SECURITIES PURCHASE AGREEMENT

 

This Securities Purchase Agreement (this “Agreement”), dated as of June 26,
2012, is made by and between NanoViricides, Inc., a Nevada corporation (the
“Company”), and Seaside 88, LP, a Florida limited partnership (the “Purchaser”).

 

WHEREAS, subject to the terms and conditions set forth in this Agreement and
pursuant to the Registration Statement (as defined below), the Company desires
to issue and sell to the Purchaser, and the Purchaser desires to purchase from
the Company, securities of the Company as more fully described in this
Agreement.

 

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

 

ARTICLE I.
DEFINITIONS

 

1.1              Definitions. In addition to the terms defined elsewhere in this
Agreement, for all purposes of this Agreement, the following terms have the
meanings set forth in this Section 1.1:

 

“20-Day VWAP” means the daily volume weighted average of actual trading prices
(measured in hundredths of cents) during normal trading hours of the Common
Stock of the Company on the Trading Market for the twenty (20) consecutive
Trading Days ending on the last Trading Day immediately preceding a Conversion
Date.

 

“Acquiring Person” shall have the meaning ascribed to such term in Section 4.4.

 

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

 

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

 

“Agreement” shall have the meaning ascribed to such term in the introduction
hereof, as the same may be amended from time to time.

 

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

 

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

 

“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.

1

 

 

“Certificate of Designation” means the Certificate of Designation, Rights and
Preferences of the Series C Stock as filed with the Secretary of State of the
State of Nevada.

 

“Closing” means the Initial Closing and the Subsequent Closing.

 

“Closing Dates” means the Initial Closing Date and the Subsequent Closing Date.

 

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

 

“Common Stock” means the common stock of the Company, par value $0.001 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 its
Subsidiaries that 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” shall have the meaning ascribed to such term in the introduction
hereof, including any successor or assign thereof.

 

“Company Counsel” means Tarter Krinsky & Drogin LLP, 1350 Broadway, New York, NY
10018.

 

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

 

“Conversion Shares” means the shares of Common Stock issued or issuable to the
Purchaser upon conversion of the Shares.

 

“Conversion Volume Amount” means an amount equal to fifteen percent (15%) of the
total number of shares of Common Stock traded during the ten (10) Trading Days
preceding a Conversion Date, as reported by Bloomberg Financial Markets, rounded
up to the nearest whole number.

 

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

 

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

 

“Floor” shall mean $0.20 (as the same may be proportionately adjusted in respect
of any stock split, stock dividend, combination, recapitalization or the like
with respect to the Common Stock).

 

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

2

 

 

“Initial Closing” means the closing of the purchase and sale of the first 2,500
Shares pursuant to Section 2.2.

 

“Initial Closing Date” means the Trading Day on which all of the Transaction
Documents have been executed and delivered by the applicable parties thereto,
and all conditions precedent to (i) the Purchaser’s obligations to pay the
Subscription Amount for the first tranche of 2,500 Shares and (ii) the Company’s
obligations to deliver such 2,500 Shares, in each case, have been satisfied or
waived, but in no event later than the third (3rd) Trading Day following the
date hereof.

 

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

 

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

 

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

 

“Per Share Purchase Price” equals $1,000.00, subject to adjustment for reverse
and forward stock splits, stock dividends, stock combinations and other similar
transactions that occur after the date of this Agreement.

 

“Per Share Conversion Price” shall be an amount equal to the lower of (i) the
daily volume weighted average of actual trading prices (measured in hundredths
of cents) during normal trading hours of the Common Stock on the Trading Market
for the ten (10) consecutive Trading Days ending on the last Trading Day
immediately preceding a Conversion Date, as reported by Bloomberg Financial
Markets, multiplied by 0.85 and (ii) the daily volume weighted average of actual
trading prices (measured in hundredths of cents) during normal trading hours of
the Common Stock on the Trading Market for the Trading Day immediately preceding
a Conversion Date, as reported by Bloomberg Financial Markets, multiplied by
0.88.

 

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

 

“Person” means an individual, 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.

 

“Prospectus Supplement” means the supplement or supplements to the base
prospectus contained in the Registration Statement to be filed in connection
with the sale to the Purchaser, and the resale by the Purchaser, of the
Securities.

 

“Purchaser” shall have the meaning ascribed to such term in the introduction
hereof, including any successor or assign thereof.

 

“Purchaser Party” shall have the meaning ascribed to such term in Section 4.7.

3

 

 

“Registration Statement” means the registration statement of the Company,
Commission File No. 333-165221, as the same may amended from time to time,
covering the issuance and sale to the Purchaser, and the resale by the
Purchaser, of the Securities.

 

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

 

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

 

“Rule 424” means Rule 424 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 Shares and the Conversion Shares.

 

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

 

“Series C Stock” means the shares of Series C Convertible Preferred Stock,
$0.001 par value per share, of the Company.

