Document:

Unassociated Document

    SECURITIES
      PURCHASE AGREEMENT

     

    SECURITIES
      PURCHASE AGREEMENT
      (the
      "Agreement"),
      dated
      as of July 7, 2008, by and between Green Screen Interactive Software, Inc.,
      a Delaware corporation, with headquarters located at 575 Broadway, New York,
      New
      York 10012 (the "Company"),
      and
      Driftwood Ventures, Inc. ("Buyer").
      

     

    WHEREAS:

     

    A. The
      Company and Buyer are executing and delivering this Agreement in reliance upon
      the exemption from securities registration afforded by Section 4(2) of the
      Securities Act of 1933, as amended (the "1933
      Act"),
      and
      Rule 506 of Regulation D ("Regulation D")
      as
      promulgated by the United States Securities and Exchange Commission (the
      "SEC")
      under
      the 1933 Act.

     

    B. The
      Company has authorized a new series of senior secured notes of the Company,
      in
      the form attached hereto as Exhibit
      A
      (the
“Notes”).

     

    C. Buyer
      wishes to purchase, and the Company wishes to sell, upon the terms and
      conditions stated in this Agreement, that aggregate principal amount of the
      Notes set forth opposite Buyer's name in column (3) on the Schedule of Buyers
      attached hereto (which aggregate amount shall be up to $7,000,000).

     

    D. The
      Notes
      are sometimes referred to herein as the "Securities".

     

    E. The
      Notes
      will rank senior to all outstanding and future indebtedness of the Company,
      subject to Permitted Indebtedness (as defined in the Notes) and will be secured
      by a perfected security interest in all of the assets of the Company (subject
      only to the security interest granted in connection with Existing Indebtedness)
      and the stock and assets of each of the Company's Subsidiaries (as defined
      below), as evidenced by the pledge agreement attached hereto as Exhibit
      B
      (the
      "Pledge
      Agreement")
      and
      the Security Agreement attached hereto as Exhibit
      C
      (the
      "Security
      Agreement")
      and
      the guarantee from each Subsidiary in the form attached hereto as Exhibit
      D
      (the
      "Guarantees",
      and
      together with the Pledge Agreement and the Security Agreement, collectively
      the
      "Security
      Documents").

     

    NOW,
      THEREFORE,
      the
      Company and Buyer hereby agree as follows:

     

    1. PURCHASE
      AND SALE OF NOTES; ADVANCES UNDER NOTES.

     

    (a) Purchase
      of Notes.

     

    (i) Notes. Subject
      to the satisfaction (or waiver) of the conditions set forth in Sections 6 and
      7
      below, the Company shall issue and sell to Buyer, and Buyer agrees to purchase
      from the Company on the Closing Date (as defined below), a principal amount
      of
      Notes as is set forth opposite Buyer's name in column (3) on the Schedule of
      Buyers (the "Closing").

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (ii) Closing.
      The
      date and time of the Closing (the "Closing
      Date")
      shall
      be 10:00 a.m., New York City time, on the date hereof.

     

    (iii) Purchase
      Price.
      The
      aggregate purchase price for the Notes to be purchased by Buyer at the Closing
      (the "Purchase
      Price")
      shall
      be the amount set forth opposite Buyer's name in column (5) of the Schedule
      of
      Buyers.

     

    (b) Form
      of Payment.
      On the
      Closing Date, (i) except as provided herein and in the Note, Buyer shall pay
      its
      Purchase Price to the Company for the Notes to be issued and sold to Buyer
      at
      the Closing, by wire transfer of immediately available funds in accordance
      with
      the Company's written wire instructions and (ii) the Company shall deliver
      to Buyer the Notes, duly executed on behalf of the Company and registered in
      the
      name of such Buyer or its designee. The Company acknowledges receipt of
      $3,028,888.89 as its first Advance (as defined below) under the Note, as payment
      of the Purchase Price ($1,000,000 of which will be sent to the Company and
      the
      remaining $2,028,888.89 will be sent by Buyer on behalf of the Company to
      Mandalay Media, Inc. for the repayment of the debt owed by the Company to
      Mandalay Media, Inc. 

     

    (c) Advances.
      Notwithstanding anything to the contrary contained herein or in the Notes,
      and
      subject to the terms and conditions of this Agreement and the Notes, and
      provided that no default has been declared under the Transaction Documents,
      the
      Buyer will lend the Company, from time to time until September 30, 2008 (the
      “Termination
      Date”),
      such
      sums as the Company may request, but which shall not exceed, in the aggregate
      principal amount $7,000,000 (the “Revolving
      Loan”).
      Subject to the foregoing limitations, the Company may borrow on a weekly basis,
      repay without penalty or premium, and reborrow amounts under this Section 1(c),
      from the date of this Agreement until the Termination Date, provided that any
      Advance made by the Buyer to the Company is contingent upon a mutually agreed
      upon budget for the use of such Advance by the Company, which agreement shall
      not be unreasonably withheld by Buyer. Notwithstanding the foregoing, Buyer
      may
      withhold its agreement if any portion of an Advance will be used for the payment
      of bonuses to any employees of the Company or its subsidiaries. 

     

    (d) Procedure
      for Advances.
      The
      Company may request Advances hereunder by written notice not later than 10:00
      a.m. New York City time on the date the Company proposes to receive an Advance.
      The Buyer shall not be required to honor a request for an Advance unless given
      by Ron Chaimowitz or such other Person or Persons as shall be so authorized
      by
      duly adopted resolutions of the board of directors of the Company from time
      to
      time, certified copies of which resolutions shall have been furnished to the
      Buyer. Subject to the terms and conditions of this Agreement and the Notes,
      and
      provided that no default has been declared under the Transaction Documents,
      the
      Buyer will make available to the Company the amount of such Advance, in United
      States Dollars and in immediately available funds on or before the second
      business day following the date of such request. For purposes of this Agreement,
      an “Advance”
means
      each loan of money or credit made to the Company by the Buyer pursuant to
      Section 1 of this Agreement. 

     

    
      
        
        

      

      
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    2. BUYER'S
      REPRESENTATIONS AND WARRANTIES. Buyer represents and warrants that:

     

    (a) No
      Sale or Distribution.
      Buyer
      is acquiring the Notes for its own account and not with a view towards, or
      for
      resale in connection with, the public sale or distribution thereof, except
      pursuant to sales registered or exempted under the 1933 Act; provided, however,
      that by making the representations herein, Buyer does not agree to hold any
      of
      the Securities for any minimum or other specific term and reserves the right
      to
      dispose of the Securities at any time in accordance with or pursuant to a
      registration statement or an exemption under the 1933 Act and pursuant to the
      applicable terms of the Transaction Documents (as defined in Section 3(b)).
      Buyer does not presently have any agreement or understanding, directly or
      indirectly, with any Person to distribute any of the Securities.

     

    (b) Reliance
      on Exemptions.
      Buyer
      understands that the Securities are being offered and sold to it in reliance
      on
      specific exemptions from the registration requirements of United States federal
      and state securities laws and that the Company is relying in part upon the
      truth
      and accuracy of, and Buyer's compliance with, the representations, warranties,
      agreements, acknowledgments and understandings of such Buyer set forth herein
      in
      order to determine the availability of such exemptions and the eligibility
      of
      such Buyer to acquire the Securities.

     

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

     

    (d) No
      Governmental Review.
      Buyer
      understands that no United States federal or state agency or any other
      government or governmental agency has passed on or made any recommendation
      or
      endorsement of the Securities or the fairness or suitability of the investment
      in the Securities nor have such authorities passed upon or endorsed the merits
      of the offering of the Securities.

     

    (e) Transfer
      or Resale.
      Buyer
      understands that: (i) the Securities have not been and are not being registered
      under the 1933 Act or any state securities laws, and may not be offered for
      sale, sold, assigned or transferred unless (A) subsequently registered
      thereunder, (B) Buyer shall have delivered to the Company an opinion of counsel,
      in a generally acceptable form, to the effect that such Securities to be sold,
      assigned or transferred may be sold, assigned or transferred pursuant to an
      exemption from such registration, or (C) Buyer provides the Company with
      reasonable assurance that such Securities can be sold, assigned or transferred
      pursuant to Rule 144 or Rule 144A promulgated under the 1933 Act, as amended,
      (or a successor rule thereto) (collectively, "Rule
      144");
      (ii)
      any sale of the Securities made in reliance on Rule 144 may be made only in
      accordance with the terms of Rule 144 and further, if Rule 144 is not
      applicable, any resale of the Securities under circumstances in which the seller
      (or the Person (as defined in Section 3(s)) through whom the sale is made)
      may
      be deemed to be an underwriter (as that term is defined in the 1933 Act) may
      require compliance with some other exemption under the 1933 Act or the rules
      and
      regulations of the SEC thereunder; and (iii) neither the Company nor any other
      Person is under any obligation to register the Securities under the 1933 Act
      or
      any state securities laws or to comply with the terms and conditions of any
      exemption thereunder. The Securities may be pledged in connection with a bona
      fide margin account or other loan or financing arrangement secured by the
      Securities and such pledge of Securities shall not be deemed to be a transfer,
      sale or assignment of the Securities hereunder, and no Buyer effecting a pledge
      of Securities shall be required to provide the Company with any notice thereof
      or otherwise make any delivery to the Company pursuant to this Agreement or
      any
      other Transaction Document (as defined in Section 3(b)), including without
      limitation, this Section 2(f).

     

    
      
        
        

      

      
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    (f) Validity;
      Enforcement.
      This
      Agreement and the Security Documents to which Buyer is a party have been duly
      and validly authorized, executed and delivered on behalf of Buyer and shall
      constitute the legal, valid and binding obligations of Buyer enforceable against
      Buyer in accordance with their respective terms, except as such enforceability
      may be limited by general principles of equity or to applicable bankruptcy,
      insolvency, reorganization, moratorium, liquidation and other similar laws
      relating to, or affecting generally, the enforcement of applicable creditors'
      rights and remedies. 

     

    (g) No
      Conflicts.
      The
      execution, delivery and performance by Buyer of this Agreement and the Security
      Documents to which Buyer is a party and the consummation by Buyer of the
      transactions contemplated hereby and thereby will not (i) result in a violation
      of the organizational documents of Buyer 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
      Buyer is a party, or (iii) result in a violation of any law, rule, regulation,
      order, judgment or decree (including federal and state securities laws)
      applicable to Buyer, except in the case of clauses (ii) and (iii) above, for
      such conflicts, defaults, rights or violations which would not, individually
      or
      in the aggregate, reasonably be expected to have a material adverse effect
      on
      the ability of Buyer to perform its obligations hereunder.

