World Moto, Inc. - Exhibit 10.1 - Filed by newsfilecorp.com






SECURITIES PURCHASE AGREEMENT 

            This
Securities Purchase Agreement (this “Agreement”) is dated as of March 5,
2015, between World Moto, Inc., a Nevada corporation (the “Company”) and
Redwood Management, LLC (the “Purchaser”) 

            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 the Purchaser, and the Purchaser 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 the 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 4.7. 

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

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

1




            “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 shares of the Company, par value $0.0001 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 Greenberg Traurig, LLP, with offices located at 1201 K Street
Suite 1100, Sacramento CA 95814. 

            “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 up to $500,000 of the 12% Senior Secured Convertible Debentures due,
subject to the terms therein, twelve months from their date of issuance, issued
by the Company to the Purchaser hereunder, in the form of Exhibit A
attached hereto. 

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

            “Effective
Date” means the earliest of the date that (a) the initial Registration
Statement has been declared effective by the Commission, (b) all of the
Registrable Securities have been sold pursuant to Rule 144 or may be sold
pursuant to Rule 144 without the requirement of the Company to be in compliance
with current public information required under Rule 144 and without volume or
manner of sale restrictions, or (c) following the one year anniversary of the
Closing Date, provided that a holder of Registrable Securities is not an
Affiliate of the Company, all of the Registrable Securities may be sold pursuant
to an exemption from registration under Section 4(1) of the Securities Act
without volume or manner-of-sale restrictions and Company counsel has delivered
to such holders a standing written unqualified opinion that resales may then be
made by such holders of the Registrable Securities pursuant to such exemption
which opinion shall be in form and substance reasonably acceptable to such
holders. “Evaluation Date” shall have the meaning ascribed to such term
in Section 3.1(r) .

            “Equity
Linked Offering” shall have the meaning set forth in Section 4.15. 

2




            “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, directors or consultants of the Company pursuant to any
equity incentive plan or compensation arrangement duly adopted for such purpose,
by a majority of the non-employee members of the Board of Directors or a
majority of the members of a committee of non-employee directors established for
such purpose, (b) shares issued pursuant to any 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, (c) securities
upon the exercise or exchange of or conversion of any Securities issued
hereunder and/or other securities exercisable or exchangeable for or convertible
into shares of Common Stock issued and outstanding on the date of this
Agreement, provided that such securities have not been amended since the date of
this Agreement to increase the number of such securities or to decrease the
exercise price, exchange price or conversion price of such securities, (d)
securities the issuance of which has been approved by the holders of majority in
interest of the aggregate principal amount of the then outstanding Debentures,
(e) securities issued pursuant to acquisitions or strategic transactions
approved by a majority of the disinterested directors of the Company, provided
that any such issuance shall only be to a Person (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 

            “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) . 

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

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

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

            “Liens”
means a lien, charge, 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. 

3




            
“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. 

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

            “Registration
Rights Agreement” means the Registration Rights Agreement, dated the date
hereof, among the Company and the Purchaser, in the form of Exhibit B attached
hereto. 

            “Registration
Statement” means a registration statement meeting the requirements set forth
in the Registration Rights Agreement and covering the resale of the Underlying
Shares (subject to reduction as required by the Commission pursuant to Rule 415
or otherwise) by the Purchaser as provided for in the Registration Rights
Agreement. 

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


            “Required
Minimum” shall have the meaning ascribed to such term in the Debentures.


            “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. 

            “Rule
424” means Rule 424 promulgated by the Commission pursuant to the Securities
Act, as such Rule may be amended or interpreted from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same purpose and effect as such Rule. 

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


            “Securities”
means the Debentures and the Underlying Shares.

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

            “Security
Agreement” means the Security Agreement, dated the date hereof, among the
Company and the Purchaser, in the form of Exhibit C attached hereto. 

            
“Short Sales” means all “short sales” as defined in Rule 200 of
Regulation SHO under the Exchange Act (but shall not be deemed to include any
sale of Securities pursuant to Rule 144).

            “Subscription
Amount” means, as to each Closing, the aggregate amount to be paid for
Debentures purchased hereunder as specified below the 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. 

4




            “Subsidiary”
means any subsidiary of the Company as set forth in the SEC Reports 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 or the OTC Bulletin Board (or any successors
to any of the foregoing, including the OTC QB). 

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

            “Transaction
Offer” shall have the meaning set forth in Section 4.15. 

            “Transfer
Agent” means Empire Stock Transfer, Inc., the current transfer agent of the
Company, with a mailing address of 1859 Whitney Mesa Dr., Henderson, NV 89014
and a facsimile number of (702) 974-1444, and any successor transfer agent of
the Company. 

            “Underlying
Shares” means the shares of Common Stock issued or issuable in connection
with the 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 other than the OTC Bulletin Board, 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 4:00 p.m. (New York City time)), (b) if the OTC Bulletin Board is the
Trading Market, the volume weighted average price of the Common Stock for such
date (or the nearest preceding date) on the OTC Bulletin Board, (c) if the
Common Stock is not then listed or quoted for trading on a Trading Market and if
prices for the Common Stock are then reported in the “Pink Sheets” published by
Pink OTC Markets, Inc. (or a similar organization or agency succeeding to its
functions of reporting prices), the most recent bid price per share of the
Common Stock so reported, or (d) 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 holders of a majority in interest of the aggregate principal amount
of the then outstanding Debentures and reasonably acceptable to the Company, the
fees and expenses of which shall be paid by the Company. 

