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EXHIBIT 10.1
 
SECURITIES PURCHASE AGREEMENT
 
This Securities Purchase Agreement (this "Agreement") is dated as of September
23, 2010, between Lenco Mobile Inc., a Delaware corporation (the "Company"), and
each purchaser identified on the signature pages hereto (each, including its
successors and assigns, a "Purchaser" and collectively the "Purchasers").
 
WHEREAS, subject to the terms and conditions set forth in this Agreement and
pursuant to Section 4(2) of the Securities Act of 1933, as amended, and Rule 506
promulgated thereunder, the Company desires to issue and sell to each Purchaser,
and each Purchaser, severally and not jointly, desires to purchase from the
Company, securities of the Company as more fully described in this Agreement.
 
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and intending to be legally bound, the Company and each Purchaser
agree as follows:
 
ARTICLE I
DEFINITIONS
 
1.1   Definitions.  In addition to the terms defined elsewhere in this
Agreement, the following terms have the meanings set forth in this Section 1.1:
 
"Affiliate" means 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.  With respect to a Purchaser, any investment fund or managed
account that is managed on a discretionary basis by the same investment manager
as such Purchaser will be deemed to be an Affiliate of such Purchaser.
 
"Board of Directors" means the board of directors of the Company.
 
"Business Day" means any day except any Saturday, any Sunday, any day which is a
federal legal holiday in the United States or any day on which banking
institutions in the State of California are authorized or required by law or
other governmental action to close.
 
"Certificate of Designation" means the Certificate of Designation to be filed
prior to the Closing by the Company with the Secretary of State of Delaware, in
the form of Exhibit A attached hereto.
 
"Closing" means the closing of the purchase and sale of the Securities pursuant
to Section 2.1.
 
"Closing Date" means the date 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.
 
 
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"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 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.
 
"Discussion Time" shall have the meaning ascribed to such term in
Section 3.2(f).
 
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.
 
"Exempt Issuance" means the issuance of (i) shares of Common Stock or options to
employees, officers or directors of the Company pursuant to any stock or option
plan in effect on the date of this Agreement or hereafter 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, (ii)
securities upon the conversion of, or as interest or dividends in lieu of cash
payment on, 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 (iii) 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" means the accounting principles generally accepted in the United States.
 
"Governmental Body" means any (i) nation, state, commonwealth, province,
territory, county, municipality, district or other jurisdiction of any nature;
(ii) U.S. federal and state government; or (iii) governmental or
quasi-governmental authority of any nature (including any governmental division,
department, agency, commission, instrumentality, official, ministry, fund,
foundation, center, organization, unit, body or entity and any court or other
tribunal).
 
"Intellectual Property Rights" shall have the meaning ascribed to such term in
Section 3.1(o).
 
"Lien" means a lien, charge, security interest, encumbrance, right of first
refusal, preemptive right or other restriction.
 
 
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"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).
 
"Pablo Representative" means a holder of shares of Preferred Stock appointed
from time to time (by notice delivered to the Company) by holders of a majority
of the shares of Preferred Stock held by the Pablo Stockholders, which holder
shall initially be Pablo Enterprises LLC.
 
"Pablo Stockholders" means Pablo Enterprises LLC and its Affiliates.
 
"Participation Maximum" shall have the meaning ascribed to such term in
Section 4.11(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 4.11(b).
 
"Preferred Stock" means the Company's Series A Convertible Preferred Stock
issued hereunder having the rights, preferences and privileges set forth in the
Certificate of Designation.
 
"Previously Disclosed" means as disclosed in the disclosure schedule signed by
the Company and delivered to each of the Purchasers on or prior to the date of
this Agreement.
 
"Pro Rata Portion" means the ratio of (i) the Subscription Amount of a
particular Purchaser participating in a Subsequent Financing and (ii) the sum of
the aggregate Subscription Amounts of all Purchasers participating such
Subsequent Financing.
 
"Proceeding" means an action, claim, suit, investigation or proceeding
(including an investigation or partial proceeding, such as a deposition).
 
"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 issuable in the future pursuant to the Transaction
Documents, including any Underlying Shares issuable upon conversion in full of
all shares of Preferred Stock, assuming that the Preferred Stock will be
converted within five years of such date.
 
