Document:

Unassociated Document

     

    
      EXECUTION
COPY

      

      SECURITIES
PURCHASE AGREEMENT

      

      THIS
SECURITIES PURCHASE
AGREEMENT (the “Agreement”), dated as of
February 25, 2010, by and among Game Trading Technologies, Inc. (formerly City
Language Exchange, Incorporated), a Delaware corporation with headquarters
located at 10957 McCormick Road, Hunt Valley, Maryland 21031 (the “Company”), and the investors
listed on the Schedule of Buyers attached hereto (individually, a “Buyer” and collectively, the
“Buyers”).

      

      RECITALS

      

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

      

      B.   The
Company has authorized a new series of convertible preferred stock of the
Company designated as Series A Convertible Preferred Stock, the terms of which
are set forth in the certificate of designation for such series of preferred
stock (the “Certificate of
Designation”) in the form attached hereto as Exhibit
A (including shares of stock issued
as a dividend thereon and any convertible preferred shares issued in replacement
thereof in accordance with the terms thereof, the “Preferred Shares”), which
Preferred Shares shall be convertible into the Company’s common stock, par value
$0.0001 per share (the “Common
Stock”), in accordance with the terms of the Certificate of
Designation.

      

      C.   The
Company has entered into that certain Securities Exchange Agreement (the “Exchange Agreement”), dated as
of February 25, 2010, by and among the Company, Gamers Factory, Inc., a Maryland
corporation (“Gamers”),
and certain stockholders of Gamers identified therein, which provides, inter alia, that at the
Closing Date (as defined in the Exchange Agreement), the Company shall acquire
Gamers through a share exchange pursuant to which the Stockholders (as defined
in the Exchange Agreement) shall contribute, sell and transfer all of the
outstanding shares of capital stock of Gamers for newly-issued shares of the
Company’s Common Stock (the “Exchange”)

      

      D.   Simultaneously
with the consummation of the Exchange, each Buyer wishes to purchase, and the
Company wishes to sell, upon the terms and conditions stated in this Agreement,
(i) the aggregate number of Preferred Shares set forth opposite such Buyer’s
name in column (3) on the Schedule of Buyers (which aggregate number for all
Buyers shall be up to 1,950,000) (as converted,
collectively, the “Conversion
Shares”), (ii) a Warrant in the form attached hereto as Exhibit
B (the “Warrants”), to acquire that
number of shares of Common Stock (as exercised, collectively, the “Warrant Shares”) set forth
opposite such Buyer’s name in column (4) on the Schedule of Buyers and (iii)
solely for Buyers purchasing Preferred Shares with a Stated Value (as defined in
the Certificate of Designation) of at least $150,000, a Unit Purchase Option
Agreement (the “Unit Purchase
Option”) in the form attached hereto as Exhibit
I, to acquire that number of additional Preferred Shares set forth
opposite such Buyer’s name in column (7) on the Schedule of Buyers and Warrants
to acquire that number of additional Warrant Shares set forth opposite such
Buyer’s name in column (8) on the Schedule of Buyers for the aggregate
additional purchase price set forth opposite such Buyer’s name in column (9) on
the Schedule of Buyers.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      F.   Contemporaneously
with the execution and delivery of this Agreement, the parties hereto are
executing and delivering a Registration Rights Agreement, in the form attached
hereto as Exhibit
C (the “Registration
Rights Agreement”), pursuant to which the Company has agreed to provide
certain registration rights with respect to the Registrable Securities (as
defined in the Registration Rights Agreement), under the Securities Act and the
rules and regulations promulgated thereunder, and applicable state securities
laws.

      

      G.   The
Preferred Shares, the Conversion Shares, the Unit Purchase Options, the Warrants
and the Warrant Shares are collectively referred to herein as the “Securities.”

      

      NOW,
THEREFORE, in consideration of the premises and the mutual agreements and
covenants contained herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and each
Buyer hereby agree as follows:

       

      
      

      
        1.  
PURCHASE
AND SALE OF PREFERRED STOCK AND WARRANTS.

      

      

      
        (a)
Preferred Shares and
Warrants. Subject
to the satisfaction (or waiver) of the conditions set forth in Sections 6 and 7
below, simultaneously with the consummation of the Exchange, 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), the number
of Preferred Shares, as is set forth opposite such Buyer’s name in column (3) on
the Schedule of Buyers, along with the Warrants to acquire that number of
Warrant Shares as is set forth opposite such Buyer’s name in column (4) on the
Schedule of Buyers.

      

      

      (b)  
Closing.  The
closing (the “Closing”)
of the purchase of the Preferred Shares and the Warrants by the Buyers shall
occur simultaneously with the closing of the Exchange, at the offices of
Greenberg Traurig, LLP, 200 Park Avenue, New York, New York 10166. The date and
time of the Closing (the “Closing Date”) shall be 10:00
a.m., New York City Time, on the date hereof, subject to the notification of
satisfaction (or waiver) of the conditions to the Closing set forth in Sections
6 and 7 below (or such later date as is mutually agreed to by the Company and
each Buyer). As used herein, “Business Day” means any day
other than a Saturday, Sunday or other day on which commercial banks in The City
of New York are authorized or required by law to remain closed.

      

      (c)  
Purchase
Price. The
aggregate purchase price for the Preferred Shares and the Warrants to be
purchased by each Buyer (the “Purchase Price”) shall be the
amount set forth opposite such Buyer’s name in column (5) on the Schedule of
Buyers. Each Buyer shall pay $2.00 for each Preferred Share and related Warrants
to be purchased by such Buyer at the Closing.

      

      (d)  
Form of
Payment. On the
Closing Date, (A) each Buyer shall pay its respective Purchase Price to the
Company for the Preferred Shares and the Warrants 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 (B) the Company
shall deliver to each Buyer the Preferred Shares (in such denominations as
is set forth opposite such Buyer’s name in column (3) on the Schedule of Buyers)
along with the Warrants (exercisable for the number of shares of Common Stock as
is set forth opposite such Buyer’s name in column (4) on the Schedule of
Buyers), each duly executed on behalf of the Company and registered in the name
of such Buyer or its designee.

       

      
        
          
          

        

        
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        2.  
REPRESENTATIONS
AND WARRANTIES OF EACH BUYER.

      

      

      Each
Buyer represents and warrants (and covenants with respect to Section 2(k)) with
respect to only itself that:

      

      (a)  
Organization;
Authority. Such
Buyer is an entity duly organized, validly existing and in good standing under
the laws of the jurisdiction of its organization with the requisite power and
authority to enter into and to consummate the transactions contemplated by the
Transaction Documents (as defined below) to which it is a party and otherwise to
carry out its obligations hereunder and thereunder.

      

      (b)  
No Public Sale or
Distribution. Such
Buyer is (i) acquiring the Preferred Shares and the Warrants, (ii) upon
conversion of the Preferred Shares will acquire the Conversion Shares and
(iii) upon exercise of the Warrants will acquire the Warrant Shares, in
each case, 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 Securities Act; provided, however, that by
making the representations herein, such Buyer does not agree, or make any
representation or warranty, to hold any of the Securities for any minimum or
other specific term and reserves the right to dispose of the Securities at any
time in accordance with or pursuant to a registration statement or an exemption
under the Securities Act.  Such Buyer is acquiring the Securities
hereunder in the ordinary course of its business. Such Buyer does not presently
have any agreement or understanding, directly or indirectly, with any Person to
distribute any of the Securities.

      

      (c)  
Accredited Investor
Status.  At
the time such Buyer was offered the Securities, it was, and as of the date
hereof is, an “accredited investor” as that term is defined in Rule 501(a) of
Regulation D.

      

      (d)  
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.

      

      (e)  
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.  Such Buyer and its advisors, if any, have been afforded the
opportunity to ask questions of the Company.  Neither such inquiries
nor any other due diligence investigations conducted by such Buyer or its
advisors, if any, or its representatives shall modify, amend or affect such
Buyer’s right to rely on the Company’s representations and warranties contained
herein or any representations and warranties contained in any other Transaction
Document or any other document or instrument executed and/or delivered in
connection with this Agreement or the consummation of the transaction
contemplated hereby. 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.

       

      
        
          
          

        

        
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      (f)  
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.

      

      (g)  
Transfer or
Resale. Such
Buyer understands that except as provided in the Registration Rights Agreement
and Section 4(h) hereof: (i) the Securities have not been and are not being
registered under the Securities 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 to such Buyer, in a generally acceptable form, to the effect
that such Securities to be sold, assigned or transferred may be sold, assigned
or transferred pursuant to an exemption from such registration, or (C) 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 Securities 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(t)) through whom the sale is
made) may be deemed to be an underwriter (as that term is defined in the
Securities Act) may require compliance with some other exemption under the
Securities Act or the rules and regulations of the SEC promulgated thereunder;
and (iii) neither the Company nor any other Person is under any obligation to
register the Securities under the Securities Act or any state securities laws or
to comply with the terms and conditions of any exemption
thereunder.

      

      (h)  
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.

      

      (i)  
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 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.

