--------------------------------------------------------------------------------

EXHIBIT 10.1
 
SECURITIES PURCHASE AGREEMENT
 
SECURITIES PURCHASE AGREEMENT (the "Agreement"), dated as of July 2, 2012, by
and among Liquidmetal Technologies, Inc., a Delaware corporation, with
headquarters located at 30452 Esperanza, Rancho Santa Margarita, California
92688 (the "Company") and the investors listed on the Schedule of Buyers
attached hereto (individually, a "Buyer" and collectively, the "Buyers").
 
WHEREAS:
 
A.          The Company and each Buyer is executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Section 4(2) of the Securities Act of 1933, as amended (the "1933 Act"), and
Rule 506 of Regulation D ("Regulation D") as promulgated by the United States
Securities and Exchange Commission (the "SEC") under the 1933 Act.
 
B.           The Company has authorized a new series of senior convertible notes
of the Company, in substantially the form attached hereto as Exhibit A (the
"Notes"), which Notes shall be convertible into the Company's common stock, par
value $0.001 per share (the "Common Stock") (the shares of Common Stock issuable
pursuant to the terms of the Notes, including, without limitation, upon
conversion, upon payment of interest, upon amortization or otherwise,
collectively, the "Conversion Shares"), in accordance with the terms of the
Notes.
 
C.           Each Buyer wishes to purchase, and the Company wishes to sell, upon
the terms and conditions stated in this Agreement, (i) that aggregate principal
amount of Notes, set forth opposite such Buyer's name in column (3) on the
Schedule of Buyers attached hereto (which aggregate principal amount of Notes
for all Buyers shall be $12,000,000), and (ii) Warrants, in substantially the
form attached hereto as Exhibit B (the "Warrants"), representing the right to
acquire that number of shares of Common Stock set forth opposite such Buyer's
name in column (4) on the Schedule of Buyers (as exercised, collectively, the
"Warrant Shares").
 
D.           Contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a Registration Rights
Agreement, substantially in the form attached hereto as Exhibit C (the
"Registration Rights Agreement"), pursuant to which the Company has agreed to
provide certain registration rights with respect to the Registrable Securities
(as defined in the Registration Rights Agreement) under the 1933 Act and the
rules and regulations promulgated thereunder, and applicable state securities
laws.
 
E.           The Notes, the Conversion Shares, the Warrants and the Warrant
Shares collectively are referred to herein as the "Securities".
 
NOW, THEREFORE, the Company and each Buyer hereby agree as follows:
 
1.             PURCHASE AND SALE OF NOTES AND WARRANTS.
 
(a)           Purchase of Notes and Warrants.  Subject to the satisfaction (or
waiver) of the conditions set forth in Sections 6 and 7 below, the Company shall
issue and sell to each Buyer, and each Buyer severally, but not jointly, agrees
to purchase from the Company on the Closing Date (as defined below), (x) a
principal amount of Notes as is set forth opposite such Buyer's name in column
(3) on the Schedule of Buyers, and (y) Warrants to acquire up to that number of
Warrant Shares as is set forth opposite such Buyer's name in column (4) on the
Schedule of Buyers (the "Closing").
 
 
 

--------------------------------------------------------------------------------

 
 
(b)           Closing.  The date and time of the Closing (the "Closing Date")
shall be 10:00 a.m., New York City time, on the date hereof (or such other date
and time as is mutually agreed to by the Company and each Buyer) after
notification of satisfaction (or waiver) of the conditions to the Closing set
forth in Sections 6 and 7 below, at the offices of Schulte Roth & Zabel LLP, 919
Third Avenue, New York, New York 10022.
 
(c)           Purchase Price.  The aggregate purchase price for the Notes and
the Warrants to be purchased by each Buyer at the Closing (the "Purchase Price")
shall be the amount set forth opposite each Buyer's name in column (5) of the
Schedule of Buyers.  Each Buyer shall pay $1,000 for each $1,000 of principal
amount of Notes and related Warrants to be purchased by such Buyer at the
Closing.  The Buyers and the Company agree that the Notes and the Warrants
constitute an "investment unit" for purposes of Section 1273(c)(2) of the
Internal Revenue Code of 1986, as amended (the "Code").  The Buyers and the
Company mutually agree that the allocation of the issue price of such investment
unit between the Notes and the Warrants in accordance with Section 1273(c)(2) of
the Code and Treasury Regulation Section 1.1273-2(h) shall be an aggregate
amount of $663,600 allocated to the Warrants and the balance of the Purchase
Price allocated to the Notes, and neither the Buyers nor the Company shall take
any position inconsistent with such allocation in any tax return or in any
judicial or administrative proceeding in respect of taxes.
 
(d)           Form of Payment.  On the Closing Date, (i) each Buyer shall pay
its Purchase Price to the Company for the Notes and the Warrants to be issued
and sold to such Buyer at the Closing (less, in the case of [Lead invsestor]
(the "Lead Investor"), the amounts withheld pursuant to Section 4(g)), by wire
transfer of immediately available funds in accordance with the Company's written
wire instructions and (ii) the Company shall deliver to each Buyer the Notes
(allocated in the principal amounts as such Buyer shall request) which such
Buyer is then purchasing hereunder along with the Warrants (allocated in the
amounts as such Buyer shall request) which such Buyer is purchasing hereunder,
in each case duly executed on behalf of the Company and registered in the name
of such Buyer or its designee.
 
2.             BUYER'S REPRESENTATIONS AND WARRANTIES.  Each Buyer, severally
and not jointly, represents and warrants with respect to only itself that:
 
(a)           No Public Sale or Distribution.  Such Buyer is (i) acquiring the
Notes and the Warrants and (ii) upon issuance of the Conversion Shares pursuant
to the terms of the Notes and upon exercise of the Warrants (other than pursuant
to a Cashless Exercise (as defined in the Warrants)) will acquire the Conversion
Shares and the Warrant Shares, for its own account and not with a view towards,
or for resale in connection with, the public sale or distribution thereof,
except pursuant to sales registered or exempted under the 1933 Act; provided,
however, that by making the representations herein, such Buyer does not agree to
hold any of the Securities for any minimum or other specific term and reserves
the right to dispose of the Securities at any time in accordance with or
pursuant to a registration statement or an exemption under the 1933 Act.  Such
Buyer is acquiring the Securities hereunder in the ordinary course of its
business.  Such Buyer does not presently have any agreement or understanding,
directly or indirectly, with any Person (as defined in Section 3(s)) to
distribute any of the Securities.
 
 
- 2 -

--------------------------------------------------------------------------------

 
 
(b)           Accredited Investor Status.  Such Buyer is an "accredited
investor" as that term is defined in Rule 501(a) of Regulation D.
 
(c)           Reliance on Exemptions.  Such Buyer understands that the
Securities are being offered and sold to it in reliance on specific exemptions
from the registration requirements of United States federal and state securities
laws and that the Company is relying in part upon the truth and accuracy of, and
such Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of such Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of such Buyer
to acquire the Securities.
 
(d)           Information.  Such Buyer and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Securities
that have been requested by such Buyer.  Such Buyer and its advisors, if any,
have been afforded the opportunity to ask questions of the Company.  Neither
such inquiries nor any other due diligence investigations conducted by such
Buyer or its advisors, if any, or its representatives shall modify, amend or
affect such Buyer's right to rely on the Company's representations and
warranties contained herein.  Such Buyer understands that its investment in the
Securities involves a high degree of risk.  Such Buyer 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.  Such Buyer acknowledges that, except for the representations,
warranties, covenants and other matters that are expressly covered by the
provisions of this Agreement and the other Transaction Documents, including the
exhibits and schedules hereto and thereto, such Buyer is relying on its own
investigation and analysis in entering into this Agreement and consummating the
transactions contemplated hereby.
 
(e)           No Governmental Review.  Such Buyer understands that no United
States 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 the investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.
 
 
- 3 -

--------------------------------------------------------------------------------

 
 
(f)           Transfer or Resale.  Such Buyer understands that except as
provided in the Registration Rights Agreement:  (i) the Securities have not been
and are not being registered under the 1933 Act or any state securities laws,
and may not be offered for sale, sold, assigned or transferred unless (A)
subsequently registered thereunder, (B) such Buyer shall have delivered to the
Company an opinion of counsel, in a form reasonably acceptable to the Company,
to the effect that such Securities to be sold, assigned or transferred may be
sold, assigned or transferred pursuant to an exemption from such registration,
or (C) such Buyer provides the Company with reasonable assurance that such
Securities can be sold, assigned or transferred pursuant to Rule 144 or Rule
144A promulgated under the 1933 Act, as amended, (or a successor rule thereto)
(collectively, "Rule 144"); (ii) any sale of the Securities made in reliance on
Rule 144 may be made only in accordance with the terms of Rule 144 and further,
if Rule 144 is not applicable, any resale of the Securities under circumstances
in which the seller (or the Person through whom the sale is made) may be deemed
to be an underwriter (as that term is defined in the 1933 Act) may require
compliance with some other exemption under the 1933 Act or the rules and
regulations of the SEC thereunder; and (iii) neither the Company nor any other
Person is under any obligation to register the Securities under the 1933 Act or
any state securities laws or to comply with the terms and conditions of any
exemption thereunder.  Notwithstanding the foregoing, the Securities may be
pledged in connection with a bona fide margin account or other loan or financing
arrangement secured by the Securities and such pledge of Securities shall not be
deemed to be a transfer, sale or assignment of the Securities hereunder, and no
Buyer effecting a pledge of Securities shall be required to provide the Company
with any notice thereof or otherwise make any delivery to the Company pursuant
to this Agreement or any other Transaction Document (as defined in Section
3(b)), including, without limitation, this Section 2(f).
 
(g)           Legends.  Such Buyer understands that the certificates or other
instruments representing the Notes and the Warrants and, until such time as the
resale of the Conversion Shares and the Warrant Shares have been registered
under the 1933 Act as contemplated by the Registration Rights Agreement, the
stock certificates representing the Conversion Shares and the Warrant Shares,
except as set forth below, shall bear any legend as required by the "blue sky"
laws of any state and a restrictive legend in substantially the following form
(and a stop-transfer order may be placed against transfer of such stock
certificates):
 
[NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE [CONVERTIBLE] [EXERCISABLE]
HAVE BEEN][THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN]
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION
OF COUNSEL, IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS
NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE
144A UNDER SAID ACT.  NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
ARRANGEMENT SECURED BY THE SECURITIES.
 
 
- 4 -

--------------------------------------------------------------------------------

 
 
The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Securities upon which it is
stamped or issue to such holder by electronic delivery at the applicable balance
account at The Depository Trust Company ("DTC"), if, unless otherwise required
by state securities laws, (i) such Securities are registered for resale under
the 1933 Act, (ii) in connection with a sale, assignment or other transfer, such
holder provides the Company with an opinion of counsel, in a generally
acceptable form, to the effect that such sale, assignment or transfer of the
Securities may be made without registration under the applicable requirements of
the 1933 Act, or (iii) the Securities can be sold, assigned or transferred
pursuant to Rule 144 or Rule 144A.  The Company shall be responsible for the
fees of its transfer agent and all DTC fees associated with such issuance.
 
(h)           Validity; Enforcement.  This Agreement and the Registration Rights
Agreement have been duly and validly authorized, executed and delivered on
behalf of such Buyer and shall constitute the legal, valid and binding
obligations of such Buyer enforceable against such Buyer in accordance with
their respective terms, except as such enforceability may be limited by general
principles of equity or to applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation and other similar laws relating to, or affecting
generally, the enforcement of applicable creditors' rights and remedies, and
except that any rights to indemnity or contribution under the Transaction
Documents may be limited by federal and state securities laws and public policy
considerations.
 
(i)             No Conflicts.  The execution, delivery and performance by such
Buyer of this Agreement and the Registration Rights Agreement and the
consummation by such Buyer of the transactions contemplated hereby and thereby
will not (i) result in a violation of the organizational documents of such Buyer
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 such Buyer is a party, or (iii)
result in a violation of any law, rule, regulation, order, judgment or decree
(including federal and state securities laws) applicable to such Buyer, except
in the case of clauses (ii) and (iii) above, for such conflicts, defaults,
rights or violations which would not, individually or in the aggregate,
reasonably be expected to have a material adverse effect on the ability of such
Buyer to perform its obligations hereunder.
 
(j)             Residency.  Such Buyer is a resident of that jurisdiction
specified below its address on the Schedule of Buyers.
 
