Document:

ASSET
      PURCHASE AGREEMENT

     

    AMONG

     

    ROO
      GROUP, INC.

     

    ROO
      MEDIA CORPORATION

     

     

    RJM
      PRICE & COMPANY, INC. 

     

    AND

     

    ROBERTSON
      PRICE

     

    

     

     

    DATED AS OF
      JANUARY 22, 2007

     

     

     

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    TABLE
      OF CONTENTS

     

    
      	
              ARTICLE
                I.

            	
              PURCHASE
                AND SALE OF ASSETS.

            	
              1

            
	 	 	 
	
              1.

            	
              Sale
                of Assets

            	
              1

            
	
              1.2.

            	
              Excluded
                Assets

            	
              2

            
	
              1.3.

            	
              Assumed
                Liabilities; Excluded Liabilities; Employees.

            	
              2

            
	
              1.4.

            	
              Purchase
                Price; Adjustment; Payment.

            	
              2

            
	
              1.5.

            	
              Purchase
                Price Allocation

            	
              4

            
	
              1.6.

            	
              Records
                and Contracts

            	
              4

            
	
              1.7.

            	
              Further
                Assurances

            	
              4

            
	
              1.8.

            	
              Sales
                and Transfer Taxes

            	
              4

            
	
              1.9.

            	
              Transfer
                of Subject Assets

            	
              4

            
	 	 	 
	
              ARTICLE
                II.

            	
              CLOSING
                AND TERMINATION

            	
              4

            
	 	 	 
	
              2.1.

            	
              Closing
                Date

            	
              4

            
	
              2.

            	
              Termination
                of Agreement

            	
              5

            
	
              2.3.

            	
              Procedure
                Upon Termination

            	
              5

            
	
              2.4.

            	
              Effect
                of Termination

            	
              5

            
	 	 	 
	
              ARTICLE
                III.

            	
              REPRESENTATIONS
                AND WARRANTIES OF THE SELLER AND THE OWNER

            	
              5

            
	 	 	 
	
              3.1.

            	
              Organization
                and Good Standing

            	
              5

            
	
              3.2.

            	
              Authorization
                of Agreement

            	
              5

            
	
              3.3.

            	
              Ownership
                of Seller

            	
              6

            
	
              3.4.

            	
              No
                Subsidiaries

            	
              6

            
	
              3.5.

            	
              Conflicts;
                Consents of Third Parties.

            	
              6

            
	
              3.6.

            	
              Ownership
                and Transfer of Assets

            	
              6

            
	
              3.7.

            	
              Financial
                Statements

            	
              7

            
	
              3.8.

            	
              No
                Undisclosed Liabilities

            	
              7

            
	
              3.9.

            	
              Absence
                of Certain Developments

            	
              7

            
	
              3.10.

            	
              Taxes.

            	
              8

            
	
              3.11.

            	
              Real
                Property.

            	
              10

            
	
              3.12.

            	
              Tangible
                Personal Property.

            	
              10

            
	
              3.13.

            	
              Intangible
                Property

            	
              11

            
	
              3.14.

            	
              Material
                Contracts

            	
              11

            
	
              3.15.

            	
              Employee
                Benefits.

            	
              12

            
	
              3.16.

            	
              Labor.

            	
              12

            
	
              3.17.

            	
              Litigation

            	
              13

            
	
              3.18.

            	
              Compliance
                with Laws; Permits.

            	
              13

            
	
              3.19.

            	
              Environmental
                Matters

            	
              13

            
	
              3.20.

            	
              Insurance

            	
              14

            
	
              3.21.

            	
              Inventories;
                Receivables; Payables.

            	
              14

            
	
              3.22.

            	
              Customers
                and Suppliers

            	
              14

            
	
              3.23.

            	
              Banks

            	
              14

            

    

     

    
      
         

      

      
        -i-

        
          

        

      

      
         

      

    

     

     

    
      	
              3.24.

            	
              No
                Misrepresentations

            	
              14

            
	
              3.25.

            	
              Financial
                Advisors

            	
              15

            
	
              3.26.

            	
              Investment
                Intention

            	
              15

            
	
              3.27.

            	
              Accredited
                Investor

            	
              15

            
	
              3.28.

            	
              Patriot
                Act

            	
              15

            
	 	 	 
	
              ARTICLE
                IV.

            	
              REPRESENTATIONS
                AND WARRANTIES OF PURCHASER AND PURCHASER

            	
              16

            
	 	 	 
	
              4.1.

            	
              Organization
                and Good Standing.

            	
              16

            
	
              4.2.

            	
              Authorization
                of Agreement.

            	
              16

            
	
              4.3.

            	
              Conflicts;
                Consents of Third Parties.

            	
              17

            
	
              4.

            	
              Litigation

            	
              17

            
	
              4.9.

            	
              Financial
                Advisors

            	
              17

            
	
              4.10.

            	
              Patriot
                Act

            	
              17

            
	
              4.11.

            	
              No
                Knowledge of Breaches

            	
              18

            
	 	 	 
	
              ARTICLE
                V.

            	
              COVENANTS

            	
              18

            
	 	 	 
	
              5.1.

            	
              Access
                to Information

            	
              18

            
	
              5.2.

            	
              Conduct
                of the Business Pending the Closing.

            	
              18

            
	
              5.3.

            	
              Consents

            	
              20

            
	
              5.4.

            	
              Other
                Actions

            	
              20

            
	
              5.5.

            	
              No
                Solicitation

            	
              20

            
	
              5.6.

            	
              Preservation
                of Records

            	
              20

            
	
              5.7.

            	
              Publicity

            	
              21

            
	
              5.8.

            	
              Use
                of Name

            	
              21

            
	
              5.9.

            	
              Employment
                Agreements

            	
              21

            
	 	 	 
	
              ARTICLE
                VI.

            	
              CONDITIONS
                TO CLOSING

            	
              22

            
	 	 	 
	
              6.1.

            	
              Conditions
                Precedent to Obligations of Parent and Purchaser

            	
              22

            
	
              6.2.

            	
              Conditions
                Precedent to Obligations of the Seller and Owner

            	
              23

            
	 	 	 
	
              ARTICLE
                VII.

            	 	 
	
              DOCUMENTS
                TO BE DELIVERED

            	
              24

            
	 	 
	
              7.1.

            	
              Documents
                to be Delivered by the Seller

            	
              24

            
	
              7.2.

            	
              Documents
                to be Delivered by the Parent

            	
              24

            
	 	 	 
	
              ARTICLE
                VIII.

            	 	 
	
              INDEMNIFICATION

            	
              24

            
	 	 
	
              8.1.

            	
              Indemnification.

            	
              24

            
	
              8.2.

            	
              Limitations
                on Indemnification

            	
              25

            
	
              8.3.

            	
              Indemnification
                Procedures.

            	
              25

            

    

     

    
      
         

      

      
        -ii-

        
          

        

      

      
         

      

    

     

     

    
      	 	 	 
	
              ARTICLE
                IX.

            	
              MISCELLANEOUS

            	
              26

            
	 	 	 
	
              9.1.

            	
              Payment
                of Sales, Use or Similar Taxes

            	
              26

            
	
              9.2.

            	
              Survival
                of Representations and Warranties

            	
              27

            
	
              9.3.

            	
              Expenses

            	
              27

            
	
              9.4.

            	
              Specific
                Performance

            	
              27

            
	
              9.5.

            	
              Further
                Assurances

            	
              27

            
	
              9.6.

            	
              Submission
                to Jurisdiction; Consent to Service of Process

            	
              27

            
	
              9.7.

            	
              Entire
                Agreement; Amendments and Waivers

            	
              28

            
	
              9.8.

            	
              Table
                of Contents and Headings

            	
              28

            
	
              9.9.

            	
              Notices

            	
              28

            
	
              9.10.

            	
              Severability

            	
              29

            
	
              9.11.

            	
              Binding
                Effect; Assignment

            	
              29

            

    

    

     

    

    
      
         

      

      
        -iii-

        
          

        

      

      
         

      

    

    ASSET
      PURCHASE AGREEMENT

     

    ASSET
      PURCHASE AGREEMENT, dated as of January 18, 2007 (the “Agreement”), between ROO
      Group, Inc., a Delaware corporation (the “Parent”), ROO Media Corporation, a
      Delaware corporation and a wholly owned subsidiary of Parent (“Purchaser”), RJM
      Price & Company, Inc., a Delaware corporation, (the “Seller”), and Robertson
      Price (the “Owner”).

     

    W
      I T N E S S E T H:

     

    WHEREAS,
      subject to the terms and conditions hereof, Seller desires to sell, transfer
      and
      assign to Purchaser, and Purchaser desires to purchase from Seller, all of
      the
      properties, rights and assets constituting the business of Seller, which is
      engaged in the business of online broadcast video and operates under the name
      “MyVideoDaily” (the “Business”); and

     

    NOW,
      THEREFORE, in consideration of the premises and the mutual covenants and
      agreements hereinafter contained, the parties hereby agree as
      follows:

     

    ARTICLE
      I.

    PURCHASE
      AND SALE OF ASSETS.

     

    1.1.  Sale
      of Assets.
      Seller
      agrees to sell, assign, transfer and deliver to Purchaser, and Purchaser agrees
      to purchase from Seller, all of Seller’s right, title and interest in and to all
      of the properties, assets and business of the Business, of every kind and
      description, tangible and intangible, real, personal or mixed, and wherever
      located, but excluding the Excluded Assets, including, without limitation,
      the
      following:

     

    (a)  Equipment.
      All
      assets of any kind or nature, including all inventory, software, supplies and
      other tangible personal property of every kind and description owned by Seller
      and used or held for use in connection with the Business, all as set forth
      on
      Schedule 1.1(a) attached hereto (“Equipment”);

     

    (b)  Contracts.
      All of
      the rights of Seller under, and interest of Seller in and to, all contracts
      relating to the Business, a true, correct and complete list of which contracts
      is attached hereto as Schedule 1.1(b) (“Contracts”);

     

    (c)  Intellectual
      Property.
      All of
      Seller’s Intellectual Property relating to the Business, as set forth on
      Schedule 1.1(c) attached hereto;

     

    (d)  Goodwill.
      All of
      the goodwill of Seller in, and the going concern value of, the Business, and
      all
      of the business and customer lists and accounts, proprietary information,
      marketing materials and collateral and trade secrets related to the Business;
      

     

    (e)  Records.
      All of
      Seller’s customer logs, location files and records, and other business files and
      records, in each case relating to the Business; and

     

    The
      assets, properties and business of Seller being sold to and purchased by Parent
      under this Section 1.1 are referred to herein collectively as the
“Assets.”

     

    
      
         

      

      
        1

        
          

        

      

      
         

      

    

    1.2.  Excluded
      Assets.
      There
      shall be excluded from the Assets and retained by Seller, all assets identified
      on Schedule 1.2 attached hereto, and all other assets of Seller which are not
      used or held for use in connection with the Business or otherwise necessary
      to
      the operation of the Business (the “Excluded Assets”).

     

    1.3.  Liabilities;
      Employees.

     

    (a)  Liabilities.
      Except
      as otherwise expressly agreed to herein, Purchaser shall not assume, pay or
      be
      liable for any liability or obligation of Seller of any kind or nature at any
      time existing or asserted, whether, known, unknown, fixed, contingent or
      otherwise, not specifically assumed herein by Parent or Purchaser or assumed
      by
      virtue of the acquisition of one or more Assets, and any liability or obligation
      relating to, resulting from or arising out of (i) the Excluded Assets, (ii)
      the
      employees of the Business or (iii) any fact existing or event occurring prior
      to, or relating to the operation of the Business prior to, the date
      hereof.

     

    (b)  Employees,
      Wages and Benefits.

     

    (i)  Seller’s
      only employee is Robertson Price. Seller shall terminate Robertson Price as
      an
      employee effective as of the Closing Date and neither Parent nor Purchaser
      shall
      assume or have any obligations or liabilities with respect to such employee,
      including, without limitation, any severance obligation. 

     

    (ii)  Parent
      shall enter into an employment agreement with Robertson Price, substantially
      in
      the form of Exhibit A hereto, (the “Employment Agreement”). 

     

    (iii)  Seller
      shall pay all wages, salaries, commissions, and the cost of all fringe benefits
      provided to its employee which shall have become due for work performed as
      of
      and through the date hereof, and Seller shall collect and pay all Taxes in
      respect of such wages, salaries, commissions and benefits.

     

    (iv)  Seller
      acknowledges and agrees that neither Parent nor Purchaser shall acquire any
      rights or interests of Seller in, or assume or have any obligations or
      liabilities of Seller under, any benefit plans maintained by Seller, or for
      the
      benefit of the employee of Seller, including, without limitation, obligations
      for severance. 

     

    1.4.  Purchase
      Price; Adjustments. 

     

    (a)  Purchase
      Price.
      In
      consideration of the sale by Seller to Purchaser of the Assets, Parent shall
      pay
      to Seller an amount up to One Million, Three Hundred and Fifty Dollars
      ($1,350,000). 

     

    (b)  Payment
      of Purchase Price.
      The
      Purchase Price will be paid as follows:

     

    (i)  $250,000
      in cash upon execution of this Agreement (“Initial Payment”), which shall be
      non-refundable absent a breach by the Seller of this Agreement; provided that
      for purposes of this Section 1.4(b)(i), a breach of the Employment Agreement
      shall not be deemed a breach of this Agreement; 

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    (ii)  $1,000,000
      in shares of Parent’s common stock, par value $.0001 per share (the “Shares”),
      payable in equal quarterly installments at a price per share which shall be
      equal to the average closing price of the Parent’s common stock over the final
      20 Trading Days of the quarterly period in which certain milestones (the
“Milestones”) set forth in the attached Schedule 1.4(b)(ii) are achieved;
      provided however, that for purposes of calculating the number of shares under
      this Section b(ii) the per share price shall not be less than $2.00; and

     

    (iii)  $100,000
      payable on the second-year anniversary date of the Closing; provided that,
      if
      Robertson Price’s employment with the Company has been terminated (a) by
      Robertson Price due to a breach by Parent or Purchaser of either the Employment
      Agreement or this Agreement (and not cured within the permitted cure-period),
      or
      (b) by Parent for any reason other than for “Cause” (as defined in the
      Employment Agreement), then the payment described in this Section 1.4(b)(iii)
      shall become immediately due and payable on the date of such
      termination.

     

    For
      purposes of this subsection (b) the term “Trading Day” shall mean any day on
      which the Parent’s Common Stock is listed or quoted on any of the New York Stock
      Exchange, the American Stock Exchange, Nasdaq Stock Market or the
      Over-the-Counter Bulletin Board. 

     

    (c)  Escrow.
      The Initial Payment shall be deposited in escrow account of Seller’s Attorney,
      Simon J. Lincoln, Esq. and shall be released on or about January 5, 2006
      (“Release Date”). Absent a court order instructing him otherwise, Escrow Agent
      shall automatically release this Initial Payment to Seller on or after the
      Release Date. 

     

    (d)  Adjustments.
      If
      Robertson Price shall have been terminated by ROO for “Cause” as defined in the
      Employment Agreement within six (6) months of the Closing Date, Seller shall
      return to Parent and Purchaser, 50% of the Shares that shall have been issued
      to
      Seller through such date. 

     

    (e) Shares.
      If,
      through or as a result of any merger, consolidation, sale of all or
      substantially all of the assets of the Parent, reorganization, recapitalization,
      reclassification, stock dividend, stock split, reverse stock split or other
      similar transaction, (i) the outstanding shares of Common Stock are increased,
      decreased or exchanged for a different number or kind of shares or other
      securities of the Parent, or (ii) additional shares or new or different shares
      or other securities of the Parent or other non-cash assets are distributed
      with
      respect to such shares of Common Stock, an appropriate and proportionate
      adjustment shall be made in Section 1.4(b)(ii) with respect to (x) the
      number and kind of shares or other securities subject to issuances of Shares,
      and (y) the minimum price for each Share.

     

    (f) Payment
      Designee.
      Seller
      may designate one or more third parties to receive any payment described in
      this
      Section 1.4. Such designation shall be in writing and delivered as required
      pursuant to Section 9.9. Parent agrees to deliver all subsequent payments to
      such designee(s); provided however, such designee shall be required to execute
      a
      document satisfactory to counsel to Parent and/or Purchaser which shall include
      the representations contained in Sections 3.26, 3.27, 3.28, 3.29, and 3.30
      of
      this Agreement.

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    1.5.  Purchase
      Price Allocation.
      Parent,
      Purchaser and Seller shall mutually agree on the allocation of the Purchase
      Price. Such allocation shall be binding upon Parent, Purchaser and Seller for
      all purposes (including financial accounting purposes, financial and regulatory
      reporting purposes and tax purposes). Parent, Purchaser and Seller each further
      agrees to file its Federal income tax returns and its other tax returns
      reflecting such allocation, Form 8594 and any other reports required by Section
      1060 of the Internal Revenue Code of 1986, as amended (the “Code”).

     

    1.6.  Records
      and Contracts.
      Seller
      shall deliver to Parent and Purchaser all of the Contracts, with such
      assignments thereof and consents to assignments as are necessary to assure
      Parent and Purchaser of the full benefit of the same. Seller shall also deliver
      to Parent and Purchaser all of Seller’s files and records constituting
      Assets.

     

    1.7.  Further
      Assurances.
      Seller
      shall, from time to time after the consummation of the transactions contemplated
      herein, at the request of Parent or Purchaser and without further consideration,
      execute and deliver further instruments of transfer and assignment and take
      such
      other action as Parent or Purchaser may reasonably require to more effectively
      transfer and assign to, and vest in, Parent or Purchaser the Assets free and
      clear of all Liens.

     

    1.8.  Sales
      and Transfer Taxes.
      All
      sales, transfer, use, recordation, documentary, stamp, excise taxes, personal
      property taxes, fees and duties (including any real estate transfer taxes)
      under
      applicable law incurred in connection with this Agreement or the transactions
      contemplated hereby will be borne and paid by Parent.

     

    1.9.  Transfer
      of Subject Assets.
      Seller
      shall deliver or cause to be delivered to Purchaser good and sufficient
      instruments of transfer transferring to Purchaser title to all of the Assets,
      together with all required consents. Such instruments of transfer (a) shall
      contain appropriate warranties and covenants which are usual and customary
      for
      transferring the type of property involved under the laws of the jurisdictions
      applicable to such transfers, (b) shall be in form and substance reasonably
      satisfactory to Purchaser and its counsel, (c) shall effectively vest in
      Purchaser good and marketable title to all of the Assets free and clear of
      all
      Liens (as hereafter defined), and (d) where applicable, shall be accompanied
      by
      evidence of the discharge of all Liens against the Assets.

     

    ARTICLE
      II.

    CLOSING
      AND TERMINATION

     

    2.1.  Closing
      Date.
      Subject
      to the satisfaction of the conditions set forth in Sections 6.1 and 6.2 hereof
      (or the waiver thereof by the party entitled to waive that condition), the
      closing of the sale and purchase of the Assets provided for in Section 1.1
      hereof (the “Closing”) shall take place at the offices of Sichenzia Ross
      Friedman Ference LLP located at 1065 Avenue of the Americas, 21st Floor, New
      York, NY 10018 (or at such other place as the parties may mutually agree upon)
      on or before January 31, 2007 (or on such other date as the parties may mutually
      agree upon). The date on which the Closing shall be held is referred to in
      this
      Agreement as the “Closing Date”

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

    2.2.  Termination
      of Agreement. This
      Agreement may be terminated prior to the Closing as follows:

     

    (a)  
      by
      mutual written consent of the Seller and the Parent; or

     

    (b)  by
      the
      Seller or the Parent if there shall be in effect a final nonappealable order
      of
      a court, government or governmental agency or body of competent jurisdiction
      (“Governmental Body”) of competent jurisdiction restraining, enjoining or
      otherwise prohibiting the consummation of the transactions contemplated hereby;
      it being agreed that the parties hereto shall promptly appeal any adverse
      determination which is not nonappealable (and pursue such appeal with reasonable
      diligence).

     

    2.3.  Procedure
      Upon Termination.
      In the
      event of termination and abandonment by the Parent or the Seller, or both,
      pursuant to Section 2.2 hereof, written notice thereof shall forthwith be given
      to the other party or parties, and this Agreement shall terminate, and the
      purchase of the Assets hereunder shall be abandoned, without further action
      by
      the Parent or the Seller. If this Agreement is terminated as provided herein
      each party shall redeliver all documents, work papers and other material of
      any
      other party relating to the transactions contemplated hereby, whether so
      obtained before or after the execution hereof, to the party furnishing the
      same.

     

    2.4.  Effect
      of Termination.
      In the
      event that this Agreement is validly terminated as provided herein, then each
      of
      the parties shall be relieved of their duties and obligations arising under
      this
      Agreement after the date of such termination and such termination shall be
      without liability to the Parent or the Seller; provided, however, that nothing
      in this Section 2.4 shall relieve the Parent or the Seller of any liability
      for
      a breach of this Agreement.

