Exhibit 10.1

SECURITIES PURCHASE AGREEMENT

This Securities Purchase Agreement (this “Agreement”) is dated as of June 11,
2013, among Authentidate Holding Corp., a Delaware corporation (the “Company”),
and each of the purchasers identified on the signature pages hereto (each, a
“Purchaser” and collectively, the “Purchasers”).

BACKGROUND

WHEREAS, subject to the terms and conditions set forth in this Agreement and
pursuant to Section 4(2) of the Securities Act of 1933, as amended (the
“Securities Act”), and Rule 506 as promulgated by the U.S. Securities and
Exchange Commission (the “Commission”) under the Securities Act, the Company
desires to issue and sell to each Purchaser, and each Purchaser, severally and
not jointly, desires to purchase from the Company, a number of units of the
Company’s securities (the “Units”) as is set forth beneath such Purchaser’s name
on the signature pages hereof, with each Unit consisting of such number of
(a) shares of Series D Convertible Preferred Stock, par value $0.10 per share
(the “Series D Preferred Stock”), and (ii) warrants to purchase shares of Common
Stock (each, a “Warrant”) as more fully described in this Agreement (the
“Offering”); and

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

ARTICLE I

DEFINITIONS

1.1 Certain Definitions. In addition to the other terms specifically defined
elsewhere in this Agreement, the following capitalized terms shall have the
following respective meanings when used herein:

“Affiliate” of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
“control”, when used with respect to any specified Person, means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms “controlling” and “controlled” have meanings correlative to the
foregoing.

“Board of Directors” means the board of directors of the Company or any
authorized committee of the board of directors.

“Business Day” means each Monday, Tuesday, Wednesday, Thursday and Friday that
is not a day on which the banking institutions in the City of New York, New York
are authorized or obligated by law or executive order to close or be closed.

“Capital Stock” of any Person means any and all shares, interests, rights to
purchase, warrants, options, participations or other equivalents of or interest
in (however designated) equity of such Person, but excluding any debt securities
convertible into such equity.

“Closing” means the closing of the purchase and sale of the Units pursuant to
Section 2.1.

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“Closing Bid Price” shall mean the most recently reported closing consolidated
bid price of the Company’s Common Stock published by the Nasdaq Stock Market
determined as of the Effective Date of this Agreement.

“Closing Date” means the Trading Day on which this Agreement has been executed
and delivered by the parties hereto, and all conditions precedent to (i) the
Purchaser’s obligations to pay the Subscription Amount and (ii) the Company’s
obligations to deliver the securities comprising the Units, in each case, have
been satisfied or waived.

“Common Stock” shall mean the common stock of Authentidate Holding Corp., par
value $0.001 per share.

“Effective Date” shall mean the date that the Company has satisfied the
following conditions (i) the Company has received subscription from Note Holders
(as defined in Section 2.3 below) holding Senior Notes (as defined in
Section 2.3 below) in an aggregate principal amount of at least the Minimum
Amount and (ii) the Company has entered into an underwriting agreement in form
and substance satisfactory to the Company providing for a firm commitment public
offering of the Company’s securities for gross proceeds in excess of $2,000,000.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Indebtedness” means, without duplication, with respect to any Person (the
“subject Person”), all liabilities, obligations and indebtedness of the subject
Person to any other Person, of any kind or nature, now or hereafter owing,
arising, due or payable, howsoever evidenced, created, incurred, acquired or
owing, whether primary, secondary, direct, contingent, fixed or otherwise,
consisting of indebtedness for borrowed money or the deferred purchase price of
property, excluding purchases of property, product, merchandise and services in
the ordinary course of business, but including (a) all obligations and
liabilities under guarantees; (b) the present value of lease payments due under
synthetic leases; and (c) all obligations and liabilities under any asset
securitization or sale/leaseback transaction; provided, further, however, that
in no event shall the term Indebtedness include the capital stock surplus,
retained earnings, minority interests in the common stock of Subsidiaries, lease
obligations (other than pursuant to (b) above), reserves for deferred income
taxes and investment credits, other deferred credits or reserves.

“Liens” means any lien, charge, security interest, encumbrance, right of first
refusal, preemptive right or other restriction, other than restrictions imposed
by securities laws.

“Majority in Interest” shall mean the holders of at least a majority (50.1%) of
the aggregate number of Series D Preferred Shares then outstanding at the time
of such determination.

“Minimum Amount” means an aggregate principal amount of Senior Notes of at least
U.S. $6,000,000.

“Per Unit Purchase Price” equals $10.00.

“Person” shall mean and include an individual, a partnership, a corporation
(including a business trust), a joint stock company, a limited liability
company, an unincorporated association, a joint venture or other entity or a
governmental authority.

 

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“Premium” means such additional amount above the Closing Bid Price so as to
ensure that the conversion price of the Series D Preferred Stock is deemed to be
an “above-market” transaction in accordance with the listing rules of the Nasdaq
Stock Market.

“Registration Rights Agreement” means the Registration Rights Agreement,
substantially in the form attached hereto as Exhibit C, pursuant to which the
Company will agree to provide certain registration rights with respect to the
Registrable Securities (as defined in the Registration Rights Agreement) under
the Securities Act and the rules and regulations promulgated thereunder, and
applicable state securities laws.

“Required Approvals” means (i) filings expressly required pursuant to this
Agreement, (ii) application(s) and/or notification(s) to the Company’s principal
Trading Market for the listing of the shares of Common Stock which may be issued
pursuant to the terms of this Agreement for trading thereon in the time and
manner required thereby; (iii) such filings as are required to be made under
applicable federal and state securities laws; (iv) approvals or consents that
have been made or obtained prior to or contemporaneously with the date of this
Agreement; (v) filings pursuant to the Exchange Act; and (vi) the filing with
the SEC of one or more registration statements in accordance with the
requirements of the Registration Rights Agreement.

“Securities Act” means the Securities Act of 1933, as amended.

“Security Agreements” means those certain Security Agreements, as amended to
date, dated March 28, 2012 and September 24, 2012, entered into among the
Company and the purchasers thereunder pursuant to which the Company granted such
purchasers a Lien against the Company’s assets to secure the Company’s
obligations under the Senior Notes.

“Senior Notes” means the aggregate principal amount of $7,350,000 of outstanding
senior secured notes issued by the Company on March 28, 2012 and September 24,
2012, as amended to date, and any deferrals, renewals or extensions thereof, and
any notes or other instruments or evidences of Indebtedness issued in respect of
or in exchange thereof.

“Short Sales” means all “short sales” as defined in Rule 200 of Regulation SHO
under the Exchange Act.

“Subsidiary” means, in respect of any Person, any corporation, association,
partnership or other business entity of which more than 50% of the total voting
power of shares of Capital Stock or other interests (including partnership
interests) entitled (without regard to the occurrence of any contingency) to
vote in the election of directors, managers, general partners or trustees
thereof is at the time owned or controlled, directly or indirectly, by (i) such
Person; (ii) such Person and one or more Subsidiaries of such Person; or
(iii) one or more Subsidiaries of such Person.

“Subscription Amount” means the aggregate amount to be paid for the Units
purchased hereunder as specified beneath each Purchaser’s name on the signature
page of this Agreement and next to the heading “Subscription Amount,” payable
(i) in United States dollars and in immediately available funds and (ii) by the
surrender for cancellation of Senior Notes by Note Holders, in an amount equal
to the amount of aggregate Per Unit Purchase Price for the number of Units
subscribed by the Purchaser.

“Trading Day” means a day on which the Trading Market on which the Company’s
Common Stock is listed for trading is open for trading.

 

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“Trading Market” means any of the following markets or exchanges on which the
Common Stock is listed or quoted for trading on the date in question: the NYSE
AMEX, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global
Select Market, the New York Stock Exchange or the OTC Bulletin Board.

“Transaction Agreements” means this Agreement, the Series D Certificate of
Designation, the Warrants, the Registration Rights Agreement, and any other
agreement or instrument executed by a party to this Agreement or in connection
with the transactions contemplated hereunder.

ARTICLE II

PURCHASE AND SALE OF SECURITIES

2.1 Purchase and Sale of Securities; Binding Agreement Date; Closing.

(a) The Company has duly authorized the issuance and sale at the Closing of a
maximum of 900,000 Units at the Per Unit Purchase Price for an aggregate
purchase price of $9,000,000 with each Unit consisting of (i) one (1) share of
the Company’s Series D Convertible Preferred Stock (the “Series D Preferred
Shares”), having the terms set forth in the Certificate of Designation for such
Series D Preferred Shares attached hereto as Exhibit A (the “Series D
Certificate of Designation”) and (ii) warrants (each, a “Warrant” and
collectively, the “Warrants”) to purchase an aggregate of ten (10) shares of
Common Stock (the “Warrant Shares”) which Warrants shall be exercisable at a per
share exercise price equal to 100% of the Closing Bid Price and otherwise be
substantially in the form attached hereto as Exhibit B. The Series D Preferred
Shares issuable hereunder shall be convertible into shares of Common Stock at an
initial conversion price equal to the Closing Bid Price plus the Premium and in
accordance with the terms of the Series D Certificate of Designation (the
“Conversion Shares”, and together with Series D Preferred Shares, the Warrants
and the Warrant Shares, the “Securities”).

(b) Upon all of the terms and subject to all of the conditions hereof, the
Company agrees to issue and sell to each Purchaser, and each of the Purchasers
hereby agrees to purchase on the Closing Date (defined below), (i) the number of
Series D Preferred Shares set forth below the Purchaser’s name on the Purchaser
Signature Page and (ii) the number of Warrants set forth below the Purchaser’s
name on the Purchaser Signature Page. The obligations of the Purchasers to
purchase Units are several and not joint. Notwithstanding anything else herein,
for purposes of determining the Closing Bid Price pursuant to Nasdaq Listing
Rules, including Rule 5005(a)(22), this Agreement shall not be binding or
effective until the execution by all necessary parties of an underwriting
agreement for a firm commitment public offering of at least $2,000,000 of the
Company’s securities.