 
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"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 Preferred Stock and the Underlying Shares.
 
"Securities Act" means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
 
"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).
 
"Stated Value" means $100 per share of Preferred Stock.
 
"Subscription Amount" means, as to each Purchaser, the aggregate amount to be
paid for the Preferred Stock 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" means any issuance by the Company or any of its
Subsidiaries of Common Stock or Common Stock Equivalents.
 
"Subsequent Financing Notice" shall have the meaning ascribed to such term in
Section 4.11(b).
 
"Subsidiary" means any direct or indirect subsidiary of the Company and shall,
where applicable, also include any direct or indirect subsidiary of the Company
formed or acquired after the date hereof.
 
"Trading Day" means a day on which the New York Stock Exchange 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 NYSE Amex,
the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select
Market or the New York Stock Exchange.
 
"Transaction Documents" means this Agreement, the Certificate of Designation,
all schedules and exhibits thereto and hereto and any other documents or
agreements executed in connection with the transactions contemplated hereunder.
 
"Underlying Shares" means the shares of Common Stock issued and issuable upon
conversion of the Preferred Stock and issued and issuable in lieu of the cash
payment of dividends on the Preferred Stock in accordance with the terms of the
Certificate of Designation.
 
 
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ARTICLE II
PURCHASE AND SALE
 
2.1   Closing.  On the Closing Date, 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 Purchasers agree, severally and not jointly, to purchase up to an
aggregate of $10.75 million in Stated Value of shares of Preferred Stock.  Each
Purchaser shall deliver to the Company via wire transfer or a certified check of
immediately available funds equal to its Subscription Amount and the Company
shall deliver to such Purchaser its respective shares of Preferred Stock and the
other items set forth in Section 2.2 issuable at the Closing.  Upon satisfaction
of the conditions set forth in Sections 2.2 and 2.3, the Closing shall occur at
the offices of Sheppard, Mullin, Richter & Hampton LLP, located at 12275 El
Camino Real, Suite 200, San Diego, California 92130, or such other location as
the parties shall mutually agree.
 
2.2   Deliveries.
 
(a)   On the Closing Date, the Company shall deliver or cause to be delivered to
each Purchaser the following:
 
(i)   this Agreement duly executed by the Company; and
 
(ii)   a certificate evidencing a number of shares of Preferred Stock equal to
such Purchaser's Subscription Amount divided by the Stated Value, registered in
the name of such Purchaser.
 
(b)   On the Closing Date, each Purchaser shall deliver or cause to be delivered
to the Company the following:
 
(i)   this Agreement duly executed by such Purchaser; and
 
(ii)   such Purchaser's Subscription Amount.
 
2.3   Closing Conditions.
 
(a)   The obligations of the Company hereunder in connection with the 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 each Purchaser required to
be performed at or prior to the Closing Date shall have been performed;
 
(iii)      the Company shall have received subscriptions and payment from the
Purchasers for Subscription Amounts of not less than $10 million; and
 
 
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(iv)      the delivery by each Purchaser of the items set forth in
Section 2.2(b).
 
(b)   The respective obligations of the Purchasers hereunder in connection with
the 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 Company contained herein (other than
representations and warranties of the Company contained herein that are
qualified by materiality or Material Adverse Effect, which shall be true and
correct in all respects on the Closing Date);
 
(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);
 
(iv)      there shall have been no Material Adverse Effect 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 OTC Bulletin Board
(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 or The OTC Bulletin Board, nor shall a banking
moratorium have been declared either by the United States or New York State
authorities; and
 
(vi)   management of the Company, including Messrs. Levinsohn, Hill, Banks and
Otto, shall have subscribed and made payment, in the aggregate, for not less
than $750,000 of Stated Value of the Preferred Stock on the terms and conditions
of this Agreement.
 
ARTICLE III
REPRESENTATIONS AND WARRANTIES
 
3.1   Representations and Warranties of the Company.  The Company represents and
warrants to each of the Purchasers that except as disclosed in the SEC Reports
or as Previously Disclosed:
 
(a)   Subsidiaries.  Each Subsidiary is 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.
 
