SECURITIES PURCHASE AGREEMENT


This Securities
Purchase Agreement (this “Agreement”) is dated as of August 18, 2014, between Labor Smart, Inc., a Nevada 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(a)(2) of the Securities Act of 1933, as amended
(the “Securities Act”), 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 for other good and valuable consideration, the receipt
and adequacy of which are hereby acknowledged, the Company and each Purchaser agree as follows:


ARTICLE I. 


DEFINITIONS


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


“Acquiring
Person” shall have the meaning ascribed to such term in Section 4.6.


“Additional
Consideration Shares” shall have the meaning ascribed to such term in Section 2.3(a).


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


“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.


“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 New York are authorized or required by law or other governmental action to
close.


“Closing
Dates” means the Trading Day(s) on which all of the Transaction Documents have been executed and delivered by the applicable
parties thereto in connection with a Closing, and all conditions precedent to (i) the Purchasers’ obligations to pay the
Subscription Amount as to such Closing and (ii) the Company’s obligations to deliver the Securities as to such Closing, in
each case, have been satisfied or waived.




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“Closing(s)”
means the one or more closings of the purchase and sale of the Securities pursuant to Section 2.2.


“Closing
Statement” means the Closing Statement in the form on Annex A attached hereto.


“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.


“Common
Stock Equivalents” means any securities of the Company or the Subsidiaries which would entitle the holder thereof to
acquire at any time Common Stock, including, without limitation, any debt, preferred stock, right, option, warrant 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.


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


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


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


“Debentures”
means the Original Issue Discount Convertible Debentures due, subject to the terms therein, 12 months from their date of issuance,
issued by the Company to the Purchasers hereunder, in the form of Exhibit A attached hereto, provided that, Debentures sold
under closings for Tranches following the First Closing will have the Optional Amortization Schedules (as defined therein) set
forth in Exhibit D hereto.


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


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


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


 


“Exempt
Issuance” means the issuance of (a) shares of Common Stock or options to employees, officers, consultants or directors
of the Company pursuant to any stock or option plan duly adopted for such purpose, by the Board of Directors , (b) securities upon
the exercise or exchange of or conversion of any Securities issued hereunder and/or other securities exercisable or exchangeable
for or convertible into shares of Common Stock issued and outstanding on the date of this Agreement, provided that such securities
have not been amended since the date of this Agreement to increase the number of such




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securities or to decrease the
exercise price, exchange price or conversion price of such securities, and (c) securities issued pursuant to acquisitions or strategic
transactions, provided that any such issuance shall only be to a Person (or to the equityholders of a Person) which is, itself
or through its subsidiaries, an operating company or an owner of an asset in a business synergistic with the business of the Company
and shall provide to the Company additional 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, (d) securities issued for consideration other than cash pursuant to a merger, consolidation, acquisition,
or similar business combination approved by the Board of Directors, (e) securities issued pursuant to an equipment loan or leasing
arrangement, real property leasing arrangement or debt financing from a bank or similar financial institution approved by the Board
of Directors, or (f) securities with respect to which the holders of the majority of the outstanding principal under the Debentures
have waived their anti-dilution rights.


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


“FCPA”
means the Foreign Corrupt Practices Act of 1977, as amended.


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


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


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


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


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


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


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


“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.


“Principal
Amount” means, as to each Purchaser, the amounts set forth below such Purchaser’s signature block on the signature
pages hereto next to the heading “Principal Amount,” in United States Dollars, which shall equal such Purchaser’s
Subscription Amount as to the applicable Closing multiplied by 1.05.




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


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


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


“Purchaser
Party” shall have the meaning ascribed to such term in Section 4.9.


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


“Required
Minimum” means, as of any date, the maximum aggregate number of shares of Common Stock then issued or potentially issuable
in the future pursuant to the Transaction Documents, including any Underlying Shares issuable upon conversion in full of all Debentures
(including Underlying Shares issuable as payment of interest on the Debentures), ignoring any conversion or exercise limits set
forth therein, and assuming that the Conversion Price is at all times on and after the date of determination 100% of the then Conversion
Price on the Trading Day immediately prior to the date of determination.


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


 


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


“Securities”
means the Debentures, the Underlying Shares and the Additional Consideration 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. 


“Subscription
Amount” means, as to each Purchaser, the aggregate amount to be paid for Debentures 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.




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


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


“Trading
Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on
the date in question: the NYSE MKT, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New
York Stock Exchange, OTCQB, or the OTC Bulletin Board (or any successors to any of the foregoing).


“Tranche(s)”
shall have the meaning ascribed to such term in Section 2.1.


“Transaction
Documents” means this Agreement, the Debentures, all exhibits and schedules thereto and hereto and any other documents
or agreements executed in connection with the transactions contemplated hereunder.


“Transfer
Agent” means West Coast Stock Transfer, Inc., the current transfer agent of the Company, with a mailing address of 721
N. Vulcan Ave. Ste. 205 and a phone number of 619-664-4780, and any successor transfer agent of the Company.


“Transfer
Agent Instruction Letter” means the letter from the Company to the Transfer Agent which instructs the Transfer Agent
to issue Underlying Shares pursuant to the Transaction Documents, in the form of Exhibit B attached hereto.


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


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


ARTICLE II.




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PURCHASE AND SALE


2.1             
Purchase. The Purchasers will purchase an aggregate of up to $1,100,000 in Subscription
Amount corresponding to an aggregate of up to $1,155,000 in Principal Amount of Debentures. The purchase will occur in seven (7)
tranches of (each a “Tranche,” and collectively the “Tranches”), with the first Tranche of
$350,000 in Subscription Amount (and $367,500 in Principal Amount) being closed on upon execution of this Agreement (the “First
Closing”). Closings for subsequent Tranches, each in the Subscription Amount of $125,000 (and Principal Amount of $131,250)
will occur on each of the first six monthly anniversaries of the First Closing, provided the Company is not in default of the Debentures,
and subject to the right of the Company to cancel any Tranche by providing written notice to the Purchasers at any time prior to
the scheduled closing date of such Tranche..


2.2             
Closing. On each 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 (with respect to the First
Closing), the Company agrees to sell, and each Purchaser, severally and not jointly, agrees to purchase, such Purchaser’s
Closing Subscription Amount as set forth on the signature page hereto executed by such Purchaser (for an aggregate of up to $1,100,000
in Subscription Amount corresponding to an aggregate of up to $1,155,000 in Principal Amount of Debentures). At each Closing, each
Purchaser shall deliver to the Company, via wire transfer or a certified check, immediately available funds equal to such Purchaser’s
Subscription Amount as set forth on the signature page hereto executed by such Purchaser, and the Company shall deliver to each
Purchaser its respective Debenture, as determined pursuant to Section 2.3(a), and the Company and each Purchaser shall deliver
the other items set forth in Section 2.3 deliverable at such Closing. Upon satisfaction of the covenants and conditions set forth
in Sections 2.3 and 2.4 for each Closing, each Closing shall occur at the offices of Company Counsel or such other location as
the parties shall mutually agree.


2.3             
Deliveries.


(a)               
On or prior to each Closing Date (except as noted), the Company shall deliver or cause to
be delivered to each Purchaser the following:


		(i)	as to the First Closing, this Agreement duly executed by the Company;



(ii)              
as to the First Closing, a legal opinion of Company Counsel, substantially in the form of
Exhibit C attached hereto; 


(iii)            
as to the First Closing, the Transfer Agent Instruction Letter duly executed by the Company
and the Transfer Agent; 


(iv)            
as to the First Closing, as additional consideration for the purchase of the Debentures, the
Purchaser’s pro rata portion of 100,000 shares of Common Stock (the “Additional Consideration Shares”); and




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(v)              
 a Debenture with a principal amount equal to such Purchaser’s Principal Amount as to
the applicable Closing, registered in the name of such Purchaser.