(c) The closing of the purchase and sale of the Securities pursuant to this
Agreement (the “Closing”) shall occur on such Business Day as the Purchasers and
Company agree. The “Closing Date” shall mean the Business Day on which this
Agreement has been executed and delivered by the parties hereto, and all
conditions precedent to (i) the Purchaser’s obligations to pay the Subscription
Amount and (ii) the Company’s obligations to deliver the Securities comprising
the Units, in each case, have been satisfied or waived.

(d) At the Closing, upon the terms and subject to the conditions set forth
herein, substantially concurrently with the execution and delivery of this
Agreement by the parties hereto, the Company shall sell, and each Purchaser
shall purchase, the number of Units specified beneath each such Purchaser’s name
on the signature pages hereto. At the Closing, each Purchaser shall deliver to
the Company an amount equal to such Purchaser’s Subscription Amount as set forth
beneath such Purchaser’s name on the signature page hereto, and the Company
shall deliver to such Purchaser the securities represented by the Units so
purchased, and the Company and the Purchaser shall deliver the

 

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other items set forth in Section 2.2 deliverable at the Closing. Each Purchaser
shall deliver its Subscription Amount to the Company either (i) by surrendering
to the Company at its principal offices for cancellation the original Senior
Note(s) held by such Purchaser, free and clear of any liens, claims, charges,
security interest or other legal or equitable encumbrances, in an amount
equivalent to such Purchaser’s Subscription Amount for Units purchased through
the cancellation of Senior Notes and/or (ii) via wire transfer of immediately
available U.S. funds to the account designated for receipt of such funds by the
Company. Upon satisfaction of the requirements, covenants and conditions set
forth in Section 2.2 and Article V, the Closing shall occur at the offices of
the Company or such other location, and at such time, as the parties shall
mutually agree.

(e) Each Purchaser acknowledges and agrees that the Company reserves the right,
in its absolute discretion, to reject a subscription for Units, in whole or in
part, at any time prior to the closing time. If a subscription is rejected in
whole, any checks or other forms of payment delivered to the Company
representing the Subscription Amount will be promptly returned to such Purchaser
without interest or deduction. If a subscription is accepted only in part, a
check representing any refund of the Subscription Amount for that portion of the
subscription for the Units which is not accepted will be promptly delivered to
each Purchaser without interest or deduction.

2.2 Deliveries.

(a) On or prior to the Closing Date, the Company shall deliver or cause to be
delivered to each Purchaser the following: (i) this Agreement, duly executed by
the Company; (ii) the Registration Rights Agreement, duly executed by the
Company; (iii) a duly executed stock certificate representing the Series D
Preferred Shares purchased hereunder; (iv) the Warrants purchased hereunder,
duly executed by the Company; (v) evidence of the filing and acceptance of the
Series D Certificate of Designation from the Secretary of State of Delaware; and
(vi) such other documents relating to the transactions contemplated by this
Agreement as the Purchasers or their counsel may reasonably request.

(b) On or prior to the Closing Date, each Purchaser shall deliver or cause to be
delivered to the Company the following: (i) this Agreement, duly executed by
such Purchaser; (ii) if such Purchaser is paying some or all of its Subscription
Amount in U.S. funds, then the Purchaser’s Subscription Amount by wire transfer
of immediately available U.S. funds to the account as specified in writing by
the Company for the amount of Securities being t purchased by payment of U.S.
funds; (iii) if such Purchaser is paying some or all of its Subscription Amount
through the surrender and cancellation of Senior Notes, then such Purchase shall
surrender to the Company the original Senior Notes registered in the name of
such Purchaser in an aggregate principal amount equivalent to the Subscription
Amount of the Purchaser to be paid through the cancellation of Senior Notes (or
an affidavit of loss and indemnity undertaking with respect thereto, in a form
acceptable to the Company); (iv) the Registration Rights Agreement, duly
executed by such Purchaser; (v) a fully completed and duly executed Accredited
Investor Certification, substantially in the form attached hereto as Schedule A;
and (vi) such other documents relating to the transactions contemplated by this
Agreement as the Company or its counsel may reasonably request.

2.3 Cancellation of Senior Notes.

(a) Each Purchaser who is a holder of Senior Notes (each a “Note Holder” and
collectively, the “Note Holders”) that is surrendering such Senior Notes in
consideration for the sale of Units hereunder hereby agrees that the aggregate
principal amount of the Senior Notes held by such Purchaser shall be cancelled
upon the Closing. Each Purchaser acknowledges that the cancellation of the
Senior Notes held by such Purchaser shall have the effects specified in the
Senior Notes and in the Security Agreements. Notwithstanding anything to the
contrary contained in the Senior Notes or in the

 

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Security Agreements or otherwise, the Company and each such Purchaser that is a
Note Holder hereby agree that upon the Closing: (i) the Company’s obligations
under the Senior Notes held by such Note Holder shall be deemed fully paid and
satisfied; (ii) the Company’s obligations to such Note Holder pursuant to the
Security Agreements shall be deemed fully satisfied; (iii) as between the
Company and the Note Holders that are Purchasers, the Security Agreements and
the Senior Notes shall automatically terminate and have no further force and
effect (other than those specific provisions which pursuant to the terms and
provisions of the Security Agreements and the Senior Note expressly survive
termination), and (iv) all security interests in and other liens on the assets
of the Company granted pursuant to the Security Agreements and the Senior Notes
(to the extent of the aggregate principal amount of Senior Notes which are
surrendered pursuant to this Agreement) shall be automatically terminated and
released.

(b) Each Note Holder that is surrendering its Senior Notes pursuant to this
Agreement hereby authorizes the Representative (as defined in the Security
Agreements) and the Company to execute and file any Uniform Commercial Code
termination statements, release and termination of trademark security interests
and other similar discharge or release documents as are necessary or reasonably
requested by the Company to terminate and release, as of record, the security
interests, financing statements, and all other notices of security interests and
liens previously filed by with respect to the Senior Notes (to the extent of the
aggregate principal amount of Senior Notes which are surrendered pursuant to
this Agreement). Such Note Holders hereby further authorize the Representative
and the Company and/or their counsel or representatives, immediately following
the Closing, to file the foregoing UCC and other termination statements
(including a Termination of Trademark Security Interest) in such jurisdictions
as are deemed necessary by the Company to terminate and release the security
interests granted pursuant to the Senior Notes. The Note Holders shall execute
and deliver to or for the Company such additional documents (in recordable form,
as appropriate) as the Company may reasonably request to carry out the foregoing
termination and release of the security interests granted under the Security
Agreements the Senior Notes. Each Note Holder further agrees that it will write
“PAID IN FULL” on the original of the Senior Notes surrendered to the Company
pursuant to this Agreement and initial such phrase and return the original
Senior Note to the Company. Notwithstanding the foregoing, however, in the event
the Purchaser does not inscribed the phrase “PAID IN FULL” on the original
Senior Notes, it hereby authorizes the Company’s agents and officers to write
such phrase on the original Senior Note.

(c) In the event a Note Holder has lost his, her or its original Senior Note, or
such Senior Notes are lost, stolen or destroyed, such Note Holder shall, instead
of returning the original Senior Note, execute and deliver to the Company an
affidavit of loss and indemnification undertaking (in a form acceptable to the
Company) with respect to such Senior Notes and in which instrument the Note
Holder acknowledges that the Senior Notes are paid in full.

ARTICLE III

REPRESENTATIONS AND WARRANTIES

3.1 Representations and Warranties of the Company. The Company hereby represents
and warrants to the Purchasers as follows:

(a) Organization and Qualification. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has the requisite legal authority to own and use its properties and assets
and to carry on its business as currently conducted. The Company is not in
violation of any of the provisions of its certificate of incorporation, bylaws
or other organizational or charter documents. The Company is duly qualified to
do business and is in good standing as a foreign corporation or other entity in
each jurisdiction in which the nature of the business conducted or property
owned by the Company makes such qualification necessary, except where the

 

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failure to be so qualified or in good standing, as the case may be, would not,
individually or in the aggregate, have, or reasonably be expected to result in,
a Material Adverse Effect (defined below). For purposes of this Agreement,
“Material Adverse Effect” means (i) a material adverse effect on the results of
operations, assets, business or financial condition of the Company and its
Subsidiaries, taken as a whole on a consolidated basis, or (ii) material and
adverse impairment of the Company’s ability to perform its obligations under
this Agreement, provided that none of the following alone shall be deemed, in
and of itself, to constitute a Material Adverse Effect: (A) a change in the
market price or trading volume of the shares of Common Stock of the Company or
(B) changes in general economic conditions or changes affecting the industry in
which the Company operates generally (as opposed to Company-specific changes) so
long as such changes do not have a disproportionate effect on the Company and
its Subsidiaries, taken as a whole.

(b) Authorization; Enforcement. The Company has the requisite corporate
authority to enter into this Agreement and to carry out its obligations
hereunder subject to the terms and conditions set forth herein. The execution
and delivery of this Agreement, the certificates representing the Series D
Preferred Shares and the Warrants, and the other Transaction Agreements have
been duly authorized by all necessary corporate action on the part of the
Company. This Agreement and the other Transaction Agreements have been duly
executed and delivered by the Company and constitutes, and the certificates
representing the Series D Preferred Shares and Warrants, when executed and
delivered in accordance with the terms hereof, will constitute, a valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms, except as may be limited by (i) applicable bankruptcy,
insolvency, reorganization or other laws of general application relating to or
affecting the enforcement of creditors’ rights generally; (ii) the effect of
rules of law governing the availability of specific performance, injunctive
relief and other equitable remedies; and (iii) insofar as indemnification and
contribution provisions may be limited by applicable law.

