SECURITIES PURCHASE AGREEMENT

 

SECURITIES PURCHASE AGREEMENT (the "Agreement"), dated as of March 24, 2014, by
and among Inventergy, Inc., a Delaware corporation, with headquarters located at
19925 Stevens Creek Boulevard, Suite 100, Cupertino, CA 95014 (the "Company"),
and the investors listed on the Schedule of Buyers attached hereto
(individually, a "Buyer" and collectively, the "Buyers").

 

WHEREAS:

 

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

 

B.   On May 10, 2013, the Company issued senior secured notes (as amended prior
to the date hereof, the "Existing Notes") to the Buyers pursuant to that certain
Securities Purchase Agreement, dated as of May 10, 2013 (as amended, the
"Existing SPA"). The Company and each Buyer desire to amend and restate the
Existing Notes, which amended and restated notes shall be convertible into the
Company's common stock, par value $0.0001 per share (the "Common Stock"), in
accordance with the terms of such amended and restated notes. To effect the
amendment and restatement of the Existing Notes, each Buyer and the Company wish
to exchange the aggregate principal amount of Existing Notes as set forth
opposite such Buyer's name in column (3) of the Schedule of Buyers for the same
aggregate principal amount of senior secured convertible notes (as amended and
restated in the form attached hereto as Exhibit A-1 and together with any senior
secured convertible notes issued in replacement thereof in accordance with the
terms thereof, the "Amended and Restated Notes"). Any shares of Common Stock
issued pursuant to the terms of the Amended and Restated Notes, are collectively
referred to herein as the "Amended and Restated Note Conversion Shares".

 

C.  The Company has also authorized a new series of senior secured convertible
notes of the Company, in substantially the form attached hereto as Exhibit A-2
(the " New Notes" and together with the Amended and Restated Notes, the
"Notes").

 

D.  Each Buyer wishes to purchase, and the Company wishes to sell, upon the
terms and conditions stated in this Agreement, that aggregate principal amount
of New Notes set forth opposite such Buyer's name in column (4) on the Schedule
of Buyers (which aggregate principal amount for all Buyers shall be $3,000,000).
Any shares of Common Stock issued or issuable pursuant to the terms of the New
Notes are collectively referred to herein as the "New Note Conversion Shares"
and together with the Amended and Restated Note Conversion Shares, the
"Conversion Shares".

 

E.   The Notes and the Conversion Shares are collectively referred to herein as
the "Securities".

 

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F.  The Existing Notes are secured by a first priority perfected security
interest in certain of the assets of the Company and its subsidiaries as
evidenced by the Security Agreement (such terms are defined in the Existing SPA)
and together with any ancillary documents related thereto, the Cash Collateral
Agreement and the Deposit Account Control Agreement (as such terms are defined
below), collectively, the "Security Documents"). For purpose of clarity, the
first priority perfected security interest will not apply to Permitted Liens (as
defined in the Notes).

 

G.  In connection with the transactions contemplated hereby, the Parties desire
to enter into, at or prior to the Closing (as defined below), the Cash
Collateral Agreement in the form attached hereto as Exhibit B-1 (as amended or
modified from time to time in accordance with its terms, the "Cash Collateral
Agreement") and the Deposit Account Control Agreement in the form attached
hereto as Exhibit B-2 (as amended or modified from time to time in accordance
with its terms, the "Deposit Account Control Agreement") with First Republic
Bank (the "Bank") The bank account governed by the Deposit Account Control
Agreement shall be referred to herein as the "Control Account".

 

NOW, THEREFORE, the Company and each Buyer hereby agree as follows:

 

3.          PURCHASE AND SALE OF NEW NOTES; EXCHANGE OF EXISTING NOTES.

 

(a)          Notes. Subject to the satisfaction (or waiver) of the conditions
set forth in Sections 6 and 7 below, (x) the Company agrees to issue and sell to
each Buyer, and each Buyer severally, but not jointly, agrees to purchase from
the Company on the Closing Date (as defined below), the aggregate principal
amount of New Notes, as is set forth opposite such Buyer's name in column (4) on
the Schedule of Buyers and (y) the Company agrees to exchange with each Buyer,
and each Buyer severally and jointly, agrees to exchange with the Company on the
Closing Date the aggregate principal amount of Existing Notes held by such
Buyer, as is set forth opposite such Buyer's name in column (3) on the Schedule
of Buyers, for the same aggregate principal amount of Amended and Restated
Notes, to be issued by the Company (the "Closing").

 

(b)          Closing. The date and time of the Closing (the "Closing Date")
shall be 10:00 a.m., New York City time, on the date hereof (or such later date
as is mutually agreed to by the Company and each Buyer) after notification of
satisfaction (or waiver) of the conditions to the Closing set forth in Sections
6 and 7 below at the offices of Schulte Roth & Zabel LLP, 919 Third Avenue, New
York, New York 10022.

 

(c)          Purchase Price. The aggregate purchase price for the New Notes to
be purchased by each Buyer (the " Purchase Price") shall be the amount set forth
opposite such Buyer's name in column (5) on the Schedule of Buyers. Each Buyer
shall pay $1,000 for each $1,000 principal amount of New Note to be purchased by
such Buyer at the Closing.

 

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(d)          Form of Payment. On the Closing Date, (A) each Buyer shall pay its
portion of the Purchase Price to the Company for the New Notes to be issued and
sold to such Buyer at the Closing (less, in the case of Hudson Bay IP
Opportunities Master Fund LP ("Hudson Bay") the amount withheld pursuant to
Section 4(f)), by wire transfer of immediately available funds in accordance
with the wire instructions of the Company and (B) the Company shall deliver to
each Buyer New Notes (each allocated in the principal amounts, as the Buyer
shall request) duly executed on behalf of the Company and registered in the name
of such Buyer or its designee. Each Buyer and the Company agree that any amounts
withheld from the Purchase Price of any New Notes pursuant to Section 4(f)
hereof shall constitute a reimbursement of the expenses described in such
Section and shall not constitute original issue discount or other discount in
respect of the New Notes for any tax or other purpose.

 

(e)          Exchange of Existing Notes for Amended and Restated Notes. Subject
to the satisfaction (or waiver) of the conditions set forth in Section 6 and 7
below, at the Closing, each Buyer shall surrender to the Company such Buyer's
Existing Notes, as is set forth opposite such Buyer's name in column (3) of the
Schedule of Buyers, and the Company shall issue and deliver to such Buyer the
same aggregate principal amount of Amended and Restated Notes. The Company shall
be required to pay to each applicable Buyer all accrued and unpaid interest on
the Existing Notes through and including the Closing Date in cash by wire
transfer of immediately available funds.

 

(f)          The parties hereto acknowledge and agree, solely for purposes of
the Security Documents, that (i) this Agreement and the other Transaction
Documents shall be deemed to be Transaction Documents (as defined in the
Existing SPA), (ii) the Notes shall be deemed to be Notes (as defined in the
Existing SPA) and (iii) the Notes shall be deemed to have been issued under the
Existing SPA.

 

2.          BUYER'S REPRESENTATIONS AND WARRANTIES.

 

Each Buyer, severally and not jointly, represents and warrants with respect to
only itself, as of the date hereof and as of the Closing Date, that:

 

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

 

(b)          No Sale or Distribution. Such Buyer is (i) acquiring the Notes, and
(ii) upon conversion of the Notes will acquire the Conversion Shares, and, in
each case, for its own account and not with a view towards, or for resale in
connection with, the public sale or distribution thereof, except pursuant to
sales registered or exempted under the 1933 Act; provided, however, that by
making the representations herein, such Buyer does not agree to hold any of the
Securities for any minimum or other specific term and reserves the right to
dispose of the Securities at any time in accordance with or pursuant to a
registration statement or an exemption under the 1933 Act. Such Buyer is
acquiring the Securities hereunder in the ordinary course of its business. Such
Buyer does not presently have any agreement or understanding, directly or
indirectly, with any Person (as defined below) to distribute any of the
Securities.

 

(c)          Accredited Investor Status. Such Buyer is an "accredited investor"
as that term is defined in Rule 501(a) of Regulation D.

 

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

 

(e)          Information. Such Buyer and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Securities
that have been requested by such Buyer. Such Buyer and its advisors, if any,
have been afforded the opportunity to ask questions of the Company. Neither such
inquiries nor any other due diligence investigations conducted by such Buyer or
its advisors, if any, or its representatives shall modify, amend or affect such
Buyer's right to rely on the Company's representations and warranties contained
herein. Such Buyer understands that its investment in the Securities involves a
high degree of risk. Such Buyer has sought such accounting, legal and tax advice
as it has considered necessary to make an informed investment decision with
respect to its acquisition of the Securities.

 

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

 

(g)          Transfer or Resale. Such Buyer understands that: (i) the Securities
have not been and are not being registered under the 1933 Act or any state
securities laws, and may not be offered for sale, sold, assigned or transferred
unless (A) subsequently registered thereunder, (B) such Buyer shall have
delivered to the Company an opinion of counsel, in a generally acceptable form,
to the effect that such Securities to be sold, assigned or transferred may be
sold, assigned or transferred pursuant to an exemption from such registration,
or (C) such Buyer provides the Company with reasonable assurance that such
Securities can be sold, assigned or transferred pursuant to Rule 144 or Rule
144A promulgated under the 1933 Act, as amended, (or a successor rule thereto)
(collectively, "Rule 144"); (ii) any sale of the Securities made in reliance on
Rule 144 may be made only in accordance with the terms of Rule 144 and further,
if Rule 144 is not applicable, any resale of the Securities under circumstances
in which the seller (or the Person) through whom the sale is made) may be deemed
to be an underwriter (as that term is defined in the 1933 Act) may require
compliance with some other exemption under the 1933 Act or the rules and
regulations of the SEC thereunder; and (iii) neither the Company nor any other
Person is under any obligation to register the Securities under the 1933 Act or
any state securities laws or to comply with the terms and conditions of any
exemption thereunder. Notwithstanding the foregoing, the Securities may be
pledged in connection with a bona fide margin account or other loan or financing
arrangement secured by the Securities and such pledge of Securities shall not be
deemed to be a transfer, sale or assignment of the Securities hereunder, and no
Buyer effecting a pledge of Securities shall be required to provide the Company
with any notice thereof or otherwise make any delivery to the Company pursuant
to this Agreement or any other Transaction Document (as defined in Section
3(b)), including, without limitation, this Section 2(g).

 

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(h)          Legends.

