Document:

exv4w2

Exhibit 4.2

EXCHANGE AND REGISTRATION RIGHTS AGREEMENT

Dated as of June 29, 2009

by and among

CINEMARK USA, INC.

EACH OF THE GUARANTORS LISTED

ON THE SIGNATURE PAGES HEREIN

and

BARCLAYS CAPITAL INC.

DEUTSCHE BANK SECURITIES INC.

J.P. MORGAN SECURITIES INC.

MORGAN STANLEY & CO. INCORPORATED

BANC OF AMERICA SECURITIES LLC

CREDIT SUISSE SECURITIES (USA) LLC

WACHOVIA CAPITAL MARKETS, LLC

 

 

     This Exchange and Registration Rights Agreement (this “Agreement”) is made and entered
into as of June 29, 2009 by and among Cinemark USA, Inc., a Texas corporation (“Cinemark”),
certain of Cinemark’s subsidiaries signatory hereto as guarantors (the “Guarantors”) and
Barclays Capital Inc., Deutsche Bank Securities Inc., J.P. Morgan Securities Inc., Morgan Stanley &
Co. Incorporated, Banc of America Securities LLC, Credit Suisse Securities (USA) LLC, and Wachovia
Capital Markets, LLC (each, a “Purchaser” and collectively, the “Purchasers”).

     Pursuant to the Purchase Agreement, dated June 16, 2009 (the “Purchase Agreement”),
among Cinemark, the Guarantors and the Purchasers, the Purchasers have agreed to purchase the
aggregate principal amount of Cinemark’s 8.625% Senior Notes due 2019 (the “Notes”) set
forth on Schedule 1 thereto which shall be jointly and severally guaranteed on a senior basis by
each of the Guarantors.

     In order to induce the Purchasers to purchase the Notes, Cinemark and each of the Guarantors
have agreed to provide the registration rights set forth in this Agreement. The execution and
delivery of this Agreement is a condition to the obligations of the Purchasers set forth in Section
5 of the Purchase Agreement.

     The parties hereby agree as follows:

SECTION 1. DEFINITIONS

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

     Act: The Securities Act of 1933, as amended.

     Additional Interest: As defined in Section 5 hereof.

     Advice: As defined in Section 6(d) hereof.

     Applicable Securities: Each of the Notes, until the earliest to occur, with respect
to a particular Note, of (a) the date on which such Note is exchanged in the Exchange Offer and
entitled to be resold to the public by the Holder thereof without complying with the prospectus
delivery requirements of the Act, (b) the date on which such Note has been effectively registered
under the Act and disposed of in accordance with a Shelf Registration Statement or (c) the date
such Note ceases to be outstanding.

     Broker-Dealer: Any broker or dealer registered under the Exchange Act.

     Business Day: Any day except a Saturday, Sunday or other day in the City of New York
on which banks are authorized to close.

     Closing Date: The date of this Agreement.

     Commission: The Securities and Exchange Commission.

 

 

     Consummate: An Exchange Offer shall be deemed “Consummated” for purposes of this
Agreement upon the occurrence of (i) the filing and effectiveness under the Act of the Exchange
Offer Registration Statement relating to the Exchange Notes to be issued in the Exchange Offer,
(ii) the maintenance of such Exchange Offer Registration Statement continuously effective and the
keeping of the Exchange Offer open for a period not less than the minimum period required pursuant
to Section 3(b) hereof, and (iii) the delivery by Cinemark to the Trustee under the Indenture of
the Exchange Notes in the same aggregate principal amount as the aggregate principal amount of the
Notes that were validly tendered by Holders thereof pursuant to the Exchange Offer.

     Effectiveness Target Date: As defined in Section 5.

     Exchange Act: The Securities Exchange Act of 1934, as amended.

     Exchange Notes: Cinemark’s 8.625% Senior Notes due 2019 to be issued pursuant to the
Indenture in the Exchange Offer.

     Exchange Offer: The registration by Cinemark and the Guarantors under the Act of the
Exchange Notes pursuant to an Exchange Offer Registration Statement pursuant to which Cinemark and
the Guarantors offer the Holders of all outstanding Applicable Securities the opportunity to
exchange all such outstanding Applicable Securities held by such Holders for Exchange Notes in an
aggregate principal amount equal to the aggregate principal amount of the Applicable Securities
validly tendered in such exchange offer by such Holders.

     Exchange Offer Registration Statement: The Registration Statement relating to the
Exchange Offer, including the related Prospectus.

     Exempt Resales: The transactions in which the Purchasers propose to sell the Notes to
certain “qualified institutional buyers,” as such term is defined in Rule 144A under the Act, and
outside the United States in reliance upon Regulation S under the Act.

     FINRA: The Financial Industry Regulatory Authority.

     Free Writing Prospectus: Each free writing prospectus (as defined in Rule 405 under
the Act) prepared by or on behalf of Cinemark or used or referred to by Cinemark in connection with
the sale of the Securities.

     Holders: As defined in Section 2(b) hereof.

     Indenture: The Indenture, dated as of June 29, 2009, among Cinemark, the Guarantors
and Wells Fargo Bank, N.A., as trustee (the “Trustee”), pursuant to which the Securities
are to be issued, as such Indenture is amended or supplemented from time to time in accordance with
the terms thereof.

     Issue Date: The date on which the Notes are originally issued under the Indenture.

     Losses: As defined in Section 8(a) hereof.

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     Notes: As defined in the preamble hereto.

     Person: An individual, partnership, corporation, limited liability company, joint
venture, association, trust or other organization whether or not a legal entity, or a government or
agency or political subdivision thereof.

     Prospectus: The prospectus, including any Free Writing Prospectus, included in a
Registration Statement, as amended or supplemented by any prospectus supplement and by all other
amendments thereto, including post-effective amendments and all material incorporated by reference
into such Prospectus.

     Purchaser: As defined in the preamble hereto.

     Registration Default: As defined in Section 5 hereof.

     Registration Statement: Any registration statement of Cinemark and the Guarantors
relating to (a) an offering of Exchange Notes pursuant to an Exchange Offer or (b) the registration
for resale of Applicable Securities pursuant to the Shelf Registration Statement, which is filed
pursuant to the provisions of this Agreement, in each case, including the Prospectus included
therein, all amendments and supplements thereto (including post-effective amendments) and all
exhibits and material incorporated by reference therein.

     Securities: The Notes and the Exchange Notes.

     Shelf Filing Deadline: As defined in Section 4(a)(x) hereof.

     Shelf Registration: A registration effected by the filing of a Shelf Registration
Statement pursuant to Section 4 hereof.

     Shelf Registration Statement: As defined in Section 4(a)(x) hereof.

     TIA: The Trust Indenture Act of 1939 as in effect on the date of the Indenture.

     Underwritten Registration or Underwritten Offering: A registration in which
securities of Cinemark and the Guarantors are sold to an underwriter for reoffering to the public.

SECTION 2. SECURITIES SUBJECT TO THIS AGREEMENT

     (a) Applicable Securities. The Securities entitled to the benefits of this
Agreement are the Applicable Securities.

     (b) Holders of Applicable Securities. A Person is deemed to be a holder of
Applicable Securities (each, a “Holder”) whenever such Person owns Applicable
Securities.

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SECTION 3. REGISTERED EXCHANGE OFFER

          (a) Unless the Exchange Offer shall not be permissible under applicable law or Commission
policy (so long as the procedures set forth in Section 6(a) below are being or have been complied
with), Cinemark and the Guarantors shall (i) use their commercially reasonable best efforts to
cause to be filed with the Commission, not later than 90 days after the Closing Date, the Exchange
Offer Registration Statement under the Act relating to the Exchange Notes and the Exchange Offer,
(ii) use their commercially reasonable best efforts to cause such Exchange Offer Registration
Statement to be declared effective by the Commission at the earliest practicable time, but not
later than 180 days after the Closing Date, (iii) in connection with the foregoing, (A) file all
pre-effective amendments to such Exchange Offer Registration Statement as may be necessary in order
to cause such Exchange Offer Registration Statement to become effective, (B) if applicable, file a
post-effective amendment to such Exchange Offer Registration Statement pursuant to Rule 430A under
the Act and (C) cause all necessary filings in connection with the registration and qualification
of the Exchange Notes to be made under the Blue Sky laws of such jurisdictions as are necessary to
permit Consummation of the Exchange Offer, and (iv) upon the effectiveness of such Exchange Offer
Registration Statement, commence and use their commercially reasonable best efforts to Consummate
the Exchange Offer. The Exchange Offer shall be on an appropriate form permitting registration of
the Exchange Notes to be offered in exchange for the Applicable Securities and to permit resales of
Securities held by Broker-Dealers as contemplated by Section 3(c) below. If, after such Exchange
Offer Registration Statement initially is declared effective by the Commission, the Exchange Offer
or the issuance of Exchange Notes thereunder or the sale of Applicable Securities pursuant thereto
as contemplated by Section 3(c) below is interfered with by any stop order, injunction or other
order or requirement of the Commission or any other governmental agency or court, such Exchange
Offer Registration Statement shall be deemed not to have become effective for purposes of this
Agreement during the period that such stop order, injunction or other similar order or requirement
shall remain in effect.

          (b) Cinemark and the Guarantors shall use their commercially reasonable best efforts to cause
the Exchange Offer Registration Statement to be effective continuously and shall keep the Exchange
Offer open for a period of not less than the minimum period required under applicable federal and
state securities laws to Consummate the Exchange Offer; provided, however, that in no event shall
such period be less than 20 Business Days. Cinemark and the Guarantors shall cause the Exchange
Offer to comply with all applicable federal and state securities laws. No securities other than
the Securities shall be included in the Exchange Offer Registration Statement. Unless the Exchange
Offer shall not be permissible under applicable law or Commission policy, Cinemark and the
Guarantors shall use their commercially reasonable best efforts to cause the Exchange Offer to be
Consummated on the earliest practicable date after the Exchange Offer Registration Statement has
become effective, but not later than 30 days thereafter.

          (c) Cinemark shall indicate in a “Plan of Distribution” section contained in the Prospectus
included in the Exchange Offer Registration Statement that any Broker-Dealer who holds Notes that
are Applicable Securities and that were acquired for its own account as a result of market-making
activities or other trading activities (other than Applicable Securities acquired

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directly from Cinemark), may exchange such Notes pursuant to the Exchange Offer; provided,
however, such Broker-Dealer may be deemed to be an “underwriter” within the meaning of the Act and
must, therefore, deliver a prospectus meeting the requirements of the Act in connection with any
resales of the Exchange Notes received by such Broker-Dealer in the Exchange Offer, which
prospectus delivery requirement may be satisfied by the delivery by such Broker-Dealer of the
Prospectus contained in the Exchange Offer Registration Statement. Such “Plan of Distribution”
section shall also contain all other information with respect to such resales by Broker-Dealers
that the Commission may require in order to permit such resales pursuant thereto, but such “Plan of
Distribution” shall not name any such Broker-Dealer or disclose the amount of Securities held by
any such Broker-Dealer except to the extent required by the Commission.

     Cinemark and the Guarantors shall use their commercially reasonable best efforts to keep the
Exchange Offer Registration Statement continuously effective, supplemented and amended as required
by the provisions of Section 6(c) below to the extent necessary to ensure that it is available for
resales of Securities acquired by Broker-Dealers for their own accounts as a result of
market-making activities or other trading activities, and to ensure that it conforms with the
requirements of this Agreement, the Act and the policies, rules and regulations of the Commission
as announced from time to time, for a period of twelve months from the date on which the Exchange
Offer Registration Statement is declared effective.

     Cinemark shall provide sufficient copies of the latest version of such Prospectus to
Broker-Dealers promptly upon request at any time during such period in order to facilitate such
resales.

SECTION 4. SHELF REGISTRATION

          (a) Shelf Registration. If (i) Cinemark and the Guarantors are not required to file
an Exchange Offer Registration Statement or consummate the Exchange Offer because the Exchange
Offer is not permitted by applicable law or Commission policy (so long as the procedures set forth
in Section 6(a) below are being or have been complied with) or (ii) any Holder of Applicable
Securities shall notify Cinemark on or prior to the 20th day following the Consummation
of the Exchange Offer that (A) such Holder is prohibited by a change in applicable law or
Commission policy from participating in the Exchange Offer, (B) such Holder may not resell the
Exchange Notes to be acquired by it in the Exchange Offer to the public without delivering a
prospectus and that the Prospectus contained in the Exchange Offer Registration Statement is not
appropriate or available for such resales by such Holder or (C) such Holder is a Broker-Dealer and
owns Notes acquired directly from Cinemark or an affiliate of Cinemark, then Cinemark and the
Guarantors shall:

     (x) use their commercially reasonable best efforts to cause to be filed a shelf
registration statement pursuant to Rule 415 under the Act, which may be an amendment to the
Exchange Offer Registration Statement (in either event, the “Shelf Registration
Statement”), on or prior to the 30th day after the obligation to file such Shelf
Registration Statement arises (and in any event within 210 days after the Closing Date) (the
“Shelf Filing Deadline”), which Shelf Registration Statement shall provide for
resales of all

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Applicable Securities, the Holders of which shall have provided the information
required pursuant to Section 4(b) hereof; and

     (y) use their commercially reasonable best efforts to cause such Shelf Registration
Statement to be declared effective by the Commission on or before the 180th day after the
obligation to file such Shelf Registration Statement arises.

Cinemark and the Guarantors shall use their commercially reasonable best efforts to keep such Shelf
Registration Statement continuously effective, supplemented and amended as required by the
provisions of Sections 6(b) and (c) hereof to the extent necessary to ensure that it is available
for resales of Securities by the Holders of Applicable Securities entitled to the benefit of this
Section 4(a), and to ensure that it conforms with the requirements of this Agreement, the Act and
the policies, rules and regulations of the Commission as announced from time to time, for a period
of two years following the Closing Date.

          (b) Provision by Holders of Certain Information in Connection with the Shelf Registration
Statement. No Holder of Applicable Securities may include any of its Applicable Securities in
any Shelf Registration Statement pursuant to this Agreement unless and until such Holder furnishes
to Cinemark in writing, within 20 Business Days after receipt of a request therefor, such
information as Cinemark may reasonably request specified in Item 507 and Item 508 of Regulation S-K
under the Act for use in connection with any Shelf Registration Statement or Prospectus or
preliminary Prospectus included therein. Each Holder as to which any Shelf Registration Statement
is being effected agrees to furnish promptly to Cinemark all information required to be disclosed
in order to make the information previously furnished to Cinemark by such Holder not materially
misleading. No Holder of Applicable Securities shall be entitled to Additional Interest pursuant
to Section 5 hereof unless and until such Holder shall have used its best efforts to provide all
such reasonably requested information.

SECTION 5. ADDITIONAL INTEREST

     If (i) any of the Registration Statements required by this Agreement is not filed with the
Commission on or prior to the date specified for such filing in this Agreement, (ii) any of such
Registration Statements has not been declared effective by the Commission on or prior to the date
specified for such effectiveness in this Agreement (the “Effectiveness Target Date”),
(iii) the Exchange Offer has not been Consummated within 30 Business Days after the Effectiveness
Target Date with respect to the Exchange Offer Registration Statement or (iv) any Registration
Statement required by this Agreement is filed and declared effective but shall thereafter cease to
be effective or fail to be usable for its intended purpose without being succeeded within two
Business Days by a post-effective amendment to such Registration Statement that cures such failure
and that is itself immediately declared effective (each such event referred to in clauses
(i) through (iv), a “Registration Default”), Cinemark and the Guarantors hereby agree to
pay, jointly and severally, additional cash interest (“Additional Interest”) to each Holder
of Applicable Securities. Such Additional Interest, with respect to the first 90-day period
immediately following the occurrence of each such Registration Default, shall equal an increase in
the annual interest rate on the Notes by 0.5%. The amount of Additional Interest will increase by
an additional 0.5% per annum with respect to each subsequent 90-day

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period relating to each such Registration Default until all Registration Defaults have been
cured, up to a maximum amount of Additional Interest for all Registration Defaults of 1.0% per
annum. The Securities will not accrue Additional Interest from and after the third anniversary of
the Issue Date even if Cinemark is not in compliance with its obligations under this Agreement.
Cinemark shall notify the Trustee within one Business Day after (i) each and every Registration
Default and (ii) the date the Registration Default has been so cured. Cinemark and the Guarantors
shall, jointly and severally, pay all accrued Additional Interest to Holders in New York, New York
by wire transfer of immediately available funds or by federal funds check in the same manner as
interest is paid under the Notes. Following the cure of all Registration Defaults relating to any
particular Applicable Securities, the accrual of Additional Interest with respect to such
Applicable Securities will cease. The parties agree that the obligation to pay Additional Interest
will be the sole remedy of Holders with respect to damages arising from a Registration Default
(except as provided in Section 12(a) hereof).

     All obligations of Cinemark and the Guarantors set forth in the preceding paragraph that are
outstanding with respect to any Applicable Security at the time such security ceases to be an
Applicable Security shall survive until such time as all such obligations with respect to such
Security shall have been satisfied in full.

SECTION 6. REGISTRATION PROCEDURES

          (a) Exchange Offer Registration Statement. In connection with the Exchange Offer,
Cinemark and the Guarantors shall comply with all of the provisions of Section 6(c) below, shall
use their commercially reasonable best efforts to effect such exchange to permit the sale of
Applicable Securities being sold in accordance with the intended method or methods of distribution
thereof, and shall comply with all of the following provisions:

     (i) If in the reasonable opinion of counsel to Cinemark there is a question as to
whether the Exchange Offer is permitted by applicable law, Cinemark and the Guarantors
hereby agree to seek a no-action letter or other favorable decision from the Commission,
including oral advice from the staff of the Commission, allowing Cinemark and the Guarantors
to Consummate an Exchange Offer for such Notes. Cinemark and the Guarantors hereby agree to
pursue the issuance of such a decision to the Commission staff level but shall not be
required to take commercially unreasonable action to effect a change of Commission policy.
In connection with the foregoing, Cinemark and the Guarantors hereby agree, however, to (A)
participate in telephonic conferences with the Commission, (B) deliver to the Commission
staff an analysis prepared by counsel to Cinemark setting forth the legal bases, if any,
upon which such counsel has concluded that such an Exchange Offer should be permitted and
(C) diligently pursue a resolution (which need not be favorable) by the Commission staff of
such matters.