(c) Required Approvals; No Conflicts. The Company is not required to obtain any
consent, waiver, authorization or order of, give any notice to, or make any
filing or registration with, any court or other federal, state, local or other
governmental authority or other Person or entity in connection with the
execution, delivery and performance by the Company of this Agreement or the
issuance, sale or delivery of the Securities other than the Required Approvals
and if required, the Stockholder Approval contemplated by Section 6.9 of this
Agreement. Subject to the Required Approvals and if required, the Stockholder
Approval contemplated by Section 6.9 of this Agreement, the execution and
delivery by the Company of this Agreement and the certificates representing the
Series D Preferred Shares and the Warrants, and the performance by the Company
of its obligations hereunder and thereunder, do not and will not (i) conflict
with or violate any provision of the Company’s certificate of incorporation,
bylaws or other organizational or charter documents, (ii) conflict with, or
constitute a default under (or an event that, 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 under (with or without
notice, lapse of time or both), any agreement, credit facility, debt or other
instrument evidencing a debt of the Company or other understanding to which the
Company is a party, or by which any of its properties or assets is bound, except
to the extent that such conflict or default or termination, amendment,
acceleration or cancellation right would not reasonably be expected to have a
Material Adverse Effect, or (iii) result in a violation of any law, rule,
regulation, order, judgment, injunction, decree or other restriction of any
court or governmental authority to which the Company is subject, or by which any
of its properties or assets is bound, except to the extent that such violation
would not reasonably be expected to have a Material Adverse Effect.

(d) Capitalization. As of May 31, 2013, the authorized capital stock of the
Company consists of (i) 100,000,000 shares of Common Stock, of which
(A) 30,655,285 shares are issued and outstanding (after giving effect to the
issuance of all shares of common stock upon the conversion of our

 

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previously outstanding shares of Series C Convertible Redeemable Preferred
Stock, which were converted as of April 5, 2013); (B) 3,304,855 shares are
reserved for issuance upon the exercise of stock options and the vesting of
restricted stock units outstanding under the Company’s equity compensation
plans; (C) 13,631,953 shares are reserved for issuance upon exercise of common
stock purchase warrants granted prior to the date of this Agreement; and (D) and
such additional stock options and shares of Common Stock which may be issued
from time to time in accordance with the terms of the Company’s current equity
compensation plans; and (ii) 5,000,000 shares of Preferred Stock, $0.10 par
value per share, of which 28,000 shares are issued and outstanding and
designated as Series B Convertible Preferred Stock and which shares of Series B
Convertible Preferred Stock are convertible into an aggregate of 250,000 shares
of Common Stock. All of the issued shares of capital stock of the Company have
been duly and validly authorized and issued, are fully paid and non-assessable
and were issued in full compliance with applicable state and federal securities
laws. Except as disclosed in this Agreement, the SEC Reports (as defined below),
or in another document publicly filed by the Company with the Commission prior
to the date first set forth above, the Company has no outstanding options or
warrants to purchase, or obligations convertible into, or any contracts or
commitments to issue or sell, shares of its capital stock or any such options,
warrants, rights, convertible securities or obligations. The description of the
Company’s equity compensation plans and the options or other rights granted and
exercised thereunder set forth in the SEC Reports accurately and fairly presents
in all material respects the information required by the Securities Act to be
shown with respect to such plans, options and rights.

(e) Due Issuance. The Series D Preferred Shares and the Warrants to be issued
and the shares of Common Stock to be issued upon conversion of the Series D
Preferred Shares and exercise of the Warrants (and solely with respect to the
issuance of any Conversion Shares and Warrant Shares in excess of the Exchange
Cap (as defined in Section 6.8), subject to the Stockholder Approval), will be
duly authorized and, when issued and paid for in accordance with this Agreement,
the Series D Certificate of Designation and the Warrants, as the case may be,
will be duly and validly issued and outstanding, fully paid and non-assessable,
free and clear of all Liens and will not be subject to pre-emptive or similar
rights of stockholders of the Company.

(f) Litigation. Except as described in the Company’s reports filed with the SEC
pursuant to the Exchange Act (the “SEC Reports”), there is no pending or, to the
best knowledge of the Company, threatened action, suit, proceeding or
investigation before any court, governmental agency or body, or arbitrator
having jurisdiction over the Company, or any of its Affiliates that would affect
the execution by the Company or the performance by the Company of its
obligations under this Agreement, and all other agreements entered into by the
Company relating hereto. Except as disclosed in the SEC Reports, there is no
pending or, to the best knowledge of the Company, threatened action, suit,
proceeding or investigation before any court, governmental agency or body, or
arbitrator having jurisdiction over the Company, or any of its Affiliates which
litigation if adversely determined would reasonably be expected to have a
Material Adverse Effect.

(g) Intellectual Property. Except as disclosed in the SEC Reports, each of the
Company and its subsidiaries owns or has the valid right to use all Intellectual
Property (as defined below) necessary for the conduct of the businesses of the
Company and its subsidiaries in the manner described in the SEC Reports as now
conducted or proposed to be conducted. Except as disclosed in the SEC Reports:
(i) to the knowledge of the Company, no third party has infringed,
misappropriated, diluted or otherwise violated in any material respect any
Intellectual Property rights of the Company or any of its subsidiaries, and no
claims for any of the foregoing have been brought against any third party by the
Company or any of its subsidiaries; (ii) the Intellectual Property owned by the
Company or its subsidiaries and, to the knowledge of the Company, the
Intellectual Property licensed to the Company or its subsidiaries have not been
adjudged invalid or unenforceable, in whole or in part, and there is no pending
or, to the knowledge of the Company, threatened action, suit, proceeding,
investigation or claim

 

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challenging the validity, enforceability, scope, issuance/registration, use or
ownership of any such Intellectual Property, and the Company is unaware of any
facts which would form a reasonable basis for any such claim; (iii) there is no
pending or, to the knowledge of the Company, threatened action, suit, proceeding
or claim by others that the Company or any of its subsidiaries infringes,
misappropriates, dilutes or otherwise violates any Intellectual Property of
others; and (iv) each of the Company and its subsidiaries has taken commercially
reasonable steps, consistent with industry standards, to maintain and protect
all Intellectual Property that is material to the conduct of its business. The
term “Intellectual Property” as used herein means all patents, patent
applications, trademarks, trademark applications, service marks, trade names,
trade dress, domain names, copyrights, licenses, inventions, trade secrets,
technology, software, systems, know-how and other intellectual property and
proprietary rights.

(h) Property. The Company does not own any real property. The Company and its
subsidiaries have good and marketable title to all properties and assets
described in the SEC Reports as owned by it, in each case free and clear of all
Liens, except such as (i) are described in the SEC Reports or (ii) 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 its
subsidiaries. Any real property and buildings held under lease by the Company
and its subsidiaries are held by them under valid, subsisting and enforceable
leases with such exceptions as do not interfere with the use made and proposed
to be made of such property and buildings by the Company and its subsidiaries.

(i) Permits. The Company and its subsidiaries possess all licenses,
certificates, clearances, authorizations or permits issued by the appropriate
governmental or regulatory agencies or authorities (collectively, “Permits”)
that are necessary to enable them to own, lease and operate their respective
properties and to carry on their respective businesses as presently conducted,
except where the failure to possess such licenses, certificates, authorization
or permits would not reasonably be expected to have a Material Adverse Effect.
The Company has not received notice of any revocation or modification of any
such Permits and has no reason to believe that any such license, certificate,
permit or authorization will not be renewed in the ordinary course. The Company
has not received any Form 483 notice of adverse finding from the U.S. Food and
Drug Administration (“FDA”), warning letter, untitled letter or other
correspondence or notice from FDA or any other governmental or regulatory
authority alleging or asserting noncompliance with any applicable laws or any
Permits. The Company has filed, obtained, maintained or submitted all material
reports, documents, forms, notices, applications, records, claims, submissions
and supplements or amendments as required by any applicable laws or Permits and
that all such reports, documents, forms, notices, applications, records, claims,
submissions and supplements or amendments were complete and correct on the date
filed in all material respects (or were corrected or supplemented by a
subsequent submission).

(j) Financial Statements. The financial statements of the Company, together with
the related schedules and the notes thereto, included or incorporated by
reference in the SEC Reports comply in all material respects with applicable
accounting requirements and the applicable requirements of the Securities Act
and Exchange Act as in effect at the time of filing. Such financial statements
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis during the periods involved (“GAAP”), except as
may be otherwise specified in such financial statements or the notes thereto,
and fairly present in all material respects the financial position of the
Company as of and for the dates thereof and the results of operations and cash
flows for the periods then ended, subject, in the case of unaudited statements,
to normal, immaterial, year-end audit adjustments. EisnerAmper LLP, who has
audited certain financial statements of the Company, are independent registered
public accountants as required by the Securities Act and Exchange Act and have
been appointed by the Company’s audit committee (if so empowered by the Board of
Directors) comprised only of independent directors, or by the Board of
Directors, as the case may be.

 

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(k) Material Liabilities and Indebtedness. Since the date of the latest audited
financial statements included in the SEC Reports, except as disclosed in the SEC
Reports: (i) there has been no event, occurrence or development that,
individually or in the aggregate, has had or would reasonably be expected to
result in a Material Adverse Effect, (ii) the Company has not incurred any
liabilities (contingent or otherwise) other than (A) trade payables and accrued
expenses incurred in the ordinary course of business consistent with past
practice and (B) liabilities not required to be reflected in the Company’s
financial statements pursuant to GAAP or required to be disclosed in filings
made with the Commission, (iii) the Company has not altered its method of
accounting or the identity of its auditors, and (iv) other than with respect to
the Company’s shares of Series B Convertible Preferred Stock and Series C
Convertible Preferred Stock, the Company has not declared or made any dividend
or distribution of cash or other property to its shareholders or purchased,
redeemed or made any agreements to purchase or redeem any shares of its capital
stock. Except for the issuance of the Securities contemplated by this Agreement
or as set forth in the SEC Reports, no event, liability or development has
occurred or exists with respect to the Company or its subsidiaries or their
respective business, properties, operations or financial condition, that would
be required to be disclosed by the Company under applicable securities laws at
the time this representation is made or deemed made that has not been publicly
disclosed at least one Trading Day prior to the date that this representation is
made.