 

(i)          Such Buyer understands that the certificates or other instruments
representing the Notes and, until such time as the resale of the Conversion
Shares have been registered under the 1933 Act, the stock certificates
representing the Conversion Shares, except as set forth below, shall bear any
legend as required by the "blue sky" laws of any state and a restrictive legend
in substantially the following form (and a stop-transfer order may be placed
against transfer of such stock certificates):

 

[NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE [CONVERTIBLE] HAVE BEEN][THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN] REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE
ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL, IN A GENERALLY
ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT AND APPLICABLE
STATE SECURITIES LAWS OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A
UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
ARRANGEMENT SECURED BY THE SECURITIES.

 

At any time after the Public Company Date, the legend set forth above shall be
removed and the Company shall issue a certificate without such legend to the
holder of the Securities upon which it is stamped or, if available, issue to
such holder by electronic delivery at the applicable balance account at The
Depository Trust Company ("DTC"), if, unless otherwise required by state
securities laws, (i) such Securities are registered for resale under the 1933
Act, (ii) in connection with a sale, assignment or other transfer, such holder
provides the Company with an opinion of counsel, in a generally acceptable form,
to the effect that such sale, assignment or transfer of the Securities may be
made without registration under the applicable requirements of the 1933 Act, or
(iii) the Securities can be sold, assigned or transferred pursuant to Rule 144
or Rule 144A. The Company shall be responsible for the fees of its transfer
agent and all DTC fees associated with such issuance.

 

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(ii)         At any time after the Public Company Date (as defined below), if
the Company shall fail for any reason or for no reason to issue to the holder of
the Securities within three (3) Trading Days (after the occurrence of any of (i)
through (iii) above (the initial date of such occurrence, the "Legend Removal
Date"), a certificate without such legend to the holder or to issue such
Securities to such holder by electronic delivery at the applicable balance
account at DTC, and if on or after such Trading Day the holder purchases (in an
open market transaction or otherwise) shares of Common Stock to deliver in
satisfaction of a sale by the holder of such Securities that the holder
anticipated receiving without legend from the Company (a "Buy-In"), then the
Company shall, within three (3) Trading Days after the holder's request and in
the holder's discretion, either (i) pay cash to the holder in an amount equal to
the holder's total purchase price (including brokerage commissions, if any) for
the shares of Common Stock so purchased (the "Buy-In Price"), at which point the
Company's obligation to deliver such unlegended Securities shall terminate, or
(ii) promptly honor its obligation to deliver to the holder such unlegended
Securities as provided above and pay cash to the holder in an amount equal to
the excess (if any) of the Buy-In Price over the product of (A) such number of
shares of Common Stock, times (B) the Closing Bid Price (as defined in the
Notes) on the Legend Removal Date.

 

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

 

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

 

3.          REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

 

The Company represents and warrants to each of the Buyers that, except as set
forth on a Schedule of Exceptions (the "Schedule of Exceptions") furnished to
each Buyer, which exceptions shall qualify the representations and warranties of
the Company set forth in this Section 3 to the extent specifically referenced in
the Schedule of Exceptions, as of the date hereof and as of the Closing Date:

 

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(a)          Organization and Qualification. Each of the Company and its
"Subsidiaries" (which for purposes of this Agreement means any joint venture or
any entity in which the Company, directly or indirectly, owns any of the capital
stock or holds an equity or similar interest) are entities duly organized and
validly existing and, to the extent legally applicable, in good standing under
the laws of the jurisdiction in which they are formed, and have the requisite
power and authorization to own their properties and to carry on their business
as now being conducted. Each of the Company and its Subsidiaries is duly
qualified as a foreign entity to do business and, to the extent legally
applicable, is in good standing in every jurisdiction in which its ownership of
property or the nature of the business conducted by it makes such qualification
necessary, except to the extent that the failure to be so qualified or be in
good standing would not reasonably be expected to have a Material Adverse
Effect. As used in this Agreement, "Material Adverse Effect" means any material
adverse effect on the business, properties, assets, operations, results of
operations, condition (financial or otherwise) or prospects of the Company and
its Subsidiaries, individually or taken as a whole, or on the transactions
contemplated hereby or in the other Transaction Documents or by the agreements
and instruments to be entered into in connection herewith or therewith, or on
the authority or ability of the Company to perform its obligations under the
Transaction Documents (as defined below). The Company has no Subsidiaries,
except as set forth on Schedule 3(a).

 

(b)          Authorization; Enforcement; Validity. The Company has the requisite
corporate power and authority to enter into and perform its obligations under
this Agreement, the Notes, the Cash Collateral Agreement and the Deposit Account
Control Agreement and each of the other agreements entered into by the parties
hereto in connection with the transactions contemplated by this Agreement and
the Existing SPA (collectively, the "Transaction Documents") and to issue the
Securities in accordance with the terms hereof and thereof. The execution and
delivery of the Transaction Documents by the Company and the consummation by the
Company of the transactions contemplated hereby and thereby, including, without
limitation, the issuance of the Notes, the reservation for issuance and the
issuance of the Conversion Shares issuable upon conversion of the Notes and the
granting of a security interest in the Collateral (as defined in the Cash
Collateral Agreement) have been duly authorized by the Company's board of
directors and (other than any other filings as may be required by any state
securities agencies) no further filing, consent, or authorization is required by
the Company, its board of directors or its stockholders. This Agreement and the
other Transaction Documents of even date herewith have been duly executed and
delivered by the Company, and constitute the legal, valid and binding
obligations of the Company, enforceable against the Company in accordance with
their respective terms, except as such enforceability may be limited by general
principles of equity or applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation or similar laws relating to, or affecting generally, the
enforcement of applicable creditors' rights and remedies. Each of the
Subsidiaries party to any of the Transaction Documents has the requisite power
and authority to enter into and perform its obligations under such Transaction
Documents. The execution and delivery by the Subsidiaries party to any of the
Transaction Documents of such Transaction Documents and the consummation by such
Subsidiaries of the transactions contemplated thereby have been duly authorized
by such Subsidiaries' respective boards of directors (or other applicable
governing body) and (other than filings as may be required by state securities
agencies) no further filing, consent, or authorization is required by such
Subsidiaries, their respective boards of directors (or other applicable
governing body) or stockholders (or other applicable owners of equity of such
Subsidiaries). The Transaction Documents to which any of the Subsidiaries are
parties have been duly executed and delivered by such Subsidiaries, and
constitute the legal, valid and binding obligations of such Subsidiaries,
enforceable against them in accordance with their respective terms, except as
such enforceability may be limited by general principles of equity or applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally, the enforcement of applicable creditors'
rights and remedies.

 

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(c)          Issuance of Securities. The issuance of the Notes has been duly
authorized and upon issuance in accordance with the terms of the Transaction
Documents shall be validly issued and free from all taxes, liens and charges
with respect to the issue thereof. The Amended and Restated Notes shall be
issued hereunder pursuant to Section 3(a)(9) of the 1933 Act, and the Company
hereby acknowledges and agrees that the holding period, for purposes of Rule
144, of the Existing Notes shall be tacked to the holding period of the Amended
and Restated Notes. As of the Closing, the Company shall have reserved from its
duly authorized capital stock not less than the sum of 130% of the maximum
number of shares of Common Stock issuable upon conversion of the Notes (assuming
for purposes hereof, that the Notes are convertible at the Conversion Price (as
defined in the Notes) and without taking into account any limitations on the
conversion of the Notes set forth therein), determined as if issued as of the
Trading Day immediately preceding the applicable date of determination. Upon
issuance or conversion in accordance with the Notes, the Conversion Shares will
be validly issued, fully paid and nonassessable and free from all preemptive or
similar rights, taxes, liens and charges with respect to the issue thereof, with
the holders being entitled to all rights accorded to a holder of Common Stock.
Assuming the accuracy of each of the representations and warranties set forth in
Section 2 of this Agreement, the offer and issuance by the Company of the
Securities is exempt from registration under the 1933 Act.

 

(d)          No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and any of its Subsidiaries party to any of
the Transaction Documents and the consummation by the Company and such
Subsidiaries of the transactions contemplated hereby and thereby (including,
without limitation, the issuance of the Notes, and reservation for issuance and
issuance of the Conversion Shares) will not (i) result in a violation of any
certificate of incorporation, any certificate of formation, any certificate of
designations or other constituent documents of the Company or any of its
Subsidiaries, any capital stock of the Company or any of its Subsidiaries or the
bylaws of the Company or any of its Subsidiaries or (ii) conflict with, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) in any respect under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement,
indenture or instrument to which the Company or any of its Subsidiaries is a
party, or (iii) result in a violation of any law, rule, regulation, order,
judgment or decree (including foreign, federal and state securities laws and
regulations) applicable to the Company or any of its Subsidiaries or by which
any property or asset of the Company or any of its Subsidiaries is bound or
affected.

 

(e)          Consents. Neither the Company nor any of its Subsidiaries is
required to obtain any consent, authorization or order of, or make any filing or
registration with, any government, court, regulatory, self-regulatory,
administrative agency or commission or other governmental agency, authority or
instrumentality, domestic or foreign, of competent jurisdiction (a "Governmental
Authority") or any other Person in order for it to execute, deliver or perform
any of its obligations under or contemplated by the Transaction Documents, in
each case in accordance with the terms hereof or thereof, except for (i) the
filing of a Form D pursuant to Regulation D promulgated by the SEC under the
1933 Act and (ii) the filing required by applicable state "blue sky" securities
laws, rules and regulations. The Company and its Subsidiaries are unaware of any
facts or circumstances that might prevent the Company from obtaining or
effecting any of the registration, application or filings pursuant to the
preceding sentence.

 

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(f)          Acknowledgment Regarding Buyer's Purchase of Securities. The
Company acknowledges and agrees that each Buyer is acting solely in the capacity
of an arm's length purchaser with respect to the Transaction Documents and the
transactions contemplated hereby and thereby and that no Buyer is (i) an officer
or director of the Company or any of its Subsidiaries, or (ii) an "affiliate"
(as defined in Rule 144) of the Company or any of its Subsidiaries. The Company
further acknowledges that no Buyer is acting as a financial advisor or fiduciary
of the Company or any of its Subsidiaries (or in any similar capacity) with
respect to the Transaction Documents and the transactions contemplated hereby
and thereby, and any advice given by a Buyer or any of its representatives or
agents in connection with the Transaction Documents and the transactions
contemplated hereby and thereby is merely incidental to such Buyer's purchase of
the Securities. The Company further represents to each Buyer that the Company's
decision to enter into the Transaction Documents has been based solely on the
independent evaluation by the Company and its representatives.