     (ii) As a condition to its participation in the Exchange Offer pursuant to the terms of
this Agreement, each Holder of Applicable Securities shall furnish, upon the request of
Cinemark, prior to the Consummation thereof, a written representation to Cinemark (which may
be contained in the letter of transmittal contemplated by the Exchange Offer Registration
Statement) to the effect that (A) it is not an affiliate of

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Cinemark, (B) it is not engaged in, and does not intend to engage in, and has no
arrangement or understanding with any person to participate in, a distribution of the
Exchange Notes to be issued in the Exchange Offer and (C) it is acquiring the Exchange Notes
in its ordinary course of business. Each Holder hereby acknowledges and agrees that any
Broker-Dealer who acquired Notes directly from Cinemark or any affiliate of Cinemark and any
such Holder intending to use the Exchange Offer to participate in a distribution of the
securities to be acquired in the Exchange Offer (1) could not under Commission policy as in
effect on the date of this Agreement rely on the position of the Commission enunciated in
Morgan Stanley and Co., Inc. (available June 5, 1991) and Exxon Capital Holdings
Corporation (available May 13, 1988), as interpreted in the Commission’s letter to
Shearman & Sterling dated July 2, 1993, and similar no-action letters (including any
no-action letter obtained pursuant to clause (i) above), and (2) must comply with the
registration and prospectus delivery requirements of the Act in connection with a secondary
resale transaction and that such a secondary resale transaction should be covered by an
effective registration statement containing the selling security holder information required
by Item 507 or 508, as applicable, of Regulation S-K if the resales are of Exchange Notes
obtained by such Holder in exchange for Notes acquired by such Holders directly from
Cinemark.

     (iii) Prior to effectiveness of the Exchange Offer Registration Statement, Cinemark and
the Guarantors shall provide a supplemental letter to the Commission stating that Cinemark
and the Guarantors are registering the Exchange Offer in reliance on the position of the
Commission enunciated in Exxon Capital Holdings Corporation (available May 13,
1988), Morgan Stanley and Co., Inc. (available June 5, 1991) and, if applicable, any
no-action letter obtained pursuant to clause (i) above. The supplemental letter shall
include a representation that Cinemark and the Guarantors have not entered into any
arrangement or understanding with any Person to distribute the Exchange Notes to be received
in the Exchange Offer and that, to the best of Cinemark’s information and belief, each
Holder participating in the Exchange Offer is acquiring the Exchange Notes in its ordinary
course of business and has no arrangement or understanding with any Person to participate in
the distribution of the Exchange Notes received in the Exchange Offer.

          (b) Shelf Registration Statement. In connection with the Shelf Registration
Statement, Cinemark and the Guarantors shall comply with all the provisions of Section 6(c) below
and shall use their commercially reasonable best efforts to effect such registration to permit the
sale of the Applicable Securities being sold in accordance with the intended method or methods of
distribution thereof in accord with the provisions of Sections 4(a) and 6(c) hereto.

          (c) General Provisions. In connection with any Registration Statement and any related
Prospectus required by this Agreement to permit the sale or resale of Applicable Securities
(including, without limitation, any Registration Statement and the related Prospectus required to
permit resales of Securities by Broker-Dealers), Cinemark and the Guarantors shall:

     (i) use their commercially reasonable best efforts to keep such Registration Statement
continuously effective and provide all requisite financial statements for the

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period specified in Section 3 or 4 of this Agreement, as applicable; upon the
occurrence of any event that would cause any such Registration Statement or the Prospectus
contained therein (A) to contain a material misstatement or omission or (B) not to be
effective and usable for resale of Applicable Securities during the period required by this
Agreement, Cinemark and the Guarantors shall file promptly an appropriate amendment to such
Registration Statement, in the case of clause (A), correcting any such misstatement or
omission, and, in the case of either clause (A) or (B), use their commercially reasonable
best efforts to cause such amendment to be declared effective and such Registration
Statement and the related Prospectus to become usable for their intended purpose(s) as soon
as reasonably practicable thereafter;

     (ii) prepare and file with the Commission such amendments and post-effective amendments
to the Registration Statement as may be necessary to keep the Registration Statement
effective for the applicable period set forth in Section 3 or 4 hereof, as applicable, or
such shorter period as will terminate when all Applicable Securities covered by such
Registration Statement have been exchanged or sold or until such Applicable Securities no
longer constitute Applicable Securities or are no longer outstanding; cause the Prospectus
to be supplemented by any required Prospectus supplement, and as so supplemented to be filed
pursuant to Rule 424 under the Act, and to comply fully with the applicable provisions of
Rules 424 and 430A under the Act in a timely manner; and comply with the provisions of the
Act with respect to the disposition of all Applicable Securities covered by such
Registration Statement during the applicable period in accordance with the intended method
or methods of distribution by the sellers thereof set forth in such Registration Statement
or supplement to the Prospectus;

     (iii) advise promptly the underwriter(s), if any, and selling Holders and, if requested
by such Persons, confirm such advice in writing, (A) when the Prospectus or any Prospectus
supplement or post-effective amendment has been filed, and, with respect to any Registration
Statement or any post-effective amendment thereto, when the same has become effective,
(B) of any request by the Commission for amendments to the Registration Statement or
amendments or supplements to the Prospectus or for additional information relating thereto,
(C) of the issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement under the Act or of the suspension by any state securities commission
of the qualification of the Applicable Securities for offering or sale in any jurisdiction,
or the initiation of any proceeding for any of the preceding purposes or (D) of the
existence of any fact or the happening of any event that makes any statement of a material
fact made in the Registration Statement, the Prospectus, any amendment or supplement
thereto, or any document incorporated by reference therein untrue, or that requires the
making of any additions to or changes in the Registration Statement or the Prospectus in
order to make the statements therein not misleading. If at any time the Commission shall
issue any stop order suspending the effectiveness of the Registration Statement, or any
state securities commission or other regulatory authority shall issue an order suspending
the qualification or exemption from qualification of the Applicable Securities under state
securities or Blue Sky laws, Cinemark and the Guarantors shall use their commercially
reasonable best efforts to obtain the withdrawal or lifting of such order at the earliest
practicable time;

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     (iv) furnish to the Purchasers, each selling Holder named in any Registration Statement
or Prospectus and each of the underwriter(s) in connection with each such sale, if any,
before filing with the Commission, copies of any Registration Statement or any Prospectus
included therein or any amendments or supplements to any such Registration Statement or
Prospectus if requested by such person, which documents will be subject to the review of
such Holders and underwriter(s) in connection with each such sale, if any, for a period of
at least five Business Days, and Cinemark and the Guarantors will not file any such
Registration Statement or Prospectus or any amendment or supplement to any such Registration
Statement or Prospectus to which a selling Holder of Applicable Securities covered by such
Registration Statement or the underwriter(s) in connection with each such sale, if any,
shall reasonably object within five Business Days after the receipt thereof. A selling
Holder or underwriter, if any, shall be deemed to have reasonably objected to such filing if
such Registration Statement, amendment, Prospectus or supplement, as applicable, as proposed
to be filed, contains a material misstatement or omission or fails to comply with the
applicable requirements of the Act;

     (v) promptly provide copies prior to the filing of any document that is to be
incorporated by reference into a Registration Statement or Prospectus, if requested by any
selling Holders or the underwriter(s), if any, within five Business Days after receipt of
notification thereof from Cinemark, of such document to the selling Holders and to the
underwriter(s), if any; make Cinemark’s representatives available for discussion of such
document and other customary due diligence matters; and include such information in such
document prior to the filing thereof as such selling Holders or underwriter(s), if any,
reasonably may request;

     (vi) make available at reasonable times for inspection by the selling Holders, any
underwriter participating in any disposition pursuant to such Registration Statement, and
any attorney or accountant retained by such selling Holders or any of the underwriter(s),
all financial and other records, pertinent corporate documents and properties of Cinemark
and its subsidiaries, and cause Cinemark’s officers, directors and employees to supply all
information reasonably requested by any such Holder, underwriter, attorney or accountant in
connection with such Registration Statement subsequent to the filing thereof and prior to
its effectiveness;

     (vii) if requested by any selling Holders or the underwriter(s) in connection with each
such sale, if any, promptly include in any Registration Statement or Prospectus, pursuant to
a supplement or post-effective amendment if necessary, such information as such selling
Holders and such underwriter(s), if any, may reasonably request to have included therein,
including, without limitation, information relating to the “Plan of Distribution” of the
Applicable Securities, information with respect to the principal amount of Applicable
Securities being sold to such underwriter(s), the purchase price being paid therefor and any
other terms of the offering of the Applicable Securities to be sold in such offering; and
make all required filings of such Prospectus supplement or post-effective amendment as soon
as practicable after Cinemark is notified of the matters to be included in such Prospectus
supplement or post-effective amendment;

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     (viii) use their commercially reasonable best efforts to cause the Applicable
Securities covered by the Registration Statement to be rated with the appropriate rating
agencies, if so requested by the Holders of a majority in aggregate principal amount of
Notes covered thereby or the underwriter(s), if any;

     (ix) furnish to each selling Holder and each of the underwriter(s), if any, without
charge, at least one copy of the Registration Statement, as first filed with the Commission,
and of each amendment thereto, including all documents incorporated by reference therein and
all exhibits if so requested by such person;

     (x) deliver to each selling Holder and each of the underwriter(s) in connection with
each such sale, if any, without charge, as many copies of the Prospectus (including each
preliminary prospectus) and any amendment or supplement thereto as such Persons may
reasonably request; Cinemark and the Guarantors hereby consent to the use of the Prospectus
and any amendment or supplement thereto by each of the selling Holders and each of the
underwriter(s), if any, in connection with the offering and the sale of the Applicable
Securities covered by the Prospectus or any amendment or supplement thereto;

     (xi) enter into such agreements (including an underwriting agreement), and make such
representations and warranties, and take all such other actions in connection therewith in
order to expedite or facilitate the disposition of the Applicable Securities pursuant to any
Registration Statement contemplated by this Agreement, all to such extent as may be
reasonably acceptable to Cinemark and the Guarantors and reasonably requested by the
Purchasers or by any Holder of Applicable Securities or any underwriter in connection with
any sale or resale pursuant to any Registration Statement contemplated by this Agreement;
and whether or not an underwriting agreement is entered into and whether or not the
registration is an Underwritten Registration, Cinemark and each of the Guarantors shall:

     (A) furnish to each Purchaser, each selling Holder and each underwriter, in
such substance and scope as they may reasonably request and as are customarily made
by issuers to underwriters in primary underwritten offerings, upon the date of the
Consummation of the Exchange Offer and, if applicable, upon the effectiveness of the
Shelf Registration Statement:

     (1) a certificate, dated the date of Consummation of the Exchange Offer
or the date of effectiveness of the Shelf Registration Statement, as the
case may be, signed by (x) the President or any Vice President and (y) a
principal financial or accounting officer of Cinemark and each of the
Guarantors, confirming, as of the date thereof, the matters set forth in
paragraphs (i) and (l) of Section 5 of the Purchase Agreement and such other
matters as such parties may reasonably request; provided that references to
the “Offering Memorandum” in such certificate shall instead refer to the
Prospectus and references to the “Disclosure Package” in such certificate
shall instead refer to any time of sale information prepared in

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connection with such Exchange Offer or Shelf Registration Statement, as
the case may be;

     (2) an opinion, dated the date of Consummation of the Exchange Offer or
the date of effectiveness of the Shelf Registration Statement, as the case
may be, of counsel for Cinemark and the Guarantors, covering the matters set
forth in paragraphs (c) and (d) of Section 5 of the Purchase Agreement and
such other matters as such parties may reasonably request, and in any event
including a statement to the effect that such counsel has participated in
conferences with officers and other representatives of Cinemark,
representatives of the independent public accountants for Cinemark, the
Purchasers’ representatives and the Purchasers’ counsel at which the
contents of such Registration Statement and the related Prospectus were
discussed, although such counsel has not undertaken to investigate or
independently verify and does not assume any responsibility for, the
accuracy, completeness or fairness of such statements; and that such counsel
advises that, on the basis of the foregoing (relying as to materiality to a
large extent upon facts provided to such counsel by officers and other
representatives of Cinemark and without independent check or verification),
no facts came to such counsel’s attention that caused such counsel to
believe that the applicable Registration Statement, at the time such
Registration Statement or any post-effective amendment thereto became
effective, and, in the case of the Exchange Offer Registration Statement, as
of the date of Consummation, contained an untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, or that the
Prospectus contained in such Registration Statement as of its date and, in
the case of the opinion dated the date of Consummation of the Exchange
Offer, as of the date of Consummation, contained an untrue statement of a
material fact or omitted to state a material fact necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading. Without limiting the foregoing, such counsel may
state further that such counsel makes no comment with respect to, assumes no
responsibility for, and has not independently verified, the accuracy,
completeness or fairness of the financial statements, notes and schedules
and other financial and statistical data included in any Registration
Statement contemplated by this Agreement or the related Prospectus; and

     (3) a customary comfort letter, dated as of the date of Consummation of
the Exchange Offer or the date of effectiveness of the Shelf Registration
Statement, as the case may be, from Cinemark’s independent accountants, in
the customary form and covering matters of the type customarily covered in
comfort letters by underwriters in connection with primary underwritten
offerings, and affirming the matters

12

 

set forth in the comfort letters delivered pursuant to Section 5(f) of
the Purchase Agreement, without exception;

     (B) set forth in full or incorporate by reference in the underwriting
agreement, if any, the indemnification provisions and procedures of Section 8 hereof
with respect to all parties to be indemnified pursuant to said Section;

     (C) deliver such other documents and certificates as may be reasonably
requested by such parties to evidence compliance with clause (A) above and with any
customary conditions contained in the underwriting agreement or other agreement
entered into by Cinemark and the Guarantors pursuant to this clause (xi), if any;
and

     (D) if at any time the representations and warranties of Cinemark and each of
the Guarantors contemplated in clause (A)(1) above cease to be true and correct,
Cinemark and each of the Guarantors shall so advise the Purchasers and the
underwriter(s), if any, and each Holder promptly and, if requested by such Persons,
shall confirm such advice in writing;

     (xii) prior to any public offering of Applicable Securities, cooperate with the selling
Holders, the underwriter(s), if any, and their respective counsel in connection with the
registration and qualification of the Applicable Securities under the securities or Blue Sky
laws of such jurisdictions as the selling Holders or underwriter(s), if any, may reasonably
request and do any and all other acts or things necessary or advisable (including, without
limitation, the imposition of such restrictions on offers or sales of the Securities as are
referred to in Section 3(b) of this Agreement) to enable the disposition in such
jurisdictions of the Applicable Securities covered by the applicable Registration Statement;
provided, however, that neither Cinemark nor any Guarantor shall be required to register or
qualify as a foreign corporation where it is not now so qualified or to take any action that
would subject it to the service of process in suits or to taxation, except as to matters and
transactions relating to the Registration Statement, in any jurisdiction where it is not now
so subject;

     (xiii) shall issue, upon the request of any Holder of Notes covered by the Shelf
Registration Statement, Exchange Notes having an aggregate principal amount equal to the
aggregate principal amount of Notes surrendered to Cinemark by such Holder in exchange
therefor or being sold by such Holder; such Exchange Notes to be registered in the name of
such Holder or in the name of the purchaser(s) of such Exchange Notes, as the case may be;
in return, the Notes held by such Holder shall be surrendered to Cinemark for cancellation;

     (xiv) cooperate with the selling Holders and the underwriter(s), if any, to facilitate
the timely preparation and delivery of certificates representing Applicable Securities to be
sold and not bearing any restrictive legends; and to register such Applicable Securities in
such denominations (which denominations shall be of $1,000 and integral multiples thereof)
and such names as the Holders or the underwriter(s), if

13

 

any, may request at least two Business Days prior to any such sale of Applicable
Securities made by such underwriter(s);

     (xv) use their commercially reasonable best efforts to cause the Applicable Securities
covered by the Registration Statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary to enable the seller or sellers
thereof or the underwriter(s), if any, to consummate the disposition of such Applicable
Securities;

     (xvi) if any fact or event contemplated by Section 6(c)(iii)(D) above shall exist or
have occurred, prepare a supplement or post-effective amendment to the Registration
Statement or related Prospectus or any document incorporated therein by reference or file
any other required document so that, as thereafter delivered to the purchasers of Applicable
Securities, the Prospectus will not contain an untrue statement of a material fact or omit
to state any material fact necessary to make the statements therein not misleading;

     (xvii) provide a CUSIP number for all Applicable Securities not later than the
effective date of the Registration Statement covering such Applicable Securities and provide
the Trustee under the Indenture with printed certificates for the Applicable Securities
which are in a form eligible for deposit with the Depository Trust Company;

     (xviii) cooperate and assist in any filings required to be made with FINRA and in the
performance of any due diligence investigation by any underwriter (including any “qualified
independent underwriter”) that is required to be retained in accordance with the rules and
regulations of FINRA, and use their commercially reasonable best efforts to cause such
Registration Statement to become effective and approved by such governmental agencies or
authorities as may be necessary to enable the Holders selling Applicable Securities to
consummate the disposition of such Applicable Securities;

     (xix) otherwise use their commercially reasonable best efforts to comply with all
applicable rules and regulations of the Commission, and make generally available to Holders,
as soon as reasonably practicable, a consolidated earnings statement meeting the
requirements of Rule 158 under the Act (which need not be audited) covering a twelve-month
period (A) beginning at the end of any fiscal quarter in which Applicable Securities are
sold to underwriters in a firm or best efforts Underwritten Offering or (B) if not sold to
underwriters in such an Underwritten Offering, commencing with the first month of Cinemark’s
first fiscal quarter commencing after the effective date of the Registration Statement;

     (xx) cause the Indenture to be qualified under the TIA not later than the effective
date of the first Registration Statement required by this Agreement, and, in connection
therewith, cooperate, with the Trustee and the Holders of Securities to effect such changes
to the Indenture as may be required for such Indenture to be so qualified in accordance with
the terms of the TIA; and execute, and use their commercially reasonable best efforts to
cause the Trustee to execute, all documents that may be

14

 

required to effect such changes and all other forms and documents required to be filed
with the Commission to enable such Indenture to be so qualified in a timely manner;

     (xxi) provide promptly to each Holder upon request each document filed with the
Commission pursuant to the requirements of Section 13 or Section 15 of the Exchange Act;

     (xxii) use their commercially reasonable best efforts to cause all Applicable
Securities covered by the Registration Statement to be listed on each securities exchange on
which similar securities issued by Cinemark are then listed if requested by the Holders of a
majority in aggregate principal amount of Notes covered by such Registration Statement or
the managing underwriter(s), if any; and

     (xxiii) to the extent any Free Writing Prospectus is used, file with the Commission any
Free Writing Prospectus that is required to be filed by Cinemark or the Guarantors with the
Commission in accordance with the Act and to retain any Free Writing Prospectus not required
to be filed.