(k)           Certain Trading Activities.  Such Buyer has not directly or
indirectly, nor has any of its Buyer Trading Affiliates (as defined below),
engaged in any purchases or sales of securities of the Company (including,
without limitation, any Short Sales (as defined in Regulation SHO promulgated
under the 1934 Act (as defined in Section 3(f) below) involving the Company’s
securities) since the time that such Buyer was first contacted by the Company or
any other Person regarding the transactions contemplated hereby.  Such Buyer
covenants that neither it nor any of its Buyer Trading Affiliates will engage in
any purchases or sales of securities of the Company (including Short Sales)
prior to the time that the transactions contemplated by this Agreement are
publicly disclosed by the Company.  Notwithstanding the foregoing, for the
avoidance of doubt, nothing contained herein shall constitute a representation,
warranty or covenant with respect to the identification of the availability of,
or securing of, available shares to borrow in order to effect short sales or
similar transactions after the transactions contemplated by this Agreement are
publicly disclosed.  Such Buyer has maintained, and covenants that until such
time as the transactions contemplated by this Agreement are publicly disclosed
by the Company, such Buyer will maintain, the confidentiality of all disclosures
made to it in connection with this transaction (including the existence and
terms of this transaction).
 
 
- 5 -

--------------------------------------------------------------------------------

 
 
3.             REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
 
The Company represents and warrants to each of the Buyers and the Placement
Agent (as defined below) that:
 
(a)            Organization and Qualification.  Each of the Company and its
"Subsidiaries" (which for purposes of this Agreement means any entity in which
the Company, directly or indirectly, owns any of the capital stock or holds an
equity or similar interest (other than an entity of which the Company owns less
then 5% of its equity) are entities duly organized and validly existing in good
standing under the laws of the jurisdiction in which they are formed, and have
the requisite power and authorization to own their properties and to carry on
their business as now being conducted.  Each of the Company and its Subsidiaries
is duly qualified as a foreign entity to do business and is in good standing in
every jurisdiction in which its ownership of property or the nature of the
business conducted by it makes such qualification necessary, except to the
extent that the failure to be so qualified or be in good standing would not
reasonably be expected to have a Material Adverse Effect.  As used in this
Agreement, "Material Adverse Effect" means any material adverse effect on the
business, properties, assets, operations, results of operations, condition
(financial or otherwise) or prospects of the Company and its Subsidiaries,
individually or taken as a whole, or on the transactions contemplated hereby or
on the other Transaction Documents or by the agreements and instruments to be
entered into in connection herewith or therewith, or on the authority or ability
of the Company to perform its obligations under the Transaction Documents.  The
Company has no Subsidiaries except as set forth on Schedule 3(a).
 
(b)           Authorization; Enforcement; Validity.  The Company has the
requisite power and authority to enter into and perform its obligations under
this Agreement, the Notes, the Warrants, the Registration Rights Agreement, the
Lock-Up Agreements (as defined in Section 7(xii)), Voting Agreements (as defined
in Section 4(u)), the Irrevocable Transfer Agent Instructions (as defined in
Section 5(b)) and each of the other agreements entered into by the parties
hereto in connection with the transactions contemplated by this Agreement
(collectively, the "Transaction Documents") and to issue the Securities in
accordance with the terms hereof and thereof.  The execution and delivery 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 Notes and the Warrants, the reservation for issuance and the
issuance of the Conversion Shares and the reservation for issuance and issuance
of Warrant Shares issuable upon exercise of the Warrants have been duly
authorized by the Company's Board of Directors and (other than the filing with
the SEC of a Form D and one or more Registration Statements (as defined in the
Registration Rights Agreement) in accordance with the requirements of the
Registration Rights Agreement and other filings as may be required by state
securities agencies) no further filing, consent, or authorization is required by
the Company, its Board of Directors or its stockholders.  This Agreement and the
other Transaction Documents have been duly executed and delivered by the Company
and constitute the legal, valid and binding obligations of the Company,
enforceable against the Company in accordance with their respective terms,
except as such enforceability may be limited by general principles of equity or
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally, the enforcement of applicable
creditors' rights and remedies, and except that any rights to indemnity or
contribution under the Transaction Documents may be limited by federal and state
securities laws and public policy considerations.
 
 
- 6 -

--------------------------------------------------------------------------------

 
 
(c)           Issuance of Securities.  The issuance of the Notes and the
Warrants are duly authorized and, upon issuance, shall be validly issued and
free from all taxes, liens and charges with respect to the issue thereof.  As of
the Closing, a number of shares of Common Stock shall have been duly authorized
and reserved for issuance which equals or exceeds 150% of the aggregate of the
maximum number of shares of Common Stock (the "Required Reserved Amount) (i)
issuable pursuant to the terms of the Notes upon the conversion thereof at the
initial conversion price thereof, and (ii) upon exercise of the Warrants at the
initial exercise price therefor, without taking into account any limitations on
the conversion of the Notes or exercise of the Warrants set forth in the Notes
and Warrants, respectively).  Upon issuance of the Conversion Shares pursuant to
the terms of the Notes or exercise of the Warrants in accordance with the
Warrants, as the case may be, the Conversion Shares and the Warrant Shares,
respectively, will be validly issued, fully paid and nonassessable and free from
all preemptive or similar rights, 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.  Assuming the accuracy of each of the representations
and warranties set forth in Section 2 of this Agreement, the offer and issuance
by the Company of the Securities is exempt from registration under the 1933 Act.
 
(d)           No Conflicts.  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 Notes and the Warrants and reservation for issuance and issuance
of the Conversion Shares and the Warrant Shares) will not (i) result in a
violation of any memorandum of association, certificate of incorporation,
certificate of formation, any certificate of designations or other constituent
documents of the Company or any of its Subsidiaries, any capital stock of the
Company or any of its Subsidiaries or the articles of association or bylaws of
the Company or any of its Subsidiaries or (ii) conflict with, or constitute a
default (or an event which with notice or lapse of time or both would become a
default) in any respect under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any material agreement, indenture or
instrument to which the Company or any of its Subsidiaries is a party, or (iii)
result in a violation of any law, rule, regulation, order, judgment or decree
(including foreign, federal and state securities laws and regulations and the
rules and regulations of the OTC Bulletin Board (the "Principal Market") and
applicable laws of the State of Delaware and any other state laws) 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.
 
 
- 7 -

--------------------------------------------------------------------------------

 
 
(e)           Consents.  Neither the Company nor any of its Subsidiaries is
required to obtain any consent, authorization or order of, or make any filing or
registration with, any court, governmental agency or any regulatory or
self-regulatory agency or any other Person in order for it to execute, deliver
or perform any of its obligations under or contemplated by the Transaction
Documents, in each case in accordance with the terms hereof or thereof.  All
consents, authorizations, orders, filings and registrations which the Company or
any of its Subsidiaries is required to obtain pursuant to the preceding sentence
have been obtained or effected on or prior to the Closing Date, and the Company
and its Subsidiaries are unaware of any facts or circumstances that might
prevent the Company or any of its Subsidiaries from obtaining or effecting any
of the registration, application or filings pursuant to the preceding
sentence.  The Company is not in violation of the listing requirements of the
Principal Market and has no knowledge of any facts that would reasonably lead to
delisting or suspension of the Common Stock in the foreseeable future.  The
issuance by the Company of the Securities shall not have the effect of delisting
or suspending the Common Stock from the Principal Market.
 
(f)           Acknowledgment Regarding Buyer's Purchase of Securities.  The
Company acknowledges and agrees that each Buyer is acting solely in the capacity
of an arm's length purchaser with respect to the Transaction Documents and the
transactions contemplated hereby and thereby and that no Buyer is (i) an officer
or director of the Company or any of its Subsidiaries, (ii) an "affiliate" of
the Company or any of its Subsidiaries (as defined in Rule 144) or (iii) to the
knowledge of the Company, a "beneficial owner" of more than 10% of the shares of
Common Stock (as defined for purposes of Rule 13d-3 of the Securities Exchange
Act of 1934, as amended (the "1934 Act")).  The Company further acknowledges
that no Buyer is acting as a financial advisor or fiduciary of the Company or
any of its Subsidiaries (or in any similar capacity) with respect to the
Transaction Documents and the transactions contemplated hereby and thereby, and
any advice given by a Buyer or any of its representatives or agents in
connection with the Transaction Documents and the transactions contemplated
hereby and thereby is merely incidental to such Buyer's purchase of the
Securities.  The Company further represents to each Buyer 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.
 
(g)           No General Solicitation; Placement Agent's Fees.  Neither the
Company, nor any of its Subsidiaries or affiliates, nor any Person acting on its
or their behalf, has engaged in any form of general solicitation or general
advertising (within the meaning of Regulation D) in connection with the offer or
sale of the Securities.  The Company shall be responsible for the payment of any
placement agent's fees, financial advisory fees, or brokers' commissions (other
than for persons engaged by any Buyer or its investment advisor) relating to or
arising out of the transactions contemplated hereby, including, without
limitation, placement agent fees payable to Roth Capital Partners LLC, as
placement agent (the "Placement Agent") in connection with the sale of the
Securities.  The Company shall pay, and hold each Buyer harmless against, any
liability, loss or expense (including, without limitation, attorney's fees and
out-of-pocket expenses) arising in connection with any such claim.  The Company
acknowledges that it has engaged the Placement Agent in connection with the sale
of the Securities.  Other than the Placement Agent, neither the Company nor any
of its Subsidiaries has engaged any placement agent or other agent in connection
with the sale of the Securities.
 
(h)           No Integrated Offering.  None of the Company, its Subsidiaries,
any of their affiliates, and any Person acting on 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 require registration of any of
the Securities under the 1933 Act, whether through integration with prior
offerings or otherwise, or cause this offering of the Securities to require
approval of stockholders of the Company for purposes of the 1933 Act or any
applicable stockholder approval provisions, including, without limitation, under
the rules and regulations of any exchange or automated quotation system on which
any of the securities of the Company are listed or designated.  None of the
Company, its Subsidiaries, their affiliates and any Person acting on their
behalf will take any action or steps referred to in the preceding sentence that
would require registration of any of the Securities under the 1933 Act or cause
the offering of the Securities to be integrated with other offerings for
purposes of any such applicable stockholder approval provisions.
 
 
- 8 -

--------------------------------------------------------------------------------

 
 
(i)             Dilutive Effect.  The Company understands and acknowledges that
the number of Conversion Shares issuable pursuant to the terms of the Notes and
the number of Warrant Shares issuable upon exercise of the Warrants will
increase in certain circumstances.  The Company further acknowledges that its
obligation to issue Conversion Shares pursuant to the terms of the Notes in
accordance with this Agreement and the Notes and its obligation to issue the
Warrant Shares upon exercise of the Warrants in accordance with this Agreement
and the Warrants is, in each case, absolute and unconditional regardless of the
dilutive effect that such issuance may have on the ownership interests of other
stockholders of the Company.
 
(j)            Application of Takeover Protections; Rights Agreement.  The
Company and its board of directors have taken all necessary action, if any, in
order to render inapplicable any control share acquisition, business
combination, poison pill (including any distribution under a rights agreement)
or other similar anti-takeover provision under the Certificate of Incorporation
(as defined in Section 3(r)) or the laws of the jurisdiction of its formation
which is or could become applicable to any Buyer as a result of the transactions
contemplated by this Agreement, including, without limitation, the Company's
issuance of the Securities and any Buyer's ownership of the Securities.  The
Company has not adopted a stockholder rights plan or similar arrangement
relating to accumulations of beneficial ownership of Common Stock or a change in
control of the Company.
 
(k)           SEC Documents; Financial Statements.  Except as disclosed in
Schedule 3(k), during the two (2) years prior to the date hereof, the Company
has timely filed all reports, schedules, forms, statements and other documents
required to be filed by it with the SEC pursuant to the reporting requirements
of the 1934 Act (all of the foregoing filed prior to the date hereof, and all
exhibits included therein and financial statements, notes and schedules thereto
and documents incorporated by reference therein being hereinafter referred to as
the "SEC Documents").  The Company has delivered to the Buyers or their
respective representatives true, correct and complete copies of the SEC
Documents not available on the EDGAR system.  As of their respective filing
dates and except as disclosed in Schedule 3(k), the SEC Documents complied in
all material respects with the requirements of the 1934 Act and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC Documents,
and none of the SEC Documents, at the time they were filed with the SEC,
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.  As of their respective filing dates, the financial statements of
the Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto.  Except as disclosed in Schedule
3(k), financial statements have been prepared in accordance with generally
accepted accounting principles, consistently applied, during the periods
involved (except (i) as may be otherwise indicated in such financial statements
or the notes thereto, or (ii) in the case of unaudited interim statements, to
the extent they may exclude footnotes or may be condensed or summary statements)
and fairly present in all material respects the financial position of the
Company as of the dates thereof and the results of its operations and cash flows
for the periods then ended (subject, in the case of unaudited statements, to
normal year-end audit adjustments).
 
