Document:

EX-4.18

INVESTMENT AGREEMENT

                              INVESTMENT AGREEMENT

INVESTMENT AGREEMENT ("Agreement"), dated as of June 8, 2004, by and
between GameZnFlix, Inc., a Nevada corporation ("Company"), and Southern
Securities, Inc., a Delaware corporation ("Investor").

WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Investor shall invest up to Fifteen Million
Dollars ($15,000,000) to purchase the Company's common stock, one tenth of
one cent ($0.001) par value per share ("Common Stock");

WHEREAS, such investments will be made in reliance upon the provisions
of Section 4(2) under the Securities Act of 1933, as amended ("1933 Act"), Rule
506 of Regulation D, and the rules and regulations promulgated thereunder,
and/or upon such other exemption from the registration requirements of the
1933 Act as may be available with respect to any or all of the investments
in Common Stock to be made hereunder; and

WHEREAS, contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a Registration
Rights Agreement substantially in the form attached hereto as Exhibit A (as
amended from time to time, "Registration Rights Agreement") pursuant to
which the Company has agreed to provide certain registration rights under
the 1933 Act, and the rules and regulations promulgated thereunder, and
applicable state securities laws.

NOW THEREFORE, in consideration of the foregoing recitals, which shall
be considered an integral part of this Agreement, the covenants and
agreements set forth hereafter, and other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the Company and
the Investor hereby agree as follows:

SECTION 1.  DEFINITIONS.

As used in this Agreement, the following terms shall have the following
meanings specified or indicated, and such meanings shall be equally
applicable to the singular and plural forms of the defined terms:

"1933 Act" shall have the meaning set forth in the preamble, above.

"1934 Act" shall mean the Securities Exchange Act of 1934, as it may be
amended.

"Affiliate" shall have the meaning specified in Section 5(h), below.

"Agreement" shall mean this Investment Agreement.

"Best Bid" shall mean the highest posted bid price of the Common Stock.

"Buy In" shall have the meaning specified in Section 6, below.

"Buy In Adjustment Amount" shall have the meaning specified in Section 6.

"Closing" shall have the meaning specified in Section 2(h).

"Closing Date" shall mean seven (7) Trading Days following the Put Notice
Date.

"Common Stock" shall have the meaning set forth in the preamble to this
Agreement.

"Control" or "Controls" shall have the meaning specified in Section 5(h).

"Covering Shares" shall have the meaning specified in Section 6.

"Effective Date" shall mean the date the SEC declares effective under the
1933 Act the Registration Statement covering the Securities.

"Environmental Laws" shall have the meaning specified in Section 4(m), below.

"Execution Date" shall mean the date first indicated above.

"Indemnitiees" shall have the meaning specified in Section 10, below.

"Indemnified Liabilities" shall have the meaning specified in Section 10,
below.

"Ineffective Period" shall mean any period of time that the Registration
Statement or any Supplemental Registration Statement (as defined in the
Registration Rights Agreement) becomes ineffective or unavailable for use
for the sale or resale, as applicable, of any or all of the Registrable
Securities (as defined in the Registration Rights Agreement) for any reason
(or in the event the prospectus under either of the above is not current and
deliverable) during any time period required under the Registration Rights
Agreement.

"Investor" shall have the meaning indicated above.

"Major Transaction" shall have the meaning specified in Section 2(g), above.

"Material Adverse Effect" shall have the meaning specified in Section 4(a).

"Material Facts" shall have the meaning specified in Section 2(m).

"Maximum Common Stock Issuance" shall have the meaning specified in Section
2(j).

"Open Period" shall mean the period beginning on and including the Trading
Day immediately following the Effective Date and ending on the earlier to
occur of (i) the date which is 36 months from the Effective Date; and (ii)
termination of the Agreement in accordance with Section 9, below.

"Partial Release Form" shall have the meaning specified in Section 2(i),
below.

"Pricing Period" shall mean the period beginning on the Put Notice Date and
ending on and including the date that is five (5) Trading Days after such
Put Notice Date.

"Principal Market" shall mean the American Stock Exchange, Inc., the
National Association of Securities Dealers, Inc. Over-the-Counter Bulletin
Board, the Nasdaq National Market System or the Nasdaq SmallCap Market,
whichever is the principal market on which the Common Stock is listed.

"Prospectus" shall mean the prospectus, preliminary prospectus and
supplemental prospectus used in connection with the Registration Statement.

"Purchase Amount" shall mean the total amount being paid by the Investor on
a particular Closing Date to purchase the Securities.

"Purchase Price" shall mean eighty-eight percent (88%) of the lowest volume
weighted average price of the Common Stock during the Pricing Period.

"Put Amount" shall have the meaning set forth in Section 2(b) hereof.

"Put Notice" shall mean a written notice sent to the Investor by the Company
stating the Put Amount of Shares the Company intends to sell to the Investor
pursuant to the terms of the Agreement and stating the current number of
Shares issued and outstanding on such date.

"Put Notice Date" shall mean the Trading Day immediately following the day
on which the Investor receives a Put Notice, however a Put Notice shall be
deemed delivered on (X) the Trading Day it is received by facsimile or
otherwise by the Investor if such notice is received prior to 9:00 am
Eastern Time, or (Y) the immediately succeeding Trading Day if it is
received by facsimile or otherwise after 9:00 am Eastern Time on a Trading
Day. No Put Notice may be deemed delivered on a day that is not a Trading
Day.

"Put Restriction" shall mean the days between the end of the Pricing Period
and the date on which the Investor deems the Put closed.  During this time,
the Company shall not be entitled to deliver another Put Notice.

"Registration Period" shall have the meaning specified in Section 5(c),
below.

"Registration Rights Agreement" shall have the meaning set forth in the
recitals, above.

"Registration Statement" means the registration statement of the Company
filed under the 1933 Act covering the Common Stock issuable hereunder.

"Related Party" shall have the meaning specified in Section 5(h).

"Resolution" shall have the meaning specified in Section 8(f).

"SEC" shall mean the U.S. Securities & Exchange Commission.

"SEC Documents" shall have the meaning specified in Section 4(f).

"Securities" shall mean the shares of Common Stock issued pursuant to the
terms of the Agreement.

"Shares" shall mean the shares of the Company's Common Stock.

"Sold Shares" shall have the meaning specified in Section 6.

"Subsidiaries" shall have the meaning specified in Section 4(a).

"Trading Day" shall mean any day on which the Principal Market for the
Common Stock is open for trading, from the hours of 9:30 am until 4:00 pm.

"Transaction Documents" shall mean this Agreement, the Registration Rights
Agreement, and each of the other agreements entered into by the parties
hereto in connection with this Agreement.

"Valuation Event" shall have the meaning specified in Section 2(k).

SECTION 2.  PURCHASE AND SALE OF COMMON STOCK.

(a)  Purchase and Sale of Common Stock. Subject to the terms and
conditions set forth herein, the Company shall issue and sell to the
Investor, and the Investor shall purchase from the Company, up to that
number of Shares having an aggregate Purchase Price of Fifteen Million
Dollars ($15,000,000).

(b)  Delivery of Put Notices.

(i) Subject to the terms and conditions of the Transaction Documents,
and from time to time during the Open Period, the Company may, in its
sole discretion, deliver a Put Notice to the Investor which states the
Put Amount (designated in shares of Common Stock) which the Company
intends to sell to the Investor on a Closing Date. The Put Notice
shall be in the form attached hereto as Exhibit B and incorporated
herein by reference.  The amount that the Company shall be entitled to
Put to the Investor ("Put Amount") shall be equal to, at the Company's
election, either: (A) two hundred percent (200%) of the average daily
volume (U.S. market only) of the Common Stock for the ten (10) Trading
Days prior to the applicable Put Notice Date, multiplied by the
average of the three (3) daily closing Best Bid prices immediately
preceding the Put Date, or (B) ten thousand dollars ($10,000);
provided that in no event will the Put Amount be more than three
hundred thousand dollars ($300,000) with respect to any single Put,
and the aggregate dollar amount of all Puts in any thirty (30) day
period shall not exceed three hundred thousand dollars ($300,000).
During the Open Period, the Company shall not be entitled to submit a
Put Notice until after the previous Closing has been completed.  The
Purchase Price for the Common Stock identified in the Put Notice shall
be equal to eighty-eight percent (88%) of the lowest closing Best Bid
price of the Common Stock during the Pricing Period.

(ii) Within seven (7) calendar days after the commencement of each
calendar quarter occurring subsequent to the commencement of the Open
Period, the Company undertakes to notify Investor as to its reasonable
expectations as to the Put Amount it intends to raise during such
calendar quarter, if any, through the issuance of Put Notices.  Such
notification shall constitute only the Company's good faith estimate
with respect to such calendar quarter and shall in no way obligate the
Company to raise such amount during such calendar quarter or otherwise
limit its ability to deliver Put Notices during such calendar quarter.
The failure by the Company to comply with this provision may be cured
by the Company's notification Investor at any time as to its
reasonable expectations with respect to the current calendar quarter.

(c) Interest. It is the intention of the parties that any interest
that may be deemed to be payable under this Agreement shall not exceed the
maximum amount permitted under applicable law.  If any applicable law sets
the maximum interest amount, and any payment required under this Agreement
exceeds such limit, then: (i) any such interest shall be reduced by the
amount necessary to reduce the interest to the legally permitted limit; and
(ii) any sums already collected (if any) from a party which exceed the
legally permitted limits will be refunded to such party.

(d) Investor's Obligation to Purchase Shares. Subject to the
conditions set forth in this Agreement, following the Investor's receipt of
a validly delivered Put Notice, the Investor shall be required to purchase
from the Company during the related Pricing Period that number of Shares
having an aggregate Purchase Price equal to the lesser of (i) the Put Amount
set forth in the Put Notice, and (ii) two hundred percent (200%) of the
aggregate trading volume of the Common Stock during the applicable Pricing
Period times (x) eighty-eight percent (88%) of the average of the three (3)
lowest closing bid prices of the Company's Common Stock during the specified
Pricing Period, but only if said Shares bear no restrictive legend, are not
subject to stop transfer instructions and are being held in escrow, pursuant
to Section 2(h), prior to the applicable Closing Date.

(e) Limitation on Investor's Obligation to Purchase Shares. In no
event shall the Investor purchase Shares (whether from the Company or in
public or private secondary transactions) other than pursuant to this
Agreement until such date as this Agreement is terminated.

(f) Conditions to Investor's Obligation to Purchase Shares.
Notwithstanding anything to the contrary in this Agreement, the Company
shall not be entitled to deliver a Put Notice and the Investor shall not be
obligated to purchase any Shares at a Closing (as defined in Section 2(h))
unless each of the following conditions are satisfied:

(i) a Registration Statement shall have been declared effective and
shall remain effective and available for the resale of all the
Registrable Securities (as defined in the Registration Rights
Agreement) at all times until the Closing with respect to the subject
Put Notice;

(ii)  there shall be a minimum of five (5) trading days between each
Put Notice;

(iii) at all times during the period beginning on the related Put
Notice Date and ending on and including the related Closing Date, the
Common Stock shall have been listed on the Principal Market and shall
not have been suspended from trading thereon for a period of five
consecutive Trading Days during the Open Period and the Company shall
not have been notified of any pending or threatened proceeding or
other action to delist or suspend the Common Stock;

(iv) the Company has complied with its obligations and is otherwise
not in breach of a material provision of, or in default under, this
Agreement, the Registration Rights Agreement or any other agreement
executed in connection herewith which has not been corrected prior to
delivery of the Put Notice Date;

(v) no injunction shall have been issued and remain in force, or
action commenced by a governmental authority which has not been stayed
or abandoned, prohibiting the purchase or the issuance of the
Securities; and

(vi) the issuance of the Securities will not violate any shareholder
approval requirements of the Principal Market.

If any of the events described in clauses (i) through (v) above occurs
during a Pricing Period, then the Investor shall have no obligation to
purchase the Put Amount of Common Stock set forth in the applicable Put
Notice.

(g) Major Transaction. For purposes of this Agreement, a "Major
Transaction" shall be deemed to have occurred upon the closing of any of the
following events: (i) the consolidation, merger or other business
combination of the Company with or into another person (other than pursuant
to a migratory merger effected solely for the purposes of changing the
jurisdiction of incorporation of the Company or other than a transaction in
which the Company is the surviving corporation); (ii) the sale or transfer
of all or substantially all of the Company's assets; or (iii) the
consummation of a purchase, tender or exchange offer made to, and accepted
by, the holders of more than fifty percent (50%) of the economic interest
in, or the combined voting power of all classes of voting stock of, the
Company.

(h) Mechanics of Purchase of Shares by Investor. Subject to the
satisfaction of the conditions set forth in Sections 2(f), 7 and 8, the
closing of the purchase by the Investor of Shares or the Investor deeming a
Put closed (a "Closing") shall occur on the date which is no later than
seven (7) Trading Days following the applicable Put Notice Date or when the
Investor deems a Put closed (each a "Closing Date"). Prior to each Closing
Date, (I) the Company shall deliver to the Investor pursuant to the this
Agreement, certificates representing the Shares to be issued to the Investor
on such date and registered in the name of the Investor; and (II) the
Investor shall deliver to the Company the Purchase Price to be paid for such
Shares, determined as set forth in Sections 2(b) and 2(d). In lieu of
delivering physical certificates representing the Securities and provided
that the Company's transfer agent then is participating in The Depository
Trust Company ("DTC") Fast Automated Securities Transfer ("FAST") program,
upon request of the Investor, the Company shall use its commercially
reasonable efforts to cause its transfer agent to electronically transmit
the Securities by crediting the account of the Investor's prime broker
(which shall be specified by the Investor a reasonably sufficient time in
advance) with DTC through its Deposit Withdrawal Agent Commission ("DWAC")
system.

The Company understands that a delay in the issuance of Securities
beyond the Closing Date could result in economic loss to the Investor. After
the Effective Date, as compensation to the Investor for such loss, the
Company agrees to pay late payments to the Investor for late issuance of
Securities (delivery of Securities after the applicable Closing Date) in
accordance with the following schedule (where "No. of Days Late" is defined
as the number of days beyond the Closing Date):

Late  Payment  For  Each
No. of Days Late               $10,000 of Common Stock

          1                            $100
          2                            $200
          3                            $300
          4                            $400
          5                            $500
          6                            $600
          7                            $700
          8                            $800
          9                            $900
          10                           $1,000

Over 10: $1,000 + $200 for each Business Day late beyond 10 days

The Company shall pay any payments incurred under this Section in
immediately available funds upon demand.  Nothing herein shall limit the
Investor's right to pursue actual damages for the Company's failure to issue
and deliver the Securities to the Investor, except to the extent that such
late payments shall constitute payment for and offset any such actual
damages alleged by the Investor, and any Buy In Adjustment Amount.

(i) Overall Limit on Common Stock Issuable. Notwithstanding anything
contained herein to the contrary, if during the Open Period the Company
becomes listed on an exchange that limits the number of shares of Common
Stock that may be issued without shareholder approval, then the number of
Shares issuable by the Company and purchasable by the Investor, including
the shares of Common Stock issuable to the Investors pursuant to Section
11(b), shall not exceed that number of the shares of Common Stock that may
be issuable without shareholder approval, subject to appropriate adjustment
for stock splits, stock dividends, combinations or other similar
recapitalization affecting the Common Stock (the "Maximum Common Stock
Issuance"), unless the issuance of Shares, including any Common Stock to be
issued to the Investors pursuant to Section 11(b), in excess of the Maximum
Common Stock Issuance shall first be approved by the Company's shareholders
in accordance with applicable law and the By-laws and Amended and Restated
Certificate of Incorporation of the Company, if such issuance of shares of
Common Stock could cause a delisting on the Principal Market.  The parties
understand and agree that the Company's failure to seek or obtain such
shareholder approval shall in no way adversely affect the validity and due
authorization of the issuance and sale of Securities or the Investor's
obligation in accordance with the terms and conditions hereof to purchase a
number of Shares in the aggregate up to the Maximum Common Stock Issuance
limitation, and that such approval pertains only to the applicability of the
Maximum Common Stock Issuance limitation provided in this Section 2(j).

(j) For the purpose of this Agreement, the term "Valuation Event"
means the Company taking any of the following actions at any time during a
Pricing Period:

(i) the subdivision or combinations of the Company's Common Stock;

(ii) the payment of a dividend or any other distribution with respect
to shares of the Company's Common Stock;

(iii) the issuance of any options or other rights to subscribe for or
purchase Common Stock ("Options") or any securities convertible into
or exchangeable for Common Stock ("Convertible Securities"), the price
per share for which Common Stock is shall be less than the bid price
in effect immediately prior to such issuance of such Options or
Convertible Securities;

(iv) the issuance of shares of Common Stock other than as provided in
the foregoing subsections (i) through (iii), at a price per share
less, or for other consideration lower, than the bid price in effect
immediately prior to such issuance, or without consideration; or

(v) the distribution of its assets or evidences of indebtedness to the
holders of Common Stock as a dividend in liquidation or by way of
return of capital or other than as a dividend payable out of earnings
or surplus legally available for dividends under applicable law or any
distribution to such holders made in respect of the sale of all or
substantially all of the Company's assets (other than under the
circumstances provided for in the foregoing subsections (i) through
(iv)).

(k) The Company agrees that it shall not take any action that would
result in a Valuation Event occurring during a Pricing Period.

SECTION 3.  INVESTOR'S REPRESENTATIONS, WARRANTIES AND COVENANTS.

The Investor represents and warrants to the Company, and covenants, that:

(a) Sophisticated Investor. The Investor has, by reason of its
business and financial experience, such knowledge, sophistication and
experience in financial and business matters and in making investment
decisions of this type that it is capable of (i) evaluating the merits and
risks of an investment in the Securities and making an informed investment
decision; (ii) protecting its own interest; and (iii) bearing the economic
risk of such investment for an indefinite period of time.

(b) Authorization; Enforcement. This Agreement has been duly and
validly authorized, executed and delivered on behalf of the Investor and is
a valid and binding agreement of the Investor enforceable against the
Investor in accordance with its terms, subject as to enforceability to
general principles of equity and to applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation and other similar laws relating to,
or affecting generally, the enforcement of applicable creditors' rights and
remedies.

(c) Section 9 of the 1934 Act.  During the term of this Agreement,
the Investor shall comply with the provisions of Section 9 of the 1934 Act,
and the rules promulgated thereunder, with respect to transactions involving
the Common Stock.  The Investor agrees not to short, either directly or
indirectly through its affiliates, principals or advisors, the Company's
common stock during the term of this Agreement.

(d) Accredited Investor.  Investor is an "accredited investor" as
that term is defined in Rule 501(a)(3) of Regulation D of the 1933 Act.

(e) No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Investor and the consummation by the Investor
of the transactions contemplated hereby and thereby will not result in a
violation of Partnership Agreement or other organizational documents of the
Investor.

(f) Opportunity To Discuss. The Investor has had an opportunity to
discuss the business, management and financial affairs of the Company with
the Company's management.

(g) Investment Purposes. The Investor is purchasing the Securities
for its own account for investment purposes and not with a view towards
distribution and agrees to resell or otherwise dispose of the Securities
solely in accordance with the registration provisions of the 1933 Act (or
pursuant to an exemption from such registration provisions).

