Exhibit 10.2
 
Execution Version
PURCHASE AGREEMENT

PURCHASE AGREEMENT (the “Agreement”), dated as of April 24, 2012, by and between
ENOVA SYSTEMS, INC., a California corporation, (the “Company”), and LINCOLN PARK
CAPITAL FUND, LLC, an Illinois limited liability company (the “Investor”).

WHEREAS:
 
Subject to the terms and conditions set forth in this Agreement, the Company has
the right to sell to the Investor, in its sole and absolute discretion, and the
Investor has the obligation to buy from the Company, up to Three Million Four
Hundred Thousand Dollars ($3,400,000) of shares of the Company’s common stock,
no par value per share (the “Common Stock”). The shares of Common Stock to be
purchased hereunder (including, without limitation, the Initial Purchase Shares
(as defined herein)) are referred to herein as the “Purchase Shares”.
 
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 Investor hereby
agree as follows:
 
1.           CERTAIN DEFINITIONS.

For purposes of this Agreement, the following terms shall have the following
meanings:

(a)           “Accelerated Purchase Notice” shall mean an irrevocable written
notice from the Company to the Investor directing the Investor to buy such
Accelerated Purchase Amount in Purchase Shares as specified by the Company
therein on the Purchase Date.

(b)           “Available Amount” means initially Three Million Four Hundred
Thousand Dollars ($3,400,000) in the aggregate, which amount shall be reduced by
the amount of the Initial Purchase, the Regular Purchase Amount and the
Accelerated Purchase Amount actually purchased by the Investor each time the
Investor purchases shares of Common Stock pursuant to Section 2 hereof.

(c)           “Average Price” means a price per Purchase Share (rounded to the
nearest tenth of a cent) equal to the quotient obtained by dividing (i) the
aggregate gross purchase price paid by the Investor for all Purchase Shares
purchased pursuant to this Agreement, by (ii) the aggregate number of Purchase
Shares issued pursuant to this Agreement.

(d)           “Bankruptcy Law” means Title 11, U.S. Code, or any similar federal
or state law for the relief of debtors.

(e)           “Base Price” means a price per Purchase Share equal to the sum of
(i) the Signing Market Price and (ii) $0.035 (subject to adjustment for any
reorganization, recapitalization, non-cash dividend, stock split, reverse stock
split or other similar transaction that occurs on or after the date of this
Agreement).

(f)           “Base Prospectus” means the Company’s final base prospectus, dated
August 30, 2011, a preliminary form of which is included in the Registration
Statement, including the documents incorporated by reference therein.

(g)           “Business Day” means any day on which the Principal Market is open
for trading including any day on which the Principal Market is open for trading
for a period of time less than the customary time.

 
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(h)           “Closing Sale Price” means, for any security as of any date, the
last closing sale price for such security on the Principal Market as reported by
the Principal Market, or, if the Principal Market is not the principal
securities exchange or trading market for such security, the last closing sale
price of such security on the principal securities exchange or trading market
where such security is listed or traded as reported by the Principal Market.

(i)           “Confidential Information” means any information disclosed by
either party to the other party, either directly or indirectly, in writing,
orally or by inspection of tangible objects (including, without limitation,
documents, prototypes, samples, plant and equipment), which is designated as
"Confidential," "Proprietary" or some similar designation. Information
communicated orally shall be considered Confidential Information if such
information is confirmed in writing as being Confidential Information within ten
(10) Business Days after the initial disclosure. Confidential Information may
also include information disclosed to a disclosing party by third parties.
Confidential Information shall not, however, include any information which (i)
was publicly known and made generally available in the public domain prior to
the time of disclosure by the disclosing party; (ii) becomes publicly known and
made generally available after disclosure by the disclosing party to the
receiving party through no action or inaction of the receiving party; (iii) is
already in the possession of the receiving party at the time of disclosure by
the disclosing party as shown by the receiving party’s files and records
immediately prior to the time of disclosure; (iv) is obtained by the receiving
party from a third party without a breach of such third party’s obligations of
confidentiality; (v) is independently developed by the receiving party without
use of or reference to the disclosing party’s Confidential Information, as shown
by documents and other competent evidence in the receiving party’s possession;
or (vi) is required by law to be disclosed by the receiving party, provided that
the receiving party gives the disclosing party prompt written notice of such
requirement prior to such disclosure and assistance in obtaining an order
protecting the information from public disclosure.

(j)           “Common Stock Equivalents” means any securities of the Company or
its Subsidiaries which entitle the holder thereof to acquire at any time shares
of Common Stock, including, without limitation, any debt, preferred stock,
rights, options, warrants or other instrument that is at any time convertible
into or exercisable or exchangeable for, or otherwise entitles the holder
thereof to receive, shares of Common Stock.

(k)           “Custodian” means any receiver, trustee, assignee, liquidator or
similar official under any Bankruptcy Law.

(l)           “DTC” means The Depository Trust Company, or any successor
performing substantially the same function for the Company.

(m)           “DWAC Shares” means shares of Common Stock that are (i) issued in
electronic form, (ii) freely tradable and transferable and without restriction
on resale and (iii) timely credited by the Company to the Investor’s or its
designee’s specified Deposit/Withdrawal at Custodian (DWAC) account with DTC
under its Fast Automated Securities Transfer (FAST) Program or any similar
program hereafter adopted by DTC performing substantially the same function.

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

(o)           “Floor Price” means Thirteen Cents ($0.13) (which shall be
appropriately adjusted for any reorganization, recapitalization, non-cash
dividend, stock split or other similar transaction).

(p)           “Initial Prospectus Supplement” means the prospectus supplement to
the Base Prospectus complying with Rule 424(b) under the Securities Act that is
filed with the SEC and delivered by the Company to the Investor upon the
execution and delivery of this Agreement in accordance with Section 5(a),
including the documents incorporated by reference therein.

(q)           “Maturity Date” means the date that is 720 Business Days (36
Monthly Periods) from the Commencement Date.

 
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(r)           “Monthly Period” means each successive 20 Business Day period
commencing with the Commencement Date.

(s)           “Person” means an individual or entity, including, but not limited
to, any limited liability company, a partnership, a joint venture, a
corporation, a trust, an unincorporated organization and a government or any
department or agency thereof.

(t)           “Principal Market” means the NYSE Amex; provided however, that in
the event the Company’s Common Stock is ever listed or traded on The NASDAQ
Capital Market, The NASDAQ Global Market, The NASDAQ Global Select Market or the
New York Stock Exchange, then the “Principal Market” shall mean such other
market or exchange on which the Company’s Common Stock is then listed or traded.

(u)           “Prospectus” means the Base Prospectus, as supplemented by any
Prospectus Supplement (including the Initial Prospectus Supplement), including
the documents incorporated by reference therein.

(v)           “Prospectus Supplement” means any prospectus supplement to the
Base Prospectus (including the Initial Prospectus Supplement) filed with the SEC
pursuant to Rule 424(b) under the Securities Act in connection with the
transactions contemplated by this Agreement, including the documents
incorporated by reference therein.

(w)           “Purchase Date” means with respect to any particular purchase made
hereunder, the Business Day on which the Investor receives by 4:30 p.m. Eastern
time of such Business Day a valid Regular Purchase Notice or Accelerated
Purchase Notice that the Investor is to buy Purchase Shares pursuant to Section
2 hereof.

(x)           “Registration Statement” means the effective registration
statement on Form S-3 (Commission File No. 333-176480) filed by the Company with
the SEC pursuant to the Securities Act for the registration of shares of its
Common Stock, including the Securities, and certain other securities, as such
Registration Statement has been or may be amended and supplemented from time to
time, including all documents filed as part thereof or incorporated by reference
therein, and including all information deemed to be a part thereof at the time
of effectiveness pursuant to Rule 430B of the Securities Act, including any
comparable successor registration statement filed by the Company with the SEC
pursuant to the Securities Act for the registration of shares of its Common
Stock, including the Securities.

(y)           “Regular Purchase Amount” means, with respect to any particular
Regular Purchase made hereunder, the portion of the Available Amount to be
purchased by the Investor pursuant to a Purchase Notice in accordance with
Section 2(a) hereof.

(z)            “Regular Purchase Notice” means a written notice from the Company
to the Investor directing the Investor to buy such Regular Purchase Amount in
Purchase Shares as specified by the Company therein on the Purchase Date.

(aa)           “Regular Purchase Price” means, with respect to a Regular
Purchase, the lower of (i) the lowest Sale Price of the Common Stock on the
applicable Purchase Date and (ii) the arithmetic average of the three (3) lowest
Closing Sale Prices of the Common Stock during the twelve (12) consecutive
Business Days ending on the Business Day immediately preceding such Purchase
Date (in each case, to be appropriately adjusted for any reorganization,
recapitalization, non-cash dividend, stock split or other similar transaction
that occurs on or after the date of this Agreement).

(bb)           “Sale Price” means any sale price for the shares of Common Stock
on the Principal Market as reported by the Principal Market.

(cc)           “SEC” means the U.S. Securities and Exchange Commission.

 
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(dd)           “Securities” means, collectively, the Purchase Shares and the
Commitment Shares.

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

(ff)           “Signing Market Price” means $0.23, representing the official
closing price of the Common Stock as reported to the Consolidated Tape on the
Business Day immediately preceding the date of this Agreement.

(gg)           “Staff Interpretations” means the interpretations of the SEC’s
staff set forth in response to question 139.21 of the Compliance and Disclosure
Interpretations of Securities Act Sections of the Division of Corporation
Finance of the Commission dated March 4, 2011.

(hh)           “Subsidiary” means any Person the Company wholly-owns or
controls, or in which the Company, directly or indirectly, owns a majority of
the voting stock or similar voting interest, in each case that would be
disclosable pursuant to Item 601(b)(21) of Regulation S-K promulgated under the
Securities Act.

(ii)           “Transaction Documents” means, collectively, this Agreement and
the schedules and exhibits hereto, and each of the other agreements, documents,
certificates and instruments entered into or furnished by the parties hereto in
connection with the transactions contemplated hereby and thereby.

(jj)       “Transfer Agent” means Computershare Trust Company, N.A., or such
other Person who is then serving as the transfer agent for the Company in
respect of the Common Stock.

2.  PURCHASE AND SALE OF COMMON STOCK.
 
Subject to the terms and conditions set forth in this Agreement, the Company has
the right, but not the obligation, to sell to the Investor, in its sole and
absolute discretion, and the Investor has the obligation to purchase from the
Company, Purchase Shares as follows:
 
(a)              Commencement of Sales of Common Stock.  Following the
satisfaction of the conditions (the “Commencement”) as set forth in Sections 7
and 8 below (the date of satisfaction of such conditions, (the “Commencement
Date”), the Investor shall purchase $250,000 worth of Purchase Shares (such
purchase the “Initial Purchase” and such Purchase Shares are referred herein as
“Initial Purchase Shares”) at the applicable Regular Purchase Price. Beginning
five (5) Business Days following the Commencement Date, the Company shall have
the right, but not the obligation, in its sole and absolute discretion, to
deliver to the Investor from time to time a Regular Purchase Notice directing
the Investor to buy Purchase Shares (each such purchase a “Regular Purchase”) in
any amount up to two hundred thousand (200,000) Purchase Shares per Regular
Purchase Notice at the applicable Regular Purchase Price on the applicable
Purchase Date.  The Company may deliver multiple Regular Purchase Notices to the
Investor so long as at least two (2) Business Days have passed since the most
recent Regular Purchase was completed.

 
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(b)              Accelerated Purchases.  At any time after the Commencement
Date, the Company shall also have the right to direct the Investor to buy up to
200,000 Purchase Shares (each such purchase an “Accelerated Purchase” and the
amount so purchased the “Accelerated Purchase Amount”) per Accelerated Purchase
Notice at the Accelerated Purchase Price on the Purchase Date by delivering to
the Investor Accelerated Purchase Notices provided that the Closing Sale Price
of the Common Stock must not be below $.20 (subject to equitable adjustment for
any reorganization, recapitalization, non-cash dividend, stock split or other
similar transaction) on the Purchase Date (the “Accelerated Purchase Threshold
Price”).  As used herein, the term “Accelerated Purchase Price” shall mean the
lesser of (i) the lowest Sale Price of the Common Stock on the Purchase Date or
(ii) the lowest Regular Purchase Price during the previous ten (10) Business
Days prior to the date that the valid Accelerated Purchase Notice was received
by the Investor.  However, if on any Purchase Date the Closing Sale Price of the
Common Stock is below the Accelerated Purchase Threshold Price, such Accelerated
Purchase shall be void and the Investor’s obligations to buy Purchase Shares in
respect of that Accelerated Purchase Notice shall be terminated.  Thereafter,
the Company shall again have the right to submit an Accelerated Purchase Notice
as set forth herein by delivery of a new Accelerated Purchase Notice only if the
Closing Sale Price of the Common Stock is at or above the Accelerated Purchase
Threshold Price on the date of the delivery of the Accelerated Purchase
Notice.  The Company may deliver multiple Accelerated Purchase Notices to the
Investor so long as at least two (2) Business Days have passed since the most
recent Accelerated Purchase was completed.
 
(c)               Payment for Purchase Shares.   The Investor shall pay to the
Company an amount equal to the Regular Purchase Amount (or, with respect to the
Initial Purchase, an amount equal to the price for the Initial Purchase Shares
set forth in Section 2(a)) if purchased by the Investor pursuant to Section
2(a), or the Accelerated Purchase Amount if purchased by the Investor pursuant
to Section 2(b), with respect to such Purchase Shares as full payment for such
Purchase Shares, via wire transfer of immediately available funds to such
account as the Company may from time to time designate by written notice in
accordance with this Agreement, on the same Business Day that the Investor
receives such Purchase Shares, if they are received by the Investor before 1:00
p.m. Eastern time, or if received by the Investor after 1:00 p.m. Eastern time,
on the next Business Day, and (ii) the Company shall, or shall cause the
Transfer Agent to, electronically transfer such Purchase Shares as DWAC Shares
to an account or accounts specified in writing by the Investor to the Company
against payment therefor. The Company shall not issue any fraction of a share of
Common Stock in connection with any purchase and, if the issuance would result
in the issuance of a fraction of a share of Common Stock, the Company shall
round such fraction of a share of Common Stock up or down to the nearest whole
share. All payments made under this Agreement shall be made in lawful money of
the United States of America or wire transfer of immediately available funds to
such account as the Company may from time to time designate by written notice in
accordance with the provisions of this Agreement. Whenever any amount expressed
to be due by the terms of this Agreement is due on any day that is not a
Business Day, the same shall instead be due on the next succeeding day that is a
Business Day.
 
