Document:

<PAGE>

                                                                     EXHIBIT 4.1

                               EXCHANGE AGREEMENT

      This Exchange Agreement (this "Agreement") is dated as of March 30, 2005,
by and among Boundless Motor Sports Racing, Inc., a Colorado corporation (the
"Company"), and the holders of shares of the Company's Series A Convertible
Preferred Stock whose signatures appear on the signature page attached hereto
(the "Holders").

                                    RECITALS:

      WHEREAS, the Holders currently hold an aggregate of 5,216.1519 shares of
Series A Convertible Preferred Stock of the Company, par value $.01 per share
and stated value $2,700 per share, convertible into shares of the Company's
common stock ("Common Stock") at a conversion price of $2.70 per share (the
"Series A Preferred Shares"), issued pursuant to that Series A Convertible
Preferred Stock Purchase Agreement dated as of July 30, 2004 by and among the
Company and the Holders (the "Series A Purchase Agreement"); and

      WHEREAS, subject to the terms and conditions set forth herein, the Company
desires to cancel and retire the Series A Preferred Shares and forfeit any and
all rights under the Series A Purchase Agreement and the Certificate of
Designation of the Relative Rights and Preferences of the Series A Convertible
Preferred Stock filed with the Colorado Secretary of State on July 30, 2004 and
the Holders are willing to exchange the Series A Preferred Shares for an
aggregate of 4,790.3659 shares of Series B Convertible Preferred Stock of the
Company, par value $.01 per share and stated value $3,000 per share, convertible
into shares of Common Stock at a conversion price of $3.00 per share (the
"Series B Preferred Shares").

      NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby agreed and acknowledged, the parties hereby
agree as follows:

                                   AGREEMENT:

      1.    SECURITIES EXCHANGE.

            (a)   In consideration of and in express reliance upon the
representations, warranties, covenants, terms and conditions of this Agreement,
each Holder agrees to deliver to the Company the Series A Preferred Shares in
exchange for the Series B Preferred Shares and the Company agrees to issue and
deliver the Series B Preferred Shares to the Holders in exchange for the Series
A Preferred Shares.

            (b)   The closing under this Agreement (the "Closing") shall take
place at the offices of Kramer Levin Naftalis & Frankel LLP, 919 Third Avenue,
New York, NY 10022 upon the satisfaction of each of the conditions set forth in
Sections 4 and 5 hereof (the "Closing Date").

            (c)   At the Closing, the Company shall issue to the Holders an
aggregate of 4,790.3659 Series B Preferred Shares as set forth on Exhibit A
hereto and the Holders shall deliver to the Company for cancellation the Series
A Preferred Shares. The Series B Preferred Shares are sometimes referred to
herein as the "Securities".

<PAGE>

      2.    REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE HOLDERS. Each of
the Holders hereby makes the following representations and warranties to the
Company, and covenants for the benefit of the Company, with respect solely to
itself and not with respect to any other Holder:

            (a)   If a Holder is an entity, such Holder is a corporation,
limited liability company or partnership duly incorporated or organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization.

            (b)   This Agreement has been duly authorized, validly executed and
delivered by each Holder and is a valid and binding agreement and obligation of
each Holder enforceable against such Holder in accordance with its terms,
subject to limitations on enforcement by general principles of equity and by
bankruptcy or other laws affecting the enforcement of creditors' rights
generally, and each Holder has full power and authority to execute and deliver
the Agreement and the other agreements and documents contemplated hereby and to
perform its obligations hereunder and thereunder.

            (c)   Each Holder understands that the Securities are being offered
and sold to it in reliance on specific provisions of Federal and state
securities laws and that the Company is relying upon the truth and accuracy of
the representations, warranties, agreements, acknowledgments and understandings
of each Holder set forth herein for purposes of qualifying for exemptions from
registration under the Securities Act of 1933, as amended (the "Securities Act")
and applicable state securities laws.

            (d)   Each Holder is an "accredited investor" as defined under Rule
501 of Regulation D promulgated under the Securities Act.

            (e)   Each Holder is and will be acquiring the Securities for such
Holder's own account, and not with a view to any resale or distribution in whole
or in part, in violation of the Securities Act or any applicable securities
laws.

            (f)   The offer and sale of the Securities is intended to be exempt
from registration under the Securities Act, by virtue of Section 3(a)(9) and/or
4(2) thereof. Each Holder understands that the Securities purchased hereunder
have not been registered under the Securities Act and that none of the
Securities can be sold or transferred unless they are first registered under the
Securities Act and such state and other securities laws as may be applicable or
the Company receives an opinion of counsel reasonably acceptable to the Company
that an exemption from registration under the Securities Act is available (and
then the Securities may be sold or transferred only in compliance with such
exemption and all applicable state and other securities laws).

      3.    REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY. The
Company represents and warrants to each Holder, and covenants for the benefit of
each Holder, as follows:

            (a)   The Company has been duly incorporated and is validly existing
and in good standing under the laws of the state of Colorado, with full
corporate power and authority to own, lease and operate its properties and to
conduct its business as currently conducted, and is

                                       2
<PAGE>

duly registered and qualified to conduct its business and is in good standing in
each jurisdiction or place where the nature of its properties or the conduct of
its business requires such registration or qualification, except where the
failure to register or qualify would not have a Material Adverse Effect. For
purposes of this Agreement, "Material Adverse Effect" shall mean any material
adverse effect on the business, operations, properties, prospects, or financial
condition of the Company and its subsidiaries and/or any condition,
circumstance, or situation that would prohibit or otherwise materially interfere
with the ability of the Company to perform any of its obligations under this
Agreement in any material respect.

            (b)   The Securities have been duly authorized by all necessary
corporate action and, when paid for or issued in accordance with the terms
hereof, the Securities shall be validly issued and outstanding, fully paid and
nonassessable, free and clear of all liens, encumbrances and rights of refusal
of any kind.

            (c)   This Agreement has been duly authorized, validly executed and
delivered on behalf of the Company and is a valid and binding agreement and
obligation of the Company enforceable against the Company in accordance with its
terms, subject to limitations on enforcement by general principles of equity and
by bankruptcy or other laws affecting the enforcement of creditors' rights
generally, and the Company has full power and authority to execute and deliver
the Agreement and the other agreements and documents contemplated hereby and to
perform its obligations hereunder and thereunder.

            (d)   The execution and delivery of the Agreement and the
consummation of the transactions contemplated by this Agreement by the Company,
will not (i) conflict with or result in a breach of or a default under any of
the terms or provisions of, (A) the Company's articles of incorporation or
by-laws, or (B) of any material provision of any indenture, mortgage, deed of
trust or other material agreement or instrument to which the Company is a party
or by which it or any of its material properties or assets is bound, (ii) result
in a violation of any provision of any law, statute, rule, regulation, or any
existing applicable decree, judgment or order by any court, Federal or state
regulatory body, administrative agency, or other governmental body having
jurisdiction over the Company, or any of its material properties or assets or
(iii) result in the creation or imposition of any material lien, charge or
encumbrance upon any material property or assets of the Company or any of its
subsidiaries pursuant to the terms of any agreement or instrument to which any
of them is a party or by which any of them may be bound or to which any of their
property or any of them is subject except in the case of clauses (i)(B), (ii) or
(iii) for any such conflicts, breaches, or defaults or any liens, charges, or
encumbrances which would not have a Material Adverse Effect.

            (e)   The delivery and issuance of the Securities in accordance with
the terms of and in reliance on the accuracy of each Holder's representations
and warranties set forth in this Agreement will be exempt from the registration
requirements of the Securities Act.

            (f)   No consent, approval or authorization of or designation,
declaration or filing with any governmental authority on the part of the Company
is required in connection with the valid execution and delivery of this
Agreement or the offer, sale or issuance of the Securities or the consummation
of any other transaction contemplated by this Agreement.

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<PAGE>

            (g)   The Company has complied and will comply with all applicable
federal and state securities laws in connection with the offer, issuance and
delivery of the Securities hereunder. Neither the Company nor anyone acting on
its behalf, directly or indirectly, has or will sell, offer to sell or solicit
offers to buy any of the Securities, or similar securities to, or solicit offers
with respect thereto from, or enter into any preliminary conversations or
negotiations relating thereto with, any person, or has taken or will take any
action so as to bring the issuance and sale of any of the Securities under the
registration provisions of the Securities Act and applicable state securities
laws. Neither the Company nor any of its affiliates, nor any person acting on
its or their behalf, has engaged in any form of general solicitation or general
advertising (within the meaning of Regulation D under the Securities Act) in
connection with the offer or sale of any of the Securities.

            (h)   The Company represents that it has not paid, and shall not
pay, any commissions or other remuneration, directly or indirectly, to the
Holder or to any third party for the solicitation of the exchange of the Series
A Preferred Shares pursuant to this Agreement.

            (i)   The Company covenants and agrees that promptly following the
Closing Date, all outstanding Series A Preferred Shares will be cancelled and
retired by the Company.

      4.    CONDITIONS PRECEDENT TO THE OBLIGATION OF THE COMPANY TO ISSUE THE
SECURITIES. The obligation hereunder of the Company to issue and deliver the
Securities to each Holder is subject to the satisfaction or waiver, at or before
the Closing Date, of each of the conditions set forth below. These conditions
are for the Company's sole benefit and may be waived by the Company at any time
in its sole discretion.

            (a)   Each Holder shall have executed and delivered this Agreement.

            (b)   Each Holder shall have performed, satisfied and complied in
all material respects with all covenants, agreements and conditions required by
this Agreement to be performed, satisfied or complied with by such Holder at or
prior to the Closing Date.

            (c)   The representations and warranties of each Holder shall be
true and correct in all material respects as of the date when made and as of the
Closing Date as though made at that time, except for representations and
warranties that are expressly made as of a particular date, which shall be true
and correct in all material respects as of such date.

      5.    CONDITIONS PRECEDENT TO THE OBLIGATION OF THE HOLDERS TO ACCEPT THE
SECURITIES. The obligation hereunder of each Holder to accept the Securities is
subject to the satisfaction or waiver, at or before the Closing Date, of each of
the conditions set forth below. These conditions are for each Holder's sole
benefit and may be waived by each Holder at any time in its sole discretion.

            (a)   The Company shall have executed and delivered this Agreement.

            (b)   The Company shall have performed, satisfied and complied in
all material respects with all covenants, agreements and conditions required by
the Agreement to be performed, satisfied or complied with by the Company at or
prior to the Closing Date.

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<PAGE>

            (c)   Each of the representations and warranties of the Company
shall be true and correct in all material respects as of the date when made and
as of the Closing Date as though made at that time, except for representations
and warranties that speak as of a particular date, which shall be true and
correct in all material respects as of such date.

            (d)   No statute, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction which prohibits the
consummation of any of the transactions contemplated by this Agreement at or
prior to the Closing Date.

            (e)   As of the Closing Date, no action, suit or proceeding before
or by any court or governmental agency or body, domestic or foreign, shall be
pending against or affecting the Company, or any of its properties, which
questions the validity of the Agreement or the transactions contemplated thereby
or any action taken or to be taken pursuant thereto. As of the Closing Date, no
action, suit, claim or proceeding before or by any court or governmental agency
or body, domestic or foreign, shall be pending against or affecting the Company,
or any of its properties, which, if adversely determined, is reasonably likely
to result in a Material Adverse Effect.

      6.    RIGHTS, BENEFITS AND OBLIGATIONS OF SERIES B CONVERTIBLE PREFERRED
STOCK PURCHASE AGREEMENT AND REGISTRATION RIGHTS AGREEMENT. The Company and the
Holders hereby agree that the Company and the Holders shall have all of the
rights and benefits, and be subject to all of the obligations, under (i) the
Series B Convertible Preferred Stock Purchase Agreement dated as of February 28,
2005 among the Company and the purchasers named therein (the "Series B Purchase
Agreement") and (ii) the Registration Rights Agreement dated as of February 28,
2005 among the Company and the purchasers named therein (the "Registration
Rights Agreement"), in each case, with respect to the Securities sold pursuant
to this Agreement.

      7.    GOVERNING LAW; CONSENT TO JURISDICTION. This Agreement shall be
governed by and interpreted in accordance with the laws of the State of New York
without giving effect conflicts of law principles that would result in the
application of the substantive laws of another jurisdiction. Each of the parties
consents to the exclusive jurisdiction of the Federal courts whose districts
encompass any part of the County of New York located in the City of New York in
connection with any dispute arising under this Agreement and hereby waives, to
the maximum extent permitted by law, any objection, including any objection
based on forum non conveniens, to the bringing of any such proceeding in such
jurisdictions. Each party waives its right to a trial by jury. Each party to
this Agreement irrevocably consents to the service of process in any such
proceeding by the mailing of copies thereof by registered or certified mail,
postage prepaid, to such party at its address set forth herein. Nothing herein
shall affect the right of any party to serve process in any other manner
permitted by law.

