Contract

SECURITIES PURCHASE AGREEMENT SECURITIES PURCHASE AGREEMENT (this “Agreement”), dated as of February 25,2005, by and among WinWin Gaming, Inc., a Delaware corporation, withheadquarters located at 8687 W. Sahara Ave. Suite 201, Las Vegas, Nevada 89117(the “Company”), and the investors listed on the Schedule of Buyers attachedhereto (each, a “Buyer” and collectively, the “Buyers”). WHEREAS: A. The Company and the Buyers are executing and delivering this Agreementin reliance upon the exemption from securities registration afforded by Rule 506of Regulation D (“Regulation D”) as promulgated by the United States Securitiesand Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended(as so amended, the “1933 Act”); B. The Company has authorized the issuance and sale of up to fourteenmillion (14,000,000) shares of its common stock, par value $0.01 per share (the”Common Stock”) and warrants, in substantially the form attached hereto asExhibit A (the “Warrants”), pursuant to the terms of this Agreement; C. The Buyers wish to purchase, upon the terms and conditions stated inthis Agreement, an aggregate of up to fourteen million (14,000,000) shares ofCommon Stock (the “Offered Shares”) in the respective amounts set forth oppositeeach Buyer’s name on the Schedule of Buyers, together with Warrants exercisableinto share of Common Stock (the “Warrant Shares”); and D. Contemporaneously with the execution and delivery of this Agreement,the parties hereto are executing and delivering a Registration Rights Agreement(the “Registration Rights Agreement”), pursuant to which the Company has agreedto provide certain registration rights under the 1933 Act and the rules andregulations promulgated thereunder, and applicable state securities laws. NOW, THEREFORE, the Company and the Buyers hereby agree as follows:1. PURCHASE AND SALE OF OFFERED SHARES. a. Purchase of Offered Shares. Subject to the satisfaction (orwaiver) of the conditions set forth in Sections 6 and 7 below, the Company shallissue and sell to each Buyer and each Buyer severally agrees to purchase fromthe Company the respective number of Offered Shares set forth opposite suchBuyer’s name on the Schedule of Buyers, together with the Warrants, at therespective purchase price (the “Purchase Price”) set forth opposite such Buyer’sname on the Schedule of Buyers (the “Closing”). The Offered Shares, togetherwith the Warrants and the Warrant Shares are referred to herein as the”Securities”). b. Closing Dates. i. Initial Closing Date. The date and time of the initialClosing (the “Initial Closing Date”) shall be 10:00 a.m. California Time, on thedate hereof, subject to notification of satisfaction (or waiver) of theconditions to the Closing set forth in Sections 6 and 7 below (or such laterdate as is mutually agreed to by the Company and the Buyers). The initialClosing shall occur on the Closing Date at the offices of Shartsis, Friese &Ginsburg LLP, One Maritime Plaza, 18th Floor, San Francisco, California 94111. 1 ii. Subsequent Closings. It is anticipated that new investorsreasonably approved by the initial Buyer hereunder (the “New Buyers”) may not bepurchasing Offered Shares at the initial Closing, but may acquire Offered Sharesin an aggregate amount (taken together with the Offered Shares acquired by theinitial Buyer) not to exceed Fourteen Million (14,000,000) shares of CommonStock at additional closings to occur on or before the thirtieth (30th) dayfollowing the date hereof (each a “Subsequent Closing,” and together with theInitial Closing, the “Closings”; with the date of any Initial Closing orSubsequent Closing, as applicable, being referred to herein as a “ClosingDate”), provided however, that Van Wagoner Private Opportunities Fund L.P. shallhave the right to acquire up to 2,000,000 Offered Shares at the first SubsequentClosing of at least 1,000,000 Offered Shares to New Buyers, or if no suchSubsequent Closing occurs, on the thirtieth (30th) day after the InitialClosing. Any such Offered Shares Van Wagoner Private Opportunities Fund L.P.elects not to purchase at the first Subsequent Closing shall thereafter beavailable for sale as otherwise provided in this Section 1.b.ii. Any sales ofOffered Shares and Warrants at Subsequent Closings shall be made on the termsand conditions set forth in this Agreement and shall be considered to have beenissued pursuant hereto. The Schedule of Buyers shall be amended at eachSubsequent Closing, without the need to obtain the consent of any party hereto,to reflect the name and address of each New Purchaser participating in suchSubsequent Closing, the number of Offered Shares issued at such SubsequentClosings and the other information required by the Schedule of Buyers. Each NewPurchaser who participates in a Subsequent Closing shall execute and deliver tothe Company a counterpart signature page or joinder to this Agreement pursuantto which each such New Purchaser agrees to be bound by the terms and provisionshereof. The Company shall deliver to each such New Purchaser at each SubsequentClosing a Compliance Certificate executed by an executive officer of theCompany, dated the Subsequent Closing Date, and certifying (i) that therepresentations and warranties made by the Company in Section 3 of thisAgreement were true and correct when made, and are true and correct in allmaterial respects as of the Subsequent Closing Date and (ii) that all covenants,agreements, and conditions contained in this Agreement to be performed by theCompany on or prior to the Subsequent Closing have been fully performed orcomplied with in all material respects. iii. Form of Payment. On the Closing Date, (i) each Buyer shall payan amount equal to the Purchase Price to the Company for the Offered Shares andWarrants to be issued and sold to such Buyer at the Closing, by wire transfer ofimmediately available funds in accordance with the Company’s written wireinstructions, and (ii) the Company shall deliver to each Buyer, stockcertificates (in the denominations as such Buyer shall request (the “CommonStock Certificates”) representing such number of the Offered Shares which suchBuyer is then purchasing (as indicated opposite such Buyer’s name on theSchedule of Buyers), along with the Warrant, duly executed on behalf of theCompany and registered in the name of such Buyer or its designee.2. BUYERS’ REPRESENTATIONS AND WARRANTIES. Each Buyer represents and warrants, severally and not jointly, that: a. Investment Purpose. Such Buyer (i) is acquiring the OfferedShares and the Warrants for its own account for investment only and not with aview towards, or for resale in connection with, the public sale or distributionthereof, except pursuant to sales registered or exempt from registration underthe 1933 Act; provided, however, that by making the representations herein, suchBuyer does not agree to hold any of the Offered Shares or the Warrants for anyminimum or other specific term and reserves the right to dispose of them at anytime in accordance with or pursuant to a registration statement or an exemptionunder the 1933 Act and otherwise in accordance with applicable law. 2 b. Accredited Investor Status. Such Buyer is an “accreditedinvestor” as that term is defined in Rule 501(a)(3) of Regulation D, and suchBuyer is also knowledgeable, sophisticated and experienced in making, and isqualified to make decisions with respect to, investments in securitiespresenting an investment decision like that involved in the purchase of theSecurities, including investments in securities issued by the Company andinvestments in comparable companies. c. Reliance on Exemptions. Such Buyer understands that theSecurities are being offered and sold to it in reliance on specific exemptionsfrom the registration requirements of United States federal and state securitieslaws and that the Company is relying in part upon the truth and accuracy of, andsuch Buyer’s compliance with, the representations, warranties, agreements,acknowledgments and understandings of such Buyer set forth herein in order todetermine the availability of such exemptions and the eligibility of such Buyerto acquire such securities. d. Information. Such Buyer and its advisors, if any, have beenfurnished with all materials relating to the business, finances and operationsof the Company and materials relating to the offer and sale of the Securitieswhich have been requested by such Buyer. Such Buyer and its advisors, if any,have been afforded the opportunity to ask questions of the Company. Neither suchinquiries nor any other due diligence investigations conducted by such Buyer orits advisors, if any, or its representatives shall modify, amend or affect suchBuyer’s right to rely on the Company’s representations and warranties containedin Section 3 below. Such Buyer understands that its investment in the Securitiesinvolves a high degree of risk. Such Buyer has sought such accounting, legal andtax advice as it has considered necessary to make an informed investmentdecision with respect to its acquisition of the Securities. c. No Governmental Review. Such Buyer understands that no UnitedStates federal or state agency or any other government or governmental agencyhas passed on or made any recommendation or endorsement of the Securities or thefairness or suitability of the investment in the Securities nor have suchauthorities passed upon or endorsed the merits of the offering of theSecurities. d. Transfer or Resale. Such Buyer understands that except asprovided in the Registration Rights Agreement: (i) the Securities have not beenand are not being registered under the 1933 Act or any state securities laws,and may not be offered for sale, sold, assigned or transferred unlesssubsequently registered thereunder or there is an exemption from registration;(ii) any sale of the Securities made in reliance on Rule 144 promulgated underthe 1933 Act, as amended, or any successor rule thereto (“Rule 144″) may be madeonly in accordance with the terms of Rule 144 and further, if Rule 144 is notapplicable, any resale of the Securities under circumstances in which the seller(or the person through whom the sale is made) may be deemed to be an underwriter(as that term is defined in the 1933 Act) may require compliance with some otherexemption under the 1933 Act or the rules and regulations of the SEC thereunder;and (iii) neither the Company nor any other person is under any obligation toregister such securities under the 1933 Act or any state securities laws or tocomply with the terms and conditions of any exemption thereunder. 