EXHIBIT 10.46


SECURITIES PURCHASE AGREEMENT


This Securities
Purchase Agreement (this “Agreement”) is dated as of February 26, 2007,
among 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:


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


“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 144 under the Securities Act.  With respect to a Purchaser, any investment
fund or managed account that is managed on a discretionary basis by the same
investment manager as such Purchaser will be deemed to be an Affiliate of such
Purchaser.


“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.


“Business Day”
means any day except Saturday, Sunday, any day which shall be 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.



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“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 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.


“Effective Date”
means the date that the initial Registration Statement filed by the Company
pursuant to the Registration Rights Agreement is first declared effective by
the Commission.


“Escrow Agent”
means Crown Bank, a Minnesota chartered bank, with offices at 601 Marquette
Avenue, Minneapolis, MN 55402.


“Escrow Deposit
Agreement” means the Escrow Deposit Agreement, dated as of January     ,
2007, by and among the Company, Midtown and the Escrow Agent pursuant to which
the Purchasers shall deposit Subscription Amounts with the Escrow Agent to be
held by the Escrow Agent in a non-interest bearing account to be applied to the
transactions contemplated hereunder, substantially in the Form of Exhibit D
attached hereto.


“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 of the Company or a majority of the members of a committee of
non-employee directors established, (b) securities upon the exercise or
exchange of or conversion of any Securities issued hereunder and/or other
securities exercisable or exchangeable for or



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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, (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 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, (e) for purposes of Sections 4.13 and 4.14 only and
with the prior written consent of Midtown, up to an amount of Common Stock and
warrants equal to the difference between $5,225,000 and the aggregate
Subscription Amounts hereunder, on substantially the same terms and conditions
as hereunder, with investors executing definitive agreements for the purchase
of such securities and such transactions having closed on or before the earlier
of (i) the Filing Date (as defined in the Registration Rights Agreement) or
(ii) the date that the initial Registration Statement is filed with the Commission
and (f) up to an aggregate of 4,000,000 shares of Common Stock and/or Common
Stock purchase warrants.


 “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 National Indian Gaming Commission (“NIGC”), 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.


“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).



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“Midtown” shall
mean Midtown Partners & Co., LLC, a Florida limited liability company.


“Participation Maximum”
shall have the meaning ascribed to such term in Section 4.13.


“Per Share Purchase
Price” equals $0.55 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
Agreement” means the Placement Agent Agreement, dated as of September 18,
2006, by and between the Company and Midtown.


“Pre-Notice” shall
have the meaning ascribed to such term in Section 4.13.


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


“Purchaser Party”
shall have the meaning ascribed to such term in Section 4.9.


“Registration Rights
Agreement” means the Registration Rights Agreement, dated the date hereof,
among the Company and the Purchasers, in the form of Exhibit A attached
hereto.


“Registration
Statement” means a registration statement meeting the requirements set
forth in the Registration Rights Agreement and covering the resale by the
Purchasers 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.



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“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.


“Subsequent Financing”
shall have the meaning ascribed to such term in Section 4.13.


“Subsequent Financing
Notice” shall have the meaning ascribed to such term in Section 4.13.


“Subsidiary” means
any subsidiary of the Company as set forth on Schedule 3.1(a).


 “Trading Day” means a day on which the
Common Stock is traded on a Trading Market.


“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 Registration Rights Agreement, the
Escrow Deposit 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.


“Warrants” means
collectively the Common Stock purchase warrants delivered to the Purchasers at
the Closing in accordance with Section 2.2(a)(iv) hereof, which Warrants shall
be first exercisable on the six month anniversary of the Issue Date and have a
term of exercise equal to 5 years, in the form of Exhibit C attached
hereto.


