SECURITIES PURCHASE AGREEMENT

This SECURITIES PURCHASE AGREEMENT (the “Agreement”) is made and entered into as
of September 23, 2011 by and among Torvec, Inc., a New York corporation (the
“Company”), B. Thomas Golisano, a resident of the State of Florida (the
“Investor”), and each other Purchaser listed on the Schedule of Purchasers
attached hereto (each along with the Investor, a “Purchaser” and collectively
the “Purchasers”).

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

WHEREAS, the Purchasers desire to purchase from the Company, and the Company
desires to issue and sell to the Purchasers, (a) an aggregate of 15,562,500
shares of the Company’s Series C Voting Convertible Preferred Stock, par value
$0.01 per share (the “Series C Convertible Preferred Stock”), initially
convertible into an equivalent number of common shares of the Company, par value
$0.01 per share (“Common Stock”), for an aggregate purchase price of at least
$6,225,000 at a price of $0.40 per share, and (b) Warrants to Purchase up to an
aggregate of 1,556,250 shares of Common Stock in the form of Warrant attached as
Exhibit A hereto (the “Warrants” and collectively with the Series C Convertible
Preferred Stock, the “Securities”), each in the respective amounts set forth
next to each Purchaser’s name on the Schedule of Purchasers attached hereto;

WHEREAS, the Company has filed, or will file prior to the Closing, a Certificate
of Amendment (“Certificate of Amendment”) to the Company’s Certificate of
Incorporation, as amended through January 29, 2007 (collectively, the
“Certificate of Incorporation”, and as amended by the Certificate of Amendment,
the “Amended Certificate of Incorporation”) in the form attached hereto as
Exhibit B; and

WHEREAS, in connection herewith, certain of the Company’s directors and
executive officers have entered into, or will be entering into, a separate
Subscription Agreement (“Directors Subscription Agreement”) to purchase (a) up
to 687,500 shares of the Company’s Series C Convertible Preferred Stock, which
are initially convertible into an equivalent number of shares of Common Stock
for an aggregate purchase price of up to $275,000 at a price of $0.40 per share,
and (b) Warrants to Purchase up to 68,750 shares of Common Stock which contain
the same terms and conditions as the Warrant being purchased by the Investor
pursuant hereto (collectively, the “Directors’ Investment Transaction”);

NOW THEREFORE, in consideration of the foregoing and the mutual covenants and
agreements hereinafter set forth, the Company and each Purchaser hereto,
severally and not jointly, agree as follows:

Section 1. Purchase and Sale of Securities.

1.1 Sale and Purchase. Upon the terms and subject to the conditions herein, and
in reliance on the representations and warranties made by the Company in this
Agreement, each Purchaser hereby severally agrees to purchase from the Company,
and the Company hereby agrees to issue and sell to each Purchaser at the Closing
(defined in Section 1.4 below), free and clear of any and all Claims (as defined
below) (a) that number of Convertible Preferred Shares and (b) an accompanying
number of Warrants, each as set forth next to each Purchaser’s name on the
Schedule of Purchasers attached hereto, for the aggregate purchase price set
forth on the Schedule of Purchasers (the “Purchase Price”). The Convertible
Preferred Shares shall have the rights, privileges and preferences contained in
the Amended Certificate of Incorporation. Each Warrant shall be immediately
exercisable in accordance with its terms.

1.2 Amended Certificate of Incorporation. Immediately prior to or
contemporaneously with the Closing, the Company shall have filed with the
Secretary of State of New York the Certificate of Amendment, and the same shall
have become effective prior to the Closing in accordance with New York law.

1.3 Use of Proceeds. The Company may use the proceeds from the sale of the
Securities for general corporate purposes.

1.4 Closing. The closing of the issuance, sale, transfer, assignment, conveyance
and delivery of the Securities (the “Closing”) will take place at the offices of
Woods Oviatt Gilman, LLP, Two State Street, Rochester New York 14614, at
10:00 a.m., on the date hereof (the “Closing Date”).

1.5 Closing Deliveries. At the Closing:

(a) Each Purchaser shall deliver to the Company:

(i) in United States dollars and in immediately available funds, the Purchase
Price for the Securities purchased by the Purchaser by wire transfer to an
account designated by the Company; and

(ii) Such other supporting documents and certificates as the Company may
reasonably request or as may be required pursuant to this Agreement or another
Transaction Document in order to effect the transactions contemplated hereunder
and thereunder; and

(iii) The Investors’ Rights Agreement in the form attached hereto as Exhibit C,
duly executed by the Purchaser.

(b) The Company shall deliver or cause to be delivered to each Purchaser the
following:

(i) a stock certificate representing all of the Convertible Preferred Shares
issued hereunder registered in the name of the Purchaser, which certificate(s)
shall contain the restrictive legend required hereby and the Investors’ Rights
Agreement;

(ii) a Warrant registered in the name of the Purchaser, duly executed by the
Company representing the number of Warrant Shares for such Purchaser as
reflected on the Schedule of Purchasers, which Warrant shall contain the
restrictive legend required hereby; and

(iii) the Investors’ Rights Agreement, in the form attached hereto as Exhibit C,
duly executed by the Company.

(c) The Company shall deliver or cause to be delivered to the Investor the
following:

(i) certificate of the secretary or assistant secretary of the Company
certifying, as of the Closing, as to (A) the Amended Certificate of
Incorporation, (ii) the By-Laws of the Company as amended or amended and
restated to date, (iii) the resolutions of the board of directors of the Company
approving the Transaction Documents and the other documents to be delivered by
the Company thereunder and the performance of the obligations of the Company
thereunder and (iv) the resolutions of the holders of the Class A Non-Voting
Cumulative Convertible Preferred Stock (as defined in Section 2.4(a)) and the
Class B Non-Voting Cumulative Convertible Preferred Stock (as defined in
Section 2.4(a)) approving the content and filing of the Certificate of
Amendment, and (v) the names and true signatures of the officers of the Company
authorized to sign the Transaction Documents to be delivered by the Company
under this Agreement and the other Transaction Documents;

(ii) a certificate of the Secretary of State of the State of New York as of a
recent date, as to the good standing of the Company and as to the Charter
Documents of the Company on file in the office of the Secretary of State;

(iii) the legal opinion of Richard Sullivan, Esq., general counsel for the
Company, substantially in the form of Exhibit D hereto;

(iv) a copy of the Directors Subscription Agreement representing proceeds of at
least $125,000, and each other document or agreement required to be executed by
the Company or any other party thereto, in each case duly executed by each party
thereto; and

(v) such other supporting documents and certificates as the Investor may
reasonably request or as may be required pursuant to this Agreement or another
Transaction Document.

1.6 Reservation of Shares. The Company has authorized and has reserved and
covenants to continue to reserve out of its authorized Common Stock, free of
preemptive rights and other similar contractual rights of stockholders, the
maximum number of shares of Common Stock as shall from time to time be
sufficient to effect the conversion of all of the Convertible Preferred Shares
and the exercise of the Warrants.

1.7 Transfer Taxes. All transfer taxes, fees and duties under applicable law
incurred in connection with the sale and transfer of the Convertible Preferred
Shares under this Agreement will be borne and paid by the Company and it shall
promptly reimburse the Purchasers for any such tax, fee or duty which any of
them is required to pay under applicable law.

1.8 Further Assurances. The Company, on the one hand, and a Purchaser, on the
other hand, from time to time after the Closing at the request of the other and
without further consideration shall execute and deliver further instruments of
issuance, transfer and assignment and take such other action as the other may
reasonably require to fully and more effectively transfer and assign to, and
vest in, the Purchasers, the Securities and all rights thereto, and to fully
implement the provisions of this Agreement and the other Transaction Documents.

1.9 Certain Definitions. For purposes of this Agreement, the following terms
shall have the meanings given thereto:

(a) “Affiliate” of a Person shall mean with respect to such a Person or entity,
any Person or entity which directly or indirectly Controls, is Controlled by, or
is under common Control with such Person or entity.

(b) “Business Consultants Stock Plan” shall mean that certain Business
Consultants Stock Plan of the Company adopted as of June 2, 1999, as amended.

(c) “Claim” shall mean any and all liens, claims, options, charges, pledges,
security interests, voting agreements, voting trusts, encumbrances, rights or
restrictions of any nature.

(d) “Control” (including the terms “controlled by” and “under common control
with”) means the possession, directly or indirectly, or as trustee or executor,
of the power to direct or cause the direction of the management policies of a
Person, whether through the ownership of stock, as trustee or executor, by
contract or credit arrangement or otherwise.

(e) “Convertible Preferred Shares” means the shares of the Series C Convertible
Preferred Stock purchased hereunder.

(f) “Conversion Shares” means the shares of Common Stock issuable upon
conversion of the Convertible Preferred Shares.

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

(h) “Existing Preferred Stock” means collectively the Company’s outstanding
Class A Non-Voting Cumulative Convertible Preferred Stock (as defined in
Section 2.4(a)) and Class B Non-Voting Cumulative Convertible Preferred Stock
(as defined in Section 2.4(a)).

(i) “GAAP” means generally accepted accounting principles as applied in the
United States.