(l) Transactions with Related Parties. Except as set forth in the SEC Reports,
none of the officers or directors of the Company and, to the knowledge of the
Company, none of the employees of the Company is presently a party to any
transaction with the Company or any subsidiary (other than for services as
employees, officers and directors), including any contract, agreement or other
arrangement providing for the furnishing of services to or by, providing for
rental of real or personal property to or from, or otherwise requiring payments
to or from any officer, director or such employee or, to the knowledge of the
Company, any entity in which any officer, director, or any such employee has a
substantial interest or is an officer, director, trustee or partner, in each
case as would be required to be disclosed pursuant to the requirements of
Item 404 of Regulation S-K. Each Purchaser acknowledges that, as set forth in
the SEC Reports, certain officers, directors and holder of greater than 5% of
the Company’s outstanding shares of Common Stock are the beneficial owners of an
aggregate principal amount of $4,850,000 of outstanding Senior Notes and that
each such person may be a party to this Agreement and surrender the Senior Notes
held by them in consideration of the issuance of the Units hereunder.

(m) Nature of Company’s Obligation. The Company further acknowledges that its
obligations under the Transaction Agreements, including, without limitation, its
obligation to issue the Warrant Shares, are unconditional and absolute and not
subject to any right of set off, counterclaim, delay or reduction, regardless of
the effect of any such dilution or any claim the Company may have against any
Purchaser and regardless of the dilutive effect that such issuance may have on
the ownership of the other stockholders of the Company.

(n) No Defaults. Except as disclosed in the Company’s SEC Reports, the Company
and its Subsidiaries are not, nor have they received notice that they would be
with the passage of time, giving of notice, or both, in breach or violation of
any of the terms and provisions of, or in default under (a) their charters and
bylaws, (b) any statute, rule, regulation or order of any governmental agency or
body or any court, domestic or foreign, having jurisdiction over them, or any of
their material assets or properties, or (c) any material agreement or instrument
to which they are a party or by which they are bound or to which any of their
assets or properties are subject, except, in the case of clauses (b) and
(c) only, for such conflicts, breaches or violations as have not and are not
reasonably be expected to result in, individually or in the aggregate, a
Material Adverse Effect.

 

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(o) Insurance. The Company, on behalf of itself and its subsidiaries, carries,
or is covered by, insurance from insurers of recognized financial responsibility
in such amounts and covering such risks as is customary for companies engaged in
similar businesses in similar industries. All policies of insurance of the
Company and its subsidiaries are in full force and effect; each of the Company
and its subsidiaries is in compliance with the terms of such policies in all
material respects; and none of the Company or its subsidiaries has received
notice from any insurer or agent of such insurer that capital improvements or
other expenditures are required or necessary to be made in order to continue
such insurance; there are no claims by the Company or any of its subsidiaries
under any such policy or instrument as to which any insurance company is denying
liability or defending under a reservation of rights clause; and none of the
Company or its subsidiaries 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 could not reasonably be expected to have a Material
Adverse Effect.

(p) Taxes. The Company has filed all federal, state, local and foreign income
and franchise tax returns required to be filed through the date hereof, subject
to permitted extensions, and has paid all taxes due thereon, and no tax
deficiency has been determined adversely to the Company, nor does the Company
have any knowledge of any tax deficiencies that could, in the aggregate,
reasonably be expected to have a Material Adverse Effect. There is no pending
dispute with any taxing authority relating to the Company’s payment of taxes in
any material amount except which the Company is contesting in good faith and the
Company has no knowledge of any proposed liability for any tax to be imposed
upon the properties or assets of the Company for which there is not an adequate
reserve reflected in the Company’s financial statements included or incorporated
by reference in the SEC Reports.

(q) Trading Market. Except as disclosed in the SEC Reports, the Company has not,
in the twelve (12) months preceding the date hereof, received notice from the
Nasdaq Stock Market to the effect that the Company is not in compliance with the
listing or maintenance requirements of the Nasdaq Stock Market. Except as
described in the SEC Reports, the Company has no reason to believe that it will
not in the foreseeable future continue to be in compliance or regain compliance
in a timely manner, as the case may be, with all such listing and maintenance
requirements. The issuance and sale of the Securities hereunder does not
contravene, in a manner which is expected to have a Material Adverse Effect, the
rules and regulations of the Nasdaq Stock Market and no stockholder approval is
required for the Company to fulfill its obligations under the Transaction
Agreements, other than as described in this Agreement. The Common Stock has been
registered pursuant to Section 12(b) of the Exchange Act and is currently listed
on the Nasdaq Stock Market.

(r) SEC Reports. The Company has filed all SEC Reports required to be filed by
it under the Exchange Act for the two years preceding the date hereof on a
timely basis or has received a valid extension of such time of filing and has
filed any such SEC Reports prior to the expiration of any such extension. As of
their respective dates, the SEC Reports filed for the two years preceding the
date hereof have complied in all material respects with the requirements of the
Exchange Act and the rules and regulations promulgated thereunder, and none of
such SEC Reports, when filed, contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or necessary
in order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.

(s) Sarbanes-Oxley Compliance. The Company is in compliance in all material
respects with all provisions of the Sarbanes-Oxley Act of 2002, as amended,
applicable to it, and the applicable rules and regulations promulgated
thereunder by all government and regulatory authorities and agencies. The
Company maintains a system of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in accordance with
management’s general or

 

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specific authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles in the United States and to maintain accountability for
assets, (iii) access to assets is permitted only in accordance with management’s
general or specific authorization and (iv) the recorded accountability for
assets is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect thereto. The Company has established
and maintains and evaluates “disclosure controls and procedures” (as such term
is defined in Rule 13a-15 and Rule 15d-15 under the Exchange Act) and “internal
control over financial reporting” (as such term is defined in Rule 13a-15 and
Rule 15d-15 under the Exchange Act). The Company’s certifying officers have
evaluated the effectiveness of the Company’s disclosure controls and procedures
and the Company presented in its most recent periodic report filed for a
completed fiscal quarter in accordance with the Exchange Act, the conclusions of
the Company’s certifying officers about the effectiveness of such disclosure
controls and procedures.

The Purchaser acknowledges and agrees that the Company does not make and has not
made any representations or warranties with respect to the transactions
contemplated hereby other than those representations and warranties specifically
set forth in this Agreement.

3.2 Representations, Warranties and Acknowledgements of the Purchasers. Each
Purchaser, severally and not jointly, represents and warrants with respect to
only itself, as of the Closing Date, that:

(a) Organization; Authority. Each Purchaser certifies that it is resident in the
jurisdiction set out on the applicable signature page of this Agreement. Such
address was not created and is not used solely for the purpose of acquiring the
Securities and each Purchaser was solicited to purchase in such jurisdiction.
The Purchaser is either a natural person or an entity, and in the case of an
entity, (i) such Purchaser is an entity duly organized, validly existing and in
good standing under the laws of the jurisdiction of its organization and has the
requisite corporate, partnership or other power and authority to enter into this
Agreement, to subscribe for and purchase the Securities as contemplated herein
and to carry out its obligations hereunder, and (ii) the execution and delivery
of, and performance under, this Agreement and the other Transaction Agreements
have been duly authorized by all necessary corporate, partnership or other
action on the part of such Purchaser. The Purchaser is duly authorized to
execute, deliver and perform this Agreement, the other Transaction Agreements
and all other necessary documentation. In the case of all Purchasers, whether or
not a natural person, this Agreement has been duly authorized, executed and
delivered by such Purchaser and constitutes a legal, valid and binding
obligation of each such Purchaser, enforceable against him, her or it in
accordance with its terms, except as may be limited by (A) applicable
bankruptcy, insolvency, reorganization or other laws of general application
relating to or affecting the enforcement of creditors’ rights generally, (B) the
effect of rules of law governing the availability of specific performance and
other equitable remedies, and (C) insofar as indemnification and contribution
provisions may be limited by applicable law.

(b) No Conflicts. The execution, delivery and performance by the Purchaser of
this Agreement and each of the Transaction Agreements to which it is a party,
and the consummation by the Purchaser of the transactions contemplated by this
Agreement and each such Transaction Agreement, do not and will not (i) conflict
with or violate any provision of the Purchaser’s certificate of incorporation,
bylaws or other organizational or charter documents, or (ii) conflict with or
result in a violation of any law, rule, regulation, order, judgment, injunction,
decree or other restriction of any court or governmental authority to which the
Purchaser is subject (including federal and state securities laws and
regulations), or by which any property or asset of the Purchaser is bound or
affected.

(c) No General Solicitation. The subscription for the Securities by each
Purchaser has not been made through or as a result of, and the distribution of
the Notes is not being accompanied by any advertisement, including without
limitation in printed public media, radio, television or telecommunications,
including electronic display, or as part of a general solicitation.

 

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(d) Restricted Securities. Each Purchaser understands that the Series D
Preferred Shares, the Conversion Shares, the Warrants, and the Warrant Shares,
will be characterized as “restricted securities” under U.S. federal securities
laws inasmuch as, if issued, they will be acquired from the Company in a
transaction not involving a public offering and that, under U.S. federal
securities laws and applicable regulations, the Series D Preferred Shares, the
Conversion Shares, the Warrants, and the Warrant Shares may be resold without
registration under the Securities Act only in certain limited
circumstances. Such Purchaser acknowledges that all certificates representing
any of the Series D Preferred Shares, the Conversion Shares, the Warrants, and
the Warrant Shares will bear a restrictive legend in a form as set forth below
and hereby consents to the transfer agent for the Company’s Common Stock making
a notation on its records to implement the restrictions on transfer described
herein. Such Purchaser understands that except as provided in the Transaction
Agreements: (i) the Securities have not been and are not being registered under
the Securities Act or any state securities laws, must be held indefinitely and
may not be offered for sale, sold, assigned or transferred unless
(A) subsequently registered thereunder, (B) such Purchaser shall have delivered
to the Company an opinion of counsel, in a generally acceptable form, 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 Purchaser 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 Securities Act (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 Securities Act) may require
compliance with some other exemption under the Securities Act or the rules and
regulations of the Commission thereunder; and (iii) neither the Company nor any
other Person is under any obligation to register the Securities under the
Securities Act or any state securities laws or to comply with the terms and
conditions of any exemption thereunder.

