SECURITIES PURCHASE AGREEMENT

 

This Securities Purchase Agreement (this “Agreement”) is dated as of October 31,
2013, by and between Propell Technologies Group, Inc., a Delaware corporation
(the “Company”), and Seaside 88, LP, a Florida limited partnership (such
investor, including its successors and assigns, “Seaside”).

 

WHEREAS, subject to the terms and conditions set forth in this Agreement and
pursuant to Section 4(2) of the Securities Act (as defined herein), and Rule 506
promulgated thereunder, the Company desires to issue and sell to Seaside, and
Seaside desires to purchase from the Company, securities of the Company as more
fully described in this Agreement.

 

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

 

ARTICLE I.
DEFINITIONS

 

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

 

“Acquiring Person” shall have the meaning ascribed to such term in Section 4.5.

 

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

 

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

 

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

 

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

 

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

 

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

 

“Cap” means 10 million shares of Common Stock.

 

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

 

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

 

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

 

“Common Stock” means the common stock of the Company, par value $0.001 per
share, and any other class of securities into which such securities may
hereafter be reclassified or changed.

 

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

 

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

 

“Company Counsel” means Gracin & Marlow LLP or other counsel reasonably
acceptable to Seaside.

 

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

 

“Dollar Limit” shall have the meaning ascribed to such term in Section 2.5(b).

 

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

 

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

 

“Federal Reserve” shall have the meaning ascribed to such term in Section
3.1(mm).

 

“Final Subsequent Closing Date” shall mean the date of the Subsequent Closing
that occurs on the earlier of (a) such time as Seaside has purchased that number
of Shares equal to the Cap, and (b) the one-year anniversary of the Initial
Closing Date.

 

“Floor” shall mean $0.15 (as the same may be proportionately adjusted in respect
of any stock split, stock dividend, combination, recapitalization or the like
with respect to the Common Stock).

 

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

 

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

 

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

 

“Initial Closing Date” means the date when all of the Transaction Documents and
all other documents required to be executed and delivered in connection with the
Initial Closing pursuant this Agreement have been executed and delivered by the
applicable parties thereto, and all conditions precedent to Seaside’s
obligations to purchase the Shares, and the Company’s obligations to issue and
deliver the Shares, have been satisfied or waived with respect to the Initial
Closing.

 

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

 

“Legend Removal Date” shall have the meaning ascribed to such term in Section
4.1(c).

 

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

 

“Material Adverse Effect” means any condition, event, change or effect that
would reasonably be expected to have a material adverse effect on (a) the
legality, validity or enforceability of any Transaction Document, (b) the
results of operations, assets, business, prospects or financial condition of the
Company and its Subsidiaries, taken as a whole, or (c) the Company’s ability to
perform in any material respect on a timely basis its obligations under any
Transaction Document, but shall not mean or include any condition, event or
change which (1) is or results from events or occurrences relating to the
economy in general (including arising from terrorist attacks, acts of war or
civil unrest) or the Company’s industry in general and not specifically relating
to the Company or having a disproportionate impact on the Company, or (2)
results from the announcement of this Agreement or the transactions contemplated
hereby or by the other Transaction Documents.

 

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

 

“Money Laundering Laws” shall have the meaning ascribed to such term in Section
3.1(nn).

 

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

 

“Per Share Purchase Price” shall be an amount equal to the average of the high
and low trading prices (measured in hundredths of cents) of the Common Stock on
the Trading Market during normal trading hours for the five (5) consecutive
Trading Days immediately prior to a Closing Date, multiplied by 0.50.

 

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

 

“Public Information Failure” shall have the meaning ascribed to such term in
Section 4.2(b).

 

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“Public Information Failure Payments” shall have the meaning ascribed to such
term in Section 4.2(b).

 

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

 

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

 

“Rule 424” means Rule 424 promulgated by the Commission pursuant to the
Securities Act, as such rule may be amended or interpreted from time to time, or
any similar rule or regulation hereafter adopted by the Commission having
substantially the same purpose and effect as such rule.

 

 

“Seaside” shall have the meaning ascribed to such term in the introduction
hereof.

 

“Seaside Party” shall have the meaning ascribed to such term in Section 4.8.

 

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

 

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

 

“Share Amount” means the number of Shares to be purchased at a Closing, such
number to be equal to ten percent (10.0%) of the total number of shares of
Common Stock traded during normal trading hours during the 20 Trading Days
immediately preceding such Closing, as reported by Bloomberg Financial Markets.

 

“Shares” means the shares of Common Stock issued or issuable to Seaside pursuant
to this Agreement (as the same may be proportionately adjusted in respect of any
stock split, stock dividend, combination, recapitalization or the like with
respect to the Common Stock).

 

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

 

“Subscription Amount” means the amount to be paid for Shares at a Closing by
Seaside in United States dollars and in immediately available funds, calculated
as the product of (a) the Share Amount for such Closing and (b) the Per Share
Purchase Price for such Closing.

 

“Subsequent Closing” means each closing of the purchase and sale of the Shares
pursuant to Section 2.2.

 

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“Subsequent Closing Date” means the date that is one (1) month subsequent to the
previous Closing Date (or, if such day is not a Trading Day, then the first day
thereafter that is a Trading Day) commencing the month after the Initial Closing
Date and ending on the Final Subsequent Closing Date, or in each case, such
later dates when all conditions precedent to Seaside’s obligations to purchase
the Shares, and the Company’s obligations to issue and deliver the Shares, have
been satisfied or waived with respect to the Subsequent Closing, unless this
Agreement is earlier terminated pursuant to the terms hereof.

 

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

 

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

 

“Trading Market” means whichever of the following markets or exchanges on which
the Common Stock is listed or quoted for trading on the date in question: the
New York Stock Exchange, the NYSE MKT, the Nasdaq Capital Market, the Nasdaq
Global Market, the Nasdaq Global Select Market or the Over-The-Counter Bulletin
Board (or any successors to any of the foregoing).

 

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

 

“Transfer Agent” means Nevada Agency and Transfer Company, with a mailing
address of 50 West Liberty Street, Suite 880, Reno NV 89501 and a telephone
number of 775-322-0626 and a facsimile number of 775-322-5623, and any successor
transfer agent of the Company.

 

“VWAP” means the daily volume weighted average of actual trading prices measured
in hundreths of cents of the Common Stock of the Company on the Trading Market
on the applicable date(s).

