Exhibit
10.1


 


Convertible
note PURCHASE AGREEMENT


 


This
Convertible Note Purchase Agreement (this “Agreement”) is dated as of January 27, 2017, between American Power
Group Corporation, a Delaware corporation (the “Company”), and each purchaser identified on the signature pages
hereto (each, a “Purchaser” and collectively the “Purchasers”).


 


WHEREAS,
subject to the terms and conditions set forth in this Agreement and pursuant to Section 4(2) of the Securities Act of 1933, as
amended, and Rule 506 of Regulation D promulgated thereunder, the Company desires to issue and sell to each Purchaser, and each
Purchaser desires to purchase from the Company, the Company’s Subordinated Contingent Convertible Promissory Note, in the
form of Exhibit A attached hereto (each, a “Note” and, together, the “Notes”), as
more fully described in this Agreement; and


 


WHEREAS,
each Purchaser is an “Accredited Investor”, as such term is defined in Rule 501(a) of Regulation D;


 


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


 


ARTICLE
I.

DEFINITIONS


 


1.1       Definitions.
In addition to the terms defined elsewhere in this Agreement, (a) capitalized terms that are not otherwise defined herein have
the meanings given to such terms in the Certificate of Designation (as defined herein) (without regard to any changes or amendments
thereto after the date hereof) and (b) the following terms have the meanings set forth in this Section 1.1:


 


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


 


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


 


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


 


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


 


“Certificate
of Amendment” shall have the meaning ascribed to such term in Section 4.14.


 




     


	



    


    

 


“Certificate
of Designation” means the Certificate of Designation of Preferences, Rights and Limitations of Series E Preferred Stock,
to be filed by the Company with the Secretary of State of Delaware, in the form of Exhibit B attached hereto.


 


“Certificate
of Incorporation” means the Company’s Restated Certificate of Incorporation, as in effect on the date hereof and
as amended from time to time.


 


“Closing”
means the closing of the purchase and sale of the Notes in connection with the Initial Closing, pursuant to Section 2.1, and in
the case of each closing that occurs subsequent to the Initial Closing, pursuant to the provisions set forth in Section 2.2.


 


“Closing
Date” means the Trading Day on which all of the Transaction Documents (other than the Certificate of Designation and
the Warrants) have been executed and delivered by the applicable parties thereto, and all conditions precedent to (i) the Purchasers’
obligations to pay the Subscription Amount at such Closing and (ii) the Company’s obligations to deliver the Notes at such
Closing, in each case, have been satisfied or waived.


 


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


 


“Common
Stock” means the common stock of the Company, par value $0.01 per share, and any other class of securities into which
such securities may hereafter be reclassified or changed.


 


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


 


“Conversion
Price” shall have the meaning ascribed to such term in the Certificate of Designation.


 


“Conversion
Shares” means the shares of Series E Preferred Stock issuable upon conversion of the Notes.


 


“Equity
Securities” means the Conversion Shares, the Warrants and the Underlying Shares.


 


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


 


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


 


“Initial
Closing” means the first Closing pursuant to this Agreement.


 


“Initial
Closing Date” means the date of the Initial Closing.


 




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


 


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


 


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


 


“Option
Plan” shall have the meaning assigned to such term in Section 2.4(c).


 


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


 


“Registration
Rights Agreement” means the Registration Rights Agreement dated as of June 1, 2015, as amended, among the Company and
certain of the Purchasers, as the same may be amended from time to time.


 


“Registration
Rights Amendment” means the amendment to the Registration Rights Agreement, in the form of Exhibit C attached
hereto.


 


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


 


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


 


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


 


“Securities”
means the Notes and the Equity Securities.


 


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


 


“Security
Agreement” means the security assignment agreement to be executed and delivered at the Initial Closing by the Company,
granting to Arrow, LLC, as agent for the Purchasers, a security interest in (i) the Amended and Restated Senior Secured Demand
Promissory Note dated December 1, 2015, issued by Trident Resources LLC, in the original principal amount of $497,190 and (ii)
all related guarantees and collateral security interests, in the form of Exhibit D attached hereto.


 


“Series
A Preferred Stock” means the Company’s 10% Convertible Preferred Stock, par value $1.00 per share.


 




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“Series
B Preferred Stock” means the Company’s Series B 10% Convertible Preferred Stock, par value $1.00 per share.


 


“Series
C Preferred Stock” means the Company’s Series C Convertible Preferred Stock, par value $1.00 per share.


 


“Series
E Preferred Stock” means the Company’s Series E Convertible Preferred Stock, par value $1.00 per share.


 


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


 


“Subordination
Agreement” means the subordination agreement to be executed and delivered at the Initial Closing by the Purchasers and
Iowa State Bank, in the form of Exhibit E attached hereto.


 


“Subscription
Amount” means, as to each Purchaser, the aggregate amount to be paid for the Note purchased hereunder as specified below
such Purchaser’s name on the signature pages of this Agreement, in United States dollars and in immediately available funds.


 


“Subsidiary”
means any subsidiary of the Company as set forth on Exhibit 21.1 to the Company’s Annual Report on Form 10-K for the fiscal
year ended September 30, 2016 and shall, where applicable, also include any direct or indirect subsidiary of the Company formed
or acquired after the date thereof.


 


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


 


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


 


“Transaction
Documents” means this Agreement, the Notes, the Security Agreement, the Certificate of Designation, the Voting Agreement,
the Warrants, all exhibits and schedules thereto and hereto and any other documents or agreements executed in connection with
the transactions contemplated hereunder.


 


“Transfer
Agent” means American Stock Transfer & Trust Company, LLC, the current transfer agent of the Company, with a mailing
address of 6201 15th Avenue Brooklyn, New York 11219, and a facsimile number of (718) 765-8712, and any successor transfer agent
of the Company.


 


“Underlying
Shares” means the shares of Common Stock issued and issuable upon conversion of the Conversion Shares and upon exercise
of the Warrants.


 




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“Voting
Agreement” means the Amended and Restated Voting Agreement in the form of Exhibit F attached hereto.