(h) No Registration as a Dealer. The Investor is not and shall not be
required to be registered as a "dealer" under the 1934 Act, either as a
result of its execution and performance of its obligations under this
Agreement or otherwise.

(i) The Investor is a corporation, duly organized, validly existing
and in good standing in the British Virgin Islands.

(j) The Investor understands that it is liable for its own tax
liabilities.

(k) The investor shall comply with Regulation M under the 1934 Act,
if applicable.

SECTION 4.  REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

Except as set forth in the Schedules attached hereto, or as disclosed on the
Company's SEC Documents, the Company represents and warrants to the Investor
that:

(a) Organization and Qualification. The Company is a corporation duly
organized and validly existing in good standing under the laws of the
British Virgin Islands, and has the requisite corporate power and
authorization to own its properties and to carry on its business as now
being conducted.  Each of the Company and its Subsidiaries is duly qualified
as a foreign corporation to do business and is in good standing in every
jurisdiction in which 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, financial condition
or prospects of the Company and its Subsidiaries, if any, taken as a whole,
or on the transactions contemplated hereby or by the agreements and
instruments to be entered into in connection herewith, or on the authority
or ability of the Company to perform its obligations under the Transaction
Documents (as defined in Section 1 and 4(b), below).

(b) Authorization; Enforcement; Compliance with Other Instruments.

(i) The Company has the requisite corporate power and authority to
enter into and perform this Agreement, the Registration Rights
Agreement, 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 to
issue the Securities in accordance with the terms hereof and thereof.

(ii) The execution and delivery of the Transaction Documents by the
Company and the consummation by it of the transactions contemplated
hereby and thereby, including without limitation the reservation for
issuance and the issuance of the Securities pursuant to this
Agreement, have been duly and validly authorized by the Company's
Board of Directors and no further consent or authorization is required
by the Company, its Board of Directors, or its shareholders.

(iii) The Transaction Documents have been duly and validly executed
and delivered by the Company.

(iv) The Transaction Documents constitute the valid and binding
obligations of the Company enforceable against the Company in accordance
with their terms, except as such enforceability may be limited by general
principles of equity or applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation or similar laws relating to, or affecting generally,
the enforcement of creditors' rights and remedies.

(c) Capitalization. As of the date hereof, the authorized capital
stock of the Company consists of nine hundred million (900,000,000) shares
of Common Stock, $0.001 par value per share, of which as of the date hereof,
five hundred fifty-six million one hundred fifty-seven thousand eight
hundred eighty-two (556,157,882) shares are issued and outstanding.  All of
such outstanding shares have been, or upon issuance will be, validly issued
and are fully paid and nonassessable.  Except as disclosed in the Company's
publicly available filings with Periodic Filings, (i) no shares of the
Company's capital stock are 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 debt securities; (iii) there are no
outstanding shares of capital stock, options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to,
or securities or rights convertible into, any shares of capital stock of the
Company or any of its Subsidiaries, or contracts, commitments,
understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to issue additional shares of capital
stock of the Company or any of its Subsidiaries or options, warrants, scrip,
rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into, any shares of capital
stock of the Company or any of its Subsidiaries; (iv) there are no
agreements or arrangements under which the Company or any of its
Subsidiaries is obligated to register the sale of any of their securities
under the 1933 Act (except the Registration Rights Agreement); (v) there are
no outstanding securities 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; (vi) there are no securities or instruments
containing anti-dilution or similar provisions that will be triggered by the
issuance of the Securities as described in this Agreement; (vii) the Company
does not have any stock appreciation rights or "phantom stock" plans or
agreements or any similar plan or agreement; and (viii) there is no dispute
as to the classification of any shares of the Company's capital stock.  The
Company has furnished to the Investor, or the Investor has had access
through EDGAR to, true and correct copies of the Company's articles of
incorporation, as amended, as in effect on the date hereof ("Articles of
Incorporation"), and the Company's by-laws, as in effect on the date hereof
("By-Laws"), and the terms of all securities convertible into or exercisable
for Common Stock and the material rights of the holders thereof in respect
thereto.

(d) Issuance of Shares. The Company has reserved One Hundred Fifty
Million (150,000,000) Shares for issuance pursuant to this Agreement has
been duly authorized and reserved for issuance (subject to adjustment
pursuant to the Company's covenant set forth in Section 5(f) below) pursuant
to this Agreement.  Upon issuance in accordance with this Agreement, the
Securities will be validly issued, fully paid and non-assessable and free
from all taxes, liens and charges with respect to the issue thereof.  In the
event the Company cannot register a sufficient number of Shares for issuance
pursuant to this Agreement, the Company will use its best efforts to
authorize and reserve for issuance the number of Shares required for the
Company to perform its obligations hereunder as soon as reasonably
practicable.

(e) 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 will not (i) result in a
violation of the Certificate of Incorporation, any Certificate of
Designations, Preferences and Rights of any outstanding series of preferred
stock of the Company or the By-laws; or (ii) conflict with, or constitute a
material default (or an event which with notice or lapse of time or both
would become a material default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any material
agreement, contract, indenture mortgage, indebtedness or instrument to which
the Company or any of its Subsidiaries is a party, or result in a violation
of any law, rule, regulation, order, judgment or decree (including United
States federal and state securities laws and regulations and the rules and
regulations of the Principal Market or principal securities exchange or
trading market on which the Common Stock is traded or listed) 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. Except as
disclosed in Schedule 4(e), neither the Company nor its Subsidiaries is in
violation of any term of, or in default under, the Articles of
Incorporation, any Certificate of Designations, Preferences and Rights of
any outstanding series of preferred stock of the Company or the By-Laws or
their organizational charter or by-laws, respectively, or any contract,
agreement, mortgage, indebtedness, indenture, instrument, judgment, decree
or order or any statute, rule or regulation applicable to the Company or its
Subsidiaries, except for possible conflicts, defaults, terminations,
amendments, accelerations, cancellations and violations that would not
individually or in the aggregate have a Material Adverse Effect.  The
business of the Company and its Subsidiaries is not being conducted, and
shall not be conducted, in violation of any law, statute, ordinance, rule,
order or regulation of any governmental authority or agency, regulatory or
self-regulatory agency, or court, except for possible violations the
sanctions for which either individually or in the aggregate would not have a
Material Adverse Effect. Except as specifically contemplated by this
Agreement and as required under the 1933 Act, the Company is not required to
obtain any consent, authorization, permit or order of, or make any filing or
registration (except the filing of a registration statement) with, any
court, governmental authority or agency, regulatory or self-regulatory
agency or other third party in order for it to execute, deliver or perform
any of its obligations under, or contemplated by, the Transaction Documents
in accordance with the terms hereof or thereof. All consents,
authorizations, permits, orders, filings and registrations which the Company
is required to obtain pursuant to the preceding sentence have been obtained
or effected on or prior to the date hereof and are in full force and effect
as of the date hereof. Except as disclosed in Schedule 4(e), the Company and
its Subsidiaries are unaware of any facts or circumstances that might give
rise to any of the foregoing.  The Company is not, and will not be, in
violation of the listing requirements of the Principal Market as in effect
on the date hereof and on each of the Closing Dates and is not aware of any
facts which would reasonably lead to delisting of the Common Stock by the
Principal Market in the foreseeable future.

(f) SEC Documents; Financial Statements. Since at least January 1,
2004, the Company has filed all reports, schedules, forms, statements and
other documents required to be filed by it with the SEC pursuant to the
reporting requirements of the 1934 Act (all of the foregoing filed prior to
the date hereof and all exhibits included therein and financial statements
and schedules thereto and documents incorporated by reference therein being
hereinafter referred to as the "SEC Documents").  The Company has delivered
to the Investor or its representatives, or they have had access through
EDGAR to, true and complete copies of the SEC Documents. As of their
respective dates, the SEC Documents complied in all material respects with
the requirements of the 1934 Act and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Documents, and none of the SEC
Documents, at the time they were filed with the SEC, contained any untrue
statement of a material fact or omitted to state a material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading.  As of their
respective dates, the financial statements of the Company included in the
SEC Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC
with respect thereto.  Such financial statements have been prepared in
accordance with generally accepted accounting principles, consistently
applied, during the periods involved (except (i) as may be otherwise
indicated in such financial statements or the notes thereto, or (ii) in the
case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in
all material respects the financial position of the Company as of the dates
thereof and the results of its operations and cash flows for the periods
then ended (subject, in the case of unaudited statements, to normal year-end
audit adjustments).  No other written information provided by or on behalf
of the Company to the Investor which is not included in the SEC Documents,
including, without limitation, information referred to in Section 4(d) of
this Agreement, contains any untrue statement of a material fact or omits to
state any material fact necessary to make the statements therein, in the
light of the circumstance under which they are or were made, not misleading.
Neither the Company nor any of its Subsidiaries or any of their officers,
directors, employees or agents have provided the Investor with any material,
nonpublic information which was not publicly disclosed prior to the date
hereof and any material, nonpublic information provided to the Investor by
the Company or its Subsidiaries or any of their officers, directors,
employees or agents prior to any Closing Date shall be publicly disclosed by
the Company prior to such Closing Date.

(g) Absence of Certain Changes. Except as set forth in the SEC
Documents, the Company does not intend to change the business operations of
the Company. The Company has not taken any steps, and does not currently
expect to take any steps, to seek protection pursuant to any bankruptcy law
nor does the Company or its Subsidiaries have any knowledge or reason to
believe that its creditors intend to initiate involuntary bankruptcy
proceedings.

(h) Absence of Litigation. Except as set forth in the SEC Documents,
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 executive officers of Company or
any of its Subsidiaries, threatened against or affecting the Company, the
Common Stock or any of the Company's Subsidiaries or any of the Company's or
the Company's Subsidiaries' officers or directors in their capacities as
such, in which an adverse decision could have a Material Adverse Effect.

(i) Acknowledgment Regarding Investor's Purchase of Shares. The
Company acknowledges and agrees that the Investor is acting solely in the
capacity of arm's length purchaser with respect to the Transaction Documents
and the transactions contemplated hereby and thereby.  The Company further
acknowledges that the Investor is not acting as a financial advisor or
fiduciary of the Company (or in any similar capacity) with respect to the
Transaction Documents and the transactions contemplated hereby and thereby
and any advice given by the Investor or any of its respective
representatives or agents in connection with the Transaction Documents and
the transactions contemplated hereby and thereby is merely incidental to the
Investor's purchase of the Securities.  The Company further represents to
the Investor that the Company's decision to enter into the Transaction
Documents has been based solely on the independent evaluation by the Company
and its representatives.

(j) No Undisclosed Events, Liabilities, Developments or
Circumstances.  Except as set forth in the SEC Documents, since January 1,
2004, no event, liability, development or circumstance has occurred or
exists, or to the Company's knowledge is contemplated to occur, with respect
to the Company or its Subsidiaries or their respective business, properties,
assets, prospects, operations or financial condition, that would be required
to be disclosed by the Company under applicable securities laws on a
registration statement filed with the SEC relating to an issuance and sale
by the Company of its Common Stock and which has not been publicly
announced.

(k) Employee Relations.  Neither the Company nor any of its
Subsidiaries is involved in any union labor dispute nor, to the knowledge of
the Company or any of its Subsidiaries, is any such dispute threatened.
Neither the Company nor any of its Subsidiaries is a party to a collective
bargaining agreement, and the Company and its Subsidiaries believe that
relations with their employees are good.  No executive officer (as defined
in Rule 501(f) of the 1933 Act) has notified the Company that such officer
intends to leave the Company's employ or otherwise terminate such officer's
employment with the Company.

(l) Intellectual Property Rights.  The Company and its Subsidiaries
own or possess adequate rights or licenses to use all trademarks, trade
names, service marks, service mark registrations, service names, patents,
patent rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and rights necessary to conduct their
respective businesses as now conducted.  Except as set forth the SEC
Documents, none of the Company's trademarks, trade names, service marks,
service mark registrations, service names, patents, patent rights,
copyrights, inventions, licenses, approvals, government authorizations,
trade secrets or other intellectual property rights necessary to conduct its
business as now or as proposed to be conducted have expired or terminated,
or are expected to expire or terminate within two years from the date of
this Agreement.  The Company and its Subsidiaries do not have any knowledge
of any infringement by the Company or its Subsidiaries of trademark, trade
name rights, patents, patent rights, copyrights, inventions, licenses,
service names, service marks, service mark registrations, trade secret or
other similar rights of others, or of any such development of similar or
identical trade secrets or technical information by others and, except as
set forth on the SEC Documents, there is no claim, action or proceeding
being made or brought against, or to the Company's knowledge, being
threatened against, the Company or its Subsidiaries regarding trademark,
trade name, patents, patent rights, invention, copyright, license, service
names, service marks, service mark registrations, trade secret or other
infringement; and the Company and its Subsidiaries are unaware of any facts
or circumstances which might give rise to any of the foregoing.  The Company
and its Subsidiaries have taken commercially reasonable security measures to
protect the secrecy, confidentiality and value of all of their intellectual
properties.

(m) Environmental Laws.  The Company and its Subsidiaries (i) are, to
the knowledge of management of the Company, in compliance with any and all
applicable foreign, federal, state and local laws and regulations relating
to the protection of human health and safety, the environment or hazardous
or toxic substances or wastes, pollutants or contaminants ("Environmental
Laws"); (ii) have, to the knowledge of management of the Company, received
all permits, licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses; and (iii) are in
compliance, to the knowledge of the Company, with all terms and conditions
of any such permit, license or approval where, in each of the three
foregoing cases, the failure to so comply would have, individually or in the
aggregate, a Material Adverse Effect.

(n) 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 except such as are described in the SEC Documents
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 or any of its Subsidiaries.  Any real property and facilities held
under lease by the Company or 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.

(o) 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 reasonably 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.

(p) Regulatory Permits.  The Company and its Subsidiaries have in
full force and effect all certificates, approvals, authorizations and
permits from the appropriate federal, state, local or foreign regulatory
authorities and comparable foreign regulatory agencies, necessary to own,
lease or operate their respective properties and assets and conduct their
respective businesses, and neither the Company nor any such Subsidiary has
received any notice of proceedings relating to the revocation or
modification of any such certificate, approval, authorization or permit,
except for such certificates, approvals, authorizations or permits which if
not obtained, or such revocations or modifications which, would not have a
Material Adverse Effect.

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

(r) No Materially Adverse Contracts, Etc.  Neither the Company nor
any of its Subsidiaries is subject to any charter, corporate or other legal
restriction, or any judgment, decree, order, rule or regulation which in the
judgment of the Company's officers has or is expected in the future to have
a Material Adverse Effect.  Neither the Company nor any of its Subsidiaries
is a party to any contract or agreement that in the judgment of the
Company's officers has or is expected to have a Material Adverse Effect.

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

(t) Certain Transactions.  Except as set forth in the SEC Documents
filed at least ten (10) days prior to the date hereof and except for arm's
length transactions pursuant to which the Company makes payments in the
ordinary course of business upon terms no less favorable than the Company
could obtain from third parties and other than the grant of stock options
disclosed in the SEC Documents, none of the officers, directors, or
employees of the Company is presently a party to any transaction with the
Company or any of its Subsidiaries (other than for services as employees,
officers and directors), including any contract, agreement or other
arrangement providing for the furnishing of services to or by, providing for
rental of real or personal property to or from, or otherwise requiring
payments to or from any officer, director or such employee or, to the
knowledge of the Company, any corporation, partnership, trust or other
entity in which any officer, director, or any such employee has a
substantial interest or is an officer, director, trustee or partner.

(u) Dilutive Effect.  The Company understands and acknowledges that
the number of shares of Common Stock issuable upon purchases pursuant to
this Agreement will increase in certain circumstances including, but not
necessarily limited to, the circumstance wherein the trading price of the
Common Stock declines during the period between the Effective Date and the
end of the Open Period.  The Company's executive officers and directors have
studied and fully understand the nature of the transactions contemplated by
this Agreement and recognize that they have a potential dilutive effect.
The Board of Directors of the Company has concluded, in its good faith
business judgment, that such issuance is in the best interests of the
Company. The Company specifically acknowledges that, subject to such
limitations as are expressly set forth in the Transaction Documents, its
obligation to issue shares of Common Stock upon purchases pursuant to this
Agreement is absolute and unconditional regardless of the dilutive effect
that such issuance may have on the ownership interests of other shareholders
of the Company.

(v) Right of First Refusal.  The Company shall not, directly or
indirectly, without the prior written consent of Investor 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) any of its
Common Stock or securities convertible into Common Stock at a price that is
less than the market price of the Common Stock at the time of issuance of
such security or investment (a "Subsequent Financing") for a period of one
(1) year after the Effective Date, except (i) the granting of options or
warrants to employees, officers, directors and consultants, and the issuance
of shares upon exercise of options granted, under any stock option plan
heretofore or hereafter duly adopted by the Company, or shares issued for
services rendered or to be rendered to the Company; (ii) shares issued upon
exercise of any currently outstanding warrants or options and upon
conversion of any currently outstanding convertible debenture or convertible
preferred stock, in each case disclosed pursuant to Section 4(c); (iii)
securities issued in connection with the capitalization or creation of a
joint venture with a strategic partner; (iv) shares issued to pay part or
all of the purchase price for the acquisition by the Company of another
entity (which, for purposes of this clause (iv), shall not include an
individual or group of individuals); and (v) shares issued in a bona fide
public offering by the Company of its securities, unless (A) the Company
delivers to Investor a written notice ("Subsequent Financing Notice") of its
intention to effect such Subsequent Financing, which Subsequent Financing
Notice shall describe in reasonable detail the proposed terms of such
Subsequent Financing, the amount of proceeds intended to be raised
thereunder, the person with whom such Subsequent Financing shall be
effected, and attached to which shall be a term sheet or similar document
relating thereto; and (B) Investor shall not have notified the Company by
5:00 p.m. (New York time) on the fifth (5th) Trading Day after its receipt of
the Subsequent Financing Notice of its willingness to provide, subject to
completion of mutually acceptable documentation, financing to the Company on
substantially the terms set forth in the Subsequent Financing Notice.  If
Investor shall fail to notify the Company of its intention to enter into
such negotiations within such time period, then the Company may effect the
Subsequent Financing substantially upon the terms set forth in the
Subsequent Financing Notice; provided that the Company shall provide
Investor with a second Subsequent Financing Notice, and Investor shall again
have the right of first refusal set forth above in this Section, if the
Subsequent Financing subject to the initial Subsequent Financing Notice
shall not have been consummated for any reason on the terms set forth in
such Subsequent Financing Notice within thirty Trading Days after the date
of the initial Subsequent Financing Notice.  The rights granted to Investor
in this Section are not subject to any prior right of first refusal given to
any other person disclosed on Schedule 4(c).

(w) Lock-Up. The Company shall cause its officers, insiders,
directors, affiliates or other related parties to refrain from selling
Common Stock during each Pricing Period.

(x) No General Solicitation.  Neither the Company, nor any of its
affiliates, nor any person acting on its 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 Common Stock
offered hereby.

(y) No brokers, finders or financial advisory fees or commissions
will be payable by the Company with respect to the transaction contemplated
by this Agreement excepted as outlined in Section 11 (m).

SECTION 5.  COVENANTS OF THE COMPANY

(a) Best Efforts. The Company shall use commercially reasonable
efforts timely to satisfy each of the conditions to be satisfied by it as
provided in Section 7 of this Agreement.