              (d)              Purchase Price Floor.   The Company and the
Investor shall not effect any purchases of Purchase Shares under this Agreement
on any Purchase Date where the purchase price for any purchases of Purchase
Shares would be less than the Floor Price.
 

 
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(e)              Compliance with Registration Statement Eligibility Requirements
and Rules of Principal Market.
 
(i)              Maximum Share Cap.  The Company shall not issue or sell any
shares of Common Stock pursuant to this Agreement, and the Investor shall not
purchase or acquire any shares of Common Stock pursuant to this Agreement, to
the extent that after giving effect thereto, the aggregate number of shares of
Common Stock that would be issued pursuant to this Agreement would exceed the
lesser of: (A) subject to Section 2(e)(ii) below, 8,500,000 shares of Common
Stock (which number shall be reduced, on a share-for-share basis, by the number
of shares of Common Stock issued or issuable pursuant to any transaction or
series of transactions that may be aggregated with the transactions contemplated
by this Agreement under applicable rules of the NYSE Amex or any other Principal
Market on which the Common Stock may be listed or quoted) (the “Exchange Cap”),
unless and until the Company elects to solicit stockholder approval of the
transactions contemplated by this Agreement and the stockholders of the Company
have in fact approved the transactions contemplated by this Agreement in
accordance with the applicable rules and regulations of the NYSE Amex, any other
Principal Market on which the Common Stock may be listed or quoted, and the
Articles of Incorporation and Bylaws of the Company; and (B) for so long as the
Company is subject to the limitations set forth in General Instruction I.B.6. of
Form S-3 and the Staff Interpretations, the maximum number of shares of Common
Stock that the Company may issue pursuant to this Agreement and the transactions
contemplated hereby without exceeding the limitations set forth in General
Instruction I.B.6. of Form S-3 and the Staff Interpretations (the “Registration
Statement Eligibility Cap”). For all purposes of this Agreement, the term
“Maximum Share Cap” shall mean the lesser of (i) the Exchange Cap, to the extent
applicable to the transactions contemplated by this Agreement, and (ii) the
Registration Statement Eligibility Cap, to the extent applicable to the
transactions contemplated by this Agreement. For the avoidance of doubt, the
Company may, but shall be under no obligation to, request its stockholders to
approve the transactions contemplated by this Agreement; provided, that if
stockholder approval is not obtained in accordance with this Section 2(e)(i),
the Exchange Cap shall be applicable for all purposes of this Agreement and the
transactions contemplated hereby at all times during the term of this Agreement
(except as set forth in Section 2(e)(ii) below).
 
(ii)              At-Market Transaction.  Notwithstanding Section 2(e)(i) above,
the Exchange Cap shall not be applicable for any purposes of this Agreement and
the transactions contemplated hereby, solely to the extent that (and only for so
long as) the Average Price shall equal or exceed the Base Price (it being hereby
acknowledged and agreed that the Exchange Cap shall be applicable for all
purposes of this Agreement and the transactions contemplated hereby at all other
times during the term of this Agreement, unless the stockholder approval
referred to in Section 2(e)(i) is obtained).
 
(iii)              General.  The Company shall not issue any shares of Common
Stock pursuant to this Agreement if such issuance would reasonably be expected
to result in (A) non-compliance with General Instruction I.B.6. of Form S-3 and
the Staff Interpretations or (B) a breach of the rules and regulations of the
NYSE Amex or any other Principal Market on which the Common Stock may be listed
or quoted. The provisions of this Section 2(e) shall be implemented in a manner
otherwise than in strict conformity with the terms hereof only if necessary to
ensure compliance with General Instruction I.B.6. of Form S-3, the Staff
Interpretations and the rules and regulations of the NYSE Amex or any other
Principal Market on which the Common Stock may be listed or quoted.
 
(f)              Beneficial Ownership Limitation.  Notwithstanding anything to
the contrary contained in this Agreement, the Company shall not issue or sell
and the Investor shall not purchase or acquire any shares of Common Stock under
this Agreement which, when aggregated with all other shares of Common Stock then
beneficially owned by the Investor and its affiliates (as calculated pursuant to
Section 13(d) of the Exchange Act and Rule 13d-3 promulgated thereunder), would
result in the beneficial ownership by the Investor and its affiliates of more
than 9.99% of the then issued and outstanding shares of Common Stock (the
“Beneficial Ownership Limitation”). Upon the written or oral request of the
Investor, the Company shall promptly (but not later than 24 hours) confirm
orally or in writing to the Investor the number of shares of Common Stock then
outstanding. The Investor and the Company shall each cooperate in good faith in
the determinations required hereby and the application hereof. The Investor’s
written certification to the Company of the applicability of the Beneficial
Ownership Limitation, and the resulting effect thereof hereunder at any time,
shall be conclusive with respect to the applicability thereof and such result
absent manifest error.
 

 
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3.           INVESTOR'S REPRESENTATIONS AND WARRANTIES.

The Investor represents and warrants to the Company that as of the date hereof
and as of the Commencement Date:

(a)           Accredited Investor Status.  The Investor is an “accredited
investor” as that term is defined in Rule 501(a)(3) of Regulation D promulgated
under the Securities Act.

(b)           Information.  The Investor understands that its investment in the
Securities involves a high degree of risk.  The Investor (i) is able to bear the
economic risk of an investment in the Securities including a total loss thereof,
(ii) has such knowledge and experience in financial and business matters that it
is capable of evaluating the merits and risks of the proposed investment in the
Securities and (iii) has had an opportunity to ask questions of and receive
answers from the officers of the Company concerning the financial condition and
business of the Company and others matters related to an investment in the
Securities.  Neither such inquiries nor any other due diligence investigations
conducted by the Investor or its representatives shall modify, amend or affect
the Investor's right to rely on the Company's representations and warranties
contained in Section 4 below. The Investor has sought such accounting, legal and
tax advice as it has considered necessary to make an informed investment
decision with respect to its acquisition of the Securities.

(c)           No Governmental Review.  The Investor understands that no U.S.
federal or state agency or any other government or governmental agency has
passed on or made any recommendation or endorsement of the Securities or the
fairness or suitability of an investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.

(d)           Validity; Enforcement.  This Agreement has been duly and validly
authorized, executed and delivered on behalf of the Investor and is a valid and
binding agreement of the Investor enforceable against the Investor in accordance
with its terms, subject as to enforceability to general principles of equity and
to applicable bankruptcy, insolvency, reorganization, moratorium, liquidation
and other similar laws relating to, or affecting generally, the enforcement of
applicable creditors' rights and remedies.

(e)           Residency.  The Investor is a resident of the State of Illinois.

(f)           No Prior Short Selling.  The Investor represents and warrants to
the Company that at no time prior to the date of this Agreement has any of the
Investor, its agents, representatives or affiliates engaged in or effected, in
any manner whatsoever, directly or indirectly, any (i) “short sale” (as such
term is defined in Rule 200 of Regulation SHO of the Exchange Act) of the Common
Stock or (ii) hedging transaction, which establishes a net short position with
respect to the Common Stock.

4.           REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

Except as set forth in the SEC Documents, the Company represents and warrants to
the Investor that as of the date hereof and as of the Commencement Date:

(a)           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 described in the
SEC Documents.  Neither the Company nor any Subsidiary is in violation or
default of any of the provisions of its respective certificate or articles of
incorporation, bylaws or other organizational or charter documents.  Each of the
Company and the Subsidiaries is duly qualified to conduct business and is in
good standing as a foreign corporation or other entity in each jurisdiction in
which the nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so qualified or in good
standing, as the case may be, would not have or reasonably be expected to result
in a material adverse effect upon the business, prospects, properties,
operations, condition (financial or otherwise) or results of operations of the
Company and its Subsidiaries, taken as a whole, or in its ability to perform its
obligations under this Agreement (a “Material Adverse Effect”).  The Company has
no Subsidiaries except as set forth in the SEC Documents.

 
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(b)           Authorization; Enforcement; Validity.  (i) The Company has the
requisite corporate power and authority to enter into and perform its
obligations under this Agreement and each of the other Transaction Documents to
which it is a party, and to issue the Securities in accordance with the terms
hereof and thereof, (ii) the execution and delivery of the Transaction Documents
by the Company to which it is a party and the consummation by it of the
transactions contemplated hereby and thereby, including without limitation, the
issuance of the Initial Commitment Shares and the reservation for issuance and
the issuance of the Purchase Shares and Additional Commitment Shares, issuable
pursuant to this Agreement, have been duly authorized by the Company's Board of
Directors (the “Board of Directors”) and no further consent or authorization is
required by the Company, the Board of Directors or its stockholders, (iii) this
Agreement has been, and each other Transaction Document shall be on the
Commencement Date, duly executed and delivered by the Company and (iv) this
Agreement constitutes, and each other Transaction Document upon its execution by
the Company, shall constitute, the valid and binding obligations of the Company
enforceable against the Company in accordance with its terms, except (A) as
limited by general equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors’ rights generally, (B) as limited by laws relating to
the availability of specific performance, injunctive relief or other equitable
remedies and (C) insofar as indemnification and contribution provisions may be
limited by applicable law.  The Board of Directors has approved the resolutions
(the “Signing Resolutions”) substantially in the form as set forth as Exhibit C
attached hereto to authorize this Agreement and the transactions contemplated
hereby.  The Signing Resolutions are valid, in full force and effect and have
not been modified or supplemented in any respect.  The Company has delivered to
the Investor a true and correct copy of a unanimous written consent adopting the
Signing Resolutions executed by all of the members of the Board of
Directors.  No other approvals or consents of the Board of Directors or the
Company’s stockholders is necessary under applicable laws and the Company’s
Articles of Incorporation or Bylaws to authorize the execution and delivery of
this Agreement or any of the transactions contemplated hereby, including, but
not limited to, the issuance of the Commitment Shares and the issuance of the
Purchase Shares.

(c)           Capitalization.  The capitalization of the Company is as described
in the Company’s most recently filed Prospectus Supplement, Annual Report on
Form 10-K or Quarterly Report on Form 10-Q, as applicable.  Except as disclosed
in a filing by the Company under the Securities Act or the Exchange Act,
including pursuant to Section 13(a) or 15(d), (i) no shares of the Company's
capital stock are subject to preemptive rights or any other similar rights or
any liens or encumbrances suffered or permitted by the Company, (ii) there are
no outstanding debt securities, (iii) there are no outstanding options,
warrants, scrip, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into, any shares of
capital stock of the Company or any of its Subsidiaries, or contracts,
commitments, understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to issue additional shares of capital stock
of the Company or any of its Subsidiaries or options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company or any of its Subsidiaries, (iv) there are no agreements or arrangements
under which the Company or any of its Subsidiaries is obligated to register the
sale of any of their respective securities under the Securities Act, (v) there
are no outstanding securities or instruments of the Company or any of its
Subsidiaries which contain any redemption or similar provisions, and there are
no contracts, commitments, understandings or arrangements by which the Company
or any of its Subsidiaries is or may become bound to redeem a security of the
Company or any of its Subsidiaries, (vi) there are no securities or instruments
containing anti-dilution or similar provisions that will be triggered by the
issuance of the Securities as described in this Agreement and (vii) the Company
does not have any stock appreciation rights or "phantom stock" plans or
agreements or any similar plan or agreement.  The Company has furnished or made
available to the Investor true and correct copies of the Company's Articles of
Incorporation, as amended and as in effect on the date hereof (the “Articles of
Incorporation”), and the Company's Bylaws, as amended and as in effect on the
date hereof (the "Bylaws"), and summaries of the terms of all securities
convertible into or exercisable for Common Stock, if any, and copies of any
documents containing the material rights of the holders thereof in respect
thereto.

 
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(d)           Issuance of Securities.  Upon issuance and payment therefor in
accordance with the terms and conditions of this Agreement, the Purchase Shares
shall be validly issued, fully paid and nonassessable and free from all taxes,
liens and charges with respect to the issue thereof, with the holders being
entitled to all rights accorded to a holder of Common Stock.  7,300,000 shares
of Common Stock have been duly authorized and reserved for issuance under this
Agreement as Purchase Shares.  286,651  shares of Common Stock (subject to
equitable adjustment for any reorganization, recapitalization, non-cash
dividend, stock split or other similar transaction) have been duly authorized
and reserved for issuance as Additional Commitment Shares in accordance with
this Agreement.  Upon issuance in accordance with the terms and conditions of
this Agreement, the Commitment Shares, shall be validly issued, fully paid and
nonassessable and free from all taxes, liens and charges with respect to the
issue thereof, with the holders being entitled to all rights accorded to a
holder of Common Stock. The Securities are being issued pursuant to the
Registration Statement and the issuance of the Securities has been registered by
the Company pursuant to the Securities Act. Upon receipt of the Purchase Shares
and the Commitment Shares, the Investor will have good and marketable title to
such Securities and such Securities will be immediately freely tradable on the
Principal Market.

