Exhibit 10.1

 

 

 

SECURITIES PURCHASE AGREEMENT

 

This Securities Purchase Agreement (this “Agreement”) is dated as of September
12, 2014 among AtheroNova Inc., a Delaware corporation (the “Company”), each
purchaser identified on the signature pages hereto (each, including its
successors and assigns, a “Purchaser” and collectively the “Purchasers”), and
W-Net Fund I, L.P., which will serve as the initial representative of the
Purchasers, and is referred to herein from time to time as the “Purchaser
Representative.”

 

WHEREAS, subject to the terms and conditions set forth in this Agreement and
pursuant to Section 4(2) of the Securities Act of 1933, as amended (the
“Securities Act”), and Rule 506 promulgated thereunder, the Company desires to
issue and sell to each Purchaser, and each Purchaser, severally and not jointly,
desires to purchase from the Company, securities of the Company as more fully
described in this Agreement.

 

NOW, THEREFORE, in consideration of the mutual covenants contained in this
Agreement, and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the Company and each Purchaser agree
as follows:

 

ARTICLE I.

DEFINITIONS

 

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

 

“Affiliate” means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with a
Person, as such terms are used in and construed under Rule 405 under the
Securities Act. With respect to a Purchaser, any investment fund or managed
account that is managed on a discretionary basis by the same investment manager
as such Purchaser will be deemed to be an Affiliate of such Purchaser.

 

“Board of Directors” means the board of directors of the Company.

 

“Business Day” means any day except any Saturday, any Sunday, any day which is a
federal legal holiday in the United States or any day on which banking
institutions in the State of California are authorized or required by law or
other governmental action to close.

 

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

 

“Closing Date” shall have the meaning ascribed to such term in Section 2.1(a).

 

“Commission” means the Securities and Exchange Commission.

 

“Common Stock” means the common stock of the Company, par value $0.0001 per
share, and any other class of securities into which such securities may
hereafter be reclassified or changed into.

 

 

 
 

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

 

“Company Counsel” means Stubbs Alderton & Markiles, LLP, with offices located at
15260 Ventura Boulevard, 20th Floor, Sherman Oaks, California 91403, Attention:
Louis Wharton, fax: (818) 444-6309.

 

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

 

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

 

“Discussion Time” shall have the meaning ascribed to such term in Section
3.2(f).

 

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

 

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

 

“Initial Closing” shall have the meaning ascribed to such term in Section
2.1(a).

 

“Intellectual Property” means any and all United States and foreign: (a) patent
registrations and patent applications (including all reissues, divisions,
continuations, continuations-in-part, extensions and reexaminations) and all
rights therein and all improvements to the inventions disclosed in each such
registration or application, (b) trademarks, service marks, trade dress, trade
names and corporate names, whether or not registered, including but not limited
to all common law rights, and registrations and applications for registration
thereof, (c) copyrights (including but not limited to copyrights on designs)
(registered or otherwise) and registrations and applications for registration
thereof, (d) computer software, including, without limitation, source code,
operating systems and specifications, data, data bases, files, documentation and
other materials related thereto, data and documentation, (e) trade secrets and
confidential technical and business information (including but not limited to
formulas, compositions, and inventions reduced to practice, whether or not
patentable), (f) confidential technology (including know-how and show-how),
manufacturing and production processes and techniques, research and development
information, drawings, specifications, designs, plans, proposals, technical
data, copyrightable works, financial, marketing and business data, pricing and
cost information, business and marketing plans and customer and supplier lists
and information, (h) any right arising under any law providing protection to
industrial or other designs, (i) all rights to obtain and rights to apply for
patents, and to register trademarks and copyrights, and (j) all rights to sue or
recover and retain damages and costs and attorneys’ fees for present and past
infringement of any of the foregoing.

 

“Intercreditor Agreement” means the Intercreditor Agreement, dated as of
February 12, 2014, among the Company, the holders of Second Amended and Restated
2.5% Senior Secured Convertible Notes having an original issuance date of May
13, 2010 (the “2.5% Notes”) signatory thereto and the holders of 6% Senior
Secured Convertible Notes having an original issuance date of February 12, 2014
(the “6% Notes” and together with the 2.5% Notes, the “Existing Senior Debt”)
signatory thereto (the signatory holders of such Existing Senior Debt, the
“Existing Holders”), as amended by that certain Amendment No. 1 to Intercreditor
Agreement dated the date hereof, among the Company, the Purchasers and the
Existing Holders (the “Intercreditor Agreement Amendment”), substantially in the
form of Exhibit F attached hereto.

 

 

 
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“IP Security Agreement” means the Intellectual Property Security Agreement,
dated the date hereof, by the Company in favor of the Purchasers, in the form of
Exhibit D attached hereto, securing the obligations of the Company under the
Notes and other Transaction Documents.

 

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

 

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

 

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

 

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

 

“Notes” means the 8.0% Senior Secured Convertible Notes due, subject to the
terms therein, one (1) year from their date of issuance, issued by the Company
to the Purchasers hereunder, in the form of Exhibit A attached hereto.

 

“Person” means an individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or subdivision thereof) or other entity
of any kind.

 

“Purchaser Party” shall have the meaning ascribed to such term in Section 4.8.

 

“Purchaser Rep Expenses” shall have the meaning ascribed to such term in Section
2.1(b)(iii).

 

“Purchaser Representative” shall have the meaning ascribed to such term in
Section 2.1(b)(i).

 

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

 

“Required Minimum” means, as of any date, the maximum aggregate number of shares
of Common Stock then issued or potentially issuable in the future pursuant to
the Transaction Documents, including any Underlying Shares issuable upon
exercise or conversion in full of all Notes and Warrants (including Underlying
Shares issuable as payment of interest), ignoring any conversion or exercise
limits set forth therein, and assuming that the Conversion Price is at all times
on and after the date of determination 70% of the VWAP occurring during the
twenty (20) consecutive Trading Days immediately preceding the date of
determination.

 

 

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

 

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

 

“Securities” means the Notes, the Warrants and the Underlying Shares.

 

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

 

“Security Agreement” means the Security Agreement, dated the date hereof, by the
Company in favor of the Purchasers, in the form of Exhibit C attached hereto,
securing the obligations of the Company under the Notes and other Transaction
Documents.

