Exhibit 10.1

SECURITIES PURCHASE AGREEMENT

This SECURITIES PURCHASE AGREEMENT (the “Agreement”), dated as of May 14, 2015,
is by and between InterCloud Systems, Inc., a Delaware corporation
(the “Company”), and Dominion Capital LLC (the “Investor”).

 

RECITALS

 

A.           The Company and the Investor are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Section 4(a)(2) of the Securities Act of 1933, as amended (the “1933 Act”),
and Rule 506 of Regulation D (“Regulation D”) as promulgated by the United
States Securities and Exchange Commission (the “SEC”) under the 1933 Act.

B.           The Company has authorized the issuance of a senior note in the
original principal amount of $1,000,000, in the form attached hereto as Exhibit
A (the “Note”).

 

C.           The Investor wishes to purchase, and the Company wishes to sell,
upon the terms and conditions stated in this Agreement, the Note.

 

E.           The parties have agreed that the obligation to repay the Note shall
be an unsecured obligation of the Company.

AGREEMENT

NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Investor
hereby agree as follows:

1.PURCHASE AND SALE OF NOTE.

(a)           Note. Subject to the satisfaction (or waiver) of the conditions
set forth in Sections ‎6 and ‎7 below, the Company shall issue and sell to the
Investor, and the Investor shall purchase from the Company on the Closing Date
(as defined below), the Note.

(b)           Closing. The closing (the “Closing”) of the purchase of the Note
by the Investor shall occur at the offices of Pryor Cashman LLP, 7 Times Square,
New York, New York 10036. The date and time of the Closing (the “Closing Date”)
shall be 10:00 a.m., New York time, on the first (1st) Business Day on which the
conditions to the Closing set forth in Sections ‎6 and ‎7 below are satisfied or
waived (or such later date as is mutually agreed to by the Company and the
Investor). As used herein “Business Day” means any day other than a Saturday,
Sunday or other day on which commercial banks in New York, New York are
authorized or required by law to remain closed.

(c)           Purchase Price. The purchase price for the Note to be purchased by
the Investor (the “Purchase Price”) shall be $1,000,000.

 

 

 

 

(d)           Payment of Purchase Price; Delivery of Note. On the Closing Date,
(i) the Investor shall pay the Purchase Price to the Company for the Note by
wire transfer of immediately available funds in accordance with the Company’s
written wire instructions (less the amounts withheld pursuant to Section ‎4(e))
and (ii) the Company shall deliver to the Investor the Note duly executed on
behalf of the Company and registered in the name of the Investor or its
designee.

 

2.INVESTOR’S REPRESENTATIONS AND WARRANTIES.

The Investor represents and warrants to the Company that:

(a)           Organization; Authority. The Investor is an entity duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization with the requisite power and authority to enter into and to
consummate the transactions contemplated by the Transaction Documents (as
defined below) to which it is a party and otherwise to carry out its obligations
hereunder and thereunder.

(b)           No Public Sale or Distribution. The Investor is acquiring the Note
for its own account and not with a view towards, or for resale in connection
with, the public sale or distribution thereof in violation of applicable
securities laws, except pursuant to sales registered or exempted under the 1933
Act; provided, however, by making the representations herein, the Investor does
not agree, or make any representation or warranty, to hold the Note for any
minimum or other specific term and reserves the right to dispose of the Note at
any time in accordance with or pursuant to a registration statement or an
exemption from registration under the 1933 Act. The Investor does not presently
have any agreement or understanding, directly or indirectly, with any Person to
distribute the Note in violation of applicable securities laws.

(c)           Accredited Investor Status. The Investor is an “accredited
investor” as that term is defined in Rule 501(a) of Regulation D.

 

(d)           Reliance on Exemptions. The Investor understands that the Note is
being offered and sold to it in reliance on specific exemptions from the
registration requirements of United States federal and state securities laws and
that the Company is relying in part upon the truth and accuracy of, and the
Investor’s compliance with, the representations, warranties, agreements,
acknowledgments and understandings of such Investor set forth herein in order to
determine the availability of such exemptions and the eligibility of the
Investor to acquire the Note.

 

(e)           Information. The Investor and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Note which
have been requested by the Investor. The Investor and its advisors, if any, have
been afforded the opportunity to ask questions of the Company. The Investor
understands that its investment in the Note involves a high degree of risk. The
Investor has sought such accounting, legal and tax advice as it has considered
necessary to make an informed investment decision with respect to its
acquisition of the Note.

(f)            No Governmental Review. The Investor understands that no United
States federal or state agency or any other government or governmental agency
has passed on or made any recommendation or endorsement of the Note or the
fairness or suitability of the investment in the Note nor have such authorities
passed upon or endorsed the merits of the offering of the Note.

 

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(g)           Transfer or Resale. The Investor understands that: (i) the Note
has not been and is not being registered under the 1933 Act or any state
securities laws, and may not be offered for sale, sold, assigned or transferred
unless (A) subsequently registered thereunder, (B) the Investor shall have
delivered to the Company (if requested by the Company) an opinion of counsel to
the Investor, in a form reasonably acceptable to the Company, to the effect that
the Note to be sold, assigned or transferred may be sold, assigned or
transferred pursuant to an exemption from such registration, or (C) the Investor
provides the Company with reasonable assurance that the Note can be sold,
assigned or transferred pursuant to Rule 144 or Rule 144A promulgated under the
1933 Act (or a successor rule thereto) (collectively, “Rule 144”); (ii) any sale
of the Note made in reliance on Rule 144 may be made only in accordance with the
terms of Rule 144, and further, if Rule 144 is not applicable, any resale of the
Note under circumstances in which the seller (or the Person (as defined below)
through whom the sale is made) may be deemed to be an underwriter (as that term
is defined in the 1933 Act) may require compliance with some other exemption
under the 1933 Act or the rules and regulations of the SEC promulgated
thereunder; and (iii) neither the Company nor any other Person is under any
obligation to register the Note under the 1933 Act or any state securities laws
or to comply with the terms and conditions of any exemption thereunder.

 

(h)           Validity; Enforcement. This Agreement has been duly and validly
authorized, executed and delivered on behalf of the Investor and constitutes the
legal, valid and binding obligations of the Investor enforceable against the
Investor in accordance with its terms, except as such enforceability may be
limited by general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation and other similar laws relating to, or
affecting generally, the enforcement of applicable creditors’ rights and
remedies.

(i)            No Conflicts. The execution, delivery and performance by the
Investor of this Agreement and the consummation by the Investor of the
transactions contemplated hereby will not (i) result in a violation of the
organizational documents of the Investor, (ii) conflict with, or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to which
the Investor is a party or (iii) result in a violation of any law, rule,
regulation, order, judgment or decree (including federal and state securities
laws) applicable to the Investor, except in the case of clauses (ii) and (iii)
above, for such conflicts, defaults, rights or violations which would not,
individually or in the aggregate, reasonably be expected to have a material
adverse effect on the ability of the Investor to perform its obligations
hereunder.

 

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3.REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

The Company represents and warrants to the Investor that:

(a)           Organization and Qualification. Each of the Company and each of
its Subsidiaries are entities duly organized and validly existing and in good
standing under the laws of the jurisdiction in which they are formed, and have
the requisite power and authority to own their properties and to carry on their
business as now being conducted and as presently proposed to be conducted. Each
of the Company and each of its Subsidiaries is duly qualified as a foreign
entity to do business and is in good standing in every jurisdiction in which its
ownership of property or the nature of the business conducted by it makes such
qualification necessary, except to the extent that the failure to be so
qualified or be in good standing would not have a Material Adverse Effect.
“Material Adverse Effect” means any material adverse effect on (i) the business,
properties, assets, liabilities, operations (including results thereof),
condition (financial or otherwise) or prospects of the Company or any
Subsidiary, either individually or taken as a whole, (ii) the transactions
contemplated hereby or in any of the other Transaction Documents or (iii) the
authority or ability of the Company or any of its Subsidiaries to timely perform
any of their respective obligations under any of the Transaction Documents (as
defined below). Other than as set forth in the SEC Documents (as defined below),
the Company has no Subsidiaries. “Subsidiaries” means any Person in which the
Company, directly or indirectly, (I) beneficially owns at least 20% of the
outstanding capital stock or holds any equity or similar interest of such Person
or (II) controls or operates all or any part of the business, operations or
administration of such Person, and each of the foregoing, is individually
referred to herein as a “Subsidiary.”

 

(b)           Authorization; Enforcement; Validity. The Company has the
requisite power and authority to enter into and perform its obligations under
this Agreement and the other Transaction Documents and to issue the Note in
accordance with the terms hereof and thereof. The execution and delivery of this
Agreement and the other Transaction Documents by the Company, and the
consummation by the Company of the transactions contemplated hereby and thereby
(including, without limitation, the issuance of the Note) have been duly
authorized by the Company’s board of directors, and (other than the filing of a
Form D under Regulation D of the 1933 Act and the 8-K Filing) no further filing,
consent or authorization is required by the Company, its board of directors or
its stockholders or other governing body. This Agreement and the other
Transaction Documents to which it is a party have been duly executed and
delivered by the Company, and each constitutes the legal, valid and binding
obligations of the Company, enforceable against the Company in accordance with
its respective terms, except as such enforceability may be limited by general
principles of equity or applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation or similar laws relating to, or affecting generally, the
enforcement of applicable creditors’ rights and remedies and except as rights to
indemnification and to contribution may be limited by federal or state
securities law. “Transaction Documents” means, collectively, this Agreement, the
Note, and each of the other agreements and instruments entered into or delivered
by any of the parties hereto in connection with the transactions contemplated
hereby and thereby, as may be amended from time to time.

(c)           Issuance of Note. The issuance of the Note is duly authorized and,
upon issuance in accordance with the terms of the Transaction Documents, will be
validly issued, fully paid and non-assessable and free from all preemptive or
similar rights, mortgages, defects, claims, liens, pledges, charges, taxes,
rights of first refusal, encumbrances, security interests and other encumbrances
(collectively, “Liens”) with respect to the issue thereof. Subject to the
accuracy of the representations and warranties of the Investor in this
Agreement, the offer and issuance by the Company of the Note is exempt from
registration under the 1933 Act.