(j) “Knowledge” means the actual knowledge after reasonable investigation of
Richard A. Kaplan, Robert Fishback, Richard Sullivan and Keith Gleasman.

(k) “Legal Requirements” means all foreign, federal, state, municipal and local
statutes, laws, ordinances, judgments, decrees, orders, rules, regulations,
policies and guidelines;

(l) “Material Adverse Effect” means any event, change or effect that is or would
reasonably be expected to be materially adverse to the assets, liabilities,
condition (financial or other), prospects, business or results of operations of
the Company or any of its Subsidiaries, other than any event, change or effect
relating to or resulting from: (i) the announcement or other disclosure of this
Agreement or the transactions contemplated herein; (ii) conditions or changes in
the general economic, business or financial environment which do not affect the
Company or its Subsidiaries or the industries in which the Company or its
Subsidiaries operate in a disproportionate manner; (iii) an act of terrorism or
an outbreak or escalation of hostilities or war (whether declared or not
declared) or any natural disasters or any national or international calamity or
crisis affecting the United States; (iv) changes in Legal Requirements which do
not affect the Company or its Subsidiaries or the industries in which the
Company or its Subsidiaries operate in a disproportionate manner; or (v) changes
in United States generally accepted accounting principles (“GAAP”) which do not
affect the Company disproportionately. “Permitted Encumbrances” means (i) real
estate taxes, assessments and other governmental levies, fees, or charges
imposed that are (x) not due and payable as of the Closing Date or (y) being
contested by appropriate proceedings; (ii) mechanics’ liens and similar liens
for labor, materials, or supplies provided for amounts that are (x) not
delinquent or (y) being contested by appropriate proceedings (and, in either
event, are not material); (iii) zoning, building codes, and other land use laws
regulating the use or occupancy of real property or the activities conducted
thereon that are imposed by any governmental authority having jurisdiction over
real property; (iv) liens, security interest or other encumbrances for any
publicly disclosed indebtedness of the Company or its Subsidiaries; and
(v) easements, covenants, conditions, restrictions and other similar matters
affecting title to real property and other encroachments and title and survey
defects that do not or would not materially impair the use or occupancy of such
real property in the operation of the business of the Company and its
Subsidiaries taken as a whole.

(m) “Person” means an individual, corporation, partnership, association, trust,
any unincorporated organization or any other entity.

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

(o) “SEC Reports” means all reports, schedules, forms, statements and other
documents required to be filed with the SEC by the Company for the two year
period prior to the Closing through and including through the date hereof, with
the SEC pursuant to the reporting requirements of the Exchange Act, including
all exhibits included or incorporated by reference therein and financial
statements and schedules thereto and documents included or incorporated by
reference therein.

(p) “Subsidiary” of a Person means any corporation more than fifty (50%) percent
of whose outstanding voting securities, or any partnership, limited liability
company joint venture or other entity more than fifty percent (50%) of whose
total equity interest, is directly or indirectly owned by such Person.

(q) “Transaction Documents” means this Agreement, the Warrants, the Certificate
of Amendment, and the Investors’ Rights Agreement and each other agreement,
document and instrument executed in connection with the transactions
contemplated hereby or thereby.

(r) “Warrant Shares” means the shares of Common Stock issuable upon exercise of
a Warrant.

(s) “Underlying Shares” means the Conversion Shares and the Warrants Shares.

Section 2. Representations and Warranties of the Company.

In order to induce the Purchasers to enter into this Agreement and consummate
the transactions contemplated hereby, the Company hereby represents and warrants
to each Purchaser that the following representations and warranties are true and
complete as of the Closing; provided, that such representations and warranties
are subject to the qualifications and exceptions set forth in the disclosure
schedule delivered to each Purchaser pursuant to this Agreement (the “Disclosure
Schedule”). The qualifications and exceptions on the Disclosure Schedule shall
be arranged in sections corresponding to the numbered and lettered sections and
subsections in this Section 2, and the qualifications and exceptions in any
section or subsection shall qualify other sections and subsections in this
Section 2 only to the extent expressly included in the Disclosure Schedule as a
qualification or exception to such other section or subsection.

2.1 Organization and Corporate Power.

(a) The Company is a corporation duly organized, validly existing and in good
standing under the laws of New York, and is duly qualified or registered to do
business as a foreign corporation (i) in each jurisdiction listed in
Schedule 2.1 and (ii) in each jurisdiction in which the failure to be so duly
qualified or registered has had, or could have, a Material Adverse Effect. Each
Subsidiary is duly organized, validly existing and in good standing under the
laws of its State of organization and each jurisdiction in which the failure of
that Subsidiary to be so qualified or registered has had, or could have, a
Material Adverse Effect.

(b) The Company has all required corporate power and authority to carry on its
business as presently conducted, to enter into and perform this Agreement and
the other Transaction Documents to which it is a party and to carry out the
transactions contemplated hereby and thereby, including the issuance and
delivery of the Securities.

(c) True, complete and correct copies of the Certificate of Incorporation and
the Company’s By-Laws, in each case as amended and in effect as of immediately
prior to the filing of the Certificate of Amendment (the “Charter Documents”),
have been furnished to the Investor by the Company.

2.2 Authorization and Non-Contravention.

(a) This Agreement and the other Transaction Documents are valid and binding
obligations of the Company, enforceable in accordance with their respective
terms.

(b) The execution, delivery and performance of this Agreement and the other
Transaction Documents, the issuance and delivery of the Convertible Preferred
Shares, and, upon conversion of the Convertible Preferred Shares and the
exercise of the Warrant, the issuance and delivery of the Underlying Shares,
respectively, have been duly authorized by all necessary corporate or other
action of the Company’s Board of Directors and the Company’s stockholders.

(c) The execution and delivery of this Agreement and the other Transaction
Documents, the issuance and delivery of the Convertible Preferred Shares, and,
upon conversion of the Convertible Preferred Shares and the exercise of the
Warrants, the issuance and delivery of the Underlying Shares, and the
performance of the transactions contemplated by this Agreement and the other
Transaction Documents, do not and will not: (i) violate or result in a violation
of, conflict with or constitute or result in a violation of (whether after the
giving of notice, lapse of time or both) any provision of the Charter Documents,
as amended through the Closing Date; (ii) conflict with, or constitute a default
(or an event that with notice or lapse of time or both would become a default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation (with or without notice, lapse of time or both) of, any agreement,
credit facility, debt, order, writ, decree or other instrument (evidencing a
Company debt or otherwise) or other understanding to which the Company or any
Subsidiary is a party, including, without limitation, any registration rights of
any Person, or by which any property or asset of the Company or any Subsidiary
is bound; or (iii) violate, conflict with or result in a violation of, or
constitute a default (whether after the giving of notice, lapse of time or both)
under, any provision of any Legal Requirement; or (iv) result in the creation of
any Claim upon any assets of the Company or any Subsidiary; except in the case
of each of clauses, (ii), (iii) and (iv), such as would not have a Material
Adverse Effect;

(d) The Company is not required to obtain any consent, waiver, authorization or
order of, give any notice to, or make any filing or registration with, any court
or other federal, state, local or other governmental authority or other Person
in connection with the execution, delivery and performance by the Company of the
Transaction Documents and the consummation of the transactions herein and in the
other Transaction Documents, other than the filing of the Certificate of
Amendment (which will have been filed with the New York State Secretary of State
prior to the Closing), the filing of any Form D required to be filed with the
SEC and such other filings as are required to be made under applicable federal
and state securities laws.

2.3 The Securities.

(a) The Convertible Preferred Shares purchased by each Purchaser hereunder will
have the rights, preferences, privileges, terms and provisions set forth in the
Amended Certificate of Incorporation.

(b) Upon delivery to each Purchaser at the Closing of the stock certificate
provided for in Section 1.5(b)(i) above and the Warrant as provided for in
Section 1.5(b)(ii) above with respect to the Securities for issuance, sale,
transfer, assignment, conveyance and delivery to such Purchaser, and upon the
Company’s receipt of the Purchase Price payable by such Purchaser in accordance
with Section 1.5(a)(i) above, (i) such Purchaser will become the sole record,
legal and beneficial owner of (A) such Convertible Preferred Shares, (B) such
Warrant and (C) upon conversion of the Convertible Preferred Shares, and the
exercise of the Warrant and payment of the exercise price therefor, the
Underlying Shares, as applicable, and the Purchaser will have good and
marketable title to the Securities and the Underlying Shares and each shall pass
to such Purchaser, free and clear of any Claims, except for the restrictions on
transfer created by the Investor Rights Agreement and applicable securities
laws; and (ii) the Convertible Preferred Shares and the Warrants to be issued at
the Closing have been duly authorized by all necessary corporate action
(including, without limitation, any required shareholder or director meeting and
consent) and shall be validly issued and outstanding, fully paid and
non-assessable, and will be issued in compliance with all applicable federal and
state securities laws. When the Warrant Shares are issued and paid for in
accordance with the terms of this Agreement and as set forth in the Warrants,
and when the Conversion Shares are issued upon conversion of the Convertible
Preferred Shares, the Warrant Shares and Conversion Shares will be duly
authorized by all necessary corporate action and validly issued and outstanding,
fully paid and non-assessable, free and clear of all Claims of any kind and the
holders (other than restrictions on transfer created by this Agreement, the
Investor Rights Agreement and applicable securities laws) shall be entitled to
all rights accorded to a holder of Common Stock.