 

“Security Documents” means any and all security agreements, pledge agreements,
hypothecation agreements, collateral assignments, mortgages, deeds of trust,
control agreements and similar such agreements, executed and delivered by the
Company, any of its Subsidiaries and/or any third party in favor of the
Purchasers pursuant to the Transaction Documents which secures the Company’s
obligations under the Transaction Documents and/or any of the Securities, and
other documents executed, delivered and/or filed by the Company, any of its
Subsidiaries, any third party and/or the Purchasers as permitted or required
under any of the foregoing, including without limitation the Security Agreement
and the IP Security Agreement.

 

“Short Sales” means all “short sales” as defined in Rule 200 of Regulation SHO
under the Exchange Act (but shall not be deemed to include the location and/or
reservation of borrowable shares of Common Stock).

 

“Subscription Amount” means, as to each Purchaser, the aggregate amount to be
paid for Notes and Warrants purchased hereunder as specified below such
Purchaser’s name on the signature page of this Agreement and next to the heading
“Subscription Amount,” in United States dollars and in immediately available
funds. The initial principal amount of each Purchaser’s Note shall be equal to
such Purchaser’s Subscription Amount.

 

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

 

“Subsidiary Guarantee” means the Subsidiary Guarantee, in the form attached
hereto as Exhibit E, executed by each Subsidiary in favor of the Purchasers,
guaranteeing the Company’s obligations under the Notes.

 

 

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

 

“Trading Market” means the following markets or exchanges on which the Common
Stock is listed or quoted for trading on the date in question: any national
securities exchange, the Over the Counter Bulletin Board market or the OTC
Markets Group’s OTCQB or OTCQX markets.

 

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

 

“Transfer Agent” means Securities Transfer Corp., the current transfer agent of
the Company with a mailing address of 2591 Dallas Parkway, Suite 102, Frisco, TX
75034, and a facsimile number of (469) 633-0088, and any successor transfer
agent of the Company.

 

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

 

“VWAP” means, for any measurement period, the price determined by the first of
the following clauses that applies: (a) the volume weighted average price of the
Common Stock for such period on the Trading Market; (b) if the Common Stock is
not then quoted for trading on the Trading Market and if prices for the Common
Stock are then reported in the “Pink Sheets” published by Pink Sheets, LLC, the
OTC Market Group’s OTCPink market or a similar organization or agency succeeding
to their functions of reporting prices, the volume weighted average price of the
Common Stock for such period on such substitute market; or (c) in all other
cases, the fair market value of a share of Common Stock as determined by an
independent appraiser selected in good faith by the Purchaser Representative and
reasonably acceptable to the Company.

 

“Warrants” means the Common Stock purchase warrants delivered to the Purchasers
at a Closing in accordance with Section 2.2(a) hereof in the form of Exhibit B
attached hereto.

 

“Warrant Shares” means the shares of Common Stock issuable upon exercise of the
Warrants.

 

“W-Net” means W-Net Fund I, L.P.

 

ARTICLE II.

PURCHASE AND SALE

 

2.1     Closings.

 

(a)     The initial purchase and sale of the Notes and Warrants (the “Initial
Closing”) shall take place on September 12, 2014, at 10:00 a.m., Pacific Time,
at the offices of Company Counsel or at such other location or time or on such
other date mutually agreed upon by the Company and all of the Purchasers,
subject to the conditions precedent for a Closing as set forth in Section 2.3,
and to each party’s obligations hereunder having been satisfied or waived. In
the event that there is more than one closing, the term “Closing” shall apply to
each such closing and the term “Closing Date” shall refer to the date of such
closing, unless otherwise specified. At each Closing, upon the terms and subject
to the conditions set forth herein, the Company agrees to sell, and the
Purchasers participating in such Closing, severally and not jointly, agree to
purchase, in the aggregate, up to $1,000,000 in principal amount of the Notes.
If any Notes authorized for purchase hereunder remain available for purchase
following the Initial Closing, then, subject to the terms and conditions herein,
the Company may sell and issue at one or more additional Closings up to the
balance of the Notes authorized and available for issuance hereunder within 90
days after the Initial Closing. For purposes of clarity the aggregate principal
amount of all Notes issued hereunder shall not exceed $1,000,000.

 

 

 
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(b)

Purchaser Representative.

 

(i)     By virtue of the execution of this Agreement by each Purchaser, each of
the Purchasers shall be deemed to have agreed to appoint W-Net as its agent and
attorney-in-fact, as the purchaser representative (the “Purchaser
Representative”) for and on behalf of the Purchasers to give and receive notices
and communications, to agree to, negotiate, enter into settlements and
compromises of, and comply with orders of courts with respect to any
indemnification claims, to assert, negotiate, enter into settlements and
compromises of, and comply with orders of courts with respect to, any other
claim by the Company against any Purchaser or by any such Purchaser against the
Company, in each case relating to this Agreement or the transactions
contemplated hereby, and to take all other actions that are either (A) necessary
or appropriate in the judgment of the Purchaser Representative for the
accomplishment of the foregoing or (B) specifically mandated by the terms of
this Agreement. Such agency may be changed by the Purchasers from time to time
upon not less than thirty (30) days prior written notice to the Company;
provided, however, that the Purchaser Representative may not be removed unless
Purchasers holding at least two-thirds (2/3) of the outstanding principal amount
of the Notes agree to such removal and to the identity of the substituted agent.
A vacancy in the position of Purchaser Representative, whether due to the
resignation, removal or dissolution of the Purchaser Representative or for any
other reason, may be filled by the recipients of a majority in interest of the
outstanding principal amount of the Notes. No bond shall be required of the
Purchaser Representative, and the Purchaser Representative shall not receive any
compensation for its services. Notices or communications to or from the
Purchaser Representative shall constitute notice to or from the Purchasers.