 

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(d)           No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby (including, without limitation, the
issuance of the Note) will not (i) result in a violation of the Certificate of
Incorporation (as defined below) (including, without limitation, any certificate
of designation contained therein) or other organizational documents of the
Company or any of its Subsidiaries, any capital stock of the Company or any of
its Subsidiaries or Bylaws (as defined below) or the bylaws any of its
Subsidiaries, (ii) conflict with, or constitute a default (or an event which
with notice or lapse of time or both would become a default) under, or give to
others any rights of termination, amendment, acceleration or cancellation of,
any agreement, indenture or instrument to which the Company or any of its
Subsidiaries is a party or (iii) result in a violation of any law, rule,
regulation, order, judgment or decree (including, without limitation, foreign,
federal and state securities laws and regulations and the rules and regulations
of the NASDAQ Capital Market (the “Principal Market”) and including all
applicable federal laws, rules and regulations) applicable to the Company or any
of its Subsidiaries or by which any property or asset of the Company or any of
its Subsidiaries is bound or affected except, in the case of clause (ii) above,
to the extent such violations, conflicts, defaults or rights could not
reasonably be expected to have a Material Adverse Effect.

 

(e)           Consents. Neither the Company nor any Subsidiary is required to
obtain any consent from, authorization or order of, or make any filing or
registration with (other than the filing of a Form D under Regulation D of the
1933 Act and the 8-K Filing), any court, Governmental Entity or any regulatory
or self-regulatory agency or any other Person in order for it to execute,
deliver or perform any of its respective obligations under, or contemplated by,
the Transaction Documents, in each case, in accordance with the terms hereof or
thereof. All consents, authorizations, orders, filings and registrations which
the Company is required to obtain pursuant to the prior sentence have been or
will be obtained or effected on or prior to the Closing Date, and the Company is
not aware of any facts or circumstances which might prevent the Company from
obtaining or effecting any of the registration, application or filings
contemplated by the Transaction Documents. The Company is not in violation of
the requirements of the Principal Market and has no knowledge of any facts or
circumstances which could reasonably lead to delisting or suspension of the
Common Stock in the foreseeable future. “Governmental Entity” means any nation,
state, county, city, town, village, district, or other political jurisdiction of
any nature, federal, state, local, municipal, foreign, or other government,
governmental or quasi-governmental authority of any nature (including any
governmental agency, branch, department, official, or entity and any court or
other tribunal), multi-national organization or body; or body exercising, or
entitled to exercise, any administrative, executive, judicial, legislative,
police, regulatory, or taxing authority or power of any nature or
instrumentality of any of the foregoing, including any entity or enterprise
owned or controlled by a government or a public international organization or
any of the foregoing.

(f)            Acknowledgment Regarding Investor’s Purchase of Note. The Company
acknowledges and agrees that the Investor is acting solely in the capacity of an
arm’s length purchaser with respect to the Transaction Documents and the
transactions contemplated hereby and thereby and that the Investor is not (i) an
officer or director of the Company or any of its Subsidiaries, (ii) an
“affiliate” (as defined in Rule 144) of the Company or any of its Subsidiaries
or (iii) to its knowledge, a “beneficial owner” (as defined for purposes of Rule
13d-3 of the 1934 Act) of more than 10% of the shares of Common Stock (as
defined below). The Company further acknowledges that the Investor is not acting
as a financial advisor or fiduciary of the Company or any of its Subsidiaries
(or in any similar capacity) with respect to the Transaction Documents and the
transactions contemplated hereby and thereby, and any advice given by the
Investor or any of its representatives or agents in connection with the
Transaction Documents and the transactions contemplated hereby and thereby is
merely incidental to the Investor’s purchase of the Note. The Company further
represents to the Investor that the Company’s decision to enter into the
Transaction Documents to which it is a party has been based solely on the
independent evaluation by the Company and its representatives. “Common Stock”
means (i) the Company’s shares of common stock, $0.0001 par value per share, and
(ii) any capital stock into which such common stock shall have been changed or
any share capital resulting from a reclassification of such common stock.

 

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(g)           No General Solicitation; Placement Agent’s Fees. Neither the
Company, nor any of its Subsidiaries or affiliates, nor any Person acting on its
or their behalf, has engaged in any form of general solicitation or general
advertising (within the meaning of Regulation D) in connection with the offer or
sale of the Note. The Company shall be responsible for the payment of any
placement agent’s fees, financial advisory fees, or brokers’ commissions (other
than for Persons engaged by the Investor or its investment advisor) relating to
or arising out of the transactions contemplated hereby. Neither the Company nor
any of its Subsidiaries has engaged any placement agent or other agent in
connection with the offer or sale of the Note, other than Aegis Capital Corp.

 

(h)           No Integrated Offering. None of the Company, its Subsidiaries or
any of their affiliates, nor any Person acting on their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would require registration of the
issuance of the Note under the 1933 Act, whether through integration with prior
offerings or otherwise, or cause this offering of the Note to require approval
of stockholders of the Company under any applicable stockholder approval
provisions, including, without limitation, under the rules and regulations of
any exchange or automated quotation system on which any of the securities of the
Company are listed or designated for quotation. None of the Company, its
Subsidiaries, their affiliates nor any Person acting on their behalf will take
any action or steps that would require registration of the issuance of the Note
under the 1933 Act or cause the offering of the Note to be integrated with other
offerings of securities of the Company.

(i)            Note as Security. The Company acknowledges that (i) the Note
issued hereunder is a “security” for purposes of Section 2(a)(1) of the 1933 Act
and (ii) the offer and sale of the Note hereunder is governed by the 1933 Act.

 

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(j)            Reserved SEC Documents; Financial Statements. During the two (2)
years prior to the date hereof, the Company has timely filed all reports,
schedules, forms, proxy statements, statements and other documents required to
be filed by it with the SEC pursuant to the reporting requirements of the 1934
Act (all of the foregoing filed prior to the date hereof and all exhibits and
appendices included therein and financial statements, notes and schedules
thereto and documents incorporated by reference therein being hereinafter
referred to as the “SEC Documents”). The Company has delivered or has made
available to the Investor or its representatives true, correct and complete
copies of each of the SEC Documents not available on the EDGAR system. As of
their respective dates, the SEC Documents complied in all material respects with
the requirements of the 1934 Act and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Documents, and none of the SEC
Documents, at the time they were filed with the SEC, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. As of
their respective dates, the financial statements of the Company included in the
SEC Documents complied in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto as in effect as of the time of filing. Such financial statements have
been prepared in accordance with generally accepted accounting principles
(“GAAP”), consistently applied, during the periods involved (except (i) as may
be otherwise indicated in such financial statements or the notes thereto, or
(ii) in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in all
material respects the financial position of the Company as of the dates thereof
and the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments which will not be material, either individually or in the
aggregate). No other information provided by or on behalf of the Company to the
Investor which is not included in the SEC Documents (including, without
limitation, information referred to in Section ‎2(e) of this Agreement) contains
any untrue statement of a material fact or omits to state any material fact
necessary in order to make the statements therein not misleading, in the light
of the circumstance under which they are or were made. The Company is not
currently contemplating to amend or restate any of the financial statements
(including, without limitation, any notes or any letter of the independent
accountants of the Company with respect thereto) included in the SEC Documents
(the “Financial Statements”), nor is the Company currently aware of facts or
circumstances which would require the Company to amend or restate any of the
Financial Statements, in each case, in order for any of the Financials
Statements to be in compliance with GAAP and the rules and regulations of the
SEC. The Company has not been informed by its independent accountants that they
recommend that the Company amend or restate any of the Financial Statements or
that there is any need for the Company to amend or restate any of the Financial
Statements.

(k)           Absence of Certain Changes. Since the date of the Company’s most
recent audited financial statements contained in a Form 10-K, there has been no
material adverse change and no material adverse development in the business,
assets, liabilities, properties, operations (including results thereof),
condition (financial or otherwise) or prospects of the Company or any of its
Subsidiaries. Since the date of the Company’s most recent audited financial
statements contained in a Form 10-K, other than as disclosed in the SEC
Documents, neither the Company nor any of its Subsidiaries has (i) declared or
paid any dividends, (ii) sold any assets, individually or in the aggregate,
outside of the ordinary course of business without making public disclosure
thereof or (iii) made any capital expenditures, individually or in the
aggregate, outside of the ordinary course of business without making public
disclosure thereof. Neither the Company nor any of its Subsidiaries has taken
any steps to seek protection pursuant to any law or statute relating to
bankruptcy, insolvency, reorganization, receivership, liquidation or winding up,
nor does the Company or any Subsidiary have any knowledge or reason to believe
that any of their respective creditors intend to initiate involuntary bankruptcy
proceedings or any actual knowledge of any fact which would reasonably lead a
creditor to do so. The Company and its Subsidiaries, individually and on a
consolidated basis, are not as date of hereof, and after giving effect to the
transactions contemplated hereby to occur at the Closing will not be, Insolvent
(as defined below). For purposes of this Section 3(k), “Insolvent” means, (I)
with respect to the Company and its Subsidiaries, on a consolidated basis, (i)
the present fair saleable value of the Company’s and its Subsidiaries’ assets is
less than the amount required to pay the Company’s and its Subsidiaries’ total
Indebtedness (as defined below), (ii) the Company and its Subsidiaries are
unable to pay their debts and liabilities, subordinated, contingent or
otherwise, as such debts and liabilities become absolute and matured or (iii)
the Company and its Subsidiaries intend to incur or believe that they will incur
debts that would be beyond their ability to pay as such debts mature; and (II)
with respect to the Company and each Subsidiary, individually, (i) the present
fair saleable value of the Company’s or such Subsidiary’s (as the case may be)
assets is less than the amount required to pay its respective total
Indebtedness, (ii) the Company or such Subsidiary (as the case may be) is unable
to pay its respective debts and liabilities, subordinated, contingent or
otherwise, as such debts and liabilities become absolute and matured or (iii)
the Company or such Subsidiary (as the case may be) intends to incur or believes
that it will incur debts that would be beyond its respective ability to pay as
such debts mature. Neither the Company nor any of its Subsidiaries has engaged
in any business or in any transaction, and is not about to engage in any
business or in any transaction, for which the Company’s or such Subsidiary’s
remaining assets constitute unreasonably small capital.

 

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(l)            No Undisclosed Events, Liabilities, Developments or
Circumstances. No event, liability, development or circumstance has occurred or
exists, or is reasonably expected to exist or occur with respect to the Company,
any of its Subsidiaries or any of their respective businesses, properties,
liabilities, prospects, operations (including results thereof) or condition
(financial or otherwise), that (i) would be required to be disclosed by the
Company under applicable securities laws on a registration statement on Form S-1
filed with the SEC relating to an issuance and sale by the Company of its Common
Stock and which has not been publicly announced, (ii) could have a material
adverse effect on the Investor’s investment hereunder or (iii) could have a
Material Adverse Effect.