     

    3. REPRESENTATIONS
      AND WARRANTIES OF THE COMPANY. The Company represents and warrants to Buyer
      that:

     

    (a) Organization
      and Qualification.
      The
      Company and its "Subsidiaries"
      (which
      for purposes of this Agreement means any entity in which the Company, directly
      or indirectly, owns more than 50% of the capital stock or holds an equity or
      similar interest) are entities duly organized and validly existing and, to
      the
      extent legally applicable, in good standing under the laws of the jurisdiction
      in which they are formed, and have the requisite power and authorization to
      own
      their properties and to carry on their business as now being conducted. Each
      of
      the Company and its Subsidiaries is duly qualified as a foreign entity to do
      business and to the extent legally applicable, is in good standing in every
      jurisdiction in which its ownership of property or 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. As used in this Agreement, "Material
      Adverse Effect"
      means
      any material adverse effect on the business, properties, assets, operations,
      results of operations, condition (financial or otherwise) or prospects of the
      Company and its Subsidiaries, taken as a whole, or on the transactions
      contemplated hereby and the other Transaction Documents or by the agreements
      and
      instruments to be entered into in connection herewith or therewith, or on the
      authority or ability of the Company to perform its obligations under the
      Transaction Documents (as defined below). The Company has no Subsidiaries except
      as set forth on Schedule
      3(a).

     

    
      
        
        

      

      
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    (b) Authorization;
      Enforcement; Validity.
      The
      Company has the requisite corporate power and authority to enter into and
      perform its obligations under this Agreement, the Notes, the Security Documents
      and each of the other agreements entered into by the parties hereto in
      connection with the transactions contemplated by this Agreement (collectively,
      the "Transaction
      Documents")
      and
      the Agreement and Plan of Merger, by and among the Buyer, DFTW Merger Sub,
      Inc.
      and the Company, dated July 7, 2008 (the “Merger
      Agreement”),
      and
      to issue the Securities in accordance with the terms hereof and thereof. The
      execution and delivery of the Transaction Documents by the Company and the
      consummation by the Company of the transactions contemplated hereby and thereby,
      including, without limitation, the issuance of the Notes and the granting of
      a
      security interest in the Collateral (as defined in the Security Documents)
      have
      been duly authorized by the Company's Board of Directors and other than as
      set
      forth in Section 3(e), no further filing, consent or authorization is required
      by the Company, its Board of Directors or its stockholders. This Agreement
      and
      the other Transaction Documents of even date herewith have been duly executed
      and delivered by the Company, and constitute the legal, valid and binding
      obligations of the Company enforceable against the Company in accordance with
      their respective 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 applicable creditors' rights and remedies. 

     

    (c) Issuance
      of Securities.
      The
      issuance of the Notes are duly authorized and are free from all taxes, liens
      and
      charges with respect to the issue thereof. Assuming the accuracy of each of
      the
      representations and warranties set forth in Section 2 of this Agreement, the
      offer and issuance by the Company of the Securities is exempt from registration
      under the 1933 Act.

     

    (d) No
      Conflicts.
      The
      execution, delivery and performance of the Transaction Documents by the Company
      and the consummation by the Company of the transactions contemplated hereby
      and
      thereby (including, without limitation, the issuance of the Notes and the
      granting of a security interest in the Collateral will not (i) result in a
      violation of any certificate of incorporation, certificate of formation, any
      certificate of designations or other constituent documents of the Company or
      any
      of is Subsidiaries, any capital stock of the Company or any of its Subsidiaries
      or bylaws of the Company or any of its Subsidiaries or (ii) conflict with,
      or
      constitute a default (or an event which with notice or lapse of time or both
      would become a default) in any respect 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 (iii) result in a violation of any law, rule, regulation, order,
      judgment or decree (including foreign, federal and state securities laws and
      regulations applicable to the Company or any of its Subsidiaries or by which
      any
      property or asset of the Company or any of its Subsidiaries is bound or
      affected. Buyer acknowledges and agrees that the execution, delivery and
      performance of the Transaction Documents themselves shall not be deemed a
      violation of the Merger Agreement, except as otherwise set forth in the Merger
      Agreement. 

     

    
      
        
        

      

      
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    (e) Consents.
      Neither
      the Company nor any of its Subsidiaries is required to obtain any consent,
      authorization or order of, or make any filing or registration with, any court,
      governmental agency or any regulatory or self-regulatory agency or any other
      Person in order for it to execute, deliver or perform any of its obligations
      under or contemplated by the Transaction Documents, in each case in accordance
      with the terms hereof or thereof, except for the following consents,
      authorizations, orders, filings and registrations (none of which is required
      to
      be filed or obtained before the Closing): the filing of appropriate UCC
      financing statements with the appropriate states and other authorities pursuant
      to the Pledge and Security Agreement.

     

    (f) No
      General Solicitation; Placement Agent's Fees.
      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) in connection with the offer or sale of
      the
      Securities. The Company shall be responsible for the payment of any placement
      agent's fees, financial advisory fees, or brokers' commissions (other than
      for
      persons engaged by any Buyer or its investment advisor) relating to or arising
      out of the transactions contemplated hereby. The Company has not engaged any
      placement agent or other agent in connection with the sale of the
      Securities.

     

    (g) Absence
      of Certain Changes.
      Since
      December 31, 2007, there has been no material adverse change and no material
      adverse development in the business, properties, operations, condition
      (financial or otherwise), results of operations or prospects of the Company
      or
      its Subsidiaries. Except as disclosed in Schedule
      3(g),
      since
      December 31, 2007, the Company has not (i) declared or paid any dividends,
      (ii)
      sold any assets, individually or in the aggregate, in excess of $100,000 outside
      of the ordinary course of business or (iii) had capital expenditures,
      individually or in the aggregate, in excess of $100,000. The Company has not
      taken any steps to seek protection pursuant to any bankruptcy law nor does
      the
      Company have any knowledge or reason to believe that its creditors intend to
      initiate involuntary bankruptcy proceedings or any actual knowledge of any
      fact
      that would reasonably lead a creditor to do so. The Company and its
      Subsidiaries, individually and on a consolidated basis, are not as of the date
      hereof, and after giving effect to the transactions contemplated hereby to
      occur
      at the Closing, will not be Insolvent (as defined below). For purposes of this
      Section 3(g), "Insolvent"
      means,
      with respect to any Person (as defined in Section 3(l)), (i) the present fair
      saleable value of such Person's assets is less than the amount required to
      pay
      such Person's total Indebtedness (as defined in Section 3(l)), (ii) such Person
      is unable to pay its debts and liabilities, subordinated, contingent or
      otherwise, as such debts and liabilities become absolute and matured, (iii)
      such
      Person intends to incur or believes that it will incur debts that would be
      beyond its ability to pay as such debts mature or (iv) such Person has
      unreasonably small capital with which to conduct the business in which it is
      engaged as such business is now conducted and is proposed to be
      conducted.

     

    (h) Conduct
      of Business; Regulatory Permits.
      Neither
      the Company nor its Subsidiaries is in violation of any term of or in default
      under its Certificate of Incorporation, any certificate of designations of
      any
      outstanding series of preferred stock of the Company or Bylaws or their
      organizational charter or bylaws, respectively. Neither the Company nor any
      of
      its Subsidiaries is in violation of any judgment, decree or order or any
      statute, ordinance, rule or regulation applicable to the Company or its
      Subsidiaries, and neither the Company nor any of its Subsidiaries will conduct
      its business in violation of any of the foregoing, except for possible
      violations which could not, individually or in the aggregate, reasonably be
      expected to have a Material Adverse Effect. The Company and its Subsidiaries
      possess all certificates, authorizations and permits issued by the appropriate
      regulatory authorities necessary to conduct their respective businesses, except
      where the failure to possess such certificates, authorizations or permits would
      not have, individually or in the aggregate, a Material Adverse Effect, 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.

     

    
      
        
        

      

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

     

    (j) Transactions
      With Affiliates.
      None of
      the officers, directors or employees of the Company or any of its Subsidiaries
      is presently a party to any transaction with the Company or any of its
      Subsidiaries (other than for ordinary course services as employees, officers
      or
      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 such
      officer, director or employee or, to the knowledge of the Company, any
      corporation, partnership, trust or other entity in which any such officer,
      director, or employee has a substantial interest or is an officer, director,
      trustee or partner.

     

    (k) Equity
      Capitalization.
      As of
      the date hereof, the authorized capital stock of the Company consists of
      50,000,000 shares of common stock, par value $0.0001 per share (“Common
      Stock”)
      of
      which as of the date hereof, 3,694,737 are issued and outstanding, 10,000,000
      shares of preferred stock, of which as of the date hereof, no shares are issued
      and outstanding, 354,605 shares are reserved for issuance pursuant to the
      Company's stock option and purchase plans and 246,243 shares are reserved for
      issuance pursuant to securities (other than the aforementioned options and
      the
      Notes) exercisable or exchangeable for, or convertible into, shares of Common
      Stock. All of such outstanding shares have been, or upon issuance will be,
      validly issued and are fully paid and nonassessable. Except as disclosed in
      Schedule
      3(k):
      (i)
      none of the Company's capital stock is subject to preemptive rights or any
      other
      similar rights or any liens or encumbrances suffered or permitted by the
      Company; (ii) there are no outstanding options, warrants, scrip, rights to
      subscribe to, calls or commitments of any character whatsoever relating to,
      or
      securities or rights convertible into, or exercisable or exchangeable for,
      any
      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 capital stock of the
      Company or any of its Subsidiaries or options, warrants, scrip, rights to
      subscribe to, calls or commitments of any character whatsoever relating to,
      or
      securities or rights convertible into, or exercisable or exchangeable for,
      any
      capital stock of the Company or any of its Subsidiaries; (iii) there are no
      outstanding debt securities, notes, credit agreements, credit facilities or
      other agreements, documents or instruments evidencing Indebtedness of the
      Company or any of its Subsidiaries or by which the Company or any of its
      Subsidiaries is or may become bound; (iv) there are no financing statements
      securing obligations in any material amounts, either singly or in the aggregate,
      filed in connection with the Company or any of its Subsidiaries; (v) there
      are
      no agreements or arrangements under which the Company or any of its Subsidiaries
      is obligated to register the sale of any of their securities under the 1933
      Act;
      (vi) there are no outstanding securities or instruments of the Company or any
      of
      its Subsidiaries which contain any redemption or similar provisions, and there
      are no contracts, commitments, understandings or arrangements by which the
      Company or any of its Subsidiaries is or may become bound to redeem a security
      of the Company or any of its Subsidiaries; (vii) there are no securities or
      instruments containing anti-dilution or similar provisions that will be
      triggered by the issuance of the Securities; (viii) the Company does not have
      any stock appreciation rights or "phantom stock" plans or agreements or any
      similar plan or agreement; and (ix) the Company and its Subsidiaries have no
      liabilities or obligations, other than those incurred in the ordinary course
      of
      the Company's or its Subsidiaries' respective businesses and which, individually
      or in the aggregate, do not or would not have a Material Adverse Effect. The
      Company has furnished to the Buyer true, correct and complete copies of the
      Company's Certificate of Incorporation, as amended and as in effect on the
      date
      hereof (the "Certificate
      of Incorporation"),
      and
      the Company's Bylaws, as amended and as in effect on the date hereof (the
      "Bylaws"),
      and
      the terms of all securities convertible into, or exercisable or exchangeable
      for, shares of Common Stock and the material rights of the holders thereof
      in
      respect thereto.