(e)           No Conflicts; Compliance.  The execution, delivery and performance
of the Transaction Documents by the Company and the consummation by the Company
of the transactions contemplated hereby and thereby (including, without
limitation, the issuance of the Initial Commitment Shares and the reservation
for issuance and issuance of the Purchase Shares, and the Additional Commitment
Shares) will not (i) result in a violation of the Articles of Incorporation or
the Bylaws or (ii) conflict with, or constitute a default (or an event which
with notice or lapse of time or both would become a default) under, or give to
others any rights of termination, amendment, acceleration or cancellation of,
any agreement, indenture or instrument to which the Company or any of its
Subsidiaries is a party, or (iii) subject to the Required Approvals (as defined
below), result in a violation of any law, rule, regulation, order, judgment or
decree (including federal, state and foreign securities laws and regulations and
the rules and regulations of the Principal Market applicable to the Company or
any of its Subsidiaries) or by which any property or asset of the Company or any
of its Subsidiaries is bound or affected, except in the case of clauses (ii) and
(iii) above, for such conflicts, defaults, terminations, amendments,
accelerations, cancellations and violations which would not reasonably be
expected to result in a Material Adverse Effect. Except as disclosed in the SEC
Documents, neither the Company nor any of its Subsidiaries is in violation of
its Articles of Incorporation or Bylaws (or other similar organizational
documents), or is in violation of any term of, or is in default under, any
contract, agreement, mortgage, indebtedness, indenture, instrument, judgment,
decree or order or any statute, rule or regulation applicable to the Company or
its Subsidiaries, except for such conflicts, defaults, terminations or
amendments which could not reasonably be expected to have a Material Adverse
Effect.  The business of the Company and its Subsidiaries is not being
conducted, and shall not be conducted, in knowing violation of any law,
ordinance or regulation of any governmental entity, except for such violations
the sanctions for which would not reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect.

(f)           Filings and Authorizations. Except as disclosed in the SEC
Documents and except where the failure to obtain any such consent, authorization
or order or make any such filing or registration would not reasonably be
expected to result in a Material Adverse Effect, the Company is not required to
obtain any consent, authorization or order of, or make any filing or
registration with, any federal, state, local or foreign court or governmental
agency or any federal, state, local or foreign regulatory or self-regulatory
agency in order for it to execute, deliver or perform any of its obligations
under or contemplated by the Transaction Documents in accordance with the terms
hereof or thereof, other than (i) as specifically contemplated by this
Agreement, (ii) as required under the Securities Act and applicable state
securities or “Blue Sky” laws, and (iii) as required under the rules and
regulations of the Principal Market in connection with the transactions
contemplated hereby (collectively, the “Required Approvals”), each of which has
been, or (if not required to have been obtained or made on or prior to the date
of this Agreement), shall be, timely obtained or made prior to the Commencement
Date. Since one year prior to the date hereof, except as disclosed in the SEC
Documents, the Company has not received nor delivered any notices or
correspondence from or to the Principal Market relating to actual and material
non-compliance with a listing standard or rule of the Principal Market. The
Principal Market has not commenced any delisting proceedings against the
Company.

 
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(g)           SEC Documents; Financial Statements. The Company has filed all
reports, schedules, forms, statements and other documents required to be filed
by the Company under the Securities Act and the Exchange Act, including pursuant
to Section 13(a) or 15(d) thereof, for the twelve (12) months preceding the
initial filing date of the Registration Statement (or such shorter period as the
Company was required by law or regulation to file such material) through date
hereof (the foregoing materials, including the exhibits thereto and documents
incorporated by reference therein, being collectively referred to herein as the
“SEC Documents”) on a timely basis or has received a valid extension of such
time of filing and has filed any such SEC Documents prior to the expiration of
any such extension.  As of their respective dates, the SEC Documents complied in
all material respects with the requirements of the Securities Act and the
Exchange Act, as applicable, and none of the SEC Documents, 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
Documents comply in all material respects with applicable accounting
requirements and the rules and regulations of the SEC 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. The Company has delivered or made available to the Investor true
and complete copies of all comment letters and substantive correspondence
received by the Company from the SEC during the 12 months immediately preceding
the date hereof, together with all written responses of the Company thereto in
the form such responses were filed with the SEC. There are no outstanding or
unresolved comments or undertakings in such comment letters received by the
Company from the SEC. To the knowledge of the Company, the SEC has not commenced
any enforcement proceedings against the Company or any of its Subsidiaries.

(h)           Absence of Certain Changes.  Except as disclosed in the SEC
Documents and except as contemplated by this Agreement, since the date of the
latest audited financial statements included within the SEC Documents, there has
been no change in the business, properties, operations, financial condition or
results of operations of the Company or its Subsidiaries that would reasonably
be expected to result in a Material Adverse Effect.  The Company has not taken
any steps, and does not currently expect to take any steps, to seek protection
pursuant to any Bankruptcy Law nor does the Company or any of its Subsidiaries
have any knowledge or reason to believe that its creditors intend to initiate
involuntary bankruptcy or insolvency proceedings.  The Company is financially
solvent and is generally able to pay its debts as they become due.

(i)           Absence of Litigation. Except as disclosed in the SEC Documents,
there is no action, suit, proceeding, inquiry or investigation before or by any
court, public board, government agency, self-regulatory organization or body
pending or, to the knowledge of the Company, threatened against or affecting the
Company or any Subsidiary or any of the Company’s or its Subsidiaries’ officers
or directors in their capacities as such, which would, if there were an
unfavorable decision, reasonably be expected to result in a Material Adverse
Effect.

(j)           Acknowledgment Regarding Investor's Status.  The Company
acknowledges and agrees that the Investor is acting solely in the capacity of
arm's length purchaser with respect to the Transaction Documents and the
transactions contemplated hereby and thereby.  The Company further acknowledges
that the Investor is not acting as a financial advisor or fiduciary of the
Company (or in any similar capacity) with respect to the Transaction Documents
and the transactions contemplated hereby and thereby and any advice given by the
Investor or any of its representatives or agents in connection with the
Transaction Documents and the transactions contemplated hereby and thereby is
merely incidental to the Investor's purchase of the Securities.  The Company
further represents to the Investor that the Company's decision to enter into the
Transaction Documents has been based solely on the independent evaluation by the
Company and its representatives and advisors.

 
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(k)           No Integrated Offering.  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 in a manner that
would require stockholder approval pursuant to the rules of the Principal Market
on which any of the securities of the Company are listed or designated. The
issuance and sale of the Securities hereunder does not contravene the rules and
regulations of the Principal Market.

 (l)           Intellectual Property Rights.  The Company or any Subsidiary own
(or can acquire on reasonable terms) all patents, patent applications,
trademarks, service marks, trade names, copyrights, licenses and other similar
intellectual property rights currently employed by them in connection with the
business currently operated by them that are necessary for use in the conduct of
their respective businesses as described in the SEC Documents and which the
failure to so have would not reasonably be expected to have a Material Adverse
Effect (collectively, the “Intellectual Property Rights”).  To the knowledge of
the Company, all such Intellectual Property Rights owned by the Company or any
Subsidiary are enforceable and there is no existing infringement by another
Person of any of the Intellectual Property Rights owned by the Company or any
Subsidiary. Except as set forth in the SEC Documents, there are no actions,
suits or judicial proceedings pending, or to the Company’s knowledge threatened,
relating to patents or proprietary information to which the Company or any of
its Subsidiaries is a party or of which any property of the Company or any of
its Subsidiaries is subject, and neither the Company nor any of its Subsidiaries
has received any written notice or is otherwise aware of any infringement of or
conflict with asserted rights of any other Person with respect to any
Intellectual Property Rights owned by the Company or any Subsidiary, or of any
facts or circumstances which could render any Intellectual Property Rights owned
by the Company or any Subsidiary invalid or inadequate to protect the interest
of the Company and its Subsidiaries therein, and which infringement or conflict
(if the subject of any unfavorable decision, ruling or finding) or invalidity or
inadequacy, individually or in the aggregate, would reasonably be expected to
have a Material Adverse Effect.

(m)           Environmental Laws.  The Company and its Subsidiaries (i) are in
compliance with any and all applicable Environmental Laws, (ii) have received
all permits, licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses and (iii) are in
compliance with all terms and conditions of any such permit, license or
approval, except in the case of clauses (i), (ii) and (iii) above, where the
failure to so comply or to obtain such permits, licenses or approvals would not
reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect.  As used herein, “Environmental Laws” means foreign,
federal, state and local laws and regulations relating to any pollutant,
chemical, substance and any toxic, infectious, carcinogenic, reactive,
corrosive, ignitable or flammable chemical, or chemical compound, or hazardous
substance, material or waste, whether solid, liquid or gas, that is subject to
regulation, control or remediation, including without limitation, any quantity
of asbestos in any form, urea formaldehyde, radon gas, crude oil or any fraction
thereof, all forms of natural gas, petroleum products or by-products or
derivatives.

(n)           Title.  The Company and the Subsidiaries have good and marketable
title in fee simple to all real property owned by them and valid title in all
personal property owned by them described in the SEC Documents that is material
to the business of the Company and the Subsidiaries, in each case free and clear
of all liens, encumbrances and defects (collectively, “Liens”), except for Liens
that are not reasonably likely to result in a Material Adverse Effect.  Any real
property and facilities held under lease by the Company and its Subsidiaries are
held by them under valid, subsisting and enforceable leases with which the
Company and the Subsidiaries are in compliance (with such exceptions as are not
material and do not interfere with the use made and proposed to be made of such
property and buildings by the Company and its Subsidiaries).

 
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(o)           Insurance.  The Company and each of its Subsidiaries are insured
by insurers of recognized financial responsibility against such losses and risks
and in such amounts as management of the Company believes to be prudent and
customary in the businesses in which the Company and its Subsidiaries are
engaged.  Neither the Company nor any of its Subsidiaries has been refused any
insurance coverage sought or applied for and neither the Company nor any such
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.

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

(q)           Tax Status.  The Company and each of its Subsidiaries has made or
filed (or requested valid extensions of) all federal, state and foreign income
and all other material tax returns, reports and declarations required by any
jurisdiction to which it is subject (unless and only to the extent that the
Company and each of its Subsidiaries has set aside on its books provisions
reasonably adequate for the payment of all unpaid and unreported taxes) and 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, except those being contested in good faith.  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 know of no basis for any such
claim.

(r)           Transactions With Affiliates.   Except as set forth in the SEC
Documents, none of the officers or directors of the Company and, to the
knowledge of the Company, none of the employees of the Company is presently a
party to any transaction with the Company or any Subsidiary (other than for
services as employees, officers and directors) that is required to be disclosed
and is not disclosed, including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of real
or personal property to or from, or otherwise requiring payments to or from any
officer, director or such employee or, to the knowledge of the Company, any
entity in which any officer, director, or any such employee has a substantial
interest or is an officer, director, trustee or partner, in each case in excess
of $120,000, other than for (i) payment of salary or consulting fees for
services rendered, (ii) reimbursement for expenses incurred on behalf of the
Company and (iii) other employee benefits, including stock option agreements
under any equity incentive plan of the Company.

(s)           Application of Takeover Protections.  The Company and its board of
directors have taken or will take prior to the Commencement Date 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 Articles of
Incorporation or the laws of the state of its incorporation which is or could
become applicable to the Investor as a result of the transactions contemplated
by this Agreement, including, without limitation, the Company's issuance of the
Securities and the Investor's ownership of the Securities.

 
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(t)            Disclosure.  Except with respect to the material terms and
conditions of the transactions contemplated by the Transaction Documents that
will be, and to the extent that they actually are, timely publicly disclosed by
the Company, the Company confirms that neither it nor any other Person acting on
its behalf has provided the Investor or its agents or counsel with any
information that it believes constitutes or might constitute material,
non-public information which is not otherwise disclosed in the Registration
Statement or the SEC Documents.  The Company understands and confirms that the
Investor will rely on the foregoing representation in effecting acquisitions and
sales of securities of the Company.  All of the disclosure furnished by or on
behalf of the Company to the Investor regarding the Company, its business and
the transactions contemplated hereby, including the disclosure schedules to this
Agreement, is true and correct and does not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading. The press releases disseminated by the Company during the
twelve months preceding the date of this Agreement taken as a whole do not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made and when made,
not misleading.  The Company acknowledges and agrees that the Investor neither
makes nor has made any representations or warranties with respect to the
transactions contemplated hereby other than those specifically set forth in
Section 3 hereof.

(u)           Foreign Corrupt Practices.   Neither the Company, nor to the
knowledge of the Company, any agent or other person acting on behalf of the
Company, has (i) directly or indirectly, used any funds for unlawful
contributions, gifts, entertainment or other unlawful expenses related to
foreign or domestic political activity, (ii) made any unlawful payment to
foreign or domestic government officials or employees or to any foreign or
domestic political parties or campaigns from corporate funds, (iii) failed to
disclose fully any contribution made by the Company (or made by any person
acting on its behalf of which the Company is aware) which is in violation of
law, or (iv) violated in any respect any provision of the Foreign Corrupt
Practices Act of 1977, as amended, except in the case of clauses (i), (ii),
(iii), and (iv) above, where the failure to so comply would not reasonably be
expected to have, either individually or in the aggregate, a Material Adverse
Effect.