 

(m)         Conduct of Business; Regulatory Permits. Neither the Company nor any
of its Subsidiaries is in violation of any term of or in default under its
Certificate of Incorporation, any certificate of designation, preferences or
rights of any other outstanding series of preferred stock of the Company or any
of its Subsidiaries or Bylaws or their organizational charter, certificate of
formation or certificate of incorporation or bylaws, respectively. Neither the
Company nor any of its Subsidiaries is in violation of any judgment, decree or
order or any statute, ordinance, rule or regulation applicable to the Company or
any of its Subsidiaries, and neither the Company nor any of its Subsidiaries
will conduct its business in violation of any of the foregoing, except in all
cases for possible violations which could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect. Without limiting the
generality of the foregoing, the Company is not in violation of any of the
rules, regulations or requirements of the Principal Market and has no knowledge
of any facts or circumstances that could reasonably lead to delisting or
suspension of the Common Stock by the Principal Market in the foreseeable
future. Since November 1, 2013, (i) the Common Stock has been listed or
designated for quotation on the Principal Market, (ii) trading in the Common
Stock shall not have been suspended by the SEC or the Principal Market and (iii)
the Company has received no communication, written or oral, from the SEC or the
Principal Market regarding the suspension or delisting of the Common Stock from
the Principal Market. The Company and each of its Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate regulatory
authorities necessary to conduct their respective businesses, except where the
failure to possess such certificates, authorizations or permits would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect, and neither the Company nor any such Subsidiary has received any
notice of proceedings relating to the revocation or modification of any such
certificate, authorization or permit.

 

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(n)           Foreign Corrupt Practices. Neither the Company, the Company’s
subsidiary or any director, officer, agent, employee, nor any other person
acting for or on behalf of the foregoing (individually and collectively, a
“Company Affiliate”) have violated the U.S. Foreign Corrupt Practices Act (the
“FCPA”) or any other applicable anti-bribery or anti-corruption laws, nor has
any Company Affiliate offered, paid, promised to pay, or authorized the payment
of any money, or offered, given, promised to give, or authorized the giving of
anything of value, to any officer, employee or any other person acting in an
official capacity for any Governmental Entity to any political party or official
thereof or to any candidate for political office (individually and collectively,
a “Government Official”) or to any person under circumstances where such Company
Affiliate knew or was aware of a high probability that all or a portion of such
money or thing of value would be offered, given or promised, directly or
indirectly, to any Governmental Official, for the purpose of:

(i)            (A) influencing any act or decision of such Government Official
in his/her official capacity, (B) inducing such Government Official to do or
omit to do any act in violation of his/her lawful duty, (C) securing any
improper advantage, or (D) inducing such Government Official to influence or
affect any act or decision of any Governmental Entity, or

(ii)           assisting the Company or its Subsidiaries in obtaining or
retaining business for or with, or directing business to, the Company or its
Subsidiaries. Neither the Company nor any of its Subsidiaries nor any director,
officer, agent, employee or other Person acting on behalf of the Company or any
of its Subsidiaries has, in the course of its actions for, or on behalf of, the
Company or any of its Subsidiaries (i) used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expenses relating to
political activity; (ii) made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate funds; (iii)
violated or is in violation of any provision of the U.S. Foreign Corrupt
Practices Act of 1977, as amended; or (iv) made any unlawful bribe, rebate,
payoff, influence payment, kickback or other unlawful payment to any foreign or
domestic government official or employee.

(o)           Sarbanes-Oxley Act. The Company and each Subsidiary is in
compliance with all applicable requirements of the Sarbanes-Oxley Act of 2002
and all applicable rules and regulations promulgated by the SEC thereunder.

(p)           Transactions With Affiliates. Except as disclosed in the SEC
Documents, none of the officers, directors, employees or affiliates of the
Company or any of its Subsidiaries is presently a party to any transaction with
the Company or any of its Subsidiaries (other than for ordinary course services
as employees, officers or directors), including any contract, agreement or other
arrangement providing for the furnishing of services to or by, providing for
rental of real or personal property to or from, or otherwise requiring payments
to or from any such officer, director, employee or affiliate or, to the
knowledge of the Company or any of its Subsidiaries, any corporation,
partnership, trust or other Person in which any such officer, director, employee
or affiliate has a substantial interest or is an employee, officer, director,
trustee or partner.

 

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(q)           Equity Capitalization. As of the date hereof, the authorized
capital stock of the Company consists of (i) 500,000,000 shares of Common Stock,
of which, 23,069,141 are issued and outstanding and 8,425,672 shares are
reserved for issuance pursuant to Convertible Securities (as defined below) and
(ii) 50,000,000 shares of preferred stock, of which none are issued and
outstanding. 2,350 shares of Common Stock are held in treasury. All of such
outstanding shares are duly authorized and have been, or upon issuance will be,
validly issued and are fully paid and nonassessable. 6,159,859 shares of the
Company’s issued and outstanding Common Stock on the date hereof are as of the
date hereof owned by Persons who are “affiliates” (as defined in Rule 405 of the
1933 Act and calculated based on the assumption that only officers, directors
and holders of at least 10% of the Company’s issued and outstanding Common Stock
are “affiliates” without conceding that any such Persons are “affiliates” for
purposes of federal securities laws) of the Company or any of its Subsidiaries.
(i) None of the Company’s or any Subsidiary’s capital stock is subject to
preemptive rights or any other similar rights or any Liens suffered or permitted
by the Company or any Subsidiary; (ii) except as disclosed in the SEC Documents,
there are no outstanding options, warrants, scrip, rights to subscribe to, calls
or commitments of any character whatsoever relating to, or securities or rights
convertible into, or exercisable or exchangeable for, any capital stock of the
Company or any of its Subsidiaries, or contracts, commitments, understandings or
arrangements by which the Company or any of its Subsidiaries is or may become
bound to issue additional capital stock of the Company or any of its
Subsidiaries or options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, or exercisable or exchangeable for, any capital stock of the
Company or any of its Subsidiaries; (iii) except as disclosed in the SEC
Documents, there are no outstanding debt securities, notes, credit agreements,
credit facilities or other agreements, documents or instruments evidencing
Indebtedness of the Company or any of its Subsidiaries or by which the Company
or any of its Subsidiaries is or may become bound; (iv) there are no outstanding
securities or instruments of the Company or any of its Subsidiaries which
contain any redemption or similar provisions, and there are no contracts,
commitments, understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to redeem a security of the Company or any
of its Subsidiaries; (v) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of
the Note; (vii) neither the Company nor any Subsidiary has any stock
appreciation rights or “phantom stock” plans or agreements or any similar plan
or agreement; and (vii) neither the Company nor any of its Subsidiaries have any
liabilities or obligations required to be disclosed in the SEC Documents which
are not so disclosed in the SEC Documents, other than those incurred in the
ordinary course of the Company’s or its Subsidiaries’ respective businesses and
which, individually or in the aggregate, do not or could not reasonably be
expected to have a Material Adverse Effect. The Company has furnished to the
Investor, or filed publicly with the SEC on the EDGAR System, true, correct and
complete copies of the Company’s Certificate of Incorporation, as amended and as
in effect on the date hereof (the “Certificate of Incorporation”), and the
Company’s bylaws, as amended and as in effect on the date hereof (the “Bylaws”),
and the terms of all Convertible Securities and the material rights of the
holders thereof in respect thereto.

 

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(r)            Indebtedness and Other Contracts. Neither the Company nor any of
its Subsidiaries (i) except as disclosed in the SEC Documents, has any
outstanding Indebtedness (as defined below), (ii) except as disclosed in the SEC
Documents, is a party to any contract, agreement or instrument, the violation of
which, or default under which, by the other party(ies) to such contract,
agreement or instrument could reasonably be expected to result in a Material
Adverse Effect, (iii) is in violation of any term of, or in default under, any
contract, agreement or instrument relating to any Indebtedness, except where
such violations and defaults would not reasonably be expected to result,
individually or in the aggregate, in a Material Adverse Effect, or (iv) is a
party to any contract, agreement or instrument relating to any Indebtedness, the
performance of which, in the judgment of the Company’s officers, has or is
expected to have a Material Adverse Effect. For purposes of this Agreement, (x)
“Indebtedness” of any Person means, without duplication (A) all indebtedness for
borrowed money, (B) all obligations issued, undertaken or assumed as the
purchase price of property or services (including, without limitation, “capital
leases” in accordance with GAAP) (other than trade payables entered into in the
ordinary course of business), (C) all reimbursement or payment obligations with
respect to letters of credit, surety bonds and other similar instruments, (D)
all obligations evidenced by notes, bonds, debentures or similar instruments,
including obligations so evidenced incurred in connection with the acquisition
of property, assets or businesses, (E) all indebtedness created or arising under
any conditional sale or other title retention agreement, or incurred as
financing, in either case with respect to any property or assets acquired with
the proceeds of such indebtedness (even though the rights and remedies of the
seller or bank under such agreement in the event of default are limited to
repossession or sale of such property), (F) all monetary obligations under any
leasing or similar arrangement which, in connection with GAAP, consistently
applied for the periods covered thereby, is classified as a capital lease, (G)
all indebtedness referred to in clauses (A) through (F) above secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien upon or in any property or assets
(including accounts and contract rights) owned by any Person, even though the
Person which owns such assets or property has not assumed or become liable for
the payment of such indebtedness, and (H) all Contingent Obligations in respect
of indebtedness or obligations of others of the kinds referred to in clauses (A)
through (G) above; (y) “Contingent Obligation” means, as to any Person, any
direct or indirect liability, contingent or otherwise, of that Person with
respect to any indebtedness, lease, dividend or other obligation of another
Person if the primary purpose or intent of the Person incurring such liability,
or the primary effect thereof, is to provide assurance to the obligee of such
liability that such liability will be paid or discharged, or that any agreements
relating thereto will be complied with, or that the holders of such liability
will be protected (in whole or in part) against loss with respect thereto; and
(z) “Person” means an individual, a limited liability company, a partnership, a
joint venture, a corporation, a trust, an unincorporated organization, any other
entity and any Governmental Entity or any department or agency thereof.

(s)           Absence of Litigation. Except as disclosed in the SEC Documents,
(i) there is no action, suit, proceeding, inquiry or investigation before or by
the Principal Market, any court, public board, other Governmental Entity,
self-regulatory organization or body pending or, to the knowledge of the
Company, threatened against or affecting the Company or any of its Subsidiaries,
the Common Stock or any of the Company’s or its Subsidiaries’ officers or
directors which is outside of the ordinary course of business or individually or
in the aggregate material to the Company or any of its Subsidiaries, (ii) no
director, officer or employee of the Company or any of its subsidiaries has
willfully violated 18 U.S.C. §1519 or engaged in spoliation in reasonable
anticipation of litigation, and (iii) there has not been, and to the knowledge
of the Company, there is not pending or contemplated, any investigation by the
SEC involving the Company, any of its Subsidiaries or any current or former
director or officer of the Company or any of its Subsidiaries. The SEC has not
issued any stop order or other order suspending the effectiveness of any
registration statement filed by the Company under the 1933 Act or the 1934 Act.