     

    
      
        
        

      

      
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    (l) Indebtedness
      and Other Contracts.
      Except
      as disclosed in Schedule
      3(l),
      neither
      the Company nor any of its Subsidiaries (i) has any outstanding Indebtedness
      (as
      defined below), (ii) is a party to any contract, agreement or instrument, the
      violation of which, or default under which, by the other party(ies) to such
      contract, agreement or instrument could reasonably be expected to result in
      a
      Material Adverse Effect, (iii) is in violation of any term of or in default
      under any contract, agreement or instrument relating to any Indebtedness, except
      where such violations and defaults would not result, individually or in the
      aggregate, in a Material Adverse Effect, or (iv) is a party to any contract,
      agreement or instrument relating to any Indebtedness, the performance of which,
      in the judgment of the Company's officers, has or is expected to have a Material
      Adverse Effect. Schedule
      3(l)
      provides
      a detailed description of the material terms of any such outstanding
      Indebtedness. For purposes of this Agreement: (x) "Indebtedness"
      of any
      Person means, without duplication (A) all indebtedness for borrowed money,
      (B)
      all obligations issued, undertaken or assumed as the deferred purchase price
      of
      property or services, including (without limitation) "capital leases" in
      accordance with generally accepted accounting principles (other than trade
      payables entered into in the ordinary course of business), (C) all reimbursement
      or payment obligations with respect to letters of credit, surety bonds and
      other
      similar instruments, (D) all obligations evidenced by notes, bonds, debentures
      or similar instruments, including obligations so evidenced incurred in
      connection with the acquisition of property, assets or businesses, (E) all
      indebtedness created or arising under any conditional sale or other title
      retention agreement, or incurred as financing, in either case with respect
      to
      any property or assets acquired with the proceeds of such indebtedness (even
      though the rights and remedies of the seller or bank under such agreement in
      the
      event of default are limited to repossession or sale of such property), (F)
      all
      monetary obligations under any leasing or similar arrangement which, in
      connection with generally accepted accounting principles, consistently applied
      for the periods covered thereby, is classified as a capital lease, (G) all
      indebtedness referred to in clauses (A) through (F) above secured by (or for
      which the holder of such Indebtedness has an existing right, contingent or
      otherwise, to be secured by) any mortgage, lien, pledge, charge, security
      interest or other encumbrance upon or in any property or assets (including
      accounts and contract rights) owned by any Person, even though the Person which
      owns such assets or property has not assumed or become liable for the payment
      of
      such indebtedness, and (H) all Contingent Obligations in respect of indebtedness
      or obligations of others of the kinds referred to in clauses (A) through (G)
      above; (y) "Contingent
      Obligation"
      means,
      as to any Person, any direct or indirect liability, contingent or otherwise,
      of
      that Person with respect to any indebtedness, lease, dividend or other
      obligation of another Person if the primary purpose or intent of the Person
      incurring such liability, or the primary effect thereof, is to provide assurance
      to the obligee of such liability that such liability will be paid or discharged,
      or that any agreements relating thereto will be complied with, or that the
      holders of such liability will be protected (in whole or in part) against loss
      with respect thereto; and (z) "Person"
      means
      an individual, a limited liability company, a partnership, a joint venture,
      a
      corporation, a trust, an unincorporated organization and a government or any
      department or agency thereof.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    (m) Absence
      of Litigation.
      Except
      as set forth in Schedule
      3(m),
      there
      is no action, suit, proceeding, inquiry or investigation before or by any court,
      public board, government agency, self-regulatory organization or body pending
      or, to the knowledge of the Company, threatened against or affecting the Company
      or any of its Subsidiaries, the Common Stock or any of the Company's
      Subsidiaries or any of the Company's or its Subsidiaries' officers or directors.
      

     

    (n) 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 have a Material
      Adverse Effect. 

     

    (o) Employee
      Relations.
      Neither
      the Company nor any of its Subsidiaries is a party to any collective bargaining
      agreement or employs any member of a union. The Company and its Subsidiaries
      believe that their relations with their employees are good. No executive officer
      of the Company or any of its Subsidiaries (as defined in Rule 501(f) of the
      1933
      Act) has notified the Company or any of such Subsidiary that such officer
      intends to leave the Company or any of such Subsidiary or otherwise terminate
      such officer's employment with the Company or any of such Subsidiary. No
      executive officer of the Company or any of its Subsidiaries, is, or is now
      expected to be, in violation of any material term of any employment contract,
      confidentiality, disclosure or proprietary information agreement,
      non-competition agreement, or any other contract or agreement or any restrictive
      covenant, and the continued employment of each such executive officer does
      not
      subject the Company or any of its Subsidiaries to any liability with respect
      to
      any of the foregoing matters.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    (ii) The
      Company and its Subsidiaries are in compliance with all federal, state, local
      and foreign laws and regulations respecting labor, employment and employment
      practices and benefits, terms and conditions of employment and wages and hours,
      except where failure to be in compliance would not, either individually or
      in
      the aggregate, reasonably be expected to result in a Material Adverse
      Effect.

     

    (p) Title.
      The
      Company and its Subsidiaries have good and marketable title in fee simple to
      all
      real property and good and marketable title to all personal property owned
      by
      them which is material to the business of the Company and its Subsidiaries,
      in
      each case free and clear of all liens, encumbrances and defects such as are
      described in Schedule
      3(p)
      or such
      as do not materially affect the value of such property and do not interfere
      with
      the use made and proposed to be made of such property by the Company and any
      of
      its Subsidiaries. Any real property and facilities held under lease by the
      Company and any of 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.

     

    (q) Intellectual
      Property Rights.
      The
      Company and its Subsidiaries own or possess adequate rights or licenses to
      use
      all trademarks, service marks and all applications and registrations therefor,
      trade names, patents, patent rights, copyrights, original works of authorship,
      inventions, trade secrets and other intellectual property rights ("Intellectual
      Property Rights")
      necessary to conduct their respective businesses as now conducted. None of
      the
      Company's registered, or applied for, Intellectual Property Rights have expired
      or terminated or have been abandoned, or are expected to expire or terminate
      or
      expected to be abandoned, within three years from the date of this Agreement.
      The Company does not have any knowledge of any infringement by the Company
      or
      its Subsidiaries of Intellectual Property Rights of others. There is no claim,
      action or proceeding being made or brought, or to the knowledge of the Company,
      being threatened, against the Company or its Subsidiaries regarding its
      Intellectual Property Rights. The Company is unaware of any facts or
      circumstances which might give rise to any of the foregoing infringements or
      claims, actions or proceedings. The Company and its Subsidiaries have taken
      reasonable security measures to protect the secrecy, confidentiality and value
      of all of their Intellectual Property Rights.

     

    (r) Environmental
      Laws.
      The
      Company and its Subsidiaries (i) are in compliance with any and all
      Environmental Laws (as hereinafter defined), (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 where, in each
      of
      the foregoing clauses (i), (ii) and (iii), the failure to so comply could be
      reasonably expected to have, individually or in the aggregate, a Material
      Adverse Effect. The term "Environmental
      Laws"
      means
      all federal, state, local or foreign laws relating to pollution or protection
      of
      human health or the environment (including, without limitation, ambient air,
      surface water, groundwater, land surface or subsurface strata), including,
      without limitation, laws relating to emissions, discharges, releases or
      threatened releases of chemicals, pollutants, contaminants, or toxic or
      hazardous substances or wastes (collectively, "Hazardous
      Materials") into
      the
      environment, or otherwise relating to the manufacture, processing, distribution,
      use, treatment, storage, disposal, transport or handling of Hazardous Materials,
      as well as all authorizations, codes, decrees, demands or demand letters,
      injunctions, judgments, licenses, notices or notice letters, orders, permits,
      plans or regulations issued, entered, promulgated or approved
      thereunder.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    (s) Subsidiary
      Rights.
      The
      Company or one of its Subsidiaries has the unrestricted right to vote, and
      (subject to limitations imposed by applicable law) to receive dividends and
      distributions on, all capital securities of its Subsidiaries as owned by the
      Company or such Subsidiary.

     

    (t) Tax
      Status.
      The
      Company and each of its Subsidiaries (i) has made or filed all foreign, federal
      and state income and all other tax returns, reports and declarations required
      by
      any jurisdiction to which it is subject, (ii) has paid all taxes and other
      governmental assessments and charges 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 (iii) 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.

     

    (u) Internal
      Accounting and Disclosure 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 and liability accountability, (iii) access to assets or
      incurrence of liabilities is permitted only in accordance with management's
      general or specific authorization and (iv) the recorded accountability for
      assets and liabilities is compared with the existing assets and liabilities
      at
      reasonable intervals and appropriate action is taken with respect to any
      difference.

     

    (v) Ranking
      of Notes.
      Except
      as set forth on Schedule
      3(v),
      no
      Indebtedness of the Company is senior to or ranks pari
      passu
      with the
      Notes in right of payment, whether with respect of payment of redemptions,
      interest, damages or upon liquidation or dissolution or otherwise.