3 e. Legends. Such Buyer understands that the certificates or otherinstruments representing the Securities, except as set forth below, shall bear arestrictive legend in substantially the following form (and a stop-transferorder may be placed against transfer of such stock certificates): THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS, OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE PROVISIONS OF A SECURITIES PURCHASE AGREEMENT BETWEEN THE COMPANY AND THE HOLDER, WHICH MAY RESTRICT THE TRANSFER OF SUCH SECURITIES IN CERTAIN CIRCUMSTANCES. A COPY OF SUCH AGREEMENT MAY BE OBTAINED, WITHOUT CHARGE, AT THE COMPANY’S PRINCIPAL OFFICE.The legends set forth above shall be removed and the Company shall issue acertificate without such legends to the holder of the Securities upon which itis stamped, if, unless otherwise required by state securities laws, (i) suchSecurities are registered for resale under the 1933 Act, (ii) in connection witha sale transaction, such holder provides the Company with an opinion of counsel,in a generally acceptable form, to the effect that a public sale, assignment ortransfer of the Securities may be made without registration under the 1933 Act,or (iii) such holder provides the Company with reasonable assurances that theSecurities can be sold pursuant to Rule 144 without any restriction as to thenumber of securities acquired as of a particular date that can then beimmediately sold. Such Buyer acknowledges, covenants and agrees to sell theSecurities represented by a certificate(s) from which the legends have beenremoved, only pursuant to (i) a registration statement effective under the 1933Act or (ii) advice of counsel that such sale is exempt from registrationrequired by Section 5 of the 1933 Act, including, without limitation, atransaction pursuant to Rule 144. f. Validity; Enforcement. Such Buyer has full right, power,authority and capacity to enter into this Agreement and to consummate thetransactions contemplated hereby. This Agreement has been duly and validlyauthorized, executed and delivered on behalf of such Buyer and is a valid andbinding agreement of such Buyer enforceable against such Buyer in accordancewith its terms, subject as to enforceability to general principles of equity andto applicable bankruptcy, insolvency, reorganization, moratorium, liquidationand other similar laws relating to, or affecting generally, the enforcement ofapplicable creditors’ rights and remedies. g. Residency. Such Buyer is a resident of that state and countryspecified in its address on the Schedule of Buyers. h. Brokers or Finders. The Company will not incur, directly orindirectly, as a result of any action taken by the Buyers, any liability forbrokerage or finders’ fees or agents’ commissions or any similar charges inconnection with this Agreement or any transactions contemplated hereby. 43. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and warrants to each of the Buyers that: a. Organization and Qualification. The Company and its”Subsidiaries” (which for purposes of this Agreement means a “Subsidiary” asdefined in Rule 405 under the 1933 Act) are corporations duly organized andvalidly existing in good standing under the laws of the jurisdiction in whichthey are incorporated, and have the requisite corporate power and authorizationto own their properties and to carry on their business as now being conducted,except where the failure of any Subsidiary to be duly organized, validlyexisting and in good standing would not have a Material Adverse Effect. Each ofthe Company and its Subsidiaries is duly qualified as a foreign corporation todo business and is in good standing in every jurisdiction in which its ownershipof property or the nature of the business conducted by it makes suchqualification necessary, except to the extent that the failure to be soqualified or be in good standing would not have a Material Adverse Effect. Asused in this Agreement, “Material Adverse Effect” means any material adverseeffect on the business, properties, assets, operations, results of operations,financial condition or prospects of the Company and its Subsidiaries, if any,taken as a whole, or on the transactions contemplated hereby or by theagreements and instruments to be entered into in connection herewith, or on theauthority or ability of the Company to perform its obligations under theTransaction Documents (as defined below). The Company has no Subsidiaries exceptas set forth on Schedule 3(a). b. Authorization; Enforcement; Validity. (i) The Company has therequisite corporate power and authority to enter into and perform thisAgreement, the Registration Rights Agreement, the Irrevocable Transfer AgentInstructions (as defined in Section 5), the Warrants and each of the otheragreements entered into by the parties hereto in connection with thetransactions contemplated by this Agreement (collectively, the “TransactionDocuments”), and to issue the Securities in accordance with the terms hereof andthereof, (ii) the execution and delivery of the Transaction Documents by theCompany and the consummation by it of the transactions contemplated hereby andthereby, including without limitation the issuance of the Offered Shares and theWarrants and the reservation for issuance and the issuance of the shares ofCommon Stock to be issued on exercise of the Warrants (the “Warrant Shares”),have been duly authorized by the Company’s Board of Directors and no furtherconsent or authorization is required by the Company, its Board of Directors orits stockholders, (iii) the Transaction Documents have been duly executed anddelivered by the Company, (iv) the Transaction Documents constitute the validand binding obligations of the Company enforceable against the Company inaccordance with their terms, except as such enforceability may be limited bygeneral principles of equity or applicable bankruptcy, insolvency,reorganization, moratorium, liquidation or similar laws relating to, oraffecting generally, the enforcement of creditors’ rights and remedies. c. Capitalization. As of the date hereof, the authorized capitalstock of the Company consists of (i) 300,000,000 shares of Common Stock, ofwhich as of the date hereof, 41,411,601 shares are issued and outstanding,20,000,000 shares are reserved for issuance pursuant to the Company’s stockoption and purchase plans and 4,189,445 shares are issuable and reserved forissuance pursuant to securities (other than the Warrants) exercisable orexchangeable for, or convertible into, shares of Common Stock, and (ii)10,000,000 shares of Preferred Stock, of which as of the date hereof, no sharesare issued and outstanding. All of such outstanding shares have been, or uponissuance will be, validly issued and are fully paid and nonassessable. Except asdisclosed in Schedule 3(c), (i) no shares of the Company’s capital stock aresubject to preemptive rights or any other similar rights or any liens orencumbrances suffered or permitted by the Company, (ii) none of the Company orany of its Subsidiaries has any outstanding debt securities, (iii) there are nooutstanding options, warrants, scrip, rights to subscribe to, calls or 5commitments of any character whatsoever relating to, or securities or rightsconvertible into, any shares of capital stock of the Company or any of itsSubsidiaries, or contracts, commitments, understandings or arrangements by whichthe Company or any of its Subsidiaries is or may become bound to issueadditional shares of capital stock of the Company or any of its Subsidiaries oroptions, warrants, scrip, rights to subscribe to, calls or commitments of anycharacter whatsoever relating to, or securities or rights convertible into, anyshares of capital stock of the Company or any of its Subsidiaries, (iv) thereare no agreements or arrangements under which the Company or any of itsSubsidiaries is obligated to register the sale of any of their securities underthe 