 

“Share Amount” means the number of Shares to be converted by Purchaser on a
Conversion Date, such number to be equal to the quotient, calculated to four
places to the right of the decimal point, determined by dividing (a) the product
of the Conversion Volume Amount and the Per Share Conversion Price by (b) the
Per Share Purchase Price, subject to the limitations set forth in Section 2.6(f)
and 2.7 herein.

 

“Share Limit” shall have the meaning ascribed to such term in Section 2.6(f).

 

“Shares” means the shares of Series C Stock issued to the Purchaser pursuant to
this Agreement.

 

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

 

“Subscription Amount” shall have the meaning ascribed to such term in Section
2.4(b)(ii).

 

“Subsequent Closing” means the closing of the purchase and sale of the second
2,500 Shares pursuant to Section 2.3.

4

 

 

“Subsequent Closing Date” means the day that is ten (10) Business Days
subsequent to the final Conversion Date on which the last of the Shares issued
and sold in the Initial Closing have been converted into Common Stock (or, if
any such day is not a Trading Day, then the first day thereafter that is a
Trading Day), or such later date when all conditions precedent to (i) the
Purchaser’s obligations to purchase the second tranche of 2,500 Shares and (ii)
the Seller’s obligations to deliver such 2,500 Shares at the Subsequent Closing
have been satisfied or waived, unless this Agreement is earlier terminated
pursuant to the terms hereof.

 

“Subsidiary” means any subsidiary of the Company 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.

 

“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 New
York Stock Exchange, the NYSE Alternext Exchange, the NYSE Amex, the Nasdaq
Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the
Over-The-Counter Bulletin Board or the OTCQX (or any successors to any of the
foregoing).

 

“Transaction Documents” means this Agreement and all schedules hereto (including
the Disclosure Schedules) and any other documents or agreements executed in
connection with the transactions contemplated hereunder.

 

“Transfer Agent” means Corporate Stock Transfer, Inc., the current transfer
agent of the Company, with a mailing address of 3200 Cherry Creek Drive South,
Suite 430, Denver, CO 80209 and a facsimile number of (302) 282-5800, and any
successor transfer agent of the Company.

 

ARTICLE II.
PURCHASE AND SALE

 

2.1              Sale and Issuance of the Series C Stock.

 

(a)                On or before the Initial Closing Date, the Company shall
adopt and file with the Secretary of State of the State of Nevada the
Certificate of Designation for the Series C Stock in the form of Exhibit A
attached hereto and made a part hereof (the “Certificate of Designation”).

 

(b)               On the terms and subject to the conditions set forth in this
Agreement, at each Closing the Purchaser agrees to purchase, and the Company
agrees to sell, the applicable number of shares of the Series C Stock at the Per
Share Purchase Price.

 

2.2              Initial Closing. On the Initial Closing Date, upon the terms
and subject to the conditions set forth herein, the Company shall issue and sell
to the Purchaser, in book entry form to be maintained by the Company, and the
Purchaser shall purchase from the Company, 2,500 shares of Series C Stock at the
Per Share Purchase Price. Upon satisfaction or waiver of the covenants and
conditions set forth in Sections 2.4 and 2.5, the Initial Closing shall occur
remotely via the exchange of documents and signatures on the Initial Closing
Date.

5

 

 

2.3              Subsequent Closing. On the Subsequent Closing Date, upon the
terms and subject to the conditions set forth herein, the Company shall issue
and sell to the Purchaser, in book entry form to be maintained by the Company,
and the Purchaser shall purchase from the Company, 2,500 shares of Series C
Stock at the Per Share Purchase Price. Upon satisfaction or waiver of the
covenants and conditions set forth in Sections 2.4 and 2.5, the Subsequent
Closing shall occur remotely via the exchange of documents and signatures on the
Subsequent Closing Date.

 

2.4              Deliveries.

 

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

 

(i)                 solely on the Initial Closing Date, this Agreement duly
executed by the Company;

 

(ii)               the opinion of Company Counsel, substantially in the form of
Exhibit B hereto;

 

(iii)             an officer’s certificate of the Company’s Chief Executive
Officer or Chief Financial Officer in the form of Exhibit C attached hereto; and

 

(iv)             a certificate evidencing the number of Shares to be purchased
by the Purchaser at such Closing, registered in the name of the Purchaser.

 

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

 

(i)                 solely on the Initial Closing Date, this Agreement duly
executed by the Purchaser; and

 

(ii)               funds in United States Dollars in an amount equal to the Per
Share Purchase Price multiplied by the number of Shares to be purchased by the
Purchaser at such Closing (the “Subscription Amount”), in each case less the
amount due the Purchaser for reimbursement of its expenses pursuant to Section
5.2 hereof, by wire transfer to the account as specified in writing by the
Company.

