SECURITIES
PURCHASE AGREEMENT


 


This SECURITIES
PURCHASE AGREEMENT (the “Agreement”), dated as of May 7, 2013, is by and among Axion Power International,
Inc., a Delaware corporation with offices located at 3601 Clover Lane, New Castle, Pennsylvania 16105 (the ”Company”),
and each of the investors listed on the Schedule of Buyers attached hereto (individually, a “Buyer” and collectively,
the “Buyers”).


 


RECITALS


 


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


 


B.           The
Company has authorized the issuance of senior convertible notes, in the aggregate original principal amount of $9,000,000, in the
form attached hereto as Exhibit A (the “Notes”), which Notes shall be convertible into shares
of the Company’s common stock, $0.0001 par value per share (the “Common Stock”) (as converted, collectively,
the “Conversion Shares”), in accordance with the terms of the Notes.


 


C.           Each
Buyer wishes to purchase, and the Company wishes to sell, upon the terms and conditions stated in this Agreement, (i) a Note in
the aggregate original principal amount set forth opposite such Buyer’s name in column (3) on the Schedule of Buyers and
(ii) a warrant to initially acquire up to that number of additional shares of Common Stock set forth opposite such Buyer’s
name in column (4) on the Schedule of Buyers, in the form attached hereto as Exhibit B (the “Warrants”)
(as exercised, collectively, the “Warrant Shares”).


 


D.           The
Notes may be entitled to interest and certain other amounts, which, at the option of the Company and subject to certain conditions,
may be paid in shares of Common Stock (the “Interest Shares”) or in cash.


 


E.           At
the Closing, the parties hereto shall execute and deliver a Registration Rights Agreement, in the form attached hereto as Exhibit
D (the “Registration Rights Agreement”), pursuant to which the Company has agreed to provide certain
registration rights with respect to the Registrable Securities (as defined in the Registration Rights Agreement), under the 1933
Act and the rules and regulations promulgated thereunder, and applicable state securities laws.


 


F.           The
Notes, the Conversion Shares, the Interest Shares, the Warrants and the Warrant Shares are collectively referred to herein as the
“Securities.”


 


AGREEMENT


 


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


 




    	 



    	 



    

 


1.          PURCHASE
AND SALE OF NOTES AND WARRANTS.


 


(a)          Notes
and Warrants. Subject to the satisfaction (or waiver) of the conditions set forth in Sections 6 and 7 below, the Company shall
issue and sell to each Buyer, and each Buyer severally, but not jointly, shall purchase from the Company on the Closing Date (as
defined below) a Note in the original principal amount as is set forth opposite such Buyer’s name in column (3) on the Schedule
of Buyers along with Warrants to initially acquire up to that aggregate number of Warrant Shares as is set forth opposite such
Buyer’s name in column (4) on the Schedule of Buyers.


 


(b)          Closing.
The closing (the “Closing”) of the purchase of the Notes and the Warrants by the Buyers shall occur at the offices
of Greenberg Traurig, LLP, MetLife Building, 200 Park Avenue, New York, NY 10166. The date and time of the Closing (the “Closing
Date”) shall be 10:00 a.m., New York time, on the first (1st) Business Day on which the conditions to the Closing set
forth in Sections 6 and 7 below are satisfied or waived (or such other date as is mutually agreed to by the Company and each Buyer).
As used herein “Business Day” means any day other than a Saturday, Sunday or other day on which commercial banks
in New York, New York are authorized or required by law to remain closed.


 


(c)          Purchase
Price. The aggregate purchase price for the Notes and the Warrants to be purchased by each Buyer (the “Purchase Price”)
shall be the amount set forth opposite such Buyer’s name in column (6) on the Schedule of Buyers. Each Buyer and the Company
agree that the Notes and the Warrants constitute an “investment unit” for purposes of Section 1273(c)(2) of the Internal
Revenue Code of 1986, as amended (the “Code”).


 


(d)          Form
of Payment. On the Closing Date, (i) each Buyer shall pay its respective Purchase Price (less, in the case of Capital Ventures
(as defined below), the amounts withheld pursuant to Section 4(g)) for the Notes and the Warrants to be issued and sold to such
Buyer at the Closing, by wire transfer of immediately available funds in accordance with the Flow of Funds Letter (as defined below)
and (ii) the Company shall deliver to each Buyer (A) a Note in the aggregate original principal amount as is set forth opposite
such Buyer’s name in column (3) of the Schedule of Buyers and (B) a Warrant pursuant to which such Buyer shall have the right
to initially acquire up to such number of Warrant Shares as is set forth opposite such Buyer’s name in column (4) of the
Schedule of Buyers, in all cases, duly executed on behalf of the Company and registered in the name of such Buyer or its designee.


 


2.          BUYER’S
REPRESENTATIONS AND WARRANTIES.


 


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


 


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


 




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(b)          No
Public Sale or Distribution. Such Buyer (i) is acquiring its Note and Warrants, (ii) upon conversion of its Note will acquire
the Conversion Shares issuable upon conversion thereof, and (iii) upon exercise of its Warrants will acquire the Warrant Shares
issuable upon exercise thereof, in each case, for its own account and not with a view towards, or for resale in connection with,
the public sale or distribution thereof in violation of applicable securities laws, except pursuant to sales registered or exempted
under the 1933 Act; provided, however, by making the representations herein, such Buyer does not agree, or make any representation
or warranty, to hold any of the Securities for any minimum or other specific term and reserves the right to dispose of the Securities
at any time in accordance with or pursuant to a registration statement or an exemption from registration under the 1933 Act. Such
Buyer does not presently have any agreement or understanding, directly or indirectly, with any Person to distribute any of the
Securities in violation of applicable securities laws.


 


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


 


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


 


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


 


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


 


(g)          Transfer
or Resale. Such Buyer understands that except as provided in the Registration Rights Agreement and Section 4(h) hereof: (i)
the Securities have not been and are not being registered under the 1933 Act or any state securities laws, and may not be offered
for sale, sold, assigned or transferred unless (A) subsequently registered thereunder, (B) such Buyer shall have delivered to the
Company (if requested by the Company) an opinion of counsel to such Buyer, in a form reasonably acceptable to the Company, to the
effect that such Securities to be sold, assigned or transferred may be sold, assigned or transferred pursuant to an exemption from
such registration, or (C) such Buyer provides the Company with reasonable assurance that such Securities can be sold, assigned
or transferred pursuant to Rule 144 or Rule 144A promulgated under the 1933 Act (or a successor rule thereto) (collectively, “Rule
144”); (ii) any sale of the Securities made in reliance on Rule 144 may be made only in accordance with the terms of
Rule 144, and further, if Rule 144 is not applicable, any resale of the Securities under circumstances in which the seller (or
the Person (as defined below) through whom the sale is made) may be deemed to be an underwriter (as that term is defined in the
1933 Act) may require compliance with some other exemption under the 1933 Act or the rules and regulations of the SEC promulgated
thereunder; and (iii) neither the Company nor any other Person is under any obligation to register the Securities under the 1933
Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder.


 




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


 


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


 


(j)           Residency.
Such Buyer is a resident of the jurisdiction specified below its address on the Schedule of Buyers.


 


(k)          Certain
Trading Activities. Such Buyer has not directly or indirectly, nor has any person acting on behalf of or pursuant to any understanding
with such Buyer, engaged in any transactions in the securities of the Company (including, without limitation, Short Sales involving
the Company’s securities) since the time that such Buyer was first contacted by the Company or the Placement Agent (as defined
herein) regarding the investment in the Company contemplated herein. “Short Sales” include, without limitation,
all “short sales” as defined in Rule 200 promulgated under Regulation SHO under the 1934 Act (“Regulation
SHO”) and all types of direct and indirect stock pledges, forward sales contracts, options, puts, calls, swaps and similar
arrangements (including on a total return basis), and sales and other transactions through non-U.S. broker dealers or foreign regulated
brokers (but shall not be deemed to include the location and/or reservation of borrowable shares of Common Stock).


 




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3.          REPRESENTATIONS
AND WARRANTIES OF THE COMPANY.


 


The Company represents
and warrants to each of the Buyers that, as of the date hereof and as of the Closing Date:


 


(a)          Organization
and Qualification. Each of the Company and each of its Subsidiaries are entities duly organized and validly existing and in
good standing under the laws of the jurisdiction in which they are formed, and have the requisite power and authority to own their
properties and to carry on their business as now being conducted and as presently proposed to be conducted. Each of the Company
and each of its Subsidiaries is duly qualified as a foreign entity to do business and is in good standing in every jurisdiction
in which its ownership of property or the nature of the business conducted by it makes such qualification necessary, except to
the extent that the failure to be so qualified or be in good standing would not have a Material Adverse Effect. As used in this
Agreement, “Material Adverse Effect” means any material adverse effect on (i) the business, properties, assets,
liabilities, operations (including results thereof), condition (financial or otherwise) or prospects of the Company or any Subsidiary,
individually or taken as a whole, (ii) the transactions contemplated hereby or in any of the other Transaction Documents or (iii)
the authority or ability of the Company or any of its Subsidiaries to perform any of their respective obligations under any of
the Transaction Documents (as defined below). Other than the Persons (as defined below) set forth on Schedule 3(a) the Company
has no Subsidiaries. None of Axion Power Corporation, a corporation organized under the laws of Canada, or C&T Corporation,
a corporation organized under the laws of Canada owns or possesses any material property or assets or has any operations, business
or liabilities (each, an “Inactive Subsidiary”). “Subsidiaries” means any Person in which
the Company, directly or indirectly, (I) owns any of the outstanding capital stock or holds any equity or similar interest of such
Person or (II) controls or operates all or any part of the business, operations or administration of such Person, and each of the
foregoing, is individually referred to herein as a “Subsidiary” (excluding any Inactive Subsidiaries).