 
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(v)           Registration Statement. The Company has prepared and filed with
the SEC in accordance with the provisions of the Securities Act the Registration
Statement. The Registration Statement was declared effective by order of the SEC
on August 30, 2011. The Registration Statement is effective pursuant to the
Securities Act and available for the issuance of the Securities thereunder, and
the Company has not received any written notice that the SEC has issued or
intends to issue a stop order or other similar order with respect to the
Registration Statement or the Prospectus or that the SEC otherwise has
(i) suspended or withdrawn the effectiveness of the Registration Statement or
(ii) issued any order preventing or suspending the use of the Prospectus or any
Prospectus Supplement, in either case, either temporarily or permanently or
intends or has threatened in writing to do so. The “Plan of Distribution”
section of the Prospectus permits the issuance of the Securities hereunder. At
the time the Registration Statement and any amendments thereto became effective,
at the date of this Agreement and at each deemed effective date thereof pursuant
to Rule 430B(f)(2) of the Securities Act, the Registration Statement and any
amendments thereto complied and will comply in all material respects with the
requirements of the Securities Act and did not and will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading; and
the Base Prospectus and any Prospectus Supplement thereto, at the time such Base
Prospectus or such Prospectus Supplement thereto was issued and on the
Commencement Date, complied and will comply in all material respects with the
requirements of the Securities Act and did not and will not contain an untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading; provided that this representation and warranty does
not apply to statements in or omissions from any Prospectus Supplement made in
reliance upon and in conformity with information relating to the Investor
furnished to the Company in writing by or on behalf of the Investor expressly
for use therein. The Company meets all of the requirements for the use of a
registration statement on Form S-3 pursuant to the Securities Act for the
offering and sale of the Securities contemplated by this Agreement in reliance
on General Instruction I.B.6. of Form S-3 and the Staff Interpretations, and the
SEC has not notified the Company of any objection to the use of the form of the
Registration Statement pursuant to Rule 401(g)(1) of the Securities Act. The
Company hereby confirms that it shall not issue any shares of Common Stock
pursuant to this Agreement if such issuance would reasonably be expected to
result in non-compliance with General Instruction I.B.6. of Form S-3 and the
Staff Interpretations. The Registration Statement, as of its effective date,
meets the requirements set forth in Rule 415(a)(1)(x) pursuant to the Securities
Act. At the earliest time after the filing of the Registration Statement that
the Company or another offering participant made a bona fide offer (within the
meaning of Rule 164(h)(2) of the Securities Act) relating to any of the
Securities, the Company was not and is not an Ineligible Issuer (as defined in
Rule 405 of the Securities Act).  The Company has not distributed any offering
material in connection with the offering and sale of any of the Securities, and,
until the Investor does not hold any of the Securities, shall not distribute any
offering material in connection with the offering and sale of any of the
Securities, to or by the Investor, in each case, other than the Registration
Statement or any amendment thereto, the Prospectus or any Prospectus Supplement
required pursuant to applicable law or the Transaction Documents. The Company
has not made, and agrees that unless it obtains the prior written consent of the
Investor it will not make, an offer relating to the Securities that would
constitute a “free writing prospectus” as defined in Rule 405 under the
Securities Act. The Company shall comply with the requirements of Rules 164 and
433 under the Securities Act applicable to any such free writing prospectus
consented to by the Investor, including in respect of timely filing with the
SEC, legending and record keeping.

(w)           DTC Eligibility.  The Company, through the Transfer Agent,
currently participates in the DTC Fast Automated Securities Transfer (FAST)
Program and the Common Stock can be transferred electronically to third parties
via the DTC Fast Automated Securities Transfer (FAST) Program.

(x)           Sarbanes-Oxley. The Company is in material compliance with all
provisions of the Sarbanes-Oxley Act of 2002, as amended, which are applicable
to it as of the date hereof, except where the failure to be in compliance is not
reasonably likely to result in a Material Adverse Effect.
 

 
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(y)           Certain Fees. Except as disclosed (if any) on Schedule 4(y), no
brokerage or finder’s fees or commissions are or will be payable by the Company
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. Except as disclosed (if any) on
Schedule 4(y), the Investor 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 4(y) that may be due in connection with the
transactions contemplated by the Transaction Documents.
 
(z)           Investment Company. The Company is not, and immediately after
receipt of payment for the Securities will not be, an “investment company”
within the meaning of the Investment Company Act of 1940, as amended.
 
(aa)           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 pursuant to
the Exchange Act nor has the Company received any notification that the SEC is
currently contemplating terminating such registration. Except as disclosed in
the SEC Documents, the Company has not, in the 12 months preceding the date
hereof, received any written notice from any Person to the effect that the
Company is in actual and material non-compliance with the listing or maintenance
requirements of the Principal Market. Except as disclosed in the SEC Documents,
the Company is in compliance with all such listing and maintenance requirements.
 
(bb)           Accountants.  The Company’s accountants are set forth in the SEC
Documents and, to the knowledge of the Company, such accountants are an
independent registered public accounting firm as required by the Securities Act.
 
(cc)           Regulation M Compliance. The Company has not, and to its
knowledge no Person 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.
 
(dd)           Shell Company Status. The Company is not, and has never been, an
issuer identified in Rule 144(i)(1) under the Securities Act.
 

 
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5.           COVENANTS.

(a)           Filing of Current Report and Initial Prospectus Supplement.  The
Company agrees that it shall, within the time required under the Exchange Act,
file with the SEC a report on Form 8-K relating to the transactions contemplated
by, and describing the material terms and conditions of, the Transaction
Documents (the “Current Report”). The Company further agrees that it shall,
within the time required under Rule 424(b) under the Securities Act, file with
the SEC the Initial Prospectus Supplement pursuant to Rule 424(b) under the
Securities Act specifically relating to the transactions contemplated by, and
describing the material terms and conditions of, the Transaction Documents,
containing information previously omitted at the time of effectiveness of the
Registration Statement in reliance on Rule 430B under the Securities Act, and
disclosing all information relating to the transactions contemplated hereby
required to be disclosed in the Registration Statement and the Prospectus as of
the date of the Initial Prospectus Supplement, including, without limitation,
information required to be disclosed in the section captioned “Plan of
Distribution” in the Prospectus. The Investor acknowledges that it will be
identified in the Initial Prospectus Supplement as an underwriter within the
meaning of Section 2(a)(11) of the Securities Act. The Company shall permit the
Investor to review and comment upon the Current Report and the Initial
Prospectus Supplement at least two (2) Business Days prior to their filing with
the SEC, the Company shall give due consideration to all such comments, and the
Company shall not file the Current Report or the Initial Prospectus Supplement
with the SEC in a form to which the Investor reasonably objects. The Investor
shall use its reasonable best efforts to comment upon the Current Report and the
Initial Prospectus Supplement within one (1) Business Day from the date the
Investor receives the final pre-filing draft version thereof from the Company.
The Investor shall furnish to the Company such information regarding itself, the
Securities held by it and the intended method of distribution thereof, including
any arrangement between the Investor and any other Person relating to the sale
or distribution of the Securities, as shall be reasonably requested by the
Company in connection with the preparation and filing of the Current Report and
the Initial Prospectus Supplement, and shall otherwise cooperate with the
Company as reasonably requested by the Company in connection with the
preparation and filing of the Current Report and the Initial Prospectus
Supplement.

(b)           Blue Sky. The Company shall take all such action, if any, as is
reasonably necessary in order to obtain an exemption for or to qualify (i) the
issuance of the Commitment Shares and the sale of the Purchase Shares to the
Investor under this Agreement and (ii) any subsequent resale of the Commitment
Shares and any Purchase Shares by the Investor, in each case, under applicable
securities or “Blue Sky” laws of the states of the United States in such states
as is reasonably requested by the Investor from time to time, and shall provide
evidence of any such action so taken to the Investor.

(c)           Listing/DTC.  The Company shall promptly secure the listing of all
of the Purchase Shares and Commitment Shares to be issued to the Investor
hereunder on the Principal Market (subject to official notice of issuance)
except that, unless the stockholder approval referred to in Section 2(e)(i) is
obtained, the Company shall not be required in connection with the issuance or
sale of any shares of Common Stock to the Investor to secure the listing of more
than approximately 19.9% of the outstanding shares of Common Stock. The Company
shall use reasonable best efforts to maintain, so long as any shares of Common
Stock shall be listed on the Principal Market, such listing of all such
Securities from time to time issuable hereunder. The Company shall use
commercially reasonable efforts to maintain the listing of the Common Stock on
the Principal Market and shall comply in all respects with the Company’s
reporting, filing and other obligations under the bylaws or rules and
regulations of the Principal Market. Neither the Company nor any of its
Subsidiaries shall take any action that would reasonably be expected to result
in the delisting or suspension of the Common Stock on the Principal Market.  The
Company shall promptly, and in no event later than the following Business Day,
provide to the Investor copies of any notices it receives from the Principal
Market regarding the continued eligibility of the Common Stock for listing on
the Principal Market; provided, however, that the Company shall not be required
to provide the Investor copies of any such notice that the Company reasonably
believes constitutes material non-public information and the Company would not
be required to publicly disclose such notice in any report or statement filed
with the SEC under the Exchange Act (including on Form 8-K) or the Securities
Act. The Company shall pay all fees and expenses in connection with satisfying
its obligations under this Section.  The Company shall take all action necessary
to ensure that its Common Stock can be transferred electronically as DWAC
Shares.

 
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(d)           Limitation on Short Sales and Hedging Transactions.  The Investor
agrees that, beginning on the date of this Agreement and ending on the date of
termination of this Agreement as provided in Section 11, the Investor and its
agents, representatives and affiliates shall not in any manner whatsoever enter
into or effect, directly or indirectly, any (i) “short sale” (as such term is
defined in Rule 200 of Regulation SHO of the Exchange Act) of the Common Stock
or (ii) hedging transaction, which establishes a net short position with respect
to the Common Stock.

(e)           Issuance of Commitment Shares.  In consideration for the
Investor’s execution and delivery of this Agreement, the Company shall cause the
Transfer Agent to issue, on the date of this Agreement, 281,030 shares of Common
Stock (the “Initial Commitment Shares”) directly to the Investor electronically
as DWAC Shares and shall deliver to the Transfer Agent the Irrevocable Transfer
Agent Instructions with respect to the issuance of the Commitment Shares.  For
the avoidance of doubt, all of the Initial Commitment Shares shall be fully
earned as of the date of this Agreement, whether or not the Commencement shall
occur or any Purchase Shares are purchased by the Investor under this Agreement
and irrespective of any termination of this Agreement.  In connection with each
purchase of Purchase Shares hereunder, the Company agrees to issue to the
Investor a number of shares of Common Stock (the “Additional Commitment Shares”
and together with the Initial Commitment Shares, the “Commitment Shares”) equal
to the product of (x) 286,651 and (y) the Purchase Amount Fraction.  The
“Purchase Amount Fraction” shall mean a fraction, the numerator of which is the
Purchase Amount purchased by the Investor with respect to such purchase of
Purchase Shares and the denominator of which is Three Million Four Hundred
Thousand Dollars ($3,400,000).  The Additional Commitment Shares shall be
equitably adjusted for any reorganization, recapitalization, non-cash dividend,
stock split or other similar transaction.  For the avoidance of doubt, the
Additional Commitment Shares shall be fully earned as of the date of their
issuance pursuant to this Agreement, whether or not any additional Purchase
Shares are purchased thereafter by the Investor under this Agreement and
irrespective of any termination of this Agreement.

(f)           Non-Public Information.  Each party hereto agrees not to disclose
any Confidential Information of the other party to any third party and shall not
use the Confidential Information for any purpose other than in connection with,
or in furtherance of, the transactions contemplated hereby.  Each party hereto
acknowledges that the Confidential Information shall remain the property of the
disclosing party and agrees that it shall take all reasonable measures to
protect the secrecy of any Confidential Information disclosed by the other
party. From and after the date of this Agreement, the Company covenants and
agrees that neither it nor any other Person acting on its behalf will provide
the Investor or its agents or counsel with any information that the Company, in
its sole and absolute discretion, believes constitutes material non-public
information, unless a simultaneous public announcement thereof is made by the
Company in the manner contemplated by Regulation FD. In the event of a breach of
the foregoing covenant by the Company or any Person acting on its behalf (as
determined in the reasonable good faith judgment of the Investor), in addition
to any other remedy provided herein or in the other Transaction Documents, the
Investor shall have the right to make a public disclosure, in the form of a
press release, public advertisement or otherwise, of such material, non-public
information without the prior approval by the Company; provided that the
Investor shall have provided a draft final version of such press release, public
advertisement or otherwise at least 24 hours prior to the Investor’s public
disclosure and the Company shall have failed to publicly disclose such material,
non-public information prior to such disclosure by the Investor. The Investor
shall not have any liability to the Company, any of its Subsidiaries, or any of
their respective directors, officers, employees, stockholders or agents, for any
such disclosure. The Company understands and confirms that the Investor shall be
relying on the foregoing covenants in effecting transactions in securities of
the Company.
 
(g)           Purchase Records. The Investor and the Company shall each maintain
records showing the remaining Available Amount at any given time and the
Purchase Date and amount of the Initial Purchase, Regular Purchase Amount and
Accelerated Purchase Amount for each purchase of Purchase Shares, or shall use
such other method, reasonably satisfactory to the Investor and the Company.
 
(h)           Taxes.  The Company shall pay any and all transfer, stamp or
similar taxes that may be payable with respect to the issuance and delivery of
any shares of Common Stock to the Investor made under this Agreement.