(c) The Underlying Shares have been duly reserved for issuance by the Company.

(d) Upon conversion of the Convertible Preferred Shares and the exercise of the
Warrant and payment of the exercise price therefor, the Underlying Shares will
be issued in compliance with all applicable federal and state securities laws,
assuming the accuracy of each Purchaser’s representations and warranties set
forth in Section 3 now and at the time of such exercise or conversion.

2.4 Capitalization.

(a) As of immediately prior to the Closing and prior to the filing of the
Certificate of Amendment, the authorized capital stock of the Company consists
of (i) 400,000,000 shares of Common Stock, par value $0.01 per share, of which
(A) 45,700,399 shares are currently outstanding, (B) 664,601 shares are reserved
for issuance upon conversion of the outstanding Existing Preferred Stock,
(C) 1,841,750 shares are reserved for issuance upon the exercise of Common Stock
purchase warrants, (D) 541,848 shares are reserved for issuance upon the
exercise of options under the 1998 Stock Option Plan, (E) 276,000 shares are
reserved for issuance upon the exercise of options outstanding under the 2011
Stock Option Plan, (F) 2,724,000 additional shares are reserved for issuance
pursuant to the 2011 Stock Option Plan in respect of future awards under such
plan, (G) 7,260,000 shares are reserved for issuance upon the exercise of
outstanding non-plan options, and (H) no other shares are reserved for issuance
for any purpose, and (ii) 100,000,000 shares of preferred stock, par value $0.01
per share, including (A) 3,300,000 shares designated as “Class A Non-Voting
Cumulative Convertible Preferred Stock”, of which 587,101 shares are issued and
outstanding and which shares are convertible into 587,101 shares of Common
Stock, and (B) 300,000 shares designated as “Class B Non-Voting Cumulative
Convertible Preferred Stock”, of which 77,500 shares are issued and outstanding
and which shares are convertible into 77,500 shares of Common Stock.  The
Company is not a party to a “rights plan”, or “poison pill” agreement. 

(b) Except as disclosed in Schedule 2.4(b), there are no outstanding
subscriptions, options, warrants, commitments, preemptive rights, agreements,
arrangements or commitments of any kind relating to the issuance or sale of, or
outstanding securities convertible into or exercisable or exchangeable for, any
shares of capital stock of any class or other equity interests of the Company.

(c) As of the Closing, and after giving effect to the transactions contemplated
hereby, all of the outstanding shares of capital stock of the Company (including
the Convertible Preferred Shares) will have been duly and validly authorized and
issued, fully paid and non-assessable, and will have been offered, issued, sold
and delivered in compliance with applicable federal and state securities laws
without giving rise to preemptive rights of any kind.

(d) As of the Closing, and after giving effect to the transactions contemplated
hereby, other than rights set forth in the Transaction Documents, except as
disclosed in Schedule 2.4(d), there are (i) no preemptive rights, rights of
first refusal, put or call rights or obligations or anti-dilution rights with
respect to the issuance, sale or redemption of the Company’s capital stock or
any interests therein, or (ii) no rights to have the Company’s capital stock
(whether currently outstanding securities or any securities issuable upon
exercise or conversion of its currently outstanding securities) registered for
sale to the public in connection with the laws of any jurisdiction. To the
Company’s Knowledge, no stockholder of the Company has entered into any
agreements with respect to the voting of capital stock of the Company.

(e) The 2007 Commercializing Event Plan and the Trust Agreement, dated
September 22, 2005, each of which is referenced in the Company’s 10-Q filing
have been terminated and are of no further force or effect.

(f) Schedule 2.4(f) sets forth the capitalization of the Company (on a
fully-diluted basis) immediately following the Closing and the consummation of
the Directors’ Investment Transaction.

2.5 Subsidiaries; Investments. Except as set forth in Schedule 2.5, the Company
does not have any Subsidiaries and does not own or control, directly or
indirectly, any interest in any other corporation, partnership, trust, joint
venture, limited liability company, association or other business entity. Except
as set forth in Schedule 2.5, the Company is not a participant in any joint
venture, partnership or similar arrangement. Except as set forth in Schedule 2.5
each of the Subsidiaries listed on Schedule 2.5 is wholly owned, directly or
indirectly, by the Company and there are no outstanding subscriptions, options,
warrants, commitments, preemptive rights, agreements, arrangements or
commitments of any kind relating to the issuance or sale of, or outstanding
securities convertible into or exercisable or exchangeable for, any shares of
capital stock of any class or other equity interests of any such Subsidiary.

2.6 SEC Reports; Financial Statements.

(a) The Company has filed all forms, reports and exhibits required to be filed
by it under the Securities Act and the Exchange Act, including pursuant to
Section 13(a) or 15(d) of the Exchange Act, for the two years preceding the date
hereof on a timely basis or has received a valid extension of such time of
filing and has filed any such SEC Reports prior to the expiration of any such
extension.

(b) As of their respective dates, the SEC Reports or any amendments thereof,
complied in all material respects with the requirements of the Exchange Act
applicable to the SEC Reports, and none of the SEC Reports or to the extent such
reports were amended, 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
light of the circumstances under which they were made, not misleading.

(c) As of their respective dates, except as set forth therein or in the notes
thereto, the financial statements contained in the SEC Reports and the related
notes (the “Financial Statements”) complied as to form in all material respects
with all applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. The Financial Statements: (i) were
prepared in accordance with GAAP, consistently applied during the periods
involved (except (A) as may be otherwise indicated in the notes thereto or
(B) in the case of unaudited interim statements, to the extent that they may not
include footnotes, may be condensed or summary statements or may conform to the
SEC’s rules and instructions for Reports on Form 10-Q), (ii) fairly present in
all material respects the consolidated financial condition, position and
operating results of the Company and its consolidated Subsidiaries as of the
dates thereof and the consolidated results of their operations and cash flows
for the periods then ended (subject, in the case of unaudited statements, to
normal and recurring year-end audit adjustments) and (iii) are in all material
respects in accordance with the books of account and records of the Company and
its consolidated Subsidiaries (except as may be otherwise noted therein).
Neither the Company nor any Subsidiary has any material liabilities or
obligations, contingent or otherwise, other than (x) liabilities under contracts
and commitments incurred in the ordinary course of Company’s or Subsidiaries’
business, (y) liabilities incurred in the ordinary course of Company’s or
Subsidiaries’ business subsequent to June 30, 2011, and (z) liabilities and
obligations of a type or nature not required under GAAP to be reflected in the
Financial Statements which, in all such cases, individually and in the aggregate
would not have a Material Adverse Effect.

2.7 No Material Adverse Changes. Except as otherwise set forth in one of the
Company’s reports on Form 10-K or Form 10-Q, since the date of the latest
audited Financial Statements, (a) there has been no event, occurrence or
development that has had or that would reasonably be expected to result in a
Material Adverse Effect, (b) the Company has not incurred any liabilities
(contingent or otherwise) other than trade payables and accrued expenses
incurred in the ordinary course of business consistent with past practice,
(c) the Company has not altered its method of accounting, (d) except for the
declaration of dividends with respect to Existing Preferred Stock which
dividends are accumulated but not paid, the Company has not declared or made any
dividend or distribution of cash or other property to its stockholders or
purchased, redeemed or made any agreements to purchase or redeem any shares of
its capital stock, (e) the Company has not issued any equity securities to any
Person (including without limitation as a result of the exercise of a warrant or
option), (f) the Company has not settled or canceled any material debt, claim,
suit, arbitration or governmental investigation, (g) the Company has not sold,
assigned or transferred any material assets including without limitation any of
its intellectual property, (h) the Company has not suffered any substantial
losses, and (i) the Company has not made any agreement (written or oral) to
effect any of the foregoing. The Company does not have pending before the SEC
any request for confidential treatment of information.

2.8 Transactions with Affiliates. Except as set forth on Schedule 2.8, there are
no loans, leases or other agreements or transactions or proposed agreements or
transactions between the Company or a Subsidiary, on the one hand, and any
present or former stockholder, director, officer or employee of the Company or a
Subsidiary, or to the Knowledge of the Company any member of such officer’s,
director’s, employee’s or stockholder’s immediate family, or any Person
controlled by such officer, director, employee or stockholder or his or her
immediate family, on the other hand. No present (or to the Knowledge of the
Company, former) stockholder, director, officer or employee of the Company or a
Subsidiary, or to the Knowledge of the Company any of their respective spouses
or family members, owns directly or indirectly, on an individual or joint basis,
any interest in, or serves as an officer or director or in another similar
capacity of, any competitor, customer or supplier of the Company, or any
organization which has a material contract or arrangement with the Company.

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

2.10 Title to Assets. The Company and the Subsidiaries have good and marketable
title in all personal property owned by them that is material to the business of
the Company and the Subsidiaries, taken as a whole, in each case free and clear
of all Claims, except for Permitted Encumbrances. Neither the Company nor any
Subsidiary owns any real property. Any personal property or real property and
facilities held under lease by the Company and/or a Subsidiary are held by them
under valid, subsisting and enforceable leases with which the Company and the
Subsidiaries are in material compliance.

