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






SECURITIES PURCHASE AGREEMENT 

            This
Securities Purchase Agreement (this “Agreement”) is dated as of April 4,
2014, between World Moto, Inc., a Nevada corporation (the “Company”) and
the investors set forth in Schedule A attached hereto (each a
“Purchaser” and collectively, the “Purchasers”). 

            WHEREAS,
subject to the terms and conditions set forth in this Agreement and pursuant to
Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities
Act”), and Rule 506 promulgated thereunder, the Company desires to issue and
sell to the Purchasers, and the Purchasers, severally and not jointly, desire 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 Purchasers’
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.

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            “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 $1,000,000 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 Purchasers 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. 

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            “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. 

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“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 each 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). 

            “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. 

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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 Purchasers aggregating $500,000 ($543,478 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 Purchasers 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 April 4, 2014, or at such other time and place as the Company
and the Purchasers mutually agree upon orally or in writing (which time and
place are designated as the “First Closing”). Each Purchaser shall
deliver to the Company, via wire transfer with immediately available funds to a
designated escrow account, an amount equal to the Subscription Amount applicable
to the First Closing as set forth on the signature page hereto executed by each
such Purchaser participating in the First Closing, and the Company shall deliver
to each such Purchaser its respective Debenture, as determined pursuant to
Section 2.2, and the Company and Purchasers 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 Purchasers shall purchase an
additional $500,000 ($543,478 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
$1,000,000, 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 Purchasers 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 each 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 applicable Purchaser; and


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

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	 	(b) 	
      On or prior to any Closing Date pursuant to Section 2.1,
      each 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, each 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 applicable 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 applicable Purchaser required
to be performed at or prior to an applicable Closing Date shall have been
performed; 

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

            (b)   
     The respective obligations of each 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; and 

           
(v)          the Company shall be
current in it reporting obligations under the Exchange Act. 

ARTICLE III. 
REPRESENTATIONS AND WARRANTIES



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

7




            (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. 

            (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.

8




            (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”). 

            (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.

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            (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 Purchasers) and will not result in a right of any holder
of Company securities to adjust the exercise, conversion, exchange or reset
price under any of such securities. All of the outstanding shares of capital
stock of the Company are duly authorized, validly issued, fully paid and
nonassessable, have been issued in compliance with all federal and state
securities laws, and none of such outstanding shares was issued in violation of
any preemptive rights or similar rights to subscribe for or purchase securities.
No further approval or authorization of any stockholder, the Board of Directors
or others is required for the issuance and sale of the Securities. There are no
stockholders agreements, voting agreements or other similar agreements with
respect to the Company’s capital stock to which the Company is a party or, to
the knowledge of the Company, between or among any of the Company’s
stockholders. 

            (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.

            (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. 

11




            (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.

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

12




            (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. 

            (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.

13




            (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. 

            (t)              
Private Placement. Assuming the accuracy of each 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. Other than as disclosed in the SEC Reports 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. 

14




            (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. 

            (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. 

15




            (aa)       
     Solvency. Except as set forth in the SEC
Reports, 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. The SEC Reports set 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. 

            (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. 

16




            (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. Except as set forth in the SEC Reports, as of the
Closing Date, 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 Purchasers are
each 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 Purchasers are not acting as financial advisors or
fiduciaries 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 Purchasers or any of its representatives or agents in connection
with the Transaction Documents and the transactions contemplated thereby is
merely incidental to each Purchaser’s purchase of the Securities. The Company
further represents to the Purchasers 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. 

            (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”).

17




            (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 Placement Agent and the Subscriber a copy of
any disclosures provided thereunder. 

           
(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.

18




            (iii)
Notice of Disqualification Events. The Company will notify the Placement
Agent 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 each Purchaser. Each Purchaser
hereby represents and warrants, severally and not jointly, as of the date hereof
and as of the Closing Date on which such 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.

            (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. 

19




            (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. 

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 a Purchaser under this Agreement and the Registration Rights
Agreement. 

20




            (b)              
Each 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 a
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 a 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 a 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.

            (d)              
In addition to the Purchaser’s other available remedies, if the Company fails
(i) issue and deliver (or cause to be delivered) to a Purchaser by the Legend
Removal Date a certificate representing the Securities so delivered to the
Company by such Purchaser that is free from all restrictive and other legends or
(ii) credit the balance account of such Purchaser’s or such Purchaser’s 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.

22




            (e)                     
The Purchasers, severally and not jointly with the other Purchasers, agree with
the Company that the Purchasers 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 any
Purchaser and regardless of the dilutive effect that such issuance may have on
the ownership of the other stockholders of the Company. 

            4.3         
Furnishing of Information; Public Information. Until the earlier of (x)
the first anniversary of the initial date no Purchaser owns any Debentures and
(y) the initial date no Purchaser owns 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.

23




            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 a 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 a 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 Purchasers that it shall have publicly disclosed
all material, non-public information delivered to any of the Purchasers 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 any Purchaser, or include the name of any
Purchaser in any filing with the Commission or any regulatory agency or Trading
Market, without the prior written consent of the applicable 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 applicable Purchaser with prior notice
of such disclosure permitted under this clause (b).

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

24




            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 Purchasers. Subject to the provisions of this Section
4.10, the Company will indemnify and hold each Purchaser and its directors,
officers, shareholders, members, partners, employees and agents (and any other
Persons with a functionally equivalent role of a Person holding such titles
notwithstanding a lack of such title or any other title), each Person who
controls 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)       
Each Purchaser covenants, severally and not jointly, 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 such Purchaser no longer
owns Debentures (whether by conversion or transfer).