 


(b)          Authorization;
Enforcement; Validity. The Company has the requisite power and authority to enter into and perform its obligations under this
Agreement and the other Transaction Documents and to issue the Securities in accordance with the terms hereof and thereof. The
execution and delivery of this Agreement and the other Transaction Documents by the Company, and the consummation by the Company
of the transactions contemplated hereby and thereby (including, without limitation, the issuance of the Notes and the reservation
for issuance and issuance of the Conversion Shares issuable upon conversion of the Notes and the reservation for issuance and issuance
of any Interest Shares issuable pursuant to the terms of the Notes and the issuance of the Warrants and the reservation for issuance
and issuance of the Warrant Shares issuable upon exercise of the Warrants) have been duly authorized by the Company’s board
of directors or other governing body and (other than the filing with the SEC of one or more Registration Statements in accordance
with the requirements of the Registration Rights Agreement, a Form D with the SEC and any other filings as may be required by any
state securities agencies) no further filing, consent or authorization is required by the Company, its board of directors or its
stockholders or other governing body. This Agreement and the other Transaction Documents to which it is a party have been duly
executed and delivered by the Company and constitutes the legal, valid and binding obligations of the Company, enforceable against
the Company in accordance with their respective terms, except as such enforceability may be limited by general principles of equity
or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally,
the enforcement of applicable creditors’ rights and remedies and except as rights to indemnification and to contribution
may be limited by federal or state securities law. “Transaction Documents” means, collectively, this Agreement,
the Notes, the Warrants, the Account Control Agreements (as defined in the Notes), the Subordination Agreement (as defined below),
the Subordinated Notes (as defined below), the Subordinated Warrants (as defined below), the Subordinated Note Purchase Agreement
(as defined below), the Registration Rights Agreement, the Irrevocable Transfer Agent Instructions (as defined below) and each
of the other agreements and instruments entered into or delivered by any of the parties hereto in connection with the transactions
contemplated hereby and thereby, as may be amended from time to time.


 




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(c)          Issuance
of Securities.  The issuance of the Notes and the Warrants are duly authorized and upon issuance in accordance with the terms
of the Transaction Documents shall be validly issued, fully paid and non-assessable and free from all preemptive or similar rights,
taxes, liens, charges and other encumbrances with respect to the issuance thereof. As of the Closing, the Company shall have reserved
from its duly authorized capital stock not less than the sum of (i) 125% of the maximum number of Conversion Shares initially
issuable upon conversion of the Notes (assuming for purposes hereof that the Notes are convertible at the initial Conversion Price
(as defined in the Notes) and without taking into account any limitations on the conversion of the Notes set forth in the Notes),
(ii) 125% of the maximum number of Interest Shares initially issuable pursuant to the terms of the Notes from the Closing Date
through the twenty-one month anniversary of the Closing Date (determined as if issued on the Trading Day (as defined in the Notes)
immediately preceding the Closing Date without taking into account any limitations on the issuance of securities set forth in
the Notes) and (iii) 100% of the maximum number of Warrant Shares initially issuable upon exercise of the Warrants (without taking
into account any limitations on the exercise of the Warrants set forth therein). Upon issuance or conversion in accordance with
the Notes or exercise in accordance with the Warrants (as the case may be), the Conversion Shares, the Interest Shares and the
Warrant Shares, respectively, when issued, will be validly issued, fully paid and nonassessable and free from all preemptive or
similar rights, taxes, liens, charges and other encumbrances with respect to the issue thereof, with the holders being entitled
to all rights accorded to a holder of Common Stock. Subject to the accuracy of the representations and warranties of the Buyers
in this Agreement, the offer and issuance by the Company of the Securities is exempt from registration under the 1933 Act.


 


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


 




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


 


(f)           Acknowledgment
Regarding Buyer’s Purchase of Securities.  The Company acknowledges and agrees that each Buyer is acting solely in the
capacity of an arm’s length purchaser with respect to the Transaction Documents and the transactions contemplated hereby
and thereby and that no Buyer is (i) an officer or director of the Company or any of its Subsidiaries, (ii) an “affiliate”
(as defined in Rule 144) of the Company or any of its Subsidiaries or (iii) to its knowledge, a “beneficial owner”
of more than 10% of the shares of Common Stock (as defined for purposes of Rule 13d-3 of the Securities Exchange Act of 1934,
as amended (the “1934 Act”)). The Company further acknowledges that no Buyer is acting as a financial advisor
or fiduciary of the Company or any of its Subsidiaries (or in any similar capacity) with respect to the Transaction Documents
and the transactions contemplated hereby and thereby, and any advice given by a Buyer or any of its representatives or agents
in connection with the Transaction Documents and the transactions contemplated hereby and thereby is merely incidental to such
Buyer’s purchase of the Securities. The Company further represents to each Buyer that the Company’s decision to enter
into the Transaction Documents to which it is a party has been based solely on the independent evaluation by the Company and its
representatives.


 




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


 


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


 


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


 


(j)           Application
of Takeover Protections; Rights Agreement. The Company and its board of directors have taken all necessary action, if
any, in order to render inapplicable any control share acquisition, interested stockholder, business combination, poison pill
(including, without limitation, any distribution under a rights agreement) or other similar anti-takeover provision under the
Certificate of Incorporation, Bylaws or other organizational documents or the laws of the jurisdiction of its incorporation
or otherwise which is or could become applicable to any Buyer as a result of the transactions contemplated by this Agreement,
including, without limitation, the Company’s issuance of the Securities and any Buyer’s ownership of the
Securities. The Company and its board of directors have taken all necessary action, if any, in order to render inapplicable
any stockholder rights plan or similar arrangement relating to accumulations of beneficial ownership of shares of Common
Stock or a change in control of the Company or any of its Subsidiaries.


 




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


 









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(l)           Absence
of Certain Changes. Since the date of the Company’s most recent audited financial statements contained in a Form
10-K, there has been no material adverse change and no material adverse development in the business, assets, liabilities,
properties, operations (including results thereof), condition (financial or otherwise) or prospects of the Company or any of
its Subsidiaries. Since the date of the Company’s most recent audited financial statements contained in a Form 10-K,
neither the Company nor any of its Subsidiaries has (i) declared or paid any dividends, (ii) sold any assets, individually or
in the aggregate, outside of the ordinary course of business or (iii) made any capital expenditures, individually or in the
aggregate, outside of the ordinary course of business. Neither the Company nor any of its Subsidiaries has taken any steps to
seek protection pursuant to any law or statute relating to bankruptcy, insolvency, reorganization, receivership, liquidation
or winding up, nor does the Company or any Subsidiary have any knowledge or reason to believe that any of their respective
creditors intend to initiate involuntary bankruptcy proceedings or any actual knowledge of any fact which would reasonably
lead a creditor to do so. The Company and its Subsidiaries, individually and on a consolidated basis, are not as of the date
hereof, and after giving effect to the transactions contemplated hereby to occur at the Closing, will not be Insolvent (as
defined below). For purposes of this Section 3(l), “Insolvent” means, (I) with respect to the Company and
its Subsidiaries, on a consolidated basis, (i) the present fair saleable value of the Company’s and its
Subsidiaries’ assets is less than the amount required to pay the Company’s and its Subsidiaries’ total
Indebtedness (as defined below), (ii) the Company and its Subsidiaries are unable to pay their debts and liabilities,
subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured or (iii) the Company and its
Subsidiaries intend to incur or believe that they will incur debts that would be beyond their ability to pay as such debts
mature; and (II) with respect to the Company and each Subsidiary, individually, (i) the present fair saleable value of the
Company’s or such Subsidiary’s (as the case may be) assets is less than the amount required to pay its respective
total Indebtedness, (ii) the Company or such Subsidiary (as the case may be) is unable to pay its respective debts and
liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured or (iii) the
Company or such Subsidiary (as the case may be) intends to incur or believes that it will incur debts that would be beyond
its respective ability to pay as such debts mature. Neither the Company nor any of its Subsidiaries has engaged in any
business or in any transaction, and is not about to engage in any business or in any transaction, for which the
Company’s or such Subsidiary’s remaining assets constitute unreasonably small capital.


 


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


 




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(n)          Conduct
of Business; Regulatory Permits. Neither the Company nor any of its Subsidiaries is in violation of any term of or in
default under its Certificate of Incorporation, any certificate of designation, preferences or rights of any other
outstanding series of preferred stock of the Company or any of its Subsidiaries or Bylaws or their organizational charter,
certificate of formation or certificate of incorporation or bylaws, respectively. Neither the Company nor any of its
Subsidiaries is in violation of any judgment, decree or order or any statute, ordinance, rule or regulation applicable to the
Company or any of its Subsidiaries, and neither the Company nor any of its Subsidiaries will conduct its business in
violation of any of the foregoing, except in all cases for possible violations which could not, individually or in the
aggregate, have a Material Adverse Effect. Without limiting the generality of the foregoing, the Company is not in violation
of any of the rules, regulations or requirements of the Principal Market and has no knowledge of any facts or circumstances
that could reasonably lead to delisting or suspension of the Common Stock by the Principal Market in the foreseeable future.
Since January 1, 2010, (i) the Common Stock has been listed or designated for quotation on the Principal Market, (ii) trading
in the Common Stock has not been suspended by the SEC or the Principal Market and (iii) the Company has received no
communication, written or oral, from the SEC or the Principal Market regarding the suspension or delisting of the Common
Stock from the Principal Market. The Company and each of its Subsidiaries possess all certificates, authorizations and
permits issued by the appropriate regulatory authorities necessary to conduct their respective businesses, except where the
failure to possess such certificates, authorizations or permits would not have, individually or in the aggregate, a Material
Adverse Effect, and neither the Company nor any such Subsidiary has received any notice of proceedings relating to the
revocation or modification of any such certificate, authorization or permit.


 


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


 


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


 


(2)         assisting
the Company or its subsidiary in obtaining or retaining business for or with, or directing business to, the Company or its subsidiary.


 


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


 


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


 