5




ARTICLE II. 
PURCHASE AND SALE 


            2.1       
Closing. (a) First Closing. Subject to the satisfaction of the
conditions to closing set forth herein, the purchase and sale of Debentures, in
the amounts and to the Purchaser of $50,000 ($54,348) face amount, inclusive of
8% original issue discount (8% OID”)), listed under the heading “First Closing”
on Schedule A attached hereto shall take place at the offices of counsel
to the Purchaser at 61 Broadway, New York, NY 10006 or such other location as
the parties shall mutually agree, at 10:00 A.M., Eastern Standard Time, on March
_, 2015, or at such other time and place as the Company and the Purchaser
mutually agree upon orally or in writing (which time and place are designated as
the “First Closing”). The Purchaser shall deliver to the Company, via
wire transfer with immediately available funds to the designated account set
forth on Annex A an amount equal to the Subscription Amount applicable to the
First Closing as set forth on the signature page hereto executed by the
Purchaser participating in the First Closing, and the Company shall deliver to
the Purchaser its Debenture, as determined pursuant to Section 2.2, and the
Company and Purchaser shall deliver the other items set forth in Section 2.2
deliverable at the First Closing. 

            (b)
Subject to the satisfaction of the conditions to closing set forth herein,
within three business days after the effective date of the Registration
Statement, the Company shall sell, and the Purchaser shall purchase an
additional $450,000 ($489,130 face amount, inclusive of 8% OID) of Debentures on
the terms and conditions contained herein such that the aggregate principal
amount of Debentures sold pursuant to the terms of this Agreement shall equal
$500,000, the date on which the transactions contemplated in this Section 1.3
shall be consummated shall be designated as “Subsequent Closing” and
together with the First Closing, the “Closings”). Upon completion of any
Subsequent Closing, the Company shall amend Schedule A, without
any further consents required, to reflect the purchase and sale of Securities at
such Subsequent Closing.

            2.2        Deliveries.


	 	(a) 	
      On or prior to any Closing Date pursuant to Section 2.1,
      the Company shall deliver or cause to be delivered to the Purchaser this
      Agreement, the Security Agreement and the Registration Rights Agreement
      duly executed by the Company. In addition, on or prior to each Closing
      Date held pursuant to Section 2.1, the Company shall deliver or cause to
      be delivered to the Purchaser the following:



            (i)        a
legal opinion of Company Counsel, substantially in the form of Exhibit D
attached hereto; 

            (ii)       
a Debenture with a principal amount equal to the relevant Subscription Amount,
adjusted for the 8% OID, registered in the name of the Purchaser; and 

            (iii)       
an irrevocable letter of instructions to the Company’s Transfer Agent in
substantially the form of Exhibit E attached hereto. 

6





	 	(b) 	
      On or prior to any Closing Date pursuant to Section 2.1,
      the Purchaser shall deliver or cause to be delivered to the Company this
      Agreement and the Registration Rights Agreement duly executed by the
      Purchaser. In addition, on or prior to each Closing Date held pursuant to
      Section 2.1, the Purchaser shall deliver or cause to be delivered to the
      Company, the Purchaser’s relevant Subscription Amount by wire transfer to
      the account specified in Annex A.



            2.3       
Closing Conditions. 

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

            (i)       
the accuracy in all material respects on the applicable Closing Date of the
representations and warranties of the Purchaser 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 the Purchaser required to be performed
at or prior to an applicable Closing Date shall have been performed; 

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

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

            (i)        the
accuracy in all material respects when made and on the 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 2.2(a) of this
Agreement; 

            
(iv)        as of the relevant Closing
Date, trading in the Common Stock shall not have been suspended by the
Commission or any Trading Market;

            (v)       
the Company shall be current in it reporting obligations under the Exchange Act;
and (vi) for the avoidance of doubt and notwithstanding anything to the contrary
herein, the obligations of the Purchaser to consummate the Subsequent Closing
and purchase an additional $450,000 ($489,130 face amount, inclusive of 8% OID)
of Debentures is subject to the Company’s having sent the Company’s transfer
agent an irrevocable letter in form and substance that is satisfactory to the
Purchaser reserving from the Company’s authorized and unissued Common Stock, solely for the purpose of effecting the
conversion of the additional $450,000 ($489,130 face amount, inclusive of 8%
OID) of Debentures to be issued on the Subsequent Closing in accordance with the
following formula:

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Required Minimum = (OA/CP) x 3

OA = the outstanding principal amount
of this Debenture, plus 100% of accrued and unpaid interest hereon, plus the
applicable Interest Make-Whole Amount on such date of determination; 

CP = the applicable Conversion Price
on such date of determination. 

ARTICLE III. 
REPRESENTATIONS AND WARRANTIES



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

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

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

8




            (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
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. Other than as set forth on Schedule 3.1(e),
the Company is not required to obtain any consent, waiver, authorization or
order of, give any notice to, or make any filing or registration with, any court
or other federal, state, local or other governmental authority or other Person
in connection with the execution, delivery and performance by the Company of the
Transaction Documents, other than: (i) the filings required pursuant to Section
4.6 of this Agreement, (ii) the filing with the Commission pursuant to the Registration Rights Agreement, (iii) the notice and/or
application(s) to each applicable Trading Market for the issuance and sale of
the Securities and the listing of the Conversion Shares for trading thereon in
the time and manner required thereby, if applicable, and (iv) the filing of Form
D with the Commission and such filings as are required to be made under
applicable state securities laws (collectively, the “Required
Approvals”). 