(b)              
On or prior to the applicable Closing Date, each Purchaser shall deliver or cause to be delivered
to the Company, as applicable, the following: 


(i)                
as to the First Closing, this Agreement duly executed by such Purchaser; and


(ii)              
such Purchaser’s Subscription Amount as to the applicable Closing by wire transfer to
the account specified in writing by the Company.


2.4             
Closing Conditions. 


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


(i)                
the accuracy in all material respects on the applicable Closing Date of the representations
and warranties of the Purchasers contained herein (unless as of a specific date therein in which case they shall be accurate as
of such date);


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


(iii)            
the delivery by each Purchaser of the items set forth in Section 2.3(b) of this Agreement.


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


(i)                
the accuracy in all material respects when made and on the applicable Closing Date of the
representations and warranties of the Company contained herein (unless as of a specific date therein);


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


(iii)            
the delivery by the Company of the items set forth in Section 2.3(a) of this Agreement; 


(iv)            
there is no existing Event of Default (as defined in the Debentures) and no existing event
which, with the passage of time or the giving of notice, would constitute an Event of Default;


(v)              
there shall have been no Material Adverse Effect with respect to




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the Company since the date hereof;
and


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


ARTICLE III. 


REPRESENTATIONS AND WARRANTIES


3.1             
Representations and Warranties of the Company. Except as set forth in the Disclosure
Schedules, which Disclosure Schedules shall be deemed a part hereof and shall qualify any representation or otherwise made herein
to the extent of the disclosure contained in the corresponding section of the Disclosure Schedules, the Company hereby makes the
following representations and warranties to each Purchaser:


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


(b)              
Organization and Qualification. The Company and each of the Subsidiaries is an entity
duly incorporated or otherwise organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation
or organization, with the requisite power and authority to own and use its properties and assets and to carry on its business as
currently conducted. Neither the Company nor any Subsidiary is in violation nor default of any of the provisions of its respective
certificate or articles of incorporation, bylaws or other organizational or charter documents. Each of the Company and the Subsidiaries
is duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each jurisdiction in
which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure
to be so qualified or in good standing, as the case may be, could not have or reasonably be expected to result in: (i) a material
adverse effect on the




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legality, validity or enforceability
of any Transaction Document, (ii) a material adverse effect on the results of operations, assets, business, prospects or condition
(financial or otherwise) of the Company and the Subsidiaries, taken as a whole, or (iii) a material adverse effect on the Company’s
ability to perform in any material respect on a timely basis its obligations under any Transaction Document (any of (i), (ii) or
(iii), a “Material Adverse Effect”) and no Proceeding has been instituted in any such jurisdiction revoking,
limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification.


(c)               
Authorization; Enforcement. The Company has the requisite corporate power and authority
to enter into and to consummate the transactions contemplated by this Agreement and each of the other Transaction Documents and
otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of this Agreement and each of the other
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 herewith or therewith other than in connection with the Required Approvals. This
Agreement and each other Transaction Document to which it is a party has been (or upon delivery will have been) duly executed by
the Company and, when delivered in accordance with the terms hereof and thereof, will constitute the valid and binding obligation
of the Company enforceable against the Company in accordance with its terms, except: (i) as limited by general equitable principles
and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of
creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief
or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.


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




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clauses (ii) and (iii), such as
could not have or reasonably be expected to result in a Material Adverse Effect.


(e)               
Filings, Consents and Approvals. The Company is not required to obtain any consent,
waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state,
local or other governmental authority or other Person in connection with the execution, delivery and performance by the Company
of the Transaction Documents, other than: (i) the filings required pursuant to Section 4.6 of this Agreement, (ii) the notice and/or
application(s) to each applicable Trading Market for the issuance and sale of the Securities and the listing of the Conversion
Shares for trading thereon in the time and manner required thereby and (iii) the filing of Form D and 8-K 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 Underlying Shares, when issued in accordance with the terms of the Transaction Documents, will be validly issued, fully paid
and nonassessable, free and clear of all Liens imposed by the Company other than restrictions on transfer provided for in the Transaction
Documents. The Company has reserved from its duly authorized capital stock a number of shares of Common Stock for issuance of the
Underlying Shares at least equal to 300% of the Required Minimum on the date hereof. 


(g)              
Capitalization. The capitalization of the Company is as set forth on Schedule 3.1(g),
which Schedule 3.1(g) shall also include the number of shares of Common Stock owned beneficially, and of record, by Affiliates
of the Company as of the date hereof. The Company has not issued any capital stock since its most recently filed periodic report
under the Exchange Act, other than pursuant to the exercise of employee stock options under the Company’s stock option plans,
the issuance of shares of Common Stock to employees pursuant to the Company’s employee stock purchase plans and pursuant
to the conversion and/or exercise of Common Stock Equivalents outstanding as of the date of the most recently filed periodic report
under the Exchange Act. 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 duly authorized, validly issued, fully paid and nonassessable, have been issued in compliance with all
federal and state securities laws, and none of such outstanding shares was issued in violation of any preemptive rights or similar
rights to subscribe for or purchase securities. No further approval or authorization of any stockholder, the Board of Directors
or others is required for the issuance and sale of the Securities. There are no stockholders agreements, voting agreements or other
similar agreements with respect to the Company’s capital stock to which the Company is a party or, to the knowledge of the
Company, between or among any of the Company’s stockholders.




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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, including the exhibits thereto and documents incorporated
by reference therein, being collectively referred to herein as the “SEC Reports”). As of their respective dates,
the SEC Reports complied in all material respects with the requirements of the Securities Act and the Exchange Act, as applicable,
and none of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which
they were made, not misleading. The Company has never been an issuer subject to Rule 144(i) under the Securities Act. The financial
statements of the Company included in the SEC Reports comply in all material respects with applicable accounting requirements and
the rules and regulations of the Commission with respect thereto as in effect at the time of filing. Such financial statements
have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis during
the periods involved (“GAAP”), except as may be otherwise specified in such financial statements or the 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; Undisclosed Events, Liabilities or Developments. Since the date of
the latest audited financial statements included within the SEC Reports, except as specifically disclosed in a subsequent SEC Report
filed prior to the date hereof: (i) there has been no event, occurrence or development that has had or that could reasonably be
expected to result in a Material Adverse Effect, (ii) the Company has not incurred any liabilities (contingent or otherwise) other
than (A) trade payables and accrued expenses incurred in the ordinary course of business consistent with past practice and (B)
liabilities not required to be reflected in the Company’s financial statements pursuant to GAAP or disclosed in filings made
with the Commission, (iii) the Company has not altered its method of accounting, and (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. The Company does not have pending before the Commission any request for confidential
treatment of information. Except for the issuance of the Securities contemplated by this Agreement or as set forth on Schedule
3.1(i), no event, liability, fact, circumstance, occurrence or development has occurred or exists or is reasonably expected
to occur or exist with respect to the Company or its Subsidiaries or their respective businesses, properties, operations, assets
or financial condition, that would be required to be disclosed by the Company under applicable securities laws at the time this
representation is made or deemed made that has not been publicly disclosed at least 1 Trading Day prior to the date that this representation
is made.




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


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


(l)                
Compliance. Neither the Company nor any Subsidiary: (i) is in default under or in violation
of (and no event has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by
the Company or any Subsidiary under), nor has the Company or any Subsidiary received notice of a claim that it is in default under
or that it is in violation of, any indenture, loan or credit agreement or any other agreement or instrument to which it is a party
or by which it or any of its properties is bound (whether or not such default or violation has been waived), (ii) is in violation
of any judgment, decree or order of any court, arbitrator or other governmental authority or (iii) is or has been in violation
of any statute, rule, ordinance or regulation of any governmental authority, including without limitation all foreign, federal,
state and local laws relating to taxes, environmental protection, occupational health and safety,




    	-12-



    	 



    

product quality and safety and
employment and labor matters, except in each case as could not have or reasonably be expected to result in a Material Adverse Effect.


