Exhibit 10.1

SERIES A PREFERRED STOCK PURCHASE AGREEMENT

This Series A Preferred Stock Purchase Agreement (this “Agreement”) is dated as
of October 20, 2014, between Dataram Corporation, a New Jersey corporation (the
“Company”), and the investors that are set forth on Exhibit A attached to this
agreement (each, including its successors and assigns, the “Purchaser”, and
together the “Purchasers”).

WHEREAS, subject to the terms and conditions set forth in this Agreement and
pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended (the
“Securities Act”), and Rule 506 promulgated thereunder, the Company desires to
issue and sell to Purchasers, and Purchasers, desire to purchase from the
Company, securities of the Company as more fully described in this Agreement.

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

ARTICLE I.

DEFINITIONS

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

“2014 Annual Meeting” shall have the meaning ascribed to such term in Section
5.4(a).

“Acquiring Person” shall have the meaning ascribed to such term in Section 5.12.

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

“Affiliate” means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with a
Person, as such terms are used in and construed under Rule 405 under the
Securities Act.

“Alpha Capital” means Alpha Capital Anstalt, a Purchaser with an office at 150
Central Park South, New York, NY 10019.

“Alpha Nominee” shall have the meaning ascribed to such term in Section 5.4(b).

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

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

 

 

“Call Option” shall have the meaning ascribed to such term in Section 2.2.1.

“Call Option Notice” shall have the meaning ascribed to such term in Section
2.2.3.

“Certificate of Designation” means the Certificate of Designation to be filed
prior to the Closing by the Company with the Secretary of State of New Jersey,
in the form of Exhibit B attached hereto.

“Closing” shall have the meaning ascribed to such term in Section 4.1

“Closing Fee” shall have the meaning ascribed to such term in Section 5.5.

“Commission” means the United States Securities and Exchange Commission.

“Common Stock” means the common stock of the Company, par value $1.00 per share,
and any other class of securities into which such securities may hereafter be
reclassified or changed.

“Common Stock Equivalents” means any securities of the Company or the
Subsidiaries which would entitle the holder thereof to acquire at any time
Common Stock, including, without limitation, any debt, preferred stock, right,
option, warrant or other instrument that is at any time convertible into or
exercisable or exchangeable for, or otherwise entitles the holder thereof to
receive, Common Stock.

“Company Counsel” means Schnader Harrison Segal & Lewis LLP, with offices
located at 140 Broadway, Suite 3100, New York, NY 10005.

“Conversion Price” shall have the meaning ascribed to such term in the
Certificate of Designation.

“Evaluation Date” shall have the meaning ascribed to such term in Section
3.1(r).

 

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

 

“FCPA” means the Foreign Corrupt Practices Act of 1977, as amended.

 

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

 

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

 

“Intellectual Property Rights” shall have the meaning ascribed to such term in
Section 3.1(o).

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“Institutional Investors” shall mean Alpha Capital, Brio Capital Master Fund
Ltd., Momona Capital and Osher Capital Partners LLC, each having an office at
the address set forth on Exhibit A.

 

“Isaac” means Isaac Capital Group LLC, a Purchaser with an office at 3525 Del
Mar Heights Road, Suite 765, San Diego, CA 92130.

 

“Isaac Nominees” shall have the meaning ascribed to such term in Section 5.4(a).

 

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

 

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

 

“Material Permits” shall have the meaning ascribed to such term in Section
3.1(m).

 

“Maximum Rate” shall have the meaning ascribed to such term in Section 6.15.

 

“Nasdaq” means the Nasdaq Capital Market.

 

“Nasdaq Notice” shall mean the notice provided by Nasdaq in a letter to the
Company, dated March 28, 2014 (and any subsequent, related correspondence)
informing the Company that the Company was non-compliant with certain
requirements for continued listing on the Nasdaq Stock Market, and informing the
Company that the Company’s common stock would be suspended from listing on the
Nasdaq Stock Market as of September 11, 2014.

 

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

 

“Preferred Stock” means the Company’s Series A Preferred Stock issued hereunder
having the rights, preferences and privileges set forth in the Certificate of
Designation, in the form of Exhibit B hereto.

 

“Proceeding” means an action, claim, suit, investigation or proceeding
(including, without limitation, an informal investigation or partial proceeding,
such as a deposition), whether commenced or threatened.

 

“Public Information Failure” shall have the meaning ascribed to such term in
Section 5.9.

“Public Information Failure Payments” shall have the meaning ascribed to such
term in Section 5.9.

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“Purchase Price” shall have the meaning ascribed to such term in Section 2.1.2.

“Put/Call Exercise Period” shall have the meaning ascribed to such term in
Section 2.2.1.

 

“Put Option” shall have the meaning ascribed to such term in Section 2.2.1.

 

“Put Option Notice” shall have the meaning ascribed to such term in Section
2.2.2.

 

“Required Minimum” means, as of any date, the maximum aggregate number of shares
of Common Stock then issued or potentially issuable in the future pursuant to
the Transaction Documents, including any Underlying Shares issuable upon
exercise in full of all Warrants or conversion in full of all shares of
Preferred Stock, ignoring any conversion or exercise limits set forth therein,
and assuming that any previously unconverted shares of Preferred Stock are held
until the fifth anniversary of the date of the applicable Closing and all
dividends are paid in shares of Common Stock until such fifth anniversary.

“Restated Certificate” shall have the meaning ascribed to such term in Section
2.1.1.

 

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

 

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

 

“Securities” means the Preferred Stock, the Warrants, the Warrant Shares and the
Underlying Shares.

 

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

 

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

 

“Signing Date” means the date hereof, or at such other time and place as the
Company and Purchaser conduct an electronic exchange of documents and signatures
of the Transaction Documents.

 

“Subsequent Tranche” shall have the meaning ascribed to such term in Section
2.1.2.2.

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“Subsequent Tranche Share Total” shall have the meaning ascribed to such term in
Section 2.1.2.2.

 

“Subsidiary” means any subsidiary of the Company, all of which are as set forth
on Schedule 3.1(a) and shall, where applicable, also include any direct or
indirect subsidiary of the Company formed or acquired after the date hereof.
Subsidiary means with respect to any entity at any date, any direct or indirect
corporation, limited or general partnership, limited liability company, trust,
estate, association, joint venture or other business entity of which (A) more
than 30% of (i) the outstanding capital stock having (in the absence of
contingencies) ordinary voting power to elect a majority of the board of
directors or other managing body of such entity, (ii) in the case of a
partnership or limited liability company, the interest in the capital or profits
of such partnership or limited liability company or (iii) in the case of a
trust, estate, association, joint venture or other entity, the beneficial
interest in such trust, estate, association or other entity business is, at the
time of determination, owned or controlled directly or indirectly through one or
more intermediaries, by such entity, or (B) is under the actual control of the
Company.

 

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

 

“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
MKT, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global
Select Market, the New York Stock Exchange or the OTC Bulletin Board (or any
successors to any of the foregoing).

 

“Tranche A” shall have the meaning ascribed to such term in Section 2.1.2.1.

 

“Tranche A Closing” shall have the meaning ascribed to such term in Section
2.3.2.

 

“Tranche A Original Share Total” shall have the meaning ascribed to such term in
Section 2.1.2.1.

 

“Tranche A Purchase Price” shall have the meaning ascribed to such term in
Section 2.1.2.1

 

“Tranche A Warrants” shall have the meaning ascribed to such term in Section
2.3.5.3.

 

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

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“Transfer Agent” means American Stock Transfer & Trust Company, LLC, the current
transfer agent of the Company, with a mailing address of 10150 Mallard Creek
Road, Suite 307, Charlotte, NC 28262 and a facsimile number of 718-765-8742, and
any successor transfer agent of the Company.

 

“Underlying Shares” means the shares of Common Stock issued and issuable upon
conversion of the Preferred Stock and upon exercise of the Warrants, including
but not limited to shares issuable as dividends on the Preferred Stock and after
the application of reset and anti-dilution rights of the Purchasers.

 

“Variable Rate Transaction” means a transaction in which the Company or any
Subsidiary (i) issues or sells any convertible securities either (A) at a
conversion, exercise or exchange rate or other price that is based upon and/or
varies with the trading prices of or quotations for the shares of Common Stock
at any time after the initial issuance of such convertible securities, or (B)
with a conversion, exercise or exchange price that is subject to being reset at
some future date after the initial issuance of such convertible securities or
upon the occurrence of specified or contingent events directly or indirectly
related to the business of the Company or the market for the Common Stock,
including, without limitation, pursuant to any “weighted average” or
“full-ratchet” anti-dilution provision, or (ii) enters into any agreement
(including, without limitation, an equity line of credit or an “at-the-market”
offering) whereby the Company or any Subsidiary may sell securities at a future
determined price.

“VWAP” means, for any date, the daily volume weighted average price of the
Common Stock for such date (or the nearest preceding date) on the Trading Market
on which the Common Stock is then listed or quoted as reported by Bloomberg L.P.
(based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New
York City time).

“Warrants” means, collectively, the Common Stock purchase warrants delivered to
Purchaser, in the form of Exhibit C attached hereto.

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

ARTICLE II.

PURCHASE AND SALE

2.1     Purchase and Sale of Preferred Stock.

2.1.1On or before the date of the Tranche A Closing, the Company shall adopt and
file with the Secretary of State of the State of New Jersey the Amended and
Restated Certificate of Incorporation in the form of Exhibit D attached hereto
(the “Restated Certificate”).