9




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

            (g)       
Capitalization. The capitalization of the Company is as set forth on
Schedule 3.1(g). No Person has any right of first refusal,
preemptive right, right of participation, or any similar right to participate in
the transactions contemplated by the Transaction Documents. Except as set forth
in the SEC Reports (as defined below) and as a result of the purchase and sale
of the Securities, there are no outstanding options, warrants, scrip rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities, rights or obligations convertible into or exercisable or
exchangeable for, or giving any Person any right to subscribe for or acquire any
shares of Common Stock, or contracts, commitments, understandings or
arrangements by which the Company or any Subsidiary is or may become bound to
issue additional shares of Common Stock or Common Stock Equivalents. The
issuance and sale of the Securities will not obligate the Company to issue
shares of Common Stock or other securities to any Person (other than the
Purchaser) 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. 

            (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) of the Exchange Act, for the two years preceding the date
hereof (or such shorter period as the Company was required by law or regulation
to file such material) (the foregoing materials, including the exhibits thereto
and documents incorporated by reference therein, being collectively referred to
herein as the “SEC Reports”) on a timely basis or has received a valid
extension of such time of filing and has filed any such SEC
Reports prior to the expiration of any such extension. As of their respective
dates, the SEC Reports complied in all material respects with the requirements
of the Securities Act and the Exchange Act, as applicable, and none of the SEC
Reports, when filed, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading. The 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.

10




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

            (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. Except as set forth on Schedule 3.1(j), 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.

11




            (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, 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.

12




            (n)        Title
to Assets. Except as set forth on Schedule 3.1(n), 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)       
Insurance. Except as set forth on Schedule 3.1(p), the Company and
the Subsidiaries are insured by insurers of recognized financial responsibility
against such losses and risks and in such amounts as are prudent and customary
in the businesses in which the Company and the Subsidiaries are engaged,
including, but not limited to, directors and officers insurance coverage at
least equal to the aggregate Subscription Amount. Neither the Company nor any
Subsidiary has any reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business without a significant increase in cost.

            (q)        Transactions
With Affiliates and Employees. Except as set forth in the SEC Reports, none
of the officers or directors of the Company or any Subsidiary and, to the
knowledge of the Company, none of the employees of the Company or any Subsidiary
is presently a party to any transaction with the Company or any
Subsidiary (other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from 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. 

13




            (r)        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 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.

            (s)       
Certain Fees. With the exception of the commission payable to Aegis
Capital Corp., in its capacity as placement agent in connection with the
transactions contemplated by this Agreement, 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 Documents. The Purchaser 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. 

14




          (t)       
Private Placement. Assuming the accuracy of the Purchaser’s
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 Purchaser as contemplated hereby. The issuance and sale of the
Securities hereunder does not contravene the rules and regulations of the
Trading Market. 

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

            (v)       
Registration Rights. Except as set forth on Schedule 3.1(v), and
the transactions contemplated by the Transaction Documents, 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. 

            (w)        Listing
and Maintenance Requirements. The Common Stock is registered pursuant to
Section 12(b) or 12(g) of the Exchange Act, and the Company has taken no action
designed to, or which to its knowledge is likely to have the effect of,
terminating the registration of the Common Stock under the Exchange Act nor has
the Company received any notification that the Commission is contemplating
terminating such registration. Except as set forth in the SEC Reports, 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. Except as set forth in the SEC
Reports, the Company is, and has no reason to believe that it will not in the
foreseeable future continue to be, in compliance with all such listing and
maintenance requirements.

            (x)       
Application of Takeover Protections. The Company and the Board of
Directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or other similar
anti-takeover provision under the Company’s certificate of incorporation (or
similar charter documents) or the laws of its state of incorporation that is or
could become applicable to the Purchaser as a result of the Purchaser 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 Purchaser’s ownership of the Securities. 

            (y)        Disclosure.
Except with respect to the material terms and conditions of the transactions
contemplated by the Transaction Documents, the Company confirms that neither it
nor any other Person acting on its behalf has provided the Purchaser or its
agents or counsel with any information that it believes constitutes or might
constitute material, non-public information. The Company understands and
confirms that the Purchaser 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 Purchaser 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 Company acknowledges and agrees that the Purchaser makes no nor
has made any representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in Section 3.2
hereof. 

15




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

            (aa)       
Solvency. The Company has no knowledge of any facts or circumstances
which lead it to believe that it will file for reorganization or liquidation
under the bankruptcy or reorganization laws of any jurisdiction within one year
from the Closing Date. Schedule 3.1(aa), sets forth, as of the date
hereof, all outstanding secured and unsecured Indebtedness of the Company or any
Subsidiary, or for which the Company or any Subsidiary has commitments. For the
purposes of this Agreement, “Indebtedness” means (x) any liabilities for
borrowed money or amounts owed in excess of $10,000 (other than trade accounts
payable incurred in the ordinary course of business), (y) all guaranties,
endorsements and other contingent obligations in respect of indebtedness of
others, whether or not the same are or should be reflected in the Company’s
consolidated balance sheet (or the notes thereto), except guaranties by
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business; and (z) the present value of
any lease payments in excess of $10,000 due under leases required to be
capitalized in accordance with GAAP. Except as set forth in the SEC Reports,
neither the Company nor any Subsidiary is in default with respect to any
Indebtedness.

            (bb)       
Tax Status. Except as set forth on Schedule 3.1(bb) and for
matters that would not, individually or in the aggregate, have or reasonably be
expected to result in a Material Adverse Effect, the Company and its
Subsidiaries each (i) has made or filed all United States federal, state and
local income and all foreign income and franchise tax returns, reports and
declarations required by any jurisdiction to which it is subject, (ii) has paid
all taxes and other governmental assessments and charges that are material in
amount, shown or determined to be due on such returns, reports and declarations
and (iii) has set aside on its books provision reasonably adequate for the
payment of all material taxes for periods subsequent to the periods to which
such returns, reports or declarations apply. There are no unpaid taxes in any
material amount claimed to be due by the taxing authority of any
jurisdiction, and the officers of the Company or of any Subsidiary know of no
basis for any such claim. 