 
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(i)            No Variable Rate Transactions; Participation Rights.  (I)   From
the date hereof until the Maturity Date the Company shall be prohibited from
effecting or entering into an agreement to effect any issuance by the Company or
any of its Subsidiaries of Common Stock or Common Stock Equivalents for cash
consideration (or a combination of units thereof) involving a Variable Rate
Transaction other than in connection with an Exempt Issuance.  “Variable Rate
Transaction” means a transaction in which the Company (i) issues or sells any
debt or equity securities that are convertible into, exchangeable or exercisable
for, or include the right to receive additional shares of Common Stock either
(A) at a conversion price, exercise price or exchange rate or other price that
is based upon and/or varies with the trading prices of or quotations for the
shares of Common Stock at any time after the initial issuance of such debt or
equity securities, or (B) with a conversion, exercise or exchange price that is
subject to being reset at some future date after the initial issuance of such
debt or equity security or upon the occurrence of specified or contingent events
directly or indirectly related to the business of the Company or the market for
the Common Stock (including, without limitation any “full ratchet” or “weighted
average” anti-dilution provisions) or (ii) enters into any agreement, including,
but not limited to, an equity line of credit or at-the-market offering, whereby
the Company may sell securities at a future determined price. “Exempt Issuance”
means the issuance of (a) shares of Common Stock or options to employees,
officers, directors or vendors of the Company pursuant to any stock or option
plan duly adopted for such purpose, by the Board of Directors or a majority of
the members of a committee of directors established for such purpose, (b)
securities upon the exercise or exchange of or conversion of any Securities
issued hereunder and/or other securities exercisable or exchangeable for or
convertible into shares of Common Stock issued and outstanding on the date of
this Agreement, provided that such securities have not been amended since the
date of this Agreement to increase the number of such securities or to decrease
the exercise price, exchange price or conversion price of such securities, and
(c) securities issued pursuant to acquisitions or strategic transactions
approved by the Board of Directors or a majority of the members of a committee
of directors established for such purpose, which acquisitions or strategic
transactions can have a Variable Rate Transaction component, provided that any
such issuance shall only be to a Person (or to the equity holders of a Person)
which is, itself or through its subsidiaries, an operating company or an asset
in a business synergistic with the business of the Company and shall provide to
the Company additional benefits in addition to the investment of funds, but
shall not include a transaction in which the Company is issuing securities
primarily for the purpose of raising capital or to an entity whose primary
business is investing in securities.  The parties hereto acknowledge and agree
that none of the provisions of this Section 5(i)(I) shall apply to any
Change-in-Control, and that this Section 5(i)(I) shall automatically terminate
upon a Change-in-Control.  For purposes of this Section 5(i)(I), a
“Change-in-Control” means any one or more of the following, in which the Person
or Persons effecting the change-in-control transaction is, itself or through its
subsidiaries, an operating company or 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 and is not a Person or Persons whose
primary business is investing in securities: (1) the Company shall, directly or
indirectly, in one or more related transactions, (A) consolidate or merge with
or into (whether or not the Company is the surviving corporation) another
Person, with the result that the holders of the Company’s capital stock
immediately prior to such consolidation or merger together beneficially own less
than 50% of the outstanding voting power of the surviving or resulting
corporation, or (B) sell, lease, license, assign, transfer, convey or otherwise
dispose of all or substantially all of the properties or assets of the Company
to another Person, or (C) take action to facilitate a purchase, tender or
exchange offer by another Person that is accepted by the holders of more than
50% of the outstanding shares of Common Stock (not including any shares of
Common Stock held by the Person or Persons making or party to, or associated or
affiliated with the Persons making or party to, such purchase, tender or
exchange offer), or (D) consummate a stock or share purchase agreement or other
business combination (including, without limitation, a reorganization,
recapitalization, spin-off or scheme of arrangement) with another Person whereby
such other Person acquires more than 50% of the outstanding shares of Common
Stock (not including any shares of Common Stock held by the other Person or
other Persons making or party to, or associated or affiliated with the other
Persons making or party to, such stock or share purchase agreement or other
business combination), or (2) any “person” or “group” (as these terms are used
for purposes of Sections 13(d) and 14(d) of the Exchange Act) is or shall become
the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of 50% or more of the aggregate ordinary voting power
represented by issued and outstanding Common Stock.
 
 
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(II)           For six (6) Monthly Periods beginning on the date hereof, the
Company agrees that, prior to entering into each and any definitive agreement
for the sale directly or indirectly of any debt, Common Stock or Common Stock
Equivalents (a “Subsequent Transaction”), the Company shall provide notice to
the Investor (“Offering Notice”) not less than three (3) Business Days nor more
than five (5) Business Days prior to entering into any such Subsequent
Transaction, including the relevant terms and conditions of such Subsequent
Transaction, and the Investor shall have the right to participate on equivalent
terms and conditions in up to 10% of such Subsequent Transaction (the “Right of
Participation”) by delivering notice to the Company not later than two (2)
Business Days after receipt of the Offering Notice, which notice from Investor
shall indicate Investor’s intention to participate in the Subsequent Transaction
and the amount of its participation.   In the event that the Investor does not
provide notice within the two (2) Business Day period and the Company does not
enter into such Subsequent Transaction within five (5) Business Days from the
Offering Notice, the Company shall again be required to provide an Offering
Notice as set forth herein.  The Company shall deliver an Offering Notice for
each and any Subsequent Transaction and agrees that it shall not execute any
definitive documentation for any Subsequent Transaction whatsoever, unless it
has first complied with this Section 5(i)(II).  Notwithstanding anything to the
contrary in this Section 5(i)(II) and unless otherwise agreed to by Investor,
the Company shall either confirm in writing to Investor that the transaction
with respect to the Subsequent Transaction has been abandoned or shall publicly
disclose its intention to enter into the Subsequent Transaction, in either case
in such a manner such that Investor will not be in possession of any material,
non-public information, by the fifth (5th) Business Day following delivery of
the Offering Notice. If by such fifth (5th) Business Day, no public disclosure
regarding a transaction with respect to the Subsequent Transaction has been
made, and no notice regarding the abandonment of such transaction has been
received by Investor, such transaction shall be deemed to have been abandoned
and Investor shall not be in possession of any material, non-public information
with respect to the Company or any of its Subsidiaries. If the Investor is in
possession of any information that is reasonably deemed to be material,
non-public information concerning the Company or any of its Subsidiaries during
such five (5) Business Day period, the Investor agrees to keep such information
confidential and shall not engage in transactions with respect to the Company’s
securities, and the Company agrees not to deliver any Purchase Notice to the
Investor, in each case during such five (5) Business Day (or shorter) period
that the Investor may be reasonably deemed to be in possession of material,
non-public information concerning the Company or any of its Subsidiaries. Should
the Company decide to pursue such transaction with respect to the Subsequent
Transaction, the Company shall provide Investor with another Offering Notice in
accordance with, and subject to, the terms of this Section 5(i)(II) and Investor
will again have the Right of Participation set forth in this Section 5(i)(II).

 
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(j)           Effective Registration Statement; Current Prospectus; Securities
Law Compliance. The Company shall use its reasonable best efforts to keep the
Registration Statement effective pursuant to Rule 415 promulgated under the
Securities Act, and to keep the Registration Statement and the Prospectus
current and available for issuances and sales of all of the Securities by the
Company to the Investor, and for the resale by the Investor, at all times until
the earlier of (i) the date on which the Investor shall have sold all the
Securities and no Available Amount remains under this Agreement and (ii) 90 days
following the Maturity Date (the "Registration Period"). Without limiting the
generality of the foregoing, during the Registration Period, the Company shall
(a) take all action necessary to cause the Common Stock to continue to be
registered as a class of securities under Sections 12(b) or 12(g) of the
Exchange Act, shall comply with its reporting and filing obligations under the
Exchange Act, and shall not take any action or file any document (whether or not
permitted by the Exchange Act) to terminate or suspend such registration or to
terminate or suspend its reporting and filing obligations under the Exchange
Act, and (b) prepare and file with the SEC, at the Company’s expense, such
amendments (including, without limitation, post-effective amendments) to the
Registration Statement and such Prospectus Supplements pursuant to Rule 424(b)
under the Securities Act, in each case, as may be necessary to keep the
Registration Statement effective pursuant to Rule 415 promulgated under the
Securities Act, and to keep the Registration Statement and the Prospectus
current and available for issuances and sales of all of the Securities by the
Company to the Investor, and for the resale of all of the Securities by the
Investor, at all times during the Registration Period. The Investor shall
furnish to the Company such information regarding itself, the Securities held by
it and the intended method of distribution thereof as shall be reasonably
requested by the Company in connection with the preparation and filing of any
such amendment to the Registration Statement or any such Prospectus Supplement,
and shall otherwise cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of any such amendment to
the Registration Statement or any such Prospectus Supplement. The Company shall
comply with all applicable federal, state and foreign securities laws in
connection with the offer, issuance and sale of the Securities contemplated by
the Transaction Documents. Without limiting the generality of the foregoing,
neither the Company nor any of its officers, directors or affiliates will take,
directly or indirectly, any action designed or intended to stabilize or
manipulate the price of any security of the Company, or which would reasonably
be expected to cause or result in, stabilization or manipulation of the price of
any security of the Company.

(k)           Stop Orders.  The Company shall advise the Investor promptly (but
in no event later than 24 hours) and shall confirm such advice in writing: (i)
of the Company’s receipt of notice of any request by the SEC for amendment of or
a supplement to the Registration Statement, the Prospectus, any Prospectus
Supplement or for any additional information.; (ii) of the Company’s receipt of
notice of the issuance by the SEC of any stop order suspending the effectiveness
of the Registration Statement or prohibiting or suspending the use of the
Prospectus or any Prospectus Supplement, or of the Company’s receipt of any
notification of the suspension of qualification of the Securities for offering
or sale in any jurisdiction or the initiation or contemplated initiation of any
proceeding for such purpose; and (iii) of the Company becoming aware of the
happening of any event, which makes any statement of a material fact made in the
Registration Statement, the Prospectus or any Prospectus Supplement untrue or
which requires the making of any additions to or changes to the statements then
made in the Registration Statement, the Prospectus or any Prospectus Supplement
in order to state a material fact required by the Securities Act to be stated
therein or necessary in order to make the statements then made therein (in the
case of the Prospectus or any Prospectus Supplement, in light of the
circumstances under which they were made) not misleading, or of the necessity to
amend the Registration Statement or supplement the Prospectus or any Prospectus
Supplement to comply with the Securities Act or any other law. The Company shall
not be required to disclose to the Investor the substance or specific reasons of
any of the events set forth in clauses (i) through (iii) of the immediately
preceding sentence, but rather, shall only be required to disclose that the
event has occurred. The Company shall not deliver to the Investor any Regular
Purchase Notice or Accelerated Purchase Notice, and the Investor shall not be
obligated to purchase any shares of Common Stock under this Agreement, during
the continuation or pendency of any of the foregoing events. If at any time the
SEC shall issue any stop order suspending the effectiveness of the Registration
Statement or prohibiting or suspending the use of the Prospectus or any
Prospectus Supplement, the Company shall use its reasonable best efforts to
obtain the withdrawal of such order at the earliest possible time. The Company
shall furnish to the Investor, without charge, a copy of any correspondence from
the SEC or the staff of the SEC to the Company or its representatives relating
to the Registration Statement or the Prospectus, as the case may be.
 
 
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(l)           Amendments to Registration Statement; Prospectus Supplements.
Except as provided in this Agreement and other than periodic and current reports
required to be filed pursuant to the Exchange Act, the Company shall not file
with the SEC any amendment to the Registration Statement or any supplement to
the Base Prospectus that refers to the Investor, the Transaction Documents or
the transactions contemplated thereby (including, without limitation, any
Prospectus Supplement filed in connection with the transactions contemplated by
the Transaction Documents), in each case with respect to which (a) the Investor
shall not previously have been advised and afforded the opportunity to review
and comment thereon at least two (2) Business Days prior to filing with the SEC,
as the case may be, (b) the Company shall not have given due consideration to
any comments thereon received from the Investor or its counsel, or (c) the
Investor shall reasonably object, unless the Company reasonably has determined
that it is necessary to amend the Registration Statement or make any supplement
to the Prospectus to comply with the Securities Act or any other applicable law
or regulation, in which case the Company shall promptly (but in no event later
than 24 hours) so inform the Investor, the Investor shall be provided with a
reasonable opportunity to review and comment upon any disclosure referring to
the Investor, the Transaction Documents or the transactions contemplated
thereby, as applicable, and the Company shall expeditiously furnish to the
Investor a copy thereof. In addition, for so long as, in the reasonable opinion
of counsel for the Investor, the Prospectus is required to be delivered in
connection with any acquisition or sale of Securities by the Investor, the
Company shall not file any Prospectus Supplement with respect to the Securities
without furnishing to the Investor as many copies of such Prospectus Supplement,
together with the Prospectus, as the Investor may reasonably request.

(m)           Prospectus Delivery.  The Company consents to the use of the
Prospectus (and of each Prospectus Supplement thereto) in accordance with the
provisions of the Securities Act and with the securities or “blue sky” laws of
the jurisdictions in which the Securities may be sold by the Investor, in
connection with the offering and sale of the Securities and for such period of
time thereafter as the Prospectus is required by the Securities Act to be
delivered in connection with sales of the Securities. The Company will make
available to the Investor upon request, and thereafter from time to time will
furnish to the Investor, as many copies of the Prospectus (and each Prospectus
Supplement thereto) as the Investor may reasonably request for the purposes
contemplated by the Securities Act within the time during which the Prospectus
is required by the Securities Act to be delivered in connection with sales of
the Securities. If during such period of time any event shall occur that in the
reasonable judgment of the Company and its counsel, or in the reasonable
judgment of the Investor and its counsel, is required to be set forth in the
Registration Statement, the Prospectus or any Prospectus Supplement or should be
set forth therein in order to make the statements made therein (in the case of
the Prospectus or any Prospectus Supplement, in light of the circumstances under
which they were made) not misleading, or if in the reasonable judgment of the
Company and its counsel, or in the reasonable judgment of the Investor and its
counsel, it is otherwise necessary to amend the Registration Statement or
supplement the Prospectus or any Prospectus Supplement to comply with the
Securities Act or any other applicable law or regulation, the Company shall
forthwith prepare and, subject to Section 5(l) above, file with the SEC an
appropriate amendment to the Registration Statement or an appropriate Prospectus
Supplement and in each case shall expeditiously furnish to the Investor, at the
Company’s expense, such amendment to the Registration Statement or such
Prospectus Supplement, as applicable, as may be necessary to reflect any such
change or to effect such compliance. The Company shall have no obligation to
separately advise the Investor of, or deliver copies to the Investor of, the SEC
Documents, all of which the Investor shall be deemed to have notice of.

(n)           Integration. From and after the date of this Agreement, 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) of the Company that would be integrated with the offer or sale of the
Securities such that the rules or regulations of the Principal Market would
require stockholder approval of this transaction prior to the closing of such
other transaction unless stockholder approval is obtained before the closing of
such subsequent transaction.

(o)           Use of Proceeds. The Company will use the net proceeds from the
offering only for working capital and general corporate purposes, and the net
proceeds from the offering shall not be used 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).
 

 
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(p)           Other Transactions. The Company shall not enter into, announce or
recommend to its stockholders any agreement, plan, arrangement or transaction in
or of which the terms thereof would restrict, materially delay, conflict with or
impair the ability or right of the Company to perform its obligations under the
Transaction Documents, including, without limitation, the obligation of the
Company to deliver the Purchase Shares and the Commitment Shares to the Investor
in accordance with the terms of the Transaction Documents.
 