(e) Certain Legends.

(i) Such Purchaser understands that the Securities are “restricted securities”
and that the certificates or other instruments representing the Series D
Preferred Shares, the Conversion Shares, the Warrants and the Warrant Shares
shall bear any applicable legend as required under U.S. federal securities laws
and 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 certificates):

NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE
OR EXERCISABLE HAS BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION
OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED
FOR SALE, SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT,
OR APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN AVAILABLE EXEMPTION
THEREFROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS
EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE
SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.

 

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(ii) In the event that the Series D Preferred Shares are converted into
Conversion Shares or the Warrants are exercised for shares of Common Stock, such
Conversion Shares and Warrant Shares, as the case may be, shall bear any
applicable legend as required under U.S. federal securities laws and 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):

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), 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, OR (B) AN OPINION OF
COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER
SAID ACT (II) UNLESS SOLD OR TRANSFERRED TO A “QUALIFIED INSTITUTIONAL BUYER”
WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT OR (III) UNLESS SOLD
PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.

(iii) The Company may at any time place a stop transfer order on its transfer
books against the shares of Common Stock underlying the Series D Preferred
Shares and the Warrants. Such stop order will be removed, and further transfer
of such shares of Common Stock will be permitted, upon an effective registration
of the respective shares of Common Stock, or the receipt by the Company of an
opinion of counsel satisfactory to the Company that such further transfer may be
effected pursuant to an applicable exemption from registration.

(f) Reliance on Representations. Such Purchaser 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
Purchaser’s compliance with, the representations, warranties, agreements,
acknowledgments and understandings of such Purchaser set forth herein and in the
applicable schedules and exhibits in order to determine the availability of such
exemptions and the eligibility of such Purchaser to acquire the Securities. The
Purchaser undertakes to immediately notify the Company of any change in any
statement or other information relating to the Purchaser set forth in such
applicable schedules and exhibits which takes place prior to the Closing time.
No Person has made any written or oral representations to the Purchaser that
(i) any Person will resell or repurchase the Series D Preferred Shares, the
Conversion Shares, the Warrants or the Warrant Shares, (ii) that any Person will
refund all or any part of the Purchase Price, or (iii) as to the future price or
value of the shares of Common Stock of the Company.

(g) Schedules. Each Purchaser acknowledges that this Agreement and Schedule A
attached hereto require the Purchaser to provide certain personal information to
the Company. Such information is being collected by the Company for the purposes
of completing the transactions contemplated by this Agreement, which includes,
without limitation, determining the Purchaser’s eligibility to purchase the
Securities under the securities laws applicable in the United States and other
applicable securities laws, preparing and registering certificates representing
the Securities and completing filings required by any stock exchange or
securities regulatory authority. The Purchaser’s personal information may be
disclosed by the Company to: (a) stock exchanges or securities regulatory
authorities, (b) any of the other parties involved in the Offering, including
legal counsel and may be included in record books in connection with the
Offering, and (c) pursuant to any disclosure requirements

 

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existing under the U.S. federal or state securities laws. By executing this
Agreement, the Purchaser is deemed to be consenting to the foregoing collection,
use and disclosure of the Purchaser’s personal information; provided, that in
the event of a disclosure pursuant to clause (a) of the preceding sentence, the
Company shall (to the extent it is legally permitted), use commercially
reasonable efforts to give such Purchaser advance notice of any required
disclosure. The Purchaser also consents to the filing of copies or originals of
any of the Purchaser’s documents as may be required to be filed with any stock
exchange or securities regulatory authority in connection with the transactions
contemplated hereby.

(h) No Public Sale or Distribution. Each Purchaser will be acquiring the Series
D Preferred Shares, the Conversion Shares, the Warrants and the Warrant Shares,
in the ordinary course of business for his, her or its own account and not for
the benefit of any other Person and not with a view towards, or for resale in
connection with, the public sale or distribution thereof, and the Purchaser
covenants that it will not resell the Series D Preferred Shares, the Conversion
Shares, the Warrants and the Warrant Shares except pursuant to sales registered
under the Securities Act or under an exemption from such registration and in
compliance with applicable U.S. federal and state securities laws, and such
Purchaser does not have a present arrangement to effect any distribution of the
Series D Preferred Shares, the Conversion Shares, the Warrants and the Warrant
Shares to or through any Person or entity.

(i) Investor Status. On the date such Purchaser was offered the Securities and
on the date hereof and such Purchaser is and will be either an “accredited
investor” as defined in Rule 501(a) promulgated under Regulation D of the
Securities Act or a “qualified institutional buyer” as defined in Rule 144A(a)
under the Securities Act. The Purchaser has properly completed, executed and
delivered to the Company the applicable “accredited investor” certificate set
forth in the Schedules hereto and the information contained therein is true and
correct. Such Purchaser is not required to be registered as a broker-dealer
under Section 15 of the Exchange Act.

(j) Experience of Purchaser. There are risks associated with the purchase of and
investment in the Securities, and the Purchaser, either alone or together with
his, her or its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating
the merits and risks of entering into this Agreement and making his, her or its
Purchase Price and the merits and risks of the prospective investment in the
Series D Preferred Shares, the Conversion Shares, the Warrants and the Warrant
Shares, and such Purchaser has so evaluated such merits and risks. Such
Purchaser understands that he, she or it must bear the economic risk of an
investment in the Series D Preferred Shares, the Conversion Shares, the Warrants
and the Warrant Shares, if any, indefinitely and is able to bear such risk and
to afford a complete loss of such investment.

(k) Access to Information. Such Purchaser acknowledges that he, she or it has
reviewed the SEC Reports and has been afforded (i) the opportunity to ask such
questions as he, she or it has deemed necessary of, and to receive answers from,
representatives of the Company concerning the terms and conditions of this
Agreement and the merits and risks of the prospective investment in the
Securities, (ii) access to information about the Company and its Subsidiaries
and their respective financial condition, results of operations, business,
properties, management and prospects sufficient to enable him, her or it to
evaluate the terms and conditions of this Agreement and the merits and risks of
the prospective investment in the Securities and (iii) the opportunity to obtain
such additional information that the Company possesses or can acquire without
unreasonable effort or expense that is necessary to make an informed decision.
The Purchaser is not purchasing the Series D Preferred Shares and Warrants based
on knowledge of material information concerning the Company that has not been
generally disclosed. Such Purchaser and its advisors, if any, in acquiring the
Securities, have relied solely on their independent investigation of the Company
and have been afforded the opportunity to ask questions of the Company. Neither
such inquiries nor any other due diligence investigations conducted by such
Purchaser or its advisors, if any, or its representatives shall modify, amend or
affect such Purchaser’s right to rely on the

 

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Company’s representations and warranties contained herein. Such Purchaser
understands that its investment in the Securities involves a high degree of
risk. Such Purchaser 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.

(l) No Governmental Review. Each Purchaser understands that no United States
federal or state agency, or any other government or governmental agency has
reviewed or passed on or made, or will pass on or make, any recommendation or
endorsement of the Series D Preferred Shares, the Conversion Shares, the
Warrants and the Warrant Shares or the fairness or suitability of the
prospective investment in the Series D Preferred Shares, the Conversion Shares,
the Warrants and the Warrant Shares.

(m) Aggregate Investment. Each Purchaser understands that his, her or its
subscription for the Securities forms part of a larger offering of Securities by
the Company as described herein. Each Purchaser understands that there is no
minimum aggregate subscription required to close the Offering.

(n) Securities and Other Transactions. Other than consummating the transactions
contemplated hereunder, the Purchaser has not, nor has any Person acting on
behalf of or pursuant to any understanding with the Purchaser, directly or
indirectly executed any purchases or sales, including Short Sales, of the
securities of the Company during the period commencing as of the time that the
Purchaser first became aware of the proposed transactions contemplated hereunder
and ending immediately prior to the execution hereof. Notwithstanding the
foregoing, in the case of a Purchaser that is a multi-managed investment vehicle
whereby separate portfolio managers manage separate portions of the Purchaser’s
assets and the portfolio managers have no direct knowledge of the investment
decisions made by the portfolio managers managing other portions of the
Purchaser’s assets, the representation set forth above shall only apply with
respect to the portion of assets managed by the portfolio manager that made the
investment decision to purchase the Units covered by this Agreement. Other than
to other Persons party to this Agreement and its Affiliates and their respective
investment advisors, agents, counsel and other advisors, the Purchaser has
maintained the confidentiality of all disclosures made to it in connection with
this transaction (including the existence and terms of this transaction). Such
Purchaser has no present intent to effect a “change of control” of the Company
as such term is understood under the rules promulgated pursuant to Section 13(d)
of the Exchange Act.

(o) No Legal, Tax or Investment Advice. Each Purchaser understands that nothing
in this Agreement or any other materials presented by or on behalf of the
Company to him, her or it in connection with this Agreement and the transactions
contemplated herein, including the prospective investment in the Series D
Preferred Shares, the Conversion Shares, the Warrants and the Warrant Shares,
constitutes legal, tax or investment advice. Each Purchaser has consulted such
legal, tax and investment advisors as he, she or it, in his, her or its sole
discretion, has deemed necessary or appropriate in the circumstances. The
Purchaser is not relying on the Company or its counsel in this regard.