 

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(t)            Insurance. The Company and each of its Subsidiaries are insured
by insurers of recognized financial responsibility against such losses and risks
and in such amounts as management of the Company believes to be prudent and
customary in the businesses in which the Company and its Subsidiaries are
engaged. Neither the Company nor any such Subsidiary has been refused any
insurance coverage sought or applied for, and neither the Company nor any such
Subsidiary has any reason to believe that it will be unable to renew its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not have a Material Adverse Effect.

(u)           Employee Relations. Neither the Company nor any of its
Subsidiaries is a party to any collective bargaining agreement or employs any
member of a union. The Company believes that its and its Subsidiaries’ relations
with their respective employees are good. No executive officer (as defined in
Rule 501(f) promulgated under the 1933 Act) or other key employee of the Company
or any of its Subsidiaries has notified the Company or any such Subsidiary that
such officer intends to leave the Company or any such Subsidiary or otherwise
terminate such officer’s employment with the Company or any such Subsidiary. No
executive officer or other key employee of the Company or any of its
Subsidiaries is, or is now expected to be, in violation of any material term of
any employment contract, confidentiality, disclosure or proprietary information
agreement, non-competition agreement, or any other contract or agreement or any
restrictive covenant, and the continued employment of each such executive
officer or other key employee (as the case may be) 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 federal,
state, local and foreign laws and regulations respecting labor, employment and
employment practices and benefits, terms and conditions of employment and wages
and hours, except where failure to be in compliance would not, either
individually or in the aggregate, reasonably be expected to result in a Material
Adverse Effect.

(v)           Title. The Company and its Subsidiaries have good and marketable
title in fee simple to all real property, and have good and marketable title to
all personal property, owned by them which is material to the business of the
Company and its Subsidiaries, in each case, free and clear of all Liens except
such as do not materially affect the value of such property and do not interfere
with the use made and proposed to be made of such property by the Company and
any of its Subsidiaries. Any real property and facilities held under lease by
the Company or any of its Subsidiaries are held by them under valid, subsisting
and enforceable leases with such exceptions as are not material and do not
interfere with the use made and proposed to be made of such property and
buildings by the Company or any of its Subsidiaries.

 

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(w)         Intellectual Property Rights. The Company and its Subsidiaries own
or possess adequate rights or licenses to use all trademarks, trade names,
service marks, service mark registrations, service names, patents, patent
rights, copyrights, original works, inventions, licenses, approvals,
governmental authorizations, trade secrets and other intellectual property
rights and all applications and registrations therefor (“Intellectual Property
Rights”) necessary to conduct their respective businesses as now conducted and
as presently proposed to be conducted. None of the Company’s or its
Subsidiaries’ Intellectual Property Rights have expired, terminated or been
abandoned, or are expected to expire, terminate or be abandoned, within three
years from the date of this Agreement. The Company has no knowledge of any
infringement by the Company or any of its Subsidiaries of Intellectual Property
Rights of others. There is no claim, action or proceeding being made or brought,
or to the knowledge of the Company or any of its Subsidiaries, being threatened,
against the Company or any of its Subsidiaries regarding their Intellectual
Property Rights. The Company is not aware of any facts or circumstances which
might give rise to any of the foregoing infringements or claims, actions or
proceedings. The Company and each of its Subsidiaries have taken reasonable
security measures to protect the secrecy, confidentiality and value of all of
their Intellectual Property Rights.

(x)          Environmental Laws. The Company and its Subsidiaries (i) are in
compliance with all Environmental Laws (as defined below), (ii) have received
all permits, licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses and (iii) are in
compliance with all terms and conditions of any such permit, license or approval
where, in each of the foregoing clauses (i), (ii) and (iii), the failure to so
comply could be reasonably expected to have, individually or in the aggregate, a
Material Adverse Effect. “Environmental Laws” means all federal, state, local or
foreign laws relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata), including, without limitation,
laws relating to emissions, discharges, releases or threatened releases of
chemicals, pollutants, contaminants, or toxic or hazardous substances or wastes
(collectively, “Hazardous Materials”) into the environment, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials, as well as all
authorizations, codes, decrees, demands or demand letters, injunctions,
judgments, licenses, notices or notice letters, orders, permits, plans or
regulations issued, entered, promulgated or approved thereunder.

(y)         Subsidiary Rights. The Company or one of its Subsidiaries has the
unrestricted right to vote, and to receive dividends and distributions on, all
capital securities of its Subsidiaries as owned by the Company or such
Subsidiary.

(z)          Tax Status. The Company and each of its Subsidiaries (i) has timely
made or filed all foreign, federal and state income and all other tax returns,
reports and declarations required by any jurisdiction to which it is subject,
(ii) has timely paid all taxes and other governmental assessments and charges
that are material in amount, shown or determined to be due on such returns,
reports and declarations, except those being contested in good faith and (iii)
has set aside on its books provision reasonably adequate for the payment of all
taxes for periods subsequent to the periods to which such returns, reports or
declarations apply. There are no unpaid taxes in any material amount claimed to
be due by the taxing authority of any jurisdiction, and the officers of the
Company and its Subsidiaries know of no basis for any such claim. The Company is
not operated in such a manner as to qualify as a passive foreign investment
company, as defined in Section 1297 of the U.S. Internal Revenue Code of 1986,
as amended (the “Code”).

 

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(aa)        Internal Accounting and Disclosure Controls. The Company and each of
its Subsidiaries maintains internal control over financial reporting (as such
term is defined in Rule 13a-15(f) under the 1934 Act) that is effective to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with GAAP, including 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 and liability accountability, (iii) access to assets
or incurrence of liabilities is permitted only in accordance with management’s
general or specific authorization and (iv) the recorded accountability for
assets and liabilities is compared with the existing assets and liabilities at
reasonable intervals and appropriate action is taken with respect to any
difference. The Company maintains disclosure controls and procedures (as such
term is defined in Rule 13a-15(e) under the 1934 Act) that are effective in
ensuring that information required to be disclosed by the Company in the reports
that it files or submits under the 1934 Act is recorded, processed, summarized
and reported, within the time periods specified in the rules and forms of the
SEC, including, without limitation, controls and procedures designed to ensure
that information required to be disclosed by the Company in the reports that it
files or submits under the 1934 Act is accumulated and communicated to the
Company’s management, including its principal executive officer or officers and
its principal financial officer or officers, as appropriate, to allow timely
decisions regarding required disclosure. Neither the Company nor any of its
Subsidiaries has received any notice or correspondence from any accountant or
other Person relating to any potential material weakness or significant
deficiency in any part of the internal controls over financial reporting of the
Company or any of its Subsidiaries.

(bb)       Off Balance Sheet Arrangements. There is no transaction, arrangement,
or other relationship between the Company or any of its Subsidiaries and an
unconsolidated or other off balance sheet entity that is required to be
disclosed by the Company in its 1934 Act filings and is not so disclosed or that
otherwise could be reasonably likely to have a Material Adverse Effect.

(cc)        Investment Company Status. The Company is not, and upon consummation
of the sale of the Note will not be, an “investment company,” an affiliate of an
“investment company,” a company controlled by an “investment company” or an
“affiliated person” of, or “promoter” or “principal underwriter” for, an
“investment company” as such terms are defined in the Investment Company Act of
1940, as amended.

(dd)       Reserved.

(ee)        Reserved.

(ff)         U.S. Real Property Holding Corporation. Neither the Company nor any
of its Subsidiaries is, or has ever been, and so long as the Note is held by the
Investor, shall become, a U.S. real property holding corporation within the
meaning of Section 897 of the Code, and the Company and each Subsidiary shall so
certify upon the Investor’s request.

(gg)       Reserved.

 

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(hh)       Reserved.

(ii)          Bank Holding Company Act. Neither the Company nor any of its
Subsidiaries is subject to the Bank Holding Company Act of 1956, as amended (the
“BHCA”) and to regulation by the Board of Governors of the Federal Reserve
System (the “Federal Reserve”). Neither the Company nor any of its Subsidiaries
or affiliates owns or controls, directly or indirectly, five percent (5%) or
more of the outstanding shares of any class of voting securities or twenty-five
percent (25%) or more of the total equity of a bank or any equity 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.

(jj)          Real Property. Each of the Company and its Subsidiaries holds good
title to all real property, leases in real property, or other interests in real
property owned or held by the Company or any of its Subsidiaries (the “Real
Property”) owned by the Company or any of its Subsidiaries (as applicable).
Except as set forth in the SEC Documents, the Real Property is free and clear of
all mortgages, defects, claims, liens, pledges, charges, taxes, rights of first
refusal, encumbrances, security interests and other encumbrances (collectively
“Encumbrances”) and is not subject to any rights of way, building use
restrictions, exceptions, variances, reservations, or limitations of any nature
except for (a) liens for current taxes not yet due and (b) zoning laws and other
land use restrictions that do not impair the present or anticipated use of the
property subject thereto.

(kk)        Fixtures and Equipment. Each of the Company and its Subsidiaries (as
applicable) has good title to, or a valid leasehold interest in, the tangible
personal property, equipment, improvements, fixtures, and other personal
property and appurtenances that are used by the Company or its Subsidiary in
connection with the conduct of its business (the “Fixtures and Equipment”). The
Fixtures and Equipment are sufficient for the conduct of the Company’s and/or
its Subsidiaries’ businesses (as applicable) in the manner as conducted prior to
the Closing. Except as set forth in the SEC Documents, each of the Company and
its Subsidiaries owns all of its Fixtures and Equipment free and clear of all
Encumbrances except for (a) liens for current taxes not yet due and (b) zoning
laws and other land use restrictions that do not impair the present or
anticipated use of the property subject thereto.

(ll)          Illegal or Unauthorized Payments; Political Contributions. Neither
the Company nor any of its Subsidiaries nor, to the best of the Company’s
knowledge (after reasonable inquiry of its officers and directors), any of the
officers, directors, employees, agents or other representatives of the Company
or any of its Subsidiaries or any other business entity or enterprise with which
the Company or any Subsidiary is or has been affiliated or associated, has,
directly or indirectly, made or authorized any payment, contribution or gift of
money, property, or services, whether or not in contravention of applicable law,
(i) as a kickback or bribe to any Person or (ii) to any political organization,
or the holder of or any aspirant to any elective or appointive public office
except for personal political contributions not involving the direct or indirect
use of funds of the Company or any of its Subsidiaries.