          (d) Restrictions on Holders. Each Holder agrees by acquisition of an Applicable
Security that, upon receipt of any notice from Cinemark of the existence of any fact of the kind
described in Section 6(c)(iii)(D) hereof, such Holder will forthwith discontinue disposition of
Applicable Securities pursuant to the applicable Registration Statement until such Holder’s receipt
of the copies of the supplemented or amended Prospectus contemplated by Section 6(c)(xvi) hereof,
or until it is advised in writing (the “Advice”) by Cinemark that the use of the Prospectus
may be resumed, and has received copies of any additional or supplemental filings that are
incorporated by reference in the Prospectus. If so directed by Cinemark, each Holder will deliver
to Cinemark (at Cinemark’s expense) all copies, other than permanent file copies then in such
Holder’s possession, of the Prospectus covering such Applicable Securities that was current at the
time of receipt of such notice. In the event Cinemark shall give any such notice, the time period
regarding the effectiveness of such Registration Statement set forth in Section 3 or 4 hereof, as
applicable, shall be extended by the number of days during the period from and including the date
of the giving of such notice pursuant to Section 6(c)(iii)(D) hereof to and including the date when
each selling Holder covered by such Registration Statement shall have received the copies of the
supplemented or amended Prospectus contemplated by Section 6(c)(xvi) hereof or shall have received
the Advice.

SECTION 7. REGISTRATION EXPENSES

          (a) All expenses incident to Cinemark and the Guarantors’ performance of or compliance with
this Agreement will be borne jointly and severally by Cinemark and the Guarantors, regardless of
whether a Registration Statement becomes effective, including without limitation: (i) all
registration and filing fees and expenses (including filings made by any Purchaser or Holder with
FINRA (and, if applicable, the reasonable fees and expenses of any “qualified independent
underwriter” and its counsel that may be required by the rules and regulations of FINRA)); (ii) all
fees and expenses incurred in connection with compliance with federal securities and state Blue Sky
or securities laws; (iii) all expenses of printing (including

15

 

printing certificates for the Exchange Notes to be issued in the Exchange Offer and printing
of Prospectuses), messenger and delivery services and telephone; (iv) all fees and disbursements of
counsel for Cinemark, and in accordance with Section 7(b) below, the Holders of Applicable
Securities; (v) if applicable, all application and filing fees in connection with listing
Securities on a national securities exchange or automated quotation system pursuant to the
requirements hereof; and (vi) all fees and disbursements of independent certified public
accountants of Cinemark (including the expenses of any special audit and comfort letters required
by or incident to such performance).

     Cinemark and the Guarantors will bear their internal expenses (including, without limitation,
all salaries and expenses of its officers and employees performing legal or accounting duties), the
expenses of any annual audit and the fees and expenses of any Person, including special experts,
retained by Cinemark and/or any Guarantor.

          (b) In connection with any Registration Statement required by this Agreement (including,
without limitation, the Exchange Offer Registration Statement and the Shelf Registration
Statement), Cinemark and the Guarantors will reimburse the Purchasers and the Holders of
Applicable Securities being tendered in the Exchange Offer and/or resold pursuant to the “Plan of
Distribution” contained in the Exchange Offer Registration Statement or registered pursuant to the
Shelf Registration Statement, as applicable, for the reasonable fees and disbursements of not more
than one counsel, which shall be Simpson Thacher & Bartlett LLP or such other counsel as may be
chosen by the Holders of a majority in principal amount of the Applicable Securities for whose
benefit such Registration Statement is being prepared.

SECTION 8. INDEMNIFICATION

          (a) Cinemark and the Guarantors agree, jointly and severally, to indemnify and hold harmless,
to the fullest extent permitted by applicable law, each of the Holders, each person, if any, who
controls any Holder within the meaning of Section 15 of the Act or Section 20(a) of the Exchange
Act and the respective officers, directors, partners, employees, representatives and agents of each
Holder or any controlling person, against any and all losses, liabilities, claims, damages and
expenses whatsoever (including but not limited to reasonable attorneys’ fees and any and all
reasonable expenses whatsoever incurred in investigating, preparing or defending against any
litigation, commenced or threatened, or any claim whatsoever, and any and all amounts paid in
settlement of any claim or litigation) (collectively, “Losses”), joint or several, to which
they or any of them may become subject under the Act, the Exchange Act or otherwise, insofar as
such losses, liabilities, claims, damages or expenses (or actions in respect thereof) arise out of
or are based upon any untrue statement or alleged untrue statement of a material fact contained in
any Registration Statement or Prospectus, or in any supplement thereto or amendment thereof, or
arise out of or are based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided, however, that neither Cinemark
nor any Guarantor will be liable in any such case to the extent, but only to the extent, that any
such Loss arises out of or is based upon any such untrue statement or alleged untrue statement or
omission or alleged omission made therein in reliance upon and in conformity with written
information furnished to Cinemark and the Guarantors by or on behalf

16

 

of any Holders expressly for use therein. This indemnity will be in addition to any liability
which Cinemark or any Guarantor may otherwise have, including, under this Agreement.

          (b) Each of the Holders agrees, severally and not jointly, to indemnify and hold harmless
Cinemark, each of the Guarantors, each person, if any, who controls Cinemark or any Guarantor
within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act and the respective
officers, directors, partners, employees, representatives and agents of Cinemark or any Guarantor
or any controlling person, against any and all Losses, joint or several, to which they or any of
them may become subject under the Act, the Exchange Act or otherwise, insofar as such losses,
liabilities, claims, damages or expenses (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of a material fact contained in any
Registration Statement or Prospectus, or in any amendment thereof or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, in each case to the extent, but only to the extent,
that any such loss, liability, claim, damage or expense arises out of or is based upon any untrue
statement or alleged untrue statement or omission or alleged omission made therein in reliance upon
and in conformity with written information furnished to Cinemark and the Guarantors by or on behalf
of such Holder expressly for use therein; provided, however, that in no case shall any Holder be
liable or responsible for any amount in excess of the dollar amount of the proceeds received by
such Holder upon the sale of the Securities giving rise to such indemnification obligation, unless
such Losses are a result of the gross negligence or willful misconduct of such Holder as determined
in a final judgment by a court of competent jurisdiction. This indemnity will be in addition to
any liability which any Holder may otherwise have, including under this Agreement.

          (c) Promptly after receipt by an indemnified party under subsection (a) or (b) above of notice
of the commencement of any action, such indemnified party shall, if a claim in respect thereof is
to be made against the indemnifying party under such subsection, notify each party against whom
indemnification is to be sought, in writing of the commencement thereof (but the failure so to
notify an indemnifying party shall not relieve it from any liability which it may have under this
Section 8 except to the extent that it has been prejudiced in any material respect by such failure
or from any liability which it may otherwise have). In case any such action is brought against any
indemnified party, and it notifies an indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein, and to the extent it may elect by
written notice delivered to the indemnified party promptly after receiving the aforesaid notice
from such indemnified party, to assume the defense thereof with counsel reasonably satisfactory to
such indemnified party. Notwithstanding the foregoing, the indemnified party or parties shall have
the right to employ its or their own counsel in any such case, but the fees and expenses of such
counsel shall be at the expense of such indemnified party or parties unless (i) the employment of
such counsel shall have been authorized in writing by the indemnifying parties in connection with
the defense of such action and the indemnifying party has agreed in writing to pay the fees and
expenses of such counsel, (ii) the indemnifying parties shall not have employed counsel to take
charge of the defense of such action within a reasonable time after notice of commencement of the
action, or (iii) such indemnified party or parties shall have concluded, upon the advice of
counsel, that there may be defenses available to it or them

17

 

which are different from or additional to those available to one or all of the indemnifying
parties (in which case the indemnifying parties shall not have the right to direct the defense of
such action on behalf of the indemnified party or parties), in any of which events such fees and
expenses of counsel shall be borne by the indemnifying parties; provided, however, that the
indemnifying party under subsection (a) or (b) above, shall only be liable for the legal expenses
of one counsel (in addition to any local counsel) for all indemnified parties in each jurisdiction
in which any claim or action is brought. Anything in this subsection to the contrary
notwithstanding, an indemnifying party shall not be liable for any settlement of any claim or
action effected without its written consent; provided, however, that such consent was not
unreasonably withheld.

          (d) In order to provide for contribution in circumstances in which the indemnification
provided for in this Section 8 is for any reason held to be unavailable or is insufficient to hold
harmless a party indemnified hereunder, Cinemark and the Guarantors, on the one hand, and each
Holder, on the other hand, shall contribute to the aggregate losses, claims, damages, liabilities
and expenses of the nature contemplated by such indemnification provision (including any
investigation, legal and other expenses incurred in connection with, and any amount paid in
settlement of, any action, suit or proceeding or any claims asserted, but after deducting in the
case of losses, claims, damages, liabilities and expenses suffered by Cinemark and the Guarantors,
any contribution received by Cinemark and the Guarantors from persons, other than the Holders, who
may also be liable for contribution, including persons who control either Cinemark or any Guarantor
within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act) to which
Cinemark, any Guarantor and any Holder may be subject, in such proportion as is appropriate to
reflect the relative benefits received by Cinemark and the Guarantors, on the one hand, and any
such Holder, on the other hand, or, if such allocation is not permitted by applicable law or if
indemnification is not available as a result of the indemnifying party not having received notice
as provided in this Section 8, in such proportion as is appropriate to reflect not only the
relative benefits referred to above but also the relative fault of Cinemark and the Guarantors, on
the one hand, and the Holders, on the other hand, in connection with the statements or omissions
which resulted in such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative benefits received by Cinemark and the Guarantors,
on the one hand, and any Holder, on the other hand, shall be deemed to be in the same proportion as
(x) the total proceeds from the offering of the Securities (net of discounts and commissions but
before deducting expenses) received by Cinemark and the Guarantors and (y) the total proceeds
received by such Holder upon its sale of Securities which would otherwise give rise to the
indemnification obligation, respectively. The relative fault of Cinemark and the Guarantors, on
the one hand, and of the Holders, on the other hand, shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by Cinemark and the
Guarantors or the Holders and the parties’ relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. Cinemark, each of the Guarantors and
each Holder agree that it would not be just and equitable if contribution pursuant to this Section
8 were determined by pro rata allocation or by any other method of allocation which does not take
into account the equitable considerations referred to above. Notwithstanding the provisions of
this Section 8, (i) no Holder shall be required to contribute, in the aggregate, any amount in
excess of the dollar amount by which the

18

 

proceeds received by such Holder with respect to the sale of its Securities exceeds the amount
of any damages which such Holder has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission and (ii) no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes
of this Section 8, each person, if any, who controls a Holder within the meaning of Section 15 of
the Act or Section 20(a) of the Exchange Act and the respective officers, directors, partners,
employees, representatives and agents of a Holder or any controlling person shall have the same
rights to contribution as such Holder, and each person, if any, who controls Cinemark or any
Guarantor within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act and the
respective officers, directors, partners, employees, representatives and agents of Cinemark or any
Guarantor or any controlling person shall have the same rights to contribution as Cinemark and each
of the Guarantors, subject in each case to clauses (i) and (ii) of this Section 8(d). Any party
entitled to contribution will, promptly after receipt of notice of commencement of any action, suit
or proceeding against such party in respect of which a claim for contribution may be made against
another party or parties under this Section 8, notify such party or parties from whom contribution
may be sought, but the failure to so notify such party or parties shall not relieve the party or
parties from whom contribution may be sought from any obligation it or they may have under this
Section 8 or otherwise.

SECTION 9. RULE 144A

     Cinemark and the Guarantors hereby agree with each Holder, for so long as any Applicable
Securities remain outstanding, to make available to any Holder or beneficial owner of Applicable
Securities in connection with any sale thereof and any prospective purchaser of such Applicable
Securities from such Holder or beneficial owner, the information required by Rule 144A(d)(4) under
the Act in order to permit resales of such Applicable Securities pursuant to Rule 144A.

SECTION 10. UNDERWRITTEN REGISTRATIONS

     No Holder may participate in any Underwritten Registration hereunder unless such Holder (a)
agrees to sell such Holder’s Applicable Securities on the basis provided in any underwriting
arrangements approved by the Persons entitled hereunder to approve such arrangements and (b)
completes and executes all reasonable questionnaires, powers of attorney, indemnities, underwriting
agreements, lock-up letters and other documents required under the terms of such underwriting
arrangements.

SECTION 11. SELECTION OF UNDERWRITERS

     The Holders of Applicable Securities covered by the Shelf Registration Statement who desire to
do so may sell such Applicable Securities in an Underwritten Offering. In any such Underwritten
Offering, the investment banker or investment bankers and manager or managers that will administer
the offering will be selected by the Holders of a majority in aggregate principal amount of the
Applicable Securities included in such offering; provided, that such investment bankers and
managers must be reasonably satisfactory to Cinemark (it being

19

 

understood that Barclays Capital Inc. is reasonably satisfactory); such investment bankers and
manager or managers are referred to herein as the “underwriters”.

SECTION 12. MISCELLANEOUS

          (a) Remedies. Cinemark and the Guarantors agree that monetary damages (including the
Additional Interest contemplated hereby) would not be adequate compensation for any loss incurred
by reason of a breach by it of the provisions of this Agreement and hereby agree to waive the
defense in any action for specific performance that a remedy at law would be adequate.

          (b) No Inconsistent Agreements. Neither Cinemark nor any Guarantor will, on or after
the date of this Agreement, enter into any agreement with respect to its securities that is
inconsistent with the rights granted to the Holders in this Agreement or otherwise conflicts with
the provisions hereof. The rights granted to the Holders hereunder do not in any way conflict
with, and are not inconsistent with, the rights granted to the holders of Cinemark’s securities
under any agreement in effect on the date hereof.

          (c) Adjustments Affecting the Securities. Neither Cinemark nor any Guarantor will
take any action, or permit any change to occur, with respect to the Securities that would
materially and adversely affect the ability of the Holders to Consummate any Exchange Offer.

          (d) Amendments and Waivers. The provisions of this Agreement may not be amended,
modified or supplemented, and waivers or consents to or departures from the provisions hereof may
not be given unless Cinemark has obtained the written consent of Holders of a majority of the
outstanding principal amount of Applicable Securities. Notwithstanding the foregoing, a waiver or
consent to departure from the provisions hereof that relates exclusively to the rights of Holders
whose securities are being tendered pursuant to the Exchange Offer or registered pursuant to the
Shelf Registration and that does not affect directly or indirectly the rights of other Holders
whose securities are not being tendered pursuant to such Exchange Offer or registered pursuant to
the Shelf Registration, may be given by the Holders of a majority of the outstanding principal
amount of Applicable Securities being tendered or registered, as applicable.

          (e) Notices. All notices and other communications provided for, or permitted
hereunder, shall be made in writing by hand-delivery, first-class mail (registered or certified,
return receipt requested), telex, telecopier, or air courier guaranteeing overnight delivery:

     (i) if to a Holder, at the address set forth on the records of the Registrar under the
Indenture, with a copy to the Registrar under the Indenture; and

     (ii) if to Cinemark:

	 	 	 	 	 
	 

	 	 	 	Cinemark USA, Inc.
	 

	 	 	 	3900 Dallas Parkway
	 

	 	 	 	Suite 500
	 

	 	 	 	Plano, Texas 75093
	 

	 	 	 	Phone No.: (972) 665-1000
	 

	 	 	 	Telecopier No.: (972) 665-1004
	 

	 	 	 	Attention: Michael Cavalier

20

 

	 	 	 	 	 
	 	 	with a copy to:
	 
	 	 	 	 
	 

	 	 	 	Akin, Gump, Strauss, Hauer & Feld, L.L.P.
	 

	 	 	 	1700 Pacific Avenue, Suite 4100
	 

	 	 	 	Dallas, Texas 75201
	 

	 	 	 	Phone No.: (214) 969-2800
	 

	 	 	 	Telecopier No.: (214) 969-4343
	 

	 	 	 	Attention: Terry M. Schpok, P.C.

     All such notices and communications shall be deemed to have been duly given: at the time
delivered by hand, if personally delivered; five Business Days after being deposited in the mail,
postage prepaid, if mailed; when answered back, if telexed; when receipt acknowledged, if
telecopied; and on the next Business Day, if timely delivered to an air courier guaranteeing
overnight delivery.

     Copies of all such notices, demands or other communications shall be concurrently delivered by
the Person giving the same to the Trustee at the address specified in the Indenture.

          (f) Successors and Assigns. This Agreement shall inure to the benefit of and be
binding upon the successors and assigns of each of the parties, including without limitation and
without the need for an express assignment, subsequent Holders of Applicable Securities; provided,
however, that this Agreement shall not inure to the benefit of or be binding upon a successor or
assign of a Holder unless and to the extent such successor or assign acquired Applicable Securities
from such Holder.

          (g) Counterparts. This Agreement may be executed in any number of counterparts and by
the parties hereto in separate counterparts, each of which when so executed shall be deemed to be
an original and all of which taken together shall constitute one and the same agreement.

          (h) Headings. The headings in this Agreement are for convenience of reference only
and shall not limit or otherwise affect the meaning hereof.

          (i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK.

          (j) Severability. In the event that any one or more of the provisions contained
herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable,
the validity, legality and enforceability of any such provision in every other respect and of the
remaining provisions contained herein shall not be affected or impaired thereby.

21

 

          (k) Entire Agreement. This Agreement together with the other Transaction Documents
(as defined in the Purchase Agreement) is intended by the parties as a final expression of their
agreement and intended to be a complete and exclusive statement of the agreement and understanding
of the parties hereto in respect of the subject matter contained herein. There are no
restrictions, promises, warranties or undertakings, other than those set forth or referred to
herein with respect to the registration rights granted by Cinemark and the Guarantors with respect
to the Applicable Securities. This Agreement supersedes all prior agreements and understandings
between the parties with respect to such subject matter.

[Signatures on the following page]

22

 

     IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written
above.