 

(ii)     The Purchaser Representative shall not be liable for any act done or
omitted hereunder as Purchaser Representative while acting (A) in good faith or
(B) with the consent of the holders of a majority in interest of the outstanding
principal amount of the Notes. The Purchasers shall indemnify the Purchaser
Representative and hold the Purchaser Representative harmless against any loss,
liability or expense incurred without willful misconduct or bad faith on the
part of the Purchaser Representative and arising out of or in connection with
the acceptance or administration of the Purchaser Representative’s duties
hereunder, including the reasonable fees and expenses of any legal counsel,
accountant or other professional advisor retained by the Purchaser
Representative. The Purchaser Representative will be entitled to the advancement
and reimbursement by the Purchasers of costs and expenses incurred by or on
behalf of the Purchaser Representative in the performance of its duties
hereunder, including the reasonable fees and expenses of any legal counsel. A
decision, act, consent or instruction of the Purchaser Representative,
including, but not limited to, an amendment, extension or waiver of this
Agreement, shall constitute a decision of the Purchasers and shall be final,
binding and conclusive upon the Purchasers; and the Company may rely upon any
such decision, act, consent or instruction of the Purchaser Representative as
being the decision, act, consent or instruction of the Purchasers.

 

 

 
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(iii)     Each Purchaser agrees to pay and be responsible for such Purchaser’s
pro rata portion (based upon the portion of Notes previously subscribed for by
such Purchaser) of any expenses or other costs incurred by the Purchaser
Representative in the course of performing the role of Purchaser Representative
under this Agreement (“Purchaser Rep Expenses”). From time to time as such
Purchaser Rep Expenses are incurred or are reasonably anticipated to be
incurred, the Purchaser Representative may submit invoices therefor to each of
the Purchasers with a calculation of the amount owed by each Purchaser based on
their respective pro rata portions thereof. Within thirty (30) days after
delivery of each such invoice, each Purchaser shall pay to the Purchaser
Representative such Purchaser’s pro rata portion of such invoiced amount. All
such invoiced amounts shall be deemed to be valid and reimbursable unless (A)
the amount of such Purchaser Rep Expenses is manifestly incorrect or (B) the
nature of such invoiced amounts is clearly unrelated to any reasonable
activities of the Purchaser Representative under this Agreement.

 

2.2     Deliveries.

 

(a)     On each Closing Date, the Company shall deliver or cause to be delivered
to each Purchaser participating in such Closing the following:

 

 

(i)

this Agreement, duly executed by the Company;

 

(ii)     a Note with a principal amount equal to such Purchaser’s Subscription
Amount, registered in the name of such Purchaser;

 

(iii)     a Warrant, registered in the name of such Purchaser to purchase up to
a number of shares of Common Stock equal to 50% of such Purchaser’s Subscription
Amount divided by the Conversion Price of the Notes (it being understood that
such Conversion Price shall be determined upon the consummation of a Qualified
Financing, as defined in the Notes), with an exercise price equal to $2.00,
subject to adjustment as set forth therein, exercisable from the Closing Date
for a term of five years;

 

(iv)     the Intercreditor Agreement Amendment, duly executed by the Company and
each holder of Existing Senior Debt;

 

(v)     the Security Documents, including, without limitation, the Security
Agreement and the IP Security Agreement, duly executed by the Company and each
Subsidiary; and

 

 

 
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(vi)     the Subsidiary Guarantee, duly executed by each Subsidiary.

 

(b)     On each Closing Date, each Purchaser participating in such Closing shall
deliver or cause to be delivered to the Company the following:

 

 

(i)

this Agreement, duly executed by such Purchaser;

 

(ii)     the Intercreditor Agreement Amendment, duly executed by such Purchaser;

 

(iii)     such Purchaser’s Subscription Amount by wire transfer to the account
as specified in writing by the Company; and

 

(iv)     the Security Documents to which each Purchaser is a party and required
by law to be signed by such Party in order to be binding.

 

2.3     Closing Conditions.

 

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

 

(i)     the accuracy in all material respects on the Closing Date of the
representations and warranties of the Purchasers participating in such Closing
contained herein;

 

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

 

(iii)     at such Closing, the delivery by each Purchaser participating in such
Closing of the items set forth in Section 2.2(b) of this Agreement.

 

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

 

(i)     the accuracy in all material respects when made and on the Closing Date
of the representations and warranties of the Company contained herein;

 

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

 

(iii)     at such Closing, the delivery by the Company of the items set forth in
Section 2.2(a) of this Agreement.

 

ARTICLE III.

REPRESENTATIONS AND WARRANTIES

 

3.1     Representations and Warranties of the Company. Except as set forth under
the corresponding section of the disclosure schedules delivered to the
Purchasers concurrently herewith (“Disclosure Schedules”) which Disclosure
Schedules shall be deemed a part hereof, the Company hereby makes the following
representations and warranties to each Purchaser.

 

 

 
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(a)     Subsidiaries. All of the direct and indirect subsidiaries of the Company
are set forth on Schedule 3.1(a). The Company owns, directly or indirectly, all
of the capital stock or other equity interests of each Subsidiary free and clear
of any Liens, and all of the issued and outstanding shares of capital stock of
each Subsidiary are validly issued and are fully paid, non-assessable and free
of preemptive and similar rights to subscribe for or purchase securities.

 

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

 

(c)     Authorization; Enforcement. The Company and the Subsidiaries have the
requisite corporate power and authority to enter into and to consummate the
transactions contemplated by each of the Transaction Documents and otherwise to
carry out their obligations hereunder and thereunder. The execution and delivery
of each of the Transaction Documents by the Company and the Subsidiaries and the
consummation by it of the transactions contemplated hereby and thereby have been
duly authorized by all necessary action on the part of the Company and the
Subsidiaries and no further action is required by the Company, the Subsidiaries,
their board of directors or their stockholders in connection therewith other
than in connection with the Required Approvals. Each Transaction Document has
been (or upon delivery will have been) duly executed by the Company and the
Subsidiaries, as applicable, and, when delivered in accordance with the terms
hereof and thereof, will constitute the valid and binding obligation of the
Company and the Subsidiaries enforceable against the Company and the
Subsidiaries in accordance with its terms, except (i) as limited by general
equitable principles and applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting enforcement of
creditors’ rights generally, (ii) as limited by laws relating to the
availability of specific performance, injunctive relief or other equitable
remedies and (iii) insofar as indemnification and contribution provisions may be
limited by applicable law.