      8.    NOTICES. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand delivery, express overnight
courier, registered first class mail, or telecopier (provided that any notice
sent by telecopier shall be confirmed by other means pursuant to this Section
11), initially to the address set forth below, and thereafter at such other
address, notice of which is given in accordance with the provisions of this
Section.

                                       5
<PAGE>

            (a)   if to the Company:

                    Boundless Motor Sports Racing, Inc.
                    2500 McGee Drive, Suite 147
                    Norman, Oklahoma 73072
                    Attention: Paul Kruger and Brian Carter
                    Tel. No.: (405) 360-5047
                    Fax No.: (405) 360-5354

                    with a copy to:

                    Jackson Walker L.L.P.
                    2435 N. Central Expressway
                    Suite 600
                    Richardson, Texas, 75080
                    Attention: Richard F. Dahlson
                    Tel No.: (972) 744-2996
                    Fax No.: (972) 744-2990

            (b)   if to the Holders:

                    At the address of such Holder set forth on Exhibit A
                    to this Agreement.

                    with a copy to:

                    Kramer Levin Naftalis & Frankel LLP
                    919 Third Avenue
                    New York, New York 10022
                    Attention: Christopher S. Auguste
                    Tel No.: (212) 715-9100
                    Fax No.: (212) 715-8000

      All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; when receipt is
acknowledged, if telecopied; or when actually received or refused if sent by
other means.

      9.    ENTIRE AGREEMENT. This Agreement constitutes the entire
understanding and agreement of the parties with respect to the subject matter
hereof and supersedes all prior and/or contemporaneous oral or written proposals
or agreements relating thereto all of which are merged herein. This Agreement
may not be amended or any provision hereof waived in whole or in part, except by
a written amendment signed by both of the parties.

      10.   COUNTERPARTS. This Agreement may be executed by facsimile signature
and in counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

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            [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]

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<PAGE>

      IN WITNESS WHEREOF, this Agreement was duly executed on the date first
written above.

                                       BOUNDLESS MOTOR SPORTS RACING, INC.

                                       By: /s/ Brian Carter
                                           Name: Brian Carter
                                           Title: Vice President

                                       HOLDER

                                       North Sound Legacy Fund LLC
                                        By: North Sound Capital,
                                          its Manager

                                          By: /s/ Andrew B David
                                             Name: Andrew B. David
                                             Title: General Counsel

                                       North Sound Legacy Institutional Fund LLC
                                        By: North Sound Capital,
                                          its Manager

                                         By: /s/ Andrew B David
                                            Name: Andrew B. David
                                            Title: General Counsel

                                       North Sound Legacy International Fund LLC
                                        By: North Sound Capital,
                                          its Manager

                                         By: /s/ Andrew B David
                                            Name: Andrew B. David
                                            Title: General Counsel

                                       Royal Bank of Canada
                                            By: its agent RBC Capital Markets
                                              Corporation

                                              By: /s/ Josef Muskatel
                                                 Name: Josef Muskatel
                                                 Title: Director and Senior
                                                        Counsel

                                       8
<PAGE>

                                         By: /s/ Johan Wahlstedt
                                            Name: Johan Wahlstedt
                                            Title: Managing Director

                                       9<PAGE>

                                                                     EXHIBIT 4.2

                  SERIES B CONVERTIBLE PREFERRED STOCK PURCHASE

                                    AGREEMENT

                           DATED AS OF MARCH 31, 2005

                                      AMONG

                       BOUNDLESS MOTOR SPORTS RACING, INC.

                                       AND

                       THE PURCHASERS LISTED ON EXHIBIT A

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                               PAGE
                                                                                               ----
<S>                                                                                            <C>
ARTICLE I Purchase and Sale of Preferred Stock.............................................     1

         Section 1.1       Purchase and Sale of Stock......................................     1
         Section 1.2       The Conversion Shares...........................................     1
         Section 1.3       Purchase Price and Closing......................................     1
         Section 1.4       Warrants........................................................     2
         Section 1.5       Exchange of Promissory Notes....................................     2

ARTICLE II Representations and Warranties..................................................     2

         Section 2.1       Representations and Warranties of the Company...................     2
         Section 2.2       Representations and Warranties of the Purchasers................    12

ARTICLE III Covenants......................................................................    14

         Section 3.1       Securities Compliance...........................................    14
         Section 3.2       Registration and Listing........................................    15
         Section 3.3       Inspection Rights...............................................    15
         Section 3.4       Compliance with Laws............................................    15
         Section 3.5       Keeping of Records and Books of Account.........................    15
         Section 3.6       Reporting Requirements..........................................    15
         Section 3.7       Amendments......................................................    16
         Section 3.8       Other Agreements................................................    17
         Section 3.9       Distributions...................................................    17
         Section 3.10      Status of Dividends.............................................    17
         Section 3.11      Use of Proceeds.................................................    18
         Section 3.12      Future Financings; Right of First Offer and Refusal.............    18
         Section 3.13      Reservation of Shares...........................................    19
         Section 3.14      Transfer Agent Instructions.....................................    19
         Section 3.15      Disposition of Assets...........................................    20
         Section 3.16      Reporting Status................................................    20
         Section 3.17      Disclosure of Transaction ......................................    20
         Section 3.18      Disclosure of Material Information..............................    20
         Section 3.19      Pledge of Securities............................................    21
         Section 3.20      Independent Board Members ......................................    21
         Section 3.21      Nasdaq Listing..................................................    21
         Section 3.22      Board Observer Rights...........................................    21

ARTICLE IV Conditions......................................................................    21

         Section 4.1       Conditions Precedent to the Obligation of the Company to
                Sell the Shares............................................................    21
</TABLE>

<PAGE>

<TABLE>
<S>                                                                                            <C>
         Section 4.2       Conditions Precedent to the Obligation of the Purchasers to
                Purchase the Shares........................................................    22

ARTICLE V Stock Certificate Legend.........................................................    24

         Section 5.1       Legend..........................................................    24

ARTICLE VI Indemnification.................................................................    25

         Section 6.1       General Indemnity...............................................    25
         Section 6.2       Indemnification Procedure.......................................    25

ARTICLE VII Miscellaneous..................................................................    26

         Section 7.1       Fees and Expenses...............................................    26
         Section 7.2       Specific Enforcement, Consent to Jurisdiction...................    27
         Section 7.3       Entire Agreement; Amendment.....................................    27
         Section 7.4       Notices.........................................................    28
         Section 7.5       Waivers.........................................................    28
         Section 7.6       Headings........................................................    29
         Section 7.7       Successors and Assigns..........................................    29
         Section 7.8       No Third Party Beneficiaries....................................    29
         Section 7.9       Governing Law...................................................    29
         Section 7.10      Survival........................................................    29
         Section 7.11      Counterparts....................................................    29
         Section 7.12      Publicity.......................................................    29
         Section 7.13      Severability....................................................    29
         Section 7.14      Further Assurances..............................................    30
</TABLE>

                                       ii
<PAGE>

             SERIES B CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT

      This SERIES B CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT (the
"Agreement") is dated as of March 31, 2005 by and among Boundless Motor Sports
Racing, Inc., a Colorado corporation (the "Company"), and each of the Purchasers
of shares of Series B Convertible Preferred Stock of the Company whose names are
set forth on Exhibit A hereto (individually, a "Purchaser" and collectively, the
"Purchasers").

      The parties hereto agree as follows:

                                   ARTICLE I

                      PURCHASE AND SALE OF PREFERRED STOCK

            Section 1.1 Purchase and Sale of Stock. Upon the following terms and
conditions, the Company shall issue and sell to the Purchasers and each of the
Purchasers shall purchase from the Company, the number of shares of the
Company's Series B Convertible Preferred Stock, par value $.01 per share (the
"Preferred Shares"), at a purchase price of $3,000 per share, set forth opposite
such Purchaser's name on Exhibit A hereto. Upon the following terms and
conditions, each of the Purchasers shall be issued Series B Warrants, in
substantially the form attached hereto as Exhibit B (the "Warrants"), to
purchase the number of shares of the Company's common stock, par value $.0001
per share (the "Common Stock") set forth opposite such Purchaser's name on
Exhibit A hereto. The aggregate purchase price for the Preferred Shares and the
Warrants shall be $1,000,000. The designation, rights, preferences and other
terms and provisions of the Series B Convertible Preferred Stock are set forth
in the Certificate of Designation of the Relative Rights and Preferences of the
Series B Convertible Preferred Stock attached hereto as Exhibit C (the
"Certificate of Designation"). The Company and the Purchasers are executing and
delivering this Agreement in accordance with and in reliance upon the exemption
from securities registration afforded by Rule 506 of Regulation D ("Regulation
D") as promulgated by the United States Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Securities
Act") or Section 4(2) of the Securities Act.

            Section 1.2 The Conversion Shares. The Company has authorized and
has reserved and covenants to continue to reserve, free of preemptive rights and
other similar contractual rights of stockholders, such number of shares of
Common Stock as shall from time to time be sufficient to effect the conversion
of all of the Preferred Shares and exercise of the Warrants then outstanding.
Any shares of Common Stock issuable upon conversion of the Preferred Shares and
exercise of the Warrants (and such shares when issued) are herein referred to as
the "Conversion Shares" and the "Warrant Shares", respectively. The Preferred
Shares, the Conversion Shares and the Warrant Shares are sometimes collectively
referred to as the "Shares".

            Section 1.3 Purchase Price and Closing. The Company agrees to issue
and sell to the Purchasers and, in consideration of and in express reliance upon
the representations, warranties, covenants, terms and conditions of this
Agreement, the Purchasers, severally but not

<PAGE>

jointly, agree to purchase that number of the Preferred Shares and Warrants set
forth opposite their respective names on Exhibit A. The aggregate purchase price
of the Preferred Shares and Warrants being acquired by each Purchaser is set
forth opposite such Purchaser's name on Exhibit A (for each such Purchaser, the
"Purchase Price" and collectively referred to as the "Purchase Prices"). The
closing of the purchase and sale of the Preferred Shares and Warrants shall take
place at the offices of Kramer Levin Naftalis & Frankel LLP, 919 Third Avenue,
New York, New York 10022 (the "Closing") at 1:00 p.m. (eastern time) or at such
other time and place as the Purchasers and the Company may agree upon, upon the
satisfaction of each of the conditions set forth in Article IV hereof (the
"Closing Date"). Funding with respect to the Closing shall take place by wire
transfer of immediately available funds on or prior to the Closing Date.

            Section 1.4 Warrants. The Company agrees to issue to each of the
Purchasers Warrants to purchase a number of shares of Common Stock equal to
fifty percent (50%) of the number of Conversion Shares issuable upon conversion
of such Purchaser's Preferred Shares purchased. The number of Warrants each
Purchaser shall be issued pursuant to this Agreement is set forth opposite such
Purchaser's name on Exhibit A hereto. The Warrants shall expire seven (7) years
from the Closing Date and shall have an exercise price per share equal to $4.00.

                                   ARTICLE II

                         REPRESENTATIONS AND WARRANTIES

            Section 2.1 Representations and Warranties of the Company. The
Company hereby makes the following representations and warranties to the
Purchasers, except as set forth in the Company's disclosure schedule delivered
with this Agreement as follows:

            (a)   Organization, Good Standing and Power. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Colorado and has the requisite corporate power to own,
lease and operate its properties and assets and to conduct its business as it is
now being conducted. The Company does not have any subsidiaries except as set
forth in the Company's Form 10-KSB for the year ended September 30, 2004, as
amended, including the accompanying financial statements (the "Form 10-KSB"), or
in the Company's Form 10-QSB for the fiscal quarters ended June 30, 2004, March
31, 2004 and December 31, 2003 (collectively, the "Form 10-QSB"), or on Schedule
2.1(a) hereto. The Company and each such subsidiary is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction
in which the nature of the business conducted or property owned by it makes such
qualification necessary except for any jurisdiction(s) (alone or in the
aggregate) in which the failure to be so qualified will not have a Material
Adverse Effect (as defined in Section 2.1(c) hereof) on the Company's financial
condition.