 


“Warrants”
means the Common Stock purchase warrants to be delivered to the Purchasers upon the conversion of the Notes, in the form of Exhibit
G attached hereto.


 


“WPU
Agreement” means the Forbearance and Waiver Agreement to be executed and delivered at the Initial Closing by the Company,
WPU Leasing, LLC and American Power Group, Inc., in the form of Exhibit H attached hereto.


 


ARTICLE
II.

PURCHASE AND SALE


 


2.1       Initial
Closing. On the Initial Closing Date, upon the terms and subject to the conditions set forth herein, substantially concurrent
with the execution and delivery of this Agreement by the parties hereto, the Company agrees to sell, and the Purchasers, severally
and not jointly, agree to purchase, Notes in the aggregate principal amount of not less than $2,500,000. At the Initial Closing,
each Purchaser shall deliver to the Company, via wire transfer or a certified check of immediately available funds, by cancellation
or conversion of indebtedness of the Company to Purchaser, including interest, or by any combination of such methods, an amount
equal to such Purchaser’s Subscription Amount and the Company shall deliver to each Purchaser a Note in the principal amount
of such Purchaser’s Subscription Amount; and the Company and the Purchasers shall deliver the other items as set forth herein
that are deliverable at the Initial Closing. The Initial Closing shall occur on the Closing Date at the offices of the Company’s
counsel or such other location as the Parties shall mutually agree. Notwithstanding that the Closing occurs in a sequence in respect
of the other transactions contemplated by the Transaction Documents, the Parties acknowledge and agree that each Closing, including
the Initial Closing, is part of and not severable from the other transactions contemplated by this Agreement or the other Transaction
Documents.


 


2.2       Subsequent
Closings. After the Initial Closing, the Company shall have the right to sell additional Notes to one or more additional Purchasers
at one or more additional Closings, provided, however, that (i) the Company shall not sell Notes with an aggregate principal
amount of more than $3,000,000 pursuant to this Agreement and (ii) the final Closing hereunder shall be held within six months
after the Initial Closing. Each additional Purchaser shall become a party to this Agreement, the Registration Rights Amendment,
the Security Agreement, the Voting Agreement and the Subordination Agreement by executing and delivering a counterpart signature
page to each of the agreements.


 


2.3       Deliverables.


 


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


 


(i)       a
copy of this Agreement duly executed by the Company;


 




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(ii)       a
Note, in the principal amount of the respective Purchaser’s Subscription Amount, registered in the name of such Purchaser;


 


(iii)       a
copy of the Registration Rights Amendment, duly executed by the Company;


 


(iv)       a
copy of the Voting Agreement, duly executed by the Company and such parties thereto as may be required to amend the Voting Agreement
as contemplated thereby;


 


(v)       a
copy of the Security Agreement, duly executed by the Bank and acknowledged by the Company; and


 


(vi)       a
copy of the Subordination Agreement, duly executed by the Bank and acknowledged by the Company.


 


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


 


(i)       a
copy of this Agreement duly executed by such Purchaser;


 


(ii)       such
Purchaser’s Subscription Amount by wire transfer or a certified check of immediately available funds;


 


(iii)       a
copy of the Registration Rights Amendment, duly executed by such Purchaser;


 


(iv)       a
copy of the Voting Amendment, duly executed by such Purchaser;


 


(v)       a
copy of the Security Agreement, duly executed by such Purchaser; and


 


(vi)       a
copy of the Subordination Agreement, duly executed by such Purchaser.


 


2.4       Closing
Conditions.


 


(a)       The
obligations of the Company to each of the Purchasers, severally and not jointly, hereunder in connection with each Closing are
subject to the following conditions being met:


 


(i)       each
of the representations and warranties made by such Purchaser in this Agreement is true and correct in all material respects on
and as of such Closing, as though each such representation or warranty had been made on and as of such Closing, except that those
representations and warranties that address matters only as of a particular date shall remain true and correct as of such date;


 




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(ii)       all
obligations, covenants and agreements of such Purchaser required to be performed at or prior to the Closing shall have been performed
in all material respects; and


 


(iii)       the
delivery by such Purchaser of the items as set forth herein.


 


(b)       The
respective obligations of each Purchaser, severally and not jointly, hereunder in connection with each Closing are subject to
the following conditions being met:


 


(i)       each
of the representations and warranties of the Company in this Agreement that is qualified by a reference to materiality or Material
Adverse Effect shall be true in all respects as so qualified on and as of such Closing, including the Initial Closing, and each
of the representations and warranties of the Company in this Agreement that is not so qualified shall be true and correct in all
material respects on and as of such Closing and as of all previous Closings, including the Initial Closing, as though each such
representation or warranty had been made on and as of each respective Closing, except that those representations and warranties
that address matters only as a particular date shall remain true and correct as of such date;


 


(ii)       all
obligations, covenants and agreements of the Company required to be performed at or prior to such Closing shall have been performed
in all material respects;


 


(iii)       the
delivery by the Company of the items as set forth herein;


 


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


 


(v)       the
holders of the Company’s Series C Preferred Stock shall have waived all antidilution adjustments otherwise applicable to
the issuance of the Notes and the issuance or deemed issuance of the Equity Securities;


 


(vi)       the
Company shall have obtained such additional waivers and consents from its security holders as the Purchasers may reasonably request
to effectuate the transactions contemplated by this Agreement; and


 


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


 




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(c)       Prior
to the Initial Closing, the Board of Directors shall have amended the Company’s 2016 Stock Option Plan (the “Option
Plan”), to provide for the issuance of options to purchase up to 90,000,000 shares of Common Stock, such amendment to
be conditioned on the approval of the Certificate of Amendment by the Company’s stockholders.


 


(d)       Prior
to the Initial Closing, the Company shall have amended its employment agreements with each of Maurice Needham, Lyle Jensen, Charles
Coppa and Michael Schiltz to provide that the Company’s severance or salary continuation obligations under such agreements
shall not exceed three months.


 


ARTICLE
III.