 

 

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

 

(e)     Filings, Consents and Approvals. Neither the Company nor any Subsidiary
is required to obtain any consent, waiver, authorization or order of, give any
notice to, or make any filing or registration with, any court or other federal,
state, local or other governmental authority or other Person in connection with
the execution, delivery and performance by the Company and the Subsidiaries of
the Transaction Documents, other than (i) the Intercreditor Agreement Amendment,
(ii) filings required pursuant to Section 4.9, (iii) the notice and/or
application(s) to each applicable Trading Market for the issuance and sale of
the Securities and the listing of the Underlying Shares for trading thereon in
the time and manner required thereby, (iv) the filing of Form D with the
Commission and such filings as are required to be made under applicable state
securities laws, and (v) filings required under the terms of the Security
Documents (collectively, the “Required Approvals”).

 

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

 

 

 
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(g)     SEC Reports; Financial Statements. The Company has filed all reports,
schedules, forms, statements and other documents required to be filed by the
Company under the Securities Act and the Exchange Act, including pursuant to
Section 13(a) or 15(d) thereof, for the two years preceding the date hereof (or
such shorter period as the Company was required by law or regulation to file
such material) (the foregoing materials, including the exhibits thereto and
documents incorporated by reference therein, being collectively referred to
herein as the “SEC Reports”) on a timely basis or has received a valid extension
of such time of filing and has filed any such SEC Reports prior to the
expiration of any such extension. As of their respective dates, the SEC Reports
complied in all material respects with the requirements of the Securities Act
and the Exchange Act, as applicable, and none of the SEC Reports, as of the
filing date, contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading. The financial statements of the Company included in
the SEC Reports comply in all material respects with applicable accounting
requirements and the rules and regulations of the Commission with respect
thereto as in effect at the time of filing. Such financial statements have been
prepared in accordance with United States generally accepted accounting
principles applied on a consistent basis during the periods involved (“GAAP”),
except as may be otherwise specified in such financial statements or the notes
thereto and except that unaudited financial statements may not contain all
footnotes required by GAAP, and fairly present in all material respects the
financial position of the Company and its consolidated Subsidiaries as of and
for the dates thereof and the results of operations and cash flows for the
periods then ended, subject, in the case of unaudited statements, to normal,
immaterial, year-end audit adjustments. Since June 30, 2014, the Company has not
effected any change in any method of accounting or accounting practice, except
for any such change required because of a concurrent change in GAAP.

 

(h)     Compliance. To the knowledge of the Company, the Company and the
Subsidiaries are in compliance in all material respects with all applicable laws
(including, without limitation, applicable laws relating to zoning,
environmental matters and the safety and health of employees), ordinances,
regulations and orders of all Governmental Entities. Neither the Company nor any
of the Subsidiaries has been charged with and, to the knowledge of the Company,
is not now under investigation with respect to, a violation of any applicable
law, regulation, ordinance, order or other requirement of a Governmental Entity.
Neither the Company nor any of its Subsidiaries is a party to or bound by any
order, judgment, decree or injunction of any Governmental Entity.

 

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

 

 

 
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(j)     Private Placement. Assuming the accuracy of the Purchasers’
representations and warranties set forth in Section 3.2, no registration under
the Securities Act is required for the offer and sale of the Securities by the
Company to the Purchasers as contemplated hereby, and neither the Company, nor
any of its Affiliates, nor any Person acting on its or their behalf has,
directly or indirectly, made any offers or sales of any security or solicited
any offers to buy any security, under circumstances that would cause this
offering of the Securities to be integrated with prior offerings by the Company
for purposes of (A) the Securities Act which would require the registration of
any such securities under the Securities Act, or (B) any applicable shareholder
approval provisions of any Trading Market on which any of the securities of the
Company are listed or designated. Neither the Company nor any person acting on
behalf of the Company has offered or sold any of the Securities by any form of
general solicitation or general advertising.

 

(k)     Disclosure. None of the Transaction Documents, nor any schedule or
exhibit thereto, nor any other statements, documents or certificates made or
delivered in connection herewith or therewith contains any untrue statement of a
material fact or omits to state a material fact necessary to make the statements
contained herein and therein not misleading in light of the circumstances under
which such statements were made.

 

(l)     Seniority. As of the Closing Date, no indebtedness or other claim
against the Company is senior to the Notes in right of payment, whether with
respect to interest or upon liquidation or dissolution, or otherwise, other than
the 2.5% Senior Secured Promissory Notes issued by the Company as of May 13,
2010, as amended to date, the 6% Senior Secured Convertible Notes issued by the
Company as of February 12, 2014, indebtedness secured by purchase money security
interests (which is senior only as to underlying assets covered thereby) and
capital lease obligations (which is senior only as to the property covered
thereby).

 

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

 

3.2     Representations and Warranties of the Purchasers. Each Purchaser, for
itself and for no other Purchaser, hereby represents and warrants as of the date
hereof and as of the Closing Date to the Company as follows:

 

(a)     Organization; Authority. Such Purchaser is an entity duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization with full right, corporate or partnership power and authority to
enter into and to consummate the transactions contemplated by the Transaction
Documents and otherwise to carry out its obligations hereunder and thereunder.
The execution and delivery of the Transaction Documents and performance by such
Purchaser of the transactions contemplated by the Transaction Documents have
been duly authorized by all necessary corporate or similar action on the part of
such Purchaser. Each Transaction Document to which it is a party has been duly
executed by such Purchaser, and when delivered by such Purchaser in accordance
with the terms hereof, will constitute the valid and legally binding obligation
of such Purchaser, enforceable against it in accordance with its terms, except
(i) as limited by general equitable principles and applicable bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting enforcement of creditors’ rights generally, (ii) as limited by laws
relating to the availability of specific performance, injunctive relief or other
equitable remedies and (iii) insofar as indemnification and contribution
provisions may be limited by applicable law.

