented in its most recently
filed periodic report under the Exchange Act the conclusions of the certifying
officers about the effectiveness of the disclosure controls and procedures
based on their evaluations as of the Evaluation Date.  Since the Evaluation Date, there have been no
changes in the Company’s internal control over financial reporting (as such
term is defined in the Exchange Act) that has materially affected, or is
reasonably likely to materially affect, the Company’s internal control over
financial reporting.


 


(s)           Certain
Fees.  Other than fees payable to
each Placement Agent in accordance with the Placement Agent Agreement as set
forth in detail on Schedule 3.1(s), no brokerage or finder’s fees or
commissions are or will be payable by the Company to any broker, financial
advisor or consultant, finder, placement agent, investment banker, bank or
other Person with respect to the transactions contemplated by the Transaction
Documents.  The Purchasers shall have no
obligation with respect to any fees or with respect to any claims 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 the Transaction
Documents.


 


(t)            Private
Placement. Assuming the accuracy of the Purchasers’ representations and
warranties set forth in Section 3.2, no registration under the Securities
Act is required for the offer and sale of the Securities by the Company to the
Purchasers as contemplated hereby. The issuance and sale of the Securities
hereunder does not contravene the rules and regulations of the Trading
Market.


 


(u)           Investment
Company. The Company is not, and is not an Affiliate of, and immediately
after receipt of payment for the Securities, will not be or be an Affiliate of,
an “investment company” within the meaning of the Investment Company Act of
1940, as amended.  The Company shall
conduct its business in a manner so that it will not become subject to the
Investment Company Act of 1940, as amended.


 


(v)           Registration
Rights.  No Person has any right to
cause the Company to effect the registration under the Securities Act of any
securities of the Company.


 


(w)          Listing
and Maintenance Requirements.  The
Common Stock is registered pursuant to Section 12(b) or 12(g) of
the Exchange Act, and the Company has taken no action designed to, or which to
its knowledge is likely to have the effect of, terminating the registration of
the Common Stock under the Exchange Act nor has the Company received any
notification that the Commission is contemplating terminating such
registration.  The Company has not, in
the 12 months preceding the date hereof, received notice from any Trading
Market on which the Common Stock is or has been listed or quoted to the effect
that the Company is not in compliance with the listing or maintenance
requirements of such Trading Market. The Company is, and has no reason


 
















 


to believe
that it will not in the foreseeable future continue to be, in compliance with
all such listing and maintenance requirements.


 


(x)            Application
of Takeover Protections.  The Company
and the 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 certificate of incorporation (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 as a result of the Company’s
issuance of the Securities and the Purchasers’ ownership of the Securities.


 


(y)           Disclosure.  Except with respect to the material terms and
conditions of the transactions contemplated by the Transaction Documents, the
Company confirms that neither it nor, to its knowledge, any other Person acting
on its behalf has provided any of the Purchasers or their agents or counsel
with any information that it believes constitutes or might constitute material,
non-public information.   The Company
understands and confirms that the Purchasers will rely on the foregoing
representation in effecting transactions in securities of the Company.  All disclosure furnished by or on behalf of
the Company to the Purchasers regarding the Company, its business and the
transactions contemplated hereby, including the Disclosure Schedules to this
Agreement, is true and correct and does not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading. The press releases disseminated by the Company during the
twelve months preceding the date of this Agreement taken as a whole, in
conjunction with the SEC Reports, do not contain any untrue statement of a
material fact or omit 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 and when made, not misleading.  The Company acknowledges and agrees that no
Purchaser makes or has made any representations or warranties with respect to
the transactions contemplated hereby other than those specifically set forth in
Section 3.2 hereof.


 


(z)            No Integrated Offering. Assuming the
accuracy of the Purchasers’ representations and warranties set forth in Section 3.2,
neither the Company, nor any of its 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 this offering of the Securities to be integrated with prior
offerings by the Company for purposes of (i) the Securities Act which
would require the registration of any such securities under the Securities Act,
or (ii) any applicable shareholder approval provisions of any Trading
Market on which any of the securities of the Company are listed or designated.


 


(aa)         Solvency.  Based on the consolidated financial condition
of the Company as of the Closing Date, after giving effect to the receipt by
the Company of the proceeds from the sale of the Securities hereunder: (i) the
fair saleable value of the Company’s 


 

















 


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 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 liabilities 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).  The Company has no knowledge of any facts or
circumstances that lead it to believe that it will file for reorganization or
liquidation under the bankruptcy or reorganization laws of any jurisdiction
within one year from the Closing Date. 
Schedule 3.1(aa) sets forth as of the date hereof 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”
means (x) 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), (y) 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 (z) 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.


 


(bb)         Tax
Status.  Except for matters that
would not, individually or in the aggregate, have or reasonably be expected to
result in a Material Adverse Effect, the Company and each Subsidiary has filed
all necessary federal, state and foreign income and franchise tax returns and
has paid or accrued all taxes shown as due thereon, and the Company has no
knowledge of a tax deficiency which has been asserted or threatened against the
Company or any Subsidiary.


 


(cc)         No
General Solicitation.  Neither the
Company nor, to the Company’s knowledge, any person acting on behalf of the Company
has offered or sold any of the Securities by any form of general solicitation
or general advertising.  The Company has
offered the Securities for sale only to the Purchasers and certain other “accredited
investors” within the meaning of Rule 501 under the Securities Act.


 


(dd)         Foreign
Corrupt Practices.  Neither the
Company, nor to the knowledge of the Company, any agent or other person acting
on behalf of the Company, has: (i) directly or indirectly, used any 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.


 


(ee)         Accountants.  The Company’s accounting firm is set forth on
Schedule 3.1(ee) of the Disclosure Schedules.  To the knowledge and belief of the Company,
such accounting firm: (i) is a registered public accounting firm as
required by the Exchange Act and (ii) shall express its opinion with
respect to the financial statements to be included in the Company’s Annual
Report for the year ending December 31, 2008.


 


(ff)           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.


 


(gg)         Acknowledgment Regarding Purchasers’
Purchase of Securities.  The Company
acknowledges and agrees that each of the Purchasers is acting solely in the
capacity of an arm’s length purchaser with respect to the Transaction Documents
and the transactions contemplated thereby. The Company further acknowledges
that no Purchaser is acting as a financial advisor or fiduciary of the Company
(or in any similar capacity) with respect to the Transaction Documents and the
transactions contemplated thereby and any advice given by any Purchaser or any
of their respective representatives or agents in connection with the
Transaction Documents and the transactions contemplated thereby is merely
incidental to the Purchasers’ purchase of the Securities.  The Company further represents to each
Purchaser that the Company’s decision to enter into this Agreement and the
other Transaction Documents has been based solely on the independent evaluation
of the transactions contemplated hereby by the Company and its representatives.


 


(hh)         Regulation M Compliance.  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 in the
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of any of the Securities, (ii) sold, bid
for, purchased, or, paid any compensation for soliciting purchases of, any of
the Securities, or (iii) paid or agreed to pay to any Person any
compensation for soliciting another to purchase any other securities of the
Company, other than, in the case of clauses (ii) and (iii), compensation
paid to the Company’s placement agent in connection with the placement of the
Securities.


