EXECUTION VERSION




 


CONVERTIBLE NOTE PURCHASE AGREEMENT


 


This Convertible Note
Purchase Agreement (this “Agreement”) is dated as of March 13, 2012, by and among ECOtality, Inc., a Nevada
corporation (the “Company”), and ABB Technology Ventures Ltd (the “Investor”).


 


WHEREAS, the Company
has authorized the issuance of an Unsecured Convertible Note in the aggregate principal amount of $5,000,000, in the form attached
hereto as Exhibit A (the “Note”), which Note shall be convertible into shares of the Company’s
common stock, par value $0.001 per share (the “Common Stock”), in accordance with the terms of the Note; and


 


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


 


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


 


ARTICLE
1. 


DEFINITIONS


 


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


 


“Action”
means any action, suit, inquiry, notice of violation, proceeding (including any partial proceeding such as a deposition) or investigation
pending or threatened in writing against or affecting the Company, any Subsidiary or any of their respective properties before
or by any court, arbitrator, governmental or administrative agency, regulatory authority (federal, state, county, local or foreign),
stock market, stock exchange or trading facility.


 


“Affiliate”
means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common
control with a Person, as such terms are used in and construed under Rule 144.


 


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


 


“Closing”
means the closing of the purchase and sale of the Securities pursuant to Article 2.


 


“Closing Date”
means the third Business Day immediately after the date on which all of the conditions set forth in Sections 5.1 and 5.2
hereof (other than those that are satisfied at the Closing itself) have been satisfied or, if permissible, waived, or such other
date as the parties may agree.


 



    	 



    	 



    

 


“Commission”
means the U.S. Securities and Exchange Commission.


 


“Common Stock”
has the meaning set forth in the Recitals hereto.


 


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


 


“Company Counsel”
means Farella Braun + Martel LLP.


 


“Company Deliverables”
has the meaning set forth in Section 2.2(a).


 


“Confidential
Information” means trade secrets, confidential information and proprietary know how (including ideas, formulae, compositions,
processes, procedures and techniques, research and development information, computer program code, performance specifications,
support documentation, drawings, specifications, designs, business and marketing plans, pricing and cost information, and customer
and supplier lists and related information).


 


“Confidentiality
Agreement” means that certain Mutual Nondisclosure and Confidentiality Agreement, dated as of August 4, 2010, by and
between the Company and the Investor.


 


“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.


 


“Conversion
Price” the “Conversion Price,” as used in the Note, shall be $1.27.


 


“Conversion
Shares” means, collectively, the shares of Common Stock that are issuable upon conversion of the Note in accordance with
its terms.


 


“Disclosure
Materials” has the meaning set forth in Section 3.1(h).


 


“Effective Date”
means the date that the Registration Statement required by Section 2(a) of the Registration Rights Agreement is first declared
effective by the Commission.


 


“Environmental
Laws” means all Laws, now or hereafter in effect and as amended, relating to the Environment, health, safety, natural
resources or Hazardous Materials, including CERCLA; the Resource Conservation and Recovery Act, 42 U.S.C. §§ 6901 et
seq.; the Hazardous Materials Transportation Act, 49 U.S.C. §§ 6901 et seq.; the Clean Water Act, 33 U.S.C. §§
1251 et seq.; the Toxic Substances Control Act, 15 U.S.C. §§ 2601 et seq.; the Clean Air Act, 42 U.S.C. §§
7401 et seq.; the Safe Drinking Water Act, 42 U.S.C. §§ 300f et seq.; the Atomic Energy Act, 42 U.S.C. §§ 2011
et seq.; the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. §§ 136 et seq.; and the Federal Food, Drug
and Cosmetic Act, 21 U.S.C. §§ 301 et seq.


 



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“Evaluation
Date” has the meaning set forth in Section 3.1(v).


 


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


 


“GAAP”
means U.S. generally accepted accounting principles, consistently applied.


 


“Government
Assistance Agreement” means (a) any written grant or cooperative agreement, as set forth in 31 U.S.C. § 6301, et
seq., between two or more parties that includes the Company or any of its Subsidiaries on the one hand and a Governmental Authority
on the other; or (b) any agreement between the Company or any of its Subsidiaries on the one hand and a third party on the other
in support of the performance of a grant or cooperative agreement between that third party and a Governmental Authority.


 


“Government
Bid” means any quotation, bid or proposal by the Company or any of its Subsidiaries that, if accepted or awarded, would
result in a Government Contract.


 


“Government
Contract” means any written contract or agreement (other than a Government Assistance Agreement) that constitutes a binding
commitment between two or more parties that: (a) includes the Company or any of its Subsidiaries on the one hand and a Governmental
Authority on the other; or (b) is entered into by the Company or any of its Subsidiaries on the one hand and a third party on the
other in support of a contract between that third party and a Governmental Authority; for the design, manufacture or sale of products
or the provision of services by the Company, any of its Subsidiaries or such third party, or specifying the terms under which products
or services will ultimately be purchased by or reimbursed by or on behalf of a Governmental Authority in whole or in part.


 


“Governmental
Authority” means any domestic (federal, state, municipal or local) or foreign or multinational government or governmental,
regulatory, political, judicial or quasi judicial or administrative subdivision, department, authority, entity, agency, commission,
board, bureau, court, or instrumentality.


 


“Hazardous Materials”
means (i) petroleum and petroleum products, radioactive materials, asbestos-containing materials, urea formaldehyde foam insulation,
transformers or other equipment that contain polychlorinated biphenyls and radon gas and (ii) any other chemicals, materials or
substances defined as or included in the definition of “hazardous substances,” “hazardous wastes,” “hazardous
materials,” “extremely hazardous wastes,” “restricted hazardous wastes,” “toxic substances,”
“toxic pollutants,” “contaminants” or “pollutants,” or words of similar import, under any applicable
Environmental Law.


 



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“Indebtedness”
of any Person means: (i) all indebtedness for borrowed money; (ii) all obligations issued, undertaken or assumed as the
deferred purchase price of property or services (including, without limitation, “capital leases” in accordance with
GAAP) (other than trade payables entered into in the ordinary course of business); (iii) all reimbursement or payment obligations
with respect to letters of credit, surety bonds and other similar instruments; (iv) all obligations evidenced by notes, bonds,
debentures or similar instruments or bankers’ acceptances, including obligations so evidenced incurred in connection with
the acquisition of property, assets or businesses (or, without duplication, reimbursement agreements in respect thereof); (v) 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); (vi) all
monetary obligations under any leasing or similar arrangement which, under GAAP, consistently applied for the periods covered thereby,
would be classified as a capital lease; (vii) all indebtedness referred to in clauses (i) through (vi) above secured
by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien upon
any property or assets (including accounts and contract rights) owned by any Person; and (viii) all Contingent Obligations
in respect of indebtedness or obligations of others of the kinds referred to in clauses (i) through (vii) above.