 

ARTICLE II.
PURCHASE AND SALE

 

2.1 Initial Closing. On the Initial Closing Date, upon the terms and subject to
the conditions set forth herein, substantially concurrent with the execution and
delivery of this Agreement by the parties hereto, the Company agrees to sell,
and Seaside agrees to purchase, the Share Amount at the Per Share Purchase Price
as calculated for the Initial Closing. Seaside shall deliver to the Company, via
wire transfer of immediately available funds, the Subscription Amount for the
Initial Closing, and the Company shall deliver to Seaside the Share Amount for
the Initial Closing, and the Company and Seaside shall deliver the other items
set forth in Section 2.3 deliverable at the Initial Closing. Upon satisfaction
or waiver of the covenants and conditions set forth in Sections 2.3 and 2.4, the
Initial Closing shall occur on the Initial Closing Date electronically or at
such physical location as the parties shall mutually agree.

 

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2.2 Subsequent Closings. On each Subsequent Closing Date, upon the terms and
subject to the conditions set forth herein, including but not limited to Section
2.5, the Company agrees to sell, and Seaside agrees to purchase, the Share
Amount at the Per Share Purchase Price as calculated for such Subsequent
Closing. Seaside shall deliver to the Company, via wire transfer of immediately
available funds, the Subscription Amount, and the Company shall deliver to
Seaside the Share Amount, for such Subsequent Closing, subject to Section 2.5,
and the Company and Seaside shall deliver the other items set forth in Section
2.3 deliverable at such Subsequent Closing. Upon satisfaction or waiver of the
covenants and conditions set forth in Sections 2.3, 2.4 and 2.5, each Subsequent
Closing shall occur on the applicable Subsequent Closing Date electronically or
at such physical location as the parties shall mutually agree.

 

2.3 Deliveries.

 

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

 

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

 

(ii) solely on the Initial Closing Date, the opinion of Company Counsel,
substantially in the form of Exhibit A hereto;

 

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

 

(iv) a copy of the irrevocable instructions to the Transfer Agent instructing
the Transfer Agent to deliver, on an expedited basis, a certificate evidencing
the applicable Share Amount purchased by Seaside at such Closing, registered in
the name of Seaside.

 

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

 

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

 

(ii) the applicable Subscription Amount by wire transfer to the account as
specified in writing by the Company, and in each case less the amount due
Seaside for reimbursement of its expenses pursuant to Section 5.2 hereof.

 

2.4 Closing Conditions.

 

(a) The obligations of the Company hereunder in connection with each Closing are
subject to the satisfaction by Seaside, or waiver by the Company, of the
following conditions:

 

(i) the accuracy on the Closing Date of the representations and warranties of
Seaside contained herein (provided that representations and warranties that
speak as of a specific date shall continue to be true and correct as of the
Closing with respect to such date);

 

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(ii) the performance or satisfaction by Seaside of all obligations, covenants
and agreements required to be performed by Seaside at or prior to the Closing
Date;

 

(iii) the delivery by Seaside of the items set forth in Section 2.3(b) of this
Agreement; and

 

(iv) with respect to any Subsequent Closing, the satisfaction of the conditions
set forth in Section 2.5 of this Agreement.

 

(b) The obligations of Seaside hereunder in connection with each Closing are
subject to the satisfaction by the Company, or waiver by Seaside, of the
following conditions:

 

(i) the accuracy on the Closing Date of the representations and warranties of
the Company contained herein (provided that representations and warranties that
speak as of a specific date shall continue to be true and correct as of the
Closing with respect to such date);

 

(ii) the performance or satisfaction by the Company of all obligations,
covenants and agreements required to be performed by the Company at or prior to
the Closing Date, including obtaining all Required Approvals;

 

(iii) the delivery by the Company of the items set forth in Section 2.3(a) of
this Agreement;

 

(iv) with respect to any Subsequent Closing, the satisfaction of the conditions
set forth in Section 2.5 of this Agreement;

 

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

 

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

 

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2.5 The Floor; Limitation on Purchases; The Cap.

 

(a) With respect to each Subsequent Closing, in the event the Per Share Purchase
Price does not equal or exceed the Floor as calculated with respect to such
Subsequent Closing, then such Subsequent Closing will not occur. In each such
event, there will be one fewer Closing pursuant to this Agreement. The failure
to have a Subsequent Closing due to failure to meet the Floor will not impact
any other Subsequent Closing.

 

(b) If, for any Subsequent Closing, the proposed Subscription Amount to be
invested by Seaside at such Subsequent Closing is greater than two and one-half
times the Subscription Amount invested by Seaside at the immediately preceding
Closing (the “Dollar Limit”), then Seaside shall have the option to reduce the
number of Shares purchased at such Subsequent Closing such that the amount of
the investment at such Closing is an amount equal to as near as possible the
applicable Dollar Limit.

 

(c) In no event will any Subsequent Closing occur if, as a result of Seaside’s
purchase of Shares at such Subsequent Closing, Seaside’s beneficial ownership of
the Common Stock, calculated in accordance with Rule 13d-3 promulgated by the
Commission, will exceed 9.9% of the Company’s outstanding Common Stock
immediately after such Subsequent Closing. In such event, Seaside will purchase
only that number of Shares that will cause its beneficial ownership, calculated
in accordance with Rule 13d-3, to remain below 9.9%.

 

(d) In no event will any Subsequent Closing occur if, as a result of Seaside’s
purchase of the applicable Share Amount at such Subsequent Closing, Seaside will
have purchased an aggregate number of Shares in excess of the Cap. In such
event, Seaside will purchase only that number of Shares at such Subsequent
Closing that will cause its purchase of Shares to be equal to as near as
possible the Cap.

 

 

 

ARTICLE III.
REPRESENTATIONS AND WARRANTIES

 

3.1 Representations and Warranties of the Company. Except as set forth under the
corresponding section of the disclosure schedules delivered concurrently
herewith, which disclosure schedules shall be deemed a part hereof (the
“Disclosure Schedules”), the Company hereby makes the representations and
warranties set forth below as of the date hereof and as of each Closing Date
(provided that representations and warranties that speak as of a specific date
shall continue to be true and correct as of such Closing with respect to such
date):

 

(a) Subsidiaries. All of the significant subsidiaries (as that term is defined
in Rule 1-02 of Regulation S-X promulgated by the Commission) of the Company are
listed in the Company’s most recent Annual Report on Form 10-K as modified by
any subsequent SEC Reports filed with the SEC (each a “Subsidiary”). The Company
owns, directly or indirectly, all of the capital stock or other equity interests
of each Subsidiary free and clear of any Liens, and all of the issued and
outstanding shares of capital stock of each Subsidiary are validly issued and
are fully paid, non-assessable and free of preemptive and similar rights to
subscribe for or purchase securities. If the Company has no subsidiaries, all
other references to the Subsidiaries or any of them in the Transaction Documents
shall be disregarded.