       

      
        
          
          

        

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

      

      (k)  
Certain Trading
Activities. Such
Buyer has not directly or indirectly, nor has any Person acting on behalf of or
pursuant to any understanding with such Buyer, engaged in any transactions in
the securities of the Company (including without limitation, any Short Sales
involving the Company’s securities) since the time that the Buyer was first
contacted by the Company regarding an investment in the Company. “Short Sales” include, without
limitation, all “short sales” as defined in Rule 200 promulgated under
Regulation SHO under the Exchange Act (“Regulation SHO”) and all types
of direct and indirect stock pledges, forward sale contracts, options, puts,
calls, swaps and similar arrangements (including on a total return basis), and
sales and other transactions through non-U.S. broker dealers or foreign
regulated brokers.

      

      (l)  
General
Solicitation. Such
Buyer is not purchasing the Securities as a result of any advertisement,
article, notice or other communication regarding the Securities published in any
newspaper, magazine or similar media or broadcast over television or radio or
presented at any seminar.

       

      
        3.  
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY.

      

      

      Except as
set forth under the corresponding section of the disclosure schedules delivered
to the Buyers concurrently herewith (the “Disclosure Schedules”), which
Disclosure Schedules shall be deemed a part hereof and shall qualify any
representation made herein to the extent of the disclosure contained in the
corresponding section of the Disclosure Schedules, the Company hereby makes the
following representations and warranties each of the Buyers that:

      

      (a)  
Incorporation of
Exchange Agreement Representations and Warranties.  The
Company (as successor in interest to the business of Gamers) hereby confirms
that each and every representation and warranty (“Business Representations and
Warranties”) made by Gamers in Section 2.4 and in Sections 2.10 through
2.31, inclusive, of the Exchange Agreement (together with the disclosure
schedules referenced therein) is hereby incorporated herein by reference in its
entirety to the same extent and with the same force and effect as if each of
them was fully and completely set forth herein, and may be relied upon by each
of the Buyers as if repeated in full by the Company herein.

      

      (b)  
Organization and
Qualification. The
Company and its “Subsidiaries” (which for
purposes of this Agreement means any Person in which the Company, directly or
indirectly, owns capital stock or holds an equity or similar interest) are
entities duly organized and validly existing and in good standing under the laws
of the jurisdiction in which they are formed, and have the requisite power and
authorization to own their properties and to carry on their business as now
being conducted and as presently proposed to be conducted. Each of the Company
and its Subsidiaries is duly qualified as a foreign entity 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 (i) the business, properties, assets,
liabilities, operations (including results thereof), condition (financial or
otherwise) or prospects of the Company and its Subsidiaries, individually or
taken as a whole, (ii) the transactions contemplated hereby or in the other
Transaction Documents (as defined below) or by the agreements and instruments to
be entered into in connection herewith or therewith or (iii) the authority or
ability of the Company to perform its obligations under the Transaction
Documents (as defined below). Except for Gamers Inc., the Company has no
Subsidiaries.

       

      
        
          
          

        

        
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        (c)   Authorization; Enforcement;
Validity. The
Company has the requisite power and authority to enter into and perform its
obligations under this Agreement, the Certificate of Designation, the Unit
Purchase Options, the Warrants, the Registration Rights Agreement, the
Irrevocable Transfer Agent Instructions (as defined in Section 5(b)), the
Lock-Up 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.  The execution and delivery of this Agreement and
the other 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 Preferred Shares (including the Preferred Shares
receivable upon exercise of the Unit Purchase Options), the reservation for
issuance and the issuance of the Conversion Shares issuable upon conversion of
the Preferred Shares (including the Preferred Shares receivable upon exercise of
the Unit Purchase Options), the Unit Purchase Options, the issuance of the
Warrants (including the Warrants receivable upon exercise of the Unit Purchase
Options) and the reservation for issuance and issuance of the Warrant Shares
issuable upon exercise of the Warrants (including the Warrants receivable upon
exercise of the Unit Purchase Options), have been duly authorized by the
Company’s Board of Directors and (other than the filing with the SEC of one or
more Registration Statements in accordance with the requirements of the
Registration Rights Agreement, the filing of the Form D with the SEC and any
other filings as may be required by any state securities agencies) no further
filing, consent or authorization is required by the Company or its Board of
Directors or stockholders. This Agreement and the other Transaction Documents
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 as rights to indemnification and to contribution may be
limited by federal or state securities law. The Certificate of Designation, in
the form attached hereto as Exhibit
A, shall be filed with the Secretary of State of the State of Delaware on
or prior to Closing.

         

        
          
            
            

          

          
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        (d)   Issuance of
Securities. The
issuance of the Preferred Shares, the Unit Purchase Options and the Warrants are
duly authorized and upon issuance in accordance with the terms of the
Transaction Documents shall be validly issued, fully paid and non-assessable and
free from all taxes, liens, charges and other encumbrances with respect to the
issue thereof, and the Preferred Shares shall be entitled to the rights and
preferences set forth in the Certificate of Designation. As of the Closing, the
Company shall have reserved from its duly authorized capital stock not less than
120% of the sum of (i) the maximum number of shares of Common Stock issuable
upon conversion of the Preferred Shares (including the Preferred Shares
receivable upon exercise of the Unit Purchase Options) (assuming for purposes
hereof that the Preferred Shares are convertible at the Conversion Price and
without taking into account any limitations on the conversion of the Preferred
Shares set forth in the Certificate of Designation), (ii) the maximum number of
shares of Common Stock issuable upon exercise of the Warrants (including the
Warrants receivable upon exercise of the Unit Purchase Options) (assuming for
purposes hereof that the Warrants are fully exerciseable and without taking into
account any limitations on the exercise of the Warrants set forth in the
Warrants). Upon issuance or conversion in accordance with the Certificate of
Designation or exercise in accordance with the Warrants (as the case may be) the
Conversion Shares and the Warrant Shares, respectively, will be validly issued,
fully paid and nonassessable and free from all preemptive or similar rights,
taxes, liens, charges and other encumbrances with respect to the issue thereof,
with the holders being entitled to all rights accorded to a holder of Common
Stock. Subject to the accuracy of the representations and warranties of the
Buyers in this Agreement, the offer and issuance by the Company of the
Securities is exempt from registration under the Securities Act.

        

        (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 (including, without limitation, the issuance of the Preferred Shares,
the Unit Purchase Options, the Warrants, the Conversion Shares and Warrant
Shares and the reservation for issuance of the Conversion Shares and the Warrant
Shares) will not (i) result in a violation of the certificate of incorporation
of the Company or any of its Subsidiaries, any capital stock of the Company, the
bylaws of the Company or any of its Subsidiaries, or the Certificate of
Designation of the Company or any of its Subsidiaries, (ii) conflict with, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which the Company or any of its Subsidiaries is a party, except to
the extent such conflict, default or termination right would not reasonably be
expected to have a Material Adverse Effect, 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 OTC
Bulletin Board (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 clause (ii) or (iii) above, to the extent such
violations that could not reasonably be expected to have a Material Adverse
Effect.

        

        (f)   Consents.  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 other than (i) the filings required pursuant to Section 4(j), (ii) the
filing of the Registration Statement with the SEC and (iii) the filing of Form D
with the SEC and such filings as are required to be made under applicable state
securities laws.  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, 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. To the best of its
knowledge, the Company is not in violation of the requirements of the Principal
Market and has no knowledge of any facts which could reasonably lead to
delisting or suspension of the Common Stock in the foreseeable
future.

         

        
          
            
            

          

          
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        (g)   Acknowledgment Regarding
Buyer’s Purchase of Securities. The
Company acknowledges and agrees that each Buyer is acting solely in the capacity
of an arm’s length purchaser with respect to the Transaction Documents and the
transactions contemplated hereby and thereby and that, except as disclosed on
Schedule 3(g), no Buyer is (i) an officer or director of the Company, (ii) an
“affiliate” of the Company or any of its Subsidiaries (as defined in Rule 144)
or (iii) to its knowledge, a “beneficial owner” of more than 10% of the shares
of Common Stock (as defined for purposes of Rule 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 any of its Subsidiaries (or in any similar capacity) with
respect to the Transaction Documents and the transactions contemplated hereby
and thereby, and any advice given 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
decision of the Company and each of the Subsidiaries to enter into the
Transaction Documents, as applicable,  has been based solely on the
independent evaluation by the Company and its Subsidiaries and their
representatives.

        

        (h)   No General Solicitation;
Placement Agent’s Fees. Neither
the Company, nor any of its Subsidiaries or 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. Except as set forth on Schedule 3(h), the
Company has not engaged any placement agent or other agent in connection with
the sale of the Securities.

        

        (i)   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 Securities Act or
cause this offering of the Securities to be integrated with prior offerings by
the Company for purposes of the Securities 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 Securities Act or
cause the offering of any of the Securities to be integrated with other
offerings.