 

 

 
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(b)     Own Account. Such Purchaser understands that the Securities are
“restricted securities” and have not been registered under the Securities Act or
any applicable state securities law and is acquiring the Securities as principal
for its own account and not with a view to or for distributing or reselling such
Securities or any part thereof in violation of the Securities Act or any
applicable state securities law, has no present intention of distributing any of
such Securities in violation of the Securities Act or any applicable state
securities law and has no direct or indirect arrangement or understandings with
any other persons to distribute or regarding the distribution of such Securities
(this representation and warranty not limiting such Purchaser’s right to sell
the Securities pursuant to any registration statement filed under the Securities
Act or otherwise in compliance with applicable federal and state securities
laws) in violation of the Securities Act or any applicable state securities law.
Such Purchaser is acquiring the Securities hereunder in the ordinary course of
its business.

 

(c)     Purchaser Status. At the time such Purchaser was offered the Securities,
it was, and at the date hereof it is, and on each date on which it or its
permitted assignee converts any Notes or exercises any Warrants it or such
permitted assignee, as the case may be, will be an “accredited investor” as
defined in Rule 501 under the Securities Act. Such Purchaser is not required to
be registered as a broker-dealer under Section 15 of the Exchange Act.

 

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

 

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

 

 

 
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(f)     Short Sales and Confidentiality Prior To The Date Hereof. Other than
consummating the transactions contemplated hereunder, such Purchaser has not
directly or indirectly, nor has any Person acting on behalf of or pursuant to
any understanding with such Purchaser, executed any purchases or sales,
including Short Sales, of the securities of the Company during the period
commencing from the time that such Purchaser first received a term sheet
(written or oral) from the Company or any other Person representing the Company
setting forth the material terms of the transactions contemplated hereunder
until the date hereof (“Discussion Time”). Notwithstanding the foregoing, in the
case of a Purchaser that is a multi-managed investment vehicle whereby separate
portfolio managers manage separate portions of such Purchaser's assets and the
portfolio managers have no direct knowledge of the investment decisions made by
the portfolio managers managing other portions of such Purchaser's assets, the
representation set forth above shall only apply with respect to the portion of
assets managed by the portfolio manager that made the investment decision to
purchase the Securities covered by this Agreement. Other than to other Persons
party to this Agreement, such Purchaser has maintained the confidentiality of
all disclosures made to it in connection with this transaction (including the
existence and terms of this transaction).

 

ARTICLE IV.

OTHER AGREEMENTS OF THE PARTIES

 

4.1     Transfer Restrictions.

 

(a)     The Securities may only be disposed of in compliance with state and
federal securities laws. In connection with any transfer of Securities other
than pursuant to an effective registration statement or Rule 144, to the Company
or to an Affiliate of a Purchaser or in connection with a pledge as contemplated
in Section 4.1(b), the Company may require the transferor thereof to provide to
the Company an opinion of counsel selected by the transferor and reasonably
acceptable to the Company, the form and substance of which opinion shall be
reasonably satisfactory to the Company, to the effect that such transfer does
not require registration of such transferred Securities under the Securities
Act. As a condition of transfer, any such transferee shall agree in writing to
be bound by the terms of this Agreement and shall have the rights of a Purchaser
under this Agreement.

 

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

 

[NEITHER] THIS SECURITY [NOR THE SECURITIES INTO WHICH THIS SECURITY IS
[EXERCISABLE] [CONVERTIBLE]] HAS [NOT] BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON
AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS. THIS SECURITY [AND THE SECURITIES ISSUABLE
UPON [EXERCISE] [CONVERSION] OF THIS SECURITY] MAY BE PLEDGED IN CONNECTION WITH
A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.

 

 

 
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The Company acknowledges and agrees that a Purchaser may from time to time
pledge pursuant to a bona fide margin agreement with a registered broker-dealer
or grant a security interest in some or all of the Securities to a financial
institution that is an “accredited investor” as defined in Rule 501 under the
Securities Act and who agrees to be bound by the provisions of this Agreement
and, if required under the terms of such arrangement, such Purchaser may
transfer pledged or secured Securities to the pledgees or secured parties. Such
a pledge or transfer would not be subject to approval of the Company and no
legal opinion of legal counsel of the pledgee, secured party or pledgor shall be
required in connection therewith. Further, no notice shall be required of such
pledge. At the appropriate Purchaser’s expense, the Company will execute and
deliver such reasonable documentation as a pledgee or secured party of
Securities may reasonably request in connection with a pledge or transfer of the
Securities, including, if the Securities are subject to a registration statement
filed under the Securities Act, the preparation and filing of any required
prospectus supplement under Rule 424(b)(3) under the Securities Act or other
applicable provision of the Securities Act to appropriately amend the list of
selling stockholders thereunder.

 

(c)     Certificates evidencing the Underlying Shares shall not contain any
legend (including the legend set forth in Section 4.1(b) hereof), except for any
legend reasonably referring to any applicable transfer restrictions under state
securities laws: (i) while a registration statement covering the resale of such
security is effective under the Securities Act, or (ii) if such Underlying
Shares are eligible for resale under Rule 144 and the holder thereof is not an
Affiliate of the Company, or (iii) if such legend is not required under
applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the staff of the Commission). If
required by the Transfer Agent to effect the removal of the legend hereunder,
the Company shall cause its counsel to issue a legal opinion to the Transfer
Agent promptly after the date which is six (6) months following the Closing Date
(if the Company has been subject to the reporting requirements of Section 13 or
15(d) of the Exchange Act for the then preceding ninety (90) days and has filed
all reports required to be filed thereunder during the then preceding twelve
(12) months (or such shorter period that the Company was required to file such
reports) and the holder thereof is not an Affiliate of the Company). If all or
any portion of a Note or Warrant is converted or exercised (as applicable) at a
time when there is an effective registration statement to cover the resale of
the Underlying Shares, or if such Underlying Shares may be sold under Rule 144
or if such legend is not otherwise required under applicable requirements of the
Securities Act (including judicial interpretations and pronouncements issued by
the staff of the Commission) then such Underlying Shares shall be issued free of
all legends, except for any legend reasonably referring to any applicable
transfer restrictions under state securities laws. The Company agrees that at
such time as such legend is no longer required under this Section 4.1(c), it
will, no later than three Trading Days following the delivery by a Purchaser to
the Company or the Transfer Agent of a certificate representing Underlying
Shares, as applicable, issued with a restrictive legend (such third Trading Day,
the “Legend Removal Date”), deliver or cause to be delivered to such Purchaser a
certificate representing such shares that is free from all restrictive and other
legends. The Company may not make any notation on its records or give
instructions to the Transfer Agent that enlarge the restrictions on transfer set
forth in this section. Certificates for Underlying Shares subject to legend
removal hereunder shall be transmitted by the Transfer Agent to the Purchaser by
crediting the account of the Purchaser’s prime broker with the Depository Trust
Company Fast Automated Securities Transfer Program as directed by such
Purchaser.