     

    (w) Investment
      Company Status.
      The
      Company is not, and upon consummation of the sale of the Securities will not
      be,
      an "investment company," a company controlled by an "investment company" or
      an
      "affiliated person" of, or "promoter" or "principal underwriter" for, an
      "investment company" as such terms are defined in the Investment Company Act
      of
      1940, as amended.

     

    (x) Disclosure.
      The
      Company understands and confirms that the Buyer will rely on the foregoing
      representations in effecting transactions in securities of the Company. All
      disclosure provided to the Buyer regarding the Company, its business and the
      transactions contemplated hereby, including the Schedules to this Agreement,
      furnished by or on behalf of the Company is true and correct and does not
      contain any untrue statement of a material fact or omit to state any material
      fact necessary in order to make the statements made therein, in the light of
      the
      circumstances under which they were made, not misleading.

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    4. COVENANTS.

     

    (a) Form
      D
      and Blue Sky.
      The
      Company agrees to file a Form D with respect to the Securities as required
      under
      Regulation D and to provide a copy thereof to Buyer promptly after such filing.
      The Company shall, on or before the Closing Date, take such action as the
      Company shall reasonably determine is necessary in order to obtain an exemption
      for or to qualify the Securities for sale to the Buyer at the Closing pursuant
      to this Agreement under applicable securities or "Blue Sky" laws of the states
      of the United States (or to obtain an exemption from such qualification), and
      shall provide evidence of any such action so taken to the Buyers on or prior
      to
      the Closing Date. The Company shall make all filings and reports relating to
      the
      offer and sale of the Securities required under applicable securities or "Blue
      Sky" laws of the states of the United States following the Closing
      Date.

     

    (b) Use
      of
      Proceeds; Budget.
      The
      Company will use the proceeds from the sale of the Securities solely as
      contemplated under Section 1(c) and for the repayment of the debt owed to
      Mandalay Media, Inc. 

     

    (c) Financial
      Information.
      The
      Company shall deliver to the Buyer quarterly financial statements within 45
      days after quarter-end, and annual financial statements within 90 days of
      year-end. In addition, Buyer shall receive monthly statements of cash flow
      for the immediately preceding month and projections of cash flow for the next
      month within 10 days of the end of each calendar month.

     

    (d) Restriction
      on Redemption and Cash Dividends.
      So long
      as any Notes are outstanding, the Company shall not, directly or indirectly,
      redeem, or declare or pay any cash dividend or distribution on, the Common
      Stock
      without the prior express written consent of the holders of Notes representing
      not less than a majority of the aggregate principal amount of the then
      outstanding Notes.

     

    (e) Additional
      Notes; Variable Securities.
      So long
      as Buyer beneficially owns any Securities, the Company will not issue any Notes
      other than to the Buyer as contemplated hereby and the Company shall not issue
      any other securities that would cause a breach or default under the Notes.
      Except as contemplated by the Merger Agreement, for so long as any Notes remain
      outstanding, the Company shall not, in any manner, issue or sell any rights,
      warrants or options to subscribe for or purchase Common Stock or directly or
      indirectly convertible into or exchangeable or exercisable for Common Stock.
      

     

    (f) Corporate
      Existence.
      So long
      as Buyer beneficially owns any Securities, and except with respect to the Merger
      Agreement, the Company shall not be party to any Fundamental Transaction (as
      defined in the Notes) unless the Company is in compliance with the applicable
      provisions governing Fundamental Transactions set forth in the
      Notes.

     

    (g) Conduct
      of Business.
      The
      business of the Company and its Subsidiaries shall not be conducted in violation
      of any law, ordinance or regulation of any governmental entity, except where
      such violations would not result, either individually or in the aggregate,
      in a
      Material Adverse Effect.

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    (h) Additional
      Issuances of Securities.

     

    (i) For
      purposes of this Section 4(i), the following definitions shall
      apply.

     

    (A) "Convertible
      Securities"
      means
      any stock or securities (other than Options) convertible into or exercisable
      or
      exchangeable for shares of Common
      Stock.

     

    (B) "Options"
      means
      any rights, warrants or options to subscribe for or purchase shares of
Common
      Stock or
      Convertible Securities.

     

    (C) "Common
      Stock Equivalents"
      means,
      collectively, Options and Convertible Securities.

     

    (ii) From
      the
      date hereof until the Notes are paid in full, except to the extent as
      contemplated by the Merger Agreement, the Company will not, directly or
      indirectly, offer, sell, grant any option to purchase, or otherwise dispose
      of
      (or announce any offer, sale, grant or any option to purchase or other
      disposition of) any of its or its Subsidiaries' equity or equity equivalent
      securities, including without limitation any debt, preferred stock or other
      instrument or security that is, at any time during its life and under any
      circumstances, convertible into or exchangeable or exercisable for shares of
      Common Stock or Common Stock Equivalents (any such offer, sale, grant,
      disposition or announcement being referred to as a "Subsequent
      Placement").

     

    (i) Incurrence
      of Liens.
      So long
      as any Notes are outstanding, the Company shall not, directly or indirectly,
      allow or suffer to exist any Lien, other than Permitted Liens (as defined in
      the
      Notes), upon any property or assets (including accounts and contract rights)
      owned by the Company.

     

    5. [INTENTIONALLY
      LEFT BLANK].

     

    6. CONDITIONS
      TO THE COMPANY'S OBLIGATION TO SELL. The obligation of the Company hereunder
      to issue and sell the Notes to Buyer at the Closing is subject to the
      satisfaction, at or before the Closing Date, of each of the following
      conditions, provided that these conditions are for the Company's sole benefit
      and may be waived by the Company at any time in its sole discretion by providing
      Buyer with prior written notice thereof:

     

    (a) Buyer
      shall have executed each of the Transaction Documents to which it is a party
      and
      delivered the same to the Company

     

    (b) Buyer
      shall have delivered to the Company the Purchase Price, in accordance with
      the
      terms hereof and the Note by wire transfer of immediately available funds
      pursuant to the wire instructions provided by the Company.

     

    (c) The
      representations and warranties of Buyer shall be true and correct in all
      material respects (except for those representations and warranties that are
      qualified by materiality or Material Adverse Effect, which shall be true and
      correct in all respects) as of the date when made and as of the Closing Date
      as
      though made at that time (except for representations and warranties that speak
      as of a specific date), and Buyer shall have performed, satisfied and complied
      in all material respects with the covenants, agreements and conditions required
      by this Agreement to be performed, satisfied or complied with by Buyer at or
      prior to the Closing Date.

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    7. CONDITIONS
      TO BUYER'S OBLIGATION TO PURCHASE. The obligation of Buyer hereunder to
      purchase the Notes at the Closing is subject to the satisfaction, at or before
      the Closing Date, of each of the following conditions, provided that these
      conditions are for Buyer's sole benefit and may be waived by Buyer at any time
      in its sole discretion by providing the Company with prior written notice
      thereof:

     

    (a) The
      Company shall have duly executed and delivered to Buyer (i) each of the
      Transaction Documents and (ii) the Notes, being purchased by Buyer at the
      Closing pursuant to this Agreement. 

     

    (b) Such
      Buyer shall have received the opinion of the Company's outside counsel, dated
      as
      of the Closing Date, in substantially the form of Exhibit
      E
      attached
      hereto.

     

    (c) The
      Company shall have delivered to such Buyer a certificate evidencing the
      formation and good standing of the Company and each of its Subsidiaries in
      such
      entity's jurisdiction of formation issued by the Secretary of State (or
      comparable office) of such jurisdiction, as of a date within 10 days of the
      Closing Date.

     

    (d) The
      Company shall have delivered to such Buyer a certificate evidencing the
      Company's qualification as a foreign corporation and good standing issued by
      the
      Secretary of State of the State of Delaware (or comparable office) of each
      jurisdiction in which the Company conducts business, each as of a date within
      10
      days of the Closing Date.

     

    (e) The
      Company shall have delivered to such Buyer a certificate, executed by the
      Secretary of the Company and dated as of the Closing Date, as to (i) the
      resolutions consistent with Section 3(b) as adopted by the Company's Board
      of
      Directors in a form reasonably acceptable to such Buyer, (ii) the Certificate
      of
      Incorporation and (iii) the Bylaws, each as in effect at the Closing in the
      form
      attached hereto as Exhibit
      F.

     

    (f) The
      representations and warranties of the Company shall be true and correct in
      all
      material respects (except for those representations and warranties that are
      qualified by materiality or Material Adverse Effect, which shall be true and
      correct in all respects) as of the date when made and as of the Closing Date
      as
      though made at that time (except for representations and warranties that speak
      as of a specific date) and the Company shall have performed, satisfied and
      complied in all material respects with the covenants, agreements and conditions
      required by the Transaction Documents to be performed, satisfied or complied
      with by the Company at or prior to the Closing Date. Buyer shall have received
      a
      certificate, executed by the Chief Executive Officer of the Company, dated
      as of
      the Closing Date, to the foregoing effect and as to such other matters as may
      be
      reasonably requested by Buyer in the form attached hereto as Exhibit
      G.

     

    (g) The
      Company shall have obtained all governmental, regulatory or third party consents
      and approvals, if any, necessary for the sale of the Securities.

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

    (h) In
      accordance with the terms of the Security Documents, the Company shall
      have:

     

    (i) filed
      such financing statements and other documents in such offices as the Buyer
      may
      request to perfect the security interests granted by the Security Agreement
      (it
      being understood that in no event shall financing statements be filed against
      fixtures in the local jurisdictions of their location); and

     

    (ii) delivered
      to the Buyer all certificates evidencing any of the Pledged Shares (as defined
      in the Pledge Agreement), accompanied by undated stock or other powers duly
      executed in blank.