 


“Intellectual
Property Rights” means all of the following in any jurisdiction throughout the world, and all corresponding rights, presently
or hereafter existing, whether arising by operation of law, contract, license or otherwise: (i) patents, industrial designs, patent
disclosures and inventions (whether or not patentable and whether or not reduced to practice); together with all improvements thereto,
and all reissues, continuations, continuations in part, revisions, divisionals, extensions, and reexaminations in connection with
any of the foregoing; (ii) trademarks, service marks, trade dress, trade names, corporate names, designs, logos, slogans, Internet
domain names, and all other indicia of origin, together with all goodwill associated with each of the foregoing (collectively,
“Marks”); (iii) all works of authorship (whether or not copyrightable), copyrights and copyrightable works,
mask works, database rights and moral rights; (iv) registrations, applications and renewals for any of the foregoing; (v) software
(including source code, executable code, systems, tools, firmware, data, data bases and documentation therefor); (vi) Confidential
Information; (vii) all other proprietary and intellectual property rights; and (viii) all copies and tangible embodiments or descriptions
of any of the foregoing (in whatever form or medium).


 


“Investment
Amount” means $5,000,000.


 


“Investor”
has the meaning set forth in the Recitals hereto.


 


“Investor Deliverables”
has the meaning set forth in Section 2.2(b).


 


“Investor Directors”
means any members of the Company’s Board of Directors that were nominated by the Investor.


 


“Investor Party”
has the meaning set forth in Section 4.6.


 


“Law”
means any federal, national, supranational, state, provincial, local or similar statute, law, ordinance, regulation, rule, code,
order, or rule of law (including common law) of any Governmental Authority, and any judicial or administrative interpretation thereof.


 



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“Lien”
means any lien, charge, mortgage, pledge, deed of trust, conditional sale or other title retention agreement, encumbrance, security
interest, right of first refusal or other restrictions of any kind.


 


“Losses”
has the meaning set forth in Section 4.6.


 


“Material Adverse
Effect” means any event, change, condition, development, circumstance, effect, factor or occurrence that (i) has a material
and adverse effect on the legality, validity or enforceability of any Transaction Document, (ii) has a material and adverse effect
on the operations, assets, prospects, business, liabilities or condition (financial or otherwise) of the Company and its Subsidiaries,
taken as a whole or (iii) materially and adversely impairs the ability of the Company to perform on a timely basis its obligations
under, or to consummate the transactions contemplated by, the Transaction Documents.


 


“Money Laundering
Laws” has the meaning set forth in Section 3.1(hh).


 


“New York Courts”
means the courts of the State of New York and the United States District Court for the Southern District of New York.


 


“Note”
has the meaning set forth in the Recitals hereto.


 


“OFAC”
has the meaning set forth in Section 3.1(gg).


 


“Outside Date”
means the sixtieth (60th) calendar day following the date of this Agreement; provided, that if such day should
fall on a day that is not a Business Day, the Outside Date shall be deemed the next subsequent day that is a Business Day.


 


“Owned Real
Property” means all land, together with all buildings, structures, improvements and fixtures located thereon, and all
easements and other rights and interests appurtenant thereto, owned by the Company or any of its Subsidiaries and used in the Company’s
or its Subsidiaries’ business as such business is described in the SEC Reports.


 


“Permitted Indebtedness”
has the meaning set forth in Section 4.13.


 


“Permitted Liens”
means: (i) Liens for taxes, assessments, governmental charges or claims, that are not yet due and payable (provided that such items
are properly reserved for on the books of the Company); (ii) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, materialmens and other similar Liens arising or incurred in the ordinary course of business and imposed by Law; (iii)
Liens incurred or deposits made in connection with obligations not due or delinquent with respect to workers’ compensation,
unemployment insurance and other types of social security; (iv) Liens (A) upon or in any equipment acquired or held by the Company
or any of its Subsidiaries to secure the purchase price of such equipment or Indebtedness incurred solely for the purpose of financing
the acquisition or lease of such equipment, or (B) existing on such equipment at the time of its acquisition, provided that the
Lien is confined solely to the property so acquired and improvements thereon, and the proceeds of such equipment; (v) Liens incurred
in connection with the extension, renewal or refinancing of the indebtedness secured by Liens of the type described in clause (iv)
above, provided that any extension, renewal or replacement Lien shall be limited to the property encumbered by the existing Lien
and the principal amount of the Indebtedness being extended, renewed or refinanced does not increase; (vi) leases or subleases
and licenses and sublicenses granted to others in the ordinary course of the Company’s business, not interfering in any material
respect with the business of the Company and its Subsidiaries taken as a whole; (vii) Liens arising from judgments, decrees or
attachments not in excess of $10.0 million; (viii) Liens securing Senior Indebtedness permitted to be incurred hereunder;
and (ix) Liens listed on Schedule 3.1(p).


 



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


 


“Placement Agent”
has the meaning set forth in Section 3.1(x).


 


“Proceeding”
means an action, claim, suit, investigation or proceeding (including, without limitation, an investigation or partial proceeding,
such as a deposition), whether commenced or threatened.


 


“Registration
Rights Agreement” means the Registration Rights Agreement, dated as of the date of this Agreement, between the Company
and the Investor, in the form of Exhibit B hereto.


 


“Registration
Statement” means a registration statement meeting the requirements set forth in the Registration Rights Agreement and
covering the resale by the Investor of the Conversion Shares.


 


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


 


“SEC Reports”
has the meaning set forth in Section 3.1(h).


 


“Securities”
means the Note and the Conversion Shares.


 


“Securities
Act” means the Securities Act of 1933, as amended.


 


“Senior Indebtedness”
means (i) all Indebtedness secured by any real or personal property of the Company, (ii) any other Indebtedness for borrowed money
or any guaranty of such Indebtedness outstanding at any time from or to a bank or other recognized financial institution or lender,
(iii) any trade payables or other Indebtedness incurred by the Company in the ordinary course of business, and (iv) any other Indebtedness
or guaranty of Indebtedness issued in exchange for any of the foregoing.


 


“Short Sales”
include, without limitation, all “short sales” as defined in Rule 200 promulgated under Regulation SHO under the Exchange
Act and all types of direct and indirect stock pledges, forward sale contracts, options, puts, calls, swaps and similar arrangements
(including on a total return basis), and sales and other transactions through non-US broker dealers or foreign regulated brokers.


 



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“Strategic Agreements”
means, collectively, the Blink Network License Agreement and the Amended and Restated Collaboration and Strategic Supplier Relationship
Framework Agreement, each to be entered into on or about the date hereof between the Company and one or more Affiliates of the
Investor.


 


“Subsidiary”
means, as to the Company, any “subsidiary” as defined in Rule 1-02(x) of the Regulation S-X promulgated by the Commission
under the Exchange Act.