         

        
          
            
            

          

          
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        (j)   Dilutive
Effect. The
Company understands and acknowledges that the number of Conversion Shares and/or
Warrant Shares (as the case may be) will increase in certain circumstances. The
Company further acknowledges that its obligation to issue Conversion Shares upon
conversion of the Preferred Shares in accordance with this Agreement and the
Certificate of Designation and its obligation to issue the Warrant Shares upon
exercise of the Warrants in accordance with this Agreement and the Warrants is,
in each case, absolute and unconditional regardless of the dilutive effect that
such issuance may have on the ownership interests of other stockholders of the
Company.

        

        (k)   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 its certificate of incorporation
or the laws of the jurisdiction of its incorporation or otherwise 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.

        

        (l)   SEC Documents; Financial
Statements. To the
best of its knowledge, during the two (2) years prior to the date hereof, the
Company has timely 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, notes and
schedules thereto and documents incorporated by reference therein being
hereinafter referred to as the “SEC Documents”). To the best
of its knowledge, 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. To the best of its knowledge, 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 as in effect as of the time of filing. 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 which will not be material, either individually or in the
aggregate). To the best of its knowledge, no other 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(e) of this
Agreement, contains any untrue statement of a material fact or omits to state
any material fact necessary in order to make the statements therein not
misleading, in the light of the circumstance under which they are or were
made.

         

        
          
            
            

          

          
            9

            
              

            

          

          
            
            

          

        

         

        (m)   Absence of Certain
Changes. To the
best of its knowledge, since the date of the most recent audited financial
statements contained within the SEC Reports, there has been no material adverse
change and no material adverse development in the business, assets, liabilities,
properties, operations (including results thereof), condition (financial or
otherwise) or prospects of the Company or any of its Subsidiaries. To the best
of its knowledge, since the date of the Company’s most recent audited financial
statements contained in a Form 10-K, neither the Company nor any of its
Subsidiaries has (i) declared or paid any dividends, (ii) sold any assets,
individually or in the aggregate, in excess of $100,000 outside of the ordinary
course of business or (iii) had capital expenditures, individually or in the
aggregate, in excess of $100,000. To the best of its knowledge, neither the
Company nor any of its Subsidiaries has 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 and its Subsidiaries, individually and on a
consolidated basis, are not as of the date hereof, and after giving effect to
the transactions contemplated hereby to occur at the Closing, will not be
Insolvent (as defined below). For purposes of this Section 3(m), “Insolvent” means, with respect
to the Company, on a consolidated basis with its Subsidiaries, (i) the present
fair saleable value of the Company’s and its Subsidiaries’ assets is less than
the amount required to pay the Company’s and its Subsidiaries’ total
Indebtedness (as defined in Section 3(t)), (ii) the Company and its Subsidiaries
are unable to pay their debts and liabilities, subordinated, contingent or
otherwise, as such debts and liabilities become absolute and matured or (iii)
the Company and its Subsidiaries intend to incur or believe that they will incur
debts that would be beyond their ability to pay as such debts mature. The
Company has not engaged in business or in any transaction, and is not about to
engage in business or in any transaction, for which the Company’s remaining
assets constitute unreasonably small capital.

        

        (n)   No Undisclosed Events,
Liabilities, Developments or Circumstances. To the
best of its knowledge, other than with respect to the transactions contemplated
by the Exchange Agreement, no event, liability, development or circumstance has
occurred or exists, or is contemplated to occur with respect to the Company, any
of its Subsidiaries or their respective business, properties, liabilities,
prospects, operations (including results thereof) or condition (financial or
otherwise), that would be required to be disclosed by the Company under
applicable securities laws on a registration statement on Form S-1 filed with
the SEC relating to an issuance and sale by the Company of its Common Stock and
which has not been publicly announced.

        

        (o)   Conduct of Business;
Regulatory Permits. Neither
the Company nor any of its Subsidiaries is in violation of any term of or in
default under its certificate of incorporation, the Certificate of Designation,
any other certificate of designation, preferences or rights of any other
outstanding series of preferred stock of the Company or its bylaws or their
organizational charter or certificate of incorporation 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 any of its Subsidiaries, and neither the Company nor any of its
Subsidiaries will conduct its business in violation of any of the foregoing,
except in all cases for possible violations which would not, individually or in
the aggregate, have a Material Adverse Effect. Without limiting the generality
of the foregoing, to the best of its knowledge, the Company is not in violation
of any of the rules, regulations or requirements of the Principal Market and has
no knowledge of any facts or circumstances that could reasonably lead to
delisting or suspension of the Common Stock by the Principal Market in the
foreseeable future. The Company and each of its Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate regulatory
authorities necessary to conduct their respective businesses, except where the
failure to possess such certificates, authorizations or permits would not have,
individually or in the aggregate, a Material Adverse Effect, and neither the
Company nor any such Subsidiary has received any notice of proceedings relating
to the revocation or modification of any such certificate, authorization or
permit.

         

        
          
            
            

          

          
            10

            
              

            

          

          
            
            

          

        

         

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

        

        (q)   Sarbanes-Oxley
Act. To the
best of its knowledge, the Company is in compliance with all applicable
requirements of the Sarbanes-Oxley Act of 2002 that are effective as of the date
hereof, and all applicable rules and regulations promulgated by the SEC
thereunder that are effective as of the date hereof.

        

        (r)   Transactions With
Affiliates. Other
than as disclosed on Schedule 3(r), none of the officers, directors or employees
of the Company or any of its Subsidiaries is presently a party to any
transaction with the Company or any of its Subsidiaries (other than for ordinary
course services as employees, officers or directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any such officer, director or employee or, to the
knowledge of the Company or any of its Subsidiaries, 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.

        

        (s)   Equity
Capitalization.  As
of the date hereof, the authorized capital stock of the Company consists of (i)
100,000,000 shares of Common Stock, of which as of the date hereof, not more
than 1,200,000 shares are issued and outstanding (after taking into
consideration the cancellation of such number of shares of Common Stock
contemplated by Section 5.2(f)(7)(iii) of the Exchange Agreement) and (ii)
20,000,000 shares of preferred stock, none of which, as of the date hereof, are
issued and outstanding.  To the best of its knowledge, all of such
outstanding shares are duly authorized and have been, or upon issuance will be,
validly issued and are fully paid and nonassessable. To the best of its
knowledge, except as disclosed in Schedule 3(s): (i) none of the Company’s
capital stock is subject to preemptive rights or any other similar rights or any
liens or encumbrances suffered or permitted by the Company; (ii) there are no
outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, or exercisable or exchangeable for, any capital stock of the
Company or any of its Subsidiaries, or contracts, commitments, understandings or
arrangements by which the Company or any of its Subsidiaries is or may become
bound to issue additional capital stock of the Company or any of its
Subsidiaries or options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, or exercisable or exchangeable for, any capital stock of the
Company or any of its Subsidiaries; (iii) there are no outstanding debt
securities, notes, credit agreements, credit facilities or other agreements,
documents or instruments evidencing Indebtedness (as defined in Section 3(t)) of
the Company or any of its Subsidiaries or by which the Company or any of its
Subsidiaries is or may become bound; (iv) there are no financing statements
securing obligations in any material amounts, either individually or in the
aggregate, filed in connection with the Company or any of its Subsidiaries; (v)
there are no agreements or arrangements under which the Company or any of its
Subsidiaries is obligated to register the sale of any of their securities under
the Securities Act (except pursuant to the Registration Rights Agreement); (vi)
there are no outstanding securities or instruments of the Company or any of its
Subsidiaries which contain any redemption or similar provisions, and there are
no contracts, commitments, understandings or arrangements by which the Company
or any of its Subsidiaries is or may become bound to redeem a security of the
Company or any of its Subsidiaries; (vii) there are no securities or instruments
containing anti-dilution or similar provisions that will be triggered by the
issuance of the Securities (other than the Securities to be issued pursuant to
this Agreement); (viii) the Company does not have any stock appreciation rights
or “phantom stock” plans or agreements or any similar plan or agreement; and
(ix) neither the Company nor any of its Subsidiaries have any liabilities or
obligations required to be disclosed in the SEC Documents which are not so
disclosed in the SEC Documents, other than those incurred in the ordinary course
of the Company’s or its Subsidiaries’ respective businesses and which,
individually or in the aggregate, do not or could not have a Material Adverse
Effect.

         

        
          
            
            

          

          
            11

            
              

            

          

          
            
            

          

        

         

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

         

        
          
            
            

          

          
            12

            
              

            

          

          
            
            

          

        

         

        (u)   Absence of
Litigation. Except
as set forth in the SEC Reports or Schedule 3(u), 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 or any of its Subsidiaries, the Common Stock or any of the Company’s
Subsidiaries or any of the Company’s or its Subsidiaries’ officers or directors
which is outside of the ordinary course of business or individually or in the
aggregate material to the Company.

        

        (v)   Insurance. The
Company and each of its Subsidiaries are insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts as
management of the Company believes to be prudent and customary in the businesses
in which the Company and its Subsidiaries are engaged. Neither the Company nor
any such Subsidiary has been refused any insurance coverage sought or applied
for, and neither the Company nor any such Subsidiary has any reason to believe
that it will be unable 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.