 


(ii)           Stock Option Plans.
Each stock option granted by the Company under the Company’s stock option plan
was granted (i) in accordance with the terms of the Company’s stock option
plan and (ii) with an exercise price at least equal to the fair market
value of the Common Stock on the date such stock option would be considered
granted under GAAP and applicable law. No stock option granted under the Company’s
stock option plan has been backdated. 
The Company has not knowingly granted, and 


 

















 


there is no
and has been no Company policy or practice to knowingly grant, stock options
prior to, or otherwise knowingly coordinate the grant of stock options with,
the release or other public announcement of material information regarding the
Company or its Subsidiaries or their financial results or prospects.


 


3.2           Representations and
Warranties of the Purchasers.  Each
Purchaser, for itself and for no other Purchaser, hereby represents and
warrants as of the date hereof and as of the Closing Date to the Company as
follows:


 


(a)           Organization;
Authority.  If such Purchaser is an
entity, such Purchaser is an entity duly organized, validly existing and in
good standing under the laws of the jurisdiction of its organization with full
right, corporate or partnership power and authority to enter into and to
consummate the transactions contemplated by the Transaction Documents and
otherwise to carry out its obligations hereunder and thereunder. The execution
and delivery of the Transaction Documents and performance by such Purchaser of
the transactions contemplated by the Transaction Documents have been duly
authorized by all necessary corporate or similar action on the part of such
Purchaser.  Each Transaction Document to
which it is a party has been duly executed by such Purchaser, and when
delivered by such Purchaser in accordance with the terms hereof, will
constitute the valid and legally binding obligation of such Purchaser,
enforceable against it in accordance with its terms, except: (i) as
limited by general equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors’ rights generally, (ii) as limited by laws
relating to the availability of specific performance, injunctive relief or
other equitable remedies and (iii) insofar as indemnification and
contribution provisions may be limited by applicable law.


 


(b)           Own
Account.  Such Purchaser understands
that the Securities are “restricted securities” and have not been registered
under the Securities Act or any applicable state securities law and is
acquiring the Securities as principal for its own account and not with a view to
or for distributing or reselling such Securities or any part thereof in
violation of the Securities Act or any applicable state securities law, has no
present intention of distributing any of such Securities in violation of the
Securities Act or any applicable state securities law and has no direct or
indirect arrangement or understandings with any other persons to distribute or
regarding the distribution of such Securities (this representation and warranty
not limiting such Purchaser’s right to sell the Securities pursuant to a
Registration Statement or otherwise in compliance with applicable federal and
state securities laws) in violation of the Securities Act or any applicable
state securities law.  If such Purchaser
is not an individual, such Purchaser is acquiring the Securities hereunder in
the ordinary course of its business. Each Purchaser who is an individual must
also fill out an individual investor questionnaire provided by the Company and
deliver such questionnaire at the Closing.


 


(c)           Purchaser
Status.  At the time such Purchaser
was offered the Securities, it was, and as of the date hereof it is, and on
each date on which it exercises any Warrants, it will be either: (i) an “accredited
investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under
the Securities Act or (ii) a “qualified institutional buyer” as defined


 

















 


in Rule 144A(a) under
the Securities Act.  Such Purchaser is
not required to be registered as a broker-dealer under Section 15 of the
Exchange Act.


 


(d)           Experience
of Such Purchaser.  Such Purchaser,
either alone or together with its representatives, has such knowledge,
sophistication and experience in business and financial matters so as to be
capable of evaluating the merits and risks of the prospective investment in the
Securities, and has so evaluated the merits and risks of such investment.  Such Purchaser is able to bear the economic
risk of an investment in the Securities and, at the present time, is able to
afford a complete loss of such investment.


 


(e)           General
Solicitation.  Such Purchaser is not
purchasing the Securities as a result of any advertisement, article, notice or
other communication regarding the Securities published in any newspaper,
magazine or similar media or broadcast over television or radio or presented at
any seminar or any other general solicitation or general advertisement.


 


(f)            Short
Sales and Confidentiality Prior To The Date Hereof.  Other than consummating the transactions
contemplated hereunder, such Purchaser has not directly or indirectly, nor has
any Person acting on behalf of or pursuant to any understanding with such
Purchaser, executed any purchases or sales, including Short Sales, of the
securities of the Company during the period commencing from the time that such
Purchaser first received a term sheet (written or oral) from the Company or any
other Person representing the Company setting forth the material terms of the
transactions contemplated hereunder until the date hereof (“Discussion Time”).  Notwithstanding the foregoing, in the case of
a Purchaser that is a multi-managed investment vehicle whereby separate
portfolio managers manage separate portions of such Purchaser’s assets and the
portfolio managers have no direct knowledge of the investment decisions made by
the portfolio managers managing other portions of such Purchaser’s assets, the
representation set forth above shall only apply with respect to the portion of
assets managed by the portfolio manager that made the investment decision to
purchase the Securities covered by this Agreement.  Other than to other Persons party to this
Agreement, such Purchaser has maintained the confidentiality of all disclosures
made to it in connection with this transaction (including the existence and
terms of this transaction).


 


(g)           FELONIES; DENIAL OF GAMING LICENSE.  EACH PURCHASER, AND IF SUCH PURCHASER IS AN
ENTITY EACH PERSON WHO CONTROLS SUCH PURCHASER (WITHIN THE MEANING OF SECTION 15
OF THE SECURITIES ACT AND SECTION 20 OF THE EXCHANGE ACT), (A) HAS
NOT BEEN CONVICTED OF A FELONY IN ANY U.S. OR FOREIGN JURISDICTION, WHICH
CONVICTION HAS NOT BEEN SUBSEQUENTLY OVERTURNED ON APPEAL AND (B) HAS NOT
BEEN FOUND UNSUITABLE FOR, DENIED, OR, AFTER GRANT, HAD REVOKED OR SUSPENDED,
ANY LICENSE OR OTHER AUTHORIZATION TO PARTICIPATE IN THE GAMING INDUSTRY ISSUED
BY ANY GOVERNMENTAL AUTHORITY INCLUDING, WITHOUT LIMITATION, NIGC, ANY TRIBE OR
TRIBAL GAMING AUTHORITY, CLGCC OR MRC.


 

















 


(h)           GAMING AUTHORITIES.  EACH PURCHASER HEREBY ACKNOWLEDGES AND AGREES
THAT SUCH PURCHASER’S INVESTMENT IN THE SECURITIES PURSUANT TO THIS AGREEMENT MAY SUBJECT
SUCH PURCHASER TO SCRUTINY BY THE GAMING AUTHORITIES.  EACH PURCHASER FURTHER ACKNOWLEDGES THAT IF
SUCH PURCHASER BECOMES A BENEFICIAL OWNER OF FIVE PERCENT (5%) OR MORE OF THE
OUTSTANDING COMMON STOCK, SUCH PURCHASER MAY BECOME SUBJECT TO ENHANCED
SCRUTINY BY THE GAMING AUTHORITIES. 
UNDER CLGCC RULES, THE COMPANY MUST DISCLOSE TO THE CLGCC ANY HOLDER OF
FIVE PERCENT (5%) OR MORE OF THE OUTSTANDING COMMON STOCK AND CLGCC MAY THEN
DETERMINE WHETHER TO PERFORM A BACKGROUND INVESTIGATION OF THAT
STOCKHOLDER.  IN ADDITION, THE COMPANY
MUST DISCLOSE TO CLGCC ANY HOLDER OF TEN PERCENT (10%) OR MORE OF ITS
OUTSTANDING COMMON STOCK AND THAT HOLDER MUST FILE AN APPLICATION FOR A FINDING
OF SUITABILITY WITH CLGCC.  AS PROVIDED
IN THE ARTICLES OF INCORPORATION, EACH PURCHASER COVENANTS AND AGREES TO
PROMPTLY PROVIDE INFORMATION AND MATERIALS THAT ARE REQUIRED BY THE GAMING
AUTHORITIES AND TO COMPLY WITH ANY OTHER REQUIREMENTS OF THE GAMING AUTHORITIES
AND AGREES TO DO SO AT THE PURCHASER’S EXPENSE.