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2.1.2Subject to the terms and conditions of this Agreement, the Company Agrees
to sell, and each Purchaser agrees to purchase, the number of shares of
Preferred Stock set forth opposite each Purchaser’s name on Exhibit A, up to an
aggregate of 1,300,000 shares of Preferred Stock at a purchase price of $5.00
per share of Preferred Stock (the “Purchase Price”), and Warrants as determined
pursuant to Sections 2.3.5.3 and 2.3.6.3. The sale of the Preferred Stock shall
take place in multiple tranches as follows:

2.1.2.1Each Purchaser agrees to purchase, and the Company agrees to sell and
issue to each Purchaser, the number of shares of Preferred Stock set forth on
Exhibit A hereto (the “Tranche A Original Share Total”) in a first tranche
(“Tranche A”) at an aggregate purchase price of $3,000,000 (the “Tranche A
Purchase Price”); provided, however, that if Nasdaq requires a greater number of
issued shares of Preferred Stock, in order for the Company to maintain its
listing on Nasdaq, then the Tranche A Original Share Total will be increased to
an amount equal to the lowest number of shares of Preferred Stock (but in no
event lower than the Tranche A Original Share Total) as is required by Nasdaq to
maintain the Company’s listing on Nasdaq.

2.1.2.2Each Purchaser agrees to purchase, and the Company agrees to sell and
issue to each Purchaser, up to 700,000 shares of Preferred Stock (the
“Subsequent Tranche Share Total”) in subsequent tranches (each, a “Subsequent
Tranche”), that may be issued at any time and from time to time, as set forth in
Section 2.2, at an aggregate purchase price of up to $3,500,000 (provided,
however, that if Nasdaq requires a greater number of issued shares of Preferred
Stock, in order for the Company to maintain its listing on Nasdaq, then the
Isaac portion of the Subsequent Tranche Share Total will be increased to an
amount equal to the lowest number of shares of Preferred Stock (but in no event
lower than the Subsequent Tranche Share Total) as is required by Nasdaq to
maintain the Company’s listing on Nasdaq) in the event and in accordance with
the terms of (i) the exercise by the Purchasers of the Put Option or (ii) the
exercise by the Company of the Call Option.

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2.2     Put Option and Call Option

2.2.1At any time following the date of the Tranche A Closing and prior to
October 6, 2019 (the “Put/Call Exercise Period”), each Purchaser may exercise
its right to purchase and to require the Company to sell, at the Purchase Price,
additional shares of Preferred Stock, in an amount, per Purchaser, up to the
number of shares set forth on Exhibit G hereto (the “Put Option”). At such time
during the Put/Call Exercise Period as a Purchaser has not exercised the Put
Option, the Company may exercise its right to cause and require such Purchaser
to purchase, at the Purchase Price, additional shares of Preferred Stock in an
aggregate amount of up to the Subsequent Tranche Share Total (the “Call
Option”). At each exercise of a Call Option by the Company, each Purchaser shall
purchase, out of the total amount of shares of Preferred Stock subject to such
Call Option exercise, such Purchaser’s proportionate share of the Subsequent
Tranche Share Total, as set forth on Exhibit G.

2.2.2If a Purchaser desires to exercise the Put Option under this Section 2.2,
the Purchaser shall give written notice to the Company during the Put/Call
Exercise Period of the exercise of such Put Option in accordance with this
Section 2.2 (the “Put Option Notice”).

2.2.3If the Company desires to exercise the Call Option under this Section 2.2,
the Company shall give written notice to each Purchaser during the Put/Call
Exercise Period of the exercise of such Call Option in accordance with this
Section 2.2 (the “Call Option Notice”).

2.3     Pre-Closing; Closing and Subsequent Closings; Delivery.

2.3.1From the Signing Date until the date of the Tranche A Closing, the Company
agrees that it will not solicit, encourage others to solicit, encourage or
accept any offers for the purchase or acquisition of: (i) any capital stock of
the Company, (ii) all or any substantial part of the assets of the Company, or
(iii) proposals for any merger or consolidation involving the Company, and the
Company shall not negotiate with or enter into any agreement or understanding
with any other person with respect to any such transaction.

2.3.2Subject to the satisfaction or waiver of the conditions set forth in
Article IV hereof, the closing with respect to Tranche A shall take place at
such time and place as the Company and the Purchasers mutually agree upon (which
time and place are designated as the “Tranche A Closing”).

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2.3.3Subject to the satisfaction or waiver of the conditions set forth in
Article IV hereof, the closing with respect to Subsequent Tranches shall take
place remotely via the electronic exchange of documents and signatures no later
than thirty (30) days following the receipt by the Company of the Put Option
Notice or the receipt by a Purchaser of the Call Option Notice, as applicable,
or at such other time and place as the Company and Purchaser mutually agree upon
(each such time and place are designated as the “Subsequent Tranche Closing”).

2.3.4At the Tranche A Closing and each Subsequent Tranche Closing, respectively,
the Company shall deliver to Purchaser a certificate representing the shares of
Preferred Stock being purchased thereby against payment of the purchase price
thereof by check or wire transfer to the Company, in each case as set forth on
Exhibit F.

2.3.5On or prior to the Tranche A Closing, the Company shall deliver or cause to
be delivered to each Purchaser:

2.3.5.1This agreement, duly executed by the Company, dated as of the date
hereto;

2.3.5.2A legal opinion of Company Counsel, substantially in the form of Exhibit
E hereto, dated as of the Tranche A Closing;

2.3.5.3A Warrant registered in the name of each Purchaser to purchase Common
Stock of the Company in the respective amounts set forth on the signature page
hereto (the “Tranche A Warrants”);

2.3.5.4A certificate, signed by the Chief Executive Officer and Chief Financial
Officer of the Company, certifying that the conditions specified in Section 4.2
have been fulfilled, as of the date of the Tranche A Closing;

2.3.5.5All authorizations, approvals or permits, if any, of any governmental
authority or regulatory body of the United States or of any state that are
required in connection with the lawful issuance and sale of the Securities, as
of the date of the Tranche A Closing;

2.3.5.6The Restated Certificate in the form filed with and accepted by the New
Jersey Secretary of State;

2.3.5.7A certificate, dated as of the date of the Tranche A Closing, signed by
the Secretary of the Company, certifying (i) the Bylaws of the Company, (ii)
resolutions of the Board of Directors of the Company approving this Agreement
and the Transactions, and (iii) resolutions of the stockholders of the Company
approving the Restated Certificate;

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2.3.5.8With respect only to Isaac, a payment by check or wire transfer for
certain legal fees and other expenses as provided in Section 5.5; and

2.3.5.9With respect only to Isaac, the Closing Fee.

2.3.6On or prior to each Subsequent Tranche Closing, the Company shall deliver
or cause to be delivered to Each Purchaser, as applicable:

2.3.6.1This agreement, duly executed by the Company, dated as of the date of the
Subsequent Tranche Closing;

2.3.6.2A legal opinion of Company Counsel, substantially in the form of Exhibit
E hereto, dated as of the date of the Subsequent Tranche Closing;

2.3.6.3A Warrant registered in the name of each Purchaser to purchase the number
of shares of Common Stock into which the Preferred Stock issued to Each
Purchaser on the Subsequent Tranche Closing may be converted as of the date of
issuance thereof, having the same exercise price as the Tranche A Warrants (such
Warrant may be delivered within three Trading Days of the date of the Subsequent
Tranche Closing);

2.3.6.4A certificate, signed by the Chief Executive Officer and Chief Financial
Officer of the Company, certifying that the conditions specified in Section 4.2
have been fulfilled, as of the date of the Subsequent Tranche Closing;

2.3.6.5All authorizations, approvals or permits, if any, of any governmental
authority or regulatory body of the United States or of any state that are
required in connection with the lawful issuance and sale of the Securities, as
of the date of the Subsequent Tranche Closing;

2.3.6.6A certificate, dated as of the date of the Subsequent Tranche Closing,
signed by the Secretary of the Company, certifying (i) the Bylaws of the
Company, (ii) resolutions of the Board of Directors of the Company approving
this Agreement and the Transactions, and (iii) the Restated Certificate of the
Company;

ARTICLE III.

REPRESENTATIONS AND WARRANTIES

3.1     Representations and Warranties of the Company. Except as set forth in
the Disclosure Schedules, which Disclosure Schedules shall be deemed a part
hereof and shall qualify any representation or warranty made herein only to the
extent of the disclosure contained in the corresponding section of the
Disclosure Schedules, the Company hereby makes the following representations and
warranties to each Purchaser:

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(a) Subsidiaries. All of the direct and indirect Subsidiaries of the Company are
set forth on Schedule 3.1(a). The Company owns, directly or indirectly, all of
the capital stock or other equity interests of each Subsidiary free and clear of
any Liens, and all of the issued and outstanding shares of capital stock of each
Subsidiary are validly issued and are fully paid, non-assessable and free of
preemptive and similar rights to subscribe for or purchase securities. If the
Company has no Subsidiaries, all other references to the Subsidiaries or any of
them in the Transaction Documents shall be disregarded.

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

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

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

(e) Filings, Consents and Approvals. 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 in connection with the execution,
delivery and performance by the Company of the Transaction Documents, other
than: (i) the filings required pursuant to Section 5.1 of this Agreement, (ii)
the notice and/or application(s) to each applicable Trading Market for the
issuance and sale of the Securities and the listing of the Common Stock,
Preferred Shares and Warrant Shares for trading thereon in the time and manner
required thereby, (iii) the filing of Form D with the Commission, (iv) such
filings as are required to be made under applicable state securities laws, and
(v) except as set forth on Schedule 3.1(e),.