 


“Trading Day”
means (i) a day on which the Common Stock is traded on a Trading Market, or (ii) if the Common Stock is not quoted on any Trading
Market, a day on which the Common Stock is quoted in the over-the-counter market as reported by the Pink Sheets LLC (or any similar
organization or agency succeeding to its functions of reporting prices); provided, that in the event that the Common Stock is not
listed or quoted as set forth in (i) and (ii) hereof, then Trading Day shall mean a Business Day.


 


“Trading Market”
means whichever of the New York Stock Exchange, NYSE Amex, the NASDAQ Stock Market (including, for the avoidance of doubt, the
NASDAQ Global Select Market, the NASDAQ Global Market and the NASDAQ Capital Market and any successor markets thereto) or OTC Bulletin
Board on which the Common Stock is listed or quoted for trading on the date in question.


 


“Transaction
Documents” means this Agreement, the Note, the Registration Rights Agreement, the Warrant Amendment, the License Agreement
and any other documents or agreements executed in connection with the transactions contemplated hereunder and thereunder.


 


“Transactions”
means the transactions contemplated by the Transaction Documents.


 


“VWAP”
means, for any date, the average of the daily volume weighted average prices of the Common Stock for such date (or the nearest
preceding date) on the Trading Market on which the Common Stock is then listed or quoted.


 


“Warrant”
means the warrant to purchase 1,041,667 shares of Common Stock issued by the Company to the Investor on January 13, 2011.


 


“Warrant Amendment”
has the meaning set forth in Section 2.2(a)(iii).


 


ARTICLE
2. 


PURCHASE
AND SALE


 


2.1           Closing.
Upon the terms and subject to the conditions set forth in this Agreement, on the Closing Date the Company shall issue and sell
to the Investor, and the Investor shall purchase from the Company, the Note. The Closing shall take place at the offices of Company
Counsel, located at Russ Building, 235 Montgomery Street, 17th floor, San Francisco, California 94104, on the Closing Date or at
such other location or time as the parties may agree. 


 



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2.2           Closing
Deliveries.


 


(a)          At
the Closing, the Company shall deliver or cause to be delivered to the Investor the following (the “Company Deliverables”):


 


(i)          the
Note, with the “Conversion Price,” as such term is used therein, equal to the Conversion Price, registered in the name
of the Investor and duly executed by the Company;


 


(ii)         the
Registration Rights Agreement, duly executed by the Company;


 


(iii)        an
amendment to the Warrant, duly executed by the Company, setting the Exercise Price (as defined in the Warrant) at $2.50 per share,
in the form attached hereto as Exhibit C (the “Warrant Amendment”);


 


(iv)        the
Strategic Agreements, duly executed by the Company;


 


(v)         the
legal opinion of Company Counsel, in the form attached hereto as Exhibit D, addressed to the Investor; and


 


(vi)        a
certificate, executed on behalf of the Company by its Secretary, dated as of the Closing Date, certifying the resolutions adopted
by the board of directors of the Company approving the Transactions and the issuance of the Note, certifying the then current versions
of the Articles of Incorporation and Bylaws of the Company and certifying as to the signatures and authority of persons signing
the Transaction Documents and related documents on behalf of the Company.


 


(b)          At
the Closing, the Investor shall deliver or cause to be delivered to the Company the following (the “Investor Deliverables”):


 


(i)          the
Registration Rights Agreement, duly executed by the Investor;


 


(ii)         the
Warrant Amendment, duly executed by the Investor;


 


(iii)        the
Strategic Agreements, duly executed by the Investor; and


 


(iv)        the
Investment Amount, in United States dollars and in immediately available funds, by wire transfer to an account designated in writing
by the Company for such purpose.


 


ARTICLE
3.


REPRESENTATIONS
AND WARRANTIES


 


3.1           Representations
and Warranties of the Company. The Company hereby represents and warrants to the Investor that, as of the date hereof and as
of the Closing Date:


 



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(a)          Subsidiaries.
The Company has no direct or indirect Subsidiaries other than as listed on Schedule 3.1(a) hereto. Except as disclosed on
Schedule 3.1(a), the Company owns, directly or indirectly, all of the capital stock of each Subsidiary free and clear of
any and all Liens, and all the issued and outstanding shares of capital stock of each Subsidiary are validly issued and are fully
paid, non-assessable and free of preemptive and similar rights. Other than as listed on Schedule 3.1(a), neither the Company
nor any of its Subsidiaries owns, directly or indirectly, capital stock or other equity interests of any other Person.


 


(b)          Organization
and Qualification. The Company and each Subsidiary are duly incorporated or otherwise organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or organization (as applicable), with the requisite power and
authority to own and use its properties and assets and to carry on its business as such business is described in the SEC Reports.
Neither the Company nor any Subsidiary is in violation of any of the provisions of its respective certificate or articles of incorporation,
bylaws or other organizational or charter documents. Except as disclosed on Schedule 3.1(a), the Company and each Subsidiary
are duly qualified to conduct their respective businesses and are in good standing as a foreign corporation or other entity in
each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except
where the failure to be so qualified or in good standing, as the case may be, would not, individually or in the aggregate, have
or reasonably be expected to result in a Material Adverse Effect. True, correct and complete copies of the Company’s Articles
of Incorporation and Bylaws have previously been made available to the Investor.


 


(c)          Authorization;
Enforcement. The board of directors of the Company (at a meeting duly called and held) has approved this Agreement, the other
Transaction Documents, the execution, delivery and performance of this Agreement and the consummation of the Transactions. The
Company has the requisite corporate power and authority to enter into and to consummate the Transactions contemplated by each of
the Transaction Documents and otherwise to perform its obligations thereunder. The execution and delivery of each of the Transaction
Documents by the Company and the consummation by it of the Transactions have been duly authorized by all necessary action on the
part of the Company and no further action is required by the Company or any Subsidiary in connection therewith. Each Transaction
Document has been, or upon the Closing will have been, validly executed and delivered by the Company and constitutes or, upon the
Closing will constitute, the valid and binding obligation of the Company enforceable against the Company in accordance with its
terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, or similar laws relating to, or affecting
generally the enforcement of, creditors’ rights and remedies or by other equitable principles of general application. Without
limiting the generality of the foregoing, no approval by the stockholders of the Company is required in connection with this Agreement,
any of the Transaction Documents, the performance by the Company of its obligations hereunder and thereunder, or the consummation
by the Company of the transactions contemplated hereby and thereby.