 
- 9 -

--------------------------------------------------------------------------------

 
 
(l)            Absence of Certain Changes.  Except as disclosed in Schedule
3(l), since December 31, 2011, there has been no material adverse change and no
material adverse development in the business, assets, properties, operations,
condition (financial or otherwise), results of operations or prospects of the
Company or its Subsidiaries.  Except as disclosed in Schedule 3(l), since
December 31, 2011, neither the Company nor any of its Subsidiaries has (i)
declared or paid any dividends, (ii) sold any assets, individually or in the
aggregate, in excess of $100,000 outside of the ordinary course of business or
(iii) had capital expenditures, individually or in the aggregate, in excess of
$100,000.  Neither the Company nor any of its Subsidiaries has taken any steps
to seek protection pursuant to any bankruptcy law nor does the Company have any
knowledge or reason to believe that its creditors intend to initiate involuntary
bankruptcy proceedings or any actual knowledge of any fact that would reasonably
lead a creditor to do so.  The Company and its Subsidiaries, individually and on
a consolidated basis, are not as of the date hereof, and after giving effect to
the transactions contemplated hereby to occur at the Closing, will not be
Insolvent (as defined below).  For purposes of this Section 3(l), "Insolvent"
means, with respect to any Person, (i) the present fair saleable value of such
Person's assets is less than the amount required to pay such Person's total
Indebtedness (as defined in Section 3(s)), (ii) such Person is unable to pay its
debts and liabilities, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured, (iii) such Person intends to incur or
believes that it will incur debts that would be beyond its ability to pay as
such debts mature or (iv) such Person has unreasonably small capital with which
to conduct the business in which it is engaged as such business is now conducted
and is proposed to be conducted.
 
(m)           No Undisclosed Events, Liabilities, Developments or
Circumstances.  No event, liability, development or circumstance has occurred or
exists, or is contemplated to occur with respect to the Company, its
Subsidiaries or their respective business, properties, prospects, operations or
financial condition, that would be required to be disclosed by the Company under
applicable securities laws on a registration statement on Form S-1 filed with
the SEC relating to an issuance and sale by the Company of its Common Stock and
which has not been publicly announced.
 
(n)           Conduct of Business; Regulatory Permits.  Neither the Company nor
any of its Subsidiaries is in violation of any term of or in default under any
certificate of designations of any outstanding series of preferred stock of the
Company (if any), its Certificate of Incorporation or Bylaws (as defined in
Section 3(r)) or their organizational charter or memorandum of association or
certificate of incorporation or articles of association or bylaws,
respectively.  Neither the Company nor any of its Subsidiaries is in violation
of any judgment, decree or order or any statute, ordinance, rule or regulation
applicable to the Company or any of its Subsidiaries, and neither the Company
nor any of its Subsidiaries will conduct its business in violation of any of the
foregoing, except for possible violations which could not, individually or in
the aggregate, reasonably be expected to have a Material Adverse
Effect.  Without limiting the generality of the foregoing, the Company is not in
violation of any of the rules, regulations or requirements of the Principal
Market and has no knowledge of any facts or circumstances that would reasonably
lead to delisting or suspension of the Common Stock by the Principal Market in
the foreseeable future.  Except as set forth in Schedule 3(n), during the two
(2) years prior to the date hereof, the Common Stock has been designated for
quotation on the Principal Market.  Except as set forth in Schedule 3(n), during
the two (2) years prior to the date hereof, (i) trading in the Common Stock has
not been suspended by the SEC or the Principal Market and (ii) the Company has
received no communication, written or oral, from the SEC or the Principal Market
regarding the suspension or delisting of the Common Stock from the Principal
Market.  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 such certificates, authorizations or permits would
not have, individually or in the aggregate, a Material Adverse Effect, and
neither the Company nor any such Subsidiary has received any notice of
proceedings relating to the revocation or modification of any such certificate,
authorization or permit.
 
 
- 10 -

--------------------------------------------------------------------------------

 
 
(o)           Foreign Corrupt Practices.  Neither the Company, nor any of its
Subsidiaries, nor any director, officer, agent, employee or other Person acting
on behalf of the Company or any of its Subsidiaries has, in the course of its
actions for, or on behalf of, the Company or any of its Subsidiaries (i) used
any corporate funds for any unlawful contribution, gift, entertainment or other
unlawful expenses relating to political activity; (ii) made any direct or
indirect unlawful payment to any foreign or domestic government official or
employee from corporate funds; (iii) violated or is in violation of any
provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or (iv)
made any unlawful bribe, rebate, payoff, influence payment, kickback or other
unlawful payment to any foreign or domestic government official or employee.
 
(p)           Sarbanes-Oxley Act.  The Company is in compliance with any and all
applicable requirements of the Sarbanes-Oxley Act of 2002 that are effective as
of the date hereof, and any and all applicable rules and regulations promulgated
by the SEC thereunder that are effective as of the date hereof.
 
(q)            Transactions With Affiliates.  Except as set forth on Schedule
3(q), none of the officers, directors or employees of the Company or any of its
Subsidiaries is presently a party to any transaction with the Company or any of
its Subsidiaries (other than for ordinary course services as employees, officers
or directors), including any contract, agreement or other arrangement providing
for the furnishing of services to or by, providing for rental of real or
personal property to or from, or otherwise requiring payments to or from any
such officer, director or employee or, to the knowledge of the Company or any of
its Subsidiaries, any corporation, partnership, trust or other entity in which
any such officer, director, or employee has a substantial interest or is an
officer, director, trustee or partner.
 
 
- 11 -

--------------------------------------------------------------------------------

 
 
(r)            Equity Capitalization.  As of the date hereof, the authorized
capital stock of the Company consists of (i) 400,000,000 shares of Common Stock,
of which as of the date hereof, 191,852,906 shares are issued and outstanding,
34,271,581 shares are reserved for issuance pursuant to the Company's stock
option and purchase plans and 44,779,557 shares are reserved for issuance
pursuant to securities (other than the aforementioned options, the Notes and the
Warrants) exercisable or exchangeable for, or convertible into, Common Stock,
(ii) 10,000,000 shares of the Company's Series A Preferred Stock, par value
$0.001 per share (1,875,000 of which are designated as Series A-1 Preferred
Stock and 3,281,253 of which are designated as Series A-2 Preferred Stock), of
which as of the date hereof, 506,936 shares of Series A Preferred Stock are
issued or outstanding, consisting of 105,234 shares of Series A-1 Preferred
Stock and 401,705 shares of Series A-2 Preferred Stock and (iii) there are
134,926,803 shares of Common Stock held by non-affiliates of the Company.  All
of such outstanding shares have been, or upon issuance will be, validly issued
and are fully paid and nonassessable.  Except as disclosed in Schedule 3(r): (i)
none of the Company's capital stock is 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 options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, or exercisable or exchangeable for, 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, or exercisable or exchangeable for, any
shares of capital stock of the Company or any of its Subsidiaries; (iii) there
are no outstanding debt securities, notes, credit agreements, credit facilities
or other agreements, documents or instruments evidencing Indebtedness of the
Company or any of its Subsidiaries or by which the Company or any of its
Subsidiaries is or may become bound; (iv) there are no financing statements
securing obligations in any material amounts, either singly or in the aggregate,
filed in connection with the Company or any of its Subsidiaries; (v) 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 securities under the 1933 Act
(except pursuant to the Registration Rights Agreement); (vi) 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; (vii) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of
the Securities; (viii) the Company does not have any stock appreciation rights
or "phantom stock" plans or agreements or any similar plan or agreement; and
(ix) the Company and its Subsidiaries have no liabilities or obligations
required to be disclosed in the SEC Documents but not so disclosed in the SEC
Documents, other than those incurred in the ordinary course of the Company's or
any of its Subsidiary's' respective businesses and which, individually or in the
aggregate, do not or would not have a Material Adverse Effect.  The Company has
furnished or made available to the Buyers true, correct and complete copies of
the Company's Certificate of Incorporation, as amended and as in effect on the
date hereof (the "Certificate of Incorporation"), and the Company's Bylaws, as
amended and as in effect on the date hereof (the "Bylaws"), and the terms of all
securities convertible into, or exercisable or exchangeable for, shares of
Common Stock and the material rights of the holders thereof in respect thereto.
 
 
- 12 -

--------------------------------------------------------------------------------

 
 
(s)           Indebtedness and Other Contracts.  Except as disclosed in Schedule
3(s), neither the Company nor any of its Subsidiaries (i) has any outstanding
Indebtedness (as defined below), (ii) is a party to any contract, agreement or
instrument, the violation of which, or default under which, by the other
party(ies) to such contract, agreement or instrument could reasonably be
expected to result in a Material Adverse Effect, (iii) is in violation of any
term of or in default under any contract, agreement or instrument relating to
any Indebtedness, except where such violations and defaults would not result,
individually or in the aggregate, in a Material Adverse Effect, or (iv) is a
party to any contract, agreement or instrument relating to any Indebtedness, the
performance of which, in the judgment of the Company's officers, has or is
expected to have a Material Adverse Effect.  Schedule 3(s) provides a detailed
description of the material terms of any such outstanding Indebtedness.  For
purposes of this Agreement:  (x) "Indebtedness" of any Person means, without
duplication and other than trade payables entered into in the ordinary course of
business consistent with past practice (A) all indebtedness for borrowed money,
(B) all obligations issued, undertaken or assumed as the deferred purchase price
of property or services, including, without limitation, "capital leases" in
accordance with United States generally accepted accounting principles (other
than trade payables entered into in the ordinary course of business consistent
with past practice), (C) all reimbursement or payment obligations with respect
to letters of credit, surety bonds and other similar instruments, (D) all
obligations evidenced by notes, bonds, debentures or similar instruments,
including obligations so evidenced incurred in connection with the acquisition
of property, assets or businesses, (E) all indebtedness created or arising under
any conditional sale or other title retention agreement, or incurred as
financing, in either case with respect to any property or assets acquired with
the proceeds of such indebtedness (even though the rights and remedies of the
seller or bank under such agreement in the event of default are limited to
repossession or sale of such property), (F) all monetary obligations under any
leasing or similar arrangement which, in connection with United States generally
accepted accounting principles, consistently applied for the periods covered
thereby, is classified as a capital lease, (G) all indebtedness referred to in
clauses (A) through (F) above secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any mortgage, lien, pledge, charge, security interest or other encumbrance upon
or in any property or assets (including accounts and contract rights) owned by
any Person, even though the Person which owns such assets or property has not
assumed or become liable for the payment of such indebtedness, and (H) all
Contingent Obligations in respect of indebtedness or obligations of others of
the kinds referred to in clauses (A) through (G) above; (y) "Contingent
Obligation" means, as to any Person, any direct or indirect liability,
contingent or otherwise, of that Person with respect to any Indebtedness, lease,
dividend or other obligation of another Person if the primary purpose or intent
of the Person incurring such liability, or the primary effect thereof, is to
provide assurance to the obligee of such liability that such liability will be
paid or discharged, or that any agreements relating thereto will be complied
with, or that the holders of such liability will be protected (in whole or in
part) against loss with respect thereto; and (z) "Person" means an individual, a
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)            Absence of Litigation.  There is no action, suit, proceeding,
inquiry or investigation before or by the Principal Market, 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
of its Subsidiaries, the Common Stock or any of the Company's Subsidiaries or
any of the Company's or its Subsidiaries' officers or directors, whether of a
civil or criminal nature or otherwise, in their capacities as such, except as
set forth in Schedule 3(t).  The matters set forth in Schedule 3(t) would not
reasonably be expected to have a Material Adverse Effect.
 
 
- 13 -

--------------------------------------------------------------------------------

 
 
(u)           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 such Subsidiary 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 at a cost that would not have a Material Adverse Effect.
 
(v)           Employee Relations.
 
(i)           Neither the Company nor any of its Subsidiaries is a party to any
collective bargaining agreement or employs any member of a union.  The Company
and its Subsidiaries believe that their relations with their employees are
good.  No executive officer of the Company or any of its Subsidiaries (as
defined in Rule 501(f) of the 1933 Act) has notified the Company or any such
Subsidiary that such officer intends to leave the Company or any such Subsidiary
or otherwise terminate such officer's employment with the Company or any such
Subsidiary.  No executive officer of the Company or any of its Subsidiaries, to
the knowledge of the Company or any of its Subsidiaries, is, or is now expected
to be, in violation of any material term of any employment contract,
confidentiality, disclosure or proprietary information agreement,
non-competition agreement, or any other contract or agreement or any restrictive
covenant, and the continued employment of each such executive officer does not
subject the Company or any of its Subsidiaries to any liability with respect to
any of the foregoing matters.
 
