dkmz_ex107.htm


    EXHIBIT
10.7

     

    SECURITIES
PURCHASE AGREEMENT

     

    SECURITIES PURCHASE AGREEMENT
(the “Agreement”), dated
as of April 23, 2010, by and among KaChing KaChing, Inc., a Delaware
corporation, with principal offices located at 9029 South Pecos Road, Suite
2800, Henderson, Nevada 89074 (the “Company”), and the investors
listed on the Schedule
of Buyers attached hereto (each, a “Buyer” and, collectively, the
“Buyers”). Capitalized
terms used and not defined elsewhere in this Agreement have the respective
meanings assigned to such terms in the Appendix
hereto.

     

    WHEREAS:

     

    A.           The
Company and the Buyers are executing and delivering this Agreement in reliance
upon the exemption from securities registration afforded by Rule 506 of
Regulation D (“Regulation D”) as
promulgated by the United States Securities and Exchange Commission (the “SEC”) under the Securities Act
of 1933, as amended (the “1933
Act”); and

     

    B.           The
Buyers, severally and not jointly, desire to purchase from the Company, and the
Company wishes to sell to the Buyers, upon the terms and conditions stated in
this Agreement, (i) secured senior notes,

in the form attached as Exhibit A, in an
original aggregate principal amount of $1,255,875 on the Closing Date (such
notes, together with any promissory notes or other securities issued in exchange
or substitution therefor or replacement thereof, and as any of the same may be
amended, supplemented, restated or modified and in effect from time to time, the
“Notes”) and (ii)
five-year warrants, in the form attached as Exhibit B  , exercisable for an
original aggregate amount of 3,333,334 shares of Common Stock at an initial
exercise price of $0.30 per share (such warrants, together with any other
warrants or other securities issued in exchange or substitution therefore or
replacement thereof, and as any of the same may be amended, supplemented,
restated or modified and in effect from time to time, the “Warrants”);

     

    C.           Contemporaneously
with the execution and delivery of this Agreement, the parties hereto are
executing and delivering a Registration Rights Agreement, in the form attached
as Exhibit C
(as the same may be amended, supplemented, restated or modified and in effect
from time to time, the “Registration Rights
Agreement”), pursuant to which the Company agrees to provide certain
registration rights under the 1933 Act, with respect to the Conversion Shares
(as defined in Section 1(e) below) and Warrant Shares (as defined in Section
1(e) below);

     

    D.           Contemporaneously
with the Closing (as defined in Section 1(a), below), the Company and its
Subsidiaries will execute and deliver a Security Agreement, in the form attached
as Exhibit D
(as the same may be amended, supplemented, restated or modified and in effect
from time to time, the “Security Agreement”), in favor
of the Buyers, pursuant to which the Company and its Subsidiaries will agree to
provide the Collateral Agent (as defined in the Security Agreement), as agent
for the Buyers, with a security interest in substantially all of the assets of
the Company and its Subsidiaries;

     

    E.           Contemporaneously
with the Closing, the Company and each of its Subsidiaries will execute and
deliver one or more fully executed Deposit Account Control Agreements,
substantially in the form attached as Exhibit E (the “Account Control Agreements”),
pursuant to which the Company and each of its Subsidiaries that maintain bank,
brokerage or other similar accounts will agree to provide the Collateral Agent
with “control” of such accounts;

     

    
      
         


      

      
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    F.           Contemporaneously
with the Closing, each of the Company’s Subsidiaries will execute and deliver a
Guaranty, in the form attached hereto as Exhibit F (as the
same may be amended, supplemented, restated or modified and in effect from time
to time, the “Subsidiary
Guaranty”), pursuant to
which the Subsidiaries will agree to guaranty certain obligations of the
Company.

     

    G.           Contemporaneously
with the Closing, each of Beyond Commerce, Inc., Lilinthgow Holdings, LLC, Big
Rose LLC, Mark V. Noffke and Robert J. McNulty (each a “Shareholder Guarantor” and
together, the “Shareholder
Guarantors”) will execute and deliver a Guaranty, in the form attached
hereto as Exhibit
G (each a “Shareholder
Guaranty” and together, the “Shareholder Guaranties”),
pursuant to which the Shareholder Guarantors will agree, jointly and severally,
to guaranty certain obligations of the Company (the guaranties under the
Shareholder Guaranties, including any such guaranties added after the Closing,
being referred to herein as the “Guaranties”);

     

    H.           Contemporaneously
with the Closing, the Company and each of its Subsidiaries that directly owns
capital stock or other equity interests of any other Subsidiary will each
execute and deliver a Company and Subsidiary Pledge Agreement, substantially in
the form attached as Exhibit H (each, a
“Company and Subsidiary Pledge
Agreement”), pursuant to which the Company and each such Subsidiary will
agree to pledge all of the capital stock or other equity interests in the
Subsidiaries that it directly owns to the Buyers as collateral for the
Notes.

     

    I.           Contemporaneously
with the Closing, each Shareholder Guarantor will execute and deliver a
Shareholder Pledge Agreement, substantially in the form attached as Exhibit I (each, a
“Shareholder Pledge
Agreement” and, together with the Company and Subsidiary Pledge
Agreement, the “Pledge
Agreements”), pursuant to which each Shareholder Guarantor will agree to
pledge all of the capital stock or other equity interests in the Company and the
Subsidiaries that he directly owns to the Buyers as collateral for the
Notes.

     

    NOW THEREFORE, the Company and
each of the Buyers, severally and not jointly, hereby agree as
follows:

     

    1. PURCHASE AND SALE OF NOTES
AND WARRANTS.

     

    a. Purchase and Sale of Notes
and Warrants.  Subject to the satisfaction (or waiver) of the
conditions set forth in Sections 7 and 8 below, the Company
shall issue and sell to each Buyer, and each Buyer severally agrees to purchase
from the Company (the “Closing”), (i) the Notes in
the respective principal amounts set forth opposite such Buyer’s name on the
Schedule of
Buyers and (ii) the Warrants exercisable for an aggregate number of
Warrant Shares set forth opposite such Buyer’s name on the Schedule of
Buyers.  The aggregate purchase price (the “Purchase Price”) for the Notes
and the Warrants purchased by each Buyer shall be the product of (i)
$1,255,875, multiplied
by (ii) the quotient of (A) the principal amount of the Notes purchased
by such Buyer as set forth opposite such Buyer’s name on the Schedule of Buyers,
divided by (B) $1,255,875 (such quotient, such Buyer’s “Allocation Percentage”))
(representing an aggregate purchase price of $1,255,875 for the aggregate
original principal amount of $1,255,875 of Notes and the Warrants to be
purchased by the Buyers at the Closing).

     

    
      
         


      

      
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    b. Closing
Date.  The date and time of the closing of the purchase and
sale of the Notes and Warrants (the “Closing Date”) shall be 10:00
a.m., New York City time, on the first Business Day following the date of this
Agreement, subject to the satisfaction (or waiver) of all of the conditions to
the Closing set forth in Sections 7 and 8 (or such later or
earlier date as is mutually agreed to by the Company and the
Buyers).  The Closing shall occur at the offices of Haynes and Boone,
LLP, 1221 Avenue of the Americas, 26th
Floor, New York, New York, 10020, or at such other place as the Company and the
Buyers may collectively designate in writing.

     

    c. Form of Payment and
Delivery.  On the Closing Date, (i) each Buyer shall pay such
Buyer’s Allocation Percentage of the Purchase Price to the Company for the Notes
and Warrants to be issued and sold to such Buyer on the Closing Date, by (A)
wire transfer of immediately available funds in accordance with the Company’s
written wire instructions or (B) cancellation or conversion of any prior
indebtedness of the Company owed to a Buyer (a “Debt Conversion”), and (ii)
the Company shall deliver to each Buyer (x) a Note (or Notes in the principal
amounts as such Buyer shall request) representing the original principal amount
of the Notes that such Buyer is purchasing hereunder on the Closing Date, in
each case duly executed on behalf of the Company and registered in the name of
such Buyer or its designee and (y) a Warrant (or Warrants exercisable for any
number of Warrant Shares as such Buyer shall request) to purchase the aggregate
number of Warrant Shares set forth opposite such Buyer’s name on the Schedule of Buyers,
in each case duly executed on behalf of the Company and registered in the name
of such Buyer or its designee; provided, however, that no
Warrants shall be issued to any Buyers with respect to any portion of their
Purchase Price paid through a Debt Conversion.

     

    d. Currency;
Interest.  All payments to a Buyer under this Agreement or any
of the other Transaction Documents shall be made in lawful money of the
United States of America, by wire transfer of immediately available funds
to such accounts as such Buyer may from time to time designate by written notice
in accordance with Section 10(f) of this
Agreement.  All references herein and in each of the other Transaction
Documents to “dollars” or “$” shall mean the lawful money of the United States
of America.  Any amounts payable pursuant to this Agreement that are
not paid when due shall bear interest at the rate equal to the lesser of (i) 2.0%
per month, prorated for partial months, and (ii) the highest lawful interest
rate.

     

    e. Conversion Shares / Warrant
Shares. The Company has authorized and has reserved and covenants to
continue to reserve, free of preemptive rights and other similar contractual
rights of stockholders, a number of its authorized but unissued shares of Common
Stock equal to one hundred twenty percent (120%) of the aggregate number of
shares of Common Stock to effect the conversion of the Notes and any interest
accrued and outstanding thereon and exercise of the Warrants as of the Closing
Date. Any shares of Common Stock issuable upon conversion of the Notes and any
interest accrued and outstanding on the Notes are herein referred to as the
“Conversion Shares”. Any
shares of Common Stock issuable upon exercise of the Warrants (and such shares
when issued) are herein referred to as the “Warrant Shares”. The Notes,
the Warrants, the Conversion Shares and the Warrant Shares are sometimes
collectively referred to herein as the “Securities”.

     

    
      
         


      

      
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    2. BUYER’S REPRESENTATIONS AND
WARRANTIES.

     

    Each
Buyer represents and warrants, as of the date of this Agreement and the Closing
Date, with respect to only itself, that:

     

    a. Investment
Purpose.  Such Buyer is acquiring the Securities for such
Buyer’s own account and not with a view towards, or for resale in connection
with, the public sale or distribution thereof, except pursuant to sales
registered under, or exempted from the registration requirements of, the 1933
Act; provided,
however, that by making the representations herein, such Buyer does not agree to
hold any of the Securities for any minimum or other specific term and reserves
the right to dispose of the Securities at any time in accordance with or
pursuant to a registration statement or an exemption under the
1933 Act.

     

    b. Accredited Investor
Status.  Such Buyer is an “accredited investor” as that term is
defined in Rule 501(a) of Regulation D.

     

    c. Reliance on
Exemptions.  Such Buyer understands that the Securities are
being offered and sold to it in reliance on specific exemptions from the
registration requirements of the Securities Laws and that the Company is relying
in part upon the truth and accuracy of, and such Buyer’s compliance with, the
representations, warranties, agreements, acknowledgments and understandings of
such Buyer set forth herein in order to determine the availability of such
exemptions and the eligibility of such Buyer to acquire the
Securities.

     

    d. Information.  Such
Buyer and its advisors, if any, have been furnished with all materials relating
to the business, finances and operations of the Company and materials relating
to the offer and sale of the Securities that have been requested by such
Buyer.  Such Buyer and its advisors, if any, have been afforded the
opportunity to ask questions of the Company.  Neither such inquiries
nor any other due diligence investigations conducted by such Buyer or its
advisors, if any, or its representatives shall modify, amend or affect such
Buyer’s right to rely on the Company’s representations and warranties contained
in Sections 3
and 10(l) below
or contained in any of the other Transaction Documents.  Such Buyer
understands that its investment in the Securities involves a high degree of
risk.  Such Buyer has sought such accounting, legal and tax advice as
it has considered necessary to make an informed investment decision with respect
to its acquisition of the Securities.

     

    e. No Governmental
Review.  Such Buyer understands that no Governmental Entity has
passed on or made any recommendation or endorsement of the Securities or the
fairness or suitability of an investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.

     

    
      
         


      

      
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    f. Transfer or
Resale.  Such Buyer understands that, except as provided in the
Registration Rights Agreement: (i) the Securities have not been and are not
being registered under the 1933 Act or any other Securities Laws, and may not be
offered for sale, sold, assigned or transferred unless (A) subsequently
registered thereunder, (B) such Buyer shall have delivered to the Company an
opinion of counsel, in a generally acceptable form, to the effect that the
Securities to be sold, assigned or transferred may be sold, assigned or
transferred pursuant to an exemption from such registration, or (C) such
Buyer provides the Company with reasonable assurance that the Securities can be
sold, assigned or transferred pursuant to Rule 144 promulgated under the 1933
Act, as amended (or a successor rule thereto) (“Rule 144”); (ii) any sale of
the Securities made in reliance on Rule 144 may be made only in accordance with
the terms of Rule 144, and further, if Rule 144 is not applicable, any resale of
the Securities under circumstances in which the seller (or the Person through
whom the sale is made) may be deemed to be an underwriter (as that term is
defined in the 1933 Act) may require compliance with some other exemption under
the 1933 Act or any other Securities Laws; and (iii) except as set forth in the
Registration Rights Agreement, neither the Company nor any other person is under
any obligation to register the Securities under the 1933 Act or any other
Securities Laws.  Notwithstanding the foregoing provisions of this
paragraph, the Securities may be pledged in connection with a bona fide margin
account or other loan or financing arrangement secured by the
Securities.

     

    g. Legends.  Such
Buyer understands that, except as set forth below, the certificates or other
instruments representing the Notes and the Warrants and, until such time as the
resale of the Warrant Shares and the Conversion Shares has been registered under
the 1933 Act, the stock certificates representing the Warrant Shares and the
Conversion Shares (the “Share
Certificates”) shall bear a restrictive legend in the following form (the
“1933 Act Legend”) (and
a stop-transfer order may be placed against transfer of such Share
Certificates):

     

    THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS OR (B) AN OPINION OF COUNSEL, IN A
GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
APPLICABLE STATE SECURITIES LAWS OR (II) UNLESS SOLD PURSUANT TO
RULE 144 UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY
BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR
FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

     

    The
legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Securities, if
(i) such Securities are registered for resale under the 1933 Act,
(ii) in connection with a sale transaction, such holder provides the
Company with an opinion of counsel, in a generally acceptable form, to the
effect that a public sale, assignment or transfer of the Securities may be made
without registration under the 1933 Act, (iii) such holder provides the
Company with reasonable assurances that the Securities can be sold without the
requirement to be in compliance with Rule 144(c)(1) promulgated under the
1933 Act (or a successor rule thereto) and otherwise without restriction or
limitation pursuant to Rule 144 promulgated under the 1933 Act (or a successor
rule thereto) or (iv) such holder provides the Company reasonable
assurances that the Securities have been or are being sold pursuant to
Rule 144.

     

    
      
         


      

      
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    h. Authorization; Enforcement;
Validity.  Such Buyer is a validly existing corporation,
partnership, limited liability company or other entity and has the requisite
corporate, partnership, limited liability or other organizational power and
authority to purchase the Securities pursuant to this Agreement.  This
Agreement and the Registration Rights Agreement have been duly and validly
authorized, executed and delivered on behalf of such Buyer and are valid and
binding agreements of such Buyer enforceable against such Buyer in accordance
with their respective terms.  The Security Agreement and each of the
other agreements entered into by such Buyer in connection with the transactions
contemplated hereby and thereby as of the Closing will have been duly and
validly authorized, executed and delivered on behalf of such Buyer as of the
Closing and will be valid and binding agreements of such Buyer, enforceable
against such Buyer in accordance with their respective terms.