2.11 Tax Matters. The Company and its Subsidiaries have duly and timely filed
all required tax returns and reports required to be filed by them in connection
with any federal, state and local tax, duty or charge levied, assessed or
imposed upon the Company, its Subsidiaries or their respective assets, including
unemployment and social security. The Company and its Subsidiaries have duly and
timely paid all taxes due and payable, or, with respect to those taxes which are
being contested in good faith, the Company and its Subsidiaries have made an
appropriate reserve on their respective financial statements for the same. No
taxing authority has asserted or assessed any additional tax liabilities against
the Company and its Subsidiaries which are outstanding on this date, there are
no pending audits of any tax return or report of the Company or any Subsidiary,
and neither the Company nor its Subsidiaries have filed for any extension of
time for the payment of any tax or the filing of any tax return or report.

2.12 Intellectual Property.

(a) To the knowledge of the Company and each Subsidiary, the Company and the
Subsidiaries have valid and exclusive ownership of, or have sufficient legal
rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, service mark applications, trade names, copyrights,
trade secrets, domain names, proprietary rights and processes, licenses and
other similar rights that are necessary or material for use in connection with
their respective businesses as described in the SEC Reports and as presently
proposed to be conducted and which the failure to so have could have or
reasonably be expected to result in a Material Adverse Effect (collectively, the
“Intellectual Property Rights”). To the Knowledge of the Company, all such
Intellectual Property Rights are enforceable and, other than with respect to
commercially available software products under standard end-user license
agreements and as set forth on Schedule 2.12(a), there are no outstanding
options, licenses, agreements, Claims or shared ownership interests relating to
any Intellectual Property Rights. To the Company’s Knowledge, neither the
Company nor any Subsidiary is infringing on the intellectual property rights of
any other Person nor is any Person infringing on the intellectual property
rights of the Company or any Subsidiary. Neither the Company nor any Subsidiary
has received any communications alleging that the Company or a Subsidiary has
violated or, by conducting its business, would violate any of the patents,
trademarks, service marks, tradenames, copyrights, trade secrets, mask works or
other proprietary rights or processes of any other Person.

(b) No third party has claimed that any Person employed by or affiliated with
the Company has (i) violated any of the terms or conditions of such Person’s
employment, non-competition, non-disclosure or similar agreement with such third
party; (ii) disclosed or utilized any trade secret or proprietary information or
documentation of such third party or (iii) interfered in the employment
relationship between such third party and any of its employees. To the Company’s
knowledge, no Person employed by or affiliated with the Company has used any
trade secret or any information or documentation proprietary to any other Person
in connection with the Company’s business. Each Person employed by or that has
served as a consultant has assigned to the Company all intellectual property
rights he or she owns that are related to the Company’s business including all
Intellectual Property Rights, other than such failure to obtain as would not be
reasonably expected to have a Material Adverse Effect.

2.13 Litigation, Investigations etc.. There is no claim, action, suit,
governmental or administrative proceeding or investigation, arbitration or
charge pending or, to the Knowledge of the Company, threatened against the
Company or any of its Subsidiaries or any of their directors or officers or
which questions the validity of this Agreement or any other Transaction
Document. Without limitation to the foregoing, the Company is not subject to any
investigation or proceeding by the SEC or any state securities commissions.
There is no claim, action or suit which the Company intends to initiate.

2.14 Employees; Employee Matters.

(a) Neither the Company nor its Subsidiaries have any collective bargaining
arrangements or agreements covering any of their employees, and there is no
strike or other labor dispute involving the Company or, to the Company’s
knowledge, threatened, which could have a Material Adverse Effect. Except as
disclosed in the SEC Documents, neither the Company nor its Subsidiaries have
any employment contract, or any other similar contract relating to the right of
any officer, employee or consultant to be employed or engaged by the Company or
such Subsidiary. Since December 31, 2010, no officer, consultant or employee of
the Company or its Subsidiary whose termination, either individually or in the
aggregate, could have a Material Adverse Effect, has terminated or, to the
knowledge of the Company, has any present intention of terminating his or her
employment or engagement with the Company or any Subsidiary. The Company is not
delinquent in payments to any of its employees or independent contractors for
any wages, salaries, commissions, bonuses or any other compensation for any
service performed for it to the date hereof. Except as set forth on
Schedule 2.14, upon termination of employment of any Company employee no
severance or other payments will become due.

(b) Schedule 2.14(b) sets forth each employee benefit plan maintained,
established or sponsored by the Company or which the Company participates in or
contributes to, which is subject to the Employee Retirement Income Security Act
of 1974, as amended (“ERISA”). The Company has made all required contributions
and has no liability to any such employee benefit plan, other than liability for
health plan continuation coverage described in Part 6 of Title I(B) of ERISA,
and has complied in all material respects with all applicable laws for any such
employee benefit plan.

2.15 Compliance with Legal Requirements. Except as set forth on Schedule 2.15,
the Company complies and has at all times prior to the date hereof complied in
all material respects with all applicable Legal Requirements (including, without
limitation, with respect to wages, hours, worker classification and collective
bargaining, and all environmental and safety matters), and the Company has not
received notice from any governmental authority or any other Person of any
alleged violation or noncompliance.

2.16 Insurance Coverage. The Company and the Subsidiaries are insured by
insurers            of recognized financial responsibility against such losses
and risks and in such amounts as are prudent and customary in the businesses in
which the Company and the Subsidiaries are engaged.

2.17 Investment Banking; Brokerage. There are no claims for, and the Company is
not obligated to pay any, investment banking fees, brokerage commissions,
broker’s or finder’s fees or similar compensation in connection with the
transactions contemplated by this Agreement payable by the Company or based on
any arrangement or agreement made by or on behalf of the Company.

2.18 Private Placement. Assuming the accuracy of each Purchaser’s
representations and warranties set forth in Section 3 now and at the time of any
subsequent exercise or conversion thereof, no registration under the Securities
Act is required for the offer and sale of the Securities by the Company to the
Purchaser as contemplated hereby or the issuance to a Purchaser of any
Underlying Securities. Neither the Company nor any Person acting on its behalf
has made any offer or sales of any securities or solicited any offers to
purchase any security under circumstances that would eliminate the availability
of the exemption from registration under Section 4(2) of the Securities Act.

2.19 Investment Company. The Company is not, and is not an Affiliate of, an
“investment company” within the meaning of the Investment Company Act of 1940,
as amended.

2.20 Disclaimer. EXCEPT AS EXPRESSLY SET FORTH IN THIS SECTION 2, OR AS
EXPRESSLY SET FORTH IN ANY OTHER TRANSACTION DOCUMENT, THE COMPANY MAKES NO
OTHER REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AT LAW OR IN EQUITY, IN
RESPECT OF ANY OF ITS ASSETS, LIABILITIES OR OPERATIONS.

Section 3. Representations and Warranties of the Purchaser.

In order to induce the Company to enter into this Agreement, each Purchaser
represents and warrants to the Company, severally and not jointly, as to itself,
the following:

3.1 Investment Status.

(a) The Purchaser is purchasing the Securities for its own account, for
investment only and not with a view to, or any present intention of, effecting a
distribution of such securities or any part thereof except pursuant to a
registration or an available exemption under applicable Legal Requirements.

(b) The Purchaser acknowledges that neither the Securities nor the Underlying
Shares have been registered under the Securities Act or the securities laws of
any state or other jurisdiction and cannot be disposed of unless they are
subsequently registered under the Securities Act and any applicable state laws
or an exemption from such registration is available.

3.2 Accredited Investor. The Purchaser is an “accredited investor” as defined in
Regulation D and has such knowledge and experience in financial and business
matters that he is capable of evaluating the merits and risks of the prospective
investment in the Securities.

3.3 Opportunities for Additional Information. The Purchaser acknowledges that he
has had the opportunity to ask questions of and receive answers from, or obtain
additional information from, the executive officers of the Company concerning
the financial and other affairs of the Company, and to the extent deemed
necessary in light of the Purchaser’s personal knowledge of the Company’s
affairs, the Purchaser has asked such questions and received in writing answers
to the full satisfaction of the Purchaser, and the Purchaser desires to invest
in the Company.

3.4 No General Solicitation. The Purchaser acknowledges that the Securities were
not offered to him by means of any form of general or public solicitation or
general advertising, or publicly disseminated advertisements or sales
literature, including (a) any advertisement, article, notice or other
communication published in any newspaper, magazine, or similar media, or
broadcast over television or radio, or (b) any seminar or meeting to which such
Purchaser was invited by any of the foregoing means of communications.

3.5 Rule 144. The Purchaser understands that the Securities and the Underlying
Shares must be held indefinitely unless they are registered under the Securities
Act or an exemption from registration is available. The Purchaser acknowledges
that he is familiar with Rule 144 of the rules and regulations of the SEC, as
amended, promulgated pursuant to the Securities Act, and that he has been
advised that Rule 144 permits resales only under certain circumstances. The
Purchaser understands that to the extent that Rule 144 is not available, the
Purchaser will be unable to sell any Securities or Underlying Shares without
either registration under the Securities Act or the existence of another
exemption from such registration requirement.