 

(g)          No General Solicitation; Placement Agent. Neither the Company, nor
any of its Subsidiaries or affiliates, nor any Person acting on its or their
behalf, has engaged in any form of general solicitation or general advertising
(within the meaning of Regulation D) in connection with the offer or sale of the
Securities. Neither the Company nor any of its Subsidiaries has engaged any
placement agent or other agent in connection with the sale of the Securities.

 

(h)          No Integrated Offering. None of the Company, its Subsidiaries, any
of their affiliates, and any Person acting on their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would require registration of any of
the Securities under the 1933 Act, whether through integration with prior
offerings or otherwise, or cause this offering of the Securities to require
approval of stockholders of the Company for purposes of any applicable
stockholder approval provisions, including, without limitation, under the rules
and regulations of any exchange or automated quotation system on which any of
the securities of the Company are listed or designated. None of the Company, its
Subsidiaries, their affiliates and any Person acting on their behalf will take
any action or steps referred to in the preceding sentence that would require
registration of any of the Securities under the 1933 Act or cause the offering
of the Securities to be integrated with other offerings for purposes of any such
applicable stockholder approval provisions.

 

(i)          Dilutive Effect. The Company understands and acknowledges that the
number of Conversion Shares issuable upon conversion of the Notes will increase
in certain circumstances. The Company further acknowledges that its obligation
to issue Conversion Shares upon conversion of the Notes is absolute and
unconditional regardless of the dilutive effect that such issuance may have on
the ownership interests of other stockholders of the Company.

 

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(j)          Bankruptcy; Insolvency. Neither the Company nor any of its
Subsidiaries has taken any steps to seek protection pursuant to any bankruptcy
law nor does the Company have any knowledge or reason to believe that its
creditors intend to initiate involuntary bankruptcy proceedings or any actual
knowledge of any fact that would reasonably lead a creditor to do so. The
Company and its Subsidiaries, individually and on a consolidated basis, are not
as of the date hereof, and after giving effect to the transactions contemplated
hereby to occur at the Closing, will not be Insolvent (as defined below). For
purposes of this Section 3(j), "Insolvent" means, with respect to any Person (i)
the present fair saleable value of such Person's assets is less than the amount
required to pay such Person's total Indebtedness (as defined in Section 3(m)),
(ii) such Person is unable to pay its debts and liabilities, subordinated,
contingent or otherwise, as such debts and liabilities become absolute and
matured, (iii) such Person intends to incur or believes that it will incur debts
that would be beyond its ability to pay as such debts mature or (iv) such Person
has unreasonably small capital with which to conduct the business in which it is
engaged as such business is now conducted and is proposed to be conducted.

 

(k)          Transactions With Affiliates. Except as set forth on Schedule 3(k),
no current or former employee, partner, director, officer or stockholder (direct
or indirect) of the Company or its Subsidiaries, or any associate, or, to the
knowledge of the Company, any affiliate of any thereof, or any relative with a
relationship no more remote than first cousin of any of the foregoing, is
presently, or has ever been, (i) a party to any transaction with the Company or
its Subsidiaries (including any contract, agreement or other arrangement
providing for the furnishing of services by, or rental of real or personal
property from, or otherwise requiring payments to, any such director, officer or
stockholder or such associate or affiliate or relative) or (ii) the direct or
indirect owner of an interest in any corporation, firm, association or business
organization which is a competitor, supplier or customer of the Company or its
Subsidiaries (except for a passive investment (direct or indirect) in less than
5% of the common stock of a company whose securities are traded on or quoted
through an Eligible Market), nor does any such Person receive income from any
source other than the Company or its Subsidiaries which relates to the business
of the Company or its Subsidiaries or should properly accrue to the Company or
its Subsidiaries. Except as set forth on Schedule 3(k), no employee, officer,
stockholder or director of the Company or any of its Subsidiaries or member of
his or her immediate family is indebted to the Company or its Subsidiaries, as
the case may be, nor is the Company or any of its Subsidiaries indebted (or
committed to make loans or extend or guarantee credit) to any of them, other
than (i) for payment of salary for services rendered, (ii) reimbursement for
reasonable expenses incurred on behalf of the Company, and (iii) for other
standard employee benefits made generally available to all employees or
executives (including stock option agreements outstanding under any stock option
plan approved by the board of directors of the Company).

 

(l)          Equity Capitalization. As of the date hereof, the authorized
capital stock of the Company consists of (i) 125,000,000 shares of Common Stock,
of which as of the date hereof, 12,901,103 are issued and outstanding, 915,000
are reserved for issuance pursuant to the Company's stock option and purchase
plans and (ii) 10,000,000 shares of preferred stock, $0.0001 par value,
6,176,748 of which, as of the date hereof, are issued and outstanding. All of
such outstanding shares have been, or upon issuance will be, validly issued and
are fully paid and nonassessable. The capitalization of the Company immediately
prior to the Closing Date is set forth on Schedule 3(l)(A) attached hereto and
the capitalization of the Company immediately following the Closing Date is set
forth on Schedule 3(l)(B) attached hereto. The Company has furnished to the
Buyers true, correct and complete copies of the Company's Certificate of
Incorporation, as amended and as in effect on the date hereof (the "Certificate
of Incorporation"), and the Company's Bylaws, as amended and as in effect on the
date hereof (the "Bylaws"), and the terms of all securities convertible into, or
exercisable or exchangeable for, shares of Common Stock and the material rights
of the holders thereof in respect thereto.

 

10

 

 

(m)          Indebtedness and Other Contracts. Except as disclosed on Schedule
3(m), neither the Company nor any of its Subsidiaries (i) has any outstanding
Indebtedness (as defined below), (ii) is a party to any contract, agreement or
instrument, the violation of which, or default under which, by the other
party(ies) to such contract, agreement or instrument could reasonably be
expected to result in a Material Adverse Effect, (iii) is in violation of any
term of or in default under any contract, agreement or instrument relating to
any Indebtedness, except where such violations and defaults would not result,
individually or in the aggregate, in a Material Adverse Effect, or (iv) is a
party to any contract, agreement or instrument relating to any Indebtedness, the
performance of which, in the judgment of the Company's officers, has or is
expected to have a Material Adverse Effect. Schedule 3(m) provides a detailed
description of the material terms of any such outstanding Indebtedness. For
purposes of this Agreement: (x) "Indebtedness" of any Person means, without
duplication (A) all indebtedness for borrowed money, (B) all obligations issued,
undertaken or assumed as the deferred purchase price of property or services
(including, without limitation, "capital leases" in accordance with GAAP) (other
than trade payables entered into in the ordinary course of business consistent
with past practice), (C) all reimbursement or payment obligations with respect
to letters of credit, surety bonds and other similar instruments, (D) all
obligations evidenced by notes, bonds, debentures or similar instruments,
including obligations so evidenced incurred in connection with the acquisition
of property, assets or businesses, (E) all indebtedness created or arising under
any conditional sale or other title retention agreement, or incurred as
financing, in either case with respect to any property or assets acquired with
the proceeds of such indebtedness (even though the rights and remedies of the
seller or bank under such agreement in the event of default are limited to
repossession or sale of such property), (F) all monetary obligations under any
leasing or similar arrangement which, in GAAP, consistently applied for the
periods covered thereby, is classified as a capital lease, (G) all indebtedness
referred to in clauses (A) through (F) above secured by (or for which the holder
of such Indebtedness has an existing right, contingent or otherwise, to be
secured by) any mortgage, deed of trust. lien, pledge, charge, security
interest, easement, covenant, right of way, restriction, equity or encumbrance
of any nature whatsoever in or upon any property or assets (including accounts
and contract rights) with respect to any asset (a "Lien") owned by any Person,
even though the Person which owns such assets or property has not assumed or
become liable for the payment of such indebtedness, and (H) all Contingent
Obligations in respect of indebtedness or obligations of others of the kinds
referred to in clauses (A) through (G) above; and (y) "Contingent Obligation"
means, as to any Person, any direct or indirect liability, contingent or
otherwise, of that Person with respect to any indebtedness, lease, dividend or
other obligation of another Person if the primary purpose or intent of the
Person incurring such liability, or the primary effect thereof, is to provide
assurance to the obligee of such liability that such liability will be paid or
discharged, or that any agreements relating thereto will be complied with, or
that the holders of such liability will be protected (in whole or in part)
against loss with respect thereto.

 

11

 

 

(n)          Intellectual Property.

 

(i)           Schedule 3(n)(i) sets forth a complete and current list of
registered trademarks or copyrights, issued patents, applications thereof, or
other forms of registration anywhere in the world that is owned by the Company
or a Subsidiary ("Listed Intellectual Property") and the owner of record, date
of application or issuance and relevant jurisdiction as to each. All Listed
Intellectual Property is owned by the Company or a Subsidiary, free and clear of
security interests, liens, encumbrances or claims of any nature. All Listed
Intellectual Property is valid, subsisting, unexpired, in proper form and
enforceable and all renewal fees and other maintenance fees that have fallen due
on or prior to the effective date of this Agreement have been paid. No Listed
Intellectual Property is the subject of any proceeding before any governmental,
registration or other authority in any jurisdiction, including any office action
or other form of preliminary or final refusal of registration, except as noted
on Schedule 3(n)(i). The consummation of the transactions contemplated hereby
will not alter or impair any Intellectual Property that is owned or licensed by
the Company or a Subsidiary. There is no claim, suit, action or proceeding
pending or, to the knowledge of the Company, threatened against the Company or
any Subsidiary challenging the Company's or any Subsidiary's ownership of any
Intellectual Property.

 

(ii)         Schedule 3(n)(ii) sets forth a complete list of all agreements
relating to Intellectual Property to which the Company or a Subsidiary is a
party, subject or bound (the "Intellectual Property Contracts") (other than
agreements involving (A) the license of the Company of standard, generally
commercially available "off-the-shelf" third party products that are not and
will not to any extent be part of any product, service or intellectual property
offering of the Company or (B) non-disclosure agreements). Each Intellectual
Property Contract: (i) is valid and binding on the Company or a Subsidiary, as
the case may be, and, to the Company's knowledge, the counterparties thereto,
and is in full force and effect and (ii) upon consummation of the transactions
contemplated hereby shall continue in full force and effect without penalty or
other adverse consequence.