(b) Blue Sky. The Company shall, at its sole cost and expense, on or
before each of the Closing Dates, take such action as the Company shall
reasonably determine is necessary to qualify the Securities for, or obtain
exemption for the Securities for, sale to the Investor at each of the
Closings pursuant to this Agreement under applicable securities or "Blue
Sky" laws of such states of the United States, as reasonably specified by
Investor, and shall provide evidence of any such action so taken to the
Investor on or prior to the Closing Date.

(c) Reporting Status.  Until the earlier to occur of (i) the first
date which is after the date this Agreement is terminated pursuant to
Section 9 and on which the Holders (as that term is defined in the
Registration Rights Agreement) may sell all of the Securities without
restriction pursuant to Rule 144(k) promulgated under the 1933 Act (or
successor thereto); and (ii) the date on which (A) the Holders shall have
sold all the Securities; and (B) this Agreement has been terminated pursuant
to Section 9 ("Registration Period"), the Company shall file all reports
required to be filed with the SEC pursuant to the 1934 Act, and the Company
shall not terminate its status as a reporting company under the 1934 Act.

(d) Use of Proceeds.  The Company will use the proceeds from the sale
of the Shares (excluding amounts paid by the Company for fees as set forth
in the Transaction Documents) for general corporate and working capital
purposes

(e) Financial Information.  The Company agrees to make available to
the Investor via EDGAR or other electronic means the following to the
Investor during the Registration Period: (i) within five Trading Days after
the filing thereof with the SEC, a copy of its Annual Reports on Form 10-
KSB, its Quarterly Reports on Form 10-QSB, any Current Reports on Form 8-K
and any Registration Statements or amendments filed pursuant to the 1933
Act; (ii) on the same day as the release thereof, facsimile copies of all
press releases issued by the Company or any of its Subsidiaries; (iii)
copies of any notices and other information made available or given to the
shareholders of the Company generally, contemporaneously with the making
available or giving thereof to the shareholders; and (iv) within two (2)
calendar days of filing or delivery thereof, copies of all documents filed
with, and all correspondence sent to, the Principal Market, any securities
exchange or market, or the National Association of Securities Dealers, Inc.,
unless such information is material nonpublic information.

(f) Reservation of Shares.  Subject to the following sentence, the
Company shall take all action necessary to at all times have authorized, and
reserved for the purpose of issuance, a sufficient number of shares of
Common Stock to provide for the issuance of the Securities hereunder.  In
the event that the Company determines that it does not have a sufficient
number of authorized shares of Common Stock to reserve and keep available
for issuance as described in this Section 5(f), the Company shall use its
best efforts to increase the number of authorized shares of Common Stock by
seeking shareholder approval for the authorization of such additional shares.

(g) Listing.  The Company shall promptly secure and maintain the
listing of all of the Registrable Securities (as defined in the Registration
Rights Agreement) upon the Principal Market and each other national
securities exchange and automated quotation system, if any, upon which
shares of Common Stock are then listed (subject to official notice of
issuance) and shall maintain, such listing of all Registrable Securities
from time to time issuable under the terms of the Transaction Documents.
The Company shall maintain the Common Stock's authorization for quotation on
the Principal Market.  Neither the Company nor any of its Subsidiaries shall
take any action which would be reasonably expected to result in the
delisting or suspension of the Common Stock on the Principal Market
(excluding suspensions of not more than one trading day resulting from
business announcements by the Company).  The Company shall promptly provide
to the Investor copies of any notices it receives from the Principal Market
regarding the continued eligibility of the Common Stock for listing on such
automated quotation system or securities exchange.  The Company shall pay
all fees and expenses in connection with satisfying its obligations under
this Section 5(g).

(h) Transactions with Affiliates.  The Company shall not, and shall
cause each of its Subsidiaries not to, enter into, amend, modify or
supplement, or permit any Subsidiary to enter into, amend, modify or
supplement, any agreement, transaction, commitment or arrangement with any
of its or any Subsidiary's officers, directors, persons who were officers or
directors at any time during the previous two years, shareholders who
beneficially own five percent (5%) or more of the Common Stock, or
affiliates or with any individual related by blood, marriage or adoption to
any such individual or with any entity in which any such entity or
individual owns a five percent (5%) or more beneficial interest (each a
"Related Party"), except for (i) customary employment arrangements and
benefit programs on reasonable terms, (ii) any agreement, transaction,
commitment or arrangement on an arms-length basis on terms no less favorable
than terms which would have been obtainable from a person other than such
Related Party, or (iii) any agreement, transaction, commitment or
arrangement which is approved by a majority of the disinterested directors
of the Company.  For purposes hereof, any director who is also an officer of
the Company or any Subsidiary of the Company shall not be a disinterested
director with respect to any such agreement, transaction, commitment or
arrangement.  "Affiliate" for purposes hereof means, with respect to any
person or entity, another person or entity that, directly or indirectly,

(i) has a five percent (5%) or more equity interest in that person or
entity, (ii) has five percent (5%) or more common ownership with that
person or entity, (iii) controls that person or entity, or (iv) is
under common control with that person or entity.  "Control" or
"Controls" for purposes hereof means that a person or entity has the
power, direct or indirect, to conduct or govern the policies of
another person or entity.

(i) Corporate Existence.  The Company shall use its best efforts to
preserve and continue the corporate existence of the Company.

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

(k) Reimbursement.  If (i) Investor, other than by reason of its
gross negligence or willful misconduct, becomes involved in any capacity in
any action, proceeding or investigation brought by any shareholder of the
Company, in connection with or as a result of the consummation of the
transactions contemplated by the Transaction Documents, or if Investor is
impleaded in any such action, proceeding or investigation by any person
(other than as a result of a breach of the Investor's representations and
warranties set forth in this Agreement); or (ii) Investor, other than by
reason of its gross negligence or willful misconduct, becomes involved in
any capacity in any action, proceeding or investigation brought by the SEC
against or involving the Company or in connection with or as a result of the
consummation of the transactions contemplated by the Transaction Documents
(other than as a result of a breach of the Investor's representations and
warranties set forth in this Agreement), or if Investor is impleaded in any
such action, proceeding or investigation by any person, then in any such
case, the Company shall reimburse Investor for its reasonable legal and
other expenses (including the cost of any investigation and preparation)
incurred in connection therewith, as such expenses are incurred. In
addition, other than with respect to any matter in which Investor is a named
party, the Company will pay to Investor the charges, as reasonably
determined by Investor, for the time of any officers or employees of
Investor devoted to appearing and preparing to appear as witnesses,
assisting in preparation for hearings, trials or pretrial matters, or
otherwise with respect to inquiries, hearing, trials, and other proceedings
relating to the subject matter of this Agreement. The reimbursement
obligations of the Company under this section shall be in addition to any
liability which the Company may otherwise have, shall extend upon the same
terms and conditions to any affiliates of Investor that are actually named
in such action, proceeding or investigation, and partners, directors,
agents, employees, attorneys, accountants, auditors and controlling persons
(if any), as the case may be, of Investor and any such affiliate, and shall
be binding upon and inure to the benefit of any successors of the Company,
Investor and any such affiliate and any such person.

SECTION 6.  OVER.

If the number of Shares represented by any Put Notices become
restricted or are no longer freely trading for any reason, and after the
applicable Closing Date, the Investor purchases, in an open market
transaction or otherwise, the Company's Common Stock ("Covering Shares") in
order to make delivery in satisfaction of a sale of Common Stock by the
Investor ("Sold Shares"), which delivery such Investor anticipated to make
using the Shares represented by the Put Notice (a "Buy-In"), the Company
shall pay to the Investor the Buy-In Adjustment Amount (as defined below).
The "Buy-In Adjustment Amount" is the amount equal to the excess, if any, of
(a) the Investor's total purchase price (including brokerage commissions, if
any) for the Covering Shares over (b) the net proceeds (after brokerage
commissions, if any) received by the Investor from the sale of the Sold
Shares.  The Company shall pay the Buy-In Adjustment Amount to the Investor
in immediately available funds immediately upon demand by the Investor.  By
way of illustration and not in limitation of the foregoing, if the Investor
purchases Common Stock having a total purchase price (including brokerage
commissions) of $11,000 to cover a Buy-In with respect to the Common Stock
it sold for net proceeds of $10,000, the Buy-In Adjustment Amount which the
Company will be required to pay to the Investor will be $1,000.

SECTION 7.  CONDITIONS OF THE COMPANY'S OBLIGATION TO SELL.

The obligation hereunder of the Company to issue and sell the
Securities to the Investor is further subject to the satisfaction, at or
before each Closing Date, of each of the following conditions set forth
below.  These conditions are for the Company's sole benefit and may be
waived by the Company at any time in its sole discretion.

(a) The Investor shall have executed each of this Agreement and the
Registration Rights Agreement and delivered the same to the Company.

(b) The Investor shall have delivered to the Company the Purchase
Price for the Securities being purchased by the Investor at the Closing
(after receipt of confirmation of delivery of such Securities) by wire
transfer of immediately available funds pursuant to the wire instructions
provided by the Company.

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

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

(e) No Valuation Event shall have occurred since the applicable Put
Notice Date.

SECTION 8. FURTHER CONDITIONS OF THE INVESTOR'S OBLIGATION TO PURCHASE.

The obligation of the Investor hereunder to purchase Shares is subject
to the satisfaction, on or before each Closing Date, of each of the
following conditions set forth below.

(a) The Company shall have executed each of the Transaction Documents
and delivered the same to the Investor.

(b) The Common Stock shall be authorized for quotation on the
Principal Market and trading in the Common Stock shall not have been
suspended by the Principal Market or the SEC, at any time beginning on the
date hereof and through and including the respective Closing Date (excluding
suspensions of not more than one Trading Day resulting from business
announcements by the Company, provided that such suspensions occur prior to
the Company's delivery of the Put Notice related to such Closing).

(c) The representations and warranties of the Company shall be true
and correct as of the date when made and as of the applicable Closing Date
as though made at that time (except for (i) representations and warranties
that speak as of a specific date and (ii) with respect to the
representations made in Sections 4(g), (h) and (j) and the third sentence of
Section 4(k) hereof, events which occur on or after the date of this
Agreement and are disclosed in SEC filings made by the Company at least ten
Trading Days prior to the applicable Put Notice Date) and the Company shall
have performed, satisfied and complied with the covenants, agreements and
conditions required by the Transaction Documents to be performed, satisfied
or complied with by the Company on or before such Closing Date. The Investor
may request an update as of such Closing Date regarding the representation
contained in Section 4(c) above.

(d) The Company shall have executed and delivered to the Investor the
certificates representing, or have executed electronic book-entry transfer
of, the Securities (in such denominations as such Investor shall request)
being purchased by the Investor at such Closing.

(e) The Board of Directors of the Company shall have adopted
resolutions consistent with Section 4(b)(ii) above ("Resolutions") and such
Resolutions shall not have been amended or rescinded prior to such Closing
Date.

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

(g) The Registration Statement shall be effective on each Closing
Date and no stop order suspending the effectiveness of the Registration
statement shall be in effect or shall be pending or threatened.
Furthermore, on each Closing Date (i) neither the Company nor Investor shall
have received notice that the SEC has issued or intends to issue a stop
order with respect to such Registration Statement or that the SEC otherwise
has suspended or withdrawn the effectiveness of such Registration Statement,
either temporarily or permanently, or intends or has threatened to do so
(unless the SEC's concerns have been addressed and Investor is reasonably
satisfied that the SEC no longer is considering or intends to take such
action), and (ii) no other suspension of the use or withdrawal of the
effectiveness of such Registration Statement or related prospectus shall
exist.

(h) At the time of each Closing, the Registration Statement
(including information or documents incorporated by reference therein) and
any amendments or supplements thereto shall not contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading or which
would require public disclosure or an update supplement to the prospectus.

(i) There shall have been no filing of a petition in bankruptcy,
either voluntarily or involuntarily, with respect to the Company and there
shall not have been commenced any proceedings under any bankruptcy or
insolvency laws, or any laws relating to the relief of debtors, readjustment
of indebtedness or reorganization of debtors, and there shall have been no
calling of a meeting of creditors of the Company or appointment of a
committee of creditors or liquidating agents or offering of a composition or
extension to creditors by, for, with or without the consent or acquiescence
of the Company.

(j) If applicable, the shareholders of the Company shall have
approved the issuance of any Shares in excess of the Maximum Common Stock
Issuance in accordance with Section 2(j).

(k) The conditions to such Closing set forth in Section 2(f) shall
have been satisfied on or before such Closing Date.

(l) The Company shall have certified to the Investor the number of
shares of Common Stock outstanding as of a date within ten Trading Days
prior to such Closing Date.

SECTION 9. TERMINATION.

This Agreement shall terminate upon any of the following events:

(a) when the Investor has purchased an aggregate of five million
dollars ($5,000,000) in the Common Stock of the Company pursuant to this
Agreement; provided that the Company's representations, warranties and
covenants contained in this Agreement insofar as applicable to the
transactions consummated hereunder prior to such termination, shall survive
the termination of this Agreement for the period of any applicable statute
of limitations;

(b) on the date which is thirty-six (36) months after the Effective Date;

(c) if the Company shall file or consent by answer or otherwise to
the entry of an order for relief or approving a petition for relief,
reorganization or arrangement or any other petition in bankruptcy for
liquidation or to take advantage of any bankruptcy or insolvency law of any
jurisdiction, or shall make an assignment for the benefit of its creditors,
or shall consent to the appointment of a custodian, receiver, trustee or
other officer with similar powers of itself or of any substantial part of
its property, or shall be adjudicated a bankrupt or insolvent, or shall take
corporate action for the purpose of any of the foregoing, or if a court or
governmental authority of competent jurisdiction shall enter an order
appointing a custodian, receiver, trustee or other officer with similar
powers with respect to the Company or any substantial part of its property
or an order for relief or approving a petition for relief or reorganization
or any other petition in bankruptcy or for liquidation or to take advantage
of any bankruptcy or insolvency law, or an order for the dissolution,
winding up or liquidation of the Company, or if any such petition shall be
filed against the Company;

(d) if the Company shall issue or sell any equity securities or
securities convertible into, or exchangeable for, equity securities or enter
into any other equity financing facility during the Open Period, other than
in compliance with Section 4(v);

(e) the trading of the Common Stock is suspended by the SEC, the
Principal Market or the NASD for a period of five consecutive Trading Days
during the Open Period;

(f) the Company shall not have filed with the SEC the initial
Registration Statement with respect to the resale of the Registrable
Securities in accordance with the terms of the initial Registration Rights
Agreement within 60 calendar days of the date hereof or the Registration
Statement has not been declared effective within 180 calendar days of the
date hereof; or

(g) the Common Stock ceases to be registered under the 1934 Act or
listed or traded on the Principal Market. Upon the occurrence of one of the
above-described events, the Company shall send written notice of such event
to the Investor.

SECTION 10. INDEMNIFICATION.

In consideration of the parties mutual obligations set forth in the
Transaction Documents, each of the parties (in such capacity, an
"Indemnitor") shall defend, protect, indemnify and hold harmless the other
and all of the other party's shareholders, officers, directors, employees,
counsel, and direct or indirect investors and any of the foregoing person's
agents or other representatives (including, without limitation, those
retained in connection with the transactions contemplated by this Agreement)
(collectively, "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
("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 Indemnitor or any other certificate,
instrument or document contemplated hereby or thereby; (b) any breach of any
covenant, agreement or obligation of the Indemnitor 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 and arising out of
or resulting from the execution, delivery, performance or enforcement of the
Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby, except insofar as any such
misrepresentation, breach or any untrue statement, alleged untrue statement,
omission or alleged omission is made in reliance upon and in conformity with
written information furnished to Indemnitor which is specifically intended
for use in the preparation of any such Registration Statement, preliminary
prospectus, prospectus or amendments to the prospectus.  To the extent that
the foregoing undertaking by the Indemnitor may be unenforceable for any
reason, the Indemnitor shall make the maximum contribution to the payment
and satisfaction of each of the Indemnified Liabilities which is permissible
under applicable law.  The indemnity provisions contained herein shall be in
addition to any cause of action or similar rights Indemnitor may have, and
any liabilities the Indemnitor or the Indemnitees may be subject to.

SECTION 11. GOVERNING LAW; MISCELLANEOUS.

(a) Governing Law. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of Nevada without
regard to the principles of conflict of laws. Each party hereby irrevocably
submits to the exclusive jurisdiction of the state and federal courts
sitting in the City of Las Vegas, County of Clark, 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.
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.

(b) Legal Fees; Miscellaneous Fees. Except as otherwise set forth in
the Transaction Documents, each party shall pay the fees and expenses of its
advisers, counsel, the accountants and other experts, if any, and all other
 expenses incurred by such party incident to the negotiation, preparation,
execution, delivery and performance of this Agreement. Any attorneys' fees and
expenses incurred by either the Company or by the Investor in connection with
the preparation, negotiation, execution and delivery of any amendments to this
Agreement or relating to the enforcement of the rights of any party, after the
occurrence of any breach of the terms of this Agreement by another party or any
default by another party in respect of the transactions contemplated hereunder,
shall be paid on demand by the party which breached the Agreement and/or
defaulted, as the case may be. The Company shall pay all stamp and other
taxes and duties levied in connection with the issuance of any Securities.

(c) Transaction Fee.  The Company shall upon the Closing issue to the
Investor Two Hundred Twenty-Five Thousand Dollars ($225,000) worth of the
Common Stock as fees.  On the first year anniversary from the Closing, the
Company shall issue to the Investor an additional Two Hundred Twenty-Five
Thousand Dollars ($225,000) worth of Common Stock; this second installment
shall be paid only if/when the Company: (i) draws more than Seven Million
Five Hundred Thousand Dollars ($7,500,000) in the first year of the
agreement; or (ii) the Company plans to draw money in the second year from
the Closing.  All these shares shall also have registration rights under the
Registration Righs Agreement.  The value of the shares to be issued is to be
established as the closing price on the date of issuance.  These shares are
for the purpose of offsetting the costs of the Investor in completing this
transaction.

(d) 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.

(e) Headings; Singular/Plural. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement. Whenever required by the context of this
Agreement, the singular shall include the plural and masculine shall include
the feminine.

(f) 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.

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

(h) Notices. Any notices 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 day after deposit with a nationally
recognized overnight delivery service, in each case properly addressed to
the party to receive the same. The addresses and facsimile numbers for such
communications shall be:

If to the Company:

GameZnFlix, Inc.
1535 Blackjack Road
Franklin, Kentucky 42134
Telephone:  (270) 598-0385
Facsimile:  (270) 778-0025
Attention: John Fleming, President

With a copy to:

Brian F. Faulkner
A Professional Law Corporation
27127 Calle Arroyo, Suite 1923
San Juan Capistrano, CA 92675
Telephone:  (949) 240-1361
Facsimile:  (949) 240-1362

If to the Investor:

Southern Securities, Inc.
503 Manatee Ave, Suite E
Holmes Beach, Florida 34217
Telephone:  (941) 779-2243
Facsimile:  (941) 779-1833
Attention: Scott Elliott

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

(i) No Assignment. This Agreement may not be assigned.

(j) No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and is not for the benefit of, nor may any
provision hereof be enforced by, any other person.