3.6 No Shorting. The Purchaser has not engaged in any short sales of the Common
Stock or instructed any third parties to engage in any short sales of the Common
Stock on his behalf prior to the Closing Date. The Purchaser covenants and
agrees that it will not be in a net short position with respect to the shares of
Common Stock. For purposes of this Section 3.6, a “net short position” means a
sale of Common Stock by a Purchaser that is marked as a short sale and that is
made at a time when there is no equivalent offsetting long position in Common
Stock held by the Purchaser.

3.7 General. The Purchaser understands that the Securities are being offered and
sold in reliance on a transactional exemption from the registration requirement
of Federal and state securities laws and the Company is relying upon the truth
and accuracy of the representations, warranties, agreements, acknowledgments and
understandings of the Purchaser set forth herein in order to determine the
applicability of such exemptions and the suitability of the Purchaser to acquire
the Securities.

3.8 Investment Banking; Brokerage Fees. The Purchaser has not incurred or become
liable for any investment banking fees, brokerage commissions, broker’s or
finder’s fees or similar compensation (exclusive of professional fees to lawyers
and accountants) in connection with the transactions contemplated by this
Agreement.

3.9 Exculpation Among Purchasers. The Purchaser acknowledges that it is not
relying upon any Person, other than the Company and its officers and directors,
in making its investment or decision to invest in the Company. The Purchaser
agrees that neither any Purchaser nor the respective controlling Persons,
officers, directors, partners, agents, or employees of any Purchaser shall be
liable to any other Purchaser for any action heretofore taken or omitted to be
taken by any of them in connection with the purchase of the Securities.

Section 4. Closing Conditions And Deliveries.

The obligations of each Purchaser to purchase and pay for the Securities shall
be subject to the fulfillment by the Company, to the Purchaser’s reasonable
satisfaction, before the Closing of the following conditions, unless otherwise
waived by the Purchaser:

4.1 Representations and Warranties. The representations and warranties of the
Company contained in Section 2 shall be true and correct in all respects as of
the Closing.

4.2 Performance. The Company shall have performed and complied with all
covenants, agreements, obligations and conditions contained in this Agreement
that are required to be performed or complied with by the Company on or before
the Closing.

4.3 Authorizations. All authorizations, approvals or permits, if any, of any
governmental authority or regulatory body of the United States or any state that
are required in connection with the lawful issuance of the Securities pursuant
to this Agreement shall be obtained and effective as of the Closing.

4.4 Deliveries by the Company.

(a) At the Closing, the Company shall have delivered, or shall have caused to be
delivered, those deliveries contemplated by Section 1.5(b) above.

(b) With respect to the Investor, the Company shall have delivered, or shall
have caused to be delivered, those deliveries contemplated by Section 1.5(c)
above.

4.5 Business Consultants Stock Plan. The Company shall have terminated the
Business Consultants Stock Plan.

4.6 Directors’ Investment Transaction. The Company shall have received a minimum
of $125,000 in connection with the Directors’ Investment Transaction in
accordance with the terms and conditions of the Directors Subscription
Agreement.

4.7 No Material Adverse Effect. No event shall have occurred since June 30, 2011
and no facts or conditions shall exist that, individually or in the aggregate,
have had, or would reasonably be expected to have, a Material Adverse Effect.

4.8 No Litigation or Injunction. There shall be no action, suit, claim or
proceeding of any nature pending, or overtly threatened against (a) the
Purchasers or the Company, their respective properties or any of their
respective officers, directors or Affiliates arising out of, or in any way
connected with, the transactions contemplated by this Agreement or any other
Transaction Document or (b) the Company, its properties or any of its officers,
directors or Affiliates that has had or could reasonably be expected to have a
Material Adverse Effect, and the consummation of the transactions contemplated
by this Agreement and the other Transaction Documents shall not violate any
order, decree or judgment of any court or governmental body having competent
jurisdiction.

4.9 Certificate of Amendment. The Company shall have filed the Certificate of
Amendment with the Secretary of State of New York State prior to the Closing, a
copy of the filing receipt of which shall be provided to each Purchaser.

4.10 Minimum Amount. The Company shall have received the deliveries under
Section 5.1 from the Purchasers representing an aggregate Purchase Price of at
least $6,000,000.

4.11 Reservation of Shares. The Company shall have reserved for issuance a
sufficient number of shares of Common Stock for the purpose of enabling the
Company to satisfy any obligations to issue Underlying Shares on the conversion
of the Convertible Preferred Shares and the exercise of the Warrants.

Section 5. Closing Conditions And Deliveries.

The obligations of the Company to issue and sell the Securities and to
consummate the other transactions contemplated by this Agreement and the other
Transaction Documents shall be subject to the fulfillment by each Purchaser to
the Company’s reasonable satisfaction or waiver on or before the Closing Date of
the following conditions:

5.1 Closing Deliveries by the Purchaser to the Company. At the Closing, the
Purchaser shall deliver, or shall cause to be delivered, to the Company, the
deliveries contemplated by Section 1.5(a).

5.2 Representations and Warranties. The representations and warranties of each
Purchaser contained in Section 3 shall be true and correct, in all respects as
of the Closing.

5.3 Performance. Each Purchaser shall have performed and complied with all
covenants, agreements, obligations and conditions contained in this Agreement
that are required to be performed or complied with by the Investor on or before
the Closing.

5.4 Minimum Amount. The Company shall have received the deliveries under
Section 5.1 from the Purchasers representing an aggregate Purchase Price of at
least $6,000,000.

5.5 Authorizations. All authorizations, approvals or permits, if any, of any
governmental authority or regulatory body of the United States or any state that
are required in connection with the lawful issuance of the Securities pursuant
to this Agreement shall be obtained and effective as of the Closing.

Section 6. Covenants.

The Company covenants with each of the Purchaser and the Investor, as applicable
as follows, which covenants are for the benefit of the Purchasers and the
Investor, as applicable:

6.1 Securities Compliance.

(a) The Company shall timely notify the Commission in accordance with their
rules and regulations, of the transactions contemplated by any of the
Transaction Documents, including filing a report on Form 8-K and filing a Form D
with respect to the Convertible Preferred Shares, Warrants, Conversion Shares
and Warrant Shares, if required by the Commission’s rules, and shall take all
other necessary action and proceedings as may be required and permitted by
applicable federal or state law, rule and regulation, for the legal and valid
issuance of the Convertible Preferred Shares, the Warrant, the Conversion Shares
and the Warrant Shares to the Purchasers or subsequent holders

(b) The Company is relying upon the truth and accuracy of the representations,
warranties, agreements, acknowledgments and understandings of the

Purchasers set forth herein in order to determine the applicability of Federal
and state securities laws exemptions and the suitability of such Purchasers to
acquire the Securities.

6.2 Business Consultants Stock Plan. Within thirty (30) days after the Closing
Date, the Company shall take such actions as are necessary to deregister all
unsold shares of Common Stock covered by the Registration Statements on Form S-8
listed on Schedule 6.2 for the Business Consultants Stock Plan.

6.3 Noncircumvention. The Company shall not, by amendment of its Certificate of
Incorporation or By-Laws or through any reorganization, transfer of assets,
consolidation, merger, issue or sale of securities, or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the terms
of this Agreement, the Transaction Documents or the Securities.

6.4 Net Operating Loss Carryforwards. The Company will give diligent
consideration to the status of its net operating loss carryforwards and possible
techniques to preserve its net operating loss carryforwards.

          Section 7. General.     7.1    
Waivers and Consents; Amendments.

(a) For the purposes of this Agreement and the other Transaction Documents, no
course of dealing between or among any of the parties hereto and no delay on the
part of any party hereto in exercising any rights hereunder or thereunder shall
operate as a waiver of the rights hereof and thereof. No covenant or provision
hereof may be waived otherwise than by a written instrument signed by the party
or parties so waiving such covenant or other provision as contemplated herein.

(b) No amendment to this Agreement may be made without the written consent of
the Company and Purchasers holding at least a majority of the outstanding
Convertible Preferred Shares.

7.2 Legend on Securities. The Company and the Purchasers acknowledge and agree
that:

(a) the following legend shall be typed on each certificate evidencing any of
the Convertible Preferred Shares or Underlying Shares issued at any time by the
Investor:

“THE SALE, TRANSFER, PLEDGE OR OTHER DISPOSITION OF THE SECURITIES REPRESENTED
BY THIS CERTIFICATE IS SUBJECT TO CERTAIN RESTRICTIONS SET FORTH IN THE
SECURITIES PURCHASE AGREEMENT PURSUANT TO WHICH THESE SECURITIES WERE PURCHASED
FROM THE COMPANY. COPIES OF SUCH RESTRICTIONS ARE ON FILE AT THE PRINCIPAL
OFFICES OF THE COMPANY. NO TRANSFER OF SUCH SECURITIES OR OF THIS CERTIFICATE
(OR OF ANY SHARES OR OTHER SECURITIES (OR CERTIFICATES THEREFOR) ISSUED IN
EXCHANGE FOR OR IN RESPECT OF SUCH SECURITIES) SHALL BE EFFECTIVE UNLESS AND
UNTIL THE TERMS AND CONDITIONS SET FORTH IN THE SECURITIES PURCHASE AGREEMENT
HAVE BEEN COMPLIED WITH.”