     

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

     

    8. INTENTIONALL
      LEFT BLANK.

     

    9. MISCELLANEOUS.

     

    (a) Governing
      Law; Jurisdiction; Jury Trial.
      All
      questions concerning the construction, validity, enforcement and interpretation
      of this Agreement shall be governed by the internal laws of the State of New
      York, without giving effect to any choice of law or conflict of law provision
      or
      rule (whether of the State of New York or any other jurisdictions) that would
      cause the application of the laws of any jurisdictions other than the State
      of
      New York. Each party hereby irrevocably submits to the exclusive jurisdiction
      of
      the state and federal courts sitting in The City of New York, Borough of
      Manhattan, for the adjudication of any dispute hereunder or in connection
      herewith or with any transaction contemplated hereby or discussed herein, and
      hereby irrevocably waives, and agrees not to assert in any suit, action or
      proceeding, any claim that it is not personally subject to the jurisdiction
      of
      any such court, that such suit, action or proceeding is brought in an
      inconvenient forum or that the venue of such suit, action or proceeding is
      improper. Each party hereby irrevocably waives personal service of process
      and
      consents to process being served in any such suit, action or proceeding by
      mailing a copy thereof to such party at the address for such notices to it
      under
      this Agreement and agrees that such service shall constitute good and sufficient
      service of process and notice thereof. Nothing contained herein shall be deemed
      to limit in any way any right to serve process in any manner permitted by law.
      EACH
      PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
      REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
      CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED
      HEREBY. 

     

    (b) 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;
      provided that a facsimile signature shall be considered due execution and shall
      be binding upon the signatory thereto with the same force and effect as if
      the
      signature were an original, not a facsimile signature.

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

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

     

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

     

    (e) Entire
      Agreement; Amendments.
      This
      Agreement and the other Transaction Documents supersede all other prior oral
      or
      written agreements between the Buyers, the Company, their affiliates and Persons
      acting on their behalf with respect to the matters discussed herein, and this
      Agreement, the other Transaction Documents and the instruments referenced herein
      and therein 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 Buyer makes any representation, warranty,
      covenant or undertaking with respect to such matters. No provision of this
      Agreement may be amended other than by an instrument in writing signed by the
      Company and Buyer. No provision hereof may be waived other than by an instrument
      in writing signed by the party against whom enforcement is sought. No such
      amendment shall be effective to the extent that it applies to less than all
      of
      the holders of the applicable Securities then outstanding. 

     

    (f) Notices.
      Any
      notices, consents, waivers or other communications required or permitted to
      be
      given under the terms of this Agreement must be in writing and will be deemed
      to
      have been delivered: (i) upon receipt, when delivered personally; (ii) upon
      receipt, when sent by facsimile (provided confirmation of transmission is
      mechanically or electronically generated and kept on file by the sending party);
      or (iii) one Business Day after deposit with an overnight courier 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:

     

    575
      Broadway 

    New
      York,
      New York 10012

    Telephone:
      (212) 400-4856

    Attention: Chief
      Executive Officer

    

    with
      a
      copy to:

     

    Paul
      Berg, Esq.

    Berkowitz,
      Trager & Trager, LLC

    8
      Wright
      Street

    Westport,
      Connecticut 06880

    Telephone:
      (203) 291-8220

    Facsimile:
      (203) 226-3801

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

    

    If
      to
      Buyer, to its address and facsimile number set forth on the Schedule of Buyers,
      with copies to such Buyer's representatives as set forth on the Schedule of
      Buyers

     

    or
      to
      such other address and/or facsimile number and/or to the attention of such
      other
      Person as the recipient party has specified by written notice given to each
      other party five (5) days prior to the effectiveness of such change. Written
      confirmation of receipt (A) given by the recipient of such notice, consent,
      waiver or other communication, (B) mechanically or electronically generated
      by
      the sender's facsimile machine containing the time, date, recipient facsimile
      number and an image of the first page of such transmission or (C) provided
      by an
      overnight courier service shall be rebuttable evidence of personal service,
      receipt by facsimile or receipt from an overnight courier service in accordance
      with clause (i), (ii) or (iii) above, respectively.

     

    (g) Successors
      and Assigns.
      This
      Agreement shall be binding upon and inure to the benefit of the parties and
      their respective successors and assigns, including any purchasers of the Notes.
      The Company shall not assign this Agreement or any rights or obligations
      hereunder without the prior written consent of the Buyer. Buyer may assign
      some
      or all of its rights hereunder without the consent of the Company, in which
      event such assignee shall be deemed to be Buyer hereunder with respect to such
      assigned rights

     

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

     

    (i) Survival.
      The
      representations and warranties of the Company and the Buyer contained in
      Sections 2 and 3, and the agreements and covenants set forth in Sections 4,
      5
      and 9 shall survive the Closing. Buyer shall be responsible only for its own
      representations, warranties, agreements and covenants hereunder.

     

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

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

     

    (k) Indemnification.
      In
      consideration of Buyer's execution and delivery of the Transaction Documents
      and
      acquiring the Securities thereunder and in addition to all of the Company's
      other obligations under the Transaction Documents, the Company shall defend,
      protect, indemnify and hold harmless each Buyer and each other holder of the
      Securities and all of their stockholders, partners, members, officers,
      directors, employees and direct or indirect investors and any of the foregoing
      Persons' agents or other representatives (including, without limitation, those
      retained in connection with the transactions contemplated by this Agreement)
      (collectively, the "Indemnitees")
      from
      and against any and all actions, causes of action, suits, claims, losses, costs,
      penalties, fees, liabilities and damages, and expenses in connection therewith
      (irrespective of whether any such 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 any Indemnitee 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 the Transaction Documents or any other certificate, instrument or
      document contemplated hereby or thereby, (b) any breach of any covenant,
      agreement or obligation of the Company contained in the Transaction Documents
      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 Indemnitee
      by a third party (including for these purposes a derivative action brought
      on
      behalf of the Company) and arising out of or resulting from (i) the execution,
      delivery, performance or enforcement of the Transaction Documents or any other
      certificate, instrument or document contemplated hereby or thereby, (ii) any
      transaction financed or to be financed in whole or in part, directly or
      indirectly, with the proceeds of the issuance of the Securities, (iii) any
      disclosure made by Buyer pursuant to Section 4(h), or (iv) the status of Buyer
      or holder of the Securities as an investor in the Company pursuant to the
      transactions contemplated by the Transaction Documents. To the extent that
      the
      foregoing undertaking by the Company may be unenforceable for any reason, the
      Company shall make the maximum contribution to the payment and satisfaction
      of
      each of the Indemnified Liabilities that is permissible under applicable
      law.

     

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

     

    (m) Remedies.
      Each
      Buyer and each holder of the Securities shall have all rights and remedies
      set
      forth in the Transaction Documents and all rights and remedies which such
      holders have been granted at any time under any other agreement or contract
      and
      all of the rights which such holders have under any law. Any Person having
      any
      rights under any provision of this Agreement shall be entitled to enforce such
      rights specifically (without posting a bond or other security), to recover
      damages by reason of any breach of any provision of this Agreement and to
      exercise all other rights granted by law. Furthermore, the Company recognizes
      that in the event that it fails to perform, observe, or discharge any or all
      of
      its obligations under the Transaction Documents, any remedy at law may prove
      to
      be inadequate relief to the Buyers. The Company therefore agrees that the Buyers
      shall be entitled to seek temporary and permanent injunctive relief in any
      such
      case without the necessity of proving actual damages and without posting a
      bond
      or other security.

     

    (n) Rescission
      and
      Withdrawal Right.
      Notwithstanding anything to the contrary contained in (and without limiting
      any
      similar provisions of) the Transaction Documents, whenever Buyer exercises
      a
      right, election, demand or option under a Transaction Document and the Company
      does not timely perform its related obligations within the periods therein
      provided, then Buyer may rescind or withdraw, in its sole discretion from time
      to time upon written notice to the Company, any relevant notice, demand or
      election in whole or in part without prejudice to its future actions and
      rights.

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

     

     

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

     

    [Signature
      Page Follows]

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

     

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

     

    
      	 	
              COMPANY:

            
	 	
               

               

              GREEN
                SCREEN INTERACTIVE SOFTWARE, INC.

              

              By:
                /s/
                Ron Chaimowitz

              Name:
                Ron
                Chaimowitz

              Title:
                Chief Executive Officer

            

    

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    

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

     

    
      	 	
              BUYER:

            
	 	 

              DRIFTWOOD
                VENTURES, INC.

              

              By:
                /s/
                Charles Bentz

              Name:
                Charles
                Bentz

              Title:
                Chief
                Financial Officer

            

    

    

    
      
        
        

      

      
        
          [Signature
            Page to Securities Purchase Agreement]

        

        
          

        

      

      
        
        

      

    

    

    SCHEDULE
      OF BUYERS

    

    
      	
              (1)

            	 	
              (2)

            	 	
              (3)

            	 	
              (4)

            	 	
              (5)

            	 
	
               

              Buyer

            	 	
               

              Address
                and Facsimile Number

            	 	
              Principal
                Amount of Notes

            	 	
              Purchase
                Price

            	 	
               

              Legal
                Representative's

              Address
                and Facsimile Number

            
	 	 	 	 	 	 	 	 	 
	
              Driftwood
                Ventures, Inc.

            	 	
              2121
                Avenue of the Stars, 25th
                Floor

              Los
                Angeles, CA 90067 

              Facsimile:
                (310) 277-2741

              Telephone:
                (310) 601-2500

            	 	
              $

            	
              7,000,000

            	 	
              $

            	
              7,000,000

            	 	
              Mintz
                Levin

               

              666
                Third Avenue

              New
                York, New York 10022

              Attention:
                Kenneth Koch, Esq.

              Facsimile:
                (212) 983-3115

              Telephone:
                (212) 692-6768

            

    

    
 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    EXHIBITS

    

    
      	Exhibit
              A	
              Form
                of Notes

            

    

    
      	Exhibit
              B	
              Form
                of Pledge Agreement

            

    

    
      	Exhibit
              C	
              Form
                of Security Agreement

            

    

    
      	Exhibit
              D	
              Form
                of Guarantee

            

    

    
      	Exhibit
              E	
              Form
                of Opinion of Company’s Counsel

            

    

    
      	Exhibit
              F	
              Form
                of Secretary's Certificate

            

    

    
      	Exhibit
              G	
              Form
                of Officers Certificate

            

    

    

    

    SCHEDULES

     

    
      	Schedule
              3(a)	
              Subsidiaries

            

    

    
      	Schedule
              3(l)	
              Absence
                of Certain Changes

            

    

    
      	Schedule
              3(q)	
              Transactions
                with Affiliates

            

    

    
      	Schedule

              3(r)	
              Equity
                Capitalization

            

    

    
      	Schedule
              3(s)	
              Indebtedness
                and Other Contracts

            

    

    
      	Schedule
              3(t)	
              Absence
                of Litigation

            

    

    
      	Schedule
              3(w)	
              Title

            

    

    
      	Schedule
              3(cc)	
              Ranking
                of Notes

            

    

    
      	Schedule
              4(d)	
              Use
                of ProceedsUnassociated Document

    Green
      Screen Interactive Software, Inc.