(k) Survival. The representations and warranties of the Company and
the Investor contained in Sections 2 and 3, the agreements and covenants set
forth in Sections 4 and 5, and the indemnification provisions set forth in
Section 10, shall survive each of the Closings and the termination of this
Agreement.

(l) Publicity. The Company and Investor shall consult with each other
in issuing any press releases or otherwise making public statements with
respect to the transactions contemplated hereby and no party shall issue any
such press release or otherwise make any such public statement without the
prior written consent of the other parties, which consent shall not be
unreasonably withheld or delayed, except that no prior consent shall be
required if such disclosure is required by law, in which such case the
disclosing party shall provide the other parties with prior notice of such
public statement. Notwithstanding the foregoing, the Company shall not
publicly disclose the name of Investor without the prior written consent of
such Investor, except to the extent required by law. Investor acknowledges
that this Agreement and all or part of the Transaction Documents may be
deemed to be "material contracts" as that term is defined by Item 601(b)(10)
of Regulation S-B, and that the Company may therefore be required to file
such documents as exhibits to reports or registration statements filed under
the 1933 Act or the 1934 Act. Investor further agrees that the status of
such documents and materials as material contracts shall be determined
solely by the Company, in consultation with its counsel.

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

(n) 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.

(o) Remedies. The Investor and each holder of the Shares shall have
all rights and remedies set forth in this Agreement and the Registration
Rights Agreement 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 default or breach of any provision of this
Agreement, including the recovery of reasonable attorneys fees and costs,
and to exercise all other rights granted by law.

(p) Payment Set Aside. To the extent that the Company makes a payment
or payments to the Investor hereunder or the Registration Rights Agreement
or the Investor 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, state or federal law, common law or equitable cause of
action), then to the extent of any such restoration the obligation or part
thereof originally intended to be satisfied shall be revived and continued
in full force and effect as if such payment had not been made or such
enforcement or setoff had not occurred.

(q) Pricing of Common Stock. For purposes of this Agreement, the bid
price of the Common Stock in this Agreement shall be as reported on
Bloomberg.com.

                      FORM OF INVESTOR QUESTIONNAIRE

     The information contained in this Questionnaire is being furnished in
order to determine whether the undersigned's subscription to purchase the
Shares described in this Agreement may be accepted.

     ALL INFORMATION CONTAINED IN THIS QUESTIONNAIRE WILL BE TREATED
CONFIDENTIALLY.  The undersigned understands, however, that the Company may
present this Questionnaire to such parties as it deems appropriate if called
upon to establish that the proposed offer and sale of the Securities is
exempt from registration under the 1933 Act, as amended.  Further, the
undersigned understands that the offering may be required to be reported to
the Securities and Exchange Commission, NASDAQ and to various state
securities and "blue sky" regulators.

     IN ADDITION TO SIGNING THE SIGNATURE PAGE, IF REQUESTED BY THE
COMPANY, THE UNDERSIGNED MUST COMPLETE FORM W-9.

I.  PLEASE CHECK EACH OF THE STATEMENTS BELOW THAT APPLIES.

     1.  The undersigned: (a) has total assets in excess of
$5,000,000; (b) was not formed for the specific purpose of
acquiring the securities and (c) has its principal place of
business in ___________.

     2.  The undersigned is a natural person whose individual net
worth* or joint net worth with his or her spouse exceeds
$1,000,000.

     3.  The undersigned is a natural person who had an individual
income* in excess of $200,000 in each of the two most recent
years and who reasonably expects an individual income in excess
of $200,000 in the current year.  Such income is solely that of
the undersigned and excludes the income of the undersigned's
spouse.

     4.  The undersigned is a natural person who, together with his
or her spouse, has had a joint income* in excess of $300,000 in
each of the two most recent years and who reasonably expects a
joint income in excess of $300,000 in the current year.

     *For purposes of this Questionnaire, the term "net worth" means the
excess of total assets over total liabilities.  In determining "income", an
investor should add to his or her adjusted gross income any amounts
attributable to tax-exempt income received, losses claimed as a limited
partner in any limited partnership, deductions claimed for depletion,
contributions to IRA or Keogh retirement plan, alimony payments and any
amount by which income from long-term capital gains has been reduced in
arriving at adjusted gross income.

     5.  The undersigned is:

     (a)  a bank as defined in Section 3(a)(2) of the 1933 Act;
or

     (b)  a savings and loan association or other institution as
defined in Section 3(a)(5)(A) of the 1933 Act whether
acting in its individual or fiduciary capacity; or

     (c)  a broker or dealer registered pursuant to Section 15
of the 1934 Act;  or

     (d)  an insurance company as defined in Section 2(13) of
the 1933 Act; or

     (e)  An investment company registered under the Investment
Company Act of 1940 or a business development company as
defined in Section 2(a)(48) of the Investment Company Act
of 1940; or

     (f)  a small business investment company licensed by the
U.S. Small Business Administration under Section 301 (c) or
(d) of the Small Business Investment Act of 1958; or

     6.  The undersigned is an entity in which all of the
equity owners are "accredited investors", as that term is
defined in Rule 501(a)(3) of Regulation D of the 1933 Act.

II.  INVESTOR INFORMATION.

(a)  IF THE UNDERSIGNED IS AN INDIVIDUAL:

Name _________________________________________
Street Address __________________________________
City, State, Zip Code _____________________________
Phone ____________________ Fax _________________
Social Security Number  ___________________________

Send Correspondence to:
_______________________________________________
_______________________________________________
_______________________________________________

(b)  IF THE UNDERSIGNED IS NOT AN INDIVIDUAL:

Name of Entity __________________________________
Person's Name ___________________ Title___________
State of Organization ______________________________
Principal Business Address _________________________
City, State, Zip Code ______________________________
Taxpayer Identification Number _____________________
Phone ____________________ Fax _________________

Send Correspondence to:
_______________________________________________
______________________________________________
_______________________________________________

INVESTOR SIGNATURE PAGE

     Your signature on this Signature Page evidences your agreement to be
bound by the Questionnaire, this Agreement and Registration Rights
Agreement.

     1.  The undersigned hereby represents that (a) the information
contained in the Questionnaire is complete and accurate and (b) the
undersigned will notify GameZnFlix, Inc. immediately if any material change
in any of the information occurs prior to the acceptance of the
undersigned's subscription and will promptly send GameZnFlix, Inc. written
confirmation of such change.

     2.  The undersigned signatory hereby certifies that he/she has read
and understands this Agreement and Questionnaire, and the representations
made by the undersigned in this Investment Agreement and Questionnaire are
true and accurate.

Date: June 8, 2004                                  SOUTHERN SECURITIES, INC.

                                                    By: /s/  Scott Elliott
                                                    Scott Elliott, President

COMPANY ACCEPTANCE

This Investment Agreement accepted and agreed
to this 8th day of June, 2004.

GAMEZNFLIX, INC.

By: /s/  John Fleming
John Fleming, President

LIST OF EXHIBITS

EXHIBIT  A               Registration  Rights  Agreement
EXHIBIT  B               Opinion  of  Company's  Counsel
EXHIBIT  C               Board  Resolution
EXHIBIT  D               Put  Notice
EXHIBIT  E               Put  Settlement  Sheet

LIST OF SCHEDULES

Schedule  4(a)                 Subsidiaries
Schedule  4(c)                 Capitalization
Schedule  4(e)                 Conflicts
Schedule  4(g)                 Material  Changes
Schedule  4(h)                 Litigation
Schedule  4(l)                 Intellectual  Property
Schedule  4(n)                 Liens
Schedule  4(t)                 Certain  Transactions

                                  EXHIBIT A

                        REGISTRATION RIGHTS AGREEMENT

Registration Rights Agreement ("Agreement"), dated as of June 8, 2004,
by and between GameZnFlix, Inc., a Nevada corporation ("Company"), and
Southern Securities, Inc., a Delaware corporation ("Investor").

WHEREAS, in connection with the Investment Agreement by and between
the Company and the Investor of even date herewith (the "Investment
Agreement"), the Company has agreed to issue and sell to the Investor an
indeterminate number of shares of the Company's Common Stock, no par value
per share (the "Common Stock"), to be purchased pursuant to the terms and
subject to the conditions set forth in the Investment Agreement; and

WHEREAS, to induce the Investor to execute and deliver the Investment
Agreement, the Company has agreed to provide certain registration rights
under the Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute (collectively, the "1933 Act"),
and applicable state securities laws, with respect to the shares of Common
Stock issuable pursuant to the Investment Agreement.

NOW THEREFORE, in consideration of the foregoing premises and the
mutual covenants contained hereinafter and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the Company and the Investor hereby agree as follows:

SECTION 1.  DEFINITIONS.

As used in this Agreement, the following terms shall have the following
meanings:

"Execution Date" means the date first written above.

"Holder" means Southern Securities, Inc., a Delaware corporation.

"Person" means a corporation, a limited liability company, an association, a
partnership, an organization, a business, an individual, a governmental or
political subdivision thereof or a governmental agency.

"Potential Material Event" means any of the following: (a) the possession by
the Company of material information not ripe for disclosure in a
Registration Statement, which shall be evidenced by determinations in good
faith by the Board of Directors of the Company that disclosure of such
information in the Registration Statement would be detrimental to the
business and affairs of the Company, or (b) any material engagement or
activity by the Company which would, in the good faith determination of the
Board of Directors of the Company, be adversely affected by disclosure in a
Registration Statement at such time, which determination shall be
accompanied by a good faith determination by the Board of Directors of the
Company that the Registration Statement would be materially misleading
absent the inclusion of such information.

"Principal Market" shall mean The American Stock Exchange, National
Association of Securities Dealer's, Inc. Over-the-Counter Bulletin Board,
the Nasdaq National Market or The Nasdaq SmallCap Market whichever is the
principal market on which the Common Stock is listed.

"Register," "Registered," and "Registration" refer to a registration
effected by preparing and filing one or more Registration Statements in
compliance with the 1933 Act and pursuant to Rule 415 under the 1933 Act or
any successor rule providing for offering securities on a continuous basis
("Rule 415"), and the declaration or ordering of effectiveness of such
Registration Statement(s) by the United States Securities and Exchange
Commission ("SEC").

"Registrable Securities" means (a) the shares of Common Stock issued or
issuable pursuant to the Investment Agreement, and (b) any shares of capital
stock issued or issuable with respect to such shares of Common Stock, if
any, as a result of any stock split, stock dividend, recapitalization,
exchange or similar event or otherwise, which have not been (X) included in
a Registration Statement that has been declared effective by the SEC or (Y)
sold under circumstances meeting all of the applicable conditions of Rule
144 (or any similar provision then in force) under the 1933 Act.

"Registration Statement" means a registration statement of the Company filed
under the 1933 Act covering the Registrable Securities.

All capitalized terms used in this Agreement and not otherwise defined
herein shall have the same meaning ascribed to them as in the Investment
Agreement.

SECTION 2.  REGISTRATION.

(a) On or before the execution of this Agreement, the Company shall
have provided a draft of the Registration Statement covering the Registrable
Securities to the Investor. The Company shall, as soon as practicable, but
not later than fifteen calendar days following the Execution Date, file with
the SEC a Registration Statement or Registration Statements (as is
necessary) on Form SB-2 (or, if such form is unavailable for such a
registration, on such other form as is available for such a registration),
covering the resale of all of the Registrable Securities, which Registration
Statement(s) shall state that, in accordance with Rule 416 promulgated under
the 1933 Act, such Registration Statement also covers such indeterminate
number of additional shares of Common Stock as may become issuable upon
stock splits, stock dividends or similar transactions.  The Company shall
initially register for resale One Hundred Fifty Million (150,000,000) shares
of Common Stock which would be issuable on the date preceding the filing of
the Registration Statement based on the closing bid price of the Company's
Common Stock on such date and the amount reasonably calculated that
represents Common Stock issuable to other parties as set forth in the
Investment Agreement except to the extent that the SEC requires the share
amount to be reduced as a condition of effectiveness

(b) The Company shall use commercially reasonable efforts to have the
Registration Statement(s) declared effective by the SEC within ninety (90)
calendar days after the Execution Date.

(c) The Company agrees not to include any other securities in the
Registration Statement covering the Registrable Securities without
Investor's prior written consent which Investor may withhold in its sole
discretion. Furthermore, the Company agrees that it will not file any other
Registration Statement for other securities, until thirty calendar days
after the Registration Statement for the Registrable Securities is declared
effective by the SEC.

SECTION 3.  RELATED OBLIGATIONS.

At such time as the Company is obligated to prepare and file a
Registration Statement with the SEC pursuant to Section 2(a), the Company
will effect the registration of the Registrable Securities in accordance
with the intended method of disposition thereof and, with respect thereto,
the Company shall have the following obligations:

(a) The Company shall use commercially reasonable efforts to cause
such Registration Statement relating to the Registrable Securities to become
effective within ninety (90) days after the Execution Date and shall keep
such Registration Statement effective until the earlier to occur of (i) the
date as of which the Holders may sell all of the Registrable Securities
without restriction pursuant to Rule 144(k) promulgated under the 1933 Act
(or successor thereto); or (ii) the date on which (A) the Holders shall have
sold all the Registrable Securities; and (B) the Investor has no right to
acquire any additional shares of Common Stock under the Investment Agreement
("Registration Period").  The Registration Statement (including any
amendments or supplements thereto and prospectuses contained therein) shall
not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein, or necessary to make the
statements therein, in light of the circumstances in which they were made,
not misleading.  The Company shall use its best efforts to respond to all
SEC comments within seven (7) business days from receipt of such comments by
the Company.  The Company shall use its best efforts to cause the
Registration Statement relating to the Registrable Securities to become
effective no later than three (3) business days after notice from the SEC
that the Registration Statement may be declared effective.  The Holder
agrees to provide all information which it is required by law to provide to
the Company, including the intended method of disposition of the Registrable
Securities, and the Company's obligations set forth above shall be
conditioned on the receipt of such information.

(b) The Company shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to a Registration
Statement and the prospectus used in connection with such Registration
Statement, which prospectus is to be filed pursuant to Rule 424 promulgated
under the 1933 Act, as may be necessary to keep such Registration Statement
effective during the Registration Period, and, during such period, comply
with the provisions of the 1933 Act with respect to the disposition of all
Registrable Securities of the Company covered by such Registration Statement
until such time as all of such Registrable Securities shall have been
disposed of in accordance with the intended methods of disposition by the
Investor thereof as set forth in such Registration Statement. In the event
the number of shares of Common Stock covered by a Registration Statement
filed pursuant to this Agreement is at any time insufficient to cover all of
the Registrable Securities, the Company shall amend such Registration
Statement, or file a new Registration Statement (on the short form available
therefor, if applicable), or both, so as to cover all of the Registrable
Securities, in each case, as soon as practicable, but in any event within
thirty (30) calendar days after the necessity therefor arises (based on the
then Purchase Price of the Common Stock and other relevant factors on which
the Company reasonably elects to rely), assuming the Company has sufficient
authorized shares at that time, and if it does not, within thirty (30)
calendar days after such shares are authorized.  The Company shall use
commercially reasonable efforts to cause such amendment and/or new
Registration Statement to become effective as soon as practicable following
the filing thereof.

(c) The Company shall make available to the Holders whose Registrable
Securities are included in any Registration Statement and its legal counsel
without charge (i) promptly after the same is prepared and filed with the
SEC at least one copy of such Registration Statement and any amendment(s)
thereto, including financial statements and schedules, all documents
incorporated therein by reference and all exhibits, the prospectus included
in such Registration Statement (including each preliminary prospectus) and,
with regards to such Registration Statement(s), any correspondence by or on
behalf of the Company to the SEC or the staff of the SEC and any
correspondence from the SEC or the staff of the SEC to the Company or its
representatives; (ii) upon the effectiveness of any Registration Statement,
the Company shall make available copies of the prospectus included in such
Registration Statement and all amendments and supplements thereto; and (iii)
such other documents, including copies of any preliminary or final
prospectus, as the Holders may reasonably request from time to time in order
to facilitate the disposition of the Registrable Securities.

(d) The Company shall use commercially reasonable efforts to (i)
register and qualify the Registrable Securities covered by a Registration
Statement under such other securities or "blue sky" laws of such states in
the United States as any Holder reasonably requests; (ii) prepare and file
in those jurisdictions, such amendments (including post-effective
amendments) and supplements to such registrations and qualifications as may
be necessary to maintain the effectiveness thereof during the Registration
Period; (iii) take such other actions as may be necessary to maintain such
registrations and qualifications in effect at all times during the
Registration Period, and (iv) take all other actions reasonably necessary or
advisable to qualify the Registrable Securities for sale in such
jurisdictions; provided, however, that the Company shall not be required in
connection therewith or as a condition thereto to (X) qualify to do business
in any jurisdiction where it would not otherwise be required to qualify but
for this Section 3(d), or (Y) subject itself to general taxation in any such
jurisdiction.  The Company shall promptly notify each Holder who holds
Registrable Securities of the receipt by the Company of any notification
with respect to the suspension of the registration or qualification of any
of the Registrable Securities for sale under the securities or "blue sky"
laws of any jurisdiction in the United States or its receipt of actual
notice of the initiation or threatening of any proceeding for such purpose.

(e) As promptly as practicable after becoming aware of such event,
the Company shall notify each Holder in writing of the happening of any
event as a result of which the prospectus included in a Registration
Statement, as then in effect, includes an untrue statement of a material
fact or omission to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading ("Registration Default") and use
all diligent efforts to promptly prepare a supplement or amendment to such
Registration Statement and take any other necessary steps to cure the
Registration Default, (which, if such Registration Statement is on Form S-3,
may consist of a document to be filed by the Company with the SEC pursuant
to Section 13(a), 13(c), 14 or 15(d) of the 1934 Act (as defined below) and
to be incorporated by reference in the prospectus) to correct such untrue
statement or omission, and make available copies of such supplement or
amendment to each Holder.  The Company shall also promptly notify each
Holder (i) when a prospectus or any prospectus supplement or post-effective
amendment has been filed, and when a Registration Statement or any post-
effective amendment has become effective (the Company will prepare
notification of such effectiveness which shall be delivered to the Holder on
the same day of such effectiveness and by overnight mail), additionally, the
Company will promptly provide to the Holder a copy of the effectiveness
order prepared by the SEC once it is received by the Company; (ii) of any
request by the SEC for amendments or supplements to a Registration Statement
or related prospectus or related information; (iii) of the Company's
reasonable determination that a post-effective amendment to a Registration
Statement would be appropriate; (iv) in the event the Registration Statement
is no longer effective; or (v) if Registration Statement is stale as a
result of the Company's failure to timely file its financials or otherwise.
The Company acknowledges that its failure to cure the Registration Default
within ten (10) business days will cause the Investor to suffer damages in
an amount that will be difficult to ascertain. Accordingly, the parties
agree that it is appropriate to include a provision for liquidated damages.
The parties acknowledge and agree that the liquidated damages provision set
forth in this section represents the parties' good faith effort to quantify
such damages and, as such, agree that the form and amount of such liquidated
damages are reasonable and will not constitute a penalty.  It is the
intention of the parties that interest payable under any of the terms of
this Agreement shall not exceed the maximum amount permitted under any
applicable law.  If a law, which applies to this Agreement which sets the
maximum interest amount, is finally interpreted so that the interest in
connection with this Agreement exceeds the permitted limits, then: (1) any
such interest shall be reduced by the amount necessary to reduce the
interest to the permitted limit; and (2) any sums already collected (if any)
from the Company which exceed the permitted limits will be refunded to the
Company.  The Investor may choose to make this refund by reducing the amount
that the Company owes under this Agreement or by making a direct payment to
the Company.  If a refund reduces the amount that the Company owes the
Investor, the reduction will be treated as a partial payment.  In case any
provision of this Agreement is held by a court of competent jurisdiction to
be excessive in scope or otherwise invalid or unenforceable, such provision
shall be adjusted rather than voided, if possible, so that it is enforceable
to the maximum extent possible, and the validity and enforceability of the
remaining provisions of this Agreement will not in any way be affected or
impaired thereby.