(ii)          The Company and its Subsidiaries are in compliance with all
federal, state, local and foreign laws and regulations respecting labor,
employment and employment practices and benefits, terms and conditions of
employment and wages and hours, except where failure to be in compliance would
not, either individually or in the aggregate, reasonably be expected to result
in a Material Adverse Effect.
 
(w)           Title.  The Company and its Subsidiaries have good and marketable
title in fee simple to all real property and good and marketable title to all
personal property owned by them which is material to the business of the Company
and its Subsidiaries, in each case free and clear of all liens, encumbrances and
defects except such as do not materially affect the value of such property and
do not interfere with the use made and proposed to be made of such property by
the Company and any of its Subsidiaries.   Any real property and facilities held
under lease by the Company and any of its Subsidiaries are held by them under
valid, subsisting and enforceable leases 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.
 
(x)            Intellectual Property Rights.  The Company and its Subsidiaries
own or possess adequate rights or licenses to use all material trademarks, trade
names, service marks, service mark registrations, service names, original works
of authorship, patents, patent rights, copyrights, inventions, licenses,
approvals, governmental authorizations, trade secrets and other intellectual
property rights and all applications and registrations therefor necessary to
conduct their respective businesses as now conducted in all material respects
("Intellectual Property Rights").  Except as set forth in Schedule 3(x), none of
the Company's Intellectual Property Rights have expired or terminated or have
been abandoned or are expected to expire or terminate or are expected to be
abandoned, within three years from the date of this Agreement.  The Company does
not have any knowledge of any infringement by the Company or its Subsidiaries of
Intellectual Property Rights of others.  There is no claim, action or proceeding
being made or brought, or to the knowledge of the Company or any of its
Subsidiaries, being threatened, against the Company or any of its Subsidiaries
regarding its Intellectual Property Rights.  Neither the Company nor any of its
Subsidiaries is aware of any facts or circumstances which might give rise to any
of the foregoing infringements or claims, actions or proceedings.  The Company
and its Subsidiaries have taken reasonable security measures to protect the
secrecy, confidentiality and value of all of their Intellectual Property Rights,
other than with respect to Intellectual Property Rights (such as patents, patent
applications, trademarks, service marks, and copyrights) that by their nature
involve the disclosure thereof.
 
 
- 14 -

--------------------------------------------------------------------------------

 
 
(y)           Environmental Laws.  The Company and its Subsidiaries (i) are in
compliance with any and all Environmental Laws (as hereinafter defined), (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 where, in each of the foregoing clauses (i), (ii) and (iii), the
failure to so comply could be reasonably expected to have, individually or in
the aggregate, a Material Adverse Effect.  The term "Environmental Laws" means
all federal, state, local or foreign laws relating to pollution or protection of
human health or the environment (including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface strata), including,
without limitation, laws relating to emissions, discharges, releases or
threatened releases of chemicals, pollutants, contaminants, or toxic or
hazardous substances or wastes (collectively, "Hazardous Materials") into the
environment, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous Materials,
as well as all authorizations, codes, decrees, demands or demand letters,
injunctions, judgments, licenses, notices or notice letters, orders, permits,
plans or regulations issued, entered, promulgated or approved thereunder.
 
(z)           Subsidiary Rights.  The Company or one of its Subsidiaries has the
unrestricted right to vote, and (subject to limitations imposed by applicable
law) to receive dividends and distributions on, all capital securities of its
Subsidiaries as owned by the Company or such Subsidiary.
 
(aa)          Investment Company Status.  The Company is not, and upon
consummation of the sale of the Securities, and for so long any Buyer holds any
Securities, will not be, an "investment company," a company controlled by an
"investment company" or an "affiliated person" of, or "promoter" or "principal
underwriter" for, an "investment company" as such terms are defined in the
Investment Company Act of  1940, as amended.
 
(bb)          Tax Status.  The Company and each of its Subsidiaries (i) has made
or filed all U.S. federal, state and foreign income and all other tax returns,
reports and declarations required by any jurisdiction to which it is subject,
(ii) has paid all taxes and other governmental assessments and charges that are
material in amount, shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith and (iii) has set aside
on its books provision reasonably adequate for the payment of all taxes for
periods subsequent to the periods to which such returns, reports or declarations
apply.  There are no unpaid taxes in any material amount claimed to be due by
the taxing authority of any jurisdiction, and the officers of the Company know
of no basis for any such claim.
 
 
- 15 -

--------------------------------------------------------------------------------

 
 
(cc)          Internal Accounting and Disclosure Controls.  The Company and each
of its Subsidiaries maintain a system of internal accounting controls sufficient
to provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
and liability accountability, (iii) access to assets or incurrence of
liabilities is permitted only in accordance with management's general or
specific authorization and (iv) the recorded accountability for assets and
liabilities is compared with the existing assets and liabilities at reasonable
intervals and appropriate action is taken with respect to any
difference.  Except as set forth in Schedule 3(cc), the Company maintains
disclosure controls and procedures (as such term is defined in Rule 13a-15 under
the 1934 Act) that are effective in ensuring that information required to be
disclosed by the Company in the reports that it files or submits under the 1934
Act is recorded, processed, summarized and reported, within the time periods
specified in the rules and forms of the SEC, including, without limitation,
controls and procedures designed to ensure that information required to be
disclosed by the Company in the reports that it files or submits under the 1934
Act is accumulated and communicated to the Company's management, including its
principal executive officer or officers and its principal financial officer or
officers, as appropriate, to allow timely decisions regarding required
disclosure.  Except as set forth in Schedule 3(cc), during the twelve months
prior to the date hereof neither the Company nor any of its Subsidiaries has
received any notice or correspondence from any accountant relating to any
material weakness in any part of the system of internal accounting controls of
the Company or any of its Subsidiaries.
 
(dd)          Off Balance Sheet Arrangements.  There is no transaction,
arrangement, or other relationship between the Company and an unconsolidated or
other off balance sheet entity that is required to be disclosed by the Company
in its 1934 Act filings and is not so disclosed or that otherwise would be
reasonably likely to have a Material Adverse Effect.
 
(ee)          Ranking of Notes.  No Indebtedness of the Company or any of its
Subsidiaries is senior to, or pari passu with (other than as set forth in
Schedule 3(ee)), the Notes in right of payment, whether with respect of payment
of redemptions, interest, damages or upon liquidation or dissolution or
otherwise.
 
(ff)           Transfer Taxes.  On the Closing Date, all stock transfer or other
taxes (other than income or similar taxes) which are required to be paid in
connection with the sale and transfer of the Securities to be sold to each Buyer
hereunder will be, or will have been, fully paid or provided for by the Company,
and all laws imposing such taxes will be or will have been complied with.
 
 
- 16 -

--------------------------------------------------------------------------------

 
 
(gg)          Manipulation of Price.  The Company has not, and to its knowledge
no one acting on its behalf has, (i) taken, directly or indirectly, any action
designed to cause or to result, or that could reasonably be expected to cause or
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) other
than the Placement Agent, sold, bid for, purchased, or paid any compensation for
soliciting purchases of, any of the Securities, or (iii) other than the
Placement Agent, paid or agreed to pay to any person any compensation for
soliciting another to purchase any other securities of the Company.
 
(hh)          Acknowledgement Regarding Buyers' Trading Activity.  Subject to
Section 2(k) and Section 4(t) of this Agreement, the Company acknowledges and
agrees that (i) none of the Buyers has been asked to agree, nor has any Buyer
agreed, to desist from purchasing or selling, long and/or short, securities of
the Company, or "derivative" securities based on securities issued by the
Company or to hold the Securities for any specified term; (ii) any Buyer, and
counter-parties in "derivative" transactions to which any such Buyer is a party,
directly or indirectly, presently may have a "short" position in the Common
Stock, and (iii) each Buyer shall not be deemed to have any affiliation with or
control over any arm's length counter-party in any "derivative"
transaction.  The Company further understands and acknowledges that, subject to
Section 2(k) and Section 4(t) of this Agreement, one or more Buyers may engage
in hedging and/or trading activities at various times during the period that the
Securities are outstanding, including, without limitation, during the periods
that the value of the Conversion Shares and/or the Warrant Shares are being
determined and (b) such hedging and/or trading activities, if any, can reduce
the value of the existing stockholders' equity interest in the Company both at
and after the time the hedging and/or trading activities are being
conducted.  The Company acknowledges that such aforementioned hedging and/or
trading activities do not constitute a breach of this Agreement, the Notes, the
Warrants or any of the documents executed in connection herewith.
 
(ii)            U.S. Real Property Holding Corporation.  The Company is not, has
never been, and so long as any Securities remain outstanding, shall not become,
a U.S. real property holding corporation within the meaning of Section 897 of
the Internal Revenue Code of 1986, as amended, and the Company shall so certify
upon any Buyer's request.
 
(jj)            Bank Holding Company Act.  Neither the Company nor any of its
Subsidiaries or affiliates is subject to the Bank Holding Company Act of 1956,
as amended (the "BHCA") and to regulation by the Board of Governors of the
Federal Reserve System (the "Federal Reserve").  Neither the Company nor any of
its Subsidiaries or affiliates owns or controls, directly or indirectly, five
percent (5%) or more of the outstanding shares of any class of voting securities
or twenty-five percent (25%) or more of the total equity of a bank or
any  entity that is subject to the BHCA and to regulation by the Federal
Reserve.  Neither the Company nor any of its Subsidiaries or affiliates
exercises a controlling influence over the management or policies of a bank or
any entity that is subject to the BHCA and to regulation by the Federal Reserve.
 
(kk)          No Additional Agreements.  Neither the Company nor any of its
Subsidiaries has any agreement or understanding with any Buyer with respect to
the transactions contemplated by the Transaction Documents other than as
specified in the Transaction Documents.
 
 
- 17 -

--------------------------------------------------------------------------------

 
 
(ll)            Disclosure.  The Company confirms that neither it nor any other
Person acting on its behalf has provided any of the Buyers or their agents or
counsel with any information that constitutes or could reasonably be expected to
constitute material, nonpublic information other than information that will be
disclosed in the 8-K Filing (as defined below).  The Company understands and
confirms that each of the Buyers will rely on the foregoing representations in
effecting transactions in securities of the Company.  All disclosure provided to
the Buyers regarding the Company, or any of its Subsidiaries, their business and
the transactions contemplated hereby included in the Transaction Documents or
disclosure schedules to this Agreement furnished by or on behalf of the Company
is true and correct in all material respects 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 the light of the circumstances
under which they were made, not misleading.  Except as disclosed in Schedule
3(ll), each press release issued by the Company or any of its Subsidiaries
during the twelve (12) months preceding the date of this Agreement did not at
the time of release 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 the light of the circumstances under which they
were made, not misleading.  Other than the execution of the Transaction
Documents and the closing of the transactions contemplated thereby that will be
disclosed in the 8-K filing, no event or circumstance has occurred or
information exists with respect to the Company or any of its Subsidiaries or its
or their business, properties, prospects, operations or financial conditions,
which, under applicable law, rule or regulation, requires public disclosure or
announcement by the Company but which has not been so publicly announced or
disclosed.  The Company acknowledges and agrees that no Buyer makes or has made
any representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in Section 2 or elsewhere in the
Transaction Documents.
 
(mm)        Shell Company Status.  The Company is not, and has never been, an
issuer identified in Rule 144(i)(1) of the 1933 Act.
 
(nn)         Stock Option Plans. Each stock option granted by the Company was
granted (i) in accordance with the terms of the applicable equity incentive plan
of the Company or, if not granted pursuant to a plan, was duly approved by the
board of directors of the Company, and (ii) with an exercise price at least
equal to the fair market value of the Common Stock on the date such stock option
would be considered granted under GAAP and applicable law. No stock option
granted under the Company's stock option plan has been backdated.  The Company
has not knowingly granted, and there is no and has been no policy or practice of
the Company to knowingly grant, stock options prior to, or otherwise knowingly
coordinate the grant of stock options with, the release or other public
announcement of material information regarding the Company or its Subsidiaries
or their financial results or prospects.
 
(oo)         No Disagreements with Accountants and Lawyers.  There are no
material disagreements of any kind presently existing, or reasonably anticipated
by the Company to arise, between the Company and the accountants and lawyers
formerly or presently employed by the Company, and the Company is current with
respect to any fees owed to its accountants and lawyers which could affect the
Company’s ability to perform any of its obligations under any of the Transaction
Documents.  In addition, on or prior to the date hereof, the Company had
discussions with its accountants about its financial statements previously filed
with the SEC.  Based on those discussions, the Company has no reason to believe
that it will need to restate any such financial statements or any part thereof.
 