 



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(d)          No
Conflicts. The execution, delivery and performance of the Transaction Documents by the Company and the consummation by the
Company of the transactions contemplated thereby do not and will not (i) conflict with or violate any provision of the Company’s
or any Subsidiary’s certificate or articles of incorporation, bylaws or other organizational or charter documents, or (ii)
conflict with, breach, violate or constitute a default (or an event that with notice or lapse of time or both would become a default)
under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time
or both) of any obligations under, or the loss of any benefit under any agreement, mortgage, deed of trust, permit, concession,
franchise, right, license, credit facility, debt or other instrument (evidencing a Company or Subsidiary debt or otherwise) or
other understanding to which the Company or any Subsidiary is a party or by which any property or asset of the Company or any Subsidiary
is bound or affected, or result in the creation of any Liens upon any of the properties or assets of the Company or any of its
Subsidiaries, (iii) conflict with or result in a violation of any Law, or other restriction of any court or Governmental Authority
to which the Company or a Subsidiary is subject (including, without limitation, federal and state securities Laws), or by which
any property or asset of the Company or a Subsidiary is bound or affected; except in the case of each of clauses (ii) and (iii),
such as would not, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect.


 


(e)          Filings,
Consents and Approvals. Neither the Company nor any Subsidiary is required to obtain any consent, waiver, authorization or
order of, give any notice to, or make any filing or registration with, any Governmental Authority or other Person in connection
with the execution, delivery and performance by the Company of the Transaction Documents or the consummation of the Transactions,
other than (i) the filing with the Commission of one or more Registration Statements in accordance with the requirements of the
Registration Rights Agreement, (ii) filings required by state securities laws, (iii) the filing of a Notice of Sale of Securities
on Form D with the Commission under Regulation D of the Securities Act, (iv) the filings required in accordance with Section
4.5 hereof, and (v) those that have been made or obtained prior to the date of this Agreement.


 


(f)          Issuance
of the Securities. The Securities have been duly authorized for issuance and sale to the Investor and, when issued and paid
for in accordance with the Transaction Documents, will be duly and validly issued, fully paid and nonassessable, free and clear
of all Liens. The Company has reserved from its duly authorized capital stock the maximum number of shares of Common Stock issuable,
as of the Closing Date, pursuant to the Note in order to issue the Conversion Shares.


 


(g)          Capitalization.


 


(i)          Schedule
3.1(g) sets forth, as of the date of this Agreement: (A) the authorized capital stock of the Company; (B) the number of shares
and type of all issued and outstanding capital stock of the Company; (C) the number of shares of capital stock issuable and reserved
for issuance under the Company’s various option and incentive plans; and (D) the number of shares of capital stock
issuable and reserved for issuance pursuant to securities (other than the Note) (the “Company Awards”) exercisable
for, or convertible into or exchangeable for any shares of capital stock of the Company. Schedule 3.1(g) accurately sets
forth, with respect to each Company Award outstanding (whether vested or unvested), as of the date of this Agreement: (i) the total
number of shares of Common Stock that are subject to Company Awards and the number of shares of Common Stock with respect to which
such Company Awards are immediately exercisable; (ii) if applicable to the Company Awards, the exercise price per share of Common
Stock purchasable under such Company Award and the vesting schedule and expiration date for such Company Award; and (iii) the number
of such Company Awards that will be exercisable on the Closing Date, either by reason of the Company Award vesting schedule, or
by reason of the Transactions. All outstanding equity interests of the Company and its Subsidiaries are duly authorized, validly
issued, fully paid and nonassessable.


 



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(ii)         Except
for any rights held by the Investor or as specified in Schedule 3.1(g)(ii), no securities of the Company are entitled to
preemptive or similar rights, and no Person has any right of first refusal, preemptive right, right of participation, or any similar
right to participate in the Transactions.


 


(iii)        Except
as set forth on Schedule 3.1(g)(iii), there are no outstanding options, warrants, scrip rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities, rights or obligations convertible into or exchangeable for,
or giving any Person any right to subscribe for or acquire, any shares of Common Stock, or contracts, commitments, understandings
or arrangements by which the Company or any Subsidiary is or may become bound to (A) issue, transfer or sell any shares of capital
stock or other equity interests of the Company, or securities or rights convertible into or exchangeable for such shares or equity
interests (including, without limitation, any stockholder purchase rights or “poison pill” or similar arrangements),
(B) grant, extend or enter into any such subscription, option, warrant, call, convertible securities or other similar right, agreement
or arrangement, or (C) redeem or otherwise acquire any such shares of capital stock or equity interests.


 


(iv)        The
issuance and sale of the Note will not, immediately or with the passage of time, obligate the Company to issue shares of Common
Stock, Common Stock Equivalents or other securities or provide any contractual benefit or protection to any Person (other than
the issuance of the Conversion Shares pursuant to the Note) and will not result in a right of any holder of Company securities
to adjust the exercise, conversion, exchange or reset price of any outstanding security of the Company or any of its Subsidiaries.


 


(v)         The
Company has no outstanding bonds, debentures, notes or other obligations, the holders of which have the right to vote (or which
are convertible into or exercisable for securities having the right to vote) with the stockholders of the Company on any matter.


 


(vi)        Except
as disclosed in the SEC Reports, there are no voting trusts or other agreements or understandings to which the Company is a party
with respect to the voting of the capital stock or other equity interest of the Company.


 



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(h)          SEC
Reports; Financial Statements. Except as set forth on Schedule 3.1(h), the Company has filed all reports required
to be filed by it with the Commission under the Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d)
thereof, for the twelve months preceding the date hereof (excluding disclosures of risks included in any forward-looking statement
disclaimers or other statements that are similarly non-specific and are predictive and forward-looking in nature) (the foregoing
materials being, collectively referred to herein as the “SEC Reports” and, together with the Schedules to this
Agreement (if any), the “Disclosure Materials”) on a timely basis or has timely filed a valid extension of such
time of filing and has filed any such SEC Reports prior to the expiration of any such extension. As of their respective dates,
the SEC Reports complied in all material respects with the requirements of the Securities Act and the Exchange Act and the rules
and regulations of the Commission promulgated thereunder, and none of the SEC Reports, when filed, contained any untrue statement
of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not misleading. The financial statements of the Company included
or incorporated by reference in the SEC Reports have been prepared from and are in accordance with the books and records of the
Company and its Subsidiaries in all material respects, comply in all material respects with applicable accounting requirements
and the rules and regulations of the Commission with respect thereto as in effect at the time of filing. Such financial statements
have been prepared in accordance with GAAP applied on a consistent basis during the periods involved, except as may be otherwise
specified in such financial statements or the notes thereto, and fairly present in all material respects the financial position
of the Company and its consolidated Subsidiaries as of and for the dates thereof and the results of operations and cash flows for
the periods then ended, subject, in the case of unaudited statements, to normal, recurring, immaterial, year-end audit adjustments
and the absence of footnotes therefrom. Except as set forth on Schedule 3.1(h), neither the Company nor any of its
Subsidiaries has any liabilities or obligations of any nature (absolute, accrued, contingent or otherwise) for which reasonable
reserves have not been established in accordance with GAAP in the financial statements described above, except for liabilities
that have arisen since December 31, 2010 in the ordinary and usual course of business and consistent with past practice and that,
individually or in the aggregate, have not had and would not reasonably be expected to have a Material Adverse Effect.