     

    i. Residency. Such Buyer
is a resident of that jurisdiction specified below its address on the Schedule of
Buyers.

     

    j. No Other
Agreements.  As of the Closing Date, such Buyer has not,
directly or indirectly, made any agreements with the Company relating to the
terms or conditions of the transactions contemplated by the Transaction
Documents except as set forth in the Transaction Documents.

     

    3. REPRESENTATIONS AND
WARRANTIES OF THE COMPANY.

     

    The
Company represents and warrants, as of the date of this Agreement and on the
Closing Date, to each Buyer, that:

     

    a. Organization and
Qualification; Subsidiaries.  The Company was formed on April
12, 2005.  Set forth in Schedule 3(a) is a
true and correct list of the Company’s Subsidiaries and the jurisdiction in
which each is organized or incorporated, together with their respective
jurisdictions of organization and the percentage of the outstanding capital
stock or other equity interests of each such entity that is held by the Company
or any of its Subsidiaries.  Other than with respect to the entities
listed on Schedule
3(a), the Company does not directly or indirectly own any security or
beneficial ownership interest, in any other Person (including through joint
venture or partnership agreements) or have any interest in any other
Person.  Each of the Company and its Subsidiaries is a corporation,
limited liability company, partnership or other entity and is duly organized or
formed and validly existing in good standing under the laws of the jurisdiction
in which it is incorporated or organized and has the requisite corporate,
partnership, limited liability company or other organizational power and
authority to own its properties and to carry on its business as now being
conducted and as proposed to be conducted by the Company and its
Subsidiaries.  Each of the Company and its Subsidiaries is duly
qualified to do business and is in good standing in every jurisdiction in which
its ownership or lease of property or the nature of the business conducted or
proposed to be conducted by the Company and its Subsidiaries will make such
qualification necessary,  except to the extent that the failure to be
so qualified or be in good standing could not have and could not be,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.  Except as set forth in Schedule 3(a), the
Company holds all right, title and interest in and to 100% of the capital stock,
equity or similar interests of each of its Subsidiaries, in each case, free and
clear of any Liens, including any restriction on the use, voting, transfer,
receipt of income or other exercise of any attributes of free and clear
ownership by a current holder, and no such Subsidiary owns capital stock or
holds an equity or similar interest in any other Person. All of the outstanding
shares of capital stock of each Subsidiary have been duly authorized and validly
issued, and are fully paid and nonassessable.

     

    
      
         


      

      
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    b. Authorization; Enforcement;
Validity.  Each of the Company and each of its Subsidiaries has
the requisite corporate or limited liability company power and authority to
enter into and perform its obligations under this Agreement and each of the
other Transaction Documents to which such Person is a party and to issue the
Securities in accordance with the terms hereof and thereof.  The
execution and delivery of the Transaction Documents by the Company and each of
its Subsidiaries and the consummation by the Company and each of its
Subsidiaries of the transactions contemplated hereby and thereby, including the
issuance of the Notes, the Guaranties, the Warrants, the Warrant Shares and the
Conversion Shares, have been duly authorized by the respective boards of
directors, members, managers, trustees, stockholders, other equityholders or
holders of beneficial interests, as applicable, of the Company and each of its
Subsidiaries and no further consent or authorization is required by the Company,
any of its Subsidiaries or any of their respective boards of directors, members,
managers, trustees, stockholders, other equityholders or holders of beneficial
interests, as applicable.  This Agreement and the other Transaction
Documents dated of even date herewith have been duly executed and delivered by
the Company and each of its Subsidiaries that is a party thereto, and constitute
the valid and binding obligations of the Company and each of its Subsidiaries,
enforceable against the Company and each of its Subsidiaries in accordance with
their respective terms.  As of the Closing, the Transaction Documents
dated after the date of this Agreement and on or prior to the Closing Date shall
have been duly executed and delivered by the Company and each of its
Subsidiaries that is a party thereto and shall constitute the valid and binding
obligations of the Company and each of its Subsidiaries, enforceable against the
Company and each of its Subsidiaries in accordance with their respective terms,
except as may be limited by bankruptcy, insolvency, fraudulent conveyance or
similar laws affecting creditors’ rights generally and general principles of
equity.

     

    c. Capitalization.  The
authorized Capital Stock of the Company consists of:

     

    (i) 25,000,000
shares of Preferred Stock, of which none are issued and
outstanding;

     

    (ii) 500,000,000
shares of Common Stock, of which:

     

    (A) 51,133,333
shares are issued and outstanding;

     

    (B) 3,500,000
shares are reserved for issuance pursuant to the Company’s stock option,
restricted stock and employee stock purchase plans described on Schedule 3(c)(ii)(B)
(the “Equity Plans”);
there are no shares currently issuable pursuant to outstanding awards under the
Equity Plans; and

     

    (C) 21,705,686
shares are reserved for issuance pursuant to outstanding warrants.

     

    
      
         


      

      
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    Except as
described in the foregoing provisions of this Section 3(c), no shares of Common
Stock or Preferred Stock are reserved for issuance under any plan, agreement or
arrangement and there are no shares of Capital Stock, Options, Convertible
Securities or other equity securities of the Company authorized, issued or
outstanding.  All of the outstanding and issuable shares of Capital
Stock have been, or upon issuance will be, validly issued and are, or upon
issuance will be, fully paid and nonassessable.

     

    Except as
set forth on Schedule
3(c):

     

    (1) no shares
of the Capital Stock of the Company or any of its Subsidiaries are subject to
preemptive rights or any other similar rights or any Liens suffered or permitted
by the Company or any of its Subsidiaries;

     

    (2) there are
no outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into or exercisable for, any shares of Capital Stock of the Company
or any of its Subsidiaries, or contracts, commitments, understandings or
arrangements by which the Company or any of its Subsidiaries is or may become
bound to issue additional shares of Capital Stock of the Company or any of its
Subsidiaries or options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into or exercisable for, any shares of Capital Stock of the Company
or any of its Subsidiaries;

     

    (3) there are
no agreements or arrangements under which the Company or any of its Subsidiaries
is obligated to register the sale of any of their securities under the 1933
Act;

     

    (4) there are
no outstanding securities or instruments of the Company or any of its
Subsidiaries that contain any redemption or similar provisions, and there are no
contracts, commitments, understandings or arrangements by which the Company or
any of its Subsidiaries is or may become bound to redeem a security of the
Company or any of its Subsidiaries, and there are no other stockholder
agreements or similar agreements to which the Company, any of its Subsidiaries
or, to the Company’s Knowledge, any holder of the Company’s Capital Stock is a
party;

     

    (5) there are
no securities or instruments containing anti-dilution or similar provisions that
will or may be triggered by the issuance of the Securities;

     

    (6) the
Company does not have any stock appreciation rights or “phantom stock” plans or
agreements or any similar plan or agreement; and

     

    (7) to the
Company’s Knowledge, no officer or director of the Company or beneficial owner
of any of the Company’s outstanding Common Stock has pledged Common Stock in
connection with a margin account or other loan secured by such Common
Stock.

     

    
      
         


      

      
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    The
Company has furnished to each Buyer true and correct copies of:

    


    (W)           the
Company’s Certificate of Incorporation, as amended and in effect (the “Certificate of
Incorporation”);

    


    (X)           the
Company’s Bylaws, as amended and in effect (the “Bylaws”);

    


    (Y)           the
organizational documents of each of the Company’s Subsidiaries, as amended and
in effect; and

    


    (Z)           all
documents and instruments containing the terms of all securities, if any, that,
directly or indirectly, are convertible into, or exercisable or exchangeable
for, Common Stock, and the material rights of the holders thereof in respect
thereto.

    


    d. Issuance of
Securities.  The Notes and Warrants are duly authorized and,
upon issuance in accordance with the terms of this Agreement, shall be free from
all taxes and Liens with respect to the issuance thereof and entitled to the
rights set forth therein.  The Warrant Shares and Conversion Shares
are duly authorized and, upon issuance in accordance with the terms of the
Warrants and the Notes, respectively, will be validly issued, fully paid and
nonassessable and free from taxes and Liens with respect to the issuance
thereof, with the holders being entitled to all rights accorded to a holder of
Common Stock.  The issuance by the Company of the Securities is exempt
from registration under the 1933 Act and any other applicable Securities
Laws.

     

    e. No
Conflicts.  The execution and delivery of this Agreement and
the other Transaction Documents by the Company and each of its Subsidiaries, the
performance by the Company and each of its Subsidiaries of its obligations
hereunder and thereunder and the consummation by the Company and each of its
Subsidiaries of the transactions contemplated hereby and thereby (including the
reservation for issuance and the issuance of the Conversion Shares and Warrant
Shares) will not:

     

    (i) result in
a violation of the certificate or articles of incorporation, certificate or
articles of organization, bylaws, operating agreement, partnership agreement or
any other governing documents, as applicable, of the Company or any of its
Subsidiaries;

     

    (ii) conflict
with, or constitute a breach or default (or an event which, with the giving of
notice or passage of time or both, constitutes or would constitute a breach or
default) under, or give to others any right of termination, amendment,
acceleration or cancellation of, or other remedy with respect to, any agreement,
indenture or instrument to which the Company or any of is Subsidiaries is a
party; or

     

    
      
         


      

      
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    (iii) result in
a violation of any law, rule, regulation, order, judgment or decree (including
Securities Laws and the rules and regulations, if any, of the Principal Market)
applicable to the Company or any of its Subsidiaries or by which any property or
asset of any such Person is bound or affected.

     

    Neither
the Company nor any of its Subsidiaries is in violation of any term of its
certificate or articles of incorporation, certificate or articles of
organization, bylaws, operating agreement, partnership agreement or any other
governing document, as applicable.  Neither the Company nor any of its
Subsidiaries is or has been in violation of any term of or in default under (or
with the giving of notice or passage of time or both would be in violation of or
default under) any contract, agreement, mortgage, indebtedness, indenture,
instrument, judgment, decree or order or any Law applicable to the Company or
its Subsidiaries, except where such violation or default could not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect or
result in the acceleration of any Indebtedness or other
obligation.  The business of the Company and its Subsidiaries has not
been and is not being conducted, in violation of any Law of any Governmental
Entity except as could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. Except for the filings and listings
expressly contemplated by the Registration Rights Agreement, the filing of
instruments to perfect security interests and as set forth in Schedule 3(e),
neither the Company nor any of its Subsidiaries is, has been, or will be
required to obtain any consent, authorization or order of, or make any filing or
registration with, any court or Governmental Entity in order for it to execute,
deliver or perform any of its obligations under or contemplated by the
Transaction Documents in accordance with the terms hereof or
thereof.  All consents, authorizations, orders, filings and
registrations that the Company or any of its Subsidiaries is or has been
required to obtain as described in the preceding sentence have been obtained or
effected on or prior to the date of this Agreement and prior to the date of the
effectiveness of such requirement.

     

    f. SEC Documents; Financial
Statements.

     

    (i) The
Company’s draft Current Report on Form 8-K, a copy of which is attached hereto
as Exhibit J
(the “Super 8-K”),
complies, and upon its filing with the SEC, will comply, in all material
respects with the requirements of the Securities Exchange Act of 1934, as
amended (the “Exchange
Act”), and the rules and regulations of the SEC promulgated thereunder
and other federal, state and local laws, rules and regulations applicable to the
Super 8-K, and the Super 8-K does not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading. The financial statements of the Company
included in the Super 8-K comply as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC or other applicable rules and regulations with respect thereto. Such
financial statements have been prepared in accordance with generally accepted
accounting principles (“GAAP”) applied on a consistent
basis during the periods involved (except (i) as may be otherwise indicated in
such financial statements or the notes thereto or (ii) in the case of unaudited
interim statements, to the extent they may not include footnotes or may be
condensed or summary statements), and fairly present in all material respects
the financial position of the Company and its Subsidiaries as of the dates
thereof and the results of operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments).

     

    
      
         


      

      
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    (ii) None of
the Company, its Subsidiaries and their respective officers, directors and
Affiliates or, to the Company’s Knowledge, any stockholder of the Company has
provided any information to any Buyer, including information referred to in
Section 2(d),
that, considered in the aggregate, contains any untrue statement of a material
fact or omits to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they are or
were made, not misleading.  Except as set forth in Schedule 3(f)(ii),
none of the Company, its Subsidiaries and their respective officers, directors,
employees or agents has provided any Buyer with any material, nonpublic
information.

     

    (iii) The
accounting firm that has expressed its opinion with respect to the consolidated
financial statements included in the Super 8-K (the “Audit Opinion”) is independent
of the Company pursuant to the standards set forth in Rule 2-01 of Regulation
S-X promulgated by the SEC and such firm was otherwise qualified to render the
Audit Opinion under applicable Securities Laws.

     

    (iv) There is
no transaction, arrangement or other relationship between the Company and an
unconsolidated or other off-balance-sheet entity that is required to be
disclosed by the Company in the Super 8-K that has not been so disclosed in the
Super 8-K.

     

    (v) The
Company is not a “shell company” (as defined in Rule 12b-2 under the 1934
Act).

     

    g. Sarbanes-Oxley Compliance;
Internal Accounting Controls; Disclosure Controls and Procedures; Books and
Records.

     

    (i) The
Company and its Subsidiaries are in all material respects in compliance with the
applicable provisions of the Sarbanes-Oxley Act of 2002, as amended, and the
rules and regulations thereunder (collectively, “Sarbanes-Oxley”).

     

    (ii) Neither
the Company nor any of its Subsidiaries nor any director, officer or employee,
of the Company or any of its Subsidiaries has received or otherwise had or
obtained Knowledge of any complaint, allegation, assertion or claim, whether
written or oral, regarding the accounting or auditing practices, procedures,
methodologies or methods of the Company or any of its Subsidiaries or its
internal accounting controls, including any complaint, allegation, assertion or
claim that the Company or any of its Subsidiaries has engaged in questionable
accounting or auditing practices.

     

    (iii) No
attorney representing the Company or any of its Subsidiaries, whether or not
employed by the Company or any of its Subsidiaries, has reported evidence of a
material violation of Securities Laws, breach of fiduciary duty or similar
violation by the Company or any of its Subsidiaries or any of their respective
officers, directors, employees or agents to their respective boards of directors
or any committee thereof or pursuant to Section 307 of
Sarbanes-Oxley.

     

    (iv) The
Company has, and has caused each of its Subsidiaries to, at all times, keep
books, records and accounts with respect to all of such Person’s business
activities, in accordance with sound accounting practices and GAAP consistently
applied.  The Company and each of its Subsidiaries maintains a system
of internal accounting controls sufficient to provide reasonable assurance that
(A) transactions are executed in accordance with management’s general or
specific authorizations, (B) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset and liability accountability, (C)
access to assets or incurrence of liability is permitted only in accordance with
management’s general or specific authorization and (D) the recorded
accountability for assets and liabilities is compared with the existing assets
and liabilities at reasonable intervals and appropriate action is taken with
respect to any differences.

     

    
      
         


      

      
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    (v) The
Company maintains disclosure controls and procedures required by
Rule 13a-15 or Rule 15d-15 under the 1934 Act; such disclosure
controls and procedures are effective to ensure that the information required to
be disclosed by the Company in the reports that it files with or submits to the
SEC (A) is recorded, processed, summarized and reported accurately within
the time periods specified in the SEC’s rules and forms and (B) is
accumulated and communicated to the Company’s management, including its
principal executive officer and principal financial officer, as appropriate to
allow timely decisions regarding required disclosure.