(f) The Company shall use commercially reasonable efforts to prevent
the issuance of any stop order or other suspension of effectiveness of a
Registration Statement, or the suspension of the qualification of any of the
Registrable Securities for sale in any jurisdiction and, if such an order or
suspension is issued, to obtain the withdrawal of such order or suspension
at the earliest possible moment and to notify the Holder who holds
Registrable Securities being sold of the issuance of such order and the
resolution thereof or its receipt of actual notice of the initiation or
threat of any proceeding for such purpose.

(g) The Company shall permit the Holder and one legal counsel,
designated by the Holder, to review and comment upon a Registration
Statement and all amendments and supplements thereto at least seven business
days prior to their filing with the SEC, and not file any document in a form
to which such counsel reasonably objects.  The Company may request to
shorten the Holder's review period and the Holder will, if possible, attempt
to comply with the accelerated review period.  The Company shall not submit
to the SEC a request for acceleration of the effectiveness of a Registration
Statement or file with the SEC a Registration Statement or any amendment or
supplement thereto without the prior approval of such counsel, which
approval shall not be unreasonably withheld.

(h) At the request of the Holder, the Company shall cause to be
furnished to such Holder, on the date of the effectiveness of a Registration
Statement, a legal opinion, in form and substance reasonably acceptable to
Holder's counsel, dated as of such date, of counsel representing the Company
for purposes of such Registration Statement.

(i) The Company shall make available for inspection by (i) the Holder
and

(ii) one legal counsel and one firm of accountants or other agents retained
by the Holders (collectively, "Inspectors"), at the Holders' expense, all
pertinent financial and other records, and pertinent corporate documents and
properties of the Company (collectively, "Records"), as shall be reasonably
deemed necessary by each Inspector, and cause the Company's officers,
directors and employees to supply all information which any Inspector may
reasonably request; provided, however, that each Inspector shall hold in
strict confidence and shall not make any disclosure (except to a Holder) or
use of any Record or other information which the Company determines in good
faith to be confidential, and of which determination the Inspectors are so
notified, unless (A) the disclosure of such Records is necessary to avoid or
correct a misstatement or omission in any Registration Statement or is
otherwise required under the 1933 Act, (B) the release of such Records is
ordered pursuant to a final, non-appealable subpoena or order from a court
or government body of competent jurisdiction, or (C) the information in such
Records has been made generally available to the public other than by
disclosure in violation of this or any other agreement of which the
Inspector has knowledge.  Each Holder agrees that it shall, upon learning
that disclosure of such Records is sought in or by a court or governmental
body of competent jurisdiction or through other means, give prompt notice to
the Company and allow the Company, at its expense, to undertake appropriate
action to prevent disclosure of, or to obtain a protective order for, the
Records deemed confidential.

(j) The Company shall hold in confidence and not make any disclosure
of information concerning a Holder provided to the Company unless (i)
disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to
avoid or correct a misstatement or omission in any Registration Statement,
(iii) the release of such information is ordered pursuant to a subpoena or
other final, non-appealable order from a court or governmental body of
competent jurisdiction, or (iv) such information has been made generally
available to the public other than by disclosure in violation of this
Agreement or any other agreement.  The Company agrees that it shall, upon
learning that disclosure of such information concerning a Holder is sought
in or by a court or governmental body of competent jurisdiction or through
other means, give prompt written notice to such Holder and allow such
Holder, at the Holder's expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, such information.

(k) The Company shall use commercially reasonable efforts to maintain
designation and quotation of all the Registrable Securities covered by any
Registration Statement on the Principal Market.  If, despite the Company's
best efforts, the Company is unsuccessful in satisfying the preceding
sentence, it shall use commercially reasonable efforts to cause all the
Registrable Securities covered by any Registration Statement to be listed on
each other national securities exchange and automated quotation system, if
any, on which securities of the same class or series issued by the Company
are then listed, if any, if the listing of such Registrable Securities is
then permitted under the rules of such exchange or system.  The Company
shall pay all fees and expenses in connection with satisfying its obligation
under this Section 3(k).

(l) The Company shall cooperate with the Investor to facilitate the
prompt preparation and delivery of certificates (not bearing any restrictive
legend) representing the Registrable Securities to be offered pursuant to a
Registration Statement and enable such certificates to be in such
denominations or amounts, as the case may be, as the Holders may reasonably
request.

(m) The Company shall provide a transfer agent for all the
Registrable Securities not later than the effective date of the first
Registration Statement filed pursuant hereto.

If requested by the Holder, the Company shall (i) as soon as reasonably
practical incorporate in a prospectus supplement or post-effective amendment
such information as such Holders reasonably determine should be included
therein relating to the sale and distribution of Registrable Securities,
including, without limitation, information with respect to the offering of
the Registrable Securities to be sold in such offering; (ii) make all
required filings of such prospectus supplement or post-effective amendment
as soon as reasonably possible after being notified of the matters to be
incorporated in such prospectus supplement or post-effective amendment; and
(iii) supplement or make amendments to any Registration Statement if
reasonably requested by such Holders.

(n) The Company shall use commercially reasonable efforts to cause
the Registrable Securities covered by the applicable Registration Statement
to be registered with or approved by such other governmental agencies or
authorities as may be necessary to consummate the disposition of such
Registrable Securities.

(o) The Company shall otherwise use commercially reasonable efforts
to comply with all applicable rules and regulations of the SEC in connection
with any registration hereunder.

(p) Within one (1) business day after the Registration Statement
which includes Registrable Securities is declared effective by the SEC, the
Company shall deliver to the transfer agent for such Registrable Securities,
with copies to the Investor, confirmation that such Registration Statement
has been declared effective by the SEC.

(q) At or prior to the date of the first Put Notice (as that term is
defined in the Investment Agreement) and at such other times as the Holders
may reasonably request, the Company shall cause to be delivered, letters
from the Company's independent certified public accountants (i) addressed to
the Holders that such accountants are independent public accountants within
the meaning of the 1933 Act and the applicable published rules and
regulations thereunder, and (ii) in customary form and covering such
financial and accounting matters as are customarily covered by letters of
independent certified public accountants delivered to underwriters in
connection with public offerings.

(r) The Company shall take all other reasonable actions necessary to
expedite and facilitate disposition by the Holders of Registrable Securities
pursuant to a Registration Statement.

SECTION 4.  OBLIGATIONS OF THE HOLDER.

(a) At least five (5) calendar days prior to the first anticipated
filing date of a Registration Statement the Company shall notify the Holder
in writing of the information the Company requires from each such Holder if
such Holder elects to have any of such Holder's Registrable Securities
included in such Registration Statement.  It shall be a condition precedent
to the obligations of the Company to complete the registration pursuant to
this Agreement with respect to the Registrable Securities of a particular
Holder that such Holder shall furnish in writing to the Company such
information regarding itself, the Registrable Securities held by it and the
intended method of disposition of the Registrable Securities held by it as
shall reasonably be required to effect the registration of such Registrable
Securities and shall execute such documents in connection with such
registration as the Company may reasonably request.  The Holder covenants
and agrees that, in connection with any sale of Registrable Securities by it
pursuant to a Registration Statement, it shall comply with the "Plan of
Distribution" section of the current prospectus relating to such
Registration Statement.

(b) The Holder, by such Holder's acceptance of the Registrable
Securities, agrees to cooperate with the Company as reasonably requested by
the Company in connection with the preparation and filing of any
Registration Statement hereunder, unless such Holder has notified the
Company in writing of such Holder's election to exclude all of such Holder's
Registrable Securities from such Registration Statement.

(c) The Holder agrees that, upon receipt of written notice from the
Company of the happening of any event of the kind described in Section 3(f)
or the first sentence of 3(e), such Holder will immediately discontinue
disposition of Registrable Securities pursuant to any Registration
Statement(s) covering such Registrable Securities until such Holder's
receipt of the copies of the supplemented or amended prospectus contemplated
by Section 3(f) or the first sentence of 3(e).

SECTION 5.  EXPENSES OF REGISTRATION.

All expenses, other than underwriting discounts and commissions and
other than as set forth in the Investment Agreement, incurred in connection
with registrations, filings or qualifications pursuant to Sections 2 and 3,
including, without limitation, all registration, listing and qualifications
fees, printing and accounting fees, and fees and disbursements of counsel
for the Company shall be paid by the Company; provided, however, that
nothing in this Section 5 shall obligate the Company to pay the expenses or
fees of Inspectors or counsel to the Holders.

SECTION 6.  INDEMNIFICATION.

In the event any Registrable Securities are included in a Registration
Statement under this Agreement:

(a) To the fullest extent permitted by law, the Company will, and
hereby does, indemnify, hold harmless and defend each Holder who holds such
Registrable Securities, the directors, officers, partners, employees,
counsel, agents, representatives of, and each Person, if any, who controls,
any Holder within the meaning of the 1933 Act or the Securities Exchange Act
of 1934, as amended ("1934 Act") (each, an "Indemnified Person"), against
any losses, claims, damages, liabilities, judgments, fines, penalties,
charges, costs, attorneys' fees, amounts paid in settlement or expenses,
joint or several (collectively, "Claims"), incurred in investigating,
preparing or defending any action, claim, suit, inquiry, proceeding,
investigation or appeal taken from the foregoing by or before any court or
governmental, administrative or other regulatory agency, body or the SEC,
whether pending or threatened, whether or not an indemnified party is or may
be a party thereto ("Indemnified Damages"), to which any of them may become
subject insofar as such Claims (or actions or proceedings, whether commenced
or threatened, in respect thereof) arise out of or are based upon: (i) any
untrue statement or alleged untrue statement of a material fact in a
Registration Statement or any post-effective amendment thereto or in any
filing made in connection with the qualification of the offering under the
securities or other "blue sky" laws of any jurisdiction in which the
Investor has requested in writing that the Company register or qualify the
Shares ("Blue Sky Filing"), or the omission or alleged omission to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which the statements
therein were made, not misleading; (ii) any untrue statement or alleged
untrue statement of a material fact contained in the final prospectus (as
amended or supplemented, if the Company files any amendment thereof or
supplement thereto with the SEC) or the omission or alleged omission to
state therein any material fact necessary to make the statements made
therein, in light of the circumstances under which the statements therein
were made, not misleading; or (iii) any violation or alleged violation by
the Company of the 1933 Act, the 1934 Act, any other law, including, without
limitation, any state securities law, or any rule or regulation thereunder
relating to the offer or sale of the Registrable Securities pursuant to a
Registration Statement (the matters in the foregoing clauses (i) through
(iii) being, collectively, "Violations").  Subject to the restrictions set
forth in Section 6(c) with respect to the number of legal counsel, the
Company shall reimburse the Holders and each such controlling person,
promptly as such expenses are incurred and are due and payable, for any
reasonable legal fees or other reasonable expenses incurred by them in
connection with investigating or defending any such Claim.  Notwithstanding
anything to the contrary contained herein, the indemnification agreement
contained in this Section 6(a): (i) shall not apply to a Claim arising out
of or based upon a Violation which is due to the inclusion in the
Registration Statement of the information furnished to the Company by any
Indemnified Person expressly for use in connection with the preparation of
the Registration Statement or any such amendment thereof or supplement
thereto; (ii) shall not be available to the extent such Claim is based on
(A) a failure of the Holder to deliver or to cause to be delivered the
prospectus made available by the Company or (B) the Indemnified Person's use
of an incorrect prospectus despite being promptly advised in advance by the
Company in writing not to use such incorrect prospectus; (iii) any claims
based on the manner of sale of the Registrable Securities by the Holder or
of the Holder's failure to register as a dealer under applicable securities
laws; (iv) any omission of the Holder to notify the Company of any material
fact that should be stated in the Registration Statement or prospectus
relating to the Holder or the manner of sale; and (v) any amounts paid in
settlement of any Claim if such settlement is effected without the prior
written consent of the Company, which consent shall not be unreasonably
withheld.  Such indemnity shall remain in full force and effect regardless
of any investigation made by or on behalf of the Indemnified Person and
shall survive the resale of the Registrable Securities by the Holders
pursuant to the Registration Statement.

(b) In connection with any Registration Statement in which a Holder
is participating, each such Holder agrees to severally and jointly
indemnify, hold harmless and defend, to the same extent and in the same
manner as is set forth in Section 6(a), the Company, each of its directors,
each of its officers who signs the Registration Statement, each Person, if
any, who controls the Company within the meaning of the 1933 Act or the 1934
Act and the Company's agents (collectively and together with an Indemnified
Person, an "Indemnified Party"), against any Claim or Indemnified Damages to
which any of them may become subject, under the 1933 Act, the 1934 Act or
otherwise, insofar as such Claim or Indemnified Damages arise out of or are
based upon any Violation, in each case to the extent, and only to the
extent, that such Violation is due to the inclusion in the Registration
Statement of the written information furnished to the Company by such Holder
expressly for use in connection with such Registration Statement; and,
subject to Section 6(c), such Holder will reimburse any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such Claim; provided, however, that the indemnity agreement
contained in this Section 6(b) and the agreement with respect to
contribution contained in Section 7 shall not apply to amounts paid in
settlement of any Claim if such settlement is effected without the prior
written consent of such Holder, which consent shall not be unreasonably
withheld; provided, further, however, that the Holder shall be liable under
this Section 6(b) for only that amount of a Claim or Indemnified Damages as
does not exceed the net proceeds to such Holder as a result of the sale of
Registrable Securities pursuant to such Registration Statement.  Such
indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such Indemnified Party and shall
survive the resale of the Registrable Securities by the Holders pursuant to
the Registration Statement. Notwithstanding anything to the contrary
contained herein, the indemnification agreement contained in this Section
6(b) with respect to any preliminary prospectus shall not inure to the
benefit of any Indemnified Party if the untrue statement or omission of
material fact contained in the preliminary prospectus were corrected on a
timely basis in the prospectus, as then amended or supplemented. This
indemnification provision shall apply separately to each Investor and
liability hereunder shall not be joint and several.

(c) Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 6 of notice of the commencement of any action or
proceeding (including any governmental action or proceeding) involving a
Claim, such Indemnified Person or Indemnified Party shall, if a Claim in
respect thereof is to be made against any indemnifying party under this
Section 6, deliver to the indemnifying party a written notice of the
commencement thereof, and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires,
jointly with any other indemnifying party similarly noticed, to assume
control of the defense thereof with counsel mutually satisfactory to the
indemnifying party and the Indemnified Person or the Indemnified Party, as
the case may be; provided, however, that an Indemnified Person or
Indemnified Party shall have the right to retain its own counsel with the
fees and expenses to be paid by the indemnifying party, if, in the
reasonable opinion of counsel retained by the Indemnified Person or
Indemnified Party, the representation by counsel of the Indemnified Person
or Indemnified Party and the indemnifying party would be inappropriate due
to actual or potential differing interests between such Indemnified Person
or Indemnified Party and any other party represented by such counsel in such
proceeding.  The indemnifying party shall pay for only one separate legal
counsel for the Indemnified Persons or the Indemnified Parties, as
applicable, and such counsel shall be selected by the Holders, if the
Holders are entitled to indemnification hereunder, or the Company, if the
Company is entitled to indemnification hereunder, as applicable.  The
Indemnified Party or Indemnified Person shall cooperate fully with the
indemnifying party in connection with any negotiation or defense of any such
action or Claim by the indemnifying party and shall furnish to the
indemnifying party all information reasonably available to the Indemnified
Party or Indemnified Person which relates to such action or Claim.  The
indemnifying party shall keep the Indemnified Party or Indemnified Person
fully appraised at all times as to the status of the defense or any
settlement negotiations with respect thereto.  No indemnifying party shall
be liable for any settlement of any action, claim or proceeding effected
without its written consent, provided, however, that the indemnifying party
shall not unreasonably withhold, delay or condition its consent.  No
indemnifying party shall, without the consent of the Indemnified Party or
Indemnified Person, consent to entry of any judgment or enter into any
settlement or other compromise which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such Indemnified
Party or Indemnified Person of a release from all liability in respect to
such Claim. Following indemnification as provided for hereunder, the
indemnifying party shall be surrogated to all rights of the Indemnified
Party or Indemnified Person with respect to all third parties, firms or
corporations relating to the matter for which indemnification has been made.
The failure to deliver written notice to the indemnifying party within a
reasonable time of the commencement of any such action shall not relieve
such indemnifying party of any liability to the Indemnified Person or
Indemnified Party under this Section 6, except to the extent that the
indemnifying party is prejudiced in its ability to defend such action.

(d) The indemnity agreements contained herein shall be in addition to
(i) any cause of action or similar right of the Indemnified Party or
Indemnified Person against the indemnifying party or others, and (ii) any
liabilities the indemnifying party may be subject to pursuant to the law.

SECTION 7.  CONTRIBUTION.

To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the
maximum contribution with respect to any amounts for which it would
otherwise be liable under Section 6 to the fullest extent permitted by law;
provided, however, that: (a) no contribution shall be made under
circumstances where the maker would not have been liable for indemnification
under the fault standards set forth in Section 6; (b) no seller of
Registrable Securities guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution
from any seller of Registrable Securities who was not guilty of fraudulent
misrepresentation; and (c) contribution by any seller of Registrable
Securities shall be limited in amount to the net amount of proceeds received
by such seller from the sale of such Registrable Securities.

SECTION 8.  REPORTS UNDER THE 1934 ACT.

With a view to making available to the Holders the benefits of Rule
144 promulgated under the 1933 Act or any other similar rule or regulation
of the SEC that may at any time permit the Holder to sell securities of the
Company to the public without registration ("Rule 144"), the Company agrees
to:

(a) make and keep public information available, as those terms are
understood and defined in Rule 144;

(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act so
long as the Company remains subject to such requirements (it being
understood that nothing herein shall limit the Company's obligations under
Section 5(c) of the Investment Agreement) and the filing of such reports and
other documents is required for the applicable provisions of Rule 144; and

(c) furnish to the Investor, promptly upon request, (i) a written
statement by the Company that it has complied with the reporting
requirements of Rule 144, the 1933 Act and the 1934 Act, (ii) a copy of the
most recent annual or quarterly report of the Company and such other reports
and documents so filed by the Company, and (iii) such other information as
may be reasonably requested to permit the Investor to sell such securities
pursuant to Rule 144 without registration.

SECTION 9.  NO ASSIGNMENT OF REGISTRATION RIGHTS.

The rights under this Agreement shall not be assignable.

SECTION 10. AMENDMENT OF REGISTRATION RIGHTS.

Provisions of this Agreement may be amended only with the written
consent of the Company and Holders.  No such amendment shall be effective to
the extent that it applies to less than all of the Holders of the
Registrable Securities.