REPRESENTATIONS AND WARRANTIES


 


3.1       Representations
and Warranties of the Company. The Company hereby makes the following representations and warranties to each Purchaser:


 


(a)       Subsidiaries.
Exhibit 21.1 to the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2016 sets forth a list
of all of direct and indirect Subsidiaries of the Company existing during such fiscal year. The Company owns, directly or indirectly,
all of the capital stock or other equity interests of each Subsidiary, including any direct or indirect subsidiary of the Company
formed or acquired subsequent to the filing of the above-referenced annual report, free and clear of any Liens, and all of the
issued and outstanding shares of capital stock of each Subsidiary are validly issued and are fully paid, non-assessable and free
of preemptive and similar rights to subscribe for or purchase securities.


 


(b)
       Organization and Qualification. The Company and each of the Subsidiaries is an
entity duly incorporated or otherwise organized, validly existing and in good standing under the laws of the jurisdiction of its
formation, with the requisite power and authority to own and use its properties and assets and to carry on its business as currently
conducted. Neither the Company nor any Subsidiary is in violation or default of any of the provisions of its respective certificate
or articles of incorporation, bylaws or other organizational or charter documents. Each of the Company and the Subsidiaries is
duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each jurisdiction in which
the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be
so qualified or in good standing, as the case may be, could not reasonably be expected to result in: (i) a material adverse effect
on the legality, validity or enforceability of any Transaction Document, (ii) a material adverse effect on the results of operations,
assets, business or condition (financial or otherwise) of the Company and the Subsidiaries, taken as a whole, or (iii) a material
adverse effect on the Company’s ability to perform in any material respect on a timely basis its obligations under any Transaction
Document (any of (i), (ii) or (iii), a “Material Adverse Effect”) and no action, claim, suit, investigation
or proceeding (including, without limitation, an informal investigation or partial proceeding, such as a deposition) has been
instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority
or qualification.


 




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(c)       Authorization;
Enforcement. The Company or any Subsidiary of the Company that is a party to this Agreement or the other Transaction Documents
has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by each of the Transaction
Documents to which it is a party and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery
of each of the Transaction Documents and the consummation by the Company and each Subsidiary of the transactions contemplated
hereby and thereby have been duly authorized by all required corporate or other action on the part of the Company and each Subsidiary
other than in connection with the Required Approvals. Each Transaction Document to which the Company and each Subsidiary is a
party has been (or upon delivery will have been) duly executed by the Company or such Subsidiary, as the case may be, and, when
delivered in accordance with the terms hereof and thereof, will constitute the valid and binding obligation of, and will be enforceable
against, the Company or the Subsidiary, as the case may be, in accordance with its terms, except (i) as limited by general equitable
principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement
of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive
relief or other equitable remedies and (iii) insofar as the Company’s indemnification obligations under the provisions of
Section 4.7 may be limited by applicable law.


 


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


 




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(e)       Filings,
Consents and Approvals. The Company is not required to obtain any consent, waiver, authorization or order of, give any notice
to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other
Person in connection with the execution, delivery and performance by the Company of the Transaction Documents, other than: (i)
such filings as are required to be made under applicable state securities laws, and (ii) certain stockholder approvals as contemplated
by Section 4.14 of this Agreement (collectively, the “Required Approvals”).


 


(f)       Issuance
of the Securities. Subject to the effectiveness of the filing of the Certificate of Designation with the Secretary of State
of Delaware, the Equity Securities are duly authorized and, when issued and paid for in accordance with the applicable Transaction
Documents, will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the Company other
than restrictions on transfer provided in the Transaction Documents. The Underlying Shares, when issued in accordance with the
terms of the Conversion Shares and the Warrants, will be validly issued, fully paid and nonassessable, free and clear of all Liens
imposed by the Company other than restrictions on transfer provided for in the Transaction Documents. The Company has reserved
from its duly authorized capital stock the maximum number of shares of Common Stock issuable upon the conversion of the Notes
and the exercise of the Warrants.


 


(g)       Capitalization.
No Person has any right of first refusal, preemptive right, right of participation, or any similar right to participate in the
transactions contemplated by the Transaction Documents. The issuance and sale of the Securities will not obligate the Company
to issue shares of Common Stock or other securities to any Person (other than the Purchasers) and will not result in a right of
any holder of Company securities to adjust the exercise, conversion, exchange or reset price under any of such securities. All
of the outstanding shares of capital stock of the Company are validly issued, fully paid and nonassessable, have been issued in
compliance with all federal and state securities laws, and none of such outstanding shares was issued in violation of any preemptive
rights or similar rights to subscribe for or purchase securities. Except as contemplated by Section 4.14 of this Agreement, no
further approval or authorization of any stockholder, the Board of Directors or others is required for the issuance and sale of
the Securities. Other than the Voting Agreement, there are no stockholders agreements, voting agreements or other similar agreements
with respect to the Company’s capital stock to which the Company is a party or, to the knowledge of the Company, between
or among any of the Company’s stockholders.


 


(h)       SEC
Reports; Financial Statements. The Company has filed all reports, schedules, forms, statements and other documents required
to be filed by the Company under the Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof,
for the two years preceding the date hereof (or such shorter period as the Company was required by law or regulation to file such
material) (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein, being collectively
referred to herein as the “SEC Reports”) on a timely basis or has received a valid extension of such time of
filing and has filed any such SEC Reports prior to the expiration of any such extension. As of their respective dates, and except
as may have been corrected and/or restated by subsequently filed SEC Reports, the SEC Reports complied in all material respects
with the requirements of the Securities Act and the Exchange Act, as applicable, except that the Company may not have furnished
to the Commission and posted on its corporate Web site every Interactive Data File required to be submitted and posted within
the timeframes required by Rule 405 of Regulation S-T, and none of the SEC Reports, when filed, contained any untrue statement
of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not misleading. The Company has never been an issuer subject
to Rule 144(i) under the Securities Act. Except as may have been subsequently corrected and/or restated by subsequently filed
SEC Reports, the financial statements of the Company included in the SEC Reports complied in all material respects with applicable
accounting requirements and the rules and regulations of the Commission with respect thereto as in effect at the time of filing.
Such financial statements have been prepared in accordance with United States generally accepted accounting principles applied
on a consistent basis during the periods involved (“GAAP”), except as may have been subsequently corrected
and/or restated by subsequently filed SEC Reports and as may be otherwise specified in such financial statements or the notes
thereto and except that unaudited financial statements may not contain all footnotes required by GAAP, and fairly present in all
material respects the financial position of the Company and its consolidated Subsidiaries as of and for the dates thereof and
the results of operations and cash flows for the periods indicated therein, subject, in the case of unaudited statements, to normal,
year-end audit adjustments.