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(r)           Equity
Capitalization. As of the date hereof, the authorized capital stock of the Company consists of (i) 200,000,000 shares of
Common Stock, of which, 113,290,364 are issued and outstanding and 10,143,827 shares are reserved for issuance pursuant to securities
(other than the Notes and the Warrants) exercisable or exchangeable for, or convertible into, shares of Common Stock and (ii)
12,500,000 shares of preferred stock, of which none are issued and outstanding. No shares of Common Stock are held in treasury.
All of such outstanding shares are duly authorized and have been, or upon issuance will be, validly issued and are fully paid
and nonassessable. 4,366,941 shares of the Company’s issued and outstanding Common Stock on the date hereof are as of the
date hereof owned by Persons who are “affiliates” (as defined in Rule 405 of the 1933 Act and calculated based on
the assumption that only officers, directors and holders of at least 10% of the Company’s issued and outstanding Common
Stock are “affiliates” without conceding that any such Persons are “affiliates” for purposes of federal
securities laws) of the Company or any of its Subsidiaries. To the Company’s knowledge, no Person owns 10% or more of the
Company’s issued and outstanding shares of Common Stock (calculated based on the assumption that all Convertible Securities
(as defined below), whether or not presently exercisable or convertible, have been fully exercised or converted (as
the case may be) taking account of any limitations on exercise or conversion (including “blockers”) contained therein
without conceding that such identified Person is a 10% stockholder for purposes of federal securities laws). (i) None of the Company’s
or any Subsidiary’s capital stock is subject to preemptive rights or any other similar rights or any liens or encumbrances
suffered or permitted by the Company or any Subsidiary; (ii) except as disclosed in Schedule 3(r) and other than the Subordinated
Warrants to be issued pursuant to the Subordinated Note Purchase Agreement, there are no outstanding options, warrants, scrip,
rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into,
or exercisable or exchangeable for, any capital stock of the Company or any of its Subsidiaries, or contracts, commitments, understandings
or arrangements by which the Company or any of its Subsidiaries is or may become bound to issue additional capital stock of the
Company or any of its Subsidiaries or options, warrants, scrip, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into, or exercisable or exchangeable for, any capital stock of the
Company or any of its Subsidiaries; (iii) other than as set forth on Schedule 3(r) and other than the Subordinated Notes to be
issued pursuant to the Subordinated Note Purchase Agreement, there are no outstanding debt securities, notes, credit agreements,
credit facilities or other agreements, documents or instruments evidencing Indebtedness of the Company or any of its Subsidiaries
or by which the Company or any of its Subsidiaries is or may become bound; (iv) other than in connection with the Machinery and
Equipment Loan listed on Schedule 3(r), there are no financing statements securing obligations in any amounts filed in connection
with the Company or any of its Subsidiaries; (v) there are no agreements or arrangements under which the Company or any of its
Subsidiaries is obligated to register the sale of any of their securities under the 1933 Act (except pursuant to the Registration
Rights Agreement, the Subordinated Note Purchase Agreement or with respect to the 2009 common stock placement of the Company);
(vi) there are no outstanding securities or instruments of the Company or any of its Subsidiaries which contain any redemption
or similar provisions, and there are no contracts, commitments, understandings or arrangements by which the Company or any of
its Subsidiaries is or may become bound to redeem a security of the Company or any of its Subsidiaries; (vii) there are no securities
or instruments containing anti-dilution or similar provisions that will be triggered by the issuance of the Securities; (viii)
neither the Company nor any Subsidiary has any stock appreciation rights or “phantom stock” plans or agreements or
any similar plan or agreement; and (ix) neither the Company nor any of its Subsidiaries have any liabilities or obligations required
to be disclosed in the SEC Documents which are not so disclosed in the SEC Documents, other than those incurred in the ordinary
course of the Company’s or its Subsidiaries’ respective businesses and which, individually or in the aggregate, do
not or could not have a Material Adverse Effect. The Company has furnished to the Buyers true, correct and complete copies of
the Company’s Certificate of Incorporation, as amended and as in effect on the date hereof (the “Certificate of
Incorporation”), and the Company’s bylaws, as amended and as in effect on the date hereof (the “Bylaws”),
and the terms of all securities convertible into, or exercisable or exchangeable for, shares of Common Stock and the material
rights of the holders thereof in respect thereto.


 




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


 




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(t)           Litigation.
There is no action, suit, proceeding, inquiry or investigation before or by the Principal Market, any court, public board,
other Governmental Entity, self-regulatory organization or body pending or, to the knowledge of the Company, threatened
against or affecting the Company or any of its Subsidiaries, the Common Stock or any of the Company’s or its
Subsidiaries’ officers or directors which is outside of the ordinary course of business or individually or in the
aggregate material to the Company or any of its Subsidiaries. No director, officer or employee of the Company or any of its
subsidiaries has willfully violated 18 U.S.C. §1519 or engaged in spoliation in reasonable anticipation of litigation.
Without limitation of the foregoing, there has not been, and to the knowledge of the Company, there is not pending or
contemplated, any investigation by the SEC involving the Company, any of its Subsidiaries or any current or former director
or officer of the Company or any of its Subsidiaries. The SEC has not issued any stop order or other order suspending the
effectiveness of any registration statement filed by the Company under the 1933 Act or the 1934 Act.


 


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


 


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


 




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(w)         Title.
The Company and its Subsidiaries have good and marketable title in fee simple to all real property and have good and
marketable title to all personal property owned by them which is material to the business of the Company and its
Subsidiaries, in each case, free and clear of all liens, encumbrances and defects except such as do not materially affect the
value of such property and do not interfere with the use made and proposed to be made of such property by the Company and any
of its Subsidiaries or as listed on Schedule 3(w) hereto or with respect to the Machinery and Equipment Loan set forth in
Schedule 3(r) hereto. Any real property and facilities held under lease by the Company or any of its Subsidiaries are held by
them under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the
use made and proposed to be made of such property and buildings by the Company or any of its Subsidiaries.


 


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


 


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


 




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


 


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


 


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


 




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


 


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


 


(ee)        Acknowledgement
Regarding Buyers’ Trading Activity. It is understood and acknowledged by the Company that (i) following the public
disclosure of the transactions contemplated by the Transaction Documents, in accordance with the terms thereof, none of the
Buyers have been asked by the Company or any of its Subsidiaries to agree, nor has any Buyer agreed with the Company or any
of its Subsidiaries, to desist from effecting any transactions in or with respect to (including, without limitation,
purchasing or selling, long and/or short, except in compliance with paragraph 4(t) hereof) any securities of the Company, or
“derivative” securities based on securities issued by the Company or to hold any of the Securities for any
specified term; (ii) any Buyer, and counterparties in “derivative” transactions to which any such Buyer is a
party, directly or indirectly, presently may have a “short” position in the Common Stock which was established
prior to such Buyer’s knowledge of the transactions contemplated by the Transaction Documents; and (iii) each Buyer
shall not be deemed to have any affiliation with or control over any arm’s length counterparty in any
“derivative” transaction. The Company further understands and acknowledges that following the public disclosure
of the transactions contemplated by the Transaction Documents pursuant to the Press Release (as defined below) one or more
Buyers may engage in hedging and/or trading activities at various times during the period that the Securities
are outstanding, including, without limitation, during the periods that the value and/or number of the Warrant Shares, the
Interest Shares or Conversion Shares, as applicable, deliverable with respect to the Securities are being determined and such
hedging and/or trading activities, if any, can reduce the value of the existing stockholders’ equity interest in the
Company both at and after the time the hedging and/or trading activities are being conducted. The Company acknowledges that
such aforementioned hedging and/or trading activities do not constitute a breach of this Agreement, the Notes, the Warrants
or any other Transaction Document or any of the documents executed in connection herewith or therewith.


 


(ff)         Manipulation
of Price. Neither the Company nor any of its Subsidiaries has, and, to the knowledge of the Company, no Person acting on
their behalf has, directly or indirectly, (i) taken any action designed to cause or to result in the stabilization or manipulation
of the price of any security of the Company or any of its Subsidiaries 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 (other than the Placement
Agent), or (iii) paid or agreed to pay to any Person any compensation for soliciting another to purchase any other securities
of the Company or any of its Subsidiaries.


 




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(gg)       U.S.
Real Property Holding Corporation. Neither the Company nor any of its Subsidiaries is, or has ever been, and so long as
any of the Securities are held by any of the Buyers, shall become, a U.S. real property holding corporation within the
meaning of Section 897 of the Internal Revenue Code of 1986, as amended, and the Company and each Subsidiary shall so
certify upon any Buyer’s request.


 


(hh)       Registration
Eligibility. The Company is eligible to register the Registrable Securities for resale by the Buyers using Form S-1
promulgated under the 1933 Act.


 


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


 


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


 


(kk)        [Intentionally
Omitted]. 


 


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


 


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


 




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(nn)       Management.
Except as set forth in Schedule 3(nn) hereto, during the past five year period, no current or former officer or
director or, to the knowledge of the Company, no current ten percent (10%) or greater stockholder of the Company or any of
its Subsidiaries has been the subject of:


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 




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


 


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


 


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


 


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


 


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


 




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4.          COVENANTS.


 


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


 


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


 


(c)          Reporting
Status. Until the date on which the Buyers shall have sold all of the Registrable Securities (the “Reporting
Period”), the Company shall timely file all reports required to be filed with the SEC pursuant to the 1934 Act, and
the Company shall not terminate its status as an issuer required to file reports under the 1934 Act even if the 1934 Act or
the rules and regulations thereunder would no longer require or otherwise permit such termination. From the time Form S-3 is
available to the Company for the registration of the Registrable Securities, the Company shall take all actions necessary to
maintain its eligibility to register the Registrable Securities for resale by the Buyers on Form S-3.


 


(d)          Use
of Proceeds. The Company will use the proceeds from the sale of the Securities for general corporate purposes, but not,
directly or indirectly, for (i) except as set forth on Schedule 4(d), the satisfaction of any indebtedness of the Company or
any of its Subsidiaries (other than payment of trade payables incurred after the date hereof and current liabilities in the
ordinary course of business of the Company and its Subsidiaries and consistent with prior practices), (ii) the redemption or
repurchase of any securities of the Company or any of its Subsidiaries, or (iii) the settlement of any outstanding
litigation.


 




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


 


(f)           Listing.
The Company shall promptly secure the listing or designation for quotation (as the case may be) of all of the Registrable
Securities upon each national securities exchange and automated quotation system, if any, upon which the Common Stock is then
listed or designated for quotation (as the case may be) (subject to official notice of issuance) and shall maintain such
listing or designation for quotation (as the case may be) of all Registrable Securities from time to time issuable under the
terms of the Transaction Documents on such national securities exchange or automated quotation system. The Company shall
maintain the Common Stock’s listing or authorization for quotation (as the case may be) on the Principal Market, The
New York Stock Exchange, the NYSE MKT, the Nasdaq Capital Market, the Nasdaq Global Market or the Nasdaq Global Select Market
(each, an “Eligible Market”). Neither the Company nor any of its Subsidiaries shall take any action which
could be reasonably expected to result in the delisting or suspension of the Common Stock on an Eligible Market. The Company
shall pay all fees and expenses in connection with satisfying its obligations under this Section 4(f).


 


(g)          Fees.
The Company shall reimburse Capital Ventures International (“Capital Ventures”) for all reasonable costs
and expenses incurred by it in connection with preparing and delivering the Transaction Documents (including, without
limitation, all reasonable legal fees and disbursements in connection therewith, and due diligence in connection with the
transactions contemplated thereby), which amount may be withheld by Capital Ventures from its applicable Purchase Price at
each Closing or paid by the Company on demand by Greenberg Traurig, LLP, less $30,000 which was previously advanced to
Capital Ventures by the Company; provided that such reimbursement amount shall not exceed $100,000 without the prior consent
of the Company. The Company shall be responsible for the payment of any placement agent’s fees, financial advisory
fees, Controlled Account Bank (as defined in the Notes) fees, transfer agent fees, DTC (as defined below) fees or
broker’s commissions (other than for Persons engaged by any Buyer) relating to or arising out of the transactions
contemplated hereby (including, without limitation, any fees payable to the Placement Agent, who is the Company’s sole
placement agent in connection with the transactions contemplated by this Agreement). The Company shall pay, and hold each
Buyer harmless against, any liability, loss or expense (including, without limitation, reasonable attorneys’ fees and
out-of-pocket expenses) arising in connection with any claim relating to any such payment. Except as otherwise set forth in
the Transaction Documents, each party to this Agreement shall bear its own expenses in connection with the sale of the
Securities to the Buyers.