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

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(g) Capitalization. The capitalization of the Company is as set forth on
Schedule 3.1(g), which Schedule 3.1(g) shall also specifically include: (i) the
number of shares of Common Stock owned beneficially, and of record, by
Affiliates of the Company as of the date hereof, (ii) the number of any issued
and outstanding shares of any one or more classes of preferred stock of the
Company and (iii) a description of all securities exercisable or exchangeable
for or convertible into shares of any one or more classes of preferred stock of
the Company. As of the date hereof, the Company has no capital stock that would
be senior in ranking to the Preferred Stock. The Company has not issued any
capital stock since its most recently filed periodic report under the Exchange
Act, other than pursuant to the exercise of employee stock options under the
Company’s stock option plans, the issuance of shares of Common Stock to
employees pursuant to the Company’s employee stock purchase plans and pursuant
to the conversion and/or exercise of Common Stock Equivalents outstanding as of
the date of the most recently filed periodic report under the Exchange Act. No
Person has any right of first refusal, preemptive right, right of participation,
or any similar right to participate in the transactions contemplated by the
Transaction Documents. All of the outstanding shares of capital stock of the
Company are duly authorized, validly issued, fully paid and nonassessable, have
been issued in compliance with all federal and state securities laws, and none
of such outstanding shares was issued in violation of any preemptive rights or
similar rights to subscribe for or purchase securities. No further approval or
authorization of any stockholder, the Board of Directors or others is required
for the issuance and sale of the Securities. There are no stockholders
agreements, voting agreements or other similar agreements with respect to the
Company’s capital stock to which the Company is a party or, to the knowledge of
the Company, between or among any of the Company’s stockholders.

(h) SEC Reports; Financial Statements. The Company has filed all reports,
schedules, forms, statements and other documents required to be filed by the
Company under the Securities Act and the Exchange Act, including pursuant to
Section 13(a) or 15(d) thereof, for the two years preceding the date hereof (or
such shorter period as the Company was required by law or regulation to file
such material) (the foregoing materials, including the exhibits thereto and
documents incorporated by reference therein, being collectively referred to
herein as the “SEC Reports”) on a timely basis or has received a valid extension
of such time of filing and has filed any such SEC Reports prior to the
expiration of any such extension. As of their respective dates, the SEC Reports
complied in all material respects with the requirements of the Securities Act
and the Exchange Act, as applicable, and none of the SEC Reports, when filed,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. The Company has never been an issuer subject to Rule 144(i) under
the Securities Act. The financial statements of the Company included in the SEC
Reports comply in all material respects with applicable accounting requirements
and the rules and regulations of the Commission with respect thereto as in
effect at the time of filing. Such financial statements have been prepared in
accordance with United States generally accepted accounting principles applied
on a consistent basis during the periods involved (“GAAP”), except as may be
otherwise specified in such financial statements or the notes thereto and except
that unaudited financial statements may not contain all footnotes required by
GAAP, and fairly present in all material respects the financial position of the
Company and its consolidated Subsidiaries as of and for the dates thereof and
the results of operations and cash flows for the periods then ended, subject, in
the case of unaudited statements, to normal, immaterial, year-end audit
adjustments.

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(i) Material Changes; Undisclosed Events, Liabilities or Developments. Since the
date of the latest audited financial statements included within the SEC Reports,
except as specifically disclosed in a subsequent SEC Report filed not later than
five (5) days prior to the date hereof: (i) there has been no event, occurrence
or development that has had or that could 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 disclosed in filings made with the Commission,
(iii) the Company has not altered its method of accounting, (iv) the Company has
not declared or made any dividend or distribution of cash or other property to
its stockholders or purchased, redeemed or made any agreements to purchase or
redeem any shares of its capital stock and (v) the Company has not issued any
equity securities to any officer, director or Affiliate, except pursuant to
existing Company stock option plans. The Company does not have pending before
the Commission any request for confidential treatment of information. Except for
the issuance of the Securities contemplated by this Agreement or as set forth on
Schedule 3.1(i), no event, liability, fact, circumstance, occurrence or
development has occurred or exists or is reasonably expected to occur or exist
with respect to the Company or its Subsidiaries or their respective businesses,
properties, operations, assets 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 1 Trading Day prior to the date that this representation is made.

(j) Litigation. There is no action, suit, inquiry, notice of violation,
proceeding or investigation pending or, to the knowledge of the Company,
threatened against or affecting the Company, any Subsidiary or any of their
respective properties before or by any court, arbitrator, governmental or
administrative agency or regulatory authority (federal, state, county, local or
foreign) (collectively, an “Action”) which (i) adversely affects or challenges
the legality, validity or enforceability of any of the Transaction Documents or
the Securities or (ii) could, if there were an unfavorable decision, have or
reasonably be expected to result in a Material Adverse Effect. Neither the
Company nor any Subsidiary, nor any director or officer thereof, is or has been
the subject of any Action involving a claim of violation of or liability under
federal or state securities laws or a claim of breach of fiduciary duty. There
has not been, and to the knowledge of the Company, there is not pending or
contemplated, any investigation by the Commission involving the Company or any
current or former director or officer of the Company. The Commission has not
issued any stop order or other order suspending the effectiveness of any
registration statement filed by the Company or any Subsidiary under the Exchange
Act or the Securities Act.

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(k) Labor Relations. No labor dispute exists or, to the knowledge of the
Company, is imminent with respect to any of the employees of the Company, which
could reasonably be expected to result in a Material Adverse Effect. None of the
Company’s or its Subsidiaries’ employees is a member of a union that relates to
such employee’s relationship with the Company or such Subsidiary, and neither
the Company nor any of its Subsidiaries is a party to a collective bargaining
agreement, and the Company and its Subsidiaries believe that their relationships
with their employees are good. To the knowledge of the Company, no executive
officer of the Company or any Subsidiary, is, or is now expected to be, in
violation of any material term of any employment contract, confidentiality,
disclosure or proprietary information agreement or non-competition agreement, or
any other contract or agreement or any restrictive covenant in favor of any
third party, and the continued employment of each such executive officer does
not subject the Company or any of its Subsidiaries to any liability with respect
to any of the foregoing matters. The Company and its Subsidiaries are in
compliance with all U.S. federal, state, local and foreign laws and regulations
relating to employment and employment practices, terms and conditions of
employment and wages and hours, except where the failure to be in compliance
could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.

(l) Compliance. Neither the Company nor any Subsidiary: (i) is in default under
or in violation of (and no event has occurred that has not been waived that,
with notice or lapse of time or both, would result in a default by the Company
or any Subsidiary under), nor has the Company or any Subsidiary received notice
of a claim that it is in default under or that it is in violation of, any
indenture, loan or credit agreement or any other agreement or instrument to
which it is a party or by which it or any of its properties is bound (whether or
not such default or violation has been waived), (ii) is in violation of any
judgment, decree or order of any court, arbitrator or other governmental
authority or (iii) is or has been in violation of any statute, rule, ordinance
or regulation of any governmental authority, including without limitation all
foreign, federal, state and local laws relating to taxes, environmental
protection, occupational health and safety, product quality and safety and
employment and labor matters, except in each case as could not have or
reasonably be expected to result in a Material Adverse Effect.

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

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(n) Title to Assets. Except as set forth on Schedule 3.1(n), the Company and the
Subsidiaries have good and marketable title in fee simple to all real property
owned by them and good and marketable title in all personal property owned by
them that is material to the business of the Company and the Subsidiaries, in
each case free and clear of all Liens, except for (i) Liens as do not materially
affect the value of such property and do not materially interfere with the use
made and proposed to be made of such property by the Company and the
Subsidiaries and (ii) Liens for the payment of federal, state or other taxes,
for which appropriate reserves have been made therefor in accordance with GAAP
and, the payment of which is neither delinquent nor subject to penalties. Any
real property and facilities held under lease by the Company and the
Subsidiaries are held by them under valid, subsisting and enforceable leases
with which the Company and the Subsidiaries are in compliance.

(o) Intellectual Property. The Company and the Subsidiaries have, or have rights
to use, all patents, patent applications, trademarks, trademark applications,
service marks, trade names, trade secrets, inventions, copyrights, licenses and
other intellectual property rights and similar rights as described in the SEC
Reports as necessary or required for use in connection with their respective
businesses and which the failure to so have could have a Material Adverse Effect
(collectively, the “Intellectual Property Rights”). Neither the Company nor any
Subsidiary has received a notice (written or otherwise) that any of the
Intellectual Property Rights has expired, terminated or been abandoned, or is
expected to expire or terminate or be abandoned, within two (2) years from the
date of this Agreement. Neither the Company nor any Subsidiary has received,
since the date of the latest audited financial statements included within the
SEC Reports, a written notice of a claim or otherwise has any knowledge that the
Intellectual Property Rights violate or infringe upon the rights of any Person,
except as could not have or reasonably be expected to not have a Material
Adverse Effect. To the knowledge of the Company, all such Intellectual Property
Rights are enforceable and there is no existing infringement by another Person
of any of the Intellectual Property Rights. The Company and its Subsidiaries
have taken reasonable security measures to protect the secrecy, confidentiality
and value of all of their intellectual properties, except where failure to do so
could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.