     

    Senior
      Secured Note

     

     

    
      	
              Issuance
                Date: July 7, 2008

            

    

    

    FOR
      VALUE RECEIVED,
      Green
      Screen Interactive Software, Inc., a Delaware corporation (the "Company"),
      hereby promises to pay to the order of Driftwood Ventures, Inc. or its
      registered assigns ("Holder")
      the
      principal sum of Seven Million Dollars ($7,000,000) or, if less, the aggregate
      unpaid principal amount of the Loan (as hereinafter defined) (the “Principal”)
      when
      due, whether upon the Maturity Date (as defined below), on acceleration or
      otherwise (in each case in accordance with the terms hereof) and to pay interest
      ("Interest")
      on any
      outstanding Principal at the rate of ten percent (10.00%) per annum (the
      "Interest
      Rate"),
      from
      the date set out above as the Issuance Date (the "Issuance Date")
      until
      the same becomes due and payable, whether upon the Maturity Date, acceleration
      or otherwise (in each case in accordance with the terms hereof). This Senior
      Secured Note, (including all Senior Secured Notes issued in exchange, transfer
      or replacement hereof) is hereinafter referred to as this "Note".
      Certain capitalized terms used herein are defined in Section 28. All advances
      made by Holder to the Company hereunder and all payments made to Holder on
      account of Principal hereof shall be noted by Holder on the schedule of advances
      and payments of principal that is attached as Exhibit
      A
      hereto
      and hereby made a part hereof; provided, however,
      that any
      error or omission by Holder in this regard shall not affect the obligation
      of
      the Company to pay the full amount of the Principal and Interest on all advances
      made to the Company by Holder. All advances to be made by Holder to the Company
      shall be made in accordance with Section 1 of the Securities Purchase
      Agreement.

     

    (1) PAYMENTS
      OF PRINCIPAL.
      On
      the
      Maturity Date, the Company shall pay to the Holder an amount in cash
      representing all outstanding Principal, accrued and unpaid Interest and accrued
      and unpaid Late Charges on such Principal and interest. The
      "Maturity Date"
      shall
      be September 30, 2008, as may be extended at the option of the Holder (i) in
      the
      event that, and for so long as, an Event of Default (as defined in Section
      4(a))
      shall have occurred and be continuing on the Maturity Date (as may be extended
      pursuant to this Section 1) or any event that shall have occurred and be
      continuing that with the passage of time and the failure to cure would result
      in
      an Event of Default and (ii) through the date that is ten (10) Business Days
      after the consummation of a Change of Control. Notwithstanding anything to
      the
      contrary contained herein, this Note and any and all amounts due hereunder,
      shall be automatically extinguished upon the consummation and closing of the
      transactions contemplated by that certain Agreement and Plan of Merger, by
      and
      among Holder, DFTW Merger Sub, Inc. and the Company, dated as of the date
      hereof.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (2) INTEREST;
      INTEREST RATE.
      Interest on this Note shall commence accruing on the Issuance Date and shall
      be
      computed on the basis of a 365-day year and actual days elapsed and shall be
      payable in arrears on, and including, the Maturity Date (each, an "Interest Date").
      From
      and after the occurrence and during the continuance of an Event of Default,
      the
      Interest Rate shall be increased to fifteen percent (15.00%). In the event
      that
      such Event of Default is subsequently cured, the adjustment referred to in
      the
      preceding sentence shall cease to be effective as of the date of such cure.
      

     

    (3) [INTENTIONALLY
      LEFT BLANK].
      

     

    (4) RIGHTS
      UPON EVENT OF DEFAULT.

     

    (a) Event
      of Default.
      Each of
      the following events shall constitute an "Event
      of Default":

     

    (i) the
      Company's failure to pay to the Holder any amount of Principal, Interest, Late
      Charges or other amounts when and as due under this Note or any other
      Transaction Document (as defined in the Securities Purchase Agreement) or any
      other agreement, document, certificate or other instrument delivered in
      connection with the transactions contemplated hereby and thereby to which the
      Holder is a party, except, in the case of a failure to pay Interest and Late
      Charges when and as due, in which case only if such failure continues for a
      period of at least five (5) Business Days after written notice
      thereof;

     

    (ii) any
      default under or acceleration prior to maturity of any Indebtedness of the
      Company or any of its Subsidiaries (as defined in Section 3(a) of the Securities
      Purchase Agreement);

     

    (iii) the
      Company or any of its Subsidiaries, pursuant to or within the meaning of Title
      11, U.S. Code, or any similar Federal, foreign or state law for the relief
      of
      debtors (collectively, "Bankruptcy
      Law"),
      (A)
      commences a voluntary case, (B) consents to the entry of an order for relief
      against it in an involuntary case, (C) consents to the appointment of a
      receiver, trustee, assignee, liquidator or similar official (a "Custodian"),
      (D)
      makes a general assignment for the benefit of its creditors or (E) admits in
      writing that it is generally unable to pay its debts as they become
      due;

     

    (iv) a
      court
      of competent jurisdiction enters an order or decree under any Bankruptcy Law
      that (A) is for relief against the Company or any of its Subsidiaries in an
      involuntary case, (B) appoints a Custodian of the Company or any of its
      Subsidiaries or (C) orders the liquidation of the Company or any of its
      Subsidiaries;

     

    (v) a
      final
      judgment or judgments for the payment of money aggregating in excess of $250,000
      are rendered against the Company or any of its Subsidiaries and which judgments
      are not, within sixty (60) days after the entry thereof, bonded, discharged
      or
      stayed pending appeal, or are not discharged within sixty (60) days after the
      expiration of such stay; provided, however, that any judgment which is covered
      by insurance or an indemnity from a credit worthy party shall not be included
      in
      calculating the $250,000 amount set forth above so long as the Company provides
      the Holder a written statement from such insurer or indemnity provider (which
      written statement shall be reasonably satisfactory to the Holder) to the effect
      that such judgment is covered by insurance or an indemnity and the Company
      will
      receive the proceeds of such insurance or indemnity within thirty (30) days
      of
      the issuance of such judgment;

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    (vi) the
      Company breaches any representation, warranty, covenant or other term or
      condition of any Transaction Document, except, in the case of a breach of a
      covenant which is curable, only if such breach continues for a period of at
      least ten (10) consecutive Business Days after written notice thereof;
      or

     

    (vii) any
      breach or failure in any respect to comply with Section 14 of this Note, where
      such failure continues for a period of at least five (5) Business Days after
      written notice thereof;

     

    (5) RIGHTS
      UPON FUNDAMENTAL TRANSACTION AND CHANGE OF CONTROL.

     

    (a) Assumption.
      The
      Company shall not enter into or be party to a Fundamental Transaction with
      any
      party other than the Holder or its affiliates unless the Successor Entity
      assumes in writing all of the obligations of the Company under this Note and
      the
      other Transaction Documents in accordance with the provisions of this Section
      5(a) pursuant to written agreements in form and substance satisfactory to the
      Holder and approved by the Holder prior to such Fundamental Transaction,
      including agreements to deliver to the Holder in exchange for its Note a
      security of the Successor Entity evidenced by a written instrument substantially
      similar in form and substance to the Note, including, without limitation, having
      a principal amount and interest rate equal to the principal amounts then
      outstanding and the interest rates of the Note and having similar ranking to
      the
      Note, and satisfactory to the Holder. Upon the occurrence of any Fundamental
      Transaction with any party other than the Holder or its affiliates, the
      Successor Entity shall succeed to, and be substituted for (so that from and
      after the date of such Fundamental Transaction, the provisions of this Note
      referring to the "Company" shall refer instead to the Successor Entity), and
      may
      exercise every right and power of the Company and shall assume all of the
      obligations of the Company under this Note with the same effect as if such
      Successor Entity had been named as the Company herein. The provisions of this
      Section shall apply similarly and equally to successive Fundamental
      Transactions.

     

    (6) [INTENTIONALLY
      LEFT BLANK].

     

    (7) 
      [INTENTIONALLY LEFT BLANK].

     

    (8) [INTENTIONALLY
      LEFT BLANK].
      

     

    (9) SECURITY.
      This
      Note is secured to the extent and in the manner set forth in the Security
      Documents (as defined in the Securities Purchase Agreement).

     

    (10) NONCIRCUMVENTION.
      The
      Company hereby covenants and agrees that the Company will not, by amendment
      of
      its Certificate of Incorporation, Bylaws or through any reorganization, transfer
      of assets, consolidation, merger, scheme of arrangement, dissolution, issue
      or
      sale of securities, or any other voluntary action, avoid or seek to avoid the
      observance or performance of any of the terms of this Note, and will at all
      times in good faith carry out all of the provisions of this Note and take all
      action as may be required to protect the rights of the Holder of this Note.
      

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    (11) [INTENTIONALLY
      LEFT BLANK].

     

    (12) [INTENTIONALLY
      LEFT BLANK].

     

    (13) VOTING
      RIGHTS.
      The
      Holder shall have no voting rights as the holder of this Note, except as
      required by law, including, but not limited to, the General Corporation Law
      of
      the State of Delaware and as expressly provided in this Note or any other
      Transaction Document.

     

    (14) COVENANTS.

     

    (a) Rank. All
      payments due under this Note shall be senior to all other Indebtedness of the
      Company and its Subsidiaries other than the Existing Indebtedness.

     

    (b) Incurrence
      of Indebtedness.
      So long
      as this Note is outstanding, the Company shall not, and the Company shall not
      permit any of its Subsidiaries to, directly or indirectly, incur or guarantee,
      assume or suffer to exist any Indebtedness, other than (i) the Indebtedness
      evidenced by this Note and (ii) Permitted Indebtedness.

     

    (c) Existence
      of Liens.
      So long
      as this Note is outstanding, the Company shall not, and the Company shall not
      permit any of its Subsidiaries to, directly or indirectly, allow or suffer
      to
      exist any mortgage, lien, pledge, charge, security interest or other encumbrance
      upon or in any property or assets (including accounts and contract rights)
      owned
      by the Company or any of its Subsidiaries (collectively, "Liens")
      other
      than Permitted Liens.