 
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(b)   Organization and Qualification.  The Company and each Subsidiary 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
(as applicable), 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 or 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 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 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 of the Transaction
Documents by the Company and the consummation by the Company 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, or (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 Governmental Body 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 has not had and could not reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect.
 
 
 
 
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(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 Governmental Body or other Person in connection
with the execution, delivery and performance by the Company of the Transaction
Documents, other than (i) the filing of a Current Report on Form 8-K with the
Commission, (ii) 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,
and (iii) 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").
 
(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 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.  As of the date hereof, before giving effect to the
transactions contemplated hereby to occur at the Closing, the authorized capital
stock of the Company consists of (i) 250,000,000 shares of Common Stock, of
which 66,102,746 shares are issued and outstanding, 9,000,000 shares are
reserved for issuance pursuant to the Company's stock option and purchase plans
and 2,057,621 shares are reserved for issuance pursuant to securities (other
than the aforementioned options) exercisable or exchangeable for, or convertible
into, shares of Common Stock and (ii) 1,000,000 shares of preferred stock,
$0.001 par value, none of which are issued or outstanding.  The Company has not
issued any capital stock since the filing date of 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, the issuance of
shares of Common Stock to employees pursuant to the Company's employee stock
purchase plans and pursuant to the conversion 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 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.
 
 
 
 
 
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(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 filed during the two years preceding the
date hereof (or such shorter period as the Company was required by law or
regulation to file such material) 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
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 GAAP
applied on a consistent basis during the periods involved, except as may be
otherwise specified in such financial statements or the notes 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.  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 have, individually or in the aggregate, 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,
(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, 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 that has not
been publicly disclosed at least one Trading Day prior to the date that this
representation is made.
 
 
 
 
 
 
 
 
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(j)   Litigation.  There is no Proceeding 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 Governmental Body 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 have, individually or
in the aggregate, a Material Adverse Effect.  Neither the Company nor any
Subsidiary, nor any director or officer thereof, is or has been the subject of
any Proceeding 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 Subsidiary or
any current or former director or officer of the Company or any Subsidiary.  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.
 
(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 or
any Subsidiary which has had or could reasonably be expected to have,
individually or in the aggregate, 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 of the Company or any
Subsidiary, 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 United States 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 has not had and could not reasonably be expected to have,
individually or in the aggregate, 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 Governmental Body, or (iii) is or has been in violation of any
statute, rule or regulation of any Governmental Body, including all foreign,
federal, state and local laws applicable to its business and all such laws that
affect the environment, except in each case as has not had and could not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect.
 
 
 
 
 
 
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(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 has not had and could not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect ("Material
Permits"), and neither the Company nor any Subsidiary has received any notice of
any Proceeding 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 (i) 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 (ii) 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 material patents, patent applications, trademarks, trademark
applications, service marks, trade names, trade secrets, inventions, copyrights,
licenses and other intellectual property rights and similar rights used in
connection with their respective businesses as currently operated and described
in the SEC Reports (collectively, the "Intellectual Property Rights").  Neither
the Company nor any Subsidiary has received a notice 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
the 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 has not had and could not reasonably be expected
to have, individually or in the aggregate, 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.  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.
 
 
 
 
 
 
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(q)   Transactions with Affiliates and Employees.  None of the officers or
directors of the Company or any Subsidiary and, to the knowledge of the Company,
none of the employees of the Company or any Subsidiary 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.
 
(r)   Certain Fees.  No brokerage or finder's fees or commissions are or will be
payable by the Company or any Subsidiary 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 3.1(r) that may be due in connection with the transactions
contemplated by the Transaction Documents.
 
(s)   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.
 
(t)   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.
 
(u)   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.
 
 
 
 
 
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(v)   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 as a result of the Company's issuance of the
Securities and the Purchasers' ownership of the Securities.
 
(w)   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, nonpublic 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 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 12 months preceding the
date of this Agreement did not, at the time they were issued, 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.
 
(x)   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.
 
(y)   Tax Status.  Except for matters that have not had and could not reasonably
be expected to have, individually or in the aggregate, 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.
 
(z)   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.
 