 


(i)            REDEMPTION RIGHT OF COMPANY.  EACH PURCHASER HEREBY ACKNOWLEDGES AND AGREES
THAT, AS SET FORTH IN ARTICLE XI, (A) IF SUCH PURCHASER REFUSES TO PROVIDE
ANY INFORMATION REQUESTED BY THE GAMING AUTHORITIES, OR (B) IF THE BOARD
OF DIRECTORS OF THE COMPANY MAKES A REASONABLE, GOOD FAITH DETERMINATION, IN
RESPONSE TO A WRITTEN REQUEST OR NOTICE FROM THE GAMING AUTHORITIES TO THE
COMPANY OR SUCH PURCHASER, THAT THE CONTINUED OWNERSHIP OF THE SECURITIES BY
SUCH PURCHASER MAY RESULT IN (1) THE DISAPPROVAL OR NON-RENEWAL OF
ANY GAMING CONTRACT OR (2) THE DISAPPROVAL, LOSS, MODIFICATION,
NON-RENEWAL OR NON-REINSTATEMENT OF ANY GAMING LICENSE, APPROVAL, FRANCHISE OR
CONSENT FROM ANY GAMING AUTHORITY, THE COMPANY HAS THE RIGHT TO REDEEM ANY
SECURITIES HELD BY SUCH PURCHASER IN ACCORDANCE WITH ARTICLE XI.  AS PROVIDED UNDER ARTICLE XI, THE COMPANY
MUST PROVIDE AT LEAST 30 DAYS PRIOR WRITTEN NOTICE TO THE PURCHASER BEFORE
REDEEMING THE SECURITIES AND PURCHASER HAS THE RIGHT, DURING THAT 30 DAY
PERIOD, TO DISPOSE OF THE SECURITIES OF ITS OWN ACCORD.


 

















 


ARTICLE IV.

OTHER AGREEMENTS OF THE PARTIES


 


4.1           Transfer
Restrictions.


 


(a)           The
Securities may only be disposed of in compliance with state and federal
securities laws.  In connection with any
transfer of Securities other than (i) pursuant to an effective
registration statement or Rule 144, (ii) to the Company or (iii) to
an Affiliate of a Purchaser or in connection with a pledge as contemplated in Section 4.1(b),
the Company may require the transferor thereof to provide to the Company an
opinion of counsel selected by the transferor and reasonably acceptable to the
Company, the form and substance of which opinion shall be reasonably
satisfactory to the Company, to the effect that such transfer does not require
registration of such transferred Securities under the Securities Act.  As a condition of transfer, any such
transferee shall agree in writing to be bound by the terms of this Agreement
and shall have the rights of a Purchaser under this Agreement.


 


(b)           The
Purchasers agree to the imprinting, so long as is required by this Section 4.1,
of a legend on any of the Securities in the following form:


 


THIS SECURITY HAS NOT BEEN  REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY.  THIS SECURITY MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED
BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED
INVESTOR” AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT OR OTHER LOAN
SECURED BY SUCH SECURITIES.


 


ANY TRANSFER OF THIS SECURITY
OR THE SECURITIES INTO WHICH IT IS CONVERTIBLE IS, TO THE EXTENT REQUIRED,
SUBJECT TO THE PRIOR WRITTEN APPROVAL OF THE COLORADO LIMITED GAMING CONTROL
COMMISSION, THE MINNESOTA RACING COMMISSION AND ANY OTHER STATE, FEDERAL AND/OR
TRIBAL REGULATORY AUTHORITIES AS MAY HAVE JURISDICTION OVER THE ISSUER,
ITS SHAREHOLDERS AND/OR ITS SECURITIES, AND ANY ATTEMPTED TRANSFER WITHOUT SUCH
APPROVAL SHALL BE NULL AND VOID.


 


The Company acknowledges and agrees that a
Purchaser may from time to time pledge pursuant to a bona fide margin agreement
with a registered broker-dealer or grant a security interest in some or all of the
Securities to a financial institution that is an 


 

















 


“accredited investor” as defined in Rule 501(a) under the
Securities Act and who agrees to be bound by the provisions of this Agreement
and, if required under the terms of such arrangement, such Purchaser may
transfer pledged or secured Securities to the pledgees or secured parties.  Such a pledge or transfer would not be
subject to approval of the Company and no legal opinion of legal counsel of the
pledgee, secured party or pledgor shall be required in connection
therewith.  Further, no notice shall be
required of such pledge.  At the
appropriate Purchaser’s expense, the Company will execute and deliver such
reasonable documentation as a pledgee or secured party of Securities may
reasonably request in connection with a pledge or transfer of the Securities,
including, if the Securities are subject to registration pursuant to Section 4.20,
the preparation and filing of any required prospectus supplement under Rule 424(b)(3) under
the Securities Act or other applicable provision of the Securities Act to
appropriately amend the list of selling stockholders thereunder.


 


(c)           Certificates evidencing the Shares and
Warrant Shares shall not contain any legend (including the legend set forth in Section 4.1(b) hereof),
(i) while a registration statement (including a Registration Statement)
covering the resale of such security is effective under the Securities Act, (ii) following
any sale of such Shares or Warrant Shares pursuant to Rule 144, (iii) if
such Shares or Warrant Shares are eligible for sale under Rule 144,
without the requirement for the Company to be in compliance with the current
public information required under Rule 144 as to such Underlying Shares
and without volume or manner-of-sale restrictions, or (iv) if such legend
is not required under applicable requirements of the Securities Act (including
judicial interpretations and pronouncements issued by the staff of the
Commission).  The Company shall cause its
counsel to issue a legal opinion to the Transfer Agent promptly after the
Effective Date if required by the Transfer Agent to effect the removal of the
legend hereunder.  If all or any portion
of a Warrant is exercised at a time when there is an effective registration
statement to cover the resale of the Warrant Shares, or if such Warrant Shares
may be sold under Rule 144, without the requirement for the Company to be
in compliance with the current public information required under Rule 144
as to such Underlying Shares and without volume or manner-of-sale restrictions
or if such legend is not otherwise required under applicable requirements of
the Securities Act (including judicial interpretations and pronouncements
issued by the staff of the Commission) then such Warrant Shares shall be issued
free of all legends. The Company agrees that following the Effective Date or at
such time as such legend is no longer required under this Section 4.1(c),
it will, no later than three Trading Days following the delivery by a Purchaser
to the Company or the Transfer Agent of a certificate representing Shares or
Warrant Shares, as the case may be, issued with a restrictive legend (such
third Trading Day, the “Legend Removal Date”), deliver or cause to be
delivered to such Purchaser a certificate representing such shares that is free
from all restrictive and other legends. 
The Company may not make any notation on its records or give
instructions to the Transfer Agent that enlarge the restrictions on transfer
set forth in this Section 4. 
Certificates for Securities subject to legend removal hereunder shall be
transmitted by the Transfer Agent to the Purchaser by crediting the account of
the Purchaser’s prime broker with the Depository Trust Company System as
directed by such Purchaser.