 

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(b) Organization and Qualification. The Company and each of the Subsidiaries is
an entity duly incorporated or otherwise organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
organization, with the requisite power and authority to own and use its
properties and assets and to carry on its business as currently conducted.
Neither the Company nor any Subsidiary is in violation or default of any of the
provisions of its respective certificate or articles of incorporation, bylaws or
other organizational or charter documents. The Company is duly qualified to
conduct business and is in good standing as a foreign corporation or other
entity in each jurisdiction in which the nature of the business conducted or
property owned by it makes such qualification necessary, except where the
failure to be so qualified or in good standing, as the case may be, could not
have or reasonably be expected to result in a Material Adverse Effect, and no
Action has been instituted in any such jurisdiction revoking, limiting or
curtailing or seeking to revoke, limit or curtail such power and authority or
qualification.

 

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

 

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

 

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(e) Filings, Consents and Approvals. The Company is not required to obtain any
consent, waiver, authorization or order of, give any notice to, or make any
filing or registration with, any court or other federal, state, local or other
governmental authority or other Person in connection with the execution,
delivery and performance by the Company of the Transaction Documents, other
than: (i) the filings required pursuant to Section 4.4 of this Agreement, and
(ii) the filing of Form D with the Commission and such filings as are required
to be made under applicable state securities laws (collectively, the “Required
Approvals”).

 

(f) Issuance of the Shares. The Shares are duly authorized and, when issued and
paid for in accordance with the applicable Transaction Documents, will be duly
and validly issued, fully paid and nonassessable, free and clear of all Liens
imposed by the Company other than restrictions on transfer provided for in the
Transaction Documents.

 

(g) Capitalization. The capitalization of the Company is as set forth on
Schedule 3.1(g)(1), which Schedule 3.1(g)(1) shall also include the number of
shares of Common Stock owned beneficially, and of record, by Affiliates of the
Company as of the date hereof. The Company has not issued any capital stock
since its most recently filed periodic report under the Exchange Act, other than
pursuant to the exercise of employee stock options under the Company’s stock
option plans, the issuance of shares of Common Stock to employees pursuant to
the Company’s employee stock purchase plans and pursuant to the conversion
and/or exercise of Common Stock Equivalents outstanding as of the date of the
most recently filed periodic report under the Exchange Act. No Person has any
right of first refusal, preemptive right, right of participation, or any similar
right to participate in the transactions contemplated by the Transaction
Documents. Except as a result of the purchase and sale of the Shares or as
disclosed on Schedule 3.1 (g)(2), there are no outstanding options, warrants,
scrip rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities, rights or obligations convertible into or
exercisable or exchangeable for, or giving any Person any right to subscribe for
or acquire any shares of Common Stock, or contracts, commitments, understandings
or arrangements by which the Company or any Subsidiary is or may become bound to
issue additional shares of Common Stock or Common Stock Equivalents. The
issuance and sale of the Shares will not obligate the Company to issue shares of
Common Stock or other securities to any Person (other than Seaside) and will not
result in a right of any holder of Company securities to adjust the exercise,
conversion, exchange or reset price under any of such securities. All of the
outstanding shares of capital stock of the Company are validly issued, fully
paid and nonassessable, have been issued in compliance with all federal and
state securities laws, and none of such outstanding shares was issued in
violation of any preemptive rights or similar rights to subscribe for or
purchase securities. No further approval or authorization of any stockholder,
the Board of Directors or others is required for the issuance and sale of the
Shares. There are no stockholders agreements, voting agreements or other similar
agreements with respect to the Company’s capital stock to which the Company is a
party or, to the knowledge of the Company, between or among any of the Company’s
stockholders.

 

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

 

(i) Material Changes; Undisclosed Events, Liabilities or Developments. Since the
date of the latest audited financial statements included within the SEC Reports,
except as specifically disclosed in a subsequent SEC Report filed prior to the
date hereof or the date of a Subsequent Closing, as applicable: (i) there has
been no event, occurrence or development that has had or that could reasonably
be expected to result in a Material Adverse Effect, (ii) the Company has not
incurred any liabilities (contingent or otherwise) other than (A) trade payables
and accrued expenses incurred in the ordinary course of business consistent with
past practice and (B) liabilities not required to be reflected in the Company’s
financial statements pursuant to GAAP or disclosed in filings made with the
Commission, (iii) the Company has not altered its method of accounting except as
otherwise required pursuant to GAAP, (iv) the Company has not declared or made
any dividend or distribution of cash or other property to its stockholders or
purchased, redeemed or made any agreements to purchase or redeem any shares of
its capital stock and (v) the Company has not issued any equity securities to
any officer, director or Affiliate, except pursuant to existing Company stock
option and incentive plans and awards. The Company does not have pending before
the Commission any request for confidential treatment of information. Except for
the issuance of the Shares contemplated by this Agreement or as set forth on
Schedule 3.1(i), no event, liability, fact, circumstance, occurrence or
development has occurred or exists, or is reasonably expected to occur or exist,
with respect to the Company or its Subsidiaries or their respective business,
properties, operations, assets or financial condition, that would be required to
be disclosed by the Company under applicable securities laws at the time this
representation is made or deemed made that has not been publicly disclosed at
least 1 Trading Day prior to the date that this representation is made or deemed
made.

 

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(j) Litigation. There is no action, claim, suit, inquiry, notice of violation,
proceeding or investigation pending or, to the knowledge of the Company,
threatened against or affecting the Company, any Subsidiary or any of their
respective properties before or by any court, arbitrator, governmental or
administrative agency or regulatory authority (federal, state, county, local or
foreign and including, without limitation, an informal investigation or partial
proceeding, such as a deposition) (collectively, an “Action”) which (i)
adversely affects or challenges the legality, validity or enforceability of any
of the Transaction Documents or the Shares or (ii) could, if there were an
unfavorable decision, have or reasonably be expected to result in a Material
Adverse Effect. Neither the Company nor any Subsidiary, nor any director or
officer thereof, is or has been the subject of any Action involving a claim of
violation of or liability under federal or state securities laws or a claim of
breach of fiduciary duty. There has not been, and to the knowledge of the
Company, there is not pending or contemplated, any investigation by the
Commission involving the Company or any current or former director or officer of
the Company. The Commission has not issued any stop order or other order
suspending the effectiveness of any registration statement filed by the Company
or any Subsidiary under the Exchange Act or the Securities Act.