     

    (vi) The
Company maintains internal control over financial reporting required by
Rule 13a-14 or Rule 15d-14 under the 1934 Act; such internal
control over financial reporting is, and has at all times been, effective and
does not contain, and has not contained, any material weaknesses.

     

    h. Absence of Certain
Changes.  Since December 31, 2009, neither the Company nor any
of its Subsidiaries has taken any steps, and neither the Company nor any of its
Subsidiaries currently expects to take any steps to seek protection pursuant to
any bankruptcy law nor does the Company or any of its Subsidiaries have any
knowledge or reason to believe that the creditors of such Person intend to
initiate involuntary bankruptcy proceedings or any knowledge of any fact that
would reasonably lead a creditor to do so.  Neither the Company nor
any of its Subsidiaries is as of the date this representation is made, nor after
giving effect to the transactions contemplated hereby or by any of the other
Transaction Documents will be, Insolvent.  Since December 31, 2009,
neither the Company nor any of its Subsidiaries has declared or paid any
dividends or sold any assets outside of the ordinary course of
business.  Since December 31, 2009, neither the Company nor any of its
Subsidiaries has had any capital expenditures outside the ordinary course of its
business.

     

    i. Absence of
Litigation.  Except as set forth on Schedule 3(i), (i)
there has at no time been any action, suit, proceeding, inquiry or investigation
(“Litigation”) before or
by any court, public board, Governmental Entity, self-regulatory organization or
body pending or, to the Company’s Knowledge, threatened against or affecting the
Company or any of its Subsidiaries, and (ii) to the Company’s Knowledge, no
director or officer of the Company or any of its Subsidiaries has been involved
in securities-related Litigation during the past five years.  No
Litigation disclosed on Schedule 3(i) has,
has had or could reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect.

     

    
      
         


      

      
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    j. Full Disclosure; No
Undisclosed Events, Liabilities, Developments or
Circumstances.  Since December 31, 2009 (the “Balance Sheet Date”), there
has been no Material Adverse Effect and no circumstances exist that, in the
aggregate, could reasonably be expected to be, cause or have a Material Adverse
Effect.  Except (A) as and to the extent disclosed or reserved against
on the Company’s most recent audited balance sheet, (B) as incurred since the
date thereof in the ordinary course of business consistent with past practice,
(C) as incurred at the Closing Date under the Notes and the other Transaction
Documents, or (D) as set forth on Schedule 3(j),
neither the Company, nor any of its Subsidiaries has any material liabilities or
obligations of any nature, whether fixed or unfixed, known or unknown, secured
or unsecured, absolute, accrued, contingent or otherwise and whether due or to
become due.  No representation or warranty or other statement made by
the Company or any Subsidiary in this Agreement or any of the other Transaction
Documents, the Schedules hereto or any certificate or instrument delivered
pursuant to this Agreement contains any untrue statement or omits to state a
material fact necessary to make any such statement, in light of the
circumstances in which it was made, not misleading.

     

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

     

    l. No General
Solicitation.  Except as set forth in Schedule 3(l),
neither the Company nor any of its Affiliates, nor any Person acting on the
behalf of any of the foregoing, has engaged or will engage in any form of
general solicitation or general advertising (within the meaning of
Regulation D under the 1933 Act), including advertisements, articles,
notices, or other communications published in any newspaper, magazine or similar
media or broadcast over radio, television or internet or any seminar or meeting
whose attendees have been invited by general solicitation or general
advertising, in connection with the offer or sale of the
Securities.

     

    m. No Integrated
Offering.  Neither the Company nor any of its Affiliates, nor
any Person acting on the behalf of any of the foregoing, has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
purchase any security, under circumstances that would require registration of
any of the Securities under the 1933 Act or cause this offering of the
Securities to be integrated with prior offerings by the Company for purposes of
the 1933 Act, the stockholder approval requirements of the Principal Market (as
defined in Section 3(t)), or any other regulatory or self-regulatory authority,
nor will the Company or any of its Affiliates or any Person acting on behalf of
any of the foregoing take any action or steps that would require registration of
the issuance of any of the Securities under the 1933 Act or cause the offering
of the Securities to be integrated with other offerings for purposes of the 1933
Act, the stockholder approval requirements of the Principal Market (as defined
in Section 3(t)), or any other regulatory or self-regulatory
authority.

     

    
      
         


      

      
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    n. [Reserved.]

     

    o. Employee
Relations.  Neither the Company nor any of its Subsidiaries is
involved in any labor union dispute nor, to the Knowledge of the Company, is any
such dispute threatened.  None of the employees of either the Company
or any of its Subsidiaries is or has been a member of a union that relates, or
following the Closing will relate, to such employee’s relationship with the
Company and neither the Company nor any of its Subsidiaries is or following the
Closing will be, a party to a collective bargaining agreement.  No
executive officer (as defined in Rule 3b-7 under the 1934 Act), nor any other
individual whose termination would be required to be disclosed on a Current
Report on Form 8-K, has notified the Company that such individual intends to
leave the Company or otherwise terminate such individual’s employment with the
Company.  Schedule 3(o) lists
each individual who will be employed by the Company as of the Closing
Date.  Such individuals constitute all of the employees necessary to
conduct the Company’s business as presently conducted and proposed to be
conducted (as described to the Buyers prior to the date hereof).  No
such individual is, has been, 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 employment of each
such individual does not, has not and will not subject the Company or any of its
Subsidiaries to any liability with respect to any of the foregoing
matters.  The Company and each of its Subsidiaries is, and has at all
times been, in compliance with all Laws relating to employment and employment
practices, terms and conditions of employment and wages and
hours.  The Company and each of its Subsidiaries is, and has at all
times been, in compliance with all Laws relating to employee benefits and
employee benefit plans (as such terms are defined in ERISA).

     

    p. Intellectual
Property
Rights.  The Company and its Subsidiaries own or possess
adequate rights or licenses to use all trademarks, trademark applications and
registrations, trade names, service marks, service mark registrations, service
names, patents, patent rights, patent applications, copyrights (whether or not
registered), inventions, licenses, approvals, governmental authorizations, trade
secrets and other intellectual property rights (collectively, “Intellectual Property”)
necessary to conduct their respective businesses as conducted as of the date
this representation is made.  Except as set forth in Schedule 3(p), (i)
none of the rights of the Company or any of its Subsidiaries in its Intellectual
Property have expired or terminated, or are expected to expire or terminate
within five years from the date of this Agreement, except to the extent such
termination would not and could not reasonably be expected, individually or in
the aggregate, to have a Material Adverse Effect, (ii) there has been no
infringement by the Company or any of its Subsidiaries or any of the Company’s
or any of its Subsidiaries’ licensors or licensees of any Intellectual Property
rights of others, (iii) there has been no infringement by any third parties of
any Intellectual Property owned or licensed by the Company or any of its
Subsidiaries, or of any development of similar or identical trade secrets or
technical information by others, (iv) there is no claim, action or proceeding
against or being threatened against, the Company, any of its Subsidiaries or any
of their respective licensors regarding their Intellectual Property or
infringement of other Intellectual Property rights and there is no claim, action
or proceeding against or being threatened against the Company, any of its
Subsidiaries or any of their respective licensors regarding their Intellectual
Property or infringement of other Intellectual Property rights, (v) there are no
facts or circumstances that could reasonably be expected to give rise to any of
the foregoing, (vi) there is no patent or patent application which contains
claims that interfere with the issued or pending claims of any of the
Intellectual Property owned or licensed by the Company or any of its
Subsidiaries, and (vii) none of the technology employed by the Company or any of
its Subsidiaries has been obtained or is being used by the Company or any of its
Subsidiaries in violation of any material contractual obligation binding on the
Company or any of its Subsidiaries or is being used by any of the officers,
directors or employees of the Company or of its Subsidiaries on behalf of the
Company or any of its Subsidiaries in violation of the rights of any Person or
Persons.  The Company and its Subsidiaries have taken reasonable
security measures to protect the secrecy, confidentiality and the value of all
of their material Intellectual Property.

     

    
      
         


      

      
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    q. Environmental
Laws.  Each of the Company and its Subsidiaries (i) is, and has
at all times been, in compliance with any and all, and has not violated any,
Environmental Laws, (ii) has no, and has never had any, liability for
failure to comply with any Environmental Law, (iii) has received all permits,
licenses or other approvals required of it under applicable Environmental Laws
to conduct its business as presently conducted, and (iv) is in
com­pliance with all terms and conditions of any such permit, license or
approval.

     

    r. Insurance.  The
Company and each of its Subsidiaries are insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts as
management of the Company believes to be prudent and customary in the businesses
in which the Company and its Subsidiaries are engaged.  Neither the
Company nor any such Subsidiary has been refused any insurance coverage sought
or applied for, and neither the Company nor any such 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 at a cost that would not
reasonably be expected to have a Material Adverse Effect.

     

    s. Regulatory
Permits.  The Company and its Subsidiaries possess all
certificates, authorizations, approvals, licenses and permits issued by the
appropriate federal, state or foreign regulatory authorities necessary to
conduct their respective businesses as conducted at the time this representation
is made (“Permits”), and
neither the Company nor any such Subsidiary has received any notice of
proceedings relating to the revocation or modification of any such
Permit.  The Company and its Subsidiaries have no reason to believe
that they will not be able to obtain necessary Permits as and when necessary to
enable the Company and its Subsidiaries to conduct their respective
businesses.

     

    t. Principal
Market.  The Company is not in violation of any of the rules,
regulations or requirements of the OTC Bulletin Board (the “Principal Market;” provided however,
that, if after the date of this Agreement the Common Stock is listed on another
national securities exchange or automated quotation system, the “Principal Market” shall mean
such national securities exchange or automated quotation system) and has no
Knowledge of any facts or circumstances which would reasonably lead to delisting
or suspension, or termination of the trading of, the Common Stock by the
Principal Market in the foreseeable future.

     

    
      
         


      

      
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    u. Tax
Status.  The Company and each of its Subsidiaries (i) has made
or filed all federal, state and foreign income and all other tax returns,
reports and declarations required by any jurisdiction to which it is subject,
(ii) has paid all taxes and other governmental assessments and charges shown or
determined to be due on such returns, reports and declarations, except those
being contested in good faith and for which the Company has made appropriate
reserves on its books, and (iii) has set aside on its books provisions
reasonably adequate for the payment of all taxes for periods subsequent to the
periods to which such returns, reports or declarations (referred to in clause
(i) above) apply.  There are no unpaid taxes claimed in writing to be
due from the Company or any of its Subsidiaries by the taxing authority of any
jurisdiction, and there is no basis for any such claim.  Neither the
Company nor any of its Subsidiaries is a “United States real property holding
corporation” (“USRPHC”)
as that term is defined in Section 897(c)(2) of the Internal Revenue Code of
1986, as amended, and the Treasury Regulations promulgated
thereunder.

     

    v. Transactions With
Affiliates.  Except as set forth on Schedule 3(v), no
Related Party of the Company or any of its Subsidiaries, nor any Affiliate
thereof, is presently, has been within the past three years, or will be as a
result of the transactions contemplated by this Agreement and the other
Transaction Documents, a party to any transaction, contract, agreement,
instrument, commitment, understanding or other arrangement or relationship with
the Company or any of its Subsidiaries, whether for the furnishing of services
to or by, providing for rental of real or personal property to or from, or
otherwise requiring payments or consideration to or from any such Related
Party.  No Related Party of the Company or any of its Subsidiaries, or
any of their respective affiliates, has any direct or indirect ownership
interest in any Person (other than ownership of less than 2% of the outstanding
common stock of a publicly traded corporation) in which the Company or any of
its Subsidiaries has any direct or indirect ownership interest or with which the
Company or any of its Subsidiaries competes or has a business
relationship.

     

    w. Application of Takeover
Protections; Rights Agreement.  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, or other
similar anti-takeover provision under the Certificate of Incorporation, as
amended or any certificates of designations or the laws of the State of Delaware
to the transactions contemplated by this Agreement, the Company’s issuance of
the Securities in accordance with the terms hereof and any Buyer’s ownership of
the Securities. The Company has not adopted a stockholder rights plan or similar
arrangement relating to accumulations of beneficial ownership of Common Stock or
a change in control of the Company.

     

    x. Foreign Corrupt
Practices.  Neither the Company, nor any of its Subsidiaries,
nor any director, officer, agent, employee or other person acting on behalf of
the Company or any of its Subsidiaries has, in the course of its actions for, or
on behalf of, the Company, used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expenses relating to
political activity; made any direct or indirect unlawful payment to any foreign
or domestic government official or employee from corporate funds; violated or is
in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977,
as amended; or made any unlawful bribe, rebate, payoff, influence payment,
kickback or other unlawful payment to any foreign or domestic government
official or employee.

     

    
      
         


      

      
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    y. Outstanding Indebtedness;
Liens.  Except as set forth on Schedule 3(y),
payments of principal and other payments due under the Notes will, upon issuance
at the Closing, rank senior to all other Indebtedness of the Company or any of
its Subsidiaries (in right of payment, whether with respect of payment of
redemptions, interest or damages or upon liquidation or dissolution or
otherwise).  Except as set forth on Schedule 3(y),
(i) neither the Company nor any of its Subsidiaries has any, and upon
consummation of the transactions contemplated hereby and by the other
Transaction Documents will not have any, outstanding Indebtedness other than the
Indebtedness permitted under Section 5(g), (ii) there are no, and upon
consummation of the transactions contemplated hereby and by the other
Transaction Documents there will not be any, Liens on any of the assets of the
Company and its Subsidiaries other than the Liens permitted under Section 5(h),
and (iii) there are no, and upon consummation of the transactions contemplated
hereby and by the other Transaction Documents there will not be any, financing
statements securing obligations of any amounts filed against the Company or any
of its Subsidiaries or any of their respective assets.

     

    z. Real
Property.  Neither the Company nor any of its Subsidiaries own
any real property.  Schedule 3(z)
contains a complete and correct list of all the real property, facilities and
fixtures that (i) are leased or, in the case of fixtures, otherwise owned or
possessed by the Company or any of its Subsidiaries, (ii) in connection with
which the Company or any of its Subsidiaries has entered into an option
agreement, participation agreement or acquisition agreement or (iii) the Company
or any of its Subsidiaries has agreed to lease or otherwise acquire or may be
obligated to lease or otherwise acquire in connection with the conduct of its
business (collectively, including any of the foregoing acquired after the date
of this Agreement, the “Real
Property”), which list identifies all of the Real Property and specifies
which of the Company and its Subsidiaries leases, owns or possesses each item of
the Real Property. Schedule 3(z) also
contains a complete and correct list of all leases and other agreements with
respect to which the Company or any of its Subsidiaries is a party or otherwise
bound or affected with respect to the Real Property, except easements, rights of
way, access agreements, surface damage agreements, surface use agreements or
similar agreements that pertain to Real Property that is contained wholly within
the boundaries of any leased Real Property otherwise described on Schedule 3(z) (the
“Real Property
Leases”).  All of the Real Property Leases are valid and in
full force and effect and are enforceable against all parties
thereto.  Neither the Company nor any of its Subsidiaries nor, to the
Company’s Knowledge, any other party thereto is in default in any material
respect under any of such Real Property Leases and no event has occurred which
with the giving of notice or the passage of time or both could constitute a
default under, or otherwise give any party the right to terminate, any of such
Real Property Leases, or could adversely affect the Company’s or any of its
Subsidiaries’ interest in and title to the Real Property subject to any of such
Real Property Leases.  No Real Property Lease is subject to
termination, modification or acceleration as a result of the transactions
contemplated hereby.