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


(n)              
Title to Assets. The Company and the Subsidiaries have good and marketable title in
fee simple to all real property owned by them and good and marketable title in all personal property owned by them that is material
to the business of the Company and the Subsidiaries, in each case free and clear of all Liens, except for (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, for which appropriate reserves
have been made therefor in accordance with GAAP and, 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)              
Intellectual Property. The Company and the Subsidiaries have, or have rights to use,
all patents, patent applications, trademarks, trademark applications, service marks, trade names, trade secrets, inventions, copyrights,
licenses and other intellectual property rights and similar rights as described in the SEC Reports as necessary or required for
use in connection with their respective businesses and which the failure to so have could have a Material Adverse Effect (collectively,
the “Intellectual Property Rights”). None of, and neither the Company nor any Subsidiary has received a notice
(written or otherwise) that any of, the Intellectual Property Rights has expired, terminated or been abandoned, or is expected
to expire or terminate or be abandoned, within two (2) years from the date of this Agreement. Neither the Company nor any Subsidiary
has received, since the date of the latest audited financial statements included within the SEC Reports, a written notice of a
claim or otherwise has any knowledge that the Intellectual Property Rights violate or infringe upon the rights of any Person, except
as could not have or reasonably be expected to not have a Material Adverse Effect. To the knowledge of the Company, all such Intellectual
Property Rights are enforceable and there is no existing infringement by another Person of any of the Intellectual Property Rights.
The Company and its Subsidiaries have taken reasonable security measures to protect the secrecy, confidentiality and value of all
of their intellectual properties, except where failure to do so could not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect.


(p)              
Transactions With Affiliates and Employees. Except as set forth in the SEC Reports,
none of the officers or directors of the Company or any Subsidiary and, to




    	-13-



    	 



    

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 providing for the borrowing
of money from or lending of money to, 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, stockholder, member 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.


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


(r)                
Certain Fees. Other than as set forth on Schedule 3.1(r), no brokerage or finder’s
fees or commissions are or will be payable by the Company or any Subsidiaries 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




    	-14-



    	 



    

Documents. The Purchasers shall
have no obligation with respect to any fees or with respect to any claims made by or on behalf of other Persons for fees of a type
contemplated in this Section that may be due in connection with the transactions contemplated by the Transaction Documents.


(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, while the Debentures are outstanding, conduct its
business in a manner so that it will not become an “investment company” subject to registration under the Investment
Company Act of 1940, as amended.


(u)              
Registration Rights. No Person has any right to cause the Company to effect the registration
under the Securities Act of any securities of the Company or any Subsidiaries.


(v)              
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.


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


(x)              
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




    	-15-



    	 



    

their agents or counsel with any
information that it believes constitutes or might constitute material, non-public information. The Company understands and confirms
that the Purchasers will rely on the foregoing representation in effecting transactions in securities of the Company. All of the
disclosure furnished by or on behalf of the Company to the Purchasers regarding the Company and its Subsidiaries, their respective
businesses and the transactions contemplated hereby, including the Disclosure Schedules to this Agreement, is true and correct
and does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the
statements made therein, in light of the circumstances under which they were made, not misleading. The press releases disseminated
by the Company during the twelve months preceding the date of this Agreement taken as a whole do not contain any untrue statement
of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made and when made, not misleading. The Company acknowledges and agrees
that no Purchaser makes or has made any representations or warranties with respect to the transactions contemplated hereby other
than those specifically set forth in Section 3.2 hereof.


(y)              
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.



(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.


(aa)           
Foreign Corrupt Practices. Neither the Company nor any Subsidiary, nor to the knowledge
of the Company or any Subsidiary, any agent or other person acting on behalf of the Company or any Subsidiary, 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 any Subsidiary (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 FCPA.




    	-16-



    	 



    

(bb)          
 Accountants. The Company’s accounting firm is set forth on Schedule 3.1(ee)
of the Disclosure Schedules. To the knowledge and belief of the Company, such accounting firm is a registered public accounting
firm as required by the Exchange Act.


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


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


(ee)           
Intentionally Omitted.


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


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




    	-17-



    	 



    

(hh)          
 Office of Foreign Assets Control. Neither the Company nor any Subsidiary nor, to the
Company's knowledge, any director, officer, agent, employee or affiliate of the Company or any Subsidiary is currently subject
to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”).


(ii)              
U.S. Real Property Holding Corporation. The Company is not and has never been a U.S.
real property holding corporation within the meaning of Section 897 of the Internal Revenue Code of 1986, as amended, and the Company
shall so certify upon Purchaser’s request.


(jj)              
Bank Holding Company Act. Neither the Company nor any of its Subsidiaries or Affiliates
is subject to the Bank Holding Company Act of 1956, as amended (the “BHCA”) and to regulation by the Board of
Governors of the Federal Reserve System (the “Federal Reserve”). Neither the Company nor any of its Subsidiaries
or Affiliates owns or controls, directly or indirectly, five percent (5%) or more of the outstanding shares of any class of voting
securities or twenty-five percent or more of the total equity of a bank or any entity that is subject to the BHCA and to regulation
by the Federal Reserve. Neither the Company nor any of its Subsidiaries or Affiliates exercises a controlling influence over the
management or policies of a bank or any entity that is subject to the BHCA and to regulation by the Federal Reserve.


(kk)          
Money Laundering. The operations of the Company and its Subsidiaries are and have been
conducted at all times in compliance with applicable financial record-keeping and reporting requirements of the Currency and Foreign
Transactions Reporting Act of 1970, as amended, applicable money laundering statutes and applicable rules and regulations thereunder
(collectively, the “Money Laundering Laws”), and no action, suit or proceeding by or before any court or governmental
agency, authority or body or any arbitrator involving the Company or any Subsidiary with respect to the Money Laundering Laws is
pending or, to the knowledge of the Company or any Subsidiary, threatened.


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 (unless
as of a specific date therein):


(a)               
Organization; Authority. Such Purchaser is either an individual or an entity duly incorporated
or formed, validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation with full
right, corporate, partnership, limited liability company or similar 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, partnership, limited liability company or similar action, as applicable,
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




    	-18-



    	 



    

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 in violation of the Securities Act or any
applicable state securities law (this representation and warranty not limiting such Purchaser’s right to sell the Securities
in compliance with applicable federal and state securities laws). Such Purchaser is acquiring the Securities hereunder in the ordinary
course of its business.


(c)               
Purchaser Status. At the time such Purchaser was offered the Securities, it was, and
as of the date hereof it is, and on each date on which it converts any Debentures it will be an “accredited investor”
as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities Act.


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


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


(f)               
Certain Transactions and Confidentiality. 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 as of 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 and ending
immediately prior to the execution hereof. Notwithstanding the foregoing, in the case of




    	-19-



    	 



    

a Purchaser that is a multi-managed
investment vehicle whereby separate portfolio managers manage separate portions of such Purchaser’s assets and the portfolio
managers have no direct knowledge of the investment decisions made by the portfolio managers managing other portions of such Purchaser’s
assets, the representation set forth above shall only apply with respect to the portion of assets managed by the portfolio manager
that made the investment decision to purchase the Securities covered by this Agreement. Other than to other Persons party to this
Agreement, such Purchaser has maintained the confidentiality of all disclosures made to it in connection with this transaction
(including the existence and terms of this transaction). Notwithstanding the foregoing, for avoidance of doubt, nothing contained
herein shall constitute a representation or warranty, or preclude any actions, with respect to the identification of the availability
of, or securing of, available shares to borrow in order to effect Short Sales or similar transactions in the future.


The Company acknowledges and agrees that the
representations contained in Section 3.2 shall not modify, amend or affect such Purchaser’s right to rely on the Company’s
representations and warranties contained in this Agreement or any representations and warranties contained in any other Transaction
Document or any other document or instrument executed and/or delivered in connection with this Agreement or the consummation of
the transaction contemplated hereby.