 

 

 
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(d)     Nothing herein shall limit such Purchaser’s right to pursue actual
damages for the Company’s failure to deliver certificates representing any
Securities as required by the Transaction Documents, and such Purchaser shall
have the right to pursue all remedies available to it at law or in equity
including, without limitation, a decree of specific performance and/or
injunctive relief.

 

(e)     Each Purchaser, severally and not jointly with the other Purchasers,
agrees that such Purchaser will sell any Securities pursuant to either Rule 144
or the registration requirements of the Securities Act, including any applicable
prospectus delivery requirements, or an exemption therefrom, and that if
Securities are sold pursuant to a registration statement filed under the
Securities Act, they will be sold in compliance with the plan of distribution
set forth therein, and acknowledges that the removal of the restrictive legend
from certificates representing Securities as set forth in this Section 4.1 is
predicated upon the Company’s reliance upon this understanding.

 

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

 

4.3     Furnishing of Information. Until the earliest of the time that (i) no
Purchaser owns Securities and (ii) the Warrants have expired or have been fully
exercised, the Company covenants to timely file (or obtain extensions in respect
thereof and file within the applicable grace period) all reports required to be
filed by the Company after the date hereof pursuant to the Exchange Act even if
the Company is not then subject to the reporting requirements of the Exchange
Act. As long as any Purchaser owns Securities, if the Company is not required to
file reports pursuant to the Exchange Act, it will prepare and furnish to the
Purchasers and make publicly available in accordance with Rule 144(c) such
information as would be required if the Purchasers were able to sell the
Securities under Rule 144. The Company further covenants that it will take such
further action as any holder of Securities may reasonably request, to the extent
required from time to time to enable such Person to sell such Securities without
registration under the Securities Act within the requirements of the exemption
provided by Rule 144 if such exemption becomes available. So long as any
Securities are outstanding, the Company shall cause itself to be subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act and timely
file all reports required to be filed thereunder.

 

 

 
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4.4     Integration. The Company shall not sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Securities to the Purchasers in a manner that would require the
registration under the Securities Act of the sale of the Securities to the
Purchasers or that would be integrated with the offer or sale of the Securities
for purposes of the rules and regulations of any Trading Market.

 

4.5     Conversion and Exercise Procedures. The form of Notice of Exercise
included in the Warrants sets forth the totality of the procedures required of
the Purchasers in order to exercise the Warrants. No additional legal opinion or
other information or instructions shall be required of the Purchasers to
exercise their Warrants. The Company shall honor exercises of the Warrants and
shall deliver Underlying Shares in accordance with the terms, conditions and
time periods set forth in the Transaction Documents.

 

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

 

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

 

4.8     Indemnification of Purchasers. Subject to the provisions of this Section
4.8, the Company will indemnify and hold each Purchaser and its directors,
officers, shareholders, members, partners, employees and agents (and any other
Persons with a functionally equivalent role of a Person holding such titles
notwithstanding a lack of such title or any other title), each Person who
controls such Purchaser (within the meaning of Section 15 of the Securities Act
and Section 20 of the Exchange Act), and the directors, officers, shareholders,
agents, members, partners or employees (and any other Persons with a
functionally equivalent role of a Person holding such titles notwithstanding a
lack of such title or any other title) of such controlling person (each, a
“Purchaser Party”) harmless from any and all losses, liabilities, obligations,
claims, contingencies, damages, costs and expenses, including all judgments,
amounts paid in settlements, court costs and reasonable attorneys’ fees and
costs of investigation that any such Purchaser Party may suffer or incur as a
result of or relating to (a) any breach of any of the representations,
warranties, covenants or agreements made by the Company in this Agreement or in
the other Transaction Documents or (b) any action instituted against a Purchaser
in any capacity, or any of them or their respective Affiliates, by any
stockholder of the Company who is not an Affiliate of such Purchaser, with
respect to any of the transactions contemplated by the Transaction Documents
(unless such action is based upon a breach of such Purchaser’s representations,
warranties or covenants under the Transaction Documents or any agreements or
understandings such Purchaser may have with any such stockholder or any
violations by the Purchaser of state or federal securities laws or any conduct
by such Purchaser which constitutes fraud, gross negligence, willful misconduct
or malfeasance). If any action shall be brought against any Purchaser Party in
respect of which indemnity may be sought pursuant to this Agreement, such
Purchaser Party shall promptly notify the Company in writing, and the Company
shall have the right to assume the defense thereof with counsel of its own
choosing reasonably acceptable to the Purchaser Party. Any Purchaser Party shall
have the right to employ separate counsel in any such action and participate in
the defense thereof, but the fees and expenses of such counsel shall be at the
expense of such Purchaser Party except to the extent that (i) the employment
thereof has been specifically authorized by the Company in writing, (ii) the
Company has failed after a reasonable period of time to assume such defense and
to employ counsel or (iii) in such action there is, in the reasonable opinion of
such separate counsel, a material conflict on any material issue between the
position of the Company and the position of such Purchaser Party, in which case
the Company shall be responsible for the reasonable fees and expenses of no more
than one such separate counsel. The Company will not be liable to any Purchaser
Party under this Agreement (i) for any settlement by a Purchaser Party effected
without the Company’s prior written consent, which shall not be unreasonably
withheld or delayed; or (ii) to the extent, but only to the extent that a loss,
claim, damage or liability is attributable to any Purchaser Party’s breach of
any of the representations, warranties, covenants or agreements made by such
Purchaser Party in this Agreement or in the other Transaction Documents.

 

 

 
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4.9     Reservation and Listing of Securities.