     

    ARTICLE
      III.

    REPRESENTATIONS
      AND WARRANTIES OF THE SELLER AND THE OWNER

     

    The
      Seller hereby represents and warrants to the Parent and Purchaser
      that:

     

    3.1.  Organization
      and Good Standing.
      The
      Seller is a Delaware corporation duly organized, validly existing and in good
      standing under the laws of the jurisdiction of its incorporation as set forth
      above and has all requisite power and authority to own, lease and operate its
      properties and to carry on its business as now conducted. The Seller is duly
      qualified or authorized to do business as a foreign company and is in good
      standing under the laws of each jurisdiction in which it owns or leases real
      property and each other jurisdiction in which the conduct of its business or
      the
      ownership of its properties requires such qualification or authorization, except
      where failure to be so qualified would not have a material adverse effect on
      the
      business, assets or financial condition of the Seller taken as a whole
      (“Material Adverse Effect”). 

     

    3.2.  Authorization
      of Agreement.
      The
      Seller and the Owner have all requisite, power, authority and legal capacity
      to
      execute and deliver this Agreement, and each other agreement, document, or
      instrument or certificate contemplated by this Agreement or to be executed
      by
      the Seller or the Owner in connection with the consummation of the transactions
      contemplated by this Agreement (together with this Agreement, the “Seller
      Documents”), and to consummate the transactions contemplated hereby and thereby.
      This Agreement has been, and each of the Seller Documents will be at or prior
      to
      the Closing, duly and validly executed and delivered by the Seller or the Owner
      and (assuming the due authorization, execution and delivery by the other parties
      hereto and thereto) this Agreement constitutes, and each of the Seller Documents
      when so executed and delivered will constitute, legal, valid and binding
      obligations of the Seller, enforceable against the Seller or the Owner, as
      applicable, in accordance with their respective terms, subject to applicable
      bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
      creditors’ rights and remedies generally, and subject, as to enforceability, to
      general principles of equity, including principles of commercial reasonableness,
      good faith and fair dealing (regardless of whether enforcement is sought in
      a
      proceeding at law or in equity).

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

    3.3.  Ownership
      of Seller.
      The
      Owner owns 65% of the issued and outstanding shares of the Seller, free and
      clear of any and all liens, charges or encumbrances or any kind or
      nature. 

     

    3.4.  No
      Subsidiaries.
      The
      Seller has no subsidiaries.

     

    3.5.  Conflicts;
      Consents of Third Parties. 

     

    (a)  Except
      as
      set forth in Schedule 3.5(a), none of the execution and delivery by the Seller
      or Owner of this Agreement and the Seller Documents, the consummation of the
      transactions contemplated hereby or thereby, or compliance by the Seller with
      any of the provisions hereof or thereof will (i) conflict with, or result in
      the
      breach of, any provision of the Certificate of Incorporation of the Seller,
      as
      amended to date or the Bylaws of the Seller, as amended to date; (ii) conflict
      with, violate, result in the breach or termination of, or constitute a default
      under any note, bond, mortgage, indenture, license, agreement or other
      instrument or obligation to which the Seller or any Owner is a party or by
      which
      any of them or any of their respective properties or assets is bound; (iii)
      violate any statute, rule, regulation, order or decree of any governmental
      body
      or authority by which the Seller or any Owner is bound; or (iv) result in the
      creation of any Lien upon the properties or assets of the Seller except, in
      case
      of clauses (ii), (iii) and (iv), for such violations, breaches or defaults
      as
      would not, individually or in the aggregate, have a Material Adverse
      Effect.

     

    (b)  Except
      as
      set forth in Schedule 3.5(b), No consent, waiver, approval, order, permit or
      authorization of, or declaration or filing with, or notification to, any person
      or Governmental Body is required on the part of the Seller in connection with
      the execution and delivery of this Agreement or the Seller Documents, or the
      compliance by the Seller as the case may be, with any of the provisions hereof
      or thereof.

     

    3.6.  Ownership
      and Transfer of Assets.
      Seller
      has good and marketable title to all of the Assets free and clear of all
      mortgages, pledges, security interests, charges, liens, restrictions and
      encumbrances of any kind (collectively, “Liens”) whatsoever. Upon the sale,
      assignment, transfer and delivery of the Assets to the Purchaser hereunder
      and
      under the Seller Documents, there will be vested in the Purchaser good,
      marketable and indefeasible title to the Assets, free and clear of all Liens.
      The Assets include all of the assets and properties (i) held for use by Seller
      to conduct the Business as presently conducted and (ii) necessary for Purchaser
      to operate the Business in the same manner as such business is currently
      operated by Seller. All of the tangible Assets are in good repair, have been
      well maintained and are in good operating condition, do not require any material
      modifications or repairs, and comply in all material respects with applicable
      laws, ordinances and regulations, ordinary wear and tear excepted. 

     

    
      
         

      

      
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    3.7.  Financial
      Statements.
      The
      Seller has delivered or caused to be delivered to the Parent such financial
      documents as have been requested by Parent (such financial documents are
      referred to herein as the “Seller Financial Statements”). Each of the Seller
      Financial Statements is complete and correct in all material respects. For
      the
      purposes hereof, the date October 31, 2006, is referred to as the “Seller
      Balance Sheet Date”.

     

    3.8.  No
      Undisclosed Liabilities.
      All of
      Seller’s material indebtedness, obligations and liabilities of any kind (whether
      accrued, absolute, contingent or otherwise, and whether due or to become due)
      are listed in Schedule 3.8.

     

    3.9.  Absence
      of Certain Developments.
      Except
      as expressly contemplated by this Agreement or as set forth on Schedule 3.9,
      since the Seller Balance Sheet Date:

     

    (i)  there
      has
      not been an event which had a Material Adverse Effect nor has there occurred
      any
      event which is reasonably likely to result in a Material Adverse
      Effect;

     

    (ii)  there
      has
      not been any damage, destruction or loss, whether or not covered by insurance,
      with respect to the property and assets of the Seller having a replacement
      cost
      of more than $5,000 for any single loss or $10,000 for all such
      losses;

     

    (iii)  there
      has
      not been any declaration, setting aside or payment of any distribution in
      respect of any partnership interest of the Seller or any repurchase, redemption
      or other acquisition by the Seller of any outstanding partnership, or other
      ownership interest in, the Seller;

     

    (iv)  the
      Seller has not awarded or paid any bonuses to employees of the Seller with
      respect to the fiscal years ended 2005 and 2006 or entered into any employment,
      deferred compensation, severance or similar agreement (nor amended any such
      agreement) or agreed to increase the compensation payable or to become payable
      by it to any of the Seller’s directors, officers, employees, agents or
      representatives or agreed to increase the coverage or benefits available under
      any severance pay, termination pay, vacation pay, company awards, salary
      continuation for disability, sick leave, deferred compensation, bonus or other
      incentive compensation, insurance, pension or other employee benefit plan,
      payment or arrangement made to, for or with such directors, officers, employees,
      agents or representatives (other than normal increases in the ordinary course
      of
      business consistent with past practice and that in the aggregate have not
      resulted in a material increase in the benefits or compensation expense of
      the
      Seller);

     

    (v)  there
      has
      not been any change by the Seller in accounting or Tax reporting principles,
      methods or policies;

     

    (vi)  the
      Seller has not entered into any transaction or Contract or conducted its
      business other than in the ordinary course consistent with past
      practice;

     

    
      
         

      

      
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    (vii)  the
      Seller has not failed to promptly pay and discharge current liabilities except
      where disputed in good faith by appropriate proceedings;

     

    (viii)  the
      Seller has not made any loans, advances or capital contributions to, or
      investments in, any Person or paid any fees or expenses to the Seller or any
      Affiliate of the Seller;

     

    (ix)  the
      Seller has not mortgaged, pledged or subjected to any Lien any of its assets,
      or
      acquired any assets or sold, assigned, transferred, conveyed, leased or
      otherwise disposed of any assets of the Seller, except for assets acquired
      or
      sold, assigned, transferred, conveyed, leased or otherwise disposed of in the
      ordinary course of business consistent with past practice;

     

    (x)  the
      Seller has not discharged or satisfied any Lien, or paid any obligation or
      liability (fixed or contingent), except in the ordinary course of business
      consistent with past practice and which, in the aggregate, would not be material
      to the Seller;

     

    (xi)  the
      Seller has not canceled or compromised any debt or claim or amended, canceled,
      terminated, relinquished, waived or released any Contract or right except in
      the
      ordinary course of business consistent with past practice and which, in the
      aggregate, would not be material to the Seller;

     

    (xii)  the
      Seller has not made or committed to make any capital expenditures or capital
      additions or betterments in excess of $25,000 individually or $100,000 in the
      aggregate;

     

    (xiii)  the
      Seller has not instituted or settled any material legal proceeding;
      and

     

    (xiv)  the
      Seller has not agreed to do anything set forth in this Section 3.9.

     

    3.10.  Taxes.

     

    (a)  Except
      as
      set forth on Schedule 3.10, (A) all Tax returns required to be filed by or
      on
      behalf of the Seller have been properly prepared and duly and timely filed
      with
      the appropriate taxing authorities in all jurisdictions in which such Tax
      returns are required to be filed (after giving effect to any valid extensions
      of
      time in which to make such filings), and all such Tax returns were true,
      complete and correct in all material respects; (B) all Taxes payable by or
      on
      behalf of the Seller or in respect of its income, assets or operations have
      been
      fully and timely paid, and adequate reserves or accruals for Taxes have been
      provided with respect to any period for which Tax Returns have not yet been
      filed or for which Taxes are not yet due and owing; and (C) the Seller has
      not
      executed or filed with the Internal Revenue Service (the “IRS”) or any other
      taxing authority any agreement, waiver or other document or arrangement
      extending or having the effect of extending the period for assessment or
      collection of Taxes (including, but not limited to, any applicable statute
      of
      limitation), and no power of attorney with respect to any Tax matter is
      currently in force. “Tax or Taxes” means all federal, state, local or other
      taxes or similar governmental charges, fees, levies or assessments.

     

    (b)  The
      Seller has complied in all material respects with all applicable laws (as
      defined in Section 3.18), rules and regulations relating to the payment and
      withholding of Taxes and has duly and timely withheld from employee salaries,
      wages and other compensation and has paid over to the appropriate taxing
      authorities all amounts required to be so withheld and paid over for all periods
      under all Laws.

     

    
      
         

      

      
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    (c)  Parent
      has received complete copies of (A) all federal, state, local and foreign income
      or franchise Tax Returns of the Seller relating to the taxable periods since
      inception of Seller (B) any audit report issued within the last three years
      relating to any material Taxes due from or with respect to its income, assets
      or
      operations. All income and franchise Tax returns filed by or on behalf of the
      Seller for the taxable years ended on the respective dates set forth on Schedule
      3.10 have been examined by the relevant taxing authority or the statute of
      limitations with respect to such Tax Returns has expired.

     

    (d)  Schedule
      3.10 lists all material types of Taxes paid and material types of Tax returns
      filed by or on behalf of the Seller. Except as set forth on Schedule 3.10,
      no
      claim has been made by a taxing authority in a jurisdiction where the Seller
      does not file Tax Returns such that it is or may be subject to taxation by
      that
      jurisdiction. 

     

    (e)  Except
      as
      set forth on Schedule 3.10, all deficiencies asserted or assessments made as
      a
      result of any examinations by the IRS or any other taxing authority of the
      Tax
      Returns of or covering or including the Seller that are owed by the Seller
      have
      been fully paid, and there are no other audits or investigations by any taxing
      authority in progress, nor has the Seller received any written notice from
      any
      taxing authority that it intends to conduct such an audit or investigation.
      No
      issue has been raised in writing by a federal, state, local or foreign taxing
      authority in any current or prior examination which, by application of the
      same
      or similar principles, could reasonably be expected to result in a proposed
      deficiency for any subsequent taxable period.

     

    (f)  Except
      as
      set forth on Schedule 3.10, the Seller has not (A) agreed to or is not required
      to make any adjustments pursuant to Section 481(a) of the Code or any similar
      provision of state, local or foreign law by reason of a change in accounting
      method initiated by the Seller or has any knowledge that the IRS has proposed
      any such adjustment or change in accounting method, or has any application
      pending with any taxing authority requesting permission for any changes in
      accounting methods that relate to the business or operations of the Seller,
      (B)
      executed or entered into a closing agreement pursuant to Section 7121 of the
      Code or any predecessor provision thereof or any similar provision of state,
      local or foreign law with respect to the Seller, or (C) requested any extension
      of time within which to file any Tax Return, which Tax Return has since not
      been
      filed within the period of limitations.

     

    (g)  No
      property owned by the Seller is (i) property required to be treated as being
      owned by another Person pursuant to the provisions of Section 168(f)(8) of
      the
      Internal Revenue Code of 1954, as amended and in effect immediately prior to
      the
      enactment of the Tax Reform Act of 1986, (ii) constitutes “tax-exempt use
      property” within the meaning of Section 168(h)(1) of the Code or (iii) is
“tax-exempt bond financed property” within the meaning of Section 168(g) of the
      Code.

     

    (h)  The
      Seller is not a foreign person within the meaning of Section 1445 of the
      Code.

     

    
      
         

      

      
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    (i)  The
      Seller is not a party to any tax sharing or similar agreement or arrangement
      (whether or not written) pursuant to which it will have any obligation to make
      any payments after the Closing.

     

    (j)  There
      is
      no contract, agreement, plan or arrangement covering any person that,
      individually or collectively, could give rise to the payment of any amount
      that
      would not be deductible by the Parent, the Affiliates or their respective
      affiliates by reason of Section 280G of the Code, or would constitute
      compensation in excess of the limitation set forth in Section 162(m) of the
      Code.

     

    (k)  The
      Seller is not subject to any private letter ruling of the IRS or comparable
      rulings of other taxing authorities.

     

    (l)  There
      are
      no liens as a result of any unpaid Taxes upon any of the assets of the
      Seller.

     

    (m)  Except
      as
      set forth on Schedule 3.10, the Seller has no elections in effect for federal
      income tax purposes under Sections 108, 168, 441, 463, 472, 1017, 1033 or 4977
      of the Code.

     

    (n)  The
      Seller has never owned any Subsidiaries and has never been a member of any
      consolidated, combined or affiliated group of corporations for any Tax
      purposes.

     

    3.11.  Real
      Property.

     

    (a)  Seller
      does not own any interest in any real property. Seller has no interests
      (including leases) in real property.

     

    (b)  The
      Seller does not own or hold, and is not obligated under or a party to, any
      option, right of first refusal or other contractual right to purchase, acquire,
      sell, assign or dispose of any real estate or any portion thereof or interest
      therein.

     

    3.12.  Tangible
      Personal Property.

     

    (a)  Schedule
      3.12(a) sets forth all leases of personal property (“Personal Property Leases”)
      involving annual payments in excess of $1,000 relating to personal property
      used
      in the business of the Seller or to which the Seller is a party or by which
      the
      properties or assets of the Seller is bound. The Seller has delivered or
      otherwise made available to the Parent true, correct and complete copies of
      the
      Personal Property Leases, together with all amendments, modifications or
      supplements thereto. 

     

    (b)  The
      Seller has a valid leasehold interest under each of the Personal Property Leases
      under which it is a lessee, subject to applicable bankruptcy, insolvency,
      reorganization, moratorium and similar laws affecting creditors’ rights and
      remedies generally and subject, as to enforceability, to general principles
      of
      equity (regardless of whether enforcement is sought in a proceeding at law
      or in
      equity), and there is no default under any Personal Property Lease by the Seller
      or, to the best knowledge of the Seller, by any other party thereto, and no
      event has occurred that with the lapse of time or the giving of notice or both
      would constitute a default thereunder.

     

    
      
         

      

      
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    (c)  The
      Seller has good and marketable title to all of the items of tangible personal
      property utilized in the Business (except as sold or disposed of subsequent
      to
      the date thereof in the ordinary course of business consistent with past
      practice), free and clear of any and all liens other than as set forth on
      Schedule 3.12. All such items of tangible personal property which, individually
      or in the aggregate, are material to the operation of the business of the Seller
      are in good condition and in a state of good maintenance and repair (ordinary
      wear and tear excepted) and are suitable for the purposes used. 

     

    (d)  All
      of
      the items of tangible personal property used by the Seller under the Personal
      Property Leases are in good condition and repair (ordinary wear and tear
      excepted) and are suitable for the purposes used. 

     

    3.13.  Intangible
      Property.
      Schedule
      3.13 contains a complete and correct list of each patent, trademark, trade
      name,
      service mark and copyright owned or used by the Seller as well as all
      registrations thereof and pending applications therefor, and each license or
      other agreement relating thereto. Each of the foregoing is owned by the party
      shown on such Schedule as owning the same, free and clear of all mortgages,
      claims, liens, security interests, charges and encumbrances and is in good
      standing and not the subject of any challenge. There have been no claims made
      and the Seller has not received any notice or otherwise knows or has reason
      to
      believe that any of the foregoing is invalid or conflicts with the asserted
      rights of others. The Seller possesses, owns or licenses all patents, patent
      licenses, trade names, trademarks, service marks, brand marks, brand names,
      copyrights, know-how, formulae, designs, logos and other proprietary and trade
      rights necessary for the conduct of its business as now conducted, not subject
      to any restrictions and without any known conflict with the rights of others
      and
      has not forfeited or otherwise relinquished any such patent, patent license,
      trade name, trademark, service mark, brand mark, brand name, copyright,
      know-how, formulate or other proprietary right necessary for the conduct of
      its
      business as conducted on the date hereof. The Seller is not under any obligation
      to pay any royalties or similar payments in connection with any license to
      any
      Affiliate thereof. As used in this Agreement, “Affiliate” means, with respect to
      any person, any other person directly or indirectly controlling, controlled
      by
      or under common control with such person and for purposes of individuals,
      Affiliates would include an individual’s spouse and minor children.

     

    3.14.  Material
      Contracts.
      Schedule
      3.14 sets forth all of the following Contracts to which the Seller is a party
      or
      by which it is bound (collectively, the “Material Contracts”): (i) Contracts
      with any current officer or director of the Seller; (ii) Contracts with any
      labor union or association representing any employee of the Seller; (iii)
      Contracts pursuant to which any party is required to purchase or sell a stated
      portion of its requirements or output from or to another party; (iv) Contracts
      for the sale of any of the assets of the Seller other than in the ordinary
      course of business or for the grant to any person of any preferential rights
      to
      purchase any of its assets; (v) joint venture agreements; (vi) material
      Contracts containing covenants of the Seller not to compete in any line of
      business or with any person in any geographical area or covenants of any other
      person not to compete with the Seller in any line of business or in any
      geographical area; (vii) Contracts relating to the acquisition by the Seller
      of
      any operating business or the capital stock of any other person; (viii)
      Contracts relating to the borrowing of money; or (ix) any other Contracts,
      other
      than Real Property Leases. There have been made available to the Parent, its
      affiliates and their representatives true and complete copies of all of the
      Material Contracts. Except as set forth on Schedule 3.14, all of the Material
      Contracts and other agreements are in full force and effect and are the legal,
      valid and binding obligation of the Seller, enforceable against it in accordance
      with its terms, subject to applicable bankruptcy, insolvency, reorganization,
      moratorium and similar laws affecting creditors’ rights and remedies generally
      and subject, as to enforceability, to general principles of equity (regardless
      of whether enforcement is sought in a proceeding at law or in equity). Except
      as
      set forth on Schedule 3.14, the Seller is not in default in any material respect
      under any Material Contracts, nor, to the knowledge of the Seller, is any other
      party to any Material Contract in default thereunder in any material
      respect.

     

    
      
         

      

      
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    3.15.  Employee
      Benefits. 

     

    (a)  Schedule
      3.15(a) sets forth a complete and correct list of (i) all “employee benefit
      plans”, as defined in Section 3(3) of the Employee Retirement Income Security
      Act of 1974, as amended (“ERISA”), and any other pension plans or employee
      benefit arrangements, programs or payroll practices (including, without
      limitation, severance pay, vacation pay, company awards, salary continuation
      for
      disability, sick leave, retirement, deferred compensation, bonus or other
      incentive compensation, stock purchase arrangements or policies,
      hospitalization, medical insurance, life insurance and scholarship programs)
      maintained by the Seller or to which the Seller contributes or is obligated
      to
      contribute thereunder with respect to such employee (“Employee Benefit Plans”)
      and (ii) “employee pension plans”, as defined in Section 3(2) of ERISA (“Pension
      Plans”). 

     

    3.16.  Labor.

     

    (a)  Except
      as
      set forth on Schedule 3.16(a), the Seller is not party to any labor or
      collective bargaining agreement and there are no labor or collective bargaining
      agreements which pertain to employees of the Seller. The Seller has delivered
      or
      otherwise made available to the Parent true, correct and complete copies of the
      labor or collective bargaining agreements listed on Schedule 3.16(a), together
      with all amendments, modifications or supplements thereto.