(p) Representations Regarding Senior Notes. Each Purchaser that is paying some
or all of its Subscription Amount by surrendering and cancelling Senior Notes
hereby further represents and warrants to the Company as follows: (i) such
Purchaser is the beneficial and record owner of, with good and valid title to,
the Senior Notes originally issued to it, free and clear of any and all pledges,
liens, security interests, mortgage, claims, charges, restrictions, options,
title defects or encumbrances; (ii) such Purchaser has not, in whole or in part,
(x) assigned, transferred, hypothecated, pledged or otherwise disposed of the
Senior Notes or its rights in such Senior Notes or under the Security
Agreements, or (y) given any person or entity any transfer order, power of
attorney or other authority of any nature whatsoever with respect to such Senior
Notes which would limit the Holder’s power to transfer the Senior Notes
hereunder; (iii) such Purchaser has the sole right and power to vote and dispose
of the Senior

 

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Notes, and none of such Senior Notes is subject to any voting trust or other
agreement, arrangement or restriction with respect to the voting or transfer of
any of the Senior Notes, except for this Agreement; (iv) no additional
consideration for any purpose shall be due to such Purchaser at Closing, with
respect to the Senior Notes, other than the Securities; (vi) upon delivery of
the Senior Notes to the Company for cancellation (as contemplated by this
Agreement), the Company will receive good and marketable title to the Senior
Notes, free and clear of all pledges, liens, security interests, mortgage,
claims, charges, restrictions, options, title defects or encumbrances; (vi) the
Senior Notes being surrendered for cancellation represent all of the Senior
Notes of the Company in which such Purchaser owns any legal or beneficial
interest; and (vii) no such Purchaser has employed any broker or finder or
incurred any liability for any brokerage or investment banking fees,
commissions, finders’ structuring fees, financial advisory fees or other similar
fees in connection with any of the transactions contemplated by this Agreement.

The Company acknowledges and agrees that the Purchaser does not make or has not
made any representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in this Section 3.2.

ARTICLE IV

REGISTRATION RIGHTS

4.1 Registration Rights. Each Purchaser and the Company agree that the
Purchasers shall be entitled to the registration rights with respect to the
Securities as set forth in the Registration Rights Agreement entered into in
accordance with this Agreement.

ARTICLE V

CONDITIONS OF CLOSING

5.1 Closing Conditions in Favor of the Purchasers. The obligation of each of the
Purchasers to deliver the Purchase Price to the Company in connection with the
Closing is subject to the satisfaction, or the waiver by such Purchaser, on or
prior to such payment, of each of the following conditions:

(a) Representations and Warranties. The representations and warranties of the
Company contained herein shall be true and correct in all material respects as
of the date hereof and as of the applicable Closing as though made on and as of
such date (provided that representations and warranties which are confined to a
specified date shall speak only as of such date).

(b) Performance. The Company shall have performed, satisfied and complied with,
in all material respects, all covenants, agreements and conditions required by
this Agreement to be performed, satisfied or complied with by it at or prior to
the Closing, including the delivery of the items set forth in Section 2.2(a) of
this Agreement.

(c) Required Approval. The Company shall have received all Required Approvals
for the applicable Closing.

(d) Series D Certificate of Designation. The Company shall have duly adopted,
executed and filed with the Secretary of State of the State of Delaware (i) the
Series D Certificate of Designation in the form attached hereto as Exhibit A and
the Series D Certificate of Designation shall be in full force and effect under
the laws of the State of Delaware as of the Closing Date and shall not have been
amended or modified.

 

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(e) Surrender of Minimum Amount. The Company shall have received subscriptions
from Purchasers who are Note Holders that have agreed to surrender an aggregate
principal amount of Senior Notes of not less than the Minimum Amount in
consideration of the purchase of Units hereunder.

5.2 Closing Conditions in Favor of the Company. The entering into of this
Agreement by the Company with each of the Purchasers, and the acceptance by the
Company of such Purchaser’s Purchase Price, is subject to the satisfaction, or
the waiver by the Company, at or prior to the applicable Closing, of each of the
following conditions:

(a) Representations and Warranties. The representations and warranties of such
Purchaser contained herein shall be true and correct in all material respects as
of the date hereof and as of the applicable Closing as though made on and as of
such date.

(b) Accredited Investor Certificate. Such Purchaser shall have completed and
executed and delivered the applicable Accredited Investor Certificate.

(c) Performance. Such Purchaser shall have performed, satisfied and complied
with, in all material respects, all other covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by him,
her or it at or prior to the applicable Closing, including the delivery of the
items set forth in Section 2.2(b) of this Agreement..

(d) Required Approval. The Company shall have received all Required Approvals
for the applicable Closing.

ARTICLE VI

COVENANTS

6.1 Reservation of Common Stock. So long as any Purchaser owns any Series D
Preferred Shares or Warrants, the Company shall at all times reserve and keep
available out of its authorized but unissued shares of Common Stock, a
sufficient number of shares of Common Stock for the purpose of enabling the
Company to issue shares of Common Stock issued (i) upon conversion of the Series
D Preferred Shares and (ii) upon the exercise of the Warrants issued as part of
the Units purchased pursuant to this Agreement.

6.2 Securities Laws Disclosure; Publicity. The Company shall, by 5:30 p.m. (New
York City time) on the fourth Trading Day immediately following the date hereof,
file a Current Report on Form 8-K disclosing the material terms of the
transactions contemplated hereby and including the form of this Agreement as an
exhibit thereto. From and after the issuance of such Form 8-K, the Company shall
have publicly disclosed all material, non-public information delivered to any
Purchaser by the Company or any of its subsidiaries, or any of their respective
officers, directors, employees or agents in connection with the transactions
contemplated by this Agreement. The Company and the Purchasers shall consult
with each other in issuing any press releases with respect to the transactions
contemplated hereby, and neither the Company nor the Purchasers shall issue any
such press release without the prior consent of the Company, with respect to any
press release of any of the Purchasers, or without the prior consent of the
Purchasers holding a majority of the Notes, with respect to any press release of
the Company, which consent shall not unreasonably be withheld or delayed, except
if such disclosure is required by law, in which case the disclosing party shall
promptly provide the other party with prior notice of such public statement or
communication.

6.3 Use of Proceeds. The Company shall use the additional net proceeds from the
sale of the Securities hereunder for general business and working capital
purposes.

 

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6.4 Listing of Common Stock; Reporting Status. The Company hereby agrees to use
commercially reasonable efforts to maintain the listing of the Common Stock on
the Nasdaq Stock Market, and as soon as reasonably practicable, to list all of
the shares of Common Stock issuable upon conversion of the Series D Preferred
Stock or upon the exercise of the Warrants thereon. Until the earlier of (i) the
date on which the Purchaser shall have sold all of the Conversion Shares and
Warrant Shares and (ii) the date on which the Purchaser may sell all of the
Securities without restriction pursuant to Rule 144 and without the requirement
to be in compliance with Rule 144(c)(1) (or any successor thereto) promulgated
under the Securities Act (the “Reporting Period”), the Company shall timely file
all reports required to be filed with the Commission pursuant to the Exchange
Act, and the Company shall not terminate its status as an issuer required to
file reports under the Exchange Act even if the Exchange Act or the rules and
regulations thereunder would no longer require or otherwise permit such
termination.

6.5 Certain Transactions and Confidentiality. Each Purchaser covenants that
neither it nor any Affiliate acting on its behalf or pursuant to any
understanding with it will execute any purchases or sales, including Short
Sales, of any of the Company’s securities during the period commencing with the
execution of this Agreement and ending at such time that the transactions
contemplated by this Agreement are first publicly announced pursuant to
Section 6.2. Each Purchaser covenants that until such time as the transactions
contemplated by this Agreement are publicly disclosed by the Company pursuant to
Section 6.2, such Purchaser will maintain the confidentiality of the existence
and terms of this transaction. Notwithstanding the foregoing and notwithstanding
anything contained in this Agreement to the contrary, the Company expressly
acknowledges and agrees that unless a Purchaser possesses material, non-public
information with respect to the Company, has entered into a confidentiality
agreement with the Company, or otherwise is restricted in its trading activities
with respect to the Company’s Common Stock, (i) no Purchaser makes any
representation, warranty or covenant hereby that it will not engage in effecting
transactions in any securities of the Company after the time that the
transactions contemplated by this Agreement are first publicly announced;
(ii) no Purchaser shall be restricted or prohibited from effecting any
transactions in any securities of the Company in accordance with applicable
securities laws from and after the time that the transactions contemplated by
this Agreement are first publicly announced; and (iii) no Purchaser shall have
any duty of confidentiality to the Company or its Subsidiaries relating to this
Agreement after the initial disclosure of the transactions contemplated by this
Agreement.

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

6.7 Transfer Restrictions. The Securities may only be disposed of in compliance
with state and federal securities laws. In connection with any transfer of
Securities other than pursuant to an effective registration statement, to the
Company or to an affiliate of a Purchaser or to an entity managed by a Purchaser
(provided, in such case the prospective transferee agrees in all such instances
in writing to be subject to the terms hereof to the same extent as if he or she
were an original Purchaser hereunder), the Company may require the transferor
thereof to provide to the Company an opinion of counsel, the form and substance
of which opinion shall be reasonably satisfactory to the Company, to the effect
that such transfer does not require registration of such transferred Securities
under the Securities Act. As a condition of transfer, any such transferee shall
agree in writing to be bound by the terms of this Agreement.