            (b)   Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and perform this Agreement, the
Registration Rights Agreement attached hereto as Exhibit D (the "Registration
Rights Agreement"), the Irrevocable Transfer Agent Instructions (as defined in
Section 3.14), the Certificate of Designation, and the Warrants (collectively,
the "Transaction Documents") and to issue and sell the Shares and the Warrants
in accordance with the terms hereof. The execution, delivery and performance of
the

                                       2
<PAGE>

Transaction Documents by the Company and the consummation by it of the
transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate action, and no further consent or
authorization of the Company or its Board of Directors or stockholders is
required. This Agreement has been duly executed and delivered by the Company.
The other Transaction Documents will have been duly executed and delivered by
the Company at the Closing. Each of the Transaction Documents constitutes, or
shall constitute when executed and delivered, a valid and binding obligation of
the Company enforceable against the Company in accordance with its terms, except
as such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation, conservatorship, receivership or
similar laws relating to, or affecting generally the enforcement of, creditor's
rights and remedies or by other equitable principles of general application.

            (c)   Capitalization. The authorized capital stock of the Company
and the shares thereof currently issued and outstanding as of March 31, 2005 are
set forth on Schedule 2.1(c) hereto. All of the outstanding shares of the
Company's Common Stock and Series B Convertible Preferred Stock have been duly
and validly authorized. Except as set forth in this Agreement and the
Registration Rights Agreement and as set forth on Schedule 2.1(c) hereto, no
shares of Common Stock are entitled to preemptive rights or registration rights
and there are no outstanding options, warrants, scrip, rights to subscribe to,
call or commitments of any character whatsoever relating to, or securities or
rights convertible into, any shares of capital stock of the Company.
Furthermore, except as set forth in this Agreement and the Registration Rights
Agreement or on Schedule 2.1(c), there are no contracts, commitments,
understandings, or arrangements by which the Company is or may become bound to
issue additional shares of the capital stock of the Company or options,
securities or rights convertible into shares of capital stock of the Company.
Except for customary transfer restrictions contained in agreements entered into
by the Company in order to sell restricted securities or as set forth on
Schedule 2.1(c) hereto, the Company is not a party to any agreement granting
registration or anti-dilution rights to any person with respect to any of its
equity or debt securities. The Company is not a party to, and it has no
knowledge of, any agreement restricting the voting or transfer of any shares of
the capital stock of the Company. Except as set forth on Schedule 2.1(c) hereto,
the offer and sale of all capital stock, convertible securities, rights,
warrants, or options of the Company issued prior to the Closing complied with
all applicable Federal and state securities laws, and no stockholder has a right
of rescission or claim for damages with respect thereto which would have a
Material Adverse Effect (as defined below) on the Company's financial condition
or operating results. The Company has furnished or made available to the
Purchasers true and correct copies of the Company's Articles of Incorporation as
in effect on the date hereof (the "Articles"), and the Company's Bylaws as in
effect on the date hereof (the "Bylaws"). For the purposes of this Agreement,
"Material Adverse Effect" means any material adverse effect on the business,
operations, properties, prospects, or financial condition of the Company and its
subsidiaries and/or any condition, circumstance, or situation that would
prohibit or otherwise materially interfere with the ability of the Company to
perform any of its obligations under this Agreement in any material respect.

            (d)   Issuance of Shares. The Preferred Shares and the Warrants to
be issued at the Closing have been duly authorized by all necessary corporate
action and the Preferred Shares, when paid for or issued in accordance with the
terms hereof, shall be validly issued and

                                       3
<PAGE>

outstanding, fully paid and nonassessable and entitled to the rights and
preferences set forth in the Certificate of Designation. When the Conversion
Shares and the Warrant Shares are issued in accordance with the terms of the
Certificate of Designation and the Warrants, respectively, such shares will be
duly authorized by all necessary corporate action and validly issued and
outstanding, fully paid and nonassessable, and the holders shall be entitled to
all rights accorded to a holder of Common Stock.

            (e)   No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company, the performance by the Company of its
obligations under the Certificate of Designation and the consummation by the
Company of the transactions contemplated herein and therein do not and will not
(i) violate any provision of the Company's Articles or Bylaws, (ii) conflict
with, or constitute a default (or an event which with notice or lapse of time or
both would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, mortgage, deed of
trust, indenture, note, bond, license, lease agreement, instrument or obligation
to which the Company is a party or by which it or its properties or assets are
bound, (iii) create or impose a lien, mortgage, security interest, charge or
encumbrance of any nature on any property of the Company under any agreement or
any commitment to which the Company is a party or by which the Company is bound
or by which any of its respective properties or assets are bound, or (iv) result
in a violation of any federal, state, local or foreign statute, rule,
regulation, order, judgment or decree (including Federal and state securities
laws and regulations) applicable to the Company or any of its subsidiaries or by
which any property or asset of the Company or any of its subsidiaries are bound
or affected, except, in all cases other than violations pursuant to clauses (i)
and (iv) above, for such conflicts, defaults, terminations, amendments,
accelerations, cancellations and violations as would not, individually or in the
aggregate, have a Material Adverse Effect. The business of the Company and its
subsidiaries is not being conducted in violation of any laws, ordinances or
regulations of any governmental entity, except for possible violations which
singularly or in the aggregate do not and will not have a Material Adverse
Effect. The Company is not required under Federal, state or local law, rule or
regulation to obtain any consent, authorization or order of, or make any filing
or registration with, any court or governmental agency in order for it to
execute, deliver or perform any of its obligations under the Transaction
Documents, or issue and sell the Preferred Shares, the Warrants, the Conversion
Shares and the Warrant Shares in accordance with the terms hereof or thereof
(other than any filings which may be required to be made by the Company with the
Commission or state securities administrators subsequent to the Closing, any
registration statement which may be filed pursuant hereto, and the Certificate
of Designation); provided that, for purposes of the representation made in this
sentence, the Company is assuming and relying upon the accuracy of the relevant
representations and agreements of the Purchasers herein.

            (f)   Commission Documents, Financial Statements. The Common Stock
is registered pursuant to Section 12(b) or 12(g) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), and, since September 30, 2004, the
Company has timely filed all reports, schedules, forms, statements and other
documents required to be filed by it with the Commission pursuant to the
reporting requirements of the Exchange Act, including material filed pursuant to
Section 13(a) or 15(d) of the Exchange Act (all of the foregoing including
filings incorporated by reference therein being referred to herein as the
"Commission Documents"). The Company has

                                       4
<PAGE>

delivered or made available to each of the Purchasers true and complete copies
of the Commission Documents filed with the Commission since September 30, 2004.
The Company has not provided to the Purchasers any material non-public
information or other information which, according to applicable law, rule or
regulation, was required to have been disclosed publicly by the Company but
which has not been so disclosed, other than with respect to the transactions
contemplated by this Agreement. At the times of their respective filings, the
Form 10-KSB and the Form 10-QSB complied in all material respects with the
requirements of the Exchange Act and the rules and regulations of the Commission
promulgated thereunder and other federal, state and local laws, rules and
regulations applicable to such documents, and, as of their respective dates,
none of the Form 10-KSB and the Form 10-QSB contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements of the Company included in the Commission Documents comply as to form
in all material respects with applicable accounting requirements and the
published rules and regulations of the Commission or other applicable rules and
regulations with respect thereto. Such financial statements have been prepared
in accordance with United States generally accepted accounting principles
("GAAP") applied on a consistent basis during the periods involved (except (i)
as may be otherwise indicated in such financial statements or the notes thereto
or (ii) in the case of unaudited interim statements, to the extent they may not
include footnotes or may be condensed or summary statements), and fairly present
in all material respects the financial position of the Company and its
subsidiaries as of the dates thereof and the results of operations and cash
flows for the periods then ended (subject, in the case of unaudited statements,
to normal year-end audit adjustments).

            (g)   Subsidiaries. Schedule 2.1(g) hereto sets forth each
subsidiary of the Company, showing the jurisdiction of its incorporation or
organization and showing the percentage of each person's ownership. For the
purposes of this Agreement, "subsidiary" shall mean any corporation or other
entity of which at least a majority of the securities or other ownership
interest having ordinary voting power (absolutely or contingently) for the
election of directors or other persons performing similar functions are at the
time owned directly or indirectly by the Company and/or any of its other
subsidiaries. All of the outstanding shares of capital stock of each subsidiary
have been duly authorized and validly issued, and are fully paid and
nonassessable. There are no outstanding preemptive, conversion or other rights,
options, warrants or agreements granted or issued by or binding upon any
subsidiary for the purchase or acquisition of any shares of capital stock of any
subsidiary or any other securities convertible into, exchangeable for or
evidencing the rights to subscribe for any shares of such capital stock. Neither
the Company nor any subsidiary is subject to any obligation (contingent or
otherwise) to repurchase or otherwise acquire or retire any shares of the
capital stock of any subsidiary or any convertible securities, rights, warrants
or options of the type described in the preceding sentence. Neither the Company
nor any subsidiary is party to, nor has any knowledge of, any agreement
restricting the voting or transfer of any shares of the capital stock of any
subsidiary.

            (h)   No Material Adverse Change. Since September 30, 2004, the
Company has not experienced or suffered any Material Adverse Effect, except as
disclosed on Schedule 2.1(h) hereto.

                                       5
<PAGE>

            (i)   No Undisclosed Liabilities. Except as set forth on Schedule
2.1(i) hereto, neither the Company nor any of its subsidiaries has any
liabilities, obligations, claims or losses (whether liquidated or unliquidated,
secured or unsecured, absolute, accrued, contingent or otherwise) other than
those incurred in the ordinary course of the Company's or its subsidiaries
respective businesses since September 30, 2004 and which, individually or in the
aggregate, do not or would not have a Material Adverse Effect on the Company or
its subsidiaries.

            (j)   No Undisclosed Events or Circumstances. Except as set forth on
Schedule 2.1(j) hereto, no event or circumstance has occurred or exists with
respect to the Company or its subsidiaries or their respective businesses,
properties, prospects, operations or financial condition, which, under
applicable law, rule or regulation, requires public disclosure or announcement
by the Company but which has not been so publicly announced or disclosed.

            (k)   Indebtedness. The Form 10-KSB, Form 10-QSB or Schedule 2.1(k)
hereto sets forth as of a recent date all outstanding secured and unsecured
Indebtedness of the Company or any subsidiary, or for which the Company or any
subsidiary has commitments. For the purposes of this Agreement, "Indebtedness"
shall mean (a) any liabilities for borrowed money or amounts owed in excess of
$100,000 (other than trade accounts payable incurred in the ordinary course of
business), (b) all guaranties, endorsements and other contingent obligations in
respect of Indebtedness of others, whether or not the same are or should be
reflected in the Company's balance sheet (or the notes thereto), except
guaranties by endorsement of negotiable instruments for deposit or collection or
similar transactions in the ordinary course of business; and (c) the present
value of any lease payments in excess of $25,000 due under leases required to be
capitalized in accordance with GAAP. Except as set forth on Schedule 2.1(k),
neither the Company nor any subsidiary is in default with respect to any
Indebtedness.

            (l)   Title to Assets. Each of the Company and the subsidiaries has
good and marketable title to all of its real and personal property reflected in
the Form 10-KSB, free and clear of any mortgages, pledges, charges, liens,
security interests or other encumbrances, except for those disclosed in the Form
10-KSB, Form 10-QSB or on Schedule 2.1(l) hereto or such that, individually or
in the aggregate, do not cause a Material Adverse Effect on the Company's
financial condition or operating results. All said leases of the Company and
each of its subsidiaries are valid and subsisting and in full force and effect.

            (m)   Actions Pending. There is no action, suit, claim,
investigation, arbitration, alternate dispute resolution proceeding or any other
proceeding pending or, to the knowledge of the Company, threatened against the
Company or any subsidiary which questions the validity of this Agreement or any
of the other Transaction Documents or the transactions contemplated hereby or
thereby or any action taken or to be taken pursuant hereto or thereto. Except as
set forth in the Form 10-KSB, Form 10-QSB or on Schedule 2.1(m) hereto, there is
no action, suit, claim, investigation, arbitration, alternate dispute resolution
proceeding or any other proceeding pending or, to the knowledge of the Company,
threatened, against or involving the Company, any subsidiary or any of their
respective properties or assets. Except as set forth in the Form 10-KSB, Form
10-QSB or Schedule 2.1(m) hereto, there are no outstanding orders, judgments,
injunctions, awards or decrees of any court, arbitrator or governmental or
regulatory body against the Company or any subsidiary or any officers or
directors of the Company or subsidiary

                                       6
<PAGE>

in their capacities as such.