        

        (w)   Employee
Relations.  (i)  Neither
the Company nor any of its Subsidiaries is a party to any collective bargaining
agreement or employs any member of a union. The Company and its Subsidiaries
believe that their relations with their employees are good.  No
executive officer (as defined in Rule 501(f) of the Securities Act) of the
Company or any of its Subsidiaries has notified the Company or any such
Subsidiary that such officer intends to leave the Company or any such Subsidiary
or otherwise terminate such officer’s employment with the Company or any such
Subsidiary. No executive officer of the Company or any of its Subsidiaries is,
or is now expected to be, in violation of any material term of any employment
contract, confidentiality, disclosure or proprietary information agreement,
non-competition agreement, or any other contract or agreement or any restrictive
covenant, and the continued employment of each such executive officer does not
subject the Company or any of its Subsidiaries to any liability with respect to
any of the foregoing matters. (ii) The Company and its Subsidiaries are in
compliance with all federal, state, local and foreign laws and regulations
respecting labor, employment and employment practices and benefits, terms and
conditions of employment and wages and hours, except where failure to be in
compliance would not, either individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect.

         

        
          
            
            

          

          
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        (x)   Title. Except
as set forth on Schedule 3(x), 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 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.

        

        (y)   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 other intellectual property
rights (“Intellectual Property
Rights”) necessary to conduct their respective businesses as now
conducted and as presently proposed to be conducted.  None of the
Company’s or its Subsidiaries’ Intellectual Property Rights have expired,
terminated or been abandoned, or are expected to expire, terminate or be
abandoned, within three years from the date of this Agreement.  The
Company does not have any knowledge of any infringement by the Company or any of
its Subsidiaries of Intellectual Property Rights of others.  There is
no claim, action or proceeding being made or brought, or to the knowledge of the
Company, being threatened, against the Company or any of its Subsidiaries
regarding their Intellectual Property Rights.  The Company is unaware
of any facts or circumstances which might give rise to any of the foregoing
infringements or claims, actions or proceedings. The Company and each of its
Subsidiaries have taken reasonable security measures to protect the secrecy,
confidentiality and value of all of their Intellectual Property
Rights.

        

        (z)   Environmental
Laws. The
Company and its Subsidiaries (i) are in compliance with 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.

         

        
          
            
            

          

          
            14

            
              

            

          

          
            
            

          

        

         

        (aa)   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.

        

        (bb)   Internal Accounting and
Disclosure Controls. The
Company and each of its Subsidiaries maintains 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. The Company maintains disclosure controls and procedures (as such
term is defined in Rule 13a-14 under the Exchange Act) that are effective in
ensuring that information required to be disclosed by the Company in the reports
that it files or submits under the Exchange Act is recorded, processed,
summarized and reported, within the time periods specified in the rules and
forms of the SEC, including, without limitation, controls and procedures
designed in to ensure that information required to be disclosed by the Company
in the reports that it files or submits under the Exchange Act is accumulated
and communicated to the Company’s management, including its principal executive
officer or officers and its principal financial officer or officers, as
appropriate, to allow timely decisions regarding required disclosure. Neither
the Company nor any of its Subsidiaries has received any notice or
correspondence from any accountant relating to any potential material weakness
in any part of the system of internal accounting controls of the Company or any
of its Subsidiaries.

        

        (cc)   Off Balance Sheet
Arrangements. To the
best of its knowledge, other than as disclosed in the Exchange Agreement, there
is no transaction, arrangement, or other relationship between the Company or any
of its Subsidiaries and an unconsolidated or other off balance sheet entity that
is required to be disclosed by the Company in its Exchange Act filings and is
not so disclosed or that otherwise could be reasonably likely to have a Material
Adverse Effect.

        

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

         

        
          
            
            

          

          
            15

            
              

            

          

          
            
            

          

        

         

        (ee)   Transfer
Taxes. On the
Closing Date, all stock transfer or other taxes (other than income or similar
taxes) which are required to be paid in connection with the sale and transfer of
the Securities to be sold to each Buyer hereunder will be, or will have been,
fully paid or provided for by the Company, and all laws imposing such taxes will
be or will have been complied with.

        

        (ff)   Acknowledgement Regarding
Buyers’ Trading Activity. It is
understood and acknowledged by the Company (i) that, following one year after
the date on which the last registration statement the Company is required to
file so that all of the Registrable Securities (as defined in the Registration
Rights Agreement) are registered, none of the Buyers have been asked by the
Company or any of its Subsidiaries to agree, nor has any Buyer agreed with the
Company or any of its Subsidiaries, to desist from purchasing or selling, long
and/or short, securities of the Company, or “derivative” securities based on
securities issued by the Company or to hold the Securities for any specified
term; (ii) that any Buyer, and counter parties in “derivative” transactions to
which any such Buyer is a party, directly or indirectly, presently may have a
“short” position in the Common Stock which were established prior to such
Buyer’s knowledge of the transactions contemplated by the Transaction Documents,
and (iii) that each Buyer shall not be deemed to have any affiliation with or
control over any arm’s length counter party in any “derivative” transaction. The
Company further understands and acknowledges that following one year after the
date on which the last registration statement the Company is required to file so
that all of the Registrable Securities (as defined in the Registration Rights
Agreement) are registered one or more Buyers may engage in hedging and/or
trading activities at various times during the period that the Securities are
outstanding, including, without limitation, during the periods that the value of
the Conversion Shares and the Warrant Shares deliverable with respect to the
Securities are being determined and (b) such hedging and/or trading activities,
if any, can reduce the value of the existing stockholders’ equity interest in
the Company both at and after the time the hedging and/or trading activities are
being conducted. The Company acknowledges that such aforementioned hedging
and/or trading activities do not constitute a breach of this Agreement or any
other Transaction Document or any of the documents executed in connection
herewith or therewith.

        

        (gg)   Disclosure.  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 disclosure provided to the Buyers regarding the Company
and its Subsidiaries, their businesses and the transactions contemplated hereby,
including the Schedules to this Agreement, furnished by or on behalf of the
Company is true and correct and does not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading. 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.

        
           

          
            
              
              

            

            
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          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.  As soon as practicable, but
in no event later than thirty (30) days after the Closing Date, the Company
shall submit all necessary documentation to be included in Standard & Poor’s
Corporation Descriptions.  Additionally, the Company shall continue to
publish all information so as to have available “current public information” in
Standard & Poor’s Corporation Descriptions, for state “blue sky” exemption
purposes.

        

        (c)   Reporting
Status. Until
the date on which the Buyers shall have sold all the Conversion Shares and
Warrant Shares, and none of the Preferred Shares or Warrants is outstanding (the
“Reporting Period”), the
Company shall timely file all reports required to be filed with the SEC pursuant
to the Exchange Act, and the Company shall not terminate its status as an issuer
required to file reports under the Exchange Act even if the Exchange Act or the
rules and regulations thereunder would no longer require or otherwise permit
such termination.

        

        (d)   Use of
Proceeds. The
Company will use the proceeds from the sale of the Securities solely as set
forth on Schedule 4(d).

        

        (e)   Investor and Media Relations
Consultant.  The
Company shall retain and use the services of an investor and media relations
consultant (“Investor and Media
Relations Consultant”) which Investor and Media Relations Consultant
shall be reasonably acceptable to Vision Capital Advisors, LLC (“Vision
Capital”).  The Company shall deposit $300,000 of the proceeds
from this offering into a segregated account (the “IR Escrow”) solely for the
purposes of paying the expenses of investor and media relations initiatives
arranged by the Company in cooperation with such Investor and Media Relations
Consultant for a period of twelve (12) months following the Closing
Date.  If Vision or its permitted assigns exercises in full its Unit
Purchase Option, the Company shall deposit an additional $100,000 of the
proceeds from such exercise into the IR Escrow.  The Company shall use
reasonable efforts to undertake any such measures as the Investor and Media
Relations Consultant shall recommend that are, in good faith, acceptable to the
Company’s Board of Directors.

        

        (f)   Director and Officer
Insurance. As soon
as practicable, but in no event later than sixty (60) days following the Closing
Date, the Company and each Subsidiary agree to be insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as are prudent and customary in the businesses in which the Company and
the Subsidiaries are engaged, including, but not limited to directors and
officers insurance coverage at least equal to $4,000,000.

         

        
          
            
            

          

          
            17

            
              

            

          

          
            
            

          

        

         

        (g)   Listing.  The
Company shall promptly secure the quotation of all of the Registrable Securities
(as defined in the Registration Rights Agreement) upon the Principal Market and
shall maintain such quotation of all Registrable Securities from time to time
issuable under the terms of the Transaction Documents on the Principal Market or
an Eligible Market (as defined in the Certificate of Designation). 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 could be reasonably expected to result in the delisting or
suspension of the Common Stock on an Eligible Market. The Company shall pay all
fees and expenses in connection with satisfying its obligations under this
Section 4(g).

        

        (h)   Nasdaq.  The
Company shall use its best efforts to increase the number of members on its
Board of Directors and establish audit, compensation and nomination/corporate
governance committees of its Board of Directors such that within sixty (60) days
after the Closing Date, (i) a majority of the members on its Board of Directors
shall be considered “independent directors” within the meaning of the rules of
the Nasdaq Stock Market, and (ii) the Company’s corporate governance structure
meets the continued listing requirements of the Nasdaq Stock
Market.  As soon as practicable, the Company shall take all
necessary and appropriate actions to list its shares of Common Stock for trading
on the Nasdaq Capital Market or Nasdaq Global Market provided the Company meets
the applicable listing standards for listing on a national securities
exchange.