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



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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 9,500,000 Shares, along with Warrants.  The minimum aggregate Subscription Amount by
any Purchaser shall be $100,000, provided that the Company may, in its sole
discretion, accept an aggregate Subscription Amount of less than $100,000 from
a Purchaser.  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
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, 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 40% of such Purchaser’s Shares, with an exercise price equal to $0.61
per share, subject to adjustment therein;


(v)                                 a common stock
purchase warrant registered in the name of Midtown, or its designees, to
purchase up to a number of shares of Common Stock equal to 8% of the aggregate
Subscription Amounts divided by $1.00, with an exercise price equal to $1.00,
subject to adjustment therein (such Warrants, the “Placement Agent Warrants”
and the aggregate number of shares of Common Stock underlying the Placement
Agent Warrants, the “Placement Agent Shares”);


(vi)                              the Escrow Deposit
Agreement duly executed by the Company and Midtown; and


(vii)                           the Registration Rights
Agreement duly executed by the Company.



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(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;


(ii)                                  such Purchaser’s
Subscription Amount by certified check or wire transfer to the Escrow Agent;
and


(iii)                               the Registration Rights
Agreement duly executed by such Purchaser.


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 when made and
on the Closing Date of the representations and warranties of the Purchasers
contained herein;


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


(iii)                               the delivery by the Purchasers 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 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; and


(v)                                 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



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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 Shares 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, then 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 (as applicable), 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 or 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,



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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, its board of directors or its stockholders in connection
therewith other than in connection with the Required Approvals.  Each Transaction Document 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 of
the Transaction Documents by the Company, the issuance and sale of the Shares
and the consummation by the Company of the other transactions 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, or (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) filings required pursuant to Section 4.4 of this
Agreement, (ii) the filing with the Commission of the Registration



 9
 









Statement, (iii) application(s), if any, to
each applicable Trading Market for the listing of the Securities for trading
thereon in the time and manner required thereby, (iv) the filing of Form D with
the Commission and such filings as are required to be made under applicable
state securities laws and (v) notice to, and approvals, if any, of, MRC, CLGCC
and NIGC (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.  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).  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 plan and pursuant to the
conversion 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 of the Company 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.



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(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 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 that has not been publicly disclosed at least 1 Trading
Day prior to the date that this representation is made.



 11
 









(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, and neither the Company or 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, 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.



 12
 









(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 have or 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 that is
material to the business of the Company and the Subsidiaries 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 necessary or material for use in connection with their
respective businesses as described in the SEC Reports 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
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.



 13
 









(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 $60,000 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 the fees payable to Midtown which
are set forth on Schedule 3.1(s) attached hereto, 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



 14
 









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.  Other than each of the Purchasers, 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
Company’s 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 its board of directors have taken all necessary action, if any, in order to
render inapplicable any control share acquisition, business combination, poison
pill (including any distribution under a rights agreement) or other similar
anti-takeover provision under the Company’s 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



 15
 









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, 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 the Securities Act or 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 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
dates thereof 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 (a) any liabilities for borrowed money
or amounts owed in excess of $50,000 (other than trade accounts payable
incurred in the ordinary course of business), (b) all guaranties, endorsements
and other contingent



 16
 









obligations in respect of Indebtedness of
others, whether or not the same are or should be reflected in the Company’s
balance sheet (or the notes thereto), except guaranties by endorsement of
negotiable instruments for deposit or collection or similar transactions in the
ordinary course of business; and (c) the present value of any lease payments in
excess of $50,000 due under leases required to be capitalized in accordance
with GAAP.  Neither the Company nor any
Subsidiary is in default with respect to any Indebtedness.


(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 Schedule.  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 on Form
10-KSB for the year ending December 31, 2006.


(ee)                            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.


(ff)                                  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



 17
 









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.


(gg)                          Acknowledgement
Regarding Purchaser’s Trading Activity. 
Anything in this Agreement or elsewhere herein to the contrary
notwithstanding (except for Sections 3.2(f) and 4.15 hereof), it is understood
and acknowledged by the Company (i) that none of the Purchasers have been asked
to agree, nor has any Purchaser agreed, to desist from purchasing or selling,
long and/or short, securities of the Company, or “derivative” securities based
on securities issued by the Company or to hold the Securities for any specified
term; (ii) that past or future open market or other transactions by any
Purchaser, including Short Sales, and specifically including, without
limitation, Short Sales or “derivative” transactions, before or after the
closing of this or future private placement transactions, may negatively impact
the market price of the Company’s publicly-traded securities; (iii) that any
Purchaser, and counter-parties in “derivative” transactions to which any such
Purchaser is a party, directly or indirectly, presently may have a “short”
position in the Common Stock, and (iv) that each Purchaser shall not be deemed
to have any affiliation with or control over any arm’s length counter-party in
any “derivative” transaction.  The
Company further understands and acknowledges that (a) one or more Purchasers may
engage in hedging activities at various times during the period that the
Securities are outstanding, including, without limitation, during the periods
that the value of the Warrant Shares deliverable with respect to Securities are
being determined and (b) such hedging activities (if any) could reduce the
value of the existing stockholders’ equity interests in the Company at and
after the time that the hedging activities are being conducted.  The Company acknowledges that such
aforementioned hedging activities do not constitute a breach of any of the
Transaction Documents.