16




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

            (dd)               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. 

            (ee)               Accountants.
The Company’s accounting firm is GBH CPA’s, PC. To the knowledge and belief of
the Company, such accounting firm: (i) is a registered public accounting firm as
required by the Exchange Act and (ii) shall express its opinion with respect to
the financial statements to be included in the Company’s Annual Report for the
fiscal year ending December 31, 2013. 

            (ff)              
Seniority. As of the Closing Date, except as set forth on Schedule
3.1(ff), no Indebtedness or other claim against the Company is senior to the
Debentures in right of payment, whether with respect to interest or upon
liquidation or dissolution, or otherwise, other than indebtedness secured by
purchase money security interests (which is senior only as to underlying assets
covered thereby) and capital lease obligations (which is senior only as to the
property covered thereby).

            (gg)              
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. 

            (hh)               Acknowledgment
Regarding Purchaser’s Purchase of Securities. The Company acknowledges and
agrees that the Purchaser 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 the Purchaser is not
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 the Purchaser or any of its
representatives or agents in connection with the Transaction Documents and the
transactions contemplated thereby is merely incidental to the Purchaser’s
purchase of the Securities. The Company further represents to the Purchaser
that the Company’s decision to enter into this Agreement and the other
Transaction Documents has been based solely on the independent evaluation of the
transactions contemplated hereby by the Company and its representatives. 

17




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

            (jj)               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”).

            (kk)               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. 

            (ll)              
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. 

            (mm)              
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. 

            (nn)              
Bad Actor Disqualification. 

            (i)
No Disqualification Events. With respect to Securities to be offered and
sold hereunder in reliance on Rule 506 under the Securities Act ("Regulation D
Securities"), none of the Company, any of its predecessors, any affiliated
issuer, any director, executive officer, other
officer of the Company participating in the offering, any beneficial owner of
20% or more of the Company's outstanding voting equity securities, calculated on
the basis of voting power, nor any promoter (as that term is defined in Rule 405
under the Securities Act) connected with the Company in any capacity at the time
of sale (each, an "Issuer Covered Person" and, together, "Issuer
Covered Persons") is subject to any of the "Bad Actor" disqualifications
described in Rule 506(d)(1)(i) to (viii) under the Securities Act (a
"Disqualification Event"), except for a Disqualification Event covered by
Rule 506(d)(2) or (d)(3). The Company has exercised reasonable care to determine
whether any Issuer Covered Person is subject to a Disqualification Event. The
Company has complied, to the extent applicable, with its disclosure obligations
under Rule 506(e), and has furnished to the the Purchaser a copy of any
disclosures provided thereunder. 

18




            (ii)
Other Covered Persons. The Company is not aware of any person that (i)
has been or will be paid (directly or indirectly) remuneration for solicitation
of purchasers in connection with the sale of the Securities and (ii) who is
subject to a Disqualification Event.

            (iii)
Notice of Disqualification Events. The Company will notify the Purchaser
in writing of (i) any Disqualification Event relating to any Issuer Covered
Person and (ii) any event that would, with the passage of time, become a
Disqualification Event relating to any Issuer Covered Person, prior to any
Closing of this Offering. 

            3.2        
 Representations and Warranties of Purchaser. The Purchaser hereby
represents and warrants, as of the date hereof and as of the Closing Date on
which the Purchaser is purchasing Securities to the Company as follows (unless
as of a specific date therein): 

            (a)               Organization;
Authority. If the Purchaser is an entity, the Purchaser is 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.
If the Purchaser is an entity, the execution and delivery of the Transaction
Documents and performance by the 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 the Purchaser. Each Transaction Document to which it is a party has been
duly executed by the Purchaser, and when delivered by the Purchaser in
accordance with the terms hereof, will constitute the valid and legally binding
obligation of the 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.

19




            (b)              
Own Account. The 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 the Purchaser’s right to sell the
Securities pursuant to the Registration Statement or otherwise in compliance
with applicable federal and state securities laws). The Purchaser is acquiring
the Securities hereunder in the ordinary course of its business. 

            (c)              
Purchaser Status. At the time the 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 either: (i) an “accredited investor” as defined in
Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities Act or
(ii) a “qualified institutional buyer” as defined in Rule 144A(a) under the
Securities Act. 

            (d)              
Experience of the Purchaser. The 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. The 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. The 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, the Purchaser has not directly or
indirectly, nor has any Person acting on behalf of or pursuant to any
understanding with the Purchaser, executed any transactions in any securities of
the Company, including Short Sales, of the securities of the Company during the
period commencing as of the time that the 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 (it being understood and agreed
that for all purposes of this Agreement, and, without implication that the
contrary would otherwise be true, that neither transactions nor purchases nor
sales shall include the location and/or reservation of borrowable shares of
Common Stock). Other than to other Persons party to this Agreement, the
Purchaser has maintained the confidentiality of all disclosures made to it in
connection with this transaction (including the existence and terms of this
transaction). 

The Company acknowledges and agrees that the representations
contained in Section 3.2 shall not modify, amend or affect the 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. 