 




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(h)          Pledge
of Securities. Notwithstanding anything to the contrary contained in this Agreement, the Company acknowledges and agrees
that the Securities may be pledged by a Buyer in connection with a bona fide margin agreement or other loan or financing
arrangement that is secured by the Securities. The pledge of Securities shall not be deemed to be a transfer, sale or
assignment of the Securities hereunder, and no Buyer effecting a pledge of Securities shall be required to provide the
Company with any notice thereof or otherwise make any delivery to the Company pursuant to this Agreement or any other
Transaction Document. The Company hereby agrees to execute and deliver such documentation as a pledgee of the Securities may
reasonably request in connection with a pledge of the Securities to such pledgee by a Buyer.


 


(i)           Disclosure
of Transactions and Other Material Information. The Company shall, on or before 8:30 a.m., New York time, on the
first (1st) Business Day after the date of this Agreement, issue a press release (the “Press
Release”) reasonably acceptable to the Buyers disclosing all the material terms of the transactions contemplated by
the Transaction Documents. On or before 8:30 a.m., New York time, on the first (1st) Business Day after the date
of this Agreement, the Company shall file a Current Report on Form 8-K describing all the material terms of the transactions
contemplated by the Transaction Documents in the form required by the 1934 Act and attaching all the material Transaction
Documents (including, without limitation, this Agreement (and all schedules to this Agreement), the form of Notes, the form
of the Warrants and the form of the Registration Rights Agreement) (including all attachments, the “8-K
Filing”). From and after the filing of the 8-K Filing, the Company shall have disclosed all material, non-public
information (if any) provided to any of the Buyers by the Company or any of its Subsidiaries or any of their respective
officers, directors, employees or agents in connection with the transactions contemplated by the Transaction Documents. The
Company shall not, and the Company shall cause each of its Subsidiaries and each of its and their respective officers,
directors, employees and agents not to, provide any Buyer with any material, non-public information regarding the Company or
any of its Subsidiaries from and after the issuance of the Press Release without the express prior written consent of such
Buyer. In the event of a breach of any of the foregoing covenants, including, without limitation, Section 4(o) of this
Agreement, or any of the covenants or agreements contained in any other Transaction Document, by the Company, any of its
Subsidiaries, or any of its or their respective officers, directors, employees and agents (as determined in the reasonable
good faith judgment of such Buyer), in addition to any other remedy provided herein or in the Transaction Documents, such
Buyer shall have the right to make a public disclosure, in the form of a press release, public advertisement or otherwise, of
such breach or such material, non-public information, as applicable, without the prior approval by the Company, any of
its Subsidiaries, or any of its or their respective officers, directors, employees or agents. No Buyer shall have any
liability to the Company, any of its Subsidiaries, or any of its or their respective officers, directors, employees,
stockholders or agents, for any such disclosure. Subject to the foregoing, neither the Company, its Subsidiaries nor any
Buyer shall issue any press releases or any other public statements with respect to the transactions contemplated hereby;
provided, however, the Company shall be entitled, without the prior approval of any Buyer, to make the Press Release and any
press release or other public disclosure with respect to such transactions (i) in substantial conformity with the 8-K Filing
and contemporaneously therewith and (ii) as is required by applicable law and regulations (provided that in the case of
clause (i) each Buyer shall be consulted by the Company in connection with any such press release or other public disclosure
prior to its release). Without the prior written consent of the applicable Buyer, the Company shall not (and shall cause each
of its Subsidiaries and affiliates to not) disclose the name of such Buyer in any filing, announcement, release or otherwise.
Notwithstanding anything contained in this Agreement to the contrary and without implication that the contrary would
otherwise be true, the Company expressly acknowledges and agrees that no Buyer has had, and no Buyer shall have (unless
expressly agreed to by a particular Buyer after the date hereof in a written definitive and binding agreement executed by the
Company and such particular Buyer (it being understood and agreed that no Buyer may bind any other Buyer with respect
thereto)), any duty of confidentiality with respect to, or a duty not to trade on the basis of, any material,
non-public information regarding the Company or any of its Subsidiaries.


 




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(j)           Additional
Registration Statements. Until the Applicable Date (as defined below) and at any time thereafter while any Registration
Statement is not effective or the prospectus contained therein is not available for use or any Current Public Information
Failure (as defined in the Registration Rights Agreement) exists, the Company shall not file a registration statement (other
than an Excluded Registered Offering (as defined below)) under the 1933 Act relating to securities that are not the
Registrable Securities. “Applicable Date” means the earlier of (x) the first date on which the resale by
the Buyers of all Registrable Securities is covered by one or more effective Registration Statements (as defined in the
Registration Rights Agreement) (and each prospectus contained therein is available for use on such date) or (y) the first
date on which all of the Registrable Securities are eligible to be resold by the Buyers pursuant to Rule 144 (or, if a
Current Public Information Failure (as defined in the Registration Rights Agreement) has occurred and is continuing, such
later date after which the Company has cured such Current Public Information Failure).


 




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(k)          Additional
Issuance of Securities. So long as any Buyer beneficially owns any Notes or Warrants, the Company will not, without the prior
written consent of the Buyers holding a majority in aggregate principal amount of the Notes then outstanding, issue any Notes
(other than to the Buyers as contemplated hereby) and the Company shall not issue any other securities that would cause a breach
or default under the Notes or the Warrants. The Company agrees that for the period commencing on the date hereof and ending on
the date immediately following the later of (x) the twenty (20) Trading Day (as defined in the Warrants) anniversary of the Applicable
Date (provided that such period shall be extended by the number of calendar days during such period and any extension thereof
contemplated by this proviso on which any Registration Statement is not effective or any prospectus contained therein is not available
for use or any Current Public Information Failure exists) and (y) nine months after the Closing Date (the “Restricted
Period”), neither the Company nor any of its Subsidiaries shall directly or indirectly issue, offer, sell, grant any
option or right to purchase, or otherwise dispose of (or announce any issuance, offer, sale, grant of any option or right to purchase
or other disposition of) any equity security or any equity-linked or related security (including, without limitation, any “equity
security” (as that term is defined under Rule 405 promulgated under the 1933 Act), any Convertible Securities (as defined
below), any debt security convertible into equity, any preferred stock or any purchase rights) (any such issuance, offer, sale,
grant, disposition or announcement (whether occurring during the Restricted Period or at any time thereafter) is referred to as
a “Subsequent Placement”). Notwithstanding the foregoing, this Section 4(k) shall not apply in respect of the
issuance of (A) shares of Common Stock or standard options to purchase Common Stock to directors, officers or employees of the
Company in their capacity as such pursuant to an Approved Stock Plan (as defined below), provided that (1) all such issuances
(taking into account the shares of Common Stock issuable upon exercise of such options) after the date hereof pursuant to this
clause (A) do not, in the aggregate, exceed more than 5% of the Common Stock issued and outstanding immediately prior to the date
hereof and (2) the exercise price of any such options is not lowered, none of such options are amended to increase the number
of shares issuable thereunder and none of the terms or conditions of any such options are otherwise materially changed in any
manner that adversely affects any of the Buyers; (B) shares of Common Stock issued upon the conversion or exercise of Convertible
Securities (other than standard options to purchase Common Stock issued pursuant to an Approved Stock Plan that are covered by
clause (A) above) issued prior to the date hereof, provided that the conversion, exercise or other method of issuance (as the
case may be) of any such Convertible Security is made solely pursuant to the conversion, exercise or other method of issuance
(as the case may be) provisions of such Convertible Security that were in effect on the date immediately prior to the date of
this Agreement, the conversion, exercise or issuance price of any such Convertible Securities (other than standard options to
purchase Common Stock issued pursuant to an Approved Stock Plan that are covered by clause (A) above) is not lowered, none of
such Convertible Securities (other than standard options to purchase Common Stock issued pursuant to an Approved Stock Plan that
are covered by clause (A) above) are amended to increase the number of shares issuable thereunder and none of the terms or conditions
of any such Convertible Securities (other than standard options to purchase Common Stock issued pursuant to an Approved Stock
Plan that are covered by clause (A) above) are otherwise materially changed in any manner that adversely affects any of the Buyers;
(C) the Conversion Shares, (D) the Interest Shares, (E) Warrant Shares, (F) the Subordinated Notes, the Subordinated Warrants
and the shares of Common Stock issuable upon conversion or exercise of the Subordinated Notes and the Subordinated Warrants, respectively,
provided that the conversion, exercise or other method of issuance (as the case may be) of any such Subordinated Note or Subordinated
Warrant, respectively, is made solely pursuant to the conversion, exercise or other method of issuance (as the case may be) provisions
of such Subordinated Note or Subordinated Warrant, respectively, that were in effect on the date of initial issuance pursuant
to the Subordinated Note Purchase Agreement, the conversion, exercise or issuance price of any such Subordinated Note or Subordinated
Warrant, respectively, is not lowered, none of such Subordinated Note or Subordinated Warrant, respectively, are amended to increase
the number of shares issuable thereunder and none of the terms or conditions of any such Subordinated Note or Subordinated Warrant,
respectively, are otherwise materially changed in any manner that adversely affects any of the Buyers (each of the foregoing in
clauses (A) through (F), collectively the “Excluded Securities”), (G) except during the twenty Trading Day
period immediately following the Applicable Date, any Subsequent Placement that would not be a Dilutive Issuance (as defined in
the Notes) under the Notes assuming for such purpose that the Conversion Price in effect immediately prior to such Subsequent
Placement (solely for the purposes of such calculation) equals $[         ]1
(as adjusted for stock splits, stock combinations, recapitalizations and similar events) and (H) Common Stock issued or issuable
pursuant to a bona fide underwritten public offering (each, an “Excluded Registered Offering”)with an institution
that regularly underwrites as a principal part of its business public offerings which generates gross proceeds to the Company
of at least $5,000,000 (other than an "at-the-market offering" as defined in Rule 415(a)(4) under the 1933 Act in conjunction
with an "equity line"). “Approved Stock Plan” means any employee benefit plan which has been approved
by the board of directors of the Company prior to or subsequent to the date hereof pursuant to which shares of Common Stock and
standard options to purchase Common Stock may be issued to any employee, officer or director for services provided to the Company
in their capacity as such. “Convertible Securities” means any capital stock or other security of the Company
or any of its Subsidiaries that is at any time and under any circumstances directly or indirectly convertible into, exercisable
or exchangeable for, or which otherwise entitles the holder thereof to acquire, any capital stock or other security of the Company
(including, without limitation, Common Stock) or any of its Subsidiaries.