 
- 18 -

--------------------------------------------------------------------------------

 
 
(pp)         Equity Securities.  Neither the Company nor any of its Subsidiaries
is, directly or indirectly, a party to or otherwise subject to, any agreement to
issue, offer, sell, exchange, grant any option or right to purchase, or
otherwise dispose of any equity security or any equity-linked or related
security (including, without limitation, any “equity security” (as that term is
defined under Rule 405 promulgated under the 1933 Act), any Convertible
Securities, any Options (as such terms are defined in the Notes), any debt, any
preferred stock or any purchase rights) in any way pursuant to or relating to
Section 3(a)(9) of the 1933 Act or Section 3(a)(10) of the 1933 Act.
 
(qq)          Visser Right of Participation.  The Company has obtained the
waiver of Visser Precision Cast, LLC ("Visser") with respect to its right to
participate in the transactions contemplated hereby.
 
4.             COVENANTS.
 
(a)           Best Efforts.  Each party shall use its best efforts timely to
satisfy each of the covenants and the conditions to be satisfied by it as
provided in Sections 6 and 7 of this Agreement.
 
(b)           Form D and Blue Sky.  The Company agrees to file a Form D with
respect to the Securities as required under Regulation D and to provide a copy
thereof to each Buyer promptly after such filing.  The Company shall, on or
before the Closing Date, 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 Buyers at the Closing pursuant to this Agreement
under applicable securities or "Blue Sky" laws of the states of the United
States (or to obtain an exemption from such qualification), and shall provide
evidence of any such action so taken to the Buyers on or prior to the Closing
Date.  The Company shall make all filings and reports relating to the offer and
sale of the Securities required under applicable securities or "Blue Sky" laws
of the states of the United States following the Closing Date.
 
(c)           Reporting Status.  Until the date on which the Investors (as
defined in the Registration Rights Agreement) shall have sold all of the
Conversion Shares and Warrant Shares and none of the Notes or Warrants are
outstanding (the "Reporting Period"), the Company shall timely file all reports
required to be filed with the SEC pursuant to the 1934 Act, and the Company
shall not terminate its status as an issuer required to file reports under the
1934 Act even if the 1934 Act or the rules and regulations thereunder would no
longer require or otherwise permit such termination.
 
(d)           Use of Proceeds.  The Company will use the proceeds from the sale
of the Securities solely as set forth in Schedule 4(d), but not for (i) the
repayment of any outstanding Indebtedness of the Company or any of its
Subsidiaries (other than as set forth in Schedule 4(d)) or (ii) the redemption
or repurchase of any of its or its Subsidiaries' equity securities.
 
 
- 19 -

--------------------------------------------------------------------------------

 
 
(e)           Financial Information.  The Company agrees to send the following
to each Investor during the Reporting Period (i) unless the following are filed
with the SEC through EDGAR and are available to the public through the EDGAR
system, within one (1) Business Day after the filing thereof with the SEC, a
copy of its Annual Reports on Form 10-K, any Quarterly Reports on Form 10-Q, any
Current Reports on Form 8-K (or any analogous reports under the 1934 Act) and
any registration statements (other than on Form S-8) or amendments filed
pursuant to the 1933 Act, (ii) on the same day as the release thereof, facsimile
or e-mailed copies of all press releases issued by the Company or any of its
Subsidiaries (unless such press release is already included on a Form 8-K
available to the public through the EDGAR system), and (iii) copies of any
notices and other information made available or given to the stockholders of the
Company generally, contemporaneously with the making available or giving thereof
to the stockholders.  As used herein, "Business Day" means any day other than
Saturday, Sunday or other day on which commercial banks in The City of New York
are authorized or required by law to remain closed.
 
(f)            Listing.  The Company shall promptly secure the listing of all of
the Registrable Securities (as defined in the Registration Rights Agreement)
upon each national securities exchange and automated quotation system, if any,
upon which the Common Stock is then listed (subject to official notice of
issuance) and shall maintain such listing of all Registrable Securities from
time to time issuable under the terms of the Transaction Documents.  The Company
shall maintain the authorization for quotation of the Common Stock on the
Principal Market or any other Eligible Market (as defined in the
Warrants).  Neither the Company nor any of its Subsidiaries shall take any
action which would be reasonably expected to result in the delisting or
suspension of the Common Stock on the Principal Market unless the Common Stock
is listed on another Eligible Market.  The Company shall pay all fees and
expenses in connection with satisfying its obligations under this Section 4(f).
 
(g)           Fees.  The Company shall reimburse the Lead Investor (a Buyer) or
its designee(s) (in addition to any other expense amounts paid to any Buyer or
its counsel prior to the date of this Agreement) for all actual out-of-pocket
reasonable costs and expenses incurred in connection with the transactions
contemplated by the Transaction Documents (including all legal fees and
disbursements in connection therewith, documentation and implementation of the
transactions contemplated by the Transaction Documents and due diligence in
connection therewith), which amount may be withheld by such Buyer from its
Purchase Price at the Closing to the extent not paid prior to the Closing.  The
Company shall be responsible for the payment of any placement agent's fees,
financial advisory fees, or broker's commissions (other than for Persons engaged
by any Buyer) relating to or arising out of the transactions contemplated
hereby, including, without limitation, any fees or commissions payable to the
Placement Agent.  The Company shall pay, and hold each Buyer harmless against,
any liability, loss or expense (including, without limitation, reasonable
attorney's fees and out-of-pocket expenses) arising in connection with any claim
relating to any such payment.  Except as otherwise set forth in the Transaction
Documents, each party to this Agreement shall bear its own expenses in
connection with the sale of the Securities to the Buyers.
 
 
- 20 -

--------------------------------------------------------------------------------

 
 
(h)           Pledge of Securities.  The Company acknowledges and agrees that
the Securities may be pledged by an Investor in connection with a bona fide
margin agreement or other loan or financing arrangement that is secured by the
Securities.  The pledge of Securities shall not be deemed to be a transfer, sale
or assignment of the Securities hereunder, and no Investor effecting a pledge of
Securities shall be required to provide the Company with any notice thereof or
otherwise make any delivery to the Company pursuant to this Agreement or any
other Transaction Document, including, without limitation, Section 2(f) hereof;
provided that an Investor and its pledgee shall be required to comply with the
provisions of Section 2(f) hereof in order to effect a sale, transfer or
assignment of Securities to such pledgee.  The Company hereby agrees to execute
and deliver such documentation as a pledgee of the Securities may reasonably
request in connection with a pledge of the Securities to such pledgee by an
Investor.
 
(i)           Disclosure of Transactions and Other Material Information.  On or
before 8:30 a.m., New York City time, July 2, 2012, the Company shall issue a
press release and file a Current Report on Form 8-K describing the terms of the
transactions contemplated by the Transaction Documents in the form required by
the 1934 Act and attaching the material Transaction Documents (including,
without limitation, this Agreement (and all schedules and exhibits to this
Agreement), the form of the Notes, the Form of Warrants and the form of the
Registration Rights Agreement as exhibits to such filing (including all
attachments, the "8-K Filing").  From and after the filing of the 8-K Filing
with the SEC, no Buyer shall be in possession of any material, nonpublic
information received from the Company, any of its Subsidiaries or any of their
respective officers, directors, employees or agents, that is not disclosed in
the 8-K Filing.  The Company shall not, and shall cause each of its Subsidiaries
and its and each of their respective officers, directors, employees and agents,
not to, provide any Buyer with any material, nonpublic information regarding the
Company or any of its Subsidiaries from and after the filing of the 8-K Filing
with the SEC without the express prior written consent of such Buyer.  If a
Buyer has, or believes it has, received any such material, nonpublic information
regarding the Company or any of its Subsidiaries from the Company, any of its
Subsidiaries or any of their respective officers, directors, affiliates or
agents, it may provide the Company with written notice thereof.  The Company
shall, within two (2) Trading Days (as defined in the Notes) of receipt of such
notice, make public disclosure of such material, nonpublic information.  In the
event of a breach of the foregoing covenant by the Company, any of its
Subsidiaries, or any of its or their respective officers, directors, employees
and agents, in addition to any other remedy provided herein or in the
Transaction Documents, a Buyer shall have the right to make a public disclosure,
in the form of a press release, public advertisement or otherwise, of such
material, nonpublic information without the prior approval by the Company, its
Subsidiaries, or any of its or their respective officers, directors, employees
or agents.  No Buyer shall have any liability to the Company, its Subsidiaries,
or any of its or their respective officers, directors, employees, stockholders
or agents for any such disclosure that is made in good faith in accordance with
the provisions hereof.  To the extent that the Company delivers any material,
non-public information to a Buyer without such Buyer’s consent, the Company
hereby covenants and agrees that such Buyer shall not have any duty of
confidentiality with respect to, or a duty not to trade on the basis of, such
material, non-public information.  Subject to the foregoing, neither the
Company, its Subsidiaries nor any Buyer shall issue any press releases or any
other public statements with respect to the transactions contemplated hereby;
provided, however, that the Company shall be entitled, without the prior
approval of any Buyer, to make any press release or other public disclosure with
respect to such transactions (i) in substantial conformity with the 8-K Filing
and contemporaneously therewith and (ii) as is required by applicable law and
regulations (provided that in the case of clause (i) each Buyer shall be
consulted by the Company in connection with any such press release or other
public disclosure prior to its release).  Except for the Registration Statements
required to be filed pursuant to the Registration Rights Agreement, without the
prior written consent of any applicable Buyer, neither the Company nor any of
its Subsidiaries or affiliates shall disclose the name of such Buyer in any
filing, announcement, release or otherwise unless required by law or regulation.
 
 
- 21 -

--------------------------------------------------------------------------------

 
 
(j)             Additional Notes; Variable Securities; Dilutive Issuances.  So
long as any Buyer beneficially owns any Notes, the Company will not issue any
Notes other than to the Buyers as contemplated hereby and the Company shall not
issue any other securities that would cause a breach or default under the
Notes.  For so long as any Notes remain outstanding, the Company shall not, in
any manner, issue or sell any rights, warrants or options to subscribe for or
purchase Common Stock or directly or indirectly convertible into or exchangeable
or exercisable for Common Stock at a price which varies or may vary with the
market price of the Common Stock, including by way of one or more reset(s) to
any fixed price unless the conversion, exchange or exercise price of any such
security cannot be less than the then applicable Conversion Price (as defined in
the Notes) with respect to the Common Stock into which any Note is convertible
or the then applicable Exercise Price (as defined in the Warrants) with respect
to the Common Stock into which any Warrant is exercisable.  For so long as any
Notes are outstanding, neither the Company nor any of it Subsidiaries shall
incur any Indebtedness, other than in accordance with the provisions of the
Notes.
 
(k)            Corporate Existence.  So long as any Buyer beneficially owns any
Securities, the Company shall (i) maintain its corporate existence and (ii) not
be party to any Fundamental Transaction (as defined in the Notes) unless the
Company is in compliance with the applicable provisions governing Fundamental
Transactions set forth in the Notes and the Warrants.
 
(l)             Reservation of Shares.  So long as any Buyer owns any
Securities, the Company shall take all action necessary to at all times have
authorized, and reserved for the purpose of issuance, no less than 150% of the
sum of (i) the number of Conversion Shares issuable pursuant to the terms of the
Notes (without taking into account any limitations on the issuance thereof
pursuant to the terms of the Notes), and (ii) the number of Warrant Shares
issuable upon exercise of the Warrants then outstanding (without taking into
account any limitations on the exercise of the Warrants set forth in the
Warrants).  If at any time the number of shares of Common Stock authorized and
reserved for issuance is not sufficient to meet the Required Reserved Amount,
the Company will promptly take all corporate action necessary to authorize and
reserve a sufficient number of shares, including, without limitation, calling a
special meeting of stockholders to authorize additional shares to meet the
Company's obligations under Section 3(c), in the case of an insufficient number
of authorized shares, obtain stockholder approval of an increase in such
authorized number of shares, and voting the management shares of the Company in
favor of an increase in the authorized shares of the Company to ensure that the
number of authorized shares is sufficient to meet the Required Reserved Amount.
 
 
- 22 -

--------------------------------------------------------------------------------

 
 
(m)           Conduct of Business.  The business of the Company and its
Subsidiaries shall not be conducted in violation of any law, ordinance or
regulation of any governmental entity, except where such violations would not
result, either individually or in the aggregate, in a Material Adverse Effect.
 
(n)           Additional Issuances of Securities.
 
(i)                                  For purposes of this Section 4(n), the
following definitions shall apply.
 
(1)               "Convertible Securities" means any stock or securities (other
than Options) convertible into or exercisable or exchangeable for shares of
Common Stock.
 