6.           TRANSFER AGENT INSTRUCTIONS.

On the date of this Agreement, the Company shall issue irrevocable instructions
to the Transfer Agent, and any subsequent transfer agent, to issue the Purchase
Shares and the Commitment Shares in accordance with the terms of this Agreement
(the “Irrevocable Transfer Agent Instructions”). All Securities to be issued to
or for the benefit of the Investor pursuant to this Agreement shall be issued as
DWAC Shares. The Company warrants to the Investor that no instruction other than
the Irrevocable Transfer Agent Instructions referred to in this Section 6 will
be given by the Company to the Transfer Agent with respect to the Securities,
and the Securities shall otherwise be freely transferable on the books and
records of the Company.

 
7.
CONDITIONS TO THE COMPANY'S RIGHT TO COMMENCE SALES OF SHARES OF COMMON STOCK.

The right of the Company hereunder to commence sales of the Purchase Shares on
the Commencement Date is subject to the satisfaction or, where legally
permissible, the waiver of each of the following conditions:

(a)           The Investor shall have executed each of the Transaction Documents
and delivered the same to the Company;

(b)           No stop order with respect to the Registration Statement shall be
pending or threatened by the SEC;

(c)           All federal, state, local and foreign governmental laws, rules and
regulations applicable to the transactions contemplated by the Transaction
Documents and necessary for the execution, delivery and performance of the
Transaction Documents and the consummation of the transactions contemplated
thereby in accordance with the terms thereof shall have been complied with, and
all consents, authorizations and orders of, and all filings and registrations
with, all federal, state, local and foreign courts or governmental agencies and
all federal, state, local and foreign regulatory or self-regulatory agencies
necessary for the execution, delivery and performance of the Transaction
Documents and the consummation of the transactions contemplated thereby in
accordance with the terms thereof shall have been obtained or made, including,
without limitation, in each case those required under the Securities Act, the
Exchange Act, applicable state securities or “Blue Sky” laws or applicable rules
and regulations of the Principal Market or otherwise required by the SEC, the
Principal Market, or any state securities regulators;

(d)           No statute, regulation, order, decree, writ, ruling or injunction
shall have been enacted, entered, promulgated, threatened or endorsed by any
federal, state or local court or governmental authority of competent
jurisdiction which prohibits the consummation of or which would materially
modify or delay any of the transactions contemplated by the Transaction
Documents;

(e)           As required pursuant to Section 5(c), all Securities to be issued
by the Company to the Investor under the Transaction Documents shall have been
approved for listing on the Principal Market in accordance with the applicable
rules and regulations of the Principal Market, subject only to official notice
of issuance; and

(f)           The representations and warranties of the Investor shall be true
and correct in all material respects as of the date hereof and as of the
Commencement Date.

 
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8.           CONDITIONS TO THE INVESTOR'S OBLIGATION TO PURCHASE SHARES OF
COMMON STOCK.

The obligation of the Investor to buy Purchase Shares under this Agreement is
subject to the satisfaction or, where legally permissible, the waiver of each of
the following conditions on or prior to the Commencement Date and, once such
conditions have been initially satisfied, there shall not be any ongoing
obligation to satisfy such conditions after the Commencement Date:

(a)           The Company shall have executed each of the Transaction Documents
and delivered the same to the Investor;
 
(b)           The Common Stock shall be listed on the Principal Market, trading
in the Common Stock shall not have been within the last 365 days suspended by
the SEC or the Principal Market, and all Securities to be issued by the Company
to the Investor pursuant to this Agreement shall have been approved for listing
on the Principal Market in accordance with the applicable rules and regulations
of the Principal Market, subject only to official notice of issuance.

(c)           The Investor shall have received the opinion of the Company's
legal counsel dated as of the Commencement Date substantially in the form agreed
to prior to the date of this Agreement by the Company’s legal counsel and the
Investor’s legal counsel;

(d)           The representations and warranties of the Company shall be true
and correct in all material respects (except to the extent that any such
representations and warranties are qualified as to materiality, in which case,
such representations and warranties shall be true and correct as so qualified)
as of the date hereof and as of the Commencement Date as though made at that
time (except for representations and warranties that speak as of a specific
date, which shall be true and correct as of such date), and the Company shall
have performed, satisfied and complied in all material respects with the
covenants, agreements and conditions required by the Transaction Documents to be
performed, satisfied or complied with by the Company at or prior to the
Commencement Date.  The Investor shall have received a certificate, executed by
the CEO, President or CFO of the Company, dated as of the Commencement Date, to
the foregoing effect in the form attached hereto as Exhibit A;

(e)           The Board of Directors of the Company shall have adopted
resolutions in the form attached hereto as Exhibit B which shall be in full
force and effect without any amendment or supplement thereto as of the
Commencement Date;

(f)           As of the Commencement Date, the Company shall have reserved out
of its authorized and unissued Common Stock, (A) solely for the purpose of
effecting purchases of Purchase Shares hereunder, 7,300,000 shares of Common
Stock and (B) as Additional Commitment Shares in accordance with Section 5(e)
hereof, 286,651 shares of Common Stock;

(g)           The Irrevocable Transfer Agent Instructions shall have been
delivered to and acknowledged in writing by the Company and the Company's
Transfer Agent, and the Initial Commitment Shares shall have been issued
directly to the Investor electronically as DWAC Shares;

(h)           The Company shall have delivered to the Investor a certificate
evidencing the incorporation and good standing of the Company in the State of
California issued by the Secretary of State of the State of California as of a
date within ten (10) Business Days of the Commencement Date;

 
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(i)           The Company shall have delivered to the Investor a certified copy
of the Articles of Incorporation as certified by the Secretary of State of the
State of California within ten (10) Business Days of the Commencement Date;

(j)           The Company shall have delivered to the Investor a secretary's
certificate executed by the Secretary of the Company, dated as of the
Commencement Date, in the form attached hereto as Exhibit C;

(k)           The Registration Statement shall continue to be effective and no
stop order with respect to the Registration Statement shall be pending or
threatened by the SEC. The Company shall have a maximum dollar amount certain of
Common Stock registered under the Registration Statement which is sufficient to
issue to the Investor not less than (i) the full Available Amount worth of
Purchase Shares plus (ii) all of the Commitment Shares. The Current Report and
the Initial Prospectus Supplement each shall have been filed with the SEC, as
required pursuant to Section 5(a), and copies of the Prospectus shall have been
delivered to the Investor in accordance with Section 5(m) hereof. The Prospectus
shall be current and available for issuances and sales of all of the Securities
by the Company to the Investor, and for the resale of all of the Securities by
the Investor. Any other Prospectus Supplements required to have been filed by
the Company with the SEC under the Securities Act at or prior to the
Commencement Date shall have been filed with the SEC within the applicable time
periods prescribed for such filings under the Securities Act. All reports,
schedules, registrations, forms, statements, information and other documents
required to have been filed by the Company with the SEC at or prior to the
Commencement Date pursuant to the reporting requirements of the Exchange Act
shall have been filed with the SEC within the applicable time periods prescribed
for such filings under the Exchange Act;

(l)           No Event of Default has occurred, or any event which, after notice
and/or lapse of time, would become an Event of Default has occurred;

(m)           All federal, state and local governmental laws, rules and
regulations applicable to the transactions contemplated by the Transaction
Documents and necessary for the execution, delivery and performance of the
Transaction Documents and the consummation of the transactions contemplated
thereby in accordance with the terms thereof shall have been complied with, and
all consents, authorizations and orders of, and all filings and registrations
with, all federal, state and local courts or governmental agencies and all
federal, state and local regulatory or self-regulatory agencies necessary for
the execution, delivery and performance of the Transaction Documents and the
consummation of the transactions contemplated thereby in accordance with the
terms thereof shall have been obtained or made, including, without limitation,
in each case those required under the Securities Act, the Exchange Act,
applicable state securities or “Blue Sky” laws or applicable rules and
regulations of the Principal Market, or otherwise required by the SEC, the
Principal Market or any state securities regulators;

(n)           No statute, regulation, order, decree, writ, ruling or injunction
shall have been enacted, entered, promulgated, threatened or endorsed by any
federal, state, local or foreign court or governmental authority of competent
jurisdiction which prohibits the consummation of or which would materially
modify or delay any of the transactions contemplated by the Transaction
Documents;

(o)           No action, suit or proceeding before any federal, state, local or
foreign arbitrator or any court or governmental authority of competent
jurisdiction shall have been commenced or threatened, and no inquiry or
investigation by any federal, state, local or foreign governmental authority of
competent jurisdiction shall have been commenced or threatened, against the
Company, or any of the officers, directors or affiliates of the Company, seeking
to restrain, prevent or change the transactions contemplated by the Transaction
Documents, or seeking material damages in connection with such transactions;

 
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(p)           On or prior to the Commencement Date, the Company shall take all
necessary action, if any, and such actions as reasonably requested by the
Investor, in order to render inapplicable any control share acquisition,
business combination, stockholder rights plan or poison pill (including any
distribution under a rights agreement) or other similar anti-takeover provision
under the Articles of Incorporation or the laws of the state of its
incorporation which is or could become applicable to the Investor as a result of
the transactions contemplated by this Agreement, including, without limitation,
the Company's issuance of the Securities and the Investor's ownership of the
Securities; and

(q)           The Company shall have provided the Investor with the information
requested by the Investor in connection with its due diligence requests made
prior to, or in connection with, the Commencement, in accordance with the terms
of Section 5(f) hereof.

 
9.
INDEMNIFICATION.

(a)           In consideration of the Investor's execution and delivery of the
Transaction Documents and acquiring the Securities hereunder and in addition to
all of the Company's other obligations under the Transaction Documents, the
Company shall defend, protect, indemnify and hold harmless the Investor and all
of its affiliates, stockholders, officers, directors, employees and direct or
indirect investors and any of the foregoing person's agents or other
representatives (including, without limitation, those retained in connection
with the transactions contemplated by this Agreement) (collectively, the
“Investor Indemnitees”) from and against any and all actions, causes of action,
suits, claims, losses, costs, penalties, fees, liabilities and damages, and
expenses in connection therewith (irrespective of whether any such Indemnitee is
a party to the action for which indemnification hereunder is sought), and
including reasonable attorneys' fees and disbursements (the “Indemnified
Liabilities”), incurred by any Investor Indemnitee as a result of, or arising
out of, or relating to: (a) any misrepresentation or breach of any
representation or warranty made by the Company in the Transaction Documents or
any other certificate, instrument or document contemplated hereby or thereby,
(b) any breach of any covenant, agreement or obligation of the Company contained
in the Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby, (c) any cause of action, suit or claim brought
or made against such Indemnitee and arising out of or resulting from the
execution, delivery, performance or enforcement of the Transaction Documents or
any other certificate, instrument or  document contemplated hereby or thereby,
(d) any violation of the Securities Act, the Exchange Act, state securities or
“Blue Sky” laws, or the rules and regulations of the Principal Market in
connection with the transactions contemplated by the Transaction Documents by
the Company or any of its Subsidiaries, affiliates, officers, directors or
employees, (e) any untrue statement or alleged untrue statement of a material
fact contained, or incorporated by reference, in the Registration Statement or
any amendment thereto or any omission or alleged omission to state therein, or
in any document incorporated by reference therein, a material fact required to
be stated therein or necessary to make the statements therein not misleading, or
(f) any untrue statement or alleged untrue statement of a material fact
contained, or incorporated by reference, in the Prospectus, or any omission or
alleged omission to state therein, or in any document incorporated by reference
therein, a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading; provided, however, that (I) the indemnity contained in clause
(c) of this Section 9(a) shall not apply to any Indemnified Liabilities which
result from the fraudulent conduct, gross negligence or willful misconduct of
the Indemnitee or a material breach of the Investor’s representations,
warranties or covenants contained in this Agreement, (II) the indemnity
contained in clauses (d), (e) and (f) of this Section 9(a) shall not apply to
any Indemnified Liabilities to the extent, but only to the extent, arising out
of or based upon any untrue statement or alleged untrue statement or omission or
alleged omission made in reliance upon and in conformity with written
information furnished to the Company by or on behalf of the Investor expressly
for use in any Prospectus Supplement (it being hereby acknowledged and agreed
that the written information set forth on Exhibit D attached hereto is the only
written information furnished to the Company by or on behalf of the Investor
expressly for use in the Initial Prospectus Supplement), if the Prospectus was
timely made available by the Company to the Investor pursuant to Section 5(k),
and (III) the indemnity contained in clauses (d), (e) and (f) of this Section 9
shall not inure to the benefit of the Investor to the extent such Indemnified
Liabilities are based on a failure of the Investor to deliver or to cause to be
delivered the Prospectus (including any revisions or corrections thereto) made
available by the Company, if such Prospectus (including any revisions or
corrections thereto) was timely made available by the Company pursuant to
Section 5(k), and if delivery of the Prospectus (including any revisions or
corrections thereto) would have cured the defect giving rise to such Indemnified
Liabilities.

 
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(b)           In connection with the Initial Prospectus Supplement or any other
Prospectus Supplement, the Investor shall defend, protect, indemnify and hold
harmless, to the same extent and in the same manner as is set forth in Section
9(a), the Company, each of its directors, each of its officers who signed the
Registration Statement, and each Person, if any, who controls the Company within
the meaning of the Securities Act or the Exchange Act (collectively, the
“Company Indemnitees” and, together with the Investor Indemnities, the
“Indemnitees”), against any Indemnified Liabilities that arise out of or are
based upon any of the occurrences set forth in clauses (d), (e) or (f) of
Section 9(a) hereof, in each case to the extent, and only to the extent, that
such occurrence occurs in reliance upon and in conformity with written
information about the Investor furnished to the Company by or on behalf of the
Investor expressly for use in any Prospectus Supplement (it being hereby
acknowledged and agreed that the written information set forth on Exhibit D
attached hereto is the only written information furnished to the Company by or
on behalf of the Investor expressly for use in the Initial Prospectus
Supplement), if the Prospectus was timely made available by the Company to the
Investor pursuant to Section 5(k); provided, however, that the Investor shall be
liable under this Section 9(b) for only that amount of Indemnified Liabilities
as does not exceed the net proceeds to the Investor as a result of the sale of
Securities pursuant to the Registration Statement and the Prospectus.