 

2.5              Closing Conditions.

 

(a)                The obligations of the Company hereunder to sell Shares at a
Closing are subject to the satisfaction by the Purchaser, or waiver by the
Company, of each of the following conditions:

 

(i)                 the representations and warranties of the Purchaser
contained herein shall be true and correct as of the Closing Date (unless such
representations and warranties speak as of a specific date, in which case they
shall be true and correct as of such date);

6

 

 

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

 

(iii)             the Purchaser shall have delivered the items set forth in
Section 2.4(b) of this Agreement applicable for such Closing.

 

(b)               The obligations of the Purchaser hereunder to acquire Shares
at a Closing are subject to the satisfaction by the Company, or waiver by the
Purchaser, of each of the following conditions:

 

(i)                 the representations and warranties of the Company contained
herein shall be true and correct as of the Closing Date (unless such
representations and warranties speak as of a specific date, in which case they
shall be true and correct as of such date);

 

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

 

(iii)             the Company shall have delivered the items set forth in
Section 2.4(a) of this Agreement applicable for such Closing;

 

(iv)             the Company shall have obtained all authorizations, approvals
and permits, if any, of any Person required in connection with the lawful
issuance and sale of the Shares to the Purchaser at such Closing, and all such
authorizations, approvals and permits shall be effective as of such Closing;

 

(v)               there shall have been no Material Adverse Effect with respect
to the Company since the date hereof;

 

(vi)             the Registration Statement shall be in full force and effect;
and

 

(vii)           from the date hereof to the Closing Date, trading in the Common
Stock shall not have been suspended by the Commission or the Company’s principal
Trading Market, and, at any time prior to the Closing Date, trading in
securities generally as reported by Bloomberg L.P. shall not have been suspended
or limited, or minimum prices shall not have been established on securities
whose trades are reported by such service, or on any Trading Market, nor shall a
banking moratorium have been declared either by the United States or New York
State authorities, nor shall there have occurred any material outbreak or
escalation of hostilities or other national or international calamity of such
magnitude in its effect on, or any material adverse change in, any financial
market which, in each case, in the reasonable judgment of the Purchaser, makes
it impracticable or inadvisable to purchase the Shares at the Closing.

7

 

 

2.6              Automatic Conversion of Shares; Conversion Dates; Per Share
Conversion Price.

 

(a)                Each of the Company and Purchaser agrees that, (i) on each of
the Initial Closing Date and the Subsequent Closing Date, the Share Amount shall
automatically convert, without any action on the part of the Purchaser, into
shares of Common Stock of the Company, and (ii) on every fourteenth (14th) day
after each of the Initial Closing Date and Subsequent Closing Date (or, if such
day in not a Trading Day, then the first day thereafter that is a Trading Day)
(each, a “Conversion Date”), the Share Amount shall automatically convert (or
such lesser number of Shares that then remains unconverted), without any action
on the part of the Purchaser, into shares of Common Stock of the Company until
all of the Shares have been converted, in each case subject to the conditions to
conversion set forth herein and the limitations set forth in Sections 2.6(f) and
2.7 herein.

 

(b)               No conversion shall occur on a Conversion Date unless the
following conditions are met:

 

(i)                 the 20-Day VWAP as calculated with respect to such
Conversion Date shall equal or exceed the Floor;

 

(ii)               the Registration Statement shall be in full force and effect;
and

 

(iii)             as of the Conversion Date, trading in the Common Stock shall
not have been suspended by the Commission or the Company’s principal Trading
Market, and, at any time prior to the Conversion Date, trading in securities
generally as reported by Bloomberg L.P. shall not have been suspended or
limited, or minimum prices shall not have been established on securities whose
trades are reported by such service, or on any Trading Market, nor shall a
banking moratorium have been declared either by the United States or New York
State authorities, nor shall there have occurred any material outbreak or
escalation of hostilities or other national or international calamity of such
magnitude in its effect on, or any material adverse change in, any financial
market which, in each case, in the reasonable judgment of the Purchaser, makes
it impracticable or inadvisable to sell the Conversion Shares issuable in
connection with such conversion.

 

(c)                For each Conversion Date for which all conditions to
conversion have been satisfied, the Share Amount shall be convertible into the
number of shares of Common Stock that results from dividing (x) the product of
the Per Share Purchase Price and the Share Amount by (y) the Per Share
Conversion Price in effect at the time of conversion for each Share being
converted. The Per Share Conversion Price shall be subject to adjustment from
time to time as provided in the Certificate of Designation. On each Conversion
Date that occurs, the Company shall deliver or cause to be delivered to the
Purchaser the number of Conversion Shares issuable on each such Conversion Date,
registered in the name of the Purchaser, via the DTC DWAC system, as specified
on the signature page hereto, subject to the limitation set forth in Section
2.6(f) below.