1933 Act (except the Registration Rights Agreement), (v) there are nooutstanding securities or instruments of the Company or any of its Subsidiarieswhich contain any redemption or similar provisions, and there are no contracts,commitments, understandings or arrangements by which the Company or any of itsSubsidiaries is or may become bound to redeem a security of the Company or anyof its Subsidiaries, (vi) there are no securities or instruments containingantidilution or similar provisions that will be triggered by the issuance of theSecurities as described in this Agreement, and (vii) the Company does not haveany stock appreciation rights or stock “phantom stock” plans or agreements orany similar plan or agreement. The Company has furnished to the Buyer true andcomplete copies of the Company’s Certificate of Incorporation, as amended and asin effect on the date hereof (the “Certificate of Incorporation”), and theCompany’s By-laws as amended and as in effect on the date hereof (the”By-laws”), and the terms of all securities convertible into or exercisable forCommon Stock and the material rights of the holders thereof in respect thereto.Schedule 3(c) lists all issuances of the Company’s securities (both debt andequity) since January 1, 2004, detailing the name of the acquirer, the numberand type of securities acquired, and the consideration paid. Schedule 3(c) alsolists each sale of Common Stock by the Company’s officers, directors and greaterthan 5% owners of the Company’s Common Stock from January 1, 2004, through andincluding the date of this Agreement. d. Issuance of Securities. The Offered Shares are duly authorizedand, upon issuance in accordance with the terms hereof, shall be (i) validlyissued, fully paid and nonassessable, (ii) free from all taxes, liens andcharges with respect to the issue thereof and (iii) entitled to the rights andpreferences set forth in the Certificate of Incorporation. A sufficient numberof shares of Common Stock (subject to adjustment pursuant to the Company’scovenant set forth in Section 4(f) below) have been duly authorized and reservedfor issuance upon exercise of the Warrants such that upon such exercise theCompany will have sufficient shares to issue to the holders of the Warrants inorder to satisfy its obligations thereunder. Upon exercise of the Warrants, theWarrant Shares will be validly issued, fully paid and nonassessable and freefrom all taxes, liens and charges with respect to the issue thereof, with theholders being entitled to all rights accorded to a holder of Common Stock. Theissuance by the Company of the Securities is exempt from registration under the1933 Act. e. No Conflicts. The execution, delivery and performance of theTransaction Documents by the Company, the performance by the Company of itsobligations under the Certificate of Incorporation and the consummation by theCompany of the transactions contemplated hereby and thereby (including, withoutlimitation, the reservation for issuance and the issuance and registration ofthe Warrant Shares) will not (i) result in a violation of the Certificate ofIncorporation or the By-laws or (ii) conflict with, or constitute a default (oran event which with notice or lapse of time or both would become a default)under, or give to others any rights of termination, amendment, acceleration orcancellation of, any material agreement, indenture or instrument to which theCompany or any of its Subsidiaries is a party, or result in a violation of anylaw, rule, regulation, order, judgment or decree (including federal and statesecurities laws and regulations and the rules and regulations of the PrincipalMarket (as defined in Section 4(h) below)) applicable to the Company or any ofits Subsidiaries or by which any property or asset of the Company or any of itsSubsidiaries is bound or affected. Neither the Company nor its Subsidiaries isin violation of any term of or in default under its Certificate of Incorporationor By-laws or their organizational charter or by-laws, respectively, except, ineach case, where such violation, individually or in the aggregate, could notreasonably be expected to have a Material Adverse Effect on the Company. Neitherthe Company nor any of its Subsidiaries is in violation of any term of or indefault under any material contract, agreement, mortgage, indebtedness,indenture, instrument, judgment, decree or order or any statute, rule orregulation applicable to the Company or its Subsidiaries, except, in each case,where such violation could not reasonably be expected to, individually or in theaggregate, have a Material Adverse Effect on the Company. The business of theCompany and its Subsidiaries is not being conducted in violation of any law,ordinance or regulation of any governmental entity, except for violations thesanctions for which either individually or in the aggregate could not reasonablybe expected to have a Material Adverse Effect. Except as specificallycontemplated by this Agreement and as required under the 1933 Act, the Companyis not required to obtain any consent, authorization or order of, or make anyfiling or registration with, any court or governmental agency or any regulatoryor self-regulatory agency in order for it to execute, deliver or perform any ofits obligations under or contemplated by the Transaction Documents or to performits obligations under the Certificate of Designations, in each case inaccordance with the terms hereof or thereof. All consents, authorizations,orders, filings and registrations which the Company is required to obtainpursuant to the preceding sentence have been obtained or effected on or prior tothe date hereof. 6 f. SEC Documents; Financial Statements. Since April 14, 2004, theCompany has filed all reports, schedules, forms, statements and other documentsrequired to be filed by it with the SEC pursuant to the reporting requirementsof the Securities Exchange Act of 1934, as amended (the “1934 Act”) (all of theforegoing filed prior to the date hereof and all exhibits included therein andfinancial statements and schedules thereto and documents incorporated byreference therein being hereinafter referred to as the “SEC Documents”). TheCompany has delivered to or otherwise made available to the Buyers or theirrespective representatives true and complete copies of the SEC Documents. As oftheir respective dates, the SEC Documents complied in all material respects withthe requirements of the 1934 Act and the rules and regulations of the SECpromulgated thereunder applicable to the SEC Documents, and none of the SECDocuments, at the time they were filed with the SEC, contained any untruestatement of a material fact or omitted to state a material fact required to bestated therein or necessary in order to make the statements therein, in light ofthe circumstances under which they were made, not misleading. As of theirrespective dates, the financial statements of the Company included in the SECDocuments complied as to form in all material respects with applicableaccounting requirements and the published rules and regulations of the SEC withrespect thereto. Such financial statements have been prepared in accordance withgenerally accepted accounting principles, consistently applied, during theperiods involved (except (i) as may be otherwise indicated in such financialstatements or the notes thereto or (ii) in the case of unaudited interimstatements, to the extent they may exclude footnotes or may be condensed orsummary statements) and fairly present in all material respects the financialposition of the Company as of the dates thereof and the results of itsoperations and cash flows for the periods then ended (subject, in the case ofunaudited statements, to normal year-end audit adjustments). No otherinformation provided by or on behalf of the Company to the Buyers which is notincluded in the SEC Documents, including, without limitation, informationreferred to in Section 2(d) of this Agreement, contains any untrue statement ofa material fact or omits to state any material fact necessary in order to makethe statements therein, in the light of the circumstance under which they are orwere made, not misleading. Neither the Company nor any of its Subsidiaries orany of their officers, directors, employees or agents have provided the Buyerswith any material, nonpublic information. 