            (n)   Compliance with Law. The business of the Company and the
subsidiaries has been and is presently being conducted in accordance with all
applicable federal, state and local governmental laws, rules, regulations and
ordinances, except as set forth in the Form 10-KSB, Form 10-QSB, or such that,
individually or in the aggregate, do not cause a Material Adverse Effect. The
Company and each of its subsidiaries have all franchises, permits, licenses,
consents and other governmental or regulatory authorizations and approvals
necessary for the conduct of its business as now being conducted by it unless
the failure to possess such franchises, permits, licenses, consents and other
governmental or regulatory authorizations and approvals, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect.

            (o)   Taxes. Except as set forth in the Form 10-KSB or in the Form
10-QSB, the Company and each of the subsidiaries has accurately prepared and
filed all federal, state and other tax returns required by law to be filed by
it, has paid or made provisions for the payment of all taxes shown to be due and
all additional assessments, and adequate provisions have been and are reflected
in the financial statements of the Company and the subsidiaries for all current
taxes and other charges to which the Company or any subsidiary is subject and
which are not currently due and payable. None of the federal income tax returns
of the Company or any subsidiary have been audited by the Internal Revenue
Service. The Company has no knowledge of any additional assessments, adjustments
or contingent tax liability (whether federal or state) of any nature whatsoever,
whether pending or threatened against the Company or any subsidiary for any
period, nor of any basis for any such assessment, adjustment or contingency.

            (p)   Certain Fees. Except as set forth in this Agreement or on
Schedule 2.1(p) hereto, no brokers, finders or financial advisory fees or
commissions will be payable by the Company or any subsidiary or any Purchaser
with respect to the transactions contemplated by this Agreement.

            (q)   Disclosure. To the best of the Company's knowledge, neither
this Agreement or the Schedules hereto nor any other documents, certificates or
instruments furnished to the Purchasers by or on behalf of the Company or any
subsidiary in connection with the transactions contemplated by this Agreement
contain any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements made herein or therein, in the light
of the circumstances under which they were made herein or therein, not
misleading.

            (r)   Operation of Business. The Company and each of the
subsidiaries owns or possesses all patents, trademarks, domain names (whether or
not registered) and any patentable improvements or copyrightable derivative
works thereof, websites and intellectual property rights relating thereto,
service marks, trade names, copyrights, licenses and authorizations as set forth
in the Form 10-KSB, Form 10-QSB and on Schedule 2.1(r) hereto, and all rights
with respect to the foregoing, which are necessary for the conduct of its
business as now conducted without any conflict with the rights of others.

            (s)   Environmental Compliance. The Company and each of its
subsidiaries

                                       7
<PAGE>

have obtained all material approvals, authorization, certificates, consents,
licenses, orders and permits or other similar authorizations of all governmental
authorities, or from any other person, that are required under any Environmental
Laws. The Form 10-KSB or Form 10-QSB describes all material permits, licenses
and other authorizations issued under any Environmental Laws to the Company or
its subsidiaries. "Environmental Laws" shall mean all applicable laws relating
to the protection of the environment including, without limitation, all
requirements pertaining to reporting, licensing, permitting, controlling,
investigating or remediating emissions, discharges, releases or threatened
releases of hazardous substances, chemical substances, pollutants, contaminants
or toxic substances, materials or wastes, whether solid, liquid or gaseous in
nature, into the air, surface water, groundwater or land, or relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of hazardous substances, chemical substances, pollutants,
contaminants or toxic substances, material or wastes, whether solid, liquid or
gaseous in nature. The Company has all necessary governmental approvals required
under all Environmental Laws and used in its business or in the business of any
of its subsidiaries. The Company and each of its subsidiaries are also in
compliance with all other limitations, restrictions, conditions, standards,
requirements, schedules and timetables required or imposed under all
Environmental Laws. Except for such instances as would not individually or in
the aggregate have a Material Adverse Effect, there are no past or present
events, conditions, circumstances, incidents, actions or omissions relating to
or in any way affecting the Company or its subsidiaries that violate or may
violate any Environmental Law after the Closing Date or that may give rise to
any environmental liability, or otherwise form the basis of any claim, action,
demand, suit, proceeding, hearing, study or investigation (i) under any
Environmental Law, or (ii) based on or related to the manufacture, processing,
distribution, use, treatment, storage (including without limitation underground
storage tanks), disposal, transport or handling, or the emission, discharge,
release or threatened release of any hazardous substance.

            (t)   Books and Record Internal Accounting Controls. The books and
records of the Company and its subsidiaries accurately reflect in all material
respects the information relating to the business of the Company and the
subsidiaries, the location and collection of their assets, and the nature of all
transactions giving rise to the obligations or accounts receivable of the
Company or any subsidiary. The Company and each of its subsidiaries maintain a
system of internal accounting controls sufficient, in the judgment of the
Company, to provide reasonable assurance that (i) transactions are executed in
accordance with management's general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management's general or
specific authorization and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate
actions is taken with respect to any differences.

            (u)   Material Agreements. Except as set forth in the Form 10-KSB,
Form 10-QSB or on Schedule 2.1(u) hereto, neither the Company nor any subsidiary
is a party to any written or oral contract, instrument, agreement, commitment,
obligation, plan or arrangement, a copy of which would be required to be filed
with the Commission as an exhibit to a registration statement on Form S-3 or
applicable form (collectively, "Material Agreements") if the Company or any
subsidiary were registering securities under the Securities Act. Except as set
forth on Schedule 2.1(u) or in the Commission Documents, the Company and each of
its subsidiaries has

                                       8
<PAGE>

in all material respects performed all the obligations required to be performed
by them to date under the foregoing agreements, have received no notice of
default and, to the best of the Company's knowledge are not in default under any
Material Agreement now in effect, the result of which could cause a Material
Adverse Effect. Except as set forth on Schedule 2.1(u) or in the Commission
Documents, no written or oral contract, instrument, agreement, commitment,
obligation, plan or arrangement of the Company or of any subsidiary limits or
shall limit the payment of dividends on the Company's Preferred Shares, other
Preferred Stock, if any, or its Common Stock.

            (v)   Transactions with Affiliates. Except as set forth in the Form
10-KSB, Form 10-QSB or on Schedule 2.1(v) hereto, there are no loans, leases,
agreements, contracts, royalty agreements, management contracts or arrangements
or other continuing transactions between (a) the Company or any subsidiary on
the one hand, and (b) on the other hand, any officer, employee, consultant or
director of the Company, or any of its subsidiaries, or any person owning any
capital stock of the Company or any subsidiary or any member of the immediate
family of such officer, employee, consultant, director or stockholder or any
corporation or other entity controlled by such officer, employee, consultant,
director or stockholder, or a member of the immediate family of such officer,
employee, consultant, director or stockholder.

            (w)   Securities Act of 1933. Based in material part upon the
representations herein of the Purchasers, the Company has complied and will
comply with all applicable federal and state securities laws in connection with
the offer, issuance and sale of the Shares and the Warrants hereunder. Neither
the Company nor anyone acting on its behalf, directly or indirectly, has or will
sell, offer to sell or solicit offers to buy any of the Shares, the Warrants or
similar securities to, or solicit offers with respect thereto from, or enter
into any preliminary conversations or negotiations relating thereto with, any
person, or has taken or will take any action so as to bring the issuance and
sale of any of the Shares and the Warrants under the registration provisions of
the Securities Act and applicable state securities laws, and neither the Company
nor any of its affiliates, nor any person acting on its or their behalf, has
engaged in any form of general solicitation or general advertising (within the
meaning of Regulation D under the Securities Act) in connection with the offer
or sale of any of the Shares and the Warrants.

            (x)   Governmental Approvals. Except as set forth in the Form 10-KSB
or Form 10-QSB, and except for the filing of any notice prior or subsequent to
the Closing Date that may be required under applicable state and/or Federal
securities laws (which if required, shall be filed on a timely basis), including
the filing of a Form D and a registration statement or statements pursuant to
the Registration Rights Agreement, and the filing of the Certificate of
Designation with the Secretary of State for the State of Colorado, no
authorization, consent, approval, license, exemption of, filing or registration
with any court or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, is or will be necessary for, or in
connection with, the execution or delivery of the Preferred Shares and the
Warrants, or for the performance by the Company of its obligations under the
Transaction Documents.

            (y)   Employees. Neither the Company nor any subsidiary has any
collective

                                       9
<PAGE>

bargaining arrangements or agreements covering any of its employees, except as
set forth in the Form 10-KSB, Form 10-QSB or on Schedule 2.1(y) hereto. Except
as set forth in the Form 10-KSB, Form 10-QSB or on Schedule 2.1(y) hereto,
neither the Company nor any subsidiary has any employment contract, agreement
regarding proprietary information, non-competition agreement, non-solicitation
agreement, confidentiality agreement, or any other similar contract or
restrictive covenant, relating to the right of any officer, employee or
consultant to be employed or engaged by the Company or such subsidiary. Since
September 30, 2004, no officer, consultant or key employee of the Company or any
subsidiary whose termination, either individually or in the aggregate, could
have a Material Adverse Effect, has terminated or, to the knowledge of the
Company, has any present intention of terminating his or her employment or
engagement with the Company or any subsidiary.

            (z)   Absence of Certain Developments. Except as provided on
Schedule 2.1(z) hereto, since September 30, 2004, neither the Company nor any
subsidiary has:

                  (i)   issued any stock, bonds or other corporate securities or
any rights, options or warrants with respect thereto;

                  (ii)  borrowed any amount or incurred or become subject to any
liabilities (absolute or contingent) except current liabilities incurred in the
ordinary course of business which are comparable in nature and amount to the
current liabilities incurred in the ordinary course of business during the
comparable portion of its prior fiscal year, as adjusted to reflect the current
nature and volume of the Company's or such subsidiary's business;

                  (iii) discharged or satisfied any lien or encumbrance or paid
any obligation or liability (absolute or contingent), other than current
liabilities paid in the ordinary course of business;

                  (iv)  declared or made any payment or distribution of cash or
other property to stockholders with respect to its stock, or purchased or
redeemed, or made any agreements so to purchase or redeem, any shares of its
capital stock;

                  (v)   sold, assigned or transferred any other tangible assets,
or canceled any debts or claims, except in the ordinary course of business;

                  (vi)  sold, assigned or transferred any patent rights,
trademarks, trade names, copyrights, trade secrets or other intangible assets or
intellectual property rights, or disclosed any proprietary confidential
information to any person except to customers in the ordinary course of business
or to the Purchasers or their representatives;

                  (vii) suffered any substantial losses or waived any rights of
material value, whether or not in the ordinary course of business, or suffered
the loss of any material amount of prospective business;

                  (viii) made any changes in employee compensation except in the
ordinary course of business and consistent with past practices;

                                       10
<PAGE>

                  (ix)  made capital expenditures or commitments therefor that
aggregate in excess of $100,000;

                  (x)   entered into any other transaction other than in the
ordinary course of business, or entered into any other material transaction,
whether or not in the ordinary course of business;

                  (xi)  made charitable contributions or pledges in excess of
$25,000;

                  (xii) suffered any material damage, destruction or casualty
loss, whether or not covered by insurance;

                  (xiii) experienced any material problems with labor or
management in connection with the terms and conditions of their employment;

                  (xiv) effected any two or more events of the foregoing kind
which in the aggregate would be material to the Company or its subsidiaries; or

                  (xv)  entered into an agreement, written or otherwise, to take
any of the foregoing actions.

            (aa)  Public Utility Holding Company Act and Investment Company Act
Status. The Company is not a "holding company" or a "public utility company" as
such terms are defined in the Public Utility Holding Company Act of 1935, as
amended. The Company is not, and as a result of and immediately upon the Closing
will not be, an "investment company" or a company "controlled" by an "investment
company," within the meaning of the Investment Company Act of 1940, as amended.

            (bb)  ERISA. No liability to the Pension Benefit Guaranty
Corporation has been incurred with respect to any Plan by the Company or any of
its subsidiaries which is or would be materially adverse to the Company and its
subsidiaries. The execution and delivery of this Agreement and the issuance and
sale of the Preferred Shares will not involve any transaction which is subject
to the prohibitions of Section 406 of ERISA or in connection with which a tax
could be imposed pursuant to Section 4975 of the Internal Revenue Code of 1986,
as amended, provided that, if any of the Purchasers, or any person or entity
that owns a beneficial interest in any of the Purchasers, is an "employee
pension benefit plan" (within the meaning of Section 3(2) of ERISA) with respect
to which the Company is a "party in interest" (within the meaning of Section
3(14) of ERISA), the requirements of Sections 407(d)(5) and 408(e) of ERISA, if
applicable, are met. As used in this Section 2.1(ac), the term "Plan" shall mean
an "employee pension benefit plan" (as defined in Section 3 of ERISA) which is
or has been established or maintained, or to which contributions are or have
been made, by the Company or any subsidiary or by any trade or business, whether
or not incorporated, which, together with the Company or any subsidiary, is
under common control, as described in Section 414(b) or (c) of the Code.