 

(iii)        The Company and its Subsidiaries are not under any obligation to
pay royalties or other payments in connection with any agreement, nor restricted
from assigning their rights respecting Intellectual Property nor will the
Company or any Subsidiary otherwise be, as a result of the execution and
delivery of this Agreement or the performance of the Company's obligations under
this Agreement, in breach of any agreement relating to the Intellectual
Property.

 

(iv)        Except as set forth on Schedule 3(n)(iv), no present or former
employee, officer or director of the Company or any Subsidiary, or agent or
outside contractor of the Company or any Subsidiary, holds any right, title or
interest, directly or indirectly, in whole or in part, in or to any Intellectual
Property that is owned or licensed by the Company or any Subsidiary.

 

12

 

 

(v)         For the purpose of this Section 3(n), "Intellectual Property" shall
mean all of the following: (A) trademarks and service marks, trade dress,
product configurations, trade names and other indications of origin,
applications or registrations in any jurisdiction pertaining to the foregoing
and all goodwill associated therewith; (B) inventions, discoveries,
improvements, ideas, know-how, formula methodology, processes, technology,
software (including password unprotected interpretive code or source code,
object code, development documentation, programming tools, drawings,
specifications and data) and applications and patents in any jurisdiction
pertaining to the foregoing, including re-issues, continuations, divisions,
continuations-in-part, renewals or extensions; (C) trade secrets, including
confidential information and the right in any jurisdiction to limit the use or
disclosure thereof; (D) copyrights in writings, designs software, mask works or
other works, applications or registrations in any jurisdiction for the foregoing
and all moral rights related thereto; (E) database rights; (F) Internet Web
sites, domain names and applications and registrations pertaining thereto and
all intellectual property used in connection with or contained in all versions
of the Company's Web sites; (G) rights under all agreements relating to the
foregoing; (H) books and records pertaining to the foregoing; and (I) claims or
causes of action arising out of or related to past, present or future
infringement or misappropriation of the foregoing.

 

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

 

(p)          Transfer Taxes. On the Closing Date, all stock transfer or other
taxes (other than income or similar taxes) which are required to be paid in
connection with the sale and transfer of the Securities to be sold to each Buyer
hereunder will be, or will have been, fully paid or provided for by the Company,
and all laws imposing such taxes will be or will have been complied with.

 

(q)          Ranking of Notes. No Indebtedness of the Company or any of its
Subsidiaries other than Permitted Senior Indebtedness (as defined in the Notes)
is senior to or ranks pari passu with the Notes in right of payment, whether
with respect of payment of redemptions, interest, damages or upon liquidation or
dissolution or otherwise.

 

(r)          Shell Company Status. The Company is not, and has never been, an
issuer identified in Rule 144(i)(1).

 

(s)          No Disqualification Events. With respect to Securities to be
offered and sold hereunder in reliance on Rule 506 under the 1933 Act
("Regulation D Securities"), none of the Company, any of its predecessors, any
affiliated issuer, any director, executive officer, other officer of the Company
participating in the offering hereunder, any beneficial owner of 20% or more of
the Company's outstanding voting equity securities, calculated on the basis of
voting power, nor any promoter (as that term is defined in Rule 405 under the
1933 Act) connected with the Company in any capacity at the time of sale (each,
an "Issuer Covered Person" and, together, "Issuer Covered Persons") is subject
to any Disqualification Event, except for a Disqualification Event covered by
Rule 506(d)(2) or (d)(3). The Company has exercised reasonable care to determine
whether any Issuer Covered Person is subject to a Disqualification Event. The
Company has complied, to the extent applicable, with its disclosure obligations
under Rule 506(e), and has furnished to the Buyers a copy of any disclosures
provided thereunder.

 

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

 

13

 

 

(u)          Absence of Certain Changes. Since May 10, 2013, there has been no
material adverse change and no material adverse development in the business,
assets, properties, operations, condition (financial or otherwise), results of
operations or prospects of the Company or its Subsidiaries.

 

(v)         Disclosure. The Company understands and confirms that each of the
Buyers will rely on the foregoing representations in effecting transactions in
securities of the Company. No statement made by the Company in this Agreement,
any other Transaction Document or the exhibits and schedules attached hereto or
in any certificate or schedule furnished or to be furnished by or on behalf of
the Company to the Investors or any of their representatives in connection with
the transactions contemplated hereby contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the statements
contained herein or therein not misleading.

 

(w)          Regulations T, U and X.  The Company is not or will not be engaged
in the business of extending credit for the purpose of purchasing or carrying
margin stock (within the meaning of Regulation T, U or X), and the Purchase
Prices will not be used to purchase or carry any margin stock or to extend
credit to others for the purpose of purchasing or carrying any margin stock.

 

4.          COVENANTS.

 

(a)          Best Efforts. Each party shall use its best efforts timely to
satisfy each of the covenants below and the conditions to be satisfied by it as
provided in Sections 6 and 7 of this Agreement.

 

(b)          Use of Proceeds. The Company will use the proceeds from the sale of
the Securities as substantially set forth on Schedule 4(b).

 

(c)          Reporting Status. Immediately following the Public Company Date and
until the date on which a Buyer or any transferee or assignee thereof to whom a
Buyer assigns its rights as a holder of Securities under this Agreement (each an
"Investor", and collectively, the "Investors") shall have sold all of the
Conversion Shares and none of the Notes is outstanding (the "Reporting Period"),
the Company shall timely file all reports required to be filed with the SEC
pursuant to the Securities Exchange Act of 1934, as amended (the "1934 Act"),
and the Company shall not terminate its status as an issuer required to file
reports under the 1934 Act even if the 1934 Act or the rules and regulations
thereunder would no longer require or otherwise permit such termination, and the
Company shall use reasonable best efforts to take all actions necessary to
permit it to, and thereafter to maintain its eligibility to, register the
Conversion Shares for resale by the Buyers on Form S-3.

 

14

 

 

(d)          Financial Information Post-Public Company Date. From and after the
date the shares of Common Stock of the Company (or its successor or parent by
merger, recapitalization, reorganization, or otherwise) are registered under the
1934 Act (the "Public Company Date"), and as long as any Securities remain
outstanding, the Company agrees to send the following to each Investor during
the Reporting Period (i) unless the following are filed with the SEC through
EDGAR and are available to the public through the EDGAR system, within one (1)
Business Day after the filing thereof with the SEC, a copy of its Annual Reports
on Form 10-K and Quarterly Reports on Form 10-Q, any Current Reports on Form 8-K
(or any analogous reports under the 1934 Act) and any registration statements
(other than on Form S-8) or amendments filed pursuant to the 1933 Act, (ii) on
the same day as the release thereof, facsimile or e-mailed copies of all press
releases issued by the Company or any of its Subsidiaries, and (iii) copies of
any notices and other information made available or given to the stockholders of
the Company generally, contemporaneously with the making available or giving
thereof to the stockholders. As used herein, "Business Day" means any day other
than Saturday, Sunday or other day on which commercial banks in the City of New
York are authorized or required by law to remain closed.

 

(e)          Listing. Immediately following the Public Company Date, the Company
shall promptly secure the listing or quotation of the Conversion Shares upon
each national securities exchange and automated quotation system, if any, upon
which the Common Stock is then listed (subject to official notice of issuance)
(the date such listing initially occurs, the "Listing Date") and shall promptly
secure, in accordance with the Notes and this Agreement, the listing or
quotation of all additional Conversion Shares from time to time issued under the
terms of the Transaction Documents. After the Public Company Date, the Company
shall maintain the listing or quotation of the Conversion Shares on each
national securities exchange and automated quotation system, if any, upon which
the Common Stock continues to be listed or quoted. The Company shall pay all
fees and expenses in connection with satisfying its obligations under this
Section 4(e).

 

(f)          Fees. Subject to Section 8 below, at Closing, the Company shall
reimburse Hudson Bay or its designee(s) for all costs and expenses incurred in
connection with the transactions contemplated by the Transaction Documents
(including all legal fees and disbursements in connection therewith,
documentation and implementation of the transactions contemplated by the
Transaction Documents and due diligence in connection therewith), which amount
may be withheld by such Buyer from its Purchase Price at the Closing to the
extent not previously reimbursed by the Company. Notwithstanding the foregoing,
in no event will the costs and expenses of Hudson Bay reimbursed by the Company
pursuant to this Section 4(f) exceed $40,000. The Company shall be responsible
for the payment of any placement agent's fees, financial advisory fees, broker's
commissions or fees payable to the Bank in connection with the Deposit Account
Control Agreement, relating to or arising out of the transactions contemplated
hereby. The Company shall pay, and hold each Buyer harmless against, any
liability, loss or expense (including, without limitation, reasonable attorney's
fees and out-of-pocket expenses) arising in connection with any claim relating
to any such payment. Except as otherwise set forth in the Transaction Documents,
each party to this Agreement shall bear its own expenses in connection with the
sale of the Securities to the Buyers.

 

(g)          Pledge of Securities. The Company acknowledges and agrees that the
Securities may be pledged by an Investor in connection with a bona fide margin
agreement or other loan or financing arrangement that is secured by the
Securities. The pledge of Securities shall not be deemed to be a transfer, sale
or assignment of the Securities hereunder, and no Investor effecting a pledge of
Securities shall be required to provide the Company with any notice thereof or
otherwise make any delivery to the Company pursuant to this Agreement or any
other Transaction Document, including, without limitation, Section 2(g) hereof;
provided that an Investor and its pledgee shall be required to comply with the
provisions of Section 2(g) hereof in order to effect a sale, transfer or
assignment of Securities to such pledgee. The Company hereby agrees to execute
and deliver such documentation as a pledgee of the Securities may reasonably
request in connection with a pledge of the Securities to such pledgee by an
Investor.

 

15

 

 

(h)          Disclosure of Transactions and Other Material Information. On or
before 8:30 am, New York City time, on the first Business Day after this
Agreement has been executed, the Company shall issue a customary press release
(the "Press Release") describing the terms of the transaction contemplated by
the Transaction Documents. From and after the filing of the Press Release, no
Buyer shall be in possession of any material, nonpublic information received
from the Company, any of its Subsidiaries or any of their respective officers,
directors, employees or agents, that is not disclosed in the Press Release.
Other than the Press Release, neither the Company, its Subsidiaries nor any
Buyer shall issue any press releases or any other public statements with respect
to the transactions contemplated hereby; provided, however, that the Company
shall be entitled, without the prior approval of any Buyer, to make any press
release or other public disclosure with respect to such transactions as is
required by applicable law and regulations, provided that each Buyer shall be
consulted by the Company in connection with any such press release or other
public disclosure prior to its release. Without the prior written consent of any
applicable Buyer, neither the Company nor any of its Subsidiaries or affiliates
shall disclose the name of such Buyer in the Press Release or any filing,
announcement, release or otherwise, except as required by law, provided that
each Buyer shall be consulted by the Company in connection with any such
disclosure prior to such disclosure.