(c)           The indemnity in this Section 9 shall not apply to amounts paid in
settlement of any claim if such settlement is effected without the prior written
consent of the Company or the Investor, whichever shall be the indemnifying
party (the “Indemnifying Party”), which consent shall not be unreasonably
withheld, conditioned or delayed. To the extent that the foregoing undertakings
by the Company and the Investor may be unenforceable for any reason, the Company
shall make the maximum contribution to the payment and satisfaction of each of
the Indemnified Liabilities which is permissible under applicable law.  Payment
under the indemnification in this Section 9 shall be made by the Indemnifying
Party within thirty (30) days from the date the Indemnitee makes written request
for it. If any action shall be brought against any Indemnitee in respect of
which indemnity may be sought pursuant to this Agreement, such Indemnitee shall
promptly notify the Indemnifying Party in writing, and the Indemnifying Party
shall have the right to assume the defense thereof with counsel of its own
choosing reasonably acceptable to the Indemnitee. Any Indemnitee shall have the
right to employ separate counsel in any such action and participate in the
defense thereof, but the fees and expenses of such counsel shall be at the
expense of such Indemnitee, except to the extent that (i) the employment thereof
has been specifically authorized by the Indemnifying Party in writing, (ii) the
Indemnifying Party 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 such separate counsel, a material conflict on any material
issue between the position of the Indemnifying Party and the position of such
Indemnitee, in which case the Indemnifying Party shall be responsible for the
reasonable fees and expenses of no more than one such separate counsel.

10.           EVENTS OF DEFAULT.

An “Event of Default” shall be deemed to have occurred at any time as any of the
following events occurs:

(a)           the effectiveness of the Registration Statement registering the
Securities lapses for any reason (including, without limitation, the issuance of
a stop order or similar order), or the Prospectus is unavailable for the sale by
the Company to the Investor (or the resale by the Investor) of any or all of the
Securities to be issued to the Investor under the Transaction Documents, and
such lapse or unavailability continues for a period of ten (10) consecutive
Business Days or for more than an aggregate of thirty (30) Business Days in any
365-day period;

(b)           the suspension from trading on the Principal Market for a period
of ten (10) consecutive Business Days, provided that the Company may not direct
the Investor to purchase shares of Common Stock during any such suspension;

(c)           the delisting of the Common Stock from the Principal Market,
provided, however, that the Common Stock is not immediately thereafter trading
on the New York Stock Exchange, The NASDAQ Capital Market, The NASDAQ Global
Market or The NASDAQ Global Select Market (or nationally recognized successor
thereto);

 
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(d)           the failure for any reason by the Transfer Agent to issue Purchase
Shares or Additional Commitment Shares to the Investor within five (5) Business
Days after the applicable Purchase Date on which the Investor is entitled to
receive such Securities;

(e)           the Company breaches any representation, warranty, covenant or
other term or condition under any Transaction Document if such breach has a
Material Adverse Effect and except, in the case of a breach of a covenant which
is reasonably curable, only if such breach continues for a period of at least
five (5) Business Days after the Company obtains notice of such breach;

(f)           if any Person commences a proceeding against the Company pursuant
to or within the meaning of any Bankruptcy Law;

(g)           if the Company pursuant to or within the meaning of any Bankruptcy
Law; (i) commences a voluntary case, (ii) consents to the entry of an order for
relief against it in an involuntary case, (iii) consents to the appointment of a
Custodian of it or for all or substantially all of its property, or (iv) makes a
general assignment for the benefit of its creditors or is generally unable to
pay its debts as the same become due;

(h)           a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that (i) is for relief against the Company in an involuntary
case, (ii) appoints a Custodian of the Company or for all or substantially all
of its property, or (iii) orders the liquidation of the Company or any
Subsidiary; or

   (i)           if at any time after the Commencement Date, the Maximum Share
Cap is reached (to the extent such Maximum Share Cap is applicable pursuant to
Section 2(e) hereof).

In addition to any other rights and remedies under applicable law and this
Agreement, including the Investor termination rights set forth in Section 11
hereof, so long as an Event of Default has occurred and is continuing, or if any
event which, after notice and/or lapse of time, would become an Event of
Default, has occurred and is continuing, or so long as the Regular Purchase
Price or Accelerated Purchase Price is below the Floor Price, the Company shall
not deliver to the Investor any Regular Purchase Notice or Accelerated Purchase
Notice, respectively, and the Investor shall not purchase any shares of Common
Stock under this Agreement.

11.           TERMINATION

This Agreement may be terminated only as follows:

(a)           If pursuant to or within the meaning of any Bankruptcy Law, the
Company commences a voluntary case or any Person commences a proceeding against
the Company, a Custodian is appointed for the Company or for all or
substantially all of its property, or the Company makes a general assignment for
the benefit of its creditors (any of which would be an Event of Default as
described in Sections 10(f), 10(g) and 10(h) hereof), this Agreement shall
automatically terminate without any liability or payment to the Company (except
as set forth below) without further action or notice by any Person.

(b)           In the event that the Commencement shall not have occurred on or
before May 15, 2012, due to the failure to satisfy the conditions set forth in
Sections 7 and 8 above with respect to the Commencement, either the Company or
the Investor shall have the option to terminate this Agreement at the close of
business on such date or thereafter without liability of any party to any other
party (except as set forth below); provided, however, that the right to
terminate this Agreement under this Section 11(b) shall not be available to any
party if such party is then in breach of any covenant or agreement contained in
this Agreement or any representation or warranty of such party contained in this
Agreement fails to be true and correct such that the conditions set forth in
Section 7(f) or Section 8(d), as applicable, could not then be satisfied.

 
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(c)            At any time after the Commencement Date, the Company shall have
the option to terminate this Agreement for any reason or for no reason by
delivering notice (a “Company Termination Notice”) to the Investor electing to
terminate this Agreement without any liability whatsoever of any party to any
other party under this Agreement (except as set forth below).  The Company
Termination Notice shall not be effective until one (1) Business Day after it
has been received by the Investor.

(d)           This Agreement shall automatically terminate on the date that the
Company sells and the Investor purchases the full Available Amount as provided
herein, without any action or notice on the part of any party and without any
liability whatsoever of any party to any other party under this Agreement
(except as set forth below).

(e)           If, for any reason or for no reason, the full Available Amount has
not been purchased in accordance with Section 2 of this Agreement by the
Maturity Date, this Agreement shall automatically terminate on the Maturity
Date, without any action or notice on the part of any party and without any
liability whatsoever of any party to any other party under this Agreement
(except as set forth below).

Except as set forth in Sections 11(a) (in respect of an Event of Default under
Sections 10(f), 10(g) and 10(h)) and 11(e), any termination of this Agreement
pursuant to this Section 11 shall be effected by written notice from the Company
to the Investor, or the Investor to the Company, as the case may be, setting
forth the basis for the termination hereof.  The representations and warranties
and covenants of the Company and the Investor contained in Sections 3, 4, 5, and
6 hereof, the indemnification provisions set forth in Section 9 hereof and the
agreements and covenants set forth in Sections 10, 11 and 12, shall survive the
Commencement and any termination of this Agreement.  No termination of this
Agreement shall (i) affect the Company's or the Investor's rights or obligations
under this Agreement with respect to pending purchases of Purchase Shares and
the Company and the Investor shall complete their respective obligations with
respect to any pending purchases of Purchase Shares under this Agreement or (ii)
be deemed to release the Company or the Investor from any liability for
intentional misrepresentation or willful breach of any of the Transaction
Documents.

12.           MISCELLANEOUS.

(a)           Governing Law; Jurisdiction; Jury Trial.  The corporate laws of
the State of California shall govern all issues concerning the relative rights
of the Company and its stockholders. All other questions concerning the
construction, validity, enforcement and interpretation of this Agreement and the
other Transaction Documents shall be governed by the internal laws of the State
of Illinois, without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of Illinois or any other jurisdictions)
that would cause the application of the laws of any jurisdictions other than the
State of Illinois.  Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the City of Chicago, for
the adjudication of any dispute hereunder or under the other Transaction
Documents or in connection herewith or therewith, or with any transaction
contemplated hereby or discussed herein, 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 brought in an inconvenient forum or that the venue of such
suit, action or proceeding is improper.  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 to such party at the
address for such 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 manner permitted by law.  EACH PARTY HEREBY IRREVOCABLY
WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT
OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

(b)           Counterparts.  This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party; provided that a facsimile signature or
signature delivered by e-mail in a “.pdf” format data file shall be considered
due execution and shall be binding upon the signatory thereto with the same
force and effect as if the signature were an original signature.

 
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(c)           Headings.  The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.

(d)           Severability.  If any provision of this Agreement shall be invalid
or unenforceable in any jurisdiction, such invalidity or unenforceability shall
not affect the validity or enforceability of the remainder of this Agreement in
that jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.

(e)           Entire Agreement; Amendment.  The Transaction Documents supersede
all other prior oral or written agreements between the Investor, the Company,
their affiliates and Persons acting on their behalf with respect to the subject
matter thereof, and this Agreement, the other Transaction Documents and the
instruments referenced herein contain the entire understanding of the parties
with respect to the matters covered herein and therein and, except as
specifically set forth herein or therein, neither the Company nor the Investor
makes any representation, warranty, covenant or undertaking with respect to such
matters. The Company acknowledges and agrees that is has not relied on, in any
manner whatsoever, any representations or statements, written or oral, other
than as expressly set forth in the Transaction Documents. No provision of this
Agreement may be amended other than by a written instrument signed by both
parties hereto.

(f)           Notices.  Any notices, consents or other communications required
or permitted to be given under the terms of this Agreement must be in writing
and will be deemed to have been delivered: (i) upon receipt when delivered
personally; (ii) upon receipt when sent by facsimile (provided confirmation of
transmission is mechanically or electronically generated and kept on file by the
sending party); or (iii) one Business Day after deposit with a nationally
recognized overnight delivery service, in each case properly addressed to the
party to receive the same. The addresses and facsimile numbers for such
communications shall be:

If to the Company:
 
Enova Systems, Inc.
1560 West 190th Street
Torrance, CA 90501
Telephone:    (310) 527-2800
Facsimile:     (310) 527-7888
Attention:      Michael Staran, President and Chief Executive Officer

With a copy to:
 
Reed Smith LLP
101 Second Street
Suite 1800
San Francisco, CA 94105
Telephone:    (415) 543-8700
Facsimile:     (415) 391-8269
Attention:      Donald C. Reinke, Esq.

If to the Investor:
 
Lincoln Park Capital Fund, LLC
440 North Wells, Suite 620
Chicago, IL 60654
Telephone:     (312) 822-9300
Facsimile:      (312) 822-9301
Attention:       Josh Scheinfeld/Jonathan Cope

 
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With a copy to:
 
Greenberg Traurig, LLP
The MetLife Building
200 Park Avenue
New York, NY 10166
Telephone:      (212) 801-9200
Facsimile:       (212) 801-6400
Attention:        Anthony J. Marsico, Esq.

If to the Transfer Agent:
 
Computershare Trust Company, N.A.
350 Indiana Street, Suite 750
Golden, Colorado 80401
Telephone:       (800) 962-4284
Facsimile:        (303) 262-0632
Attention:         Kim Porter

or at such other address and/or facsimile number and/or to the attention of such
other person as the recipient party has specified by written notice given to
each other party three (3) Business Days prior to the effectiveness of such
change.  Written confirmation of receipt (A) given by the recipient of such
notice, consent or other communication, (B) mechanically or electronically
generated by the sender's facsimile machine containing the time, date, and
recipient facsimile number or (C) provided by a nationally recognized overnight
delivery service, shall be rebuttable evidence of personal service, receipt by
facsimile or receipt from a nationally recognized overnight delivery service in
accordance with clause (i), (ii) or (iii) above, respectively.

(g)           Successors and Assigns.  This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and
assigns.  The Company shall not assign this Agreement or any rights or
obligations hereunder without the prior written consent of the Investor,
including by merger or consolidation.  The Investor may not assign its rights or
obligations under this Agreement.

(h)           No Third Party Beneficiaries.  This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person.

(i)           Publicity.  The Investor shall have the right to approve before
issuance any press release, SEC filing or any other public disclosure made by or
on behalf of the Company whatsoever with respect to, in any manner, the
Investor, its purchases hereunder or any aspect of the Transaction Documents or
the transactions contemplated thereby; provided, however, that the Company shall
be entitled, without the prior approval of the Investor, to make any press
release or other public disclosure (including any filings with the SEC) with
respect to such transactions as is required by applicable law and regulations
(including the regulations of the Principal Market), so long as prior to making
any such press release or other public disclosure the Company and its counsel
shall have provided the Investor and its counsel with a reasonable opportunity
to review and comment upon, and shall have consulted with the Investor and its
counsel on the form and substance of, such press release or other disclosure.
The Company agrees and acknowledges that its failure to fully comply with this
provision constitutes a Material Adverse Effect. The Company shall have the
right to approve before issuance any press release or any other public
disclosure made by or on behalf of the Investor whatsoever with respect to, in
any manner, the Company or any aspect of the Transaction Documents or the
transactions contemplated thereby; provided, however, that the Investor shall be
entitled, without the prior approval of the Company, to make any press release
or other public disclosure with respect to such transactions as is required by
applicable law and regulations, so long as prior to making any such press
release or other public disclosure the Investor and its counsel shall have
provided the Company and its counsel with a reasonable opportunity to review and
comment upon, and shall have consulted with the Company and its counsel on the
form and substance of, such press release or other disclosure.

 
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(j)           Further Assurances.  Each party shall do and perform, or cause to
be done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to consummate and make
effective, as soon as reasonably possible, the Commencement, and to carry out
the intent and accomplish the purposes of this Agreement and the consummation of
the other transactions contemplated hereby.

(k)           No Financial Advisor, Placement Agent, Broker or Finder.  The
Company represents and warrants to the Investor that, except as disclosed (if
any) in Schedule 4(y), it has not engaged any financial advisor, placement
agent, broker or finder in connection with the transactions contemplated hereby.
The Investor represents and warrants to the Company that it has not engaged any
financial advisor, placement agent, broker or finder in connection with the
transactions contemplated hereby. The Company shall be responsible for the
payment of any fees or commissions, if any, of any financial advisor, placement
agent, broker or finder relating to or arising out of the transactions
contemplated hereby. The Company shall pay, and hold the Investor harmless
against, any liability, loss or expense (including, without limitation,
attorneys' fees and out of pocket expenses) arising in connection with any such
claim.