     

    aa. Tangible
Assets.  The Company and its Subsidiaries have good and
marketable title to all of the tangible assets that are material to their
businesses (the “Assets”), in each case free
and clear of any Lien, other than Permitted Liens. The Assets include all
tangible assets necessary for the conduct of the Company’s and its Subsidiaries’
businesses as presently proposed to be conducted.  The Assets that are
facilities, fixtures, equipment, and other personal property have been
maintained in accordance with normal industry practice, and are in good
operating condition and repair (subject to normal wear and tear), and are
suitable for the purposes for which they are now used and proposed to be
used.  There are no existing agreements, options, commitments or
rights with, of or to any Person to acquire any such Assets, or any interests
therein.

     

    
      
         


      

      
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    bb. No Materially Adverse
Contracts, Etc.  The Company is not subject to any charter,
contract, agreement, instrument, corporate or other legal restriction, or any
judgment, decree, order, rule, regulation or other Law that has, has had, or is
expected in the future to have, a Material Adverse Effect.

     

    cc. Investment
Company.  The Company is not, and upon each Closing will not
be, an “investment company,” a company controlled by an “investment company,” or
an “affiliated person” of, or “promoter” or “principal underwriter” for, an
“investment company,” as such terms are defined in the Investment Company
Act.

     

    dd. Stock Options. Every
Option issued by the Company (i) has (or, if no longer outstanding, had), with
respect to each share of Common Stock into which it is convertible or for which
it is exercisable or exchangeable, an exercise price equal to or greater than
the fair market value per share of Common Stock on the date of grant of such
Option, (ii) was issued in compliance with the terms of the plan under which it
was issued and in compliance with applicable Laws, rules and regulations,
including the rules and regulations of the Principal Market, and (iii) has been
accounted for in accordance with GAAP and otherwise been disclosed accurately
and completely and in accordance with the requirements of the Securities Laws,
including Rule 402 of Regulation S-K promulgated by the SEC, and the Company has
paid, or properly reserved for, all taxes payable with respect to each such
Option (including with respect to the issuance and exercise thereof), and has
not deducted any amounts from its taxable income that it is not entitled to
deduct with respect to any such stock option (including the issuance and
exercise thereof).

     

    4. AFFIRMATIVE
COVENANTS.

     

    a. Best
Efforts.  Each party shall use its reasonable best efforts to
timely satisfy each of the conditions to be satisfied by it as provided in Sections 7 and 8 of this
Agreement.

     

    b. Form D and Blue
Sky.  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 to each Buyer promptly after such filing.  The Company
shall, on or before the Closing Date, 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 Buyers at the Closing to occur on the
Closing Date pursuant to this Agreement under applicable Securities Laws of the
states of the United States, and shall provide to each Buyer evidence of any
such action so taken on or prior to the Closing Date.  The Company
shall make all filings and reports relating to the offer and sale of the
Securities required under applicable Securities Laws of the states of the United
States following the Closing Date.

     

    
      
         


      

      
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    c. Reporting
Status.  During the period commencing on the date of this
Agreement and ending on the first date after the Closing Date that is the latest
of (i) the date that the Securities may be sold without the requirement to be in
compliance with Rule 144(c)(1) promulgated under the 1933 Act (or successor
thereto) and otherwise without restriction or limitation pursuant to Rule 144
promulgated under the 1933 Act (or successor thereto), (ii) the date on which no
Notes or Warrants remain outstanding and (iii) the date on which the Security
Agreement has been terminated (the period ending on such latest date, the “Reporting Period”), the
Company shall timely file all reports required to be filed with the SEC pursuant
to the 1934 Act, and the Company shall not terminate its status as an issuer
required to file reports under the 1934 Act even if the Securities Laws
otherwise would permit such termination.

     

    d. Use of
Proceeds.  The Company will use the proceeds as provided in
Schedule
4(d).

     

    e. Financial
Information.  From the date of this Agreement until the first
date following the Closing Date on which the Notes and Warrants are no longer
outstanding and the Security Agreement has terminated, the Company agrees to
send the following to each Buyer (i) unless the following are filed with the SEC
through EDGAR and are immediately available to the public through the EDGAR
system, within one Business Day after the filing thereof with the SEC, a copy of
each of its quarterly reports on Form 10-Q and annual reports on Form 10-K
(each, a “Periodic
Report”), Current Reports on Form 8-K, registration statements and
amendments and supplements to each of the foregoing, (ii) unless immediately
available through Bloomberg, facsimile copies of all press releases issued by
the Company or any of its Subsidiaries, contemporaneously with the issuance
thereof, and (iii) unless the following are filed with the SEC through EDGAR and
are immediately available to the public through the EDGAR system, copies of any
notices and other information made available or given to the stockholders of the
Company generally, contemporaneously with the making available or giving thereof
to the stockholders.

     

    f. Internal Accounting
Controls.  From the date of this Agreement until the first date
following the Closing Date on which the Notes and Warrants are no longer
outstanding and the Security Agreement has terminated, the Company shall, and,
shall cause each of its Subsidiaries to:

     

    (i) at all
times keep books, records and accounts with respect to all of such Person’s
business activities, in accordance with sound accounting practices and GAAP
consistently applied;

     

    (ii) maintain
a system of internal accounting controls sufficient to provide reasonable
assurance that (A) transactions are executed in accordance with management’s
general or specific authorizations, (B) transactions are recorded as necessary
to permit preparation of financial statements in conformity with GAAP and to
maintain asset and liability accountability, (C) access to assets or incurrence
of liability is permitted only in accordance with management’s general or
specific authorization and (D) the recorded accountability for assets and
liabilities is compared with the existing assets and liabilities at reasonable
intervals and appropriate action is taken with respect to any
differences;

     

    (iii) timely
file and make publicly available on the SEC’s EDGAR system, all certifications
and statements required by (A) Rule 13a-14 or Rule 15d-14 under the 1934 Act and
(B) Section 906 of Sarbanes Oxley with respect to any Periodic
Reports;

     

    
      
         


      

      
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    (iv) maintain
disclosure controls and procedures required by Rule 13a-15 or Rule 15d-15 under
the 1934 Act, and cause such disclosure controls and procedures to be effective
at all times to ensure that the information required to be disclosed by the
Company in the reports that it files with or submits to the SEC (A) is recorded,
processed, summarized and reported accurately within the time periods specified
in the SEC’s rules and forms and (B) is accumulated and communicated to the
Company’s management, including its principal executive officer and principal
financial officer, as appropriate to allow timely decisions regarding required
disclosure; and

     

    (v) maintain
internal control over financial reporting required by Rule 13a-14 or Rule 15d-14
under the 1934 Act, and cause such internal control over financial reporting to
be effective at all times and not contain any material weaknesses.

     

    g. Listing.  During
the Reporting Period, the Company shall use its best efforts to promptly secure
the listing of all of the Warrant Shares and Conversion Shares upon each
national securities exchange and automated quotation system upon which shares of
Common Stock are then listed (subject to official notice of issuance) and, shall
maintain, so long as any other shares of Common Stock shall be so listed, such
listing of all Warrant Shares and Conversion Shares from time to time issuable
under the terms of the Transaction Documents. So long as any Securities are
outstanding, the Company shall maintain the Common Stock’s listing on the
Principal Market (or a United States national exchange or market) and shall not
take any action that would reasonably be expected to result in the suspension or
termination of trading of the Common Stock on the Principal Market, except to
begin trading on a different United States national exchange or
market.  The Company shall pay all fees and expenses in connection
with satisfying its obligations under this Section
4(g).

     

    h. Expenses.  At
the Closing, the Company shall pay each Buyer a reimbursement amount, up to an
aggregate of $30,000 among all Buyers, for
all of such Buyer’s legal, due diligence and other expenses incurred in
connection with this Agreement and the transaction contemplated hereby,
including fees and expenses of attorneys, investigative and other consultants
and travel costs and all other expenses relating to negotiating and preparing
the Transaction Documents and consummating the transactions contemplated
thereby.  In addition to reimbursement obligations of the Company set
forth in above in this Section 4(h), and not in limitation thereof, following
the Closing, the Company shall promptly reimburse each Buyer, each holder of
Notes, each holder of Warrants, each holder of Warrant Shares and each holder of
Conversion Shares and the Collateral Agent for all of the respective
out-of-pocket fees, costs and expenses incurred thereby in connection with any
amendment, modification or waiver of any of the Transaction Documents, the
enforcement of such Person’s rights and remedies under any of the Transaction
Documents and/or any release, termination, amendment or modification of any Lien
of such Buyer or holder or the Collateral Agent in any of the Collateral (as
defined in the Security Agreement).

     

    
      
         


      

      
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    i. Disclosure of Transactions
and Other Material Information.

     

    (i) Contemporaneous
with or prior to the earlier of (i) the Company’s first public announcement of
the transactions contemplated hereby and (ii) 4:00 p.m. (New York City time) on
the fourth Business Day following the Closing Date, the Company shall file a
Form 8-K (the “Announcing Form
8-K”) with the SEC.  The Announcing Form 8-K, which may be
included within the Super 8-K, (x) shall describe the terms of the transactions
contemplated by the Transaction Documents, including the purchase of the Notes
and Warrants, (y) shall include as exhibits to such Form 8-K this Agreement
(including the schedules hereto), the Registration Rights Agreement, the form of
Company and Subsidiary Pledge Agreement, the form of Security Agreement, the
form of Account Control Agreement, the form of Subsidiary Guaranty, the form of
Shareholder Guaranty and the form of Shareholder Pledge Agreement, the form of
Note and the form of Warrant, and (z) shall include any other information
required to be disclosed therein pursuant to any Securities Laws or other
Laws.  Unless required by Law, the Company shall not make any public
announcement regarding the transactions contemplated hereby prior to the
Closing.  Subject to the agreements and covenants set forth in this
Section 4(i),
the Company shall not issue any press releases or any other public statements
with respect to the transactions contemplated hereby or disclosing the name of
any Buyer; provided, however, that the
Company shall be entitled, without the prior approval of any Buyer, to make any
press release or other public disclosure with respect to such transactions (A)
in substantial conformity with the Announcing Form 8-K and contemporaneously
therewith and (B) as is required by applicable Law (provided; however, that the
Buyers shall be consulted by the Company in connection with any such press
release or other public disclosure prior to its release and shall be provided
with a copy thereof).

     

    (ii) From and
after the filing of the Announcing Form 8-K and the Super 8-K with the SEC, no
Buyer shall be in possession of any material nonpublic information received from
the Company, any of its Subsidiaries or any of their respective Affiliates,
officers, directors, employees or agents.  Notwithstanding any
provision herein to the contrary, the Company shall not, and shall cause each of
its Subsidiaries and its and each of their respective Affiliates, officers,
directors, employees and agents not to, provide any Buyer with any material
nonpublic information regarding the Company or any of its Subsidiaries from and
after the filing of the Announcing Form 8-K with the SEC, without the express
prior written consent of such Buyer.  In the event that a Buyer
believes that the Company, any of its Subsidiaries, or any of their respective
Affiliates, officers, directors, employees or agents has breached the foregoing
covenant, the Buyer shall so notify the Company as provided in Section 10(f)
hereof.  If the Company has failed to either (i) cause Buyer to
conclude that such information does not constitute material nonpublic
information or (ii) make public disclosure of the claimed material nonpublic
information provided to such Buyer by the end of the second full Business Day
following receipt of the notice provided for in the immediately preceding
sentence, then, in addition to any other remedy provided herein or in the
Transaction Documents, such Buyer shall have the right to make a public
disclosure in the form of a press release, public advertisement or otherwise, of
such material nonpublic information without the prior approval by the Company,
its Subsidiaries, or any of its or their respective Affiliates, officers,
directors, employees or agents.  No Buyer shall have any liability to
the Company, its Subsidiaries, or any of its or their respective Affiliates,
officers, directors, employees, stockholders or agents for any such
disclosure.  Notwithstanding anything to the contrary herein, in the
event that the Company believes that a notice or communication to any Buyer or
Investor (as defined in Section 4(j))
contains material, nonpublic information relating to the Company or any of its
Subsidiaries, the Company so shall indicate to such Buyer or Investor
contemporaneously with delivery of such notice or communication, and such
indication shall provide such Buyer or Investor the means to refuse to receive
such notice or communication; and in the absence of any such indication, the
holders of the Securities shall be allowed to presume that all matters relating
to such notice or communication do not constitute material, nonpublic
information relating to the Company or any of its Subsidiaries.  Upon
receipt or delivery by the Company or any of its Subsidiaries of any notice in
accordance with the terms of the Transaction Documents, unless the Company has
in good faith determined that the matters relating to such notice do not
constitute material, nonpublic information relating to the Company or its
Subsidiaries, the Company shall within one Business Day after any such receipt
or delivery Publicly Disclose such material, nonpublic information.

     

    
      
         


      

      
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    j. Pledge of
Securities.  The Company acknowledges and agrees that the
Securities of a Buyer may be pledged by such Buyer or its transferees (each,
including each Buyer, an “Investor”) in connection with
a bona fide margin agreement or other loan secured by the
Securities.  The pledge of Securities shall not be deemed to be a
transfer, sale or assignment of the Securities hereunder, and no Investor
effecting any such pledge of Securities shall be required to provide the Company
with any notice thereof or otherwise make any delivery to the Company pursuant
to this Agreement or any other Transaction Document, including Section 2(f) of this
Agreement.  The Company hereby agrees to execute and deliver such
documentation as a pledgee of the Securities may reasonably request in
connection with a pledge of the Securities to such pledgee by an
Investor.

     

    k. Notices.  From
the date of this Agreement until the first date following the Closing Date on
which the Notes are no longer outstanding and the Security Agreement has
terminated, the Company shall and shall cause each of its Subsidiaries to notify
the Collateral Agent in writing (A) at least 30 days in advance of any change in
such Person’s legal name and (B) within 10 days of the change of the use of any
trade name, assumed name, fictitious name or division name not previously
disclosed to the Collateral Agent in writing.  All of the foregoing
notices also shall be provided by the Company or the applicable Subsidiary to
each Buyer in writing.

     

    l. Compliance with Laws and
Maintenance of Permits.   From the date of this Agreement
until the first date following the Closing Date on which the Notes and Warrants
are no longer outstanding and the Security Agreement has terminated, the Company
shall, and shall cause each of its Subsidiaries to, maintain all governmental
consents, franchises, certificates, licenses, authorizations, approvals and
permits, the lack of which would reasonably be expected to have a Material
Adverse Effect, and the Company and each of its Subsidiaries shall remain in
compliance with all Laws (including Environmental Laws and Laws relating to
student loans, taxes, employer and employee contributions and similar items,
securities, ERISA or employee health and safety) the failure with which to
comply would have a Material Adverse Effect on such Person.