	 	 	 	 	 	 	 
	 	 	CINEMARK USA, INC.	 	 
	 	 	CINEMARK, L.L.C.	 	 
	 	 	SUNNYMEAD CINEMA CORP.	 	 
	 	 	CINEMARK PROPERTIES, INC.	 	 
	 	 	GREELEY HOLDINGS, INC.	 	 
	 	 	TRANS TEXAS CINEMA, INC.	 	 
	 	 	CINEMARK MEXICO (USA), INC.	 	 
	 	 	CINEMARK LEASING COMPANY	 	 
	 	 	CINEMARK PARTNERS I, INC.	 	 
	 	 	MULTIPLEX SERVICES, INC.	 	 
	 	 	CNMK TEXAS PROPERTIES, LLC	 	 
	 	 	BRASIL HOLDINGS, LLC	 	 
	 	 	CINEMARK CONCESSIONS, LLC	 	 
	 	 	CENTURY THEATRES, INC.	 	 
	 	 	MARIN THEATRE MANAGEMENT, LLC	 	 
	 	 	CENTURY THEATRES NG, LLC	 	 
	 	 	CINEARTS, LLC	 	 
	 	 	CINEARTS SACRAMENTO, LLC	 	 
	 	 	CORTE MADERA THEATRES, LLC	 	 
	 	 	NOVATO THEATRES, LLC	 	 
	 	 	SAN RAFAEL THEATRES, LLC	 	 
	 	 	NORTHBAY THEATRES, LLC	 	 
	 	 	CENTURY THEATRES SUMMIT SIERRA, LLC	 	 
	 	 	CENTURY THEATRES SEATTLE, LLC	 	 
	 	 	CNMK INVESTMENTS, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ Michael D. Cavalier
 

Michael D. Cavalier
	 	 
	 

	 	Title:
	 	Senior Vice President-General Counsel	 	 
	 
	 	 	 	 	 	 
	 	 	MULTIPLEX PROPERTIES, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Vatoni Ragsdale	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	Vatoni Ragsdale	 	 
	 

	 	Title:
	 	President	 	 

 

 

	 	 	 	 	 	 	 
	 	 	LAREDO THEATRE, LTD.,	 	 
	 	 	by Sunnymead Cinema Corp., its general partner	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ Michael D. Cavalier
 

Michael D. Cavalier
	 	 
	 

	 	Title:
	 	Senior Vice President-General Counsel	 	 

 

 

Accepted:

BARCLAYS CAPITAL INC.

DEUTSCHE BANK SECURITIES INC.

J.P. MORGAN SECURITIES INC.

MORGAN STANLEY & CO. INCORPORATED

BANC OF AMERICA SECURITIES LLC

CREDIT SUISSE SECURITIES (USA) LLC

WACHOVIA CAPITAL MARKETS, LLC

BY BARCLAYS CAPITAL INC.

	 	 	 	 	 
	By:
	 	/s/ Robert Chen	 	 
	 

	 	 

Authorized Representativeex101.htm

    AMDENDED
AND RESTATED

     

    SECURITIES
PURCHASE AGREEMENT

     

    This
Amended and Restated Securities Purchase Agreement (this “Agreement”) is dated
as of July 2, 2009, between Beyond Commerce, Inc., a Nevada corporation with
headquarters located at 9029 South Pecos, Suite 2800, Henderson, Nevada 89074
(the “Company”), and OmniReliant Holdings, Inc. (the “Purchaser”).

     

    WHEREAS, the Company and
Purchaser have previously entered into a Securities Purchase Agreement, dated as
of June 29, 2009, whereby the Purchaser would sell a series of original issue
discount secured convertible debentures in the aggregate face amount of up to
$3,500,000, with the Company receiving proceeds of up to $3,000,000, which would
have occurred in two separate tranches, the first closing to occur on or about
June 29, 2009 with the Company receiving proceeds of up to $500,000 and a second
closing to occur on or about July 30, 2009, with the Company receiving proceeds
of up to $2,500,000

    

    WHEREAS, the Company and the
Purchaser have determined to enter into an additional tranche, to occur on or
about July 2, 2009, whereby the Company would sell an original issue discount
secured convertible debenture with a face amount of $583,330 with the Company
receiving proceeds of $500,000;

    

    WHEREAS, the Company and the
Purchaser are executing and delivering this Agreement in accordance with and in
reliance upon the exemption from securities registration for offers and sales to
accredited investors afforded, inter alia, by Rule 506
under Regulation D (“Regulation D”) as promulgated by the United States
Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933,
as amended (the “1933 Act”), and/or Section 4(2) of the 1933 Act;
and

    

    WHEREAS, the Purchaser wishes
to purchase a series of secured original issue discount convertible promissory
debentures of the Company (each, the “Debenture” and collectively, the
“Debentures”) and warrants to purchase shares of the Company’s common stock (the
“Warrant”), subject to and upon the terms and conditions of this Agreement and
acceptance of this Agreement by the Company, on the terms and conditions
referred to herein;

    

    WHEREAS, the Purchaser
purchased: (i) the first Debenture, with a face value of $583,330 for a purchase
price of $500,000 on June 29, 2009, and will purchase (ii) the second Debenture
with a face value of $583,330 for a purchase price of $500,000 on or about July
2, 2009 and (iii) the third Debenture with a face value of $2,333,340 for a
purchase price of up to $2,000,000 on or before July 30, 2009; and

    

    WHEREAS, the Company’s
obligations to repay the Debentures will be secured by a security agreement (the
“Security Agreement “) and certain stock (the “Pledged Shares”) of the Company
pledged by the Affiliates (the “Pledgors”) pursuant to a Security Interest and
Pledge Agreement, as amended (the “Pledge Agreement”) and will be guaranteed by
the subsidiaries (the “Subsidiaries”) of the Company (the “Subsidiary
Guaranty”).

    

    WHEREAS, in addition to the
Debentures, the Purchaser will receive warrants (the “Warrants”) to purchase an
aggregate of 15,000,000 shares of the Company’s Common Stock, which will be
distributed pro rata to the Purchaser among the three Closings;

    

    WHEREAS, as inducement for the
Purchaser purchasing the Debentures, the Purchaser will be entitled to appoint
one individual as a director to the Company’s board of directors

    

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

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

    ARTICLE
I.

    DEFINITIONS

     

    1.1 Definitions.  In
addition to the terms defined elsewhere in this Agreement: (a) capitalized terms
that are not otherwise defined herein have the meanings given to such terms in
the Debentures (as defined herein), and (b) the following terms have the
meanings set forth in this Section 1.1:

     

    “Acquiring Person”
shall have the meaning ascribed to such term in Section 4.7.

     

    “Action” shall have
the meaning ascribed to such term in Section 3.1(j).

     

    “Affiliate” means any
officer, director or beneficial owner of at least 10% of the Company’s issued
and outstanding common stock or any Person that, directly or indirectly through
one or more intermediaries, controls or is controlled by or is under common
control with a Person, as such terms are used in and construed under Rule 405
under the Securities Act.  

     

    “Board of Directors”
means the board of directors of the Company.

     

    “Business Day” means
any day except Saturday, Sunday, any day which is a federal legal holiday in the
United States or any day on which banking institutions in the State of New York
are authorized or required by law or other governmental action to
close.

     

    “Closing” means the
closing of the purchase and sale of the Securities pursuant to Section
2.1.

     

    “Closing Date” means
the Trading Day when all of the Transaction Documents have been executed and
delivered by the applicable parties thereto, and all conditions precedent to (i)
the Purchasers’ obligations to pay the Subscription Amount and (ii) the
Company’s obligations to deliver the Securities have been satisfied or
waived.

     

    “Closing Price” means
on any particular date (a) the last reported closing bid price per share of
Common Stock on such date on the Trading Market (as reported by Bloomberg L.P.
at 4:15 p.m. (New York City time)), or (b) if there is no such price on such
date, then the closing bid price on the Trading Market on the date nearest
preceding such date (as reported by Bloomberg L.P. at 4:15 p.m. (New York City
time)), or (c)  if the Common Stock is not then listed or quoted on a
Trading Market and if prices for the Common Stock are then reported in the “pink
sheets” published by Pink OTC Markets, Inc. (or a similar organization or agency
succeeding to its functions of reporting prices), the most recent bid price per
share of the Common Stock so reported, or (d) if the shares of Common Stock
are not then publicly traded the fair market value of a share of Common Stock as
determined by an independent appraiser selected in good faith by the Purchasers
of a majority in interest of the Shares then outstanding and reasonably
acceptable to the Company, the fees and expenses of which shall be paid by the
Company.

     

    “Commission” means the
United States Securities and Exchange Commission.

     

    “Common Stock” means
the common stock of the Company, par value $0.001 per share, and any other class
of securities into which such securities may hereafter be reclassified or
changed into.

     

    “Common Stock
Equivalents” means any securities of the Company or the Subsidiaries
which would entitle the holder thereof to acquire at any time Common Stock,
including, without limitation, any debt, preferred stock, rights, options,
warrants or other instrument that is at any time convertible into or exercisable
or exchangeable for, or otherwise entitles the holder thereof to receive, Common
Stock.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    “Company Counsel”
means Sichenzia Ross Friedman Ference LLP, with offices located at 61 Broadway,
32nd
Floor, New York, NY 10006.

     

    “Conversion Price”
shall have the meaning ascribed to such term in the Debentures.

     

    “Debentures” means the
Original Issue Discount Secured Convertible Debentures due, subject to the terms
therein, 12 months from their date of issuance, issued by the Company to the
Purchaser hereunder, in the form of Exhibit A attached
hereto.

     

    “Disclosure Schedules”
shall have the meaning ascribed to such term in Section 3.1.

     

    “Discussion Time”
shall have the meaning ascribed to such term in Section 3.2(f).

     

     “Escrow Agent” means
Company Counsel.

     

    “Escrow Agreement”
means the escrow agreement entered into prior to the date hereof, by and among
the Company and the Escrow Agent pursuant to which the Purchasers, shall deposit
Subscription Amounts with the Escrow Agent to be applied to the transactions
contemplated hereunder.

     

    “Evaluation Date”
shall have the meaning ascribed to such term in Section 3.1(r).

     

    “Exchange Act” means
the Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder.

    

    “Exempt Issuance”
means the issuance of (a) shares of Common Stock or options to employees,
officers or directors of the Company pursuant to any stock or option plan duly
adopted for such purpose, by a majority of the non-employee members of the Board
of Directors or a majority of the members of a committee of non-employee
directors established for such purpose, (b) securities upon the exercise or
exchange of or conversion of any Securities issued hereunder and/or other
securities exercisable or exchangeable for or convertible into shares of Common
Stock issued and outstanding on the date of this Agreement, provided that such
securities have not been amended since the date of this Agreement to increase
the number of such securities or to decrease the exercise, exchange or
conversion price of such securities, and (c) securities issued pursuant to
acquisitions or strategic transactions approved by a majority of the
disinterested directors of the Company, provided that any such issuance shall
only be to a Person which is, itself or through its subsidiaries, an operating
company in a business synergistic with the business of the Company and in which
the Company receives benefits in addition to the investment of funds, but shall
not include a transaction in which the Company is issuing securities primarily
for the purpose of raising capital or to an entity whose primary business is
investing in securities.

     

     “GAAP” shall have the
meaning ascribed to such term in Section 3.1(h).

     

    “Indebtedness” shall
have the meaning ascribed to such term in Section 3.1(aa).

     

    “Intellectual Property
Rights” shall have the meaning ascribed to such term in Section
3.1(o).

     

    “Legend Removal Date”
shall have the meaning ascribed to such term in Section 4.1(c).

     

    “Liens” means a lien,
charge, security interest, encumbrance, right of first refusal, preemptive right
or other restriction.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    “Lock-Up Agreement”
means the Lock-Up Agreement, dated as of the date hereof, by and among the
Company and the directors, officers, and 10% stockholders of the Company, in the
form of Exhibit
B attached hereto.

     

    “Material Adverse
Effect” shall have the meaning assigned to such term in Section
3.1(b).

     

    “Material Permits”
shall have the meaning ascribed to such term in Section 3.1(m).

     

    “Maximum Rate” shall
have the meaning ascribed to such term in Section 5.17.

     

    “Participation
Maximum” shall have the meaning ascribed to such term in Section
4.12(a).

     

    “Person” means an
individual or corporation, partnership, trust, incorporated or unincorporated
association, joint venture, limited liability company, joint stock company,
government (or an agency or subdivision thereof) or other entity of any
kind.

     

     “Pre-Notice” shall
have the meaning ascribed to such term in Section 4.12(b).

     

     “Pro Rata Portion”
shall have the meaning ascribed to such term in Section 4.12(e).

     

    “Proceeding” means an
action, claim, suit, investigation or proceeding (including, without limitation,
an informal investigation or partial proceeding, such as a deposition), whether
commenced or threatened.

     

    “Public Information
Failure” shall have the meaning ascribed to such term in Section
4.3(b).

     

    “Public Information Failure
Payments” shall have the meaning ascribed to such term in Section
4.3(b).

     

    “Purchaser Party”
shall have the meaning ascribed to such term in Section 4.10.

     

     “Required Approvals”
shall have the meaning ascribed to such term in Section 3.1(e).

     

    “Required Minimum”
means, as of any date, the maximum aggregate number of shares of Common Stock
then issued or potentially issuable in the future pursuant to the Transaction
Documents, including any Underlying Shares issuable upon exercise in full of all
Warrants or conversion in full of all Debentures (including Underlying Shares
issuable as payment of interest on the Debentures), ignoring any conversion or
exercise limits set forth therein, and assuming that the Conversion Price is at
all times on and after the date of determination 75% of the then Conversion
Price on the Trading Day immediately prior to the date of
determination.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    “Rule 144” means Rule
144 promulgated by the Commission pursuant to the Securities Act, as such Rule
may be amended from time to time, or any similar rule or regulation hereafter
adopted by the Commission having substantially the same effect as such
Rule.

     

    “SEC Reports” shall
have the meaning ascribed to such term in Section 3.1(h).

     

    “Securities” means the
Debentures, the Warrants, the Warrant Shares and the Underlying
Shares.

     

    “Securities Act” means
the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.

     

    “Security Interest and Pledge
Agreement” means the Security Interest and Pledge Agreement, dated the
date hereof, among the Company and the Purchasers, in the form of Exhibit E attached
hereto.

    

    “Security Documents”
shall mean the Security Agreement, the Subsidiary Guarantees and any other
documents and filing required thereunder in order to grant the Purchasers a
first priority security interest in the assets of the Company and the
Subsidiaries as provided in the Security Agreement, including all UCC-1 filing
receipts.

     

    “Short Sales” means
all “short sales” as defined in Rule 200 of Regulation SHO under the Exchange
Act (but shall not be deemed to include the location and/or reservation of
borrowable shares of Common Stock). 

     

     “Subscription Amount”
means, as to the Purchaser, the aggregate amount to be paid for Debentures and
Warrants purchased hereunder as specified below such Purchaser’s name on the
signature page of this Agreement and next to the heading “Subscription Amount,”
in United States dollars and in immediately available funds.

     

    “Subsequent Financing”
shall have the meaning ascribed to such term in Section 4.12(a).

     

    “Subsequent Financing
Notice” shall have the meaning ascribed to such term in Section
4.12(b).

     

    “Subsidiary” means any
subsidiary of the Company as set forth on Schedule 3.1(a) and
shall, where applicable, also include any direct or indirect subsidiary of the
Company formed or acquired after the date hereof.

     

    “Subsidiary Guarantee”
means the Subsidiary Guarantee, dated the date hereof, by each Subsidiary in
favor of the Purchasers, in the form of Exhibit F attached
hereto.

     

    “Trading Day” means a
day on which the principal Trading Market is open for trading.

     

    “Trading Market” means
the following markets or exchanges on which the Common Stock is listed or quoted
for trading on the date in question: the American Stock Exchange, the Nasdaq
Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the
New York Stock Exchange or the OTC Bulletin Board.

     

     “Transaction
Documents” means this Agreement, the Debentures, the Warrants, the
Security Agreement, the Security and Pledge Agreement, the Subsidiary Guarantee,
the Escrow Agreement, the Lock-Up Agreement, , all exhibits and schedules
thereto and hereto and any other documents or agreements executed in connection
with the transactions contemplated hereunder.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    “Transfer Agent” means
Transhare Corporation, the current transfer agent of the Company, with a mailing
address of 5105 DTC Parkway, Suite 325, Greenwood Village, CO 80111 and a
facsimile number of 303-662-1113, and any successor transfer agent of the
Company.

     

    “Underlying Shares”
means the shares of Common Stock issued and issuable upon conversion or
redemption of the Debentures and upon exercise of the Warrants and issued and
issuable in lieu of the cash payment of interest on the Debentures in accordance
with the terms of the Debentures.

     

    “Variable Rate
Transaction” shall have the meaning ascribed to such term in Section
4.13(b).

     

    “VWAP” means, for any
date, the price determined by the first of the following clauses that applies:
(a) if the Common Stock is then listed or quoted on a Trading Market, the daily
volume weighted average price of the Common Stock for such date (or the nearest
preceding date) on the Trading Market on which the Common Stock is then listed
or quoted for trading as reported by Bloomberg L.P. (based on a Trading Day from
9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)); (b)  if
the OTC Bulletin Board is not a Trading Market, the volume weighted average
price of the Common Stock for such date (or the nearest preceding date) on the
OTC Bulletin Board; (c) if the Common Stock is not then listed or quoted for
trading on the OTC Bulletin Board and if prices for the Common Stock are then
reported in the “Pink Sheets” published by Pink OTC Markets, Inc. (or a similar
organization or agency succeeding to its functions of reporting prices), the
most recent bid price per share of the Common Stock so reported; or (d) in
all other cases, the fair market value of a share of Common Stock as determined
by an independent appraiser selected in good faith by the Purchasers of a
majority in interest of the Securities then outstanding and reasonably
acceptable to the Company, the fees and expenses of which shall be paid by the
Company.

     

    “Warrants” means,
collectively, the Common Stock purchase warrants delivered to the Purchasers at
the Closing in accordance with Section 2.2(a) hereof, which Warrants shall be
exercisable immediately and have a term of exercise equal to 5 years, in the
form of Exhibit C
attached hereto.

     

    “Warrant Shares” means
the shares of Common Stock issuable upon exercise of the Warrants.

     

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    ARTICLE
II.

    PURCHASE
AND SALE

     

    2.1 Closing.  The
Closing shall take place in three stages: (i) On June 29, 2009, upon the terms
and subject to the conditions set forth herein, substantially concurrent with
the execution and delivery of this Agreement by the parties hereto, the Company
sold, and the Purchaser, purchased, an aggregate of $583,330 in principal amount
of the Debentures for an aggregate purchase price of $500,000 (the “First
Closing”); (ii) On or about July 2, 2009, upon the terms and subject to the
conditions set forth herein, substantially concurrent with the execution and
delivery of this Agreement by the parties hereto, the Company agrees to sell,
and the Purchaser, agrees to purchase, up to an aggregate of $583,330 in
principal amount of the Debentures for an aggregate purchase price of $500,000
(the “Second Closing”) and (iii) On or about July 30, 2009, upon the terms and
subject to the conditions set forth herein, the Company agrees to sell, and the
Purchaser agrees to purchase, up to an aggregate of up to $2,333,340 in
principal amount of the Debentures, for an aggregate purchase price of up to
$2,00,000 (the “Third Closing”).  The Purchaser shall deliver to the
Company via wire transfer or a certified check of immediately available funds
equal to the purchase price of the respective Debenture and the Company shall
deliver to the Purchaser its respective Debenture and a Warrant, as determined
pursuant to Section 2.2, and the Company and the Purchaser shall deliver the
other items set forth in Section 2.2 deliverable at the Closing.  Upon
satisfaction of the covenants and conditions set forth in Sections 2.2 and 2.3,
the Closing shall occur at the offices of Company Counsel or such other location
as the parties shall mutually agree.