        

        (i)   Fees.  The
Company shall reimburse Vision Opportunity Master Fund, LTD. (“Vision”) or its designee(s)
(in addition to any other expense amounts paid to any Buyer prior to the date of
this Agreement) for all reasonable costs and expenses, not to exceed $157,000,
incurred by it or its affiliates in connection with the transactions
contemplated by the Transaction Documents (including, without limitation, all
reasonable legal fees and disbursements in connection therewith, documentation
and implementation of the transactions contemplated by the Transaction Documents
and due diligence in connection therewith), which amount shall be paid at the
Closing or paid by the Company upon termination of this Agreement (as the case
may be). 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. 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.

        

        (j)   Disclosure of Transactions
and Other Material Information. The
Company shall, on or before 8:30 a.m., New York City Time, on the first
(1st)
Business Day after the date of this Agreement, (i) issue a press release (the
“Press Release”)
reasonably acceptable to the Buyers disclosing all the material terms of the
transactions contemplated by the Transaction Documents and (ii) file a Current
Report on Form 8-K describing all the material terms of the transactions
contemplated by the Transaction Documents in the form required by the Exchange
Act and attaching all the material Transaction Documents (including, without
limitation, this Agreement (and all schedules to this Agreement), the form of
Certificate of Designation, the form of Warrants and the Registration Rights
Agreement) (including all attachments, the “8-K Filing”). From and after
the issuance of the Press Release, the Company shall have disclosed any
material, nonpublic information delivered to any of the Buyers by the Company or
any of its Subsidiaries, or any of their respective officers, directors,
employees or agents (if any) in connection with the transactions contemplated by
the Transaction Documents. 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 issuance of
the Press Release without the express prior written consent of such Buyer. In
the event of a breach of the foregoing covenant by the Company, or any of its
Subsidiaries, or any of its or their respective officers, directors, employees
and agents, in addition to any other remedy provided herein or in the
Transaction Documents, a Buyer shall have the right to make a public disclosure,
in the form of a press release, public advertisement or otherwise, of such
material, nonpublic information without the prior approval by the Company, any
of its Subsidiaries, or any of its or their respective officers, directors,
employees or agents. No Buyer shall have any liability to the Company, any of
its Subsidiaries, or any of its or their respective officers, directors,
employees, stockholders or agents, for any such disclosure. Subject to the
foregoing, neither the Company, its Subsidiaries 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 contemporaneously therewith
and (ii) as is required by applicable law and regulations (provided that in the
case of clause (i) each Buyer shall be consulted by the Company in connection
with any such press release or other public disclosure prior to its
release).  Without the prior written consent of any applicable Buyer,
neither the Company nor any of its Subsidiaries shall disclose the name of such
Buyer in any filing, announcement, release or otherwise.

         

        
          
            
            

          

          
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        (k)   Restriction on Redemption
and Cash Dividends; Additional Registration Statements.  So
long as 20% of the Preferred Shares are outstanding, the Company shall not,
directly or indirectly, redeem, or declare or pay any cash dividend or
distribution on, any other capital stock of the Company without the prior
express written consent of the holders of Preferred Shares representing not less
than a majority of the aggregate number of the then outstanding Preferred
Shares. Until the Effective Date (as defined in the Registration Rights
Agreement), the Company shall not file a registration statement under the
Securities Act relating to securities that are not the Registrable
Securities.

        

        (l)   Additional Preferred
Shares. So long
as any Buyer beneficially owns any of the Securities, the Company will not,
without the prior written consent of Buyers holding a majority of the
then-outstanding Preferred Shares, issue any Preferred Shares (other than to the
Buyers as contemplated by the Transaction Documents) and the Company shall not
issue any other securities that would cause a breach or default under the
Certificate of Designation or any of the Warrants, and the Company shall comply
with the provisions of the Certificate of Designation and Warrants with respect
to participation in additional securities issuances.

        

        (m)   Corporate
Existence. So long
as any Buyer beneficially owns any Preferred Shares or any Warrants, the Company
shall not be party to any Fundamental Transaction (as defined in the Certificate
of Designation) unless (i) such Fundamental Transaction is, provided Vision,
together with its affiliates, shall then own Preferred Shares with a Stated
Value (as defined in the Certificate of Designation) of at least $400,000,
approved in writing by Vision and (ii) the Company is in compliance with the
applicable provisions governing Fundamental Transactions set forth in the
Certificate of Designation and the Warrants.

         

        
          
            
            

          

          
            19

            
              

            

          

          
            
            

          

        

         

        (n)   Reservation of
Shares. The
Company shall take all action necessary to at all times have authorized, and
reserved for the purpose of issuance, no less than 120% of (i) the maximum
number of shares of Common Stock issuable upon conversion of the Preferred
Shares (assuming for purposes hereof, that the Preferred Shares are convertible
at the Conversion Price and without taking into account any limitations on the
conversion of the Preferred Shares set forth in the Certificate of Designation)
and (ii) the maximum number of shares of Common Stock issuable upon exercise of
the Warrants (assuming for purposes hereof that the Warrants are fully
exerciseable and without taking into account any limitations on the exercise of
the Warrants set forth in the Warrants).

        

        (o)   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.

        

        (r)   Escrow of Performance
Milestone Shares. At or prior to the Closing, Todd Hays, Thomas Hays,
John Hays, Jr. and Rodney Hillman (collectively, “Company Management”) shall
deliver into escrow an aggregate of 740,000 shares of Common Stock (“Milestone Shares”) pursuant to
the terms of that certain Performance Milestone Shares Agreement in the form
attached hereto as Exhibit
D (the “Performance
Milestone Shares Agreement”).

        

        (s)   Retention of
Auditor.  The Company shall retain and use the services of a
nationally-recognized independent registered public accounting firm (“Independent Auditor”),
registered with the Public Company Accounting Oversight Board, in connection
with the audit of the Company’s consolidated financial statements for the year
ending December 31, 2010, and for subsequent periods.

        

        (t)   Short Sales. Each
Buyer, severally and not jointly with the other Buyers, covenants that neither
it, nor any Affiliate acting on its behalf or pursuant to any understanding with
it, will execute any Short Sales during the period commencing on November __,
2009 and ending one year after the date on which the last registration statement
the Company is required to file so that all of the Registrable Securities (as
defined in the Registration Rights Agreement) are registered.

        

        (u)   Executive
Compensation.  For so long as Vision, together with its
affiliates, owns Preferred Shares with a Stated Value (as defined in the
Certificate of Designation) of at least $400,000, the Company shall not create
any additional incentive compensation plan, or increase the compensation of its
executive officers and key employees without the prior written consent of Vision
Capital.

        

        (v)   Indebtedness.   For
so long as Vision, together with its affiliates, owns Preferred Shares with a
Stated Value (as defined in the Certificate of Designation) of at least
$400,000, the Company shall not permit the ratio of Indebtedtness to
shareholders’ equity to exceed, for any period (calculated as of the end of each
fiscal quarter during each such period based upon the immediately preceding four
fiscal quarters) the ratio of 1.00 to 1.00, without the prior written consent of
Vision or the unanimous approval of the Company’s “independent directors”
(within the meaning of the rules of the Nasdaq Stock Market).

         

        
          
            
            

          

          
            20

            
              

            

          

          
            
            

          

        

         

        (w)   Monitoring
Fee.  From and after the Closing Date, the Company shall pay
Vision Capital a monthly cash monitoring fee (the “Monitoring Fee”) equal to
$5,000 per month for twenty four (24) months after the Closing
Date.  The Company shall pay the Monitoring Fee by wire transfer of
immediately available funds (pursuant to wire instructions provided by Vision
Capital) on or before the tenth (10th) day of
each month, commencing on January 10, 2010.

        

        (x)   Transfer Taxes. On
the Closing Date, all stock transfer and other taxes (other than income or
similar taxes) which are required to be paid by the Company in connection with
the sale and transfer of the Securities to be sold to each Buyer hereunder shall
be fully paid for by the Company, and all laws imposing such taxes shall be
complied with by the Company.