     

    
      
         


      

      
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    m. Inspection and
Audits.  From the date of this Agreement until the first date
following the Closing Date on which the Notes are no longer outstanding and the
Security Agreement has terminated:

     

    (i) Upon
prior written notice, the Company shall, and shall cause each of its
Subsidiaries to, permit the Collateral Agent (and the Collateral Agent’s
designees), at the Collateral Agent’s own expense, to call at the Company’s and
each of its Subsidiaries’ places of business at any reasonable times, and,
without hindrance or delay, to inspect, examine and audit the Collateral and to
inspect, audit, check and make extracts from such Person’s books, records,
journals, orders, receipts and any correspondence and other data relating to the
Collateral or any transactions between the parties hereto, and the Collateral
Agent (and the Collateral Agent’s designees) shall have the right to make such
verification concerning the Collateral as the Collateral Agent may consider
reasonable under the circumstances; and

     

    (ii) Notwithstanding
anything to the contrary herein, upon written request to the Company by any
Buyer, the Company shall promptly provide such Buyer with any financial,
operating or other type of information requested by such Buyer to the extent
that is reasonably available or can be developed without significant effort or
expense to the Company, subject to such Buyer’s execution of a confidentiality
agreement reasonably acceptable to the Company with respect to such information,
which execution shall constitute a waiver, with respect to any material
non-public information regarding the Company and the Subsidiaries provided to
such Buyer directly in response to such written request, of the restriction
herein on the Company’s disclosure to such Buyer of material nonpublic
information.

     

    n. Collateral.  From
the date of this Agreement until the first date following the Closing Date on
which the Notes are no longer outstanding and the Security Agreement is
terminated, the Company shall, and shall cause each of its Subsidiaries to,
maintain and preserve the Collateral and the value thereof.

     

    o. Insurance.  From
the date of this Agreement until the first date following the Closing Date on
which the Notes are no longer outstanding and the Security Agreement has
terminated, the Company shall, and shall cause each of its Subsidiaries to
maintain, at its expense, such public liability and third party property damage
insurance with companies that regularly insure Persons engaged in businesses
similar to that of the Company or the applicable Subsidiary and in coverage and
amount consistent with Persons of established reputation engaged in similar
business.  Original (or certified) copies of such policies have been
delivered to each Buyer, together with evidence of payment of all premiums
therefor.

     

    p. Taxes.  From
the date of this Agreement until the first date following the Closing Date on
which the Notes are no longer outstanding and the Security Agreement has
terminated, the Company shall and shall cause each of its Subsidiaries to file
all required tax returns and pay all of its taxes when due, subject to any
extensions granted by the applicable taxing authority, including taxes imposed
by federal, state or municipal agencies, and shall cause any Liens for taxes to
be promptly released; provided, however, that the
Company and its Subsidiaries shall have the right to contest the payment of such
taxes in good faith by appropriate proceedings so long as (i) the amount so
contested is shown on such Person’s financial statements; and (ii) the
contesting of any such payment does not give rise to a Lien for
taxes.

     

    
      
         


      

      
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    q. Intellectual
Property.  From the date of this Agreement until the first date
following the Closing Date on which the Notes and Warrants are no longer
outstanding and the Security Agreement has terminated, the Company shall and
shall cause each of its Subsidiaries to maintain adequate Intellectual Property
to continue its business as presently proposed to be conducted by it or as
hereafter conducted by it, unless the failure to maintain any of the foregoing
would not reasonably be expected to have a Material Adverse Effect.

     

    r. Patriot Act, Investor
Secrecy Act and Office of Foreign Assets Control.  As required
by federal law and such Buyer’s policies and practices, each Buyer may need to
obtain, verify and record certain customer identification information and
documentation in connection with opening or maintaining accounts, or
establishing or continuing to provide services, and, during the Reporting
Period, the Company agrees to, and shall cause each of its Subsidiaries to,
provide such information.

     

    s. Security Covenants.
 From the date of
this Agreement until the first date following the Closing Date on which the
Notes are no longer outstanding and the Security Agreement has terminated, the
Company shall, and shall cause each of its Subsidiaries to, at its own cost and
expense, cause to be promptly and duly taken, executed, acknowledged and
delivered all such further acts, documents and assurances as may from time to
time be necessary or as a Buyer or the Collateral Agent may from time to time
request in order to carry out the intent and purposes of this Agreement, the
Security Documents and the other Transaction Documents and the transactions
contemplated hereby and thereby, including all such actions to establish,
create, preserve, protect and perfect a first priority Lien in favor of the
Collateral Agent for the benefit of such Buyer in the Collateral (as each term
is defined in the Security Agreement). Immediately upon creation of any
Subsidiary, the Company shall immediately pledge or cause to be pledged to the
Buyers the capital stock or other equity securities of such new Subsidiary in
accordance with the terms of the Company and Subsidiary Pledge Agreement (and to
the extent the Company has not previously executed and delivered the Company
and  Subsidiary Pledge Agreement to the Collateral Agent, the Company
shall execute and deliver the Company and Subsidiary Pledge Agreement to the
Collateral Agent immediately upon creation of a Subsidiary, pursuant to which
the Company shall pledge its interest in such Subsidiary to the Collateral
Agent), and cause such new Subsidiary to enter into a Subsidiary Guaranty and
the Security Agreement and such other Security Documents as necessary to grant
to the Buyers a security interest in, and lien on, substantially all of the
assets of such new Subsidiary, and comply with the terms thereof.

     

    (i) Without
limiting the generality of the foregoing, in the event that the Company or any
of its Subsidiaries shall, at any time from the date of this Agreement until the
first date following the Closing Date on which the Notes are no longer
outstanding and the Security Agreement has terminated, acquire or form any new
Subsidiary after the date hereof, the Company shall, or shall cause the
respective Subsidiary to cause such new Subsidiary, upon such acquisition or
concurrently with such formation, as applicable, (A) to execute a Subsidiary
Guaranty and the Security Agreement, or a joinder thereto, and thereafter
perform its obligations under, the Subsidiary Guaranty and the Security
Agreement, and (B) to deliver such proof of corporate (or comparable) action,
incumbency of officers, opinions of counsel and other documents as Collateral
Agent shall have required or requested.

     

    
      
         


      

      
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    (ii)  From
the date of this Agreement until the first date following the Closing Date on
which the Notes and Warrants are no longer outstanding and the Security
Agreement has terminated, the Company shall, and shall cause each of its
Subsidiaries to, (A) refrain from engaging to any substantial extent in any
business other than a business related to Internet transactions involving
E-Commerce, advertising and Website design and licensing and business reasonably
related thereto or in furtherance thereof, and (B) preserve, renew and keep in
full force and effect their respective material rights, privileges and
franchises necessary or desirable in the normal conduct of their
business.

     

    t. Public Disclosure of Change
of Control or Organic Change.  From the date of this Agreement
until the first date following the Closing Date on which the Notes and Warrants
are no longer outstanding and the Security Agreement has terminated, in the
event of a Change of Control or Organic Change, the Company shall no later than
the Business Day that is fifteen (15) Business Days prior to the consummation of
a Change of Control or an Organic Change, Publicly Disclose the principal terms
of the agreement or agreements giving rise to such Change of Control or Organic
Change, including the expected date on which the transaction shall be
consummated (the first public announcement thereof, the “Change of Control
Announcement”).

     

    u. Lock-Up
Agreement.  The persons listed on Schedule 4(u) hereto
shall be subject to the terms and provisions of lock-up agreement in
substantially the form as Exhibit K hereto (the
“Lock-Up
Agreement”).

     

    v. Reservation of
Shares. So long as any of the Notes or Warrants remain outstanding, the
Company shall take all action necessary to at all times have authorized and
reserved for the purpose of issuance, one hundred twenty percent (120%) of the
aggregate number of shares of Common Stock needed to provide for the issuance of
the Conversion Shares and the Warrant Shares.

     

    5. NEGATIVE
COVENANTS.

     

    a. Prohibition Against Variable
Priced Securities.  From the date of this Agreement until the
first date following the Closing Date on which no Buyer holds any Securities,
the Company shall not in any manner issue or sell any Options or Convertible
Securities that are convertible into or exchangeable or exercisable for shares
of Common Stock at a price that varies or may vary with the market price of
shares of Common Stock, including by way of one or more resets to a fixed price
or increases in the number of shares of Common Stock issued or issuable, or at a
price that upon the passage of time or the occurrence of certain events
automatically is reduced or is adjusted or at the option of any Person may be
reduced or adjusted, whether or not based on a formulation of the then-current
market price of the Common Stock.

     

    
      
         


      

      
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    b. Status.  From
the date of this Agreement until the first date following the Closing Date on
which the Notes and Warrants are no longer outstanding and the Security
Agreement has terminated, the Company shall not become a USRPHC; and upon any
Buyer’s request, the Company shall inform such Buyer whether any of the
Securities then held by such Buyer constitute a U.S. real property interest
pursuant to Treasury Regulation Section 1.897-2(h) without regard to Treasury
Regulation Section 1.897-2(h)(3).

     

    c. Stay, Extension and Usury
Laws.  The Company covenants (to the extent that it may
lawfully do so) that it shall not at any time insist upon, plead, or in any
manner whatsoever claim or take the benefit or advantage of, any stay, extension
or usury law or other law that would prohibit or forgive it from paying all or
any portion of any principal of, or interest or premium on any of the Notes as
contemplated herein or therein, wherever enacted, now or at any time hereafter
in force, or which may affect the covenants under, or the performance of, any of
the Transaction Documents; and the Company (to the extent it may lawfully do so)
hereby expressly waives all benefit or advantage of any such law, and covenants
that it will not, by resort to any such law, hinder, delay or impede the
execution of any power granted to any Buyer herein or in any of the other
Transaction Documents, but will suffer and permit the execution of every such
power as though no such law has been enacted.

     

    d. Restriction on Purchases or
Payments.  Except as provided in any of the Transaction
Documents, from the date of this Agreement until the first date following the
Closing Date on which the Notes are no longer outstanding and the Security
Agreement has terminated, the Company shall not, and shall not permit any of its
Subsidiaries to, (i) declare, set aside or pay any dividends on or make any
other distributions (whether in cash, stock, equity securities or property) in
respect of any the Company’s or any Subsidiary’s Capital Stock, or split,
combine or reclassify any Capital Stock of the Company or any of its
Subsidiaries, or issue or authorize the issuance of any other securities in
respect or, in lieu of, or in substitution for any Capital Stock of the Company
or any of its Subsidiaries, or establish or set any record date with respect to
any of the foregoing; provided, however, that any
Subsidiary may declare, set aside or pay dividends on or make any other
distributions (whether in cash, stock, equity securities or property) in respect
of any of its Capital Stock that is held solely by the Company or a wholly-owned
domestic Subsidiary, provided that all of
the equity of such Subsidiary is directly or indirectly owned by the Company,
such Subsidiary is controlled by the Company and such Subsidiary is a party to a
Subsidiary Guaranty, or (ii) purchase, redeem or otherwise acquire, directly or
indirectly, any shares of the Company’s or any of its Subsidiaries’ Capital
Stock.

     

    e. Payment and Lien
Restrictions.  From the date of this Agreement until the first
date following the Closing Date on which the Notes are no longer outstanding and
the Security Agreement has terminated, (i) the Company shall not, nor will it
permit any of its Subsidiaries to, enter into or assume any agreement
prohibiting or otherwise restricting the creation or assumption of any Lien upon
its properties or assets, whether now owned or hereafter acquired, or requiring
the grant of any security for an obligation, except to the extent any such
agreement provides for Permitted Liens; and (ii) except as provided herein, the
Company shall not and shall not cause or permit its Subsidiaries to directly or
indirectly create or otherwise cause or suffer to exist or become effective any
consensual encumbrance or consensual restriction of any kind on the ability of
any such Subsidiary to:  (1) pay dividends or make any other
distribution on any of such Subsidiary’s Capital Stock owned by the Company or
any other Subsidiary; (2) pay any Indebtedness owed to the Company or any other
Subsidiary; (3) make loans or advances to the Company or any other Subsidiary;
or (4) transfer any of its property or assets to the Company or any other
Subsidiary.

     

    
      
         


      

      
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    f. Prepayments.  Except
for intercompany indebtedness among the Company and its Subsidiaries permitted
by Section
5(g), from the date of this Agreement until the first date following the
Closing Date on which the Notes are no longer outstanding and the Security
Agreement has terminated, the Company shall not, nor will it permit any of its
Subsidiaries to, prepay any Indebtedness other than the Notes.

     

    g. Indebtedness.  From
the date of this Agreement until the first date following the Closing Date on
which the Notes are no longer outstanding and the Security Agreement has
terminated, the Company shall not, and shall cause each of its Subsidiaries not
to, create, incur, assume, extend the term of, become obligated on or suffer to
exist (directly or indirectly), any Indebtedness other than under the Notes
issued pursuant to this Agreement, except that the Company and its Subsidiaries
may:

     

    (i) incur
non-convertible Indebtedness for borrowed money, but only to the extent (A) a
subordination agreement in favor of and in form and substance satisfactory to,
each Buyer in its sole and absolute discretion is executed and delivered to such
Buyer with respect thereto (which subordination agreement shall prohibit
payments in respect of such subordinated Indebtedness for so long as the Notes
are outstanding), (B) the terms of such subordinated Indebtedness do not require
or permit payment of principal thereon until at least 90 days after the maturity
date of any outstanding Notes, and (C) such subordinated Indebtedness is not
secured by any of the assets of the Company or any of its
Subsidiaries;

     

    (ii) incur unsecured
intercompany Indebtedness amongst the Company and one or more of its
wholly-owned domestic Subsidiaries that is a party to, and in compliance with,
the Subsidiary Guaranty;

     

    (iii) incur
Indebtedness of the Company and its Subsidiaries for taxes, assessments,
municipal or governmental charges not yet due; and

     

    (iv) incur
obligations of the Company and its Subsidiaries for collection or deposit in the
ordinary course of business.

     

    h. Liens.  From
the date of this Agreement until the first date following the Closing Date on
which the Notes are no longer outstanding and the Security Agreement has
terminated, the Company shall not, and shall cause each of its Subsidiaries not
to, grant or suffer to exist (voluntarily or involuntarily) any Lien, claim,
security interest or other encumbrance whatsoever on any of its assets, other
than Permitted Liens.

     

    i. Sale of
Collateral.  Until the first date on which the Notes are no
longer outstanding and the Security Agreement has terminated, neither the
Company nor any of the Subsidiaries shall sell, transfer, assign or dispose of
any Collateral, except for sales of inventory in the ordinary course of
business, licenses or sublicenses of rights in intellectual property on a
non-exclusive or other limited basis in the ordinary course of business and
sales of obsolete equipment.

     

    
      
         


      

      
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    j. Corporate
Existence.  From the date of this Agreement until the first
date following the Closing Date on which the Notes and Warrants are no longer
outstanding and the Security Agreement has terminated, the Company shall
maintain its corporate existence and shall not sell all or substantially all of
the Company’s assets (including, for the avoidance of any doubt, all or
substantially all of the assets of the Subsidiaries in the aggregate), except in
the event of a merger or consolidation or sale or transfer of all or
substantially all of the Company’s assets (including, for the avoidance of any
doubt, all or substantially all of the assets of the Subsidiaries in the
aggregate) where (i) the surviving or successor entity in such transaction (A)
assumes the Company’s obligations hereunder and under the other Transaction
Documents and (B) is a publicly traded corporation the common stock of which is
listed on a national securities exchange, and (ii) immediately before and
immediately after giving effect to such transaction, no Event of Default (as
defined in the Notes) shall have occurred and be continuing.