(mm)      Money Laundering. The Company and its Subsidiaries are in compliance
with, and have not previously violated, the USA Patriot Act of 2001 and all
other applicable U.S. and non-U.S. anti-money laundering laws and regulations,
including, but not limited to, the laws, regulations and Executive Orders and
sanctions programs administered by the U.S. Office of Foreign Assets Control,
including, but not limited to, (i) Executive Order 13224 of September 23, 2001
entitled, “Blocking Property and Prohibiting Transactions With Persons Who
Commit, Threaten to Commit, or Support Terrorism” (66 Fed. Reg. 49079 (2001));
and (ii) any regulations contained in 31 CFR, Subtitle B, Chapter V.

 

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(nn)        Management. During the past three year period, no current officer or
director or, to the knowledge of the Company, no current ten percent (10%) or
greater stockholder of the Company or any of its Subsidiaries has been the
subject of:

(i)            a petition under bankruptcy laws or any other insolvency or
moratorium law or the appointment by a court of a receiver, fiscal agent or
similar officer for such Person, or any partnership in which such person was a
general partner at or within two years before the filing of such petition or
such appointment, or any corporation or business association of which such
person was an executive officer at or within two years before the time of the
filing of such petition or such appointment;

(ii)           a conviction in a criminal proceeding or a named subject of a
pending criminal proceeding (excluding traffic violations that do not relate to
driving while intoxicated or driving under the influence);

(iii)          any order, judgment or decree, not subsequently reversed,
suspended or vacated, of any court of competent jurisdiction, permanently or
temporarily enjoining any such person from, or otherwise limiting, the following
activities:

(1)           Acting as a futures commission merchant, introducing broker,
commodity trading advisor, commodity pool operator, floor broker, leverage
transaction merchant, any other person regulated by the United States Commodity
Futures Trading Commission or an associated person of any of the foregoing, or
as an investment adviser, underwriter, broker or dealer in securities, or as an
affiliated person, director or employee of any investment company, bank, savings
and loan association or insurance company, or engaging in or continuing any
conduct or practice in connection with such activity;

(2)           Engaging in any type of business practice; or

(3)           Engaging in any activity in connection with the purchase or sale
of any security or commodity or in connection with any violation of securities
laws or commodities laws;

(iv)          any order, judgment or decree, not subsequently reversed,
suspended or vacated, of any authority barring, suspending or otherwise limiting
for more than sixty (60) days the right of any such person to engage in any
activity described in the preceding sub paragraph, or to be associated with
persons engaged in any such activity;

(v)           a finding by a court of competent jurisdiction in a civil action
or by the SEC or other authority to have violated any securities law, regulation
or decree and the judgment in such civil action or finding by the SEC or any
other authority has not been subsequently reversed, suspended or vacated; or

 

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(vi)          a finding by a court of competent jurisdiction in a civil action
or by the Commodity Futures Trading Commission to have violated any federal
commodities law, and the judgment in such civil action or finding has not been
subsequently reversed, suspended or vacated.

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

(pp)        No Disagreements with Accountants and Lawyers. There are no material
disagreements of any kind presently existing, or reasonably anticipated by the
Company to arise, between the Company and the accountants and lawyers presently
employed by the Company and the Company is current with respect to any fees owed
to its accountants and lawyers which could affect the Company's ability to
perform any of its obligations under any of the Transaction Documents. In
addition, on or prior to the date hereof, the Company had discussions with its
accountants about its financial statements previously filed with the SEC. Based
on those discussions, the Company has no reason to believe that it will need to
restate any such financial statements or any part thereof.

(qq)        No Disqualification Events. None of the Company, any of its
predecessors, any affiliated issuer, any director, executive officer, other
officer of the Company participating in the offering contemplated hereby, 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 1933 Act) connected with the Company in
any capacity at the time of sale (each, an “Issuer Covered Person”) is subject
to any of the “Bad Actor” disqualifications described in Rule 506(d)(1)(i) to
(viii) under the 1933 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.

(rr)          No Additional Agreements. The Company does not have any agreement
or understanding with the Investor with respect to the transactions contemplated
by the Transaction Documents other than as specified in the Transaction
Documents.

(ss)         Public Utility Holding Act. None of the Company nor any of its
Subsidiaries is a “holding company,” or an “affiliate” of a “holding company,”
as such terms are defined in the Public Utility Holding Act of 2005.

 

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(tt)         Federal Power Act. None of the Company nor any of its Subsidiaries
is subject to regulation as a “public utility” under the Federal Power Act, as
amended.

(uu)       Disclosure. The Company confirms that neither it nor any other Person
acting on its behalf has provided to the Investor or its agents or counsel with
any information that constitutes or could reasonably be expected to constitute
material, non-public information concerning the Company or any of its
Subsidiaries, other than the existence of the transactions contemplated by this
Agreement and the other Transaction Documents. The Company understands and
confirms that the Investor will rely on the foregoing representations in
effecting transactions in securities of the Company. All disclosure provided to
the Investor regarding the Company and its Subsidiaries, their businesses and
the transactions contemplated hereby, including the schedules to this Agreement,
furnished by or on behalf of the Company or any of its Subsidiaries 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 the light of the circumstances under which they were made, not misleading.
All of the written information furnished after the date hereof by or on behalf
of the Company or any of its Subsidiaries to the Investor pursuant to or in
connection with this Agreement and the other Transaction Documents, taken as a
whole, will be true and correct in all material respects as of the date on which
such information is so provided and will not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading. Each press release issued by the Company or any of its
Subsidiaries during the twelve (12) months preceding the date of this Agreement
did not at the time of release contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they are made, not misleading. No event or circumstance has occurred or
information exists with respect to the Company or any of its Subsidiaries or its
or their business, properties, liabilities, prospects, operations (including
results thereof) or conditions (financial or otherwise), which, under applicable
law, rule or regulation, requires public disclosure at or before the date hereof
or announcement by the Company but which has not been so publicly disclosed. All
financial projections and forecasts that have been prepared by or on behalf of
the Company or any of its Subsidiaries and made available to the Investor have
been prepared in good faith based upon reasonable assumptions and represented,
at the time each such financial projection or forecast was delivered to the
Investor, the Company’s best estimate of future financial performance (it being
recognized that such financial projections or forecasts are not to be viewed as
facts and that the actual results during the period or periods covered by any
such financial projections or forecasts may differ from the projected or
forecasted results). The Company acknowledges and agrees that the Investor does
not make and has not made any representations or warranties with respect to the
transactions contemplated hereby other than those specifically set forth in
Section ‎2.

(vv)       Ranking of Note. No unsecured Indebtedness of the Company, at the
Closing, will be senior to the Note in right of payment, whether with respect to
payment or redemptions, interest, damages, upon liquidation or dissolution or
otherwise.

 

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4.COVENANTS.

(a)           Best Efforts. The Investor shall use its best efforts to timely
satisfy each of the conditions to be satisfied by it as provided in Section ‎6
of this Agreement. The Company shall use its best efforts to timely satisfy each
of the conditions to be satisfied by it as provided in Section ‎7 of this
Agreement.

(b)           Form D and Blue Sky. The Company shall file a Form D with respect
to the issuance of the Note as required under Regulation D and to provide a copy
thereof to the Investor promptly after such filing. The Company shall, on or
before the Closing Date, take such action as the Company shall reasonably
determine is necessary in order to obtain an exemption for, or to, qualify the
Note for sale to the Investor at the Closing pursuant to this Agreement under
applicable securities or “Blue Sky” laws of the states of the United States (or
to obtain an exemption from such qualification), and shall provide evidence of
any such action so taken to the Investor on or prior to the Closing Date.
Without limiting any other obligation of the Company under this Agreement, the
Company shall timely make all filings and reports relating to the offer and sale
of the Note required under all applicable securities laws (including, without
limitation, all applicable federal securities laws and all applicable “Blue Sky”
laws), and the Company shall comply with all applicable foreign, federal, state
and local laws, statutes, rules, regulations and the like relating to the
offering and sale of the Note to the Investor.

(c)           Use of Proceeds. The Company shall use the proceeds from the sale
of the Note for general corporate purposes but not, directly or indirectly, for
(i) the satisfaction of any indebtedness of the Company or any of its
Subsidiaries (other than payment of trade payables incurred after the date
hereof in the ordinary course of business of the Company and its Subsidiaries
and consistent with prior practices), (ii) the redemption or repurchase of any
securities of the Company or any of its Subsidiaries or (iii) the settlement of
any outstanding litigation.

(d)           Financial Information. As long as the Note remains outstanding,
the Company agrees to send the following to the Investor during the Reporting
Period (i) unless the following are filed with the SEC through EDGAR and are
available to the public through the EDGAR System, within one (1) Business Day
after the filing thereof with the SEC, a copy of its Annual Reports on Form 10-K
and Quarterly Reports on Form 10-Q, any interim reports or any consolidated
balance sheets, income statements, stockholders’ equity statements and/or cash
flow statements for any period other than annual, any Current Reports on Form
8-K and any registration statements (other than on Form S-8) or amendments filed
pursuant to the 1933 Act, (ii) unless the following are either filed with the
SEC through EDGAR or are otherwise widely disseminated via a recognized news
release service (such as PR Newswire), on the same day as the release thereof,
facsimile copies of all press releases issued by the Company or any of its
Subsidiaries and (iii) unless the following are filed with the SEC through
EDGAR, copies of any notices and other information made available or given to
the stockholders of the Company generally, contemporaneously with the making
available or giving thereof to the stockholders.

 

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(e)           Fees. The Company shall reimburse the Investor for all reasonable
costs and expenses incurred by it or its affiliates in connection with the
structuring, documentation, negotiation and closing of the transactions
contemplated by the Transaction Documents (including, without limitation, as
applicable, all reasonable legal fees of outside counsel and disbursements of
counsel to the Investor , any other reasonable fees and expenses in connection
therewith, structuring, documentation, negotiation and closing of the
transactions contemplated by the Transaction Documents and due diligence and
regulatory filings in connection therewith) which amount shall not exceed $2,000
without the consent of the Company. The Company shall be responsible for the
payment of any placement agent’s fees, financial advisory fees, or broker’s
commissions (other than for Persons engaged by the Investor) relating to or
arising out of the transactions contemplated hereby. The Company shall pay, and
hold the Investor harmless against, any liability, loss or expense (including,
without limitation, reasonable attorneys’ fees and out-of-pocket expenses)
arising in connection with any claim relating to any such payment. Except as
otherwise set forth in the Transaction Documents, each party to this Agreement
shall bear its own expenses in connection with the sale of the Note to the
Investor.