7 g. Absence of Certain Changes. Except as disclosed in Schedule 3(g),since December 31, 2003, there has been no material adverse change and nomaterial adverse development in the business, properties, operations, financialcondition, results of operations or prospects of the Company or itsSubsidiaries. The Company has not taken any steps, and does not currently expectto take any steps, to seek protection pursuant to any bankruptcy law nor doesthe Company or any of its Subsidiaries have any knowledge or reason to believethat its creditors intend to initiate involuntary bankruptcy proceedings. Exceptas disclosed in Schedule 3(g), since December 31, 2003 the Company has notdeclared or paid any dividends, sold any assets in excess of $50,000 outside ofthe ordinary course of business or had capital expenditures in excess of$50,000. Except as disclosed in Schedule 3(g), since December 31, 2003, therehas not been any other event which could have a Material Adverse Effect or whichcould adversely affect the validity or enforceability of, or the authority orthe ability of the Company to perform its obligations under the TransactionDocuments. h. Absence of Litigation. Except as set forth in Schedule 3(h),there is no action, suit, proceeding, inquiry or investigation before or by anycourt, public board, government agency, self-regulatory organization or bodypending or, to the knowledge of the Company or any of its Subsidiaries,threatened against or affecting the Company or any of its Subsidiaries or any ofthe Company’s or the Company’s Subsidiaries’ officers or directors in theircapacities as such, which could have a Material Adverse Effect. i. Acknowledgment Regarding Buyers’ Purchase of Securities. TheCompany acknowledges and agrees that each of the Buyers is acting solely in thecapacity of arm’s-length purchaser with respect to the Transaction Documents andthe transactions contemplated hereby and thereby. The Company furtheracknowledges that each Buyer is not acting as a financial advisor or fiduciaryof the Company (or in any similar capacity) with respect to the TransactionDocuments and the transactions contemplated hereby and thereby, and any advicegiven by any of the Buyers or any of their respective representatives or agentsin connection with the Transaction Documents and the transactions contemplatedhereby and thereby is merely incidental to such Buyer’s purchase of theSecurities. The Company further represents to each Buyer that the Company’sdecision to enter into the Transaction Documents has been based solely on theindependent evaluation by the Company and its representatives. j. No Undisclosed Events, Liabilities, Developments orCircumstances. No event, liability, development or circumstance has occurred orexists, or is contemplated to occur, with respect to the Company or itsSubsidiaries or their respective business, properties, prospects, operations orfinancial condition, that would be required to be disclosed by the Company underapplicable securities laws on a registration statement filed with the SECrelating to an issuance and sale by the Company of its Common Stock and whichhas not been publicly announced. 8 k. No General Solicitation. Neither the Company, nor any of itsaffiliates, nor, to the Company’s knowledge, any person acting on its or theirbehalf, has engaged in any form of general solicitation or general advertising(within the meaning of Regulation D) in connection with the offer or sale of theSecurities. l. No Integrated Offering. Neither the Company, nor any of itsaffiliates, nor, to the Company’s knowledge, any person acting on its or theirbehalf has, directly or indirectly, made any offers or sales of any security orsolicited any offers to buy any security, under circumstances that would requireregistration of any of the Securities under the 1933 Act or cause this offeringof the Securities to be integrated with prior offerings by the Company forpurposes of the 1933 Act or any applicable stockholder approval provisions,including, without limitation, under the rules and regulations of any exchangeor automated quotation system on which any of the securities of the Company arelisted or designated, nor will the Company or any of its Subsidiaries take anyaction or steps that would require registration of any of the Securities underthe 1933 Act (except pursuant to the Registration Rights Agreement) or cause theoffering of the Securities to be integrated with other offerings. m. Employee Relations. Neither the Company nor any of itsSubsidiaries is involved in any union labor dispute nor, to the knowledge of theCompany or any of its Subsidiaries, is any such dispute threatened. None of theCompany’s or its Subsidiaries’ employees is a member of a union, neither theCompany nor any of its Subsidiaries is a party to a collective bargainingagreement, and the Company and its Subsidiaries believe that their relationswith their employees are good. No executive officer (as defined in Rule 501(f)of the 1933 Act) has notified the Company that such officer intends to leave theCompany or otherwise terminate such officer’s employment with the Company. Noexecutive officer, to the best knowledge of the Company and its Subsidiaries,is, or is now expected to be, in violation of any material term of anyemployment contract, confidentiality, nondisclosure or proprietary informationagreement, non-competition agreement, or any other contract or agreement or anyrestrictive covenant, and the continued employment of each such executiveofficer does not subject the Company or any of its Subsidiaries to any liabilitywith respect to any of the foregoing matters. n. Intellectual Property Rights. The Company and its Subsidiariesown or possess adequate rights or licenses to use all trademarks, trade names,service marks, service mark registrations, service names, patents, patentrights, copyrights, inventions, licenses, approvals, governmentalauthorizations, trade secrets and rights necessary to conduct their respectivebusinesses as now conducted or as proposed to be conducted, except where thefailure to own or possess such rights could not reasonably be expected to,individually or in the aggregate, have a Material Adverse Effect. None of theCompany’s trademarks, trade names, service marks, service mark registrations,service names, patents, patent rights, copyrights, inventions, licenses,approvals, government authorizations, trade secrets or other intellectualproperty rights have expired or terminated, or are expected to expire orterminate within two years from the date of this Agreement, unless suchexpiration or termination could not reasonably be expected to, individually orin the aggregate, have a Material Adverse Effect. The Company and itsSubsidiaries do not have any knowledge of any infringement by the Company or itsSubsidiaries of trademark, trade name rights, patents, patent rights,copyrights, inventions, licenses, service names, service marks, service markregistrations, trade secret or other similar rights of others, or of any suchdevelopment of similar or identical trade secrets or technical information byothers and, there is no claim, action or proceeding being made or broughtagainst, or to the Company’s knowledge, being threatened against, the Company orits Subsidiaries regarding trademark, trade name, patents, patent rights,invention, copyright, license, service names, service marks, service markregistrations, trade secret or other infringement; and the Company and itsSubsidiaries are unaware of any facts or circumstances which might give rise toany of the foregoing. The Company and its Subsidiaries have taken reasonablesecurity measures to protect the secrecy, confidentiality and value of all oftheir intellectual properties, and the Company is not aware of any third partymaking any unauthorized or infringing use of the intellectual properties of theCompany or any of its Subsidiaries. 9 o. Environmental Laws. The Company and its Subsidiaries (i) are incompliance with any and all applicable foreign, federal, state and local lawsand regulations relating to the protection of human health and safety, theenvironment or hazardous or toxic substances or wastes, pollutants orcontaminants (“Environmental Laws”), (ii) have received all permits, licenses orother approvals required of them under applicable Environmental Laws to conducttheir respective businesses and (iii) are in compliance with all terms andconditions of any such permit, license or approval except where, in each of thethree foregoing cases, the failure to so comply could not reasonably be expectedto have, individually or in the aggregate, a Material Adverse Effect. p. Title. The Company and its Subsidiaries have sufficient title toall real property, if any, owned by it and good and valid title to all personalproperty owned by it which, in each case, is material to the business of theCompany and its Subsidiaries, in each case free and clear of all liens,encumbrances and defects, except such as do not materially affect the value ofsuch property and do not interfere with the use made and proposed to be made ofsuch property by the Company and any of its Subsidiaries. Any real property andfacilities held under lease by the Company and any of its Subsidiaries are heldby them under valid, subsisting and enforceable leases with such exceptions asare not material and do not interfere with the use made and proposed to be madeof such property and buildings by the Company and its Subsidiaries. q. Insurance. The Company and each of its Subsidiaries are insuredby insurers of recognized financial responsibility against such losses and risksand in such amounts as management of the Company believes to be prudent andcustomary in the businesses in which the Company and its Subsidiaries areengaged, and all of such insurance is in full force and effect. Neither theCompany nor any such Subsidiary has been refused any insurance coverage soughtor applied for and neither the Company nor any such Subsidiary has any reason tobelieve that it will not be able to renew its existing insurance coverage as andwhen such coverage expires or to obtain similar coverage