“NO SALE, OFFER TO SELL, OR TRANSFER OF THE SERIES C PREFERRED SHARES
REPRESENTED BY THIS CERTIFICATE , OR THE SECURITIES ISSUABLE UPON THE CONVERSION
THEREOF, SHALL BE MADE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND IN COMPLIANCE WITH ANY
APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT THE PROPOSED TRANSFER IS EXEMPT FROM THE REGISTRATION REQUIREMENTS
OF SAID ACT AND IS IN COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS.”

(b) a legend shall be placed on the Warrant, or the Underlying Shares, in the
form contained on the form of Warrant attached as Exhibit A hereto.

(c) the aforementioned legends shall be placed on or omitted (or removed) from
certificates representing the Convertible Preferred Shares, Warrant and
Underlying Shares as set forth in the Investors’ Rights Agreement.

7.3 Survival and Expiration. The respective representations, warranties,
covenants and agreements of the Company and each Purchaser set forth in this
Agreement (except covenants and agreements which are expressly required to be
performed and are performed in full on or prior to the Closing Date) shall
survive the Closing and the consummation of the transactions contemplated
hereby.

7.4 Indemnification

(a) The Company agrees to indemnify and hold harmless the Purchasers, their
beneficiaries, heirs, successors and assigns for loss or damage including,
without limitation, reasonable attorneys’ fees and other expenses, arising as a
result of or related to any breach by the Company of any of its representations
and warranties contained in this Agreement. For purposes of this Agreement, such
loss or damage shall specifically exclude any lost profits (but shall not
exclude loss of value), consequential damages or punitive damages.

(b) Each Purchaser, severally and not jointly on its own behalf agrees to
indemnify and hold harmless the Company, and its Affiliates, and each Person who
controls any of them within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act (a “Company Indemnified Party”), for loss and
damage including, without limitation, reasonable attorneys’ fees and other
expenses arising as a result of or related to any breach by the Purchaser of any
of his, her or its representations and warranties contained in this Agreement.
For purposes of this Agreement, such loss or damage shall specifically exclude
any lost profits, consequential damages or punitive damages.

(c) The maximum amount payable by the Company to a Purchaser, or a Purchaser to
the Company or any Company Indemnified Party, for losses or damages in respect
of claims made by the Purchaser for indemnification under this Section 7.4,
shall not exceed an amount equal to the Purchase Price paid by such Purchaser.

(d) After the Closing, the rights and remedies expressly provided pursuant to
the terms of this Agreement will constitute the sole and exclusive basis for,
and means of, recourse between the parties with respect to the subject matter
hereof, and the Company and the Purchaser each expressly waives any and all
other rights or causes of action with respect to the subject matter hereof that
it may have against the other party now or in the future under any applicable
Legal Requirement. Without limiting the generality of the foregoing, each party
agrees that, after the Closing, this Section 7.4 provides its sole remedy with
respect to any loss or damages arising from the breach by another party of any
of the breaching party’s representations and warranties contained in this
Agreement; provided, however, that (i) this Section 7.4(d) shall not apply with
respect to any claim based on fraud or intentional misrepresentation, and
(ii) nothing contained in this Agreement shall impair or limit in any way the
rights or remedies available to the Purchaser under or in respect of the other
Transaction Documents.

7.5 Governing Law; Waiver of Jury Trial. This Agreement shall be deemed to be a
contract made under, and shall be construed in accordance with, the laws of the
State of New York, without giving effect to conflict of laws principles thereof.
EACH PARTY HERETO ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE
UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND
THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING
OUT OF OR RELATING TO THIS AGREEMENT AND THE OTHER TRANSACTION DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.

7.6 Section Headings; Construction. The descriptive headings in this Agreement
have been inserted for convenience only and shall not be deemed to limit or
otherwise affect the construction of any provision thereof or hereof. The use in
this Agreement of the masculine pronoun in reference to a party hereto shall be
deemed to include the feminine or neuter, and vice versa, as the context may
require. The parties have participated jointly in the negotiation and drafting
of this Agreement and the other Transaction Documents with counsel sophisticated
in investment transactions. In the event an ambiguity or question of intent or
interpretation arises, this Agreement and the other Transaction Documents shall
be construed as if drafted jointly by the parties and no presumption or burden
of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any provisions of this Agreement and the other Transaction
Documents. Where the word “including” or the word “includes” is used in this
Agreement, it means “including (or includes) without limitation”.

7.7 Counterparts. This Agreement may be executed simultaneously in any number of
counterparts, each of which when so executed and delivered shall be taken to be
an original; but such counterparts shall together constitute but one and the
same document.

7.8 Notices and Demands. Any notice or demand which is required or provided to
be given under this Agreement shall be deemed to have been sufficiently given
and received for all purposes when delivered in writing by hand, facsimile,
email or other method of electronic delivery, or five (5) days after being sent
by certified or registered mail, postage and charges prepaid, return receipt
requested, or two (2) days after being sent by overnight delivery providing
receipt of delivery, to the following addresses:

(a) if to the Company, to: Torvec Inc., 1999 Mt. Read Boulevard, Building 3,
Rochester, NY 14615, Attention: Chief Executive Officer, Fax: 585-254-1105,
Email: dickk@torvec.com, with copies (which shall not constitute notice) to
Torvec Inc., 1999 Mt. Read Boulevard, Building 3, Rochester, NY 14615,
Attention: General Counsel, Fax: 585-254-1105, Email: dsullivan@torvec.com; and

(b) if to the Investor, to: B. Thomas Golisano, 3175 Green Dolphin Lane, Naples,
Florida 34102, Fax: 585-383-3428, Email: tgolisano@bluetie.com, with a copy
(which shall not constitute notice) to Fisher Asset Management,       ,       ,
Attention: David Still, Fax: 585-340-1202, Email:       

(c) if to a Purchaser other than the Investor, to the address set forth on the
Schedule of Purchasers.

7.9 Remedies; Severability. Notwithstanding anything herein to the contrary, it
is specifically understood and agreed that any breach of the provisions of the
Transaction Documents by any Person subject hereto or thereto will result in
irreparable injury to the other parties hereto or thereto, that the remedy at
law alone will be an inadequate remedy for such breach, and that, in addition to
any other remedies which they may have at law or in equity, including recovery
of damages, such other parties may enforce their respective rights by actions
for specific performance (to the extent permitted by law). Whenever possible,
each provision of this Agreement shall be interpreted in such a manner as to be
effective and valid under applicable law, but if any provision of this Agreement
shall be deemed prohibited or invalid under such applicable law, such provision
shall be ineffective to the extent of such prohibition or invalidity, and such
prohibition or invalidity shall not invalidate the remainder of such provision
or the other provisions of this Agreement.

7.10 Integration. This Agreement, including the exhibits, schedules, documents
and instruments referred to herein or therein constitute the entire agreement,
and supersede all other prior agreements and understandings, both written and
oral, among the parties with respect to the subject matter hereof and thereof.

7.11 Assignability; Binding Agreement. This Agreement may not be assigned by any
party hereto without the prior written consent of each other party hereto. This
Agreement shall be binding upon and enforceable by, and shall inure to the
benefit of, the parties hereto and their respective successors, heirs,
executors, administrators and permitted assigns, and no others. Notwithstanding
the foregoing, nothing in this Agreement is intended to give any Person not
named herein the benefit of any legal or equitable right, remedy or claim under
this Agreement, except as expressly provided herein.

7.12 Press Releases and Public Announcements. No Party shall issue any press
release or make any public announcement relating to the subject matter of this
Agreement without the prior written approval of the Company and the Investor,
except as may otherwise be required by applicable Legal Requirement, or rule of
any trading market where the Company’s securities are quoted in order to
maintain current reporting status.

7.13 Fees and Expenses. Except as otherwise specified in this Section 7.13 or
agreed in writing by the parties, all costs and expenses incurred in connection
with this Agreement, the Transaction Documents and the transactions contemplated
by this Agreement shall be paid by the party incurring such cost or expense. At
the Closing, the Company shall promptly reimburse the Investor upon presentation
of appropriate invoices and documentation therefor for all Reimbursable Expenses
incurred, by or on behalf of the Investor. For purposes of this Agreement,
“Reimbursable Expenses” shall mean all reasonable out-of-pocket fees and
expenses incurred by the Investor in connection with his due diligence
investigation of the Company, the preparation of this Agreement and the other
Transaction Documents and consummation of the transactions contemplated by this
Agreement, including all reasonable fees and expenses of counsel to the
Investor.