 

(i)          Additional Notes; Variable Securities. So long as any Buyer
beneficially owns any Securities, the Company will not issue any Notes other
than to the Buyers as contemplated hereby and the Company shall not issue any
other securities that would cause a breach or default under the Notes. For so
long as any Securities remain outstanding, the Company shall not, in any manner,
issue or sell any rights, warrants or options to subscribe for or purchase
Common Stock or directly or indirectly convertible into or exchangeable or
exercisable for Common Stock at a price which varies or may vary with the market
price of the Common Stock, including by way of one or more reset(s) to any fixed
price unless the conversion, exchange or exercise price of any such security
cannot be less than the then applicable Conversion Price with respect to the
Common Stock into which any Notes are convertible.

 

(j)          Corporate Existence. So long as any Buyer beneficially owns any
Securities, the Company shall (i) maintain its corporate existence and (ii) not
be party to any Fundamental Transaction unless the Company is in compliance with
the applicable provisions governing Fundamental Transactions set forth in the
Notes.

 

(k)          Reservation of Shares. The Company shall take all action necessary
to at all times have authorized, and reserved for the purpose of issuance, no
less than 130% of the maximum number of shares of Common Stock issuable upon
conversion of the Notes (assuming for purposes hereof, that the Notes are
convertible at the Conversion Price and without taking into account any
limitations on the conversion of the Notes set forth therein) as determined as
if issued as of the trading day immediately preceding the applicable date of
determination (the "Required Reserved Amount"). If at any time the number of
shares of Common Stock authorized and reserved for issuance is not sufficient to
meet the Required Reserved Amount, the Company will promptly take all corporate
action necessary to authorize and reserve a sufficient number of shares,
including, without limitation, calling a special meeting of stockholders to
authorize additional shares to meet the Company's obligations under Section
3(c), in the case of an insufficient number of authorized shares, obtain
stockholder approval of an increase in such authorized number of shares, and
voting the management shares of the Company in favor of an increase in the
authorized shares of the Company to ensure that the number of authorized shares
is sufficient to meet the Required Reserved Amount.

 

16

 

 

(l)          Conduct of Business. The business of the Company and its
Subsidiaries shall not be conducted in violation of any law, ordinance or
regulation of any governmental entity, except where such violations would not
result, either individually or in the aggregate, in a Material Adverse Effect.
The Company and its Subsidiaries shall at all times be in compliance with the
Foreign Corrupt Practices Act; the PATRIOT Act, and all other applicable U.S.
and non-U.S. anti-money laundering laws and regulations; and the laws,
regulations and Executive Orders and sanctions programs administered by the
OFAC, including, without limitation, the "Anti-Money Laundering/OFAC Laws".

 

(m)           Public Information. At any time during the period commencing on
the six (6) month anniversary of the Public Company Date and ending at such time
that all of the Securities, if a registration statement is not available for the
resale of all of the Securities, may be sold without restriction or limitation
pursuant to Rule 144 and without the requirement to be in compliance with Rule
144(c)(1), if the Company shall (i) fail for any reason to satisfy the
requirements of Rule 144(c)(1), including, without limitation, the failure to
satisfy the current public information requirement under Rule 144(c) or (ii) if
the Company has ever been an issuer described in Rule 144(i)(1)(i) or becomes
such an issuer in the future, and the Company shall fail to satisfy any
condition set forth in Rule 144(i)(2) (a "Public Information Failure") then, as
partial relief for the damages to any holder of Securities by reason of any such
delay in or reduction of its ability to sell the Securities (which remedy shall
not be exclusive of any other remedies available at law or in equity), the
Company shall pay to each such holder an amount in cash equal to one and
one-half percent (1.5%) of the aggregate Purchase Price of such holder's
Securities on the day of a Public Information Failure and on every thirtieth day
(pro-rated for periods totaling less than thirty days) thereafter until the
earlier of (i) the date such Public Information Failure is cured and (ii) such
time that such public information is no longer required pursuant to Rule 144.
The payments to which a holder shall be entitled pursuant to this Section 4(m)
are referred to herein as "Public Information Failure Payments." Public
Information Failure Payments shall be paid on the earlier of (I) the last day of
the calendar month during which such Public Information Failure Payments are
incurred and (II) the third Business Day after the event or failure giving rise
to the Public Information Failure Payments is cured. In the event the Company
fails to make Public Information Failure Payments in a timely manner, such
Public Information Failure Payments shall bear interest at the rate of 1.5% per
month (prorated for partial months) until paid in full.

 

(n)          Additional Issuances of Securities.

 

(i)          For purposes of this Section 4(n), the following definitions shall
apply.

 

17

 

 

(1)         "Common Stock Equivalents" means, collectively, Options and
Convertible Securities.

 

(2)         "Convertible Securities" means any stock or securities (other than
Options) convertible into or exercisable or exchangeable for shares of Common
Stock.

 

(3)         "Options" means any rights, warrants or options to subscribe for or
purchase Common Stock or Convertible Securities.

 

(4)         "Subsequent Placement" means any direct or indirect offer, sale,
grant of any option to purchase, or other disposition of (or announcement of any
offer, sale, grant or any option to purchase or other disposition of) any of the
Company's or its Subsidiaries' debt, including without limitation any Permitted
Indebtedness.

 

(ii)         From the Closing Date until a Full Collateralization Event (as
defined in the Notes), the Company will not, directly or indirectly, effect any
Subsequent Placement unless the Company shall have first complied with this
Section 4(n)(ii).

 

(1)         The Company shall deliver to each Buyer an irrevocable written
notice (the "Offer Notice") of any proposed or intended issuance or sale or
exchange (the "Offer") of the securities being offered (the "Offered
Securities") in a Subsequent Placement, which Offer Notice shall (w) identify
and describe the Offered Securities, (x) describe the price and other terms upon
which they are to be issued, sold or exchanged, and the number or amount of the
Offered Securities to be issued, sold or exchanged, (y) identify the persons or
entities (if known) to which or with which the Offered Securities are to be
offered, issued, sold or exchanged and (z) offer to issue and sell to or
exchange with the Buyers one hundred percent (100%) of the Offered Securities,
allocated among such Buyers based on each Buyer's pro rata portion of Notes
issued and exchanged hereunder (the "Basic Amount"). With respect to each Buyer
that elects to purchase its Basic Amount, such Buyer may also indicate it will
purchase or acquire any additional portion of the Offered Securities
attributable to the Basic Amounts of other Buyers should the other Buyers
subscribe for less than their Basic Amounts (the "Undersubscription Amount"),
which process shall be repeated until the Buyers shall have an opportunity to
subscribe for any remaining Undersubscription Amount.

 

18

 

 

(2)         To accept an Offer, in whole or in part, such Buyer must deliver a
written notice to the Company prior to the end of the tenth (10th) Business Day
after such Buyer's receipt of the Offer Notice (the "Offer Period"), setting
forth the portion of such Buyer's Basic Amount that such Buyer elects to
purchase and, if such Buyer shall elect to purchase all of its Basic Amount, the
Undersubscription Amount, if any, that such Buyer elects to purchase (in either
case, the "Notice of Acceptance"). If the Basic Amounts subscribed for by all
Buyers are less than the total of all of the Basic Amounts, then each Buyer who
has set forth an Undersubscription Amount in its Notice of Acceptance shall be
entitled to purchase, in addition to the Basic Amounts subscribed for, the
Undersubscription Amount it has subscribed for; provided, however, that if the
Undersubscription Amounts subscribed for exceed the difference between the total
of all the Basic Amounts and the Basic Amounts subscribed for (the "Available
Undersubscription Amount"), each Buyer who has subscribed for any
Undersubscription Amount shall be entitled to purchase only that portion of the
Available Undersubscription Amount as the Basic Amount of such Buyer bears to
the total Basic Amounts of all Buyers that have subscribed for Undersubscription
Amounts, subject to rounding by the Company to the extent its deems reasonably
necessary. Notwithstanding anything to the contrary contained herein, if the
Company desires to modify or amend the terms and conditions of the Offer prior
to the expiration of the Offer Period, the Company may deliver to the Buyers a
new Offer Notice and the Offer Period shall expire on the tenth (10th) Business
Day after such Buyer's receipt of such new Offer Notice.

 

(3)         The Company shall have five (5) Business Days from the expiration of
the Offer Period above to offer, issue, sell or exchange all or any part of such
Offered Securities as to which a Notice of Acceptance has not been given by the
Buyers (the "Refused Securities") pursuant to a definitive agreement (the
"Subsequent Placement Agreement") but only to the offerees described in the
Offer Notice (if so described therein) and only upon terms and conditions
(including, without limitation, unit prices and interest rates) that are not
more favorable to the acquiring Person or Persons or less favorable to the
Company than those set forth in the Offer Notice and (ii) to publicly announce
(a) the execution of such Subsequent Placement Agreement, and (b) either (x) the
consummation of the transactions contemplated by such Subsequent Placement
Agreement or (y) the termination of such Subsequent Placement Agreement, which,
from and after the Public Company Date, shall be filed with the SEC on a Current
Report on Form 8-K with such Subsequent Placement Agreement and any documents
contemplated therein filed as exhibits thereto.

 

(4)         In the event the Company shall propose to sell less than all the
Refused Securities (any such sale to be in the manner and on the terms specified
in Section 4(n)(ii)(3) above), then each Buyer may, at its sole option and in
its sole discretion, reduce the number or amount of the Offered Securities
specified in its Notice of Acceptance to an amount that shall be not less than
the number or amount of the Offered Securities that such Buyer elected to
purchase pursuant to Section 4(n)(ii)(2) above multiplied by a fraction, (i) the
numerator of which shall be the number or amount of Offered Securities the
Company actually proposes to issue, sell or exchange (including Offered
Securities to be issued or sold to Buyers pursuant to Section 4(n)(ii)(3) above
prior to such reduction) and (ii) the denominator of which shall be the original
amount of the Offered Securities. In the event that any Buyer so elects to
reduce the number or amount of Offered Securities specified in its Notice of
Acceptance, the Company may not issue, sell or exchange more than the reduced
number or amount of the Offered Securities unless and until such securities have
again been offered to the Buyers in accordance with Section 4(n)(ii)(1) above.