            (cc)  Dilutive Effect. The Company understands and acknowledges that
the number of Conversion Shares issuable upon conversion of the Preferred Shares
and the Warrant Shares issuable upon exercise of the Warrants will increase in
certain circumstances. The

                                       11
<PAGE>

Company further acknowledges that its obligation to issue Conversion Shares upon
conversion of the Preferred Shares in accordance with this Agreement and the
Certificate of Designation and its obligations to issue the Warrant Shares upon
the exercise of the Warrants in accordance with this Agreement and the Warrants,
is, in each case, absolute and unconditional regardless of the dilutive effect
that such issuance may have on the ownership interest of other stockholders of
the Company.

            (dd)  No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales of any security or solicited any offers to
buy any security under circumstances that would cause the offering of the Shares
pursuant to this Agreement to be integrated with prior offerings by the Company
for purposes of the Securities Act which would prevent the Company from selling
the Shares pursuant to Rule 506 under the Securities Act, or any applicable
exchange-related stockholder approval provisions, nor will the Company or any of
its affiliates or subsidiaries take any action or steps that would cause the
offering of the Shares to be integrated with other offerings. The Company does
not have any registration statement pending before the Commission or currently
under the Commission's review and since August 1, 2004, the Company has not
offered or sold any of its equity securities or debt securities convertible into
shares of Common Stock.

            (ee)  Sarbanes-Oxley Act. Except as set forth on Schedule 2.1(ee)
hereto, the Company is in compliance with the applicable provisions of the
Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act"), and the rules and
regulations promulgated thereunder, that are effective, and intends to comply
with other applicable provisions of the Sarbanes-Oxley Act, and the rules and
regulations promulgated thereunder, upon the effectiveness of such provisions.

            Section 2.2 Representations and Warranties of the Purchasers. Each
of the Purchasers hereby makes the following representations and warranties to
the Company with respect solely to itself and not with respect to any other
Purchaser:

            (a)   Organization and Standing of the Purchasers. If the Purchaser
is an entity, such Purchaser is a corporation or partnership duly incorporated
or organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization.

            (b)   Authorization and Power. Each Purchaser has the requisite
power and authority to enter into and perform this Agreement and to purchase the
Preferred Shares and Warrants being sold to it hereunder. The execution,
delivery and performance of this Agreement and the Registration Rights Agreement
by such Purchaser and the consummation by it of the transactions contemplated
hereby and thereby have been duly authorized by all necessary corporate or
partnership action, and no further consent or authorization of such Purchaser or
its Board of Directors, stockholders, or partners, as the case may be, is
required. Each of this Agreement and the Registration Rights Agreement has been
duly authorized, executed and delivered by such Purchaser and constitutes, or
shall constitute when executed and delivered, a valid and binding obligation of
the Purchaser enforceable against the Purchaser in accordance with the terms
thereof.

                                       12
<PAGE>

            (c)   No Conflicts. The execution, delivery and performance of this
Agreement and the Registration Rights Agreement and the consummation by such
Purchaser of the transactions contemplated hereby and thereby or relating hereto
do not and will not (i) result in a violation of such Purchaser's charter
documents or bylaws or other organizational documents or (ii) conflict with, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of any agreement, indenture or
instrument or obligation to which such Purchaser is a party or by which its
properties or assets are bound, or result in a violation of any law, rule, or
regulation, or any order, judgment or decree of any court or governmental agency
applicable to such Purchaser or its properties (except for such conflicts,
defaults and violations as would not, individually or in the aggregate, have a
material adverse effect on such Purchaser). Such Purchaser is not required to
obtain any consent, authorization or order of, or make any filing or
registration with, any court or governmental agency in order for it to execute,
deliver or perform any of its obligations under this Agreement or the
Registration Rights Agreement or to purchase the Preferred Shares or acquire the
Warrants in accordance with the terms hereof, provided that for purposes of the
representation made in this sentence, such Purchaser is assuming and relying
upon the accuracy of the relevant representations and agreements of the Company
herein.

            (d)   Acquisition for Investment. Each Purchaser is acquiring the
Preferred Shares and the Warrants solely for its own account for the purpose of
investment and not with a view to or for sale in connection with distribution.
Each Purchaser does not have a present intention to sell the Preferred Shares or
the Warrants, nor a present arrangement (whether or not legally binding) or
intention to effect any distribution of the Preferred Shares or the Warrants to
or through any person or entity; provided, however, that by making the
representations herein and subject to Section 2.2(f) below, such Purchaser does
not agree to hold the Shares or the Warrants for any minimum or other specific
term and reserves the right to dispose of the Shares or the Warrants at any time
in accordance with Federal and state securities laws applicable to such
disposition. Each Purchaser acknowledges that it is able to bear the financial
risks associated with an investment in the Preferred Shares and the Warrants and
that it has been given full access to such records of the Company and the
subsidiaries and to the officers of the Company and the subsidiaries and
received such information as it has deemed necessary or appropriate to conduct
its due diligence investigation and has sufficient knowledge and experience in
investing in companies similar to the Company in terms of the Company's stage of
development so as to be able to evaluate the risks and merits of its investment
in the Company.

            (e)   Status of Purchasers. Such Purchaser is an "accredited
investor" as defined in Regulation D promulgated under the Securities Act. Such
Purchaser is not required to be registered as a broker-dealer under Section 15
of the Exchange Act and such Purchaser is not a broker-dealer.

            (f)   Opportunities for Additional Information. Each Purchaser
acknowledges that such Purchaser has had the opportunity to ask questions of and
receive answers from, or obtain additional information from, the executive
officers of the Company concerning the financial and other affairs of the
Company, and to the extent deemed necessary in light of such Purchaser's
personal knowledge of the Company's affairs, such Purchaser has asked such

                                       13
<PAGE>

questions and received answers to the full satisfaction of such Purchaser, and
such Purchaser desires to invest in the Company.

            (g)   No General Solicitation. Each Purchaser acknowledges that the
Preferred Shares and the Warrants were not offered to such Purchaser by means of
any form of general or public solicitation or general advertising, or publicly
disseminated advertisements or sales literature, including (i) any
advertisement, article, notice or other communication published in any
newspaper, magazine, or similar media, or broadcast over television or radio, or
(ii) any seminar or meeting to which such Purchaser was invited by any of the
foregoing means of communications.

            (h)   Rule 144. Such Purchaser understands that the Shares must be
held indefinitely unless such Shares are registered under the Securities Act or
an exemption from registration is available. Such Purchaser acknowledges that
such Purchaser is familiar with Rule 144 of the rules and regulations of the
Commission, as amended, promulgated pursuant to the Securities Act ("Rule 144"),
and that such person has been advised that Rule 144 permits resales only under
certain circumstances. Such Purchaser understands that to the extent that Rule
144 is not available, such Purchaser will be unable to sell any Shares without
either registration under the Securities Act or the existence of another
exemption from such registration requirement.

            (i)   General. Such Purchaser understands that the Shares are being
offered and sold in reliance on a transactional exemption from the registration
requirement of Federal and state securities laws and the Company is relying upon
the truth and accuracy of the representations, warranties, agreements,
acknowledgments and understandings of such Purchaser set forth herein in order
to determine the applicability of such exemptions and the suitability of such
Purchaser to acquire the Shares.

            (j)   Independent Investment. Except as may be disclosed in any
filings with the Commission by the Purchasers under Section 13 and/or Section 16
of the Exchange Act, no Purchaser has agreed to act with any other Purchaser for
the purpose of acquiring, holding, voting or disposing of the Shares purchased
hereunder for purposes of Section 13(d) under the Exchange Act, and each
Purchaser is acting independently with respect to its investment in the Shares.

                                  ARTICLE III

                                   COVENANTS

      The Company covenants with each of the Purchasers as follows, which
covenants are for the benefit of the Purchasers and their permitted assignees
(as defined herein).

            Section 3.1 Securities Compliance. The Company shall notify the
Commission in accordance with their rules and regulations, of the transactions
contemplated by any of the Transaction Documents, including filing a Form D with
respect to the Preferred Shares, Warrants, Conversion Shares and Warrant Shares
as required under Regulation D, and shall take all other necessary action and
proceedings as may be required and permitted by

                                       14
<PAGE>

applicable law, rule and regulation, for the legal and valid issuance of the
Preferred Shares, the Warrants, the Conversion Shares and the Warrant Shares to
the Purchasers or subsequent holders.

            Section 3.2 Registration and Listing. The Company will cause its
Common Stock to continue to be registered under Sections 12(b) or 12(g) of the
Exchange Act, will comply in all respects with its reporting and filing
obligations under the Exchange Act, will comply with all requirements related to
any registration statement filed pursuant to this Agreement or the Registration
Rights Agreement, and will not take any action or file any document (whether or
not permitted by the Securities Act or the rules promulgated thereunder) to
terminate or suspend such registration or to terminate or suspend its reporting
and filing obligations under the Exchange Act or Securities Act, except as
permitted herein. The Company will take all action necessary to continue the
listing or trading of its Common Stock on the OTC Bulletin Board, Nasdaq
SmallCap Market or other exchange or market on which the Common Stock is
trading.

            Section 3.3 Inspection Rights. The Company shall permit, during
normal business hours and upon reasonable request and reasonable notice, each
Purchaser or any employees, agents or representatives thereof, so long as such
Purchaser shall be obligated hereunder to purchase the Preferred Shares or shall
beneficially own any Preferred Shares, or shall own Conversion Shares which, in
the aggregate, represent more than 2% of the total combined voting power of all
voting securities then outstanding, for purposes reasonably related to such
Purchaser's interests as a stockholder to examine and make reasonable copies of
and extracts from the records and books of account of, and visit and inspect the
properties, assets, operations and business of the Company and any subsidiary,
and to discuss the affairs, finances and accounts of the Company and any
subsidiary with any of its officers, consultants, directors, and key employees.

            Section 3.4 Compliance with Laws. The Company shall comply, and
cause each subsidiary to comply, with all applicable laws, rules, regulations
and orders, noncompliance with which could have a Material Adverse Effect.

            Section 3.5 Keeping of Records and Books of Account. The Company
shall keep and cause each subsidiary to keep adequate records and books of
account, in which complete entries will be made in accordance with GAAP
consistently applied, reflecting all financial transactions of the Company and
its subsidiaries, and in which, for each fiscal year, all proper reserves for
depreciation, depletion, obsolescence, amortization, taxes, bad debts and other
purposes in connection with its business shall be made.

            Section 3.6 Reporting Requirements. If the Commission ceases making
periodic reports filed under Section 13 of the Exchange Act available via its
Election Data Gathering Retrieval and Analysis System, then at a Purchaser's
request the Company shall furnish the following to such Purchaser so long as
such Purchaser shall be obligated hereunder to purchase the Preferred Shares or
shall beneficially own any Preferred Shares, or shall own Conversion Shares
which, in the aggregate, represent more than 2% of the total combined voting
power of all voting securities then outstanding:

                                       15
<PAGE>

            (a)   Quarterly Reports filed with the Commission on Form 10-QSB as
soon as practical after the document is filed with the Commission, and in any
event within five (5) days after the document is filed with the Commission;

            (b)   Annual Reports filed with the Commission on Form 10-KSB as
soon as practical after the document is filed with the Commission, and in any
event within five (5) days after the document is filed with the Commission; and

            (c)   Copies of all notices and information, including without
limitation notices and proxy statements in connection with any meetings, that
are provided to holders of shares of Common Stock, contemporaneously with the
delivery of such notices or information to such holders of Common Stock.

            Section 3.7 Amendments. The Company shall not amend or waive any
provision of the Articles or Bylaws of the Company in any way that would
adversely affect the liquidation preferences, dividends rights, conversion
rights, voting rights or redemption rights of the Preferred Shares; provided,
however, that any creation and issuance of another series of Junior Stock (as
defined in the Certificate of Designation) or any other class or series of
equity securities which by its terms shall rank on parity with the Preferred
Shares shall not be deemed to materially and adversely affect such rights,
preferences or privileges.