20




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 restricted Securities other
than pursuant to an effective registration statement or Rule 144 or to the
Company, 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
complies with applicable state and federal securities laws and does not require
registration of such transferred Securities under the Securities Act. As a
condition of such transfer of restricted Securities, any such transferee shall
agree in writing to be bound by the terms of this Agreement and the Registration
Rights Agreement and shall have the rights and obligations of the Purchaser
under this Agreement and the Registration Rights Agreement. 

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

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

            The
Company acknowledges and agrees that the Securities may be pledged by the
Purchaser in connection with a bona fide margin agreement or other loan or
financing arrangement that is secured by the Securities. The pledge of
Securities shall not be deemed to be a transfer, sale or assignment of the Securities hereunder, and
no Purchaser effecting a pledge of Securities shall be required to provide the
Company with any notice thereof or otherwise make any delivery to the Company
pursuant to this Agreement or any other Transaction Document; provided that the Purchaser and its pledgee shall be required to comply with the
provisions of Section 4.1(a) hereof in order to effect a sale, transfer or
assignment of Securities to such pledgee. Subject to the foregoing, the Company
hereby agrees to execute and deliver such documentation as a pledgee of the
Securities may reasonably request in connection with a pledge of the Securities
to such pledgee by an Investor.

21




            (c)                     
Certificates evidencing the Underlying Shares shall not contain any legend
(including the legend set forth in Section 4.1(b) hereof): (i) while a
registration statement (including the Registration Statement) covering the
resale of such security is effective under the Securities Act, (ii) following
any sale of such Underlying Shares pursuant to Rule 144 (subject to execution
and delivery by the holder of such Underlying Shares and such holder’s
broker-dealer of customary documentation acceptable to the Company with respect
to such Rule 144 sale), or (ii) 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) as determined by Company
Counsel. The Company shall cause its counsel to issue a legal opinion (at the
expense of the holder of Underlying Shares) to the Transfer Agent promptly after
the Effective Date if required by the Transfer Agent to effect the removal of
the legend hereunder. If all or any portion of a Debenture is converted 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 by the
applicable holder of Underlying Shares under Rule 144 without the requirement
for the Company to be in compliance with the current public information required
under Rule 144 as to such Underlying Shares and without volume or manner-of-sale
restrictions or if such legend is not otherwise required under applicable
requirements of the Securities Act (including judicial interpretations and
pronouncements issued by the staff of the Commission) as determined by Company
counsel then such Underlying Shares shall be issued free of all legends. The
Company agrees that following the Effective Date or 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 the Purchaser to the Company or the
Transfer Agent of a certificate representing Underlying Shares and, in
connection with any sale in reliance on Rule 144, such customary documentation
acceptable to the Company and executed by such holder of Underlying Shares and
such holder’s broker-dealer in connection with such sale, as applicable, issued
with a restrictive legend (such third Trading Day, the “Legend Removal
Date”), deliver or cause to be delivered to the Purchaser a certificate
representing such shares that is free from all restrictive and other legends.
The Company may not make any notation on its records or give instructions to the
Transfer Agent that enlarge the restrictions on transfer set forth in this
Section 4. Certificates for Underlying Shares subject to legend removal
hereunder shall be transmitted by the Transfer Agent to the Purchaser by
crediting the account of the Purchaser’s prime broker with the Depository Trust
Company System as directed by the Purchaser.

22




            (d)                      In
addition to the Purchaser’s other available remedies, if the Company fails (i)
issue and deliver (or cause to be delivered) to the Purchaser by the Legend
Removal Date a certificate representing the Securities so delivered to the
Company by the Purchaser that is free from all restrictive and other legends or (ii) credit the
balance account of the Purchaser’s or its nominee with DTC for such number of
Conversion Shares so delivered to the Company, and if after such date the
Purchaser is required by its brokerage firm to purchase (in an open market
transaction or otherwise), or the Purchaser’s brokerage firm otherwise
purchases, shares of Common Stock to deliver in satisfaction of a sale by the
Purchaser of the Conversion Shares which the Purchaser was entitled to receive
upon the conversion relating to such Legend Removal Date (a “Buy-In”),
then the Company shall (A) pay in cash to the Purchaser (in addition to any
other remedies available to or elected by the Purchaser) the amount, if any, by
which (x) the Purchaser’s total purchase price (including any brokerage
commissions) for the Common Stock so purchased exceeds (y) the product of (1)
the aggregate number of shares of Common Stock that the Purchaser was entitled
to receive from the conversion at issue multiplied by (2) the actual sale price
at which the sell order giving rise to such purchase obligation was executed
(including any brokerage commissions) and (B) at the option of the Purchaser,
either reissue (if surrendered) this Debenture in a principal amount equal to
the principal amount of the attempted conversion (in which case such conversion
shall be deemed rescinded) or deliver to the Purchaser the number of shares of
Common Stock that would have been issued if the Company had timely complied with
its delivery requirements under Section 4(c). For example, if the Purchaser
purchases Common Stock having a total purchase price of $11,000 to cover a
Buy-In with respect to an attempted conversion of a Debenture with respect to
which the actual sale price of the Conversion Shares (including any brokerage
commissions) giving rise to such purchase obligation was a total of $10,000
under clause (A) of the immediately preceding sentence, the Company shall be
required to pay the Purchaser $1,000. The Purchaser shall provide the Company
written notice indicating the amounts payable to the Purchaser in respect of the
Buy-In and, upon request of the Company, evidence of the amount of such loss.
Nothing herein shall limit the 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 the 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.