 
















 


(d)           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, for each $1,000 of Shares or Warrant Shares
(based on the VWAP of the Common Stock on the date such Securities are
submitted to the Transfer Agent) delivered for removal of the restrictive
legend and subject to Section 4.1(c), $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 Legend Removal Date until such
certificate is delivered without a legend. Nothing herein shall limit such
Purchaser’s right 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.


 


(e)           Each Purchaser, severally and not jointly with the
other Purchasers, agrees that such Purchaser will sell any Securities pursuant
to either the registration requirements of the Securities Act, including any
applicable prospectus delivery requirements, or an exemption therefrom, and
that if Securities are sold pursuant to a Registration Statement, they will be
sold in compliance with the plan of distribution set forth therein, and
acknowledges that the removal of the restrictive legend from certificates
representing Securities as set forth in this Section 4.1 is predicated
upon the Company’s reliance upon this understanding.


 


4.2           Furnishing of Information; Public
Information.


 


(a)           If the Common Stock is not registered under Section 12(b) or
12(g) of the Exchange Act on the date hereof, the Company agrees to cause
the Common Stock to be registered under Section 12(g) of the Exchange
Act on or before the 60th calendar day following the date hereof.
Until the time that no Purchaser owns Securities, the Company covenants to
maintain the registration of the Common Stock under Section 12(b) or
12(g) of the Exchange Act and to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to the
Exchange Act.  As long as any Purchaser
owns Securities, if the Company is not required to file reports pursuant to the
Exchange Act, it will prepare and furnish to the Purchasers and make publicly available
in accordance with Rule 144(c) such information as is required for
the Purchasers to sell the Securities under Rule 144. The Company further
covenants that it will take such further action as any holder of Securities may
reasonably request, to the extent required from time to time to enable such
Person to sell such Securities without registration under the Securities Act
within the requirements of the exemption provided by Rule 144.


 


(b)           At any time during the period commencing from the six (6) month
anniversary of the date hereof and ending at such time that all of the
Securities may be sold without the requirement for the Company to be in
compliance with Rule 144(c)(1) and otherwise without restriction or
limitation pursuant to Rule 144, 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 one percent (1.0%) of the aggregate
Subscription Amount of such Purchaser’s Securities on the day of a Public
Information Failure and on every thirtieth (30th) day thereafter an
amount equal to 2.0% 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
Underlying Shares pursuant to Rule 144.  The payments to which a
Purchaser shall be entitled pursuant to this Section 4.2(b) are
referred to herein as “Public Information Failure Payments.” 
Public Information Failure  Payments
shall be paid on the earlier of (i) the last day of the calendar month
during which such Public Information Failure  Payments
are incurred and (ii) the third (3rd) Business Day after the
event or failure giving rise to the Public Information Failure  Payments is cured.  In the event the
Company fails to make Public Information Failure  Payments in a timely manner, such Public Information Failure  Payments shall bear interest at the rate
of 1.5% per month (prorated for partial months) until paid in full. 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.


 


4.3           Integration. 
The Company shall not 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
Securities to the Purchasers in a manner that would require the registration
under the Securities Act of the sale of the Securities to the Purchasers or
that would be integrated with the offer or sale of the Securities for purposes
of the rules and regulations of any Trading Market such that it would
require shareholder approval prior to the closing of such other transaction
unless shareholder approval is obtained before the closing of such subsequent
transaction.


 


4.4           Securities Laws Disclosure; Publicity. 
The Company shall, (i) by 8:30 a.m. (New York City time) on
the Trading Day immediately following the date hereof, issue a press release
disclosing the material terms of the transactions contemplated hereby and (ii) by
8:30 a.m. New York time on the fourth Trading Day immediately following
the date hereof issue a Current Report on Form 8-K, disclosing the
material terms of the transactions contemplated hereby, and including the
Transaction Documents as exhibits thereto. 
The Company and each Purchaser shall consult with each other in issuing
any other press releases with respect to the transactions contemplated hereby,
and neither the Company nor any Purchaser shall issue any such press release
nor otherwise make any such public statement without the prior consent of the
Company, with respect to any press release of any Purchaser, or without the
prior consent of each Purchaser, with respect to any press release of the
Company, which consent shall not unreasonably be withheld or delayed, except if
such disclosure is required by law, in which case the disclosing party shall
promptly provide the other party with prior notice of such public statement or
communication.  Notwithstanding the
foregoing, the Company shall not publicly disclose the name of any Purchaser,
or include the name of any Purchaser in any filing with the Commission or any
regulatory agency or Trading Market, without the prior written consent of such
Purchaser, except: (a) as required by federal securities law in connection
with (i) any registration statement contemplated by Section 4.20 of
this Agreement and (ii) the filing of final Transaction Documents
(including signature pages thereto) with the Commission and (b) to
the 


 





















 


extent such disclosure is required by law or Trading Market
regulations, in which case the Company shall provide the Purchasers with prior
notice of such disclosure permitted under this clause (b).


 


4.5           Shareholder Rights Plan. 
No claim will be made or enforced by the Company or, with the consent of
the Company, any other Person, that any Purchaser is an “Acquiring Person”
under any control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or similar anti-takeover
plan or arrangement in effect or hereafter adopted by the Company, or that any
Purchaser could be deemed to trigger the provisions of any such plan or
arrangement, by virtue of receiving Securities under the Transaction Documents
or under any other agreement between the Company and the Purchasers.


 


4.6           Non-Public Information.  Except with respect to the material terms and
conditions of the transactions contemplated by the Transaction Documents, the
Company covenants and agrees that neither it, nor any other Person acting on
its behalf, 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 covenant in effecting
transactions in securities of the Company.


 


4.7           Use of Proceeds. 
Except as set forth on Schedule 4.7 attached hereto, the Company
shall use the net proceeds from the sale of the Securities hereunder for
working capital purposes and shall not use such proceeds for: (a) the
satisfaction of any portion of the Company’s debt (other than payment of trade
payables in the ordinary course of the Company’s business and prior practices),
(b) the redemption of any Common Stock or Common Stock Equivalents (except
pursuant to Article XI or as provided in Section 2.1(c) herein)
or (c) the settlement of any outstanding litigation.