 


(i)          Press
Releases. The press releases disseminated by the Company during the twelve months preceding the date of this Agreement taken
as a whole do not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the circumstances under which they were made and when made, not
misleading.


 


(j)          Material
Changes. Since the date of the latest audited financial statements included within the SEC Reports, except as specifically
disclosed in Schedule 3.1(j) or the SEC Reports:


 


(i)          there
has been no event, occurrence or development that has had or that would reasonably be expected to result in a Material Adverse
Effect;


 


(ii)         neither
the Company nor any Subsidiary has incurred any liabilities (direct, indirect, contingent, or otherwise) other than (A) trade payables,
accrued expenses and other liabilities incurred in the ordinary course of business consistent with past practice and (B) liabilities
not required to be reflected in the Company’s financial statements pursuant to GAAP or required to be disclosed in filings
made with the Commission, which are, individually or in the aggregate, material;


 


(iii)        the
Company has not altered its method of accounting or the identity of its auditors;


 



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(iv)        the
Company has not declared or made any dividend or distribution of cash or other property to its stockholders or purchased, redeemed
or made any agreements to purchase or redeem any shares of its capital stock;


 


(v)         there
has been no waiver, not in the ordinary course of business, by the Company or any of its Subsidiaries of a material right or of
a material debt owed to it;


 


(vi)        there
has been no material transaction entered into by the Company or any of its Subsidiaries other than in the ordinary course of business;
and


 


(vii)       there
has been no sale, assignment, transfer, license, abandonment, loss, lapse or other disposition of, or failure to maintain, enforce
or protect, any material Company Intellectual Property.


 


Except for the issuance
of the Securities and the other Transactions contemplated by the Transaction Documents, no event, liability or development has
occurred or exists with respect to the Company or any of its Subsidiaries or their respective businesses, properties, operations
or financial condition that, in each case, is required to be disclosed by the Company under applicable securities Laws at the time
this representation is made that has not been publicly disclosed. Except as disclosed on Schedule 3.1(j), the Company does
not have pending before the Commission any request for confidential treatment of information.


 


(k)          Litigation.
There is no Action which (i) adversely affects or challenges the legality, validity or enforceability of any of the Transaction
Documents or the Securities or (ii) except as specifically disclosed in Schedule 3.1(k) or the SEC Reports, would, if there
were an unfavorable decision, individually or in the aggregate, be material to the Company. To the knowledge of the Company, neither
the Company nor any Subsidiary, nor any director or officer thereof (in his or her capacity as such), is or has been the subject
of any Action involving a claim of violation of or liability under federal or state securities laws or a claim of breach of fiduciary
duty, except as specifically disclosed in Schedule 3.1(k) or the SEC Reports. There has not been, and to the knowledge of
the Company, there is not pending any investigation by the Commission involving the Company or any current or former director or
officer of the Company (in his or her capacity as such) except as specifically disclosed in Schedule 3.1(k) or the SEC Reports.
The Commission has not issued any stop order or other order suspending the effectiveness of any registration statement filed by
the Company or any Subsidiary under the Exchange Act or the Securities Act.


 


(l)          Labor
Relations. Except as set forth on Schedule 3.1(l):


 


(i)          No
material labor dispute exists or, to the knowledge of the Company, is threatened or imminent with respect to any of the employees
of the Company or any Subsidiary.


 



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(ii)         There
are no unfair labor practice charges or complaints, or representation petitions pending or, to the Company’s knowledge, threatened
before the National Labor Relations Board or any other federal, state or local labor commission relating to the Company’s
or any of its Subsidiaries’ employees, and no such charges, complaints or petitions have been filed against the Company within
the past three years. Each of the Company and its Subsidiaries is, and at all times has been, in compliance in all material respects
with all applicable Laws respecting employment (including Laws relating to citizenship classification of employees and independent
contractors) and employment practices, terms and conditions of employment, wages and hours, and immigration and naturalization.
Except as set forth on Schedule 3.1(l), within the past three years, the Company has not implemented any plant closing
or layoff of employees that could result in a violation of the WARN Act.


 


(m)          Compliance.
Neither the Company nor any Subsidiary (i) is in default under or in violation of (and no event has occurred that has not been
waived that, with notice or lapse of time or both, would result in a default by the Company or any Subsidiary under), nor has the
Company or any Subsidiary received notice of a claim that it is in default under or that it is in violation of, any indenture,
loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is
bound (whether or not such default or violation has been waived), (ii) is in violation of any order of any court, arbitrator or
Governmental Authority, or (iii) except as set forth on Schedule 3.1(m), is or has been in violation of any Law in any material
respect, including without limitation all foreign, federal, state and local laws relating to taxes, environmental protection, occupational
health and safety, product quality and safety and employment and labor matters, except (in the case of clause (i) and (ii) only)
as would not, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect. The Company
is in compliance in all material respects with all effective requirements of the Sarbanes-Oxley Act of 2002, as amended, and the
rules and regulations thereunder, that are applicable to it.


 


(n)          Regulatory
Permits. The Company and the Subsidiaries possess all certificates, authorizations, permits, franchises, grants, licenses,
easements, variances, exceptions, consents, approvals, clearances, permissions, qualifications and registrations issued by the
appropriate Governmental Authorities necessary to own, lease and operate their properties and assets or conduct their respective
businesses as described in the SEC Reports (the “Company Permits”), except where the failure to possess such
permits would not, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect, and
neither the Company nor any Subsidiary has received any notice of proceedings relating to the revocation or modification of any
such permits. All Company Permits are valid and in full force and effect, except where the failure to be in full force and effect
would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect. The Company is, and
each of its Subsidiaries is, in compliance with the terms and requirements of such Company Permits, except where the failure to
be in compliance would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.


 


(o)          Environment.
Except as set forth on Schedule 3.1(o) or as would not, individually or in the aggregate, reasonably be expected to result
in a Material Adverse Effect:


 


(i)          The
Company and its Subsidiaries have been and are in compliance with all applicable Environmental Laws in all material respects, including,
but not limited to, possessing all permits and other governmental authorizations required for their operations under applicable
Environmental Laws;


 



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(ii)         There
is no pending or, to the knowledge of the Company, threatened Action pursuant to any Environmental Law against the Company or any
of its Subsidiaries. To the Company’s knowledge, neither the Company nor any of its Subsidiaries has received written notice
from any person, including but not limited to any Governmental Authority, alleging that the Company or any of its Subsidiaries
has been or is in violation of any applicable Environmental Law or otherwise may be liable under any applicable Environmental Law,
which violation or liability is unresolved. Neither the Company nor any of its Subsidiaries is a party or subject to any material
order of a Governmental Authority pursuant to Environmental Law;


 


(iii)        With
respect to real property that is currently owned, leased or operated by the Company or any of its Subsidiaries, or was formerly
owned, leased or operated by the Company or any of its Subsidiaries, (i) there have been no releases, spills or discharges of Hazardous
Materials on or, to the knowledge of the Company, underneath, or migrating to or from any of such real property, and (ii) there
is no storage or disposal of Hazardous Materials at any such real property, that in either case would reasonably be expected to
result in an obligation to remediate such environmental condition pursuant to applicable Environmental Law in effect as of the
Closing Date or result in liability pursuant to applicable Environmental Law in effect as of the Closing Date with respect to remediation
conducted by other Persons;


 


(iv)        The
Company and its Subsidiaries have not, either expressly or by operation of law, assumed, undertaken, or provided an indemnity with
respect to any material liability (contingent or otherwise) or material investigatory, remedial or corrective obligation of any
other Person relating to Environmental Laws.