SECTION 11. MISCELLANEOUS.

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

If to the Company:

GameZnFlix, Inc.
1535 Blackjack Road
Franklin, Kentucky 42134
Telephone:  (270) 598-0385
Facsimile:  (270) 778-0025
Attention: John Fleming, President

With a copy to:

Brian F. Faulkner
A Professional Law Corporation
27127 Calle Arroyo, Suite 1923
San Juan Capistrano, CA 92675
Telephone:  (949) 240-1361
Facsimile:  (949) 240-1362

If to the Investor:

Southern Securities, Inc.
503 Manatee Ave, Suite E
Holmes Beach, Florida 34217
Telephone:  (941) 779-2243
Facsimile:  (941) 779-1833
Attention: Scott Elliott

Each party shall provide five business days prior notice to the other
party of any change in address, phone number or facsimile number.

(b) Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.

(c) The laws of the State of Nevada shall govern all issues arising
from or related to this Agreement without regard to the principles of
conflict of laws.  Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the City of Las
Vegas, County of Clark, 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.  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.

(d) This Agreement and the Transaction Documents constitute the
entire agreement among the parties hereto with respect to the subject matter
hereof and thereof.  There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein and therein.

(e) This Agreement and the Transaction Documents supersede all prior
agreements and understandings among the parties hereto with respect to the
subject matter hereof and thereof.

(f) The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof. Whenever
required by the context of this Agreement, the singular shall include the
plural and masculine shall include the feminine. This Agreement shall not be
construed as if it had been prepared by one of the parties, but rather as if
all the parties had prepared the same.

(g) This Agreement may be executed in two or more identical
counterparts, each of which shall be deemed an original but all of which
shall constitute one and the same agreement. This Agreement, once executed
by a party, may be delivered to the other party hereto by facsimile
transmission of a copy of this Agreement bearing the signature of the party
so delivering this Agreement.

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

          SIGNATURE PAGE OF REGISTRATION RIGHTS AGREEMENT

Your signature on this Signature Page evidences your agreement to be
bound by the terms and conditions of the Registration Rights Agreement as of
the date first written above.

The undersigned signatory hereby certifies that he has read and
understands the Investment Agreement, and the representations made by the
undersigned in this Investment Agreement are true and accurate, and agrees
to be bound by its terms.

                                  SOUTHERN SECURITIES, INC.

                                  By: /s/  Scott Elliott
                                  Scott Elliott, President

                                  GAMEZNFLIX, INC.

                                  By: /s/  John Fleming
                                  John Fleming, President

                                  EXHIBIT D

Date:

RE: Put Notice Number __

Dear :

This is to inform you that as of today, GameZnFlix, Inc., a Nevada
corporation ("Company"), hereby elects to exercise its right pursuant to the
Investment Agreement to require Southern Securities, Inc. to purchase shares
of its common stock.  The Company hereby certifies that:

The amount of this put is $__________.

The Pricing Period runs from ________ until _______.

The current number of shares issued and outstanding as of the Company are:

Regards,

John Fleming, President
GameZnFlix, Inc.

                                    EXHIBIT E

                               PUT SETTLEMENT SHEET

Date:

Pursuant to the Put given by GameZnFlix, Inc. to Southern Securities, Inc.
on ______________, 2004, we are now submitting the amount of common shares
for you to issue to this company.

Please have a certificate bearing no restrictive legend totaling __________
shares issued to Southern Securities, Inc. immediately and send via DWAC to
the following account:

If not DWAC eligible, please send Federal Express Priority Overnight to:

Once these shares are received by us, we will break have the funds wired to
the Company.

Regards,

DATE PRICE
Date of Day 1     Closing Bid of Day 1
Date of Day 2     Closing Bid of Day 2
Date of Day 3     Closing Bid of Day 3
Date of Day 4     Closing Bid of Day 4
Date of Day 5     Closing Bid of Day 5

LOWEST 1 (ONE) CLOSING BID IN PRICING PERIOD
PUT AMOUNT
AMOUNT WIRED TO COMPANY
PURCHASE PRICE (88% (EIGHTY-EIGHT PERCENT))
AMOUNT OF SHARES DUE

The undersigned has completed this Put as of this ___ day of _________,
2004.

GameZnFlix, Inc.

By: _____________________EXHIBIT 10.1

 

SECURITIES PURCHASE AGREEMENT

 

SECURITIES PURCHASE AGREEMENT
(the “Agreement”), dated as of
June 10, 2004, by and among EPIQ Systems, Inc., a Missouri corporation, with
headquarters located at 501 Kansas Avenue, Kansas City, Kansas 66105 (the “Company”), and the investors listed on the
Schedule of Buyers attached hereto (individually, a “Buyer” and collectively, the “Buyers”).

 

WHEREAS:

 

A.            The Company and each Buyer are
executing and delivering this Agreement in reliance upon the exemption from
securities registration afforded by Rule 144A (“Rule 144A”) of the Securities Act of 1933, as amended (the “1933 Act”), by Section 4(2) of the 1933 Act
and Rule 506 of Regulation D (“Regulation D”)
and as promulgated by the United States Securities and Exchange Commission (the
“SEC”) under the 1933 Act;

 

B.            The Company has authorized
contingent convertible subordinated notes of the Company in the form attached
hereto as Exhibit A (together with any contingent convertible
subordinated notes issued in replacement thereof in accordance with the terms
thereof, the “Notes”), which Notes
shall be convertible into shares of the Company’s Common Stock, par value $0.01
per share (the “Common Stock”) (as
converted, the “Conversion Shares”),
in accordance with the terms of the Notes;

 

C.            Each Buyer wishes to purchase, and
the Company wishes to sell, upon the terms and conditions stated in this
Agreement, that aggregate principal amount of Notes set forth opposite such
Buyer’s name in column (3) on the Schedule of Buyers (which aggregate principal
amount for all Buyers shall be $50,000,000);

 

D.            Contemporaneously with the execution
and delivery of this Agreement, the parties hereto are executing and delivering
a Registration Rights Agreement, substantially in the form attached hereto as Exhibit
B (the “Registration Rights Agreement”),
pursuant to which the Company has agreed to provide certain registration rights
with respect to the Notes and the Conversion Shares under the 1933 Act and the
rules and regulations promulgated thereunder, and applicable state securities
laws; and

 

G.            The Notes and the Conversion Shares
collectively are referred to herein as the “Securities”.

 

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

 

1.             PURCHASE AND SALE OF NOTES.

 

(a)           Purchase of Notes.

 

(i)            Notes.  Subject
to the satisfaction (or waiver) of the conditions set forth in Sections 6(a)
and 7(a) below, the Company shall issue and sell to each Buyer, and each Buyer
severally, but not jointly, agrees to purchase from the Company on the Closing
Date (as defined below), a principal amount of Notes, as is set forth opposite
such Buyer’s name in column (3) on the Schedule of Buyers  (the “Closing”).

 

(ii)           Closing.  The Closing shall occur on the Closing Date
at the offices of Schulte Roth & Zabel LLP, 919 Third Avenue, New York, New
York 10022.

 

1

 

(iii)          Purchase Price.  The purchase price for each Buyer (the “Purchase Price”) of the Notes to be
purchased by each such Buyer at the Closing shall be equal to $1.00 for each
$1.00 of principal amount of Notes being purchased by such Buyer at the
Closing.

 

(b)           Closing Date.  The date and time of the Closing (the “Closing Date”) shall be 10:00 a.m., New
York Time, on the date hereof, subject to notification of satisfaction (or
waiver) of the conditions to the Closing set forth in Sections 6(a) and 7(a)
below (or such later date as is mutually agreed to by the Company and each
Buyer).

 

(c)           Form of Payment.  On the Closing Date, (i) each Buyer shall
pay its Purchase Price to the Company for the Notes to be issued and sold to
such 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 each Buyer the Notes (in the principal amounts as such
Buyer shall request) which such Buyer is then purchasing, duly executed on
behalf of the Company and registered in the name of such Buyer or its designee.

 

2.             BUYER’S REPRESENTATIONS AND
WARRANTIES.

 

Each Buyer represents and warrants with respect to only itself that:

 

(a)           No Public Sale or Distribution.  Such Buyer is (i) acquiring the Notes and
(ii) upon conversion of the Notes will acquire the Conversion Shares issuable
upon conversion of the Notes, in the ordinary course of business 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, such Buyer does not agree to hold any of the
Securities for any minimum or other specific term and reserves the right to
dispose of the Securities at any time in accordance with or pursuant to a
registration statement or an exemption from the registration requirements of
the 1933 Act and applicable state securities laws.  Such Buyer is acquiring the Securities hereunder in the ordinary
course of its business.  Such Buyer
presently does not have any agreement or understanding, directly or indirectly,
with any Person to distribute any of the Securities.  “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.

 

(b)           Qualified Institutional Buyer;
Accredited Investor Status.  Such
Buyer is a “qualified institutional buyer” as defined in Rule 144A under the
1933 Act (a “QIB”) and such Buyer
is an “accredited investor” as that term is defined in Rule

501(a) of Regulation D.

 

(c)           Transfer or Resale.  In connection with such Buyer’s subsequent
offers to sell, such Buyer (i) will offer the Notes for resale only upon the
terms and conditions set forth in this Agreement and, if required, pursuant to
prospectus delivery requirements (the “Exempt
Resales”), and (ii) will solicit offers to buy the Notes only from,
and will offer and sell the Notes only to, (A) persons reasonably believed by
such Buyer to be QIBs or (B) persons reasonably believed by such Buyer to be an
“accredited investor” as that term is defined in Rule 501(a) of Regulation D
(an “Accredited Investor”) or (C)
persons reasonably believed by such Buyer to be non-U.S. persons referred to in
Regulation S under the 1933 Act (“Non-U.S.
Persons”), and in connection with each such sale, it will take
reasonable steps to ensure that the purchaser of such Notes is aware that such
sale is being made in reliance on Rule 144A, Regulation D or Regulation S, as
applicable.

 

2

 

(d)           General Solicitation.  No form of general solicitation or general
advertising in violation of the 1933 Act has been or will be used nor will any
offers in any manner involving a public offering within the meaning of Section
4(2) of the 1933 Act or, with respect to Notes to be sold in reliance on
Regulation S, by means of any directed selling efforts be made by such Buyer or
any of its representatives in connection with the offer and sale of any of the
Notes.

 

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

 

(f)            Information.  Such Buyer and its advisors, if any, have
been furnished with all materials relating to the business, finances and
operations of the Company and materials relating to the offer and sale of the
Securities which have been requested by such Buyer.  Buyer has received and reviewed the Company’s Annual Report on
Form 10-K for the year ended December 31, 2003, its Quarterly Report on Form
10-Q for the quarter ended March 31, 2004, and each Current Report on Form 8-K
filed by the Company since December 31, 2003. 
Such Buyer and its advisors, if any, have been afforded the opportunity
to ask questions of the Company and have received what such Buyer and its
advisors, if any, believe to be satisfactory answers to any such
inquiries.  Neither such inquiries nor
any other due diligence investigations conducted by such Buyer or its advisors,
if any, or its representatives shall modify, amend or affect such Buyer’s right
to rely on the Company’s representations and warranties contained herein.  Such Buyer understands that its investment
in the Securities involves a high degree of risk.  Such Buyer has sought such accounting, legal and tax advice as it
has considered necessary to make an informed investment decision with respect
to its acquisition of the Securities.

 

(g)           No Governmental Review.  Such 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.

 

(h)           Restrictions.  Such Buyer understands that except as
provided in this Agreement and the Registration Rights Agreement: (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) such Buyer shall
have delivered to the Company an opinion of counsel, in a form reasonably
acceptable to the Company, 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) such 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 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

 

3

 

otherwise make any delivery to the Company pursuant to this Agreement
or any other Transaction Document, including, without limitation, this Section
2(h); provided, that in order to make any sale, transfer or assignment
of Securities, such Buyer and its pledgee makes such disposition in accordance
with or pursuant to a registration statement or an exemption under the 1933
Act.

 

(i)            Legends.  Until the time set forth below, such Buyer
understands that the certificates or other instruments representing the Notes
and the stock certificates representing the Conversion Shares shall bear any
legend as required by the “blue sky” laws of any state and a restrictive legend
in substantially the following form (and a stop-transfer order may be placed
against transfer of such stock certificates):

 

[NEITHER THE
ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE
SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN][THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN] REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR (B) AN OPINION OF COUNSEL, IN A FORM REASONABLY ACCEPTABLE TO THE
COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD
PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.  NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
ARRANGEMENT SECURED BY THE SECURITIES.

 

The legend set forth above
shall be removed and the Company shall issue a certificate without such legend
to the holder of the Securities upon which it is stamped, if, unless otherwise
required by state securities laws, (i) as to the Conversion Shares, when such
Conversion Shares are registered for resale under the 1933 Act, (ii) in
connection with a sale, assignment or other transfer pursuant to a registration
statement or if such holder provides the Company with an opinion of counsel, in
a form reasonably acceptable to the Company, to the effect that such sale,
assignment or transfer of the Securities may be made pursuant to Rule 144, or
(iii) such holder provides the Company with reasonable assurance that the
Securities can be sold, assigned or transferred pursuant to Rule 144(k).

 

(j)            Validity; Enforcement.  This Agreement and the Registration Rights
Agreement have been duly and validly authorized, executed and delivered on
behalf of such Buyer and shall constitute the legal, valid and binding
obligations of such Buyer enforceable against such 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, and except that any
rights to indemnity or contribution under the Transaction Documents may be
limited by federal and state securities laws and public policy considerations.

 

(k)           No Conflicts.  The execution, delivery and performance by
such Buyer of this Agreement and the Registration Rights Agreement and the
consummation by such Buyer of the transactions contemplated hereby and thereby
will not (i) result in a violation of the organizational documents of such
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 such Buyer

 

4

 

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 such 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 such Buyer to perform its obligations
hereunder.

 

(l)            Residency.  Such Buyer is a resident of that
jurisdiction specified below its address on the Schedule of Buyers.  Such Buyer represents that it was not
organized solely for purposes of making an investment in the Company.

 

3.             REPRESENTATIONS AND WARRANTIES
OF THE COMPANY.

 

The Company
represents and warrants to each of the Buyers that:

 

(a)           Organization and Qualification.  Except as set forth on Schedule 3(a),
the Company and its “Subsidiaries”
(which for purposes of this Agreement means any entity in which the Company,
directly or indirectly, owns at least 25% of the capital stock or holds at
least 25% of the equity or similar interests) are corporations or limited
liability companies duly organized and validly existing in good standing under
the laws of the jurisdiction in which they are organized, and have the
requisite corporate 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
corporation to do business and 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 the Company’s Annual Report
on Form 10-K for the year ended December 31, 2003 (the “2003 10-K”).

 

(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 Registration Rights Agreement, the
Irrevocable Transfer Agent Instructions (as defined in Section 5(b)) 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 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 reservation for issuance and the issuance of
the Conversion Shares issuable upon conversion, issuance or exercise thereof,
as the case may be, have been duly authorized by the Company’s Board of
Directors and no further consent or authorization is required by the Company,
its Board of Directors or its stockholders. 
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, and except that any rights to indemnity or contribution under the
Transaction Documents may be limited by federal and state securities laws and
public policy considerations.

 

5

 

(c)           Issuance of Securities.  The Notes are duly authorized and, upon issuance
in accordance with the terms hereof, shall be free from all taxes, liens and
charges with respect to the issue thereof. 
As of the Closing, a number of shares of Common Stock shall have been
duly authorized and reserved for issuance which equals the sum of 100% of the
number of shares of Common Stock issuable upon conversion of the Notes to be
issued at such Closing.  Upon
conversion, exercise or issuance in accordance with the Notes, the Conversion
Shares will be validly issued, fully paid and nonassessable and free from all
transfer, stamp or similar taxes, liens and charges with respect to the issue
thereof, with the holders being entitled to all rights accorded to a holder of
Common Stock.  Assuming the accuracy of
each of the representations and warranties of the Buyers contained in Section 2
and, in connection with Securities issued after the transfer of any Securities
hereunder assuming that such transfer was made in compliance with the covenants
and agreements in this Agreement and the Registration Rights Agreement relating
to the transfer of any Securities, the issuance by the Company of the
Securities is exempt from the registration requirements of Section 5 of 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 reservation for issuance and issuance
of the Conversion Shares) will not (i) result in a violation of the certificate
of incorporation, any certificate of designations, preferences and rights of
any outstanding series of preferred stock 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) under, or
give to others any rights of termination, amendment, acceleration or
cancellation of, any material agreement, indenture or instrument to which the
Company or any of its Subsidiaries is a party, except which are the subject of
written waivers or consents which have been obtained or effected on or prior to
the Closing Date or (iii) result in a violation of any law, rule, regulation,
order, judgment or decree (including federal and state securities laws and
regulations and the rules and regulations of the Principal Market) 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, except in the case
of clauses (ii) and (iii), for such breaches or defaults as could not
reasonably be expected to have a Material Adverse Effect.

 

(e)           Consents.  Except as disclosed in Schedule 3(e),
the Company is not 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.  All consents, authorizations,
orders, filings and registrations which the Company is required to obtain
pursuant to the preceding sentence have been obtained or effected on or prior
to the Closing Date (other then filings and reports relating to the offer and
sale of the Securities required under Regulation D or applicable securities or
“Blue Sky” laws as contemplated under Section 4(b) of this Agreement), and the
Company and its Subsidiaries are unaware of any facts or circumstances which
might prevent the Company from obtaining or effecting any of the registration,
application or filings pursuant to the preceding sentence.  The Company is not in violation of the
listing requirements of the Principal Market and has no knowledge of any facts
which would reasonably lead to delisting or suspension of the Common Stock in
the foreseeable future.

 

(f)            Acknowledgment Regarding Buyer’s
Purchase of Securities.  The Company
acknowledges and agrees that each Buyer is acting solely in the capacity of
arm’s length purchaser with respect to the Transaction Documents and the
transactions contemplated hereby and thereby and that immediately prior to the
execution of this Agreement no Buyer is (i) an officer or director of the
Company, (ii) an “affiliate” of the Company (as defined in Rule 144) or (iii)
to the knowledge of the Company, a “beneficial owner” of more than 10% of the
Common Stock (as defined for purposes of Rule

 

6

 

13d-3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)).  The Company further acknowledges that no Buyer is acting as a
financial advisor or fiduciary of the Company (or in any similar capacity) with
respect to the Transaction Documents and the transactions contemplated hereby
and thereby, and any advice given to the Company by a Buyer or any of its
representatives or agents in connection with the Transaction Documents and the
transactions contemplated hereby and thereby is merely incidental to such
Buyer’s purchase of the Securities.  The
Company further represents to each Buyer that the Company’s decision to enter
into the Transaction Documents has been based on the independent evaluation by
the Company and its representatives and in reliance upon the representations
and warranties of each Buyer hereunder.

 

(g)           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 shall
pay, and hold each Buyer harmless against, any liability, loss or expense
(including, without limitation, attorney’s fees and out-of-pocket expenses)
arising in connection with any such claim. 
The Company acknowledges that is has engaged A.G. Edwards & Sons’ as
placement agent (the “Agent”) in
connection with the sale of the Notes. 
Other than the Agent, the Company has not engaged any placement agent or
other agent in connection with the sale of the Notes.