     

    (d) Restricted
      Payments.
      The
      Company shall not, and the Company shall not permit any of its Subsidiaries
      to,
      directly or indirectly, redeem, defease, repurchase, repay or make any payments
      in respect of, by the payment of cash or cash equivalents (in whole or in part,
      whether by way of open market purchases, tender offers, private transactions
      or
      otherwise), all or any portion of any Permitted Indebtedness, whether by way
      of
      payment in respect of principal of (or premium, if any) or interest on such
      Indebtedness, if at the time such payment is due or is otherwise made or, after
      giving effect to such payment, an event constituting, or that with the passage
      of time and without being cured would constitute, an Event of Default has
      occurred and is continuing; provided that notwithstanding the foregoing, no
      principal (or any portion thereof) of any Subordinated Indebtedness may be
      paid
      (whether upon maturity, redemption, acceleration or otherwise) so long as this
      Note is outstanding.

     

    (e) Restriction
      on Redemption and Cash Dividends.
      Until
      the Note has been satisfied in accordance with its terms, the Company shall
      not,
      directly or indirectly, redeem, repurchase or declare or pay any cash dividend
      or distribution on its capital stock without the prior express written consent
      of the Holder.

     

    (15) [INTENTIONALLY
      LEFT BLANK]

     

    (16) [INTENTIONALLY
      LEFT BLANK]

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    (17) TRANSFER.
      This
      Note may be offered, sold, assigned or transferred by the Holder without the
      consent of the Company, subject only to the provisions of Section 2(f) of the
      Securities Purchase Agreement.

     

    (18) REISSUANCE
      OF THIS NOTE.

     

    (a) Transfer.
      If this
      Note is to be transferred, the Holder shall surrender this Note to the Company,
      whereupon the Company will forthwith issue and deliver upon the order of the
      Holder a new Note (in accordance with Section 18(d)), registered as the Holder
      may request, representing the outstanding Principal being transferred by the
      Holder and, if less then the entire outstanding Principal is being transferred,
      a new Note (in accordance with Section 18(d)) to the Holder representing the
      outstanding Principal not being transferred. 

     

    (b) Lost,
      Stolen or Mutilated Note.
      Upon
      receipt by the Company of evidence reasonably satisfactory to the Company of
      the
      loss, theft, destruction or mutilation of this Note, and, in the case of loss,
      theft or destruction, of any indemnification undertaking by the Holder to the
      Company in customary form and, in the case of mutilation, upon surrender and
      cancellation of this Note, the Company shall execute and deliver to the Holder
      a
      new Note (in accordance with Section 18(d)) representing the outstanding
      Principal.

     

    (c) Note
      Exchangeable for Different Denominations.
      This
      Note is exchangeable, upon the surrender hereof by the Holder at the principal
      office of the Company, for a new Note or Notes (in accordance with Section
      18(d)
      and in principal amounts of at least $100,000) representing in the aggregate
      the
      outstanding Principal of this Note, and each such new Note will represent such
      portion of such outstanding Principal as is designated by the Holder at the
      time
      of such surrender.

     

    (d) Issuance
      of New Notes.
      Whenever the Company is required to issue a new Note pursuant to the terms
      of
      this Note, such new Note (i) shall be of like tenor with this Note, (ii) shall
      represent, as indicated on the face of such new Note, the Principal remaining
      outstanding (or in the case of a new Note being issued pursuant to Section
      18(a)
      or Section 18(c), the Principal designated by the Holder which, when added
      to
      the principal represented by the other new Notes issued in connection with
      such
      issuance, does not exceed the Principal remaining outstanding under this Note
      immediately prior to such issuance of new Notes), (iii) shall have an issuance
      date, as indicated on the face of such new Note, which is the same as the
      Issuance Date of this Note, (iv) shall have the same rights and conditions
      as
      this Note, and (v) shall represent accrued and unpaid Interest and Late Charges
      on the Principal and Interest of this Note, if any, from the Issuance
      Date.

     

    (19) REMEDIES,
      CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE
      RELIEF.
      The
      remedies provided in this Note shall be cumulative and in addition to all other
      remedies available under this Note and any of the other Transaction Documents
      at
      law or in equity (including a decree of specific performance and/or other
      injunctive relief), and nothing herein shall limit the Holder's right to pursue
      actual and consequential damages for any failure by the Company to comply with
      the terms of this Note. Amounts set forth or provided for herein with respect
      to
      payments and the like (and the computation thereof) shall be the amounts to
      be
      received by the Holder and shall not, except as expressly provided herein,
      be
      subject to any other obligation of the Company (or the performance thereof).
      The
      Company acknowledges that a breach by it of its obligations hereunder will
      cause
      irreparable harm to the Holder and that the remedy at law for any such breach
      may be inadequate. The Company therefore agrees that, in the event of any such
      breach or threatened breach, the Holder shall be entitled, in addition to all
      other available remedies, to an injunction restraining any breach, without
      the
      necessity of showing economic loss and without any bond or other security being
      required.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    (20) PAYMENT
      OF COLLECTION, ENFORCEMENT AND OTHER COSTS.
      If (a)
      this Note is placed in the hands of an attorney for collection or enforcement
      or
      is collected or enforced through any legal proceeding or the Holder otherwise
      takes action to collect amounts due under this Note or to enforce the provisions
      of this Note or (b) there occurs any bankruptcy, reorganization, receivership
      of
      the Company or other proceedings affecting Company creditors' rights and
      involving a claim under this Note, then the Company shall pay the reasonable
      costs incurred by the Holder for such collection, enforcement or action or
      in
      connection with such bankruptcy, reorganization, receivership or other
      proceeding, including, but not limited to, attorneys' fees and
      disbursements.

     

    (21) CONSTRUCTION;
      HEADINGS.
      This
      Note shall be deemed to be jointly drafted by the Company and the Holder and
      shall not be construed against any person as the drafter hereof. The headings
      of
      this Note are for convenience of reference and shall not form part of, or affect
      the interpretation of, this Note.

     

    (22) FAILURE
      OR INDULGENCE NOT WAIVER.
      No
      failure or delay on the part of the Holder in the exercise of any power, right
      or privilege hereunder shall operate as a waiver thereof, nor shall any single
      or partial exercise of any such power, right or privilege preclude other or
      further exercise thereof or of any other right, power or privilege.

     

    (23) [INTENTIONALLY
      LEFT BLANK]

     

    (24) NOTICES;
      PAYMENTS.

     

    (a) Notices.
      Whenever notice is required to be given under this Note, unless otherwise
      provided herein, such notice shall be given in accordance with Section 9(f)
      of
      the Securities Purchase Agreement. The Company shall provide the Holder with
      prompt written notice of all actions taken pursuant to this Note, including
      in
      reasonable detail a description of such action and the reason therefore. Without
      limiting the generality of the foregoing, the Company will give written notice
      to the Holder at least twenty (20) days prior to the date on which the Company
      closes its books or takes a record (i) with respect to any dividend or
      distribution upon the Common Stock, (ii) with respect to any pro rata
      subscription offer to holders of Common Stock or (iii) for determining rights
      to
      vote with respect to any Fundamental Transaction, dissolution or liquidation,
      provided in each case that such information shall be made known to the public
      prior to or in conjunction with such notice being provided to the
      Holder.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    (b) Payments.
      Whenever any payment of cash is to be made by the Company to any Person pursuant
      to this Note, such payment shall be made in lawful money of the United States
      of
      America by a check drawn on the account of the Company and sent via overnight
      courier service to such Person at such address as previously provided to the
      Company in writing (which address, in the case of each of the Purchasers, shall
      initially be as set forth on the Schedule of Buyers attached to the Securities
      Purchase Agreement); provided that the Holder may elect to receive a payment
      of
      cash via wire transfer of immediately available funds by providing the Company
      with prior written notice setting out such request and the Holder's wire
      transfer instructions. Whenever any amount expressed to be due by the terms
      of
      this Note is due on any day which is not a Business Day, the same shall instead
      be due on the next succeeding day which is a Business Day and, in the case
      of
      any Interest Date which is not the date on which this Note is paid in full,
      the
      extension of the due date thereof shall not be taken into account for purposes
      of determining the amount of Interest due on such date. Any amount of Principal
      or other amounts due under the Transaction Documents, other than Interest,
      which
      is not paid when due shall result in a late charge being incurred and payable
      by
      the Company in an amount equal to interest on such amount at the rate of fifteen
      percent (15.0%) per annum from the date such amount was due until the same
      is
      paid in full ("Late
      Charge").

     

    (25) CANCELLATION.
      After
      all Principal, accrued Interest and other amounts at any time owed on this
      Note
      have been paid in full, this Note shall automatically be deemed canceled, shall
      be surrendered to the Company for cancellation and shall not be
      reissued.

     

    (26) WAIVER
      OF NOTICE.
      To the
      extent permitted by law, the Company hereby waives demand, notice, protest and
      all other demands and notices in connection with the delivery, acceptance,
      performance, default or enforcement of this Note and the Securities Purchase
      Agreement.

     

    (27) GOVERNING
      LAW; JURISDICTION;
      SEVERABILITY; JURY TRIAL.
      This
      Note shall be construed and enforced in accor-dance with, and all questions
      concerning the construction, validity, interpretation and performance of this
      Note shall be governed by, the internal laws of the State of New York, without
      giving effect to any choice of law or conflict of law provision or rule (whether
      of the State of New York or any other jurisdictions) that would cause the
      application of the laws of any jurisdictions other than the State of New York.
      The Company hereby irrevocably submits to the exclusive jurisdiction of the
      state and federal courts sitting in The City of New York, Borough of Manhattan,
      for the adjudication of any dispute hereunder or in connection herewith or
      with
      any transaction contemplated hereby or discussed herein, and hereby irrevocably
      waives, and agrees not to assert in any suit, action or proceeding, any claim
      that it is not personally subject to the jurisdiction of any such court, that
      such suit, action or proceeding is brought in an inconvenient forum or that
      the
      venue of such suit, action or proceeding is improper. Nothing contained herein
      shall be deemed to limit in any way any right to serve process in any manner
      permitted by law. In the event that any provision of this Note is invalid or
      unenforceable under any applicable statute or rule of law, then such provision
      shall be deemed inoperative to the extent that it may conflict therewith and
      shall be deemed modified to conform with such statute or rule of law. Any such
      provision which may prove invalid or unenforceable under any law shall not
      affect the validity or enforceability of any other provision of this Note.
      Nothing contained herein shall be deemed or operate to preclude the Holder
      from
      bringing suit or taking other legal action against the Company in any other
      jurisdiction to collect on the Company's obligations to the Holder, to realize
      on any collateral or any other security for such obligations, or to enforce
      a
      judgment or other court ruling in favor of the Holder. THE
      COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
      REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
      CONNECTION WITH OR ARISING OUT OF THIS NOTE OR ANY TRANSACTION CONTEMPLATED
      HEREBY.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    (28) CERTAIN
      DEFINITIONS.
      For
      purposes of this Note, the following terms shall have the following
      meanings:

     

    (a) "Approved
      Stock Plan"
      means
      any employee benefit plan which has been approved by the Board of Directors
      of
      the Company, pursuant to which the Company's securities may be issued to any
      employee, officer or director for services provided to the Company.