        
           

          5.   REGISTER;
TRANSFER AGENT INSTRUCTIONS; LEGEND.

        

        

        (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
Securities), a register for the Preferred Shares and the Warrants in which the
Company shall record the name and address of the Person in whose name the
Preferred Shares and the Warrants have been
issued (including the name and address of each transferee), the number of
Preferred Shares held by such Person, the number of Conversion Shares issuable
upon conversion of the Preferred Shares and Warrant Shares issuable upon
exercise of the Warrants 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 Conversion Shares and the
Warrant Shares in such amounts as specified from time to time by each Buyer to
the Company upon conversion of the Preferred Shares or exercise of the Warrants
in the form of Exhibit
E attached hereto (the “Irrevocable Transfer Agent
Instructions”). The Company represents and 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(f)
hereof, will be given by the Company to its transfer agent with respect to the
Securities, and that the Securities shall otherwise be freely transferable on
the books and records of the Company, as applicable, 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 Section 2(f),
the Company shall permit the transfer and shall promptly instruct its transfer
agent to issue one or more certificates or credit shares to the applicable
balance accounts at DTC in such name and in such denominations as specified by
such Buyer to effect such sale, transfer or assignment. In the event that such
sale, assignment or transfer involves Conversion Shares and Warrant Shares sold,
assigned or transferred pursuant to an effective registration statement or in
compliance with Rule 144, the transfer agent shall issue such Securities to the
Buyer, assignee or transferee, as the case may be, without any restrictive
legend in accordance with Section 5(d) below. 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. The Company shall cause
its counsel to issue the legal opinion referred to in the Irrevocable Transfer
Agent Instructions to the Company’s transfer agent on the Effective Date. Any
fees (with respect to the transfer agent, counsel to the Company or otherwise)
associated with the issuance of such opinion or the removal of any legends on
any of the Securities shall be borne by the Company.

         

        
          
            
            

          

          
            21

            
              

            

          

          
            
            

          

        

         

        (c)   Legends. Each
Buyer understands that the certificates or other instruments representing the
Preferred Shares and the Warrants and, until such time as the resale of the
Conversion Shares and the Warrant Shares have been registered under the
Securities Act as contemplated by the Registration Rights Agreement, the stock
certificates representing the Conversion Shares and the Warrant Shares, except
as set forth below, 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] [EXERCISABLE] 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 TO THE HOLDER HEREOF, IN A GENERALLY ACCEPTABLE FORM, THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE
144 OR 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.

         

        
           

        

        
          (d)   Removal of
Legends.
Certificates evidencing Securities shall not be required to contain the legend
set forth in Section 5(c) above or any other legend (i) while a registration
statement (including the Registration Statement) covering the resale of such
Securities is effective under the Securities Act, (ii) following any sale of
such Securities pursuant to Rule 144, (iii) in connection with a sale,
assignment or other transfer (other than under Rule 144) provided such Buyer
provides the Company with an opinion of counsel to such Buyer, in a generally
acceptable form, to the effect that such sale, assignment or transfer of the
Securities may be made without registration under the applicable requirements of
the Securities Act or (iv) if such legend is not required under applicable
requirements of the Securities Act (including, without limitation, controlling
judicial interpretations and pronouncements issued by the SEC). If a legend is
not required pursuant to the foregoing, the Company shall no later than two (2)
Trading Days following the delivery by a Buyer to the Company or the transfer
agent (with notice to the Company) of a legended certificate representing such
Securities (endorsed or with stock powers attached, signatures guaranteed, and
otherwise in form necessary to affect the reissuance and/or transfer, if
applicable), together with any other deliveries from such Buyer as may be
required above in this Section 5(d), as directed by such Buyer, either: (A)
deliver (or cause to be delivered to) such Buyer a certificate representing such
Securities that is free from all restrictive and other legends or (B) if the
Securities so delivered by such Buyer were Conversion Shares or Warrant Shares,
credit the balance account of such Buyer’s or such Buyer’s nominee with DTC with
a number of shares of Common Stock equal to the number of Conversion Shares or
Warrant Shares (as the case may be) represented by the certificate so delivered
by such Buyer (the date by which such certificate is required to be delivered to
such Buyer pursuant to the foregoing is referred to herein as the “Required Delivery
Date”).

        

         

        
          
            
            

          

          
            22

            
              

            

          

          
            
            

          

        

         

        (e)   Failure to Timely Deliver;
Buy-In. If the
Company fails to (i) issue and deliver (or cause to be delivered) to a Buyer by
the Required Delivery Date a certificate representing the Conversion Shares or
Warrant Shares (as the case may be) so delivered to the Company by such Buyer
that is free from all restrictive and other legends or (ii) credit the balance
account of such Buyer’s or such Buyer’s nominee with DTC for such number of
shares of Conversion Shares or Warrant Shares so delivered to the Company, then,
in addition to all other remedies available to such Buyer, but subject to the
Limitation on Damages (as defined in the Certificate of Designation), the
Company shall pay in cash to such Buyer on each day after the Required Delivery
Date that the issuance or credit of such shares is not timely effected an amount
equal to 1.0% of the product of (A) the sum of the number of shares of
Conversion Shares or Warrant Shares (as the case may be) not issued to such
Buyer on a timely basis and to which such Buyer is entitled and (B) the Closing
Sale Price (as defined in the Certificate of Designation) of the shares of
Common Stock on the Required Delivery Date. In addition to the foregoing, if the
Company fails to so properly deliver such unlegended certificates or so properly
credit the balance account of such Buyer’s or such Buyer’s nominee with DTC by
the Required Delivery Date, and if on or after the Required Delivery Date such
Buyer purchases (in an open market transaction or otherwise) shares of Common
Stock to deliver in satisfaction of a sale by such Buyer of shares of Common
Stock that such Buyer anticipated receiving from the Company without any
restrictive legend (a “Buy-In”), then the Company
shall, within three (3) Trading Days after such Buyer’s request and in such
Buyer’s sole discretion, either (i) pay cash to such Buyer in an amount equal to
such Buyer’s total purchase price (including brokerage commissions, if any) for
the shares of Common Stock so purchased (the “Buy-In Price”), at which point
the Company’s obligation to deliver such certificate shall terminate and such
shares shall be cancelled, or (ii) promptly honor its obligation to deliver to
such Buyer a certificate or certificates representing such number of shares of
Common Stock that would have been issued if the Company timely complied with its
obligations hereunder and pay cash to such Buyer in an amount equal to the
excess (if any) of the Buy-In Price over the product of (A) such number of
shares of Conversion Shares or Warrant Shares (as the case may be) that the
Company was required to deliver to such Buyer by the Required Delivery Date
times (B) the Closing Sale Price of the Common Stock on the Required Delivery
Date.

         

        
          
            
            

          

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

        

        

        (a)   The
obligation of the Company hereunder to issue and sell the Preferred Shares and the related Warrants
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, if in the case of Vision, the amount is withheld pursuant to
Section 4(h))) for the Preferred Shares and the related Warrants being purchased by such
Buyer at the Closing by wire transfer of immediately available funds pursuant to
the wire instructions provided by the Company.

        

        (iii)   The
Exchange shall occur simultaneously with the Closing.

        

        (iv)   The
legal opinion of Greenberg Traurig, LLP, New York, New York, contemplated by
Section 5.2(e) of the Exchange Agreement shall have been delivered to Gamers,
which may be relied upon by the Buyers as if fully and completed addressed to
them.

        

        (v)   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)   The
obligation of each Buyer hereunder to purchase the Preferred Shares and the
related Warrants 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 duly executed and delivered to such Buyer (A) each of
the Transaction Documents, (B) the Preferred Shares (in such numbers as is set
forth across from such Buyer’s name in column (3) of the Schedule of Buyers),
and the related Warrants (in such numbers as is set forth across from such
Buyer’s name in column (4) of the Schedule of Buyers) being purchased by such
Buyer at the Closing pursuant to this Agreement and (C) the Unit Purchase
Options (to acquire that number of additional Preferred Shares set forth
opposite such Buyer’s name in column (7) on the Schedule of Buyers and Warrants
to acquire that number of additional Warrant Shares set forth opposite such
Buyer’s name in column (8) on the Schedule of Buyers) being received by such
Buyer at the Closing pursuant to this Agreement.

         

        
          
            
            

          

          
            24

            
              

            

          

          
            
            

          

        

        
 

        (ii)   Such
Buyer shall have received the opinion of Sichenzia Ross Friedman Ference LLP,
the Company’s outside counsel, dated as of the Closing Date, in the form of
Exhibit
F attached hereto.

        

        (iii)   Company
Management shall have delivered the Milestone Shares into escrow and shall have
duly executed and delivered the Performance Milestone Shares
Agreement.

        

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

        

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

        

        (vi)   The
Company shall have delivered to such Buyer a certified copy of its certificate
of incorporation as certified by the Secretary of State of the State of Delaware
within ten (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(c) as adopted by the Company’s board of
directors in a form reasonably acceptable to such Buyer, (ii) its certificate of
incorporation and (iii) its bylaws, each as in effect at the Closing, in the
form attached hereto as Exhibit
G.

        

        (viii)   Each
and every representation and warranty 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
H.

        

        (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 on the Closing
Date immediately prior to the Closing.

        

        (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 maintenance requirements of the Principal
Market.

         

        
          
            
            

          

          
            25

            
              

            

          

          
            
            

          

        

         

        (xi)   The
Company shall have obtained all governmental, regulatory or third party consents
and approvals, if any, necessary for the sale of the Securities, including
without limitation, those required by the Principal Market.

        

        (xii)   The
Certificate of Designation in the form attached hereto as Exhibit
A shall have been filed with the Secretary of State of the State of
Delaware and shall be in full force and effect, enforceable against the Company
in accordance with its terms and shall not have been amended.