8

 

 

(d)               If, with respect to any Conversion Date, the Floor is not met
or the Registration Statement is not in full force and effect, then no
conversion of Shares will occur on such Conversion Date. With respect to any
Conversion Date on which no conversion of Shares occurs due to the failure of
the Registration Statement to be in full force and effect, the redemption rights
set forth in the Certificate of Designation shall be available to the Purchaser
with respect to such Securities. With respect to any Conversion Date on which no
conversion of Shares occurs due to the failure of the Floor to be met, the
Shares not converted on such Conversion Date shall be added to the Shares to be
converted on the following Conversion Date.

 

(e)                In connection with each conversion on a Conversion Date, the
Company shall provide irrevocable instructions to the Transfer Agent instructing
the Transfer Agent to deliver, via the DWAC DTC system, the number of Conversion
Shares to be issued to the Purchaser at each such Conversion Date, registered in
the name of the Purchaser as specified on the signature page hereto.

 

(f)                Notwithstanding anything contained herein to the contrary,
if, with respect to any Conversion Date, the proposed number of Conversion
Shares to be received by the Purchaser on such Conversion Date is greater than
two (2) times the number of Conversion Shares received by the Purchaser on the
immediately preceding Conversion Date (the “Share Limit”), then Purchaser shall
have the option to reduce the number of Shares converted on such Conversion Date
such that the number of Conversion Shares to be received by Purchaser on such
Conversion Date is an amount equal to as near as possible the applicable Share
Limit.

 

2.7              Ownership Limitation. In no event, as a result of any
conversion or otherwise, shall the Purchaser own, beneficially or of record,
more than 4.99% of the issued and outstanding Common Stock of the Company
immediately after such conversion or other event.

 

ARTICLE III.
REPRESENTATIONS AND WARRANTIES

 

3.1              Representations and Warranties of the Company. Except as set
forth in the corresponding section of the disclosure schedules delivered
concurrently herewith (the “Disclosure Schedules”), which Disclosure Schedules
may be updated in connection with the Subsequent Closing and which shall be
deemed a part hereof and shall qualify any representation made herein 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 the Purchaser:

 

(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 such securities. If the Company has no subsidiaries, all other
references to the Subsidiaries or any of them in the Transaction Documents shall
be disregarded.

9

 

 

(b)               Organization and Qualification. Each of the Company and its
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 or default of
any of the provisions of its respective certificate or articles of
incorporation, bylaws or other organizational or charter documents. Each of the
Company and its 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 a material adverse effect on (i) the legality, validity or enforceability of
any Transaction Document, (ii) the results of operations, assets, business,
prospects or condition (financial or otherwise) of the Company and the
Subsidiaries, taken as a whole, or (iii) 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”). No Action 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 to
which it is a party and otherwise to carry out its obligations hereunder and
thereunder. The execution and delivery of this Agreement and each of the other
Transaction Documents to which it is a party 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 therewith other than in connection with the Required
Approvals (as defined below). Each 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 its terms, 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.

 

(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, and the consummation by the Company of the transactions contemplated
hereby and thereby (including without limitation the issuance and sale of the
Securities), 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) subject to the Required Approvals, conflict with or result in a violation
of any law, rule, regulation, order, judgment, injunction, decree or other
restriction of any court or governmental authority to which the Company or a
Subsidiary is subject (including federal and state securities laws and
regulations), or by which any property or asset of the Company or a Subsidiary
is bound or affected, except in the case of clause (ii), such as could not have
or reasonably be expected to result in a Material Adverse Effect.

10

 

 

(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 4.3 of this Agreement,
and (ii) such filings, if any, as are required to be made under applicable state
securities laws (collectively, the “Required Approvals”).

 

(f)                Issuance of the Securities. The Securities are duly
authorized and, when issued and paid for in accordance with the applicable
Transaction Documents, will be duly and validly issued, fully paid and
nonassessable, free and clear of all Liens imposed by the Company other than
restrictions on transfer provided for in the Transaction Documents. The Company
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
the Shares on each Conversion Date, such number of its shares of Common Stock as
shall from time to time be sufficient to effect the conversion of all
outstanding Shares. The issuance by the Company to the Purchaser, and the resale
by the Purchaser, of the Securities have been registered under the Securities
Act and all of the Conversion Shares when delivered will be freely transferable
and tradable on the Trading Market by the Purchaser without restriction (other
than any restrictions arising solely from an act or omission of the Purchaser).
The Registration Statement is effective and available for the issuance or resale
of the Securities thereunder and the Company has not received any notice that
the Commission has issued or intends to issue a stop-order with respect to the
Registration Statement or that the Commission otherwise has suspended or
withdrawn the effectiveness of the Registration Statement, either temporarily or
permanently, or intends or has threatened in writing to do so. The “Plan of
Distribution” section under the Registration Statement as supplemented by the
Prospectus Supplement permits the issuance and sale or resale of the Securities,
including the Conversion Shares.