            Section 3.8 Other Agreements. The Company shall not enter into any
agreement in which the terms of such agreement would restrict or impair the
right or ability to perform of the Company or any subsidiary under any
Transaction Document.

            Section 3.9 Distributions. So long as any Preferred Shares
or Warrants remain outstanding, the Company agrees that it shall not (i) declare
or pay any dividends or make any distributions to any holder(s) of Common Stock
or (ii) purchase or otherwise acquire for value, directly or indirectly, any
Common Stock or other equity security of the Company.

            Section 3.10 Status of Dividends. The Company covenants and agrees
that (i) no Federal income tax return or claim for refund of Federal income tax
or other submission to the Internal Revenue Service will adversely affect the
Preferred Shares, any other series of its Preferred Stock, or the Common Stock,
and any deduction shall not operate to jeopardize the availability to Purchasers
of the dividends received deduction provided by Section 243(a)(1) of the Code or
any successor provision, (ii) in no report to shareholders or to any
governmental body having jurisdiction over the Company or otherwise will it
treat the Preferred Shares other than as equity capital or the dividends paid
thereon other than as dividends paid on equity capital unless required to do so
by a governmental body having jurisdiction over the accounts of the Company or
by a change in generally accepted accounting principles required as a result of
action by an authoritative accounting standards setting body, and (iii) other
than pursuant to this Agreement or the Certificate of Designation, it will take
no action which would result in the dividends paid by the Company on the
Preferred Shares out of the Company's current or accumulated earnings and
profits being ineligible for the dividends received deduction provided by
Section 243(a)(1) of the Code. The preceding sentence shall not be deemed to
prevent the Company from designating the Preferred Stock as "Convertible
Preferred Stock" in its annual

                                       16
<PAGE>

and quarterly financial statements in accordance with its prior practice
concerning other series of preferred stock of the Company. Notwithstanding the
foregoing, the Company shall not be required to restate or modify its tax
returns for periods prior to the Closing Date. In the event that the Purchasers
have reasonable cause to believe that dividends paid by the Company on the
Preferred Shares out of the Company's current or accumulated earnings and
profits will not be treated as eligible for the dividends received deduction
provided by Section 243(a)(1) of the Code, or any successor provision, the
Company will, at the reasonable request of the Purchasers of 51% of the
outstanding Preferred Shares, join with the Purchasers in the submission to the
Service of a request for a ruling that dividends paid on the Shares will be so
eligible for Federal income tax purposes, at the Purchasers expense. In
addition, the Company will reasonably cooperate with the Purchasers (at
Purchasers' expense) in any litigation, appeal or other proceeding challenging
or contesting any ruling, technical advice, finding or determination that
earnings and profits are not eligible for the dividends received deduction
provided by Section 243(a)(1) of the Code, or any successor provision to the
extent that the position to be taken in any such litigation, appeal, or other
proceeding is not contrary to any provision of the Code or incurred in
connection with any such submission, litigation, appeal or other proceeding.
Notwithstanding the foregoing, nothing herein contained shall be deemed to
preclude the Company from claiming a deduction with respect to such dividends if
(i) the Code shall hereafter be amended, or final Treasury regulations
thereunder are issued or modified, to provide that dividends on the Preferred
Shares or Conversion Shares should not be treated as dividends for Federal
income tax purposes or that a deduction with respect to all or a portion of the
dividends on the Shares is allowable for Federal income tax purposes, or (ii) in
the absence of such an amendment, issuance or modification and after a
submission of a request for ruling or technical advice, the service shall rule
or advise that dividends on the shares should not be treated as dividends for
Federal income tax purposes. If the Service determines that the Preferred Shares
or Conversion Shares constitute debt, the Company may file protective claims for
refund.

            Section 3.11 Use of Proceeds. The proceeds from the sale of the
Preferred Shares will be used by the Company for working capital and general
corporate purposes.

            Section 3.12 Future Financings; Right of First Offer and Refusal.
(a) For purposes of this Agreement, a "Subsequent Financing" shall be defined as
any subsequent offer or sale to, or exchange with (or other type of distribution
to), any third party of Common Stock or any securities convertible, exercisable
or exchangeable into Common Stock, including debt securities so convertible
(collectively, the "Financing Securities"), other than a Permitted Financing.
For purposes of this Agreement, "Permitted Financing" shall mean any transaction
involving (i) the Company's issuance of any Financing Securities (other than for
cash) in connection with a merger, acquisition or consolidation of the Company,
(ii) the Company's issuance of Financing Securities in connection with strategic
license agreements and other partnering arrangements so long as such issuances
are not for the purpose of raising capital, (iii) the Company's issuance of
Financing Securities in connection with bona fide firm underwritten public
offerings of its securities, (iv) the Company's issuance of Common Stock or the
issuance or grants of options to purchase Common Stock pursuant to the Company's
stock option plans and employee stock purchase plans outstanding on the date
hereof, (v) as a result of the exercise of options or warrants or conversion of
convertible notes or preferred stock which are granted or issued as of the date
of this Agreement or issued pursuant to this Agreement or the Series C

                                       17
<PAGE>

Convertible Preferred Stock Purchase Agreement, (vi) any Warrants issued to the
Purchasers and any warrants issued to the placement agent for the transactions
contemplated by this Agreement or the Series C Convertible Preferred Stock
Purchase Agreement or in connection with other financial services rendered to
the Company, (vii) the payment of any dividend on the Preferred Shares or on the
Series A Convertible Preferred Stock of the Company, or (viii) the issuance of
up to $1,000,000 of shares of the Company's Series A Convertible Preferred Stock
and warrants to Boundless Investments, L.L.C. in exchange for cancellation of
$1,000,000 of principal amount of a promissory note issued on July 30, 2004.

            (b)   During the period commencing on the Closing Date and ending on
the date that is eighteen (18) months following the Closing Date, the Company
covenants and agrees to promptly notify (in no event later than five (5) days
after making or receiving an applicable offer) in writing (a "Rights Notice")
each Purchaser of the terms and conditions of any proposed Subsequent Financing.
The Rights Notice shall describe, in reasonable detail, the proposed Subsequent
Financing, the proposed closing date of the Subsequent Financing, which shall be
within thirty (30) calendar days from the date of the Rights Notice, including,
without limitation, all of the terms and conditions thereof and proposed
definitive documentation to be entered into in connection therewith. The Rights
Notice shall provide each Purchaser an option (the "Rights Option") during the
ten (10) trading days following delivery of the Rights Notice (the "Option
Period") to inform the Company whether such Purchaser will purchase up to fifty
percent (50%) of its Purchase Price for the securities being offered in such
Subsequent Financing on the same, absolute terms and conditions as contemplated
by such Subsequent Financing (the "First Refusal Rights"). If any Purchaser
elects not to participate in such Subsequent Financing, the other Purchasers may
participate on a pro-rata basis so long as such participation in the aggregate
does not exceed fifty percent (50%) of the total Purchase Price hereunder. For
purposes of this Section, all references to "pro rata" means, for any Purchaser
electing to participate in such Subsequent Financing, the percentage obtained by
dividing (x) the total number of Preferred Shares purchased by such Purchaser at
the Closing by (y) the total number of Preferred Shares purchased by all of the
participating Purchasers at the Closing. Delivery of any Rights Notice
constitutes a representation and warranty by the Company that there are no other
material terms and conditions, arrangements, agreements or otherwise except for
those disclosed in the Rights Notice, to provide additional compensation to any
party participating in any proposed Subsequent Financing, including, but not
limited to, additional compensation based on changes in the Purchase Price or
any type of reset or adjustment of a purchase or conversion price or to issue
additional securities at any time after the closing date of a Subsequent
Financing. If the Company does not receive notice of exercise of the Rights
Option from the Purchasers within the Option Period, the Company shall have the
right to close the Subsequent Financing on the scheduled closing date with a
third party; provided that all of the material terms and conditions of the
closing are the same as those provided to the Purchasers in the Rights Notice.
If the closing of the proposed Subsequent Financing does not occur on that date,
any closing of the contemplated Subsequent Financing or any other Subsequent
Financing shall be subject to all of the provisions of this Section 3.12,
including, without limitation, the delivery of a new Rights Notice. The
provisions of this Section 3.12(b) shall not apply to issuances of Financing
Securities in a Permitted Financing.

                                       18
<PAGE>

            Section 3.13 Reservation of Shares. So long as any of the Preferred
Shares or Warrants remain outstanding, the Company shall take all action
necessary to at all times have authorized, and reserved for the purpose of
issuance, no less than the aggregate number of shares of Common Stock needed to
provide for the issuance of the Conversion Shares and the Warrant Shares.

            Section 3.14 Transfer Agent Instructions. The Company shall issue
irrevocable instructions to its transfer agent, and any subsequent transfer
agent, to issue certificates, registered in the name of each Purchaser or its
respective nominee(s), for the Conversion Shares and the Warrant Shares in such
amounts as specified from time to time by each Purchaser to the Company upon
conversion of the Preferred Shares or exercise of the Warrants in the form of
Exhibit E attached hereto (the "Irrevocable Transfer Agent Instructions"). Prior
to registration of the Conversion Shares and the Warrant Shares under the
Securities Act, all such certificates shall bear the restrictive legend
specified in Section 5.1 of this Agreement. The Company warrants that no
instruction other than the Irrevocable Transfer Agent Instructions referred to
in this Section 3.14 will be given by the Company to its transfer agent and that
the Shares 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. Nothing in this Section 3.14 shall affect in any way each
Purchaser's obligations and agreements set forth in Section 5.1 to comply with
all applicable prospectus delivery requirements, if any, upon resale of the
Shares. If a Purchaser 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 Shares may be made without registration under the Securities Act
or the Purchaser provides the Company with reasonable assurances that the Shares
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 Conversion Shares
and the Warrant Shares, promptly instruct its transfer agent to issue one or
more certificates in such name and in such denominations as specified by such
Purchaser and without any restrictive legend. The Company acknowledges that a
breach by it of its obligations under this Section 3.14 will cause irreparable
harm to the Purchasers by vitiating the intent and purpose of the transaction
contemplated hereby. Accordingly, the Company acknowledges that the remedy at
law for a breach of its obligations under this Section 3.14 will be inadequate
and agrees, in the event of a breach or threatened breach by the Company of the
provisions of this Section 3.14, that the Purchasers shall be entitled, in
addition to all other available remedies, to an 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.

            Section 3.15 Disposition of Assets. So long as the Preferred Shares
remain outstanding, neither the Company nor any Subsidiary shall sell, transfer
or otherwise dispose of any of its properties, assets and rights including,
without limitation, its software and intellectual property, to any person except
for sales to customers in the ordinary course of business or with the prior
written consent of the holders of a majority of the Preferred Shares then
outstanding.

            Section 3.16 Reporting Status. So long as a Purchaser beneficially
owns any of the Securities, the Company shall timely file all reports required
to be filed with the Commission pursuant to the Exchange Act, and the Company
shall not terminate its status as an issuer

                                       19
<PAGE>

required to file reports under the Exchange Act even if the Exchange Act or the
rules and regulations thereunder would permit such termination.

            Section 3.17 Disclosure of Transaction. The Company shall issue a
press release describing the material terms of the transactions contemplated
hereby (the "Press Release") as soon as practicable after the Closing but in no
event later than one hour after the Closing; provided, however, that if the
Closing occurs after 4:00 P.M. Eastern Time on any Trading Day, the Company
shall issue the Press Release no later than 9:00 A.M. Eastern Time on the first
Trading Day following the Closing Date. The Company shall also file with the
Commission a Current Report on Form 8-K (the "Form 8-K") describing the material
terms of the transactions contemplated hereby (and attaching as exhibits thereto
this Agreement, the Registration Rights Agreement, the Certificate of
Designation, the form of Warrant and the Press Release) as soon as practicable
following the Closing Date but in no event more than three (3) Trading Days
following the Closing Date, which Press Release and Form 8-K shall be subject to
prior review and comment by the Purchasers. "Trading Day" means any day during
which the OTC Bulletin Board (or other principal exchange on which the Common
Stock is traded) shall be open for trading.

            Section 3.18 Disclosure of Material Information. The Company
covenants and agrees that neither it nor any other person acting on its behalf
has provided or will provide any Purchaser or its agents or counsel with any
information that the Company believes constitutes material non-public
information, unless prior thereto such Purchaser shall have executed a written
agreement regarding the confidentiality and use of such information. The Company
understands and confirms that each Purchaser shall be relying on the foregoing
representations in effecting transactions in securities of the Company.