(p) Insurance. The Company and the Subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as are prudent and customary in the businesses in which the Company and
the Subsidiaries are engaged, including, but not limited to, directors and
officers insurance coverage at least equal to the aggregate Purchase Price
(which such directors and officers insurance will be maintained by the Company
with its existing carrier for a period of twenty-four (24) months following the
Tranche A Closing). Neither the Company nor any Subsidiary has any reason to
believe that it will not be able to renew its existing insurance coverage as and
when such coverage expires or to obtain similar coverage from similar insurers
as may be necessary to continue its business without a significant increase in
cost.

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(q) Transactions With Affiliates and Employees. Except as set forth in the SEC
Reports, none of the officers or directors of the Company or any Subsidiary and,
to the knowledge of the Company, none of the employees of the Company or any
Subsidiary 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, providing for the borrowing of money from or lending of
money to 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, stockholder, member or partner, in each case in
excess of $120,000 other than for: (i) payment of salary or consulting fees for
services rendered, (ii) reimbursement for expenses incurred on behalf of the
Company and (iii) other employee benefits, including stock option agreements
under any stock option plan of the Company.

(r) Sarbanes-Oxley; Internal Accounting Controls. The Company and the
Subsidiaries are in compliance with any and all applicable requirements of the
Sarbanes-Oxley Act of 2002 that are effective as of the date hereof, and any and
all applicable rules and regulations promulgated by the Commission thereunder
that are effective as of the date hereof and as of the Closing Date. The Company
and the Subsidiaries maintain a system of internal accounting controls
sufficient to provide reasonable assurance that: (i) transactions are executed
in accordance with management’s general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP and to maintain asset accountability, (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 to any differences. The Company and the Subsidiaries have
established disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) for the Company and the Subsidiaries and designed such
disclosure controls and procedures to ensure that information required to be
disclosed by the Company in the reports it files or submits under the Exchange
Act is recorded, processed, summarized and reported, within the time periods
specified in the Commission’s rules and forms. The Company’s certifying officers
have evaluated the effectiveness of the disclosure controls and procedures of
the Company and the Subsidiaries as of the end of the period covered by the most
recently filed periodic report under the Exchange Act (such date, the
“Evaluation Date”). The Company presented in its most recently filed periodic
report under the Exchange Act the conclusions of the certifying officers about
the effectiveness of the disclosure controls and procedures based on their
evaluations as of the Evaluation Date. Since the Evaluation Date, there have
been no changes in the internal control over financial reporting (as such term
is defined in the Exchange Act) of the Company and its Subsidiaries that have
materially affected, or is reasonably likely to materially affect, the internal
control over financial reporting of the Company and its Subsidiaries.

17

 

 

(s) Certain Fees. Except as described in Section 5.5, no brokerage or finder’s
fees or commissions are or will be payable by the Company or any Subsidiary to
any broker, financial advisor or consultant, finder, placement agent, investment
banker, bank or other Person with respect to the transactions contemplated by
the Transaction Documents. Purchaser shall have no obligation with respect to
any fees or with respect to any claims made by or on behalf of other Persons for
fees of a type contemplated in this Section that may be due in connection with
the transactions contemplated by the Transaction Documents.

(t) Private Placement. Assuming the accuracy of the Purchaser’s representations
and warranties set forth in Section 3.2, no registration under the Securities
Act is required for the offer and sale of the Securities by the Company to the
Purchasers as contemplated hereby. The issuance and sale of the Securities
hereunder does not contravene the rules and regulations of the Trading Market.

(u) Investment Company. The Company is not, and is not an Affiliate of, and
immediately after receipt of payment for the Securities, will not be or be an
Affiliate of, an “investment company” within the meaning of the Investment
Company Act of 1940, as amended. The Company shall conduct its business in a
manner so that it will not become an “investment company” subject to
registration under the Investment Company Act of 1940, as amended.

(v) Registration Rights. Except as set forth on Schedule 3.1(v), no Person has
any right to cause the Company to effect the registration under the Securities
Act of any securities of the Company or any Subsidiary.

(w) Application of Takeover Protections. The Company and the Board of Directors
have taken all necessary action, if any, in order to render inapplicable any
control share acquisition, business combination, poison pill (including any
distribution under a rights agreement) or other similar anti-takeover provision
under the Company’s certificate of incorporation (or similar charter documents)
or the laws of its state of incorporation that is or could become applicable to
Purchaser as a result of Purchaser and the Company fulfilling their obligations
or exercising their rights under the Transaction Documents, including without
limitation as a result of the Company’s issuance of the Securities and the
Purchasers’ ownership of the Securities.

(x) Disclosure. Except with respect to the material terms and conditions of the
transactions contemplated by the Transaction Documents, the Company confirms
that neither it nor any other Person acting on its behalf has provided any
Purchaser or its agents or counsel with any information that it believes
constitutes or might constitute material, non-public information. The Company
understands and confirms that each Purchaser will rely on the foregoing
representation in effecting transactions in securities of the Company. All of
the disclosure furnished by or on behalf of the Company to Purchasers regarding
the Company and its Subsidiaries, their respective businesses and the
transactions contemplated hereby, including the Disclosure Schedules to this
Agreement, is true and correct and does not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements made

18

 

 

therein, in light of the circumstances under which they were made, not
misleading. The press releases disseminated by the Company during the twelve
months preceding the date of this Agreement taken as a whole do not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made and when made, not misleading.
The Company acknowledges and agrees that no Purchaser makes or has made any
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in Section 3.2 hereof.

(y) No Integrated Offering. Assuming the accuracy of each Purchaser’s
representations and warranties set forth in Section 3.2, neither the Company,
nor any of its Affiliates, nor any Person acting on its or their behalf has,
directly or indirectly, made any offers or sales of any security or solicited
any offers to buy any security, under circumstances that would cause this
offering of the Securities to be integrated with prior offerings by the Company
for purposes of (i) the Securities Act which would require the registration of
any such securities under the Securities Act, or (ii) any applicable shareholder
approval provisions of any Trading Market on which any of the securities of the
Company are listed or designated.

(z) Solvency. Based on the consolidated financial condition of the Company as of
the date of the applicable Closing, after giving effect to the receipt by the
Company of the proceeds from the sale of the Securities hereunder: (i) the fair
saleable value of the Company’s assets exceeds the amount that will be required
to be paid on or in respect of the Company’s existing debts and other
liabilities (including known contingent liabilities) as they mature, (ii) the
Company’s assets do not constitute unreasonably small capital to carry on its
business as now conducted and as proposed to be conducted including its capital
needs taking into account the particular capital requirements of the business
conducted by the Company, consolidated and projected capital requirements and
capital availability thereof, and (iii) the current cash flow of the Company,
together with the proceeds the Company would receive, were it to liquidate all
of its assets, after taking into account all anticipated uses of the cash, would
be sufficient to pay all amounts on or in respect of its liabilities when such
amounts are required to be paid. The Company does not intend to incur debts
beyond its ability to pay such debts as they mature (taking into account the
timing and amounts of cash to be payable on or in respect of its debt). The
Company has no knowledge of any facts or circumstances which lead it to believe
that it will file for reorganization or liquidation under the bankruptcy or
reorganization laws of any jurisdiction within one year from the Closing Date.
Schedule 3.1(z) sets forth as of the date hereof all outstanding secured and
unsecured Indebtedness of the Company or any Subsidiary, or for which the
Company or any Subsidiary has commitments. For the purposes of this Agreement,
“Indebtedness” means (x) any liabilities for borrowed money or amounts owed in
excess of $50,000 (other than trade accounts payable incurred in the ordinary
course of business), (y) all guaranties, endorsements and other contingent
obligations in respect of indebtedness of others, whether or not the same are or
should be reflected in the Company’s consolidated balance sheet (or the notes
thereto), except guaranties by endorsement of negotiable instruments for deposit
or collection or similar transactions in the ordinary course of business; and
(z) the present value of any lease payments in excess of $50,000 due under
leases required to be capitalized in accordance with GAAP. Neither the Company
nor any Subsidiary is in default with respect to any Indebtedness.

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(aa) Tax Status. Except for matters that would not, individually or in the
aggregate, have or reasonably be expected to result in a Material Adverse
Effect, the Company and its Subsidiaries each (i) has made or filed all United
States federal, state and local income and all foreign income and franchise tax
returns, reports and declarations required by any jurisdiction to which it is
subject, (ii) has paid all taxes and other governmental assessments and charges
that are material in amount, shown or determined to be due on such returns,
reports and declarations and (iii) has set aside on its books provision
reasonably adequate for the payment of all material taxes for periods subsequent
to the periods to which such returns, reports or declarations apply. There are
no unpaid taxes in any material amount claimed to be due by the taxing authority
of any jurisdiction, and the officers of the Company or of any Subsidiary know
of no basis for any such claim.

(bb) No General Solicitation. Neither the Company nor any person acting on
behalf of the Company has offered or sold any of the Securities by any form of
general solicitation or general advertising.

(cc) Foreign Corrupt Practices. Neither the Company nor any Subsidiary, nor to
the knowledge of the Company or any Subsidiary, any agent or other person acting
on behalf of the Company or any Subsidiary, has: (i) directly or indirectly,
used any funds for unlawful contributions, gifts, entertainment or other
unlawful expenses related to foreign or domestic political activity, (ii) made
any unlawful payment to foreign or domestic government officials or employees or
to any foreign or domestic political parties or campaigns from corporate funds,
(iii) failed to disclose fully any contribution made by the Company or any
Subsidiary (or made by any person acting on its behalf of which the Company is
aware) which is in violation of law or (iv) violated in any material respect any
provision of FCPA.