7.14 Waiver of Conflicts. Each party to this Agreement acknowledges that Woods
Oviatt Gilman, LLP, counsel for the Company, has in the past performed and may
continue to perform legal services for the Investor in matters unrelated to the
transactions described in this Agreement, including the representation of such
Investor in venture capital financings and other matters. Accordingly, each
party to this Agreement hereby (a) acknowledges that they have had an
opportunity to ask for information relevant to this disclosure; and (b) gives
its informed consent to Woods Oviatt Gilman LLP’s representation of certain of
the Investor in such unrelated matters and to Woods Oviatt Gilman LLP’s
representation of the Company in connection with this Agreement and the
transactions contemplated hereby.

7.15 Finders Fee. Each party represents that it neither is nor will be obligated
for any finder’s fee or commission in connection with this transaction. Each
Purchaser agrees to indemnify and to hold harmless the Company from any
liability for any commission or compensation in the nature of a finder’s or
broker’s fee arising out of this transaction (and the costs and expenses of
defending against such liability or asserted liability) for which each Purchaser
or any of its officers, employees, or representatives is responsible. The
Company agrees to indemnify and hold harmless each Purchaser from any liability
for any commission or compensation in the nature of a finder’s or broker’s fee
arising out of this transaction (and the costs and expenses of defending against
such liability or asserted liability) for which the Company or any of its
officers, employees or representatives is responsible.

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1

IN WITNESS WHEREOF, the parties have executed this Agreement or have caused this
Agreement to be duly executed and delivered by their proper and duly authorized
officers as of the day and year first above written.

     
COMPANY:
 
 

TORVEC, INC.
 
By: /s/ Richard A. Kaplan—
 

Name:
Title:
  Richard A. Kaplan
Chief Executive Officer

    PURCHASERS:

      /s/ B. Thomas Golisano—
 

Name:
  B. Thomas Golisano

    /s/ Charles T. Graham      

    Name: Charles T. Graham

/s/ David Still      

    Name: David Still

SCHEDULE OF PURCHASERS

 

                                                                  Purchaser
     
Address and
      Number of
      Aggregate
      Purchase
               
Facsimile Number
          Convertible           Number of           Price                
 
          Preferred Shares           Warrant                                
 
          Being Purchased           Shares                                 
 
                                                B. Thomas Golisano          
3175 Green Dolphin
            15,212,500               1,521,250             $ 6,085,000          
       
Ln Naples, FL 34102 Fax: 585-340-1202
                                                               
 
                                                Charles T. Graham          
10 Turtle Creek
            250,000               25,000             $ 100,000                  
Pittsford, NY 14534 Fax: None
                                                               
 
                                                David Still          
18 Wrenfield Lane
            100,000               10,000             $ 40,000                  
Pittsford, NY 14534 Fax: 585-340-1202
                                                               
 
                                                TOTAL          
 
            15,562,500               1,556,250             $ 6,225,000          
       
 
                                               

DISCLOSURE SCHEDULES

Reference is made to the Securities Purchase Agreement dated as of September 23,
2011 (the “Purchase Agreement”), by and between Torvec, Inc., a New York
corporation (the “Company”), and B. Thomas Golisano, a resident of the State of
Florida (the “Investor”) and each other Purchaser listed on the Schedule of
Purchasers attached thereto (each along with the Investor, a “Purchaser” and
collectively the “Purchasers”). This document constitutes the Disclosure
Schedules defined in the Purchase Agreement and referred to in Section 2 of the
Purchase Agreement.

The fact that any item of information is contained herein shall not be construed
to mean that such information is required to be disclosed by the Purchase
Agreement. Such information shall not be used as a basis for interpreting the
term “material,” “materially,” “materiality,” or “material adverse effect” in
the Purchase Agreement.

Terms defined in the Purchase Agreement and not otherwise defined in the
Disclosure Schedules are used herein as defined in the Purchase Agreement. The
section headings in the Disclosure Schedules are for convenience of reference
only and shall not be deemed to alter or affect the express description of the
sections of the Disclosure Schedules as set forth in the Purchase Agreement. The
Disclosure Schedules are arranged in sections corresponding to the lettered and
numbered Sections contained in the Purchase Agreement.

Unless otherwise stated, all statements made herein are made as of the date of
the execution of the Purchase Agreement or such date as may be referenced to in
that Section of the Purchase Agreement to which the statement relates.

The signature of the Purchasers below is only for purposes of the Purchasers
acknowledging receipt of the Disclosures Schedules as provided by the Company
and is not, in any way, an acknowledgement, agreement, representation or
warranty by any of the Purchasers that the information contained on the
Disclosure Schedules is true, accurate or complete.

          TORVEC, INC.   PURCHASERS:    
 
    By:  
/s/ Richard A. Kaplan—
  /s/ B. Thomas Golisano—    
 
       
Richard A. Kaplan, Chief Executive Officer
  B. Thomas Golisano

    /s/ David Still      

David Still

/s/ Charles T. Graham      

    Charles T. Graham

Schedule 2.1

Jurisdictions of Qualification

New York

Schedule 2.4(b)

Outstanding Subscriptions, etc.

At June 30, 2011, there were 587,101 Class A Non-Voting Cumulative Convertible
Preferred Stock (“Class A Preferred Shares”) outstanding. Cumulative dividends
payable upon conversion of these outstanding shares of Class A Preferred Shares
amounted to approximately $1,443,000 as of June 30, 2011.  In the event the
dividends with respect to all accumulated and unsettled dividends were paid in
Class A Preferred Shares, pursuant to their terms at June 30, 2011, the Company
would issue 360,750 Class A Preferred Shares. 

At June 30, 2011, there were 77,500 Class B Non-Voting Cumulative Convertible
Preferred Stock (“Class B Preferred Shares”) outstanding. Cumulative dividends
payable upon conversion of these outstanding shares of Class B Preferred Shares
amounted to approximately $223,000 as of June 30, 2011.  In the event the
dividends with respect to all accumulated and unsettled dividends were paid in
Class A Preferred Shares, pursuant to their terms at June 30, 2011, the Company
would issue 44,600 Class B Preferred Shares. 

The Company has the following additional outstanding subscriptions, options,
warrants, commitments, preemptive rights, agreements, arrangements or
commitments of any kind relating to the issuance or sale of, or outstanding
securities convertible into or exercisable or exchangeable for, any shares of
capital stock of any class or other equity interests of the Company:

•   Warrants to purchase 1,841,750 shares of Common Stock;

•   Stock options to purchase 541,848 shares of Common Stock under the 1998
Stock Option Plan;

•   Stock options to purchase 276,000 shares of Common Stock under the 2011
Stock Option Plan; and

•   Non-plan stock options to purchase 7,260,000 shares of Common Stock.

Concurrently with the execution of the Purchase Agreement, the Company is
obtaining additional financing through the sale of up to 687,500 Investment
Units, for an aggregate of $275,000 to three directors and one executive officer
of the Company in reliance upon the provisions of Rule 506 of Regulation D,
under the Securities Act of 1933, as amended. Each “Investment Unit” consists of
one (1) share of the Company’s Series C Voting Convertible Preferred Stock, par
value $0.01 per share, initially convertible into an equivalent number of shares
of Common Stock, par value $0.01 per share, and a warrant to purchase one-tenth
(1/10th) of a share of Common Stock.

Schedule 2.4(d)

Outstanding Registration Rights

The Company issued warrants to purchase 500,000 shares of Common Stock with
registration rights to two individual members of L.T. Lawrence in 1998. Warrants
covering 375,000 of the shares were cancelled. The remaining warrants covering
125,000 shares are exercisable and have registration rights if and when the
Company has an initial public offering. The members have demand and piggyback
registration rights with respect to the foregoing.

In 2002 the Company issued a warrant to purchase 1.0 million shares of Common
Stock with registration rights to Eric Steenburgh in connection with his
appointment as CEO, pursuant to a certain Series B Warrant dated April 16,
2002.  The warrant is exercisable in 3 tranches:

1 — 250,000 shares  at $.25 per share – already exercised and sold

2 — 250,000 shares at $.50 per share – already exercised and sold

3 – Warrant to purchase 500,000 shares at $.75 per share, vests upon a sale of
the Company or the sale or licensing of one or more of the Company’s
technology.  No triggering event has occurred yet.  No termination date. 
Mr. Steenburgh has piggyback registration rights only with respect to the
foregoing.

Schedule 2.4(f)

Post-Closing Capitalization

(See attached)

                                                              Torvec, Inc.      
                                      Post Closing Capital Structure            
                        As of September 23, 2011                             As
of 9/7/11   Financing Transaction   As of 9/23/11              
Convertible Preferred Shares:
                                               
 
                                               
Preferred A Shares
  587,101                           587,101        
Preferred A Accum. Dividends*
  360,754                           360,754        
Preferred B Shares
  77,500                           77,500        
Preferred B Accum. Dividends*
  44,683                           44,683        
Preferred C Shares:
                                               
Golisano Investor Group
                  15,562,500           15,562,500        
Directors / Officer
      1,070,038   687,500   16,250,000   687,500   17,320,038
 
                                               
Stock Options:
                                               
 
                                               
1998 Stock Option Plan @ 6/30/11
  641,848                           641,848        
Less: Expired Since 6/30/11
  (100,000 )                           (100,000 )        
Non-Plan Options:
                                               
R. Kaplan
  5,150,000                           5,150,000        
R. Fishback
  250,000                           250,000        
Board / Advisor
  1,350,000                           1,350,000        
Retired Board
  150,000                           150,000        
Engineers
  360,000                           360,000        
2011 Stock Option Plan:
                                               
Board
  275,000                           275,000        
Employees
  1,000   8,077,848       —   1,000   8,077,848
 
                                               
Warrants:
                                               
 
                                               
Warrants Outstanding as of 9/7/11
  1,841,750                           1,841,750        
Financing Transaction - 9/23/11:
                                               
Golisano Investor Group
                  1,556,250           1,556,250        
Directors / Officer
      1,841,750   68,750   1,625,000   68,750   3,466,750
 
                                               
 
                                   
 
                                               
TOTAL Potentially Dilutive Shares
          10,989,636           17,875,000           28,864,636
Outstanding Common Shares
          45,700,399           —           45,700,399
Total Common Shares including Dilutive Securities
          56,690,035           17,875,000           74,565,035
 
                                                * Note: Impact from Acccumulated
Dividends on Preferred Stock excludes accrual subsequent to 6/30/11....not
material.
                       