 


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 and obligations of a Purchaser under
this Agreement. 


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


[NEITHER] THIS SECURITY [NOR THE
SECURITIES INTO WHICH THIS SECURITY IS [CONVERTIBLE] HAS [NOT] BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER




    	-20-



    	 



    

THE SECURITIES ACT OR PURSUANT
TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN
ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE
SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY [AND THE SECURITIES ISSUABLE UPON [CONVERSION]
OF THIS SECURITY] MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH
A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT OR OTHER
LOAN SECURED BY SUCH SECURITIES.


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


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




    	-21-



    	 



    

account of the Purchaser’s
prime broker with the Depository Trust Company System as directed by such Purchaser.


 


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


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


4.3             
Furnishing of Information; Public Information. 


(a)               
If the Common Stock is not registered under Section 12(b) or 12(g) of the Exchange Act on
the date hereof, the Company agrees to cause the Common Stock to be registered under Section 12(g) of the Exchange Act on or before
the 60th calendar day following the date hereof. Until the earliest of the time that no Purchaser owns Securities, the
Company covenants to maintain the registration of the Common Stock under Section 12(b) or 12(g) of the Exchange Act and to timely
file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by
the Company after the date hereof pursuant to the Exchange Act even if the Company is not then subject to the reporting requirements
of the Exchange Act. 


(b) At
any time during the period commencing from the six (6) month anniversary of the date hereof and ending at such time that all of
the Securities may be sold without the requirement for the Company to be in compliance with Rule 144(c)(1) and otherwise without
restriction or limitation pursuant to Rule 144, if the Company shall fail for any reason to satisfy the current public information
requirement under Rule 144(c) (a “Public Information Failure”) then, in addition to such Purchaser’s other
available remedies, the Company shall pay to a Purchaser, in cash, as partial liquidated damages and not as a penalty, by reason
of any such delay in or reduction of its ability to sell the Securities, an amount in cash equal to two percent (2.0%) of the aggregate




    	-22-



    	 



    

Subscription Amount of such Purchaser’s
Securities on the day of a Public Information Failure and on every thirtieth (30th) day (pro rated for periods totaling
less than thirty days) thereafter until the earlier of (a) the date such Public Information Failure is cured and (b) such time
that such public information is no longer required  for the Purchasers to transfer the Underlying Shares pursuant to Rule
144.  The payments to which a Purchaser shall be entitled pursuant to this Section 4.3(b) are referred to herein as “Public
Information Failure Payments.”  Public Information Failure Payments shall be paid on the earlier of (i) the
last day of the calendar month during which such Public Information Failure Payments are incurred and (ii) the third (3rd)
Business Day after the event or failure giving rise to the Public Information Failure Payments is cured.  In the event
the Company fails to make Public Information Failure Payments in a timely manner, such Public Information Failure Payments
shall bear interest at the rate of 1.5% per month (prorated for partial months) until paid in full. Nothing herein shall limit
such Purchaser’s right to pursue actual damages for the Public Information Failure, and such Purchaser shall have the right
to pursue all remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or
injunctive relief.


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


4.5             
Conversion and Exercise Procedures. The form of Notice of Conversion included in the
Debentures sets forth the totality of the procedures required of the Purchasers in order to convert the Debentures. Without limiting
the preceding sentences, no ink-original Notice of Conversion shall be required, nor shall any medallion guarantee (or other type
of guarantee or notarization) of any Notice of Conversion form be required in order to convert the Debenture. No additional legal
opinion, other information or instructions shall be required of the Purchasers to convert their Debentures. The Company shall honor
conversions of the Debentures and shall deliver Underlying Shares in accordance with the terms, conditions and time periods set
forth in the Transaction Documents.


4.6             
Shareholder Rights Plan. No claim will be made or enforced by the Company or, with
the consent of the Company, any other Person, that any Purchaser is an “Acquiring Person” under any control share acquisition,
business combination, poison pill (including any distribution under a rights agreement) or similar anti-takeover plan or arrangement
in effect or hereafter adopted by the Company, or that any Purchaser could be deemed to trigger the provisions of any such plan
or arrangement, by virtue of receiving Securities under the Transaction Documents or under any other agreement between the Company
and the Purchasers.


4.7             
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-




    	-23-



    	 



    

public information, unless prior thereto
such Purchaser shall have entered into a written agreement with the Company 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.


4.8             
Use of Proceeds. The Company shall use the net proceeds hereunder at its sole discretion.



4.9             
Indemnification of Purchasers. Subject to the provisions of this Section 4.9, 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 persons (each, a “Purchaser Party”) harmless from any and all losses, liabilities, obligations,
claims, contingencies, damages, costs and expenses, including all judgments, amounts paid in settlements, court costs and reasonable
attorneys’ fees and costs of investigation that any such Purchaser Party may suffer or incur as a result of or relating to
(a) any breach of any of the representations, warranties, covenants or agreements made by the Company in this Agreement or in the
other Transaction Documents or (b) any action instituted against the Purchaser Parties 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 such Purchaser Party’s
representations, warranties or covenants under the Transaction Documents or any agreements or understandings such Purchaser Party
may have with any such stockholder or any violations by such Purchaser Party of state or federal securities laws or any conduct
by such Purchaser Party which constitutes fraud, gross negligence, willful misconduct or malfeasance). If any action shall be brought
against any Purchaser Party in respect of which indemnity may be sought pursuant to this Agreement, such Purchaser Party shall
promptly notify the Company in writing, and the Company shall have the right to assume the defense thereof with counsel of its
own choosing reasonably acceptable to the Purchaser Party. Any Purchaser Party shall have the right to employ separate counsel
in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of
such Purchaser Party except to the extent that (i) the employment thereof has been specifically authorized by the Company in writing,
(ii) the Company has failed after a reasonable period of time to assume such defense and to employ counsel or (iii) in such action
there is, in the reasonable opinion of counsel, a material conflict on any material issue between the position of the Company and
the position of such Purchaser Party, in which case the Company shall be responsible for the reasonable fees and expenses of no
more than one such separate counsel. The Company will not be liable to any Purchaser Party under this Agreement (y) for any settlement
by a Purchaser Party effected without the Company’s prior written consent, which shall not be unreasonably withheld or delayed;
or (z) to the extent, but only to the extent that a loss, claim, damage or liability is attributable to any Purchaser Party’s
breach of any of the representations, warranties, covenants or agreements made by such Purchaser Party in this Agreement or in
the other Transaction Documents. The indemnification required by this Section 4.9 shall be made by periodic




    	-24-



    	 



    

payments of the amount thereof during
the course of the investigation or defense, as and when bills are received or are incurred. The indemnity agreements contained
herein shall be in addition to any cause of action or similar right of any Purchaser Party against the Company or others and any
liabilities the Company may be subject to pursuant to law.


4.10         
Reservation and Listing of Securities.


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


(b)              
If, on any date, the number of authorized but unissued (and otherwise unreserved) shares of
Common Stock is less than 300% of the Required Minimum on such date, then the Board of Directors shall use commercially reasonable
efforts to amend the Company’s certificate or articles of incorporation to increase the number of authorized but unissued
shares of Common Stock to at least 300% of the Required Minimum at such time, as soon as possible and in any event not later than
the 75th day after such date.


(c)               
The Company shall, if applicable: (i) in the time and manner required by the principal Trading
Market, prepare and file with such Trading Market an additional shares listing application covering a number of shares of Common
Stock at least equal to the Required Minimum on the date of such application, (ii) take all steps necessary to cause such shares
of Common Stock to be approved for listing or quotation on such Trading Market as soon as possible thereafter, (iii) provide to
the Purchasers evidence of such listing or quotation and (iv) maintain the listing or quotation of such Common Stock on any date
at least equal to the Required Minimum on such date on such Trading Market or another Trading Market.