(dd) Accountants. The Company’s accounting firm is set forth on Schedule 3.1(dd)
of the Disclosure Schedules. To the knowledge and belief of the Company, such
accounting firm: (i) is a registered public accounting firm as required by the
Exchange Act and (ii) shall express its opinion with respect to the financial
statements to be included in the Company’s Annual Report for the fiscal year
ending December 2014.

(ee) Seniority. Except as disclosed on Schedule 3.1(ee), as of the date of the
applicable Closing, no Indebtedness or other claim against the Company is senior
to the Preferred Stock in right of payment, whether with respect to interest or
upon liquidation or dissolution, or otherwise, other than indebtedness secured
by purchase money security interests (which is senior only as to underlying
assets covered thereby) and capital lease obligations (which is senior only as
to the property covered thereby).

(ff) No Disagreements with Accountants and Lawyers. There are no disagreements
of any kind presently existing, or reasonably anticipated by the Company to
arise, between the Company and the accountants and lawyers formerly or presently
employed by the Company and the Company is current with respect to any fees owed
to its accountants and lawyers which could affect the Company’s ability to
perform any of its obligations under any of the Transaction Documents.

20

 

 

(gg) Acknowledgment Regarding Purchaser’s Purchase of Securities. The Company
acknowledges and agrees that each Purchaser is acting solely in the capacity of
an arm’s length purchaser with respect to the Transaction Documents and the
transactions contemplated thereby. The Company further acknowledges that each
Purchaser is not acting as a financial advisor or fiduciary of the Company (or
in any similar capacity) with respect to the Transaction Documents and the
transactions contemplated thereby and any advice given by any Purchaser or any
of their respective representatives or agents in connection with the Transaction
Documents and the transactions contemplated thereby is merely incidental to the
such Purchaser’s purchase of the Securities. The Company further represents to
Purchasers that the Company’s decision to enter into this Agreement and the
other Transaction Documents has been based solely on the independent evaluation
of the transactions contemplated hereby by the Company and its representatives.

(hh) Acknowledgment Regarding Each Purchaser’s Trading Activity. Anything in
this Agreement or elsewhere herein to the contrary notwithstanding (except for
Sections 3.2(g) and 5.16 hereof), it is understood and acknowledged by the
Company that: (i) no Purchaser has been asked by the Company to agree, nor has
any Purchaser agreed, to desist from purchasing or selling, long and/or short,
securities of the Company, or “derivative” securities based on securities issued
by the Company or to hold the Securities for any specified term, (ii) past or
future open market or other transactions by any Purchaser, specifically
including, without limitation, Short Sales or “derivative” transactions, before
or after the closing of this or future private placement transactions, may
negatively impact the market price of the Company’s publicly-traded securities,
(iii) any Purchaser, and counter-parties in “derivative” transactions to which
such Purchaser is a party, directly or indirectly, may presently have a “short”
position in the Common Stock and (iv) no Purchaser shall be deemed to have any
affiliation with or control over any arm’s length counter-party in any
“derivative” transaction. The Company further understands and acknowledges that
(y) Purchasers may engage in hedging activities at various times during the
period that the Securities are outstanding, including, without limitation,
during the periods that the value of the Underlying Shares deliverable with
respect to Securities are being determined, and (z) such hedging activities (if
any) could reduce the value of the existing stockholders’ equity interests in
the Company at and after the time that the hedging activities are being
conducted.  The Company acknowledges that such aforementioned hedging activities
do not constitute a breach of any of the Transaction Documents.

(ii) Regulation M Compliance.  The Company has not, and to its knowledge no one
acting on its behalf has, (i) taken, directly or indirectly, any action designed
to cause or to result in the stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of any of the
Securities, (ii) sold, bid for, purchased, or paid any compensation for
soliciting purchases of, any of the Securities, or (iii) paid or agreed to pay
to any Person any compensation for soliciting another to purchase any other
securities of the Company.

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(jj) Stock Option Plans. Each stock option granted by the Company under the
Company’s stock option plan was granted (i) in accordance with the terms of the
Company’s stock option plan and (ii) with an exercise price at least equal to
the fair market value of the Common Stock on the date such stock option would be
considered granted under GAAP and applicable law. No stock option granted under
the Company’s stock option plan has been backdated. The Company has not
knowingly granted, and there is no and has been no Company policy or practice to
knowingly grant, stock options prior to, or otherwise knowingly coordinate the
grant of stock options with, the release or other public announcement of
material information regarding the Company or its Subsidiaries or their
financial results or prospects.

(kk) Office of Foreign Assets Control. Neither the Company nor any Subsidiary
nor, to the Company's knowledge, any director, officer, agent, employee or
affiliate of the Company or any Subsidiary is currently subject to any U.S.
sanctions administered by the Office of Foreign Assets Control of the U.S.
Treasury Department (“OFAC”).

(ll) U.S. Real Property Holding Corporation. The Company is not and has never
been a U.S. real property holding corporation within the meaning of Section 897
of the Internal Revenue Code of 1986, as amended, and the Company shall so
certify upon Purchaser’s request.

(mm) Bank Holding Company Act. Neither the Company nor any of its Subsidiaries
or Affiliates is subject to the Bank Holding Company Act of 1956, as amended
(the “BHCA”) and to regulation by the Board of Governors of the Federal Reserve
System (the “Federal Reserve”). Neither the Company nor any of its Subsidiaries
or Affiliates owns or controls, directly or indirectly, five percent (5%) or
more of the outstanding shares of any class of voting securities or twenty-five
percent or more of the total equity of a bank or any entity that is subject to
the BHCA and to regulation by the Federal Reserve. Neither the Company nor any
of its Subsidiaries or Affiliates exercises a controlling influence over the
management or policies of a bank or any entity that is subject to the BHCA and
to regulation by the Federal Reserve.

(nn) Money Laundering. The operations of the Company and its Subsidiaries are
and have been conducted at all times in compliance with applicable financial
record-keeping and reporting requirements of the Currency and Foreign
Transactions Reporting Act of 1970, as amended, applicable money laundering
statutes and applicable rules and regulations thereunder (collectively, the
“Money Laundering Laws”), and no action, suit or proceeding by or before any
court or governmental agency, authority or body or any arbitrator involving the
Company and any Subsidiary with respect to the Money Laundering Laws is pending
or, to the knowledge of the Company or any Subsidiary, threatened.

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(pp) No Disqualification Events.  With respect to the Securities to be offered
and sold hereunder in reliance on Rule 506 under the Securities Act, none of the
Company, any of its predecessors, any affiliated issuer, any director, executive
officer, other officer of the Company participating in the offering hereunder,
any beneficial owner of 20% or more of the Company’s outstanding voting equity
securities, calculated on the basis of voting power, nor any promoter (as that
term is defined in Rule 405 under the Securities Act) connected with the Company
in any capacity at the time of sale (each, an "Issuer Covered Person" and,
together, "Issuer Covered Persons") is subject to any of the "Bad Actor"
disqualifications described in Rule 506(d)(1)(i) to (viii) under the Securities
Act (a "Disqualification Event"), except for a Disqualification Event covered by
Rule 506(d)(2) or (d)(3). The Company has exercised reasonable care to determine
whether any Issuer Covered Person is subject to a Disqualification Event. The
Company has complied, to the extent applicable, with its disclosure obligations
under Rule 506(e), and has furnished to the Purchasers a copy of any disclosures
provided thereunder.

 

(qq) Other Covered Persons. The Company is not aware of any person (other than
any Issuer Covered Person) that has been or will be paid (directly or
indirectly) remuneration for solicitation of purchasers in connection with the
sale of any Securities.

 

(rr) Notice of Disqualification Events. The Company will notify Purchasers in
writing, prior to the date of the Tranche A Closing and any subsequent tranche
Closing of (i) any Disqualification Event relating to any Issuer Covered Person
and (ii) any event that would, with the passage of time, become a
Disqualification Event relating to any Issuer Covered Person. Any such
occurrence may be deemed by a Purchaser to have a Material Adverse Effect.

 

3.2 Representations and Warranties of Purchasers. Each Purchaser hereby
represents and warrants to the Company as follows:

(a) Authority. Purchaser has full power and authority to enter into this
Agreement. This Agreement, when executed and delivered by Purchaser, will
constitute the valid and legally binding obligation of Purchaser, enforceable in
accordance with its terms, except as limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance, and any other
laws of general application affecting enforcement of creditors’ rights
generally, and as limited by laws relating to the availability of specific
performance; or other equitable remedies.

(b) Own Account. Purchaser understands that the Securities are “restricted
securities” and have not been registered under the Securities Act or any
applicable state securities law and is acquiring the Securities as principal for
its own account and not with a view to or for distributing or reselling such
Securities or any part thereof in violation of the Securities Act or any
applicable state securities law, has no present intention of distributing any of
such Securities in violation of the Securities Act or any applicable state
securities law and has no direct or indirect arrangement or understandings with
any other persons to distribute or regarding the distribution of such Securities
in violation of the Securities Act or any applicable state securities law.
Purchaser is acquiring the Securities hereunder in the ordinary course of its
business.

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(c) Purchaser Status. At the time Purchaser was offered the Securities, it was,
and as of the date hereof it is, and on each date on which it exercises any
Warrants or converts any shares of Preferred Stock, it will be either: (i) an
“accredited investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or
(a)(8) under the Securities Act or (ii) a “qualified institutional buyer” as
defined in Rule 144A(a) under the Securities Act.