11

 

 

(g)               Capitalization. The capitalization of the Company is as set
forth on Schedule 3.1(g), which Schedule 3.1(g) shall also include the number of
shares of Common Stock owned beneficially, and of record, by Affiliates of the
Company as of the date hereof. The Company has not issued any capital stock
since its most recently filed periodic or current report under the Exchange Act,
other than (i) in payment for goods or services, (ii) pursuant to the Company’s
employee compensation agreements, (iii) upon the exercise of employee stock
options under the Company’s stock option plans, (iv) to employees pursuant to
the Company’s employee stock purchase plans and (v) 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. Except as a result of the purchase and sale of the Securities or as
set forth on Schedule 3.1(g), there are no outstanding options, warrants, scrip
rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities, rights or obligations convertible into or
exercisable or exchangeable for, or giving any Person any right to subscribe for
or acquire any shares of Common Stock, or contracts, commitments, understandings
or arrangements by which the Company or any Subsidiary is or may become bound to
issue additional shares of Common Stock or Common Stock Equivalents. The
issuance and sale of the Securities will not obligate the Company to issue
shares of Common Stock or other securities to any Person (other than the
Purchaser) and will not result in a right of any holder of Company securities to
adjust the exercise, conversion, exchange or reset price under any of such
securities. All of the outstanding shares of capital stock of the Company are
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. There are no stockholder 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 (2) 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”) and any notices, reports or other filings pursuant
to applicable requirements of the Trading Market, on a timely basis or has
received a valid extension of such time of filing and has filed any such SEC
Reports and notices, reports or other filings pursuant to applicable
requirements of the Trading Market 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 (i) 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 (ii)
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.

12

 

 

(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 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 one (1) Trading Day prior to the date that this representation is made.

 

(j)                 Litigation. There is no claim, 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 or assets before or by any court, arbitrator,
governmental or administrative agency or regulatory authority (federal, state,
county, local or foreign, and including without limitation an informal
investigation or partial proceeding, such as a deposition) (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 (in his or her capacity as such), 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 (in his or her capacity as
such). 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 and, to the Company’s
knowledge, no proceeding for such purpose is pending before or threatened by the
Commission.

13

 

 

(k)               Labor Relations. No material labor dispute exists or, to the
knowledge of the Company, is imminent with respect to any of the employees of
the Company, which dispute 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. No executive officer, to
the knowledge of the Company, 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
governmental body 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 and foreign regulatory authorities necessary to conduct their
respective businesses as described in the SEC Reports (“Permits”), except where
the failure to possess such Permits could not reasonably be expected to result
in a Material Adverse Effect, and neither the Company nor any Subsidiary has
received any notice of Actions relating to the revocation or modification of any
Permit.

14

 

 

(n)               Title to Assets. The Company and the Subsidiaries have good
and marketable title 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, 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)               Patents and Trademarks. 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 material 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”). None of, and
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,
misappropriate or infringe upon the rights of any Person. 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 items of intellectual
property (whether owned or licensed), 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. 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.

 

(q)               Transactions With Affiliates and Employees. Except as set
forth in the SEC Reports, none of the officers or directors of the Company and,
to the knowledge of the Company, none of the employees of the Company is
presently a party to any transaction with the Company or any Subsidiary (other
than for services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
knowledge of the Company, any entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner, in each case 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.

15

 

 

(r)                 Sarbanes-Oxley; Internal Accounting Controls. The Company is
and shall be as of each Closing Date in compliance with any and all applicable
requirements of the Sarbanes-Oxley Act of 2002 that are effective as of the date
hereof and thereof, and any and all applicable rules and regulations promulgated
by the Commission thereunder that are effective as of the date hereof and as of
such 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 has established disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company 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.

 

(s)                Certain Fees. Except for a fee payable to Midtown Partners &
Co., LLC (such broker or its successor or assign, the “Broker”), no brokerage or
finder’s fees or commissions are or will be payable by the Company to any
broker, financial advisor or consultant, finder, placement agent, investment
banker, bank or other Person with respect to the transactions contemplated by
the Transaction Documents. The 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 herein that may be due in connection with the
transactions contemplated by the Transaction Documents.

 

(t)                 Investment Company. The Company is not, and is not an
Affiliate of, and immediately after receipt of payment for the Shares, 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.

 

(u)               Listing and Maintenance Requirements. The Company’s Common
Stock is registered pursuant to Section 12(g) of the Exchange Act, and the
Company has taken no action designed to, or which to its knowledge is likely to
have the effect of, terminating the registration of the Common Stock under the
Exchange Act, nor has the Company received any notification that the Commission
is contemplating terminating such registration. The Company has not, in the
twelve (12) months preceding the date hereof, received notice from any Trading
Market on which the Common Stock is or has been listed or quoted to the effect
that the Company does not comply with the listing or maintenance requirements of
such Trading Market. The Company is, and has no reason to believe that it will
not in the foreseeable future continue to be, in compliance with all such
listing and maintenance requirements. The issuance and sale of the Shares
hereunder does not contravene the rules and regulations of the Trading Market.