 




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(i)       Material
Changes; Undisclosed Events, Liabilities or Developments. Since the date of the latest audited financial statements included
within the SEC Reports, except as otherwise disclosed in the SEC Reports (including the amended and/or restated SEC Reports),
(i) there has been no event, occurrence or development that has had or that could reasonably be expected to result in a Material
Adverse Effect, (ii) the Company has not incurred any liabilities (contingent or otherwise) other than (A) trade payables and
accrued expenses incurred in the ordinary course of business consistent with past practice and (B) liabilities not required to
be reflected in the Company’s financial statements pursuant to GAAP or disclosed in filings made with the Commission, (iii)
the Company has not altered its method of accounting, (iv) the Company has not declared or made any dividend or distribution of
cash or other property to its stockholders, other than dividends paid on outstanding shares of the Company’s preferred stock,
or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock and (v) the Company has not
issued any equity securities to any officer, director or Affiliate, except pursuant to arms’ length transactions approved
by the Board of Directors. The Company does not have pending before the Commission any request for confidential treatment of information.
Except for the issuance of the Securities contemplated by this Agreement, no event, liability or development that could reasonably
be expected to result in a Material Adverse Effect has occurred or exists with respect to the Company or its Subsidiaries or their
respective business, properties, operations or financial condition that would be required to be disclosed by the Company under
applicable securities laws at the time this representation is made or deemed made that has not been publicly disclosed at least
one Trading Day prior to the date that this representation is made.


 


(j)       Litigation.
There is no action, suit, inquiry, notice of violation, proceeding or investigation pending or, to the knowledge of the Company,
threatened against or affecting the Company, any Subsidiary or any of their respective properties before or by any court, arbitrator,
governmental or administrative agency or regulatory authority (federal, state, county, local or foreign) (collectively, an “Action”)
which (i) adversely affects or challenges the legality, validity or enforceability of any of the Transaction Documents or the
Securities or (ii) could, if there were an unfavorable decision, reasonably be expected to result in a Material Adverse Effect.
Neither the Company nor any Subsidiary, to the knowledge of the Company, nor any director or officer thereof, is or has been the
subject of any Action involving a claim of violation of or liability under federal or state securities laws or a claim of breach
of fiduciary duty. There has not been, and to the knowledge of the Company, there is not pending or contemplated, any investigation
by the Commission involving the Company or any current or former officer or any current director of the Company. The Commission
has not issued any stop order or other order suspending the effectiveness of any registration statement filed by the Company or
any Subsidiary under the Exchange Act or the Securities Act.


 


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


 


(l)       Compliance.
Neither the Company nor any Subsidiary: (i) is in default under or in violation of (and no event has occurred that has not been
waived that, with notice or lapse of time or both, would result in a default by the Company or any Subsidiary under), nor has
the Company or any Subsidiary received notice of a claim that it is in default under or that it is in violation of, any indenture,
loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is
bound (whether or not such default or violation has been waived), (ii) is in violation of any judgment, decree or order of any
court, arbitrator or governmental body or (iii) except as disclosed in the Company’s Current Report on Form 8-K filed with
the Commission on May 21, 2015, is or has been in violation of any statute, rule, ordinance or regulation of any governmental
authority, including without limitation all foreign, federal, state and local laws applicable to its business and all such laws
that affect the environment, except in each case as could not reasonably be expected to result in a Material Adverse Effect.


 




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


 


(n)       Title
to Assets. The Company and the Subsidiaries have good and marketable title in fee simple to all real property owned by them
and good and marketable title in all personal property owned by them that is material to the business of the Company and the Subsidiaries,
in each case free and clear of all Liens, except for Liens in favor of Iowa State Bank and WPU Leasing, LLC, Liens reflected in
the Company’s financial statements and Liens for the payment of federal, state or other taxes, the payment of which is neither
delinquent nor subject to penalties. Any real property and facilities held under lease by the Company and the Subsidiaries are
held by them under valid, subsisting and enforceable leases with which the Company and the Subsidiaries are in compliance.


 


(o)       Patents
and Trademarks. The Company and the Subsidiaries have, or have rights to use, all patents, patent applications, trademarks,
trademark applications, service marks, trade names, trade secrets, inventions, copyrights, licenses and other intellectual property
rights and similar rights necessary or material for use in connection with their respective businesses as described in the SEC
Reports and which the failure to so have could reasonably be expected to result in a Material Adverse Effect (collectively, the
“Intellectual Property Rights”). Neither the Company nor any Subsidiary has received a notice (written or otherwise)
that any of the Intellectual Property Rights used by the Company or any Subsidiary violates or infringes upon the rights of any
Person. To the knowledge of the Company, all Intellectual Property Rights that the Company owns or has rights to are enforceable
and there is no existing infringement by another Person of any of the Intellectual Property Rights. The Company and its Subsidiaries
have taken reasonable security measures to protect the secrecy, confidentiality and value of their intellectual property that
consist of trade secrets.


 


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


 




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


 


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


 




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


 


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


 


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


 


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


 


(w)       Disclosure.
Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents, the Company
confirms that neither it nor any other Person acting on its behalf has provided any of the Purchasers or their agents or counsel
with any information that it believes constitutes or might constitute material, non-public information. The Company understands
and confirms that the Purchasers will rely on the foregoing representation in effecting transactions in securities of the Company.
All of the disclosure furnished, taken as a whole, by or on behalf of the Company to the Purchasers regarding the Company, its
business and the transactions contemplated hereby, is true and correct in all material respects and does not contain any untrue
statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in light
of the circumstances under which they were made, not misleading. The Company acknowledges and agrees that no Purchaser makes or
has made any representations or warranties with respect to the transactions contemplated hereby other than those specifically
set forth in Section 3.2 hereof.