     

    (b)  Except
      as
      set forth on Schedule 3.16(b), no employees of the Seller are represented by
      any
      labor organization. No labor organization or group of employees of the Seller
      has made a pending demand for recognition, and there are no representation
      proceedings or petitions seeking a representation proceeding presently pending
      or, to the best knowledge of the Seller, threatened to be brought or filed,
      with
      the National Labor Relations Board or other labor relations tribunal. There
      is
      no organizing activity involving the Seller pending or, to the best knowledge
      of
      the Seller, threatened by any labor organization or group of employees of the
      Seller.

     

    (c)  There
      are
      no (i) strikes, work stoppages, slowdowns, lockouts or arbitrations or (ii)
      material grievances or other labor disputes pending or, to the best knowledge
      of
      the Seller, threatened against or involving the Seller. There are no unfair
      labor practice charges, grievances or complaints pending or, to the best
      knowledge of the Seller, threatened by or on behalf of any employee or group
      of
      employees of the Seller.

     

    
      
         

      

      
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    3.17.  Litigation.
      Except
      as set forth in Schedule 3.17, there is no suit, action, proceeding, or, to
      the
      knowledge of Seller, investigation, claim or order pending or threatened against
      the Seller (or to the knowledge of the Seller pending or threatened, against
      any
      of the officers, directors or key employees of the Seller with respect to their
      business activities on behalf of the Seller), or to which the Seller is
      otherwise a party, which, if adversely determined, would have a Material Adverse
      Effect, before any court, or before any governmental department, commission,
      board, agency, or instrumentality; nor to the knowledge of the Seller is there
      any reasonable basis for any such action, proceeding, or investigation. The
      Seller is not subject to any judgment, order or decree of any court or
      governmental agency except to the extent the same are not reasonably likely
      to
      have a Material Adverse Effect and is not engaged in any legal action to recover
      monies due it or for damages sustained by it. 

     

    3.18.  Compliance
      with Laws; Permits.

     

    The
      Seller is in compliance with all federal, state and local statutes, laws, rules,
      regulations, orders and ordinances (“Laws”) applicable to it or to the conduct
      of its business or operations or the use of its properties (including any leased
      properties) and assets, except for such non-compliances as would not,
      individually or in the aggregate, have a Material Adverse Effect. The Seller
      has
      all governmental permits and approvals from state, federal or local authorities
      which are required for it to operate its business, except for those the absence
      of which would not, individually or in the aggregate, have a Material Adverse
      Effect. 

     

    3.19.  Environmental
      Matters.
      Except
      as set forth on Schedule 3.19 hereto:

     

    (a)  the
      operations of the Seller are in compliance with all applicable laws promulgated
      by any governmental entity which prohibit, regulate or control any hazardous
      material or hazardous material activity (“Environmental Laws”) and all permits
      issued pursuant to Environmental Laws or otherwise;

     

    (b)  the
      Seller has obtained all permits required under all applicable Environmental
      Laws
      necessary to operate its business;

     

    (c)  the
      Seller is not the subject of any outstanding written order or Contract with
      any
      governmental authority or person respecting (i) Environmental Laws, (ii)
      Remedial Action or (iii) any release or threatened release of a Hazardous
      Material (“Release”);

     

    (d)  the
      Seller has not received any written communication alleging either or both that
      it may be in violation of any Environmental Law, or any permit issued pursuant
      to Environmental Law, or may have any liability under any Environmental
      Law;

     

    (e)  the
      Seller does not have any current contingent liability in connection with any
      Release into the indoor or outdoor environment (whether on-site or
      off-site);

     

    
      
         

      

      
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    (f)  there
      are
      no investigations of the business, operations, or currently or previously owned,
      operated or leased property of the Seller pending or, to the Seller’s knowledge,
      threatened which could lead to the imposition of any liability pursuant to
      Environmental Law;

     

    (g)  to
      the
      Seller’s knowledge, there is not located at any of the properties of the Seller
      any (i) underground storage tanks, (ii) asbestos-containing material or (iii)
      equipment containing polychlorinated biphenyls; and,

     

    (h)  the
      Seller has provided to the Parent all environmentally related audits, studies,
      reports, analyses, and results of investigations that have been performed with
      respect to the currently or previously owned, leased or operated properties
      of
      the Seller.

     

    3.20.  Insurance.
      Schedule
      3.20 sets forth a complete and accurate list of all policies of insurance of
      any
      kind or nature covering the Seller or any of its employees, properties or
      assets, including, without limitation, policies of life, disability, fire,
      theft, workers compensation, employee fidelity and other casualty and liability
      insurance. All such policies are in full force and effect, and, to the Seller’s
      knowledge, it is not in default of any provision thereof, except for such
      defaults as would not, individually or in the aggregate, have a Material Adverse
      Effect. 

     

    3.21.  Inventories;
      Receivables; Payables.

     

    (a)  The
      inventories of the Seller are in good and marketable condition, and are saleable
      in the ordinary course of business.

     

    (b)  The
      Seller’s accounts receivable through the date of this Agreement shall be the
      responsibility of the Seller. Such account receivables have arisen from bona
      fide transactions in the ordinary course of business consistent with past
      practice. 

     

    (c)  Any
      accounts payable and/or any liability related to the inventory purchased by
      Seller pursuant to this Agreement shall be the responsibility of the Purchaser.
      Such accounts payable are the result of bona fide transactions in the ordinary
      course of business.

     

    3.22.  Customers
      and Suppliers.
      Schedule
      3.22 sets forth a list of all customers and suppliers of the Seller, showing
      the
      approximate total sales by the Seller to each such customer and the approximate
      total purchases by the Seller from each such supplier, during the last one
      year
      period ended November 30, 2006.
      Since
      December 1, 2006, there has not been any material adverse change in the business
      relationship of the Seller with any customer or supplier listed on Schedule
      3.22. 

     

    3.23.  Banks.
      Schedule
      3.23 contains a complete and correct list of the names and locations of all
      banks in which the Seller has accounts or safe deposit boxes and the names
      of
      all persons authorized to draw thereon or to have access thereto. Except as
      set
      forth on Schedule 3.23, no person holds a power of attorney to act on behalf
      of
      the Seller.

     

    3.24.  No
      Misrepresentations.
      No
      representation or warranty of the Seller and the Owner contained in this
      Agreement or in any schedule hereto or in any certificate or other instrument
      furnished by the Seller and the Owner to the Parent pursuant to the terms
      hereof, taken as a whole, contains any untrue statement of a material fact
      or
      omits to state a material fact necessary to make the statements contained herein
      or therein not misleading.

     

    
      
         

      

      
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    3.25.  Financial
      Advisors.
      No
      Person has acted, directly or indirectly, as a broker, finder or financial
      advisor for the Seller in connection with the transactions contemplated by
      this
      Agreement and no Person is entitled to any fee or commission or like payment
      in
      respect thereof.

     

    3.26.  Information.
      Seller
      and
      Owner have been furnished with or have had access at the EDGAR Website of the
      Securities and Exchange Commission to all of Parent’s filings with the SEC. In
      addition, the Seller has received in writing from Parent such other information
      concerning its operations, financial condition and other matters as the Seller
      and Owner have requested in writing and considered all factors the Sellers
      deem
      material in deciding on the advisability of investing in the Shares.

     

    3.27.  Investment
      Intention.
      The
      Seller is acquiring the Shares for its own account, for investment purposes
      only
      and not with a view to the distribution (as such term is used in Section 2(11)
      of the Securities Act of 1933, as amended (the “Securities Act”). The Seller
      understands that the Shares have not been registered under the Securities Act
      and cannot be sold unless subsequently registered under the Securities Act
      or an
      exemption from such registration is available.

     

    3.28.  Investment
      Experience.
      The
      Seller is in a financial position to hold the Shares and is able to bear the
      economic risk and withstand a complete loss of the Seller’s investment in the
      Shares. The Seller recognizes that the Shares involve a high degree of risk.
      The
      Seller is a sophisticated investor, is able to fend for itself in the
      transaction contemplated by this Agreement, and has such knowledge and
      experience in financial and business matters that the Seller is capable of
      evaluating the merits and risks of the prospective investment in the
      Shares. 

     

    3.29.  Restricted
      Securities. The
      Seller understands that the Shares have not been registered under the Securities
      Act, and will not sell, offer to sell, assign, pledge, hypothecate or otherwise
      transfer any of Shares unless (i) pursuant to an effective registration
      statement under the Securities Act, (ii) such holder provides the Company with
      an opinion of counsel, in form and substance reasonably acceptable to the
      Company, to the effect that a sale, assignment or transfer of the Shares may
      be
      made without registration under the Securities Act and the transferee agrees
      to
      be bound by the terms and conditions of this Agreement, (iii) such holder
      provides the Company with reasonable assurances (in the form of seller and
      broker representation letters) that the Shares can be sold pursuant to Rule
      144
      promulgated under the Securities Act (“Rule
      144”)
      or
      (iv) pursuant to Rule 144(k) promulgated under the Securities Act following
      the applicable holding period. 

     

    3.30.  Legend.
      The
      Seller agrees that the certificates for the Shares shall bear the following
      legend and that the Seller will comply with the restrictions on transfer set
      forth in such legend:

     

    THESE
      SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION
      OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
      REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
      ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
      EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
      AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
      REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
      SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR
      TO
      SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
      COMPANY.

     

    
      
         

      

      
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    3.31.  Patriot
      Act.
      The
      Seller certifies that, to the best of the Seller’s knowledge, the Seller has not
      been designated, and is not owned or controlled, by a “suspected terrorist” as
      defined in Executive Order 13224. The Seller hereby acknowledges that the Parent
      seeks to comply with all applicable Laws concerning money laundering and related
      activities. In furtherance of those efforts, the Seller hereby represents,
      warrants and agrees that: (i) none of the cash or property owned by the Seller
      has been or shall be derived from, or related to, any activity that is deemed
      criminal under United States law; and (ii) no contribution or payment by the
      Seller has, and this Agreement will not, cause the Seller to be in violation
      of
      the United States Bank Secrecy Act, the United States International Money
      Laundering Control Act of 1986 or the United States International Money
      Laundering Abatement and Anti-Terrorist Financing Act of 2001. 

     

    ARTICLE
      IV.

    REPRESENTATIONS
      AND WARRANTIES OF

    PARENT
      AND PURCHASER

     

    The
      Parent and the Purchaser jointly and severally represent and warrant
      that:

     

    4.1.  Organization
      and Good Standing.

     

    (a)  The
      Parent is a corporation duly organized, validly existing and in good standing
      under the laws of the State of Delaware; and

     

    (b)  Purchaser
      is a corporation duly incorporated and validly existing and in good standing
      under the laws of the State of Delaware.

     

    4.2.  Authorization
      of Agreement.

     

    (a)  The
      Parent and the Purchaser have full corporate power and authority to execute
      and
      deliver this Agreement, the Employment Agreement and each other agreement,
      document, instrument or certificate contemplated by this Agreement or to be
      executed by the Parent in connection with the consummation of the transactions
      contemplated hereby and thereby (together with the Employment Agreement, the
      “Parent Documents”), and to consummate the transactions contemplated hereby and
      thereby. The execution, delivery and performance by the Parent and Purchaser
      of
      this Agreement and each Parent Document have been duly authorized by all
      necessary corporate action on behalf of the Parent and Purchaser. This Agreement
      has been, and each Parent Document will be at or prior to the Closing, duly
      executed and delivered by the Parent and (assuming the due authorization,
      execution and delivery by the other parties hereto and thereto) this Agreement
      constitutes, and each Parent Document when so executed and delivered will
      constitute, legal, valid and binding obligations of the Parent and Purchaser,
      enforceable against the Parent and Purchaser in accordance with their respective
      terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium
      and similar laws affecting creditors’ rights and remedies generally, and
      subject, as to enforceability, to general principles of equity, including
      principles of commercial reasonableness, good faith and fair dealing (regardless
      of whether enforcement is sought in a proceeding at law or in
      equity).

     

    
      
         

      

      
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    (b)  Purchaser
      has the corporate power, capacity and authority to enter into and complete
      this
      Agreement.

     

    4.3.  Conflicts;
      Consents of Third Parties. 

     

    (a)  Except
      as
      set forth on Schedule 4.3 hereto, neither of the execution and delivery by
      the
      Parent or Purchaser of the Parent Documents, nor the compliance by the Parent
      and Purchaser with any of the provisions hereof or thereof will (i) conflict
      with, or result in the breach of, any provision of the certificate of
      incorporation, or by-laws of the Parent or Purchaser, respectively, (ii)
      conflict with, violate, result in the breach of, or constitute a default under
      any note, bond, mortgage, indenture, license, agreement or other obligation
      to
      which the Parent or Purchaser is a party or by which the Parent, Purchaser
      or
      their respective properties or assets are bound or (iii) violate any statute,
      rule, regulation, order or decree of any governmental body or authority by
      which
      the Parent or Purchaser is bound, except, in the case of clauses (ii) and (iii),
      for such violations, breaches or defaults as would not, individually or in
      the
      aggregate, have a material adverse effect on the business, properties, results
      of operations, prospects, conditions (financial or otherwise) of the Parent
      and
      its subsidiaries, taken as a whole.

     

    (b)  No
      consent, waiver, approval, order, permit or authorization of, or declaration
      or
      filing with, or notification to, any Person or Governmental Body is required
      on
      the part of the Parent in connection with the execution and delivery of this
      Agreement or the Parent Documents or the compliance by Parent with any of the
      provisions hereof or thereof.

     

    4.4.  Litigation.
      There
      are no Legal Proceedings pending or, to the best knowledge of the Parent,
      threatened that are reasonably likely to prohibit or restrain the ability of
      the
      Parent or Purchaser to enter into this Agreement or consummate the transactions
      contemplated hereby.

     

    4.5.  Financial
      Advisors.
      No
      person has acted, directly or indirectly, as a broker, finder or financial
      advisor for the Parent in connection with the transactions contemplated by
      this
      Agreement and no person is entitled to any fee or commission or like payment
      in
      respect thereof.

     

    4.6.  Patriot
      Act.
      The
      Parent certifies that, to the best of the Parent’s knowledge, the Parent has not
      been designated, and is not owned or controlled, by a “suspected terrorist” as
      defined in Executive Order 13224. The Parent hereby acknowledges that the Seller
      seeks to comply with all applicable Laws concerning money laundering and related
      activities. In furtherance of those efforts, the Parent hereby represents,
      warrants and agrees that: (i) none of the cash or property owned by the Seller
      has been or shall be derived from, or related to, any activity that is deemed
      criminal under United States law; and (ii) no contribution or payment by the
      Parent has, and this Agreement will not, cause the Parent to be in violation
      of
      the United States Bank Secrecy Act, the United States International Money
      Laundering Control Act of 1986 or the United States International Money
      Laundering Abatement and Anti-Terrorist Financing Act of 2001.

     

    
      
         

      

      
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    4.7.  No
      Knowledge of Breaches.
      Parent
      does not have actual knowledge of any breach of any representation and warranty
      made by Seller and the Owner hereunder.

     

    ARTICLE
      V.

    COVENANTS

     

    5.1.  Access
      to Information.
      The
      Seller and Owner agree that, prior to the Closing Date, the Parent shall be
      entitled, through its officers, employees and representatives (including,
      without limitation, its legal advisors and accountants), to make such
      investigation of the properties, businesses and operations of the Seller and
      such examination of the books, records and financial condition of the Seller
      as
      it reasonably requests and to make extracts and copies of such books and
      records. Any such investigation and examination shall be conducted during
      regular business hours and under reasonable circumstances, and the Seller shall
      cooperate fully therein. No investigation by the Parent prior to or after the
      date of this Agreement shall diminish or obviate any of the representations,
      warranties, covenants or agreements of the Seller contained in the Seller
      Documents. In
      order
      that the Parent may have full opportunity to make such physical, business,
      accounting and legal review, examination or investigation as it may reasonably
      request of the affairs of the Seller, Seller shall cause its officers,
      employees, consultants, agents, accountants, attorneys and other representatives
      to cooperate fully with such representatives in connection with such review
      and
      examination.

     

    5.2.  Conduct
      of the Business Pending the Closing.

     

    (a)  Except
      as
      otherwise expressly contemplated by this Agreement or with the prior written
      consent of the Parent, the Seller shall:

     

    (i)  conduct
      its business only in the ordinary course consistent with past
      practice;

     

    (ii)  use
      its
      best efforts to (A) preserve its present business operations, organization
      and
      goodwill and (B) preserve its present relationship with Persons having business
      dealings with it;

     

    (iii)  maintain
      (A) all of its assets and properties in their current condition, ordinary wear
      and tear excepted and (B) insurance upon all of its properties and assets in
      such amounts and of such kinds comparable to that in effect on the date of
      this
      Agreement;

     

    (iv)  (A)
      maintain its books, accounts and records in the ordinary course of business
      consistent with past practices, (B) continue to collect accounts receivable
      and
      pay accounts payable utilizing normal procedures and without discounting or
      accelerating payment of such accounts, and (C) comply with all contractual
      and
      other obligations applicable to its operation; and

     

    
      
         

      

      
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    (v)  comply
      in
      all material respects with applicable Laws.

     

    (b)  Except
      as
      otherwise expressly contemplated by this Agreement or with the prior written
      consent of the Parent, the Seller shall not:

     

    (i)  except
      for trade payables and for indebtedness for borrowed money incurred in the
      ordinary course of business and consistent with past practice, borrow monies
      for
      any reason or draw down on any line of credit or debt obligation, or become
      the
      guarantor, surety, endorser or otherwise liable for any debt, obligation or
      liability (contingent or otherwise) of any other Person; 

     

    (ii)  place
      a
      Lien (except for liens that do not materially impair the use of the property
      subject thereto in their respective businesses as presently conducted) on any
      of
      its properties or assets (whether tangible or intangible);

     

    (iii)  acquire
      any material properties or assets or sell, assign, transfer, convey, lease
      or
      otherwise dispose of any of its material properties or assets (except for fair
      consideration in the ordinary course of business consistent with past
      practice);

     

    (iv)  cancel
      or
      compromise any debt or claim or waive or release any material right except
      in
      the ordinary course of business consistent with past practice;

     

    (v)  enter
      into any commitment for capital expenditures in excess of $1,000 for any
      individual commitment and $5,000 for all commitments in the
      aggregate;

     

    (vi)  introduce
      any material change with respect to its operation, including any material change
      in the types, nature, composition or quality of its products or services,
      experience any material change in any contribution of its product lines to
      its
      revenues or net income, or, other than in the ordinary course of business,
      make
      any change in product specifications or prices or terms of distributions of
      such
      products; 

     

    (vii)  enter
      into any transaction or make or enter into any Contract which by reason of
      its
      size or otherwise is not in the ordinary course of business consistent with
      past
      practice;

     

    (viii)  enter
      into or agree to enter into any merger or consolidation with, any corporation
      or
      other entity, and not engage in any new business or invest in, make a loan,
      advance or capital contribution to, or otherwise acquire the securities of
      any
      other Person;

     

    (ix)  except
      for transfers of cash pursuant to normal cash management practices, make any
      investments in or loans to, or pay any fees or expenses to, or enter into or
      modify any Contract with any Affiliate; or

     

    (x)  agree
      to
      do anything prohibited by this Section 5.2 or anything which would make any
      of
      the representations and warranties of the Seller in this Agreement or the Seller
      Documents untrue or incorrect in any material respect as of any time through
      and
      including the Effective Time.

     

    
      
         

      

      
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    5.3.  Consents.
      The
      Seller shall use its best efforts, and the Parent shall cooperate with the
      Seller, to obtain at the earliest practicable date all consents and approvals
      required to consummate the transactions contemplated by this Agreement,
      including, without limitation, the consents and approvals referred to in Section
      3.5(b) hereof; provided, however, that neither the Seller nor the Parent shall
      be obligated to pay any consideration therefor to any third party from whom
      consent or approval is requested.

     

    5.4.  Other
      Actions.
      Each of
      the Seller, Owner, Parent and Purchaser shall use its best efforts to (i) take
      all actions necessary or appropriate to consummate the transactions contemplated
      by this Agreement and (ii) cause the fulfillment at the earliest practicable
      date of all of the conditions to their respective obligations to consummate
      the
      transactions contemplated by this Agreement.