from similar insurersas may be necessary to continue its business at a cost that could not reasonablybe expected to, individually or in the aggregate, have a Material AdverseEffect. r. Regulatory Permits. The Company and its Subsidiaries possess allcertificates, authorizations and permits issued by the appropriate federal,state or foreign regulatory authorities necessary to conduct their respectivebusinesses, except where the failure to possess any such certificate,authorization or permit could not reasonably be expected to, individually or inthe aggregate, have a Material Adverse Effect, and neither the Company nor anysuch Subsidiary has received any notice of proceedings relating to therevocation or modification of any such certificate, authorization or permit. s. Internal Accounting Controls. The Company and each of itsSubsidiaries maintain a system of internal accounting controls sufficient toprovide reasonable assurance that (i) transactions are executed in accordancewith management’s general or specific authorizations, (ii) transactions arerecorded as necessary to permit preparation of financial statements inconformity with generally accepted accounting principles and to maintain assetaccountability, (iii) access to assets is permitted only in accordance withmanagement’s general specific or authorization and (iv) the recordedaccountability for assets is compared with the existing assets at reasonableintervals and appropriate action is taken with respect to any differences. 10 t. Tax Status. The Company and each of its Subsidiaries has made orfiled all federal and state income and all other tax returns, reports anddeclarations required by any jurisdiction to which it is subject unless and onlyto the extent that the Company and each of its Subsidiaries has set aside on itsbooks provisions reasonably adequate for the payment of all unpaid andunreported taxes) and has paid all taxes and other governmental assessments andcharges that are material in amount, shown or determined to be due on suchreturns, reports and declarations, except those being contested in good faithand has set aside on its books provision reasonably adequate for the payment ofall taxes for periods subsequent to the periods to which such returns, reportsor declarations apply. There are no unpaid taxes in any material amount claimedto be due by the taxing authority of any jurisdiction, and the officers of theCompany know of no basis for any such claim. u. Transactions With Affiliates. Except as set forth in Schedule3(u) or in the SEC Documents filed at least ten (10) days prior to the datehereof and other than the grant of stock options disclosed on Schedule 3(c),none of the officers, directors, or employees of the Company is presently aparty to any transaction with the Company or any of its Subsidiaries (other thanfor services as employees, officers and directors), including any contract,agreement or other arrangement providing for the furnishing of services to orby, providing for rental of real or personal property to or from, or otherwiserequiring payments to or from any officer, director or such employee or, to theknowledge of the Company, any corporation, partnership, trust or other entity inwhich any officer, director, or any such employee has a substantial interest oris an officer, director, trustee or partner. v. Rights Agreement. The Company has not adopted a shareholderrights plan or similar arrangement relating to accumulations of beneficialownership of Common Stock or a change in control of the Company. w. No Other Agreements. The Company has not, directly or indirectly,made any agreements with any Buyers relating to the terms or conditions of thetransactions contemplated by the Transaction Documents except as set forth inthe Transaction Documents. x. Material Contracts. All material contracts of the Company thatare required by applicable rules and regulations of the SEC to be filed asexhibits to the SEC Documents (“Material Contracts”) have been so filed. TheCompany has not received notice of a default and is not in default under, orwith respect to, any Material Contract. To the knowledge of the Company, noother party to any Material Contract is in default thereunder, nor does anycondition exist that, with notice or lapse of time or both, would constitute adefault by such party thereunder. y. Brokers or Finders. The Buyers will not incur, directly orindirectly, as a result of any action taken by the Company, any liability forbrokerage or finders’ fees or agents’ commissions or any similar charges inconnection with this Agreement or any transactions contemplated hereby. 11 z. Officers, Directors and 5% Shareholders. Each of the Company’skey executive officers and directors and persons owning 5% or more of the CommonStock is listed on Schedule 3(z).4. COVENANTS. a. Closing Conditions Compliance. Each party shall use its bestefforts to satisfy timely each of the conditions to be satisfied by it asprovided in Sections 6 and 7 of this Agreement. b. Form D and Blue Sky. The Company agrees to file a Form D withrespect to the Securities as required under Regulation D and to provide a copythereof to each Buyer promptly after such filing. The Company shall, on orbefore the Closing Date, take such action as the Company shall reasonablydetermine is necessary in order to obtain an exemption for or to qualify theSecurities for sale to the Buyers at the Closing pursuant to this Agreementunder applicable securities or “Blue Sky” laws of the states of the UnitedStates. The Company shall make all filings and reports relating the offer andsale of the Securities required under applicable securities or “Blue Sky” lawsof the states of the United States following the Closing Date. c. Reporting Status. Until the earlier of (i) the date as of whichthe Investors (as that term is defined in the Registration Rights Agreement) maysell all of the Offered Shares and the Warrant Shares without restrictionpursuant to Rule 144(k) promulgated under the 1933 Act (or successor thereto),or (ii) the date on which (A) the Investors shall have sold all the OfferedShares and the Warrant Shares and (B) none of the Offered Shares or Warrants isoutstanding (the “Registration Period”), the Company shall file all reportsrequired to be filed with the SEC pursuant to the 1934 Act, and the Companyshall not terminate its status as an issuer required to file reports under the1934 Act even if the 1934 Act or the rules and regulations thereunder wouldotherwise permit such termination. d. Use of Proceeds. The Company will use the proceeds from the saleof the Offered Shares for substantially the same purposes and in substantiallythe same amounts as indicated in Schedule 4(d). e. Financial Information. The Company agrees that until the secondanniversary of the Initial Closing it shall send the following to each Investor(as that term is defined in the Registration Rights Agreement) during theRegistration Period: (i) within two (2) days after the filing thereof with theSEC, a copy of its Annual Reports on Form 10-K, its Quarterly Reports on Form10-Q, any Current Reports on Form 8-K, including any amendments to suchdocuments, and any registration statements (other than on Form S-8) oramendments filed pursuant to the 1933 Act, provided that if any such report isnot filed with the SEC through EDGAR then the Company shall deliver a copy ofsuch report to each Investor by facsimile on the same day it is filed with theSEC; (ii) on the same day as the release thereof, facsimile copies of all pressreleases issued by the Company or any of its Subsidiaries; and (iii) copies ofany notices and other information made available or given to the stockholders ofthe Company generally, contemporaneously with the making available or givingthereof to the stockholders. f. Reservation of Shares. The Company shall take all actionnecessary to at all times have authorized, and reserved for the purpose ofissuance, no less than 100% of the number of shares of Common Stock needed toprovide for the issuance of the shares of Common Stock upon exercise of alloutstanding Warrants. 