16

 

 

(v)               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) and the laws of its state of incorporation that is or
could become applicable to the Purchaser as a result of the Purchaser and the
Company fulfilling their respective obligations or exercising their respective
rights under the Transaction Documents, including without limitation as a result
of the Company’s issuance of the Securities and the Purchaser’s ownership of the
Securities.

 

(w)             Effective Registration Statement. The Registration Statement has
been declared effective by the Commission and remains effective as of the date
hereof and the Company knows of no reason why the Registration Statement will
not continue to remain effective for the foreseeable future. The Company is
eligible to use Form S-3 registration statements for the issuance of securities.

 

(x)               Disclosure. The Company confirms that neither it nor any other
Person acting on its behalf (as such term is used in Regulation FD) has provided
the Purchaser or its agents or counsel with any information that constitutes or
might reasonably be expected to constitute material, non-public information
except insofar as the existence and terms of the proposed transactions hereunder
may constitute such information. The Company understands and confirms that the
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 the Purchaser regarding the Company, its business and the
transactions contemplated hereby, including the Disclosure Schedules to this
Agreement, is true and correct and does not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading.

 

(y)               Solvency. Based on the consolidated financial condition of the
Company as of the Closing Date, after giving effect to the receipt by the
Company of the proceeds from the sale of the Shares 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 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 that lead it to believe
that it will file for reorganization or liquidation under the bankruptcy or
reorganization laws of any jurisdiction within one (1) year from the last
Closing Date hereunder.

17

 

 

(z)                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 each Subsidiary (i) has made or filed all 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, 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 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.

 

(aa)Acknowledgment Regarding the Purchaser’s Acquisition of the Securities. The
Company acknowledges and agrees that the 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
the 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 the Purchaser or its
representatives or agents in connection with the Transaction Documents and the
transactions contemplated thereby is merely incidental to the Purchaser’s
acquisition of the Securities. The Company further represents to the Purchaser
that the Company’s decision to enter into this Agreement and the other
Transaction Documents has been based solely on the independent evaluation of the
transactions contemplated hereby and thereby by the Company and its
representatives.

 

(bb)           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, other than, in the case of clauses (ii) and (iii),
compensation paid to the Company’s placement agent (if any) in connection with
the placement of the Securities.

 

(cc)            Stock Option Plans. Each stock option granted by the Company
under the Company’s stock option plans was granted (i) in accordance with the
terms of the applicable Company 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 any of the Company’s stock option plans 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.

18

 

 

3.2              Representations and Warranties of the Purchaser. The Purchaser
makes the following representations and warranties to the Company:

 

(a)                Organization; Authority. The Purchaser is a limited
partnership duly organized, validly existing and in good standing under the laws
of the State of Florida, with full right, power and authority to enter into and
to consummate the transactions contemplated by this Agreement and the other
Transaction Documents to which it is a party and otherwise to carry out its
obligations hereunder and thereunder. The execution and delivery of this
Agreement and the other Transaction Documents to which it is a party by the
Purchaser and performance by the Purchaser of the transactions contemplated
hereby and thereby have been duly authorized by all necessary action on the part
of the Purchaser and no such further action is required. Each Transaction
Document to which the Purchaser is a party has been duly executed by the
Purchaser, and when delivered by the Purchaser in accordance with the terms
hereof, will constitute the valid and legally binding obligation of the
Purchaser, enforceable against it in accordance with its terms, except: (i) as
limited by general equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors’ rights generally, (ii) as limited by laws relating to
the availability of specific performance, injunctive relief or other equitable
remedies and (iii) insofar as indemnification and contribution provisions may be
limited by applicable law.

 

(b)               Experience of The Purchaser. The Purchaser, either alone or
together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating
the merits and risks of the prospective investment in the Securities, and has so
evaluated the merits and risks of such investment. The 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.

 

(c)                Short Sales. The Purchaser has not directly or indirectly
executed any Short Sales or other hedging transactions in the securities of the
Company through the date hereof.

 

The Company acknowledges and agrees that the representations contained in
Section 3.2 shall not modify, amend or affect the 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.
OTHER AGREEMENTS OF THE PARTIES

 

4.1              No Transfer Restrictions. Certificates evidencing the
Securities shall not contain any legend restricting their transferability by the
Purchaser. The Company shall cause its counsel to issue a legal opinion to the
Company’s Transfer Agent if required by the Transfer Agent to effect a transfer
of any of the Securities; such opinion shall be provided by the Company’s
counsel at no expense to the Purchaser.