        

        (xiii)   The
aggregate Purchase Price paid to the Company for the Securities by the Buyers at
the Closing shall not be less than $3,700,000.

        

        (xiv)   The
Exchange shall occur simultaneously with the Closing.

        

        (xv)   The
Company shall have delivered to such Buyer a certificate of the Chief Executive
Officer of the Company certifying to (A) the repayment of all outstanding
principal and accrued and unpaid interest owed by Gamers to Allegiance Capital
Limited Partnership (“Allegiance”), and (B) the
exchange of a warrant held by Allegiance for 200,000 shares of the Company’s
Common Stock.

        

        (xvi)   The
Company shall have entered into written employment agreements with each of Todd
Hays and Rodney Hillman, on terms and conditions which are reasonably
satisfactory to Vision.

        

        (xvii)   Each
of Vision and the Clinton Group shall have completed all its business, legal,
accounting and environmental due diligence with respect to the Company and the
Subsidiaries and shall, in their sole judgment, be satisfied with the results
thereof and shall have received the approval of their respective investment
committee for the consummation of the transactions contemplated by this
Agreement.

        

        (xviii)   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 three (3) 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 a
non-breaching party’s failure to waive such unsatisfied condition(s)), any such
non-breaching party shall have the right to terminate its obligations under this
Agreement with respect to such breaching party at the close of business on such
date without liability of such non-breaching party to any other party; provided, however, that the
abandonment of the sale and purchase of the Preferred Shares and the Warrants
shall be applicable only to such non-breaching party providing such written
notice, provided further,
notwithstanding any such termination the Company shall remain obligated to
reimburse the non-breaching Buyers for the expenses described in Section 4(h)
above. Nothing contained in this Section 8 shall be deemed to release any party
from any liability for any breach by such party of the terms and provisions of
this Agreement or the other Transaction Documents or to impair the right of any
party to compel specific performance by any other party of its obligations under
this Agreement or the other Transaction Documents.

         

        
          
            
            

          

          
            26

            
              

            

          

          
            
            

          

        

        
           

          9.   MISCELLANEOUS.

        

        

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

        

        (b)   Counterparts. This
Agreement may be executed in two or more identical counterparts, all of which
shall be considered one and the same agreement and shall become effective when
counterparts have been signed by each party and delivered to the other party. In
the event that any signature is delivered by facsimile transmission or by an
e-mail which contains an electronic file of an executed signature page, such
signature page shall create a valid and binding obligation of the party
executing (or on whose behalf such signature is executed) with the same force
and effect as if such facsimile or electronic file signature page (as the case
may be) were an original thereof.

        

        (c)   Headings;
Gender. The
headings of this Agreement are for convenience of reference and shall not form
part of, or affect the interpretation of, this Agreement. Unless the context
clearly indicates otherwise, each pronoun herein shall be deemed to include the
masculine, feminine, neuter, singular and plural forms thereof. The terms “including,” “includes,” “include” and words of
like import shall be construed broadly as if followed by the words “without
limitation.”  The terms “herein,” “hereunder,” “hereof” and words of
like import refer to this entire Agreement instead of just the provision in
which they are found.

         

        
          
            
            

          

          
            27

            
              

            

          

          
            
            

          

        

         

        (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, the Exchange Agreement, the other Transaction Documents and the
schedules and exhibits attached hereto and thereto and the instruments
referenced herein and therein supersede all other prior oral or written
agreements between the Buyers, the Company, their affiliates and Persons acting
on their behalf with respect to the matters contained herein, and this
Agreement, the Exchange Agreement, the other Transaction Documents, the
schedules and exhibits attached hereto and thereto and the instruments
referenced herein and therein contain the entire understanding of the parties
with respect to the matters covered herein and therein and, except as
specifically set forth herein or therein, neither the Company nor any Buyer
makes any representation, warranty, covenant or undertaking with respect to such
matters. No provision of this Agreement may be amended or waived other than by
an instrument in writing signed by the Company and the holders of at least a
majority of the Preferred Shares issued and issuable hereunder, and any
amendment or to, or waiver of any provision of, this Agreement made in
conformity with the provisions of this Section 9(e) shall be binding on all
Buyers and holders of Securities, as applicable, provided that any Buyer may
give a waiver in writing as to itself. No such amendment or waiver (unless given
pursuant to the foregoing proviso) shall be effective to the extent that it
applies to less than all of the holders of the Preferred Shares then
outstanding. No consideration shall be offered or paid to any Person to amend or
consent to a waiver or modification of any provision of any of the Transaction
Documents unless the same consideration also is offered to all of the parties to
the Transaction Documents, holders of Preferred Shares, or holders of the
Warrants, as the case may be. 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. Without limiting the foregoing, the Company confirms
that, except as set forth in this Agreement, no Buyer has made any commitment or
promise or has any other obligation to provide any financing to the Company or
otherwise.

        

        (f)   Notices. Any
notices, consents, waivers or other communications required or permitted to be
given under the terms of this Agreement must be in writing and will be deemed to
have been delivered: (i) upon receipt, when delivered personally; (ii) upon
receipt, when sent by facsimile (provided confirmation of transmission is
mechanically or electronically generated and kept on file by the sending party);
or (iii) one (1) Business Day after deposit with an overnight courier service
with next day delivery specified, in each case, properly addressed to the party
to receive the same. The addresses and facsimile numbers for such communications
shall be:

         

        
          
            
            

          

          
            28

            
              

            

          

          
            
            

          

        

         

        If to the
Company:

        

        Gamers
Factory Inc.

        10957
McCormick Road

        Hunt
Valley, Maryland 21031

        Telephone:  (410)
316-9900

        Facsimile:  (443)
638-0255

        Attention:  Mr.
Todd Hays, President and CEO

        

        With a
copy (for informational purposes only) to:

        

        Sichenzia
Ross Friedman Ference LLP

        61
Broadway, 32nd Floor

        New York,
New York 10006

        Telephone:  (212)
930-9700

        Facsimile:  (212)
930-9725

        Attention:  Gregory
Sichenzia, Esq.

        

        If to the
Transfer Agent:

        

        Island
Stock Transfer

        100
Second Avenue South, Suite 705-S

        St.
Petersburg, Florida 33701

        Telephone:  (727)
289-0010

        Facsimile:  (727)
289-0069

        Attention:  Carl
Dilley

        

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

        

        with a
copy (for informational purposes only) to:

        

        Greenberg
Traurig, LLP

        MetLife
Building

        200 Park
Avenue

        New York,
New York 10166

        Telephone:  (212)
801-9200

        Facsimile:  (212)
801-6400

        Attention:  Spencer
G. Feldman, Esq.

        

        or to
such other address and/or facsimile number and/or to the attention of such other
Person as the recipient party has specified by written notice given to each
other party five (5) days prior to the effectiveness of such change provided, that
Greenberg Traurig, LLP shall only receive notices sent to Vision. 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.

         

        
          
            
            

          

          
            29

            
              

            

          

          
            
            

          

        

         

        (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
Preferred Shares or the Warrants. The Company shall not assign this Agreement or
any rights or obligations hereunder without the prior written consent of the
holders of at least a majority of the aggregate number of Registrable Securities
issued and issuable under the Transaction Documents, including, without
limitation, by way of a Fundamental Transaction (unless the Company is in
compliance with the applicable provisions governing Fundamental Transactions set
forth in the Certificate of Designation and the Warrants). A Buyer may assign
some or all of its rights hereunder in connection with transfer of any of its
Preferred Shares or Warrants without the consent of the Company, in which event
such assignee shall be deemed to be a Buyer hereunder with respect to such
assigned rights.

        

        (h)   No Third Party
Beneficiaries. This
Agreement is intended for the benefit of the parties hereto and their respective
permitted successors and assigns, and is not for the benefit of, nor may any
provision hereof be enforced by, any other Person, other than the Indemnitees
referred to in Section 9(k).

        

        (i)   Survival. Unless
this Agreement is terminated under Section 8 in accordance with the terms
thereof, the representations, warranties, agreements and covenants shall survive
the Closing. For the avoidance of doubt, notwithstanding the fact that the
representations and warranties contained in the Exchange Agreement do not
survive the Effective Time (as defined in the Exchange Agreement), the Company
acknowledges and agrees that the Business Representations and Warranties
contained in the Exchange Agreement and incorporated by reference into Section
3.1(a) of this Agreement 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 affiliate of a
Buyer that holds Preferred Shares or Warrants 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 any of the Transaction Documents or any other certificate, instrument
or document contemplated hereby or thereby, (b) any breach of any covenant,
agreement or obligation of the Company contained in any of the Transaction
Documents or any other certificate, instrument or document contemplated hereby
or thereby or (c) any cause of action, suit or claim brought or made against
such Indemnitee by a third party (including for these purposes a derivative
action brought on behalf of the Company) and arising out of or resulting from
(i) the execution, delivery, performance or enforcement of the Transaction
Documents or any other certificate, instrument or document contemplated hereby
or thereby, (ii) any transaction financed or to be financed in whole or in part,
directly or indirectly, with the proceeds of the issuance of the Securities,
(iii) any disclosure made by such Buyer pursuant to Section 4(j), or (iv) 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;
provided, that no Buyer shall be entitled to indemnification to the extent any
of the foregoing is caused by its gross negligence or willful misconduct. 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.