 

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

 

12

 

 

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

 

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

 

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

 

(o) Patents and Trademarks. The Company and the Subsidiaries have, or have
rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, trade secrets, inventions, copyrights,
licenses and other intellectual property rights and similar rights as described
in the SEC Reports as necessary or material for use in connection with their
respective businesses and which the failure to so have could have a Material
Adverse Effect (collectively, the “Intellectual Property Rights”). None of, and
neither the Company nor any Subsidiary has received a notice (written or
otherwise) that any of, the Intellectual Property Rights has expired, terminated
or been abandoned, or is expected to expire or terminate or be abandoned, within
two (2) years from the date of this Agreement. Neither the Company nor any
Subsidiary has received, since the date of the latest audited financial
statements included within the SEC Reports, a written notice of a claim or
otherwise has any knowledge that the Intellectual Property Rights violate or
infringe upon the rights of any Person, except as would not have a Material
Adverse Effect. To the knowledge of the Company, all such Intellectual Property
Rights are enforceable and there is no existing infringement by another Person
of any of the Intellectual Property Rights. The Company and its Subsidiaries
have taken reasonable security measures to protect the secrecy, confidentiality
and value of all of their intellectual properties, except where failure to do so
could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.

 

13

 

 

(p) Insurance. The Company and the Subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as are prudent and customary in the businesses in which the Company and
the Subsidiaries are engaged, including, but not limited to, directors and
officers insurance coverage at least equal to the aggregate Subscription Amount
from all Closings. Neither the Company nor any Subsidiary has any reason to
believe that it will not be able to renew its existing insurance coverage as and
when such coverage expires or to obtain similar coverage from similar insurers
as may be necessary to continue its business without a significant increase in
cost.

 

(q) Transactions With Affiliates and Employees. Except as set forth in the SEC
Reports, none of the officers or directors of the Company and, to the knowledge
of the Company, none of the employees of the Company is presently a party to any
transaction with the Company or any Subsidiary (other than for services as
employees, officers and directors), including any contract, agreement or other
arrangement providing for the furnishing of services to or by, providing for
rental of real or personal property to or from, or otherwise requiring payments
to or from any officer, director or such employee or, to the knowledge of the
Company, any entity in which any officer, director, or any such employee has a
substantial interest or is an officer, director, trustee or partner, in each
case in excess of $120,000 other than for: (i) payment of salary or consulting
fees for services rendered, (ii) reimbursement for expenses incurred on behalf
of the Company and (iii) other employee benefits, including stock option
agreements under any stock option plan of the Company.

 

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

 

14

 

 

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

 

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

 

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

 

(v) Registration Rights. No Person has any right to cause the Company to effect
the registration under the Securities Act of any securities of the Company.

 

15

 

 

(w) Listing and Maintenance Requirements. The Company has not, in the 12 months
preceding the date hereof, received notice from any Trading Market on which the
Common Stock is or has been listed or quoted to the effect that the Company is
not in compliance with the listing or maintenance requirements of such Trading
Market. The Company is, and has no reason to believe that it will not in the
foreseeable future continue to be, in compliance with all such listing and
maintenance requirements.

 

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

 

(y) Disclosure. Except with respect to the material terms and conditions of the
transactions contemplated by the Transaction Documents, the Company confirms
that neither it nor any other Person acting on its behalf has provided Seaside
or its agents or counsel with any information that it believes constitutes or
might constitute material, non-public information. The Company understands and
confirms that Seaside will rely on the foregoing representation in effecting
transactions in securities of the Company. All of the disclosure furnished by or
on behalf of the Company to Seaside regarding the Company, its business and the
transactions contemplated hereby, including the Disclosure Schedules to this
Agreement, is true and correct and does not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading. The press releases disseminated by the Company during the
twelve months preceding the date of this Agreement taken as a whole do not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made and when made,
not misleading. The Company acknowledges and agrees that Seaside 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 3.2 hereof.

 

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

 

16

 

 

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

 

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

 

(cc) No General Solicitation. Neither the Company nor any person acting on
behalf of the Company has offered or sold any of the Shares by any form of
general solicitation or general advertising. The Company has offered the Shares
for sale only to Seaside.

 

17

 

 

(dd) Foreign Corrupt Practices. Neither the Company, nor to the knowledge of the
Company, any agent or other person acting on behalf of the Company, has: (i)
directly or indirectly, used any funds for unlawful contributions, gifts,
entertainment or other unlawful expenses related to foreign or domestic
political activity, (ii) made any unlawful payment to foreign or domestic
government officials or employees or to any foreign or domestic political
parties or campaigns from corporate funds, (iii) failed to disclose fully any
contribution made by the Company (or made by any person acting on its behalf of
which the Company is aware) which is in violation of law or (iv) violated in any
material respect any provision of the Foreign Corrupt Practices Act of 1977, as
amended.

 

(ee) Accountants. The Company’s accounting firm is Liggett, Vogt and Webb P.A.
To the knowledge and belief of the Company, such accounting firm: (i) is a
registered public accounting firm as required by the Exchange Act and (ii) shall
express its opinion with respect to the financial statements to be included in
the Company’s Annual Report for the year ending December 31, 2013.

 

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

 

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

 

(hh) Acknowledgment Regarding Seaside’s Trading Activity. Anything in this
Agreement or elsewhere herein to the contrary notwithstanding (except for
Sections 3.2(f) and 4.10 hereof), it is understood and acknowledged by the
Company that: (i) Seaside has not been asked by the Company to agree, nor has
Seaside agreed, to desist from purchasing or selling, long and/or short,
securities of the Company, or “derivative” securities based on securities issued
by the Company or to hold the Shares for any specified term, (ii) past or future
open market or other transactions by Seaside, specifically including, without
limitation, Short Sales or “derivative” transactions, before or after the
closing of this or future private placement transactions, may negatively impact
the market price of the Company’s publicly-traded securities, (iii) Seaside, and
counter-parties in “derivative” transactions to which Seaside is a party,
directly or indirectly, may presently have a “short” position in the Common
Stock and (iv) Seaside shall not be deemed to have any affiliation with or
control over any arm’s length counter-party in any “derivative” transaction. The
Company further understands and acknowledges that (y) Seaside may engage in
hedging activities at various times during the period that the Shares are
outstanding, and (z) such hedging activities (if any) could reduce the value of
the existing stockholders’ equity interests in the Company at and after the time
that the hedging activities are being conducted.  The Company acknowledges that
such aforementioned hedging activities do not constitute a breach of any of the
Transaction Documents.