 


4.8           Indemnification of Purchasers.  
Subject to the provisions of this Section 4.8, the Company will
indemnify and hold each Purchaser and its directors, officers, shareholders,
members, partners, employees and agents (and any other Persons with a
functionally equivalent role of a Person holding such titles notwithstanding a
lack of such title or any other title), each Person who controls such Purchaser
(within the meaning of Section 15 of the Securities Act and Section 20
of the Exchange Act), and the directors, officers, shareholders, agents,
members, partners or employees (and any other Persons with a functionally
equivalent role of a Person holding such titles notwithstanding a lack of such
title or any other title) of such controlling persons (each, a “Purchaser
Party”) harmless from any and all losses, liabilities, obligations, claims,
contingencies, damages, costs and expenses, including all judgments, amounts
paid in settlements, court costs and reasonable attorneys’ fees and costs of
investigation that any such Purchaser Party may suffer or incur as a result of
or relating to (a) any breach of any of the representations, warranties,
covenants or agreements made by the Company in this Agreement or in the other
Transaction Documents or (b) any action instituted against a Purchaser in
any capacity, or any of them or their respective Affiliates, by any stockholder
of the Company who is not an Affiliate of such Purchaser, with respect to any
of the transactions contemplated by the Transaction Documents (unless such
action is based upon a breach of such Purchaser’s representations, warranties
or covenants under the Transaction Documents or any agreements or 


 





















 


understandings such Purchaser may have with any such stockholder or any
violations by the Purchaser of state or federal securities laws or any conduct
by such Purchaser which constitutes fraud, gross negligence, willful misconduct
or malfeasance).  If any action shall be
brought against any Purchaser Party in respect of which indemnity may be sought
pursuant to this Agreement, such Purchaser Party shall promptly notify the
Company in writing, and the Company shall have the right to assume the defense
thereof with counsel of its own choosing reasonably acceptable to the Purchaser
Party.  Any Purchaser Party shall have
the right to employ separate counsel in any such action and participate in the
defense thereof, but the fees and expenses of such counsel shall be at the
expense of such Purchaser Party except to the extent that (i) the
employment thereof has been specifically authorized by the Company in writing, (ii) the
Company has failed after a reasonable period of time to assume such defense and
to employ counsel or (iii) in such action there is, in the reasonable
opinion of such separate counsel, a material conflict on any material issue
between the position of the Company and the position of such Purchaser Party,
in which case the Company shall be responsible for the reasonable fees and
expenses of no more than one such separate counsel.  The Company will not be liable to any
Purchaser Party under this Agreement (y) for any settlement by a Purchaser
Party effected without the Company’s prior written consent, which shall not be
unreasonably withheld or delayed; or (z) to the extent, but only to the
extent that a loss, claim, damage or liability is attributable to any Purchaser
Party’s breach of any of the representations, warranties, covenants or
agreements made by such Purchaser Party in this Agreement or in the other
Transaction Documents.


 


4.9           Reservation of Common Stock. As of the date hereof, the Company has
reserved and the Company shall continue to reserve and keep available at all
times, free of preemptive rights, a sufficient number of shares of Common Stock
for the purpose of enabling the Company to issue Shares pursuant to this
Agreement and Warrant Shares pursuant to any exercise of the Warrants.


 


4.10         Listing of Common Stock. The Company hereby agrees to use good
faith commercially reasonable efforts to maintain the listing or quotation of
the Common Stock on a Trading Market, and as soon as reasonably practicable
following the Closing (but not later than the earlier of the Effective Date and
the first anniversary of the Closing Date) to list or quote all of the Shares
and Warrant Shares on such Trading Market. The Company further agrees, if the
Company applies to have the Common Stock traded on any other Trading Market, it
will then include in such application all of the Shares and Warrant Shares, and
will take such other action as is necessary to cause all of the Shares and
Warrant Shares to be listed on such other Trading Market as promptly as
possible.  The Company will then take all
action reasonably necessary to continue the listing or quotation and trading of
its Common Stock on a Trading Market and will comply in all respects with the Company’s
reporting, filing and other obligations under the bylaws or rules of the
Trading Market.


 


4.11         Equal Treatment of Purchasers. 
No consideration (including any modification of any Transaction
Document) 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.  For clarification
purposes, this provision constitutes a separate right granted to each Purchaser
by the Company and negotiated separately by each Purchaser, and is intended for
the Company to treat the 


 





















 


Purchasers as a class and shall not in any way be construed as the
Purchasers acting in concert or as a group with respect to the purchase,
disposition or voting of Securities or otherwise.


 


4.12         [RESERVED].


 


4.13         Subsequent Equity Sales.


 


(a)           From the date hereof until 45 days after the Effective
Date and including the proceeds from the sale of Securities hereunder, neither
the Company nor any Subsidiary shall issue shares of Common Stock, Common Stock
Equivalents or Indebtedness (other than trade payables in the ordinary course)
with proceeds in excess of, in the aggregate among all sales during such
period, $3.5 million.


 


(b)           From the date hereof until the date that is the 12
month anniversary of the Effective Date, the Company shall be prohibited from
effecting or entering into an agreement to effect any Subsequent Financing
involving a Variable Rate Transaction.  “Variable
Rate Transaction” means a transaction in which the Company (i) issues
or sells any debt or equity securities that are convertible into, exchangeable
or exercisable for, or include the right to receive, additional shares of
Common Stock either (A) at a conversion price, exercise price or exchange
rate or other price that is based upon, and/or varies with, the trading prices
of or quotations for the shares of Common Stock at any time after the initial
issuance of such debt or equity securities or (B) with a conversion,
exercise or exchange price that is subject to being reset at some future date
after the initial issuance of such debt or equity security or upon the
occurrence of specified or contingent events directly or indirectly related to
the business of the Company or the market for the Common Stock or (ii) enters
into any agreement, including, but not limited to, an equity line of credit,
whereby the Company may sell securities at a future determined price.  Any Purchaser shall be entitled to obtain
injunctive relief against the Company to preclude any such issuance, which
remedy shall be in addition to any right to collect damages.


 


(c)           From the date hereof until the 6 month anniversary of
the Effective Date, if the Company effects any issuance by the Company or any
of its Subsidiaries of Common Stock (a “Subsequent Financing”), if any
terms of such Subsequent Financing are less favorable to the Company than the
terms granted under the Transaction Documents, unless waived in writing by a
Purchaser, the terms of the Transaction Documents shall be amended to
incorporate such less favorable terms to the Company for the benefit of such
Purchaser and, if warrants, option or other consideration was paid to the
investors in connection with the Subsequent Financing that are less favorable
to the Company than the issuance of the Warrants hereunder, such additional
securities shall be issued to each Purchaser, unless waived in writing by such
Purchaser, to the extent that each Purchaser receives terms identical to the
investors in the Subsequent Financing. 
By way of example, if the Company undertakes a Subsequent Financing of
$100,000 of Common Stock and 100% warrant coverage and no other terms that are
less favorable to the Company, the Company shall issue each Purchaser
additional common stock purchase warrants such that the aggregate warrant
coverage issued hereunder is 100% and the terms of the warrants issued shall
have the terms most favorable to the 


 





















 


Purchasers.   From the date hereof until the 6 month
anniversary of the Effective Date, if the Company effects any issuance by the
Company or any of its Subsidiaries of Common Stock Equivalents or Indebtedness
(other than trade payables in the ordinary course) (a “CSE Subsequent
Financing”), each Purchaser may elect, in its sole discretion, to exchange
all or some of the Shares and 50% of the Warrants (pro-rata in proportion to
the Shares exchanged) then held by such Purchaser for any securities issued in
a CSE Subsequent Financing on a $1.00 for $1.00 basis (that is, for each $1.00
of Subscription Amount paid for the Shares on the Closing and surrendered by
the Purchaser, the Purchaser shall receive $1.00 of units in such CSE
Subsequent Financing) based on the Subscription Amount of such Shares on the
Closing, along with any liquidated damages and other amounts owing thereon, and
the effective price at which such securities were sold in such CSE Subsequent
Financing.  By way of example, if the
Company undertakes a CSE Subsequent Financing of $100,000 of preferred stock
and warrants, the Purchaser shall have the right, but not the obligation, in
its sole discretion, to purchase $100,000 of preferred stock and warrants of
such CSE Subsequent Financing by surrendering Shares purchased hereunder for a
Subscription Amount of $100,000 and 50% of the Warrants issued to such
Purchaser as a result of such Subscription Amount.  Notwithstanding anything to the contrary, in
lieu of surrendering any Warrants hereunder, a Purchaser may elect to keep the
Warrants otherwise required to be surrendered in lieu of a 1 for 1 set off of
warrant shares or option shares issuable to such Purchaser pursuant to a CSE
Subsequent Financing.