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

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

(f) Access to Information. Purchaser acknowledges that it has had the
opportunity to review the Transaction Documents (including all exhibits and
schedules thereto) and the SEC Reports and has been afforded (i) the opportunity
to ask such questions as it has deemed necessary of, and to receive answers
from, representatives of the Company concerning the terms and conditions of the
offering of the Securities and the merits and risks of investing in the
Securities; (ii) access to information about the Company and its financial
condition, results of operations, business, properties, management and prospects
sufficient to enable it to evaluate its investment; 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
investment decision with respect to the investment.

(g) Certain Transactions and Confidentiality. Other than consummating the
transactions contemplated hereunder, Purchaser has not directly or indirectly,
nor has any Person acting on behalf of or pursuant to any understanding with
Purchaser, executed any purchases or sales, including Short Sales, of the
securities of the Company during the period commencing as of the time that
Purchaser first received a term sheet (written or oral) from the Company or any
other Person representing the Company setting forth the material terms of the
transactions contemplated hereunder and ending immediately prior to the
execution hereof. Other than to other Persons party to this Agreement, Purchaser
has maintained the confidentiality of all disclosures made to it in connection
with this transaction (including the existence and terms of this transaction).
Notwithstanding the foregoing, for avoidance of doubt, nothing contained herein
shall constitute a representation or warranty, or preclude any actions, with
respect to the identification of the availability of, or securing of, available
shares to borrow in order to effect Short Sales or similar transactions in the
future.

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The Company acknowledges and agrees that the representations contained in
Section 3.2 shall not modify, amend or affect any Purchaser’s right to rely on
the Company’s representations and warranties contained in this Agreement or any
representations and warranties contained in any other Transaction Document or
any other document or instrument executed and/or delivered in connection with
this Agreement or the consummation of the transaction contemplated hereby.

 

ARTICLE IV.

CONDITIONS TO CLOSING

 

4.1 The obligations of the Company hereunder, on or before each of the Tranche A
Closing and the Subsequent Tranche Closing (each, a “Closing”) are subject to
the following conditions being met:

(a) the accuracy in all material respects on the date of the applicable Closing
of the representations and warranties of Purchaser contained herein (unless as
of a specific date therein in which case they shall be accurate as of such
date);

(b) all obligations, covenants and agreements of Purchaser required to be
performed at or prior to the date of the applicable Closing shall have been
performed;

(c) all authorizations, approvals or permits, if any, of any governmental
authority or regulatory body of the United States or of any state that are
required in connection with the lawful issuance and sale of the Securities
pursuant to this Agreement shall be obtained and effective;

(d) the approval by Nasdaq of the lawful issuance and sale of the Securities
pursuant to this Agreement shall have been obtained;

(e) with respect to the Tranche A Closing, the affirmative vote of the majority
of votes cast by holders of shares of Common Stock of the Company entitled to
vote at an annual meeting of the Company approving the issuance of the shares of
Preferred Stock and of the Underlying Shares, in accordance with Nasdaq
Marketplace Rule 5635; and

(f) the receipt by the Company of filing acceptance by the Secretary of State of
the State of New Jersey of the Restated Certificate.

4.2 The obligations of each Purchaser hereunder, on or before each applicable
Closing are subject to the following conditions being met:

(a) the accuracy in all material respects when made and on the date of the
applicable Closing of the representations and warranties of the Company
contained herein (unless as of a specific date therein);

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

(c) the delivery by the Company of the items set forth in Section 2.3 of this
Agreement, as applicable;

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(d) the completion of legal and financial due diligence to the satisfaction of
Purchasers;

(e) the approval by Nasdaq of the lawful issuance and sale of the Securities
pursuant to this Agreement shall have been obtained;

(f) with respect to the Tranche A Closing, the affirmative vote of the majority
of votes cast by holders of the shares of Common Stock of the Company entitled
to vote at an annual meeting of the Company approving the issuance of the shares
of Preferred Stock and of the Underlying Shares, in accordance with Nasdaq
Marketplace Rule 5635;

(g) the completion of a financial valuation of the Company by an independent
third party, to the satisfaction of Purchaser in its sole discretion;

(h) the receipt by the Company of filing acceptance by the Secretary of State of
the State of New Jersey of the Restated Certificate; and

(i) No event or condition shall have occurred or shall be alleged to have
occurred that constitutes or, with notice or the passage of time, or both, would
constitute a default or a basis of force majeure or other claim of excusable
delay or nonperformance by the Company, or any other person or entity, under any
contract, agreement, arrangement, commitment or other understanding, written or
oral, described above in this Section 4.2(i) which default, or the delay or
nonperformance of which, individual or in the aggregate, would have a Material
Adverse Effect.

ARTICLE V.

OTHER AGREEMENTS OF THE PARTIES

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

5.2 Reporting Status. Until the date on which no Preferred Stock or Warrants are
outstanding, the Company shall timely file all reports required to be filed with
the SEC pursuant to the 1934 Act, and the Company shall not terminate its status
as an issuer required to file reports under Section 12(g) of the 1934 Act even
if the 1934 Act or the rules and regulations thereunder would no longer require
or otherwise permit such termination.

5.3 Use of Proceeds. The Company shall use the net proceeds from the sale of the
Securities hereunder solely as set forth on Schedule 5.3.

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5.4 Board of Directors.

(a) The Company grants Isaac the right to annually nominate two (2) members to
the Company’s Board of Directors (the “Isaac Nominees”), such Isaac Nominees to
be presented for a full vote to the stockholders of the Company at the Company’s
annual meeting of stockholders, beginning at the 2014 Annual Meeting (the “2014
Annual Meeting”). The Company and Purchasers agree that the Isaac Nominees shall
meet the independent director requirements under Nasdaq Marketplace Rule
5605(a)(2). Isaac shall have the right to appoint the Isaac Nominees for so long
as any shares of Preferred Stock remains outstanding, subject to any threshold
limitations in accordance with applicable Nasdaq rules.

(b) The Company grants Alpha Capital the right to nominate one (1) member to the
Company’s Board of Directors (the “Alpha Nominee”), such Alpha Nominee to be
presented for a full vote to the stockholders of the Company at the 2014 Annual
Meeting and any adjournments thereof. For the avoidance of doubt, Alpha Capital
shall not have the right to nominate any member to the Company’s Board of
Directors under this Agreement or any of the Transaction Documents at any time
following the 2014 Annual Meeting, or any adjournments thereof.

5.5 Fees. The Company shall reimburse Isaac for all costs and expenses incurred
by it or its affiliates in connection with the transactions contemplated by the
Transaction Documents (including, without limitation, all legal fees and
disbursements in connection therewith, structuring, documentation and
implementation of the transactions contemplated by the Transaction Documents and
due diligence and regulatory filings in connection therewith) in a
non-accountable amount not to exceed $35,000. The Company shall also pay to
Isaac a closing fee in the amount of five percent (5%) of the aggregate Purchase
Price for the Transactions contemplated hereunder (the “Closing Fee”), which
Closing Fee shall be paid in shares of the Company’s Common Stock valued at the
Conversion Price as of the Tranche A Closing date. The Company shall pay all
Transfer Agent fees (including, without limitation, any fees required for
same-day processing of any instruction letter delivered by the Company and any
conversion or exercise notice delivered by Purchasers), stamp taxes and other
taxes and duties levied in connection with the delivery of any Securities to
each Purchaser.

5.6 Transfer Restrictions.

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

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(b) Purchaser agrees to the imprinting, so long as is required by this Section
5.6, of a legend on any of the Securities in the following form:

NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE
AND CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION
OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS 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. THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OR CONVERSION
OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT
WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT
IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT
OR OTHER LOAN SECURED BY SUCH SECURITIES.

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

(c) Certificates evidencing the Underlying Shares shall not contain any legend
(including the legend set forth in Section 5.6(b) hereof): (i) while a
registration statement covering the resale of such security is effective under
the Securities Act, (ii) following any sale of such Underlying Shares pursuant
to Rule 144, (iii) if such Underlying Shares are eligible for sale under Rule
144, without the requirement for the Company to be in compliance with the
current public information required under Rule 144 as to such Underlying Shares
and without volume or manner-of-sale restrictions or (iv) if such legend is not
required under applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the staff of the Commission).

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

5.8 Conduct of Business. The business of the Company shall not be conducted in
violation of any law, ordinance or regulation of any governmental entity, except
where such violations would not result, either individually or in the aggregate,
in a Material Adverse Effect.

5.9 Furnishing of Information; Public Information.

(a) If the Common Stock is not registered under Section 12(b) or 12(g) of the
Exchange Act on the date hereof, the Company agrees to cause the Common Stock to
be registered under Section 12(g) of the Exchange Act on or before the 60th
calendar day following the date hereof. Until the earliest of the time that (i)
Purchaser does not own Securities or (ii) the Warrants have expired, the Company
covenants to maintain the registration of the Common Stock under Section 12(b)
or 12(g) of the Exchange Act and to timely file (or obtain extensions in respect
thereof and file within the applicable grace period) all reports required to be
filed by the Company after the date hereof pursuant to the Exchange Act even if
the Company is not then subject to the reporting requirements of the Exchange
Act.