 





 



 


1          Insert
the lesser of (x) the VWAP (as defined in the Notes) of the Common Stock as of close of business of the Principal Market immediately
prior to the execution of this Agreement and (y) the quotient of (I) the sum of the lowest twenty VWAPs of each Trading Day during
the forty Trading Day Period ending as of close of business of the Principal Market immediately prior to the execution of this
Agreement, divided by (II) twenty.


 




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(l)           Reservation
of Shares. So long as any Notes or Warrants remain outstanding, the Company shall take all action necessary to at all
times have authorized, and reserved for the purpose of issuance, no less than the sum of (i) 125% of the maximum number of
shares of Common Stock issuable upon conversion of all the Notes then outstanding (assuming for purposes hereof, that the
Notes are convertible at the Conversion Price (as defined in the Notes) and without regard to any limitations on the
conversion of the Notes set forth therein), and (ii) 125% of the maximum number of Interest Shares issuable pursuant to the
terms of the Notes then outstanding from the Closing Date through the twenty-one month anniversary of the Closing Date
(determined as if issued on the Trading Day immediately preceding the Closing Date without taking into account any
limitations on the issuance of securities set forth in the Notes) and (iii) 100% of the maximum number of Warrant Shares
issuable upon exercise of all the Warrants then outstanding (without regard to any limitations on the exercise of the
Warrants set forth therein).


 


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


 


(n)          Other
Notes; Variable Securities. So long as any Notes remain outstanding, the Company will not issue any Notes (other than to
the Buyers as contemplated hereby) and the Company shall not issue any other securities that would cause a breach or default
under the Notes. So long as any Notes remain outstanding, the Company and each Subsidiary shall be prohibited from effecting
or entering into an agreement to effect any Subsequent Placement involving a Variable Rate Transaction. “Variable
Rate Transaction” means a transaction in which the Company or any Subsidiary (i) issues or sells any Convertible
Securities either (A) at a conversion, exercise or exchange rate or other price that is based upon and/or varies with the
trading prices of or quotations for the shares of Common Stock at any time after the initial issuance of such Convertible
Securities, or (B) with a conversion, exercise or exchange price that is subject to being reset at some future date after the
initial issuance of such Convertible Securities or upon the occurrence of specified or contingent events directly or
indirectly related to the business of the Company or the market for the Common Stock, other than pursuant to a customary
“weighted average” or “full ratchet” anti-dilution provision or (ii) enters into any agreement
(including, without limitation, an equity line of credit or an “at-the-market” offering) whereby the Company or
any Subsidiary may sell securities at a future determined price (other than standard and customary
“preemptive” or “participation” rights). Each Buyer shall be entitled to obtain injunctive relief
against the Company and its Subsidiaries to preclude any such issuance, which remedy shall be in addition to any right to
collect damages.


 




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(o)          Participation
Right. From the date hereof through the two (2) year anniversary of the Closing Date, neither the Company nor any of its
Subsidiaries shall, directly or indirectly, effect any Subsequent Placement unless the Company shall have first complied with
this Section 4(o). The Company acknowledges and agrees that the right set forth in this Section 4(o) is a right
granted by the Company, separately, to each Buyer.


 


(i)          At
least two (2) Trading Days prior to any proposed or intended Subsequent Placement, the Company shall deliver to each Buyer a written
notice of its proposal or intention to effect a Subsequent Placement (each such notice, a “Pre-Notice”), which
Pre-Notice shall not contain any information (including, without limitation, material, non-public information) other than: (i)
a statement that the Company proposes or intends to effect a Subsequent Placement, (ii) a statement that the statement in clause
(i) above does not constitute material, non-public information and (iii) a statement informing such Buyer that it is entitled to
receive an Offer Notice (as defined below) with respect to such Subsequent Placement upon its written request. Upon the written
request of a Buyer within two (2) Trading Days after the Company’s delivery to such Buyer of such Pre-Notice, and only upon
a written request by such Buyer, the Company shall promptly, but no later than one (1) Trading Day after such request, deliver
to such Buyer an irrevocable written notice (the “Offer Notice”) of any proposed or intended issuance or sale
or exchange (the “Offer”) of the securities being offered (the “Offered Securities”) in a
Subsequent Placement, which Offer Notice shall (w) identify and describe the Offered Securities, (x) describe the price and other
terms upon which they are to be issued, sold or exchanged, and the number or amount of the Offered Securities to be issued, sold
or exchanged, (y) identify the Persons (if known) to which or with which the Offered Securities are to be offered, issued, sold
or exchanged and (z) offer to issue and sell to or exchange with such Buyer in accordance with the terms of the Offer such Buyer’s
pro rata portion of 30% of the Offered Securities, provided that the number of Offered Securities which such Buyer shall have the
right to subscribe for under this Section 4(o) shall be (a) based on such Buyer’s pro rata portion of the aggregate
original principal amount of the Notes purchased hereunder by all Buyers (the “Basic Amount”), and (b) with
respect to each Buyer that elects to purchase its Basic Amount, any additional portion of the Offered Securities attributable to
the Basic Amounts of other Buyers as such Buyer shall indicate it will purchase or acquire should the other Buyers subscribe for
less than their Basic Amounts (the “Undersubscription Amount”).


 




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


 


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


 


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


 




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(v)         Upon
the closing of the issuance, sale or exchange of all or less than all of the Refused Securities, such Buyer shall acquire from
the Company, and the Company shall issue to such Buyer, the number or amount of Offered Securities specified in its Notice of Acceptance.
The purchase by such Buyer of any Offered Securities is subject in all cases to the preparation, execution and delivery by the
Company and such Buyer of a separate purchase agreement relating to such Offered Securities reasonably satisfactory in form and
substance to such Buyer and its counsel.


 


(vi)        Any
Offered Securities not acquired by a Buyer or other Persons in accordance with this Section 4(o) may not be issued, sold or
exchanged until they are again offered to such Buyer under the procedures specified in this Agreement.


 


(vii)       The
Company and each Buyer agree that if any Buyer elects to participate in the Offer, neither the Subsequent Placement Agreement with
respect to such Offer nor any other transaction documents related thereto (collectively, the “Subsequent Placement Documents”)
shall include any term or provision whereby such Buyer shall be required to agree to any restrictions on trading as to any securities
of the Company or be required to consent to any amendment to or termination of, or grant any waiver, release or the like under
or in connection with, any agreement previously entered into with the Company or any instrument received from the Company.


 


(viii)      Notwithstanding
anything to the contrary in this Section 4(o) and unless otherwise agreed to by such Buyer, the Company shall either confirm in
writing to such Buyer that the transaction with respect to the Subsequent Placement has been abandoned or shall publicly disclose
its intention to issue the Offered Securities, in either case, in such a manner such that such Buyer will not be in possession
of any material, non-public information, by the fifth (5th) Business Day following delivery of the Offer Notice. If
by such fifth (5th) Business Day, no public disclosure regarding a transaction with respect to the Offered Securities
has been made, and no notice regarding the abandonment of such transaction has been received by such Buyer, such transaction shall
be deemed to have been abandoned and such Buyer shall not be in possession of any material, non-public information with respect
to the Company or any of its Subsidiaries. Should the Company decide to pursue such transaction with respect to the Offered Securities,
the Company shall provide such Buyer with another Offer Notice and such Buyer will again have the right of participation set forth
in this Section 4(o). The Company shall not be permitted to deliver more than one such Offer Notice to such Buyer in any thirty
(30) day period, except as expressly contemplated by the last sentence of Section 4(o)(ii).


 


(ix)         The
restrictions contained in this Section 4(o) shall not apply in connection with the issuance of (I) any Excluded Securities, (II)
the issuance of the Subordinated Notes or the Subordinated Warrants as contemplated by the Subordinated Note Purchase Agreement
or (III) any shares of Common Stock issued or issuable in connection with strategic or commercial alliances, acquisitions, mergers,
and strategic partnerships, provided, that (x) the primary purpose of such issuance is not to raise capital as determined in good
faith by the board of directors of the Company, (y) the purchaser or acquirer of the securities in such issuance solely consists
of either (A) the actual participants in such strategic or commercial alliance or strategic or commercial partnership, (B) the
actual owners of such assets or securities acquired in such acquisition or merger or (C) the stockholders, partners or members
of the foregoing Persons and (z) the number or amount of securities issued to such Persons by the Company shall not be disproportionate
to each such Person’s actual participation in such strategic or commercial alliance or strategic or commercial partnership
or ownership of such assets or securities to be acquired by the Company, as applicable. The Company shall not circumvent the provisions
of this Section 4(o) by providing terms or conditions to one Buyer that are not provided to all.


 




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(p)          Passive
Foreign Investment Company. The Company shall conduct its business in such a manner as will ensure that the Company will
not be deemed to constitute a passive foreign investment company within the meaning of Section 1297 of the U.S. Internal Revenue
Code of 1986, as amended.


 


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


 


(r)           Corporate
Existence. So long as any Buyer beneficially owns any Notes or Warrants, the Company shall not be party to any
Fundamental Transaction (as defined in the Notes) unless the Company is in compliance with the applicable provisions
governing Fundamental Transactions set forth in the Notes and the Warrants.


 


(s)          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 Notes set forth the totality of the procedures required of the Buyers in order to exercise the
Warrants or convert the Notes. Except as provided in Section 5(d), no additional legal opinion, other information or
instructions shall be required of the Buyers to exercise their Warrants or convert their Notes. The Company shall honor
exercises of the Warrants and conversions of the Notes and shall deliver the Conversion Shares, Interest Shares and Warrant
Shares in accordance with the terms, conditions and time periods set forth in the Notes and Warrants.


 


(t)           Trading
in Common Stock.


 


(i)          Each
Buyer hereby agrees, severally and not jointly, for so long as such Buyer owns any Notes, such Buyer shall not (x) maintain a Net
Short Position (as defined below) or (y) together with any of its affiliate Buyers, sell shares of Common Stock of the Company
received by such Buyer pursuant to a Company Conversion (as defined in the Notes) during any Trading Day in an amount, in the aggregate,
exceeding 15% of the composite aggregate share trading volume as reported on Bloomberg (as defined in the Warrant) of the Common
Stock measured at the time of each sale of securities during such Trading Day.