 


(p)          Title
to Assets. Except as set forth on Schedule 3.1(p), the Company and the Subsidiaries have valid land use rights for all
real property that is material to their respective businesses and good and marketable title in all personal property that is material
to their respective businesses, in each case free and clear of all Liens, except for Permitted Liens. Any real property and facilities
held under lease by the Company and the Subsidiaries are held by them under valid, subsisting and enforceable leases of which the
Company and the Subsidiaries are in compliance. The SEC Reports set forth the address and description of each Owned Real Property.
Except as set forth on Schedule 3.1(p), with respect to each Owned Real Property: (i) the Company or one of its Subsidiaries
(as the case may be) has good and marketable indefeasible fee simple title to such Owned Real Property, free and clear of all Liens
except Permitted Liens, (ii) except as set forth in the SEC Reports, neither the Company nor any of its Subsidiaries has leased
or otherwise granted to any Person the right to use or occupy such Owned Real Property or any portion thereof and (iii) there are
no outstanding options, rights of first offer or rights of first refusal to purchase such Owned Real Property or any portion thereof
or interest therein. Neither the Company nor any of its Subsidiaries is a party to any agreement or option to purchase any real
property or interest therein.


 






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(q)          Intellectual
Property.


  


(i)          Schedule
3.1(q)(i) sets forth a correct and complete list of all of the following that are owned, used or held for use by the Company
or any of its Subsidiaries in the operation of their respective businesses as currently conducted (identifying for each, as applicable,
the owner, jurisdiction and the issuance, registration and application numbers and filing, registration and issuance dates): (i)
all patented or registered Intellectual Property, including all Internet domain name registrations; (ii) all pending patent applications
or other applications for registration of any Intellectual Property; (iii) all trade or corporate names and all material unregistered
trademarks and service marks; and (iv) all proprietary software owned or developed by the Company or any of its Subsidiaries. The
Company Intellectual Property is currently in compliance with all legal requirements (including timely filings, proofs, prosecution,
disclosures and payments of fees) and is valid, subsisting and enforceable and no loss of any of the material Company Intellectual
Property owned by the Company or any Subsidiary is reasonably foreseeable (except for patents upon the expiration of their statutory
term).


 


(ii)         Except
as set forth on Schedule 3.1(q)(ii), no Company Intellectual Property is now involved in, or has been involved in within
the past six (6) years, any cancellation, Action, opposition proceeding, or other dispute, litigation or proceeding, and, to the
Company’s knowledge, no such action is threatened.


 


(iii)        No
patent contained in the Company Intellectual Property is now involved in any interference, reissue, re examination or opposition
proceeding and no such patent has been misused.


 


(iv)        The
Company and its Subsidiaries solely own and possess all right, title and interest in and to, or have the valid right to use pursuant
to an enforceable written license set forth on Schedule 3.1(q)(iv), all of the Intellectual Property necessary for, or used
or held for use in, the operation of the Company’s and each of its Subsidiaries’ respective businesses as currently
conducted and/or as described in the SEC Reports (the “Company Intellectual Property”), including with respect
to the ownership, maintenance and operation of the Company’s and its Subsidiaries’ material properties and assets,
free and clear of all Liens, adverse claims, covenants not to sue, and, except as set forth on Schedule 3.1(q)(iv), licenses
granted to any other Person and/or obligations to license any such Intellectual Property. The Company and/or its Subsidiaries have
a valid and enforceable written license to use all third party Intellectual Property necessary for, or used or held for use in,
the operation of the respective businesses of the Company and its Subsidiaries.


 


(v)         The
Company and its Subsidiaries have not infringed, misappropriated or otherwise impaired or conflicted with, and the conduct of the
Company’s and its Subsidiaries’ businesses as currently conducted does not infringe, misappropriate or otherwise impair
or conflict with (collectively, “Infringe”) any Intellectual Property or other rights of any third party. To
the knowledge of the Company, the Company Intellectual Property is not being Infringed by any third party. There is no litigation,
claim or order that was either made within the past six (6) years or is presently pending or outstanding or, to the knowledge of
the Company, threatened or imminent, that alleges that the conduct of the respective businesses of the Company or of any of its
Subsidiaries Infringes any Intellectual Property, or that seeks to limit or challenge or that concerns the ownership, use, patentability,
registrability, validity or enforceability of any Company Intellectual Property and the Company’s and its Subsidiaries’
use of any Intellectual Property. No Company Intellectual Property is subject to any outstanding settlement, consent or order restricting
the use thereof (including any judgment, notice, ruling, injunction, assessment, award, decree or writ of any Governmental Authority).


 



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(vi)        The
Company and its Subsidiaries have taken all actions necessary, and all actions common in the industry, to maintain, protect, and
enforce all material Company Intellectual Property, including the secrecy, confidentiality and value of trade secrets and other
confidential information. All employees, consultants and independent contractors of the Company or any Subsidiary who have had
access to Confidential Information and/or who have been involved in, or have contributed to, the creation or development of any
Company Intellectual Property have executed a written agreement to maintain the confidentiality of such Confidential Information
and to assign to the Company or such Subsidiary all Intellectual Property created or developed by such Person in the course of
such Person’s employment or other engagement with the Company and has executed appropriate agreements that are substantially
consistent with the Company’s standard forms thereof. Except under written confidentiality obligations, there has been no
disclosure of any of the Company’s or its Subsidiaries’ Confidential Information to any third party.


 


(vii)       Except
as set forth on Schedule 3.1(q)(vii), neither the Company nor any of its Subsidiaries has created or developed any Intellectual
Property with the use of any third party funding, personnel or facilities or through the use of any other third party resources
(including any resources of any university or Governmental Authority). Except as set forth on Schedule 3.1(q)(vii), no university
or Governmental Authority has any right, title or interest (including any option or license) in or to any Company Intellectual
Property. Other than as set out in Schedule 3.1(q)(vii), neither the Company nor any of its Subsidiaries is a party to,
or otherwise subject to, any contracts, commitments, understandings or arrangements with any university or Governmental Authority.