 




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


 


(y)       Tax
Status. The Company and each Subsidiary has filed all necessary federal, state and foreign income and franchise tax returns
and has paid or accrued all taxes shown as due thereon, and the Company has no knowledge of a tax deficiency which has been asserted
or threatened against the Company or any Subsidiary.


 


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


 


(aa)Accountants.
The Company’s accounting firm is set forth in the SEC Reports. To the knowledge and belief of the Company, such accounting
firm (i) is a registered public accounting firm as required by the Exchange Act and (ii) shall express its opinion with respect
to the financial statements to be included in the Company’s Annual Report for the fiscal year ending September 30, 2016.


 


(bb)
Acknowledgment Regarding Purchasers’ Purchase of Securities. The Company acknowledges and agrees that each of the
Purchasers is acting solely in the capacity of an arm’s length purchaser with respect to the Transaction Documents and the
transactions contemplated thereby. The Company further acknowledges that no Purchaser is acting as a financial advisor or fiduciary
of the Company (or in any similar capacity) with respect to the Transaction Documents and the transactions contemplated thereby
and any advice given by any Purchaser or any of their respective representatives or agents in connection with the Transaction
Documents and the transactions contemplated thereby is merely incidental to the Purchasers’ purchase of the Securities.
The Company further represents to each Purchaser that the Company’s decision to enter into this Agreement and the other
Transaction Documents has been based solely on the independent evaluation of the transactions contemplated hereby and thereby
by the Company and its representatives.


 




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(cc)Acknowledgement
Regarding Purchasers’ Trading Activity. Anything in this Agreement or elsewhere herein to the contrary notwithstanding
(except for Sections 3.2(e) and 4.11 hereof), it is understood and acknowledged by the Company that: (i) none of the Purchasers
have been asked by the Company to agree, nor has any Purchaser agreed, to desist from purchasing or selling, long and/or short,
securities of the Company, or “derivative” securities based on securities issued by the Company or to hold the Securities
for any specified term; (ii) past or future open market or other transactions by any Purchaser, specifically including, without
limitation, Short Sales or “derivative” transactions, before or after the closing of this or future private placement
transactions, may negatively impact the market price of the Company’s publicly-traded securities; (iii) any Purchaser, and
counter-parties in “derivative” transactions to which any such Purchaser is a party, directly or indirectly, presently
may have a “short” position in the Common Stock, and (iv) no Purchaser shall be deemed to have any affiliation with
or control over any arm’s length counter-party in any “derivative” transaction. The Company further understands
and acknowledges that (y) one or more Purchasers may engage in hedging activities at various times during the period that the
Securities are outstanding, including, without limitation, during the periods that the value of the Underlying Shares deliverable
with respect to Securities are being determined, and (z) such hedging activities (if any) could reduce the value of the existing
stockholders’ equity interests in the Company at and after the time that the hedging activities are being conducted. The
Company acknowledges that such aforementioned hedging activities do not constitute a breach of any of the Transaction Documents.


 


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


 


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


 


(ff)No
General Solicitation. Neither the Company nor any person acting on behalf of the Company has offered or sold any of the Securities
by any form of general solicitation or general advertising.


 




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


 


3.2       Representations
and Warranties of the Purchasers. Each Purchaser, for itself and for no other Purchaser, hereby represents and warrants as
of the Closing Date of such Purchaser’s purchase of a Note to the Company as follows (unless as of a specific date therein):


 


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


 


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


 


(c)       Purchaser
Status. At the time such Purchaser was offered the Securities, it was, and as of the date hereof it is, and on each date on
which it exercises the Warrant or converts any of the Notes, it will be either: (i) an “accredited investor” as defined
in Rule 501(a) under the Securities Act or (ii) a “qualified institutional buyer” as defined in Rule 144A(a) under
the Securities Act. Such Purchaser is not required to be registered as a broker-dealer under Section 15 of the Exchange Act.


 




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


 


(e)       No
General Solicitation. Such Purchaser is not purchasing the Securities as a result of any press release, Form D or other filing
made by the Company under federal or state securities laws, advertisement, article, notice or other communication regarding the
Securities published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar
or any other general solicitation or general advertisement.


 


(f)       Speculative
Investment. Such Purchaser understands and recognizes that the purchase of the Securities is highly speculative and involves
a high degree of risk and that only investors who can afford the loss of their entire investment should consider investing in
the Company. Such Purchaser has reviewed the risk factors in the SEC Reports.


 


(g)       Principal
Place of Business. The address of such Purchaser furnished by such Purchaser on the signature page hereto is such Purchaser’s
principal business address.


 


(h)       U.S.
Person. Such Purchaser is a United States Person.


 


(i)       No
Reliance on Other Statements. No statements, promises, warranties or representations have been made to such Purchaser concerning
the Securities or the Company, its business or prospects, or other matters, by the Company, by the Company’s representatives,
or by any other persons or entities, except as set forth in the Transaction Documents and the SEC Reports. Such Purchaser has
not relied on any representation, written or oral, not contained in the Transaction Documents or the SEC Reports in deciding to
purchase the Securities.


 


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


 




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ARTICLE
IV.

OTHER AGREEMENTS OF THE PARTIES


 


4.1       Transfer
Restrictions.


 


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


 


(b)       The
Purchasers agree to the imprinting, so long as is required by this Section 4.1, of a legend on any of the Securities in the following
form:


 


[NEITHER]
THIS SECURITY [NOR THE SECURITIES INTO WHICH THIS SECURITY IS [EXERCISABLE] [CONVERTIBLE]] HAS [NOT] BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION
NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. SUCH
SECURITIES MAY BE TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY AND THE REGISTERED HOLDER
OF SUCH SECURITIES, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY. THIS SECURITY [AND THE SECURITIES ISSUABLE UPON
[EXERCISE] [CONVERSION] OF THIS SECURITY] MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER
OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a) UNDER THE SECURITIES
ACT OR OTHER LOAN SECURED BY SUCH SECURITIES.