12 g. Lock Up. The Company shall obtain for Buyers’ benefit the writtenagreement from each of its executive officers and directors not to sell, loan,dispose, pledge or transfer, directly or indirectly, more than five percent (5%)of the Company’s capital stock they own or control, such restrictions to applyfrom the date hereof through the period ending on the day following the 180thconsecutive day that the Registration Statement is available for the resale ofthe Offered Shares and Warrant Shares. Such agreement shall be in substantiallythe form provided in Exhibit B hereto. The Company shall provide a standing stopwith its transfer agent to prohibit any such proscribed activity. h. Listing. The Company shall promptly secure the listing of all ofthe Registrable Securities (as defined in the Registration Rights Agreement)upon each national securities exchange and automated quotation system, if any,upon which shares of Common Stock are then listed (subject to official notice ofissuance) and shall maintain, so long as any other shares of Common Stock shallbe so listed, such listing of all Registrable Securities from time to timeissuable under the terms of the Transaction Documents. Subject to meetingapplicable listing requirements, the Company shall use reasonable businessefforts to obtain authorization of the Common Stock for quotation on the NasdaqNational Market, the Nasdaq SmallCap Market, The New York Stock Exchange, Inc.or The American Stock Exchange, Inc., as applicable (the “Principal Market”).Once listed for quotation on the Principal Market, neither the Company nor anyof its Subsidiaries shall take any action which would be reasonably expected toresult in the delisting or suspension of the Common Stock on the PrincipalMarket. The Company shall pay all fees and expenses in connection withsatisfying its obligations under this Section 4(h). i. Expenses. The Company shall reimburse Van Wagoner PrivateOpportunities Fund L.P. its expenses (including reasonable attorneys’ fees andexpenses) in due diligence and negotiating and preparing the TransactionDocuments and consummating the transactions contemplated thereby up to anaggregate of $25,000. j. Filing of Form 8-K. On or before the first (1st) business dayfollowing the Closing Date, the Company shall file a Form 8-K with the SECdescribing the terms of the transactions contemplated by the TransactionDocuments in the form required by the 1934 Act. k. Limitation on Filing Registration Statements. From the datehereof through the period ending on the day following the 30th consecutivetrading day that the Registration Statement is available for the resale of theOffered Shares and Warrant Shares, the Company shall not register any securitiesother than the Securities and securities on Form S-8 issued in connection withany stock option plan, stock purchase plan, stock bonus plan or other plan forthe benefit of employees, officers or directors of the Company.5. TRANSFER AGENT INSTRUCTIONS. a. Delivery of Legended Common Stock. Upon execution of thisAgreement, the Company shall issue irrevocable instructions to its transferagent, and any subsequent transfer agent, to issue certificates, registered inthe name of each Buyer or its respective nominee(s), for the Offered Shares andthe Warrant Shares in such amounts as specified from time to time by each Buyerto the Company (the “Irrevocable Transfer Agent Instructions”), whichinstructions shall be in the form as provided in Exhibit D hereto. Prior toregistration of the Offered Shares and the Warrant Shares under the 1933 Act,all Securities shall bear the restrictive legend specified in Section 2(g) ofthis Agreement. The Company warrants that no instruction other than theIrrevocable Transfer Agent Instructions referred to in this Section 5, and stoptransfer instructions to give effect to Section 2(f) hereof (in the case of theOffered Shares and the Warrant Shares, prior to registration of the OfferedShares and the Warrant Shares under the 1933 Act) will be given by the Companyto its transfer agent and that the Securities shall otherwise be freelytransferable on the books and records of the Company as and to the extentprovided in this Agreement and the Registration Rights Agreement. 13 b. Delivery of Unlegended Common Stock. After the Offered Shares andWarrant Shares have been registered for resale, in lieu of delivering physicalcertificates representing Offered Shares or Warrant Shares, provided theCompany’s transfer agent is participating in the Depositary Trust Company(“DTC”) Fast Automated Securities Transfer program, on the written request of aBuyer who shall have previously instructed its broker to confirm such request tothe Company’s transfer agent, the Company shall cause its transfer agent totransmit electronically the Offered Shares or the Warrant Shares to the Buyer bycrediting the account of the Buyer’s prime broker with DTC through its DepositWithdrawal Agent Commission system no later than the date upon which the Companyis required to deliver shares to the Buyer under the terms of this Agreement.Nothing in this Section 5 shall affect in any way each Buyer’s obligations andagreements set forth in Section 2(g) to comply with all applicable prospectusdelivery requirements, if any, upon resale of the Securities. If a Buyerprovides the Company with an opinion of counsel, in a generally acceptable form,to the effect that a public sale, assignment or transfer of the Securities maybe made without registration under the 1933 Act or the Buyer provides theCompany with reasonable assurances (including, without limitation, by deliveringa certificate of an executive officer of such Buyer) that the Securities can besold pursuant to Rule 144 without any restriction as to the number of securitiesacquired as of a particular date that can then be immediately sold, the Companyshall permit the transfer, and promptly instruct its transfer agent to issue oneor more certificates in such name and in such denominations as specified by suchBuyer and without any restrictive legend. c. Timing of Delivery. Whenever the Company is required to deliverSecurities under the Transaction Documents, whether with or without arestrictive legend, such delivery shall be made within three (3) business daysof the day that request is made for delivery of such Securities. d. Specific Performance. The Company acknowledges that a breach byit or its transfer agent of their respective obligations hereunder will causeirreparable harm to the Buyers by vitiating the intent and purpose of thetransaction contemplated hereby. Accordingly, the Company acknowledges that theremedy at law for a breach of its obligations under this Section 5 will beinadequate and agrees, in the event of a breach or threatened breach of theprovisions of this Section 5, that the Buyers shall be entitled, in addition toall other available remedies, to an order and/or injunction restraining anybreach and requiring immediate issuance and transfer, without the necessity ofshowing economic loss and without any bond or other security being required.6. CONDITIONS TO THE COMPANY’S OBLIGATION TO SELL. The obligation of the Company hereunder to issue and sell the OfferedShares to each Buyer at the Closing is subject to the satisfaction, at or beforethe Closing Date, of each of the following conditions, provided that theseconditions are for the Company’s sole benefit and may be waived by the Companyat any time in its sole discretion by providing each Buyer with prior writtennotice thereof: 14 a. Such Buyer shall have executed each of the Transaction Documentsto which it is a party and delivered the same to the Company. b. Such Buyer shall have delivered to the Company the Purchase Pricefor the Offered Shares and the related Warrants being purchased by such Buyer atthe Closing by wire transfer of immediately available funds pursuant to the wireinstructions provided by the Company. c. The representations and warranties of such Buyer shall be trueand correct as of the Closing Date (except for representations and warrantiesthat speak as of a specific date), and such Buyer shall have performed,satisfied and complied in all material respects with the covenants, agreementsand conditions required by this Agreement to be performed, satisfied or compliedwith by such Buyer at or prior to the Closing Date. d. The offer and sale of the Offered Shares and the related Warrantsto such Buyer pursuant to this Agreement shall be exempt from the registrationrequirements under the 1933 Act and shall be exempt from the registration and/orqualification requirements of all applicable state securities laws. e. Such Buyer shall have delivered to the Company such otherdocuments relating to the transactions contemplated by this Agreement as theCompany or its counsel reasonably request.8. CONDITIONS TO EACH BUYER’S OBLIGATION TO PURCHASE. The obligation of each Buyer hereunder to purchase the Offered Shares ateach Closing is subject to the satisfaction, at or before the applicable ClosingDate, of each of the following conditions, provided that these conditions arefor each Buyer’s sole benefit and may be waived by such Buyer at any time in itssole discretion by providing the Company with prior written notice thereof: a. The Company shall have executed each of the Transaction Documentsand delivered the same to such Buyer. b. Trading in the Common Stock shall not have been suspended. c. The representations and warranties of the Company shall be trueand correct as of the Closing Date (except for representations and warrantiesthat speak as of a specific date) and the Company shall have performed,satisfied and complied with the covenants, agreements and conditions required bythe Transaction Documents to be performed, satisfied or complied with by theCompany at or prior to the Closing Date. Such Buyer shall have received acertificate, executed by the Chief Executive Officer of the Company, dated as ofthe Closing Date, to the foregoing effect and as to such other matters as may bereasonably requested by such Buyer. d. Such Buyer shall have received the opinion of the Company’scounsel dated as of the Closing Date, in form, scope and substance reasonablysatisfactory to such Buyer and in substantially the form of Exhibit C attachedhereto. 