(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.


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



 18















(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,
delivery and performance by such Purchaser of the transactions contemplated by
this Agreement have been duly authorized by any necessary corporate or similar
action on the part of such Purchaser. 
Each Transaction Document to which such Purchaser 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 the
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 Midtown and deliver such questionnaire at
the Closing.


(c)                                  Purchaser Status.  At the time such Purchaser was offered the
Securities, it was, and at 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) 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.



 19
 









(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 the transaction contemplated hereunder, such Purchaser has
not, nor has any Person acting on behalf of or pursuant to any understanding
with such Purchaser, directly or indirectly executed any transaction, including
Short Sales, in 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 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.  NIGC
IS CURRENTLY ENGAGED IN A BACKGROUND INVESTIGATION OF THE COMPANY AND NIGC HAS



 20
 









INFORMED THE MANAGEMENT OF THE COMPANY THAT
ANY HOLDER OF FIVE PERCENT (5%) OR MORE OF THE OUTSTANDING COMMON STOCK MUST
SUBMIT AN APPLICATION FOR A BACKGROUND INVESTIGATION BY NIGC.  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 pursuant to an effective registration statement or Rule 144, to the
Company or 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



 21
 









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 and the
Registration Rights 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 NATIONAL INDIAN GAMING 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 the Registration Rights 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



 22
 









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 the Registration Rights Agreement, 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)), (i) while a registration
statement (including the Registration Statement) covering the resale of such
security is effective under the Securities Act, or (ii) following any sale of
such Shares or Warrant Shares pursuant to Rule 144, or (iii) if such Shares or
Warrant Shares are eligible for sale under Rule 144(k), 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, 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 any Transfer Agent of the
Company that enlarge the restrictions on transfer set forth in this
Section.  Certificates for Securities
subject to legend removal hereunder shall be transmitted by the Transfer Agent
of the Company to the Purchasers by crediting the account of the Purchaser’s
prime broker with the Depository Trust Company System.


(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.



 23
 









(e)                                  Each Purchaser,
severally and not jointly with the other Purchasers, agrees 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 that the
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.


4.2                                 Furnishing
of Information.  As long as any
Purchaser owns Securities, the Company covenants 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.


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 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 City 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 filing 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 or 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 (i)
as required by federal securities law in connection with (A) any registration
statement contemplated by the Registration Rights Agreement and (B) the filing
of



 24
 









final
Transaction Documents (including signature pages thereto) with the Commission
and (ii) 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 subclause (ii).


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 representations
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 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), or to redeem any Common Stock or Common Stock Equivalents
(except pursuant to Article XI or as provided in Section 2.1(c) herein) or to
settle any outstanding litigation.


4.8                                 [RESERVED].


4.9                                 Indemnification
of Purchasers.  Subject to the
provisions of this Section 4.9, 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, or any of them or their respective Affiliates,
by any stockholder of the Company who is not an Affiliate of



 25
 









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 (i) for any settlement by a Purchaser
Party effected without the Company’s prior written consent, which shall not be
unreasonably withheld or delayed; or (ii) 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.


4.10                           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.


4.11                           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 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
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.


4.12                           Equal
Treatment of Purchasers.  No
consideration shall be offered or paid to any Person to amend or consent to a
waiver or modification of any provision of any of the Transaction Documents
unless the same consideration is also offered to all of the parties to the
Transaction Documents.  For clarification
purposes, this provision constitutes a separate right



 26
 









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.


4.13                           [RESERVED].