            (e)                     
The Purchaser agrees with the Company that the Purchaser will sell any
Securities pursuant to either the registration requirements of the Securities
Act, including any applicable prospectus delivery requirements, or an exemption
therefrom, and that if Securities are sold pursuant to a Registration Statement,
they will be sold in compliance with the plan of distribution set forth therein,
and acknowledges that the removal of the restrictive legend from certificates
representing Securities as set forth in this Section 4.1 is predicated upon the
Company’s reliance upon this understanding. 

            (f)                     
The Company shall be responsible for providing a legal opinion upon each
conversion to the effect that the Underlying Shares are exempt from registration
under the Securities Act, so long as the requirements of Rule 144 are satisfied.


            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 the Purchaser and regardless
of the dilutive effect that such issuance may have on the ownership of the other
stockholders of the Company. 

23




            4.3          Furnishing
of Information; Public Information. Until the earlier of (x) the first
anniversary of the initial date that the Purchaser does not own any Debentures
and (y) the initial date that the Purchaser does not own any 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. 

            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
Purchaser 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
Purchaser to convert its 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          Securities
Laws Disclosure; Publicity. The Company shall (a) by 9:30 a.m. (New York
City time) on the Trading Day immediately following the date hereof, issue a
press release disclosing the material terms of the transactions contemplated
hereby, and (b) file a Current Report on Form 8-K, including the Transaction
Documents as exhibits thereto, with the Commission within the time required by
the Exchange Act. From and after the issuance of such press release, the Company
represents to the Purchaser that it shall have publicly disclosed all material,
non-public information delivered to the Purchaser by the Company or any of its
Subsidiaries, or any of their respective officers, directors, employees or
agents in connection with the transactions contemplated by the Transaction
Documents. Notwithstanding the foregoing, the Company shall not publicly
disclose the name of the Purchaser, or include the name of the Purchaser in any
filing with the Commission or any regulatory agency or Trading Market, without
the prior written consent of the Purchaser, except: (a) as required by federal
securities law in connection with (i) any registration statement contemplated by
the Registration Rights Agreement and (ii) the filing of final Transaction
Documents with the Commission and (b) to the extent such disclosure is required by law or Trading
Market regulations, in which case the Company shall provide the Purchaser with
prior notice of such disclosure permitted under this clause (b).

24




            4.7        
 Shareholder Rights Plan. No claim will be made or enforced by the
Company or, with the consent of the Company, any other Person, that the
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 the 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
Purchaser.

            4.8        
 Non-Public Information. Except with respect to the material terms
and conditions of the transactions contemplated by the Transaction Documents or
as otherwise required by the Transaction Documents, the Company covenants and
agrees that neither it, nor any other Person acting on its behalf, will provide
the Purchaser or its agents or counsel with any information that the Company
believes constitutes material non-public information, unless prior thereto the
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 the Purchaser shall be relying on the foregoing covenant in
effecting transactions in securities of the Company.

            4.9        
 Use of Proceeds. The Company shall use the net proceeds from the
sale of the Securities hereunder for working capital purposes and shall not use
such proceeds: (a) for the satisfaction of any portion of the Company’s debt
(other than payment of trade payables in the ordinary course of the Company’s
business and prior practices), (b) for the redemption of any Common Stock or
Common Stock Equivalents, (c) for the settlement of any outstanding litigation
or (d) in violation of FCPA or OFAC regulations. 

            4.10       
Indemnification of Purchaser. Subject to the provisions of this Section
4.10, the Company will indemnify and hold the Purchaser and its directors,
officers, shareholders, members, partners, employees and agents (and any other
Persons with a functionally equivalent role of a Person holding such titles
notwithstanding a lack of such title or any other title), each Person who
controls the 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 the 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 the
Purchaser Party, with respect to any of the transactions contemplated by the
Transaction Documents (unless such action is based upon a breach of the Purchaser Party’s representations, warranties or covenants
under the Transaction Documents or any agreements or understandings the
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 the
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, the
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 the 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 the 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 the Purchaser Party
in this Agreement or in the other Transaction Documents. The indemnification
required by this Section 4.10 shall be made by periodic 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.

25




            4.11       
Reservation and Listing of Securities. 

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

            (b)        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 covering the Securities, (ii) take all steps reasonably necessary to cause
the Conversion Shares to be approved for listing or quotation on such Trading
Market as soon as possible thereafter, (iii) provide to the Purchaser evidence
of such listing or quotation and (iv) maintain the listing or quotation of such
Common Stock on such date on such Trading Market or another Trading Market. 

            4.12       
Certain Transactions and Confidentiality. 

                          (a)        The
Purchaser 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 earlier of (i) the Maturity Date
of the Debentures and (ii) the date the Purchaser no longer owns Debentures
(whether by conversion or transfer).

26




                          (b)       
The Purchaser covenants that until such time as the transactions contemplated by
this Agreement are publicly disclosed by the Company, the Purchaser will
maintain the confidentiality of the existence and terms of this transaction and
the information included in the Transaction Documents and the Disclosure
Schedules.

                          (c)        Except
as set forth in Sections 4.12(a) and 4.12(b) above, the Company expressly
acknowledges and agrees that (i) the Purchaser shall not be restricted from
effecting transactions in any securities of the Company in accordance with
applicable securities laws after the time that the transactions contemplated by
this Agreement are first publicly announced, and (ii) the Purchaser shall not
have any duty of confidentiality to the Company or its Subsidiaries after the
transactions contemplated by this Agreement are first publicly announced.

            4.13       
Form D; Blue Sky Filings. The Company agrees to timely file a Form D with
respect to the Securities as required under Regulation D and to provide a copy
thereof, promptly upon request of the Purchaser. The Company shall take such
action as the Company shall reasonably determine is necessary in order to obtain
an exemption for, or to qualify the Securities for, sale to the Purchaser at the
Closing under applicable securities or “Blue Sky” laws of the states of the
United States, and shall provide evidence of such actions promptly upon request
of the Purchaser. 