(b) At any time during the period commencing from the six (6) month anniversary
of the date hereof and ending at such time that all of the Securities may be
sold without the requirement for the Company to be in compliance with Rule
144(c)(1) and otherwise without restriction or limitation pursuant to Rule 144,
if the Company shall fail for any reason to satisfy the current public
information requirement under Rule 144(c) (a “Public Information Failure”) then,
in addition to Purchaser’s other available remedies, the Company shall pay to
Purchaser, in cash, as partial liquidated damages and not as a penalty, by
reason of any such delay in or reduction of its ability to sell the Securities,
an amount in cash equal to two percent (2.0%) of the aggregate Purchase Price of
Purchaser’s Securities and Underlying Shares, without duplication, on the day of
a Public Information Failure and on every thirtieth (30th) day (pro rated for
periods totaling less than thirty days) thereafter until the earlier of (a) the
date such Public Information Failure is cured and (b) such time that such public
information is no longer required  for Purchaser to transfer the Underlying
Shares pursuant to Rule 144.  The payments to which Purchaser shall be entitled
pursuant to this Section 5.9(b) are referred to herein as “Public Information
Failure Payments.”  Public Information Failure Payments shall be paid on the
earlier of (i) the last day of the calendar month during which such Public
Information Failure Payments are incurred and (ii) the third (3rd) Business Day
after the event or failure giving rise to the Public Information Failure
Payments is cured.  In the event the Company fails to make Public Information
Failure Payments in a timely manner, such Public Information Failure Payments
shall bear interest at the rate of 1.5% per month (prorated for partial months)
until paid in full. Nothing herein shall limit Purchaser’s right to pursue
actual damages for the Public Information Failure, and Purchaser shall have the
right to pursue all remedies available to it at law or in equity including,
without limitation, a decree of specific performance and/or injunctive relief.

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5.10 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 in a manner that would require the registration under the Securities
Act of the sale of the Securities or that would be integrated with the offer or
sale of the Securities for purposes of the rules and regulations of any Trading
Market such that it would require shareholder approval prior to the closing of
such other transaction unless shareholder approval is obtained before the
closing of such subsequent transaction.

5.11 Securities Laws Disclosure; Publicity. The Company shall, by 9:00 a.m. (New
York City time) on the Trading Day immediately following the date hereof, and
immediately following the date of each applicable Closing, file a Current Report
on Form 8-K and press release disclosing the material terms of the transactions
contemplated hereby, including the Transaction Documents as exhibits thereto.
From and after the issuance of such press release, the Company represents to
Purchasers that it shall have publicly disclosed all material, non-public
information delivered to Purchasers 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 the Transaction Documents. The
Company and Purchasers shall consult with each other in issuing any other press
releases with respect to the transactions contemplated hereby, and neither the
Company nor any Purchaser shall issue any such press release nor otherwise make
any such public statement without the prior consent of the Company, with respect
to any press release of such Purchaser, or without the prior consent of
Purchasers, 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.

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

5.13 Non-Public Information. Except with respect to the material terms and
conditions of the transactions contemplated by the Transaction Documents, the
Company covenants and agrees that neither it, nor any other Person acting on its
behalf, will provide any Purchaser or its agents or counsel with any information
that the Company believes constitutes material non-public information, unless
prior thereto such Purchaser shall have entered into a written agreement with
the Company regarding the confidentiality and use of such information. The
Company understands and confirms that each Purchaser shall be relying on the
foregoing covenant in effecting transactions in securities of the Company.

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5.14 Indemnification of Purchaser. Subject to the provisions of this Section
5.14, the Company will indemnify and hold each Purchaser and its directors,
officers, shareholders, members, partners, employees, attorneys, consultants,
and agents (and any other Persons with a functionally equivalent role of a
Person holding such titles notwithstanding a lack of such title or any other
title), each Person who controls such Purchaser (within the meaning of Section
15 of the Securities Act and Section 20 of the Exchange Act), and the directors,
officers, shareholders, agents, members, partners or employees (and any other
Persons with a functionally equivalent role of a Person holding such titles
notwithstanding a lack of such title or any other title) of such controlling
persons (each, a “Purchaser Party”) harmless from any and all losses,
liabilities, obligations, claims, contingencies, damages, costs and expenses,
including all judgments, amounts paid in settlements, court costs and reasonable
attorneys’ fees and costs of investigation that any such Purchaser Party may
suffer or incur as a result of or relating to (a) any breach of any of the
representations, warranties, covenants or agreements made by the Company in this
Agreement or in the other Transaction Documents or (b) any action instituted
against the Purchaser Parties in any capacity, or any of them or their
respective Affiliates, by any stockholder of the Company who is not an Affiliate
of such Purchaser Party, with respect to any of the transactions contemplated by
the Transaction Documents (unless such action is based upon a breach of such
Purchaser Party’s representations, warranties or covenants under the Transaction
Documents or any agreements or understandings such Purchaser Party may have with
any such stockholder or any violations by such Purchaser Party of state or
federal securities laws or any conduct by such Purchaser Party which constitutes
fraud, gross negligence, willful misconduct or malfeasance). If any action shall
be brought against any Purchaser Party in respect of which indemnity may be
sought pursuant to this Agreement, such Purchaser Party shall promptly notify
the Company in writing, and the Company shall have the right to assume the
defense thereof with counsel of its own choosing reasonably acceptable to the
Purchaser Party. Any Purchaser Party shall have the right to employ separate
counsel in any such action and participate in the defense thereof, but the fees
and expenses of such counsel shall be at the expense of such Purchaser Party
except to the extent that (i) the employment thereof has been specifically
authorized by the Company in writing, (ii) the Company has failed after a
reasonable period of time to assume such defense and to employ counsel or (iii)
in such action there is, in the reasonable opinion of counsel, a material
conflict on any material issue between the position of the Company and the
position of such Purchaser Party, in which case the Company shall be responsible
for the reasonable fees and expenses of no more than one such separate counsel.
The Company will not be liable to any Purchaser Party under this Agreement (y)
for any settlement by a Purchaser Party effected without the Company’s prior
written consent, which shall not be unreasonably withheld or delayed; or (z) to
the extent that a loss, claim, damage or liability is attributable to any
Purchaser Party’s breach of any of the representations, warranties, covenants or
agreements made by such Purchaser Party in this Agreement or in the other
Transaction Documents. The indemnification required by this Section 5.14 shall
be made by periodic payments of the amount thereof during the course of the
investigation or defense, as and when bills are received or are incurred. The
indemnity agreements contained herein shall be in addition to any cause of
action or similar right of any Purchaser Party against the Company or others and
any liabilities the Company may be subject to pursuant to applicable law.

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5.15 Reservation and Listing of Securities.

(a) The Company shall promptly secure the listing or designation for quotation
(as the case may be) of all of the Underlying Shares upon each national
securities exchange and automated quotation system, if any, upon which the
Common Stock is then listed or designated for quotation (as the case may be)
(subject to official notice of issuance) (but in no event later than the date of
the Tranche A Closing) and shall maintain such listing or designation for
quotation (as the case may be) of all the shares of Common Stock from time to
time issuable under the terms of the Transaction Documents on such national
securities exchange or automated quotation system. The Company shall maintain
the Common Stock’s listing or designation for quotation (as the case may be) on
the principal Trading Market. Neither the Company nor any of its Subsidiaries
shall take any action which could be reasonably expected to result in the
delisting or suspension of the Common Stock on a Trading Market. The Company
shall pay all fees and expenses in connection with satisfying its obligations
under this Section 5.15(a).

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

(c) The Company shall, if applicable: (i) in the time and manner required by the
principal Trading Market, prepare and file with such Trading Market an
additional shares listing application covering a number of shares of Common
Stock at least equal to the Required Minimum on the date of such application,
(ii) take all steps necessary to cause such shares of Common Stock to be
approved for listing or quotation on such Trading Market as soon as possible
thereafter, including, but not limited to, taking all reasonable steps to appeal
and reverse the Nasdaq Notice, (iii) provide to Purchaser evidence of such
listing or quotation and (iv) maintain the listing or quotation of such Common
Stock on any date at least equal to the Required Minimum on such date on such
Trading Market or another Trading Market. The Company agrees to maintain the
eligibility of the Common Stock for electronic transfer through the Depository
Trust Company or another established clearing corporation, including, without
limitation, by timely payment of fees to the Depository Trust Company or such
other established clearing corporation in connection with such electronic
transfer.

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5.16 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 the
initial press release as described in Section 5.11.  Each Purchaser covenants
that until such time as the transactions contemplated by this Agreement are
publicly disclosed by the Company pursuant to the initial press release as
described in Section 5.11, Purchaser will maintain the confidentiality of the
existence and terms of this transaction and the information included in the
Transaction Documents and the Disclosure Schedules. Notwithstanding the
foregoing, and notwithstanding anything contained in this Agreement to the
contrary, the Company expressly acknowledges and agrees that (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
pursuant to the initial press release as described in Section 5.11, (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 pursuant to the initial press release as described in
Section 5.11 and (iii) no Purchaser shall have any duty of confidentiality to
the Company or its Subsidiaries after the issuance of the initial press release
as described in Section 5.11. 

5.17 No Solicitation. The Company will not, and will cause its respective
Affiliates, employees, agents and representatives not to, directly or
indirectly, solicit or enter into discussions or transactions with, or
encourage, or provide any information to, any corporation, partnership or other
entity or group (other than Purchasers and their designees) concerning any
merger, sale of ownership interests and/or assets of the Company,
recapitalization or similar transaction.