 


(r)          Taxes.


 


(i)          Except
as set forth on Schedule 3.1(r) or as would not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect: (i) all Tax Returns required to be filed by the Company and each of its Subsidiaries in any jurisdiction have been
timely filed, other than those filings being contested in good faith; (ii) all Taxes due pursuant to such Tax Returns or pursuant
to any assessment received by the Company or any of its Subsidiaries have been paid, other than those being contested in good faith
and for which adequate reserves in accordance with GAAP have been provided; and (iii) all such Tax Returns are true, correct and
complete in all respects.


 


(ii)         Except
as set forth on Schedule 3.1(r) or as would not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect: (i) there are no disputes pending, or claims asserted, for Taxes or assessments upon the Company or any of its
Subsidiaries for which the Company does not have reserves that are adequate under GAAP; (ii) neither the Company nor any of its
Subsidiaries is (A) a party to or is bound by any Tax sharing, allocation or indemnification agreement or arrangement (other than
such an agreement or arrangement exclusively between or among the Company and its Subsidiaries) or (B) has any liability for the
Taxes of any Person (other than the Company or any of its Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any similar
provision of state, local or foreign law); and (iii) neither the Company nor any of its Subsidiaries has participated in a “listed
transaction” within the meaning of Treasury Regulation Section 1.6011-4(b)(2).


 



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(s)          Employee
Benefits.


 


(i)          All
“employee benefit plans”, as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
(“ERISA”), as to which the Company or any entity which, with the Company, would be deemed to be a single employer
under Section 414(b), (c), (m) or (o) of the Code (collectively, the “Company Group”), may have any liability
and that are subject to Title IV of ERISA or Section 302 of ERISA or Section 412 of the Code shall be referred to herein as “Company
Plans.” No liability has been incurred under Title IV of ERISA, Section 302 of ERISA or Section 412 of the Code that
would reasonably be expected to have a Material Adverse Effect, and, to the knowledge of the Company, no facts exist or events
have occurred that would reasonably be expected to result in any such liability that would reasonably be expected to have a Material
Adverse Effect. There has been no adverse change in the funded status of the Company Plans and each other pension and other post-employment
benefit plans (as such terms are used in Statement of Financial Accounting Standards No. 158) with respect to which the Company
may have any liability, considered individually and in the aggregate, since December 31, 2009, that would reasonably be expected
to have a Material Adverse Effect.


 


(ii)         Except
as, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect, the consummation of the
transactions contemplated hereby will not result in an increase in the amount of, or acceleration in the timing of payment of vesting
of, any compensation payable or awarded by the Company or any of its Subsidiaries to any of its or their employees under any employment
agreements, plans or programs of the Company or any of its Subsidiaries. Except as disclosed in the SEC Reports, no employee compensation
or other employment-related liabilities have been incurred that would reasonably be expected to result in a Material Adverse Effect
and no facts exists or events have occurred that would reasonably be expected to result in any such liability that would reasonably
be expected to have a Material Adverse Effect.


 


(t)          Insurance.
The Company and the Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and
in such amounts as are reasonable and customary in the businesses in which the Company and the Subsidiaries are engaged and for
the properties owned or leased by each of the Company or its Subsidiaries. Neither the Company nor any Subsidiary has any reason
to believe that it will not be able to renew its and the Subsidiaries’ existing insurance coverage as and when such coverage
expires or to obtain similar coverage from similar insurers when such coverage expires.


 


(u)          Transactions
With Affiliates and Employees. Except as set forth on Schedule 3.1(u) or in the SEC Reports, none of the officers
or directors, employees or significant stockholders of the Company is presently a party to any transaction with the Company or
any Subsidiary (other than for services as employees, officers and directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring
payments to or from any officer, director, employee or such stockholder or, to the knowledge of the Company, any entity in which
any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner.


 



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(v)         Internal
Accounting Controls. The Company and the Subsidiaries maintain a system of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations,
(ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain
asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization,
and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences. The Company has established and maintains disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) and designed such disclosure controls and procedures to ensure that material information
relating to the Company, including its Subsidiaries, is made known to the Company’s chief executive officer and chief financial
officer by others within those entities, particularly during the period in which the Company’s Form 10-K or 10-Q, as the
case may be, is being prepared. The Company’s certifying officers have evaluated the effectiveness of the Company’s
controls and procedures in accordance with Item 307 of Regulation S-K under the Exchange Act for the Company’s most recently
ended fiscal quarter or fiscal year-end (such date, the “Evaluation Date”). The Company presented in its most
recently filed Form 10-K or Form 10-Q the conclusions of the certifying officers about the effectiveness of the disclosure controls
and procedures based on their evaluations as of the Evaluation Date. Since the Evaluation Date, there have been no significant
changes in the Company’s internal controls (as such term is defined in Item 308(c) of Regulation S-K under the Exchange Act)
or, to the knowledge of the Company, in other factors that would reasonably be expected to significantly affect the Company’s
internal controls.


 


(w)          Solvency.
Upon consummation of the Transactions, (i) the Company’s fair saleable value of its assets exceeds the amount that will be
required to be paid on or in respect of the Company’s existing debts and other liabilities (including known contingent liabilities)
as they mature, (ii) the Company’s assets do not constitute unreasonably small capital to carry on its business as now conducted
and as proposed to be conducted including its capital needs taking into account the particular capital requirements of the business
conducted by the Company, and projected capital requirements and capital availability thereof, and (iii) the current cash flow
of the Company, together with the proceeds the Company would receive, were it to liquidate all of its assets, after taking into
account all anticipated uses of the cash, would be sufficient to pay all amounts on or in respect of its debt when such amounts
are required to be paid. Except as set forth on Schedule 3.1(w), the Company does not intend to incur debts beyond its ability
to pay such debts as they mature (taking into account the timing and amounts of cash to be payable on or in respect of its debt).


 


(x)          Certain
Fees. No brokerage or finder’s fees or commissions are or will be payable by the Company or any Subsidiary to any broker,
financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the Transactions.


 



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(y)          Certain
Registration Matters. Assuming the accuracy of the Investor’s representations and warranties set forth in Section
3.2, no registration under the Securities Act is required for the offer and sale of the Note and the offer of the Conversion
Shares by the Company to the Investor under the Transaction Documents. The Company is eligible to register the Conversion Shares
for resale by the Investor under Form S-3 promulgated under the Securities Act, subject to the restrictions imposed by the Commission
with respect to the number of shares which may be registered for resale on such form. Except as set forth in Schedule 3.1(y),
the Company has not granted or agreed to grant to any Person, other than the Investor pursuant to the Registration Rights Agreement,
any rights (including “piggy-back” registration rights) to have any securities of the Company registered with the Commission
or any other Governmental Authority that have not been satisfied through an effective registration statement or by waiver of such
rights to the extent specified in Schedule 3.1(y).