            4.14        Offerings
of New Securities. Until the date on which no Debentures remain outstanding,
and with respect to the Purchaser, the Company will not, directly or indirectly,
effect any Subsequent Placement (as defined below) unless the Company shall have
first complied with this Section 4.14; provided, that the Company shall not be
required to comply with this Section 4.14 if such Subsequent Placement would be
integrated with such prior offering by the principal Trading Market in which the
Common Stock is then trading (the “Principal Market”) or pursuant
to the Securities Act, or any other applicable shareholder approval provisions,
including, without limitation, under the rules and regulations of any exchange
or automated quotation system on which any of the securities of the Company are
listed or designated. 

            
(a)        At least four (4) Business
Days prior to any proposed or intended Subsequent Placement, the Company or its
agent shall orally contact the Purchaser and ask whether the Purchaser is
willing to agree to receive material non-public information (each such notice, a
“Pre-Notice”), provided that neither the Company nor its agents shall
provide any material, non-public information with respect to the Company or any
of its Subsidiaries to the Purchaser without the expressed written consent of
the Purchaser to receive such material, non-public information. Upon the written
request of the Purchaser no later than one (1) Business Day after the
Purchaser’s receipt of such Pre-Notice, and only upon a written request by the
Purchaser, the Company shall promptly, but no later than one (1) Business Day
after such request, deliver to the Purchaser by facsimile an irrevocable written
notice (the “Offer Notice”) of any proposed or intended issuance or sale or
exchange (the “Offer”) of the securities being offered (the
“Offered Securities”) in a Subsequent Placement within one (1)
Business Day of the determination of the terms of such Subsequent Placement,
which Offer Notice shall (w) identify and describe the Offered Securities, (x)
describe the price and other final terms upon which they are to be issued, sold
or exchanged, and the number or amount of the Offered Securities to be issued,
sold or exchanged, (y) identify the persons or entities (if known) to which or
with which the Offered Securities are to be offered, issued, sold or exchanged
and (z) offer to issue and sell to or exchange with the Purchaser (which offer
being non-transferable to any successor to the Purchaser) at least 30% of the
Offered Securities (the “Basic Amount”). 

27




            
(b)        To accept an Offer, in whole or in
part, the Purchaser must deliver a written notice to the Company prior to the
end of the third (3rd) full Business Day after the Purchaser’s
receipt of the Offer Notice (for purposes of this Section 4.14(b), receipt of
the Offer Notice shall not be deemed to have occurred until the Purchaser shall
have physically received such Offer Notice) (the “Offer Period”), setting
forth the portion of the Purchaser’s Basic Amount that such Purchaser elects to
purchase (the “Notice of Acceptance”).

            
(c)        The Company shall have thirty (30)
Business Days from the expiration of the Offer Period above to offer, issue,
sell or exchange all or any part of such Offered Securities as to which a Notice
of Acceptance has not been given by such Purchaser (the “Refused
Securities”), but only to the offerees described in the Offer Notice (if
so described therein) and only upon terms and conditions (including, without
limitation, unit prices and interest rates) that are not more favorable to the
acquiring Person or Persons or less favorable to the Company than those set
forth in the Offer Notice. 

            (d)       
The purchase by the Purchaser of any Offered Securities is subject in all cases
to the preparation, execution and delivery by the Company and the participating
Purchaser of a purchase agreement relating to such Offered Securities reasonably
satisfactory in form and substance to the Purchaser (the “Subsequent
Placement Agreement”). 

            (f)       
Any Offered Securities not acquired by the Purchaser or other Persons in
accordance with this Section 4.14 may not be issued, sold or exchanged until
they are again offered to the Purchaser under the procedures specified in this
Agreement. 

            (g)       
The Company and the Purchaser agree that if such Purchaser elects to participate
in the Offer, without the written consent of such Purchaser, neither the
Subsequent Placement Agreement with respect to such Offer nor any other
transaction documents related thereto shall include any term or provision
whereby such Purchaser shall be required to agree to any restrictions on trading
as to any securities of the Company with respect to any period after the public
announcement of such Subsequent Placement beyond those restrictions on the
transfer or sale of the securities purchased in such Subsequent Placement agreed
to by other purchasers in such Subsequent Placement or be required to consent to
any amendment to or termination of, or grant any waiver or release under or in
connection with, any agreement previously entered into with the Company or any
instrument received from the Company. 

            (h)        The
restrictions contained in this Section 4.14 shall not apply (1) in connection
with the issuance of any Excluded Securities (as defined below) and (2) to the
extent that counsel to the Company has advised that with respect to a Subsequent Placement
of Offered Securities that are not being issued pursuant to a registration
statement under the Securities Act, the exercising of the participation right
would result in the Company not being able to offer or sell the Offered
Securities pursuant to any exemption from the registration requirements of the
Securities Act.

28




            (i)        Notwithstanding
anything herein to the contrary, the rights granted to the Purchaser pursuant to
this Section 4.14 shall not be transferrable to any other Person without the
prior written consent of the Company. 

           
(j)        For the purposes of this Section
4.14, the following definitions will apply: 

                   (i)        
 “Convertible Securities” means any shares or securities (other than
Options) directly or indirectly convertible into or exercisable or exchangeable
for shares of Common Stock.

                   (ii)       
 “Excluded Securities” means any securities of the Company issued in
any Exempt Issuance.