     

    5.5.  No
      Solicitation.
      The
      Seller will not, and will not cause or permit any of its partners, officers,
      employees, representatives or agents (collectively, the “Representatives”) to,
      directly or indirectly, (i) discuss, negotiate, undertake, authorize, recommend,
      propose or enter into, either as the proposed surviving, merged, acquiring
      or
      acquired corporation, any transaction involving a merger, consolidation,
      business combination, purchase or disposition of any amount of the assets or
      capital stock or other equity interest in it other than the transactions
      contemplated by this Agreement (an “Acquisition Transaction”), (ii) facilitate,
      encourage, solicit or initiate discussions, negotiations or submissions of
      proposals or offers in respect of an Acquisition Transaction, (iii) furnish
      or
      cause to be furnished, to any Person, any information concerning its business,
      operations, properties or assets in connection with an Acquisition Transaction,
      or (iv) otherwise cooperate in any way with, or assist or participate in,
      facilitate or encourage, any effort or attempt by any other Person to do or
      seek
      any of the foregoing. The Seller will inform the Parent in writing immediately
      following the receipt by the Seller or any Representative of any proposal or
      inquiry in respect of any Acquisition Transaction.

     

    5.6.  Preservation
      of Records.
      The
      Seller, Owner, the Parent and Purchaser agree that each of them shall preserve
      and keep the records held by it relating to the business of the Seller for
      a
      period of three years from the Closing Date (six years with respect to tax
      related records) and shall make such records and personnel available to the
      other as may be reasonably required by such party in connection with, among
      other things, preparation of financial statements, disclosure of information
      to
      the Securities and Exchange Commission, stock exchange or similar entity, any
      insurance claims by, legal proceedings against or governmental investigations
      of
      the Seller, the Parent or Purchaser or any of their Affiliates or in order
      to
      enable the Seller, the Parent or Purchaser to comply with their respective
      obligations under this Agreement, the Employment Agreement and each other
      agreement, document or instrument contemplated hereby or thereby. In the event
      the Seller, the Parent or Purchaser wishes to destroy such records after that
      time, such party shall first give ninety (90) days prior written notice to
      the
      other and such other party shall have the right at its option and expense,
      upon
      prior written notice given to such party within that ninety (90) day period,
      to
      take possession of the records within one hundred and eighty (180) days after
      the date of such notice.

     

    
      
         

      

      
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    5.7.  Publicity.
      Neither
      the Seller, the Parent nor the Purchaser shall issue any press release or public
      announcement concerning this Agreement or the transactions contemplated hereby
      without obtaining the prior written approval of the other party hereto, which
      approval will not be unreasonably withheld or delayed, unless, in the sole
      judgment of the Parent or the Seller, disclosure is otherwise required by
      applicable Law or by the applicable rules of any stock exchange on which the
      Parent or the Seller lists securities, provided that, to the extent required
      by
      applicable Law, the party intending to make such release shall use its best
      efforts consistent with such applicable Law to consult with the other party
      with
      respect to the text thereof. 

     

    5.8.  Use
      of Name.
      The
      Seller hereby agrees that upon the consummation of the transactions contemplated
      hereby, the Parent and Purchaser shall have the sole right to the use of the
      name “My Video Daily” and variations thereof and the Seller shall not, and shall
      not cause or permit any Affiliate to use such name or any variation or
      simulation thereof. 

     

    5.9.  Piggyback
      Registration.
      (i) If
      the Company proposes to register any of its Common Stock under the Securities
      Act, whether as a result of an offering for its own account or the account
      of
      others (but excluding any registrations to be effected for Forms S-4 or S-8
      or
      other applicable successor Forms) on a Registration Statement, the Company
      shall, each such time, give to the Seller twenty (20) days’ prior written notice
      of its intent to do so, and such notice shall describe the proposed registration
      and shall offer the Seller the opportunity to include in such Registration
      Statement such number of the Shares as the Seller may request. Upon the written
      request of the Seller given to the Company within fifteen (15) days after the
      receipt of any such notice by the Company, the Company shall include in such
      Registration Statement all or part of the Shares, to the extent requested to
      be
      registered, subject to clause (ii) below. 

     

    (ii)
       If
      a
      registration pursuant to this Section 5.9 involves an underwritten offering
      and
      the managing underwriter shall advise the Company in writing that, in its
      opinion, the number of shares of Common Stock requested by the Seller to be
      included in such registration is likely to materially and adversely affect
      the
      success of the offering or the price that would be received for any shares
      of
      Common Stock included in such offering, then, notwithstanding anything in this
      Section 5.9 to the contrary, the Company shall only be required to include
      in
      such registration, to the extent of the number of shares of Common Stock which
      the Company is so advised can be sold in such offering, (A) first, any shares
      of
      Common Stock proposed to be included in such registration for the account of
      the
      Company, and (B) second, the number of shares of Common Stock requested to
      be
      included in such registration for the account of any stockholders of the Company
      (including the Seller), pro rata among such stockholders on the basis of the
      number of shares of Common Stock that each of them has requested to be included
      in such registration.

     

    (iii)
       In
      connection with any offering involving an underwriting of shares, the Company
      shall not be required under this Section 5.9 or otherwise to include the Shares
      of the Seller therein unless the Seller accepts and agrees to the terms of
      the
      underwriting, which shall be reasonable and customary, as agreed upon between
      the Company and the underwriters selected by the Company.

    

    
      
         

      

      
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    5.10.  Employment
      Agreement.
      The
      Owner hereby agrees that, on or prior to the Closing Date, Robertson Price
      shall
      execute and deliver to Parent and Purchaser an employment agreement,
      substantially in the form of Exhibit A hereto (the “Employment
      Agreement”).

     

    ARTICLE
      VI.

    CONDITIONS
      TO CLOSING

     

    6.1.  Conditions
      Precedent to Obligations of Parent and Purchaser.
      The
      obligation of the Parent and Purchaser to consummate the transactions
      contemplated by this Agreement is subject to the fulfillment, on or prior to
      the
      Closing Date, of each of the following conditions (any or all of which may
      be
      waived by the Parent in whole or in part to the extent permitted by applicable
      Law):

     

    (a)  all
      representations and warranties of the Seller and Owner contained herein shall
      be
      true and correct as of the date hereof;

     

    (b)  all
      representations and warranties of the Seller contained herein qualified as
      to
      materiality shall be true and correct, and the representations and warranties
      of
      the Seller contained herein not qualified as to materiality shall be true and
      correct in all material respects, at and as of the Closing Date with the same
      effect as though those representations and warranties had been made again at
      and
      as of that time;

     

    (c)  the
      Seller shall have performed and complied in all material respects with all
      obligations and covenants required by this Agreement to be performed or complied
      with by it on or prior to the Closing Date;

     

    (d)  the
      Parent shall have been furnished with certificates (dated the Closing date
      and
      in form and substance reasonably satisfactory to the Parent) executed by the
      Seller certifying as to the fulfillment of the conditions specified in Sections
      6.1(a), 6.1(b) and 6.1(c) hereof;

     

    (e)  the
      Parent shall have obtained all consents and waivers referred to in Section
      4.3
      hereof with respect to the transactions contemplated by this Agreement and
      the
      Parent Documents;

     

    (f)  there
      shall not have been or occurred any event which will have a Material Adverse
      Effect;

     

    (g)  the
      Seller shall have obtained all consents and waivers referred to in Section
      3.5
      hereof, in a form reasonably satisfactory to the Parent, with respect to the
      transactions contemplated by this Agreement and the Seller
      Documents;

     

    (h)  no
      Legal
      Proceedings shall have been instituted or threatened or claim or demand made
      against the Seller or the Parent seeking to restrain or prohibit or to obtain
      substantial damages with respect to the consummation of the transactions
      contemplated hereby, and there shall not be in effect any order by a
      Governmental Body of competent jurisdiction restraining, enjoining or otherwise
      prohibiting the consummation of the transactions contemplated
      hereby;

     

    
      
         

      

      
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    (i)  the
      Seller shall have delivered a Certificate of Incumbency executed by the
      Company’s Secretary; 

     

    (j)  the
      Seller shall have delivered a certificate of the Company executed by the
      Company’s Secretary attaching and certifying to the truth and correctness of (i)
      the Certificate of Incorporation, (ii) the Bylaws and (iii) the resolutions
      adopted by the Company’s Board of Directors and Shareholders in connection with
      the transactions contemplated by this Agreement.

     

    (k)  the
      Owner
      shall have entered into the Employment Agreement with the Purchaser,
      substantially in the form of Exhibit A hereto; 

     

    (l)  the
      Parent shall have received disclosure schedules required pursuant to Article
      3
      hereof, which shall be reasonably satisfactory to the Parent.

     

    6.2.  Conditions
      Precedent to Obligations of the Seller and Owner.
      The
      obligations of the Seller and Owner to consummate the transactions contemplated
      by this Agreement are subject to the fulfillment, prior to or on the Closing
      Date, of each of the following conditions (any or all of which may be waived
      by
      the Seller in whole or in part to the extent permitted by applicable
      law):

     

    (a)  all
      representations and warranties of the Parent and Purchaser contained herein
      shall be true and correct as of the date hereof;

     

    (b)  all
      representations and warranties of the Parent and Purchaser contained herein
      qualified as to materiality shall be true and correct, and all representations
      and warranties of the Parent and Purchaser contained herein not qualified as
      to
      materiality shall be true and correct in all material respects, at and as of
      the
      Closing Date with the same effect as though those representations and warranties
      had been made again at and as of that date;

     

    (c)  the
      Parent and Purchaser shall have performed and complied in all material respects
      with all obligations and covenants required by this Agreement to be performed
      or
      complied with by Parent and Purchaser on or prior to the Closing
      Date;

     

    (d)  the
      Seller shall have been furnished with certificates (dated the Closing Date
      and
      in form and substance reasonably satisfactory to the Seller) executed by the
      Chief Executive Officer and Chief Financial Officer of the Parent and the
      Purchaser certifying as to the fulfillment of the conditions specified in
      Sections 6.2(a), 6.2(b) and 6.2(c), and resolutions of the Board of Directors
      of
      the Parent and Purchaser authorizing the acquisition of the Seller;

     

    (e)  there
      shall not be in effect any order by a Governmental Body of competent
      jurisdiction restraining, enjoining or otherwise prohibiting the consummation
      of
      the transactions contemplated hereby; and

     

    (f)  the
      Parent and Purchaser shall have entered into the Employment Agreement,
      substantially in the form of Exhibit A hereto.

     

    
      
         

      

      
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    ARTICLE
      VII.

    DOCUMENTS
      TO BE DELIVERED

     

    7.1.  Documents
      to be Delivered by the Seller.
      At the
      Closing, the Seller shall deliver, or cause to be delivered, to the Parent
      and
      Purchaser the following:

     

    (a)  copies
      of
      all consents and waivers referred to in Section 6.1(g) hereof;

     

    (b)  the
      certificates and resolutions referred to in Sections 6.1 (d), (i) and (j)
      hereof;

     

    (c)  Employment
      Agreement, substantially in the form of Exhibit A hereto, duly executed;
      and

     

    (d)  such
      other documents as the Parent and Purchaser shall reasonably
      request.

     

    7.2.  Documents
      to be Delivered by the Parent.
      At the
      Closing, the Parent and Purchaser shall deliver to the Seller the
      following:

     

    (a)  the
      certificates and resolutions referred to in Section 6.2(d) hereof;
      and

     

    (b)  such
      other documents as the Seller shall reasonably request.

     

    ARTICLE
      VIII.    INDEMNIFICATION

     

    8.1.  Indemnification.

     

    (a)  Subject
      to Section 8.2 hereof, the Seller hereby agrees to indemnify and hold the
      Parent, Purchaser and their respective directors, officers, employees,
      Affiliates, agents, successors and assigns (collectively, the “Parent
      Indemnified Parties”) harmless from and against:

     

    (i)  any
      and
      all liabilities of the Seller of every kind, nature and description, absolute
      or
      contingent, existing as against the Seller prior to and including the Closing
      Date or thereafter coming into being or arising by reason of any state of facts
      existing, or any transaction entered into, on or prior to the Closing Date,
      except to the extent that the same have been fully provided for (and accrued
      and
      applied as a liability) in the Parent Balance Sheet or were incurred in the
      ordinary course of business between the Parent Balance Sheet Date and the
      Closing Date; 

     

    (ii)  subject
      to Section 9.3, any and all losses, liabilities, obligations, damages, costs
      and
      expenses based upon, attributable to or resulting from the failure of any
      representation or warranty of the Seller set forth in Section 3 hereof, or
      any
      representation or warranty contained in any certificate delivered by or on
      behalf of the Seller pursuant to this Agreement, to be true and correct in
      all
      respects as of the date made; 

     

    
      
         

      

      
        24

        
          

        

      

      
         

      

    

    (iii)  any
      and
      all losses, liabilities, obligations, damages, costs and expenses based upon,
      attributable to or resulting from the breach of any covenant or other agreement
      on the part of the Seller under this Agreement; 

     

    (iv)  any
      and
      all notices, actions, suits, proceedings, claims, demands, assessments,
      judgments, costs, penalties and expenses, including attorneys’ and other
      professionals’ fees and disbursements (collectively, “Expenses”) incident to any
      and all losses, liabilities, obligations, damages, costs and expenses with
      respect to which indemnification is provided hereunder (collectively,
“Losses”).

     

    (b)  Subject
      to Section 8.2, Parent and Purchaser hereby agree to indemnify and hold the
      Seller, the Owner and their Affiliates, agents, successors and assigns
      (collectively, the “Seller Indemnified Parties”) harmless from and
      against:

     

    (i)  subject
      to Section 9.3, any and all Losses based upon, attributable to or resulting
      from
      the failure of any representation or warranty of the Parent and Purchaser set
      forth in Section 4 hereof, or any representation or warranty contained in any
      certificate delivered by or on behalf of the Parent pursuant to this Agreement,
      to be true and correct as of the date made;

     

    (ii)  any
      and
      all Losses based upon, attributable to or resulting from the breach of any
      covenant or other agreement on the part of the Parent and Purchaser under this
      Agreement; 

     

    (iii)  any
      and
      all Losses of the Parent or Purchaser of every kind, nature and description,
      absolute or contingent, existing as against the Parent or Purchaser after the
      Closing Date coming into being or arising by reason of any state of facts
      existing, or any transaction entered into, after the Closing Date, except for
      (A) such Losses for which Seller and the Owner have an obligation to indemnify
      the Parent Indemnified Parties pursuant to Section 8.1 and (B) such Losses
      that
      affect all shareholders of Parent or Purchaser by virtue of their status as
      shareholders; and

     

    (iv)  any
      and
      all Expenses incident to the foregoing.

     

    8.2.  Limitations
      on Indemnification.
      An
      indemnifying party shall not have any liability under this Section 8 unless
      the
      aggregate amount of Losses and Expenses to the indemnified parties finally
      determined to arise thereunder based upon, attributable to or resulting from
      the
      failure of any representation or warranty to be true and correct, exceeds
      $100,000 (the “Basket”) and, in such event, the indemnifying party shall be
      required to pay the entire amount of such Losses and Expenses in excess of
      $100,000 (the “Deductible”). 

     

    8.3.  Indemnification
      Procedures.

     

    (a)  In
      the
      event that any Legal Proceedings shall be instituted or that any claim or demand
      (“Claim”) shall be asserted by any Person in respect of which payment may be
      sought under Section 8.1 hereof (regardless of the Basket or the Deductible
      referred to above), the indemnified party shall reasonably and promptly cause
      written notice of the assertion of any Claim of which it has knowledge which
      is
      covered by this indemnity to be forwarded to the indemnifying party. The
      indemnifying party shall have the right, at its sole option and expense,

     

    
      
         

      

      
        25

        
          

        

      

      
         

      

    

     

    to
      be
      represented by counsel of its choice, which must be reasonably satisfactory
      to
      the indemnified party, and to defend against, negotiate, settle or otherwise
      deal with any Claim which relates to any Losses indemnified against hereunder.
      If the indemnifying party elects to defend against, negotiate, settle or
      otherwise deal with any Claim which relates to any Losses indemnified against
      hereunder, it shall within five (5) days (or sooner, if the nature of the Claim
      so requires) notify the indemnified party of its intent to do so. If the
      indemnifying party elects not to defend against, negotiate, settle or otherwise
      deal with any Claim which relates to any Losses indemnified against hereunder,
      fails to notify the indemnified party of its election as herein provided or
      contests its obligation to indemnify the indemnified party for such Losses
      under
      this Agreement, the indemnified party may defend against, negotiate, settle
      or
      otherwise deal with such Claim. If the indemnified party defends any Claim,
      then
      the indemnifying party shall reimburse the indemnified party for the Expenses
      of
      defending such Claim upon submission of periodic bills. If the indemnifying
      party shall assume the defense of any Claim, the indemnified party may
      participate, at his or its own expense, in the defense of such Claim; provided,
      however, that such indemnified party shall be entitled to participate in any
      such defense with separate counsel at the expense of the indemnifying party
      if,
      (i) so requested by the indemnifying party to participate or (ii) in the
      reasonable opinion of counsel to the indemnified party, a conflict or potential
      conflict exists between the indemnified party and the indemnifying party that
      would make such separate representation advisable; and provided, further, that
      the indemnifying party shall not be required to pay for more than one such
      counsel for all indemnified parties in connection with any Claim. The parties
      hereto agree to cooperate fully with each other in connection with the defense,
      negotiation or settlement of any such Claim.

     

    (b)  After
      any
      final judgment or award shall have been rendered by a court, arbitration board
      or administrative agency of competent jurisdiction and the expiration of the
      time in which to appeal therefrom, or a settlement shall have been consummated,
      or the indemnified party and the indemnifying party shall have arrived at a
      mutually binding agreement with respect to a Claim hereunder, the indemnified
      party shall forward to the indemnifying party notice of any sums due and owing
      by the indemnifying party pursuant to this Agreement with respect to such matter
      and the indemnifying party shall be required to pay all of the sums so due
      and
      owing to the indemnified party by wire transfer of immediately available funds
      within 10 business days after the date of such notice.

     

    (c)  The
      failure of the indemnified party to give reasonably prompt notice of any Claim
      shall not release, waive or otherwise affect the indemnifying party’s
      obligations with respect thereto except to the extent that the indemnifying
      party can demonstrate actual loss and prejudice as a result of such
      failure.

     

    ARTICLE
      IX.

    MISCELLANEOUS

     

    9.1.  Payment
      of Sales, Use or Similar Taxes.
      All
      sales, use, transfer, intangible, recordation, documentary stamp or similar
      Taxes or charges, of any nature whatsoever, applicable to, or resulting from,
      the transactions contemplated by this Agreement shall be borne by the
      Parent.

     

    
      
         

      

      
        26

        
          

        

      

      
         

      

    

    9.2.  Survival
      of Representations and Warranties.
      The
      parties hereto hereby agree that the representations and warranties contained
      in
      this Agreement or in any certificate, document or instrument delivered in
      connection herewith, shall survive the execution and delivery of this Agreement,
      and the Closing hereunder, regardless of any investigation made by the parties
      hereto; provided, however, that any claims or actions with respect thereto
      (other than claims for indemnifications with respect to the representation
      and
      warranties contained in Sections 3.7, 3.10, 3.17, 3.19, 4.4 and 4.5 which shall
      survive for periods coterminous with any applicable statutes of limitation)
      shall terminate unless within twelve (12) months after the Closing Date written
      notice of such claims is given to the Seller or such actions are
      commenced.

     

    9.3.  Expenses.
      Except
      as otherwise provided in this Agreement, the Seller, the Parent and Purchaser
      shall each bear its own expenses incurred in connection with the negotiation
      and
      execution of this Agreement and each other agreement, document and instrument
      contemplated by this Agreement and the consummation of the transactions
      contemplated hereby and thereby.

     

    9.4.  Specific
      Performance.
      The
      Seller and Owner acknowledge and agree that the breach of this Agreement would
      cause irreparable damage to the Parent and Purchaser and that the Parent and
      Purchaser will not have an adequate remedy at law. Therefore, unless validly
      terminated pursuant to Section 2.2 above, the obligations of the Seller under
      this Agreement, including, without limitation, the Seller’s obligation to sell
      the Assets to the Parent and Purchaser, shall be enforceable by a decree of
      specific performance issued by any court of competent jurisdiction, and
      appropriate injunctive relief may be applied for and granted in connection
      therewith. Such remedies shall, however, be cumulative and not exclusive and
      shall be in addition to any other remedies which any party may have under this
      Agreement or otherwise.

     

    9.5.  Further
      Assurances.
      The
      Seller, the Parent and Purchaser each agrees to execute and deliver such other
      documents or agreements and to take such other action as may be reasonably
      necessary or desirable for the implementation of this Agreement and the
      consummation of the transactions contemplated hereby.

     

    9.6.  Submission
      to Jurisdiction; Consent to Service of Process

     

    (a)  The
      parties hereto hereby irrevocably submit to the non-exclusive jurisdiction
      of
      any federal or state court located within the State of New York over any dispute
      arising out of or relating to this Agreement or any of the transactions
      contemplated hereby and each party hereby irrevocably agrees that all claims
      in
      respect of such dispute or any suit, action proceeding related thereto may
      be
      heard and determined in such courts. The parties hereby irrevocably waive,
      to
      the fullest extent permitted by applicable Law, any objection which they may
      now
      or hereafter have to the laying of venue of any such dispute brought in such
      court or any defense of inconvenient forum for the maintenance of such dispute.
      Each of the parties hereto agrees that a judgment in any such dispute may be
      enforced in other jurisdictions by suit on the judgment or in any other manner
      provided by law.