 


(c)       The
Company acknowledges and agrees that Purchasers may from time to time pledge pursuant to a bona fide margin agreement with a registered
broker-dealer or grant a security interest in some or all of the Equity Securities to a financial institution that is an “accredited
investor” as defined in Rule 501(a) under the Securities Act and who agrees to be bound by the provisions of this Agreement
and, if required under the terms of such arrangement, such Purchaser may transfer pledged or secured Equity Securities to the
pledgees or secured parties. Such a pledge or transfer would not be subject to approval of the Company and no legal opinion of
legal counsel of the pledgee, secured party or pledgor shall be required in connection therewith. Further, no notice shall be
required of such pledge. At the appropriate Purchaser’s expense, the Company will execute and deliver such reasonable documentation
as a pledgee or secured party of Securities may reasonably request in connection with a pledge or transfer of the Equity Securities,
including, if the Equity Securities are subject to an effective registration statement under the Securities Act, the preparation
and filing of any required prospectus supplement under Rule 424(b)(3) promulgated by the Commission under the Securities Act,
as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission
having substantially the same purpose and effect as such Rule, or any other applicable provision of the Securities Act to appropriately
amend the list of selling stockholders thereunder.


 




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


 


(e)       Each
Purchaser, severally and not jointly with the other Purchasers, agrees with the Company that such Purchaser will sell any Securities
pursuant to either the registration requirements of the Securities Act, including any applicable prospectus delivery requirements,
or an exemption therefrom, and that if Equity Securities are sold pursuant to an effective registration statement, they will be
sold in compliance with the plan of distribution set forth therein, and acknowledges that the removal of the restrictive legend
from certificates representing Securities as set forth in this Section 4.1 is predicated upon the Company’s reliance upon
this understanding.


 




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4.2       Acknowledgment
of Dilution. The Company acknowledges that the issuance of the Securities may result in dilution of the outstanding shares
of Common Stock, which dilution may be substantial under certain market conditions. The Company further acknowledges that its
obligations under the Transaction Documents, including, without limitation, its obligation to issue the Underlying Shares pursuant
to the Transaction Documents, are unconditional and absolute and not subject to any right of set off, counterclaim, delay or reduction,
regardless of the effect of any such dilution or any claim the Company may have against any Purchaser and regardless of the dilutive
effect that such issuance may have on the ownership of the other stockholders of the Company.


 


4.3       Furnishing
of Information; Public Information. Until the earliest of the time that (i) no Purchaser owns Securities or (ii) the Warrants
have expired, the Company covenants to maintain the registration of the Common Stock under Section 12(b) or 12(g) of the Exchange
Act and to timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required
to be filed by the Company after the date hereof pursuant to the Exchange Act even if the Company is not then subject to the reporting
requirements of the Exchange Act.


 


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


 


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


 


4.6       Use
of Proceeds. The Company shall use the net proceeds from the sale of the Securities hereunder for working capital purposes,
as approved by the Board of Directors, including the repayment of short-term loans other than the Notes. The Company shall not
use such proceeds for the redemption of any Common Stock or Common Stock Equivalents.


 




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4.7       Indemnification
of Purchasers. Subject to the provisions of this Section 4.7, the Company will indemnify and hold each Purchaser and its directors,
officers, shareholders, members, partners, employees and agents (and any other Persons with a functionally equivalent role of
a Person holding such titles notwithstanding a lack of such title or any other title), each Person who controls such Purchaser
(within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, shareholders,
agents, members, partners or employees (and any other Persons with a functionally equivalent role of a Person holding such titles
notwithstanding a lack of such title or any other title) of such controlling persons (each, a “Purchaser Party”)
harmless from any and all losses, liabilities, obligations, claims, contingencies, damages, costs and expenses, including all
judgments, amounts paid in settlements, court costs and reasonable attorneys’ fees and costs of investigation that any such
Purchaser Party may suffer or incur as a result of or relating to (a) any breach of any of the representations, warranties, covenants
or agreements made by the Company in this Agreement or in the other Transaction Documents or (b) any action instituted against
a Purchaser Party in any capacity, or any of them or their respective Affiliates, by any stockholder of the Company who is not
an Affiliate of such Purchaser Party, with respect to any of the transactions contemplated by the Transaction Documents (unless
such action is based upon a breach of such Purchaser Party’s representations, warranties or covenants under the Transaction
Documents or any agreements or understandings such Purchaser Party may have with any such stockholder or any violations by such
Purchaser Party of state or federal securities laws or any conduct by such Purchaser Party which constitutes fraud, gross negligence,
willful misconduct or malfeasance). If any action shall be brought against any Purchaser Party in respect of which indemnity may
be sought pursuant to this Agreement, such Purchaser Party shall promptly notify the Company in writing, and the Company shall
have the right to assume the defense thereof with counsel of its own choosing reasonably acceptable to the Purchaser Party. Any
Purchaser Party shall have the right to employ separate counsel in any such action and participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of such Purchaser Party except to the extent that (i) the employment
thereof has been specifically authorized by the Company in writing, (ii) the Company has failed after a reasonable period of time
to assume such defense and to employ counsel or (iii) in such action there is, in the reasonable opinion of counsel, a material
conflict on any material issue between the position of the Company and the position of such Purchaser Party, in which case the
Company shall be responsible for the reasonable fees and expenses of no more than one such separate counsel. The Company will
not be liable to any Purchaser Party under this Agreement (y) for any settlement by a Purchaser Party effected without the Company’s
prior written consent, which shall not be unreasonably withheld or delayed; or (z) to the extent, but only to the extent that
a loss, claim, damage or liability is attributable to any Purchaser Party’s breach of any of the representations, warranties,
covenants or agreements made by such Purchaser Party in this Agreement or in the other Transaction Documents.


 


4.8       Reservation
of Common Stock. As of the date hereof, and subject to the effectiveness of the filing of the Certificate of Amendment and
the Certificate of Designation with the Secretary of State of Delaware, the Company has reserved and the Company shall continue
to reserve and keep available at all times, free of preemptive rights, a sufficient number of shares of Common Stock for the purpose
of enabling the Company to issue all of the Underlying Shares.