 




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(ii)         For
purposes hereof, a "Net Short Position" by a person means a position whereby such person has executed one or more
sales of Common Stock that is marked as a short sale (but not including any sale marked “short exempt”) and that is
executed at a time when such Buyer has no equivalent offsetting long position in the Common Stock (or is deemed to have a long
position hereunder or otherwise in accordance with Regulation SHO of the 1934 Act). For purposes of determining whether a Buyer
has an equivalent offsetting long position in the Common Stock, all Common Stock (A) that is owned by such Buyer, (B) that may
be issued as Interest Shares pursuant to the terms of the Notes issuable to such Buyer on the Closing Date or, after the Closing
Date, then held by such Buyer or (C) that would be issuable upon conversion or exercise in full of all Securities issuable to such
Buyer on the Closing Date or, after the Closing Date, then held by such Buyer (assuming that such Securities were then fully convertible
or exercisable, notwithstanding any provisions to the contrary, and giving effect to any conversion or exercise price adjustments
that would take effect given only the passage of time) shall be deemed to be held long by such Buyer.


 


(u)          Stockholder
Approval. The Company shall provide each stockholder entitled to vote at either (x) the next annual meeting of
stockholders of the Company or (y) a special meeting of stockholders of the Company (the “Stockholder
Meeting”), which shall be promptly called and held not later than September 30, 2013 (the “Stockholder
Meeting Deadline”), a proxy statement, substantially in a form which shall have been previously reviewed by
Greenberg Traurig LLP, at the expense of the Company but in any event such expense not to exceed $5,000 without the prior
written approval of the Company; soliciting each such stockholder's affirmative vote at the Stockholder Meeting for approval
of resolutions (“Stockholder Resolutions”) providing for the Company's increase the authorized shares of
Common Stock of the Company from 200,000,000 to at least 300,000,000 (such affirmative approval being referred to herein as
the “Stockholder Approval”, and the date such Stockholder Approval is obtained, the “Stockholder
Approval Date”), and the Company shall use its reasonable best efforts to solicit its stockholders' approval of
such resolutions and to cause the Board of Directors of the Company to recommend to the stockholders that they approve such
resolutions. The Company shall be obligated to seek to obtain the Stockholder Approval by the Stockholder Meeting Deadline.
If, despite the Company's reasonable best efforts the Stockholder Approval is not obtained on or prior to the Stockholder
Meeting Deadline, the Company shall cause an additional Stockholder Meeting to be held once in each of the three subsequent
calendar quarters thereafter until such Stockholder Approval is obtained. If, despite the Company's reasonable best efforts
the Stockholder Approval is not obtained after such subsequent stockholder meetings, the Company shall cause an
additional Stockholder Meeting to be held semi-annually thereafter until such Stockholder Approval is obtained.


 


(v)          Closing
Documents. On or prior to fourteen (14) calendar days after the Closing Date, the Company agrees to deliver, or cause to
be delivered, to each Buyer and Greenberg Traurig, LLP executed copies of the Transaction Documents, Securities and other document
required to be delivered to any party pursuant to Section 7 hereof.


 




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5.          REGISTER;
TRANSFER AGENT INSTRUCTIONS; LEGEND.


 


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


 


(b)          Transfer
Agent Instructions. The Company shall issue irrevocable instructions to its transfer agent and any subsequent transfer
agent in a form acceptable to each of the Buyers (the “Irrevocable Transfer Agent Instructions”) to issue
certificates or credit shares to the applicable balance accounts at The Depository Trust Company (“DTC”),
registered in the name of each Buyer or its respective nominee(s), for the Conversion Shares, the Interest Shares and the
Warrant Shares in such amounts as specified from time to time by each Buyer to the Company upon conversion of the Notes or
the exercise of the Warrants (as the case may be). The Company represents and warrants that no instruction other than the
Irrevocable Transfer Agent Instructions referred to in this Section 5(b), and stop transfer instructions to give effect
to Section 2(g) hereof, will be given by the Company to its transfer agent with respect to the Securities, and that the
Securities shall otherwise be freely transferable on the books and records of the Company, as applicable, to the extent
provided in this Agreement and the other Transaction Documents. If a Buyer effects a sale, assignment or transfer of the
Securities in accordance with Section 2(g), the Company shall permit the transfer and shall promptly instruct its transfer
agent to issue one or more certificates or credit shares to the applicable balance accounts at DTC in such name and in such
denominations as specified by such Buyer to effect such sale, transfer or assignment. In the event that such sale, assignment
or transfer involves Conversion Shares, the Interest Shares or Warrant Shares sold, assigned or transferred pursuant to an
effective registration statement or in compliance with Rule 144, the transfer agent shall issue such shares to such Buyer,
assignee or transferee (as the case may be) without any restrictive legend in accordance with Section 5(d) below. The
Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to a Buyer.
Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Section 5(b)
will be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this
Section 5(b), that a Buyer shall be entitled, in addition to all other available remedies, to an order and/or injunction
restraining any breach and requiring immediate issuance and transfer, without the necessity of showing economic loss and
without any bond or other security being required. The Company shall cause its counsel to issue the legal opinion referred to
in the Irrevocable Transfer Agent Instructions to the Company’s transfer agent on each Effective Date (as defined in
the Registration Rights Agreement). Any fees (with respect to the transfer agent, counsel to the Company or otherwise)
associated with the issuance of such opinion or the removal of any legends on any of the Securities shall be borne by the
Company.


 


(c)          Legends.
Each Buyer understands that the Securities have been issued (or will be issued in the case of the Conversion Shares, the
Interest Shares and the Warrant Shares) pursuant to an exemption from registration or qualification under the 1933 Act and
applicable state securities laws, and except as set forth below, the Securities shall bear any legend as required by the
“blue sky” laws of any state and a restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of such stock certificates):


 




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


 


(d)          Removal
of Legends. Certificates evidencing Securities shall not be required to contain the legend set forth in Section 5(c)
above or any other legend (i) while a registration statement (including a Registration Statement) covering the resale of such
Securities is effective under the 1933 Act, (ii) following any sale of such Securities pursuant to Rule 144 (assuming the
transferor is not an affiliate of the Company), (iii) if such Securities are eligible to be sold, assigned or transferred
under Rule 144 (provided that a Buyer provides the Company with reasonable assurances that such Securities are eligible for
sale, assignment or transfer under Rule 144 which shall not include an opinion of Buyer’s counsel), (iv) in connection
with a sale, assignment or other transfer (other than under Rule 144), provided that such Buyer provides the Company with an
opinion of counsel to such Buyer, in a generally acceptable form, to the effect that such sale, assignment or transfer of the
Securities may be made without registration under the applicable requirements of the 1933 Act or (v) if such legend is not
required under applicable requirements of the 1933 Act (including, without limitation, controlling judicial interpretations
and pronouncements issued by the SEC). If a legend is not required pursuant to the foregoing, the Company shall no later than
two (2) Trading Days following the delivery by a Buyer to the Company or the transfer agent (with notice to the Company) of a
legended certificate representing such Securities (endorsed or with stock powers attached, signatures guaranteed, and
otherwise in form necessary to affect the reissuance and/or transfer, if applicable), together with any other deliveries from
such Buyer as may be required above in this Section 5(d), as directed by such Buyer, either: (A) provided that the
Company’s transfer agent is participating in the DTC Fast Automated Securities Transfer Program and such Securities are
Conversion Shares, Interest Shares or Warrant Shares, credit the aggregate number of shares of Common Stock to which such
Buyer shall be entitled to such Buyer’s or its designee’s balance account with DTC through its Deposit/Withdrawal
at Custodian system or (B) if the Company’s transfer agent is not participating in the DTC Fast Automated Securities
Transfer Program, issue and deliver (via reputable overnight courier) to such Buyer, a certificate representing such
Securities that is free from all restrictive and other legends, registered in the name of such Buyer or its designee (the
date by which such credit is so required to be made to the balance account of such Buyer’s or such
Buyer’s nominee with DTC or such certificate is required to be delivered to such Buyer pursuant to the foregoing is
referred to herein as the “Required Delivery Date”). The Company shall be responsible for any transfer
agent fees or DTC fees with respect to any issuance of Securities or the removal of any legends with respect to any
Securities in accordance herewith.


 




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(e)          Failure
to Timely Deliver; Buy-In. If the Company fails to (i) issue and deliver (or cause to be delivered) to a Buyer by the
Required Delivery Date a certificate representing the Securities so delivered to the Company by such Buyer that is free from
all restrictive and other legends or (ii) credit the balance account of such Buyer’s or such Buyer’s nominee with
DTC for such number of Conversion Shares or Warrant Shares so delivered to the Company, then, in addition to all other
remedies available to such Buyer, the Company shall pay in cash to such Buyer on each day after the Required Delivery Date
that the issuance or credit of such shares is not timely effected an amount equal to 1% per month of the original principal
amount of such Buyer’s Note. In addition to the foregoing, if the Company fails to so properly deliver such unlegended
certificates or so properly credit the balance account of such Buyer’s or such Buyer’s nominee with DTC by the
Required Delivery Date, and if on or after the Required Delivery Date such Buyer purchases (in an open market transaction or
otherwise) shares of Common Stock to deliver in satisfaction of a sale by such Buyer of all or any portion of the number of
shares of Common Stock, or a sale of a number of shares of Common Stock equal to all or any portion of the number of shares
of Common Stock that such Buyer anticipated receiving from the Company without any restrictive legend, then, in addition to
all other remedies available to such Buyer, the Company shall, within three (3) Trading Days after such Buyer’s request
and in such Buyer’s sole discretion, either (i) pay cash to such Buyer in an amount equal to such Buyer’s total
purchase price (including brokerage commissions and other out-of-pocket expenses, if any) for the shares of Common Stock so
purchased (including brokerage commissions and other out-of-pocket expenses, if any) (the “Buy-In Price”),
at which point the Company’s obligation to so deliver such certificate or credit such Buyer’s balance account
shall terminate and such shares shall be cancelled, or (ii) promptly honor its obligation to so deliver to such Buyer a
certificate or certificates or credit such Buyer’s DTC account representing such number of shares of Common Stock that
would have been so delivered if the Company timely complied with its obligations hereunder and pay cash to such Buyer in an
amount equal to the excess (if any) of the Buy-In Price over the product of (A) such number of shares of Conversion Shares or
Warrant Shares (as the case may be) that the Company was required to deliver to such Buyer by the Required Delivery Date
multiplied by (B) the lowest Closing Sale Price (as defined in the Warrants) of the Common Stock on any Trading Day during
the period commencing on the date of the delivery by such Buyer to the Company of the applicable Conversion Shares or Warrant
Shares (as the case may be) and ending on the date of such delivery and payment under this clause (ii).