4.11         
Equal Treatment of Purchasers. No consideration (including any modification of any
Transaction Document) shall be offered or paid to any Person to amend or consent to a waiver or modification of any provision of
this Agreement unless the same consideration is also offered to all of the parties to this Agreement. Further, the Company shall
not make any payment of principal or interest on the Debentures in amounts which are disproportionate to the respective principal
amounts outstanding on the Debentures at any applicable time. For clarification purposes, this provision constitutes a separate
right granted to 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.


4.12         
Certain Transactions and Confidentiality. 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, of any of the Company’s securities during the period commencing with the execution of this
Agreement and ending on the date that the Debentures are no longer outstanding (provided that this provision shall not prohibit
any sales made where a corresponding Notice of Conversion is tendered to the Company and the shares received upon such conversion
or exercise are used to close out such sale).  




    	-25-



    	 



    

4.13         
 Right of First Refusal. Commencing on the First Closing and until 30 days thereafter,
the Company shall provide the Purchasers not less than ten (10) Business Days prior written notice of any proposed sale by the
Company for cash of its common stock or other securities or debt obligations, except in connection with an Exempt Issuance. The
Purchasers will have the right during the ten (10) Business Days following receipt of the notice to purchase such offered common
stock, debt or other securities in accordance with the terms and conditions set forth in the notice of sale in the same proportion
to each other as their purchase of Securities hereunder. 


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 First Closing has not been consummated on or before August 31, 2014; provided,
however, that such termination will not affect the right of any party to sue for any breach by any other party (or parties).


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 (including, without limitation, any fees required for same-day processing of any
instruction letter delivered by the Company and any conversion or exercise notice delivered by a Purchaser), stamp taxes and other
taxes and duties levied in connection with the delivery of any Securities to the Purchasers.


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 thereof 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
at or prior to 12:00 p.m. (New York City time) on a Trading Day, (b) the next Trading Day after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile number set forth on the signature pages attached hereto on
a day that is not a Trading Day or later than 12:00 p.m. (New York City time) on any Trading Day, (c) the second (2nd)
Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service or (d) upon actual receipt
by the party to whom such notice is required to be given. The address for such notices and communications shall be as set forth
on the signature pages attached hereto.




    	-26-



    	 



    

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 at least
67% in interest of the Securities 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.


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 New York, without regard to the principles of conflicts of law thereof. Each party agrees that all legal proceedings
concerning the interpretations, enforcement and defense of the transactions contemplated by this Agreement and any other Transaction
Documents (whether brought against a party hereto or its respective affiliates, directors, officers, shareholders, partners, members,
employees or agents) shall be commenced exclusively in the state and federal courts sitting in the City of New York. Each party
hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the City of New York, Borough
of Manhattan for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein (including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives,
and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of
any such court, that such suit, action or proceeding is improper or is an inconvenient venue for such proceeding. Each party hereby
irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing
a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address
in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process
and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner
permitted by law. If either party shall commence an




    	-27-



    	 



    

action, suit or proceeding to enforce
any provisions of the Transaction Documents, then, in addition to the obligations of the Company under Section 4.9, the prevailing
party in such action, suit 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 contained herein shall survive the Closings
and the delivery of the Securities.


5.11         
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 each other party, it being understood that the parties need not sign the same counterpart. In the
event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file,
such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed)
with the same force and effect as if such facsimile or “.pdf” signature page were an original thereof.


5.12         
Severability. If any term, provision, covenant or restriction of this Agreement is
held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or
invalidated, and the parties hereto shall use their commercially reasonable efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is
hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions,
covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.


5.13         
Rescission and Withdrawal Right. Notwithstanding anything to the contrary contained
in (and without limiting any similar provisions of) any of the other Transaction Documents, whenever any Purchaser exercises a
right, election, demand or option under a Transaction Document and the Company does not timely perform its related obligations
within the periods therein provided, then such Purchaser may rescind or withdraw, in its sole discretion from time to time upon
written notice to the Company, any relevant notice, demand or election in whole or in part without prejudice to its future actions
and rights; provided, however, that in the case of a rescission of a conversion of a Debenture, the applicable Purchaser
shall be required to return any shares of Common Stock subject to any such rescinded conversion notice concurrently with the return
to such Purchaser of the aggregate exercise price paid to the Company for such shares.


5.14         
Replacement of Securities. If any certificate or instrument evidencing any Securities
is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon
cancellation thereof (in the case of mutilation), or in lieu of and substitution therefor, a new certificate or instrument, but
only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction. The applicant for a new
certificate or instrument under such circumstances shall also pay any reasonable third-party




    	-28-



    	 



    

costs (including customary indemnity)
associated with the issuance of such replacement Securities.


5.15         
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. 


5.16         
Payment Set Aside. To the extent that the Company makes a payment or payments to any
Purchaser pursuant to any Transaction Document or a Purchaser enforces or exercises its rights thereunder, and such payment or
payments or the proceeds of such enforcement or exercise or any part thereof are subsequently invalidated, declared to be fraudulent
or preferential, set aside, recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the Company,
a trustee, receiver or any other Person under any law (including, without limitation, any bankruptcy law, state or federal law,
common law or equitable cause of action), then to the extent of any such restoration the obligation or part thereof originally
intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement
or setoff had not occurred.


5.17         
Usury. To the extent it may lawfully do so, the Company hereby agrees not to insist
upon or plead or in any manner whatsoever claim, and will resist any and all efforts to be compelled to take the benefit or advantage
of, usury laws wherever enacted, now or at any time hereafter in force, in connection with any claim, action or proceeding that
may be brought by any Purchaser in order to enforce any right or remedy under any Transaction Document. Notwithstanding any provision
to the contrary contained in any Transaction Document, it is expressly agreed and provided that the total liability of the Company
under the Transaction Documents for payments in the nature of interest shall not exceed the maximum lawful rate authorized under
applicable law (the “Maximum Rate”), and, without limiting the foregoing, in no event shall any rate of interest
or default interest, or both of them, when aggregated with any other sums in the nature of interest that the Company may be obligated
to pay under the Transaction Documents exceed such Maximum Rate. It is agreed that if the maximum contract rate of interest allowed
by law and applicable to the Transaction Documents is increased or decreased by statute or any official governmental action subsequent
to the date hereof, the new maximum contract rate of interest allowed by law will be the Maximum Rate applicable to the Transaction
Documents from the effective date thereof forward, unless such application is precluded by applicable law. If under any circumstances
whatsoever, interest in excess of the Maximum Rate is paid by the Company to any Purchaser with respect to indebtedness evidenced
by the Transaction Documents, such excess shall be applied by such Purchaser to the unpaid principal balance of any such indebtedness
or be refunded to the Company, the manner of handling such excess to be at such Purchaser’s election.


5.18         
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




    	-29-



    	 



    

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 hereto or 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 its review and
negotiation of the Transaction Documents. The Company has elected to provide all Purchasers with the same terms and Transaction
Documents for the convenience of the Company and not because it was required or requested to do so by any of the Purchasers.


5.19         
Liquidated Damages. The Company’s obligations to pay any partial liquidated damages
or other amounts owing under the Transaction Documents is a continuing obligation of the Company and shall not terminate until
all unpaid partial liquidated damages and other amounts have been paid notwithstanding the fact that the instrument or security
pursuant to which such partial liquidated damages or other amounts are due and payable shall have been canceled.


5.20         
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.


5.21         
Construction. The parties agree that each of them and/or their respective counsel have
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 thereto. In addition, 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.


5.22         
WAIVER OF JURY TRIAL. IN ANY ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION BROUGHT
BY ANY PARTY AGAINST ANY OTHER PARTY, THE PARTIES EACH KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE
LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY WAIVES FOREVER TRIAL BY JURY. 