 

19

 

 

(5)         Upon the closing of the issuance, sale or exchange of all or less
than all of the Refused Securities, the Buyers shall acquire from the Company,
and the Company shall issue to the Buyers, the number or amount of Offered
Securities specified in the Notices of Acceptance, as reduced pursuant to
Section 4(n)(ii)(3) above if the Buyers have so elected, upon the terms and
conditions specified in the Offer. The purchase by the Buyers of any Offered
Securities is subject in all cases to the preparation, execution and delivery by
the Company and the Buyers of a purchase agreement relating to such Offered
Securities reasonably satisfactory in form and substance to the Buyers and their
respective counsel.

 

(6)         Any Offered Securities not acquired by the Buyers or other persons
in accordance with Section 4(n)(ii)(3) above may not be issued, sold or
exchanged until they are again offered to the Buyers under the procedures
specified in this Agreement.

 

(7)         The Company and the Buyers agree that if any Buyer elects to
participate in the Offer, neither the Subsequent Placement Agreement with
respect to such Offer nor any other transaction documents related thereto
(collectively, the "Subsequent Placement Documents") shall include any term or
provisions whereby any Buyer shall be required to agree to any restrictions in
trading as to any securities of the Company owned by such Buyers prior to such
Subsequent Placement.

 

(8)         Notwithstanding anything to the contrary in this Section 4(n) and
unless otherwise agreed to by the Required Holders, the Company shall either
confirm in writing to the Buyers that the transaction with respect to the
Subsequent Placement has been abandoned or shall publicly disclose its intention
to issue the Offered Securities, in either case in such a manner such that the
Buyers will not be in possession of material non-public information, by the
fifteenth (15th) Business Day following delivery of the Offer Notice. If by the
fifteenth (15th) Business Day following delivery of the Offer Notice no public
disclosure regarding a transaction with respect to the Offered Securities has
been made, and no notice regarding the abandonment of such transaction has been
received by the Buyers, such transaction shall be deemed to have been abandoned
and the Buyers shall not be deemed to be in possession of any material,
non-public information with respect to the Company. Should the Company decide to
pursue such transaction with respect to the Offered Securities, the Company
shall provide each Buyer with another Offer Notice and each Buyer will again
have the right of participation set forth in this Section 4(n)(ii). From and
after the Public Company Date, the Company shall not be permitted to deliver
more than one such Offer Notice to the Buyers in any 60-day period.

 

(o)          Taxes. The Company will pay, and save and hold the Buyers harmless
from any and all liabilities (including interest and penalties) with respect to,
or resulting from any delay or failure in paying, stamp and other taxes (other
than income taxes), if any, which may be payable or determined to be payable by
the Company on the execution and delivery or acquisition of the Notes or the
Conversion Shares.

 

(p)          Books and Records. The Company will keep proper books of record and
account, in which full and correct entries shall be made of all financial
transactions and the assets and business of the Company and its Subsidiaries in
accordance with GAAP.

 

20

 

 

(q)          Collateral Agent.

 

(i)          Each Buyer hereby (a) appoints Hudson Bay as the collateral agent
hereunder and under the Security Documents (in such capacity, the "Collateral
Agent"), and (b) authorizes the Collateral Agent (and its officers, directors,
employees and agents) to take such action on such Buyer's behalf in accordance
with the terms hereof and thereof. The Collateral Agent shall not have, by
reason hereof or pursuant to any Security Documents, a fiduciary relationship in
respect of any Buyer. Neither the Collateral Agent nor any of its officers,
directors, employees and agents shall have any liability to any Buyer for any
action taken or omitted to be taken in connection hereof or the Security
Documents except to the extent caused by its own gross negligence or willful
misconduct, and each Buyer agrees to defend, protect, indemnify and hold
harmless the Collateral Agent and all of its officers, directors, employees and
agents (collectively, the "Collateral Agent Indemnitees") from and against any
losses, damages, liabilities, obligations, penalties, actions, judgments, suits,
fees, costs and expenses (including, without limitation, reasonable attorneys'
fees, costs and expenses) incurred by such Collateral Agent Indemnitee, whether
direct, indirect or consequential, arising from or in connection with the
performance by such Collateral Agent Indemnitee of the duties and obligations of
Collateral Agent pursuant hereto or any of the Security Documents.

 

(ii)         The Collateral Agent shall be entitled to rely upon any written
notices, statements, certificates, orders or other documents or any telephone
message believed by it in good faith to be genuine and correct and to have been
signed, sent or made by the proper Person, and with respect to all matters
pertaining to this Agreement or any of the other Transaction Documents and its
duties hereunder or thereunder, upon advice of counsel selected by it.

 

(iii)        The Collateral Agent may resign from the performance of all its
functions and duties hereunder and under the Notes and the Security Documents at
any time by giving at least ten (10) Business Days prior written notice to the
Company and each holder of the Notes. Such resignation shall take effect upon
the acceptance by a successor Collateral Agent of appointment as provided below.
Upon any such notice of resignation, the holders of a majority of the
outstanding principal amount of Notes shall appoint a successor Collateral
Agent. Upon the acceptance of the appointment as Collateral Agent, such
successor Collateral Agent shall succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Collateral Agent, and the
retiring Collateral Agent shall be discharged from its duties and obligations
under this Agreement, the Notes and the Security Agreement. After any Collateral
Agent's resignation hereunder, the provisions of this Section 4(q) shall inure
to its benefit. If a successor Collateral Agent shall not have been so appointed
within said ten (10) Business Day period, the retiring Collateral Agent shall
then appoint a successor Collateral Agent who shall serve until such time, if
any, as the holders of a majority of the outstanding principal amount of Notes
appoints a successor Collateral Agent as provided above.

 

(iv)        The Company hereby covenants and agrees to take all actions as
promptly as practicable reasonably requested by either the holders of a majority
of the outstanding principal amount of Notes or the Collateral Agent (or its
successor), from time to time pursuant to the terms of this Section 4(q), to
secure a successor Collateral Agent satisfactory to such requesting
part(y)(ies), in their sole discretion, including, without limitation, by paying
all fees of such successor Collateral Agent, by having the Company agree to
indemnify any successor Collateral Agent and by each of the Company executing a
collateral agency agreement or similar agreement and/or any amendment to the
Security Documents reasonably requested or required by the successor Collateral
Agent.

 

21

 

 

(v)         Each Buyer hereby acknowledges and agrees that, given that there is
a cost as well as a benefit to perfecting a security interest in the Collateral,
that the Collateral Agent will not initially perfect its security interest in
all assets of the Company, including in Intellectual Property outside of the
United States. Each Buyer further acknowledges and agrees that the
indemnification of the Collateral Agent Indemnitees will apply regardless of
whether or not the Collateral Agent perfects its security interest in all
Collateral. If a Buyer desires that the Collateral Agent perfect its security
interest in any Collateral that is not otherwise perfected, such Buyer shall
notify the Collateral Agent in writing of such desire along with a cost/benefit
analysis of such perfection. The Collateral Agent will consider any such request
and will otherwise take direction from the holders of a majority of the
outstanding principal amount of Notes.

 

(r)          Termination of Security Agreement. Upon a Full Collateralization
Event (as defined in the Notes, the Collateral Agent shall promptly consent to
the termination of the Security Agreement and shall release all liens granted to
the Collateral Agent thereunder; provided, however, that notwithstanding
anything to the contrary contained herein, the termination of the Security
Agreement shall not have any impact on the Cash Collateral Agreement or the
Deposit Account Control Agreement, which shall survive a Full Collateralization
Event and continue in full force and effect after a Full Collateralization
Event. The Parties hereto acknowledge and agree that as of the Closing Date, the
Collateral Agent will not require the Company to file documentation to perfect
the security interest in Intellectual Property outside the United States.
Notwithstanding the foregoing, upon the written request of the Collateral Agent,
the Company shall secure or perfect the security interest in any such
Intellectual Property or other Collateral in accordance with the terms of the
Security Documents.

 

(s)          Withdrawals from the Control Account. The parties hereto
acknowledge and agree that, from and after a Full Collateralization Event, in
addition to any other rights of the Collateral Agent, the Collateral Agent shall
be entitled to withdraw any or all amounts in the Control Account from time to
time (each a "Note Withdrawal" and collectively, the "Note Withdrawals"), as
long as any the amount of any such Note Withdrawal is applied against the
Conversion Amount of the Notes in accordance with the terms of the Notes or any
amount outstanding under the Notes, applied in each instance pro-rata among the
Notes (except with the prior written consent of each Holder of Notes with
respect to any such payment which is not pro-rata in accordance with the
respective outstanding principal amounts of each Note).

 

(t)          Release of Liens. On or prior to the Closing Date, the Company
shall cause all Liens with respect to assets of the Company and its Subsidiaries
(other than those in favor of the Collateral Agent or the Buyers) to be
released, including without limitation Liens in favor of Joseph Beyers.

 

22

 

 

(u)          Existing Deposit Control Agreement. The parties hereby acknowledge
and agree that on or prior to the Closing the Collateral Agent and the Company
shall deliver a joint notice to Wells Fargo Bank, National Association (the
"Existing DACA Bank") instructing the Existing DACA Bank to transfer any and all
cash deposited in the Collateral Accounts (as defined in the Deposit Account
Control Agreement (as defined in the Existing SPA)) to the Control Account (as
defined herein) and, upon such transfer, to terminate the Deposit Account
Control Agreement (as defined in the Existing SPA). The Collateral Agent and the
Company agree that upon acceptance by the Existing DACA Bank of the notice set
forth in the immediately preceding sentence, the Deposit Account Control
Agreement (as defined in the Existing SPA) shall have no further force and
effect.

 

(v)         Threshold Price. The definition of "Threshold Price" in the Existing
SPA is hereby replaced in its entirety with the following:

 

""Threshold Price" means $1.61 (as adjusted for stock splits, stock dividends,
recapitalizations, reorganizations, reclassifications, combinations, reverse
stock splits or other similar events occurring after March 23, 2014)."

 

(w)          Modification of Common Stockholder Lock-Up Agreements executed on
or about May 9, 2013. Effective upon the Closing, the “Release Percentage” as
defined in those certain Lock-Up Agreements dated on or about May 9, 2013
between the Company and certain holders of common stock of the Company party
thereto, shall be triggered upon the earliest of (i) the Full Collateralization
Event, (ii) when no Indebtedness is secured by the referenced patents and (iii)
upon the redemption in full of all of the Notes.