 

18

 

 

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

 

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

 

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

 

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

 

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

 

19

 

 

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

 

3.2 Representations and Warranties of Seaside. Seaside hereby makes the
representations and warranties set forth below to the Company as of the date
hereof and as of each Closing Date (provided that representations and warranties
that speak as of a specific date shall continue to be true and correct as of
such Closing with respect to such date):

 

(a) Organization; Authority. Seaside is an entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization with full right, corporate or partnership power and authority to
enter into and to consummate the transactions contemplated by the Transaction
Documents and otherwise to carry out its obligations hereunder and thereunder.
The execution and delivery of the Transaction Documents and performance by
Seaside of the transactions contemplated by the Transaction Documents have been
duly authorized by all necessary corporate, partnership, limited liability
company or similar action, as applicable, on the part of Seaside. Each
Transaction Document to which it is a party has been duly executed by Seaside,
and when delivered by Seaside in accordance with the terms hereof, will
constitute the valid and legally binding obligation of Seaside, enforceable
against it in accordance with its terms, except: (i) as limited by general
equitable principles and applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting enforcement of
creditors’ rights generally, (ii) as limited by laws relating to the
availability of specific performance, injunctive relief or other equitable
remedies and (iii) insofar as indemnification and contribution provisions may be
limited by applicable law.

 

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

 

20

 

 

(c) Experience of Seaside. Seaside, either alone or together with its
representatives, has such knowledge, sophistication and experience in business
and financial matters so as to be capable of evaluating the merits and risks of
the prospective investment in the Shares, and has so evaluated the merits and
risks of such investment. Seaside is able to bear the economic risk of an
investment in the Shares and, at the present time, is able to afford a complete
loss of such investment.

 

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

 

(e) No Brokers or Finders. No agent, broker, investment bank or firm is or will
be entitled to any broker’s or finder’s fee, or any commission or similar fee,
from Seaside in connection with any of the transactions contemplated by this
Agreement or any other Transaction Document.

 

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

 

ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES

 

4.1 Transfer Restrictions; Legends and Legend Removal. (a) The Shares may only
be disposed of in compliance with state and federal securities laws. In
connection with any transfer of Shares other than pursuant to an effective
registration statement or Rule 144, to the Company or to an Affiliate of Seaside
or in connection with a pledge as contemplated in Section 4.1(b), the Company
may require the transferor thereof to provide to the Company an opinion of
counsel selected by the transferor and reasonably acceptable to the Company, the
form and substance of which opinion shall be reasonably satisfactory to the
Company, to the effect that such transfer does not require registration of such
transferred Shares under the Securities Act. As a condition of transfer, any
such transferee shall agree in writing to be bound by the terms of this
Agreement and shall have the rights and obligations of Seaside under this
Agreement.

 

21

 

 

 

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

 

THIS SECURITY HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO
THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
ACCEPTABLE TO THE COMPANY. THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A
BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A
FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a)
UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH SECURITIES.

 

The Company acknowledges and agrees that Seaside may from time to time pledge
pursuant to a bona fide margin agreement with a registered broker-dealer or
grant a security interest in some or all of the Shares to a financial
institution that is an “accredited investor” as defined in Rule 501(a) under the
Securities Act and that agrees to be bound by the provisions of this Agreement
and, if required under the terms of such arrangement, Seaside may transfer
pledged or secured Shares to the pledgees or secured parties. At Seaside’s
expense, the Company will execute and deliver such reasonable documentation as a
pledgee or secured party of Shares may reasonably request in connection with a
pledge or transfer of the Shares, including, if the Shares are then registered
for resale, the preparation and filing of any required prospectus supplement
under Rule 424(b)(3) under the Securities Act or other applicable provision of
the Securities Act to appropriately amend the list of selling stockholders.

 

(c) Certificates evidencing the Shares shall not contain any legend (including
the legend set forth in Section 4.1(b) hereof), (i) while a registration
statement covering the resale of such security is effective under the Securities
Act, (ii) following any sale of such Shares pursuant to Rule 144, (iii) if such
Shares are eligible for sale under Rule 144, without the requirement for the
Company to be in compliance with the current public information required under
Rule 144 as to such Shares and without volume or manner-of-sale restrictions, or
(iv) if such legend is not required under applicable requirements of the
Securities Act (including judicial interpretations and pronouncements issued by
the staff of the Commission). From and after six (6) months from the applicable
Closing Date, unless Seaside is then an Affiliate of the Company, at such time
as Seaside has sold or proposes to sell all or any portion of the Shares then
eligible to be sold pursuant to Rule 144, the Company shall cause its counsel to
issue a legal opinion to the Transfer Agent if required by the Transfer Agent to
effect the removal of the legend hereunder with respect to the Shares sold or
proposed to be sold. The Company agrees that following the time as such legend
is no longer required under this Section 4.1(c), it will, no later than three
Trading Days following the delivery by Seaside to the Company or the Transfer
Agent of a certificate representing Shares issued with a restrictive legend
(such third Trading Day, the “Legend Removal Date”), deliver or cause to be
delivered to Seaside a certificate representing such shares that is free from
all restrictive and other legends. The Company may not make any notation on its
records or give instructions to the Transfer Agent that enlarge the restrictions
on transfer set forth in this Section 4. Certificates for Shares subject to
legend removal hereunder shall be transmitted by the Transfer Agent to Seaside
by crediting the account of Seaside’s prime broker with the Depository Trust
Company System as directed by Seaside.

 

22

 

 

(d) In addition to Seaside’s other available remedies, the Company shall pay to
Seaside, in cash, as partial liquidated damages and not as a penalty, for each
$1,000 of Shares (based on the VWAP of the Common Stock on the date such Shares
are submitted to the Transfer Agent) delivered for removal of the restrictive
legend and subject to Section 4.1(c), $10 per Trading Day (increasing to $20 per
Trading Day five (5) Trading Days after such damages have begun to accrue) for
each Trading Day after the Legend Removal Date until such certificate is
delivered without a legend. Nothing herein shall limit Seaside’s right to pursue
actual damages for the Company’s failure to deliver certificates representing
any Shares as required by the Transaction Documents, and Seaside shall have the
right to pursue all remedies available to it at law or in equity including,
without limitation, a decree of specific performance and/or injunctive relief.

 

(e) Seaside agrees with the Company that Seaside will sell any Shares pursuant
to either the registration requirements of the Securities Act, including any
applicable prospectus delivery requirements, or an exemption therefrom, and that
if Shares are sold pursuant to a registration statement, they will be sold in
compliance with the plan of distribution set forth therein, and acknowledges
that the removal of the restrictive legend from certificates representing Shares
as set forth in this Section 4.1 is predicated upon the Company’s reliance upon
this understanding.