 
 
 
 
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(aa)   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.
 
3.2   Representations and Warranties of the Purchasers.  Each 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, partnership or limited liability
company 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 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 at the date hereof it is, and on each date on which it converts any
shares of Preferred Stock 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.
 
 
 
 
 
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(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).
 
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.
 
 
 
 
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(b)   The Purchasers agree to the imprinting, so long as is required by
applicable law, 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 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.
 
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.
 
 
 
 
 
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4.3   Furnishing of Information.  Until the time that no Purchaser owns
Securities, the Company covenants 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.
 
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.
 
4.5   Conversion and Exercise Procedures.  The form of Notice of Conversion
included in the Certificate of Designation sets forth the totality of the
procedures required of the Purchasers in order to convert the Preferred
Stock.  No additional legal opinion or other information or instructions shall
be required of the Purchasers to convert their Preferred Stock.
 
4.6   Publicity.  The Company and each 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 or 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 Purchasers holding a majority of the Preferred
Stock issued under this Agreement then outstanding, 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.
 
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.
 
 
 
 
 
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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 each Purchaser shall be relying on the foregoing covenant in
effecting transactions in securities of the Company.
 
4.9   Use of Proceeds.  The Company shall use the net proceeds from the sale of
the Securities for working capital purposes and business expansion 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 or (c) the settlement of any outstanding litigation.
 
4.10      Indemnification of Purchasers.  Subject to the provisions of this
Section 4.10, the Company will indemnify and hold each 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 person (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
Party 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 Party, with
respect to any of the transactions contemplated by the Transaction Documents
(unless such action is based upon a breach of the related Purchaser's
representations, warranties or covenants under the Transaction Documents or any
agreements or understandings such related Purchaser may have with any such
stockholder or any violations by the related Purchaser of state or federal
securities laws or any conduct by such related 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 (x) the employment thereof has been specifically
authorized by the Company in writing, (y) the Company has failed after a
reasonable period of time to assume such defense and to employ counsel or (z) 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 (A) for any settlement by a Purchaser Party effected without the
Company's prior written consent, which shall not be unreasonably withheld,
conditioned or delayed; or (B) 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.
 
 
 
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4.11     Participation in Future Financings.
 
(a)   From the date hereof until the 12 month anniversary of the date hereof,
subject to this Section 4.11, each Purchaser shall have the right to participate
in any Subsequent Financing in such amount as the Purchaser may elect, up 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 three Trading Days prior to the closing of the Subsequent
Financing, the Company shall deliver to each Purchaser a written notice of its
intent to effect a Subsequent Financing ("Pre-Notice"), which notice shall ask
such Purchaser if it wants to review the details of such financing.  Upon the
request of a Purchaser to the Company for additional details of such Subsequent
Financing, which request shall be provided by the Purchaser to the Company by
not later than 5:30 p.m. (New York City Time) on the Trading Day after the
Company delivered the Pre-Notice, and only upon such request by such Purchaser,
the Company shall promptly after its receipt of such request, deliver a written
notice to such Purchaser that describes in reasonable detail the proposed terms
of the Subsequent Financing, the amount of proceeds intended to be raised and
the Persons through or with whom such Subsequent Financing is proposed to be
effected (a "Subsequent Financing Notice").
 
(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 third Trading Day after the Company delivered the Subsequent
Financing 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 5:30 p.m. (New York City Time) such Trading Day, such
Purchaser shall be deemed to have notified the Company that it does not elect to
participate.
 
(d)   If by 5:30 p.m. (New York City time) on the third Trading Day after the
Company has delivered the Subsequent Financing Notice, the Company receives
notices from any Purchasers of their willingness to participate in the
Subsequent Financing and the amount of such Purchasers' participation in such
Subsequent Financing as set forth in such notices are, in the aggregate, less
than the Participation Maximum, then the Company may effect the Subsequent
Financing in accordance with the notices delivered by such Purchasers.
 
(e)   If by 5:30 p.m. (New York City time) on the third Trading Day after the
Company has delivered the Subsequent Financing Notice, the Company receives
notices from the Purchasers seeking to purchase more than the aggregate amount
of the Participation Maximum, each such Purchaser shall have the right to
purchase its Pro Rata Portion of the Participation Maximum.
 