     

    (b)  Each
      of
      the parties hereto hereby consents to process being served by any party to
      this
      Agreement in any suit, action or proceeding by the mailing of a copy thereof
      in
      accordance with the provisions of Section 9.9.

     

    
      
         

      

      
        27

        
          

        

      

      
         

      

    

    9.7.  Entire
      Agreement; Amendments and Waivers.
      This
      Agreement (including the schedules and exhibits hereto) represents the entire
      understanding and agreement between the parties hereto with respect to the
      subject matter hereof and can be amended, supplemented or changed, and any
      provision hereof can be waived, only by written instrument making specific
      reference to this Agreement signed by the party against whom enforcement of
      any
      such amendment, supplement, modification or waiver is sought. No action taken
      pursuant to this Agreement, including without limitation, any investigation
      by
      or on behalf of any party, shall be deemed to constitute a waiver by the party
      taking such action of compliance with any representation, warranty, covenant
      or
      agreement contained herein. The waiver by any party hereto of a breach of any
      provision of this Agreement shall not operate or be construed as a further
      or
      continuing waiver of such breach or as a waiver of any other or subsequent
      breach. No failure on the part of any party to exercise, and no delay in
      exercising, any right, power or remedy hereunder shall operate as a waiver
      thereof, nor shall any single or partial exercise of such right, power or remedy
      by such party preclude any other or further exercise thereof or the exercise
      of
      any other right, power or remedy. All remedies hereunder are cumulative and
      are
      not exclusive of any other remedies provided by law.

     

    (a)  Governing
      Law.
      This
      Agreement shall be governed by and construed in accordance with the laws of
      the
      State of New York.

     

    9.8.  Table
      of Contents and Headings.
      The
      table of contents and section headings of this Agreement are for reference
      purposes only and are to be given no effect in the construction or
      interpretation of this Agreement.

     

    9.9.  Notices.
      All
      notices and other communications under this Agreement shall be in writing and
      shall be deemed given when delivered personally or mailed by certified mail,
      return receipt requested, to the parties (and shall also be transmitted by
      facsimile to the Persons receiving copies thereof) at the following addresses
      (or to such other address as a party may have specified by notice given to
      the
      other party pursuant to this provision):

     

    If
      to
      Parent or Purchaser:

    

    ROO
      Group, Inc.

    228
      East
      45th
      Street,
      8th
      Floor

    New
      York,
      NY 10017

    Attention:
      Robert Petty, CEO 

    Phone:
      (646) 352-0260

    Fax:
      (646) 619-4074

    

    With
      a
      copy to:

     

    Richard
      Friedman, Esq.

    Sichenzia
      Ross Friedman Ference LLP

    1065
      Avenue of the Americas

    New
      York,
      New York 10018

    Phone:
      212-930-9700

    Fax:
      212-930-9725

    

    
      
         

      

      
        28

        
          

        

      

      
         

      

    

    If
      to
      Seller or Owner:

    

    RJM
      Price
& Company, Inc.

    377
      Broome St. Suite A.

    New
      York,
      NY., 10013

    Attn:
      Robertson Price

    Phone:
      _______________

    Fax:
      _________________

    

    

    With
      a
      copy to:

    

    Simon
      J.
      Lincoln, Esq.

    110
      East
      59th
      Street,
      Suite 3200

    New
      York,
      NY 10022

    Attn:
      Simon J. Lincoln, Esq.

    Phone:
      212-625-3110

    Fax:
      212-625-3421

    

    9.10.  Acknowledgment
      of Representation of Counsel. Parent,
      Purchaser, Seller and the Owner each acknowledges that each party has been
      represented by counsel in connection with this Agreement and the subject matter
      hereof and has not relied upon any tax advice, legal counsel or business advice
      provided by the other party

     

    9.11.  Severability.
      If any
      provision of this Agreement is invalid or unenforceable, the balance of this
      Agreement shall remain in effect.

     

    9.12.  Binding
      Effect; Assignment.
      This
      Agreement shall be binding upon and inure to the benefit of the parties and
      their respective successors and permitted assigns. Nothing in this Agreement
      shall create or be deemed to create any third party beneficiary rights in any
      person or entity not a party to this Agreement. No assignment of this Agreement
      or of any rights or obligations hereunder may be made by either the Seller
      or
      the Parent (by operation of law or otherwise) without the prior written consent
      of the other parties hereto and any attempted assignment without the required
      consents shall be void. 

     

    
      
         

      

      
        29

        
          

        

      

      
         

      

    

    ROO
      Group, Inc. 

     

    

    

    By: __/s/
      Rob Petty___________________

    Name: 
      Rob
      Petty

    Title: Chief
      Executive Officer

    

    

    ROO
      Media
      Corporation

    

    By: _/s/
      Rob Petty_____________________

    Name: Rob
      Petty

    Title: Chief
      Executive Officer

    

    

     

    RJM
      Price
& Company, Inc. 

    

    

    By: __/s/
      Robertson J. Price____________

    Name: Robertson
      Price 

    Title: President

    

    

     
      /s/ Robertson
      Price                                         
 

    Robertson
      Price

    

    

    
      
         

      

      
        30

        
          

        

      

      
         

      

    

    

    Schedule
      1.1(b)

    List
      of Seller’s Contracts

    

    1.
      Ask
      Jeeves Contract, by and between R.J.M. Price & Company, Inc., and IAC Search
& Media, Inc., dated 7/13/2006.

    

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Schedule
      1.1(c)

    Intellectual
      Property

    

       

    	
                         
              1. Domain Names:

          	 

    	i.  
              	
            MyVideoDaily.com

          

    	ii.  
              	
            MyVideoDay.com

          

    	iii.  
              	
            MyMusicVideoDaily.com

          

    	iv.  
              	
            MusicVideoDaily.com

          

    	v.  
              	
            GoMusicVideo.com

          

    	vi.  
              	
            GetNewsVideo.com

          

    	vii.  
              	
            VideoNewsChannel.com

          

    	viii.  
              	
            VideoNewsNet.com

          

    	ix.  
              	
            VideoNewsCenter.com

          

    	x.  
              	
            eFilmTrailers.com

          

    	xi.  
              	
            eFashionVideo.com

          

    	xii.  
              	
            USNewsVideo.com

          

    	xiii.  
              	
            MyVdeo.com

          

    	xiv.  
              	
            MiVDo.com

          

    	xv.  
              	
            MivOH.com

          

    	xvi.  
              	
            MyDNow.com

          

    	xvii.  
              	
            Viduko.com

          

    	xviii.  
              	
            Viduku.com

          

    	2.    
                   	
            
              Code:

            

          

    	i.  	
               
              All code associated with:

          

    	1.   
              	
            MyVideoDaily.com

          

    	2.   
              	
            MyVideoDaily
              administration console/reporting

          

    	3.  	
               
              MyVideoDaily Software Applications including the MVD miniplayer and
              MVD
              screensaver

          

    

    

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Schedule
      1.2

    Excluded
      Assets

    

    

    None

     

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Schedule
      1.4(b)(ii)

    Milestones

    

    SCHEDULE
      1

    

    The
      achievement of any one Milestone shall require the issuance by Purchaser of
      $166,667 in Shares to Seller.

    

    1.
       Full
      integration into the Parent of MVD’s keyword generation and search marketing
      engine. With the understanding that this effort must be ongoing.

    

    2.
       Robertson
      Price to utilize his best efforts to increase organic traffic to the Parent’s
      properties by 50%, recognizing the Parent needs to support those efforts. The
      determination as to the achievement of this milestone shall be made by the
      Parent in its sole and absolute discretion. 

    

    3.
      Using
      MyVideoDaily in the best interests of the Parent, which. The determination
      as to
      the achievement of this milestone shall be made by the Parent in its sole and
      absolute discretion. 

    

    4.
      Lead
      and deliver product development initiative to provide most profitable customer
      /
      consumer / traffic driven feature set for ROO's 2007 product offering. These
      improvements should include Community and User Generated Content modules. The
      determination as to the achievement of this milestone shall be made by the
      Parent in its sole and absolute discretion

    

    5.
      Assist
      in traffic driving recommendations initiatives for key clients leading to
      increased revenues over and above original customer projections,
      recognizing the Parent needs to support those efforts. The determination as
      to
      the achievement of this milestone shall be made by the Parent in its sole and
      absolute discretion

     

    6.
      Robertson Price employed for a full year; provided that if his employment is
      terminated by (a) Robertson Price due to a breach by Parent or the Purchaser
      of
      this Agreement or the Employment Agreement, which breach is not cured within
      the
      permitted cure-period, or (b) Parent or the Purchaser for any reason other
      than
      for “Cause” (as defined in the Employment Agreement), then Robertson Price will,
      as of the date of termination, automatically be deemed to have been employed
      for
      a full year (as required in this Section 6 of Schedule 1).

    

    The
      Parties agree:

    (a)  there
      is
      no particular order for when these Milestones are to be completed. The Parent
      may, at its discretion, determine the focus of Robertson Price in achieving
      these Milestones. However, the achievement of any Milestone in any order shall
      require the issuance of Shares described above.

     

    (b)
      These
      Milestones are intended to be completed in one year.

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Schedule
      3.5(a)

    No
      Conflicts; Consents of Third Parties

     

     

    None

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Schedule
      3.5(b)

    Contract
      Assignments

     

     

    R.
      J. M.
      Price & Company, Inc., must seek consent to assign the “Ask Jeeves” contract
      to ROO. The governing provision of this contract is inserted below:

    

    Assignment.
      This
      Agreement is not assignable by either party without the prior written approval
      of the other party. Notwithstanding the foregoing, either party may assign
      this
      Agreement without consent to a successor in interest, any affiliated entity
      or
      in connection with any merger, consolidation, any sale of all or substantially
      all of such party's assets or any other transaction in which more than fifty
      (50%) percent of its voting securities are transferred; provided that the
      assignment is not to a competitor of the non-assigning party, as reasonably
      determined by the non-assigning party, in such case either party can terminate
      this Agreement.

    

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    
      

    

    Schedule
      3.8

    Liabilities

    

    

    None

     

     

    

 

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    Schedule
      3.9

    Absence
      of Certain Developments

    

    

    

    None

     

     

    

 

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    Schedule
      3.10

    Taxes

    

    

    All
      Seller taxes will be paid in full by seller

     

     

    

 

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

     

    Schedule
      3.12

    Personal
      Property Leases

    

    

    

    None

     

     

    
 

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    Schedule
      3.13

    Intangible
      Property

    

    	I.   
             	
            Trade
              Names:

          

    	i.  
              	
            MyVideoDaily.com

          

    	ii.  
              	
            MyVideoDay.com

          

    	iii.  
              	
            MyMusicVideoDaily.com

          

    	iv.  
              	
            MusicVideoDaily.com

          

    	v.  
              	
            GoMusicVideo.com

          

    	vi.  
              	
            GetNewsVideo.com

          

    	vii.  
              	
            VideoNewsChannel.com

          

    	viii.  
              	
            VideoNewsNet.com

          

    	ix.  
              	
            VideoNewsCenter.com

          

    	x.  
              	
            eFilmTrailers.com

          

    	xi.  
              	
            eFashionVideo.com

          

    	xii.  
              	
            USNewsVideo.com

          

    	xiii.  
              	
            MyVdeo.com

          

    	xiv.  
              	
            MiVDo.com

          

    	xv.  
              	
            MivOH.com

          

    	xvi.  
              	
            MyDNow.com

          

    	xvii.  
              	
            Viduko.com

          

    	xviii.  
              	
            Viduku.com

          

    	II.   
             	
            Patents:
              None

          

    	III.   
             	
            Service
              Marks: None

          

    	IV.   
             	
            Copyrights:
              None

          

    

    

    None

     

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Schedule
      3.14

    Material
      Contracts

    

    	I.   
             	
            Shareholder
              Agreements. All Shareholders were required to enter into a standard
              shareholder agreement in exchange for their
              equity.

          

    	a.   
             	
            Jenifer
              Meyerhardt (5/16/06)

          

    	b.  
              	
            Tim
              Ogilvie (3/10/2006)

          

    	c.  
              	
            Richard
              Price (2/21/2006)

          

    	d.  
              	
            Phil
              Koblence (2/21/2006)

          

    	II.   
             	
            Advisor
              Agreements, All Shareholders were also required to enter into advisor
              agreements in exchange for their
              equity.

          

    	a.  
              	
            Jenifer
              Meyerhardt (5/16/06)

          

    	b.  
              	
            Tim
              Ogilvie (3/10/2006)

          

    	c.  
              	
            Richard
              Price (2/21/2006)

          

    	d.   
             	
            Phil
              Koblence (2/21/2006)

          

    	III.  
              	
            All
              contracts listed in Schedule
              1.1(b)

          

     

     

    
 

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    Schedule
      3.15

    Employee
      Benefits

    

    

    

    None

     

     

    

 

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    Schedule
      3.16

    Labor
      Matters

    

    

    

    None

     

     

     

    

 

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    Schedule
      3.17

    Litigation

    

    

    

    

    None

     

     

    

 

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

     

    Schedule
      3.19

    Environmental
      Matters

    

    

    

    None

     

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Schedule
      3.20

    Insurance

    

    

    None

     

     

     

    

 

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Schedule
      3.22

    Customers
      and Suppliers

    

    I.
      Customers:

    1.
      ROO (No Revenue)

    2.
      Amazon (No Revenue)

    3.
      Ask Jeeves ($20,096.32 in Revenue)

    4.
      Google ($642.45 in Revenue)

    

    II.
      Suppliers:

    1.
      ROO (No Cost)

    2.
      NYI.net (Hosting Services at $79.00 Cost per month)

    

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    Schedule
      3.23

    Banks

    

    

    

    1.
      Citibank

     

     

    

 

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    Schedule
      4.3

    Conflicts;
      Consents of Third Parties

    

    

    

    

    None.STANDBY
      EQUITY DISTRIBUTION AGREEMENT 

     

    THIS
      STANDBY EQUITY DISTRIBUTION AGREEMENT (the
      “Agreement”)
      is
      entered into as of August 25, 2004 between CORNELL
      CAPITAL PARTNERS, LP,
      a
      Delaware limited partnership (the “Investor”),
      and
TEXAS
      PROTOTYPES, INC.,
      a Texas
      corporation (the “Company”).

     

    WHEREAS,
      the
      parties desire that, upon the terms and subject to the conditions contained
      herein, the Company shall issue and sell to the Investor, from time to time
      as
      provided herein, and the Investor shall purchase from the Company up to Fifteen
      Million Dollars ($15,000,000) of the Company’s common stock, par value
      $0.001 per share (the “Common
      Stock”);
      and

     

    WHEREAS,
      such
      investments will be made in reliance upon the provisions of Regulation D
      (“Regulation
      D”)
      of the
      Securities Act of 1933, as amended, and the regulations promulgated thereunder
      (the “Securities
      Act”),
      and
      or upon such other exemption from the registration requirements of the
      Securities Act as may be available with respect to any or all of the investments
      to be made hereunder; and

     

    WHEREAS,
      the
      Company has engaged Newbridge Securities Corporation to act as the Company’s
      exclusive placement agent in connection with the sale of the Company’s Common
      Stock to the Investor hereunder pursuant to the Placement Agent Agreement dated
      the date hereof by and among the Company, the Placement Agent and the Investor
      (the “Placement
      Agent Agreement”).

     

    NOW,
      THEREFORE,
      the
      parties hereto agree as follows:

     

    ARTICLE
      I.

    Certain
      Definitions

     

    Section
      1.1. “Advance”
shall
      mean the portion of the Commitment Amount requested by the Company in the
      Advance Notice.

     

    Section
      1.2. “Advance
      Date”
shall
      mean the date the Butler Gonzalez LLP Escrow Account is in receipt of the funds
      from the Investor and Butler Gonzalez LLP, as the Investor’s Counsel, is in
      possession of free trading shares from the Company and therefore an Advance
      by
      the Investor to the Company can be made and Butler Gonzalez LLP can release
      the
      free trading shares to the Investor. The Advance Date shall be one (1) Trading
      Day after the end of the Pricing Period.

     

    Section
      1.3. “Advance
      Notice”
shall
      mean a written notice to the Investor setting forth the Advance amount that
      the
      Company requests from the Investor and the Advance Date.

     

    Section
      1.4. “Advance
      Notice Date”
shall
      mean each date the Company delivers to the Investor an Advance Notice requiring
      the Investor to advance funds to the Company, subject to the terms of this
      Agreement. No Advance Notice Date shall be less than seven (7) Trading Days
      after the prior Advance Notice Date.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Section
      1.5. “Bid
      Price”
shall
      mean, on any date, the closing bid price (as reported by Bloomberg L.P.) of
      the
      Common Stock on the Principal Market or if the Common Stock is not traded on
      a
      Principal Market, the highest reported bid price for the Common Stock, as
      furnished by the National Association of Securities Dealers, Inc.

     

    Section
      1.6. “Closing”
shall
      mean one of the closings of a purchase and sale of Common Stock pursuant to
      Section 2.3.

     

    Section
      1.7. “Commitment
      Amount”
shall
      mean the aggregate amount of up to Fifteen Million Dollars ($15,000,000),
      which the Investor has agreed to provide to the Company in order to purchase
      the
      Company’s Common Stock pursuant to the terms and conditions of this
      Agreement.

     

    Section
      1.8. “Commitment
      Period”
shall
      mean the period commencing on the earlier to occur of (i) the Effective Date,
      or
      (ii) such earlier date as the Company and the Investor may mutually agree in
      writing, and expiring on the earliest to occur of (x) the date on which the
      Investor shall have made payment of Advances pursuant to this Agreement in
      the
      aggregate amount of Fifteen Million Dollars ($15,000,000), (y) the date
      this Agreement is terminated pursuant to Section 2.5, or (z) the date occurring
      twenty-four (24) months after the Effective Date.

     

    Section
      1.9. “Common
      Stock”
shall
      mean the Company’s common stock, par value $0.001 per share.

     

    Section
      1.10. “Condition
      Satisfaction Date”
shall
      have the meaning set forth in Section 7.2.

     

    Section
      1.11. “Damages”
shall
      mean any loss, claim, damage, liability, costs and expenses (including, without
      limitation, reasonable attorney’s fees and disbursements and costs and expenses
      of expert witnesses and investigation).

     

    Section
      1.12. “Effective
      Date”
shall
      mean the date on which the SEC first declares effective a Registration Statement
      registering the resale of the Registrable Securities as set forth in Section
      7.2(b).

     

    Section
      1.13. “Escrow
      Agreement”
shall
      mean the escrow agreement among the Company, the Investor, and Butler Gonzalez
      LLP dated the date hereof.

     

    Section
      1.14. “Exchange
      Act”
shall
      mean the Securities Exchange Act of 1934, as amended, and the rules and
      regulations promulgated thereunder.

     

    Section
      1.15. “Material
      Adverse Effect”
shall
      mean any condition, circumstance, or situation that would prohibit or otherwise
      materially interfere with the ability of the Company to enter into and perform
      any of its obligations under this Agreement or the Registration Rights Agreement
      in any material respect.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    Section
      1.16. “Market
      Price”
shall
      mean the VWAP of the Common Stock for the five days during the Pricing
      Period.

     

    Section
      1.17. “Maximum
      Advance Amount”
shall
      be One Million Dollars ($1,000,000) per Advance Notice.

     

    Section
      1.18 “NASD”
shall
      mean the National Association of Securities Dealers, Inc.

     

    Section
      1.19 “Person”
shall
      mean an individual, a corporation, a partnership, an association, a trust or
      other entity or organization, including a government or political subdivision
      or
      an agency or instrumentality thereof.

     

    Section
      1.20 “Placement
      Agent”
shall
      mean Newbridge Securities Corporation, a registered broker-dealer.

     

    Section
      1.21 “Pricing
      Period”
shall
      mean the five (5) consecutive Trading Days after the Advance Notice
      Date.

     

    Section
      1.22 “Principal
      Market”
shall
      mean the Nasdaq National Market, the Nasdaq SmallCap Market, the American Stock
      Exchange, the OTC Bulletin Board or the New York Stock Exchange, whichever
      is at
      the time the principal trading exchange or market for the Common
      Stock.

     

    Section
      1.23 “Purchase
      Price”
shall
      be set at one hundred percent (100%) of the Market Price during the Pricing
      Period.

     

    Section
      1.24 “Registrable
      Securities”
shall
      mean the shares of Common Stock to be issued hereunder (i)
      in
      respect of which the Registration Statement has not been declared effective
      by
      the SEC, (ii) which have not been sold under circumstances meeting all of the
      applicable conditions of Rule 144 (or any similar provision then in force)
      under
      the Securities Act (“Rule
      144”)
      or
      (iii) which have not been otherwise transferred to a holder who may trade such
      shares without restriction under the Securities Act, and the Company has
      delivered a new certificate or other evidence of ownership for such securities
      not bearing a restrictive legend.