 

(h)           No Integrated Offering.  None of the Company, its Subsidiaries, any
of their affiliates, and any Person acting on their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would require registration of any of
the Securities under the 1933 Act or cause this offering of the Securities to
be integrated with prior offerings by the Company for purposes of the 1933 Act
or any applicable stockholder approval provisions, including, without
limitation, under the rules and regulations of any exchange or automated
quotation system on which any of the securities of the Company are listed or
designated.  None of the Company, its
Subsidiaries, their affiliates and any Person acting on their behalf will take
any action or steps referred to in the preceding sentence that would require
registration of any of the Securities under the 1933 Act or cause the offering
of the Securities to be integrated with other offerings.

 

(i)            [INTENTIONALLY OMITTED]

 

(j)            Application of Takeover
Protections; Rights Agreement.  The
Company and its board of directors have taken all necessary action, if any, in
order to render inapplicable any control share acquisition, business
combination, poison pill (including any distribution under a rights agreement)
or other similar anti-takeover provision under the Company’s Articles of
Incorporation (the “Articles of Incorporation”)
or the laws of the state of its incorporation which is or could become
applicable to any Buyer as a result of the transactions contemplated by this
Agreement, including, without limitation, the Company’s issuance of the
Securities and any Buyer’s ownership of the Securities.  The Company has not adopted a stockholder
rights plan or similar arrangement relating to accumulations of beneficial
ownership of Common Stock or a change in control of the Company.

 

(k)           SEC Documents; Financial
Statements.  Since January 1, 2001,
the Company has filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the Exchange Act (all of the foregoing filed prior to the date
hereof, and all exhibits included therein and financial statements and
schedules thereto and documents incorporated by reference therein being
hereinafter referred to as the “SEC Documents”).  The Company has delivered to the Buyers or
their respective representatives true, correct and complete copies of the

 

7

 

SEC Documents not available on the EDGAR system.  As of their respective dates, the SEC
Documents complied in all material respects with the requirements of the
Exchange Act and the rules and regulations of the SEC promulgated thereunder
applicable to the SEC Documents, and none of the SEC Documents, at the time
they were filed with the SEC, contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or necessary
in order to make the statements therein, in the light of the circumstances
under which they were made, not misleading. 
As of their respective dates, the financial statements of the Company
included in the SEC Documents complied as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto.  Such
financial statements have been prepared in accordance with generally accepted
accounting principles, consistently applied, during the periods involved
(except (i) as may be otherwise indicated in such financial statements or the
notes thereto, or (ii) in the case of unaudited interim statements, to the
extent they may exclude footnotes or may be condensed or summary statements)
and fairly present in all material respects the financial position of the
Company as of the dates thereof and the results of its operations and cash
flows for the periods then ended (subject, in the case of unaudited statements,
to normal year-end audit adjustments). 
No other written information provided by or on behalf of the Company to
the Buyers which is not included in the SEC Documents, including, without
limitation, information referred to in Section 2(d) of this Agreement, and
taken as a whole with the SEC Documents, contains any untrue statement of a
material fact or omits to state any material fact necessary in order to make
the statements therein, in the light of the circumstance under which they are
or were made, not misleading.

 

(l)            Absence of Certain Changes.  Except as disclosed in Schedule 3(l)
or the SEC Documents filed since December 31, 2003, since December 31, 2003,
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 the SEC Documents
filed since December 31, 2003 or in Schedule 3(l), since December 31, 2003, 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 $1,000,000.  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 which would reasonably lead a creditor to do so.  The Company is 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(l), “Insolvent” means (i) the present fair saleable value of the
Company’s assets is less than the amount required to pay the Company’s total Indebtedness(as
defined in Section 3(s)), (ii) the Company is unable to pay its debts and
liabilities, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured, (iii) the Company intends to incur or
believes that it will incur debts that would be beyond its ability to pay as
such debts mature or (iv) the Company 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.

 

(m)          [INTENTIONALLY OMITTED].

 

(n)           Conduct of Business; Regulatory
Permits.  Neither the Company nor
its Subsidiaries is in violation of any term of or in default under its
Articles or Certificate of Incorporation, any Certificate of Designations,
Preferences and Rights 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,
except for possible violations which would not, individually or in the
aggregate, have a Material Adverse Effect. 
Without limiting the generality of the foregoing, the Company is not in
violation of any of the rules, regulations or requirements of the Nasdaq

 

8

 

National Market (the “Principal
Market”) other than violations which could not reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect
and has no knowledge of any facts or circumstances which would reasonably lead
to delisting or suspension of the Common Stock by the Principal Market in the
foreseeable future.  Since January 1,
2003, (i) the Common Stock has been designated for quotation on the Principal
Market, (ii) trading in the Common Stock has not been suspended by the SEC or
the Principal Market and (iii) the Company has received no communication,
written or oral, from the SEC or the Principal Market regarding the suspension
or delisting of the Common Stock from the Principal Market.  The Company and its Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state or foreign 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.

 

(o)           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 (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.

 

(p)           Sarbanes-Oxley Act.  The Company is in compliance with any and
all applicable requirements of the Sarbanes-Oxley Act of 2002 that are
effective as of the date hereof, and any and all applicable rules and
regulations promulgated by the SEC thereunder that are effective as of the date
hereof, except where such noncompliance would not have, individually or in the
aggregate, a Material Adverse Effect.

 

(q)           Transactions With Affiliates.  Except as set forth on Schedule 3(q)
and in the SEC Documents filed at least ten days prior to the date hereof and
other than the grant of stock options since December 31, 2003 disclosed on Schedule
3(q), none of the officers, directors or employees of the Company 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 material 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.

 

(r)            Equity Capitalization.  As of the date hereof, the authorized
capital stock of the Company consists of (x) 50,000,000 shares of Common Stock,
of which as of the date hereof, 17,834,180 shares of Common Stock are issued
and outstanding, 5,403,962 shares of Common Stock are reserved for issuance
pursuant to the Company’s stock option and purchase plans and no shares of
Common Stock are reserved for issuance pursuant to securities (other than the
Notes and stock options referenced in the preceding clause) exercisable or
exchangeable for, or convertible into, shares of Common Stock, and (y)
2,000,000 shares of preferred stock, of which as of the date hereof, none are
issued and outstanding.  All of such
outstanding shares have been, or upon issuance will be, validly issued and are
fully paid and nonassessable.  All of
such outstanding shares of capital stock are duly authorized, validly issued,
fully paid and nonassessable.  No shares
of capital stock of the Company are subject to preemptive rights or

 

9

 

any other similar rights of the shareholders of the Company or any
liens or encumbrances imposed through the actions or failure to act of the
Company.  Other than as set forth on Schedule
3(r), pursuant to this Agreement or as contemplated by the Company’s
employee and director benefit, incentive, or option plans disclosed in the
Company’s SEC Documents (the “Plans”), there are no outstanding options,
warrants, scrip, rights to subscribe for, puts, calls, rights of first refusal,
and there are no agreements, understandings, claims, antidilution protection or
other commitments or rights of any character whatsoever that could require the
Company to issue additional shares of capital stock of the Company or adjust
the purchase or exercise price of any such instrument.  Other than as set forth on Schedule 3(r),
there are no agreements or arrangements, including any set forth in the SEC
Documents, (other than the Registration Rights Agreement) under which the
Company is obligated to register the sale of any of its securities under the
1933 Act.

 

(s)           Indebtedness and Other Contracts.  Except as disclosed in the Company’s 2003
10-K or the other SEC Documents filed since December 31, 2003, neither the
Company nor any of its Subsidiaries (i) has any outstanding Indebtedness (as
defined in the Notes), or (ii) 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.

 

(t)            Absence of Litigation.  There is no action, suit, proceeding,
inquiry or investigation before or by the Principal Market, 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, the
Common Stock or any of the Company’s Subsidiaries that could, individually or
in the aggregate, reasonably be expected to result in a Material Adverse Effect

 

(u)           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.  Since January
1, 2003, 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.

 

(v)           Employee Relations.  (i) 
Neither the Company nor any of its Subsidiaries is a party to any
collective bargaining agreement.  The
Company and its Subsidiaries believe that their relations with their employees
are good.  No executive officer of the
Company (as defined in Rule 501(f) of the 1933 Act) has notified the Company
that such officer intends to leave the Company or otherwise terminate such
officer’s employment with the Company. 
No executive officer of the Company, to the knowledge of the Company,
is, or is now expected to be, in violation of any material term of any
employment contract, confidentiality, disclosure or proprietary information
agreement, non-competition agreement, or any other contract or agreement or any
restrictive covenant.  To the knowledge
of the Company, 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.

 

(ii)           The Company and its Subsidiaries are
in compliance with all federal, state, local and foreign laws and regulations
respecting employment and employment practices, 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.

 

10

 

(w)          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 except 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.

 

(x)            Intellectual Property Rights.  To the knowledge of the Company, the Company
and its Subsidiaries own or possess adequate rights or licenses to use all
trademarks, trade names, service marks, service mark registrations, service
names, patents, patent rights, copyrights, inventions, licenses, approvals,
governmental authorizations, trade secrets and other intellectual property
rights (“Intellectual Property Rights”)
necessary to conduct their respective businesses as now conducted.  None of the Company’s Intellectual Property
Rights have expired or terminated, or are expected to expire or terminate,
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,
except where such infringement would not, individually or in the aggregate,
have a Material Adverse Effect.  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 which could have a Material Adverse
Effect.  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.

 

(y)           Environmental Laws.  To the knowledge of the Company, 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.

 

(z)            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.

 

(aa)         Tax Status.  The Company and each of its Subsidiaries (i)
has made or filed all federal and state income and all other tax returns,
reports and declarations required by any jurisdiction to which it is subject,
(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

 

11

 

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.

 

(bb)         Internal Accounting Controls.  The Company and each of its Subsidiaries
maintain a system of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in accordance with
management’s general or specific authorizations, (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain asset 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.

 

(cc)         Disclosure.  The Company confirms that neither it nor, to
its knowledge, any officer, director or agent of the Company has provided any
of the Buyers or their respective agents or counsel with any information that
constitutes material, nonpublic information. 
The Company understands and confirms that each of the Buyers will rely
on the foregoing representations in effecting transactions in securities of the
Company.  All written disclosure
provided to the Buyers regarding the Company, its business and the transactions
contemplated hereby, including the Schedules to this Agreement, furnished by or
on behalf of the Company, taken as a whole, are true and correct and do not
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading.  No event or circumstance has occurred or
information exists with respect to the Company or any Subsidiary or either of
its or their respective business, properties, prospects, operations or
financial conditions, which, under applicable law, rule or regulation, requires
public disclosure or announcement by the Company on or before the date hereof
but which has not been so publicly announced or disclosed (assuming for this
purpose that the Company’s reports filed under the Exchange Act, as amended,
are being incorporated into an effective registration statement filed by the
Company under the 1933 Act).  The
Company acknowledges and agrees that no Buyer makes or has made any
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in Section 2.

 

(dd)         Manipulation of Price.  The Company has not, and to its knowledge no
one acting on its behalf has, (i) taken, directly or indirectly, any action
designed to cause or to result in, or that has constituted or which might
reasonably be expected to constitute, the stabilization or manipulation of the
price of any security of the Company to facilitate the sale or resale of any of
the Securities, (ii) sold, bid for, purchased, or paid anyone any compensation
for soliciting purchases of, any of the Securities, or (iii) paid or agreed to
pay to any person any compensation for soliciting another to purchase any other
securities of the Company.

 

(ee)         Rule 144A Resales.  Assuming (i) that the purchasers in the
Exempt Resales are QIBs or Non-U.S. Persons and (ii) the accuracy of the
Buyer’s representations contained in Section 2 of this Agreement, the Notes are
eligible for resale pursuant to Rule 144A under the 1933 Act and no other
securities of the Company are of the same class (within the meaning of Rule
144A under the 1933 Act) as the Notes and listed on a national securities
exchange registered under Section 6 of the Exchange Act, or quoted in a U.S.
automated inter-dealer quotation system. 
No securities of the Company of the same class as the Notes have been
offered, issued or sold by the Company or any of its affiliates within the
six-month period immediately prior to the date hereof.

 

12

 

4.             COVENANTS.

 

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

 

(b)           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 each Buyer promptly after such filing.  The Company shall, on or before the Closing Date, take such
action as the Company shall reasonably determine is necessary in order to
obtain an exemption for or to qualify the Securities for sale to the Buyers at
the Closing 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 and, prior to any
public offering of the Registrable Securities pursuant to the Registration
Statement, use its best efforts to register or qualify or cooperate with the
Buyers in connection with the registration or qualification (or exemption from
such registration or qualification) of such Securities for resale under the
securities or Blue Sky laws of such jurisdictions within the United States as
holders of Notes representing not less than a majority of the aggregate
principal amount of the then outstanding Notes reasonably request.

 

(c)           Reporting Status.  With a view to making available to the
Investors (as that term is defined in the Registration Rights Agreement) the
benefits of Rule 144 promulgated under the Securities Act or any similar rule
or regulation of the Commission that may at any time permit the Investors to
sell securities of the Company to the public without registration (“Rule 144”), until two years after no Notes
are outstanding, the Company shall: (1) make and keep public information
available, as those terms are understood and defined in Rule 144; (2) file with
the Commission in a timely manner all reports and other documents required of
the Company under the Securities Act and the Exchange Act; and (3) furnish to
each Investor, so long as such Investor owns Registrable Securities (the “Reporting Period”), promptly upon request,
(A) a written statement by the Company, if true, that it has complied with the
applicable reporting requirements of Rule 144, the Securities Act and the
Exchange Act, (B) a copy of the most recent annual or quarterly report of the
Company and copies of such other reports and documents so filed by the Company,
(C) the information required by Rule 144A(d)(4) (or any successor rule) under
the Securities Act, and (D) such other information as may be reasonably
requested to permit the Investors to sell such securities pursuant to Rule 144
without registration.

 

(d)           [INTENTIONALLY OMITTED].

 

(e)           Financial Information.  The Company agrees to send the following to
each Investor during the Reporting Period (i) unless the following are filed
with the SEC through EDGAR and are available to the public through the EDGAR
system, within one (1) Business Day after the filing thereof with the SEC, a
copy of its Annual Reports on Form 10-K, its Quarterly Reports on Form 10-Q,
any Current Reports on Form 8-K and any registration statements (other than on
Form S-8) or amendments filed pursuant to the 1933 Act, and (ii) copies of any
notices and other information made available or given to the stockholders of
the Company generally, contemporaneously with the making available or giving
thereof to the stockholders (other than those in connection with the Company’s
annual meeting of stockholders).

 

(f)            Listing.  The Company shall promptly secure the
listing of all of the Conversion Shares (as defined in the Registration Rights
Agreement) upon each national securities exchange and automated quotation
system, if any, upon which shares of Common Stock are then listed (subject to

 

13

 

official notice of issuance) and shall use its reasonable best efforts
to maintain, so long as any other shares of Common Stock shall be so listed,
such listing of all Conversion Shares from time to time issuable under the
terms of the Transaction Documents.  The
Company shall use its reasonable best efforts to maintain the Common Stock’s
authorization for quotation on the Principal Market.  Neither the Company nor any of its Subsidiaries shall take any
action which would be reasonably expected to result in the delisting or
suspension of the Common Stock on the Principal Market.  The Company shall pay all fees and expenses
in connection with satisfying its obligations under this Section 4(f).

 

(g)           Fees.  The Company shall reimburse the Buyers in
the maximum aggregate amount of $25,000 for the Buyers’ reasonable expenses
actually incurred in connection with the preparation, execution and performance
of this Agreement and the transactions contemplated hereunder, which amount
will be net funded from the Purchase Price of Riverview Group, LLC at the
Closing.  The Company shall be
responsible for the payment of any placement agent’s fees, financial advisory
fees, or broker’s commissions (other than for Persons engaged by any Buyer)
relating to or arising out of the transactions contemplated hereby, including,
without limitation, any fees or commissions payable to the Agent.  The Company shall pay, and hold each Buyer
harmless against, any liability, loss or expense (including, without
limitation, reasonable attorney’s fees and out-of-pocket expenses) arising in
connection with any claim relating to any such payment.  Except as otherwise set forth in this
Agreement or in the Transaction Documents, each party to this Agreement shall
bear its own expenses in connection with the sale of the Securities to the
Buyers.

 

(h)           Pledge of Securities.  The Company acknowledges and agrees that the
Securities may be pledged by an Investor (as defined in the Registration Rights
Agreement) in connection with a bona fide margin agreement or other loan or
financing arrangement that is secured by the Securities.  The pledge of Securities shall not be deemed
to be a transfer, sale or assignment of the Securities hereunder, and no
Investor effecting 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, including,
without limitation, Section 2(f) hereof; provided that an Investor and its
pledgee shall be required to comply with the provisions of Section 2(f) hereof
in order to effect a sale, transfer or assignment of Securities to such
pledgee.  The Company hereby agrees to
execute and deliver such documentation as a pledgee of the Securities may
reasonably request in connection with a pledge of the Securities to such
pledgee by an Investor.

 

(i)            Disclosure of Transactions and
Other Material Information.  On or
before 8:30 a.m., New York Time, on June 14, 2004,  the Company shall file a Current Report on Form 8-K
describing the terms of the transactions contemplated by the Transaction
Documents in the form required by the Exchange Act, and attaching the material
Transaction Documents (including, without limitation, this Agreement, the form
of Note, and the Registration Rights Agreement) as exhibits to such filing
(including all attachments, the “8-K Filing”).  From and after the filing of the 8-K Filing
with the SEC, unless required pursuant to Section 3(i) of the Registration
Rights Agreement, no Buyer shall be in possession of any material, nonpublic
information received from the Company, any of its Subsidiaries or any of its
respective officers, directors, employees or agents, that is not disclosed in
the 8-K Filing.  Unless required
pursuant to Section 3(i) of the Registration Rights Agreement, the Company
shall not, and shall cause each of its Subsidiaries and its and each of their
respective officers, directors, employees and agents, not to, provide any Buyer
with any material, nonpublic information regarding the Company or any of its
Subsidiaries from and after the filing of the 8-K Filing with the SEC without
the express written consent of such Buyer. 
Neither the Company nor any Buyer shall issue any press releases or any
other public statements with respect to the transactions contemplated hereby; provided,
however, that the Company shall be entitled, without the prior approval
of any Buyer, to make any press release or other public disclosure with respect
to such transactions (i) in substantial conformity with the 8-K Filing and prior
to or contemporaneously therewith and (ii) as is required by applicable law and
regulations

 

14

 

(provided that in the case of clause (i) Riverview Group, LLC, shall be
consulted by the Company in connection with any such press release or other
public disclosure prior to its release).