     

    2.2 Deliveries.

     

    (a) On or
prior to the First Closing, the Company delivered or cause to be delivered to
the Purchaser the following:

     

    (i) This
Agreement, duly executed by the Company;

     

    (ii) Debenture
with a face amount of $583,330;

     

    (iii) a Warrant
registered in the name of the Purchaser to purchase up to 2,499,986 shares of
the Company’s Common Stock with an exercise price equal to $0.70 subject to
adjustment therein;

     

    (iv) Pledge
Agreement duly executed by the Company and the Pledgor

     

    (v) Irrevocable
Transfer Agent Instructions, duly executed by the Company, the Pledgor and the
Company’s transfer agent;

     

    (vi) the
Escrow Agreement, duly executed by the Company

     

    (b) On or
prior to the First Closing, the Purchaser delivered or cause to be delivered to
the Purchaser the following:

    

    (i) This
Agreement, duly executed by the Purchaser;

    

    (ii) The
Purchaser Price by wire transfer to the account as specified in writing by the
Company;

    

    (iii) The
Pledge Agreement, duly executed by the Purchaser; and

    

    (iv) The
Escrow Agreement

    

    (c) On or
prior to the Second Closing, the Company shall deliver or cause to be delivered
to the Purchaser, the following:

    

    (i) This
Agreement, duly executed by the Company;

     

    (ii) Debenture
with a face amount of up to $583,330;

     

    (iii) A Warrant
registered in the name of the Purchaser to purchase up to 2,499,986 shares of
the Company’s Common Stock with an exercise price equal to $0.70, subject to
adjustment therein;

     

    (iv) the Security Agreement, duly executed
by the Company and each Subsidiary, along with all of the Security Documents,
including the Subsidiary Guarantee, duly executed by the parties
thereto;

     

    (v) the
Pledge Agreement, duly executed by the Company and each Pledgor, along with the
Pledgor’s pledged stock certificates and medallion guaranteed stock
powers

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    (vi) the
Subsidiary Guaranty, duly executed by the Subsidiaries of the
Company;

     

    (vii) Irrevocable
Transfer Agent Instructions, duly executed by the Company, the Pledgors and the
Company’s transfer agent; and

     

    (viii) the
Escrow Agreement, duly executed by the Company.

     

    (d) On or
prior to the Second Closing, the Purchaser shall deliver or cause to be
delivered to the Company the following:

     

    (i) This
Agreement, duly executed by the Purchaser;

    

    
      	
              (ii)  

            	
              the
      Purchase Price by wire transfer to the account as specified in writing by
      the Company

            

    

    

    
      	
              (iii)  

            	
              The
      Security Agreement, duly executed by the
  Purchaser;

            

    

    

    
      	
              (iv)  

            	
              The
      Pledge Agreement, duly executed by the
  Purchaser;

            

    

    

    
      	
              (v)  

            	
              The
      Subsidiary Guaranty, duly executed by the Purchaser;
  and

            

    

    

    
      	
              (vi)  

            	
              The
      Escrow Agreement duly executed by the
Purchaser

            

    

    

    (e) On or
prior to the Third Closing, the Company shall deliver or cause to be delivered
to the Purchaser the following:

     

    (i) Debenture
with the face amount of $2,333,340

    

    (ii)  A
Warrant registered in the name of the Purchaser to purchase up to 10,000,028
shares of the Company’s Common Stock with an exercise price equal to $0.70,
subject to adjustment therein

    

    (iii) The
Escrow Agreement, duly executed by the Company

    

    (f) On or
prior to the Third Closing, the Purchaser shall deliver or cause to be delivered
to the Company the following:

     

    (i) the
Purchase Price by wire transfer to the account as specified in writing by the
Company;

     

    (ii) the
Escrow Agreement, duly executed by the Purchaser;

     

    2.3 Closing
Conditions.

     

    (a) The
obligations of the Company hereunder in connection with any Closing are subject
to the following conditions being met:

     

    (i) the
accuracy in all material respects on the Closing Date of the representations and
warranties of the Purchasers contained herein;

     

    (ii) all
obligations, covenants and agreements of the Purchaser required to be performed
at or prior to the Closing Date shall have been performed; and

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

    (iii) the
delivery by the Purchaser of the items set forth in Section 2.2 of this
Agreement.

     

    (b) The
respective obligations of the Purchasers hereunder in connection with any
Closing are subject to the following conditions being met:

     

    (i) the
accuracy in all material respects when made and on the Closing Date of the
representations and warranties of the Company contained herein;

     

    (ii) all
obligations, covenants and agreements of the Company required to be performed at
or prior to the Closing Date shall have been performed;

     

    (iii) the
delivery by the Company of the items set forth in Section 2.2(a) of this
Agreement;

     

    (iv) there
shall have been no Material Adverse Effect with respect to the Company since the
date hereof;

     

    (v) from the
date hereof to the Closing Date, trading in the Common Stock shall not have been
suspended by the Commission  or the Company’s principal Trading Market
(except for any suspension of trading of limited duration agreed to by the
Company, which suspension shall be terminated prior to the Closing), and, at any
time prior to the Closing Date, trading in securities generally as reported by
Bloomberg L.P. shall not have been suspended or limited, or minimum prices shall
not have been established on securities whose trades are reported by such
service, or on any Trading Market, nor shall a banking moratorium have been
declared either by the United States or New York State authorities nor shall
there have occurred any material outbreak or escalation of hostilities or other
national or international calamity of such magnitude in its effect on, or any
material adverse change in, any financial market which, in each case, in the
reasonable judgment of the Purchaser, makes it impracticable or inadvisable to
purchase the Securities at the Closing.

     

    (vi) no event
of default outstanding or continues to be outstanding; and

     

    (vii) the 2008
debt will be restructured to extend the maturity date by twelve
months.

     

    (viii) the
Company will obtain the consent of its prior investors who currently hold
convertible senior notes in the principal amount of $2,380,000, which closed on
December 28, 2008, January 25, 2008, February 8, 2008, July 7, 2008 and August
7, 2008, respectively, to extend their respective notes and subsequent resets
for an additional six months and will for an additional six months, if the
Debentures held by the Purchaser are still outstanding;

     

    (ix) the
Company will provide the Purchaser with the right to direct who shall provide
credit card processing services to the Company, provided that said serves are at
rates more favorable than the Company’s current processing rates.

     

    (x) the
Company shall grant the Purchaser the right to utilize its video content player
to commercially distribute video of its own products.

     

    (xi) In
consideration for the Purchaser agreeing to purchase the Debentures, upon each
Closing, the Company agrees to issue to the Purchaser the Warrant substantially
in the form attached hereto as Exhibit E, for the purchase of up to 15,000,000
shares of the Company’s common stock, to be issued pro rata over the course of
the three Closings.

     

    (xii) In
addition to the foregoing, the Purchaser will be entitled to appoint one
individual as director to the Company’s board of directors

     

    (xiii)  The
purchase of the Debentures and the issuance of the Warrant to the Purchaser and
the other transactions contemplated hereby are sometimes referred to herein and
in the other Transaction Agreements as the purchase and sale of the
Securities

     

    

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    ARTICLE
III.

    REPRESENTATIONS
AND WARRANTIES

     

    3.1 Representations and
Warranties of the Company.  Except as set forth in the
Disclosure Schedules, which Disclosure Schedules shall be deemed a part hereof
and shall qualify any representation or otherwise 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
to the Purchaser:

     

    (a) Subsidiaries.  All
of the direct and indirect subsidiaries of the Company are set forth on Schedule
3.1(a).  The Company owns, directly or indirectly, all of the
capital stock or other equity interests of each Subsidiary free and clear of any
Liens, and all of the issued and outstanding shares of capital stock of each
Subsidiary are validly issued and are fully paid, non-assessable and free of
preemptive and similar rights to subscribe for or purchase
securities.  If the Company has no subsidiaries, all other references
to the Subsidiaries or any of them in the Transaction Documents shall be
disregarded.

     

    (b) Organization and
Qualification.  The Company and each of the Subsidiaries is an
entity duly incorporated or otherwise organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
organization, with the requisite power and authority to own and use its
properties and assets and to carry on its business as currently
conducted.  Neither the Company nor any Subsidiary is in violation nor
default of any of the provisions of its respective certificate or articles of
incorporation, bylaws or other organizational or charter
documents.  Each of the Company and the Subsidiaries is duly qualified
to conduct business and is in good standing as a foreign corporation or other
entity in each jurisdiction in which the nature of the business conducted or
property owned by it makes such qualification necessary, except where the
failure to be so qualified or in good standing, as the case may be, could not
have or reasonably be expected to result in: (i) a material adverse effect on
the legality, validity or enforceability of any Transaction Document, (ii) a
material adverse effect on the results of operations, assets, business,
prospects or condition (financial or otherwise) of the Company and the
Subsidiaries, taken as a whole, or (iii) a material adverse effect on the
Company’s ability to perform in any material respect on a timely basis its
obligations under any Transaction Document (any of (i), (ii) or (iii), a “Material Adverse
Effect”) and no Proceeding has been instituted in any such jurisdiction
revoking, limiting or curtailing or seeking to revoke, limit or curtail such
power and authority or qualification.

     

    (c) Authorization;
Enforcement.  The Company has the requisite corporate power and
authority to enter into and to consummate the transactions contemplated by each
of the Transaction Documents and otherwise to carry out its obligations
hereunder and thereunder.  The execution and delivery of each of the
Transaction Documents by the Company and the consummation by it of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary action on the part of the Company and no further action is required by
the Company, the Board of Directors or the Company’s stockholders in connection
therewith other than in connection with the Required Approvals.  Each
Transaction Document to which it is a party has been (or upon delivery will have
been) duly executed by the Company and, when delivered in accordance with the
terms hereof and thereof, will constitute the valid and binding obligation of
the Company enforceable against the Company in accordance with its terms,
except: (i) as limited by general equitable principles and applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors’ rights generally, (ii) as
limited by laws relating to the availability of specific performance, injunctive
relief or other equitable remedies and (iii) insofar as indemnification and
contribution provisions may be limited by applicable law.

     

    (d) No
Conflicts.  The execution, delivery and performance by the
Company of the Transaction Documents, the issuance and sale of the Securities
and the consummation by it to which it is a party of the other transactions
contemplated hereby and thereby do not and will not: (i) conflict with or
violate any provision of the Company’s or any Subsidiary’s certificate or
articles of incorporation, bylaws or other organizational or charter documents,
(ii) conflict with, or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, result in the creation of
any Lien upon any of the properties or assets of the Company or any Subsidiary,
or give to others any rights of termination, amendment, acceleration or
cancellation (with or without notice, lapse of time or both) of, any agreement,
credit facility, debt or other instrument (evidencing a Company or Subsidiary
debt or otherwise) or other understanding to which the Company or any Subsidiary
is a party or by which any property or asset of the Company or any Subsidiary is
bound or affected, or (iii) subject to the Required Approvals, conflict with or
result in a violation of any law, rule, regulation, order, judgment, injunction,
decree or other restriction of any court or governmental authority to which the
Company or a Subsidiary is subject (including federal and state securities laws
and regulations), or by which any property or asset of the Company or a
Subsidiary is bound or affected; except in the case of each of clauses (ii) and
(iii), such as could not have or reasonably be expected to result in a Material
Adverse Effect.

     

    (e) Filings, Consents and
Approvals.  The Company is not required to obtain any consent,
waiver, authorization or order of, give any notice to, or make any filing or
registration with, any court or other federal, state, local or other
governmental authority or other Person in connection with the execution,
delivery and performance by the Company of the Transaction Documents, other
than: (i) the filings required pursuant to Section 4.6 of this Agreement, (ii)
the filing with the Commission of the Registration Statement, (iii) the notice
and/or application(s) to each applicable Trading Market for the issuance and
sale of the Securities and the listing of the Underlying Shares for trading
thereon in the time and manner required thereby, (iv) the filing of Form D with
the Commission and such filings as are required to be made under applicable
state securities laws (collectively, the “Required
Approvals”).

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    (f) Issuance of the
Securities.  The Securities are duly authorized and, when
issued and paid for in accordance with the applicable Transaction Documents,
will be duly and validly issued, fully paid and nonassessable, free and clear of
all Liens imposed by the Company other than restrictions on transfer provided
for in the Transaction Documents.  The Underlying Shares, when issued
in accordance with the terms of the Transaction Documents, will be validly
issued, fully paid and nonassessable, free and clear of all Liens imposed by the
Company other than restrictions on transfer provided for in the Transaction
Documents.  The Company has reserved from its duly authorized capital
stock a number of shares of Common Stock for issuance of the Underlying Shares
at least equal to the Required Minimum on the date hereof.

     

    (g) Capitalization.  The
capitalization of the Company is as set forth on Schedule 3.1(g),
which Schedule
3.1(g) shall also include the number of shares of Common Stock owned
beneficially, and of record, by Affiliates of the Company as of the date hereof.
The Company has not issued any capital stock since its most recently filed
periodic report under the Exchange Act, other than pursuant to the exercise of
employee stock options under the Company’s stock option plans, those issuance
found on Schdule A the issuance of shares of Common Stock to employees pursuant
to the Company’s employee stock purchase plans and pursuant to the conversion
and/or exercise of Common Stock Equivalents outstanding as of the date of the
most recently filed periodic report under the Exchange Act.  No Person
has any right of first refusal, preemptive right, right of participation, or any
similar right to participate in the transactions contemplated by the Transaction
Documents.  Except as a result of the purchase and sale of the
Securities, there are no outstanding options, warrants, scrip rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities, rights or obligations convertible into or exercisable or
exchangeable for, or giving any Person any right to subscribe for or acquire any
shares of Common Stock, or contracts, commitments, understandings or
arrangements by which the Company or any Subsidiary is or may become bound to
issue additional shares of Common Stock or Common Stock Equivalents. The
issuance and sale of the Securities will not obligate the Company to issue
shares of Common Stock or other securities to any Person (other than the
Purchasers) and will not result in a right of any holder of Company securities
to adjust the exercise, conversion, exchange or reset price under any of such
securities. All of the outstanding shares of capital stock of the Company are
validly issued, fully paid and nonassessable, have been issued in compliance
with all federal and state securities laws, and none of such outstanding shares
was issued in violation of any preemptive rights or similar rights to subscribe
for or purchase securities.  No further approval or authorization of
any stockholder, the Board of Directors or others is required for the issuance
and sale of the Securities.  There are no stockholders agreements,
voting agreements or other similar agreements with respect to the Company’s
capital stock to which the Company is a party or, to the knowledge of the
Company, between or among any of the Company’s stockholders.

     

    (h) SEC Reports; Financial
Statements.  The Company has filed all reports, schedules,
forms, statements and other documents required to be filed by the Company under
the Securities Act and the Exchange Act, including pursuant to Section 13(a) or
15(d) thereof, for the two years preceding the date hereof (or such shorter
period as the Company was required by law or regulation to file such material)
(the foregoing materials, including the exhibits thereto and documents
incorporated by reference therein, being collectively referred to herein as the
“SEC Reports”)
on a timely basis or has received a valid extension of such time of filing and
has filed any such SEC Reports prior to the expiration of any such
extension.  As of their respective dates, the SEC Reports complied in
all material respects with the requirements of the Securities Act and the
Exchange Act, as applicable, and none of the SEC Reports, when filed, 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.  The Company has never been an issuer subject to Rule
144(i) under the Securities Act. The financial statements of the Company
included in the SEC Reports comply in all material respects with applicable
accounting requirements and the rules and regulations of the Commission with
respect thereto as in effect at the time of filing.  Such financial
statements have been prepared in accordance with United States generally
accepted accounting principles applied on a consistent basis during the periods
involved (“GAAP”), except as may
be otherwise specified in such financial statements or the Debentures thereto
and except that unaudited financial statements may not contain all footnotes
required by GAAP, and fairly present in all material respects the financial
position of the Company and its consolidated Subsidiaries as of and for the
dates thereof and the results of operations and cash flows for the periods then
ended, subject, in the case of unaudited statements, to normal, immaterial,
year-end audit adjustments.

     

    (i) Material Changes;
Undisclosed Events, Liabilities or Developments.  Since the
date of the latest audited financial statements included within the SEC Reports,
except as specifically disclosed in a subsequent SEC Report filed prior to the
date hereof: (i) there has been no event, occurrence or development that has had
or that could reasonably be expected to result in a Material Adverse Effect,
(ii) the Company has not incurred any liabilities (contingent or otherwise)
other than (A) trade payables and accrued expenses incurred in the ordinary
course of business consistent with past practice and (B) liabilities not
required to be reflected in the Company’s financial statements pursuant to GAAP
or disclosed in filings made with the Commission, (iii) the Company has not
altered its method of accounting, (iv) the Company has not declared or made any
dividend or distribution of cash or other property to its stockholders or
purchased, redeemed or made any agreements to purchase or redeem any shares of
its capital stock and (v) the Company has not issued any equity securities to
any officer, director or Affiliate, except pursuant to existing Company stock
option plans. The Company does not have pending before the Commission any
request for confidential treatment of information.  Except for the
issuance of the Securities contemplated by this Agreement or as set forth on
Schedule
3.1(i), no event, liability or development has occurred or exists with
respect to the Company or its Subsidiaries or their respective business,
properties, operations or financial condition, that would be required to be
disclosed by the Company under applicable securities laws at the time this
representation is made or deemed made that has not been publicly disclosed at
least 1 Trading Day prior to the date that this representation is
made.

     

    (j) Litigation.  Except
as disclosed on Schedule 3.1 (j), there is no action, suit, inquiry, notice of
violation, proceeding or investigation pending or, to the knowledge of the
Company, threatened against or affecting the Company, any Subsidiary or any of
their respective properties before or by any court, arbitrator, governmental or
administrative agency or regulatory authority (federal, state, county, local or
foreign) (collectively, an “Action”) which (i)
adversely affects or challenges the legality, validity or enforceability of any
of the Transaction Documents or the Securities or (ii) could, if there were an
unfavorable decision, have or reasonably be expected to result in a Material
Adverse Effect.  Neither the Company nor any Subsidiary, nor any
director or officer thereof, is or has been the subject of any Action involving
a claim of violation of or liability under federal or state securities laws or a
claim of breach of fiduciary duty.  There has not been, and to the
knowledge of the Company, there is not pending or contemplated, any
investigation by the Commission involving the Company or any current or former
director or officer of the Company.  The Commission has not issued any
stop order or other order suspending the effectiveness of any registration
statement filed by the Company or any Subsidiary under the Exchange Act or the
Securities Act.