(f)            Pledge of Note. Notwithstanding anything to the contrary
contained in this Agreement, the Company acknowledges and agrees that the Note
may be pledged by the Investor in connection with a bona fide margin agreement
or other loan or financing arrangement that is secured by the Note. The pledge
of Note shall not be deemed to be a transfer, sale or assignment of the Note
hereunder, and the Investor effecting a pledge of the Note shall not be required
to provide the Company with any notice thereof or otherwise make any delivery to
the Company pursuant to this Agreement or any other Transaction Document. The
Company hereby agrees to execute and deliver such documentation as a pledgee of
the Note may reasonably request in connection with a pledge of the Note to such
pledgee by the Investor.

(g)           Disclosure of Transactions and Other Material Information. On or
before 5:30 p.m., New York time, on the fourth (4th) Business Day after the date
of this Agreement, the Company shall file a Current Report on Form 8-K
describing all the material terms of the transactions contemplated by the
Transaction Documents in the form required by the 1934 Act and attaching all the
material Transaction Documents (including, without limitation, this Agreement
(and all schedules to this Agreement) and the form of Note (including all
attachments, the “8-K Filing”). From and after the 8-K Filing, the Company shall
have publicly disclosed all material, non-public information (if any) regarding
the Company or any of its Subsidiaries delivered to the Investor 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 shall not, and the Company shall cause each
of its Subsidiaries and each of its and their respective officers, directors,
employees and agents not to, provide the Investor with any material, non-public
information regarding the Company or any of its Subsidiaries from and after the
8-K Filing without the express prior written consent of such Investor (which may
be granted or withheld in such Investor’s sole discretion). In the event of (x)
any breach of any covenant or agreements contained herein or in any other
Transaction Document (to the extent the existence of such breach constitutes
material non-public information) or (y) a breach of any of the covenants in this
Section ‎4(g) by the Company, any of its Subsidiaries, or any of its or their
respective officers, directors, employees and agents (as determined in the
reasonable good faith judgment of the Investor), in addition to any other remedy
provided herein or in the Transaction Documents, the Investor may deliver
written notice to the Company requesting that the Company make a public
disclosure with respect thereto. If the Company fails to make such public
disclosure, at any time after the fourth (4th) Trading Day immediately following
the date the Investor delivered such notice to the Company, the Investor shall
have the right to make a public disclosure, in the form of a press release,
public advertisement or otherwise, of such material, non-public information
without the prior approval by the Company, any of its Subsidiaries, or any of
its or their respective officers, directors, employees or agents. The Investor
shall not have any liability to the Company, any of its Subsidiaries, or any of
its or their respective officers, directors, employees, stockholders or agents,
for any such disclosure. Subject to the foregoing, neither the Company, its
Subsidiaries nor the Investor shall issue any press releases or any other public
statements with respect to the transactions contemplated hereby; provided,
however, the Company shall be entitled, without the prior approval of the
Investor, to make any press release or other public disclosure with respect to
such transactions (i) in substantial conformity with the 8-K Filing and
contemporaneously therewith and (ii) as is required by applicable law and
regulations (provided that in the case of clause (i) the Investor shall be
consulted by the Company in connection with any such press release or other
public disclosure prior to its release). Without the prior written consent of
the Investor (which may be granted or withheld in the Investor’s sole
discretion), the Company shall not (and shall cause each of its Subsidiaries and
affiliates to not) disclose the name of the Investor in any filing,
announcement, release or otherwise. Notwithstanding anything contained in this
Agreement to the contrary and without implication that the contrary would
otherwise be true, the Company expressly acknowledges and agrees that other than
with respect to the transactions contemplated by the Transaction Documents, the
Investor has not had, and the Investor shall not have (unless expressly agreed
to by the Investor after the date hereof in a written definitive and binding
agreement executed by the Company and the Investor), any duty of confidentiality
with respect to, or a duty not to trade on the basis of, any material,
non-public information regarding the Company or any of its Subsidiaries.

 

20

 

 

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

(i)            Passive Foreign Investment Company. The Company shall conduct its
business, and shall cause its Subsidiaries to conduct their respective
businesses, in such a manner as will ensure that the Company will not be deemed
to constitute a passive foreign investment company within the meaning of Section
1297 of the Code.

(j)            Restriction on Redemption and Cash Dividends. So long as the Note
is outstanding, the Company shall not, directly or indirectly, redeem, or
declare or pay any cash dividend or distribution on, any securities of the
Company without the prior express written consent of the Investor.

(k)           Corporate Existence. So long as the Investor owns the Note, the
Company shall not be party to any Fundamental Transaction. A “Fundamental
Transaction” occurs if (i) the Company, directly or indirectly, in one or more
related transactions effects any merger or consolidation of the Company with or
into another Person, (ii) the Company, directly or indirectly, effects any sale,
lease, license, assignment, transfer, conveyance or other disposition of all or
substantially all of its assets in one or a series of related transactions,
(iii) any, direct or indirect, purchase offer, tender offer or exchange offer
(whether by the Company or another Person) is completed pursuant to which the
holders of Common Stock are permitted to sell, tender or exchange their shares
for other securities, cash or property and has been accepted by the holders of
50% or more of the outstanding Common Stock, (iv) the Company, directly or
indirectly, in one or more related transactions effects any reclassification,
reorganization or recapitalization of the Common Stock or any compulsory share
exchange pursuant to which the Common Stock is effectively converted into or
exchanged for other securities, cash or property, (v) the Company, directly or
indirectly, in one or more related transactions consummates a stock or share
purchase agreement or other business combination (including, without limitation,
a reorganization, recapitalization, spin-off or scheme of arrangement) with
another Person whereby such other Person acquires more than 50% of the
outstanding shares of Common Stock (not including any shares of Common Stock
held by the other Person or other Persons making or party to, or associated or
affiliated with the other Persons making or party to, such stock or share
purchase agreement or other business combination).

 

21

 

 

(l)            No Frustration. So long as the Investor holds the Note, 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 Investor (which consent may be
withheld, delayed or conditioned in the sole discretion of the Investor),
effect, enter into, announce or recommend to its stockholders any agreement,
plan, arrangement or transaction (or issue, amend or waive any security) 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 Note.

(m)         Closing Documents. On or prior to fourteen (14) calendar days after
the Closing Date, the Company agrees to deliver, or cause to be delivered, to
the Investor executed copies of this Agreement, the Note and other documents
required to be delivered to any party pursuant to Section ‎7 hereof.

5.REGISTER; TRANSFER AGENT INSTRUCTIONS; LEGEND.

(a)           Register. The Company shall maintain at its principal executive
offices (or such other office or agency of the Company as it may designate by
notice to the holder of the Note), a register for the Note in which the Company
shall record the name and address of the Person in whose name the Note have been
issued (including the name and address of each transferee) and the principal
amount of the Note held by such Person. The Company shall keep the register open
and available at all times during business hours for inspection of the Investor
or its legal representatives.

(b)           Reserved.

(c)           Legends. The Investor understands that the Note has been issued
pursuant to an exemption from registration or qualification under the 1933 Act
and applicable state securities laws, and except as set forth in Section ‎5(c)
below, the Note shall bear any legend as required by the “blue sky” laws of any
state and a restrictive legend in substantially the following form:

THIS NOTE HAS NOT (AND ANY SHARES OF STOCK ISSUABLE UPON THE CONVERSION OF THIS
NOTE OR THE TRIGGERING OF AN EVENT OF DEFAULT MAY NOT HAVE) BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR UNDER THE
SECURITIES LAWS OF ANY STATE. NEITHER THIS NOTE NOR ANY SHARES OF STOCK ISSUABLE
UPON THE CONVERSION OF THIS NOTE OR THE TRIGGERING OF AN EVENT OF DEFAULT MAY BE
SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION
STATEMENT IN EFFECT WITH RESPECT TO THIS NOTE OR SHARES OF STOCK ISSUABLE UPON
DEFAULT UNDER THIS NOTE UNDER SUCH ACT UNLESS SUCH REGISTRATION IS NOT REQUIRED
PURSUANT TO A VALID EXEMPTION THEREFROM UNDER THE ACT.

 

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6.CONDITIONS TO THE COMPANY’S OBLIGATION TO SELL.

(a)           The obligation of the Company hereunder to issue and sell the Note
to the Investor at the Closing is subject to the satisfaction, at or before the
Closing Date, of each of the following conditions, provided that these
conditions are for the Company’s sole benefit and may be waived by the Company
at any time in its sole discretion by providing the Investor with prior written
notice thereof:

(i)            The Investor shall have executed each of the other Transaction
Documents to which it is a party and delivered the same to the Company.

(ii)           The Investor shall have delivered to the Company the Purchase
Price (less the amounts withheld pursuant to Section ‎4(e)) for the Note being
purchased by the Investor at the Closing by wire transfer of immediately
available funds pursuant to the wire instructions provided by the Company.

(iii)          The representations and warranties of the Investor shall be true
and correct in all material respects as of the date when made and as of the
Closing Date as though originally made at that time (except for representations
and warranties that speak as of a specific date, which shall be true and correct
as of such date), and the Investor shall have performed, satisfied and complied
in all material respects with the covenants, agreements and conditions required
by this Agreement to be performed, satisfied or complied with by such Investor
at or prior to the Closing Date.

7.CONDITIONS TO THE INVESTOR’S OBLIGATION TO PURCHASE.

(a)           The obligation of the Investor hereunder to purchase the Note at
the Closing is subject to the satisfaction, at or before the Closing Date, of
each of the following conditions, provided that these conditions are for the
Investor’s sole benefit and may be waived by the Investor at any time in its
sole discretion by providing the Company with prior written notice thereof:

(i)            The Company shall have duly executed and delivered to the
Investor each of the Transaction Documents to which it is a party and the
Company shall have duly executed and delivered to the Investor the Note being
purchased by the Investor at the Closing pursuant to this Agreement.

(ii)           The Investor shall have received the opinion of Pryor Cashman
LLP, the Company’s counsel, dated as of the Closing Date, in the form acceptable
to such Investor.

 

23

 

 

(iii)          Each and every representation and warranty of the Company shall
be true and correct as of the date when made and as of the Closing Date as
though originally made at that time (except for representations and warranties
that speak as of a specific date, which shall be true and correct as of such
date) and the Company shall have performed, satisfied and complied in all
respects with the covenants, agreements and conditions required to be performed,
satisfied or complied with by the Company at or prior to the Closing Date.

(iv)          The Company shall have obtained all governmental, regulatory or
third party consents and approvals, if any, necessary for the issuance of the
Note.

(v)           No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any
court or Governmental Entity of competent jurisdiction that prohibits the
consummation of any of the transactions contemplated by the Transaction
Documents.

(vi)          Since the date of execution of this Agreement, no event or series
of events shall have occurred that reasonably would have or result in a Material
Adverse Effect.

(vii)         The Company and its Subsidiaries shall have delivered to the
Investor such other documents, instruments or certificates relating to the
transactions contemplated by this Agreement as the Investor or its counsel may
reasonably request.