 


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


 




    	22



    


    

 


4.10       Certain
Transactions and Confidentiality. Each Purchaser, severally and not jointly with any other Purchaser, covenants that neither
it nor any Affiliate acting on behalf of or pursuant to any understanding with the Company will execute any purchases or sales,
including Short Sales of any of the Company’s securities during the period commencing with the execution of this Agreement
and ending at such time that the transactions contemplated by this Agreement are first publicly announced pursuant to a Current
Report on Form 8-K to be filed with the Commission. Each Purchaser, severally and not jointly with any other Purchaser, covenants
that until such time as the transactions contemplated by this Agreement are publicly disclosed by the Company pursuant to such
Form 8-K, such Purchaser will maintain the confidentiality of the existence and terms of this transaction and the information
included in the Transaction Documents. Notwithstanding the foregoing and notwithstanding anything contained in this Agreement
to the contrary, the Company expressly acknowledges and agrees that, except as may be required by applicable securities laws,
(i) no Purchaser makes any representation, warranty or covenant hereby that it will not engage in effecting transactions in any
securities of the Company after the time that the transactions contemplated by this Agreement are first publicly announced pursuant
to such Form 8-K, (ii) no Purchaser shall be restricted or prohibited from effecting any transactions in any securities of the
Company in accordance with applicable securities laws from and after the time that the transactions contemplated by this Agreement
are first publicly announced pursuant to such Form 8-K and (iii) no Purchaser shall have any duty of confidentiality to the Company
or its Subsidiaries after the issuance of such Form 8-K.


 


4.11       Conversion
and Exercise Procedures. Each of the form of Notice of Exercise included in the Warrants and the form of Notice of Conversion
included in the Certificate of Designation set forth the totality of the procedures required of the Purchasers in order to exercise
the Warrants or convert the Conversion Shares. No additional legal opinion, other information or instructions shall be required
of the Purchasers to exercise the Warrants or convert the Notes or the Conversion Shares. The Company shall honor exercises of
the Warrants and conversions of the Conversion Shares and shall deliver Underlying Shares in accordance with the terms, conditions
and time periods set forth in the Transaction Documents.


 


4.12       Form
D; Blue Sky Filings. The Company agrees to file a Form D with respect to the Securities as required under Regulation D and
to provide to Purchaser a copy thereof, promptly upon request of any Purchaser. The Company shall take such action as the Company
shall reasonably determine is necessary in order to obtain an exemption for, or to qualify the Securities for, sale to the Purchasers
at each Closing under applicable securities or “Blue Sky” laws of the states of the United States, and shall provide
evidence of such actions promptly upon request of any Purchaser; provided, however, that the Company shall not be required
to qualify generally to do business in any jurisdiction where it is not then so qualified, subject the Company to any material
tax in any such jurisdiction where it is not then so subject or file a general consent to service of process in any such jurisdiction.


 




    	23



    


    

 


4.13       Issuance
of Warrants. Upon the conversion of the Notes pursuant to their terms, the Company shall issue to each Purchaser a Warrant
entitling such Purchaser to purchase, at an initial exercise price per share equal to the Conversion Price, ten times the number
of shares of Common Stock into which such Purchaser’s Conversion Shares are convertible from time to time. Further, if,
and only if, the initial exercise price of the Warrants is less than $.10 per share, then the exercise prices of all of the warrants
issued to the parties to the Securities Purchase Agreement dated as of January 8, 2016 who are also Purchasers under this Agreement
shall be automatically, and without further action of the Company or the holders, deemed to be amended to reduce the exercise
prices of such warrants to equal the exercise price of the Warrants. Notwithstanding any such automatic reduction, the Company
shall, at the request of any such Purchaser, amend and restate the warrants held by such Purchaser to reflect the adjusted exercise
price.


 


4.14       Stockholders
Meeting. The Company shall take all action reasonably necessary in accordance with applicable law to convene a meeting of
its stockholders to be held at the earliest practicable time after the date of this Agreement for the purpose of approving a certificate
of amendment to the Certificate of Incorporation increasing the number of authorized shares of Common Stock from 350,000,000 to
600,000,000 shares (the “Certificate of Amendment”) and ratifying the amendment of the Option Plan contemplated
by Section 2.4(c). Further, if, and only if, the initial Conversion Price is less than $.10, then the Certificate of Amendment
shall also amend the Certificate of Incorporation to reduce the conversion prices of the Company’s Series D Convertible
Preferred Stock, par value $1.00 per share, Series D-2 Convertible Preferred Stock, par value $1.00 per share, and Series D-3
Convertible Preferred Stock, par value $1.00 per share, to equal the Conversion Price. Without limiting the generality of the
foregoing, (i) within 30 days after the Initial Closing Date, the Company shall file with the Commission a preliminary proxy statement
with respect to such meeting and (ii) the Company shall use its reasonable commercial efforts to file a definitive proxy statement
(the “Proxy Statement”) with respect to such meeting, and to distribute the Proxy Statement to its stockholders,
as soon as practicable thereafter. The Proxy Statement shall satisfy all requirements of applicable state and federal securities
laws and the Delaware General Corporation Law. The Company’s Board of Directors shall recommend to the stockholders the
adoption of the Certificate of Amendment and the ratification of such amendment to the Option Plan. The Company shall file the
Certificate of Designation and the Certificate of Amendment with the Secretary of State of Delaware within two Business Days after
receiving stockholder approval thereof as contemplated by the Proxy Statement.


 


4.15       Dividend
Deferral. The Company shall defer the payment of all cash dividends currently payable and subsequently to become payable in
respect of its preferred stock until such time as the Board of Directors, in its sole discretion, determines that such dividends
may be paid. During the deferral period, dividends on such preferred stock may be paid in shares of Common Stock in the discretion
of the Board of Directors.


 


4.16       Salary
Reductions. The Company shall use commercially reasonable efforts to obtain voluntary salary reductions from employees of
not less than $200,000 per annum in the aggregate. Subject to compliance with applicable securities laws, employees agreeing to
such salary reductions will be permitted to convert the amount of such reductions into shares of Series E Preferred Stock on the
same terms (including the issuance of Warrants) on which the Notes are convertible. The Company shall defer payment of any such
salary reductions not so converted until such time as the Board of Directors, in its sole discretion, determines that the Company’s
cash flow is sufficient to permit such payments.