19

 

 

4.2              Furnishing of Information; Public Information. As long as the
Purchaser owns any Securities, the Company covenants to use its best efforts 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 Section 15(d) of the Exchange Act even if the
Company is not then subject to the reporting requirements of the Exchange Act.
As long as the Purchaser owns Securities that are “restricted securities” as
that term is defined in Rule 144 that it has held for less than one (1) year in
accordance with Rule 144(d), if the Company is not required to file reports
pursuant to the Exchange Act, it will prepare and furnish to the Purchaser and
make publicly available in accordance with Rule 144(c) such information as is
required for the Purchaser to sell the Securities. The Company further covenants
that it will undertake its best efforts to take such further action as any
holder of Securities may reasonably request, to the extent required from time to
time to enable such Person to sell such Securities without registration under
the Securities Act, including without limitation, within the requirements of the
exemption provided by Rule 144.

 

4.3              Securities Laws Disclosure; Publicity. The Company shall timely
issue and file a Current Report on Form 8-K and press release disclosing the
material terms of the transactions contemplated hereby, and including the
Transaction Documents as exhibits to such Current Report on Form 8-K, in each
case reasonably acceptable to the Purchaser and its counsel. From and after the
issuance of such press release, the Company shall have publicly disclosed all
material, non-public information delivered to the Purchaser by the Company or
any of its Subsidiaries, or any of their respective officers, directors,
employees or agents, in connection with the transactions contemplated by the
Transaction Documents. The Company and the Purchaser shall consult with each
other in issuing any press releases with respect to the transactions
contemplated hereby, and neither the Company nor the Purchaser shall issue any
such press release nor otherwise make any such public statement without the
prior consent of the other party.

 

4.4              Shareholder Rights Plan. No claim will be made or enforced by
the Company or, with the consent of the Company, any other Person, that the
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 the Purchaser could be deemed to trigger the provisions of
any such plan or arrangement, by virtue of receiving Securities under the
Transaction Documents or under any other agreement between the Company and the
Purchaser.

 

4.5              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 the Purchaser or its agents or counsel
with any information that the Company believes constitutes material non-public
information, unless prior thereto the Purchaser shall have executed a written
agreement with the Company regarding the confidentiality and use of such
information. The Company understands and confirms that the Purchaser shall be
relying on the foregoing covenant in effecting transactions in securities of the
Company.

20

 

 

4.6              Use of Proceeds. The Company shall use the net proceeds from
the sale of the Securities hereunder for working capital and general corporate
purposes and shall not use such proceeds for: (a) the satisfaction of any
portion of the Company’s debt (other than payment of trade payables in the
ordinary course of the Company’s business consistent with prior practice), (b)
the redemption of any Common Stock or Common Stock Equivalents, (c) the
settlement of any outstanding litigation or (d) in violation of the Foreign
Corrupt Practices Act of 1977, as amended, or any rules or regulations of the
Office of Foreign Assets Control of the U.S. Treasury Department.

 

4.7              Indemnification of the Purchaser. Subject to the provisions of
this Section 4.7, the Company will indemnify and hold the Purchaser, Seaside 88
Advisors, LLC, and their respective directors, officers, shareholders, members,
partners, employees, agents and Affiliates (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 Affiliate, each Person who controls
the 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 a Purchaser
in any capacity, or any of them or their respective Affiliates, by any
stockholder of the Company who is not an Affiliate of the Purchaser, with
respect to any of the transactions contemplated by the Transaction Documents
(unless such action is based upon a breach of the Purchaser’s representations,
warranties or covenants under the Transaction Documents or any agreements or
understandings the Purchaser may have with any such stockholder or any
violations by the Purchaser of state or federal securities laws or any conduct
by the Purchaser which constitutes fraud, gross negligence, willful misconduct
or malfeasance). If any action shall be brought against any Purchaser Party in
respect of which indemnity may be sought pursuant to this Agreement, such
Purchaser Party shall promptly notify the Company in writing, and the Company
shall have the right to assume the defense thereof with counsel of its own
choosing reasonably acceptable to such 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, but only to the extent
that a loss, claim, damage or liability is attributable to any Purchaser Party’s
breach of any of the representations, warranties, covenants or agreements made
by such Purchaser Party in this Agreement or in the other Transaction Documents.
The indemnification required by this Section 4.7 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 law.

21

 

 

4.8              Listing of Common Stock. The Company shall use best efforts to
maintain the listing or quotation (as applicable) of the Common Stock on its
current Trading Market, and concurrently with the Initial Closing the Company
shall apply to list or quote the maximum number of Conversion Shares on such
Trading Market and promptly secure the listing of all of such Conversion Shares
on such Trading Market. The Company further agrees, if the Company applies to
have the Common Stock traded on any other Trading Market, it will then include
in such application all of the Conversion Shares, and will take such other
action as is necessary to cause all of the Conversion Shares to be listed or
quoted on such other Trading Market as promptly as possible. The Company will
then take all action reasonably necessary to continue the listing or quotation
and trading of its Common Stock on a Trading Market and will comply in all
respects with the Company’s reporting, filing and other obligations under the
bylaws or rules of the Trading Market.