 

4.2 Furnishing of Information; Public Information.

 

(a) For a period of two (2) years from the Closing Date, the Company covenants
to timely file (or obtain extensions in respect thereof and file within the
applicable grace period) all reports required to be filed by the Company after
the date hereof pursuant to Section 15(d) of the Exchange Act even if the
Company is not then subject to the reporting requirements of the Exchange Act.
As long as Seaside owns Shares, if the Company is not required to file reports
pursuant to the Exchange Act, it will prepare and furnish to Seaside and make
publicly available in accordance with Rule 144(c) such information as is
required for Seaside to sell the Shares, including without limitation, under
Rule 144. The Company further covenants that it will take such further action as
any holder of Shares may reasonably request, to the extent required from time to
time to enable such Person to sell such Shares without registration under the
Securities Act, including without limitation, within the requirements of the
exemption provided by Rule 144.

 

23

 

 

(b) At any time during the period commencing on the Initial Closing Date and
ending at such time that all of the Shares may be sold without the requirement
for the Company to be in compliance with Rule 144(c)(1) and otherwise without
restriction or limitation pursuant to Rule 144, if the Company shall fail for
any reason to satisfy the current public information requirement under Rule
144(c) (a “Public Information Failure”) then, in addition to Seaside’s other
available remedies, the Company shall pay to Seaside, in cash, as liquidated
damages and not as a penalty, for each $1,000 of Shares (based on the VWAP of
the Common Stock on the date on which Seaside shall first attempt a sale) sought
to be sold by Seaside, $10 per Trading Day (increasing to $20 per Trading Day
five (5) Trading Days after such damages have begun to accrue) for each Trading
Day that the Public Information Failure remains uncured by the Company. The
payments to which Seaside shall be entitled pursuant to this Section 4.2(b) are
referred to herein as “Public Information Failure Payments.”  Public Information
Failure Payments shall be paid within five (5) Business Days of the first
occurrence of the Public Information Failure and on or before the last day of
each calendar month thereafter if the Public Information Failure continues
beyond the first month.  In the event the Company fails to make Public
Information Failure Payments in a timely manner, such Public Information Failure
Payments shall bear interest at the rate of one and one-half percent (1.5%) per
month (prorated for partial months) until paid in full. Nothing herein shall
limit Seaside’s right to pursue actual damages for the Public Information
Failure, and Seaside shall have the right to pursue all remedies available to it
at law or in equity including, without limitation, a decree of specific
performance and/or injunctive relief.

 

4.3 Integration. The Company shall not sell, offer for sale or solicit offers to
buy or otherwise negotiate in respect of any security (as defined in Section 2
of the Securities Act) that would be integrated with the offer or sale of the
Shares in a manner that would require the registration under the Securities Act
of the sale of the Shares or that would be integrated with the offer or sale of
the Shares for purposes of the rules and regulations of any Trading Market such
that it would require shareholder approval prior to the closing of such other
transaction unless shareholder approval is obtained before the closing of such
subsequent transaction.

 

4.4 Securities Laws Disclosure; Publicity. The Company shall timely file a
Current Report on Form 8-K and press release disclosing the material terms of
the transactions contemplated hereby, and including the Transaction Documents as
exhibits thereto, in each case reasonably acceptable to Seaside and its counsel.
From and after the issuance of such press release, the Company shall have
publicly disclosed all material, non-public information delivered to Seaside by
the Company or any of its Subsidiaries, or any of their respective officers,
directors, employees or agents in connection with the transactions contemplated
by the Transaction Documents. The Company and Seaside shall consult with each
other in issuing any other press releases with respect to the transactions
contemplated hereby, and neither the Company nor Seaside shall issue any such
press release nor otherwise make any such public statement without the prior
consent of the Company, with respect to any press release of Seaside, or without
the prior consent of Seaside, with respect to any press release of the Company,
which consent shall not unreasonably be withheld or delayed, except if such
disclosure is required by law, in which case the disclosing party shall promptly
provide the other party with prior notice of such public statement or
communication. Notwithstanding the foregoing, the Company shall not publicly
disclose the name of Seaside, or include the name of Seaside in any filing with
the Commission or any regulatory agency or Trading Market, without the prior
written consent of Seaside, except: (a) as required by federal securities law in
connection with (i) any registration statement contemplated by Section 4.13 and
(ii) the filing of final Transaction Documents (including signature pages
thereto) with the Commission, and (b) to the extent such disclosure is required
by law or Trading Market regulations, in which case the Company shall provide
Seaside with prior notice of such disclosure permitted under this clause (b).

 

24

 

 

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

 

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

 

4.7 Use of Proceeds. Except as set forth on Schedule 4.7 attached hereto, the
Company shall use the net proceeds from the sale of the Shares hereunder for
working capital and general corporate purposes and shall not use such proceeds
for: (a) the satisfaction of any portion of the Company’s debt (other than
payment of trade payables in the ordinary course of the Company’s business
consistent with prior practices), (b) the redemption of any Common Stock or
Common Stock Equivalents, (c) the settlement of any outstanding litigation, or
(d) in violation of the FCPA or OFAC regulations.

 

25

 

 

 

4.8 Indemnification of Seaside. Subject to the provisions of this Section 4.8,
the Company will indemnify and hold Seaside, Seaside 88 Advisors, LLC, and their
respective directors, officers, shareholders, members, partners, employees,
agents and Affiliates (and any other Persons with a functionally equivalent role
of a Person holding such titles notwithstanding a lack of such title or any
other title), each Person who controls Seaside (within the meaning of Section 15
of the Securities Act and Section 20 of the Exchange Act), and the directors,
officers, shareholders, agents, members, partners or employees (and any other
Persons with a functionally equivalent role of a Person holding such titles
notwithstanding a lack of such title or any other title) of such controlling
persons (each, a “Seaside Party”) harmless from any and all losses, liabilities,
obligations, claims, contingencies, damages, costs and expenses, including all
judgments, amounts paid in settlements, court costs and reasonable attorneys’
fees and costs of investigation that any Seaside Party may suffer or incur as a
result of or relating to (a) any breach of any of the representations,
warranties, covenants or agreements made by the Company in this Agreement or in
the other Transaction Documents or (b) any action instituted against Seaside in
any capacity, or any of them or their respective Affiliates, by any stockholder
of the Company who is not an Affiliate of Seaside, with respect to any of the
transactions contemplated by the Transaction Documents (unless such action is
based upon a breach of Seaside’s representations, warranties or covenants under
the Transaction Documents or any agreements or understandings Seaside may have
with any such stockholder or any violations by Seaside of state or federal
securities laws or any conduct by Seaside which constitutes fraud, gross
negligence, willful misconduct or malfeasance). If any action shall be brought
against any Seaside Party in respect of which indemnity may be sought pursuant
to this Agreement, Seaside Party shall promptly notify the Company in writing,
and the Company shall have the right to assume the defense thereof with counsel
of its own choosing reasonably acceptable to Seaside Party. Any Seaside Party
shall have the right to employ separate counsel in any such action and
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of Seaside Party except to the extent that (i) the
employment thereof has been specifically authorized by the Company in writing,
(ii) the Company has failed after a reasonable period of time to assume such
defense and to employ counsel or (iii) in such action there is, in the
reasonable opinion of counsel, a material conflict on any material issue between
the position of the Company and the position of Seaside Party, in which case the
Company shall be responsible for the reasonable fees and expenses of no more
than one such separate counsel. The Company will not be liable to any Seaside
Party under this Agreement (y) for any settlement by a Seaside Party effected
without the Company’s prior written consent, which shall not be unreasonably
withheld or delayed; or (z) to the extent, but only to the extent that a loss,
claim, damage or liability is attributable to any Seaside Party’s breach of any
of the representations, warranties, covenants or agreements made by Seaside
Party in this Agreement or in the other Transaction Documents. The
indemnification required by this Section 4.8 shall be made by periodic payments
of the amount thereof during the course of the investigation or defense, as and
when bills are received or are incurred. The indemnity agreements contained
herein shall be in addition to any cause of action or similar right of any
Seaside Party against the Company or others, and (y) any liabilities the Company
may be subject to pursuant to law.