     

    
      
        
        

      

      
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    (k) Labor
Relations.  No material labor dispute exists or, to the
knowledge of the Company, is imminent with respect to any of the employees of
the Company, which could reasonably be expected to result in a Material Adverse
Effect.  None of the Company’s or its Subsidiaries’ employees is a
member of a union that relates to such employee’s relationship with the Company
or such Subsidiary, and neither the Company nor any of its Subsidiaries is a
party to a collective bargaining agreement, and the Company and its Subsidiaries
believe that their relationships with their employees are good.  No
executive officer, to the knowledge of the Company, is, or is now expected to
be, in violation of any material term of any employment contract,
confidentiality, disclosure or proprietary information agreement or
non-competition agreement, or any other contract or agreement or any restrictive
covenant in favor of any third party, 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.  The Company
and its Subsidiaries are in compliance with all U.S. federal, state, local and
foreign laws and regulations relating to employment and employment practices,
terms and conditions of employment and wages and hours, except where the failure
to be in compliance could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.

     

    (l) Compliance.  Neither
the Company nor any Subsidiary: (i) is in default under or in violation of (and
no event has occurred that has not been waived that, with notice or lapse of
time or both, would result in a default by the Company or any Subsidiary under),
nor has the Company or any Subsidiary received notice of a claim that it is in
default under or that it is in violation of, any indenture, loan or credit
agreement or any other agreement or instrument to which it is a party or by
which it or any of its properties is bound (whether or not such default or
violation has been waived), (ii) is in violation of any order of any court,
arbitrator or governmental body or (iii) is or has been in violation of any
statute, rule or regulation of any governmental authority, including without
limitation all foreign, federal, state and local laws applicable to its business
and all such laws that affect the environment, except in each case as could not
have or reasonably be expected to result in a Material Adverse
Effect.

     

    (m) Regulatory
Permits.  The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their
respective businesses as described in the SEC Reports, except where the failure
to possess such permits could not reasonably be expected to result in a Material
Adverse Effect (“Material Permits”),
and neither the Company nor any Subsidiary has received any notice of
proceedings relating to the revocation or modification of any Material
Permit.

     

    (n) Title to
Assets.  The Company and the Subsidiaries have good and
marketable title in fee simple to all real property owned by them and good and
marketable title in all personal property owned by them that is material to the
business of the Company and the Subsidiaries, in each case free and clear of all
Liens, except for Liens as do not materially affect the value of such property
and do not materially interfere with the use made and proposed to be made of
such property by the Company and the Subsidiaries and Liens for the payment of
federal, state or other taxes, the payment of which is neither delinquent nor
subject to penalties.  Any real property and facilities held under
lease by the Company and the Subsidiaries are held by them under valid,
subsisting and enforceable leases with which the Company and the Subsidiaries
are in compliance.

     

    (o) Patents and
Trademarks.  The Company and the Subsidiaries have, or have
rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, trade secrets, inventions, copyrights,
licenses and other intellectual property rights and similar rights as described
in the SEC Reports as necessary or material for use in connection with their
respective businesses and which the failure to so have could have a Material
Adverse Effect (collectively, the “Intellectual Property
Rights”).  Neither the Company nor any Subsidiary has received
a notice (written or otherwise) that any of the Intellectual Property Rights
used by the Company or any Subsidiary violates or infringes upon the rights of
any Person. To the knowledge of the Company, all such Intellectual Property
Rights are enforceable and there is no existing infringement by another Person
of any of the Intellectual Property Rights.  The Company and its
Subsidiaries have taken reasonable security measures to protect the secrecy,
confidentiality and value of all of their intellectual properties, except where
failure to do so could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.

     

    (p) Insurance.  The
Company and the Subsidiaries are 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 the aggregate Subscription Amount.  Neither
the Company nor any Subsidiary has any reason to believe that it will not be
able to renew its existing insurance coverage as and when such coverage expires
or to obtain similar coverage from similar insurers as may be necessary to
continue its business without a significant increase in cost.

     

    (q) Transactions With Affiliates
and Employees.  Except as set forth in the SEC Reports, none of
the officers or directors of the Company and, to the knowledge of the Company,
none of the employees of the Company is presently a party to any transaction
with the Company or any Subsidiary (other than for services as employees,
officers and directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of real
or personal property to or from, or otherwise requiring payments to or from any
officer, director or such employee or, to the knowledge of the Company, any
entity in which any officer, director, or any such employee has a substantial
interest or is an officer, director, trustee or partner, in each case in excess
of $120,000 other than for: (i) payment of salary or consulting fees for
services rendered, (ii) reimbursement for expenses incurred on behalf of the
Company and (iii) other employee benefits, including stock option agreements
under any stock option plan of the Company.

     

    
      
        
        

      

      
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    (r) Sarbanes-Oxley; Internal
Accounting Controls.  The Company is in material compliance
with all provisions of the Sarbanes-Oxley Act of 2002 which are applicable to it
as of the Closing Date.  The Company and the Subsidiaries maintain a
system of internal accounting controls sufficient to provide reasonable
assurance that: (i) transactions are executed in accordance with management’s
general or specific authorizations, (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with GAAP and to
maintain asset accountability, (iii) access to assets is permitted only in
accordance with management’s general or specific authorization, and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences. The Company has established disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and
designed such disclosure controls and procedures to ensure that information
required to be disclosed by the Company in the reports it files or submits under
the Exchange Act is recorded, processed, summarized and reported, within the
time periods specified in the Commission’s rules and forms.  The
Company’s certifying officers have evaluated the effectiveness of the Company’s
disclosure controls and procedures as of the end of the period covered by the
Company’s most recently filed periodic report under the Exchange Act (such date,
the “Evaluation
Date”).  The Company presented in its most recently filed
periodic report under the Exchange Act the conclusions of the certifying
officers about the effectiveness of the disclosure controls and procedures based
on their evaluations as of the Evaluation Date.  Since the Evaluation
Date, there have been no changes in the Company’s internal control over
financial reporting (as such term is defined in the Exchange Act) that has
materially affected, or is reasonably likely to materially affect, the Company’s
internal control over financial reporting.

     

    (s) Certain
Fees.  Except for Midtown Partners & Co., LLC, no brokerage
or finder’s fees or commissions are or will be payable by the Company to any
broker, financial advisor or consultant, finder, placement agent, investment
banker, bank or other Person with respect to the transactions contemplated by
the Transaction Documents.  The Purchasers shall have no obligation
with respect to any fees or with respect to any claims made by or on behalf of
other Persons for fees of a type contemplated in this Section that may be due in
connection with the transactions contemplated by the Transaction
Documents.

     

    (t) Private
Placement.  Assuming the accuracy of the Purchasers’
representations and warranties set forth in Section 3.2, no registration under
the Securities Act is required for the offer and sale of the Securities by the
Company to the Purchasers as contemplated hereby. The issuance and sale of the
Securities hereunder does not contravene the rules and regulations of the
Trading Market.

     

    (u) Investment Company.
The Company is not, and is not an Affiliate of, and immediately after receipt of
payment for the Securities, will not be or be an Affiliate of, an “investment
company” within the meaning of the Investment Company Act of 1940, as
amended.  The Company shall conduct its business in a manner so that
it will not become subject to the Investment Company Act of 1940, as
amended.

     

    (v) Registration
Rights.  Other than each of the Purchasers, no Person has any
right to cause the Company to effect the registration under the Securities Act
of any securities of the Company.

     

    (w) Listing and Maintenance
Requirements.  The Common Stock is registered pursuant to
Section 12(b) or 12(g) of the Exchange Act, and the Company has taken no action
designed to, or which to its knowledge is likely to have the effect of,
terminating the registration of the Common Stock under the Exchange Act nor has
the Company received any notification that the Commission is contemplating
terminating such registration.  The Company has not, in the 12 months
preceding the date hereof, received notice from any Trading Market on which the
Common Stock is or has been listed or quoted to the effect that the Company is
not in compliance with the listing or maintenance requirements of such Trading
Market. The Company is, and has no reason to believe that it will not in the
foreseeable future continue to be, in compliance with all such listing and
maintenance requirements.

     

    (x) Application of Takeover
Protections.  The Company and the Board of Directors have taken
all necessary action, if any, in order to render inapplicable any control share
acquisition, business combination, poison pill (including any distribution under
a rights agreement) or other similar anti-takeover provision under the Company’s
certificate of incorporation (or similar charter documents) or the laws of its
state of incorporation that is or could become applicable to the Purchasers as a
result of the Purchasers and the Company fulfilling their obligations or
exercising their rights under the Transaction Documents, including without
limitation as a result of the Company’s issuance of the Securities and the
Purchasers’ ownership of the Securities.

     

    (y) Disclosure.  Except
with respect to the material terms and conditions of the transactions
contemplated by the Transaction Documents, the Company confirms that neither it
nor any other Person acting on its behalf has provided any of the Purchasers or
their agents or counsel with any information that it believes constitutes or
might constitute material, non-public information.  The Company
understands and confirms that the Purchasers will rely on the foregoing
representation in effecting transactions in securities of the
Company.  All disclosure furnished by or on behalf of the Company to
the Purchasers regarding the Company, its business and the transactions
contemplated hereby, including the Disclosure Schedules to this Agreement, 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 light of the circumstances under which they were made, not
misleading.   The press releases disseminated by the Company
during the twelve months preceding the date of this Agreement taken as a whole
do not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made and
when made, not misleading.  The Company acknowledges and agrees that
no Purchaser makes or has made any representations or warranties with respect to
the transactions contemplated hereby other than those specifically set forth in
Section 3.2 hereof.

     

    
      
        
        

      

      
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    (z) No Integrated
Offering. Assuming the accuracy of the Purchasers’ representations and
warranties set forth in Section 3.2, neither the Company, nor any of its
Affiliates, nor any Person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would cause this offering of the
Securities to be integrated with prior offerings by the Company for purposes of
(i) the Securities Act which would require the registration of any such
securities under the Securities Act, or (ii) any applicable shareholder approval
provisions of any Trading Market on which any of the securities of the Company
are listed or designated.

     

    (aa) Solvency.  Based
on the consolidated financial condition of the Company as of the Closing Date,
after giving effect to the receipt by the Company of the proceeds from the sale
of the Securities hereunder: Schedule 3.1(aa) sets
forth as of the date hereof all outstanding secured and unsecured Indebtedness
of the Company or any Subsidiary, or for which the Company or any Subsidiary has
commitments.  For the purposes of this Agreement, “Indebtedness” means
(x) any liabilities for borrowed money or amounts owed in excess of $100,000
(other than trade accounts payable incurred in the ordinary course of business),
(y) all guaranties, endorsements and other contingent obligations in respect of
indebtedness of others, whether or not the same are or should be reflected in
the Company’s balance sheet (or the Debentures thereto), except guaranties by
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business; and (z) the present value of
any lease payments in excess of $50,000 due under leases required to be
capitalized in accordance with GAAP.  Neither the Company nor any
Subsidiary is in default with respect to any Indebtedness.

     

    (bb) Tax
Status.                                
Except for matters that would not, individually or in the aggregate, have or
reasonably be expected to result in a Material Adverse Effect, the Company and
each Subsidiary has filed all necessary federal, state and foreign income and
franchise tax returns and has paid or accrued all taxes shown as due thereon,
and the Company has no knowledge of a tax deficiency which has been asserted or
threatened against the Company or any Subsidiary.

     

    (cc) No General
Solicitation. Neither the Company nor any person acting on behalf of the
Company has offered or sold any of the Securities by any form of general
solicitation or general advertising.  The Company has offered the
Securities for sale only to the Purchasers and certain other “accredited
investors” within the meaning of Rule 501 under the Securities Act.

     

    (dd) Foreign Corrupt
Practices.  Neither the Company, nor to the knowledge of the
Company, any agent or other person acting on behalf of the Company, has: (i)
directly or indirectly, used any funds for unlawful contributions, gifts,
entertainment or other unlawful expenses related to foreign or domestic
political activity, (ii) made any unlawful payment to foreign or domestic
government officials or employees or to any foreign or domestic political
parties or campaigns from corporate funds, (iii) failed to disclose fully any
contribution made by the Company (or made by any person acting on its behalf of
which the Company is aware) which is  in violation of law or (iv)
violated in any material respect any provision of the Foreign Corrupt Practices
Act of 1977, as amended.

     

    (ee) Accountants.  The
Company’s accounting firm is set forth on Schedule 3.1(ee) of
the Disclosure Schedules.  To the knowledge and belief of the Company,
such accounting firm: (i) is a registered public accounting firm as required by
the Exchange Act and (ii) shall express its opinion with respect to the
financial statements to be included in the Company’s Annual Report for the year
ending December 31, 2008.

     

    (ff) No Disagreements with
Accountants and Lawyers.  There are no disagreements of any
kind presently existing, or reasonably anticipated by the Company to arise,
between the Company and the accountants and lawyers formerly or presently
employed by the Company and the Company is current with respect to any fees owed
to its accountants and lawyers which could affect the Company’s ability to
perform any of its obligations under any of the Transaction
Documents.

     

    (gg) Acknowledgment Regarding
Purchasers’ Purchase of Securities.  The Company acknowledges
and agrees that each of the Purchasers is acting solely in the capacity of an
arm’s length purchaser with respect to the Transaction Documents and the
transactions contemplated thereby.  The Company further acknowledges
that no Purchaser is acting as a financial advisor or fiduciary of the Company
(or in any similar capacity) with respect to the Transaction Documents and the
transactions contemplated thereby and any advice given by any Purchaser or any
of their respective representatives or agents in connection with the Transaction
Documents and the transactions contemplated thereby is merely incidental to the
Purchasers’ purchase of the Securities.  The Company further
represents to the Purchaser that the Company’s decision to enter into this
Agreement and the other Transaction Documents has been based solely on the
independent evaluation of the transactions contemplated hereby by the Company
and its representatives.

     

    (hh) Acknowledgment Regarding
Purchasers’ Trading Activity.  Notwithstanding anything in this Agreement
or elsewhere herein to the contrary (except for Sections 3.2(f) and
4.16
hereof), it is understood and acknowledged by the Company that: (i) none of the
Purchasers has been asked to agree by the Company, nor has any Purchaser agreed,
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) past or future open market
or other transactions by any Purchaser, specifically including, without
limitation, Short Sales or “derivative” transactions, before or after the
closing of this or future private placement transactions, may negatively impact
the market price of the Company’s publicly-traded securities, (iii) any
Purchaser, and counter-parties in “derivative” transactions to which any such
Purchaser is a party, directly or indirectly, may presently have a “short”
position in the Common Stock and (iv) the
Purchaser 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 (y) one or more Purchasers may engage in hedging activities at
various times during the period that the Securities are outstanding, including,
without limitation, during the periods that the value of the Underlying Shares
deliverable with respect to Securities are being determined, and (z) such
hedging activities (if any) could reduce the value of the existing stockholders'
equity interests in the Company at and after the time that the hedging
activities are being conducted.  The Company acknowledges that such
aforementioned hedging activities do not constitute a breach of any of the
Transaction Documents.

     

    
      
        
        

      

      
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    (ii) Regulation M
Compliance.  The Company has not, and to its knowledge no one acting
on its behalf has, (i) taken, directly or indirectly, any action designed to
cause or to result in the stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of any of the
Securities, (ii) sold, bid for, purchased, or paid any compensation for
soliciting purchases of, any of the Securities, or (iii) paid or agreed to pay
to any Person any compensation for soliciting another to purchase any other
securities of the Company, other than, in the case of clauses (ii) and (iii),
compensation paid to the Company’s placement agent in connection with the
placement of the Securities.

     

    (jj) Reserved.

     

    (kk) Reserved.

     

    (ll) Stock Option Plans.
Each stock option granted by the Company under the Company’s stock option plan
was granted (i) in accordance with the terms of the Company’s stock option plan
and (ii) with an exercise price at least equal to the fair market value of the
Common Stock on the date such stock option would be considered granted under
GAAP and applicable law. No stock option granted under the Company’s stock
option plan has been backdated.  The Company has not knowingly
granted, and there is no and has been no Company policy or practice to knowingly
grant, stock options prior to, or otherwise knowingly coordinate the grant of
stock options with, the release or other public announcement of material
information regarding the Company or its Subsidiaries or their financial results
or prospects.

     

    3.2 Representations and
Warranties of the Purchasers.    The Purchaser, for
itself and for no other Purchaser, hereby represents and warrants as of the date
hereof and as of the Closing Date to the Company as follows:

     

    (a) Organization;
Authority.  Such Purchaser is an entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization with full right, corporate or partnership power and authority to
enter into and to consummate the transactions contemplated by the Transaction
Documents and otherwise to carry out its obligations hereunder and thereunder.
The execution and delivery of the Transaction Documents and performance by such
Purchaser of the transactions contemplated by the Transaction Documents have
been duly authorized by all necessary corporate or similar action on the part of
such Purchaser.  Each Transaction Document to which it is a party has
been duly executed by such Purchaser, and when delivered by such Purchaser in
accordance with the terms hereof, will constitute the valid and legally binding
obligation of such Purchaser, enforceable against it in accordance with its
terms, except: (i) as limited by general equitable principles and applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors’ rights generally, (ii) as
limited by laws relating to the availability of specific performance, injunctive
relief or other equitable remedies and (iii) insofar as indemnification and
contribution provisions may be limited by applicable law.

     

    (b) Own
Account.  Such Purchaser understands that the Securities are
“restricted securities” and have not been registered under the Securities Act or
any applicable state securities law and is acquiring the Securities as principal
for its own account and not with a view to or for distributing or reselling such
Securities or any part thereof in violation of the Securities Act or any
applicable state securities law, has no present intention of distributing any of
such Securities in violation of the Securities Act or any applicable state
securities law and has no direct or indirect arrangement or understandings with
any other persons to distribute or regarding the distribution of such Securities
(this representation and warranty not limiting such Purchaser’s right to sell
the Securities pursuant to the Registration Statement or otherwise in compliance
with applicable federal and state securities laws) in violation of the
Securities Act or any applicable state securities law.  Such Purchaser
is acquiring the Securities hereunder in the ordinary course of its
business.

     

    (c) Purchaser
Status.  At the time such Purchaser was offered the Securities,
it was, and as of the date hereof it is, and on each date on which it exercises
any Warrants or converts any Debentures it will be either: (i) an “accredited
investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under
the Securities Act or (ii) a “qualified institutional buyer” as defined in Rule
144A(a) under the Securities Act.  Such Purchaser is not required to
be registered as a broker-dealer under Section 15 of the Exchange
Act.