 
 
 
 
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(f)   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 4.11, 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 90 Trading Days after the date
of the initial Subsequent Financing Notice.
 
(g)   Notwithstanding anything to the contrary herein, this Section 4.11 shall
not apply in respect of (i) an Exempt Issuance or (ii) a public offering of
Common Stock.
 
4.12     Subsequent Equity Sales.  From the date hereof until the date that the
Pablo Stockholders collectively own less than 50% of the shares of Preferred
Stock originally issued to Pablo Enterprises LLC pursuant to this Agreement,
neither the Company nor any Subsidiary shall issue, or enter into any agreement
to issue, any Common Stock or Common Stock Equivalents exercisable or
convertible into Common Stock at a price less than the then current conversion
price of the Preferred Stock without the prior written consent of both (a) the
holders of a majority in interest of the Preferred Stock outstanding at the time
of sale and (b) the Pablo Representative.
 
4.13     Reservation of Securities.  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 be required to fulfill its
obligations in full under the Transaction Documents.
 
4.14     Equal Treatment of Purchasers.  No consideration shall be offered or
paid to any Person to amend or consent to a waiver or modification of any
provision of any of the Transaction Documents unless the same consideration is
also offered to all of the parties to the Transaction Documents.  For
clarification purposes, this provision constitutes a separate right granted to
each Purchaser by the Company and negotiated separately by each 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.  Each 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 at the Discussion Time
and ending at the time that the transactions contemplated by this Agreement are
first publicly announced.  Each 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, such
Purchaser will maintain the confidentiality of the existence and terms of this
transaction and the information Previously Disclosed.  Each Purchaser severally
and not jointly with any other Purchaser, understands and acknowledges, and
agrees, to act in a manner that will not violate the positions of the Commission
as set forth in Item 65, Section A, of the Manual of Publicly Available
Telephone Interpretations, dated July 1997, compiled by the Office of Chief
Counsel, Division of Corporation Finance. 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.  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.
 
 
 
 
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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     Piggy-Back Registration Rights. If the Company shall determine to
prepare and file with the Commission a registration statement relating to an
offering for its own account or the account of others under the Securities Act
of any of its equity securities, other than on Form S-4 or Form S-8 (each as
promulgated under the Securities Act) or their then equivalents relating to
equity securities to be issued solely in connection with any acquisition of any
entity or business or equity securities issuable in connection with the
Company's stock option or other employee benefit plans, then the Company shall
deliver to each Purchaser a written notice of such determination and, if within
fifteen days after the date of the delivery of such notice, any such Purchaser
shall so request in writing, the Company shall include in such registration
statement all or any part of the shares of Common Stock issuable upon conversion
of the Preferred Stock as such Purchaser requests to be registered; provided,
however, that the Company shall not be required to register any securities
pursuant to this Section that are eligible for resale pursuant to Rule 144
promulgated by the Commission pursuant to the Securities Act without
volume  limitations.
 
ARTICLE V
MISCELLANEOUS
 
5.1   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
September 30, 2010; provided, however, that Sterling Capital Partners Inc. shall
not be entitled to terminate this Agreement once Pablo Enterprises LLC has paid
its Subscription Amount.
 
5.2   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.
 
 
 
 
 
 
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5.3   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.
 
5.4   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. (Pacific
Time) on a Business Day, (b) the next Business 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 Business Day or between 5:30 p.m. and 11:59 p.m. (Pacific Time) on any
Business Day, (c) the Business 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, or to such other address as a party may specify by notice to the other
parties delivered in accordance with this Section 5.4.
 
5.5   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 Purchasers holding a majority of
the Preferred Stock issued under this Agreement then outstanding 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.
 
5.6   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.
 
5.7   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 each 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."
 
5.8   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.
 
 
 
 
 
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5.9   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
Delaware, 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 New
Castle County, Delaware.  Each party hereby irrevocably submits to the exclusive
jurisdiction of such state and federal courts 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.
 
5.10     Survival.  The representations and warranties shall survive the Closing
and the delivery of the Securities for the applicable statute of limitations.
 