 

(x)          Closing Documents. On or prior to fourteen (14) calendar days after
the Closing Date, the Company agrees to deliver, or cause to be delivered, to
each Buyer and Schulte Roth & Zabel LLP a complete closing set of the executed
Transaction Documents, Securities and any other documents required to be
delivered to any party pursuant to Section 7 hereof or otherwise.

 

5.          REGISTER.

 

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

 

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

 

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

 

23

 

 

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

 

(ii)         Such Buyer shall have delivered to the Company the Purchase Price
(less, in the case of Hudson Bay, the amount withheld pursuant to Section 4(f))
for the Notes being purchased by such Buyer at the Closing by wire transfer of
immediately available funds.

 

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

 

7.          CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.

 

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

 

(i)          The Company shall have duly executed and delivered to such Buyer
(A) each of the Transaction Documents and (B) the Notes (allocated in such
principal amounts as such Buyer shall request) being purchased by such Buyer at
the Closing pursuant to this Agreement.

 

(ii)         Such Buyer shall have received the opinion of Ellenoff Grossman &
Schole LLP, the Company's outside counsel, dated as of the Closing Date, in
substantially the form of Exhibit C attached hereto.

 

(iii)        The Company shall have delivered to such Buyer a certificate
evidencing the formation and good standing of the Company and each of its
Subsidiaries in each such entity's jurisdiction of formation issued by the
Secretary of State (or equivalent) of such jurisdiction of formation as of a
date within ten (10) days of the Closing Date.

 

(iv)        The Company shall have delivered to such Buyer a certificate
evidencing the Company's qualification as a foreign corporation and good
standing issued by the Secretary of State (or comparable office) of each
jurisdiction in which the Company conducts business and is required to so
qualify, as of a date within ten (10) days of the Closing Date.

 

(v)         The Company shall have delivered to such Buyer a certificate,
executed by the Secretary of the Company and dated as of the Closing Date, as to
(i) the resolutions consistent with Section 3(b) as adopted by the Company's
board of directors in a form reasonably acceptable to such Buyer, (ii) the
Certificate of Incorporation and (iii) the Bylaws, each as in effect at the
Closing, in the form attached hereto as Exhibit D.

 

24

 

 

(vi)        The representations and warranties of the Company shall be true and
correct as of the date when made and as of the Closing Date as though made at
that time (except for representations and warranties that speak as of a specific
date, which shall be true and correct as of such specified date) and the Company
shall have performed, satisfied and complied in all respects with the covenants,
agreements and conditions required by the Transaction Documents to be performed,
satisfied or complied with by the Company at or prior to the Closing Date. Such
Buyer shall have received a certificate, executed by the Chief Executive Officer
of the Company, dated as of the Closing Date, to the foregoing effect and as to
such other matters as may be reasonably requested by such Buyer in the form
attached hereto as Exhibit E.

 

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

 

(viii)      The Company shall have delivered to counsel for the Collateral Agent
evidence of the payment in full of all Indebtedness under that certain Secured
Promissory Note dated December 19, 2013 from the Company to Joseph Beyers in the
principal amount of $3,000,000, as amended on February 6, 2014 (the "Beyers Loan
Agreement"), together with (A) a termination and release agreement with respect
to the Beyers Loan Agreement and all related documents, duly executed by Joseph
Beyers and the Company, (B) a termination of security interest in intellectual
property for each assignment for security recorded by Joseph Buyers at the
United States Patent and Trademark Office, a comparable office in any other
jurisdiction or otherwise and covering any intellectual property of the Company
and its Subsidiaries, and (C) UCC-3 termination statements for all UCC-1
financing statements filed by Joseph Beyers and covering any portion of the
Collateral (as defined in the Security Agreement), to be released to the
Collateral Agent at the Closing. After payment in full of all Indebtedness under
the Beyers Loan Agreement, the Company shall have no Indebtedness (other than
ordinary course expense reimbursements and payroll expenses) owed to Joseph
Beyers or any of his affiliates.

 

(ix)         Within six (6) Business Days prior to the Closing, the Company
shall have delivered or caused to be delivered to each Buyer certified copies of
UCC search results, listing all effective financing statements which name as
debtor the Company or any of its Subsidiaries filed in the prior five years to
perfect an interest in any assets thereof, together with copies of such
financing statements, none of which, except as otherwise agreed in writing by
the Buyers, shall cover any of the Collateral (as defined in the Security
Documents) and the results of searches for any tax lien and judgment lien filed
against such Person or its property, which results, except as otherwise agreed
to in writing by the Buyers shall not show any such Liens (as defined in the
Security Documents).

 

(x)          The Collateral Agent shall have received (i) the Cash Collateral
Agreement, duly executed by the Collateral Agent and the Company and (ii) the
Deposit Account Control Agreement, duly executed by the Collateral Agent, the
Company and the Bank.

 

(xi)         The Company shall have delivered to each Buyer the Deposit Account
Control Agreement, duly executed by all parties thereto and declared effective
by the Bank.

 

25

 

 

(xii)        The Company shall have delivered to each Buyer an amendment (the
"Merger Agreement Amendment") to that certain Agreement of Merger and Plan of
Reorganization (the "Merger Agreement") by and among the Company, eOn
Communications Corporation and Inventergy Merger Sub, Inc. dated as of December
17, 2013 in the form attached hereto as Exhibit F, executed by the Company, eOn
Communications Corporation and Inventergy Merger Sub, which Merger Agreement
Amendment shall contemplate (i) the exchange of the New Notes for senior secured
convertible notes of the Parent (as defined in the Merger) in the form of
Exhibit C attached thereto, (ii) the exchange of the Amended and Restated Notes
for senior secured convertible notes of the Parent in the form of Exhibit B
attached thereto (the "eOn Amended and Restated Notes") and (iii) that the eOn
Amended and Restated Notes will be issued by the Parent to the holder of the
Amended and Restated Notes pursuant to the registration statement on Form S-4
(File No. 333-193837), as amended or supplemented from time to time.

 

(xiii)       The Company shall have paid in cash by wire transfer of immediately
available funds to each applicable Buyer all accrued and unpaid interest on the
Existing Notes through and including the Closing Date.

 

(xiv)      The Security Agreement shall be in full force and effect.

 

(xv)       The Company shall have delivered to such Buyer such other documents
relating to the transactions contemplated by this Agreement as such Buyer or its
counsel may reasonably request.

 

8.          TERMINATION.

 

In the event that the Closing shall not have occurred with respect to a Buyer on
or before five (5) Business Days from the date hereof due to the Company's or
such Buyer's failure to satisfy the conditions set forth in Sections 6 and 7
above (and the nonbreaching party's failure to waive such unsatisfied
condition(s)), the nonbreaching party shall have the option to terminate this
Agreement with respect to such breaching party at the close of business on such
date by delivering a written notice to that effect to each other party to this
Agreement and without liability of any party to any other party; provided,
however, that if this Agreement is terminated pursuant to this Section 8, the
Company shall remain obligated to reimburse Hudson Bay or its designee(s), as
applicable, for the expenses described in Section 4(f) above.

 

26

 

 

9.          MISCELLANEOUS.

 

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

 

(b)          Counterparts. This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party; provided that a facsimile signature
shall be considered due execution and shall be binding upon the signatory
thereto with the same force and effect as if the signature were an original, not
a facsimile signature.

 

(c)          Headings. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.

 

(d)          Severability. If any provision of this Agreement is prohibited by
law or otherwise determined to be invalid or unenforceable by a court of
competent jurisdiction, the provision that would otherwise be prohibited,
invalid or unenforceable shall be deemed amended to apply to the broadest extent
that it would be valid and enforceable, and the invalidity or unenforceability
of such provision shall not affect the validity of the remaining provisions of
this Agreement so long as this Agreement as so modified continues to express,
without material change, the original intentions of the parties as to the
subject matter hereof and the prohibited nature, invalidity or unenforceability
of the provision(s) in question does not substantially impair the respective
expectations or reciprocal obligations of the parties or the practical
realization of the benefits that would otherwise be conferred upon the parties.
The parties will endeavor in good faith negotiations to replace the prohibited,
invalid or unenforceable provision(s) with a valid provision(s), the effect of
which comes as close as possible to that of the prohibited, invalid or
unenforceable provision(s).

 

27

 

 

(e)          Entire Agreement; Amendments. This Agreement and the other
Transaction Documents supersede all other prior oral or written agreements
between the Buyers, the Company, their affiliates and Persons acting on their
behalf with respect to the matters discussed herein, and this Agreement, the
other Transaction Documents and the instruments referenced herein and therein
contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor any Buyer makes any representation, warranty,
covenant or undertaking with respect to such matters. Provisions of this
Agreement may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders of
at least a majority of the aggregate principal amount of Notes outstanding as of
the applicable date of determination, which shall include Hudson Bay as long as
Hudson Bay or any of its affiliates holds at least $50,000 in aggregate amount
of Notes (the "Required Holders"); provided that any such amendment or waiver
that complies with the foregoing but that disproportionately, materially and
adversely affects the rights and obligations of any Buyer relative to the
comparable rights and obligations of the other Buyers shall require the prior
written consent of such adversely affected Buyer; provided, further, that the
provisions of Section 4(q) cannot be amended without the additional prior
written approval of the Collateral Agent or its successor. Any amendment or
waiver effected in accordance with this Section 9(e) shall be binding upon each
Buyer and holder of Securities and the Company. No such amendment shall be
effective to the extent that it applies to less than all of the Buyers or
holders of Securities. No consideration shall be offered or paid to any Person
to amend or consent to a waiver or modification of any provision of any of the
Transaction Documents unless the same consideration (other than the
reimbursement of legal fees) also is offered to all of the parties to the
Transaction Documents, holders of Notes. The Company has not, directly or
indirectly, made any agreements with any Buyers relating to the terms or
conditions of the transactions contemplated by the Transaction Documents except
as set forth in the Transaction Documents. Without limiting the foregoing, the
Company confirms that, except as set forth in this Agreement, no Buyer has made
any commitment or promise or has any other obligation to provide any financing
to the Company or otherwise.