     

    k. Affiliate
Transactions.  From the date of this Agreement until the first
date following the Closing Date on which the Notes are no longer outstanding and
the Security Agreement has terminated, the Company shall not, and shall cause
each of its Subsidiaries not to, enter into, amend, modify or supplement any
transaction, contract, agreement, instrument, commitment, understanding or other
arrangement with any Related Party, except for customary employment arrangements
and benefit programs, on reasonable terms, that are not otherwise prohibited by
this Agreement.

     

    l. Restriction on Loans;
Investments; Subsidiary Equity.  From the date of this
Agreement until the first date following the Closing Date on which the Notes are
no longer outstanding and the Security Agreement has terminated, the Company
shall not, and shall not permit any of its Subsidiaries to:

     

    (i) Make any
loans to, or investments in, any other Person, including through lending money,
deferring the purchase price of property or services (other than trade accounts
receivable on terms of 90 days or less), purchasing any note, bond, debenture or
similar instrument, entering into any letter of credit, guaranteeing (or taking
any action that has the effect of guaranteeing) any obligations of any other
Person, or acquiring any equity securities of, or other ownership interest in,
or making any capital contribution to any other entity; provided that nothing in
this Section 5(l)(i) shall prohibit the Company or any of its Subsidiaries from
acquiring companies or businesses reasonably related to the business of Internet
transactions involving E-Commerce, advertising and Website design and licensing,
which acquisitions are approved by the independent members of the Board of
Directors of the Company; or

     

    (ii) Issue,
transfer or pledge any capital stock or equity interest in any Subsidiary to any
Person other than the Company.

     

    
      
         


      

      
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    m. Employee
Compensation. From the date of this Agreement until the first date
following the Closing Date on which the Notes are no longer outstanding and the
Security Agreement has terminated, the Company shall not, and shall cause each
of its Subsidiaries not to make any payment, grant accrual, commitment or
increase (or promise to pay, grant accrue or increase) of any bonuses, salaries,
loans or other compensation to any shareholder, director, officer, employee,
agent, representative or consultant of the Company or its Subsidiaries except in
the ordinary course consistent with both past practices and the disclosures with
respect to executive and director compensation set forth in the Super
8-K.

     

    n. Investment
Company.  From the date of this Agreement until the first date
following the Closing Date on which the Notes and Warrants are no longer
outstanding and no Buyer holds any Securities, the Company shall not become an
“investment company,” a company controlled by an “investment company,” or an
“affiliated person” of, or “promoter” or “principal underwriter” for, an
“investment company,” as such terms are defined in the Investment Company
Act.

     

    o. No Avoidance of
Obligations. During the Reporting Period, the Company shall not, and
shall cause each of its Subsidiaries not to, enter into any agreement which
would limit or restrict the Company’s or any of its Subsidiaries’ ability to
perform under, or take any other voluntary action to avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed by it
under, this Agreement, the Notes, the Warrants and the other Transaction
Documents.

     

    p. Regulation
M.  Neither the Company, nor any of its Subsidiaries nor any of
their respective Affiliates will take any action prohibited by Regulation M
under the 1934 Act in connection with the offer, sale and delivery of the
Securities contemplated hereby.

     

    q. No Integrated
Offering.  Neither the Company, nor any of its Subsidiaries,
nor any of their respective Affiliates, nor any Person acting on behalf of any
of the foregoing shall, directly or indirectly, make any offers or sales of any
security or solicit any offer to purchase any security, under any circumstances
that would require registration of any of the Securities under the 1933 Act or
cause the offering of the Securities to be integrated with prior offerings by
the Company for purposes of the 1933 Act, the stockholder approval requirements
of the Principal Market, or any other regulatory or self-regulatory
authority.

     

    
      
         


      

      
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    6. TRANSFER AGENT
INSTRUCTIONS.  The Company shall issue irrevocable instructions
to its transfer agent in the form attached hereto as Exhibit L (the “Irrevocable Transfer Agent
Instructions”), and any subsequent transfer agent, to issue certificates
or credit shares to the applicable balance accounts at the Depository Trust
Company (“DTC”),
registered in the name of each Buyer or its respective nominee(s), for the
Warrant Shares and Conversion Shares in such amounts as specified from time to
time by such Buyer to the Company.  Prior to registration of the
Warrant Shares and Conversion Shares under the 1933 Act, all such certificates
shall bear the restrictive legend specified in Section
2(g).  The Company warrants that no instruction other than the
Irrevocable Transfer Agent Instructions referred to in this Section 6 and stop
transfer instructions to give effect to Section 2(f) (in the
case of the Warrant Shares and Conversion Shares, prior to registration thereof
under the 1933 Act) will be given by the Company to its transfer agent and that
the Securities shall otherwise be freely transferable on the books and records
of the Company as and to the extent provided in this Agreement and the
Registration Rights Agreement.  If a Buyer provides the Company with
an opinion of counsel, in a generally acceptable form, to the effect that a
public sale, assignment or transfer of the Securities may be made without
registration under the 1933 Act or the Buyer provides the Company with
reasonable assurance that the Securities can be sold pursuant to Rule 144
without any restriction as to the number of securities acquired as of a
particular date that can then be immediately sold, the Company shall permit the
transfer and, in the case of the Warrant Shares or Conversion Shares, promptly
instruct its transfer agent to issue one or more certificates or credit shares
to the applicable balance accounts at DTC in such name and in such denominations
as specified by such Buyer and without any restrictive legend.  The
Company acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to the Buyers by vitiating the intent and purpose of the
transactions contemplated hereby.  Accordingly, the Company
acknowledges that the remedy at law for a breach of its obligations under this
Section 6 will
be inadequate and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Section 6, that each
Buyer shall be entitled, in addition to all other available remedies, to an
injunctive order and/or injunction restraining any breach and requiring
immediate issuance and transfer, without the necessity of showing economic loss
and without any bond or other security being required.

     

    7. CONDITIONS TO THE
OBLIGATIONS OF THE COMPANY TO SELL.  The obligation of the
Company to issue and sell the Notes and the Warrants to each Buyer at the
Closing is subject to the satisfaction, at or before the Closing Date (unless
otherwise specifically provided in this Section 7), of each
of the following conditions, provided that these conditions are for the
Company’s sole benefit and may be waived by the Company at any time in its sole
discretion by providing each Buyer with prior written notice
thereof:

     

    a. Such
Buyer and the Collateral Agent shall have executed each of the Transaction
Documents to which it is a party and delivered the same to the
Company.

     

    b. Such
Buyer shall have delivered to the Company such Buyer’s Allocation Percentage of
the Purchase Price for the Notes and Warrants being purchased by such Buyer at
the Closing by wire transfer of immediately available funds pursuant to the wire
instructions provided by the Company.

     

    c. The
representations and warranties of such Buyer herein shall be true and correct as
of the date when made and as of the Closing Date as though made at that time
(except for representations and warranties that speak as of a specific date,
which shall be true and correct as of such date), and such Buyer shall have
performed, satisfied and complied with the covenants, agreements and conditions
required by the Transaction Documents to be performed, satisfied or complied
with by such Buyer at or prior to the Closing Date.

     

    
      
         


      

      
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    8. CONDITIONS TO BUYERS’
OBLIGATIONS TO PURCHASE.  The obligation of each Buyer to
purchase the Notes and the Warrants from the Company at the Closing is subject
to the satisfaction, at or before the Closing Date (unless otherwise
specifically provided in this Section 8), of each of the following conditions,
provided that these conditions are for each Buyer’s sole benefit and may be
waived only by such Buyer at any time in its sole discretion by providing the
Company with prior written notice thereof:

     

    a. The
Company and each of its Subsidiaries shall have executed and delivered the
Transaction Documents to which such Person is a party to such
Buyer.

     

    b. The
representations and warranties of the Company herein and in all of the other
Transaction Documents shall be true and correct as of the date when made and as
of the Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date, which shall be true and correct as
of such date) and the Company shall have performed, satisfied and complied with
the covenants, agreements and conditions required by the Transaction Documents
to be performed, satisfied or complied with by the Company at or prior to the
Closing Date.  Such Buyer shall have received a certificate, executed
by the chief executive officer of the Company, dated as of the Closing Date, to
the foregoing effect and as to such other matters as may be reasonably requested
by such Buyer.

     

    c. Such
Buyer shall have received the opinion of Krieger and Prager, LLP, dated as of
the Closing Date, which opinion will address, among other things, laws of the
States of Delaware and New York applicable to the transactions contemplated
hereby, in form, scope and substance reasonably satisfactory to such Buyer and
applicable to the security interest provided pursuant to the Security Agreement,
in the form of Exhibit
M hereto, and otherwise in form, scope and substance reasonably
satisfactory to such Buyer.

     

    d. Such
Buyer shall have received a fully executed copy of the Irrevocable Transfer
Agent Instructions.

     

    e. The
Company shall have executed and delivered to such Buyer the Notes and the
Warrants to be issued to such Buyer at the Closing.

     

    f. The Board
of the Company shall have adopted, and not rescinded or otherwise amended or
modified, resolutions consistent with Section 3(b)
above and in a form reasonably acceptable to such Buyer (the “Resolutions”).

     

    g. The
Company shall have delivered to such Buyer a certificate evidencing the
incorporation (or other organization) and good standing of the Company and each
Subsidiary in such entity’s state or other jurisdiction of incorporation or
organization, issued by the Secretary of State (or other applicable authority)
of such state or jurisdiction of incorporation or organization as of a date
within ten (10) days of the Closing Date.

     

    h. The
Company shall have delivered to such Buyer a secretary’s certificate, dated as
of the Closing Date, certifying as to (A) the Resolutions, (B) the
Certificate of Incorporation, as amended, certified as of a date within 10 days
of such Closing Date, by the Secretary of State of Delaware, (C) the Bylaws
of the Company, (D) the certificate or articles of incorporation or other
organizational documents of each of the Company’s Subsidiaries, each certified
as of a date within 10 days of such Closing Date, by the Secretary of State of
the state of such entity’s jurisdiction of incorporation or organization, and
(E) the bylaws or other similar documents of each of the Company’s Subsidiaries,
each as in effect at the Closing.

     

    
      
         


      

      
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    i. The
Company shall have made all filings under all applicable Securities Laws
necessary to consummate the issuance of the Securities pursuant to this
Agreement in compliance with such laws.

     

    j. The
Company shall have delivered to such Buyer a letter from the Company’s transfer
agent certifying the number of shares of Common Stock outstanding as of a date
within five days of such Closing Date.

     

    k. The
Company shall have delivered to such Buyer all waivers, consents, approvals and
authorizations required from any Persons for the consummation of the
transactions contemplated hereby (including waivers of any preemptive rights
held by any Persons), and all such waivers, consents, approvals and
authorizations shall be in full force and effect.

     

    l. The
Company shall have made all filings under all applicable federal, state,
provincial, territorial and foreign securities laws necessary to consummate the
issuance of the Securities pursuant to this Agreement in compliance with such
laws.

     

    m. The
Company shall have done all things requested by the Collateral Agent to provide
such Buyer with a valid first priority perfected security interest in all assets
of the Company and each of its Subsidiaries.

     

    n. The
Company and its Subsidiaries shall have delivered and pledged to such Buyer any
and all Instruments, Negotiable Documents, Chattel Paper (each of the foregoing
terms, as defined in the Security Agreement) and certificated securities
(accompanied by stock powers executed in blank), duly endorsed and/or
accompanied by such instruments of assignment and transfer executed by the
Company and its Subsidiaries, in such form and substance as such Buyer may
request.

     

    o. The
Company and its Subsidiaries shall have given, executed, delivered, filed and/or
recorded any financing statements, notices, instruments, documents, agreements
and other papers that may be necessary or desirable (in the reasonable judgment
of such Buyer) to create, preserve, perfect or validate the first priority,
perfected security interest granted to such Buyer pursuant to the Security
Agreement and to enable such Buyer to exercise and enforce its rights with
respect to such security interest.

     

    p. The
Company shall not have made any public announcement regarding the transactions
contemplated by the Agreement prior to the Closing.

     

    q. Each of
the persons listed on Schedule 4(u) hereto
shall have executed a Lock-Up Agreement.

     

    r. The
Company shall have delivered to such Buyer such other documents relating to the
transactions contemplated by this Agreement as such Buyer or its counsel may
reasonably request.

     

    
      
         


      

      
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    9. INDEMNIFICATION.

     

    a. Company Indemnity. In
consideration of each Buyer’s execution and delivery of this Agreement and the
other Transaction Documents to be executed by such Buyer and acquiring the
Securities hereunder and thereunder and in addition to all of the Company’s and
the Subsidiaries’ other obligations under the Transaction Documents, the Company
shall defend, protect, indemnify and hold harmless such Buyer and each other
holder of the Securities and all of their stockholders, partners, officers,
directors, members, managers, employees and direct or indirect investors and any
of the foregoing Persons’ agents or other representatives (including those
retained in connection with the transactions contemplated by this Agreement)
(collectively, the “Indemnitees”) from and against
any and all actions, causes of action, suits, claims, losses, costs, penalties,
fees, liabilities and damages, and expenses in connection therewith
(irrespective of whether any such Indemnitees is a party to the action for which
indemnification hereunder is sought), and including reasonable attorneys’ fees
and disbursements (the “Indemnified Liabilities”),
incurred by any Indemnitees as a result of, or arising out of, or relating to
(a) any misrepresentation or breach of any representation or warranty made
by the Company or any of its Subsidiaries in any of the Transaction Documents or
any other certificate, instrument or document contemplated hereby or thereby,
(b) any breach of any covenant, agreement or obligation of the Company or
any of its Subsidiaries contained in the Transaction Documents or any other
certificate, instrument or document contemplated hereby or thereby, (c) any
cause of action, suit or claim brought or made against such Indemnitees and
arising out of or resulting from the execution, delivery, performance or
enforcement of the Transaction Documents in accordance with the terms thereof or
any other certificate, instrument or document contemplated hereby or thereby in
accordance with the terms thereof (other than a cause of action, suit or claim
brought or made against an Indemnitee by such Indemnitee’s owners, investors or
Affiliates), (d) any other transaction financed or to be financed in whole
or in part, directly or indirectly, with the proceeds of the issuance of the
Securities, or (e) the status of such Buyer or holder of the Securities as an
investor in the Company.  To the extent that the foregoing undertaking
by the Company may be unenforceable for any reason, the Company shall make the
maximum contribution to the payment and satisfaction of each of the Indemnified
Liabilities that is permissible under applicable law.