 


(d)           Notwithstanding the foregoing, Section 4.13(a) and
4.13(c) shall not apply in respect of an Exempt Issuance.


 


4.14         Short Sales and Confidentiality After The
Date Hereof. Each
Purchaser, severally and not jointly with the other Purchasers, covenants that
neither it, nor any Affiliate acting on its behalf or pursuant to any
understanding with it, will execute any Short Sales during the period
commencing with the Discussion Time until the earlier of (a) the Effective
Date and (b) the 4 month anniversary of the date hereof (the “Restriction
Period”).  Each Purchaser, severally
and not jointly with the other Purchasers, covenants that until such time as
the transactions contemplated by this Agreement are publicly disclosed by the
Company as described in Section 4.4, such Purchaser will maintain the
confidentiality of the existence and terms of this transaction and the
information included in the Transaction Documents and the Disclosure
Schedules.  Notwithstanding the
foregoing, no Purchaser makes any representation, warranty or covenant hereby
that it will not engage in Short Sales in the securities of the Company after
the Restriction Period.  Notwithstanding
the foregoing, in the case of a Purchaser that is a multi-managed investment
vehicle whereby separate portfolio managers manage separate portions of such Purchaser’s
assets and the portfolio managers have no direct knowledge of the investment
decisions made by the portfolio managers managing other portions of such
Purchaser’s assets, the covenant set forth above shall only apply with respect
to the portion of assets managed by the portfolio manager that made the
investment decision to purchase the Securities covered by this Agreement.


 


4.15         Form D; Blue Sky Filings. 
The Company agrees to timely file a Form D with respect to the
Securities as required under Regulation D and to provide a copy thereof,
promptly upon request of any Purchaser. The Company shall take such action as
the Company shall 


 





















 


reasonably determine is necessary in order to obtain an exemption for,
or to qualify the Securities for, sale to the Purchasers at the Closing under
applicable securities or “Blue Sky” laws of the states of the United States,
and shall provide evidence of such actions promptly upon request of any
Purchaser.


 


4.16         Capital Changes. 
Until the one-year anniversary of the Effective Date, the Company shall
not undertake a reverse or forward stock split or reclassification of the
Common Stock without the prior written consent of the Purchasers holding a
majority in interest of the Shares.


 


4.17         Delivery of Securities After Closing. 
The Company shall deliver, or cause to be delivered, the respective
Securities purchased by each Purchaser to such Purchaser within 3 Trading Days
of the Closing Date.


 


4.18         Per Share Purchase Price Protection. 
From the date hereof until the 6 month anniversary of the Effective Date,
if in connection with any issuance by the Company or any of its Subsidiaries of
Common Stock or Common Stock Equivalents, the Company or any Subsidiary shall
issue any Common Stock or Common Stock Equivalents entitling any person or
entity to acquire shares of Common Stock at an effective price per share less
than the Per Share Purchase Price (subject to reverse and forward stock splits
and the like) (the “Discounted Purchase Price,” as further defined
below), the Company shall issue to such Purchaser that number of additional
shares of Common Stock equal to (a) the Subscription Amount paid by such
Purchaser at the Closing divided by the Discounted Purchase Price, less (b) the
Shares issued to such Purchaser at the Closing pursuant to this Agreement.  The term “Discounted Purchase Price”
shall mean the amount actually paid in consideration by third parties for each
share of Common Stock.  The sale of
Common Stock Equivalents shall be deemed to have occurred at the time of the
issuance of the Common Stock Equivalents and the Discounted Purchase Price
covered thereby shall also include the actual exercise or conversion price
thereof at the time of the conversion or exercise (in addition to the
consideration per share of Common Stock underlying the Common Stock Equivalents
received by the Company upon such sale or issuance of the Common Stock
Equivalents).  If shares are issued for a
consideration other than cash, the per share selling price shall be the fair
value of such consideration as determined in good faith by the Board of
Directors.  The Company shall not refuse
to issue a Purchaser additional Shares hereunder based on any claim that such
Purchaser or any one associated or affiliated with such Purchaser has been engaged
in any violation of law, agreement or for any other reason, unless an
injunction from a court, on notice, restraining and or enjoining an issuance
hereunder shall have been sought and obtained and the Company posts a surety
bond for the benefit of such Purchaser in the amount of 150% of the market
value of such Shares (based on the VWAP of the Common Stock on the date of the
event giving rise to the Company’s obligation hereunder), which is subject to
the injunction, which bond shall remain in effect until the completion of
litigation of the dispute and the proceeds of which shall be payable to the
Purchaser to the extent it obtains judgment. 
Nothing herein shall limit a Purchaser’s right to pursue actual damages
for the Company’s failure to deliver Shares hereunder 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.  On the date of closing of any
transaction pursuant to which securities are issued for a Discounted Purchase 


 





















 


Price, the Company shall give the Purchasers written notice
thereof.  Notwithstanding anything to the
contrary herein, this Section 4.18 shall not apply to an Exempt Issuance.


 


4.19         Redemption of Common Stock In Accordance
With Article XI.  The Company shall exercise the right to
redeem the Securities, as set forth in Section 3.2(i), in accordance with Article XI.  As provided in Article XI, the Company
shall provide at least 30 days prior written notice to the Purchaser prior to
redeeming the Securities and, during such 30-day period, the Purchaser has the
rights to dispose of such Securities of its own accord.  The Company shall not redeem any of the
Securities unless (a) a Purchaser refuses to provide any information
requested by the Gaming Authorities or (b) the board of directors of the
Company makes a reasonable, good faith determination, in response to a written
request or notice from the Gaming Authorities to the Company or such Purchaser,
that the continued ownership of the Securities by such Purchaser may result in (1) the
disapproval or non-renewal of any gaming contract or (2) the disapproval,
loss, modification, non-renewal or non-reinstatement of any gaming license,
approval, franchise or consent from any gaming authority.