     

    (d) Experience of Such
Purchaser.  Such Purchaser, either alone or together with its
representatives, has such knowledge, sophistication and experience in business
and financial matters so as to be capable of evaluating the merits and risks of
the prospective investment in the Securities, and has so evaluated the merits
and risks of such investment.  Such Purchaser is able to bear the
economic risk of an investment in the Securities and, at the present time, is
able to afford a complete loss of such investment.

     

    (e) General
Solicitation.  Such Purchaser 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 or any other
general solicitation or general advertisement.

     

    (f) Short Sales and
Confidentiality Prior To The Date Hereof.  Other than
consummating the transactions contemplated hereunder, such Purchaser has not
directly or indirectly, nor has any Person acting on behalf of or pursuant to
any understanding with such Purchaser, executed any purchases or sales,
including Short Sales, of the securities of the Company during the period
commencing from the time that such Purchaser first received a term sheet
(written or oral) from the Company or any other Person representing the Company
setting forth the material terms of the transactions contemplated hereunder
until the date hereof (“Discussion
Time”).  Notwithstanding the foregoing, in the case of a
Purchaser that is a multi-managed investment vehicle whereby separate portfolio
managers manage separate portions of such Purchaser’s assets and the portfolio
managers have no direct knowledge of the investment decisions made by the
portfolio managers managing other portions of such Purchaser’s assets, the
representation set forth above shall only apply with respect to the portion of
assets managed by the portfolio manager that made the investment decision to
purchase the Securities covered by this Agreement.  Other than to
other Persons party to this Agreement, such Purchaser has maintained the
confidentiality of all disclosures made to it in connection with this
transaction (including the existence and terms of this transaction).
Notwithstanding the foregoing, for avoidance of doubt, nothing contained herein
shall constitute a representation or warranty, or preclude any actions, with
respect to the identification of the availability of, or securing of, available
shares to borrow in order to effect short sales or similar transactions in the
future.

     

    
      
        
        

      

      
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    ARTICLE
IV.

    OTHER
AGREEMENTS OF THE PARTIES

     

    4.1 Transfer
Restrictions.

     

    (a) The
Securities may only be disposed of in compliance with state and federal
securities laws.  In connection with any transfer of Securities other
than pursuant to an effective registration statement or Rule 144, to the Company
or to an Affiliate of a Purchaser or in connection with a pledge as contemplated
in Section 4.1(b), the Company may require the transferor thereof to provide to
the Company an opinion of counsel selected by the transferor and reasonably
acceptable to the Company, the form and substance of which opinion shall be
reasonably satisfactory to the Company, to the effect that such transfer does
not require registration of such transferred Securities under the Securities
Act.  As a condition of transfer, any such transferee shall agree in
writing to be bound by the terms of this Agreement and shall have the rights of
a Purchaser under this Agreement.

     

    (b) The
Purchasers agree to the imprinting, so long as is required by this Section 4.1,
of a legend on any of the Securities in the following form:

     

    NEITHER
THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE HAS NOT
BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY,
MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM,
OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS
EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE
SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY.  THIS SECURITY AND THE SECURITIES ISSUABLE UPON CONVERSION OF
THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH
A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN
“ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT OR
OTHER LOAN SECURED BY SUCH SECURITIES.

     

    The
Company acknowledges and agrees that a Purchaser may from time to time pledge
pursuant to a bona fide margin agreement with a registered broker-dealer or
grant a security interest in some or all of the Securities to a financial
institution that is an “accredited investor” as defined in Rule 501(a) under the
Securities Act and who agrees to be bound by the provisions of this Agreement
and, if required under the terms of such arrangement, such Purchaser may
transfer pledged or secured Securities to the pledgees or secured
parties.  Such a pledge or transfer would not be subject to approval
of the Company and no legal opinion of legal counsel of the pledgee, secured
party or pledgor shall be required in connection therewith.  Further,
no notice shall be required of such pledge.  At the appropriate
Purchaser’s expense, the Company will execute and deliver such reasonable
documentation as a pledgee or secured party of Securities may reasonably request
in connection with a pledge or transfer of the Securities.

     

    Certificates
evidencing the Underlying Shares shall not contain any legend (including the
legend set forth in Section 4.1(b) hereof): (i) while a registration statement
covering the resale of such security is effective under the Securities Act, (ii)
following any sale of such Underlying Shares pursuant to Rule 144, (iii) if such
Underlying Shares are eligible for sale under Rule 144, without the requirement
for the Company to be in compliance with the current public information required
under Rule 144 as to such Underlying Shares and without volume or manner-of-sale
restrictions or (iv) if such legend is not required under applicable
requirements of the Securities Act (including judicial interpretations and
pronouncements issued by the staff of the Commission). The Company shall cause
its counsel to issue a legal opinion to the Transfer Agent promptly after the
Effective Date if required by the Transfer Agent to effect the removal of the
legend hereunder.  If all or any portion of a Debenture is converted
or Warrant is exercised at a time when there is an effective registration
statement to cover the resale of the Underlying Shares, or if such Underlying
Shares may be sold under Rule 144, without the requirement for the Company to be
in compliance with the current public information required under Rule 144 as to
such Underlying Shares and without volume or manner-of-sale restrictions or if
such legend is not otherwise required under applicable requirements of the
Securities Act (including judicial interpretations and pronouncements issued by
the staff of the Commission) then such Underlying Shares shall be issued free of
all legends.  The Company agrees that following the Effective Date or
at such time as such legend is no longer required under this Section 4.1(c), it
will, no later than three Trading Days following the delivery by a Purchaser to
the Company or the Transfer Agent of a certificate representing Underlying
Shares, as applicable, issued with a restrictive legend (such third Trading Day,
the “Legend Removal
Date”), deliver or cause to be delivered to such Purchaser a certificate
representing such shares that is free from all restrictive and other
legends.  The Company may not make any notation on its records or give
instructions to the Transfer Agent that enlarge the restrictions on transfer set
forth in this Section 4.  Certificates for Underlying Shares subject
to legend removal hereunder shall be transmitted by the Transfer Agent to the
Purchaser by crediting the account of the Purchaser’s prime broker with the
Depository Trust Company System as directed by such Purchaser.

     

    

    (c) In
addition to such Purchaser’s other available remedies, the Company shall pay to
a Purchaser, in cash, as partial liquidated damages and not as a penalty, for
each $1,000 of Underlying Shares (based on the VWAP of the Common Stock on the
date such Securities are submitted to the Transfer Agent) delivered for removal
of the restrictive legend and subject to Section 4.1(c), $10 per Trading Day
(increasing to $20 per Trading Day five (5) Trading Days after such damages have
begun to accrue) for each Trading Day after the Legend Removal Date until such
certificate is delivered without a legend.  Nothing herein shall limit
such Purchaser’s right to pursue actual damages for the Company’s failure to
deliver certificates representing any Securities as required by the Transaction
Documents, and such Purchaser shall have the right to pursue all remedies
available to it at law or in equity including, without limitation, a decree of
specific performance and/or injunctive relief.

     

    
      
        
        

      

      
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    (d) The
Purchaser, severally and not jointly with the other Purchasers, agrees that such
Purchaser will sell any Securities pursuant to either the registration
requirements of the Securities Act, including any applicable prospectus delivery
requirements, or an exemption therefrom, and that if Securities are sold
pursuant to a Registration Statement, they will be sold in compliance with the
plan of distribution set forth therein, and acknowledges that the removal of the
restrictive legend from certificates representing Securities as set forth in
this Section 4.1 is predicated upon the Company’s reliance upon this
understanding.

     

    4.2 Acknowledgment of
Dilution.  The Company acknowledges that the issuance of the
Securities may result in dilution of the outstanding shares of Common Stock,
which dilution may be substantial under certain market
conditions.  The Company further acknowledges that its obligations
under the Transaction Documents, including, without limitation, its obligation
to issue the Underlying Shares pursuant to the Transaction Documents, are
unconditional and absolute and not subject to any right of set off,
counterclaim, delay or reduction, regardless of the effect of any such dilution
or any claim the Company may have against any Purchaser and regardless of the
dilutive effect that such issuance may have on the ownership of the other
stockholders of the Company.

     

    4.3 Furnishing of Information;
Public Information.

     

    (a) If the
Common Stock is not registered under Section 12(b) or 12(g) of the Exchange Act
on the date hereof, the Company agrees to cause the Common Stock to be
registered under Section 12(g) of the Exchange Act on or before the 60th
calendar day following the date hereof. Until the earliest of the time that (i)
no Purchaser owns Securities or (ii) the Warrants have expired, the Company
covenants to maintain the registration of the Common Stock under Section 12(b)
or 12(g) of the Exchange Act and to timely file (or obtain extensions in respect
thereof and file within the applicable grace period) all reports required to be
filed by the Company after the date hereof pursuant to the Exchange
Act.    As long as any Purchaser owns Securities, if the
Company is not required to file reports pursuant to the Exchange Act, it will
prepare and furnish to the Purchasers and make publicly available in accordance
with Rule 144(c) such information as is required for the Purchasers to sell the
Securities under Rule 144.  The Company further covenants that it will
take such further action as any holder of Securities may reasonably request, to
the extent required from time to time to enable such Person to sell such
Securities without registration under the Securities Act within the requirements
of the exemption provided by Rule 144.

     

    (b)                      At
any time during the period commencing from the six (6) month anniversary of the
date hereof and ending at such time that all of the Securities may be sold
without the requirement for the Company to be in compliance with Rule 144(c)(1)
and otherwise without restriction or limitation pursuant to Rule 144, if the
Company shall fail for any reason to satisfy the current public information
requirement under Rule 144(c) (a “Public Information
Failure”) then, in addition to such Purchaser’s other available remedies,
the Company shall pay to a Purchaser, in cash, as partial liquidated damages and
not as a penalty, by reason of any such delay in or reduction of its ability to
sell the Securities, an amount in cash equal to two percent (2.0%) of the
aggregate Subscription Amount of such Purchaser’s Securities on the day of a
Public Information Failure and on every thirtieth (30th) day
(pro rated for periods totaling less than thirty days) thereafter until the
earlier of (a) the date such Public Information Failure is cured and (b) such
time that such public information is no longer required  for the Purchasers
to transfer the Underlying Shares pursuant to Rule 144.  The payments to
which a Purchaser shall be entitled pursuant to this Section 4.3(b) are referred
to herein as “Public
Information Failure Payments.”  Public Information Failure Payments shall be paid
on the earlier of (i) the last day of the calendar month during which such
Public Information Failure Payments are incurred
and (ii) the third (3rd)
Business Day after the event or failure giving rise to the Public Information
Failure Payments is
cured.  In the event the Company fails to make Public Information
Failure Payments in
a timely manner, such Public Information Failure Payments shall bear
interest at the rate of 1.5% per month (prorated for partial months) until paid
in full. Nothing herein shall limit such Purchaser’s right to pursue actual
damages for the Public Information Failure, and such Purchaser shall have the
right to pursue all remedies available to it at law or in equity including,
without limitation, a decree of specific performance and/or injunctive
relief.

     

    4.4 Integration.  The Company shall not
sell, offer for sale or solicit offers to buy or otherwise negotiate in respect
of any security (as defined in Section 2 of the Securities Act) that would be
integrated with the offer or sale of the Securities to the Purchasers in a
manner that would require the registration under the Securities Act of the sale
of the Securities to the Purchasers or that would be integrated with the offer
or sale of the Securities for purposes of the rules and regulations of any
Trading Market such that it would require shareholder approval prior to the
closing of such other transaction unless shareholder approval is obtained before
the closing of such subsequent transaction.

     

    
      
        
        

      

      
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    4.5 Conversion and Exercise
Procedures.  Each of the form of Notice of Exercise included in
the Warrants and the form of Notice of Conversion included in the
Debentures set
forth the totality of the procedures required of the Purchasers in order to
exercise the Warrants or convert the Debentures.  No additional legal
opinion, other information or instructions shall be required of the Purchasers
to exercise their Warrants or convert their Debentures.  The Company
shall honor exercises of the Warrants and conversions of the Debentures and
shall deliver Underlying Shares in accordance with the terms, conditions and
time periods set forth in the Transaction Documents.

     

    4.6 Securities Laws Disclosure;
Publicity.  The Company shall, by 8:30 a.m. (New York City
time) on the fourth Trading Day immediately following the date hereof, issue a
Current Report on Form 8-K, disclosing the material terms of the transactions
contemplated hereby, and including the Transaction Documents as exhibits
thereto.  The Company and the Purchaser shall consult with each other
in issuing any other press releases with respect to the transactions
contemplated hereby, and neither the Company nor any Purchaser shall issue any
such press release nor otherwise make any such public statement without the
prior consent of the Company, with respect to any press release of any
Purchaser, or without the prior consent of the Purchaser, with respect to any
press release of the Company, which consent shall not unreasonably be withheld
or delayed, except if such disclosure is required by law, in which case the
disclosing party shall promptly provide the other party with prior notice of
such public statement or communication.  Notwithstanding the
foregoing, the Company shall not publicly disclose the name of any Purchaser, or
include the name of any Purchaser in any filing with the Commission or any
regulatory agency or Trading Market, without the prior written consent of such
Purchaser, except: (a) as required by federal securities law in connection with
(i) any registration statement and (ii) the filing of final Transaction
Documents (including signature pages thereto) with the Commission and (b) to the
extent such disclosure is required by law or Trading Market regulations, in
which case the Company shall provide the Purchasers with prior notice of such
disclosure permitted under this clause (b).

     

    4.7 Shareholder Rights
Plan.  No claim will be made or enforced by the Company or,
with the consent of the Company, any other Person, that any Purchaser is an
“Acquiring Person” under any control share acquisition, business combination,
poison pill (including any distribution under a rights agreement) or similar
anti-takeover plan or arrangement in effect or hereafter adopted by the Company,
or that any Purchaser could be deemed to trigger the provisions of any such plan
or arrangement, by virtue of receiving Securities under the Transaction
Documents or under any other agreement between the Company and the
Purchasers.

     

    4.8 Non-Public
Information.  Except with respect to the material terms and
conditions of the transactions contemplated by the Transaction Documents, the
Company covenants and agrees that neither it, nor any other Person acting on its
behalf, will provide any Purchaser or its agents or counsel with any information
that the Company believes constitutes material non-public information, unless
prior thereto such Purchaser shall have executed a written agreement regarding
the confidentiality and use of such information.  The Company
understands and confirms that the Purchaser shall be relying on the foregoing
covenant in effecting transactions in securities of the Company.

     

    4.9 Use of
Proceeds.  Except as set forth on Schedule 4.9 attached
hereto, the Company shall use the net proceeds from the sale of the Securities
hereunder for working capital purposes and shall not use such proceeds for: (a)
the satisfaction of any portion of the Company’s debt (other than payment of
trade payables in the ordinary course of the Company’s business and prior
practices), (b) the redemption of any Common Stock or Common Stock Equivalents
(c) the settlement of any outstanding litigation or (d) the satisfaction of any
portion of the Company’s debt to St. George Investments, LLC.

     

    
      
        
        

      

      
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    4.10 Indemnification of
Purchasers.   Subject to the provisions of this Section
4.10, the Company will indemnify and hold the Purchaser and its directors,
officers, shareholders, members, partners, employees and agents (and any other
Persons with a functionally equivalent role of a Person holding such titles
notwithstanding a lack of such title or any other title), each Person who
controls such Purchaser (within the meaning of Section 15 of the Securities Act
and Section 20 of the Exchange Act), and the directors, officers, shareholders,
agents, members, partners or employees (and any other Persons with a
functionally equivalent role of a Person holding such titles notwithstanding a
lack of such title or any other title) of such controlling persons (each, a
“Purchaser
Party”) harmless from any and all losses, liabilities, obligations,
claims, contingencies, damages, costs and expenses, including all judgments,
amounts paid in settlements, court costs and reasonable attorneys’ fees and
costs of investigation that any such Purchaser Party may suffer or incur as a
result of or relating to (a) any breach of any of the representations,
warranties, covenants or agreements made by the Company in this Agreement or in
the other Transaction Documents or (b) any action instituted against a Purchaser
in any capacity, or any of them or their respective Affiliates, by any
stockholder of the Company who is not an Affiliate of such Purchaser, with
respect to any of the transactions contemplated by the Transaction Documents
(unless such action is based upon a breach of such Purchaser’s representations,
warranties or covenants under the Transaction Documents or any agreements or
understandings such Purchaser may have with any such stockholder or any
violations by the Purchaser of state or federal securities laws or any conduct
by such Purchaser which constitutes fraud, gross negligence, willful misconduct
or malfeasance).  If any action shall be brought against any Purchaser
Party in respect of which indemnity may be sought pursuant to this Agreement,
such Purchaser Party shall promptly notify the Company in writing, and the
Company shall have the right to assume the defense thereof with counsel of its
own choosing reasonably acceptable to the Purchaser Party.  Any
Purchaser Party shall have the right to employ separate counsel in any such
action and participate in the defense thereof, but the fees and expenses of such
counsel shall be at the expense of such Purchaser Party except to the extent
that (i) the employment thereof has been specifically authorized by the Company
in writing, (ii) the Company has failed after a reasonable period of time to
assume such defense and to employ counsel or (iii) in such action there is, in
the reasonable opinion of such separate counsel, a material conflict on any
material issue between the position of the Company and the position of such
Purchaser Party, in which case the Company shall be responsible for the
reasonable fees and expenses of no more than one such separate
counsel.  The Company will not be liable to any Purchaser Party under
this Agreement (y) for any settlement by a Purchaser Party effected without the
Company’s prior written consent, which shall not be unreasonably withheld or
delayed; or (z) to the extent, but only to the extent that a loss, claim, damage
or liability is attributable to any Purchaser Party’s breach of any of the
representations, warranties, covenants or agreements made by such Purchaser
Party in this Agreement or in the other Transaction Documents.

     

    4.11 Reservation and Listing of
Securities.

     

    (a) The
Company shall maintain a reserve from its duly authorized shares of Common Stock
for issuance pursuant to the Transaction Documents in such amount as may then be
required to fulfill its obligations in full under the Transaction
Documents.

     

    (b) If, on
any date, the number of authorized but unissued (and otherwise unreserved)
shares of Common Stock is less than the Required Minimum on such date, then the
Board of Directors shall use commercially reasonable efforts to amend the
Company’s certificate or articles of incorporation to increase the number of
authorized but unissued shares of Common Stock to at least the Required Minimum
at such time, as soon as possible and in any event not later than the 75th day
after such date.

     

    (c) Reserved.