     

    b. Indemnification
Procedure. Any Indemnitee entitled to indemnification under this Section
9 will give written notice to the Company of any matters giving rise to a claim
for indemnification; provided, that the failure of any party entitled to
indemnification hereunder to give notice as provided herein shall not relieve
the Company of its obligations under this Section 9 except to the extent that
the Company is actually prejudiced by such failure to give notice. In case any
action, proceeding or claim is brought against the Indemnitee in respect of
which indemnification is sought hereunder, the Company shall be entitled to
participate in and, unless in the reasonable judgment of the Company a conflict
of interest between it and the Indemnitee may exist with respect of such action,
proceeding or claim, to assume the defense thereof with counsel reasonably
satisfactory to the Indemnitee. In the event that the Company advises an
Indemnitee that it will contest such a claim for indemnification hereunder, or
fails, within thirty (30) days of receipt of any indemnification notice to
notify, in writing, such person of its election to defend, settle or compromise,
at its sole cost and expense, any action, proceeding or claim (or discontinues
its defense at any time after it commences such defense), then the Indemnitee
may, at its option, defend, settle or otherwise compromise or pay such action or
claim. In any event, unless and until the Company elects in writing to assume
and does so assume the defense of any such claim, proceeding or action, the
Indemnitee’s costs and expenses arising out of the defense, settlement or
compromise of any such action, claim or proceeding shall be losses subject to
indemnification hereunder.  The Indemnitee shall cooperate fully with
the Company in connection with any negotiation or defense of any such action or
claim by the Company and shall furnish to the Company all information reasonably
available to the Indemnitee which relates to such action or claim. The Company
shall keep the Indemnitee fully apprised at all times as to the status of the
defense or any settlement negotiations with respect thereto. If the Company
elects to defend any such action or claim, then the Indemnitee shall be entitled
to participate in such defense with counsel of its choice at its sole cost and
expense. The Company shall not be liable for any settlement of any action, claim
or proceeding effected without its prior written consent, which consent shall
not be unreasonably withheld. Notwithstanding anything in this Section 9 to the
contrary, the Company shall not, without the Indemnitee’s prior written consent,
settle or compromise any claim or consent to entry of any judgment in respect
thereof which imposes any future obligation on the Indemnitee or which does not
include, as an unconditional term thereof, the giving by the claimant or the
plaintiff to the Indemnitee of a release from all liability in respect of such
claim. The indemnification required by this Section 9 shall be made by periodic
payments of the amount thereof during the course of investigation or defense, as
and when bills are received or expense, loss, damage or liability is incurred,
so long as the Indemnitee irrevocably agrees to refund such moneys if it is
ultimately determined by a court of competent jurisdiction that such party was
not entitled to indemnification. The indemnity agreements contained herein shall
be in addition to (a) any cause of action or similar rights of the Indemnitee
against the Company or others, and (b) any liabilities the Company may be
subject to pursuant to the law.

     

    
      
         


      

      
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    10. GOVERNING LAW;
MISCELLANEOUS.

     

    a. Governing Law; Jurisdiction;
Jury Trial.  All questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be governed by
the internal laws of the State of New York, without giving effect to any choice
of law or conflict of law provision or rule (whether of the State of New York or
any other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of New York.  Each party hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in the New York City, borough of Manhattan, for the adjudication
of any dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein, 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 brought in an inconvenient forum or that the venue of such
suit, action or proceeding is improper.  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 to such party at the
address for such 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 manner permitted by law.  The
parties acknowledge that each Buyer has an office in the State of New York and
will have made the payment of the Purchase Price from its bank account located
in the State of New York.  EACH PARTY HEREBY IRREVOCABLY WAIVES ANY
RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION
OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS
AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

     

    b. Counterparts.  This
Agreement and any amendments hereto may be executed and delivered in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original, but all of which taken
together shall constitute one and the same agreement, and shall become effective
when counterparts have been signed by each party hereto and delivered to the
other parties hereto, it being understood that all parties need not sign the
same counterpart.  In the event that any signature to this Agreement
or any amendment hereto 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.  At the request of any party
each other party shall promptly re-execute an original form of this Agreement or
any amendment hereto and deliver the same to the other party.  No
party hereto shall raise the use of a facsimile machine or e-mail delivery of a
“.pdf” format data file to deliver a signature to this Agreement or any
amendment hereto or the fact that such signature was transmitted or communicated
through the use of a facsimile machine or e-mail delivery of a “.pdf” format
data file as a defense to the formation or enforceability of a contract, and
each party hereto forever waives any such defense.

     

    
      
         


      

      
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    c. Headings.  The
headings of this Agreement are for convenience of reference and shall not form
part of, or affect the interpretation of, this Agreement.

     

    d. Severability.  If
any provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement in that jurisdiction or the
validity or enforceability of any provision of this Agreement in any other
jurisdiction.

     

    e. Entire Agreement;
Amendments.  This Agreement supersedes all other prior oral or
written agreements between each Buyer, the Company, its Subsidiaries, their
Affiliates and Persons acting on their behalf with respect to the matters
discussed herein, and this Agreement and the instruments referenced herein
contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor any Buyer makes any representation, warranty,
covenant or undertaking with respect to such matters.  No provision of
this Agreement may be amended, modified or supplemented other than by an
instrument in writing signed by the Company and the Buyers holding at least
two-thirds (2/3) of the aggregate outstanding principal amount of the Notes, or
if prior to the Closing Date, by the Buyers listed on the Schedule of Buyers as
being obligated to purchase at least two-thirds (2/3) of the aggregate original
principal amount of the Notes.  Any such amendment shall bind all
holders of the Notes and the Warrants.  No such amendment shall be
effective to the extent that it applies to less than all of the holders of the
Notes and the Warrants then outstanding.

     

    f. Notices.  Any
notices, consents, waivers or other communications required or permitted to be
given under the terms of this Agreement must be in writing and will be deemed to
have been delivered:  (i) upon receipt, when delivered personally;
(ii) upon receipt, when sent by facsimile (provided confirmation
of transmission is mechanically or electronically generated and kept on file by
the sending party); or (iii) one Business Day after deposit with a nationally
recognized overnight delivery service, in each case properly addressed to the
party to receive the same.  The addresses and facsimile numbers for
such communications shall be:

     

    
      
         


      

      
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    If to the
Company:

     

    KaChing
KaChing, Inc.

    9029
South Pecos Road, Suite 2800

    Henderson,
Nevada 89074

    Attention:  Robert
J. McNulty

    Facsimile:  (702)
463-7007

     

    With a
copy to:

     

    Krieger
& Prager, LLP

    39
Broadway, Suite 920

    New York,
New York 10006

    Attention:  Samuel
M. Krieger, Esq.

    Facsimile:   (212)
363-2999

     

    If to a
Buyer, to it at the address and facsimile number set forth on the Schedule of Buyers,
with copies to such Buyer’s representatives as set forth on the Schedule of Buyers,
or, in the case of a Buyer or any party named above, at such other address
and/or facsimile number and/or to the attention of such other person as the
recipient party has specified by written notice given to each other party five
days prior to the effectiveness of such change.  Written confirmation
of receipt (A) given by the recipient of such notice, consent, waiver or other
communication, (B) mechanically or electronically generated by the sender’s
facsimile machine containing the time, date, recipient facsimile number and an
image of the first page of such transmission or (C) provided by a
nationally recognized overnight delivery service shall be rebuttable evidence of
personal service, receipt by facsimile or deposit with a nationally recognized
overnight delivery service in accordance with clause (i), (ii) or (iii) above,
respectively.

     

    g. Successors and
Assigns.  This Agreement shall be binding upon and inure to the
benefit of the parties and their respective successors and assigns, including
any purchasers of the Securities.  The Company shall not assign this
Agreement or any rights or obligations hereunder without the prior written
consent of the holders of at least two-thirds (2/3) of the aggregate principal
of the Notes then outstanding, including by merger or
consolidation.  A Buyer may assign some or all of its rights hereunder
without the consent of the Company; provided, however, that any
such assignment shall not release such Buyer from its obligations hereunder
unless such obligations are assumed by such assignee (as evidenced in writing)
and the Company has consented to such assignment and assumption, which consent
shall not be unreasonably withheld.  Notwithstanding anything to the
contrary contained in the Transaction Documents, a Buyer shall be entitled to
pledge the Securities in connection with a bona fide margin account or other
loan or financing arrangement secured by the Securities.

     

    
      
         


      

      
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    h. No Third Party
Beneficiaries.  This Agreement is intended for the benefit of
the parties hereto and their respective permitted successors and assigns and, to
the extent provided in Section 9 hereof,
each Indemnitee, and is not for the benefit of, nor may any provision hereof be
enforced by, any other Person.

     

    i. Survival.  Unless
this Agreement is terminated under Section 10(k), the
representations and warranties of each Buyer and the Company contained in Sections 2
and 3, the
agreements and covenants set forth in Sections 4,
5, 6 and 10, and the
indemnification and contribution provisions set forth in Section 9, shall
survive the Closing.  Each Buyer shall be responsible only for its own
representations, warranties, agreements and covenants hereunder.  The
Company acknowledges and agrees that the provisions of Section 4.05 of the Notes
shall survive the redemption, repayment or surrender of such Note.

     

    j. Further
Assurances.  Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.

     

    k. Termination.  In
the event that the Closing shall not have occurred with respect to a Buyer on or
before the third Business Day following the date of this Agreement due to the
Company’s or such Buyer’s failure to satisfy the conditions set forth in Sections 7 and 8 above (and the
nonbreaching party’s failure to waive such unsatisfied condition(s)), the
nonbreaching party shall have the option to terminate this Agreement with
respect to such breaching party at the close of business on such date without
liability of any party to any other party; provided, however, that if this
Agreement is terminated pursuant to this Section 10(k), the
Company shall be obligated to pay such Buyer (so long as such Buyer is not a
breaching party) its reimbursement amount as set forth in Section 4(h) as if
such Buyer had purchased the Notes and the Shares.

     

    l. Placement
Agent.  The Company represents and warrants to each Buyer that
it has not engaged any placement agent, broker or financial advisor in
connection with the sale of the Notes and Warrants. The Company shall be
responsible for the payment of any placement agent’s fees or broker’s
commissions relating to or arising out of the transactions contemplated
hereby.  The Company shall pay, and hold each Buyer harmless against,
any liability, loss or expense (including attorneys’ fees and out-of-pocket
expenses) arising in connection with any claim for any such
payment.

     

    m. No Strict
Construction.  The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent,
and no rules of strict construction will be applied against any
party.

     

    n. Remedies.  Each
Buyer and each holder of the Securities shall have all rights and remedies set
forth in the Transaction Documents and all rights and remedies that such Buyer
and holders have been granted at any time under any other agreement or contract
and all of the rights that such Buyer and holders have under any
law.  Any Person having any rights under any provision of this
Agreement shall be entitled to enforce such rights specifically (without posting
a bond or other security or proving actual damages), to recover damages by
reason of any breach of any provision of this Agreement and to exercise all
other rights granted by law, or in equity.

     

    
      
         


      

      
        37

        
          

        

      

      
         


      

    

     

    o. Rescission and Withdrawal
Right.  Notwithstanding anything to the contrary contained in
(and without limiting any similar provisions of) the Transaction Documents,
whenever any Buyer exercises a right, election, demand or option under a
Transaction Document and the Company or any of its Subsidiaries does not timely
perform its related obligations within the periods therein provided, then such
Buyer 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.

     

    p. Payment Set
Aside.  To the extent that the Company or any of its
Subsidiaries makes a payment or payments to a Buyer pursuant to this Agreement,
the Notes, the Warrants, the Registration Rights Agreement, the Subsidiary
Guaranty or any other Transaction Document or a Buyer enforces or exercises its
rights hereunder or 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
or any of its Subsidiaries, by a trustee, receiver or any other Person under any
law (including 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.

     

    q. Independent Nature of
Buyers.  The obligations of each Buyer hereunder are several
and not joint with the obligations of any other Buyer, and no Buyer shall be
responsible in any way for the performance of the obligations of any other Buyer
hereunder.  Each Buyer shall be responsible only for its own
representations, warranties, agreements and covenants hereunder.  The
decision of each Buyer to purchase the Securities pursuant to this Agreement has
been made by such Buyer independently of any other Buyer and independently of
any information, materials, statements or opinions as to the business, affairs,
operations, assets, properties, liabilities, results of operations, condition
(financial or otherwise) or prospects of the Company or any of its Subsidiaries
which may have been made or given by any other Buyer or by any agent or employee
of any other Buyer, and no Buyer or any of its agents or employees shall have
any liability to any other Buyer (or any other Person or entity) relating to or
arising from any such information, materials, statements or
opinions.  Nothing contained herein, and no action taken by any Buyer
pursuant hereto or thereto, shall be deemed to constitute the Buyers as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Buyers are in any way acting in concert or as a
group with respect to such obligations or the transactions contemplated
hereby.  Each Buyer shall be entitled to independently protect and
enforce its rights, including the rights arising out of this Agreement, the
Notes, the Warrants, the Warrant Shares, the Conversion Shares and the other
Transaction Documents, and it shall not be necessary for any other Buyer to be
joined as an additional party in any proceeding for such purpose.

     

    r. Interpretative
Matters.  Unless the context otherwise requires, (i) all
references to Sections, Schedules, Appendices or Exhibits are to Sections,
Schedules, Appendices or Exhibits contained in or attached to this Agreement,
(b) each accounting term not otherwise defined in this Agreement has the meaning
assigned to it in accordance with GAAP, (c) words in the singular or plural
include the singular and plural and pronouns stated in either the masculine, the
feminine or neuter gender shall include the masculine, feminine and neuter, (d)
the words “hereof,” “herein” and words of similar effect shall reference this
Agreement in its entirety, and (e) the use of the word “including” in this
Agreement shall be by way of example rather than limitation.

     

    
      
         


      

      
        38

        
          

        

      

      
         


      

    

     

    COMPANY
SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT

     

    IN WITNESS WHEREOF, Buyer and
the Company have caused this Securities Purchase Agreement to be duly executed
as of the date first written above.

     

    
      	 	
              COMPANY:

              


              KACHING
      KACHING, INC.

              


              


              By:            _____________________________________

              Name:       Robert
      J. McNulty

              Title:         Chief
      Executive Officer

            


    

     

    
      
         


      

      
        39

        
          

        

      

      
         


      

    

     

    BUYERS
SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT

     

     

    
      	 	
              BUYERS:

              


              HARBORVIEW MASTER FUND,
      L.P., a
      British Virgin Islands limited partnership

               

              By:        __________________________________   

              


              Name:   ____________________________________        

              


              Title:     _____________________________________
      

            


    

     

    
      
         


      

      
        40

        
          

        

      

      
         


      

    

     

    BUYERS
SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT

     

     

    
      	 	
              BUYERS:

              


              MONARCH CAPITAL FUND,
      LTD., a
      British Virgin Islands corporation

               

              By:        ___________________________________________   

              


              Name:    __________________________________________       

              


              Title:    
      ____________________________________________

            


    

     

    
      
         


      

      
        41

        
          

        

      

      
         


      

    

     

    BUYERS
SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT

     

     

    
      	 	
              BUYERS:

              


              KRIEGER & PRAGER,
      LLP, a
      New York limited liability partnership

               

              By:       ______________________________________________    

              


              Name:   _____________________________________________        

              


              Title:     ______________________________________________

            


    

     

    
      
         


      

      
        42

        
          

        

      

      
         


      

    

     

    SCHEDULE OF
BUYERS

    


     

    
      	
              Buyer’s
      Name and Legal Status

            	 	
                 
      Buyer Address and
      Facsimile Number

            	 	
              Principal
      Amount of  Notes

            	 	
              Warrant
      Shares

            	 	
              Investor’s
      Representative’s Address
      and Facsimile Number

              (to
      receive copies of notices)

            
	
               

              Harborview
      Master Fund, L.P., a British Virgin Islands limited
      partnership

            	 	
               

              c/o
      Harborview Advisors, LLC

              850
      Third Avenue, Suite 1801

              New
      York, NY 10022

              Attn:
      David Stefansky

              Fax:
      (646) 218-1401

            	 	
               

              $500,000

            	 	
               

              1,666,667

            	 	
               

              Haynes
      and Boone, LLP

              1221
      Avenue of the Americas

              26th
      Floor

              New
      York, NY  10020

              Attention:
      Rick Werner, Esq.