 


(Signature Pages
Follow)




    	-30-



    	 



    

 


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.


	
        labor smart, inc.

         

         
	Address for Notice:
	
        By: /s Ryan Schadel

        Name: Ryan Schadel

        Title: CEO

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

         

        Gregory Sichenzia, Esq.

        Sichenzia Ross Friedman Ference LLP

        61 Broadway, 32nd Floor

        New York, NY 10006

        Fax: 212-930-9725
	Fax: 770-222-5550
	
         

         

         
	 


 


[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK


SIGNATURE PAGE FOR PURCHASER FOLLOWS]




    	-31-



    	 



    

[PURCHASER
SIGNATURE PAGES TO LABOR SMART, Inc. 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: Redwood Fund III, Ltd.


Signature of Authorized Signatory of
Purchaser: /s/ John DeNobile


Name of Authorized Signatory: John DeNobile


Title of Authorized Signatory: Manager


Email Address of Authorized Signatory:
_____________________________________________


Facsimile Number of Authorized Signatory: __________________________________________


Address for Notice to Purchaser:


 


 


Address for Delivery of Securities to Purchaser (if not same as
address for notice):


 


 


First Closing Subscription Amount: $250,000


 


First Closing Principal Amount: $262,500


 


Second Closing Subscription Amount: $0


 


Second Closing Principal Amount: $0


 


Third Closing Subscription Amount: $0


 


Third Closing Principal Amount: $0


 


Fourth Closing Subscription Amount: $0


 


Fourth Closing Principal Amount: $0


 


Fifth Closing Subscription Amount: $0


 


Fifth Closing Principal Amount: $0


 


Sixth Closing Subscription Amount: $0




    	-32-



    	 



    

 


Sixth Closing Principal Amount: $0


 


Seventh Closing Subscription Amount: $0


 


Seventh Closing Principal Amount: $0


 


EIN Number: _______________________


 


[SIGNATURE PAGES CONTINUE]


 




    	-33-



    	 



    

[PURCHASER
SIGNATURE PAGES TO LABOR SMART, Inc. 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: Redwood Management,
LLC


Signature of Authorized Signatory of
Purchaser: /s/ John DeNobile


Name of Authorized Signatory: John DeNobile


Title of Authorized Signatory: Manager


Email Address of Authorized Signatory:
_____________________________________________


Facsimile Number of Authorized Signatory: __________________________________________


Address for Notice to Purchaser:


 


 


Address for Delivery of Securities to Purchaser (if not same as
address for notice):


 


 


First Closing Subscription Amount: $100,000


 


First Closing Principal Amount: $105,000


 


Second Closing Subscription Amount: $0


 


Second Closing Principal Amount: $0


 


Third Closing Subscription Amount: $0


 


Third Closing Principal Amount: $0


 


Fourth Closing Subscription Amount: $0


 


Fourth Closing Principal Amount: $0


 


Fifth Closing Subscription Amount: $0


 


Fifth Closing Principal Amount: $0


 


Sixth Closing Subscription Amount: $0




    	-34-



    	 



    

 


Sixth Closing Principal Amount: $0


 


Seventh Closing Subscription Amount: $0


 


Seventh Closing Principal Amount: $0


 


EIN Number: _______________________


 


[SIGNATURE PAGES CONTINUE]




    	-35-



    	 



    

[PURCHASER
SIGNATURE PAGES TO LABOR SMART, Inc. 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: RDW Capital, LLC


Signature of Authorized Signatory of
Purchaser: /s/ John DeNobile


Name of Authorized Signatory: John DeNobile


Title of Authorized Signatory: Manager


Email Address of Authorized Signatory:
_____________________________________________


Facsimile Number of Authorized Signatory: __________________________________________


Address for Notice to Purchaser:


 


 


Address for Delivery of Securities to Purchaser (if not same as
address for notice):


 


 


First Closing Subscription Amount: $0


 


First Closing Principal Amount: $0


 


Second Closing Subscription Amount: $125,000


 


Second Closing Principal Amount: $131,250


 


Third Closing Subscription Amount: $125,000


 


Third Closing Principal Amount: $131,250


 


Fourth Closing Subscription Amount: $125,000


 


Fourth Closing Principal Amount: $131,250


 


Fifth Closing Subscription Amount: $125,000


 


Fifth Closing Principal Amount: $131,250


 


Sixth Closing Subscription Amount: $125,000




    	-36-



    	 



    

 


Sixth Closing Principal Amount: $131,250


 


Seventh Closing Subscription Amount: $125,000


 


Seventh Closing Principal Amount: $131,250


 


EIN Number: _______________________




    	-37-



    	 



    

Annex A 


 


CLOSING STATEMENT


 


Pursuant to the attached Securities Purchase
Agreement, dated as of the date hereto, the purchasers shall purchase Debentures from Labor Smart, Inc. (the “Company”).
All funds will be disbursed in accordance with this Closing Statement.


 


Disbursement
Date:August 18, 2014


 


 


	
        I. PURCHASE PRICE

         
	 
	 	Gross Proceeds to be Received 	$
	 	 
	
        II.DISBURSEMENTS

         
	 
	 	 
	Total Amount Disbursed:	$
	 	 
	 	 
	 	 
	
        WIRE INSTRUCTIONS:

         

         

         

         

         
	 
	 	 
	
         

         

        Duly executed this 18th day of August, 2014:

         

        Labor Smart, Inc.

         

        By: ___________________

        Name:

        Title:

         
	 
	 	 	 


 




    	-38-



    	 



    

Exhibit A


 


(See Exhibit 10.2)


 




    	-39-



    	 



    

Exhibit B


 


LABOR
SMART, inc.


5604
Wendy Bagwell Parkway, Suite 223


Hiram,
Ga 30141


 


 


 


 


 


 


August 18, 2014


West Coast Stock Transfer, Inc.

721 N. Vulcan Ave. Ste. 205

Encinitas, CA 92024


 


 


Ladies
and Gentlemen:


 


Labor Smart, Inc. a Nevada corporation
(the "Company")
has entered into a securities purchase agreement, dated August 18, 2014 (the “Purchase Agreement”), with the purchasers
named therein (the “Purchasers”) providing
for the
issuance
of Original Issue Discount Convertible
Debentures in the
aggregate principal
amount of $1,155,000
(the “Debentures”).


 


A copy
of the Purchase
Agreement is attached
hereto.
You should familiarize
yourself
with your
issuance
and delivery
obligations,
as Transfer
Agent, contained
therein.
The shares
to be issued
are to
be registered
in the names
of the registered
holder of
the securities
submitted for
conversion or
exercise.


 


You, as the Company’s transfer agent (the “Transfer
Agent”) are hereby irrevocable authorized and instructed to reserve a sufficient number of shares of common stock ("Common
Stock") of the Company (initially, 25,641,000) for issuance upon full conversion of the Debentures in accordance with terms
thereof. The amount of Common Stock so reserved shall automatically replenish after each conversion and shall remain reserved throughout
the duration of the Debentures until satisfied. This means that all conversions will be out of authorized shares, and not reserve
shares. Once the authorized shares cannot accommodate the notice of conversion, then the Transfer Agent shall issue from the reserved
shares. In addition the Transfer Agent must provide any Purchasers any necessary information regarding the Company’s outstanding,
authorized and float from time to time as requested by such Purchaser.