8.TERMINATION.

In the event that the Closing shall not have occurred within seven (7) days of
the date hereof, then the Investor shall have the right to terminate its
obligations under this Agreement at any time on or after the close of business
on such date without liability of the Investor to any other party; provided,
however, the right to terminate this Agreement under this Section ‎8 shall not
be available to the Investor if the failure of the transactions contemplated by
this Agreement to have been consummated by such date is the result of the
Investor’s breach of this Agreement; and provided, further that no such
termination shall affect any obligation of the Company under this Agreement to
reimburse the Investor for the expenses described in Section ‎4(e) above.
Nothing contained in this Section ‎8 shall be deemed to release any party from
any liability for any breach by such party of the terms and provisions of this
Agreement or the other Transaction Documents or to impair the right of any party
to compel specific performance by any other party of its obligations under this
Agreement or the other Transaction Documents.

 

24

 

 

9.MISCELLANEOUS.

(a)           Governing Law; Jurisdiction; Jury Trial. All questions concerning
the construction, validity, enforcement and interpretation of this Agreement
shall be governed by the internal laws of the State of New York, without giving
effect to any choice of law or conflict of law provision or rule (whether of the
State of New York or any other jurisdictions) that would cause the application
of the laws of any jurisdictions other than the State of New York. The Company
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 under any of
the other Transaction Documents or with any transaction contemplated hereby or
thereby, and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is brought
in an inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it under
this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit, in any way any right to serve process in any manner permitted by law.
Nothing contained herein shall be deemed or operate to preclude the Investor
from bringing suit or taking other legal action against the Company in any other
jurisdiction to collect on the Company’s obligations to such Investor or to
enforce a judgment or other court ruling in favor of such Investor. EACH PARTY
HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A
JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR UNDER ANY OTHER
TRANSACTION DOCUMENT OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT, ANY
OTHER TRANSACTION DOCUMENT OR ANY TRANSACTION CONTEMPLATED HEREBY OR THEREBY.

 

(b)           Counterparts. This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party. In the event that any signature is
delivered by facsimile transmission or by an e-mail which contains a portable
document format (.pdf) file of an executed signature page, such signature page
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
signature page were an original thereof.

(c)           Headings; Gender. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement. Unless the context clearly indicates
otherwise, each pronoun herein shall be deemed to include the masculine,
feminine, neuter, singular and plural forms thereof. The terms “including,”
“includes,” “include” and words of like import shall be construed broadly as if
followed by the words “without limitation.” The terms “herein,” “hereunder,”
“hereof” and words of like import refer to this entire Agreement instead of just
the provision in which they are found.

 

25

 

 

(d)           Severability; Maximum Payment Amounts. If any provision of this
Agreement is prohibited by law or otherwise determined to be invalid or
unenforceable by a court of competent jurisdiction, the provision that would
otherwise be prohibited, invalid or unenforceable shall be deemed amended to
apply to the broadest extent that it would be valid and enforceable, and the
invalidity or unenforceability of such provision shall not affect the validity
of the remaining provisions of this Agreement so long as this Agreement as so
modified continues to express, without material change, the original intentions
of the parties as to the subject matter hereof and the prohibited nature,
invalidity or unenforceability of the provision(s) in question does not
substantially impair the respective expectations or reciprocal obligations of
the parties or the practical realization of the benefits that would otherwise be
conferred upon the parties. The parties will endeavor in good faith negotiations
to replace the prohibited, invalid or unenforceable provision(s) with a valid
provision(s), the effect of which comes as close as possible to that of the
prohibited, invalid or unenforceable provision(s). Notwithstanding anything to
the contrary contained in this Agreement or any other Transaction Document (and
without implication that the following is required or applicable), it is the
intention of the parties that in no event shall amounts and value paid by the
Company and/or any of its Subsidiaries (as the case may be), or payable to or
received by the Investor, under the Transaction Documents (including without
limitation, any amounts that would be characterized as “interest” under
applicable law) exceed amounts permitted under any applicable law. Accordingly,
if any obligation to pay, payment made to the Investor, or collection by the
Investor pursuant the Transaction Documents is finally judicially determined to
be contrary to any such applicable law, such obligation to pay, payment or
collection shall be deemed to have been made by mutual mistake of such Investor,
the Company and its Subsidiaries and such amount shall be deemed to have been
adjusted with retroactive effect to the maximum amount or rate of interest, as
the case may be, as would not be so prohibited by the applicable law. Such
adjustment shall be effected, to the extent necessary, by reducing or refunding,
at the option of such Investor, the amount of interest or any other amounts
which would constitute unlawful amounts required to be paid or actually paid to
such Investor under the Transaction Documents. For greater certainty, to the
extent that any interest, charges, fees, expenses or other amounts required to
be paid to or received by such Investor under any of the Transaction Documents
or related thereto are held to be within the meaning of “interest” or another
applicable term to otherwise be violative of applicable law, such amounts shall
be pro-rated over the period of time to which they relate.

(e)           Entire Agreement; Amendments. This Agreement, the other
Transaction Documents and the schedules and exhibits attached hereto and thereto
and the instruments referenced herein and therein supersede all other prior oral
or written agreements between the Investor, the Company, its Subsidiaries, their
affiliates and Persons acting on their behalf, including without limitation, any
transactions by the Investor with respect to the Note and the other matters
contained herein and therein, and this Agreement, the other Transaction
Documents, the schedules and exhibits attached hereto and thereto and the
instruments referenced herein and therein contain the entire understanding of
the parties solely with respect to the matters covered herein and therein;
provided, however, nothing contained in this Agreement or any other Transaction
Document shall (or shall be deemed to) (i) have any effect on any agreements the
Investor has entered into with, or any instruments the Investor has received
from, the Company or any of its Subsidiaries prior to the date hereof with
respect to any prior investment made by the Investor in the Company or (ii)
waive, alter, modify or amend in any respect any obligations of the Company or
any of its Subsidiaries, or any rights of or benefits to the Investor or any
other Person, in any agreement entered into prior to the date hereof between or
among the Company and/or any of its Subsidiaries and the Investor, or any
instruments the Investor received from the Company and/or any of its
Subsidiaries prior to the date hereof, and all such agreements and instruments
shall continue in full force and effect. Except as specifically set forth herein
or therein, neither the Company nor the Investor makes any representation,
warranty, covenant or undertaking with respect to such matters. For
clarification purposes, the Recitals are part of this Agreement. No provision of
this Agreement may be amended other than by an instrument in writing signed by
the Company and the Investor, and any amendment to any provision of this
Agreement made in conformity with the provisions of this Section ‎9‎(e) shall be
binding on the Investor and a holder of the Note, as applicable, provided that
no such amendment shall be effective to the extent that it imposes any
obligation or liability on the Investor without the Investor’s prior written
consent (which may be granted or withheld in the Investor’s sole discretion). No
waiver shall be effective unless it is in writing and signed by an authorized
representative of the waiving party, provided that the Investor may waive any
provision of this Agreement, and any waiver of any provision of this Agreement
made in conformity with the provisions of this Section ‎9‎(e) shall be binding
on the Investor and a holder of the Note, as applicable, provided that no such
waiver shall be effective to the extent that it imposes any obligation or
liability on the Investor without such Investor’s prior written consent (which
may be granted or withheld in the Investor’s sole discretion). The Company has
not, directly or indirectly, made any agreements with the Investor relating to
the terms or conditions of the transactions contemplated by the Transaction
Documents except as set forth in the Transaction Documents. Without limiting the
foregoing, the Company confirms that, except as set forth in this Agreement, the
Investor has not made any commitment or promise or has any other obligation to
provide any financing to the Company, any Subsidiary or otherwise. As a material
inducement for the Investor to enter into this Agreement, the Company expressly
acknowledges and agrees that (i) no due diligence or other investigation or
inquiry conducted by the Investor, any of its advisors or any of its
representatives shall affect the Investor’s right to rely on, or shall modify or
qualify in any manner or be an exception to any of, the Company’s
representations and warranties contained in this Agreement or any other
Transaction Document and (ii) unless a provision of this Agreement or any other
Transaction Document is expressly preceded by the phrase “except as disclosed in
the SEC Documents,” nothing contained in the SEC Documents shall affect the
Investor’s right to rely on, or shall modify or qualify in any manner or be an
exception to any of, the Company’s representations and warranties contained in
this Agreement or any other Transaction Document.

 

26

 

 

(f)            Notices. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered: (i) upon receipt, if
delivered personally; (ii) upon receipt when sent, if sent by facsimile
(provided confirmation of transmission is mechanically or electronically
generated and kept on file by the sending party); (iii) when sent, if sent by
e-mail (provided that such sent e-mail is kept on file (whether electronically
or otherwise) by the sending party and the sending party does not receive an
automatically generated message from the recipient’s e-mail server that such
e-mail could not be delivered to such recipient) and (iv) if sent by overnight
courier service, one (1) Business Day after deposit with an overnight courier
service with next day delivery specified, in each case, properly addressed to
the party to receive the same. The addresses, facsimile numbers and/or e-mail
addresses for such communications shall be:

If to the Company:

InterCloud Systems, Inc.
1030 Broad Street
Suite 102
Shrewsbury, New Jersey 07702
Facsimile: (561) 988-2307
E-mail address: dsullivan@intercloudsys.com
Attention: Chief Executive Officer

 

27

 

 

With a copy (for informational purposes only) to:

Pryor Cashman LLP
7 Times Square
New York, New York 10036
Facsimile: (212) 798-6319
E-mail address: ali.panjwani@pryorcashman.com
Attention: M. Ali Panjwani, Esq.

If to the Investor:

Dominion Capital LLC

341 West 38th Street
Suite 800
New York, NY 10018
Facsimile: (708) 844-2883
E-mail address: kordash@domcapll.com
Attention: Daniel Kordash

 

or to such other address, facsimile number or e-mail address and/or to the
attention of such other Person as the recipient party has specified by written
notice given to each other party five (5) days prior to the effectiveness of
such change. Written confirmation of receipt (A) given by the recipient of such
notice, consent, waiver or other communication, (B) mechanically or
electronically generated by the sender’s facsimile machine containing the time,
date recipient facsimile number and an image of the first page of such
transmission or (C) provided by an overnight courier service shall be rebuttable
evidence of personal service, receipt by facsimile or receipt from an overnight
courier service in accordance with clause (i), (ii) or (iv) above, respectively.
A copy of the e-mail transmission containing the time, date and recipient e-mail
address shall be rebuttable evidence of receipt by e-mail in accordance with
clause (iii) above.