(2)               "Options" means any rights, warrants or options to subscribe
for or purchase Common Stock or Convertible Securities.
 
(3)               "Common Stock Equivalents" means, collectively, Options and
Convertible Securities.
 
(ii)                               From the date hereof until the date that all
Registrable Securities are registered pursuant to an effective Registration
Statement (as such terms are defined in the Registration Rights Agreement) (the
"Trigger Date"), the Company will not, (i) directly or indirectly, offer, sell,
grant any option to purchase, or otherwise dispose of (or announce any offer,
sale, grant or any option to purchase or other disposition of) any of its or its
Subsidiaries' equity or equity equivalent securities, including without
limitation any debt, preferred stock or other instrument or security that is, at
any time during its life and under any circumstances, convertible into or
exchangeable or exercisable for Common Stock or Common Stock Equivalents (any
such offer, sale, grant, disposition or announcement being referred to as a
"Subsequent Placement") or (ii) be party to any solicitations, negotiations or
discussions with regard to the foregoing.
 
(iii)                                From the Trigger Date until the end of the
twenty first (21st) month following the Closing Date, the Company will not,
directly or indirectly, effect any Subsequent Placement unless the Company shall
have first complied with this Section 4(n)(iii).
 
 (1)           The Company shall deliver to each Buyer a written notice of its
intention to effect a Subsequent Placement (the "Pre-Notice"), which Pre-Notice
shall ask such Buyer if it wants to review the details of such financing (such
additional written notice, the "Offer Notice") of any proposed or intended
issuance or sale or exchange (the "Offer") of the securities being offered (the
"Offered Securities") in a Subsequent Placement.  For the avoidance of doubt,
such Pre-Notice shall not contain any material, non-public information.  Upon
the request of a Buyer, and only upon a request by such Buyer, for an Offer
Notice, the Company shall promptly, but no later than one (1) Trading Day after
such request, deliver an Offer Notice to such Buyer.  The Offer Notice shall (w)
identify and describe the Offered Securities, (x) describe the price and other
terms upon which they are to be issued, sold or exchanged, and the number or
amount of the Offered Securities to be issued, sold or exchanged, (y) identify
the persons or entities (if known) to which or with which the Offered Securities
are to be offered, issued, sold or exchanged and (z) offer to issue and sell to
or exchange with such Buyers 30% of the Offered Securities, allocated among such
Buyers (a) based on such Buyer's pro rata portion of the aggregate principal
amount of Notes purchased hereunder (the "Basic Amount"), and (b) with respect
to each Buyer that elects to purchase its Basic Amount, any additional portion
of the Offered Securities attributable to the Basic Amounts of other Buyers as
such Buyer shall indicate it will purchase or acquire should the other Buyers
subscribe for less than their Basic Amounts (the "Undersubscription Amount"),
which process shall be repeated until the Buyers shall have an opportunity to
subscribe for any remaining Undersubscription Amount.
 
 
- 23 -

--------------------------------------------------------------------------------

 
 
(2)            To accept an Offer, in whole or in part, such Buyer must deliver
a written notice to the Company prior to the end of the tenth (10th) Business
Day after such Buyer's receipt of the Offer Notice (the "Offer Period"), setting
forth the portion of such Buyer's Basic Amount that such Buyer elects to
purchase and, if such Buyer shall elect to purchase all of its Basic Amount, the
Undersubscription Amount, if any, that such Buyer elects to purchase (in either
case, the "Notice of Acceptance").  If the Basic Amounts subscribed for by all
Buyers are less than the total of all of the Basic Amounts, then each Buyer who
has set forth an Undersubscription Amount in its Notice of Acceptance shall be
entitled to purchase, in addition to the Basic Amounts subscribed for, the
Undersubscription Amount it has subscribed for; provided, however, that if the
Undersubscription Amounts subscribed for exceed the difference between the total
of all the Basic Amounts and the Basic Amounts subscribed for (the "Available
Undersubscription Amount"), each Buyer who has subscribed for any
Undersubscription Amount shall be entitled to purchase only that portion of the
Available Undersubscription Amount as the Basic Amount of such Buyer bears to
the total Basic Amounts of all Buyers that have subscribed for Undersubscription
Amounts, subject to rounding by the Company to the extent its deems reasonably
necessary.   Notwithstanding anything to the contrary contained herein, if the
Company desires to modify or amend the terms and conditions of the Offer prior
to the expiration of the Offer Period, the Company may deliver to the Buyers a
new Offer Notice and the Offer Period shall expire on the fifth (5th) Business
Day after such Buyer's receipt of such new Offer Notice.
 
(3)            The Company shall have ten (10) Business Days from the expiration
of the Offer Period above to offer, issue, sell or exchange all or any part of
such Offered Securities as to which a Notice of Acceptance has not been given by
the Buyers (the "Refused Securities") pursuant to a definitive agreement (the
"Subsequent Placement Agreement") but only to the offerees described in the
Offer Notice (if so described therein) and only upon terms and conditions
(including, without limitation, unit prices and interest rates) that are not
more favorable to the acquiring Person or Persons or less favorable to the
Company than those set forth in the Offer Notice and (ii) to publicly announce
(a) the execution of such Subsequent Placement Agreement, and (b) either (x) the
consummation of the transactions contemplated by such Subsequent Placement
Agreement or (y) the termination of such Subsequent Placement Agreement, which
shall be filed with the SEC on a Current Report on Form 8-K with such Subsequent
Placement Agreement and any documents contemplated therein filed as exhibits
thereto.
 
 
- 24 -

--------------------------------------------------------------------------------

 
 
(4)             In the event the Company shall propose to sell less than all the
Refused Securities (any such sale to be in the manner and on the terms specified
in Section 4(n)(iii)(3) above), then each Buyer may, at its sole option and in
its sole discretion, reduce the number or amount of the Offered Securities
specified in its Notice of Acceptance to an amount that shall be not less than
the number or amount of the Offered Securities that such Buyer elected to
purchase pursuant to Section 4(n)(iii)(2) above multiplied by a fraction, (i)
the numerator of which shall be the number or amount of Offered Securities the
Company actually proposes to issue, sell or exchange (including Offered
Securities to be issued or sold to Buyers pursuant to Section 4(n)(iii)(3) above
prior to such reduction) and (ii) the denominator of which shall be the original
amount of the Offered Securities.  In the event that any Buyer so elects to
reduce the number or amount of Offered Securities specified in its Notice of
Acceptance, the Company may not issue, sell or exchange more than the reduced
number or amount of the Offered Securities unless and until such securities have
again been offered to the Buyers in accordance with Section 4(n)(iii)(1) above.
 
(5)             Upon the closing of the issuance, sale or exchange of all or
less than all of the Refused Securities, the Buyers shall acquire from the
Company, and the Company shall issue to the Buyers, the number or amount of
Offered Securities specified in the Notices of Acceptance, as reduced pursuant
to Section 4(n)(iii)(4) above if the Buyers have so elected, upon the terms and
conditions specified in the Offer.  The purchase by the Buyers of any Offered
Securities is subject in all cases to the preparation, execution and delivery by
the Company and the Buyers of a purchase agreement relating to such Offered
Securities reasonably satisfactory in form and substance to the Buyers and their
respective counsel and on terms that are substantially identical to the purchase
agreement that the Company enters into with other investors in the Subsequent
Placement.
 
(6)             Any Offered Securities not acquired by the Buyers or other
persons in accordance with Section 4(n)(iii)(3) above may not be issued, sold or
exchanged until they are again offered to the Buyers under the procedures
specified in this Agreement.
 
(7)             The Company and the Buyers agree that if any Buyer elects to
participate in the Offer, neither the Subsequent Placement Agreement with
respect to such Offer nor any other transaction documents related thereto
(collectively, the "Subsequent Placement Documents") shall include any term or
provisions whereby any Buyer shall be required to agree to any restrictions in
trading as to any securities of the Company owned by such Buyer prior to such
Subsequent Placement.
 
 
- 25 -

--------------------------------------------------------------------------------

 
 
(8)             Notwithstanding anything to the contrary in this Section 4(n)
and unless otherwise agreed to by the Buyers, the Company shall either confirm
in writing to the Buyers that the transaction with respect to the Subsequent
Placement has been abandoned or shall publicly disclose its intention to issue
the Offered Securities, in either case in such a manner such that the Buyers
will not be in possession of material non-public information, by the twentieth
(20th) Business Day following delivery of the Offer Notice.  If by the twentieth
(20th) Business Day following delivery of the Offer Notice no public disclosure
regarding a transaction with respect to the Offered Securities has been made,
and no notice regarding the abandonment of such transaction has been received by
the Buyers, such transaction shall be deemed to have been abandoned and the
Buyers shall not be deemed to be in possession of any material, non-public
information with respect to the Company.  Should the Company decide to pursue
such transaction with respect to the Offered Securities, the Company shall
provide each Buyer with another Offer Notice and each Buyer will again have the
right of participation set forth in this Section 4(n)(iii).  The Company shall
not be permitted to deliver more than one such Offer Notice to the Buyers in any
60 day period.
 
(iv)                               The restrictions contained in subsections
(ii) and (iii) of this Section 4(n) shall not apply in connection with the
issuance of any Excluded Securities (as defined in the Notes).
 
(o)           Public Information.  At any time during the period commencing from
the six (6) month anniversary of the Closing Date and ending at such time that
all of the Securities, if a registration statement is not available for the
resale of all of the Securities, may be sold without restriction or limitation
pursuant to Rule 144 and without the requirement to be in compliance with Rule
144(c)(1), if the Company shall (i) fail for any reason to satisfy the
requirements of Rule 144(c)(1), including, without limitation, the failure to
satisfy the current public information requirement under Rule 144(c) or (ii) if
the Company has ever been an issuer described in Rule 144(i)(1)(i) or becomes
such an issuer in the future, and the Company shall fail to satisfy any
condition set forth in Rule 144(i)(2) (a "Public Information Failure") then, as
partial relief for the damages to any holder of Securities by reason of any such
delay in or reduction of its ability to sell the Securities (which remedy shall
not be exclusive of any other remedies available at law or in equity), the
Company shall pay to each such holder an amount in cash equal to one and one
half percent (1.5%) of the aggregate Purchase Price of such holder's Securities
on the day of a Public Information Failure and on every thirtieth day (pro rated
for periods totaling less than thirty days) thereafter until the earlier of (i)
the date such Public Information Failure is cured and (ii) such time that such
public information is no longer required pursuant to Rule 144.  The payments to
which a holder shall be entitled pursuant to this Section 4(o) are referred to
herein as "Public Information Failure Payments."  Public Information
Failure Payments shall be paid on the earlier of (I) the last day of the
calendar month during which such Public Information Failure Payments are
incurred and (II) the third Business Day after the event or failure giving rise
to the Public Information Failure Payments is cured.  In the event the Company
fails to make Public Information Failure Payments in a timely manner, such
Public Information Failure Payments shall bear interest at the rate of 1.5% per
month (prorated for partial months) until paid in full.  Notwithstanding the
foregoing, Company will not be liable for Public Information Failure Payments
under this Agreement to a Buyer in excess of an aggregate of 12% of the
aggregate Purchase Price paid by such Buyer for Notes and Warrants at the
Closing.
 
 
- 26 -

--------------------------------------------------------------------------------

 
 
(p)           Lock-Up.    The Company shall not amend, waive or terminate any
provision of any of the Lock-Up Agreements except to extend the term of the
lock-up period and shall enforce the provisions of each Lock-Up Agreement in
accordance with its terms.  If any officer or director that is a party to a
Lock-Up Agreement breaches any provision of a Lock-Up Agreement, the Company
shall promptly use its best efforts to seek specific performance of the terms of
such Lock-Up Agreement.
 
(q)           Visser Lock-Up. The Company shall not amend, waive or terminate
any lock-up or similar provision or agreement (each such provision or agreement,
a "Visser Lock-Up Agreement") between the Company and Visser, including without
limitation, pursuant to (i) Section 6 of that certain Subscription Agreement,
dated as of June 1, 2012, by and between Visser and the Company, (ii) Section 14
of that certain Common Stock Purchase Warrant issued by the Company to Visser of
June 1, 2012 and (iii) Section 3(d) of that certain 6% Senior Secured
Convertible Note issued by the Company to Visser on June 1, 2012, except to
extend the term of the lock-up period.  The Company shall enforce the provisions
of each Visser Lock-Up Agreement in accordance with its terms.  If Visser or any
other party to a Visser Lock-Up Agreement breaches any provision thereof, the
Company shall promptly use its best efforts to seek specific performance of the
terms of such Visser Lock-Up Agreement.
 