15 e. The Company shall have executed and delivered to such Buyer theWarrants and the Common Stock Certificates (in such denominations as such Buyershall request) for the Offered Shares being purchased by such Buyer at theClosing. f. The Board of Directors of the Company shall have adoptedresolutions authorizing the issuance of the Offered Shares, the Warrants and theWarrant Shares and the other transactions provided by this Agreement and theTransaction Documents in a form reasonably acceptable to such Buyer. g. As of the Closing Date, the Company shall have reserved out ofits authorized and unissued Common Stock a sufficient number of shares of CommonStock for the purpose of effecting the exercise of the Warrants. h. The Irrevocable Transfer Agent Instructions, in the form ofExhibit D attached hereto, shall have been delivered to and acknowledged inwriting by the Company’s transfer agent. i. The Company shall have delivered to such Buyer a certificateevidencing the incorporation and good standing of the Company and eachSubsidiary in such corporation’s state of incorporation issued by the Secretaryof State of such state of incorporation as of a date within 10 days of theClosing Date. j. The Company shall have delivered to such Buyer a certified copyof the Certificate of Incorporation as certified by the Secretary of State ofthe State of Delaware within 10 days of the Closing Date. k. The Company shall have delivered to such Buyer a secretary’scertificate, dated as the Closing Date, as to (i) the resolutions described inSection 7(f), (ii) the Certificate of Incorporation and (iii) the Bylaws, eachas in effect at the Closing. l. The Company shall have made all filings under all applicablefederal and state securities laws necessary to consummate the issuance of theSecurities pursuant to this Agreement in compliance with such laws. m. The Company shall have delivered to such Buyer such otherdocuments relating to the transactions contemplated by this Agreement as suchBuyer or its counsel reasonably request.9. INDEMNIFICATION. In consideration of each Buyer’s execution and delivery of the TransactionDocuments and acquiring the Securities thereunder and in addition to all of theCompany’s other obligations under the Transaction Documents, the Company shall,for a period of twelve months following the date the Offered Shares and theWarrant Shares have been continuously registered for resale for at least 30consecutive trading days, defend, protect, indemnify and hold harmless eachBuyer and each other holder of the Securities and all of their stockholders,officers, directors, employees, direct or indirect investors and any of theforegoing person’s agents or other representatives (including, withoutlimitation, those retained in connection with the transactions contemplated bythis Agreement) (collectively, the “Indemnitees”) from and against any and allactions, causes of action, suits, claims, losses, costs, penalties, fees,liabilities and damages, and expenses in connection therewith (irrespective ofwhether any such Indemnitee is a party to the action for which indemnificationhereunder is sought), and including reasonable attorneys’ fees and disbursements(the “Indemnified Liabilities”), incurred by any Indemnitee as a result of, orarising out of, or relating to (a) any misrepresentation or breach of anyrepresentation or warranty made by the Company in the Transaction Documents orany other certificate, instrument or document contemplated hereby or thereby,(b) any breach of any covenant, agreement or obligation of the Company containedin the Transaction Documents or any other certificate, instrument or documentcontemplated hereby or thereby, (c) any cause of action, suit or claim broughtor made against such Indemnitee and arising out of or resulting from theexecution, delivery, performance or enforcement of the Transaction Documents orany other certificate, instrument or document contemplated hereby or thereby,(d) any transaction financed or to be financed in whole or in part, directly orindirectly, with the proceeds of the issuance of the Securities or (e) thestatus of such Buyer or holder of the Securities as an investor in the Company.To the extent that the foregoing undertaking by the Company may be unenforceablefor any reason, the Company shall make the maximum contribution to the paymentand satisfaction of each of the Indemnified Liabilities which is permissibleunder applicable law. Notwithstanding anything in ??this Section 8 to thecontrary, in no event shall a Buyer have or assert any claim against the Companybased upon or arising out of any matter for which a Buyer is entitled toindemnification hereunder unless, until and to the extent that the aggregate ofall such claims under this Section 8, exceeds $10,000 aggregate threshold (atwhich point the Company will be obligated to indemnify such Buyer or Buyers fromand against all such Indemnified Liabilities back to the first dollar). 1610. GOVERNING LAW; MISCELLANEOUS. a. Governing Law; Jurisdiction; Jury Trial. The corporate laws ofthe State of Delaware shall govern all issues concerning the relative rights ofthe Company and its stockholders. All other questions concerning theconstruction, validity, enforcement and interpretation of this Agreement shallbe governed by the internal laws of the State of California, without givingeffect to any choice of law or conflict of law provision or rule (whether of theState of California or any other jurisdictions) that would cause the applicationof the laws of any jurisdictions other than the State of California. Each partyhereby irrevocably submits to the non-exclusive jurisdiction of the state andfederal courts sitting in the City of San Francisco, California, for theadjudication of any dispute hereunder or in connection herewith or with anytransaction contemplated hereby or discussed herein, and hereby irrevocablywaives, and agrees not to assert in any suit, action or proceeding, any claimthat it is not personally subject to the jurisdiction of any such court, thatsuch suit, action or proceeding is brought in an inconvenient forum or that thevenue of such suit, action or proceeding is improper. Each party herebyirrevocably waives personal service of process and consents to process beingserved in any such suit, action or proceeding by mailing a copy thereof to suchparty at the address for such notices to it under this Agreement and agrees thatsuch service shall constitute good and sufficient service of process and noticethereof. Nothing contained herein shall be deemed to limit in any way any rightto serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLYWAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THEADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUTOF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY. b. Counterparts. This Agreement may be executed in two or moreidentical counterparts, all of which shall be considered one and the sameagreement and shall become effective when counterparts have been signed by eachparty and delivered to the other parties; provided that a facsimile signatureshall be considered due execution and shall be binding upon the signatorythereto with the same force and effect as if the signature were an original, nota facsimile signature. 17 c. Headings. The headings of this Agreement are for convenience ofreference and shall not form part of, or affect the interpretation of, thisAgreement. d. Severability. If any provision of this Agreement shall be invalidor unenforceable in any jurisdiction, such invalidity or unenforceability shallnot affect the validity or enforceability of the remainder of this Agreement inthat jurisdiction or the validity or enforceability of any provision of thisAgreement in any other jurisdiction. e. Entire Agreement; Amendments. This Agreement supersedes all otherprior oral or written agreements between the Buyers, the Company, theiraffiliates and persons acting on their behalf with respect to the mattersdiscussed herein, and this Agreement and the instruments referenced hereincontain the entire understanding of the parties with respect to the matterscovered herein and therein and, except as specifically set forth herein ortherein, neither the Company nor any Buyer makes any representation, warranty,covenant or undertaking with respect to such matters. No provision of thisAgreement may be amended other than by an instrument in writing signed by theCompany and the holders of a majority of the Offered Shares then outstanding,and no provision hereof may be waived other than by an instrument in writingsigned by the party against whom enforcement is sought. No such amendment shallbe effective to the extent that it applies to less than all of the holders ofthe Offered Shares then outstanding. f. Notices. Any notices, consents, waivers or other communicationsrequired or permitted to be given under the terms of this Agreement must be inwriting and will be deemed to have been delivered: (i) upon receipt, whendelivered personally; (ii) upon receipt, when sent by facsimile (providedconfirmation of transmission is mechanically or electronically generated andkept on file by the sending party); or (iii) one business day after deposit witha nationally recognized overnight delivery service, in each case properlyaddressed to the