6.8 Limitations on Conversion and Exercise. Notwithstanding anything in this
Purchase Agreement or any of the other agreements and instruments executed in
accordance with this Purchase Agreement to the contrary, subject to receipt of
the approval of the Company’s stockholders, the Company shall not issue, and no
Purchaser shall be permitted to acquire or purchase (whether upon

 

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conversion of the Series D Preferred Shares, payment of dividends on the Series
D Preferred Shares, or exercise of the Warrants) any shares of Common Stock if
and to the extent that the purchase and issuance of such shares of Common Stock
would cause the Company to exceed the aggregate number of shares of Common Stock
which the Company may issue or be deemed to have issued without breaching the
Company’s obligations under the applicable rules and regulations of the Nasdaq
Stock Market (including, without limitation, Nasdaq Listing Rule 5635) and such
other Trading Market on which the Company’s shares of Common Stock are then
listed or quoted for trading (the “Exchange Cap”). Accordingly, if stockholder
approval would be required under the applicable listing rules of the Nasdaq
Stock Market or such other Trading Market on which the Company’s shares of
Common Stock are then listed or quoted for trading (the “Principal Market”),
then in the absence of such stockholder approval, in no event shall a Purchaser
be permitted to acquire shares of Common Stock in an amount greater than the
product of the Exchange Cap multiplied by a fraction, the numerator of which is
the Units issued to the Purchaser hereunder on the Closing Date and the
denominator of which is the total number of Units issued to all purchasers in
the Offering on the Closing Date (with respect to each purchaser, the “Exchange
Cap Allocation”). In the event that Purchaser shall sell or otherwise transfer
any of the securities comprising the Units, the transferee thereof shall be
allocated a pro rata portion of Purchaser’s Exchange Cap Allocation, and the
restrictions of the prior sentence shall apply to such transferee with respect
to the portion of the Exchange Cap Allocation allocated to such transferee.

6.9 Stockholder Approval. Solely in the event that the Company determines that
it is required in order to permit the full conversion of the Series D Preferred
Shares (including in connection with the payment of dividends on the Series D
Preferred Shares) or the full exercise of the Warrants issued pursuant to this
Agreement into shares of Common Stock in accordance with applicable listing
rules of the Principal Market (the “Stockholder Approval”), the Company shall,
following its determination that such Stockholder Approval is required, at its
next annual meeting of stockholders scheduled subsequent to such determination,
and any subsequent special or annual meeting to the extent required, call a
meeting of its stockholders for the purpose of obtaining the Stockholder
Approval, with the recommendation of the Board of Directors that such proposal
be approved, and the Company shall solicit proxies from its stockholders in
connection therewith in the same manner as all other management proposals in
such proxy statement and all management-appointed proxyholders shall vote their
proxies in favor of such proposal. If the Company does not obtain Stockholder
Approval at the first meeting, the Company shall call a meeting no less
frequently than every 180 days thereafter to seek Stockholder Approval until the
earlier of the date that Stockholder Approval is obtained or the Series D
Preferred Shares and Warrants are no longer outstanding. Each Purchaser further
agrees that it shall not be entitled to vote the shares of Common Stock of the
Company issuable to it pursuant to the terms of this Agreement, including
pursuant to the conversion of the Series D Preferred Shares or exercise of any
Warrants, at any meeting of the Company’s stockholders convened to vote on a
proposal to enable the Company to issue the shares of Common Stock underlying
the Series D Preferred Shares and Warrants in excess of 19.99% of the issued and
outstanding Common Stock of the Company.

ARTICLE VII

INDEMNIFICATION

7.1 Indemnification.

(a) The Company agrees to indemnify and hold harmless each Purchaser, its
Affiliates, each of their officers, directors, employees and agents and their
respective successors and assigns, from and against any losses, damages, or
expenses which are caused by or arise out of (A) any breach or default in the
performance by the Company of any covenant or agreement made by the Company in
the this Agreement or in the other Transaction Agreements; (B) any breach of
warranty or representation made by the Company in this Agreement or in the other
Transaction Agreements; and (C) any and all actions, suits, proceedings, claims,
demands, judgments, costs and expenses (including reasonable legal fees and
expenses) incident to any of the foregoing.

 

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(b) Each Purchaser agrees to indemnify and hold harmless the Company, its
Affiliates, each of their officers, directors, employees and agents and their
respective successors and assigns, from and against any losses, damages, or
expenses which are caused by or arise out of: (A) any breach or default in the
performance by such Purchaser of any covenant or agreement made by such
Purchaser in this Agreement or in the other Transaction Agreements; (B) any
breach of warranty or representation made by such Purchaser in this Agreement or
in the other Transaction Agreements; and (C) any and all actions, suits,
proceedings, claims, demands, judgments, costs and expenses (including
reasonable legal fees and expenses) incident to any of the foregoing.

ARTICLE VIII

GENERAL

8.1 Termination. Solely in the event that the Closing has not been consummated
on or before June 30, 2013, this Agreement may be terminated by any Purchaser,
as to such Purchaser’s obligations hereunder only and without any effect
whatsoever on the obligations between the Company and the other Purchasers, by
written notice to the other parties; provided, however, that (a) any Purchaser
may elect to extend the foregoing date solely with respect to its purchase of
the Securities hereunder and (b) any such termination will not affect the right
of any party to sue for any breach by the other party (or parties).

8.2 Confidentiality. The Purchasers acknowledge that due to certain of the
covenants contained herein or in the other Transaction Agreements, from time to
time the Purchasers may come into possession of confidential information of the
Company, including material, non-public information relating to the Company. The
Purchasers hereby agree that (i) they shall keep all such information strictly
confidential, applying, at a minimum, the same degree of care as it does to
protect its own confidential information of a similar nature; (ii) shall only
use such information in connection with the transactions contemplated by this
Agreement; and (iii) shall not disclose any of such information other than:
(a) to the Purchaser’s employees, representatives, directors, attorneys,
auditors, or Affiliates who are advised of the confidential nature of such
information (so long as any of the foregoing persons agree to be bound by the
provisions of this Section), (b) to the extent such information presently is or
hereafter becomes available on a non-confidential basis from any source of such
information that is in the public domain at the time of disclosure, (c) to the
extent disclosure is required by law (including applicable securities law),
regulation, subpoena or judicial order or any administrative body or commission
to whose jurisdiction the Purchasers are subject (provided that notice of such
requirement or order shall be promptly furnished to the Company in advance of
such disclosure), (d) to assignees or participants or prospective assignees or
participants who agree to be bound by the provisions of this Section, or
(e) with the Company’s prior written consent. The Purchasers agree to be
responsible for any breach of this agreement by any of the persons identified in
Section 8.2(iii). The Purchasers are aware that, under certain circumstances,
the United States securities laws may prohibit a Person who has received
material, non-public information from an issuer from purchasing or selling
securities of such issuer or from communicating such information to any other
Person under circumstances in which it is reasonably foreseeable that such other
Person is likely to purchase or sell such securities.

8.3 Fees and Expenses. Except as expressly set forth in this Agreement to the
contrary, each party shall pay the fees and expenses of its advisers, counsel,
accountants and other experts, if any, and all other expenses incurred by such
party incident to the negotiation, preparation, execution, delivery and
performance of this Agreement.

 

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8.4 Amendments; Waivers. No provision of this Agreement may be amended or waived
except in a written instrument signed, (i) in the case of an amendment, by the
Company and Purchasers representing a Majority in Interest, or (ii) in the case
of a waiver, by the party against whom enforcement of any such waiver is sought;
provided that, in the case of waiver by or on behalf of all of the Purchasers,
such written instrument shall be signed by Purchasers representing a Majority in
Interest; and provided, further that that any amendment that would modify this
Section 8.4 shall, in each case, require the approval of each Purchaser to which
such amendment shall apply. No waiver of any default with respect to any
provision, condition or requirement of this Agreement shall be deemed to be a
continuing waiver in the future or a waiver of any subsequent default or a
waiver of any other provision, condition or requirement hereof, nor shall any
delay or omission of any party to exercise any right hereunder in any manner
impair the exercise of any such right.

8.5 Notices. Any and all notices or other communications or deliveries required
or permitted to be provided hereunder shall be in writing and shall be deemed
given and effective on the earliest of (a) the date of transmission, if such
notice or communication is delivered via facsimile or e-mail at the facsimile
number or e-mail address referred to in this Section 8.5 prior to 5:00 p.m.
(Eastern time) on a Business Day, (b) the next Business Day after the date of
transmission, if such notice or communication is delivered via facsimile or
e-mail at the facsimile number or e-mail address referred to in this Section 8.5
on a day that is not a Business Day or later than 5:00 p.m. (Eastern time) on
any Business Day, (c) the Business Day following the date of deposit with a
nationally recognized overnight courier service or (d) upon actual receipt by
the party to whom such notice is required to be given. The addresses, facsimile
numbers and e-mail addresses for such notices and communications are those set
forth on the signature pages hereof, or such other address, facsimile number or
e-mail address as may be designated in writing hereafter, in the same manner, by
the relevant party hereto.

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

8.7 Entire Agreement. This Agreement, together with the other Transaction
Agreements contain the entire understanding of the parties with respect to the
subject matter hereof and supersede all prior agreements and understandings,
oral or written, with respect to such matters, which the parties acknowledge
have been merged into such agreements and exhibits. At or after the Closing, and
without further consideration, the parties hereto will make, do and execute and
deliver, or cause to be made, done and executed and delivered, such further
acts, deeds, assurances, documents and things as may be reasonably requested by
any of the other parties hereto in order to give practical effect to the
intention of the parties hereunder.

8.8 Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of the parties and their respective successors and permitted
assigns. The Company may not assign this Agreement or any rights or obligations
hereunder without the prior written consent of Purchasers representing a
Majority in Interest (other than by merger, consolidation or sale of all or
substantially all of the Company’s assets). A Purchaser may assign any or all of
its rights under this Agreement to any Person to whom the Purchaser assigns or
transfers any Securities, provided that such transferee agrees in writing to be
bound, with respect to the transferred Securities, by the provisions of this
Agreement that apply to the “Purchasers.”

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

 

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8.10 Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York, without regard to the principles of conflicts of law thereof. Each party
agrees that all legal proceedings concerning the interpretations, enforcement
and defense of the transactions contemplated by this Agreement (whether brought
against a party hereto or its respective Affiliates, directors, officers,
shareholders, employees or agents) shall be commenced exclusively in the state
and federal courts sitting in the City of New York, Borough of Manhattan. 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 improper or is an inconvenient venue for such
proceeding. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof via registered or certified mail or overnight delivery
(with evidence of delivery) to such party at the address in effect for notices
to it under this Agreement and agrees that such service shall constitute good
and sufficient service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any other
manner permitted by law. If either party shall commence an action or proceeding
to enforce any provisions of this Agreement, then the prevailing party in such
action or proceeding shall be reimbursed by the other party for its reasonable
attorneys’ fees and other costs and expenses incurred with the investigation,
preparation and prosecution of such action or proceeding.