         

        
          
            
            

          

          
            30

            
              

            

          

          
            
            

          

        

         

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

        

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

         

        
          
            
            

          

          
            31

            
              

            

          

          
            
            

          

        

         

        (o)   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, foreign, state or federal
law, common law or equitable cause of action), then to the extent of any such
restoration the obligation or part thereof originally intended to be satisfied
shall be revived and continued in full force and effect as if such payment had
not been made or such enforcement or setoff had not occurred.

        

        (p)   Independent Nature of
Buyers’ Obligations and Rights.  The
obligations of each Buyer under the Transaction Documents 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 group or entity, or create a
presumption that the Buyers are in any way acting in concert or as a group or
entity with respect to such obligations or the transactions contemplated by the
Transaction Documents or any matters, and the Company acknowledges that the
Buyers are not acting in concert or as a group with respect to such obligations
or the transactions contemplated by the Transaction Documents. The decision of
each Buyer to purchase Securities pursuant to the Transaction Documents has been
made by such Buyer independently of any other Buyer. Each Buyer acknowledges
that no other Buyer has acted as agent for such Buyer Purchaser in connection
with such Buyer making its investment hereunder and that no other Buyer will be
acting as agent of such Buyer in connection with monitoring such Buyer’s
investment in the Securities or enforcing its rights under the Transaction
Documents. The Company and each Buyer confirms that each Buyer has independently
participated with the Company 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
limitation, 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.  The
use of a single agreement to effectuate the purchase and sale of the Preferred
Shares and the Warrants contemplated hereby was solely in the control of the
Company, not the action or decision of any Buyer, and was done solely for the
convenience of the Company and not because it was required or requested to do so
by any Buyer.

        

        
          (q)   Delivery of
Securities.  Notwithstanding
anything contained in this Agreement or any other Transaction Document to the
contrary, unless otherwise directed in writing by the applicable Buyer, the
Company shall, and shall cause its agents and representatives to, deliver all of
such Buyer’s securities purchased pursuant to this Agreement (and all securities
which are issuable to the Purchaser pursuant to the terms of this Agreement or
any other Transaction Document) to the address for delivery of securities set
forth on such Buyer’s signature page to this Agreement, and copies of the
certificates representing such securities shall be sent to such Buyer to the
address of such Buyer as set forth on such Buyer’s signature page to this
Agreement. Each time the Company fails to comply with the foregoing, the Company
shall promptly pay to the applicable Buyer, as partial relief for damages, an
amount equal to 1% of the aggregate purchase price paid by such Buyer for the
Securities purchased by such Buyer pursuant to this Agreement, provided that the
foregoing payment obligation shall be subject to the Limitation on
Damages.

        

      

      

      [signature pages
follow]

       

      
        
          
          

        

        
          32

          
            

          

        

        
          
          

        

      

       

      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.

      

      
         

        
          
            	 	COMPANY:
	 	 
	 
      	
                    GAME
      TRADING TECHNOLOGIES, INC.

                  
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	
                    By:

                  	
                     

                  	 
      
	 
      	 
      	
                    Name:
      Todd Hays

                  	 
      
	 
      	 
      	
                    Title:
      President and CEO

                  	 
      

          

        

         

        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

      

      

      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:
	 	 
	 
      	
                    

                      VISION
      OPPORTUNITY MASTER FUND, LTD.

                    

                  
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	
                    By:

                  	
                     

                  	 
      
	 
      	 
      	
                    Name:
      Adam
      Benowitz

                  	 
      
	 
      	 
      	
                    Title:
      Portfolio
      Manager

                  	 
      

          

        

         

      

       

      
ADDRESS
FOR DELIVERY OF SECURITIES:

      

      20 West
55th
Street, 5th
Floor

      New York,
New York 10019

      Attention:  Mr.
Michael Mosiello

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      
 

      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:
	 	 
	 
      	
                    

                      [OTHER
      BUYERS]

                    

                  
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	
                    By:

                  	
                     

                  	 
      
	 
      	 
      	
                    Name:
      

                  	 
      
	 
      	 
      	
                    Title: 
      

                  	 
      

          

        

         

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      

      SCHEDULE
OF BUYERS

      

       

      
        
          	
                  (1)

                	 
      	
                  (2)

                	 
      	
                  (3)

                	 
      	
                  (4)

                	 
      	
                  (5)

                	 
      	
                  (6)

                	 
      	
                  (7)

                	 
      	
                  (8)

                	 
      	
                  (9)

                
	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	
                  
                    Buyer

                  

                	 
      	
                  
                    Address
      and Facsimile Number

                  

                	 
      	
                  
                    Aggregate
      Number of Preferred Shares

                  

                	 
      	
                  
                    Aggregate
      Number of Warrant Shares

                  

                	 
      	
                  
                    Purchase
      Price

                  

                	 
      	
                  
                    Legal
      Representative’s

                    Address
      and Facsimile Number

                  

                	 
      	
                  
                    Aggregate
      Number of Additional Preferred Shares

                  

                	 
      	
                  
                    Aggregate
      Number of Additional Warrant Shares

                  

                	 
      	
                  
                    Additional
      Purchase Price

                  

                
	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      

        

      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      EXHIBITS

       

      
        
          	
                  Exhibit
      A

                	
                  Form
      of Certificate of Designation

                
	
                  Exhibit
      B

                	
                  Form
      of Warrant

                
	
                  Exhibit
      C

                	
                  Form
      of Registration Rights Agreement

                
	
                  Exhibit
      D

                	
                  Performance
      Milestone Shares Escrow Agreement

                
	
                  Exhibit
      E

                	
                  Form
      of Irrevocable Transfer Agent Instructions

                
	
                  Exhibit
      F

                	
                  Form
      of Outside Company Counsel Opinion

                
	
                  Exhibit
      G

                	
                  Form
      of Secretary’s Certificate

                
	
                  Exhibit
      H

                	
                  Form
      of Officer’s Certificate

                
	
                  Exhibit
      I

                	
                  Form
      of Unit Purchase Option

                

        

        

        

        
          	
                  Schedule
      3(g)

                	
                  Acknowledgment

                
	
                  Schedule
      3(h)

                	
                  Placement
      Agents

                
	
                  Schedule
      3(r)

                	
                  Transactions
      with Affiliates

                
	
                  Schedule
      3(s)

                	
                  Capitalization

                
	
                  Schedule
      3(t)

                	
                  Indebtedness
      and Other Contracts

                
	
                  Schedule
      3(u)

                	
                  Litigation

                
	
                  Schedule
      3(x)

                	
                  Title

                
	
                  Schedule
      4(d)

                	
                  Use
      of ProceedsUnassociated Document

    MODIFICATION
AGREEMENT TO

    PROMISSORY
NOTES

    

    This
MODIFICATION AGREEMENT is made as of December 31, 2009 between Infinite Group,
Inc., a Delaware corporation with offices at 60 Office Park Way, Pittsford, NY
14534 (“Borrower”) and Carle C. Conway, an individual residing at
1305 E. via Entrada, Tucson, AZ  85718 (“Lender”).

    

    WHEREAS,
Lender is the holder of three (3) Promissory Notes issued by the Borrower to the
Lender, as described in more detail in the attached Schedule A (collectively,
the Notes); and

    

    WHEREAS,
the parties desire to modify the terms and conditions of the Promissory Notes as
follows:

    

    NOW,
THEREFORE, the parties agree as follows:

    

    
      	
              1)  

            	
              The
      Notes and each of them are modified to provide that the time at which the
      entire principal balance and accrued and unpaid interest shall be due and
      payable is December 31, 2010.

            

    

    

    
      	
              2)  

            	
              Except
      as modified by this Agreement, all of the terms, covenants and conditions
      of the Notes shall remain the same.

            

    

    

    In
witness whereof, Borrower and Lender have executed this Agreement under the day
and year first written above.

    

    
      
        
          
            	
                    INFINITE
      GROUP, INC.

                  	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	
                    /s/
      Michael S. Smith

                  	 
      	 
      
	
                    By:
      Michael S. Smith, President

                  	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	
                    /s/
      Carl C. Conway

                  	 
      	 
      
	
                    By:
      Carle C. Conway

                  	 
      	 
      

          

        

      

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    PROMISSORY
NOTES OF INFINITE GROUP, INC.

    IN
FAVOR OF CARLE C. CONWAY

    

    

                                                                                                                          

    

    
      
        
          	Holder      	 	Principal
      Amt    	 	 	 	Date
	 	 	 	 	 	 	 
	
                  Carle
      C. Conway

                	 
      	
                  $150,000

                	 
      	 
      	 
      	
                  8/13/03

                
	
                  Carle
      C. Conway

                	 
      	
                  $  50,000

                	 
      	 
      	 
      	
                  1/16/04

                
	
                  Carle
      C. Conway

                	 
      	
                  $  65,000

                	 
      	 
      	 
      	
                  3/11/04

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00169-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00169-of-00352.parquet"}]]