            Section 3.19 Pledge of Securities. The Company acknowledges and
agrees that the Securities may be pledged by a Purchaser in connection with a
bona fide margin agreement or other loan or financing arrangement that is
secured by the Common Stock. The pledge of Common Stock shall not be deemed to
be a transfer, sale or assignment of the Common Stock hereunder, and no
Purchaser effecting a pledge of Common Stock 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; provided that a
Purchaser and its pledgee shall be required to comply with the provisions of
Article V hereof in order to effect a sale, transfer or assignment of Common
Stock to such pledgee. At the Purchasers' expense, the Company hereby agrees to
execute and deliver such documentation as a pledgee of the Common Stock may
reasonably request in connection with a pledge of the Common Stock to such
pledgee by a Purchaser.

            Section 3.20 Independent Board Members. Prior to the filing of the
Company's next Form 10-QSB, the Company shall maintain a Board of Directors
consisting of at least three (3) independent members.

            Section 3.21 Nasdaq Listing. Within sixty (60) days of the Closing,
the Company shall submit its application for listing on the Nasdaq Stock Market,
Inc. and shall use its best efforts to obtain such listing prior to the end of
the Company's fiscal quarter ending June

                                       20
<PAGE>

30, 2005. The Company shall send to the Purchasers copies of all correspondence
to and from the Nasdaq Stock Market, Inc. in connection with its listing
application.

            Section 3.22 Board Observer Rights. So long as $2,000,000 of
Preferred Shares remains outstanding (including any shares of Series B
Convertible Preferred Stock issued pursuant to the Series B Convertible
Preferred Stock Purchase Agreement dated as of February 25, 2005), North Sound
Capital LLC shall have the right to have a representative (the "North Sound
Representative") serve as an observer of the Company's Board of Directors. The
Company shall provide the North Sound Representative at least forty-eight (48)
hours prior written notice of any meetings of the Company's Board of Directors.
The North Sound Representative may elect in its sole discretion to attend such
meetings of the Company's Board of Directors.

                                   ARTICLE IV

                                   CONDITIONS

            Section 4.1 Conditions Precedent to the Obligation of the Company to
Sell the Shares. The obligation hereunder of the Company to issue and sell the
Preferred Shares and the Warrants to the Purchasers is subject to the
satisfaction or waiver, at or before the Closing, of each of the conditions set
forth below. These conditions are for the Company's sole benefit and may be
waived by the Company at any time in its sole discretion.

            (a)   Accuracy of Each Purchaser's Representations and Warranties.
The representations and warranties of each Purchaser shall be true and correct
in all material respects as of the date when made and as of the Closing Date as
though made at that time, except for representations and warranties that are
expressly made as of a particular date, which shall be true and correct in all
material respects as of such date.

            (b)   Performance by the Purchasers. Each Purchaser shall have
performed, satisfied and complied in all respects with all covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by such Purchaser at or prior to the Closing.

            (c)   No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.

            (d)   Delivery of Purchase Price. The Purchase Price for the
Preferred Shares and Warrants has been delivered to the Company at the Closing
Date.

            (e)   Delivery of Transaction Documents. The Transaction Documents
have been duly executed and delivered by the Purchasers to the Company.

                                       21
<PAGE>

            Section 4.2 Conditions Precedent to the Obligation of the Purchasers
to Purchase the Shares. The obligation hereunder of each Purchaser to acquire
and pay for the Preferred Shares and the Warrants is subject to the satisfaction
or waiver, at or before the Closing, of each of the conditions set forth below.
These conditions are for each Purchaser's sole benefit and may be waived by such
Purchaser at any time in its sole discretion.

            (a)   Accuracy of the Company's Representations and Warranties. Each
of the representations and warranties of the Company in this Agreement and the
Registration Rights Agreement shall be true and correct in all material respects
as of the date when made and as of the Closing Date as though made at that time
(except for representations and warranties that are expressly made as of a
particular date), which shall be true and correct in all material respects as of
such date.

            (b)   Performance by the Company. The Company shall have performed,
satisfied and complied in all respects with all covenants, agreements and
conditions required by this Agreement to be performed, satisfied or complied
with by the Company at or prior to the Closing.

            (c)   No Suspension, Etc. Trading in the Company's Common Stock
shall not have been suspended by the Commission or the OTC Bulletin Board
(except for any suspension of trading of limited duration agreed to by the
Company, which suspension shall be terminated prior to the applicable Closing),
and, at any time prior to the Closing Date, trading in securities generally as
reported by Bloomberg Financial Markets ("Bloomberg") shall not have been
suspended or limited, or minimum prices shall not have been established on
securities whose trades are reported by Bloomberg, or on the New York Stock
Exchange, nor shall a banking moratorium have been declared either by the United
States or New York State authorities, nor shall there have occurred any material
outbreak or escalation of hostilities or other national or international
calamity or crisis of such magnitude in its effect on, or any material adverse
change in any financial market which, in each case, in the judgment of such
Purchaser, makes it impracticable or inadvisable to purchase the Preferred
Shares.

            (d)   No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.

            (e)   No Proceedings or Litigation. No action, suit or proceeding
before any arbitrator or any governmental authority shall have been commenced,
and no investigation by any governmental authority shall have been threatened,
against the Company or any subsidiary, or any of the officers, directors or
affiliates of the Company or any subsidiary seeking to restrain, prevent or
change the transactions contemplated by this Agreement, or seeking damages in
connection with such transactions.

            (f)   Certificate of Designation of Rights and Preferences. Prior to
the Closing, the Certificate of Designation in the form of Exhibit C attached
hereto shall have been filed with the Secretary of State of Colorado.

                                       22
<PAGE>

            (g)   Opinion of Counsel, Etc. At the Closing, the Purchasers shall
have received an opinion of counsel to the Company, dated the date of the
Closing, in the form of Exhibit F hereto, and such other certificates and
documents as the Purchasers or its counsel shall reasonably require incident to
the Closing.

            (h)   Registration Rights Agreement. At the Closing, the Company
shall have executed and delivered the Registration Rights Agreement to each
Purchaser.

            (i)   Certificates. The Company shall have executed and delivered to
the Purchasers the certificates (in such denominations as such Purchaser shall
request) for the Preferred Shares and Warrants being acquired by such Purchaser
at the Closing.

            (j)   Resolutions. The Board of Directors of the Company shall have
adopted resolutions consistent with Section 2.1(b) hereof in a form reasonably
acceptable to such Purchaser (the "Resolutions").

            (k)   Reservation of Shares. As of the Closing Date, the Company
shall have reserved out of its authorized and unissued Common Stock, solely for
the purpose of effecting the conversion of the Preferred Shares and the exercise
of the Warrants, a number of shares of Common Stock equal to the aggregate
number of Conversion Shares issuable upon conversion of the Preferred Shares
outstanding on the Closing Date and the number of Warrant Shares issuable upon
exercise of the number of Warrants assuming such Warrants were granted on the
Closing Date.

            (l)   Transfer Agent Instructions. The Irrevocable Transfer Agent
Instructions, in the form of Exhibit E attached hereto, shall have been
delivered to and acknowledged in writing by the Company's transfer agent.

            (m)   Secretary's Certificate. The Company shall have delivered to
such Purchaser a secretary's certificate, dated as of the Closing Date, as to
(i) the Resolutions, (ii) the Articles, (iii) the Bylaws, (iv) the Certificate
of Designation, each as in effect at the Closing, and (iv) the authority and
incumbency of the officers of the Company executing the Transaction Documents
and any other documents required to be executed or delivered in connection
therewith.

            (n)   Officer's Certificate. The Company shall have delivered to the
Purchasers a certificate of an executive officer of the Company, dated as of the
Closing Date, confirming the accuracy of the Company's representations,
warranties and covenants as of such Closing Date and confirming the compliance
by the Company with the conditions precedent set forth in this Section 4.2 as of
the Closing Date.

            (o)   Material Adverse Effect. No Material Adverse Effect shall have
occurred at or before the Closing Date.

                                       23
<PAGE>

                                   ARTICLE V

                            STOCK CERTIFICATE LEGEND

            Section 5.1 Legend. Each certificate representing the Preferred
Shares and the Warrants, and, if appropriate, securities issued upon conversion
thereof, shall be stamped or otherwise imprinted with a legend substantially in
the following form (in addition to any legend required by applicable state
securities or "blue sky" laws):

            THESE SECURITIES REPRESENTED BY THIS CERTIFICATE (THE "SECURITIES")
            HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
            AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS AND MAY
            NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED
            UNDER THE SECURITIES ACT AND UNDER APPLICABLE STATE SECURITIES LAWS
            OR BOUNDLESS MOTOR SPORTS RACING, INC. SHALL HAVE RECEIVED AN
            OPINION OF COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER THE
            SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE
            SECURITIES LAWS IS NOT REQUIRED.

      The Company agrees to reissue certificates representing any of the
Conversion Shares and the Warrant Shares, without the legend set forth above if
at such time, prior to making any transfer of any such securities, such holder
thereof shall give written notice to the Company describing the manner and terms
of such transfer and removal as the Company may reasonably request. Such
proposed transfer and removal will not be effected until: (a) either (i) the
Company has received an opinion of counsel reasonably satisfactory to the
Company, to the effect that the registration of the Conversion Shares or the
Warrant Shares under the Securities Act is not required in connection with such
proposed transfer, (ii) a registration statement under the Securities Act
covering such proposed disposition has been filed by the Company with the
Commission and has become effective under the Securities Act and the holder has
complied with the prospectus delivery requirements, (iii) the Company has
received other evidence reasonably satisfactory to the Company that such
registration and qualification under the Securities Act and state securities
laws are not required, or (iv) the holder provides the Company with reasonable
assurances that such security can be sold pursuant to Rule 144 under the
Securities Act; and (b) either (i) the Company has received an opinion of
counsel reasonably satisfactory to the Company, to the effect that registration
or qualification under the securities or "blue sky" laws of any state is not
required in connection with such proposed disposition, or (ii) compliance with
applicable state securities or "blue sky" laws has been effected or a valid
exemption exists with respect thereto. The Company will respond to any such
notice from a holder within five (5) business days. In the case of any proposed
transfer under this Section 5.1, the Company will use reasonable efforts to
comply with any such applicable state securities or "blue sky" laws, but shall
in no event be required, (x) to qualify to do business in any state where it is
not then qualified, (y) to take any action that would subject it to tax or to
the general service of process in any state where it is not then subject, or (z)
to comply with state securities or "blue sky" laws of any state for which
registration by coordination is unavailable to the Company. The restrictions

                                       24
<PAGE>

on transfer contained in this Section 5.1 shall be in addition to, and not by
way of limitation of, any other restrictions on transfer contained in any other
section of this Agreement. Whenever a certificate representing the Conversion
Shares or Warrant Shares is required to be issued to a Purchaser without a
legend, in lieu of delivering physical certificates representing the Conversion
Shares or Warrant Shares (provided that a registration statement under the
Securities Act providing for the resale of the Warrant Shares and Conversion
Shares is then in effect and such Purchaser complies with all applicable
securities laws in connection with the sale, including, without limitation, the
prospectus delivery requirements), the Company shall cause its transfer agent to
electronically transmit the Conversion Shares or Warrant Shares to a Purchaser
by crediting the account of such Purchaser's Prime Broker with the Depository
Trust Company through its Deposit Withdrawal Agent Commission system (to the
extent not inconsistent with any provisions of this Agreement).

                                   ARTICLE VI

                                 INDEMNIFICATION

            Section 6.1 General Indemnity. The Company agrees to indemnify and
hold harmless the Purchasers (and their respective directors, officers,
affiliates, agents, successors and assigns) from and against any and all losses,
liabilities, deficiencies, costs, damages and expenses (including, without
limitation, reasonable attorneys' fees, charges and disbursements) incurred by
the Purchasers as a result of any inaccuracy in or breach of the
representations, warranties or covenants made by the Company herein. Each
Purchaser severally but not jointly agrees to indemnify and hold harmless the
Company and its directors, officers, affiliates, agents, successors and assigns
from and against any and all losses, liabilities, deficiencies, costs, damages
and expenses (including, without limitation, reasonable attorneys' fees, charges
and disbursements) incurred by the Company as result of any inaccuracy in or
breach of the representations, warranties or covenants made by such Purchaser
herein. The maximum aggregate liability of each Purchaser pursuant to its
indemnification obligations under this Article VI shall not exceed the portion
of the Purchase Price paid by such Purchaser hereunder.