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

8.12 Execution. This Agreement may be executed by one or more of the parties
hereto on any number of separate counterparts (including by facsimile or e-mail
transmission), all of which when taken together shall be considered one and the
same agreement. In the event that any signature is delivered by facsimile
transmission or e-mail attachment, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile or e-mail-attached
signature page were an original thereof.

8.13 Survival; Severability. All representations and warranties made by the
Company and each of the Purchasers herein will survive the execution of this
Agreement, the Closing and the delivery to the Purchasers of the Securities
being purchased and the payment therefor until the first anniversary of the
Closing Date, except for those representations and warranties which speak as of
a specific date. All covenants and other agreements set forth in this Agreement
shall survive the Closing for the respective periods set forth therein and if no
such period is specified until the first anniversary of the Closing Date.
Notwithstanding anything to the contrary contained herein, Sections 7.1 and 8.4
shall survive for the applicable statute of limitations. If any provision of
this Agreement is held to be invalid or unenforceable in any respect, the
validity and enforceability of the remaining terms and provisions of this
Agreement shall not in any way be affected or impaired thereby and the parties
will attempt to agree upon a valid and enforceable provision that is a
reasonable substitute therefor, and upon so agreeing, shall incorporate such
substitute provision in this Agreement.

8.14 Replacement of Certificates. If any certificate evidencing the securities
issued or issuable hereunder is mutilated, lost, stolen or destroyed, the
Company shall issue or cause to be issued in

 

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exchange and substitution for and upon cancellation thereof (in the case of
mutilation), or in lieu of and substitution therefor, a new certificate, but
only upon receipt of evidence reasonably satisfactory to the Company of such
loss, theft or destruction and customary and reasonable indemnity or security,
if requested. The applicant for a new certificate under such circumstances shall
also pay any reasonable third-party costs (including customary indemnity)
associated with the issuance of such replacement certificates.

8.15 Interpretation. The parties agree that each of them and/or their respective
counsel has reviewed and had an opportunity to revise this Agreement and,
therefore, the normal rule of construction to the effect that any ambiguities
are to be resolved against the drafting party shall not be employed in the
interpretation of this Agreement or any amendments hereto. In addition, each and
every reference to share prices and shares of capital stock in this Agreement
shall be subject to adjustment for reverse and forward stock splits, stock
dividends, stock combinations and other similar transactions of the Common Stock
that occur after the date of this Agreement. The word “including”, whenever used
in this Agreement, shall be deemed to be followed by the phrase “without
limitation”.

8.16 Independent Nature of Purchasers’ Obligations and Rights. The obligations
of each Purchaser under any Transaction Agreement are several and not joint with
the obligations of any other Purchaser, and no Purchaser shall be responsible in
any way for the performance or non-performance of the obligations of any other
Purchaser under any Transaction Agreement. Nothing contained herein or in any
other Transaction Agreement, and no action taken by any Purchaser pursuant
thereto, shall be deemed to constitute the Purchasers as a partnership, an
association, a joint venture or any other kind of entity, or create a
presumption that the Purchasers are in any way acting in concert or as a group
with respect to such obligations or the transactions contemplated by the
Transaction Agreements. Each Purchaser shall be entitled to independently
protect and enforce its rights, including, without limitation, the rights
arising out of this Agreement or out of the other Transaction Agreements, and it
shall not be necessary for any other Purchaser to be joined as an additional
party in any proceeding for such purpose. Each Purchaser has been advised to
retain its own representation, including its own separate legal counsel, in
their review and negotiation of the Transaction Agreements.

[SIGNATURE PAGES TO FOLLOW]

 

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

 

AUTHENTIDATE HOLDING CORP.    

Address for Notice:

Connell Corporate Center

300 Connell Drive, 5th Floor

Berkeley Heights, NJ 07922

        Attn:   President By:  

 

    Fax:     Name:   O’Connell Benjamin         Title:   Chief Executive Officer
and President       With a copy to (which shall not constitute notice):      

Becker & Poliakoff, LLP

45 Broadway, 8th Floor

New York, NY 10006

Attn: Michael Goldstein

Fax: 212-557-0295

     

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGE FOR PURCHASER FOLLOWS]

 

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[PURCHASER SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT]

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

 

Name of Purchaser:  

 

 

Signature of Authorized Signatory of Purchaser:  

 

 

Name of Authorized Signatory:  

 

 

Title of Authorized Signatory:  

 

 

Email Address of Authorized Signatory:  

 

 

Facsimile Number of Authorized Signatory:  

 

 

EIN Number:  

 

  

 

Address for Notices to Purchaser:  

 

 

 

 

 

 

 

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

 

 

 

 

Total Subscription Amount: $        

Securities Purchased, comprised of:

 

No. of Series D Preferred Shares:  

 

   No. of Common Stock Warrants:  

 

  

¨ By checking this box, the Purchaser agrees that it will pay the some or all of
the Total Subscription Amount indicated above by surrendering to the Company for
cancellation one or more of Senior Notes held by such Purchaser, as indicated
below. If the Purchaser’s Total Subscription Amount will be paid solely by the
wire transfer of U.S. funds, leave this section blank.

Amount of Total Subscription Amount to be paid by surrender of Senior Notes
$        

Principal Amount of Senior Notes Owned by Purchaser and Issue Date:

1. Senior Note issued                     , 20     in the Principal Amount of
$        

2. Senior Note issued                     , 20     in the Principal Amount of
$        

 

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SCHEDULE A

ACCREDITED INVESTOR CERTIFICATE

This Accredited Investor Certificate is being delivered to the Company pursuant
to the Purchase Agreement. Capitalized terms used in this Accredited Investor
Certificate, but not defined herein, have the respective meanings attributed to
such terms in the Purchase Agreement. Investor agrees to furnish any additional
information the Company deems necessary in order to verify the information
provided below.

The Purchaser hereby acknowledges that the Company is relying on this Accredited
Investor Certificate to determine the Purchaser’s suitability for investment in
the Securities pursuant to the Securities Purchase Agreement (collectively, the
“Investment”) and hereby represents and warrants and certifies that, as of the
Closing, the Purchaser:

 

Category

I

       ¨   The Purchaser is an individual (not a partnership, corporation, etc.)
whose individual net worth, or joint net worth with his or her spouse, presently
exceeds $1,000,000 (excluding the value of such Purchaser’s principal
residence). Category
II        ¨   The Purchaser is a corporation, partnership, business trust or a
non profit organization within the meaning of Section 501(c)(3) of the Internal
Revenue Code of 1986, as amended, that was not formed for the specific purpose
of acquiring the securities offered and that has total assets in excess of
$5,000,000. Category
III        ¨   The Purchaser is an individual (not a partnership, corporation,
etc.) who reasonably expects an individual income in excess of $200,000 in the
current year and had an individual income in excess of $200,000 in each of the
last two years (including foreign income, tax exempt income and the full amount
of capital gains and losses but excluding any income of the Purchaser’s spouse
or other family members and any unrealized capital appreciation);        Or     
  ¨   The Purchaser is an individual (not a partnership, corporation, etc.) who,
together with his or her spouse, reasonably expects joint income in excess of
$300,000 for the current year and had joint income in excess of $300,000 in each
of the last two years (including foreign income, tax exempt income and the full
amount of realized capital gains and losses). Category IV        ¨   The
Purchaser is a director or executive officer of the Company. Category V        ¨
  The Purchaser is a bank, savings and loan association or credit union,
insurance company, registered investment company, registered business
development company, licensed small business investment company, or employee
benefit plan within the meaning of Title 1 of ERISA whose plan fiduciary is
either a bank, insurance company or registered investment advisor or whose total
assets exceed $5,000,000.        Describe entity:   

 

      

 

 

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Category VI        ¨   The Purchaser is a private business development company
as defined in Section 202(a)(22) of the Investment Advisors Act of 1940.
Category VII        ¨   The Purchaser is a trust with total assets in excess of
$5,000,000, not formed for the specific purpose of acquiring the securities
offered, whose purchase is directed by a sophisticated person (a person who
either alone or with his or her purchaser representative(s) has such knowledge
and experience in financial and business matters that he or she is capable of
evaluating the merits and risks of the prospective investment). A copy of the
declaration of trust or trust agreement and a representation as to the
sophistication of the person directing purchases for the trust is enclosed.
Category VIII        ¨   The Purchaser is a self directed employee benefit plan
for which all persons making investment decisions are “accredited investors”
within one or more of the categories described above. Category IX        ¨   The
Purchaser is an entity in which all of the equity owners are “accredited
investors” within one or more of the categories described above. If relying upon
this category alone, each equity owner must complete a separate copy of this
agreement.        ¨   Describe entity:  

 

      

 

Category X        ¨   The Purchaser does not come within any of the Categories I
– IX set forth above.

 

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IN WITNESS WHEREOF, the Purchaser has duly executed this Accredited Investor
Certificate as of the Closing.

 

IF THE PURCHASER IS AN ENTITY:

 

(Name of Entity – Please Print) By:  

 

Name:  

 

Title:  

 

IF THE PURCHASER IS AN INDIVIDUAL:

 

(Name – Please Print)

 

(Signature)

 

 

(Address)

 

(Telephone)

 

(Facsimile)

 

(E-Mail)

 

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EXHIBIT A

CERTIFICATE OF DESIGNATION OF

SERIES D PREFERRED STOCK

 

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EXHIBIT B

FORM OF COMMON STOCK PURCHASE WARRANT

 

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EXHIBIT C

FORM OF REGISTRATION RIGHTS AGREEMENT

 

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