     

    (b) "Business
      Day"
      means
      any day other than Saturday, Sunday or other day on which commercial banks
      in
      The City of New York are authorized or required by law to remain
      closed.

     

    (c) "Change
      of Control"
      means
      any Fundamental Transaction other than (A) any reorganization, recapitalization
      or reclassification of Common Stock, in which holders of the Company's voting
      power immediately prior to such reorganization, recapitalization or
      reclassification continue after such reorganization, recapitalization or
      reclassification to hold publicly traded securities and, directly or indirectly,
      the voting power of the surviving entity or entities necessary to elect a
      majority of the members of the board of directors (or their equivalent if other
      than a corporation) of such entity or entities, or (B) pursuant to a migratory
      merger effected solely for the purpose of changing the jurisdiction of
      incorporation of the Company.

     

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

     

    (e) "Existing
      Indebtedness"
      means
      the Indebtedness set forth on Schedule 28(h) attached hereto. 

     

    (f) "Fundamental
      Transaction"
      means
      that the Company shall, directly or indirectly, in one or more related
      transactions, (i) consolidate or merge with or into (whether or not the Company
      is the surviving corporation) another Person or Persons, or (ii) sell, assign,
      transfer, convey or otherwise dispose of all or substantially all of the
      properties or assets of the Company to another Person, or (iii) allow another
      Person to make a purchase, tender or exchange offer that is accepted by the
      holders of more than the 50% of the outstanding shares of Voting Stock (not
      including any shares of Voting Stock held by the Person or Persons making or
      party to, or associated or affiliated with the Persons making or party to,
      such
      purchase, tender or exchange offer), or (iv) consummate a stock purchase
      agreement or other business combination (including, without limitation, a
      reorganization, recapitalization, spin-off or scheme of arrangement) with
      another Person whereby such other Person acquires more than the 50% of the
      outstanding shares of Voting Stock (not including any shares of Voting Stock
      held by the other Person or other Persons making or party to, or associated
      or
      affiliated with the other Persons making or party to, such stock purchase
      agreement or other business combination), (v) reorganize, recapitalize or
      reclassify its Common Stock or (vi) any "person" or "group" (as these terms
      are
      used for purposes of Sections 13(d) and 14(d) of the Exchange Act) is or shall
      become the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
      Act),
      directly or indirectly, of 50% of the aggregate ordinary voting power
      represented by issued and outstanding Common Stock.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    (g) "GAAP"
      means
      United States generally accepted accounting principles, consistently
      applied.

     

    (h) "Indebtedness"
      of any
      Person means, without duplication (i) all indebtedness for borrowed money,
      (ii)
      all obligations issued, undertaken or assumed as the deferred purchase price
      of
      property or services, including (without limitation) "capital leases" in
      accordance with generally accepted accounting principles (other than trade
      payables entered into in the ordinary course of business), (iii) all
      reimbursement or payment obligations with respect to letters of credit, surety
      bonds and other similar instruments, (iv) all obligations evidenced by notes,
      bonds, debentures or similar instruments, including obligations so evidenced
      incurred in connection with the acquisition of property, assets or businesses,
      (v) all indebtedness created or arising under any conditional sale or other
      title retention agreement, or incurred as financing, in either case with respect
      to any property or assets acquired with the proceeds of such indebtedness (even
      though the rights and remedies of the seller or bank under such agreement in
      the
      event of default are limited to repossession or sale of such property), (vi)
      all
      monetary obligations under any leasing or similar arrangement which, in
      connection with generally accepted accounting principles, consistently applied
      for the periods covered thereby, is classified as a capital lease, (vii) all
      indebtedness referred to in clauses (i) through (vi) above secured by (or for
      which the holder of such Indebtedness has an existing right, contingent or
      otherwise, to be secured by) any mortgage, lien, pledge, charge, security
      interest or other encumbrance upon or in any property or assets (including
      accounts and contract rights) owned by any Person, even though the Person which
      owns such assets or property has not assumed or become liable for the payment
      of
      such indebtedness, and (viii) all Contingent Obligations in respect of
      indebtedness or obligations of others of the kinds referred to in clauses (i)
      through (vii) above.

     

    (i) "Parent
      Entity"
      of a
      Person means an entity that, directly or indirectly, controls the applicable
      Person and whose common stock or equivalent equity security is quoted or listed
      on an Eligible Market, or, if there is more than one such Person or Parent
      Entity, the Person or Parent Entity with the largest public market
      capitalization as of the date of consummation of the Fundamental
      Transaction.

     

    (j) "Permitted
      Indebtedness"
      means
      (i) Indebtedness incurred by the Company that is made expressly subordinate
      in
      right of payment to the Indebtedness evidenced by this Note, as reflected in
      a
      written agreement acceptable to the Holder and approved by the Holder in
      writing, (such Indebtedness, the "Subordinated
      Indebtedness"),
      (ii)
      Existing Indebtedness, (iii) Indebtedness secured by Permitted Liens, (iv)
      Indebtedness to trade creditors incurred in the ordinary course of business,
      and
      (v) extensions,
      refinancings and renewals of any items of Permitted Indebtedness, provided
      that
      the principal amount is not increased or the terms modified to impose more
      burdensome terms upon the Company or its Subsidiary, as the case may
      be.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    (k) "Permitted
      Liens"
      means
      (i) any Lien for taxes not yet due or delinquent or being contested in good
      faith by appropriate proceedings for which adequate reserves have been
      established in accordance with GAAP, (ii) any statutory Lien arising in the
      ordinary course of business by operation of law with respect to a liability
      that
      is not yet due or delinquent, (iii) any Lien created by operation of law, such
      as materialmen's liens, mechanics' liens and other similar liens, arising in
      the
      ordinary course of business with respect to a liability that is not yet due
      or
      delinquent or that are being contested in good faith by appropriate proceedings,
      (iv) Liens securing the Company's obligations under the Notes; (v) Liens (A)
      upon or in any equipment (as defined in the Security Agreement) acquired or
      held
      by the Company or any of its Subsidiaries to secure the purchase price of such
      equipment or indebtedness incurred solely for the purpose of financing the
      acquisition or lease of such equipment, or (B) existing on such equipment at
      the
      time of its acquisition, provided that the Lien is confined solely to the
      property so acquired and improvements thereon, and the proceeds of such
      equipment, (vi) Liens incurred in connection with the extension, renewal or
      refinancing of the indebtedness secured by Liens of the type described in
      clauses (i) and (v) above, provided that any extension, renewal or replacement
      Lien shall be limited to the property encumbered by the existing Lien and the
      principal amount of the Indebtedness being extended, renewed or refinanced
      does
      not increase, (vii) Liens securing the Company's obligations under the Existing
      Indebtedness; (viii) leases or subleases and licenses and sublicenses granted
      to
      others in the ordinary course of the Company's business, not interfering in
      any
      material respect with the business of the Company and its Subsidiaries taken
      as
      a whole, (ix) Liens in favor of customs and revenue authorities arising as
      a matter of law to secure payments of custom duties in connection with the
      importation of goods, and (x)
      Liens
      arising from judgments, decrees or attachments in circumstances not constituting
      an Event of Default under Section 4(a)(ix).

     

    (l) "Person"
      means
      an individual, a limited liability company, a partnership, a joint venture,
      a
      corporation, a trust, an unincorporated organization, any other entity and
      a
      government or any department or agency thereof. 

     

    (m) "Securities
      Purchase Agreement"
      means
      that certain securities purchase agreement dated as of the Subscription Date
      by
      and among the Company and the Holders pursuant to which the Company issued
      the
      Notes. 

     

    (n) "Subscription
      Date"
      means
      July 7, 2008.

     

    (o) "Successor
      Entity"
      means
      the Person, which may be the Company, formed by, resulting from or surviving
      any
      Fundamental Transaction or the Person with which such Fundamental Transaction
      shall have been made, provided that if such Person is not a publicly traded
      entity whose common stock or equivalent equity security is quoted or listed
      for
      trading on an Eligible Market, Successor Entity shall mean such Person's Parent
      Entity.

     

    (p) "Voting
      Stock"
      of a
      Person means capital stock of such Person of the class or classes pursuant
      to
      which the holders thereof have the general voting power to elect, or the general
      power to appoint, at least a majority of the board of directors, managers or
      trustees of such Person (irrespective of whether or not at the time capital
      stock of any other class or classes shall have or might have voting power by
      reason of the happening of any contingency).

     

    [Signature
      Page Follows]

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    

    IN
      WITNESS WHEREOF, the Company has caused this Note to be duly executed as of
      the
      Issuance Date set out above.

     

    

    
      	 	
              GREEN
                SCREEN INTERACTIVE SOFTWARE, INC.

            
	 	 
	 	 
	 	
              By:
                /s/
                Ron Chaimowitz

            
	 	
              Name:
                Ron
                Chaimowitz

            
	 	
              Title:
                Chief Executive Officer

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    EXHIBIT
      A

    

    ADVANCES
      AND PAYMENTS OF PRINCIPAL

    

    
      	
               

               

               

              Date

            	
               

               

              Amount
                of

              Advance

            	
               

               

              Amount
                of

              Principal
                Paid

            	
               

               

              Unpaid
                Principal Balance

            	
               

               

              Notation

              Made
                by

            
	
               

              7/7/08

            	
               

              $3,028,888.89

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