4.14                           Subsequent
Equity Sales.


(a)                                  From
the date hereof until 45 days after the Effective Date, neither the Company nor
any Subsidiary shall issue shares of Common Stock or Common Stock Equivalents
at an effective per share purchase price that is lower than the Per Share
Purchase Price, provided that, for purposes of clarity, if the holder of the
Common Stock or Common Stock Equivalents so issued shall be entitled at any
time, whether by operation of purchase price adjustments, reset provisions,
floating conversion, exercise or exchange prices or otherwise, or due to
warrants, options or rights per share that are issued in connection with such
issuance, to receive shares of Common Stock at an effective per share purchase
price that is lower than the Per Share Purchase Price, such issuance shall be
deemed to occurred at a price that is lower than the Per Share Purchase Price; provided,
however, the 45 day period set forth in this Section 4.14 shall be
extended for the number of Trading Days during such period in which (i) trading
in the Common Stock is suspended by any Trading Market, or (ii) following the
Effective Date, the Registration Statement is not effective or the prospectus
included in the Registration Statement may not be used by the Purchasers for
the resale of the Shares and Warrant Shares.


(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; provided, however, that the prohibition in this Section 4.14(b)
shall not apply if such agreement contains a contractual “floor” that is equal
to the Per Share Purchase Price and is binding on all issuances under such
agreement.  “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, exercise 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)                                  Notwithstanding
the foregoing, this Section 4.14 shall not apply in respect of an Exempt
Issuance, except that no Variable Rate Transaction shall be an Exempt Issuance.



 27
 









4.15                           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 at the Discussion Time and ending at the time that
the transactions contemplated by this Agreement are first publicly announced as
described in Section 4.4.  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 all disclosures made to it in connection with
this transaction (including the existence and terms of this transaction).  Each Purchaser understands and acknowledges,
severally and not jointly with any other Purchaser, that the Commission
currently takes the position that coverage of short sales of shares of the
Common Stock “against the box” prior to the Effective Date of the Registration
Statement with the Securities is a violation of Section 5 of the Securities
Act, as set forth in Item 65, Section A, of the Manual of Publicly Available
Telephone Interpretations, dated July 1997, compiled by the Office of Chief
Counsel, Division of Corporation Finance. 
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 time that the transactions contemplated by this
Agreement are first publicly announced as described in Section 4.4.  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.


4.16                           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.


4.17                           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.


4.18                           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.


4.19                           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



 28
 









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.


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 January 19, 2007;
provided, however, that no such termination will 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 Midtown the non-accountable sum of $25,000 for
its legal fees and expenses, $10,000 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 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 or amended except in a written instrument signed, in
the case of an amendment, by the Company



 29
 









and Purchasers
holding at least 67% of the then outstanding Securities 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 4.9.


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.  The parties hereby
waive all rights to a trial by jury.  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



 30
 









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 Shares and Warrant
Shares 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,
in the case of a rescission of an exercise of a Warrant, the Purchaser shall be
required to return any shares of Common Stock delivered in connection with 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



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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 any of the Purchasers
but only Midtown.  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                           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



 32
 









drafting party shall not be employed in the interpretation of the
Transaction Documents or any amendments hereto.


(Signature
Pages Follow)



 33
 









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:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  2001 Killebrew Drive, Suite 350

  
	
   

  	
  Name:  James
  B. Druck

  	
   

  	
  Minneapolis, Minnesota 55425

  
	
   

  	
  Title:  Chief
  Executive Officer

  	
   

  	
   

  



 


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


Oppenheimer Wolff & Donnelly LLP


Plaza VII, Suite 3300


45 South Seventh Street


Minneapolis, MN 55402


Attention: William
Kaufman, Esq.


 


[REMAINDER OF PAGE
INTENTIONALLY LEFT BLANK


SIGNATURE PAGE FOR PURCHASER FOLLOWS]



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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
  Purchaser:

  	
   

  	
   

  
	
   

  
	
  Fax Number of
  Purchaser:

  	
   

  	
   

  
	
   

  
	
  Address for
  Notice of Purchaser:

  	
   

  	
   

  
													



 


 


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


 


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:


[SIGNATURE PAGES CONTINUE]



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