  

4.9 Listing of Common Stock. The Company agrees to use its best efforts to
maintain the listing or quotation (as applicable) of the Common Stock on its
current Trading Market and all other Trading Markets on which such Common Stock
may hereafter be listed or quoted (as applicable) and will comply in all
respects with the Company’s reporting, filing and other obligations under the
bylaws or rules of such Trading Market(s). The Company further agrees that, if
the Company applies to have the Common Stock traded on any Trading Market other
than its current Trading Market, it will include in such application all of the
Shares and will take such other action as is reasonably necessary to cause all
of the Shares to be listed on such other Trading Market.

 

 

26

 

 

4.10 Certain Transactions and Confidentiality. Seaside covenants that neither
it, nor any Person acting on its behalf or pursuant to any understanding with
it, will execute any purchases or sales, including Short Sales, of any of the
Company’s securities during the period commencing with the execution of this
Agreement and ending upon the earlier of the date of termination of this
Agreement or the Final Subsequent Closing Date.  Seaside covenants that until
such time as the transactions contemplated by this Agreement are publicly
disclosed by the Company pursuant to the initial press release as described in
Section 4.4, Seaside will maintain the confidentiality of the existence and
terms of this transaction and the information included in the Transaction
Documents and the Disclosure Schedules.  Notwithstanding the foregoing, and
notwithstanding anything contained in this Agreement to the contrary, the
Company expressly acknowledges and agrees that (i) Seaside makes no
representation, warranty or covenant hereby that it will not engage in effecting
transactions in any securities of the Company after the time end of the period
contemplated by this Section 4.10, (ii) Seaside shall not be restricted or
prohibited from effecting any transactions in any securities of the Company in
accordance with applicable securities laws from and after such time, and (iii)
Seaside shall have no duty of confidentiality to the Company or its Subsidiaries
after such time, provided, that Seaside will not engage in any Short Sales while
it holds any of the Shares. 

 

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

 

4.12 Delivery of Shares After Closing. The Company shall deliver, or cause to be
delivered, to Seaside a certificate representing the applicable Share Amount
purchased by Seaside at each Closing within three (3) Trading Days of the
applicable Closing Date.

 

4.13 Piggyback Registration Rights. If, at any time after the Initial Closing
Date, the Company shall propose to file with the Commission a registration
statement under the Securities Act (other than on Forms S-4 or S-8 or any
successor to such forms), the Company shall give notice to Seaside and include
in such registration statement all or any part of the Shares that Seaside
requests to be registered; provided, however, that the Company shall not be
required to register any Shares pursuant to this Section 4.13 that are eligible
for resale pursuant to Rule 144 under the Securities Act without any requirement
for the Company to maintain current public information and without any
limitation on volume or manner of sale and provided, further that the Company
shall not be required to register any Shares pursuant to this Section 4.13 if
the managing underwriter of an underwritten public offering determines and
advises the Company in writing that the inclusion of all securities proposed to
be included by the Company and any other holders of Company securities
requesting inclusion of their securities in the underwritten public offering
would materially and adversely interfere with the successful marketing of the
offering. The Company shall use best efforts to cause such registration
statement to become effective as soon as practicable.

 

 

27

 

 

ARTICLE V.
MISCELLANEOUS

 

5.1 Termination.  This Agreement may be terminated:

 

(a) by Seaside, upon written notice to the Company, if the Initial Closing has
not been consummated on or before November 8, 2013; or

 

(b) by the Company, upon written notice to the Company, at any time following
the Initial Closing;

 

provided, however, that no such termination pursuant to this Section 5.1 will
affect the right of any party to sue for any breach by the other party (or
parties).

 

5.2 Fees and Expenses. Except as otherwise set forth in this Agreement and as
set forth in this Section 5.2 below, each party shall pay the fees and expenses
of its own advisers, counsel, accountants and other experts, if any, and all
other expenses incurred by such party incident to the negotiation, preparation,
execution, delivery and performance of this Agreement. The Company shall pay all
stamp and other taxes and duties levied in connection with the delivery of the
Shares. Notwithstanding the foregoing, the Company shall reimburse Seaside for
the fees and expenses of its counsel, White White & Van Etten PC, in an amount
equal to (a) $7,500 at the Initial Closing and (b) $2,500 at every Subsequent
Closing. Such legal fees may be withheld by Seaside from the Subscription Amount
to be paid for the Shares at such Closings.

 

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

 

5.4 Notices. Any and all notices or other communications or deliveries required
or permitted to be provided hereunder shall be in writing and shall be deemed
given and effective on the earliest of: (a) the date of transmission, if such
notice or communication is delivered via electronic mail or facsimile at the
electronic mail address or facsimile number set forth on the signature pages
attached hereto prior to 5:30 p.m. (New York City time) on a Trading Day, (b)
the next Trading Day after the date of transmission, if such notice or
communication is delivered via electronic mail or facsimile at the electronic
mail address or facsimile number set forth on the signature pages attached
hereto on a day that is not a Trading Day or later than 5:30 p.m. (New York City
time) on any Trading Day, (c) the second (2nd) Trading Day following the date of
mailing, if sent by U.S. nationally recognized overnight courier service or (d)
upon actual receipt by the party to whom such notice is required to be given.
The address for such notices and communications shall be as set forth on the
signature pages attached hereto or as otherwise provided by written notice
delivered in compliance with this Section 5.4 by the addressee to the other
party.