 


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


 


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


 




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


 


(ii)         Such
Buyer and each other Buyer shall have delivered to the Purchase Price (less, in the case of any Buyer, the amounts withheld pursuant
to Section 4(g)) for the Note and the related Warrants being purchased by such Buyer at the Closing by wire transfer of immediately
available funds in accordance with the Flow of Funds Letter.


 


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


 


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


 


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


 


(i)          The
Company and each Subsidiary (as the case may be) shall have duly executed and delivered to such Buyer each of the Transaction Documents
to which it is a party and the Company shall have duly executed and delivered to such Buyer a Note (in such original principal
amount as is set forth across from such Buyer’s name in column (3) of the Schedule of Buyers) together with the related Warrants
(initially for such aggregate number of shares of Warrant Shares as is set forth across from such Buyer’s name in column
(4) of the Schedule of Buyers, respectively) being purchased by such Buyer at the Closing pursuant to this Agreement.


 


(ii)         Such
Buyer shall have received the opinion of Jolie Kahn, Esq., the Company’s counsel, dated as of the Closing Date, in the form
acceptable to such Buyer.


 


(iii)        The
Company shall have delivered to such Buyer a copy of the Irrevocable Transfer Agent Instructions, in the form acceptable to such
Buyer, which instructions shall have been delivered to and acknowledged in writing by the Company’s transfer agent.


 


(iv)        The
Company shall have delivered to such Buyer a certificate evidencing the formation and good standing of the Company in such entity’s
jurisdiction of formation issued by the Secretary of State (or comparable office) of such jurisdiction of formation as of a date
within ten (10) days of the Closing Date.


 




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


 


(vi)        The
Company shall have delivered to such Buyer a certified copy of the Certificate of Incorporation as certified by the Delaware Secretary
of State within ten (10) days of the Closing Date.


 


(vii)       Each
Subsidiary shall have delivered to such Buyer a certified copy of its certificate of incorporation as certified by the Secretary
of State (or comparable office) of such Subsidiary’s jurisdiction of incorporation within ten (10) days of the Closing Date.


 


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


 


(ix)         Each
and every representation and warranty of the Company shall be true and correct as of the date when made and as of the Closing Date
as though originally made at that time (except for representations and warranties that speak as of a specific date, which shall
be true and correct as of such specific date) and the Company shall have performed, satisfied and complied in all respects with
the covenants, agreements and conditions required to be performed, satisfied or complied with by the Company at or prior to the
Closing Date. Such Buyer shall have received a certificate, duly executed by the Chief Executive Officer of the Company, dated
as of the Closing Date, to the foregoing effect and as to such other matters as may be reasonably requested by such Buyer in the
form acceptable to such Buyer.


 


(x)          The
Company shall have delivered to such Buyer a letter from the Company’s transfer agent certifying the number of shares of
Common Stock outstanding on the Closing Date immediately prior to the Closing.


 


(xi)         The
Common Stock (I) shall be designated for quotation or listed (as applicable) on the Principal Market and (II) shall not have been
suspended, as of the Closing Date, by the SEC or the Principal Market from trading on the Principal Market nor shall suspension
by the SEC or the Principal Market have been threatened, as of the Closing Date, either (A) in writing by the SEC or the Principal
Market or (B) by falling below the minimum maintenance requirements of the Principal Market.


 


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


 


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


 




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


 


(xv)       Each
Account Control Bank (as defined in the Notes) and the Company shall have duly executed and delivered to such Buyer the Account
Control Agreements with respect to the Master Restricted Accounts (as defined in the Notes).


 


(xvi)      The
Company shall have completed, duly executed and delivered to Capital Ventures the FCPA questionnaire in a form acceptable to Capital
Ventures.


 


(xvii)     The
Company shall have consummated the transactions contemplated by that certain securities purchase agreement in the form attached
hereto as Exhibit E (the “Subordinated Note Purchase Agreement”), pursuant to which certain existing
stockholders and affiliates of the Company (the “Subordinated Creditors”) shall concurrently herewith purchase
(i) $1 million in aggregate principal amount of subordinated convertible notes (the “Subordinated Notes”) and
certain warrants to purchase Common Stock (the “Subordinated Warrants”) from the Company for an aggregate purchase
price, in cash, of $1 million.


 


(xviii)    The
Company, each of the Subordinated Creditors and each other Buyer shall have executed and delivered to such Buyer the Subordination
Agreement, in the form attached hereto as Exhibit F (the “Subordination Agreement”)


 


(xix)       Such
Buyer shall have received a letter on the letterhead of the Company, duly executed by the Chief Executive Officer of the Company,
setting forth the wire amounts of each Buyer and the wire transfer instructions of the Company and, with respect to the portion
of the Purchase Price set forth in column (6) of the Schedule of Buyers, the wire instructions of the Control Account Bank with
respect to the Master Restricted Account (the “Flow of Funds Letter”).


 


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


 


8.          TERMINATION.


 


In the event that the
Closing shall not have occurred with respect to a Buyer within five (5) days of the date hereof, then such Buyer shall have the
right to terminate its obligations under this Agreement with respect to itself at any time on or after the close of business on
such date without liability of such Buyer to any other party; provided, however, (i) the right to terminate this Agreement under
this Section 8 shall not be available to such Buyer if the failure of the transactions contemplated by this Agreement to have
been consummated by such date is the result of such Buyer’s breach of this Agreement and (ii) the abandonment of the sale
and purchase of the Notes and the Warrants shall be applicable only to such Buyer providing such written notice, provided further
that no such termination shall affect any obligation of the Company under this Agreement to reimburse such Buyer for the expenses
described in Section 4(g) above. Nothing contained in this Section 8 shall be deemed to release any party from any liability
for any breach by such party of the terms and provisions of this Agreement or the other Transaction Documents or to impair the
right of any party to compel specific performance by any other party of its obligations under this Agreement or the other Transaction
Documents.


 




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9.          MISCELLANEOUS.


 


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


 


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


 


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


 




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


 




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(e)          Entire
Agreement; Amendments. This Agreement, the other Transaction Documents and the schedules and exhibits attached hereto and
thereto and the instruments referenced herein and therein supersede all other prior oral or written agreements between the
Buyers, the Company, its Subsidiaries, their affiliates and Persons acting on their behalf solely with respect to the matters
contained herein and therein, and this Agreement, the other Transaction Documents, the schedules and exhibits attached hereto
and thereto and the instruments referenced herein and therein contain the entire understanding of the parties solely with
respect to the matters covered herein and therein; provided, however, nothing contained in this Agreement or any other
Transaction Document shall (or shall be deemed to) (i) have any effect on any agreements any Buyer has entered into with, or
any instruments any Buyer has received from, the Company or any of its Subsidiaries prior to the date hereof with respect to
any prior investment made by such Buyer in the Company or (ii) waive, alter, modify or amend in any respect any obligations
of the Company or any of its Subsidiaries, or any rights of or benefits to any Buyer or any other Person, in any agreement
entered into prior to the date hereof between or among the Company and/or any of its Subsidiaries and any Buyer, or any
instruments any Buyer received from the Company and/or any of its Subsidiaries prior to the date hereof, and all such
agreements and instruments shall continue in full force and effect. Except as specifically set forth herein or therein,
neither the Company nor any Buyer makes any representation, warranty, covenant or undertaking with respect to such matters.
For clarification purposes, the Recitals are part of this Agreement. No provision of this Agreement may be amended other than
by an instrument in writing signed by the Company and the Required Holders (as defined below), and any amendment to any
provision of this Agreement made in conformity with the provisions of this Section 9(e) shall be binding on all Buyers
and holders of Securities, as applicable, provided that no such amendment shall be effective to the extent that it (1)
applies to less than all of the holders of the Securities then outstanding or (2) imposes any obligation or liability on any
Buyer without such Buyer’s prior written consent (which may be granted or withheld in such Buyer’s sole
discretion). No consideration shall be offered or paid to any Person to amend or consent to a waiver or modification of
any provision of any of the Transaction Documents unless the same consideration also is offered pro rata to all of the
holders of Notes with Restricted Principal (as defined in the Notes) then outstanding, if any. No waiver shall be effective
unless it is in writing and signed by an authorized representative of the waiving party, provided that the Required Holders
may waive any provision of this Agreement, and any waiver of any provision of this Agreement made in conformity with the
provisions of this Section 9(e) shall be binding on all Buyers and holders of Securities, as applicable, provided that
no such waiver shall be effective to the extent that it (1) applies to less than all of the holders of the Securities then
outstanding (unless a party gives a waiver as to itself only) or (2) imposes any obligation or liability on any Buyer without
such Buyer’s prior written consent (which may be granted or withheld in such Buyer’s sole discretion). The
Company has not, directly or indirectly, made any agreements with any Buyers relating to the terms or conditions of the
transactions contemplated by the Transaction Documents except as set forth in the Transaction Documents. Without limiting the
foregoing, the Company confirms that, except as set forth in this Agreement, no Buyer has made any commitment or promise or
has any other obligation to provide any financing to the Company, any Subsidiary or otherwise. As a material inducement for
each Buyer to enter into this Agreement, the Company expressly acknowledges and agrees that (i) no due diligence or other
investigation or inquiry conducted by a Buyer, any of its advisors or any of its representatives shall affect such
Buyer’s right to rely on, or shall modify or qualify in any manner or be an exception to any of, the
Company’s representations and warranties contained in this Agreement or any other Transaction Document and (ii) unless
a provision of this Agreement or any other Transaction Document is expressly preceded by the phrase “except as
disclosed in the SEC Documents,” nothing contained in any of the SEC Documents shall affect such Buyer’s right to
rely on, or shall modify or qualify in any manner or be an exception to any of, the Company’s representations and
warranties contained in this Agreement or any other Transaction Document. “Required Holders” means (i)
prior to the Closing Date, each Buyer entitled to purchase Notes at the Closing and (ii) on or after the Closing Date,
holders of a majority of the Registrable Securities as of such time (excluding any Registrable Securities held by the Company
or any of its Subsidiaries as of such time) issued or issuable hereunder or pursuant to the Notes and/or the Warrants (or the
Buyers, with respect to any waiver or amendment of Section 4(o)); provided, that such majority must include each holder of at
least $500,000 in aggregate principal amount of Notes.


 




    	40



    	 



    

 


(f)           Notices.
Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Agreement
must be in writing and will be deemed to have been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt,
when sent by facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by
the sending party); or (iii) one (1) Business Day after deposit with an overnight courier service with next day delivery
specified, in each case, properly addressed to the party to receive the same. The addresses and facsimile numbers for such
communications shall be:


 


If to the Company:


 


3601 Clover Lane

New Castle, Pennsylvania 16105

Telephone: (724)654-9300

Facsimile: (724) 654-1781

Attention: Chief Executive Officer and Chief Financial Officer


 


With a copy (for informational purposes only) to:


 


Jolie Kahn, Esq.