(l)           No Strict Construction.  The language used in this Agreement will
be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.

(m)           Remedies, Other Obligations, Breaches and Injunctive Relief.  The
parties’ remedies provided in this Agreement, including, without limitation, the
Investor’s and the Company’s remedies provided in Section 9, shall be cumulative
and in addition to all other remedies available to the parties under this
Agreement, at law or in equity (including a decree of specific performance
and/or other injunctive relief), no remedy of any party contained herein shall
be deemed a waiver of compliance with the provisions giving rise to such remedy
and nothing herein shall limit any party’s right to pursue actual damages for
any failure by the other party to comply with the terms of this Agreement.  The
parties acknowledge that a breach by any party of its obligations hereunder will
cause irreparable harm to the non-breaching party and that the remedy at law for
any such breach may be inadequate.  The parties therefore agree that, in the
event of any such breach or threatened breach, the non-breaching party shall be
entitled, in addition to all other available remedies, to an injunction
restraining any breach, without the necessity of showing economic loss and
without any bond or other security being required.

(n)           Enforcement Costs.  If: (i) due to a breach of this Agreement by
the Company, this Agreement is placed by the Investor in the hands of an
attorney for enforcement or is enforced by the Investor through any legal
proceeding; or (ii) an attorney is retained to represent the Investor in any
bankruptcy, reorganization, receivership or other proceedings affecting
creditors' rights and involving a claim under this Agreement; or (iii) an
attorney is retained to represent the Investor in any other proceedings
whatsoever in connection with this Agreement, except for any proceeding for
which the Investor is obligated to indemnify the Company pursuant to the
Transaction Documents, then the Company shall pay to the Investor, as incurred
by the Investor, all reasonable costs and expenses including attorneys' fees
incurred in connection therewith, in addition to all other amounts due
hereunder.

(o)           Waivers.  No provision of this Agreement may be waived other than
in a written instrument signed by the party against whom enforcement of such
waiver is sought. No failure or delay in the exercise of any power, right or
privilege hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other right, power or privilege.

*     *     *     *     *

 
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IN WITNESS WHEREOF, the Investor and the Company have caused this Purchase
Agreement to be duly executed as of the date first written above.

THE COMPANY:

ENOVA SYSTEMS, INC.
 
By: /s/ Michael Staran
Name: Michael Staran
Title:   President and Chief Executive Officer

INVESTOR:

LINCOLN PARK CAPITAL FUND, LLC
BY: LINCOLN PARK CAPITAL, LLC
BY: ROCKLEDGE CAPITAL CORPORATION

By: /s/ Josh Scheinfeld
Name:  Josh Scheinfeld
Title: President
 

 
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EXHIBITS

Exhibit A
Form of Officer’s Certificate

Exhibit B
Form of Resolutions of Board of Directors of the Company

Exhibit C
Form of Secretary’s Certificate

Exhibit D
Information About Investor Furnished to the Company

 
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EXHIBIT A

FORM OF OFFICER’S CERTIFICATE

This Officer’s Certificate (“Certificate”) is being delivered pursuant to
Section 8(e) of that certain Purchase Agreement dated as of April 24, 2012,
(“Purchase Agreement”), by and between ENOVA SYSTEMS, INC., a California
corporation (the “Company”), and LINCOLN PARK CAPITAL FUND, LLC (the
“Investor”).  Terms used herein and not otherwise defined shall have the
meanings ascribed to them in the Purchase Agreement.

The undersigned, _____________, _________________ of the Company, hereby
certifies as follows:

1.           I am the ____________________ of the Company and make the
statements contained in this Certificate;

2.           The representations and warranties of the Company contained in the
Purchase Agreement are true and correct in all material respects (except to the
extent that any of such representations and warranties is already qualified as
to materiality in Section 4 of the Purchase Agreement, in which case, such
representations and warranties are true and correct without further
qualification) as of the date when made and as of the Commencement Date as
though made at that time (except for representations and warranties that speak
as of a specific date, in which case such representations and warranties are
true and correct as of such date);

3.           The Company has performed, satisfied and complied in all material
respects with covenants, agreements and conditions required by the Transaction
Documents to be performed, satisfied or complied with by the Company at or prior
to the Commencement Date.

 
         4.          The Company has not taken any steps, and does not currently
expect to take any steps, to seek protection pursuant to any Bankruptcy Law nor
does the Company or any of its Subsidiaries have any knowledge or reason to
believe that its creditors intend to initiate involuntary bankruptcy or
insolvency proceedings. The Company is financially solvent and is generally able
to pay its debts as they become due.

IN WITNESS WHEREOF, I have hereunder signed my name on this ___ day of
[___________], 2012.

      ______________________
Name:
Title:

The undersigned as Secretary of ENOVA SYSTEMS, INC., a California corporation,
hereby certifies that _________________ is the duly elected, appointed,
qualified and acting _______________ of the Company and that the signature
appearing above is his genuine signature.

___________________________________
Secretary

 
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EXHIBIT B

FORM OF COMPANY RESOLUTIONS
FOR SIGNING PURCHASE AGREEMENT

UNANIMOUS WRITTEN CONSENT OF
_________

In accordance with the corporate laws of the state of California, the
undersigned, being all of the directors of ENOVA SYSTEMS, INC., a California
corporation (the “Corporation”) do hereby consent to and adopt the following
resolutions as the action of the Board of Directors for and on behalf of the
Corporation and hereby direct that this Consent be filed with the minutes of the
proceedings of the Board of Directors:

WHEREAS, there has been presented to the Board of Directors of the Corporation a
draft of the Purchase Agreement (the “Purchase Agreement”) by and between the
Corporation and Lincoln Park Capital Fund, LLC (“Lincoln Park”), providing for
the purchase by Lincoln Park of up to Three Million Four Hundred Thousand
Dollars ($3,400,000) of the Corporation’s common stock, no par value per share
(the “Common Stock”); and

WHEREAS, after careful consideration and review of the Purchase Agreement, the
documents attached thereto and other factors deemed relevant by the Board of
Directors, the Board of Directors has determined that it is advisable and in the
best interests of the Corporation to engage in the transactions contemplated by
the Purchase Agreement, including, but not limited to the sale of shares of
Common Stock to Lincoln Park up to the available amount under the Purchase
Agreement (the "Purchase Shares").

Transaction Documents
 
NOW, THEREFORE, BE IT RESOLVED, that the transactions described in the Purchase
Agreement are hereby approved and ________________________________________ (the
“Authorized Officers”) are severally authorized to execute and deliver the
Purchase Agreement, and any other agreements or documents contemplated thereby,
with such amendments, changes, additions and deletions as the Authorized
Officers may deem to be appropriate and approve on behalf of, the Corporation,
such approval to be conclusively evidenced by the signature of an Authorized
Officer thereon; and
 
FURTHER RESOLVED, that the Authorized Officers are authorized to execute and
deliver the Instructions (pursuant to the terms of the Purchase Agreement), with
such amendments, changes, additions and deletions as the Authorized Officers may
deem appropriate and approve on behalf of, the Corporation, such approval to be
conclusively evidenced by the signature of an Authorized Officer thereon; and
 
Execution of Purchase Agreement
 
FURTHER RESOLVED, that the Corporation be and it hereby is authorized to execute
the Purchase Agreement providing for the purchase of up to Three Million Four
Hundred Thousand Dollars ($3,400,000) of the Corporation’s common stock; and
 
Issuance of Common Stock
 
FURTHER RESOLVED, that the Corporation is hereby authorized to issue shares of
Common Stock upon the purchase of Purchase Shares up to the Available Amount
under the Purchase Agreement in accordance with the terms of the Purchase
Agreement and that, upon issuance of the Purchase Shares pursuant to the
Purchase Agreement, the Purchase Shares will be duly authorized, validly issued,
fully paid and nonassessable with no personal liability attaching to the
ownership thereof; and
 

 
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FURTHER RESOLVED, that the Corporation shall initially reserve 7,300,000 shares
of Common Stock for issuance as Purchase Shares under the Purchase Agreement;
 
FURTHER RESOLVED, that the Corporation is hereby authorized to issue 281,030
shares of Common Stock (subject to equitable adjustment for any reorganization,
recapitalization, non-cash dividend, stock split or other similar transaction)
(the “Initial Commitment Shares”) in accordance with the terms of the Purchase
Agreement and that, upon issuance of the Initial Commitment Shares pursuant to
the Purchase Agreement, the Initial Commitment Shares will be duly authorized,
validly issued, fully paid and nonassessable with no personal liability
attaching to the ownership thereof;
 
FURTHER RESOLVED, that the Corporation is hereby authorized to issue 286,651
shares of Common Stock (subject to equitable adjustment for any reorganization,
recapitalization, non-cash dividend, stock split or other similar transaction)
in connection with the purchase of Purchase Shares (the “Additional Commitment
Shares”) in accordance with the terms of the Purchase Agreement and that, upon
issuance of the Additional Commitment Shares pursuant to the Purchase Agreement,
the Additional Commitment Shares will be duly authorized, validly issued, fully
paid and nonassessable with no personal liability attaching to the ownership
thereof; and
 
FURTHER RESOLVED, that the Corporation shall initially reserve 286,651 shares of
Common Stock (subject to equitable adjustment for any reorganization,
recapitalization, non-cash dividend, stock split or other similar transaction)
for issuance as Additional Commitment Shares under the Purchase Agreement; and
 
Approval of Actions
 
FURTHER RESOLVED, that, without limiting the foregoing, the Authorized Officers
are, and each of them hereby is, authorized and directed to proceed on behalf of
the Corporation and to take all such steps as deemed necessary or appropriate,
with the advice and assistance of counsel, to cause the Corporation to
consummate the agreements referred to herein and to perform its obligations
under such agreements; and
 
FURTHER RESOLVED, that the Authorized Officers be, and each of them hereby is,
authorized, empowered and directed on behalf of and in the name of the
Corporation, to take or cause to be taken all such further actions and to
execute and deliver or cause to be executed and delivered all such further
agreements, amendments, documents, certificates, reports, schedules,
applications, notices, letters and undertakings and to incur and pay all such
fees and expenses as in their judgment shall be necessary, proper or desirable
to carry into effect the purpose and intent of any and all of the foregoing
resolutions, and that all actions heretofore taken by any officer or director of
the Corporation in connection with the transactions contemplated by the
agreements described herein are hereby approved, ratified and confirmed in all
respects.

IN WITNESS WHEREOF, the Board of Directors has executed and delivered this
Consent effective as of [_____________], 20__.

______________________

______________________

______________________

being all of the directors of ENOVA SYSTEMS, INC.

 
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EXHIBIT C

FORM OF SECRETARY’S CERTIFICATE

This Secretary’s Certificate (“Certificate”) is being delivered pursuant to
Section 7(k) of that certain Purchase Agreement dated as of April 24, 2012,
(“Purchase Agreement”), by and between ENOVA SYSTEMS, INC., a California
corporation (the “Company”) and LINCOLN PARK CAPITAL FUND, LLC (the “Investor”),
pursuant to which the Company may sell to the Investor up to Three Million Four
Hundred Thousand Dollars ($3,400,000) of the Company's Common Stock, no par
value per share (the "Common Stock").  Terms used herein and not otherwise
defined shall have the meanings ascribed to them in the Purchase Agreement.

The undersigned, ___________, Secretary of the Company, hereby certifies as
follows:

1.           I am the Secretary of the Company and make the statements contained
in this Secretary’s Certificate.

2.           Attached hereto as Exhibit A and Exhibit B are true, correct and
complete copies of the Company’s Bylaws, as amended to date (“Bylaws”), and
Articles of Incorporation, as amended to date (“Articles of Incorporation”),
respectively, in each case, as amended through the date hereof, and no action
has been taken by the Company, its directors, officers or stockholders, in
contemplation of the filing of any further amendment relating to or affecting
the Bylaws or Articles of Incorporation.

3.           Attached hereto as Exhibit C are true, correct and complete copies
of the resolutions duly adopted by the Board of Directors of the Company (the
“Board”) on [_____________], 2012, at which a quorum was present and acting
throughout.  Such resolutions have not been amended, modified or rescinded and
remain in full force and effect and such resolutions are the only resolutions
adopted by the Board, or any committee thereof, or the stockholders of the
Company relating to or affecting (i) the entering into and performance of the
Purchase Agreement, or the issuance, offering and sale of the Purchase Shares
and the Commitment Shares and (ii) and the performance of the Company of its
obligation under the Transaction Documents as contemplated therein.

4.           As of the date hereof, the authorized, issued and reserved capital
stock of the Company is as set forth on Exhibit C hereto.

IN WITNESS WHEREOF, I have hereunder signed my name on this ___ day of
[____________], 2012.

                                                                        _________________________
Secretary

The undersigned as _______________ of the Company, hereby certifies that
_________________ is the duly elected, appointed, qualified and acting Secretary
of the Company, and that the signature appearing above is his genuine signature.

                                                                       ___________________________________
Chief Executive Officer

 
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EXHIBIT D
 
Information About The Investor Furnished To The Company By The Investor
Expressly For Use In Connection With The Initial Prospectus Supplement

Information With Respect to Lincoln Capital

As of the date of the Purchase Agreement, Lincoln Park Capital Fund, LLC,
beneficially owned [__________] shares of our common stock. Josh Scheinfeld and
Jonathan Cope, the Managing Members of Lincoln Park Capital, LLC, the manager of
Lincoln Park Capital Fund, LLC, are deemed to be beneficial owners of all of the
shares of common stock owned by Lincoln Park Capital Fund, LLC. Messrs. Cope and
Scheinfeld have shared voting and investment power over the shares being offered
under the prospectus supplement filed with the SEC in connection with the
transactions contemplated under the Purchase Agreement. Lincoln Park Capital,
LLC is not a licensed broker dealer or an affiliate of a licensed broker dealer.