5.18 No Variable Rate Transactions; No Frustration. For so long as the Preferred
Stock and the Warrants remain outstanding, neither the Company nor any of its
affiliates or Subsidiaries, nor any of its or their respective officers,
employees, directors, agents or other representatives will, without the prior
written consent of the Purchasers, effect, enter into, announce or recommend to
its stockholders any agreement, plan, arrangement or transaction that would
reasonably be expected to constitute or involve a Variable Rate Transaction. So
long as any Purchaser or its affiliates hold any Securities, neither the Company
nor any of its affiliates or Subsidiaries, nor any of its or their respective
officers, employees, directors, agents or other representatives, will, without
the prior written consent of such Purchaser (which consent may be withheld,
delayed or conditioned in such Purchaser’s sole discretion), effect, enter into,
announce or recommend to its stockholders any agreement, plan, arrangement or
transaction that would or would reasonably be expected to restrict, delay,
conflict with or impair the ability or right of the Company to timely perform
its obligations under this Agreement or the Transaction Documents, including,
without limitation, the obligation of the Company to timely deliver shares of
the Preferred Stock to the Purchasers or their affiliates in accordance with
this Agreement or the Transaction Documents.

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5.19 No Modification to Warrant Exercise Price. The Company and Purchasers agree
that until the date of the Tranche A Closing, the Company will not modify the
exercise price of any outstanding warrants of the Company.

ARTICLE VI.

MISCELLANEOUS

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

6.2 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 at the facsimile number set
forth on the signature pages attached hereto at or prior to 5:30 p.m. (New York
City time) on a Trading Day, (b) the next Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number set forth on the signature pages attached hereto on a day that
is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading
Day, (c) the second (2nd) Trading Day following the date of mailing, if sent by
U.S. nationally recognized overnight courier service or (d) upon actual receipt
by the party to whom such notice is required to be given. The address for such
notices and communications shall be as set forth on the signature pages attached
hereto.

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

6.4 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.

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

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6.6 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.

6.7 Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of the Transaction Documents shall be governed by
and construed and enforced in accordance with the internal laws of the State of
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 and
any other Transaction Documents (whether brought against a party hereto or its
respective affiliates, directors, officers, shareholders, partners, members,
employees or agents) shall be commenced exclusively in the state and federal
courts sitting in the City of New York. Each party hereby irrevocably submits to
the exclusive jurisdiction of the state and federal courts sitting in the City
of New York, Borough of Manhattan for the adjudication of any dispute hereunder
or in connection herewith or with any transaction contemplated hereby or
discussed herein (including with respect to the enforcement of any of the
Transaction Documents), and hereby irrevocably waives, and agrees not to assert
in any suit, action or proceeding, any claim that it is not personally subject
to the jurisdiction of any such court, that such suit, action or proceeding is
improper or is an inconvenient venue for such proceeding. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof via
registered or certified mail or overnight delivery (with evidence of delivery)
to such party at the address in effect for notices to it under this Agreement
and agrees that such service shall constitute good and sufficient service of
process and notice thereof. Nothing contained herein shall be deemed to limit in
any way any right to serve process in any other manner permitted by law. If
either party shall commence an action, suit or proceeding to enforce any
provisions of the Transaction Documents, then, in addition to the obligations of
the Company under Section 5.14 the prevailing party in such action, suit 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.

6.8 Survival. The representations and warranties contained herein shall survive
each applicable Closing and the delivery of the Securities.

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

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

6.11 Rescission and Withdrawal Right. Notwithstanding anything to the contrary
contained in (and without limiting any similar provisions of) any of the other
Transaction Documents, whenever a Purchaser exercises a right, election, demand
or option under a Transaction Document and the Company does not timely perform
its related obligations within the periods therein provided, then Purchaser may
rescind or withdraw, in its sole discretion from time to time upon written
notice to the Company, any relevant notice, demand or election in whole or in
part without prejudice to its future actions and rights; provided, however, that
in the case of a rescission of a conversion of the Preferred Stock or exercise
of a Warrant, the Purchaser shall be required to return any shares of Common
Stock subject to any such rescinded conversion or exercise notice concurrently
with the return to Purchaser of the aggregate exercise price paid to the Company
for such shares and the restoration of Purchaser’s right to acquire such shares
pursuant to Purchaser’s Warrant (including, issuance of a replacement warrant
certificate evidencing such restored right).

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

6.13 Remedies. In addition to being entitled to exercise all rights provided
herein or granted by law, including recovery of damages, Purchasers and the
Company will be entitled to specific performance under the Transaction
Documents. The parties agree that monetary damages may not be adequate
compensation for any loss incurred by reason of any breach of obligations
contained in the Transaction Documents and hereby 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.

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

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

6.16 Liquidated Damages. The Company’s obligations to pay any partial liquidated
damages or other amounts owing under the Transaction Documents is a continuing
obligation of the Company and shall not terminate until all unpaid partial
liquidated damages and other amounts have been paid notwithstanding the fact
that the instrument or security pursuant to which such partial liquidated
damages or other amounts are due and payable shall have been canceled.

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

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6.18 Construction. The parties agree that each of them and/or their respective
counsel have reviewed and had an opportunity to revise the Transaction Documents
and, therefore, the normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not be employed
in the interpretation of the Transaction Documents or any amendments thereto. In
addition, each and every reference to share prices and shares of Common Stock in
any Transaction Document 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.

6.19 WAIVER OF JURY TRIAL. IN ANY ACTION, SUIT, OR PROCEEDING IN ANY
JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE PARTIES EACH
KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW,
HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY WAIVES FOREVER
TRIAL BY JURY.

 

(Signature Pages Follow)

38

 

Signature Page for Individuals:

 

IN WITNESS WHEREOF, Purchaser has caused this Stock Purchase Agreement to be
executed as of the date indicated below.

 

$____________________________________

 

___________________________________

Purchase Price ($5.00 per share)

 

Number of Shares ____________________________________
___________________________________

Print or Type Name

 

Print or Type Name (Joint-owner)

 

____________________________________ ___________________________________

Signature

 

Signature (Joint-owner)

 

___________________________________ __________________________________

Date

 

Date (Joint-owner)

 

____________________________________ ___________________________________

Social Security Number

 

Social Security Number (Joint-owner)

 

___________________________________

____________________________________

 

___________________________________ ____________________________________ Address
Address (Joint-owner)

 

          _______ Joint Tenancy                ______ Tenants in Common

 

             Tenancy by the Entirety

Closing Subscription Amount: US$________________

 

Closing Warrants: ___________________

 

Beneficial Ownership Limitation: _________%

 

Wiring Instructions:

 

Bank Name:     ABA #:     Swift Code:     Acct. Name:    

39

 

Partnerships, Corporations or Other Entities:

IN WITNESS WHEREOF, Purchaser has caused this Stock Purchase Agreement to be
executed as of the date indicated below.

 

$        Total Purchase Price ($5.00 per share)   Number of Shares              
          Print or Type Name of Entity                             Address      
                      Taxpayer I.D. No. (if applicable)                  Date  
                      By:     Signature: Name:   Print or Type Name and Indicate
           Title:               Title or Position with Entity

 

 

Closing Subscription Amount: US$________________

 

Closing Warrants: ___________________

 

Beneficial Ownership Limitation: _________%

 

Wiring Instructions:

Bank Name:     ABA #:     Swift Code:     Acct. Name:    

 

40

 

Company Execution Page for Stock Purchase Agreement

IN WITNESS WHEREOF, the Company has caused this Stock Purchase Agreement to be
executed, and the foregoing subscription accepted, as of the date indicated
below.

 

DATARAM CORPORATION

 

By: __________________________________

Name:

Title:

 

 

 

Date: October 6, 2014

 

 

 

 

EXHIBIT A

SCHEDULE OF PURCHASERS (Tranche A Closing)

Purchaser Name and Address Amount of Shares Purchase Price

Isaac Capital Group, LLC

3525 Del Mar Heights Road

Suite 765

San Diego, CA 92130

400,000 $2,000,000

Alpha Capital Anstalt

Pradafant 7

9490 Furstentums

Vaduz, Liechtenstein

100,000 $500,000

Brio Capital Master Fund Ltd.

100 Merrick Road

Suite 401W

Rockville Center, NY 11570

40,000 $200,000

Momona Capital

510 Madison Avenue

New York, NY 10022

20,000 $100,000

Osher Capital Partners LLC

5 Sansberry Lane

Spring Valley, NY 10977

40,000 $200,000 Total 600,000 $3,000,000

 

 

 

 

EXHIBIT B

CERTIFICATE OF DESIGNATION

(See attached)

 

 

 

EXHIBIT C

WARRANT

(See attached)

 

 

EXHIBIT D

CERTIFICATE OF INCORPORATION

(See Attached)

 

 

EXHIBIT E

LEGAL OPINION

 

 

 

EXHIBIT F

PREFERED STOCK CERTIFICATE

 

 

 

EXHIBIT G

SCHEDULE OF PURCHASERS (Subsequent Tranches)

Purchaser Name and Address Amount of Shares (up to) Purchase Price (up to)
Percentage of Subsequent Tranche Share Total

Isaac Capital Group, LLC

3525 Del Mar Heights Road

Suite 765

San Diego, CA 92130

600,000 $3,000,000 85.71%

Alpha Capital Anstalt

Pradafant 7

9490 Furstentums

Vaduz, Liechtenstein

50,000 $250,000 7.14%

Brio Capital Master Fund Ltd.

100 Merrick Road

Suite 401W

Rockville Center, NY 11570

20,000 $100,000 2.86%

Momona Capital

510 Madison Avenue

New York, NY 10022

10,000 $50,000 1.43%

Osher Capital Partners LLC

5 Sansberry Lane

Spring Valley, NY 10977

20,000 $100,000 2.86% Total 700,000 $3,500,000 100%