 

(f)          Notices. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered: (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party) or by electronic mail; or (iii) one Business
Day after deposit with an overnight courier service, in each case properly
addressed to the party to receive the same. The addresses, facsimile numbers and
email addresses for such communications shall be:

 

If to the Company:

 

Inventergy, Inc.
19925 Stevens Creek Boulevard, Suite 100
Cupertino, CA 95014
Telephone:     (408) 973-7896
Facsimile:      (408) 725-8885
Email:             joe@inventergy.com
Attention:       Joe Beyers

 

28

 

 

With a copy (for informational purposes only) to:

 

Ellenoff Grossman & Schole LLP
1345 Avenue of the Americas
New York, NY 10105
Telephone:       (212) 370-1300
Facsimile:        (212) 370-7889
Email:               jsmith@egsllp.com
Attention:         Joseph A. Smith

 

If to a Buyer, to its address, facsimile number and email address set forth on
the Schedule of Buyers, with copies to such Buyer's representatives as set forth
on the Schedule of Buyers,

 

with a copy (for informational purposes only) to:

 

Schulte Roth & Zabel LLP
919 Third Avenue
New York, New York 10022
Telephone:       (212) 756-2000
Facsimile:        (212) 593-5955
E-mail:              eleazer.klein@srz.com
Attention:         Eleazer N. Klein, Esq.

 

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

 

(g)          Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and assigns,
including any purchasers of the Notes. The Company shall not assign this
Agreement or any rights or obligations hereunder without the prior written
consent of the Required Holders, including by way of a Fundamental Transaction
(unless the Company is in compliance with the applicable provisions governing
Fundamental Transactions set forth in the Notes). A Buyer may assign some or all
of its rights hereunder without the consent of the Company, in which event such
assignee shall be deemed to be a Buyer hereunder with respect to such assigned
rights.

 

(h)          No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except that each Indemnitee shall have the right to
enforce the obligations of the Company with respect to Section 9(k).

 

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(i)          Survival. Unless this Agreement is terminated under Section 8, the
representations and warranties of the Company and the Buyers contained in
Sections 2 and 3 and the agreements and covenants set forth in Sections 4, 5 and
9 shall survive the Closing and the delivery and conversion of the Securities,
as applicable. Each Buyer shall be responsible only for its own representations,
warranties, agreements and covenants hereunder.

 

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

 

(k)          Indemnification.

 

(i)          In consideration of each Buyer's execution and delivery of the
Transaction Documents and acquiring the Securities thereunder and in addition to
all of the Company's other obligations under the Transaction Documents, the
Company shall defend, protect, indemnify and hold harmless each Buyer and each
other holder of the Securities and all of their stockholders, partners, members,
officers, directors, employees and direct or indirect investors and any of the
foregoing Persons' agents or other representatives (including, without
limitation, those retained in connection with the transactions contemplated by
this Agreement) (collectively, the "Indemnitees") from and against any and all
actions, causes of action, suits, claims, losses, costs, penalties, fees,
liabilities and damages, and expenses in connection therewith (irrespective of
whether any such Indemnitee is a party to the action for which indemnification
hereunder is sought), and including reasonable attorneys' fees and disbursements
(the "Indemnified Liabilities"), incurred by any Indemnitee as a result of, or
arising out of, or relating to (a) any misrepresentation or breach of any
representation or warranty made by the Company in the Transaction Documents or
any other certificate, instrument or document contemplated hereby or thereby,
(b) any breach of any covenant, agreement or obligation of the Company contained
in the Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby or (c) any cause of action, suit or claim brought
or made against such Indemnitee by a third party (including for these purposes a
derivative action brought on behalf of the Company) and arising out of or
resulting from (i) the execution, delivery, performance or enforcement of the
Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby, (ii) any transaction financed or to be financed
in whole or in part, directly or indirectly, with the proceeds of the issuance
of the Securities, or (iii) the status of such Buyer or holder of the Securities
as an investor in the Company pursuant to the transactions contemplated by the
Transaction Documents. To the extent that the foregoing undertaking by the
Company may be unenforceable for any reason, the Company shall make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities that is permissible under applicable law.

 

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(ii)         Promptly after receipt by an Indemnitee under this Section 9(k) of
notice of the commencement of any action or proceeding (including any
governmental action or proceeding) involving an Indemnified Liability, such
Indemnitee shall, if a claim for indemnification in respect thereof is to be
made against any indemnifying party under this Section 9(k), deliver to the
indemnifying party a written notice of the commencement thereof, and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume control of the defense thereof with counsel
mutually satisfactory to the indemnifying party and the Indemnitee; provided,
however, that an Indemnitee shall have the right to retain its own counsel with
the fees and expenses of not more than one counsel for such Indemnitee to be
paid by the indemnifying party, if, in the reasonable opinion of counsel for the
Indemnitee, the representation by such counsel of the Indemnitee and the
indemnifying party would be inappropriate due to actual or potential differing
interests between such Indemnitee and any other party represented by such
counsel in such proceeding. Legal counsel referred to in the immediately
preceding sentence shall be selected by the Investors holding at least a
majority of the Purchased Shares. The Indemnitee shall cooperate fully with the
indemnifying party in connection with any negotiation or defense of any such
action or Indemnified Liabilities by the indemnifying party and shall furnish to
the indemnifying party all information reasonably available to the Indemnitee
that relates to such action or Indemnified Liabilities. The indemnifying party
shall keep the Indemnitee fully apprised at all times as to the status of the
defense or any settlement negotiations with respect thereto. No indemnifying
party shall be liable for any settlement of any action, claim or proceeding
effected without its prior written consent, provided, however, that the
indemnifying party shall not unreasonably withhold, delay or condition its
consent. No indemnifying party shall, without the prior written consent of the
Indemnitee, which consent shall not be unreasonably withheld conditioned or
delayed, consent to entry of any judgment or enter into any settlement or other
compromise which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such Indemnitee of a release from all liability in
respect to such Indemnified Liabilities or litigation. Following indemnification
as provided for hereunder, the indemnifying party shall be subrogated to all
rights of the Indemnitee with respect to all third parties, firms or
corporations relating to the matter for which indemnification has been made. The
failure to deliver written notice to the indemnifying party within a reasonable
time of the commencement of any such action shall not relieve such indemnifying
party of any liability to the Indemnitee under this Section 9(k), except to the
extent that the indemnifying party is prejudiced in its ability to defend such
action.

 

(iii)        The indemnification required by this Section 9(k) shall be made by
periodic payments of the amount thereof during the course of the investigation
or defense, as and when bills are received or Indemnified Liabilities are
incurred.

 

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

 

(l)          No Strict Construction. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent,
and no rules of strict construction will be applied against any party.

 

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(m)          Remedies. Each Buyer and each holder of the Securities shall have
all rights and remedies set forth in the Transaction Documents and all rights
and remedies which such holders have been granted at any time under any other
agreement or contract and all of the rights which such holders have under any
law. Any Person having any rights under any provision of this Agreement shall be
entitled to enforce such rights specifically (without posting a bond or other
security), to recover damages by reason of any breach of any provision of this
Agreement and to exercise all other rights granted by law. Furthermore, the
Company recognizes that in the event that it fails to perform, observe, or
discharge any or all of its obligations under the Transaction Documents, any
remedy at law may prove to be inadequate relief to the Buyers. The Company
therefore agrees that the Buyers shall be entitled to seek temporary and
permanent injunctive relief in any such case without the necessity of proving
actual damages and without posting a bond or other security.

 

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

 

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

 

(p)          Reproduction of Documents. This Agreement and all documents
relating thereto, including, without limitation, (a) consents, waivers and
modifications which may hereafter be executed, (b) documents received by the
Buyers on the Closing Date (except for certificates evidencing the Notes
themselves), and (c) financial statements, certificates and other information
previously or hereafter furnished to the Buyers, may be reproduced by any Buyer
by any photographic, photostatic, microfilm, micro-card, miniature photographic
or other similar process and any Buyer may destroy any original document so
reproduced. All parties hereto agree and stipulate that any such reproduction
shall be admissible in evidence as the original itself in any judicial or
administrative proceeding (whether or not the original is in existence and
whether or not such reproduction was made by a Buyer in the regular course of
business) and that any enlargement, facsimile or further reproduction of such
reproduction shall likewise be admissible in evidence.

 

32

 

 

(q)          Independent Nature of Buyers' Obligations and Rights. The
obligations of each Buyer under any Transaction Document are several and not
joint with the obligations of any other Buyer, and no Buyer shall be responsible
in any way for the performance of the obligations of any other Buyer under any
Transaction Document. Nothing contained herein or in any other Transaction
Document, and no action taken by any Buyer pursuant hereto or thereto, shall be
deemed to constitute the Buyers as, and the Company acknowledges that the Buyers
do not so constitute, a partnership, an association, a joint venture or any
other kind of entity, or create a presumption that the Buyers are in any way
acting in concert or as a group, and the Company shall not assert any such claim
with respect to such obligations or the transactions contemplated by the
Transaction Documents and the Company acknowledges that the Buyers are not
acting in concert or as a group with respect to such obligations or the
transactions contemplated by the Transaction Documents. The Company acknowledges
and each Buyer confirms that it has independently participated in the
negotiation of the transaction contemplated hereby with the advice of its own
counsel and advisors. Each Buyer shall be entitled to independently protect and
enforce its rights, including, without limitation, the rights arising out of
this Agreement or out of any other Transaction Documents, and it shall not be
necessary for any other Buyer to be joined as an additional party in any
proceeding for such purpose.

 

[Signature Page Follows]

 

33

 

 

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

 

  COMPANY:       INVENTERGY, INC.         By: /s/ Joe Beyers     Name: Joe
Beyers     Title: Chairman and CEO

 

34

 

 

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

 

  BUYERS:      

HUDSON BAY IP OPPORTUNITIES

MASTER FUND LP

     

By: Hudson Bay Capital Management LP, as

its Investment Manager

        By:  /s/ Yoav Roth     Name: Yoav Roth     Title: Authorized Signatory

 

35

 

 

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

 

  BUYERS:       HS CONTRARIAN INVESTMENTS, LLC       By:  /s/ John Stetson    
Name: John Stetson     Title: Managing Member

 

36

 

 

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

 

  BUYERS:       GRQ CONSULTANTS, INC. 401K       By: /s/ Barry Honig     Name:
Barry Honig     Title: Trustee

 

37

 

 

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

 

  BUYERS:      

GRQ CONSULTANTS, INC.

        By: /s/ Barry Honig     Name: Barry Honig     Title: President

 

38

 

 

EXHIBITS

 

Exhibit A-1 Form of New Note Exhibit A-2 Form of Amended and Restated Note
Exhibit B-1 Form of Cash Collateral Agreement Exhibit B-2 Form of Deposit
Account Control Agreement Exhibit C Form of Outside Company Counsel Opinion
Exhibit D Form of Secretary's Certificate Exhibit E Form of Officer's
Certificate Exhibit F Form of Merger Agreement Amendment

 

39