                   (iii)        “Options”
means any rights, warrants or options to subscribe for or purchase shares of
Common Stock or Convertible Securities.

                   (iv)       
“Subsequent Placement” means the sale, grant of any option to purchase,
or other disposition of by the Company, directly or indirectly, of any of the
Company’s or its Subsidiaries’ equity or equity equivalent securities,
including, without limitation, any convertible debt, preferred stock or other
instrument or security that is, at any time during its life and under any
circumstances, convertible into or exchangeable or exercisable for shares of
Common Stock or Convertible Securities or Options. 

ARTICLE V. 
MISCELLANEOUS 


            5.1        
 Termination. This Agreement may be terminated by Purchaser, by
written notice to the Company, if the First Closing has not been consummated on
or before March 15, 2015; 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. At the First Closing, the Company has agreed to
reimburse the Purchaser for all reasonably documented attorney’s fees for the
transactions contemplated by this Agreement in the amount of $12,000. The
Company shall deliver to the Purchaser, prior to the Closing, a completed and
executed copy of the Closing Statement, attached hereto as Annex
A. 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 notice delivered by the Purchaser),
stamp taxes and other taxes and duties levied in connection with the delivery of
any Securities to the Purchaser provided that, the Company shall not be required
to pay any tax that may be payable in respect of any transfer involved in the
issuance and delivery of any such certificate upon conversion
in a name other than that of the Purchaser and the Company shall not be required
to issue or deliver such certificates unless or until the Person or Persons
requesting the issuance thereof shall have paid to the Company the amount of
such tax or shall have established to the satisfaction of the Company that such
tax has been paid.

29




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

            5.5        
 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 each of the Company and the Purchaser or, in the case
of a waiver, by the party against whom enforcement of any such waived provision
is sought. No waiver of any default with respect to any provision, condition or
requirement of this Agreement shall be deemed to be a continuing waiver in the
future or a waiver of any subsequent default or a waiver of any other provision,
condition or requirement hereof, nor shall any delay or omission of any party to
exercise any right hereunder in any manner impair the exercise of any such
right.

            5.6        
 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 a majority in interest of the Debentures
(other than by merger). The Purchaser may assign any or all of its rights under
this Agreement to any Person to whom the 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 “Purchaser.” 

30




            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 and this
Section 5.8. 

            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 action, suit or proceeding to enforce any
provisions of the Transaction Documents, then, in addition to the obligations of
the Company under Section 4.10, 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 Closing 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. 

31




            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 the 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 the
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 concurrently with the return to the
Purchaser of the applicable Debenture. 

            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 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 Purchaser
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 the Purchaser pursuant to any Transaction Document or the 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. 

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            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 the 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 the
Purchaser with respect to indebtedness evidenced by the Transaction Documents,
such excess shall be applied by the 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 the Purchaser’s election. 

            5.18       
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. 

            5.19       
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.

            5.20       
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. 

            5.21       
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.

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            5.22        Exculpation
By Purchaser. The Purchaser acknowledges that it is not relying upon any
person or entity, other than the Company and its representatives, in making its
investment or decision to invest in the Company.

(Signature Pages Follow) 

34




            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. 

	WORLD MOTO, INC. 	Address for Notice: 
	  	131 MOO 9 THAILAND SCIENCE PARK 
	  	INC-1 #2 
	  	PHAHONYOTHIN ROAD 
	  	KLONG1, KLONG LUANG 
	  	PATHUMTHANI W1 12120 
	 	 
	By: ________________________________________ 	Fax: 
	       Name: 	  


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

Greenberg Traurig, LLP 
1201 K Street Suite 1100

Sacramento CA 95814 
Attn.: Mark C. Lee, Esq. 
Facsimile: (916) 868
0630 


[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK 
SIGNATURE PAGE
FOR PURCHASER FOLLOWS]


35




PURCHASER SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT 

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

Name of Purchaser:
____________________________________________________________ 

	Signature of Authorized Signatory of Purchaser:
  
	 
	 
	 
	Name of Authorized Signatory: 
	 
	 
	 
	Title of Authorized Signatory: 
	 
	 
	 
	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): 

 

Subscription Amount: __________

EIN Number: _______________________


[SIGNATURE PAGES CONTINUE] 

36




Annex A 

CLOSING STATEMENT 

           
Pursuant to the attached Securities Purchase Agreement, dated as of
                                 ,
2015, the Purchaser shall purchase $[_________] of Debentures from World Moto,
Inc., a Nevada corporation (the “Company”). All funds will be wired into
an account maintained by the Company. All funds will be disbursed in accordance
with this Closing Statement. 

Disbursement Date: ________ ___, 2015 

_______________________________________________________________________________________________

	I.      
       PURCHASE PRICE 	  
	 	  
	                    
      Gross Proceeds to be Received 	$ 
	 	  
	II.     
       DISBURSEMENTS 	  
	 	  
	 	$ 
	 	$ 
	 	$ 
	 	$ 
	 	$ 
	 	  
	Total Amount Disbursed: 	$ 


 

WIRE INSTRUCTIONS: 

 

To: 

 

To:
_____________________________________________________


37




SCHEDULE A 

SCHEDULE OF PURCHASER


First Closing 

	PURCHASER NAME
      AND 	PRINCIPAL AMOUNT
      OF 
	ADDRESS 	DEBENTURES 
	Redwood Management, LLC 	$54,348 
	 	 
	 	 


Subsequent Closing 

	PURCHASER NAME
      AND 	PRINCIPAL AMOUNT
      OF 
	ADDRESS 	DEBENTURES 
	Redwood Management, LLC 	$489,130 
	 	 
	 	 


38