 


The
ability
to convert
the Debentures
in a timely
manner
is a material
obligation of
the Company
pursuant
to the
Debentures.  Your firm
is hereby
irrevocably
authorized
and instructed
to issue shares
of Common
Stock of
the Company
(without any
restrictive
legend)
to the Purchasers without any
further
action or confirmation
by the Company:
(A) upon your receipt
from any Purchaser
of: (i)
a notice
of conversion
("Conversion
Notice")
executed
by the
Purchaser; and
(ii) an
opinion of counsel
of the Purchaser,
in form,
substance
and scope
customary
for opinions
of counsel in comparable
transactions
(and satisfactory
to the transfer
agent),
to the effect that the
shares of
Common
Stock of the
Company issued to the Purchaser




    	-40-



    	 



    

pursuant to the
Conversion Notice may be resold under Rule 144 under the Securities Act of 1933, as
amended, and
should
be issued
to the
Purchaser without
any
restrictive
legend;
and
(B)
the
number
of shares
to be
issued
is less
than
4.99% of the
total
issued
common stock
of the
Company.


 


The
Company
hereby
requests
that your
firm
act immediately,
without delay
and without the
need for
any
action or
confirmation
by the
Company
with respect
to the issuance
of Common Stock
pursuant to any
Conversion
Notices received
from any
Purchaser.


 


The Purchasers and the Company
understands that the Transfer Agent shall not be required to perform any issuances or transfers of shares if (a) the Company or
request violates, or be in violation of, any terms of this Transfer Agent Agreement, (b) such an issuance or transfer of shares
be in violation of any state or federal securities laws or regulation or (c) the issuance or transfer of shares be prohibited or
stopped as required or directed by a court order.


 


The
Company
shall indemnify
you and
your officers,
directors,
principals,
partners, agents
and representatives,
and hold
each of
them harmless
from and
against
any
and all
loss, liability,
damage,
claim
or expense
(including
the reasonable
fees
and disbursements
of its attorneys)
incurred
by or asserted
against
you or any
of them arising
out of or in connection
with the instructions set
forth
herein, the performance
of your duties
hereunder
and otherwise
in respect hereof,
including the costs and
expenses
of defending yourself
or themselves
against any
claim
or liability
hereunder,
except
that the Company
shall not be liable hereunder
as to matters
in respect
of which
it is determined
that you
have acted
with gross
negligence
or in bad
faith.  You
shall have
no liability
to the Company
in respect
to any
action
taken or
any failure
to act in respect
of this if such action was
taken or omitted
to be taken in good faith,
and you
shall be
entitled to rely
in this regard
on the advice
of counsel.


 


The
Board
of Directors
of the Company
has approved
the foregoing
irrevocable
instructions
and does
hereby
extend
the Company’s
irrevocable
agreement
to indemnify
your firm
 for 
all  loss, 
liability
or  expense
 in  carrying
out  the 
authority
and 
direction  herein
contained
on the terms herein
set forth.


 


The 
Company 
agrees
 that 
in  the  event
 that 
the  Transfer
 Agent
 resigns
 as 
the Company’s
 transfer
agent,
the Company
shall engage
a suitable
replacement
transfer
agent
that will
agree
to serve
as  transfer
agent
for the
Company
and be
bound by
the terms
and conditions of
these Irrevocable
Instructions
within three (3) business
days. The Company agrees that the Transfer Agent shall not be required to perform
any issuances or transfers of shares as of the date of the termination of the Transfer Agent Agreement.


 


The
Purchasers are  intended
 to  be 
and  are
 third 
party 
beneficiaries
 hereof,
 and 
no amendment
or  modification
to the instructions
set
forth
herein may
be made
without the consent
of the Purchasers.


 


 


 


 




    	-41-



    	 



    

 


 


Very
truly yours,


 


Labor Smart, Inc.


 


 


 


By:



Name:



Title:


 


 


Acknowledged
and Agreed:


 


 


 


West Coast Stock Transfer, Inc.


 


 


 


By:



Name:


Title:


 




    	-42-



    	 



    

Exhibit C


 


August 18, 2014


 


 


 


To the Purchasers on Schedule A


 


 


Ladies and Gentlemen:


 


We are counsel to Labor
Smart, Inc., a Nevada corporation (the “Company”). We are furnishing this opinion to you pursuant to Section
2.3 of the securities purchase agreement dated on or about August 18, 2014 (the “Securities Purchase Agreement”),
by and between the Company and the Purchasers set forth on the signatures thereto, relating to the offer and sale by the Company
(the “Offering”) of up to $1,155,000 in Principal Amount (corresponding to $1,100,000 in Subscription Amount)
of its original issue discount convertible debentures (the “Debentures”) and 100,000 shares of common stock
(the “Additional Consideration Shares”). The Securities Purchase Agreement and Debentures are referred to herein
as the “Transaction Documents”. Terms not otherwise defined herein shall have the meanings ascribed to them
in the Securities Purchase Agreement.


 


We have reviewed
such documents and made such examination of law as we have deemed appropriate to give the opinions set forth below. We have relied,
without independent verification, on certificates of public officials and, as to matters of fact material to our opinions, on representations
made in the Transaction Documents and certificates and other inquiries of officers of the Company.


 


Whenever a statement herein
is qualified by "to our knowledge" or similar phrase, it means that, during the course of our representation of the Company
for the purposes of this opinion letter, (1) no information that would give those lawyers who participated in the preparation of
the letter or who have been actively involved in negotiating or preparing the Transaction Documents (collectively, the "Opinion
Letter Participants") current actual knowledge of the inaccuracy of such statement has come to their attention; (2) we have
not undertaken any independent investigation or inquiry to determine the accuracy of such statement; (3) any limited investigation
or inquiry otherwise undertaken by the Opinion Letter Participants during the preparation of this opinion letter should not be
regarded as such an investigation or inquiry; and (4) no inference as to our knowledge of any matters bearing on the accuracy of
any such statement should be drawn from the fact of our representation of the Company. We also call to your attention to the fact
that we are not general counsel to the Company and we are not familiar with all aspects of the Company’s business affairs.
We have not conducted an independent audit of the Company or its files.


 


The validity,
binding effect and enforceability of Transaction Documents may be limited or otherwise affected by (a) bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or other similar statutes, rules, regulations or other laws affecting the enforcement




    	-43-



    	 



    

of creditors’ rights and remedies
generally and (b) the unavailability of, or limitation on the availability of, a particular right or remedy (whether in a proceeding
in equity or at law) because of an equitable principle or a requirement as to commercial reasonableness, conscionability or good
faith. In addition, certain remedies, waivers and other provisions contained in the Transaction Documents might not be enforceable;
nevertheless, such unenforceability will not render such agreements invalid as a whole or preclude the practical realization of
the benefits to the parties thereunder. We express no opinions as to the application of the laws of usury to the Transaction Documents.


 


We are members
of the bar of the State of New York. We express no opinion as to the laws of any jurisdiction other than the laws of the State
of New York, the corporate laws of the State of Nevada and the federal laws of the United States of America. We express no opinion
with respect to the effect or application of any other laws. Special rulings of authorities administering any of such laws or opinions
of other counsel have not been sought or obtained by us in connection with rendering the opinions expressed herein.


 


With respect
to the opinions expressed in paragraph 1 of this opinion relating to valid existence and good standing, we have relied, without
any further examination, solely upon the information with respect to the good standing of the Company, based on a Certificate of
Good Standing or similar instrument issued by the Secretary of State or similar office in the state where the Company is incorporated.


 


Based upon and subject
to the foregoing and subject to the additional qualifications set forth below, we are of the opinion that:


 


1.The Company is a corporation validly existing in
good standing under Nevada law.


2.The Company has the corporate power
to execute and deliver, and to perform its obligations under the Transaction Documents. The Transaction Documents have been duly
authorized by all necessary corporate action on the part of the Company, and have been duly executed and delivered by the Company.


 


3.The Transaction Documents are valid
and binding obligations of the Company enforceable against the Company in accordance with their terms.


 


4.The execution, delivery and performance
of the Transaction Documents by the Company and the issuance of the Debentures and the Additional Consideration Shares do not:
(a) violate Nevada corporate law; or (b) violate the Company's Articles of Incorporation or bylaws.