2 Liberty Place, Suite 3401


Philadelphia, PA 19103 


Telephone: (215)375-6646

Facsimile: 866-705-3071




 


If to the Transfer Agent:


 


Continental Stock Transfer & Trust Company

17 Battery Place

8th Floor

New York, NY 10004

Telephone: (212) 845-3217

Facsimile: (212) 616-7616

Attention: Michael G. Mullings


 


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


 


with a copy (for informational purposes only) to:


 


Greenberg Traurig, LLP

MetLife Building

200 Park Avenue

New York, NY 10166

Telephone: (212) 801-9200

Facsimile: (212) 805-9222

Attention: Michael A. Adelstein, Esq.


 




    	41



    	 



    

 


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


 


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


 


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


 


(i)           Survival.
The representations, warranties, agreements and covenants shall survive the Closing. Each Buyer shall be responsible only
for its own representations, warranties, agreements and covenants hereunder.


 


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


 




    	42



    	 



    

 


(k)          Indemnification.
In consideration of each Buyer’s execution and delivery of the Transaction Documents and acquiring the Securities
thereunder and in addition to all of the Company’s other obligations under the Transaction Documents, the Company shall
defend, protect, indemnify and hold harmless each Buyer and each holder of any Securities and all of their stockholders,
partners, members, officers, directors, employees and direct or indirect investors and any of the foregoing Persons’
agents or other representatives (including, without limitation, those retained in connection with the transactions
contemplated by this Agreement) (collectively, the “Indemnitees”) from and against any and all actions,
causes of action, suits, claims, losses, costs, penalties, fees, liabilities and damages, and expenses in connection
therewith (irrespective of whether any such Indemnitee is a party to the action for which indemnification hereunder is
sought), and including reasonable attorneys’ fees and disbursements (the “Indemnified Liabilities”),
incurred by any Indemnitee as a result of, or arising out of, or relating to (a) any material misrepresentation or breach of
any representation or warranty made by the Company or any Subsidiary in any of the Transaction Documents, (b) any breach of
any covenant, agreement or obligation of the Company or any Subsidiary contained in any of the Transaction Documents or (c)
any cause of action, suit, proceeding or claim brought or made against such Indemnitee by a third party (including for these
purposes a derivative action brought on behalf of the Company or any Subsidiary) or which otherwise involves such Indemnitee
that arises out of or results from (i) the execution, delivery, performance or enforcement of any of the Transaction
Documents, (ii) any transaction financed or to be financed in whole or in part, directly or indirectly, with the proceeds of
the issuance of the Securities, (iii) any disclosure properly made by such Buyer pursuant to Section 4(i), or (iv) the
status of such Buyer or holder of the Securities either as an investor in the Company pursuant to the transactions
contemplated by the Transaction Documents or as a party to this Agreement (including, without limitation, as a party in
interest or otherwise in any action or proceeding for injunctive or other equitable relief). To the extent that the foregoing
undertaking by the Company may be unenforceable for any reason, the Company shall make the maximum contribution to the
payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law. Except as
otherwise set forth herein, the mechanics and procedures with respect to the rights and obligations under this
Section 9(k) shall be the same as those set forth in Section 6 of the Registration Rights Agreement.


 


(l)           Construction.
The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent,
and no rules of strict construction will be applied against any party. No specific representation or warranty shall limit the
generality or applicability of a more general representation or warranty. Each and every reference to share prices, shares of
Common Stock and any other numbers in this Agreement that relate to the Common Stock shall be automatically adjusted for any
stock splits, stock dividends, stock combinations, recapitalizations or other similar transactions that occur with respect to
the Common Stock after the date of this Agreement


 


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


 




    	43



    	 



    

 


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


 


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


 


(p)          Judgment
Currency.


 


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


 


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


 


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


 




    	44



    	 



    

 


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


 


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


 


(q)          Independent
Nature of Buyers’ Obligations and Rights. The obligations of each Buyer under the Transaction Documents are
several and not joint with the obligations of any other Buyer, and no Buyer shall be responsible in any way for the
performance of the obligations of any other Buyer under any Transaction Document. Nothing contained herein or in any other
Transaction Document, and no action taken by any Buyer pursuant hereto or thereto, shall be deemed to constitute the Buyers
as, and the Company acknowledges that the Buyers do not so constitute, a partnership, an association, a joint venture or any
other kind of group or entity, or create a presumption that the Buyers are in any way acting in concert or as a group or
entity with respect to such obligations or the transactions contemplated by the Transaction Documents or any matters, and the
Company acknowledges that the Buyers are not acting in concert or as a group, and the Company shall not assert any such
claim, with respect to such obligations or the transactions contemplated by the Transaction Documents. The decision of each
Buyer to purchase Securities pursuant to the Transaction Documents has been made by such Buyer independently of any other
Buyer. Each Buyer acknowledges that no other Buyer has acted as agent for such Buyer in connection with such Buyer making its
investment hereunder and that no other Buyer will be acting as agent of such Buyer in connection with monitoring such
Buyer’s investment in the Securities or enforcing its rights under the Transaction Documents. The Company and each
Buyer confirms that each Buyer has independently participated with the Company and its Subsidiaries in the negotiation of the
transaction contemplated hereby with the advice of its own counsel and advisors. Each Buyer shall be entitled to
independently protect and enforce its rights, including, without limitation, the rights arising out of this Agreement or out
of any other Transaction Documents, and it shall not be necessary for any other Buyer to be joined as an additional party in
any proceeding for such purpose. The use of a single agreement to effectuate the purchase and sale of the Securities
contemplated hereby was solely in the control of the Company, not the action or decision of any Buyer, and was done solely
for the convenience of the Company and its Subsidiaries and not because it was required or requested to do so by any Buyer.
It is expressly understood and agreed that each provision contained in this Agreement and in each other Transaction
Document is between the Company, each Subsidiary and a Buyer, solely, and not between the Company, its Subsidiaries and the
Buyers collectively and not between and among the Buyers.


 


[signature pages follow]


 




    	45



    	 



    

 


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


 


	 	COMPANY:
	 	 
	 	AXION POWER INTERNATIONAL, INC.
	 	 	 
	 	By:	/s/ Thomas Granville
	 	 	Name: Thomas Granville
	 	 	Title: CEO


 




    	 



    	 



    

 


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


 


	 	BUYER:
	 	 
	 	Capital Ventures International
	 	 	 
	 	By:	/s/ Martin Kobinger
	 	 	Name: Martin Kobinger
	 	 	Title:


 




    	 



    	 



    

 


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


 


	 	BUYER:
	 	 
	 	Empery Asset Master, Ltd
	 	By: Empery Asset Management, LP, its authorized agent
	 	By: Empery AM GP, LLC
	 	 	 
	 	By:	Ryan M. Lane
	 	 	Name: Ryan M. Lane
	 	 	Title: Managing Member


 




    	 



    	 



    

 


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


 


	 	BUYER:
	 	 
	 	Hartz Capital InvestmentS, LLC
	 	By: Empery Asset Management, LP, its authorized agent
	 	By: Empery AM GP, LLC
	 	 	 
	 	By:	/s/ Ryan M. Lane
	 	 	Name: Ryan M. Lane
	 	 	Title: Managing Member


 




    	 



    	 



    

 


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


 


	 	BUYER:
	 	 
	 	Hudson Bay Master Fund Ltd.
	 	 	 
	 	By:	/s/ George Antonopoulos
	 		Name: George Antonopoulos
	 	 	Title: 


 


 




    	 



    	 



    

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


 


	 	BUYER:
	 	 
	 	Parsoon Special Situation, Ltd
	 	 	 
	 	By:	/s/ Daniel H. Kochav
	 	 	Name: Daniel H. Kochav
	 	 	Title: Director


 




    	 



    	 



    

 


SCHEDULE
OF BUYERS


 


	(1)	 	(2)	 	(3)	 	 	(4)	 	 	(5)	 	 	(6)	 	 	 	(7)	 
	Buyer	 	Address
    and Facsimile Number	 	Original

    Principal

    Amount of

    Notes	 	 	Aggregate

    Number of

    Warrant

    Shares	 	 	Purchase

    Price	 	 	Wire

    Amount

    to Master

    Restricted

    Account	 	 	 	Legal
    Representative’s

    Address and Facsimile Number	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Capital
    Ventures International	 	c/o Heights Capital Management
 101
    California Street, Suite 3250
 San Francisco, CA 94111
 Attention: Martin Kobinger, 
 Investment Manager
 Facsimile:
    415-403-6525
 Telephone: 415-403-6500
 Residence: Cayman Islands	 	$	2,250,000	 	 	 	4,320,277	 	 	$	2,250,000	 	 	$	1,500,000	 	 	 	Greenberg Traurig, LLP
 MetLife Building

    200 Park Avenue
 New York, NY 10166
 Telephone:  (212) 801-9200
 Facsimile:  (212) 805-9222

    Attention:  Michael A. Adelstein, Esq.	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Empery Asset
    Master, Ltd	 	Attn: Empery Asset Management, LP
 1 Rockefeller
    Plaza, Suite 1205
 New York, NY 10020
 Attn: Martin Hoe and Ryan Lane
 Facsimile: 212-608-3307
 Residence: Cayman
    Islands	 	$	750,000	 	 	 	1,440,092	 	 	$	750,000	 	 	$	500,000	 	 	 	N/A	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Hartz Capital
    Investments, LLC	 	Attn: Empery Asset Management, LP
 1 Rockefeller
    Plaza, Suite 1205
 New York, NY 10020
 Attn: Martin Hoe and Ryan Lane
 Facsimile: 212-608-3307
 Residence: New
    Jersey	 	$	1,500,000	 	 	 	2,880,184	 	 	$	1,500,000	 	 	 	1,000,000	 	 	 	N/A	 



 




    	 



    	 



    

 


	Hudson
    Bay Master Fund Ltd.	 	777 Third Avenue, 30th Floor
 New York,
    NY 10017
 Attention: Yoav Roth
                  George
    Antonopolous
 Facsimile: 646-214-7946
 Residence: Cayman Islands	 	$	2,250,000	 	 	 	4,320,277	 	 	$	2,250,000	 	 	$	1,500,000	 	 	 	N/A	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Parsoon Special
    Situation, Ltd	 	c/o Tenor Capital Management
 1180 Avenue of Americas,
    Suite 1940
 New York, NY 10036
 Facsimile: (212) 918-5301
 Attn: Waqas Khatri, Ravi Patel
 Residence: Cayman Islands	 	$	2,250,000	 	 	 	4,320,277	 	 	$	2,250,000	 	 	$	1,500,000	 	 	 	N/A