5.11     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 and upon receipt
of an agreement to indemnify and hold the Company harmless with respect to such
certificate.  The applicant for a new certificate or instrument under such
circumstances shall also pay any reasonable third-party costs associated with
the issuance of such replacement Securities.
 
5.12     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 agree 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.
 
 
 
 
 
 
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5.13     Independent Nature of Purchasers' Obligations and Rights.  The
obligations of each 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.  Each 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.  Each Purchaser has been represented by its own
separate legal counsel in their review and negotiation of the Transaction
Documents.
 
5.14     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.
 
5.15     Construction.  The parties agree that (a) 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; (b)
each and every reference to share prices and shares of Common Stock 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; and (c) unless
the context otherwise requires: (i) a term has the meaning assigned to it; (ii)
the word "or" is not exclusive; (iii) words in the singular include the plural
and vice versa, and words of one gender shall be held to include the other
gender; (iv) all references in this Agreement to designated "Articles,"
"Sections" and other subdivisions are to the designated Articles, Sections and
other subdivisions, as applicable, of this Agreement; and the words "herein,"
"hereof," "hereunder" and other words of similar import refer to this Agreement
as a whole and not to any particular Article, Section or other subdivision of
this Agreement; (v) references to currency and the "$" sign shall mean the
lawful currency of the United States of America; (vi) the word "including" and
words of similar import when used in this Agreement shall mean "including
without limitation" unless otherwise specified; and (vii) all references to any
period of days shall be deemed to be to the relevant number of calendar days
unless otherwise specified.
 
5.16     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.
 
 
[Signature Page Follows]
 
 
 
 
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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.
 
LENCO MOBILE INC.
 
 
By:  /s/ Michael Levinsohn                                               
        Name:   Michael Levinsohn
        Title:     Chief Executive Officer
Address for Notice:
 
 
345 Chapala Street
Santa Barbara, California 93101
Facsimile:  (805) 456-2063
Attention: Chief Executive Officer
 
 
With a copy to (which shall not constitute notice):
James A. Mercer III, Esq.
Sheppard, Mullin, Richter & Hampton LLP
12275 El Camino Real, Suite 200
San Diego, California 92130

 
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOR PURCHASER FOLLOWS]
 
 
 
 
 
 
 
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[PURCHASER SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT]
 
IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
 
Name of Purchaser:      Pablo Enterprises
LLC                                                                                                                                                                                           
 
 
Signature of Authorized Signatory of Purchaser:      /s/ Bruce K.
Anderson                                                                                                                                        
 
Name of Authorized Signatory:      Bruce K.
Anderson                                                                                                                                                                              
 
Title of Authorized Signatory:
____________________________________________________________________________________________
 
Fax Number of Purchaser:
________________________________________________________________________________________________
 

 
Address for Notice of Purchaser:

 
Address for Delivery of Securities for Purchaser (if not same as above):
 

Subscription Amount:         $10,000,000                       
 
Shares of Preferred Stock:         100,000                        
 
EIN Number:  [PROVIDE THIS UNDER SEPARATE COVER]
 
 
[SIGNATURE PAGES CONTINUE]
 
 
 
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[PURCHASER SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT]
 
IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
 
Name of Purchaser:      Sterling Capital Partners Inc., a Nevada
corporation                                                                                                                                           
 
Signature of Authorized Signatory of Purchaser:      /s/ Michael
Levinsohn                                                                                                                                       
 
 
Name of Authorized Signatory:      Michael
Levinsohn                                                                                                                                                                               
 
Title of Authorized Signatory:      Chief Executive
Officer                                                                                                                                                                          
 
Fax Number of Purchaser:      (805)
456-2063                                                                                                                                                                                                  
 

 
Address for Notice of Purchaser: 345 Chappalla Street
 
      Santa Barbara, CA 93101

 
Address for Delivery of Securities for Purchaser (if not same as above):
 

 
Subscription Amount:          $750,000                      
 
Shares of Preferred Stock:         7,500                      
 
EIN Number:  [PROVIDE THIS UNDER SEPARATE COVER]
 
 
[SIGNATURE PAGES CONTINUE]
 
 
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