 


4.20         Piggy-Back Registration Rights. If at any time after the date hereof,
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 of any of its equity securities, other than on Form S-4
or Form S-8 (each as promulgated under the Securities Act), or their then
equivalents, relating to equity securities to be issued solely in connection
with any acquisition of any entity or business or equity securities issuable in
connection with stock option or other employee benefit plans, then the Company
shall send a written notice of such determination to each Purchaser and, if
within ten calendar days after the date of delivery of such notice, any such
Purchaser shall so request in writing, the Company shall include in such
Registration Statement all or any part of the Shares and Warrant Shares as the
Purchaser requests to be registered so long as such Shares and Warrant Shares
are proposed to be disposed in the same manner as those securities set forth in
the Registration Statement; provided, however, if the offering is
an underwritten offering and was initiated by the Company or at the request of
a shareholder, and if the managing underwriters advise the Company that the
inclusion of Shares or Warrant Shares requested to be included in the
Registration Statement would cause an adverse effect on the success of any such
offering, based on market conditions or otherwise (an “Adverse Effect”),
then the Company shall be required to include in such Registration Statement,
to the extent of the amount of securities that the managing underwriters advise
may be sold without causing such Adverse Effect, (a) first, the securities
of the Company and (b) second, the shares, including the Shares and
Warrant Shares, of all shareholders, on a pro rata basis, requesting
registration and whose shares the Company is obligated by contract to include
in the Registration Statement; provided, further, however,
to the extent that all of the Shares and Warrant Shares are not included in the
initial Registration Statement, the Purchaser shall have the right to request
the inclusion of its Shares and Warrant Shares in subsequent Registration
Statements until all such Shares have been registered in accordance with the
terms hereof and all such Warrant Shares have been registered in accordance
with the terms thereof.  If the offering in which the Shares and Warrant
Shares is being included in a Registration Statement is a firm commitment underwritten
offering, unless otherwise agreed by the Company, the Purchaser shall sell its
Shares and Warrant Shares in such offering using the same underwriters and,
subject to the provisions hereof, on the same terms and conditions as the other
shares of Common Stock that are included in such underwritten offering. 
The Company shall use its best efforts to cause any Registration Statement to
be declared 


 





















 


effective by the Commission as promptly as is possible following it
being filed with the Commission and to remain effective until all Shares and
Warrant Shares subject thereto have been sold. 
All fees and expenses incident to the performance of or compliance with
this Section 4.20 by the Company shall be borne by the Company whether or not
any Shares or Warrant Shares are sold pursuant to the Registration
Statement.  The Company shall indemnify
and hold harmless the Purchaser, the officers, directors, members, partners,
agents, brokers, investment advisors and employees of each of them, each person
who controls the Purchaser (within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act), and the officers, directors, members,
shareholders, partners, agents and employees of each such controlling person,
to the fullest extent permitted by applicable law, from and against any and all
losses, claims, damages, liabilities, costs (including, without limitation,
reasonable attorneys’ fees) and expenses (collectively, the “Losses”),
as incurred, arising out of or relating to (i) any untrue or alleged untrue
statement of a material fact contained in the Registration Statement, any
prospectus included therein or any form of prospectus or in any amendment or
supplement thereto or in any preliminary prospectus, or arising out of or
relating to any omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein (in the case of any
prospectus or form of prospectus or supplement thereto, in light of the
circumstances under which they were made) not misleading or (ii) any violation
or alleged violation by the Company of the Securities Act, the Exchange Act or
any state securities law, or any rule or regulation thereunder, in connection
with the performance of its obligations under this Section 4.20, except to the
extent, but only to the extent, that such untrue statements or omissions
referred to in (i) above are based solely upon information regarding the
Purchaser furnished in writing to the Company by the Purchaser expressly for
use therein, or to the extent that such information relates to the Purchaser or
the Purchaser’s proposed method of distribution of Shares and Warrant Shares
and was reviewed and expressly approved in writing by the Purchaser expressly
for use in the Registration Statement, such prospectus or such form of
prospectus or in any amendment or supplement thereto. The rights of the
Purchaser under this Section 4.20 shall survive until all Shares and Warrant
Shares have been either registered under a Registration Statement or are eligible
for sale under Rule 144 (assuming cashless exercise of the Warrants) without
volume or manner-of-sale restrictions.


 


ARTICLE V.

MISCELLANEOUS


 


5.1           Termination.  This Agreement may be terminated
by any Purchaser, as to such Purchaser’s obligations hereunder only and without
any effect whatsoever on the obligations between the Company and the other
Purchasers, by written notice to the other parties, if the Closing has not been
consummated on or before June 30, 2008; provided, however,
that such termination will not affect the right of any party to sue for any
breach by the other party (or parties).


 


5.2           Fees and Expenses. 
At the Closing, the Company has agreed to reimburse Whalehaven Capital
Management Fund Ltd (“Whalehaven”) the non-accountable sum of $15,000
for its legal fees and expenses, $5,000 of which has been paid prior to the
Closing.  Except as expressly set forth
in the Transaction Documents to the contrary, each party shall pay the fees and
expenses of its advisers, 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. 
The Company shall pay all Transfer Agent fees, stamp taxes and other
taxes and duties levied in connection with the delivery of any Securities to
the Purchasers.


 


5.3           Entire Agreement. 
The Transaction Documents, together with the exhibits and schedules
thereto, contain the entire understanding of the parties with respect to the
subject matter hereof and supersede all prior agreements and understandings,
oral or written, with respect to such matters, which the parties acknowledge
have been merged into such documents, exhibits and schedules.


 


5.4           Notices.  Any and all
notices or other communications or deliveries required or permitted to be
provided hereunder shall be in writing and shall be deemed given and effective
on the earliest of: (a) the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number set forth on
the signature pages attached hereto prior to 5:30 p.m. (New York City
time) on a Trading Day, (b) the next Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number set forth on the signature pages attached hereto on a day
that is not a Trading Day or later than 5:30 p.m. (New York City time) on
any Trading Day, (c) the second (2nd) Trading Day following the
date of mailing, if sent by U.S. nationally recognized overnight courier
service or (d) upon actual receipt by the party to whom such notice is
required to be given.  The address for
such notices and communications shall be as set forth on the signature pages attached
hereto.


 


5.5           Amendments; Waivers. 
No provision of this Agreement may be waived, modified, supplemented or
amended except in a written instrument signed, in the case of an amendment, by
the Company and the Purchasers holding at least 67% in interest of the Shares
then outstanding or, in the case of a waiver, by the party against whom
enforcement of any such waived provision is sought.  No waiver 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 subsequent default or a
waiver of any other provision, 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.


 


5.6           Headings.  The headings
herein are for convenience only, do not constitute a part of this Agreement and
shall not be deemed to limit or affect any of the provisions hereof.


 


5.7           Successors and Assigns. 
This Agreement shall be binding upon and inure to the benefit of the
parties and their successors and permitted assigns.  The Company may not assign this Agreement or
any rights or obligations hereunder without the prior written consent of each
Purchaser (other than by merger).  Any
Purchaser may assign any or all of its rights under this Agreement to any
Person to whom such Purchaser assigns or transfers any Securities, provided
such transferee agrees in writing to be bound, with respect to the transferred
Securities, by the provisions of the Transaction Documents that apply to the “Purchasers.”


 


5.8           No Third-Party Beneficiaries. 
This Agreement is intended for the benefit of the parties hereto and
their respective successors and permitted assigns and is not for the benefit
of, nor may any provision hereof be enforced by, any other Person, except as
otherwise set forth in Section 4.8.


 





















 


5.9           Governing Law. 
All questions concerning the construction, validity, enforcement and
interpretation of the Transaction Documents shall be governed by and construed
and enforced in accordance with the internal laws of the State of New York,
without regard to the principles of conflicts of law thereof.  Each party agrees that all legal proceedings
concerning the interpretations, enforcement and defense of the transactions
contemplated by this Agreement and any other Transaction Documents (whether
brought against a party hereto or its respective affiliates, directors,
officers, shareholders, employees or agents) shall be commenced exclusively in
the state and federal courts sitting in the City of New York. Each party hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in the City of New York, borough of Manhattan for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect to
the enforcement of any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper or is an inconvenient venue for
such proceeding.  Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof via
registered or certified mail or overnight delivery (with evidence of delivery)
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
contained herein shall be deemed to limit in any way any right to serve process
in any other manner permitted by law.  If
either party shall commence an action or proceeding to enforce any provisions
of the Transaction Documents, then the prevailing party in such action or
proceeding shall be reimbursed by the other party for its reasonable attorneys’
fees and other costs and expenses incurred with the investigation, preparation
and prosecution of such action or proceeding.