(g)           Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and assigns,
including, as contemplated below, any assignee or transferee of the Note. The
Company shall not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Investor (which may be granted or
withheld in the sole discretion of the Investor), including, without limitation,
by way of a Fundamental Transaction. The Investor may assign some or all of its
rights hereunder in connection with any assignment or transfer of the Note
without the consent of the Company, in which event such assignee or transferee
(as the case may be) shall be deemed to be an Investor hereunder with respect to
such assigned rights.

(h)           No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, other than the Indemnitees referred to in Section ‎9‎(k).

(i)            Survival. The representations, warranties, agreements and
covenants shall survive the Closing.

 

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(j)            Further Assurances. Each party shall do and perform, or cause to
be done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
any other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.

(k)           Indemnification.

(i)            In consideration of the Investor’s execution and delivery of the
Transaction Documents and acquiring the Note thereunder and in addition to all
of the Company’s other obligations under the Transaction Documents, the Company
shall defend, protect, indemnify and hold harmless the Investor and each holder
of the Note and all of their stockholders, partners, members, officers,
directors, employees and direct or indirect investors and any of the foregoing
Persons’ agents or other representatives (including, without limitation, those
retained in connection with the transactions contemplated by this Agreement)
(collectively, the “Indemnitees”) from and against any and all actions, causes
of action, suits, claims, losses, costs, penalties, fees, liabilities and
damages, and expenses in connection therewith (irrespective of whether any such
Indemnitee is a party to the action for which indemnification hereunder is
sought), and including reasonable attorneys’ fees and disbursements (the
“Indemnified Liabilities”), incurred by any Indemnitee as a result of, or
arising out of, or relating to (A) any misrepresentation or breach of any
representation or warranty made by the Company in any of the Transaction
Documents, (B) any breach of any covenant, agreement or obligation of the
Company contained in any of the Transaction Documents or (C) any cause of
action, suit, proceeding or claim brought or made against such Indemnitee by a
third party (including for these purposes a derivative action brought on behalf
of the Company or any Subsidiary) or which otherwise involves such Indemnitee
that arises out of or results from (1) the execution, delivery, performance or
enforcement of any of the Transaction Documents, (2) any transaction financed or
to be financed in whole or in part, directly or indirectly, with the proceeds of
the issuance of the Note, (3) any disclosure properly made by the Investor
pursuant to Section ‎4(g), or (4) the status of the Investor or holder of the
Note either as an investor in the Company pursuant to the transactions
contemplated by the Transaction Documents or as a party to this Agreement
(including, without limitation, as a party in interest or otherwise in any
action or proceeding for injunctive or other equitable relief). To the extent
that the foregoing undertaking by the Company may be unenforceable for any
reason, the Company shall make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities which is permissible under
applicable law.

 

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(ii)           Promptly after receipt by an Indemnitee under this Section 9(k)
of notice of the commencement of any action or proceeding (including, without
limitation, any governmental action or proceeding) involving an Indemnified
Liability, such Indemnitee shall, if an Indemnified Liability in respect thereof
is to be made against any indemnifying party under this Section 9(k) deliver to
the indemnifying party a written notice of the commencement thereof, and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume control of the defense thereof with counsel
mutually satisfactory to the indemnifying party and the Indemnitee; provided,
however, an Indemnitee shall have the right to retain its own counsel with the
fees and expenses of such counsel to be paid by the indemnifying party if: (A)
the indemnifying party has agreed in writing to pay such fees and expenses; (B)
the indemnifying party shall have failed promptly to assume the defense of such
Indemnified Liability and to employ counsel reasonably satisfactory to such
Indemnitee in any such Indemnified Liability; or (C) the named parties to any
such Indemnified Liability (including, without limitation, any impleaded
parties) include both such Indemnitee and the indemnifying party, and such
Indemnitee shall have been advised by counsel that a conflict of interest is
likely to exist if the same counsel were to represent such Indemnitee and the
indemnifying party (in which case, if such Indemnitee notifies the indemnifying
party in writing that it elects to employ separate counsel at the expense of the
indemnifying party, then the indemnifying party shall not have the right to
assume the defense thereof and such counsel shall be at the expense of the
indemnifying party, provided further that in the case of clause (C) above the
indemnifying party shall not be responsible for the reasonable fees and expenses
of more than one (1) separate legal counsel for such Indemnitee. The Indemnitee
shall reasonably cooperate with the indemnifying party in connection with any
negotiation or defense of any such action or Indemnified Liability by the
indemnifying party and shall furnish to the indemnifying party all information
reasonably available to the Indemnitee which relates to such action or
Indemnified Liability. The indemnifying party shall keep the Indemnitee
reasonably apprised at all times as to the status of the defense or any
settlement negotiations with respect thereto. No indemnifying party shall be
liable for any settlement of any action, claim or proceeding effected without
its prior written consent; provided, however, the indemnifying party shall not
unreasonably withhold, delay or condition its consent. No indemnifying party
shall, without the prior written consent of the Indemnitee, consent to entry of
any judgment or enter into any settlement or other compromise which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such Indemnitee of a release from all liability in respect to such
Indemnified Liability or litigation, and such settlement shall not include any
admission as to fault on the part of the Indemnitee. Following indemnification
as provided for hereunder, the indemnifying party shall be subrogated to all
rights of the Indemnitee with respect to all third parties, firms or
corporations relating to the matter for which indemnification has been made. The
failure to deliver written notice to the indemnifying party within a reasonable
time of the commencement of any such action shall not relieve such indemnifying
party of any liability to the Indemnitee under this Section 9(k), except to the
extent that the indemnifying party is materially and adversely prejudiced in its
ability to defend such action.

(iii)          The indemnification required by this Section 9(k) 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 Indemnified
Liabilities are incurred.

(iv)          The indemnity and contribution agreements contained herein shall
be in addition to (i) any cause of action or similar right of the Indemnitee
against the indemnifying party or others, and (ii) any liabilities the
indemnifying party may be subject to pursuant to the law.

 

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(l)            Construction. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party. No specific
representation or warranty shall limit the generality or applicability of a more
general representation or warranty.

(m)          Remedies. The Investor and any holder of the Note shall have all
rights and remedies set forth in the Transaction Documents and all rights and
remedies which such holders have been granted at any time under any other
agreement or contract and all of the rights which such holders have under any
law. Any Person having any rights under any provision of this Agreement shall be
entitled to enforce such rights specifically (without posting a bond or other
security), to recover damages by reason of any breach of any provision of this
Agreement and to exercise all other rights granted by law. Furthermore, the
Company recognizes that in the event that it or any Subsidiary fails to perform,
observe, or discharge any or all of its or such Subsidiary’s (as the case may
be) obligations under the Transaction Documents, any remedy at law may prove to
be inadequate relief to the Investor. The Company therefore agrees that the
Investor shall be entitled to seek specific performance and/or temporary,
preliminary and permanent injunctive or other equitable relief from any court of
competent jurisdiction in any such case without the necessity of proving actual
damages and without posting a bond or other security. The remedies provided in
this Agreement and the other Transaction Documents shall be cumulative and in
addition to all other remedies available under this Agreement and the other
Transaction Documents, at law or in equity (including a decree of specific
performance and/or other injunctive relief).

(n)           Withdrawal Right. Notwithstanding anything to the contrary
contained in (and without limiting any similar provisions of) the Transaction
Documents, whenever the Investor exercises a right, election, demand or option
under a Transaction Document and the Company or any Subsidiary does not timely
perform its related obligations within the periods therein provided, then the
Investor may rescind or withdraw, in its sole discretion from time to time upon
written notice to the Company or such Subsidiary (as the case may be), any
relevant notice, demand or election in whole or in part without prejudice to its
future actions and rights.

(o)           Payment Set Aside; Currency. To the extent that the Company makes
a payment or payments to the Investor hereunder or pursuant to any of the other
Transaction Documents or the Investor enforces or exercises its rights hereunder
or thereunder, and such payment or payments or the proceeds of such enforcement
or exercise or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the Company, a trustee,
receiver or any other Person under any law (including, without limitation, any
bankruptcy law, foreign, state or federal law, common law or equitable cause of
action), then to the extent of any such restoration the obligation or part
thereof originally intended to be satisfied shall be revived and continued in
full force and effect as if such payment had not been made or such enforcement
or setoff had not occurred. Unless otherwise expressly indicated, all dollar
amounts referred to in this Agreement and the other Transaction Documents are in
United States Dollars (“U.S. Dollars”), and all amounts owing under this
Agreement and all other Transaction Documents shall be paid in U.S. Dollars. All
amounts denominated in other currencies (if any) shall be converted into the
U.S. Dollar equivalent amount in accordance with the Exchange Rate on the date
of calculation. “Exchange Rate” means, in relation to any amount of currency to
be converted into U.S. Dollars pursuant to this Agreement, the U.S. Dollar
exchange rate as published in the Wall Street Journal on the relevant date of
calculation.

(p)           Judgment Currency.

(i)            If for the purpose of obtaining or enforcing judgment against the
Company in connection with this Agreement or any other Transaction Document in
any court in any jurisdiction it becomes necessary to convert into any other
currency (such other currency being hereinafter in this Section ‎9(q) referred
to as the “Judgment Currency”) an amount due in US Dollars under this Agreement,
the conversion shall be made at the Exchange Rate prevailing on the Trading Day
immediately preceding:

(1)the date actual payment of the amount due, in the case of any proceeding in
the courts of New York or in the courts of any other jurisdiction that will give
effect to such conversion being made on such date: or

(2)the date on which the foreign court determines, in the case of any proceeding
in the courts of any other jurisdiction (the date as of which such conversion is
made pursuant to this Section ‎9(q)(2) being hereinafter referred to as the
“Judgment Conversion Date”).

(ii)           If in the case of any proceeding in the court of any jurisdiction
referred to in Section ‎9(q)(2) above, there is a change in the Exchange Rate
prevailing between the Judgment Conversion Date and the date of actual payment
of the amount due, the applicable party shall pay such adjusted amount as may be
necessary to ensure that the amount paid in the Judgment Currency, when
converted at the Exchange Rate prevailing on the date of payment, will produce
the amount of US Dollars which could have been purchased with the amount of
Judgment Currency stipulated in the judgment or judicial order at the Exchange
Rate prevailing on the Judgment Conversion Date.

(iii)          Any amount due from the Company under this provision shall be due
as a separate debt and shall not be affected by judgment being obtained for any
other amounts due under or in respect of this Agreement or any other Transaction
Document.

 

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

 

  COMPANY:         INTERCLOUD SYSTEMS, INC.         By: /s/ Daniel Sullivan  
Name: Daniel Sullivan   Title: Chief Accounting Officer

 

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

 

  DOMINION CAPITAL LLC         By: /s/ Mikhail Gurevich   Name: Mikhail Gurevich
  Title: Managing Member 

 

 

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