              Facsimile:
      (212) 884-8234

            
	 	 	 	 	 	 	 	 	 
	
              Harborview
      Master Fund, L.P., a British Virgin Islands limited
      partnership

            	 	
                 
      c/o Harborview Advisors, LLC

              850
      Third Avenue, Suite 1801

              New
      York, NY 10022

              Attn:
      David Stefansky

              Fax:
      (646) 218-1401

               

            	 	
              $213,375(1)

            	 	
              N/A

            	 	
              Haynes
      and Boone, LLP

              1221
      Avenue of the Americas

              26th
      Floor

              New
      York, NY  10020

              Attention:
      Rick Werner, Esq.

              Facsimile:
      (212) 884-8234

            
	 	 	 	 	 	 	 	 	 
	
              Monarch
      Capital Fund Ltd., a British Virgin Islands corporation

            	 	
              c/o
      Beacon Fund Advisors,

              Harbour
      House

              Waterfront
      Drive,

              Road
      Town, Tortola,

              British
      Virgin Islands

              Fax:
      (284) 494-4771

            	 	
              $500,000

            	 	
              1,666,667

            	 	
              N/A

            
	 	 	 	 	 	 	 	 	 
	
              Krieger
      & Prager, LLP

               

            	 	
              39
      Broadway, Suite 920

              New
      York, New York 10006

              Attention:
      Samuel M. Krieger, Esq.

              Facsimile:
      (212) 363-2999

            	 	
              $42,500(1)

            	 	
              N/A

            	 	
              N/A

            


    

    _____________

    (1)  Purchase
Price for these Notes were paid through the conversion of existing
indebtedness.

     

    
      
         


      

      
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    APPENDIX

    CERTAIN
DEFINED TERMS

     

    For
purposes of this Agreement, the following terms shall have the following
meanings:

     

    “Affiliate” means, with respect
to any Person, another Person that, directly or indirectly, (i) has a five
percent (5%) equity interest in that Person, (ii) has a common ownership with
that Person, (iii) controls that Person, (iv) is controlled by that Person
or (v) shares common control with that Person; and “control” or “controls” means that a Person
has the power, direct or indirect, to conduct or govern the policies of another
Person.

     

    “Bloomberg” means Bloomberg
Financial Markets (or any successor thereto).

     

    “Business Day” means any day
other than Saturday, Sunday or other day on which commercial banks in the New
York City are authorized or required by law to remain closed.

     

    “Capital Lease Obligation”
means, as to any Person, any obligation that is required to be classified and
accounted for as a capital lease on a balance sheet of such Person prepared in
accordance with GAAP, and the amount of such obligation shall be the capitalized
amount thereof, determined in accordance with GAAP.

     

    “Capital Stock” means any and
all shares, interests, participations or other equivalents (however designated)
of capital stock of a corporation, and any and all equivalent ownership
interests in a Person (other than a corporation).

     

    “Change of Control” means (i)
the consolidation, merger or other business combination of the Company with or
into another Person (other than (A) a consolidation, merger or other business
combination in which holders of the Company’s voting power immediately prior to
the transaction continue after the transaction to hold, directly or indirectly,
a majority of the combined voting power of the surviving entity or entities
entitled to vote generally for the election of a majority of the members of the
board of directors (or their equivalent if other than a corporation) of such
entity or entities, or (B) pursuant to a migratory merger effected solely for
the purpose of changing the jurisdiction of incorporation of the Company); (ii)
the sale or transfer of all or substantially all of the Company's assets
(including, for the avoidance of doubt, the sale of all or substantially all of
the assets of the Subsidiaries in the aggregate); or (iii) the consummation of a
purchase, tender or exchange offer made to, and accepted by, the holders of more
than a majority of the outstanding Common Stock..

     

    “Collateral” has the meaning
assigned to such term in the Security Agreement.

     

    “Common Stock” means the
Company’s common stock, $.0001 par value per share.

     

    “Contingent Obligation” means,
as to any Person, any direct or indirect liability, contingent or otherwise, of
such Person with respect to any indebtedness, lease, dividend or other
obligation of another Person if a primary purpose or intent of the Person
incurring such liability, or a primary effect thereof, is to provide assurance
to the obligee of such liability that such liability will be paid or discharged,
or that any agreements relating thereto will be complied with, or that the
holders of such liability will be protected (in whole or in part) against loss
with respect thereto.

     

    
      
         


      

      
        44

        
          

        

      

      
         


      

    

     

    “Convertible Securities” means
any stock or securities (other than Options) directly or indirectly
convertible into or exchangeable or exercisable for shares of Common
Stock.

     

    “Environmental Laws” means all
Laws relating to any matter arising out of or relating to public health and
safety, or pollution or protection of the environment (including ambient air,
surface water, groundwater, land surface or subsurface strata) or workplace,
including any of the foregoing relating to the presence, use, production,
generation, handling, transport, treatment, storage, disposal, distribution,
discharge, emission, release, threatened release, control or cleanup of any
Hazardous Materials.

     

    “ERISA” means the Employee
Retirement Security Act of 1974, as amended.

     

    “GAAP” means U.S. generally
accepted accounting principles.

     

    “Governmental Entity” means the
government of the United States or any other nation, or any political
subdivision thereof, whether state, provincial or local, or any agency
(including any self-regulatory agency or organization), authority,
instrumentality, regulatory body, court, central bank or other entity exercising
executive, legislative, judicial, taxing, regulatory or administration powers or
functions of or pertaining to government.

     

    “Hazardous Materials” means any
hazardous, toxic or dangerous substance, materials and wastes, including
hydrocarbons (including naturally occurring or man-made petroleum and
hydrocarbons), flammable explosives, asbestos, urea formaldehyde insulation,
radioactive materials, biological substances, polychlorinated biphenyls,
pesticides, herbicides and any other kind and/or type of pollutants or
contaminants (including materials which include hazardous constituents), sewage,
sludge, industrial slag, solvents and/or any other similar substances,
materials, or wastes and including any other substances, materials or wastes
that are or become regulated under any Environmental Law (including any that are
or become classified as hazardous or toxic under any Environmental
Law).

     

    “Indebtedness” of any Person
means, without duplication:

     

    (i) All
indebtedness for borrowed money;

     

    (ii) All obligations issued, undertaken or
assumed as the deferred purchase price of property or services (other than
unsecured account trade payables that are (A) entered into or incurred in the
ordinary course of the Company’s and its Subsidiaries’ business, (B) on terms
that require full payment within 90 days from the date entered into or incurred
and (C) not unpaid in excess of 60 days from the receipt of invoice, or
are being contested in good faith and as to which such reserve as is required by
GAAP has been made;

     

    (iii) All
reimbursement or payment obligations with respect to letters of credit, surety
bonds and other similar instruments;

     

    
      
        
        

      

      
        45

        
          

        

      

      
        
        

      

    

     

    (iv) All
obligations evidenced by notes, bonds, debentures, redeemable capital stock or
similar instruments, including obligations so evidenced incurred in connection
with the acquisition of property, assets or businesses;

     

    (v) All
indebtedness created or arising under any conditional sale or other title
retention agreement, or incurred as financing, in either case with respect to
any property or assets acquired with the proceeds of such indebtedness (even
though the rights and remedies of the seller, bank or other financing source
under such agreement in the event of default are limited to repossession or sale
of such property);

     

    (vi) All
Capital Lease Obligations;

     

    (vii) All
indebtedness referred to in clauses (i) through (vi) above secured by (or for
which the holder of such indebtedness has an existing right, contingent or
otherwise, to be secured by) any mortgage, lien, pledge, charge, security
interest or other encumbrance upon or in any property or assets (including
accounts and contract rights) owned by any Person, even though the Person that
owns such assets or property has not assumed or become liable for the payment of
such indebtedness; and

     

    (viii) All
Contingent Obligations in respect of indebtedness or obligations of others of
the kinds referred to in clauses (i) through (vii) above.

     

    “Insolvent” means, with respect
to any Person as of any date, (i) the present fair saleable value of such
Person’s assets is less than the amount required to pay such Person’s total
indebtedness, contingent or otherwise, (ii) such Person is unable to pay its
debts and liabilities, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured, (iii) such Person intends to
incur, prior to the second anniversary of such date, or believes that it will
incur, prior to the second anniversary of such date, debts that would be beyond
its ability to pay as such debts mature, or (iv) such Person has
unreasonably small capital with which to conduct the business in which it is
engaged as such business is then conducted and is then proposed to be
conducted.

     

    “Investment Company Act” means
the Investment Company Act of 1940, as amended.

     

    “Knowledge,” “Knowledge of the Company,”
“to the Company’s
Knowledge” and similar language means the actual knowledge of any
“officer” (as such term is defined in Rule 16a-1 under the 1934 Act) of the
Company or of any Subsidiary and the knowledge any such Person would be expected
to have after reasonable due diligence and inquiry.

     

    “Laws” means all present or
future federal, state local or foreign laws, statutes, common law duties, rules,
regulations, ordinances and codes, together with all administrative or judicial
orders, consent agreements, directed duties, requests, licenses, authorizations
and permits of, and agreements with, any Governmental Entity.

     

    
      
         


      

      
        46

        
          

        

      

      
         


      

    

     

    “Lien” means with respect to
any asset or property, any mortgage, lien, pledge, hypothecation, charge,
security interest, encumbrance or adverse claim of any kind and any restrictive
covenant, condition, restriction or exception of any kind that has the practical
effect of creating a mortgage, lien, pledge, hypothecation, charge, security
interest, encumbrance or adverse claim of any kind (including any of the
foregoing created by, arising under or evidenced by any conditional sale or
other title retention agreement, the interest of a lessor with respect to a
Capital Lease Obligation, or any financing lease having substantially the same
economic effect as any of the foregoing).

     

    “Material Adverse Effect” means
any material adverse effect on (i) the business, properties, assets, operations,
results of operations, condition (financial or otherwise), credit worthiness or
prospects of the Company and its Subsidiaries, taken as a whole, (ii) any of the
transactions contemplated by the Transaction Documents, or (iii) the authority
or ability of the Company or any of its Subsidiaries to enter into the
Transaction Documents and perform its obligations thereunder.

     

    “Options” means any rights,
warrants or options to subscribe for or purchase shares of Common Stock or
Convertible Securities.

     

    “Organic Change” means any
recapitalization, reorganization, reclassification, consolidation, merger, sale
of all or substantially all of the Company’s assets to another Person or other
transaction that is effected in such a way that holders of Common Stock are
entitled to receive (either directly or upon subsequent liquidation) stock,
securities or assets with respect to, or in exchange for, Common
Stock.

     

    “Permitted Lien”
means:

     

    (i) Liens
created by the Security Documents;

     

    (ii) Liens for
taxes or other governmental charges not at the time due and payable, or which
are being contested in good faith by appropriate proceedings diligently
prosecuted, so long as foreclosure, distraint, sale or other similar proceedings
have not been initiated, and in each case for which the Company and its
Subsidiaries maintain adequate reserves in accordance with GAAP in respect of
such taxes and charges;

     

    (iii) Liens
arising in the ordinary course of business in favor of carriers, warehousemen,
mechanics and materialmen, or other similar Liens imposed by law, which remain
payable without penalty or which are being contested in good faith by
appropriate proceedings diligently prosecuted, which proceedings have the effect
of preventing the forfeiture or sale of the property subject thereto, and in
each case for which adequate reserves in accordance with GAAP are being
maintained;

     

    (iv) Liens
arising in the ordinary course of business in connection with worker’s
compensation, unemployment compensation and other types of social security
(excluding Liens arising under ERISA);

     

    
      
         


      

      
        47

        
          

        

      

      
         


      

    

     

    (v) Attachments,
appeal bonds (and cash collateral securing such bonds), judgments and other
similar Liens, for sums not exceeding $10,000 in the aggregate for the Company
and its Subsidiaries, arising in connection with court proceedings, provided that the
execution or other enforcement of such Liens is effectively stayed;

     

    (vi) Easements,
rights of way, restrictions, minor defects or irregularities in title and other
similar Liens arising in the ordinary course of business and not materially
detracting from the value of the property subject thereto and not interfering in
any material respect with the ordinary conduct of the business of the Company or
any of its Subsidiaries;

     

    (vii) Liens
arising solely by virtue of any statutory or common law provision relating to
banker’s liens, rights of set-off or similar rights and remedies and burdening
only deposit accounts or other funds maintained with a creditor depository
institution, provided that no such
deposit account is a dedicated cash collateral account or is subject to
restrictions against access by the depositor in excess of those set forth by
regulations promulgated by the Board of Governors of the U.S. Federal Reserve
System and that no such deposit account is intended by the Company or any of its
Subsidiaries to provide collateral to the depository institution;

     

    “Person” means an individual, a
limited liability company, a partnership, a joint venture, a corporation, a
trust, an unincorporated organization, a Governmental Entity or any other legal
entity.

     

    “Preferred Stock” means the
Company’s preferred stock, $.0001 par value per share.

     

    “Public Disclosure” or “Publicly Disclose” means the
Company’s public dissemination of information through the filing via the
Electronic Data Gathering, Analysis, and Retrieval system of the SEC of a
Periodic Report or Current Report disclosing such information pursuant to the
requirements of the 1934 Act.

     

    “Related Party” means a
Person’s or any of its subsidiary’s officers, directors, persons who were
officers or directors at any time during the previous two years, stockholders
(other than any holder of less than five percent (5%) of the outstanding shares
of such Person), or Affiliates of such Person or any of its subsidiaries, or any
individual related by blood, marriage or adoption to any such individual or any
entity in which any such entity or individual owns a beneficial
interest.

     

    “Security Documents” means the
Security Agreement, the Guaranties, the Pledge Agreements and any other
agreements, documents and instruments executed concurrently herewith or at any
time hereafter pursuant to which the Company, its Subsidiaries, or any other
Person either (i) guarantees payment or performance of all or any portion of the
obligations hereunder or under any other instruments delivered in connection
with the transactions contemplated hereby and by the other Transaction
Documents, and/or (ii) provides, as security for all or any portion of such
obligations, a Lien on any of its assets in favor of a Buyer, as any or all of
the same may be amended, supplemented, restated or otherwise modified from time
to time.

     

    
      
         


      

      
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    “Securities Laws” means the
securities laws (including “Blue Sky” laws), legislation and regulations of, and
the instruments, policies, rules, orders, codes, notices and interpretation
notes of, the securities regulatory authorities (including the SEC) of the
United States and any applicable states and other jurisdictions.

     

    “Subsidiary” means any entity
in which the Company, directly or indirectly:

     

    (i) beneficially
owns or otherwise holds ten percent (10%) or more of the equity or similar
interests;

     

    (ii) beneficially
owns or otherwise holds or controls ten percent (10%) or more of the outstanding
securities entitled to vote generally in the election of such entity’s directors
(or the equivalent thereof);

     

    (iii) if the
entity is a limited partnership, is a general partner;

     

    (iv) if the
entity is a limited liability company, is a manager or managing member;
or

     

    (v) otherwise
has the ability or right to control (whether by ownership, contractual right or
otherwise) the management and policies of such entity.

     

    “Transaction Documents” means
this Agreement, the Registration Rights Agreement, the Irrevocable Transfer
Agent Instructions, the Notes, the Warrants the Security Agreement, the
Guaranties, the Account Control Agreements, the Pledge Agreements and each of
the other agreements or instruments to which the Company or any of its
Subsidiaries is a party or by which it is bound and which is entered into by the
parties hereto or thereto in connection with the transactions contemplated
hereby and thereby.

     

    
      
         


      

      
        49