 


5.10         Survival.  The
representations and warranties contained herein shall survive the Closing and
the delivery of the Securities for the applicable statute of limitations.


 


5.11         Execution.  This
Agreement may be executed in two or more counterparts, all of which when taken
together shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to the
other party, it being understood that both parties need not sign the same
counterpart.  In the event that any
signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf”
format data file, such signature shall create a valid and binding obligation of
the party executing (or on whose behalf such signature is executed) with the
same force and effect as if such facsimile or “.pdf” signature page were
an original thereof.


 


5.12         Severability. 
If any term, provision, covenant or restriction of this Agreement is
held by a court of competent jurisdiction to be invalid, illegal, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall
in no way be affected, impaired or invalidated, and the parties hereto shall
use their commercially reasonable efforts to find and employ an alternative
means to achieve the same or substantially the same result as that contemplated
by such term, provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without including any
of such that may be hereafter declared invalid, illegal, void or unenforceable.


 





















 


5.13         Rescission and Withdrawal Right. 
Notwithstanding anything to the contrary contained in (and without
limiting any similar provisions of) any of the other Transaction Documents,
whenever any Purchaser exercises a right, election, demand or option under a
Transaction Document and the Company does not timely perform its related
obligations within the periods therein provided, then such Purchaser may
rescind or withdraw, in its sole discretion from time to time upon written
notice to the Company, any relevant notice, demand or election in whole or in
part without prejudice to its future actions and rights; provided, however,
that in the case of a rescission of an exercise of a Warrant, the Purchaser
shall be required to return any shares of Common Stock subject to any such
rescinded exercise notice.


 


5.14         Replacement of Securities. 
If any certificate or instrument evidencing any Securities is mutilated,
lost, stolen or destroyed, the Company shall issue or cause to be issued in
exchange and substitution for and upon cancellation thereof (in the case of
mutilation), or in lieu of and substitution therefor, a new certificate or
instrument, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction. 
The applicant for a new certificate or instrument under such
circumstances shall also pay any reasonable third-party costs (including
customary indemnity) associated with the issuance of such replacement
Securities.


 


5.15         Remedies.  In addition
to being entitled to exercise all rights provided herein or granted by law,
including recovery of damages, each of the Purchasers and the Company will be
entitled to specific performance under the Transaction Documents.  The parties agree that monetary damages may not
be adequate compensation for any loss incurred by reason of any breach of
obligations contained in the Transaction Documents and hereby agrees to waive
and not to assert in any action for specific performance of any such obligation
the defense that a remedy at law would be adequate.


 


5.16         Payment Set Aside. 
To the extent that the Company makes a payment or payments to any
Purchaser pursuant to any Transaction Document or a Purchaser enforces or
exercises its rights thereunder, and such payment or payments or the proceeds
of such enforcement or exercise or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or are required to be refunded, repaid or otherwise restored
to the Company, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law,
common law or equitable cause of action), then to the extent of any such
restoration the obligation or part thereof originally intended to be satisfied
shall be revived and continued in full force and effect as if such payment had
not been made or such enforcement or setoff had not occurred.


 


5.17         Independent Nature of Purchasers’
Obligations and Rights.  The obligations of each
Purchaser under any Transaction Document are several and not joint with the
obligations of any other Purchaser, and no Purchaser shall be responsible in
any way for the performance or non-performance of the obligations of any other
Purchaser under any Transaction Document. 
Nothing contained herein or in any other Transaction Document, and no
action taken by any Purchaser pursuant 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.  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.  Each Purchaser has been represented by its
own separate legal counsel in their review and negotiation of the Transaction
Documents.  For reasons of administrative
convenience only, Purchasers and their respective counsel have chosen to
communicate with the Company through FWS. 
FWS does not represent all of the Purchasers but only Whalehaven. The
Company 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.


 


5.18         Liquidated Damages. 
The Company’s obligations to pay any partial liquidated damages or other
amounts owing under the Transaction Documents is a continuing obligation of the
Company and shall not terminate until all unpaid partial liquidated damages and
other amounts have been paid notwithstanding the fact that the instrument or
security pursuant to which such partial liquidated damages or other amounts are
due and payable shall have been canceled.


 


5.19         Saturdays, Sundays, Holidays, etc.  If the last or appointed day for the taking of any
action or the expiration of any right required or granted herein shall not be a
Business Day, then such action may be taken or such right may be exercised on
the next succeeding Business Day.


 


5.20         Construction. The parties agree that each of them
and/or their respective counsel has reviewed and had an opportunity to revise
the Transaction Documents and, therefore, the normal rule of construction
to the effect that any ambiguities are to be resolved against the drafting
party shall not be employed in the interpretation of the Transaction Documents
or any amendments hereto.


 


5.21         WAIVER OF JURY TRIAL. 
IN ANY ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION BROUGHT BY ANY
PARTY AGAINST ANY OTHER PARTY, THE PARTIES EACH KNOWINGLY AND INTENTIONALLY, TO
THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY,
UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY WAIVES FOREVER TRIAL BY JURY.


 


(Signature Pages Follow)


 

















 


IN WITNESS WHEREOF, the parties hereto have caused
this Securities Purchase Agreement to be duly executed by their respective
authorized signatories as of the date first indicated above.


 


 


	
  SOUTHWEST CASINO CORPORATION

  	
  Address for Notice: 

  2001 Killebrew Drive, Suite 350 

  Minneapolis, MN 55425

  
	
  By:

  	
   

  	
   

  	
  Fax: 

  
	
   

  	
  Name: Thomas E. Fox

  	
  (952) 853-9991

  
	
   

  	
  Title: President 

  	
   

  
	
   

  	
   

  
	
  With a copy to (which shall not constitute notice):

  Oppenheimer Wolff & Donnelly LLP 

  Attn: William Kaufman, Esq. 

  Plaza VII, Suite 3300 

  35 South Seventh Street 

  Minneapolis, MN 55402

  	
   

  
				



 


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[PURCHASER
SIGNATURE PAGES TO SWCC SECURITIES PURCHASE AGREEMENT]


 


IN WITNESS WHEREOF, the
undersigned have caused this Securities Purchase 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
  Authorized Signatory:

  	
   

  	
   

  
	
   

  	
   

  
	
  Facsimile Number
  of Authorized Signatory:

  	
   

  	
   

  
	
   

  
	
  Address for
  Notice of Purchaser:

  
									



 


 


Address for Delivery of
Securities for Purchaser (if not same as address for notice):


 


 


Subscription Amount: $


 


Number of Shares (which
shall not exceed 9.99% of the issued and outstanding Common Stock after giving
effect to the sale of Shares hereunder):


 


Number of Warrant Shares:


 


EIN Number:  [PROVIDE THIS UNDER
SEPARATE COVER]


 


[SIGNATURE PAGES CONTINUE]