(r)            Equity Securities.  Unless otherwise agreed by the prior written
consent of the Lead Investor, the Company agrees that for so long as the Notes
remain outstanding, neither the Company nor any of its Subsidiaries shall,
directly or indirectly, issue, offer, sell, exchange, grant any option or right
to purchase, or otherwise dispose of (or announce any issuance, offer, sale,
exchange, grant of any option or right to purchase or other disposition of) any
equity security or any equity-linked or related security (including, without
limitation, any “equity security” (as that term is defined under Rule 405
promulgated under the 1933 Act), any Convertible Securities, any Options (as
such terms are defined in the Notes), any debt, any preferred stock or any
purchase rights) in any way pursuant to or relating to Section 3(a)(9) of the
1933 Act or Section 3(a)(10) of the 1933 Act.
 
(s)           Visser Note. While any Notes are outstanding, the Company agrees
not to draw down, or to request or require any advance of, any amount under any
note issued to Visser including without limitation that certain 6% Senior
Secured Convertible Note dated as of June 1, 2012 issued to Visser.
 
(t)            Certain Transactions.  During the period commencing on the date
hereof and ending on the date each Buyer no longer holds any Notes (such period,
the "Restricted Period"), each Buyer, severally and not jointly with the other
Buyers, covenants that neither it nor any of its Buyer Trading Affiliates shall
maintain a Net Short Position.  For purposes hereof, a "Net Short Position" by a
person means a position whereby such person has executed one or more sales of
Common Stock that is marked as a "short sale" (as defined in Rule 200 of
Regulation SHO under the 1934 Act) and that is executed at a time when such
Buyer has no equivalent offsetting "long" (as determined in accordance with Rule
200 of Regulation SHO under the 1934 Act) position in the Common Stock or
contract for the foregoing; provided, that any sales of Common Stock that are
marked as "short exempt" (as defined in Rule 200 of Regulation SHO under the
1934 Act) shall be deemed to be "long" for purposes of the determination of such
net short position.  For purposes of determining whether a Buyer has an
equivalent offsetting long position in the Common Stock, all Common Stock (i)
that is owned by such Buyer, or (ii) that would be issuable upon exercise or
conversion or redemption, as applicable, in full of the Warrants and Notes then
held by such Buyer (assuming that such Warrants and Notes were then fully
exercisable, convertible or redeemable, as applicable, notwithstanding any
provisions to the contrary) shall be deemed to be held long by such
Buyer.  Notwithstanding the foregoing, for the avoidance of doubt, nothing
contained herein shall constitute a covenant, or preclude any actions, with
respect to the identification of the availability of, or securing of, available
shares to borrow in order to effect short sales or similar transactions not
during the Restricted Period.  As used herein, "Buyer Trading Affiliates" means
any Person acting on behalf of or pursuant to any understanding with such Buyer
which had knowledge of the transactions contemplated hereby, (x) has or shares
discretion relating to such Buyer's investments and trading or information
concerning such Buyer's investments or (y) is subject to such Buyer's review or
input concerning such Person's investments or trading.
 
 
- 27 -

--------------------------------------------------------------------------------

 
 
(u)           Voting Agreement.  The Company shall use its reasonable best
efforts to effectuate the transactions contemplated by the Voting Agreement,
substantially in the form attached hereto as Exhibit D (the "Voting Agreement"),
executed by the Company and each of the stockholders set forth on Schedule 4(u)
(the "Stockholders").  The Company shall not terminate, amend or waive any
provision of the Voting Agreement and shall enforce the provisions of the Voting
Agreement in accordance with its terms. If the Stockholders breach any
provisions of the Voting Agreement, the Company shall promptly use its
reasonable best efforts to seek specific performance of the terms of the Voting
Agreement in accordance with Section 3.01 thereof.  In addition, if the Company
receives any notice from the Stockholders pursuant to the Voting Agreement, the
Company shall promptly, but in no event later than two (2) Business Days,
deliver a copy of such notice to each Buyer.
 
(v)            Visser Voting Agreement.  The Company shall use its reasonable
best efforts to cause Visser to execute a joinder to become a party to the
Voting Agreement as promptly as practicable after the date hereof.
 
(w)           Closing Documents.  On or prior to fourteen (14) calendar days
after the Closing Date, the Company agrees to deliver, or cause to be delivered,
to each Buyer and Schulte Roth & Zabel LLP a complete closing set of the
executed Transaction Documents, Securities and any other documents required to
be delivered to any party pursuant to Section 7 hereof or otherwise.
 
5.             REGISTER; TRANSFER AGENT INSTRUCTIONS.
 
(a)           Register.  The Company shall maintain at its principal executive
offices (or such other office or agency of the Company as it may designate by
notice to each holder of Securities), a register for the Notes and the Warrants
in which the Company shall record the name and address of the Person in whose
name the Notes and the Warrants have been issued (including the name and address
of each transferee), the principal amount of Notes held by such Person, the
number of Conversion Shares issuable pursuant to the terms of the Notes and the
number of Warrant Shares issuable upon exercise of the Warrants held by such
Person.  The Company shall keep the register open and available at all times
during business hours for inspection of any Buyer or its legal representatives.
 
 
- 28 -

--------------------------------------------------------------------------------

 
 
(b)           Transfer Agent Instructions.  The Company shall issue irrevocable
instructions to its transfer agent, and any subsequent transfer agent, to issue
certificates or credit shares to the applicable balance accounts at DTC,
registered in the name of each Buyer or its respective nominee(s), for the
Conversion Shares and the Warrant Shares issued at the Closing or issuable
pursuant to the terms of the Notes or exercise of the Warrants in such amounts
as specified from time to time by each Buyer to the Company upon conversion of
the Notes or exercise of the Warrants in the form of Exhibit E attached hereto
(the "Irrevocable Transfer Agent Instructions").  The Company warrants that no
instruction other than the Irrevocable Transfer Agent Instructions referred to
in this Section 5(b), and stop transfer instructions to give effect to Section
2(f) hereof, will be given by the Company to its transfer agent, and that the
Securities shall otherwise be freely transferable on the books and records of
the Company as and to the extent provided in this Agreement and the other
Transaction Documents.  If a Buyer effects a sale, assignment or transfer of the
Securities in accordance with Section 2(f), the Company shall permit the
transfer and shall promptly instruct its transfer agent to issue one or more
certificates or credit shares to the applicable balance accounts at DTC in such
name and in such denominations as specified by such Buyer to effect such sale,
transfer or assignment.  In the event that such sale, assignment or transfer
involves the Conversion Shares or the Warrant Shares sold, assigned or
transferred pursuant to an effective registration statement or pursuant to Rule
144, the transfer agent shall issue such Securities to the Buyer, assignee or
transferee, as the case may be, without any restrictive legend.  The Company
acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to a Buyer.  Accordingly, the Company acknowledges that the
remedy at law for a breach of its obligations under this Section 5(b) will be
inadequate and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Section 5(b), that a Buyer shall be entitled,
in addition to all other available remedies, to an order and/or injunction
restraining any breach and requiring immediate issuance and transfer, without
the necessity of showing economic loss and without any bond or other security
being required.
 
6.             CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
 
The obligation of the Company hereunder to issue and sell the Notes and the
related Warrants to each Buyer at the Closing is subject to the satisfaction, at
or before the Closing Date, of each of the following conditions, provided that
these conditions are for the Company's sole benefit and may be waived by the
Company at any time in its sole discretion by providing each Buyer with prior
written notice thereof:
 
(i)             Such Buyer shall have executed each of the Transaction Documents
to which it is a party and delivered the same to the Company.
 
 
- 29 -

--------------------------------------------------------------------------------

 
 
(ii)           Such Buyer shall have delivered to the Company the Purchase Price
(less, in the case of the Lead Investor, the amounts withheld pursuant to
Section 4(g)) for the Notes and the related Warrants being purchased by such
Buyer at the Closing by wire transfer of immediately available funds pursuant to
the wire instructions provided by the Company.
 
(iii)          The representations and warranties of such Buyer shall be true
and correct as of the date when made and as of the Closing 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 specified date), and
such Buyer shall have performed, satisfied and complied in all material respects
with the covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by such Buyer at or prior to the Closing
Date.
 
7.             CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.
 
The obligation of each Buyer hereunder to purchase the Notes and the related
Warrants at the Closing is subject to the satisfaction, at or before the Closing
Date, of each of the following conditions, provided that these conditions are
for each Buyer's sole benefit and may be waived by such Buyer at any time in its
sole discretion by providing the Company with prior written notice thereof:
 
(i)            The Company shall have duly executed and delivered to such Buyer
(A) each of the Transaction Documents, (B) the Notes (allocated in such
principal amounts as such Buyer shall request), being purchased by such Buyer at
the Closing pursuant to this Agreement and (C) the related Warrants (allocated
in such amounts as such Buyer shall request) being purchased by such Buyer at
the Closing pursuant to this Agreement.
 
(ii)           Such Buyer and the Placement Agent shall have received the
opinion of Foley & Lardner LLP, the Company's outside counsel, dated as of the
Closing Date, in substantially the form of Exhibit F attached hereto.
 
(iii)          The Company shall have delivered to such Buyer a copy of the
Irrevocable Transfer Agent Instructions, in the form of Exhibit E attached
hereto, which instructions shall have been delivered to and acknowledged in
writing by the Company's transfer agent.
 
(iv)          The Company shall have delivered to such Buyer a certificate
evidencing the formation and good standing of the Company and each of its
Subsidiaries in such entity's jurisdiction of formation issued by the Secretary
of State (or comparable office) of such jurisdiction, as of a date within ten
(10) days of the Closing Date.
 
(v)           The Company shall have delivered to such Buyer a certificate
evidencing the Company's qualification as a foreign corporation and good
standing issued by the Secretary of State (or comparable office) of each
jurisdiction in which the Company conducts business, as of a date within ten
(10) days of the Closing Date.
 
 
- 30 -

--------------------------------------------------------------------------------

 
 
(vi)          The Company shall have delivered to such Buyer a certified copy of
the Certificate of Incorporation as certified by the Secretary of State (or
comparable office) of the State of Delaware within ten (10) days of the Closing
Date.
 
(vii)         The Company shall have delivered to such Buyer a certificate,
executed by the Secretary of the Company and dated as of the Closing Date, as to
(i) the resolutions consistent with Section 3(b) as adopted by the Company's
Board of Directors in a form reasonably acceptable to such Buyer, (ii) the
Certificate of Incorporation and (iii) the Bylaws, each as in effect at the
Closing, in the form attached hereto as Exhibit G.
 
(viii)        The representations and warranties of the Company shall be true
and correct in all material respects (except for those representations and
warranties that are qualified by materiality or Material Adverse Effect, which
shall be true and correct in all respects) as of the date when made and as of
the Closing 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 specified date) and the Company shall have performed, satisfied and
complied in all 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 Closing Date.  Such Buyer shall have received a
certificate, executed by the Chief Executive Officer of the Company, dated as of
the Closing Date, to the foregoing effect and as to such other matters as may be
reasonably requested by such Buyer in the form attached hereto as Exhibit H.
 
(ix)          The Company shall have delivered to such Buyer a letter from the
Company's transfer agent certifying the number of shares of Common Stock
outstanding as of a date within five (5) days of the Closing Date.
 
(x)           The Common Stock (I) shall be designated for quotation or listed
on the Principal Market and (II) shall not have been suspended, as of the
Closing Date, by the SEC or the Principal Market from trading on the Principal
Market nor shall suspension by the SEC or the Principal Market have been
threatened, as of the Closing Date, either (A) in writing by the SEC or the
Principal Market or (B) by falling below the minimum listing maintenance
requirements of the Principal Market.
 
(xi)          The Company shall have obtained all governmental, regulatory or
third party consents and approvals, if any, necessary for the sale of the
Securities.
 
(xii)         The Company shall have delivered to each Buyer a lock-up agreement
in the form attached hereto as Exhibit I executed and delivered by each of the
Persons listed on Schedule 7(xii) (collectively, the "Lock Up Agreements").
 
(xiii)        The Voting Agreement shall have been executed and delivered to
such Buyer by the Company and each of the Stockholders.
 
(xiv)        The Company shall have delivered to such Buyer such other documents
relating to the transactions contemplated by this Agreement as such Buyer or its
counsel may reasonably request.
 