 

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

 

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

 

4.10     Corporate Structure. For a period of twelve (12) months following the
Initial Closing, the Company and its Subsidiaries shall maintain and conduct its
business at a physical office or offices, hire and retain key employees and
other personnel, and otherwise operate its business in a reasonable and
customary manner similar to other public reporting companies engaged in similar
businesses.

 

4.11     Equal Treatment of Purchasers. No consideration shall be offered or
paid to any Person to amend or consent to a waiver or modification of any
provision of any of the Transaction Documents unless the same consideration is
also offered to all of the parties to the Transaction Documents. Further, the
Company shall not make any payment of principal or interest on the Notes in
amounts which are disproportionate to the respective principal amounts
outstanding on the Notes at any applicable time. For clarification purposes,
this provision constitutes a separate right granted to each Purchaser by the
Company and negotiated separately by each Purchaser, and is intended for the
Company to treat the Purchasers as a class and shall not in any way be construed
as the Purchasers acting in concert or as a group with respect to the purchase,
disposition or voting of Securities or otherwise.

 

 

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

 

4.13     Security. The Company’s and any Subsidiaries’ obligations under the
Notes and other Transaction Documents shall be secured by all the assets of the
Company and its Subsidiaries. As of the Closing, the Purchasers participating
therein shall be granted a security interest in all the assets of the Company,
including, without limitation, all of its Intellectual Property rights and its
ownership of any and all Subsidiaries, and in the assets of any such
Subsidiaries, to be memorialized in the Security Documents. The Company shall
execute such other agreements, documents and financing statements reasonably
requested by Purchasers, which will be filed at the Company’s expense with the
applicable jurisdictions and authorities. The Company shall also execute all
such documents reasonably necessary in the opinion of the Purchasers to
memorialize and further protect the security interests described herein. The
Purchasers may appoint a collateral agent to represent them collectively in
connection with the security interests being granted to the Purchasers. The
Purchasers further acknowledge that the security interests granted pursuant to
the Security Agreement shall be subject to the terms of the Intercreditor
Agreement, as amended.

 

4.14     Additional Guarantors. The Company shall cause each of its
Subsidiaries, including those formed or acquired on or after the date hereof, to
execute and deliver to the Purchasers a Subsidiary Guarantee and a Security
Agreement in conformity with those executed and delivered at the Closing.

 

ARTICLE V.

MISCELLANEOUS

 

5.1     Termination.  This Agreement may be terminated by any Purchaser, as to
such Purchaser’s obligations hereunder only and without any effect whatsoever on
the obligations between the Company and the other Purchasers, by written notice
to the other parties, if the Initial Closing has not been consummated on or
before January 31, 2014; provided, however, that such termination will not
affect the right of any party to sue for any breach by the other party (or
parties).

 

5.2     Fees and Expenses. Except as expressly set forth in the Transaction
Documents to the contrary, each party shall pay the fees and expenses of its
advisers, counsel, accountants and other experts, if any, and all other expenses
incurred by such party incident to the negotiation, preparation, execution,
delivery and performance of this Agreement. The Company shall pay all transfer
agent fees, stamp taxes and other taxes and duties levied in connection with the
delivery of any Securities to the Purchasers.

 

 

 
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5.3     Entire Agreement. The Transaction Documents, together with the exhibits
and schedules thereto, contain the entire understanding of the parties with
respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules.

 

5.4     Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (a) the date of transmission or
delivery, if such notice or communication is delivered via facsimile at the
facsimile number, or delivered by a U.S. nationally recognized overnight courier
service to the address, set forth on the signature pages attached hereto prior
to 5:00 p.m. (Pacific time) on a Business Day, (b) the next Business Day after
the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile number, or delivered by such courier service to the
address, set forth on the signature pages attached hereto on a day that is not a
Business Day or later than 5:00 p.m. (Pacific time) on any Business Day, or (c)
upon actual receipt by the party to whom such notice is required to be given.
The address for such notices and communications shall be as set forth on the
signature pages attached hereto.

 

5.5     Amendments; Waivers. No provision of this Agreement may be waived,
modified, supplemented or amended except in a written instrument signed, in the
case of an amendment, by the Company and the Purchasers of at least a majority
in interest of the Securities still held by Purchasers or, in the case of a
waiver, by the party against whom enforcement of any such waived provision is
sought. No waiver of any default with respect to any provision, condition or
requirement of this Agreement shall be deemed to be a continuing waiver in the
future or a waiver of any subsequent default or a waiver of any other provision,
condition or requirement hereof, nor shall any delay or omission of any party to
exercise any right hereunder in any manner impair the exercise of any such
right.

 

5.6     Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.

 

5.7     Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and permitted assigns. The
Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of each Purchaser (other than by merger). Any
Purchaser may assign any or all of its rights under this Agreement to any Person
to whom such Purchaser assigns or transfers any Securities, provided that such
transferee agrees in writing to be bound, with respect to the transferred
Securities, by the provisions of the Transaction Documents that apply to the
“Purchasers.”

 

5.8     No Third-Party Beneficiaries. This Agreement is intended for the benefit
of the parties hereto and their respective successors and permitted assigns and
is not for the benefit of, nor may any provision hereof be enforced by, any
other Person, except as otherwise expressly set forth herein.

 

5.9     Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of the Transaction Documents shall be governed by
and construed and enforced in accordance with the internal laws of the State of
California, without regard to the principles of conflicts of law thereof. Each
party agrees that all legal proceedings concerning the interpretations,
enforcement and defense of the transactions contemplated by this Agreement and
any other Transaction Documents (whether brought against a party hereto or its
respective affiliates, directors, officers, shareholders, employees or agents)
shall be commenced exclusively in the state and federal courts sitting in the
County of Los Angeles. Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the County of Los
Angeles for the adjudication of any dispute hereunder or in connection herewith
or with any transaction contemplated hereby or discussed herein (including with
respect to the enforcement of any of the Transaction Documents), and hereby
irrevocably waives, and agrees not to assert in any suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of any such
court, that such suit, action or proceeding is improper or is an inconvenient
venue for such proceeding. Each party hereby irrevocably waives personal service
of process and consents to process being served in any such suit, action or
proceeding by mailing a copy thereof via registered or certified mail or
overnight delivery (with evidence of delivery) to such party at the address in
effect for notices to it under this Agreement and agrees that such service shall
constitute good and sufficient service of process and notice thereof. Nothing
contained herein shall be deemed to limit in any way any right to serve process
in any other manner permitted by law. If either party shall commence an action
or proceeding to enforce any provisions of the Transaction Documents, then the
prevailing party in such action or proceeding shall be reimbursed by the other
party for its reasonable attorneys’ fees and other costs and expenses incurred
with the investigation, preparation and prosecution of such action or
proceeding.

