DEBENTURES AND WARRANTS TO BE ISSUED AND SOLD TO SUCH BUYER AT
SUCH CLOSING, MINUS THE FEES TO BE PAID DIRECTLY FROM THE PROCEEDS OF SUCH
CLOSING AS SET FORTH HEREIN, VIA IRREVOCABLE WIRE TRANSFER, AND (II) THE COMPANY
SHALL DELIVER TO EACH BUYER, CONVERTIBLE DEBENTURES AND WARRANTS WHICH SUCH
BUYER IS PURCHASING AT SUCH CLOSING IN AMOUNTS INDICATED OPPOSITE SUCH BUYER'S
NAME ON SCHEDULE I, DULY EXECUTED ON BEHALF OF THE COMPANY.
2
(D)
STANFORD AGREEMENT.
IN ADDITION TO THE
FOREGOING, BUYER HEREBY AGREES TO THE COMPANY'S SALE AND ISSUANCE OF AN
ADDITIONAL $5,000,000 OF CONVERTIBLE DEBENTURES TO STANFORD VENTURE CAPITAL
HOLDINGS, INC. ("STANFORD") ON SUBSTANTIALLY SIMILAR TERMS HEREUNDER SUBJECT TO
STOCKHOLDER APPROVAL AS SET FORTH IN SECTION 1(E) BELOW (THE "STANFORD
CLOSING").
(E)
STOCKHOLDERS APPROVAL.
WITHIN NINETY (90)
DAYS OF THE DATE HEREOF AND PRIOR TO THE CONSUMMATION OF THE THIRD CLOSING AND
STANFORD CLOSING, THE COMPANY SHALL USE ITS REASONABLE BEST EFFORTS TO CALL AND
HOLD A SPECIAL MEETING OF THE SHAREHOLDERS, FOR THE PURPOSE OF (I) APPROVING THE
TRANSACTIONS CONTEMPLATED HEREIN AND THE STANFORD CLOSING, AND (II) INCREASING
THE AUTHORIZED COMMON STOCK OF THE COMPANY TO AT LEAST 100,000,000 SHARES OF
COMMON STOCK (SUCH AFFIRMATIVE APPROVAL BEING REFERRED TO HEREIN AS THE
"STOCKHOLDER APPROVAL").
THE COMPANY'S BOARD SHALL RECOMMEND TO THE
SHAREHOLDERS TO VOTE IN FAVOR OF APPROVING THE TRANSACTIONS CONTEMPLATED HEREIN
AND THE STANFORD CLOSING AND THE INCREASE OF THE COMPANY'S AUTHORIZED COMMON
STOCK; PROVIDED, HOWEVER THAT THE BOARD SHALL NOT BE OBLIGATED TO MAKE SUCH A
RECOMMENDATION IF THE BOARD DETERMINES IN GOOD FAITH, AFTER RECEIVING THE ADVICE
OF ITS INDEPENDENT LEGAL AND FINANCIAL ADVISORS, THAT SUCH A RECOMMENDATION
WOULD CAUSE THE BOARD TO BREACH ITS FIDUCIARY DUTIES.
2.
BUYER'S REPRESENTATIONS AND WARRANTIES.
Each Buyer represents and warrants, severally and not jointly, that:
(A)
INVESTMENT PURPOSE.
EACH BUYER IS
ACQUIRING THE SECURITIES FOR ITS OWN ACCOUNT FOR INVESTMENT ONLY AND NOT WITH A
VIEW TOWARDS, OR FOR RESALE IN CONNECTION WITH, THE PUBLIC SALE OR DISTRIBUTION
THEREOF, EXCEPT PURSUANT TO SALES REGISTERED OR EXEMPTED UNDER THE SECURITIES
ACT; PROVIDED, HOWEVER, THAT BY MAKING THE REPRESENTATIONS HEREIN, SUCH BUYER
RESERVES THE RIGHT TO DISPOSE OF THE SECURITIES AT ANY TIME IN ACCORDANCE WITH
OR PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT COVERING SUCH SECURITIES OR
AN AVAILABLE EXEMPTION UNDER THE SECURITIES ACT.
SUCH BUYER DOES NOT PRESENTLY
HAVE ANY AGREEMENT OR UNDERSTANDING, DIRECTLY OR INDIRECTLY, WITH ANY PERSON TO
DISTRIBUTE ANY OF THE SECURITIES.
(B)
ACCREDITED INVESTOR STATUS.
EACH BUYER IS
AN "ACCREDITED INVESTOR" AS THAT TERM IS DEFINED IN RULE 501(A)(3) OF REGULATION
D.
(C)
RELIANCE ON EXEMPTIONS.
EACH BUYER
UNDERSTANDS THAT THE SECURITIES ARE BEING OFFERED AND SOLD TO IT IN RELIANCE ON
SPECIFIC EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF UNITED STATES FEDERAL
AND STATE SECURITIES LAWS AND THAT THE COMPANY IS RELYING IN PART UPON THE TRUTH
AND ACCURACY OF, AND SUCH BUYER'S COMPLIANCE WITH, THE REPRESENTATIONS,
WARRANTIES, AGREEMENTS, ACKNOWLEDGMENTS AND UNDERSTANDINGS OF SUCH BUYER SET
FORTH HEREIN IN ORDER TO DETERMINE