     

    4.12 Participation in Future
Financing.

     

    (a) From the
date hereof and continuing for as long as the Debentures are outstanding, upon
any issuance by the Company or any of its Subsidiaries of Common Stock, Common
Stock Equivalents for cash consideration, Indebtedness (or a combination of
units hereof) (a “Subsequent
Financing”), the Purchaser shall have the right to participate in up to
an amount of the Subsequent Financing equal to 100% of the Subsequent Financing
(the “Participation
Maximum”) on the same terms, conditions and price provided for in the
Subsequent Financing.

     

    (b) At least
five (5) Trading Days prior to the closing of the Subsequent Financing, the
Company shall deliver to the Purchaser a written notice of its intention to
effect a Subsequent Financing (“Pre-Notice”), which
Pre-Notice shall ask such Purchaser if it wants to review the details of such
financing (such additional notice, a “Subsequent Financing
Notice”).  Upon the request of a Purchaser, and only upon a
request by such Purchaser, for a Subsequent Financing Notice, the Company shall
promptly, but no later than 1 Trading Day after such request, deliver a
Subsequent Financing Notice to such Purchaser.  The Subsequent
Financing Notice shall describe in reasonable detail the proposed terms of such
Subsequent Financing, the amount of proceeds intended to be raised thereunder
and the Person or Persons through or with whom such Subsequent Financing is
proposed to be effected and shall include a term sheet or similar document
relating thereto as an attachment.

     

    (c) Any
Purchaser desiring to participate in such Subsequent Financing must provide
written notice to the Company by not later than 5:30 p.m. (New York City time)
on the fifth (5th)
Trading Day after all of the Purchasers have received the Pre-Notice that the
Purchaser is willing to participate in the Subsequent Financing, the amount of
the Purchaser’s participation, and that the Purchaser has such funds ready,
willing, and available for investment on the terms set forth in the Subsequent
Financing Notice.  If the Company receives no notice from a Purchaser
as of such fifth (5th)
Trading Day, such Purchaser shall be deemed to have notified the Company that it
does not elect to participate.

     

    
      
        
        

      

      
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    (d) If by
5:30 p.m. (New York City time) on the fifth (5th )
Trading Day after the Purchaser has received the Pre-Notice, notifications by
the Purchaser of their willingness to participate in the Subsequent Financing
(or to cause their designees to participate) is, in the aggregate, less than the
total amount of the Subsequent Financing, then the Company may effect the
remaining portion of such Subsequent Financing on the terms and with the Persons
set forth in the Subsequent Financing Notice.

     

    (e) The
Company must provide the Purchasers with a second Subsequent Financing Notice,
and the Purchasers will again have the right of participation set forth above in
this Section 4.12, if the Subsequent Financing subject to the initial Subsequent
Financing Notice is not consummated for any reason on the terms set forth in
such Subsequent Financing Notice within 30 Trading Days after the date of the
initial Subsequent Financing Notice.

     

    (f) Notwithstanding
the foregoing, this Section 4.12 shall not apply in respect of (i) an Exempt
Issuance, or (ii) an underwritten public offering of Common Stock.

     

    4.13 Subsequent Equity
Sales.

     

    (a) From the
date hereof and continuing for a period of 90 days, neither the Company nor any
Subsidiary shall issue shares of Common Stock or Common Stock Equivalents in
regards to a financing without the express written consent of the Purchaser;
provided, however, that the 90
day period set forth in this Section 4.13 shall be extended for the number of
Trading Days during such period in which (i) trading in the Common Stock is
suspended by any Trading Market, or (ii) following the Effective Date, the
Registration Statement is not effective or the prospectus included in the
Registration Statement may not be used by the Purchasers for the resale of the
Underlying Shares.

     

    (b) From the
date hereof until such time as no Purchaser holds any of the Securities, the
Company shall be prohibited from effecting or entering into an agreement to
effect any Subsequent Financing involving a Variable Rate Transaction. “Variable Rate
Transaction” means a transaction in which the Company (i) issues or sells
any debt or equity securities that are convertible into, exchangeable or
exercisable for, or include the right to receive, additional shares of Common
Stock either (A) at a conversion price, exercise price or exchange rate or other
price that is based upon, and/or varies with, the trading prices of or
quotations for the shares of Common Stock at any time after the initial issuance
of such debt or equity securities or (B) with a conversion, exercise or exchange
price that is subject to being reset at some future date after the initial
issuance of such debt or equity security or upon the occurrence of specified or
contingent events directly or indirectly related to the business of the Company
or the market for the Common Stock or (ii) enters into any agreement, including,
but not limited to, an equity line of credit, whereby the Company may sell
securities at a future determined price.   Any Purchaser shall be
entitled to obtain injunctive relief against the Company to preclude any such
issuance, which remedy shall be in addition to any right to collect
damages.

     

    (c) Reserved.

     

    (d) Notwithstanding
the foregoing, this Section 4.13 shall not apply in respect of an Exempt
Issuance, except that no Variable Rate Transaction shall be an Exempt
Issuance.

     

    
      
        
        

      

      
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    4.14 Equal Treatment of
Purchasers.  No consideration (including any modification of
any Transaction Document) 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 is also offered to all of the parties to
the Transaction Documents. Further, the Company shall not make any payment of
principal or interest on the Debentures in amounts which are disproportionate to
the respective principal amounts outstanding on the Debentures at any applicable
time.  For clarification purposes, this provision constitutes a
separate right granted to the Purchaser by the Company and negotiated separately
by the Purchaser, and is intended for the Company to treat the Purchasers as a
class and shall not in any way be construed as the Purchasers acting in concert
or as a group with respect to the purchase, disposition or voting of Securities
or otherwise.

     

    4.15 Short Sales and
Confidentiality After The Date Hereof. The Purchaser, severally and not
jointly with the other Purchasers, 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 with the Discussion Time and ending at
such time the transactions contemplated by this Agreement are first publicly
announced as described in Section 4.6.  The Purchaser, severally and not
jointly with the other Purchasers, covenants that until such time as the
transactions contemplated by this Agreement are publicly disclosed by the
Company as described in Section 4.6, such Purchaser will maintain the
confidentiality of the existence and terms of this transaction and the
information included in the Transaction Documents and the Disclosure
Schedules.  Notwithstanding the foregoing, no Purchaser makes any
representation, warranty or covenant hereby that it will not engage in Short
Sales in the securities of the Company after the time that the transactions
contemplated by this Agreement are first publicly announced as described in
Section 4.6.  Notwithstanding the foregoing, in the case of a Purchaser
that is a multi-managed investment vehicle whereby separate portfolio managers
manage separate portions of such Purchaser’s assets and the portfolio managers
have no direct knowledge of the investment decisions made by the portfolio
managers managing other portions of such Purchaser’s assets, the covenant set
forth above shall only apply with respect to the portion of assets managed by
the portfolio manager that made the investment decision to purchase the
Securities covered by this Agreement.

     

    4.16 Form D; Blue Sky
Filings.  The Company agrees to timely file a Form D with
respect to the Securities as required under Regulation D and to provide a copy
thereof, promptly upon request of any Purchaser. The Company shall 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 Purchasers at
the Closing under applicable securities or “Blue Sky” laws of the states of the
United States, and shall provide evidence of such actions promptly upon request
of any Purchaser.

     

    4.17 Capital
Changes.  Until the one year anniversary from the date hereof,
the Company shall not undertake a reverse or forward stock split or
reclassification of the Common Stock without the prior written consent of the
Purchasers holding a majority in principal amount outstanding of the
Debentures.

     

    4.18                      Change of Chief Executive
Officer.  Upon a change of
the Company’s Chief Executive Officer, the Purchaser will be entitled to appoint
four additional directors to the Company’s board of directors

     

     

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

    ARTICLE
V.

    MISCELLANEOUS

     

    5.1 Reserved.

     

    5.2 Termination. 
This Agreement may be terminated by any Purchaser, as to such Purchaser’s
obligations hereunder only and without any effect whatsoever on the obligations
between the Company and the other Purchasers, by written notice to the other
parties, if the Closing has not been consummated on or before August 7, 2009;
provided, however, that such
termination will not affect the right of any party to sue for any breach by the
other party (or parties).

     

    5.3 Fees and
Expenses.  Except as expressly set forth in the Transaction
Documents to the contrary, each party shall pay the fees and expenses of its
advisers, counsel, accountants and other experts, if any, and all other expenses
incurred by such party incident to the negotiation, preparation, execution,
delivery and performance of this Agreement.  The Company shall pay all
Transfer Agent fees, stamp taxes and other taxes and duties levied in connection
with the delivery of any Securities to the Purchasers.

     

    5.4 Entire
Agreement.  The Transaction Documents, together with the
exhibits and schedules thereto, contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and
schedules.

     

    5.5 Notices.  Any
and all notices or other communications or deliveries required or permitted to
be provided hereunder shall be in writing and shall be deemed given and
effective on the earliest of: (a) the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number set forth on
the signature pages attached hereto prior to 5:30 p.m. (New York City time) on a
Trading Day, (b) the next Trading Day after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile number set
forth on the signature pages attached hereto on a day that is not a Trading Day
or later than 5:30 p.m. (New York City time) on any Trading Day, (c) the second
(2nd)
Trading Day following the date of mailing, if sent by U.S. nationally recognized
overnight courier service or (d) upon actual receipt by the party to whom such
notice is required to be given.  The address for such notices and
communications shall be as set forth on the signature pages attached
hereto.

     

    5.6 Amendments;
Waivers.  No provision of this Agreement may be waived,
modified, supplemented or amended except in a written instrument signed, in the
case of an amendment, by the Company and the Purchaser or, in the case of a
waiver, by the party against whom enforcement of any such waived provision is
sought.  No waiver of any default with respect to any provision,
condition or requirement of this Agreement shall be deemed to be a continuing
waiver in the future or a waiver of any subsequent default or a waiver of any
other provision, condition or requirement hereof, nor shall any delay or
omission of any party to exercise any right hereunder in any manner impair the
exercise of any such right.

     

    5.7 Headings.  The
headings herein are for convenience only, do not constitute a part of this
Agreement and shall not be deemed to limit or affect any of the provisions
hereof.

     

    5.8 Successors and
Assigns.  This Agreement shall be binding upon and inure to the
benefit of the parties and their successors and permitted
assigns.  The Company may not assign this Agreement or any rights or
obligations hereunder without the prior written consent of the Purchaser (other
than by merger).  Any Purchaser may assign any or all of its rights
under this Agreement to any Person to whom such Purchaser assigns or transfers
any Securities, provided that such transferee agrees in writing to be bound,
with respect to the transferred Securities, by the provisions of the Transaction
Documents that apply to the “Purchasers.”

     

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

    5.9 No Third-Party
Beneficiaries.  This Agreement is intended for the benefit of
the parties hereto and their respective successors and permitted assigns and is
not for the benefit of, nor may any provision hereof be enforced by, any other
Person, except as otherwise set forth in Section 4.10.

     

    5.10 Governing
Law.  All questions concerning the construction, validity,
enforcement and interpretation of the Transaction Documents shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York, without regard to the principles of conflicts of law
thereof.  Each party agrees that all legal proceedings concerning the
interpretations, enforcement and defense of the transactions contemplated by
this Agreement and any other Transaction Documents (whether brought against a
party hereto or its respective affiliates, directors, officers, shareholders,
employees or agents) shall be commenced exclusively in the state and federal
courts sitting in the City 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 (including with respect to the enforcement of any of the
Transaction Documents), 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
improper or is an inconvenient venue for such proceeding.  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
via registered or certified mail or overnight delivery (with evidence of
delivery) to such party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof.  Nothing contained herein shall
be deemed to limit in any way any right to serve process in any other manner
permitted by law.   If either party shall commence an action or
proceeding to enforce any provisions of the Transaction Documents, then the
prevailing party in such action or proceeding shall be reimbursed by the other
party for its reasonable attorneys’ fees and other costs and expenses incurred
with the investigation, preparation and prosecution of such action or
proceeding.

     

    5.11 Survival.  The
representations and warranties contained herein shall survive the Closing and
the delivery of the Securities for the applicable statute of
limitations.

     

    5.12 Execution.  This
Agreement may be executed in two or more counterparts, all of which when taken
together 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, it being understood that both parties need not sign the same
counterpart.  In the event that any signature is delivered by
facsimile transmission or by e-mail delivery of a “.pdf” format data file, such
signature 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 “.pdf” signature page were an original thereof.

     

    5.13 Severability. If any
term, provision, covenant or restriction of this Agreement is held by a court of
competent jurisdiction to be invalid, illegal, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions set forth herein
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated, and the parties hereto shall use their commercially reasonable
efforts to find and employ an alternative means to achieve the same or
substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.

     

    5.14 Rescission and Withdrawal
Right.  Notwithstanding anything to the contrary contained in
(and without limiting any similar provisions of) any of the other Transaction
Documents, whenever any Purchaser 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 Purchaser 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; provided, however, that in the
case of a rescission of a conversion of a Debenture or exercise of a Warrant,
the Purchaser shall be required to return any shares of Common Stock subject to
any such rescinded conversion or exercise notice.

     

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

    5.15 Replacement of
Securities.  If any certificate or instrument evidencing any
Securities is mutilated, lost, stolen or destroyed, the Company shall issue or
cause to be issued in exchange and substitution for and upon cancellation
thereof (in the case of mutilation), or in lieu of and substitution therefor, a
new certificate or instrument, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction.  The
applicant for a new certificate or instrument under such circumstances shall
also pay any reasonable third-party costs (including customary indemnity)
associated with the issuance of such replacement Securities.

     

    5.16 Remedies.  In
addition to being entitled to exercise all rights provided herein or granted by
law, including recovery of damages, each of the Purchasers and the Company will
be entitled to specific performance under the Transaction
Documents.  The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations contained in the Transaction Documents and hereby agrees to waive
and not to assert in any action for specific performance of any such obligation
the defense that a remedy at law would be adequate.

     

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

     

    5.18 Usury.  To
the extent it may lawfully do so, the Company hereby agrees not to insist upon
or plead or in any manner whatsoever claim, and will resist any and all efforts
to be compelled to take the benefit or advantage of, usury laws wherever
enacted, now or at any time hereafter in force, in connection with any claim,
action or proceeding that may be brought by any Purchaser in order to enforce
any right or remedy under any Transaction Document.  Notwithstanding
any provision to the contrary contained in any Transaction Document, it is
expressly agreed and provided that the total liability of the Company under the
Transaction Documents for payments in the nature of interest shall not exceed
the maximum lawful rate authorized under applicable law (the “Maximum Rate”), and,
without limiting the foregoing, in no event shall any rate of interest or
default interest, or both of them, when aggregated with any other sums in the
nature of interest that the Company may be obligated to pay under the
Transaction Documents exceed such Maximum Rate.  It is agreed that if
the maximum contract rate of interest allowed by law and applicable to the
Transaction Documents is increased or decreased by statute or any official
governmental action subsequent to the date hereof, the new maximum contract rate
of interest allowed by law will be the Maximum Rate applicable to the
Transaction Documents from the effective date forward, unless such application
is precluded by applicable law.  If under any circumstances
whatsoever, interest in excess of the Maximum Rate is paid by the Company to any
Purchaser with respect to indebtedness evidenced by the Transaction Documents,
such excess shall be applied by such Purchaser to the unpaid principal balance
of any such indebtedness or be refunded to the Company, the manner of handling
such excess to be at such Purchaser’s election.

     

    5.19 Independent Nature of
Purchasers’ Obligations and Rights.  The obligations of the
Purchaser under any Transaction Document are several and not joint with the
obligations of any other Purchaser, and no Purchaser shall be responsible in any
way for the performance or non-performance of the obligations of any other
Purchaser under any Transaction Document.  Nothing contained herein or
in any other Transaction Document, and no action taken by any Purchaser pursuant
thereto, shall be deemed to constitute the Purchasers as a partnership, an
association, a joint venture or any other kind of entity, or create a
presumption that the Purchasers are in any way acting in concert or as a group
with respect to such obligations or the transactions contemplated by the
Transaction Documents.  The Purchaser shall be entitled to
independently protect and enforce its rights, including, without limitation, the
rights arising out of this Agreement or out of the other Transaction Documents,
and it shall not be necessary for any other Purchaser to be joined as an
additional party in any proceeding for such purpose.  The Purchaser
has been represented by its own separate legal counsel in their review and
negotiation of the Transaction Documents.

     

    5.20 Liquidated
Damages.  The Company’s obligations to pay any partial
liquidated damages or other amounts owing under the Transaction Documents is a
continuing obligation of the Company and shall not terminate until all unpaid
partial liquidated damages and other amounts have been paid notwithstanding the
fact that the instrument or security pursuant to which such partial liquidated
damages or other amounts are due and payable shall have been
canceled.

     

    5.21 Saturdays, Sundays,
Holidays,
etc.                                                                                     If
the last or appointed day for the taking of any action or the expiration of any
right required or granted herein shall not be a Business Day, then such action
may be taken or such right may be exercised on the next succeeding Business
Day.

     

    5.22 Construction. The
parties agree that each of them and/or their respective counsel has reviewed and
had an opportunity to revise the Transaction Documents and, therefore, the
normal rule of construction to the effect that any ambiguities are to be
resolved against the drafting party shall not be employed in the interpretation
of the Transaction Documents or any amendments hereto. In addition, each and
every reference to share prices in any Transaction Document shall be subject to
adjustment for reverse and forward stock splits, stock dividends, stock
combinations and other similar transactions of the Common Stock that occur after
the date of this Agreement.

     

    5.23 WAIVER OF JURY
TRIAL.  IN ANY ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION
BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE PARTIES EACH KNOWINGLY AND
INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY
ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY WAIVES FOREVER TRIAL BY
JURY.

     

    

    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

    

     

    (Signature
Pages Follow)

     

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

     

    
      
        	
                BEYOND
      COMMERCE, INC.

                 

                 

              	 
      
	
                By:
      /s/ Robert
      McNulty

                Name:
      Robert McNulty

                Title:
      Chief Executive Officer

                 

                Address for Notice:

                Beyond
      Commerce, Inc.

                9029
      South Pecos, Suite 2800,

                Henderson,
      NV 89074

                Attn:
      Mark Noffke Chief Financial Officer

                Telephone
      No.: (702)-463-7000

                Telecopier
      No.: (888)-311.9569

                 

                 

              	 
      
	 
      	 
      

      

    

    

    OMNIRELIANT
HOLDINGS, INC.

    

    

    

    By: /s/
Paul Morrison

     Name:
Paul Morrison

    Title:
Chief Executive Officer

    

    Address for
Notice:

    Omni
Reliant Holdings, Inc.

    14375
Myerlake Circle

    Clearwater,
FL 33760

    Telephone
No: (813) 885-5998

     

     

    25

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