     

    Section
      1.25 “Registration
      Rights Agreement”
shall
      mean the Registration Rights Agreement dated the date hereof, regarding the
      filing of the Registration Statement for the resale of the Registrable
      Securities, entered into between the Company and the Investor.

     

    Section
      1.26 “Registration
      Statement”
shall
      mean a registration statement on Form S-1 or SB-2 (if use of such form is then
      available to the Company pursuant to the rules of the SEC and, if not, on such
      other form promulgated by the SEC for which the Company then qualifies and
      which
      counsel for the Company shall deem appropriate, and which form shall be
      available for the resale of the Registrable Securities to be registered there
      under in accordance with the provisions of this Agreement and the Registration
      Rights Agreement, and in accordance with the intended method of distribution
      of
      such securities), for the registration of the resale by the Investor of the
      Registrable Securities under the Securities Act.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    Section
      1.27 “Regulation
      D”
shall
      have the meaning set forth in the recitals of this Agreement.

     

    Section
      1.28 “SEC”
shall
      mean the Securities and Exchange Commission.

     

    Section
      1.29 “Securities
      Act”
shall
      have the meaning set forth in the recitals of this Agreement.

     

    Section
      1.30 “SEC
      Documents”
shall
      mean Annual Reports on Form 10-KSB, Quarterly Reports on Form 10-QSB, Current
      Reports on Form 8-K and Proxy Statements of the Company as supplemented to
      the
      date hereof, filed by the Company for a period of at least twelve (12) months
      immediately preceding the date hereof or the Advance Date, as the case may
      be,
      until such time as the Company no longer has an obligation to maintain the
      effectiveness of a Registration Statement as set forth in the Registration
      Rights Agreement.

     

    Section
      1.31 “Trading
      Day”
shall
      mean any day during which the New York Stock Exchange shall be open for
      business.

     

    Section
      1.32 “VWAP”
shall
      mean the volume weighted average price of the Company’s common stock as quoted
      by Bloomberg, LP.

     

    ARTICLE
      II.

    Advances

     

    Section
      2.1. Investments.

     

    (a) Advances.
      Upon
      the terms and conditions set forth herein (including, without limitation, the
      provisions of Article VII hereof), on any Advance Notice Date the Company may
      request an Advance by the Investor by the delivery of an Advance Notice. The
      number of shares of Common Stock that the Investor shall receive for each
      Advance shall be determined by dividing the amount of the Advance by the
      Purchase Price. No fractional shares shall be issued. Fractional shares shall
      be
      rounded to the next higher whole number of shares. The aggregate maximum amount
      of all Advances that the Investor shall be obligated to make under this
      Agreement shall not exceed the Commitment Amount.

     

    Section
      2.2. Mechanics.

     

    (a) Advance
      Notice.
      At any
      time during the Commitment Period, the Company may deliver an Advance Notice
      to
      the Investor, subject to the conditions set forth in Section 7.2; provided,
      however, the amount for each Advance as designated by the Company in the
      applicable Advance Notice shall not be more than the Maximum Advance Amount.
      The
      aggregate amount of the Advances pursuant to this Agreement shall not exceed
      the
      Commitment Amount. The Company acknowledges that the Investor may sell shares
      of
      the Company’s Common Stock corresponding with a particular Advance Notice on the
      day the Advance Notice is received by the Investor. There will be a minimum
      of
      seven (7) Trading Days between each Advance Notice Date.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    (b) Date
      of Delivery of Advance Notice.
      An
      Advance Notice shall be deemed delivered on (i) the Trading Day it is received
      by facsimile or otherwise by the Investor if such notice is received prior
      to
      12:00 noon Eastern Time, or (ii) the immediately succeeding Trading Day if
      it is
      received by facsimile or otherwise after 12:00 noon Eastern Time on a Trading
      Day or at any time on a day which is not a Trading Day. No Advance Notice may
      be
      deemed delivered on a day that is not a Trading Day.

     

    (c) Pre-Closing
      Share Credit.
      Within
      two (2) business days after the Advance Notice Date, the Company shall credit
      shares of the Company’s Common Stock to the Investor’s balance account with The
      Depository Trust Company through its Deposit Withdrawal At Custodian system,
      in
      an amount equal to the amount of the requested Advance divided by the closing
      Bid Price of the Company’s Common Stock as of the Advance Notice Date multiplied
      by one point one (1.1). Any adjustments to the number of shares to be delivered
      to the Investor at the Closing as a result of fluctuations in the closing Bid
      Price of the Company’s Common Stock shall be made as of the date of the Closing.
      Any excess shares shall be credited to the next Advance or, if no further
      Advance is requested by the Company, the excess shares shall be returned to
      the
      Company. In no event shall the number of shares issuable to the Investor
      pursuant to an Advance cause the Investor to own in excess of nine and 9/10
      percent (9.9%) of the then outstanding Common Stock of the Company.

     

    (d) Hardship.
      In the
      event the Investor sells the Company’s Common Stock pursuant to subsection (c)
      above and the Company fails to perform its obligations as mandated in Section
      2.5 and 2.2 (c), and specifically fails to provide the Investor with the shares
      of Common Stock for the applicable Advance, the Company acknowledges that the
      Investor shall suffer financial hardship and therefore shall be liable for
      any
      and all losses, commissions, fees, or financial hardship caused to the Investor.
      

     

    Section
      2.3. Closings.
      On each
      Advance Date, which shall be one (1) Trading Day after the Pricing Period,
      (i)
      the Company shall deliver to the Investor’s Counsel, as defined pursuant to the
      Escrow Agreement, shares of the Company’s Common Stock, representing the amount
      of the Advance by the Investor pursuant to Section 2.1 herein, registered in
      the
      name of the Investor which shall be delivered to the Investor, or otherwise
      in
      accordance with the Escrow Agreement and (ii) the Investor shall deliver to
      Butler Gonzalez LLP (the “Escrow
      Agent”)
      the
      amount of the Advance specified in the Advance Notice by wire transfer of
      immediately available funds which shall be delivered to the Company, or
      otherwise in accordance with the Escrow Agreement. In addition, on or prior
      to
      the Advance Date, each of the Company and the Investor shall deliver to the
      other through the Investor’s Counsel all documents, instruments and writings
      required to be delivered by either of them pursuant to this Agreement in order
      to implement and effect the transactions contemplated herein. Payment of funds
      to the Company and delivery of the Company’s Common Stock to the Investor shall
      occur in accordance with the conditions set forth above and those contained
      in
      the Escrow Agreement; provided,
      however,
      that to
      the extent the Company has not paid the fees, expenses, and disbursements of
      the
      Investor, the Investor’s counsel and Schiff Hardin LLP in accordance with
      Section 12.4, the amount of such fees, expenses, and disbursements may be
      deducted by the Investor (and shall be paid to the relevant party) from the
      amount of the Advance with no reduction in the amount of shares of the Company’s
      Common Stock to be delivered on such Advance Date.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    Section
      2.4. Termination
      of Investment.
      The
      obligation of the Investor to make an Advance to the Company pursuant to this
      Agreement shall terminate permanently (including with respect to an Advance
      Date
      that has not yet occurred) in the event that (i) there shall occur any stop
      order or suspension of the effectiveness of the Registration Statement for
      an
      aggregate of fifty (50) Trading Days, other than due to the acts of the
      Investor, during the Commitment Period, and (ii) the Company shall at any time
      fail materially to comply with the requirements of Article VI and such failure
      is not cured within thirty (30) days after receipt of written notice from the
      Investor, provided,
      however,
      that
      this termination provision shall not apply to any period commencing upon the
      filing of a post-effective amendment to such Registration Statement and ending
      upon the date on which such post effective amendment is declared effective
      by
      the SEC.

     

    Section
      2.5. Agreement
      to Advance Funds.

     

    (a) The
      Investor agrees to advance the amount specified in the Advance Notice to the
      Company after the completion of each of the following conditions and the other
      conditions set forth in this Agreement:

     

    (i) the
      execution and delivery by the Company, and the Investor, of this Agreement,
      and
      the Exhibits hereto;

     

    (ii) the
      Company’s Common Stock shall have been authorized for quotation on the Principal
      Market.

     

    (iii) Investor’s
      Counsel shall have received the shares of Common Stock applicable to the Advance
      in accordance with Section 2.2(c) hereof;

     

    (iv) the
      Company’s Registration Statement with respect to the resale of the Registrable
      Securities in accordance with the terms of the Registration Rights Agreement
      shall have been declared effective by the SEC;

     

    (v) the
      Company shall have obtained all material permits and qualifications required
      by
      any applicable state for the offer and sale of the Registrable Securities,
      or
      shall have the availability of exemptions therefrom. The sale and issuance
      of
      the Registrable Securities shall be legally permitted by all laws and
      regulations to which the Company is subject; 

     

    (vi) the
      Company shall have filed with the Commission in a timely manner all reports,
      notices and other documents required of a “reporting
      company”
under
      the Exchange Act and applicable Commission regulations;

     

    (vii) the
      fees
      as set forth in Section 12.4 below shall have been paid or can be withheld
      as
      provided in Section 2.3; 

     

    (viii) the
      conditions set forth in Section 7.2 shall have been satisfied; 

     

    (ix) The
      Company shall have provided to the Investor an acknowledgement, from Malone
      & Bailey, PLLC as to its ability to provide all consents required in order
      to file a registration statement in connection with this transaction;
      and

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    (x) The
      Company’s transfer agent shall be DWAC eligible.

     

    Section
      2.6. Lock
      Up Period.

     

    (i) During
      the Commitment Period, the Company shall not issue or sell, without the prior
      written consent of the Investor, (i) any Common Stock or Preferred Stock without
      consideration or for a consideration per share less than the Bid Price on the
      date of issuance or (ii) issue or sell any warrant, option, right, contract,
      call, or other security or instrument granting the holder thereof the right
      to
      acquire Common Stock without consideration or for a consideration per share
      less
      than the Bid Price on the date of issuance.

     

    (ii) On
      the
      date hereof, the Company shall obtain from each officer and director a lock-up
      agreement, as defined below, in the form annexed hereto as Schedule 2.6
      agreeing to only sell in compliance with the volume limitation of Rule
      144.

     

    ARTICLE
      III.

    Representations
      and Warranties of Investor

     

    Investor
      hereby represents and warrants to, and agrees with, the Company that the
      following are true and as of the date hereof and as of each Advance
      Date:

     

    Section
      3.1. Organization
      and Authorization.
      The
      Investor is duly incorporated or organized and validly existing in the
      jurisdiction of its incorporation or organization and has all requisite power
      and authority to purchase and hold the securities issuable hereunder. The
      decision to invest and the execution and delivery of this Agreement by such
      Investor, the performance by such Investor of its obligations hereunder and
      the
      consummation by such Investor of the transactions contemplated hereby have
      been
      duly authorized and requires no other proceedings on the part of the Investor.
      The undersigned has the right, power and authority to execute and deliver this
      Agreement and all other instruments (including, without limitations, the
      Registration Rights Agreement), on behalf of the Investor. This Agreement has
      been duly executed and delivered by the Investor and, assuming the execution
      and
      delivery hereof and acceptance thereof by the Company, will constitute the
      legal, valid and binding obligations of the Investor, enforceable against the
      Investor in accordance with its terms.

     

    Section
      3.2. Evaluation
      of Risks.
      The
      Investor has such knowledge and experience in financial tax and business matters
      as to be capable of evaluating the merits and risks of, and bearing the economic
      risks entailed by, an investment in the Company and of protecting its interests
      in connection with this transaction. It recognizes that its investment in the
      Company involves a high degree of risk.

     

    Section
      3.3. No
      Legal Advice From the Company.
      The
      Investor acknowledges that it had the opportunity to review this Agreement
      and
      the transactions contemplated by this Agreement with his or its own legal
      counsel and investment and tax advisors. The Investor is relying solely on
      such
      counsel and advisors and not on any statements or representations of the Company
      or any of its representatives or agents for legal, tax or investment advice
      with
      respect to this investment, the transactions contemplated by this Agreement
      or
      the securities laws of any jurisdiction.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    Section
      3.4. Investment
      Purpose.
      The
      securities are being purchased by the Investor for its own account, for
      investment and without any view to the distribution, assignment or resale to
      others or fractionalization in whole or in part. The Investor agrees not to
      assign or in any way transfer the Investor’s rights to the securities or any
      interest therein and acknowledges that the Company will not recognize any
      purported assignment or transfer except in accordance with applicable Federal
      and state securities laws. No other person has or will have a direct or indirect
      beneficial interest in the securities. The Investor agrees not to sell,
      hypothecate or otherwise transfer the Investor’s securities unless the
      securities are registered under Federal and applicable state securities laws
      or
      unless, in the opinion of counsel satisfactory to the Company, an exemption
      from
      such laws is available.

     

    Section
      3.5. Accredited
      Investor.
      The
      Investor is an “Accredited
      Investor”
as
      that
      term is defined in Rule 501(a)(3) of Regulation D of the Securities
      Act.

     

    Section
      3.6. Information.
      The
      Investor and its advisors (and its counsel), if any, have been furnished with
      all materials relating to the business, finances and operations of the Company
      and information it deemed material to making an informed investment decision.
      The Investor and its advisors, if any, have been afforded the opportunity to
      ask
      questions of the Company and its management. Neither such inquiries nor any
      other due diligence investigations conducted by such Investor or its advisors,
      if any, or its representatives shall modify, amend or affect the Investor’s
      right to rely on the Company’s representations and warranties contained in this
      Agreement. The Investor understands that its investment involves a high degree
      of risk. The Investor is in a position regarding the Company, which, based
      upon
      employment, family relationship or economic bargaining power, enabled and
      enables such Investor to obtain information from the Company in order to
      evaluate the merits and risks of this investment. The Investor has sought such
      accounting, legal and tax advice, as it has considered necessary to make an
      informed investment decision with respect to this transaction.

     

    Section
      3.7. Receipt
      of Documents.
      The
      Investor and its counsel has received and read in their entirety: (i) this
      Agreement and the Exhibits annexed hereto; (ii) all due diligence and other
      information necessary to verify the accuracy and completeness of such
      representations, warranties and covenants; and (iii) answers to all
      questions the Investor submitted to the Company regarding an investment in
      the
      Company; and the Investor has relied on the information contained therein and
      has not been furnished any other documents, literature, memorandum or
      prospectus. 

     

    Section
      3.8. Registration
      Rights Agreement and Escrow Agreement.
      The
      parties have entered into the Registration Rights Agreement and the Escrow
      Agreement, each dated the date hereof.

     

    Section
      3.9. No
      General Solicitation.
      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 the shares of Common Stock offered hereby.

     

    Section
      3.10. Not
      an
      Affiliate.
      The
      Investor is not an officer, director or a person that directly, or indirectly
      through one or more intermediaries, controls or is controlled by, or is under
      common control with the Company or any “Affiliate”
of
      the
      Company (as that term is defined in Rule 405 of the Securities Act). Neither
      the
      Investor nor its Affiliates has an open short position in the Common Stock
      of
      the Company, and the Investor agrees that it will not, and that it will cause
      its Affiliates not to, engage in any short sales of or hedging transactions
      with
      respect to the Common Stock, provided
      that the
      Company acknowledges and agrees that upon receipt of an Advance Notice the
      Investor will sell the Shares to be issued to the Investor pursuant to the
      Advance Notice, even if the Shares have not been delivered to the
      Investor.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    Section
      3.11. Trading
      Activities.
      The
      Investor’s trading activities with respect to the Company’s Common Stock shall
      be in compliance with all applicable federal and state securities laws, rules
      and regulations and the rules and regulations of the Principal Market on which
      the Company’s Common Stock is listed or traded. Neither the Investor nor its
      affiliates has an open short position in the Common Stock of the Company and,
      except as set forth below, the Investor shall not and will cause its affiliates
      not to engage in any short sale as defined in any applicable SEC or National
      Association of Securities Dealers rules on any hedging transactions with respect
      to the Common Stock. Without limiting the foregoing, the Investor agrees not
      to
      engage in any naked short transactions in excess of the amount of shares owned
      (or an offsetting long position) during the Commitment Period. The Investor
      shall be entitled to sell Common Stock during the applicable Pricing
      Period. 

     

    Section
      3.12. No
      Buyer
      makes any representation or warranty regarding the Company’s ability to
      successfully become a public company or to have any registration statement
      filed
      by the Company pursuant to the Registration Rights Agreement or otherwise
      declared effective by the SEC. The Company has the sole obligation to make
      any
      and all such filings as may be necessary to become a public company and to
      have
      any registration statement declared effective by the SEC.

     

    Section
      3.13. The
      Company acknowledges that the Buyer is relying on the representations and
      warranties made by the Company hereunder and that such representations and
      warranties are a material inducement to the Buyer purchasing the Convertible
      Debentures. The Company further acknowledges that without such representations
      and warranties of the Company made hereunder, the Buyer would not enter into
      this Agreement.

     

    ARTICLE
      IV.

    Representations
      and Warranties of the Company

     

    Except
      as
      stated below or on the Disclosure Schedule (the “Disclosure
      Schedule”)
      attached hereto as Exhibit “B,” the Company hereby represents and warrants
      to, and covenants with, the Investor that the following are true and correct
      as
      of the date hereof:

     

    Section
      4.1. Organization
      and Qualification.
      The
      Company is duly incorporated or organized and validly existing in the
      jurisdiction of its incorporation or organization and has all requisite power
      and authority corporate power to own its properties and to carry on its business
      as now being conducted. Each of the Company and its subsidiaries 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 by it makes
      such qualification necessary, except to the extent that the failure to be so
      qualified or be in good standing would not have a Material Adverse Effect on
      the
      Company and its subsidiaries taken as a whole.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    Section
      4.2. Authorization,
      Enforcement, Compliance with Other Instruments.
      (i) The
      Company has the requisite corporate power and authority to enter into and
      perform this Agreement, the Registration Rights Agreement, the Escrow Agreement,
      the Placement Agent Agreement and any related agreements, in accordance with
      the
      terms hereof and thereof, (ii) the execution and delivery of this Agreement,
      the
      Registration Rights Agreement, the Escrow Agreement, the Placement Agent
      Agreement and any related agreements by the Company and the consummation by
      it
      of the transactions contemplated hereby and thereby, have been duly authorized
      by the Company’s Board of Directors and no further consent or authorization is
      required by the Company, its Board of Directors or its stockholders,
      (iii) this Agreement, the Registration Rights Agreement, the Escrow
      Agreement, the Placement Agent Agreement and any related agreements have been
      duly executed and delivered by the Company, and (iv) this Agreement, the
      Registration Rights Agreement, the Escrow Agreement, the Placement Agent
      Agreement and assuming the execution and delivery thereof and acceptance by
      the
      Investor and any related agreements constitute the valid and binding obligations
      of the Company enforceable against the Company in accordance with their terms,
      except as such enforceability may be limited by general principles of equity
      or
      applicable bankruptcy, insolvency, reorganization, moratorium, liquidation
      or
      similar laws relating to, or affecting generally, the enforcement of creditors’
rights and remedies.

     

    Section
      4.3. Capitalization.
      As
      of the
      date hereof, the authorized capital stock of the Company consists of
      500,000,000 shares of stock, all of which shares are designated as Common Stock,
      par value $.001 per share. All
      of
      such outstanding shares have been validly issued and are fully paid and
      nonassessable. Except as disclosed in the Disclosure Schedule, no shares of
      Common Stock are subject to preemptive rights or any other similar rights or
      any
      liens or encumbrances suffered or permitted by the Company. Except as disclosed
      in the Disclosure Schedule, as of the date hereof, (i) there are no outstanding
      options, warrants, scrip, rights to subscribe to, calls or commitments of any
      character whatsoever relating to, or securities or rights convertible into,
      any
      shares of capital stock of the Company or any of its subsidiaries, or contracts,
      commitments, understandings or arrangements by which the Company or any of
      its
      subsidiaries is or may become bound to issue additional shares of capital stock
      of the Company or any of its subsidiaries or options, warrants, scrip, rights
      to
      subscribe to, calls or commitments of any character whatsoever relating to,
      or
      securities or rights convertible into, any shares of capital stock of the
      Company or any of its subsidiaries, (ii) there are no outstanding debt
      securities (iii)
      there are no outstanding registration statements and (iv) there are no
      agreements or arrangements under which the Company or any of its subsidiaries
      is
      obligated to register the sale of any of their securities under the Securities
      Act (except pursuant to the Registration Rights Agreement). There are no
      securities or instruments containing anti-dilution or similar provisions that
      will be triggered by this Agreement or any related agreement or the consummation
      of the transactions described herein or therein. The Company has furnished
      to
      the Investor true and correct copies of the Company’s Articles of Incorporation,
      as amended and as in effect on the date hereof (the “Articles
      of Incorporation”),
      and
      the Company’s By-laws, as in effect on the date hereof (the “By-laws”),
      and
      the terms of all securities convertible into or exercisable for Common Stock
      and
      the material rights of the holders thereof in respect thereto.