 




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ARTICLE
V.

MISCELLANEOUS


 


5.1       Fees
and Expenses. The Company shall pay all of the reasonable expenses incurred by Matthew Van Steenwyk, Neil Braverman and their
respective Affiliates in connection with the transactions contemplated by this Agreement, including the fees and expenses of their
advisers, counsel, accountants and other experts, if any. Each other party to this Agreement shall be responsible for the payment
of all of the fees and expenses of its respective advisers, counsel, accountants and other experts, if any, and all other expenses
incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement. The Company
shall pay all Transfer Agent fees, stamp taxes and other taxes and duties levied in connection with the delivery of any Securities
to the Purchasers.


 


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


 


5.3       Governing
Agreement. Should any provision of this Agreement conflict with the provisions of any other Transaction Document, the terms
of this Agreement shall govern.


 


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


 


5.5       Amendments;
Waivers. No provision of this Agreement may be waived, modified, supplemented or amended except in a written instrument signed,
in the case of an amendment, by the Company and the Purchasers holding 67% of the Notes then outstanding (or, if no Notes are
outstanding, 67% of the Underlying Shares then outstanding or issuable) or, in the case of a waiver, by the party against whom
enforcement of any such waived provision is sought. No waiver of any default with respect to any provision, condition or requirement
of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of
any other provision, condition or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder
in any manner impair the exercise of any such right.


 




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


 


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


 


5.8       No
Third-Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective successors
and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, except as
otherwise set forth in Section 4.7.


 


5.9       Governing
Law. With exception of the Subordination Agreement, which shall be governed by the laws of the State of Iowa, and the Certificate
of Designation, which shall be governed by the laws of the State of Delaware, all questions concerning the construction, validity,
enforcement and interpretation of the Transaction Documents shall be governed by and construed and enforced in accordance with
the internal laws of the State of New York, without regard to the principles of conflicts of law thereof. Each party agrees that
all legal proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Agreement
and any other Transaction Documents (whether brought against a party hereto or its respective affiliates, directors, officers,
shareholders, employees or agents) shall be commenced exclusively in the state and federal courts sitting in the City of New York.
Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the City of New
York, borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated
hereby or discussed herein (including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any 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 improper or is an inconvenient venue for such proceeding. Each party
hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding
by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at
the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process
in any other manner permitted by law. If any party shall commence an action or proceeding to enforce any provisions of the Transaction
Documents, then, in addition to the obligations of the Company under Section 4.7, the prevailing party in such action or proceeding
shall be reimbursed by the other party for its reasonable attorneys’ fees and other costs and expenses incurred with the
investigation, preparation and prosecution of such action or proceeding.


 




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


 


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


 


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


 


5.13       Rescission
and Withdrawal Right. Notwithstanding anything to the contrary contained in (and without limiting any similar provisions of)
any of the other Transaction Documents, whenever any Purchaser exercises a right, election, demand or option under a Transaction
Document and the Company does not timely perform its related obligations within the periods therein provided, then such Purchaser
may rescind or withdraw, in its sole discretion from time to time upon written notice to the Company, any relevant notice, demand
or election in whole or in part without prejudice to its future actions and rights; provided, however, that in the case
of a rescission of a conversion of the Notes or an exercise of a Warrant, the applicable Purchaser shall be required to return
any shares of Common Stock subject to any such rescinded conversion or exercise notice concurrently with the return to such Purchaser
of the aggregate exercise price paid to the Company for such shares and the restoration of such Purchaser’s right to acquire
such shares pursuant to such Purchaser’s Warrant (including issuance of a replacement warrant certificate evidencing such
restored right).


 


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


 




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


 


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


 


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


 


5.18Saturdays,
Sundays, Holidays, etc.If the last or appointed day for the taking of any action or the expiration of any right required
or granted herein shall not be a Business Day, then such action may be taken or such right may be exercised on the next succeeding
Business Day.


 


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


 


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


 


(Signature
Pages Follow)


 




    	28



     


    

 


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


 


 


	 	American
    Power Group Corporation	 	Address
    for Notice:
	 	 	 	 
	By:	/s/
    Charles E. Coppa	 	American
    Power Group Corporation
	Name:	Charles
    E. Coppa	 	7
    Kimball Lane, Building A
	Title:	Chief
    Financial Officer	 	Lynnfield,
    Massachusetts 01940
	 	 	 	Attention:
    Charles E. Coppa
	With
    a copy to (which shall not constitute notice):	 	Fax:
    (781) 224-0114


 


	Morse,
                                         Barnes-Brown & Pendleton, P.C.

        CityPoint

        230
        Third Avenue

        Waltham,
        Massachusetts 02451

        Attention:
        Carl F. Barnes

        Fax
        (781) 622-5933
	 


 


[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK.


 SIGNATURE
PAGES FOR PURCHASERS FOLLOW.]


 




    	29



    


    

 


[PURCHASER
SIGNATURE PAGES TO


 AMERICAN
POWER GROUP CORPORATION


 CONVERTIBLE
NOTE PURCHASE AGREEMENT]


 


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


 


Name
of Purchaser: ________________________________________________________


 


Signature
of Authorized Signatory of Purchaser: _________________________________


 


Name
of Authorized Signatory: _______________________________________________


 


Title
of Authorized Signatory: ________________________________________________


 


Email
Address of Authorized Signatory:_________________________________________


 


Facsimile
Number of Authorized Signatory: __________________________________________


 


Address
for Notice of Purchaser:


 


_________________________


_________________________


_________________________


_________________________


Fax:
_____________________


 


Address
for Delivery of Securities for Purchaser (if not same as address for notice):


 


_________________________


_________________________


_________________________


_________________________


Subscription
Amount: $_________________


 


[Purchaser
signature pages to this agreement are on file with


 American
Power Group Corporation and are intentionally omitted]


 




    	30