 
- 31 -

--------------------------------------------------------------------------------

 
 
8.             TERMINATION.  In the event that the Closing shall not have
occurred with respect to a Buyer on or before five (5) Business Days from the
date hereof due to the Company's or such Buyer's failure to satisfy the
conditions set forth in Sections 6 and 7 above (and the nonbreaching party's
failure to waive such unsatisfied condition(s)), the nonbreaching party shall
have the option to terminate this Agreement with respect to such breaching party
at the close of business on such date by delivering a written notice to that
effect to each other party to this Agreement and without liability of any party
to any other party; provided, however, that if this Agreement is terminated
pursuant to this Section 8, the Company shall remain obligated to reimburse the
Lead Investor or its designee(s), as applicable, for the expenses described in
Section 4(g) above.
 
9.              MISCELLANEOUS.
 
(a)            Governing Law; Jurisdiction; Jury Trial.  All questions
concerning the construction, validity, enforcement and interpretation of this
Agreement shall be governed by the internal laws of the State of New York,
without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of New York or any other jurisdictions) that would cause
the application of the laws of any jurisdictions other than the State of New
York.  Each party hereby irrevocably submits to the exclusive jurisdiction of
the state and federal courts sitting in The City of New York, Borough of
Manhattan, for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein, 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 WITH 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
(including an electronically scanned copy of an original signature) 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, not a facsimile
signature.
 
(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 is prohibited by
law or otherwise determined to be invalid or unenforceable by a court of
competent jurisdiction, the provision that would otherwise be prohibited,
invalid or unenforceable shall be deemed amended to apply to the broadest extent
that it would be valid and enforceable, and the invalidity or unenforceability
of such provision shall not affect the validity of the remaining provisions of
this Agreement so long as this Agreement as so modified continues to express,
without material change, the original intentions of the parties as to the
subject matter hereof and the prohibited nature, invalidity or unenforceability
of the provision(s) in question does not substantially impair the respective
expectations or reciprocal obligations of the parties or the practical
realization of the benefits that would otherwise be conferred upon the
parties.  The parties will endeavor in good faith negotiations to replace the
prohibited, invalid or unenforceable provision(s) with a valid provision(s), the
effect of which comes as close as possible to that of the prohibited, invalid or
unenforceable provision(s).
 
 
- 32 -

--------------------------------------------------------------------------------

 
 
(e)           Entire Agreement; Amendments.  This Agreement and the other
Transaction Documents supersede all other prior oral or written agreements
between the Buyers, the Company, their affiliates and Persons acting on their
behalf with respect to the matters discussed herein, and this Agreement, the
other Transaction Documents and the instruments referenced herein and therein
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 any Buyer makes any representation, warranty,
covenant or undertaking with respect to such matters.  Provisions of this
Agreement may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders of
at least sixty six and two-thirds percent (66 2/3%) of the aggregate number of
Registrable Securities issued or issuable hereunder and under the Notes and
Warrants (the "Required Holders"); provided that any such amendment or waiver
that complies with the foregoing but that disproportionately, materially and
adversely affects the rights and obligations of any Buyer relative to the
comparable rights and obligations of the other Buyers shall require the prior
written consent of such adversely affected Buyer.  Any amendment or waiver
effected in accordance with this Section 9(e) shall be binding upon each Buyer
and holder of Securities and the Company.  No such amendment shall be effective
to the extent that it applies to less than all of the Buyers or holders of
Securities.  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 (other than the reimbursement of legal
fees) also is offered to all of the parties to the Transaction Documents,
holders of Notes or holders of the Warrants, as the case may be.  The Company
has not, directly or indirectly, made any agreements with any Buyers relating to
the terms or conditions of the transactions contemplated by the Transaction
Documents except as set forth in the Transaction Documents.  Without limiting
the foregoing, the Company confirms that, except as set forth in this Agreement,
no Buyer has made any commitment or promise or has any other obligation to
provide any financing to the Company or otherwise.
 
 
- 33 -

--------------------------------------------------------------------------------

 
 
(f)           Notices.  Any notices, consents, waivers 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 by electronic mail; or (iii) one Business
Day after deposit with an overnight courier service, in each case properly
addressed to the party to receive the same.  The addresses, facsimile numbers
and e-mail addresses for such communications shall be:
 
If to the Company:
 

 
Liquidmetal Technologies, Inc.
 
30452 Esperanza
 
Rancho Santa Margarita, California 92688
 
Telephone:
(949) 635-2100
 
Facsimile:
(949)635-2108
 
Attention:
Tony Chung, Chief FinancialOfficer
 
E-Mail:
tony.chung@liquidmetal.com

With a copy to:
 

 
Foley & Lardner LLP
 
100 N. Tampa Street, Suite 2700
 
Tampa, FL 33602
 
Telephone: (813) 229-2300
 
Facsimile:
(813) 221-4210
 
Attention:
Curt P. Creely, Esq.
 
E-Mail:
ccreely@foley.com

 
If to the Transfer Agent:
 

 
American Stock Transfer and Trust
 
6201 15th Avenue
 
Brooklyn, NY 11219
 
Telephone:
(718) 921-8360
 
Facsimile:
(718) 765-8719
 
Attention:
Marienela Patterson
 
E-Mail:
mpatterson@amstock.com

 
If to a Buyer, to its address, facsimile number and e-mail address set forth on
the Schedule of Buyers, with copies to such Buyer's representatives as set forth
on the Schedule of Buyers,
 
with a copy (for informational purposes only) to:
 

 
Schulte Roth & Zabel LLP
 
919 Third Avenue
 
New York, New York  10022
 
Telephone:
(212) 756-2000
 
Facsimile:
(212) 593-5955
 
Attention:
Eleazer N. Klein, Esq.
 
E-mail:
eleazer.klein@srz.com

 
 
- 34 -

--------------------------------------------------------------------------------

 
 
or to such other address, facsimile number and/or e-mail address and/or to the
attention of such other Person as the recipient party has specified by written
notice given to each other party five (5) days prior to the effectiveness of
such change.  Written confirmation of receipt (A) given by the recipient of such
notice, consent, waiver or other communication, (B) mechanically or
electronically generated by the sender's facsimile machine or e-mail containing
the time, date, recipient facsimile number and an image of the first page of
such transmission or (C) provided by an overnight courier service shall be
rebuttable evidence of personal service, receipt by facsimile or receipt from an
overnight courier 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,
including any purchasers of the Notes or the Warrants.  The Company shall not
assign this Agreement or any rights or obligations hereunder without the prior
written consent of the Required Holders, including by way of a Fundamental
Transaction (unless the Company is in compliance with the applicable provisions
governing Fundamental Transactions set forth in the Notes and the Warrants).  A
Buyer may assign some or all of its rights hereunder without the consent of the
Company, in which event such assignee shall be deemed to be a Buyer hereunder
with respect to such assigned rights.
 
(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, except that each Indemnitee shall have the right to
enforce the obligations of the Company with respect to Section 9(k).
 
(i)           Survival.  Unless this Agreement is terminated under Section 8,
the representations and warranties of the Company and the Buyers contained in
Sections 2 and 3, and the agreements and covenants set forth in Sections 4, 5
and 9 shall survive the Closing.  Each Buyer shall be responsible only for its
own representations, warranties, agreements and covenants hereunder.
 
(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
any other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
 
(k)           Indemnification.  In consideration of each Buyer's execution and
delivery of the Transaction Documents and acquiring the Securities thereunder
and in addition to all of the Company's other obligations under the Transaction
Documents, the Company shall defend, protect, indemnify and hold harmless each
Buyer and each other holder of the Securities and all of their stockholders,
partners, members, officers, directors, employees and direct or indirect
investors and any of the foregoing Persons' agents or other representatives
(including, without limitation, those retained in connection with the
transactions contemplated by this Agreement) (collectively, the "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 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 or
(c) any cause of action, suit or claim brought or made against such Indemnitee
by a third party (including for these purposes a derivative action brought on
behalf of the Company) and arising out of or resulting from (i) the execution,
delivery, performance or enforcement of the Transaction Documents or any other
certificate, instrument or document contemplated hereby or thereby, (ii) any
transaction financed or to be financed in whole or in part, directly or
indirectly, with the proceeds of the issuance of the Securities, or (iii) any
disclosure made by such Buyer pursuant to Section 4(i).  To the extent that the
foregoing undertaking by the Company may be unenforceable for any reason, the
Company shall make the maximum contribution to the payment and satisfaction of
each of the Indemnified Liabilities that is permissible under applicable
law.  Except as otherwise set forth herein, the mechanics and procedures with
respect to the rights and obligations under this Section 9(k) shall be the same
as those set forth in Section 6 of the Registration Rights Agreement.
 
 
- 35 -

--------------------------------------------------------------------------------

 
 
(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.  Each Buyer and each holder of the Securities shall have
all rights and remedies set forth in the Transaction Documents and all rights
and remedies which such holders have been granted at any time under any other
agreement or contract and all of the rights which such holders have under any
law.  Any Person having any rights under any provision of this Agreement shall
be entitled to enforce such rights specifically (without posting a bond or other
security), to recover damages by reason of any breach of any provision of this
Agreement and to exercise all other rights granted by law.  Furthermore, the
Company recognizes that in the event that it fails to perform, observe, or
discharge any or all of its obligations under the Transaction Documents, any
remedy at law may prove to be inadequate relief to the Buyers.  The Company
therefore agrees that the Buyers shall be entitled to seek temporary and
permanent injunctive relief in any such case without the necessity of proving
actual damages and without posting a bond or other security.
 
(n)           Rescission and Withdrawal Right.  Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions of) the
Transaction Documents, whenever any Buyer 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 such Buyer 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.
 
(o)           Payment Set Aside.  To the extent that the Company makes a payment
or payments to the Buyers hereunder or pursuant to any of the other Transaction
Documents or the Buyers enforce or exercise their rights hereunder or
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, foreign, 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.
 
 
- 36 -

--------------------------------------------------------------------------------

 
 
(p)           Independent Nature of Buyers' Obligations and Rights.  The
obligations of each Buyer under any Transaction Document are several and not
joint with the obligations of any other Buyer, and no Buyer shall be responsible
in any way for the performance of the obligations of any other Buyer under any
Transaction Document.  Nothing contained herein or in any other Transaction
Document, and no action taken by any Buyer pursuant hereto or thereto, shall be
deemed to constitute the Buyers as, and the Company acknowledges that the Buyers
do not so constitute, a partnership, an association, a joint venture or any
other kind of entity, or create a presumption that the Buyers are in any way
acting in concert or as a group, and the Company shall not assert any such claim
with respect to such obligations or the transactions contemplated by the
Transaction Documents and the Company acknowledges that the Buyers are not
acting in concert or as a group with respect to such obligations or the
transactions contemplated by the Transaction Documents.  The Company
acknowledges and each Buyer confirms that it has independently participated in
the negotiation of the transaction contemplated hereby with the advice of its
own counsel and advisors.  Each Buyer shall be entitled to independently protect
and enforce its rights, including, without limitation, the rights arising out of
this Agreement or out of any other Transaction Documents, and it shall not be
necessary for any other Buyer to be joined as an additional party in any
proceeding for such purpose.
 
[Signature Page Follows]
 
 
- 37 -

--------------------------------------------------------------------------------

 
 
IN WITNESS WHEREOF, each Buyer and the Company have caused their respective
signature page to this Securities Purchase Agreement to be duly executed as of
the date first written above.
 

 
COMPANY:
      LIQUIDMETAL TECHNOLOGIES, INC.       By: /s/ Tony Chung       Name: Tony
Chung     Title: Chief Financial Officer               BUYERS:       /s/ Buyers

 
 
 
 
 
 
 

--------------------------------------------------------------------------------

 

EXHIBITS
 
Exhibit A
Form of Note
Exhibit B
Form of Warrant
Exhibit C
Form of Registration Rights Agreement
Exhibit D
Form of Voting Agreement
Exhibit E
Form of Irrevocable Transfer Agent Instructions
Exhibit F
Form of Opinion of Company Counsel
Exhibit G
Form of Secretary's Certificate
Exhibit H
Form of Officer's Certificate
Exhibit I
Form of Lock-Up Agreement

SCHEDULES
 
Schedule 3(a)
Subsidiaries
Schedule 3(k)
SEC Documents
Schedule 3(l)
Absence of Certain Changes
Schedule 3(n)
Regulatory Permits
Schedule 3(q)
Transactions with Affiliates
Schedule 3(r)
Equity Capitalization
Schedule 3(s)
Indebtedness and Other Contracts
Schedule 3(t)
Absence of Litigation
Schedule 3(x)
Intellectual Property Rights
Schedule 3(cc)
Internal Accounting and Disclosure Controls
Schedule 3(ee)
Ranking of Notes
Schedule 3(ll)
Disclosure
Schedule 4(d)
Use of Proceeds
Schedule 4(u)
List of Stockholders subject to Voting Agreement
Schedule 7(xii)
Parties to Lock Up Agreements

 
 

--------------------------------------------------------------------------------