 

4.9              Stockholder Approval. The Company shall not issue Conversion
Shares to the Purchaser if such issuance would require stockholder approval
pursuant to applicable rules of the Trading Market unless and until such
stockholder approval is obtained.

 

4.10          Certain Transactions. The Purchaser covenants that neither it, nor
any Affiliate acting on its behalf, will execute any Short Sales of any of the
Company’s securities during the period commencing with the execution of this
Agreement and ending on the Subsequent Closing Date. 

 

4.11          Delivery of Securities After Closing. The Company shall deliver,
or cause to be delivered, the Shares purchased by the Purchaser at a Closing to
the Purchaser within three (3) Trading Days of the applicable Closing Date.

 

ARTICLE V.
MISCELLANEOUS

 

5.1              Termination.  This Agreement may be terminated by the Purchaser
by written notice to the Company if the Initial Closing has not been consummated
on or before July 1, 2012; provided, however, that such termination will not
affect the right of any party to sue for any breach by the other party.

 

5.2              Fees and Expenses. Except as otherwise set forth in this
Agreement and as set forth in this Section 5.2, each party shall pay the fees
and expenses of its own advisers, counsel, accountants and other experts, if
any, and all other expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement. The Company
shall pay all stamp and other taxes and duties levied in connection with the
delivery of the Securities. Notwithstanding the foregoing, (a) at the Initial
Closing, the Company shall reimburse the Purchaser for the fees and expenses of
its counsel, White White & Van Etten PC, in an amount equal to $25,000 and (b)
at the Subsequent Closing, the Company shall reimburse the Purchaser for the
fees and expenses of its counsel, White White & Van Etten PC, in an amount equal
to $12,500, of which $6,250 shall be deducted from the fees owed to the Broker
by the Company. Such legal fees may be withheld by the Purchaser from the
applicable Subscription Amount to be paid for the Shares purchased at the
Initial Closing and Subsequent Closing.

22

 

 

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

 

5.4              Notices. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earliest of: (a) the date of
transmission, if such notice or communication is delivered via facsimile or
electronic mail at the facsimile number or electronic mail address set forth on
the signature pages attached hereto 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 or electronic mail at the
facsimile number or electronic mail address 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 or as otherwise provided by written
notice delivered in compliance with this Section 5.4 by the addressee to the
other party.

 

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

 

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

 

5.7              Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties and their successors and permitted
assigns. The Company may not assign this Agreement or any rights or obligations
hereunder without the prior written consent of the Purchaser (other than by
merger). The Purchaser may assign this Agreement or any rights or obligations
hereunder without the prior written consent of the Company.

 

5.8              No Third-Party Beneficiaries. This Agreement is intended for
the benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except as otherwise set forth in Section 4.8.

23

 

 

5.9              Governing Law. All questions concerning the construction,
validity, enforcement and interpretation of the Transaction Documents shall be
governed by and construed and enforced in accordance with the internal laws of
the State of New York, without regard to the principles of conflicts of law
thereof. The parties hereby waive all rights to a trial by jury. If either party
shall commence an action or proceeding to enforce any provisions of the
Transaction Documents, then the prevailing party in such action or proceeding
shall be reimbursed by the other party for its attorneys’ fees and other costs
and expenses incurred with the investigation, preparation and prosecution of
such action or proceeding.

 

5.10          Survival. The representations and warranties contained herein
shall survive the Closing and the delivery of the Securities.

 

5.11          Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
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.

 

5.12          Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their commercially reasonable efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction.

 

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

 

5.14          Rescission and Withdrawal Right. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions of) the
Transaction Documents, whenever the 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 the
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.

24

 

 

5.15          Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Purchaser 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.

 

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

 

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

 

*           *           *

25

 

 

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

 

 

 

NanoViricides, Inc.

 

 

Address for Notice:

By:_____________________________________

     Name:

     Title:

 

135 Wood Street

Suite 205

West Haven, CT 06516

Attention: Eugene Seymour

Fax: (203)

Email: Eugene@nanoviricides.com

 

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

 

 

Tarter, Krinsky & Drogin LLP

1350 Broadway

New York, NY 10018

Attention: Peter Campitiello, Esq.

Fax: (212) 216-8001

Email: PCampitiello@tarterkrinsky.com

 

Seaside 88, LP

 

By: Seaside 88 Advisors, LLC

Address for Notice:

 

 

By:_____________________________________

     Name: William J. Ritger

     Title: Manager

 

750 Ocean Royale Way, Suite 1101

Juno Beach, FL 33408

Attention: William J. Ritger and

Denis M. O’Donnell, M.D.

Fax: (866) 358-6721

Email: wjr@seaside88.com

 

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

 

 

 

White White & Van Etten PC

55 Cambridge Parkway

Cambridge, MA 02142

Attention: David A. White, Esq.

Fax: (617) 225-0205

Email: daw@wwvlaw.com

 

 

26