            Section 6.2 Indemnification Procedure. Any party entitled to
indemnification under this Article VI (an "indemnified party") will give written
notice to the indemnifying party of any matters giving rise to a claim for
indemnification; provided, that the failure of any party entitled to
indemnification hereunder to give notice as provided herein shall not relieve
the indemnifying party of its obligations under this Article VI except to the
extent that the indemnifying party is actually prejudiced by such failure to
give notice. In case any action, proceeding or claim is brought against an
indemnified party in respect of which indemnification is sought hereunder, the
indemnifying party shall be entitled to participate in and, unless in the
reasonable judgment of the indemnified party a conflict of interest between it
and the indemnifying party may exist with respect of such action, proceeding or
claim, to assume the defense thereof with counsel reasonably satisfactory to the
indemnified party. In the event that the indemnifying party advises an
indemnified party that it will contest such a claim for indemnification
hereunder, or fails, within thirty (30) days of receipt of any indemnification
notice to notify, in writing, such person of its election to defend, settle or
compromise, at its sole cost and expense, any action, proceeding or claim (or
discontinues its defense at any time after it

                                       25
<PAGE>

commences such defense), then the indemnified party may, at its option, defend,
settle or otherwise compromise or pay such action or claim. In any event, unless
and until the indemnifying party elects in writing to assume and does so assume
the defense of any such claim, proceeding or action, the indemnified party's
costs and expenses arising out of the defense, settlement or compromise of any
such action, claim or proceeding shall be losses subject to indemnification
hereunder. The indemnified party shall cooperate fully with the indemnifying
party in connection with any negotiation or defense of any such action or claim
by the indemnifying party and shall furnish to the indemnifying party all
information reasonably available to the indemnified party which relates to such
action or claim. The indemnifying party shall keep the indemnified party fully
apprised at all times as to the status of the defense or any settlement
negotiations with respect thereto. If the indemnifying party elects to defend
any such action or claim, then the indemnified party shall be entitled to
participate in such defense with counsel of its choice at its sole cost and
expense. The indemnifying party shall not be liable for any settlement of any
action, claim or proceeding effected without its prior written consent.
Notwithstanding anything in this Article VI to the contrary, the indemnifying
party shall not, without the indemnified party's prior written consent, settle
or compromise any claim or consent to entry of any judgment in respect thereof
which imposes any future obligation on the indemnified party or which does not
include, as an unconditional term thereof, the giving by the claimant or the
plaintiff to the indemnified party of a release from all liability in respect of
such claim. The indemnification required by this Article VI shall be made by
periodic payments of the amount thereof during the course of investigation or
defense, as and when bills are received or expense, loss, damage or liability is
incurred, so long as the indemnified party irrevocably agrees to refund such
moneys if it is ultimately determined by a court of competent jurisdiction that
such party was not entitled to indemnification. The indemnity agreements
contained herein shall be in addition to (a) any cause of action or similar
rights of the indemnified party against the indemnifying party or others, and
(b) any liabilities the indemnifying party may be subject to pursuant to the
law.

                                  ARTICLE VII

                                  MISCELLANEOUS

            Section 7.1 Fees and Expenses. Except as otherwise set forth in this
Agreement, the Registration Rights Agreement or the Certificate of Designation,
each party shall pay the fees and expenses of its advisors, counsel, accountants
and other experts, if any, and all other expenses, incurred by such party
incident to the negotiation, preparation, execution, delivery and performance of
this Agreement, provided that the Company shall pay all actual attorneys' fees
and expenses (including disbursements and out-of-pocket expenses) incurred by
the Purchasers in connection with (i) the preparation, negotiation, execution
and delivery of this Agreement, the Certificate of Designation, the Warrants,
the Registration Rights Agreement and the transactions contemplated thereunder,
which payment shall be made at Closing, (ii) the filing and declaration of
effectiveness by the Commission of the Registration Statement (as defined in the
Registration Rights Agreement) and (iii) any amendments, modifications or
waivers of this Agreement or any of the other Transaction Documents. In
addition, the Company shall pay all reasonable fees and expenses incurred by the
Purchasers in connection with the enforcement of this Agreement or any of the
other Transaction Documents, including, without limitation, all

                                       26
<PAGE>

reasonable attorneys' fees and expenses. The Company shall pay all stamp or
other similar taxes and duties levied in connection with issuance of the
Preferred Shares pursuant hereto.

            Section 7.2 Specific Enforcement, Consent to Jurisdiction.

            (a)   The Company and the Purchasers acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement, the Certificate of Designation or the Registration Rights Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent or cure breaches of the provisions of this
Agreement or the Registration Rights Agreement and to enforce specifically the
terms and provisions hereof or thereof, this being in addition to any other
remedy to which any of them may be entitled by law or equity.

            (b)   Each of the Company and the Purchasers (i) hereby irrevocably
submits to the jurisdiction of the United States District Court sitting in the
Southern District of New York and the courts of the State of New York located in
New York county for the purposes of any suit, action or proceeding arising out
of or relating to this Agreement or any of the other Transaction Documents or
the transactions contemplated hereby or thereby and (ii) hereby waives, and
agrees not to assert in any such suit, action or proceeding, any claim that it
is not personally subject to the jurisdiction of such court, that the suit,
action or proceeding is brought in an inconvenient forum or that the venue of
the suit, action or proceeding is improper. Each of the Company and the
Purchasers consents to process being served in any such suit, action or
proceeding by mailing a copy thereof to such party at the address in effect for
notices to it under this Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Nothing in this
Section 7.2 shall affect or limit any right to serve process in any other manner
permitted by law.

            Section 7.3 Entire Agreement; Amendment. This Agreement and the
Transaction Documents contains the entire understanding and agreement of the
parties with respect to the matters covered hereby and, except as specifically
set forth herein or in the Transaction Documents or the Certificate of
Designation, neither the Company nor any of the Purchasers makes any
representations, warranty, covenant or undertaking with respect to such matters
and they supersede all prior understandings and agreements with respect to said
subject matter, all of which are merged herein. No provision of this Agreement
may be waived or amended other than by a written instrument signed by the
Company and the holders of at least seventy-five percent (75%) of the Preferred
Shares then outstanding, and no provision hereof may be waived other than by an
a written instrument signed by the party against whom enforcement of any such
amendment or waiver is sought. No such amendment shall be effective to the
extent that it applies to less than all of the holders of the Preferred Shares
then outstanding. No consideration shall be offered or paid to any person to
amend or consent to a waiver or modification of any provision of any of the
Transaction Documents or the Certificate of Designation unless the same
consideration is also offered to all of the parties to the Transaction Documents
or holders of Preferred Shares, as the case may be.

                                       27
<PAGE>

            Section 7.4 Notices. Any notice, demand, request, waiver or other
communication required or permitted to be given hereunder shall be in writing
and shall be effective (a) upon hand delivery by telex (with correct answer back
received), telecopy or facsimile at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the date of mailing
by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be:

              If to the Company:   Boundless Motor Sports Racing, Inc.
                                   2500 McGee Drive, Suite 147
                                   Norman, Oklahoma 73072
                                   Attention: Paul Kruger and Brian Carter
                                   Tel. No.: (405) 360-5047
                                   Fax No.: (405) 360-5354

              with copies to:      Jackson Walker L.L.P.
                                   2435 N. Central Expressway
                                   Suite 600
                                   Richardson, Texas, 75080
                                   Attention: Richard F. Dahlson
                                   Tel No.: (972) 744-2996
                                   Fax No.: (972) 744-2990

              If to any Purchaser: At the address of such Purchaser set
                                   forth on Exhibit A to this Agreement,
                                   with copies to Purchaser's counsel as set
                                   forth on Exhibit A or as specified in
                                   writing by such Purchaser with copies to:

                                   Kramer Levin Naftalis & Frankel LLP
                                   919 Third Avenue
                                   New York, New York 10022
                                   Attention: Christopher S. Auguste
                                   Tel No.: (212) 715-9100
                                   Fax No.: (212) 715-8000

      Any party hereto may from time to time change its address for notices by
giving at least ten (10) days written notice of such changed address to the
other party hereto.

            Section 7.5 Waivers. No waiver by either party of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any other
provisions, condition or requirement hereof, nor shall any delay or omission of
any party to exercise any right hereunder in any manner impair the exercise of
any such right accruing to it thereafter.

                                       28
<PAGE>

            Section 7.6 Headings. The article, section and subsection headings
in this Agreement are for convenience only and shall not constitute a part of
this Agreement for any other purpose and shall not be deemed to limit or affect
any of the provisions hereof.

            Section 7.7 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their successors and assigns.

            Section 7.8 No Third Party Beneficiaries. This Agreement is intended
for the benefit of the parties hereto and their respective permitted successors
and assigns and is not for the benefit of, nor may any provision hereof be
enforced by, any other person.

            Section 7.9 Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York, without
giving effect to any of the conflicts of law principles which would result in
the application of the substantive law of another jurisdiction. This Agreement
shall not be interpreted or construed with any presumption against the party
causing this Agreement to be drafted.

            Section 7.10 Survival. The representations and warranties of the
Company and the Purchasers contained in Section 2.1(o) should survive until
thirty (30) days after the passage of the applicable statute of limitations and
those contained in Article II, with the exception of Sections 2.1(o), shall
survive the execution and delivery hereof and the Closing until the date three
(3) years from the Closing Date, and the agreements and covenants set forth in
Articles I, III, VI and VII of this Agreement shall survive the execution and
delivery hereof and the Closing hereunder until the Purchasers in the aggregate
beneficially own (determined in accordance with Rule 13d-3 under the Exchange
Act) less than 10% of the total combined voting power of all voting securities
then outstanding, provided, that Sections 3.1, 3.2, 3.4, 3.5, 3.7, 3.8, 3.9,
3.10, 3.12, 3.13, 3.14, 3.15. 3.17 and 3.18 shall not expire until the
Registration Statement required by Section 2 of the Registration Rights
Agreement is no longer required to be effective under the terms and conditions
of Registration Rights Agreement.

            Section 7.11 Counterparts. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument and shall become effective when counterparts have been signed by
each party and delivered to the other parties hereto, it being understood that
all parties need not sign the same counterpart. In the event any signature is
delivered by facsimile transmission, the party using such means of delivery
shall cause four additional executed signature pages to be physically delivered
to the other parties within five days of the execution and delivery hereof.

            Section 7.12 Publicity. The Company agrees that it will not
disclose, and will not include in any public announcement, the name of the
Purchasers without the consent of the Purchasers unless and until such
disclosure is required by law or applicable regulation, and then only to the
extent of such requirement.

            Section 7.13 Severability. The provisions of this Agreement, the
Certificate of Designation and the Registration Rights Agreement are severable
and, in the event that any court of competent jurisdiction shall determine that
any one or more of the provisions or part of the provisions contained in this
Agreement, the Certificate of Designation or the Registration Rights

                                       29
<PAGE>

Agreement shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect
any other provision or part of a provision of this Agreement, the Certificate of
Designation or the Registration Rights Agreement shall be reformed and construed
as if such invalid or illegal or unenforceable provision, or part of such
provision, had never been contained herein, so that such provisions would be
valid, legal and enforceable to the maximum extent possible.

            Section 7.14 Further Assurances. From and after the date of this
Agreement, upon the request of any Purchaser or the Company, each of the Company
and the Purchasers shall execute and deliver such instrument, documents and
other writings as may be reasonably necessary or desirable to confirm and carry
out and to effectuate fully the intent and purposes of this Agreement, the
Preferred Shares, the Conversion Shares, the Warrants, the Warrant Shares, the
Certificate of Designation, and the Registration Rights Agreement.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                       30
<PAGE>

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

                                       BOUNDLESS MOTOR SPORTS RACING, INC.

                                         By: /s/ Brian Carter
                                                Name: Brian Carter
                                                Title: Vice President

                                         PURCHASER

                                       North Sound Legacy Fund LLC
                                         By: North Sound Capital,
                                            its Manager

                                           By: /s/ Andrew B David
                                              Name: Andrew B. David
                                              Title: General Counsel

                                       North Sound Legacy Institutional Fund LLC
                                         By: North Sound Capital,
                                            its Manager

                                           By: /s/ Andrew B David
                                              Name: Andrew B. David
                                              Title: General Counsel

                                       North Sound Legacy International Fund LLC
                                         By: North Sound Capital,
                                            its Manager

                                           By: /s/ Andrew B David
                                              Name: Andrew B. David
                                              Title: General Counsel

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