 

 

 
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5.10     Survival. The representations and warranties shall survive the Closing
and the delivery of the Securities for the applicable statute of limitations.

 

5.11     Execution. This Agreement may be executed in two or more counterparts,
all of which when taken together shall be considered one and the same agreement
and shall become effective when counterparts have been signed by each party and
delivered to the other party(ies), it being understood that all parties need not
sign the same counterpart. In the event that any signature is delivered by
facsimile transmission or by e-mail delivery of a “.pdf” or other document image
format data file, such signature shall create a valid and binding obligation of
the party executing (or on whose behalf such signature is executed) with the
same force and effect as if such facsimile or “.pdf” or other document image
format data file signature page were an original thereof.

 

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

 

5.13     Rescission and Withdrawal Right. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions of) any of
the other Transaction Documents, whenever any Purchaser exercises a right,
election, demand or option under a Transaction Document and the Company does not
timely perform its related obligations within the periods therein provided,
then, until the earlier of sixty (60) days after such failure by the Company or
the Company performs such obligations, such Purchaser may rescind or withdraw,
in its sole discretion from time to time upon written notice to the Company, any
relevant notice, demand or election in whole or in part without prejudice to its
future actions and rights.

 

 

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

 

5.15     Remedies. In addition to being entitled to exercise all rights provided
herein or granted by law, including recovery of damages, each of the Purchasers
and the Company will be entitled to specific performance under the Transaction
Documents. The parties agree that monetary damages may not be adequate
compensation for any loss incurred by reason of any breach of obligations
contained in the Transaction Documents and hereby agrees to waive and not to
assert in any action for specific performance of any such obligation the defense
that a remedy at law would be adequate.

 

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

 

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

 

 

 
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5.18     Independent Nature of Purchasers’ Obligations and Rights. The
obligations of each Purchaser under any Transaction Document are several and not
joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance or non-performance of the obligations
of any other Purchaser under any Transaction Document. Nothing contained herein
or in any other Transaction Document, and no action taken by any Purchaser
pursuant thereto, shall be deemed to constitute the Purchasers as a partnership,
an association, a joint venture or any other kind of entity, or create a
presumption that the Purchasers are in any way acting in concert or as a group
with respect to such obligations or the transactions contemplated by the
Transaction Documents. Each Purchaser shall be entitled to independently protect
and enforce its rights, including without limitation the rights arising out of
this Agreement or out of the other Transaction Documents, and it shall not be
necessary for any other Purchaser to be joined as an additional party in any
proceeding for such purpose. Each Purchaser has been represented by its own
separate legal counsel in their review and negotiation of the Transaction
Documents. For reasons of administrative convenience only, Purchasers and their
respective counsel have chosen to communicate with the Company through W-Net.
W-Net does not represent all of the Purchasers but only W-Net. The Company has
elected to provide all Purchasers with the same terms and Transaction Documents
for the convenience of the Company and not because it was required or requested
to do so by the Purchasers.

 

5.19     Saturdays, Sundays, Holidays, etc. If the last or appointed day for the
taking of any action or the expiration of any right required or granted herein
shall not be a Business Day, then such action may be taken or such right may be
exercised on the next succeeding Business Day.

 

5.20     Construction. The parties agree that each of them and/or their
respective counsel has reviewed and had an opportunity to revise the Transaction
Documents and, therefore, the normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not be employed
in the interpretation of the Transaction Documents or any amendments hereto.

 

5.21     Waiver of Jury Trial. In any action, suit or proceeding in any
jurisdiction brought by any party against any other party, the parties each
knowingly and intentionally, to the greatest extent permitted by applicable law,
hereby absolutely, unconditionally, irrevocably and expressly waives forever
trial by jury.

 

 

 

[Signature Page Follows]

 

 

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

 

ATHERONOVA INC. 

Address for Notice:

 

2301 Dupont Drive, Suite 525

Irvine, CA 92612

By:__________________________________________

     Name: Thomas W. Gardner

     Title: Chief Executive Officer

Fax: (949) 476-1122

   

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

 

Stubbs Alderton & Markiles, LLP

15260 Ventura Boulevard, 20th Floor

Sherman Oaks, CA 91403

Attn: Louis Wharton, Esq.

Fax: (818) 444-6309

 

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGES FOR PURCHASERS FOLLOWS]

 

 

 

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[PURCHASER SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT]

 

IN WITNESS WHEREOF, the undersigned has caused this Securities Purchase
Agreement to be duly executed by its authorized signatory as of the date first
indicated above.

 

Name of
Purchaser:                                                                                                                                                                                             

 

Signature of Authorized Signatory of
Purchaser:                                                                                                                                        

 

Name of Authorized
Signatory:                                                                                                                                                                        

 

Title of Authorized
Signatory:                                                                                                                                                                         

 

Email Address of
Purchaser:                                                                                                                                                                            

 

Facsimile Number of
Purchaser:                                                                                                                                                                      

 

Address for Notice of
Purchaser:                                                                                                                                                                  

 

 

 

 

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

 

 

 

 

 

Subscription Amount: $_____________

 

 

 

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EXHIBIT A

 

NOTE

 

 

 

 

 

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EXHIBIT B

 

WARRANT

 

 

 

 

 

 

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EXHIBIT C

 

SECURITY AGREEMENT

 

 

 

 

 

 

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EXHIBIT D

 

INTELLECTUAL PROPERTY SECURITY AGREEMENT

 

 

 

 

 

 

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EXHIBIT E

 

SUBSIDIARY GUARANTEE

 

 

 

 

 

 

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EXHIBIT F

 

INTERCREDITOR AGREEMENT AMENDMENT