     

    
      
        
        

      

      
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    Section
      4.4. No
      Conflict.
      The
      execution, delivery and performance of this Agreement by the Company and the
      consummation by the Company of the transactions contemplated hereby will not
      (i)
      result in a violation of the Articles of Incorporation or any certificate of
      designations of any outstanding series of preferred stock of the Company or
      By-laws 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 to which the Company or any of its
      subsidiaries is a party, or result in a violation of any law, rule, regulation,
      order, judgment or decree (including federal and state securities laws and
      regulations and the rules and regulations of the Principal Market on which
      the
      Common Stock is quoted) applicable to the Company or any of its subsidiaries
      or
      by which any material property or asset of the Company or any of its
      subsidiaries is bound or affected and which would cause a Material Adverse
      Effect. Except as disclosed in the Disclosure Schedule, neither the Company
      nor
      its subsidiaries is in violation of any term of or in default under its Articles
      of Incorporation or By-laws or their organizational charter or by-laws,
      respectively, or any material contract, agreement, mortgage, indebtedness,
      indenture, instrument, judgment, decree or order or any statute, rule or
      regulation applicable to the Company or its subsidiaries. The business of the
      Company and its subsidiaries is not being conducted in violation of any material
      law, ordinance, regulation of any governmental entity. Except as specifically
      contemplated by this Agreement and as required under the Securities Act and
      any
      applicable state securities laws, the Company 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 or contemplated by this Agreement or the Registration
      Rights Agreement in accordance with the terms hereof or thereof. All consents,
      authorizations, orders, filings and registrations which the Company is required
      to obtain pursuant to the preceding sentence have been obtained or effected
      on
      or prior to the date hereof. The Company and its subsidiaries are unaware of
      any
      fact or circumstance which might give rise to any of the foregoing.

     

    Section
      4.5. Financial
      Statements.
      As of
      their respective dates, the financial statements of the Company (the
“Financial
      Statements”)
      for
      the two most recently completed fiscal years and any subsequent interim period
      complied as to form in all material respects with applicable accounting
      requirements and the published rules and regulations of the SEC with respect
      thereto. Such financial statements have been prepared in accordance with
      generally accepted accounting principles, consistently applied, 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 exclude footnotes or may be condensed or
      summary statements) and, fairly present in all material respects the financial
      position of the Company as of the dates thereof and the results of its
      operations and cash flows for the periods then ended (subject, in the case
      of
      unaudited statements, to normal year-end audit adjustments). No other
      information provided by or on behalf of the Company to the Investor contains
      any
      untrue statement of a material fact or omits to state any material fact
      necessary in order to make the statements therein, in the light of the
      circumstances under which they were made, not misleading.

     

    Section
      4.6. No
      Default.
      Except
      as disclosed in the Disclosure Schedule, the Company is not in default in the
      performance or observance of any material obligation, agreement, covenant or
      condition contained in any indenture, mortgage, deed of trust or other material
      instrument or agreement to which it is a party or by which it is or its property
      is bound and neither the execution, nor the delivery by the Company, nor the
      performance by the Company of its obligations under this Agreement or any of
      the
      exhibits or attachments hereto will conflict with or result in the breach or
      violation of any of the terms or provisions of, or constitute a default or
      result in the creation or imposition of any lien or charge on any assets or
      properties of the Company under its Articles of Incorporation, By-Laws, any
      material indenture, mortgage, deed of trust or other material agreement
      applicable to the Company or instrument to which the Company is a party or
      by
      which it is bound, or any statute, or any decree, judgment, order, rules or
      regulation of any court or governmental agency or body having jurisdiction
      over
      the Company or its properties, in each case which default, lien or charge is
      likely to cause a Material Adverse Effect on the Company’s business or financial
      condition.

     

    
      
        
        

      

      
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    Section
      4.7. Absence
      of Events of Default.
      Except
      for matters described in the Disclosure Schedule and/or this Agreement, no
      Event
      of Default, as defined in the respective agreement to which the Company is
      a
      party, and no event which, with the giving of notice or the passage of time
      or
      both, would become an Event of Default (as so defined), has occurred and is
      continuing, which would have a Material Adverse Effect on the Company’s
      business, properties, prospects, financial condition or results of
      operations.

     

    Section
      4.8. Intellectual
      Property Rights.
      The
      Company and its subsidiaries own or possess adequate rights or licenses to
      use
      all material trademarks, trade names, service marks, service mark registrations,
      service names, patents, patent rights, copyrights, inventions, licenses,
      approvals, governmental authorizations, trade secrets and rights necessary
      to
      conduct their respective businesses as now conducted. The Company and its
      subsidiaries do not have any knowledge of any infringement by the Company or
      its
      subsidiaries of trademark, trade name rights, patents, patent rights,
      copyrights, inventions, licenses, service names, service marks, service mark
      registrations, trade secret or other similar rights of others, and, to the
      knowledge of the Company, there is no claim, action or proceeding being made
      or
      brought against, or to the Company’s knowledge, being threatened against, the
      Company or its subsidiaries regarding trademark, trade name, patents, patent
      rights, invention, copyright, license, service names, service marks, service
      mark registrations, trade secret or other infringement; and the Company and
      its
      subsidiaries are unaware of any facts or circumstances which might give rise
      to
      any of the foregoing. 

     

    Section
      4.9. Employee
      Relations.
      Neither
      the Company nor any of its subsidiaries is involved in any labor dispute nor,
      to
      the knowledge of the Company or any of its subsidiaries, is any such dispute
      threatened. None of the Company’s or its subsidiaries’ employees is a member of
      a union and the Company and its subsidiaries believe that their relations with
      their employees are good.

     

    Section
      4.10. Environmental
      Laws.
      The
      Company and its subsidiaries are (i) in compliance with any and all applicable
      material foreign, federal, state and local laws and regulations relating to
      the
      protection of human health and safety, the environment or hazardous or toxic
      substances or wastes, pollutants or contaminants (“Environmental
      Laws”),
      (ii)
      have received all permits, licenses or other approvals required of them under
      applicable Environmental Laws to conduct their respective businesses and (iii)
      are in compliance with all terms and conditions of any such permit, license
      or
      approval.

     

    
      
        
        

      

      
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    Section
      4.11. Title.
      Except
      as set forth in the Disclosure Schedule, the Company has good and marketable
      title to its properties and material assets owned by it, free and clear of
      any
      pledge, lien, security interest, encumbrance, claim or equitable interest other
      than such as are not material to the business of the Company. Any real property
      and facilities held under lease by the Company and its subsidiaries are held
      by
      them under valid, subsisting and enforceable leases with such exceptions as
      are
      not material and do not interfere with the use made and proposed to be made
      of
      such property and buildings by the Company and its subsidiaries.

     

    Section
      4.12. Insurance.
      The
      Company and each of its subsidiaries are insured by insurers of recognized
      financial responsibility against such losses and risks and in such amounts
      as
      management of the Company believes to be prudent and customary in the businesses
      in which the Company and its subsidiaries are engaged. Neither the Company
      nor
      any such subsidiary has been refused any insurance coverage sought or applied
      for and neither the Company nor any such subsidiary has any reason to believe
      that it will not be able to renew its existing insurance coverage as and when
      such coverage expires or to obtain similar coverage from similar insurers as
      may
      be necessary to continue its business at a cost that would not materially and
      adversely affect the condition, financial or otherwise, or the earnings,
      business or operations of the Company and its subsidiaries, taken as a
      whole.

     

    Section
      4.13. Regulatory
      Permits.
      The
      Company and its subsidiaries possess all material certificates, authorizations
      and permits issued by the appropriate federal, state or foreign regulatory
      authorities necessary to conduct their respective businesses, and neither the
      Company nor any such subsidiary has received any notice of proceedings relating
      to the revocation or modification of any such certificate, authorization or
      permit.

     

    Section
      4.14. Internal
      Accounting Controls.
      The
      Company and each of its subsidiaries maintain a system of internal accounting
      controls sufficient to provide reasonable assurance that (i) transactions are
      executed in accordance with management’s general or specific authorizations,
      (ii) transactions are recorded as necessary to permit preparation of financial
      statements in conformity with generally accepted accounting principles and
      to
      maintain asset accountability, (iii) access to assets is permitted only in
      accordance with management’s general or specific authorization and (iv) the
      recorded accountability for assets is compared with the existing assets at
      reasonable intervals and appropriate action is taken with respect to any
      differences.

     

    Section
      4.15. No
      Material Adverse Breaches, etc.
      Except
      as set forth in the Disclosure Schedule, neither the Company nor any of its
      subsidiaries is subject to any charter, corporate or other legal restriction,
      or
      any judgment, decree, order, rule or regulation which in the judgment of the
      Company’s officers has or is expected in the future to have a Material Adverse
      Effect on the business, properties, operations, financial condition, results
      of
      operations or prospects of the Company or its subsidiaries. Except as set forth
      in the Disclosure Schedule, neither the Company nor any of its subsidiaries
      is
      in breach of any contract or agreement which breach, in the judgment of the
      Company’s officers, has or is expected to have a Material Adverse Effect on the
      business, properties, operations, financial condition, results of operations
      or
      prospects of the Company or its subsidiaries.

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    Section
      4.16. Absence
      of Litigation.
      Except
      as set forth in the Disclosure Schedule, there is no action, suit, proceeding,
      inquiry or investigation before or by any court, public board, government
      agency, self-regulatory organization or body pending against or affecting the
      Company, the Common Stock or any of the Company’s subsidiaries, wherein an
      unfavorable decision, ruling or finding would (i) have a Material Adverse Effect
      on the transactions contemplated hereby (ii) adversely affect the validity
      or
      enforceability of, or the authority or ability of the Company to perform its
      obligations under, this Agreement or any of the documents contemplated herein,
      or (iii) except as expressly disclosed in the Disclosure Schedule, have a
      Material Adverse Effect on the business, operations, properties, financial
      condition or results of operation of the Company and its subsidiaries taken
      as a
      whole.

     

    Section
      4.17. Subsidiaries.
      Except
      as disclosed in the Disclosure Schedule, the Company does not presently own
      or
      control, directly or indirectly, any interest in any other corporation,
      partnership, association or other business entity.

     

    Section
      4.18. Tax
      Status.
      Except
      as disclosed in the Disclosure Schedule, the Company and each of its
      subsidiaries has made or filed all federal and state income and all other tax
      returns, reports and declarations required by any jurisdiction to which it
      is
      subject and (unless and only to the extent that the Company and each of its
      subsidiaries has set aside on its books provisions reasonably adequate for
      the
      payment of all unpaid and unreported taxes) has paid all taxes and other
      governmental assessments and charges that are material in amount, shown or
      determined to be due on such returns, reports and declarations, except those
      being contested in good faith and has set aside on its books provision
      reasonably adequate for the payment of all taxes for periods subsequent to
      the
      periods to which such returns, reports or declarations apply. There are no
      unpaid taxes in any material amount claimed to be due by the taxing authority
      of
      any jurisdiction, and the officers of the Company know of no basis for any
      such
      claim.

     

    Section
      4.19. Certain
      Transactions.
      Except
      as set forth in the Disclosure Schedule, none of the officers, directors, or
      employees of the Company is presently a party to any transaction with the
      Company (other than for services as employees, officers and directors),
      including any contract, agreement or other arrangement providing for the
      furnishing of services to or by, providing for rental of real or personal
      property to or from, or otherwise requiring payments to or from any officer,
      director or such employee or, to the knowledge of the Company, any corporation,
      partnership, trust or other entity in which any officer, director, or any such
      employee has a substantial interest or is an officer, director, trustee or
      partner.

     

    Section
      4.20. Fees
      and Rights of First Refusal.
      The
      Company is not obligated to offer the securities offered hereunder on a right
      of
      first refusal basis or otherwise to any third parties including, but not limited
      to, current or former shareholders of the Company, underwriters, brokers, agents
      or other third parties.

     

    Section
      4.21. Use
      of
      Proceeds.
      The
      Company represents that the net proceeds from this offering will be used for
      general corporate purposes. However, in no event shall the net proceeds from
      this offering be used by the Company for the payment (or loaned to any such
      person for the payment) of any judgment, or other liability, incurred by any
      executive officer, officer, director or employee of the Company, except for
      any
      liability owed to such person for services rendered, or if any judgment or
      other
      liability is incurred by such person originating from services rendered to
      the
      Company, or the Company has indemnified such person from liability.

     

    
      
        
        

      

      
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    Section
      4.22. Further
      Representation and Warranties of the Company.
      For so
      long as any securities issuable hereunder held by the Investor remain
      outstanding, the Company acknowledges, represents, warrants and agrees that
      it
      will maintain the listing of its Common Stock on the Principal Market

     

    Section
      4.23. Opinion
      of Counsel.
      Investor shall receive an opinion letter from counsel acceptable to the Investor
      on the date hereof.

     

    Section
      4.24. Opinion
      of Counsel.
      The
      Company will obtain for the Investor, at the Company’s expense, any and all
      opinions of counsel which may be reasonably required in order to sell the
      securities issuable hereunder without restriction.

     

    Section
      4.25. Dilution.
      The
      Company is aware and acknowledges that issuance of shares of the Company’s
      Common Stock could cause dilution to existing shareholders and could
      significantly increase the outstanding number of shares of Common Stock.

     

    ARTICLE
      V.

    Indemnification

     

    Section
      5.1. Indemnification.

     

    (a) In
      consideration of the Investor’s execution and delivery of this Agreement, and in
      addition to all of the Company’s other obligations under this Agreement, the
      Company shall defend, protect, indemnify and hold harmless the Investor, and
      all
      of its officers, directors, partners, attorneys, employees and agents
      (including, without limitation, those retained in connection with the
      transactions contemplated by this Agreement) (collectively, the “Investor
      Indemnitees”)
      from
      and against any and all actions, causes of action, suits, claims, losses, costs,
      penalties, fees, liabilities and damages, and expenses in connection therewith
      (irrespective of whether any such Investor Indemnitee is a party to the action
      for which indemnification hereunder is sought), and including reasonable
      attorneys’ fees and disbursements (the “Indemnified
      Liabilities”),
      incurred by the Investor Indemnitees or any of them as a result of, or arising
      out of, or relating to (a) any misrepresentation or breach of any representation
      or warranty made by the Company in this Agreement or the Registration Rights
      Agreement or any other certificate, instrument or document contemplated hereby
      or thereby, (b) any breach of any covenant, agreement or obligation of the
      Company contained in this Agreement or the Registration Rights Agreement or
      any
      other certificate, instrument or document contemplated hereby or thereby, or
      (c)
      any cause of action, suit or claim brought or made against such Investor
      Indemnitee arising out of or resulting from the execution, delivery, performance
      or enforcement of this Agreement or any other instrument, document or agreement
      executed pursuant hereto by any of the Investor Indemnitees. To the extent
      that
      the foregoing undertaking by the Company may be unenforceable for any reason,
      the Company shall make the maximum contribution to the payment and satisfaction
      of each of the Indemnified Liabilities, which is permissible under applicable
      law.

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

    (b) In
      consideration of the Company’s execution and delivery of this Agreement, and in
      addition to all of the Investor’s other obligations under this Agreement, the
      Investor shall defend, protect, indemnify and hold harmless the Company and
      all
      of its officers, directors, shareholders, attorneys, employees and agents
      (including, without limitation, those retained in connection with the
      transactions contemplated by this Agreement) (collectively, the “Company
      Indemnitees”)
      from
      and against any and all Indemnified Liabilities incurred by the Company
      Indemnitees or any of them as a result of, or arising out of, or relating to
      (a)
      any misrepresentation or breach of any representation or warranty made by the
      Investor in this Agreement, the Registration Rights Agreement, or any instrument
      or document contemplated hereby or thereby executed by the Investor, (b) any
      breach of any covenant, agreement or obligation of the Investor(s) contained
      in
      this Agreement, the Registration Rights Agreement or any other certificate,
      instrument or document contemplated hereby or thereby executed by the Investor,
      or (c) any cause of action, suit or claim brought or made against such Company
      Indemnitee based on misrepresentations or due to a breach by the Investor and
      arising out of or resulting from the execution, delivery, performance or
      enforcement of this Agreement or any other instrument, document or agreement
      executed pursuant hereto by any of the Company Indemnitees. To the extent that
      the foregoing undertaking by the Investor may be unenforceable for any reason,
      the Investor shall make the maximum contribution to the payment and satisfaction
      of each of the Indemnified Liabilities, which is permissible under applicable
      law.

     

    (c) The
      obligations of the parties to indemnify or make contribution under this Section
      5.1 shall survive termination.

     

    ARTICLE
      VI.

    Covenants
      of the Company

     

    Section
      6.1. Registration
      Rights.
      The
      Company shall cause the Registration Rights Agreement to remain in full force
      and effect and the Company shall comply in all material respects with the terms
      thereof.

     

    Section
      6.2. Listing
      of Common Stock.
      The
      Company shall obtain and maintain the Common Stock’s authorization for quotation
      on the National Association of Securities Dealers Inc.’s Over the Counter
      Bulletin Board. 

     

    Section
      6.3. Exchange
      Act Registration.
      The
      Company will cause its Common Stock to be registered under Section 12(g) of
      the
      Exchange Act, will file in a timely manner all reports and other documents
      required of it as a reporting company under the Exchange Act and will not take
      any action or file any document (whether or not permitted by Exchange Act or
      the
      rules thereunder) to terminate or suspend such registration or to terminate
      or
      suspend its reporting and filing obligations under said Exchange
      Act.

     

    Section
      6.4. Transfer
      Agent Instructions.
      Not
      later than two (2) business days after each Advance Notice Date and prior
      to each Closing and resale of the Common Stock by the Investor, the Company
      will
      deliver instructions to its transfer agent to issue shares of Common Stock
      free
      of restrictive legends.

     

    
      
        
        

      

      
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    Section
      6.5. Corporate
      Existence.
      The
      Company will take all steps necessary to preserve and continue the corporate
      existence of the Company.

     

    Section
      6.6. Notice
      of Certain Events Affecting Registration; Suspension of Right to Make an
      Advance.
      The
      Company will immediately notify the Investor upon its becoming aware of the
      occurrence of any of the following events in respect of a registration statement
      or related prospectus relating to an offering of Registrable Securities: (i)
      receipt of any request for additional information by the SEC or any other
      Federal or state governmental authority during the period of effectiveness
      of
      the Registration Statement for amendments or supplements to the registration
      statement or related prospectus; (ii) the issuance by the SEC or any other
      Federal or state governmental authority of any stop order suspending the
      effectiveness of the Registration Statement or the initiation of any proceedings
      for that purpose; (iii) receipt of any notification with respect to the
      suspension of the qualification or exemption from qualification of any of the
      Registrable Securities for sale in any jurisdiction or the initiation or
      threatening of any proceeding for such purpose; (iv) the happening of any event
      that makes any statement made in the Registration Statement or related
      prospectus of any document incorporated or deemed to be incorporated therein
      by
      reference untrue in any material respect or that requires the making of any
      changes in the Registration Statement, related prospectus or documents so that,
      in the case of the Registration Statement, it will not contain any untrue
      statement of a material fact or omit to state any material fact required to
      be
      stated therein or necessary to make the statements therein not misleading,
      and
      that in the case of the related prospectus, it will not contain any untrue
      statement of a material fact or omit to state any material fact required to
      be
      stated therein or necessary to make the statements therein, in the light of
      the
      circumstances under which they were made, not misleading; and (v) the Company’s
      reasonable determination that a post-effective amendment to the Registration
      Statement would be appropriate; and the Company will promptly make available
      to
      the Investor any such supplement or amendment to the related prospectus. The
      Company shall not deliver to the Investor any Advance Notice during the
      continuation of any of the foregoing events.

     

    Section
      6.7. Expectations
      Regarding Advance Notices.
      Within
      ten (10) days after the commencement of each calendar quarter occurring
      subsequent to the commencement of the Commitment Period, the Company must notify
      the Investor, in writing, as to its reasonable expectations as to the dollar
      amount it intends to raise during such calendar quarter, if any, through the
      issuance of Advance Notices. Such notification shall constitute only the
      Company’s good faith estimate and shall in no way obligate the Company to raise
      such amount, or any amount, or otherwise limit its ability to deliver Advance
      Notices. The failure by the Company to comply with this provision can be cured
      by the Company’s notifying the Investor, in writing, at any time as to its
      reasonable expectations with respect to the current calendar
      quarter.