 

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

 

28

 

  

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

 

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

 

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

 

5.9 Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of the Transaction Documents shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York, without regard to the principles of conflicts of law thereof. Each
party agrees that all legal proceedings concerning the interpretations,
enforcement and defense of the transactions contemplated by this Agreement and
any other Transaction Documents (whether brought against a party hereto or its
respective affiliates, directors, officers, shareholders, employees or agents)
shall be commenced exclusively in the state and federal courts sitting in the
City of New York. Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the City of New York,
borough of Manhattan for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein (including with respect to the enforcement of any of the Transaction
Documents), and hereby irrevocably waives, and agrees not to assert in any
Action, suit or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such Action, suit or proceeding is improper
or is an inconvenient venue for such proceeding. Each party hereby irrevocably
waives personal service of process and consents to process being served in any
such Action, suit or proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to such party
at the address in effect for notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any other manner permitted by law. If either party shall
commence an Action, suit or proceeding to enforce any provisions of the
Transaction Documents, then in addition to the obligations of the Company under
Section 4.8, the prevailing party in such action or proceeding shall be
reimbursed by the other party for its reasonable attorneys’ fees and other costs
and expenses incurred with the investigation, preparation and prosecution of
such Action, suit or proceeding.

 

 

29

 

 

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

 

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

 

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

 

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

 

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

 

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

 

30

 

 

 

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

 

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

 

5.18 Construction. The parties agree that each of them and/or their respective
counsel has reviewed and had an opportunity to revise the Transaction Documents
and, therefore, the normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not be employed
in the interpretation of the Transaction Documents or any amendments hereto. In
addition, each and every reference to share prices and shares of Common Stock in
any Transaction Document shall be subject to adjustment for reverse and forward
stock splits, stock dividends, stock combinations and other similar transactions
of the Common Stock that occur after the date of this Agreement.

 

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

 

  

(Signature Pages Follow)

31

 

 

 

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

 

Propell Technologies Group, Inc.

 

 

Address for Notice:

By: /s/ John Huemoeller II                                 

Name: John Huemoeller II

Title: President

 

1701 Commerce Street

Houston, TX 77002

Attention: John Huemoeller

Fax: 713-513-5700

Email: jh@propell.com

 

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

 

 

Firm Name: Gracin & Marlow

Address: 405 Lexington Avenue

Address: New York, NY 10174

Attention: Leslie Marlow

Fax: 212-208-4657

Email: lmarlow@gracinmarlow.com

 

 

 

Seaside 88, LP

 

By: Seaside 88 Advisors, LLC

Address for Notice:    

By: /s/ William J. Ritger                            

Name: William J. Ritger

Title: Manager

 

750 Ocean Royale Way

Suite 805

North Palm Beach, FL 33408

Attention: William J. Ritger and

Denis M. O’Donnell, M.D.

Fax: 866-358-6721

Email: wjr@seaside88.com

dod@seaside88.com

 

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

 

 

 

White White & Van Etten PC

45 School Street

Boston, MA 02108

Attention: David A. White, Esq.

Fax: 617-225-0205

Email: daw@wwvlaw.com

 

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Exhibit A

 

1. The Company is a corporation duly organized under the General Corporation Law
of the State of Delaware, with corporate power and authority to enter into the
Agreement and the other Transaction Documents and perform its obligations
thereunder. The Company is validly existing and in good standing under the laws
of the State of Delaware and is qualified to do business and in good standing
under the laws of Delaware and Texas, the only states where the failure to be so
qualified and in good standing could have a Material Adverse Effect.

 

2. The execution and delivery of the Agreement and the other Transaction
Documents and the issuance and sale of the Shares thereunder has been duly
authorized by all necessary corporate action of the Company, no further action
is required by the Company or its stockholders in connection therewith; and the
Agreement and each other Transaction Document has been duly executed and
delivered by the Company and is enforceable against the Company in accordance
with its terms.

 

3. The Shares have been duly authorized and, when issued and delivered in
accordance with the terms of the Agreement, will be validly issued, fully paid
and non-assessable, and the issuance of such Shares will not be subject to any
preemptive or similar rights set forth in the Company’s Certificate of
Incorporation or Bylaws (or similar organizational documents) or any agreement
known to us or filed as an exhibit to any SEC Report.

 

4. The execution and delivery by the Company of, and the performance by the
Company of its obligations under, the Agreement (including the issuance and sale
of the Shares) and the other Transaction Documents will not contravene any
provision of any statute, law, rule or regulation applicable to the Company, any
agreement filed as an exhibit to any SEC Report, or any judgment, order or
decree of any governmental body, agency or court having jurisdiction over the
Company that is applicable to the Company or its properties.

 

5. No consent, approval, authorization, order, registration or qualification of
or with any court or arbitrator or governmental body, regulatory authority or
Trading Market is required for the execution, delivery and performance by the
Company of its obligations under the Agreement or any other Transaction
Document, other than any notice filings as are required to be made after the
Closing Date under applicable federal and state securities laws.

 

6. The Company is not, and will not be after consummation of the Agreement, the
sale of the Shares to Seaside and the application of the proceeds thereof, an
“investment company” as defined in the Investment Company Act of 1940, as
amended.

 

 

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Exhibit B

 

Officer’s Certificate

 

In connection with a Closing on the date set forth below pursuant to that
certain Securities Purchase Agreement dated as of October 31, 2013 (the
“Agreement”) by and between Propell Technologies Group, Inc., a Delaware
corporation (the “Company”) and Seaside 88, LP, a Florida limited partnership
(“Seaside”), the undersigned, the duly elected and qualified President of the
Company, does hereby certify to Seaside as follows:

 

(i)all representations and warranties of the Company contained in the Agreement
are true and correct on and as of the date hereof as if made on and as of the
date hereof (provided that representations and warranties that speak as of a
specific date shall continue to be true and correct as of the Closing with
respect to such date); and

 

(ii)the Company has performed or complied with all of its covenants and
agreements contained in the Agreement and required to be performed or complied
with by the Company on or before the date hereof.

 

Capitalized terms used but not defined herein shall have the meanings given to
them in the Agreement.

 

IN WITNESS WHEREOF, the undersigned has caused this Officer’s Certificate to be
executed this __th day of _____________, 2013.

 

 

        Propell Technologies Group, Inc.                     By:       Name:
John Huemoeller II     Title: President

 

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