party to receive the same. The addresses and facsimile numbersfor such communications shall be: If to the Company: Winwin Gaming, Inc. 8687 W. Sahara Ave. Suite 201 Las Vegas, Nevada 89117 Telephone: (702) 212-4530 Facsimile: (702) 212-4553 Attention: President With a copy to: Louis A. Bevilacqua Thelen Reid & Priest LLP 701 Pennsylvania Avenue, N.W. Suite 800 Washington, D.C. 20004-2608 Telephone: 202-508-4281 Facsimile: 202-654-1804 18 If to the Transfer Agent: Integrity Stock Transfer 2920 N. Green Valley Parkway Building 5 Suite 527 Henderson, NV 98014 Telephone: 702-317-7757 Facsimile: 702-796-5650 Attention: Don Maddalon If to a Buyer, to it at the address and facsimile number set forth on the Schedule of Buyers attached hereto, with copies to such Buyer’s representatives, if any, specified on the Schedule of Buyers, or at such other address and/or facsimile number and/or to the attention ofsuch other person as the recipient party has specified by written notice givento each other party in accordance with the above provisions five (5) days priorto the effectiveness of such change. g. Successors and Assigns. This Agreement shall be binding upon andinure to the benefit of the parties and their respective successors and assigns,including any purchasers of the Offered Shares. The Company shall not assignthis Agreement or any rights or obligations hereunder without the prior writtenconsent of the holders of a majority of the Offered Shares then outstanding,including by merger or consolidation. A Buyer may assign some or all of itsrights hereunder without the consent of the Company, provided, however, that anysuch assignment shall not release such Buyer from its obligations hereunderunless such obligations are assumed by such assignee and the Company hasconsented to such assignment and assumption. Notwithstanding anything to thecontrary contained in the Transaction Documents, the Buyers shall be entitled topledge the Securities in connection with a bona fide margin account. h. No Third Party Beneficiaries. This Agreement is intended for thebenefit of the parties hereto and their respective permitted successors andassigns, and is not for the benefit of, nor may any provision hereof be enforcedby, any other person. i. Survival. The representations, warranties and covenants of theCompany and the Buyers shall survive the Closing. Each Buyer shall beresponsible only for its own representations, warranties, agreements andcovenants hereunder. j. Publicity. The Company and each Buyer holding more than 25% ofthe Offered Shares shall have the right to approve before issuance any pressreleases or any other public statements with respect to the transactionscontemplated hereby; provided, however, that the Company shall be entitled,without the prior approval of any Buyer, to make any press release or otherpublic disclosure with respect to such transactions as is required by applicablelaw and regulations (although such Buyers shall be consulted by the Company inconnection with any such press release or other public disclosure prior to itsrelease and shall be provided with a copy thereof). k. Further Assurances. Each party shall do and perform, or cause tobe done and performed, all such further acts and things, and shall execute anddeliver all such other agreements, certificates, instruments and documents, asthe other party may reasonably request in order to carry out the intent andaccomplish the purposes of this Agreement and the consummation of thetransactions contemplated hereby. 19 l. No Strict Construction. The language used in this Agreement willdeemed to be the language chosen by the parties to express their mutual intent,and no rules of strict construction will be applied against any party. m. Remedies. Each Buyer and each holder of the Securities shall haveall rights and remedies set forth in the Transaction Documents and all rightsand remedies which such holders have been granted at any time under any otheragreement or contract and all of the rights which such holders have under anylaw. The parties hereto hereby declare that it is impossible to measure in moneythe damages which will accrue to Buyers by reason of the Company’s failure toperform any of the obligations under this Agreement and agree that the terms ofthis Agreement shall be specifically enforceable by Buyers. If a Buyerinstitutes any action or proceeding to specifically enforce the provisionshereof, any person or entity against whom such action or proceeding is broughthereby waives the claim or defense therein that such Buyer has an adequateremedy at law, and such person or entity shall not offer in any such action orproceeding the claim or defense that such remedy at law exists. n. Independence. The Company and each Buyer acknowledge that eachBuyer (other than Buyers that are affiliated with each other prior to thesigning of this Agreement) is acting and has acted independently from oneanother and not as a group in connection with the transaction evidenced by theTransaction Documents, including without limitation, performing due diligence,negotiating the Transaction Documents, and deciding whether to acquire theSecurities, hold the Securities, vote the Securities or dispose of theSecurities. The Company and each Buyer (other than Buyers that are affiliatedwith each other prior to the signing of this Agreement) further acknowledge thateach Buyer intends to act independently from one another and not as a group inconnection with (i) any amendment or waiver of rights under this Agreement orthe Registration Rights Agreement, (ii) any future purchase or sale of theCompany’s equity securities, (iii) the acquisition, holding, voting or disposingof the Securities or any other capital stock of the Company, or (iv) any othermatter arising under or related to the Transaction Documents. o. Representation. Each party hereto acknowledges that Van WagonerPrivate Opportunities Fund L.P. retained Shartsis, Friese & Ginsburg LLP torepresent it in connection with the Transaction Documents, that such itsinterests may not necessarily coincide with the interests of the other Buyers,and that each Buyer has consulted with, or has had the opportunity to consultwith, its own legal counsel and has not relied on Shartsis, Friese & GinsburgLLP for legal counsel in connection with this transaction. p. Exculpation. Each Buyer acknowledges that it is not relying uponany person, firm or corporation, other than the Company and its officers anddirectors, in making its investment or decision to invest in the Company. EachBuyer agrees that no Buyer nor the respective controlling person, officers,directors, partners, agents or employees of any Buyer shall be liable to anyother Buyer for any action heretofore or hereafter taken or omitted to be takenby any of them in connection with the purchase or sale of the Securities or theexecution of or performance under any of the Transaction Documents.. * * * * * * 20 IN WITNESS WHEREOF, the Buyers and the Company have caused this SecuritiesPurchase Agreement to be duly executed as of the date first written above. COMPANY: WinWin Gaming, Inc. By: /s/ Patrick O. Rogers ————————————- Name: Patrick O. Rogers Title: Chairman and Chief Executive Officer 21 BUYERS: Van Wagoner Private Opportunities Fund L.P. By: /s/ Garrett Van Wagoner —————————————- Name: Garrett Van Wagoner Title: 22 SECURITIES PURCHASE AGREEMENT BUYER SIGNATURE PAGE AND JOINDER AGREEMENT By executing this page in the space provided, the undersigned herebyagrees (i) that the undersigned is a “Buyer,” as defined in the SecuritiesPurchase Agreement, dated February 25, 2005, among WinWin Gaming, Inc. and theinitial Buyers party thereto (as amended, modified and supplemented from time totime, the “Agreement”), (ii) that the undersigned is a party to the Agreementfor all purposes and is obligated with respect to the purchase of the number ofSecurities specified on the amended Schedule of Buyers dated as of the datehereof (a copy of which is attached hereto) and (iii) that the undersigned isbound by all of the terms and conditions of the Agreement. For Individuals: ________________________________________ Print Name Above ________________________________________ Sign Name Above For Entities: Print Name Above By: ————————————- Name: Title: 23 SCHEDULE OF BUYERS As of February 25, 2005

Investor’s (and Investor’s Number of Representative’s, if any) Address Offered Number of PurchaseInvestor’s Name and Facsimile Number Shares Warrants Price- ————— ——————– —— ——– —– Van Wagoner PrivateOpportunities Fund As provided inL.P. c/o Van Wagoner Capital Management 4,000,000 Warrant $2,000,000 755 Sansome Street, Suite 350 San Francisco, CA 94111 Fax: 415-835-5050 With a copy to: Steven O. Gasser, Esq. Shartsis, Friese & Ginsburg LLP One Maritime Plaza, 18th Floor San Francisco, CA 94111 Fax: 415-421-2922

– ——————————————————————————– 24 SCHEDULESSchedule 3(a) SubsidiariesSchedule 3(c) CapitalizationSchedule 3(g) Material ChangesSchedule 3(h) LitigationSchedule 3(z) Key Executives and DirectorsSchedule 4(d) Use of Proceeds EXHIBITSExhibit A Form of WarrantExhibit B Form of Lock UpExhibit C Form of Company Counsel OpinionExhibit D Form of Irrevocable Transfer Agent Instructions 25