Schedule 2.5

Subsidiaries and Joint Ventures

Wholly owned subsidiaries:

Iso-Torque Corporation, a New York corporation

As set forth in the Certificate of Amendment to the Certificate of Incorporation
of the Company filed with the New York State Secretary of State on October 21,
2004, holders of Class B Non-Voting Cumulative Convertible Preferred Stock of
the Company have the right to convert each such share into one (1) fully paid
and nonassessable share of the $0.01 par value common stock of Iso-Torque
Corporation.

Variable Gear LLC, a New York limited liability company

Majority owned subsidiary:

Ice Surface Development, Inc., a New York corporation (56% owned at Closing)

Majority owned joint venture:

Torvec China, LLC, a New York limited liability company (60% ownership interest
at Closing).

Schedule 2.8

Transaction with Affiliates

(1) During the ten plus years prior to the incorporation of the Company, Vernon
E., Keith E. and James Y. Gleasman invented and patented numerous technologies
as disclosed in domestically and internationally filed patents. Upon the
Company’s incorporation, the Gleasmans assigned all of their right, title and
interest to and in such inventions and patents to the Company in exchange for
the issuance of 16,464,400 shares of the Company’s Common Stock and the
agreement of the Company to pay the Gleasmans the sum of $365,000 for
expenditures in the development of these inventions and products, the Gleasmans
having agreed to waive and release the Company from payment of any other
expenses that they had incurred in the development of these inventions and
products. The board of directors of the Company concluded that the value of the
inventions, patents and patent applications assigned to the Company, as well as
the value of the services rendered, had a value in excess of the par value of
the number of shares transferred to the assignors and service providers,
respectively. Shares issued are fully paid and nonassessable.

(2) On December 1, 1997, the Company entered into three-year consulting
agreements with Vernon, Keith and James Gleasman (major stockholders, directors
and officers) whereby each was obligated to provide services to the Company in
exchange for compensation of $12,500 each per month. In 1997 the Company granted
each Vernon, Keith and James Gleasman 25,000 nonqualified Common Stock options,
exercisable immediately at $5.00 per common share for ten years. These options
expired in 2007 and were not extended or replaced.

During 2001, the Company issued 126,667 common shares under these agreements for
approximately $665,000 of accrued consulting fees.

On September 30, 2002, the Company granted 727,047 nonqualified Common Stock
options, all exercisable immediately at $5.00 per common share, in settlement of
approximately $653,000 of accrued consulting fees under these agreements. These
options expired September 30, 2007 and were not extended or replaced.

On December 23, 2003, the Company granted 166,848 nonqualified Common Stock
options exercisable immediately at $5.00 per common share, in settlement under
the agreements for accrued consulting fees of approximately $265,000. These
options are exercisable for ten years.

The Company’s consulting agreements with Vernon, Keith and James Gleasman
expired on December 1, 2003 and were not renewed.

(3) During the years ended December 31, 2010 and 2009, the Company paid in
business consultant common shares or cash $94,494 and $94,700 respectively, to a
member of the Gleasman family for administrative, technological and engineering
consulting services.

(4) During the years ended December 31, 2010 and 2009, the Company paid in
business consultant common shares or cash $76,002 and $87,700 to a family member
of its general counsel for engineering services rendered to the Company.

(5) On September 14, 2007, the Company moved its executive offices from
Pittsford, New York to Rochester, New York, which includes both a manufacturing
and executive office facility. The Rochester facility is owned by a partnership,
with which Asher J. Flaum, a Company director, is associated. On April 28, 2008,
the Company’s board of directors approved the terms of a lease and such lease
was executed on April 29, 2008.

(6) On August 18, 2006, the Company granted 400,000 nonqualified Common Stock
warrants valued at approximately $1,237,000 to a company one member of which is
a director. The warrants are immediately exercisable at $3.27 per common share
for a period of ten years. These warrants were modified and reissued upon mutual
agreement of the parties effective October 15, 2010. These modified warrants are
immediately exercisable at $.44 per common share for a period of ten years from
the modification date. This modification was valued at $68,000 and the Company
recognized this expense in the fourth quarter of 2010.

(7) On June 19, 2006, the Company awarded an aggregate 360,000 nonqualified
Common Stock warrants valued at approximately $629,000 to a director for
additional services rendered by such director as chairman of the board’s
executive committee during 2006.

(8) On August 17, 2005, the Company repaid $28,000 indebtedness to a stockholder
by issuing 11,667 restricted common shares, such number of shares based upon the
closing price of the Company’s Common Stock on August 16, 2005.

(9) On April 28, 2008, the board of directors approved a one-time payment to its
chairman of the governance and compensation committee of $46,000 for special
services rendered in connection with required compliance under the
Sarbanes-Oxley Act. This amount was paid by the issuance of 19,167 common shares
valued as of the closing price on April 28, 2008. The Company charged $46,000 to
operations in connection with such services.

(10) On October 26, 2010, the Company issued 164,187 common shares valued at
approximately $62,400 to each of its chairman of the board and general counsel
for services rendered in connection with the engagement of the Company’s new
chief executive officer.

(11) On December 13, 2010, the Company executed a consultant agreement with a
company owned by director John Hienricy, Hienrocket, Inc., to provide consulting
services to the Company at a rate of $200 per hour. Pursuant to the agreement,
the Company agreed to pay the consultant an incentive fee equal to $10,000 or
proportionate part thereof for each $1,000,000 of revenue or proportionate part
thereof actually paid and received by the Company for a period of five years
provided the definitive agreement with the third party payer results from the
material efforts of the consultant.

(12) Stock Option Agreement dated September 30, 2010 between the Company and
Richard A. Kaplan.

(13) Employment Agreement dated October 4, 2010 between the Company and Richard
A. Kaplan.

(14) Letter Agreement dated October 18, 2010 between the Company and Robert W.
Fishback.

(15) Stock Option Agreement dated October 18, 2010 between the Company and
Robert W. Fishback.

(16) The Company has outstanding options reflecting awards to its executive
officers and directors in connection with their compensation.

(17) Three of the Company’s directors and one executive officer are
participating in the Directors’ Investment Transaction.

Other than as described herein, there are no loans, leases or other agreements
or transactions or proposed agreements or transactions between the Company or
any present or former stockholder, director, officer or employee of the Company,
or to the knowledge of the Company any member of such officer’s, director’s,
employee’s or stockholder’s immediate family, or any Person controlled by such
officer, director, employee or stockholder or his or her immediate family that
are presently effective.

Schedule 2.12(a)

Intellectual Property Agreements

License granted by Torvec on December 12, 2007 in perpetuity to HDP, Inc., 4670
Hatchery Road, Waterford, Michigan 48329-3633 as Licensee permitting HDP, Inc.
to incorporate Torvec’s Sphere-Gear Constant Velocity Joint into HDP’s Multifuel
Engine for commercialization. By its terms, the license does not grant HDP, Inc.
any other rights so that Torvec is free to develop, build and market the
Constant Velocity Joint as it sees fit in all other markets.

Schedule 2.14

Employee Termination Obligations

Pursuant to the terms of the Employment Agreement dated October 4, 2010 between
the Company and Richard A. Kaplan, if the company terminates him, removes him as
CEO, or a change in control of the Company occurs, he is entitled to three
years’ severance pay, consisting of base pay and any incentive compensation.

Pursuant to the terms of the Letter Agreement dated October 18, 2010 between the
Company and Robert W. Fishback, if the Company terminates him, removes him as
CFO, or a change in control of the Company occurs, he is entitled to 12 months’
severance pay.

Schedule 2.14(b)

ERISA Plans

None
Schedule 2.15

Compliance with Legal Requirements

As of June 30, 2011, the Company has accrued $406,000 for potential accrued
payroll tax
payables.Schedule 6.2

Registration Statements

1. Form S-8 (file no. 333-165843 – filed and declared effective on April 1,
2010). This registration statement registered an additional 5,000,000 shares of
Common Stock issuable to executive business consultants and advisors of the
Company in exchange for bona fide services rendered by such consultants and
advisors as authorized by the Board of Directors under the Company’s Business
Consultants Stock Plan.

2