     

    Section
      6.8. Restriction
      on Sale of Capital Stock.
      During
      the Commitment Period, the Company shall not issue or sell, without the prior
      written consent of the Investor, (i) any Common Stock or Preferred Stock without
      consideration or for a consideration per share less than the bid price of the
      Common Stock determined
      immediately prior to its issuance, (ii) issue or sell any
      Preferred Stock
      warrant, option, right, contract, call, or other security or instrument granting
      the holder thereof the right to acquire Common Stock without consideration
      or
      for a consideration per share less than such Common Stock’s Bid Price determined
      immediately prior to its issuance, or (iii) file any registration statement
      on
      Form S-8 for more than 10,000,000 shares.

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

     

    Section
      6.9. Consolidation;
      Merger.
      The
      Company shall not, at any time after the date hereof, effect any merger or
      consolidation of the Company with or into, or a transfer of all or substantially
      all the assets of the Company to another entity (a “Consolidation
      Event”)
      unless
      the resulting successor or acquiring entity (if not the Company) assumes by
      written instrument the obligation to deliver to the Investor such shares of
      stock and/or securities as the Investor is entitled to receive pursuant to
      this
      Agreement.

     

    Section
      6.10. Issuance
      of the Company’s Common Stock.
      The sale
      of the shares of Common Stock shall be made in accordance with the provisions
      and requirements of Regulation D and any applicable state securities
      law.

     

    ARTICLE
      VII.

    Conditions
      for Advance and Conditions to Closing

     

    Section
      7.1. Conditions
      Precedent to the Obligations of the Company.
      The
      obligation hereunder of the Company to issue and sell the shares of Common
      Stock
      to the Investor incident to each Closing is subject to the satisfaction, or
      waiver by the Company, at or before each such Closing, of each of the conditions
      set forth below.

     

    (a) Accuracy
      of the Investor’s Representations and Warranties.
      The
      representations and warranties of the Investor shall be true and correct in
      all
      material respects.

     

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

     

    Section
      7.2. Conditions
      Precedent to the Right of the Company to Deliver an Advance Notice and the
      Obligation of the Investor to Purchase Shares of Common Stock.
      The
      right of the Company to deliver an Advance Notice and the obligation of the
      Investor hereunder to acquire and pay for shares of the Company’s Common Stock
      incident to a Closing is subject to the fulfillment by the Company, on (i)
      the
      date of delivery of such Advance Notice and (ii) the applicable Advance
      Date (each a “Condition
      Satisfaction Date”),
      of
      each of the following conditions:

     

    (a) Listing
      of the Company’s Common Stock.
      The
      Company’s Common Stock shall have been authorized for quotation on the National
      Association of Securities Dealers Inc.’s Over the Counter Bulletin Board.

     

    (b) Registration
      of the Common Stock with the SEC.
      The
      Company shall have filed with the SEC a Registration Statement with respect
      to
      the resale of the Registrable Securities in accordance with the terms of the
      Registration Rights Agreement. As set forth in the Registration Rights
      Agreement, the Registration Statement shall have previously become effective
      and
      shall remain effective on each Condition Satisfaction Date and (i) neither
      the
      Company nor the Investor shall have received notice that the SEC has issued
      or
      intends to issue a stop order with respect to the Registration Statement or
      that
      the SEC otherwise has suspended or withdrawn the effectiveness of the
      Registration Statement, either temporarily or permanently, or intends or has
      threatened to do so (unless the SEC’s concerns have been addressed and the
      Investor is reasonably satisfied that the SEC no longer is considering or
      intends to take such action), and (ii) no other suspension of the use or
      withdrawal of the effectiveness of the Registration Statement or related
      prospectus shall exist. The Registration Statement must have been declared
      effective by the SEC prior to the first Advance Notice Date.

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

     

    (c) Authority.
      The
      Company shall have obtained all permits and qualifications required by any
      applicable state in accordance with the Registration Rights Agreement for the
      offer and sale of the shares of Common Stock, or shall have the availability
      of
      exemptions therefrom. The sale and issuance of the shares of Common Stock shall
      be legally permitted by all laws and regulations to which the Company is
      subject.

     

    (d) Fundamental
      Changes.
      There
      shall not exist any fundamental changes to the information set forth in the
      Registration Statement which would require the Company to file a post-effective
      amendment to the Registration Statement. 

     

    (e) Performance
      by the Company.
      The
      Company shall have performed, satisfied and complied in all material respects
      with all covenants, agreements and conditions required by this Agreement
      (including, without limitation, the conditions specified in Section 2.5
      hereof) and the Registration Rights Agreement to be performed, satisfied or
      complied with by the Company at or prior to each Condition Satisfaction
      Date.

     

    (f) No
      Injunction.
      No
      statute, rule, regulation, executive order, decree, ruling or injunction shall
      have been enacted, entered, promulgated or endorsed by any court or governmental
      authority of competent jurisdiction that prohibits or directly and adversely
      affects any of the transactions contemplated by this Agreement, and no
      proceeding shall have been commenced that may have the effect of prohibiting
      or
      adversely affecting any of the transactions contemplated by this
      Agreement.

     

    (g) No
      Suspension of Trading in or Delisting of Common Stock.
      The
      trading of the Common Stock has commenced on the Principal Market and has not
      been suspended by the SEC or the Principal Market. The issuance of shares of
      Common Stock with respect to the applicable Closing, if any, shall not violate
      the shareholder approval requirements of the Principal Market (if any). The
      Company shall not have received any notice threatening the continued listing
      of
      the Common Stock on the Principal Market.

     

    (h) Maximum
      Advance Amount.
      The
      amount of any Advance requested by the Company shall not exceed the Maximum
      Advance Amount. In addition, in no event shall the number of shares issuable
      to
      the Investor pursuant to an Advance cause the Investor to beneficially own
      in
      excess of nine and 9/10 percent (9.9%) of the then outstanding Common Stock
      of
      the Company.

     

    (i) No
      Knowledge.
      The
      Company has no knowledge of any event which would be more likely than not to
      have the effect of causing such Registration Statement to be suspended or
      otherwise ineffective.

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

     

    (j) Other.
      On each
      Condition Satisfaction Date, the Investor shall have received the certificate
      executed by an officer of the Company in the form of Exhibit
      A
      attached
      hereto.

     

    ARTICLE
      VIII.

    Due
      Diligence Review; Non-Disclosure of Non-Public Information

     

    Section
      8.1. Due
      Diligence Review.
      Prior
      to the filing of the Registration Statement the Company shall make available
      for
      inspection and review by the Investor, advisors to and representatives of the
      Investor, any underwriter participating in any disposition of the Registrable
      Securities on behalf of the Investor pursuant to the Registration Statement,
      any
      such registration statement or amendment or supplement thereto or any blue
      sky,
      NASD or other filing, all financial and other records, all SEC Documents and
      other filings with the SEC, and all other corporate documents and properties
      of
      the Company as may be reasonably necessary for the purpose of such review,
      and
      cause the Company’s officers, directors and employees to supply all such
      information reasonably requested by the Investor or any such representative,
      advisor or underwriter in connection with such Registration Statement
      (including, without limitation, in response to all questions and other inquiries
      reasonably made or submitted by any of them), prior to and from time to time
      after the filing and effectiveness of the Registration Statement for the sole
      purpose of enabling the Investor and such representatives, advisors and
      underwriters and their respective accountants and attorneys to conduct initial
      and ongoing due diligence with respect to the Company and the accuracy of the
      Registration Statement.

     

    Section
      8.2. Non-Disclosure
      of Non-Public Information.

     

    (a) The
      Company shall not disclose non-public information to the Investor, advisors
      to
      or representatives of the Investor unless prior to disclosure of such
      information the Company identifies such information as being non-public
      information and provides the Investor, such advisors and representatives with
      the opportunity to accept or refuse to accept such non-public information for
      review. The Company may, as a condition to disclosing any non-public information
      hereunder, require the Investor’s advisors and representatives to enter into a
      confidentiality agreement in form reasonably satisfactory to the Company and
      the
      Investor.

     

    (b) Nothing
      herein shall require the Company to disclose non-public information to the
      Investor or its advisors or representatives, and the Company represents that
      it
      does not disseminate non-public information to any investors who purchase stock
      in the Company in a public offering, to money managers or to securities
      analysts, provided, however, that notwithstanding anything herein to the
      contrary, the Company will, as hereinabove provided, immediately notify the
      advisors and representatives of the Investor and, if any, underwriters, of
      any
      event or the existence of any circumstance (without any obligation to disclose
      the specific event or circumstance) of which it becomes aware, constituting
      non-public information (whether or not requested of the Company specifically
      or
      generally during the course of due diligence by such persons or entities),
      which, if not disclosed in the prospectus included in the Registration Statement
      would cause such prospectus to include a material misstatement or to omit a
      material fact required to be stated therein in order to make the statements,
      therein, in light of the circumstances in which they were made, not misleading.
      Nothing contained in this Section 8.2 shall be construed to mean that such
      persons or entities other than the Investor (without the written consent of
      the
      Investor prior to disclosure of such information) may not obtain non-public
      information in the course of conducting due diligence in accordance with the
      terms of this Agreement and nothing herein shall prevent any such persons or
      entities from notifying the Company of their opinion that based on such due
      diligence by such persons or entities, that the Registration Statement contains
      an untrue statement of material fact or omits a material fact required to be
      stated in the Registration Statement or necessary to make the statements
      contained therein, in light of the circumstances in which they were made, not
      misleading.

     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

     

    ARTICLE
      IX.

    Choice
      of Law/Jurisdiction

     

    Section
      9.1. Governing
      Law.
      This
      Agreement shall be governed by and interpreted in accordance with the laws
      of
      the State of New Jersey without regard to the principles of conflict of laws.
      The parties further agree that any action between them shall be heard
      exclusively in Hudson County, New Jersey, and expressly consent to the
      jurisdiction and venue of the Superior Court of New Jersey, sitting in Hudson
      County, New Jersey and the United States District Court of New Jersey, sitting
      in Newark, New Jersey, for the adjudication of any civil action asserted
      pursuant to this paragraph.

     

    ARTICLE
      X.

    Assignment/Termination

     

    Section
      10.1. Assignment.
      Neither
      this Agreement nor any rights of the Company hereunder may be assigned to any
      other Person. 

     

    Section
      10.2. Termination.
      The
      obligations of the Investor to make Advances under Article II hereof shall
      terminate twenty-four (24) months after the Effective Date.

     

    ARTICLE
      XI.

    Notices

     

    Section
      11.1. Notices.
      Any
      notices, consents, waivers, or other communications required or permitted to
      be
      given under the terms of this Agreement must be in writing and will be deemed
      to
      have been delivered (i) upon receipt, when delivered personally; (ii) upon
      receipt, when sent by facsimile, provided a copy is mailed by U.S. certified
      mail, return receipt requested; (iii) three (3) days after being sent by U.S.
      certified mail, return receipt requested, or (iv) one (1) day after deposit
      with
      a nationally recognized overnight delivery service, in each case properly
      addressed to the party to receive the same. The addresses and facsimile numbers
      for such communications shall be:

     

    
      	
              If
                to the Company, to:

            	
              Texas
                Prototypes, Inc.

            
	 	
              1299
                Commerce Drive

            
	 	
              Richardson,
                Texas 75081

            
	 	
              Attention: Michael
                C. Shores, President

            
	 	
              Telephone: (214)
                575-9300

            
	 	
              Facsimile: (214)
                575-9314

            

    

     

     

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

     

     

    
      	
              With
                a copy to:

            	
              Schiff
                Hardin LLP

            
	 	
              1101
                Connecticut Avenue, N.W.

            
	 	
              Suite
                600

              Washington,
                D.C. 20036

            
	 	
              Telephone: (202)
                778-6461

            
	 	
              Facsimile: (202)
                778-6460

            
	 	 
	
              If
                to the Investor(s):

            	
              Cornell
                Capital Partners, LP

            
	 	
              101
                Hudson Street -Suite 3700

            
	 	
              Jersey
                City, NJ 07302

            
	 	
              Attention: Mark
                Angelo

            
	 	
              Portfolio
                Manager

            
	 	
              Telephone: (201)
                985-8300 

            
	 	
              Facsimile: (201)
                985-8266 

            
	 	 
	
              With
                a copy to:

            	
              Cornell
                Capital Partners, LP

            
	 	
              101
                Hudson Street -Suite 3700

            
	 	
              Jersey
                City, NJ 07302

            
	 	
              Attention: Troy
                J. Rillo, Esq.

            
	 	
              Senior
                Vice-President

            
	 	
              Telephone: (201)
                985-8300 

            
	 	
              Facsimile: (201)
                985-8266 

            

    

    

    Each
      party shall provide five (5) days’ prior written notice to the other party of
      any change in address or facsimile number.

     

    ARTICLE
      XII.

    Miscellaneous

     

    Section
      12.1. Counterparts.
      This
      Agreement may be executed in two or more identical counterparts, all of which
      shall be considered one and the same agreement and shall become effective when
      counterparts have been signed by each party and delivered to the other party.
      In
      the event any signature page is delivered by facsimile transmission, the party
      using such means of delivery shall cause four (4) additional original executed
      signature pages to be physically delivered to the other party within five (5)
      days of the execution and delivery hereof, though failure to deliver such copies
      shall not affect the validity of this Agreement.

     

    Section
      12.2. Entire
      Agreement; Amendments.
      This
      Agreement supersedes all other prior oral or written agreements between the
      Investor, the Company, their affiliates and persons acting on their behalf
      with
      respect to the matters discussed herein, and this Agreement and the instruments
      referenced herein contain the entire understanding of the parties with respect
      to the matters covered herein and therein and, except as specifically set forth
      herein or therein, neither the Company nor the Investor makes any
      representation, warranty, covenant or undertaking with respect to such matters.
      No provision of this Agreement may be waived or amended other than by an
      instrument in writing signed by the party to be charged with
      enforcement.

     

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

     

    Section
      12.3. Reporting
      Entity for the Common Stock.
      The
      reporting entity relied upon for the determination of the trading price or
      trading volume of the Common Stock on any given Trading Day for the purposes
      of
      this Agreement shall be Bloomberg, L.P. or any successor thereto. The written
      mutual consent of the Investor and the Company shall be required to employ
      any
      other reporting entity.

     

    Section
      12.4. Fees
      and Expenses.
      The
      Company hereby agrees to pay the following fees:

     

    (a) Legal
      Fees.
      Except
      as provided in Section 12.4(b), each of the parties shall pay its own fees
      and
      expenses (including the fees of any attorneys, accountants, appraisers or
      others engaged by such party) in connection with this Agreement and the
      transactions contemplated hereby. The outstanding fees of Schiff Hardin LLP
      may
      be paid directly out of the proceeds of any Advance hereunder, as requested
      in
      writing by Ernest M. Stern, Esq.

     

    (b) Structuring
      Fees.
      The
      Company shall pay the Structuring Fee described in the Securities Purchase
      Agreement of even date herewith. This fee shall be deemed fully earned on the
      date hereof. 

     

    (c) Commitment
      Fees.

     

    (i) On
      each
      Advance Date the Company shall pay to the Investor, directly from the gross
      proceeds held in escrow, an amount equal to five percent (5%) of the amount
      of
      each Advance. The Company hereby agrees that if such payment, as is described
      above, is not made by the Company on the Advance Date, such payment will be
      made
      at the direction of the Investor as outlined and mandated by Section 2.3 of
      this
      Agreement. 

     

    (ii) Upon
      the
      execution of this Agreement, the Company shall issue to the Investor a
      compensation debenture equal to $400,000, which shall be convertible into the
      Company’s Common Stock (the “Investor
      Shares”)
      in
      accordance with the terms thereof. The Investor shall agree not to sell the
      Investor Shares for six months after the date hereof.

     

    (iii) Fully
      Earned.
      The
      Investor’s Shares shall be deemed fully earned as of the date hereof.

     

    (iv) Registration
      Rights.
      The
      Investor’s Shares will have “piggy-back”
      registration rights.

     

    Section
      12.5. Brokerage.
      Each of
      the parties hereto represents that it has had no dealings in connection with
      this transaction with any finder or broker who will demand payment of any fee
      or
      commission from the other party. The Company on the one hand, and the Investor,
      on the other hand, agree to indemnify the other against and hold the other
      harmless from any and all liabilities to any person claiming brokerage
      commissions or finder’s fees on account of services purported to have been
      rendered on behalf of the indemnifying party in connection with this Agreement
      or the transactions contemplated hereby.

     

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

     

    Section
      12.6. Confidentiality.
      If for
      any reason the transactions contemplated by this Agreement are not consummated,
      each of the parties hereto shall keep confidential any information obtained
      from
      any other party (except information publicly available or in such party’s domain
      prior to the date hereof, and except as required by court order) and shall
      promptly return to the other parties all schedules, documents, instruments,
      work
      papers or other written information without retaining copies thereof, previously
      furnished by it as a result of this Agreement or in connection
      herein.

     

    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK]

    

    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

    

    

    IN
      WITNESS WHEREOF,
      the
      parties hereto have caused this Standby Equity Distribution Agreement to be
      executed by the undersigned, thereunto duly authorized, as of the date first
      set
      forth above.

     

    
      	 	 	 
	 	
              COMPANY:

            
	 	
              TEXAS
                PROTOTYPES, INC.

            
	 
 	 
 	 
 
	
            	By:  	/s/ Michael C. Shores
	 	
              

              Name: Michael
                C. Shores

            
	 	
              Title: President

            

    

     

    
       

      
        	 	 	 
	 	
                INVESTOR:

              
	 	
                CORNELL
                  CAPITAL PARTNERS, LP

              
	 	 
	 	
                By: Yorkville
                  Advisors, LLC

              
	 	
                Its: General
                  Partner

              
	 
 	 
 	 
 
	
              	By:  	/s/ Mark Angelo
	 	
                

                Name: Mark
                  Angelo

              
	 	
                Title: Portfolio
                  Manager

              

      

    

     

     

    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
      A

     

    ADVANCE
      NOTICE/COMPLIANCE CERTIFICATE

     

    TEXAS
      PROTOTYPES, INC.

    

    The
      undersigned, _______________________ hereby certifies, with respect to the
      sale
      of shares of Common Stock of Texas Prototypes, Inc. (the “Company”),
      issuable in connection with this Advance Notice and Compliance Certificate
      dated
      ___________________ (the “Notice”),
      delivered pursuant to the Standby Equity Distribution Agreement (the
“Agreement”),
      as
      follows: 

     

    1. The
      undersigned is the duly elected President of the Company.

     

    2. There
      are
      no fundamental changes to the information set forth in the Registration
      Statement which would require the Company to file a post effective amendment
      to
      the Registration Statement. 

     

    3.
       The
      Company has performed in all material respects all covenants and agreements
      to
      be performed by the Company on or prior to the Advance Date related to the
      Notice and has complied in all material respects with all obligations and
      conditions contained in the Agreement.

     

    4. The
      Advance requested is _____________________.

     

    The
      undersigned has executed this Certificate this ____ day of
      _________________.

    
      	 	 	 
	 	
              TEXAS
                PROTOTYPES, INC.

            
	 
 	 
 	 
 
	
            	By:  	
            
	 	
              
Name: Michael
              C. Shores
	 	Title: President

    

     

    

    
      
        
        

      

      
        EXHIBIT
          A-1

        
          

        

      

      
        
        

      

    

     

    SCHEDULED
      2.6

     

    TEXAS
      PROTOTYPES, INC.

     

    The
      undersigned hereby agrees that for a period commencing on the date hereof and
      expiring on the termination of the Agreement dated June __, 2004 between Texas
      Prototypes, Inc. (the “Company”)
      and
      Cornell Capital Partners, LP (the “Investor”)
      (the
“Lock-up
      Period”),
      he,
      she or it will not, directly or indirectly, without the prior written consent
      of
      the Investor, issue, offer, agree or offer to sell, sell, grant an option for
      the purchase or sale of, transfer, pledge, assign, hypothecate, distribute
      or
      otherwise encumber or dispose of except pursuant to Rule 144 of the General
      Rules and Regulations under the Securities Act of 1933, any securities of the
      Company, including common stock or options, rights, warrants or other securities
      underlying, convertible into, exchangeable or exercisable for or evidencing
      any
      right to purchase or subscribe for any common stock (whether or not beneficially
      owned by the undersigned), or any beneficial interest therein (collectively,
      the
“Securities”).

     

    In
      order
      to enable the aforesaid covenants to be enforced, the undersigned hereby
      consents to the placing of legends and/or stop-transfer orders with the transfer
      agent of the Company’s securities with respect to any of the Securities
      registered in the name of the undersigned or beneficially owned by the
      undersigned, and the undersigned hereby confirms the undersigned’s investment in
      the Company.

     

    Dated: _______________,
      2004

    
      	 	 	
              Signature

            
	 
 	 
 	 
 
	
            	
            	____________________________________________
	 	Address:
              ___________________________________________
	 	City, State, Zip Code:
              __________________________________
	 	 
	 	 
	 	____________________________________________
	 	Print Social Security Number 
	 	or Taxpayer I.D.
              Number

    

    

    

    
      
        
        

      

      
        SCHEDULE
          2.6-1

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