                          (b)       
Each Purchaser covenants, severally and not jointly, 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 Purchasers 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 a Purchaser. The Company shall take such action
as the Company shall reasonably determine is necessary in order to obtain an
exemption for, or to qualify the Securities for, sale to the Purchasers at the
Closing under applicable securities or “Blue Sky” laws of the states of the
United States, and shall provide evidence of such actions promptly upon request
of a Purchaser. 

26




            4.14       
Offerings of New Securities. Until the the date on which no Debentures
remain outstanding, and with respect to any 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 tfour (4) Business Days prior to any proposed or intended Subsequent
Placement, the Company or its agent shall orally contact each Purchaser and ask
whether such 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 such Purchaser without the
expressed written consent of such Purchaser to receive such material, non-public
information. Upon the written request of such Purchaser no later than one (1)
Business Day after such Purchaser’s receipt of such Pre-Notice, and only upon a
written request by such Purchaser, the Company shall promptly, but no later than
one (1) Business Day after such request, deliver to such 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 such Purchaser
(which offer being non-transferable to any successor to such Purchaser) a pro
rata portion of at least 30% of the Offered Securities allocated among such
Purchaser and the other Purchasers of Securities in this offering (the “Other
Purchasers”) (a) based on each Purchaser’s pro rata portion of all the
Securities purchased in this offering (the “Basic Amount”), and (b) if
such Purchaser elects to purchase its Basic Amount, any additional portion of
the Offered Securities attributable to the Basic Amounts of the Other Purchasers
as such Purchaser shall indicate it will purchase or acquire should the Other
Purchasers subscribe for less than their Basic Amounts (the
“Undersubscription Amount”).

27




        (b)    To
accept an Offer, in whole or in part, a Purchaser must deliver a written notice
to the Company prior to the end of the third (3rd) full Business Day
after such 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
such Purchaser shall have physically received such Offer Notice) (the “Offer
Period”), setting forth the portion of such Purchaser’s Basic Amount that
such Purchaser elects to purchase and, if such Purchaser shall elect to purchase
all of its Basic Amount, the Undersubscription Amount, if any, that such
Purchaser elects to purchase (in either case, the “Notice of Acceptance”). If
the Basic Amounts subscribed for by such Purchaser and all Other Purchasers are
less than the total of all of the Basic Amounts, then, if such Purchaser has set
forth an Undersubscription Amount in its Notice of Acceptance, such Purchaser
shall be entitled to purchase, in addition to the Basic Amounts subscribed for,
the Undersubscription Amount it has subscribed for; provided, however, that if
the Undersubscription Amounts subscribed for exceed the difference between the
total of all the Basic Amounts and the Basic Amounts subscribed for (the
“Available Undersubscription Amount”), if such Purchaser has subscribed
for any Undersubscription Amount, then such Purchaser shall be entitled to
purchase only that portion of the Available Undersubscription Amount as the
Basic Amount of such Purchaser bears to the total Basic Amounts of all Other
Purchasers that have subscribed for Undersubscription Amounts, subject to
rounding by the Company to the extent it deems reasonably necessary. 

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

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

       (g)    The
Company and each 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. 

28




       (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.

       (i)  
 Notwithstanding anything herein to the contrary, the rights granted to the
Purchasers 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 Purchasers purchasing a
majority in interest of the Debentures at the First Closing as to the
Purchasers’ obligations hereunder only and without any effect whatsoever on the
obligations between the Company and the other Purchaser, by written notice to
the other parties, if the First Closing has not been consummated on or before
April 4, 2014; provided, however, that such termination will not
affect the right of any party to sue for any breach by any other party (or
parties). 

29




            5.2        
 Fees and Expenses. At the First Closing, the Company has agreed to
reimburse Purchasers for all reasonably documented attorney’s fees for the
transactions contemplated by this Agreement in the amount of $20,000, of which
$5,000 has been paid prior to the signing of this Agreement. The Company shall
also pay the Purchaser’s $10,000 for due diligence expenses. The Company shall
deliver to the Purchasers, 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 a 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.

            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 a majority in interest of the
Debentures 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.

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            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). A 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.” 

            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. 

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            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. 

            5.13       
Rescission and Withdrawal Right. Notwithstanding anything to the contrary
contained in (and without limiting any similar provisions of) any of the other
Transaction Documents, whenever any Purchaser exercises a right, election,
demand or option under a Transaction Document and the Company does not timely
perform its related obligations within the periods therein provided, then 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.

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

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

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            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. 

            5.22       
Exculpation Among Purchasers. Each 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.
Each Purchaser agrees that no Purchaser nor the respective controlling persons,
officers, directors, partners, members, agents, or employees of any Purchaser
shall be liable to any other Purchaser for any action heretofore or hereafter
taken or omitted to be taken by any of them in connection with the purchase of
the Securities. 

(Signature Pages Follow) 

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

	WORLD MOTO, INC. 	Address for Notice: 
	  	  
	  	131 MOO 9 THAILAND SCIENCE PARK 
	  	INC-1 #2 
	  	PHAHONYOTHIN ROAD 
	  	KLONG1, KLONG LUANG 
	  	PATHUMTHANI W1 12120 
	  	THAILAND 
	  	  
	By:  _____________________________________	Fax: 011 662 564 7734 
	       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]


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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] 

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