 


5.The Debentures and Additional Consideration
Shares have been duly authorized by the Company for issuance and sale pursuant to the Securities Purchase Agreement, and when issued
and delivered by the Company pursuant to the Securities Purchase Agreement for the consideration described therein, will be duly
and validly issued, fully paid and nonassessable.


 




    	-44-



    	 



    

6.Based in part upon the representations
and warranties of the Purchasers in the Securities Purchase Agreement, the offer and sale and issuance of the Debentures and the
Additional Consideration Shares by the Company to the Purchasers pursuant to the terms of the Securities Purchase Agreement do
not require registration under Section 5 of the Securities Act.


 


 


In rendering
the opinions set forth in this opinion letter, we assume the following:


 


(a)the legal
capacity of each natural person;


 


(b)the legal
existence of all parties to the transactions referred to in the Transaction Documents excluding the Company;


 


(c)the power
and authority of each person other than the Company or person(s) acting on behalf of the Company to execute, deliver and perform
each document executed and delivered and to do each other act done or to be done by such person;


 


(d)the authorization,
execution and delivery by each person other than the Company or person(s) acting on behalf of the Company of each document executed
and delivered or to be executed and delivered by such person;


 


(e)the legality,
validity, binding effect and enforceability as to each person other than the Company or person(s) acting on behalf of the Company
of each document executed and delivered or to be executed or delivered and of each other act done or to be done by such person;


 


(f)the transactions
referred to in the Transaction Documents have been consummated;


 


(g)the payment
of all the required documentary stamps taxes and fees imposed upon the execution, filing or recording of the Transaction Documents;


 


(h)that there
have been no undisclosed modifications of any provision of any document reviewed by us in connection with the rendering of the
opinions set forth in this opinion letter and no undisclosed prior waiver of any right or remedy contained in the Transaction Documents;


 


(i)the genuineness
of each signature (other than the signatures of the officers of the Company), the completeness of each document submitted to us,
the authenticity of each document reviewed by us as an original, the conformity to the original of each document reviewed by us
as a copy and the authenticity of the original of each document received by us as a copy;


 


(j)the truthfulness
of each statement as to all factual matters otherwise not known to us to be untruthful contained in any document encompassed within
the due diligence review undertaken by us;


 




    	-45-



    	 



    

(k)the accuracy
on the date of this letter as well as on the date stated in all governmental certifications of each statement as to each factual
matter contained in such governmental certifications;


 


(l)that the
addressee has acted in good faith, without notice of adverse claims, and has complied with all laws applicable to it that affect
the transactions referred to in the Transaction Documents;


 


(m)that the
transactions referred to in the Transaction Documents comply with all tests of good faith, fairness and conscionability required
by law;


 


(n)that routine
procedural matters such as service of process or qualification to do business in the relevant jurisdictions will be satisfied by
the parties seeking to enforce the Transaction Documents;


 


(o)that all
statutes, judicial and administrative decisions, and rules and regulations of governmental agencies constituting the law for which
we are assuming responsibility are published (e.g., reported court decisions and the specialized reporting services of BNA, CCH
and Prentice-Hall) or otherwise generally accessible (e.g., LEXIS or WESTLAW) in each case in a manner generally available (i.e.,
in terms of access and distribution following publication) to lawyers practicing in our judicial circuit;


 


(p)that other
agreements related to the transactions referred to in the Transaction Documents will be enforced as written;


 


(q)that no
action, discretionary or otherwise, will be taken by or on behalf of the Company in the future that might result in a violation
of law;


 


(r)that there
are no other agreements or understandings among the parties that would modify the terms of the Transaction Documents or the respective
rights or obligations of the parties to the Transaction Documents;


 


(s)that with
respect to the Transaction Documents and to the transactions referred to therein, there has been no mutual mistake of fact and
there exists no fraud or duress; and


 


(t)the constitutionality
and validity of all relevant laws, regulations and agency actions unless a reported case has otherwise held or widespread concern
has been expressed by commentators as reflected in materials which lawyers routinely consult.


 


This opinion is
furnished to you solely for your benefit and only in connection with the transactions contemplated by the Transaction Documents.
This opinion is not to be used, disclosed, relied upon or otherwise referred to for any other purpose without our prior written
consent, except that you may show a copy of this opinion (i) to your independent auditors and attorneys, (ii) in connection with
a review of the Transaction Documents and transactions related thereto by a regulatory agency having supervisory authority over
you, the Company or any of the transactions referenced in this opinion letter for the purpose of confirming the existence of this




    	-46-



    	 



    

opinion to such regulatory authority,
(iii) in response to a court order or administrative other appropriate legal process the failure to comply with which would result
in court or administrative sanction or penalty, and (iv) in connection with the assertion of a defense as to which this opinion
is relevant and necessary.


 


 


Very truly yours,


 


 


 


Sichenzia Ross Friedman Ference LLP 


 


Schedule A


 


Redwood Fund III, Ltd.


Redwood Management, LLC


RDW Capital, LLC




    	-47-



    	 



    

Exhibit D—Optional Amortization Schedules for Subsequent Tranches


 


Tranche 2


 


	Amortization Payments	Cash (30% Premium)	Common Stock
	First Payment (March 18, 2015)	$142,187.50	$109,375
	Second Payment (April 1, 2015)	$28,437.50	$21,875


 


 


Tranche 3


 


	Amortization Payments	Cash (30% Premium)	Common Stock
	First Payment (April 18, 2015)	$142,187.50	$109,375
	Second Payment (May 1, 2015)	$28,437.50	$21,875


 


Tranche 4


 


	Amortization Payments	Cash (30% Premium)	Common Stock
	First Payment (May 18, 2015)	$142,187.50	$109,375
	Second Payment (June 1, 2015)	$28,437.50	$21,875


 


Tranche 5


 


	Amortization Payments	Cash (30% Premium)	Common Stock
	First Payment (June 18, 2015)	$142,187.50	$109,375
	Second Payment (July 1, 2015)	$28,437.50	$21,875


 


Tranche 6




    	-48-



    	 



    

 


	Amortization Payments	Cash (30% Premium)	Common Stock
	First Payment (July 18, 2015)	$142,187.50	$109,375
	Second Payment (August 1, 2015)	$28,437.50	$21,875


 


Tranche 7


 


	Amortization Payments	Cash (30% Premium)	Common Stock
	First Payment (August 18, 2015)	$142,187.50	$109,375
	Second Payment (September 1, 2015)	$28,437.50	$21,875


 




    	-49-



    	 



    

Disclosure Schedules


 


Schedule 3.1(a) Subsidiaries


 


None.


 


Schedule 3.1(g) Capitalization


 


Authorized:


 


150,000,000 shares of common stock, par value $0.001


5,000,000 shares of preferred stock, par value $0.001


 


Outstanding:


 


Number of shares of common stock outstanding: 27,291,292


 


Securities convertible or exercisable into common stock outstanding:
as set forth in the Company’s 10-Q for the period ended June 27, 2014 filed with the SEC on August 11, 2014.


 


Shares of common stock beneficially owned by affiliates:


 


Ryan Schadel:


 


15,164,800 shares of common stock (including 50,000 shares held
by spouse)


 


210,000 options to purchase common stock held by spouse


 


Matthew Rodgers:


 


100,000 options to purchase common stock


 


Shares issued since last periodic report:


 


None.


 


Schedule 3.1(i) Material Changes


 


None.


 


Schedule 3.1(n) Title to Assets


 


Transfac Capital Inc. has a lien on the Company’s accounts
receivable pursuant to a factoring line of credit.


 


IRS has a subordinated lien on the Company’s accounts receivable
to secure payroll taxes owed.


 


Schedule 3.1(r) Brokerage or Finder’s Fees or Commissions


 


The Company will pay a finder’s fee equal to 6% of the gross
proceeds.


 




    	-50-



    	 



    

Schedule 3.1(ee) Accounting Firm


 


De Joya Griffith, LLC


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 






    	-51-