 

(j)            [INTENTIONALLY OMITTED]

 

(k)           Additional Notes; Additional
Registration Statement; Additional Securities.  For so long as any Buyer beneficially owns any Securities, the
Company will not issue any Notes other than to the Buyers as contemplated
hereby and the Company shall not issue any other securities that would cause a
breach or default under the Notes. 
Until such time as the Registration Statement (as defined in the
Registration Rights Agreement) is declared effective by the SEC, (i) the
Company will not file a registration statement under the 1933 Act relating to
securities that are not the Securities, other than a registration statement on
Form S-8, in order to register the shares underlying equity incentive plans in
existence as of the date of this Agreement and (ii) the Company will not issue,
sell or exchange, agree or obligate itself to issue, sell or exchange or
reserve or set aside for issuance, sale or exchange other than in connection
with any Excluded Securities (as defined in the Notes), (A) any shares of
Common Stock, (B) any other equity security of the Company, including without
limitation shares of preferred stock, (C) any debt security of the Company (other
than debt with no equity feature), including without limitation any debt
security which by its terms is convertible into or exchangeable for any equity
security of the Company, (D) any security of the Company that is a combination
of debt and equity, or (E) any option, warrant or other right to subscribe for,
purchase or otherwise acquire any such equity security or any such debt
security of the Company.

 

(l)            Corporate Existence.  So long as any Buyer beneficially owns any
Notes, the Company shall maintain its corporate existence as a publicly traded
entity whose stock is owned by its public shareholders and shall not sell all
or substantially all of the Company’s assets, except in connection with a
Change of Control (as defined in the Notes) or Surviving Change (as defined in
the Notes) where the Company complies with its obligations under Section 5 of
the Notes.

 

(m)          Reservation of Shares.  The Company shall take all action necessary
to at all times have authorized, and reserved for the purpose of issuance, 100%
of the number of shares of Common Stock issuable upon conversion of the Notes
being issued at the Closing.

 

(n)           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.

 

(o)           [INTENTIONALLY OMITTED]

 

(p)           Sales by Buyers.  Each Buyer will sell any Securities sold by
it in compliance with applicable prospectus delivery requirements, if any, or
otherwise in compliance with the requirements for an exemption from
registration under the Securities Act and the rules and regulations promulgated
thereunder.  No Buyer will make any
sale, transfer or other disposition of the Securities in violation of the
federal or state securities laws.  In
the event that the Company is required by a regulatory agency or in a legal
proceeding to provide information as to the availability of an exemption for
the issuance of the Notes or for any Exempt Resale or for any transfers of
Securities by a Buyer, each Buyer will cooperate with the Company in providing
such written certifications as the Company may reasonably request following the
transfer of any Securities by a Buyer in order for the Company to confirm the
continuing compliance by each Buyer with its agreements relating to transfers
of the Securities.

 

15

 

(q)           CUSIP Numbers. The Company in
issuing the Securities shall use “CUSIP” numbers (if then generally in use),
and shall use such “CUSIP” numbers in notices to holders as a convenience to
holders thereof.

 

(r)            PORTAL.  If requested in writing by the holders of
Notes representing not less than a majority of the aggregate principal amount
of the then outstanding Notes, the Company shall use its reasonable best
efforts to apply for and effect the quotation of the Notes on the Private
Offerings, Resales and Trading Automated Linkages market.  The Company shall not be required to effect
the quotation of the Notes on the PORTAL market if, in the Company’s reasonable
determination, the listing thereof will permit any person to hold less than
$3,000,000 principal amount of Notes, other than by virtue of partial
redemption or partial conversion of the Notes.

 

5.             REGISTER; TRANSFER AGENT
INSTRUCTIONS.

 

(a)           Register.  The Company shall maintain at its principal
executive offices (or such other office or agency of the Company as it may
designate by notice to each holder of Notes), a register for the Notes, in
which the Company shall record the name and address of the Person in whose name
the Notes  have been issued
(including the name and address of each transferee), the principal amount of
Notes held by such Person.  The Company
shall keep the register open and available at all times during business hours
for inspection of any Buyer or its legal representatives.

 

(b)           Transfer Agent Instructions.  The Company shall issue irrevocable
instructions to its transfer agent, and any subsequent transfer agent, to issue
certificates or credit shares to the applicable balance accounts at The
Depository Trust Company (“DTC”),
registered in the name of each Buyer or its respective nominee(s), for the
Notes (but only if the Notes have been qualified for quotation on the PORTAL
market in accordance with Section 4(r)) and the Conversion Shares  in such amounts as specified from time to
time by each Buyer to the Company upon transfer of the Notes or conversion of
the Notes in the form of Exhibit C attached hereto (the “Irrevocable Transfer Agent Instructions”).  The Company warrants that no instruction
other than the Irrevocable Transfer Agent Instructions referred to in this
Section 5(b), and stop transfer instructions to give effect to Section 2(g)
hereof, will be given by the Company to its transfer agent, and that the
Securities shall otherwise be freely transferable on the books and records of
the Company as and to the extent provided in this Agreement and the other
Transaction Documents.  If a Buyer
effects a sale, assignment or transfer of the Securities in accordance with
Sections 2(h) and 2(i), the Company shall permit the transfer and shall
promptly instruct its transfer agent to issue one or more certificates or
credit Notes or shares to the applicable balance accounts at DTC (but only if
the Notes have been qualified for quotation on the PORTAL market in accordance
with Section 4(r)) in such name and in such denominations as specified by such
Buyer to effect such sale, transfer or assignment.  In the event that such sale, assignment or transfer involves
Securities sold, assigned or transferred pursuant to an effective registration
statement or pursuant to Rule 144, the transfer agent shall issue such
Securities to the Buyer, assignee or transferee, as the case may be, without
any restrictive legend.  The Company
acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to a Buyer. 
Accordingly, the Company acknowledges that the remedy at law for a
breach of its obligations under this Section 5(b) will be inadequate and
agrees, in the event of a breach or threatened breach by the Company of the
provisions of this Section 5(b), that a Buyer shall be entitled, in addition to
all other available remedies, to an order and/or injunction restraining any
breach and requiring immediate issuance and transfer, without the necessity of
showing economic loss and without any bond or other security being
required.  Nothing in this Section 5(b)
will affect in any way the Buyer’s obligations and agreements set forth in
Section 4 hereof to comply with all applicable prospectus delivery
requirements, upon resale of the Securities.

 

16

 

6.             CONDITIONS TO THE COMPANY’S
OBLIGATION TO SELL.

 

(a)           Closing Date.  The obligation of the Company hereunder to
issue and sell the Notes  to each
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 each Buyer with prior written notice thereof:

 

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

 

(ii)           Such Buyer and each other Buyer shall
have delivered to the Company the Purchase Price (less, in the case of
Riverview Group, LLC, the amounts withheld pursuant to Section 4(g)) for the
Notes being purchased by such Buyer and each other Buyer at the Closing by wire
transfer of immediately available funds pursuant to the wire instructions
provided by the Company.

 

(iii)          The representations and warranties of
such Buyer shall be true and correct in all material respects as of the date
when made and as of the Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date), and such
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 such Buyer at or prior to the Closing
Date.

 

7.             CONDITIONS TO EACH BUYER’S
OBLIGATION TO PURCHASE.

 

(a)           Closing Date.  The obligation of each 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 each Buyer’s sole
benefit and may be waived by such Buyer at any time in its sole discretion by
providing the Company with prior written notice thereof:

 

(i)            The Company shall have executed and
delivered to such Buyer (i) each of the Transaction Documents and (ii) the
Notes (in such principal amounts as such Buyer shall request)  (in such amounts as such Buyer shall
request) being purchased by such Buyer at the Closing pursuant to this
Agreement.

 

(ii)           Such Buyer shall have received the
opinion of Gilmore & Bell, P.C., the Company’s counsel, dated as of the Closing
Date, in substantially the form of Exhibit D attached hereto.

 

(iii)          The Company shall have delivered to
such Buyer a copy of the Irrevocable Transfer Agent Instructions, in the form
of Exhibit C attached hereto, which instructions shall have been delivered
to and acknowledged in writing by the Company’s transfer agent.

 

(iv)          The Company shall have delivered to
such Buyer a certificate evidencing the incorporation and good standing of the
Company and each of its Subsidiaries in such corporation’s state of
incorporation issued by the Secretary of State of such state of incorporation,
as of a date within 10 days of the Closing Date.

 

(v)           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
Kansas, as of a date within 10 days of the Closing Date.

 

17

 

(vi)          The Company shall have delivered to
such Buyer a certified copy of the Articles of Incorporation as certified by
the Secretary of State of the State of Missouri within 10 days of the Closing
Date.

 

(vii)         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 (the “Resolutions”),
(ii) the Articles of Incorporation and (iii) the Bylaws, each as in effect at
the Closing, in the form attached hereto as Exhibit E.

 

(viii)        The representations and warranties of
the Company shall be true and correct as of the date when made and as of the
Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date) and the Company shall have
performed, satisfied and complied in all 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.  Such Buyer shall have received a
certificate, executed by the Chief Executive Officer of the Company, dated as
of the Closing Date, to the foregoing effect and as to such other matters as
may be reasonably requested by such Buyer in the form attached hereto as Exhibit
F.

 

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

 

(x)            The Common Stock (I) shall be
designated for quotation or listed on the Principal Market and (II) shall not
have been suspended, as of the Closing Date, by the SEC or the Principal Market
from trading on the Principal Market nor shall suspension by the SEC or the
Principal Market have been threatened, as of the Closing Date, either (A) in
writing by the SEC or the Principal Market or (B) by falling below the minimum
listing maintenance requirements of the Principal Market.

 

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

 

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

 

8.             TERMINATION.  In the event that the Closing shall not have
occurred with respect to a Buyer on or before five (5) Business Days from the
date hereof due to the Company’s or such Buyer’s failure to satisfy the
conditions set forth in Sections 6 and 7 above (and the nonbreaching party’s
failure to waive such unsatisfied condition(s)), the nonbreaching party shall
have the option to terminate this Agreement with respect to such breaching party
at the close of business on such date without liability of any party to any
other party; provided, however, this if this Agreement is
terminated pursuant to this Section 8 by Buyer and the Company has failed to
timely satisfy the conditions in Section 7 above, the Company shall remain
obligated to reimburse the non-breaching Buyers for the expenses described in
Section 4(g) above.

 

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

 

18

 

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 non-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.

 

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

 

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

 

(e)           Entire Agreement; Amendments.  This Agreement supersedes all other prior
oral or written agreements between the Buyers, the Company, their affiliates
and Persons acting on their behalf with respect to the matters discussed
herein, and this Agreement and the instruments referenced herein contain the
entire understanding of the parties with respect to the matters covered herein
and therein and, except as specifically set forth herein or therein, neither
the Company nor any Buyer makes any representation, warranty, covenant or
undertaking with respect to such matters. 
No provision of this Agreement or the Notes may be amended other than by
an instrument in writing signed by the Company and the holders of Notes
representing at least a majority of the aggregate principal amount of the Notes
then outstanding, or, if prior to the Closing Date, the Company and the Buyers
listed on the Schedule of Buyers as being obligated to purchase at least a
majority of the aggregate principal amount of the Notes, and any amendment to
this Agreement or the Notes made in conformity with the provisions of this
Section 9(e) shall be binding on all Buyers and holders of Notes, as
applicable.  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 Notes then outstanding. 
No consideration shall be offered or paid to any Person to amend or
consent to a waiver or modification of any provision of any of the Transaction
Documents unless the same consideration also is offered to all of the parties
to the Transaction Documents, holders of Notes.  The Company has not, directly or indirectly, made any agreements
with any Buyers relating to the terms or conditions of the transactions contemplated
by the Transaction Documents except as set forth in the Transaction Documents.

 

19

 

(f)            Notices.  Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this
Agreement or the Notes must be in writing and will be deemed to have been
delivered and received:  (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:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  EPIQ
  Systems, Inc.

  
	
  501
  Kansas Avenue

  
	
  Kansas
  City, Kansas  66105-1300

  
	
  Telephone:

  	
   

  	
  913-621-9500

  
	
  Facsimile:

  	
   

  	
  913-621-7281

  
	
  Attention:

  	
   

  	
  Elizabeth M. Braham,
  Senior Vice President and

  
	
   

  	
   

  	
  Chief Financial Officer

  
	
   

  	
   

  	
   

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

  
	
   

  	
   

  	
   

  
	
  Gilmore & Bell, P.C.

  
	
  2405 Grand Boulevard, Suite 1100

  
	
  Kansas City, Missouri  64108

  
	
  Telephone:

  	
   

  	
  816-221-1000

  
	
  Facsimile:

  	
   

  	
  816-221-1018

  
	
  Attention:

  	
   

  	
  Richard M. Wright, Jr., Esq.

  
	
   

  	
   

  	
   

  
	
  If to the
  Transfer Agent:

  
	
   

  	
   

  	
   

  
	
  Wells Fargo Shareowner Services

  
	
  161 North Concord Exchange

  
	
  South St. Paul, Minnesota  55075

  
	
  Telephone:

  	
   

  	
  (651) 306-4402

  
	
   

  	
   

  	
  (800) 689-8788

  
	
  Facsimile:

  	
   

  	
  (651) 450-4078

  
	
  Attention:

  	
   

  	
  Cheryl Kelly, Account Manager

  
	
   

  	
   

  	
   

  
	
  If to a Buyer, to its
  address and facsimile number set forth on the Schedule of Buyers, with copies
  to

  
	
   

  	
   

  	
   

  
	
  (for informational purposes only)

  
	
   

  	
   

  	
   

  
	
  Schulte Roth & Zabel LLP

  
	
  919 Third Avenue

  
	
  New York New York  10022

  
	
  Telephone:

  	
   

  	
  (212)
  756-2000

  
	
  Facsimile:

  	
   

  	
  (212)
  593-5955

  
	
  Attention:

  	
   

  	
  Eleazer N.
  Klein, Esq.

  
							

 

and 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

 

20

 

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 holders of Notes
representing at least a majority of the aggregate principal amount of the Notes
then outstanding, except pursuant to a Change of Control or Corporate Event
(each as defined in Section 5 of the Notes) with respect to which the Company
is in compliance with Section 5 of the Notes. 
A Buyer may assign some or all of its rights hereunder to any purchaser
of not less than $3,000,000 principal amount of Notes (or such lesser amount
representing the remaining principal amount of such Note) without the consent
of (but with notice of such assignment to) the Company, in which event such
assignee shall be deemed to be a Buyer hereunder with respect to such assigned
rights and such assignee shall be bound by all covenants and agreements of
Buyer set forth in this Agreement.

 

(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.  Unless this Agreement is terminated under
Section 8, the representations and warranties of the Company and the Buyers
contained in Sections 2 and 3 and the agreements and covenants set forth in
Sections 4, 5 and 9 shall survive the Closing. 
Each 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.

 

(k)           Indemnification.  In consideration of each 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, (b) any breach of any covenant,
agreement or obligation of the Company contained in the Transaction Documents
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,
(ii) any transaction financed or to be financed in whole or in part, directly
or

 

21

 

indirectly, with the proceeds of the issuance of the Securities, or
(iii) the status of such 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 which is permissible under applicable
law.  Except as otherwise set forth
herein, the mechanics and procedures with respect to the rights and obligations
under this Section 9(k) shall be the same as those set forth in Section 6 of
the Registration Rights Agreement.

 

(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)           Payment Set Aside.  To the extent that the Company makes a
payment or payments to the Buyers hereunder or pursuant to any of the other
Transaction Documents or the Buyers enforce or exercise their 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, 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.

 

(o)           Independent Nature of Buyers’
Obligations and Rights.  The
obligations of each Buyer under any Transaction Document are several and not
joint with the obligations of any other Buyer, and no Buyer shall be
responsible in any way for the performance of the obligations of any other
Buyer under any Transaction Document. 
Nothing contained herein or in any other Transaction Document, and no
action taken by any Buyer pursuant hereto or thereto, shall be deemed to
constitute the Buyers as a partnership, an association, a joint venture or any
other kind of entity, or create a presumption that the Buyers are in any way
acting in concert or as a group with respect to such obligations or the
transactions contemplated by the Transaction Documents.  Each Buyer confirms that it has
independently participated in the negotiation of the transaction contemplated
hereby with the advice of its own counsel and advisors.  Each Buyer shall be entitled to
independently protect and enforce its rights, including, without limitations,
the rights arising out of this Agreement or out of any other Transaction
Documents, and it shall not be necessary for any other Buyer to be joined as an
additional party in any proceeding for such purpose.

 

[Signature Page Follows]

 

22

 

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

 

 

	
   

  	
  COMPANY:

  
	
   

  	
   

  
	
   

  	
  EPIQ SYSTEMS, INC. 

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ 
  Tom W. Olofson

  	
   

  
	
   

  	
  Name:

  	
  Tom W. Olofson

  
	
   

  	
  Title:

  	
  Chief Executive Officer

  
					

 

23

 

IN WITNESS WHEREOF,
each 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.

 

 

	
   

  	
  BUYERS:

  
	
   

  	
   

  
	
   

  	
  RIVERVIEW GROUP, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ 
  Terry Feeney

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Terry Feeney

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Chief Operating Officer

  	
   

  

 

24

 

IN WITNESS WHEREOF,
each 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.

 

	
   

  	
  BUYERS:

  
	
   

  	
   

  
	
   

  	
  SMITHFIELD FIDUCIARY LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ 
  Adam J. Chill

  	
   

  
	
   

  	
  Name: Adam J. Chill

  
	
   

  	
  Title:  Authorized
  Signatory

  

 

25

 

IN WITNESS WHEREOF,
each 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.

 

 

	
   

  	
  BUYERS:

  
	
   

  	
   

  
	
   

  	
  OMICRON MASTER TRUST

  
	
   

  	
  By:  Omicron Capital L.P., as advisor

  
	
   

  	
   

  
	
   

  	
  By:  Omicron Capital Inc., its general partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ 
  Bruce Bernstein

  	
   

  
	
   

  	
  Name:  Bruce
  Bernstein

  
	
   

  	
  Title:  Managing
  Partner

  

 

26

 

SCHEDULE OF BUYERS

 

	
  (1)

  	
   

  	
  (2)

  	
   

  	
  (3)

  	
   

  	
  (4)

  
	
  Buyer

  	
   

  	
  Address
  and Facsimile Number

  	
   

  	
  Aggregate

  Principal

  Amount of

  Notes

  	
   

  	
  Legal
  Representative’s

  Address and Facsimile Number

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Riverview
  Group, LLC

  	
   

  	
  666 Fifth Avenue, 8th
  Floor

  New York, New York  10103

  Attention:  Daniel Cardella

  Facsimile:  (212) 977-1667

  Telephone: (212) 841-4100

  Residence:  Delaware

  	
   

  	
  $

  	
  30,000,000

  	
   

  	
  Schulte Roth & Zabel
  LLP

  919 Third Avenue

  New York, New York  10022

  Attention:  Eleazer Klein, Esq.

  Facsimile:  (212) 593-5955

  Telephone: (212) 756-2000

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Smithfield Fiduciary LLC

  	
   

  	
  c/o
  Highbridge Capital

  Management, LLC

  9 West 57th Street, 27th Floor

  New York, New York  10019

  Attention:  Ari J. Storch

                   
  Adam J. Chill

  Facsimile:  (212) 751-0755 Telephone: (212) 287-4720
  Residence:  Cayman Islands

  	
   

  	
  $

  	
  10,000,000

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Omicron Master Trust

  	
   

  	
  c/o Omicron
  Capital L.P.

  810 Seventh Avenue

  39th Floor

  New York, New York 10019

  Attention:   Brian Daly

  Facsimile:   (212) 803-5269
  Telephone:  (212) 803-5263
  Residence:  Bermuda

  	
   

  	
  $

  	
  10,000,000

  	
   

  	
   

  

 

27

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