 


(z)          Government
Bids and Contracts.


 


(i)          Schedule
3.1(z)(i) sets forth a current, complete and accurate list of all Government Contracts that are currently active or have been
active within the past three (3) years.  Unless listed on Schedule 3.1(z)(i) as being “closed,” each Government
Contract listed on Schedule 3.1(z)(i) is in full force and effect and constitutes a legal, valid and binding agreement,
enforceable in accordance with its terms.  Schedule 3.1(z)(i) sets forth a current, accurate and complete list of each
of the outstanding Government Bids submitted within the past three (3) years for which no notice of award decision has been received
as of the date hereof by the Company or any of its Subsidiaries.


 


(ii)         Schedule
(z)(ii) sets forth a current, complete and accurate list of all Government Assistance Agreements that are currently active
or have been active within the past three (3) years.


 


(iii)        Except
as set forth on Schedule 3.1(z)(iii), with respect to each Government Contract, Government Bid and Government Assistance
Agreement: (A) the Company has complied in all material respects with all applicable requirements, terms and conditions; all invoices
and claims for payment, reimbursement or adjustment and all representations and certifications were current, accurate and complete
in all material respects as of their respective submission dates; (B) no written notice has been received by the Company alleging
that the Company, or any director, officer or employee thereof, is or was in material, uncured breach or violation of any applicable
Law, contractual, regulatory or administrative requirement; no written notice of termination, cure notice, or show-cause notice
or written assertion that any invoice or claim for payment, reimbursement or adjustment was false or improper has been received
by the Company; (C) all pricing discounts and rebates have been reported to and credited to Governmental Authorities in compliance
with all applicable requirements in all material respects; (D) there are no outstanding material claims or disputes between the
Company and any Governmental Authority; (E) neither the Company nor any Subsidiary has made any assignment of revenues or anticipated
revenues; and (F) the Company has maintained systems of internal controls that are, and have been, in compliance with all requirements
in all material respects including, without limitation, government cost accounting requirements.


 



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(iv)        Except
as set forth on Schedule 3.1(z)(iv), the Company and its Subsidiaries (and, to the knowledge of the Company, their respective
directors, officers, employees, agents or consultants), have not, during the past three (3) years: (A) with respect to any Government
Contract, Government Bid or Government Assistance Agreement, had access to confidential or non-public information to which they
were not lawfully entitled; (B) violated any applicable Law associated with the employment of (or discussions concerning possible
employment with) current or former officials or employees of a Governmental Authority; (C) with respect to any Government Contract,
Government Bid or Government Assistance Agreement, been under investigation, indictment or audit by any Governmental Authority;
(D) with respect to any Government Contract Government Bid or Government Assistance Agreement, been requested to provide information
by subpoena or under threat of legal or administrative penalty; (E) with respect to any Government Contract, Government Bid or
Government Assistance Agreement, conducted or initiated any investigation or made any disclosure to a Governmental Authority with
respect to any alleged irregularity, misstatement, non-compliance or false claim; been debarred, suspended, deemed non-responsible
or otherwise excluded from participation in the award of a Government Contract or of a Government Assistance Agreement, nor, to
the knowledge of the Company, are they the subject of any pending debarment, suspension or exclusion proceeding; (F) provided,
offered, solicited or accepted any payment, kickback, bribe, contribution, gift, gratuity, entertainment, benefit or anything of
value in violation of applicable Law; or (G) made any payments or expenditures relating to political activity in violation of applicable
Law.


 


(v)         The
Company and its predecessors have (A) taken all reasonable steps to protect rights in and to all technical data, computer software
and other intellectual property developed in connection with the Government Contracts and Government Assistance Agreements, and
(B) complied in all material respects with all applicable Laws, regulations and contractual and administrative requirements relating
to the placement of legends or restrictive markings on all technical data, computer software and other intellectual property developed
in connection with a Government Contract and delivered or otherwise provided to a Governmental Authority.


 


(aa)         Investment
Company. The Company is not, and is not an Affiliate of, and immediately following the Closing and upon the issuance of the
Conversion Shares, will not be, an “investment company” within the meaning of the Investment Company Act of 1940, as
amended.


 


(bb)         Application
of Takeover Protections. The Company has taken all necessary action, if any, in order to render inapplicable any control share
acquisition, “fair price,” “moratorium,” “interested stockholder,” business combination, poison
pill (including any distribution under a rights agreement) anti-takeover or other similar provision under the Company’s Articles
of Incorporation or the laws of its state of incorporation that is or would become applicable to the Investor as a result of the
Investor and the Company fulfilling their obligations or exercising their rights under the Transaction Documents, including without
limitation the Company’s issuance of the Securities and the Investor’s ownership of the Securities.


 


(cc)         Consultation
with Auditors. The Company has consulted its independent auditors concerning the accounting treatment of the Transactions,
and in connection therewith has furnished such auditors complete copies of the Transaction Documents.


 



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(dd)         Accountants.
There are no disagreements of any kind presently existing between the Company and the accountants formerly or presently employed
or engaged by the Company, that would, individually or in the aggregate, have or reasonably be expected to result in, a Material
Adverse Effect.


 


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


 


(ff)         PFIC.
Neither the Company nor any Subsidiary is or intends to become a “passive foreign investment company” within the meaning
of Section 1297 of the U.S. Internal Revenue Code of 1986, as amended.


 


(gg)         OFAC.
Neither the Company nor any Subsidiary nor, to the knowledge of the Company, any director, officer, agent, employee, Affiliate
or Person acting on behalf of the Company or any Subsidiary is currently subject to any U.S. sanctions administered by the Office
of Foreign Assets Control of the U.S. Treasury Department (“OFAC”); and the Company will not directly or indirectly
use the proceeds of the sale of the Securities, or lend, contribute or otherwise make available such proceeds to any Subsidiary,
joint venture partner or other Person or entity, towards any sales or operations in Cuba, Iran, Syria, Sudan, Myanmar or any other
country sanctioned by OFAC or for the purpose of financing the activities of any Person currently subject to any U.S. sanctions
administered by OFAC.


 


(hh)         Money
Laundering Laws. The business of each of the Company and each Subsidiary are and have been conducted at all times in compliance
with the money laundering statutes of applicable jurisdictions, the rules and regulations thereunder and any related or similar
rules, regulations or guidelines, issued, administered or enforced by any applicable governmental agency (collectively, the “Money
Laundering Laws”) and no Action, suit or Proceeding by or before any court or Governmental Authority or any arbitrator
involving the Company and/or any Subsidiary with respect to the Money Laundering Laws is pending or, to the knowledge of the Company,
threatened.


 


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


 



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(jj)         Disclosure.
To the knowledge of the Company, neither it nor any Person acting on its behalf has provided the Investor or its agents or counsel
with any information that the Company believes constitutes material, non-public information concerning the Company, the Subsidiaries
or their respective businesses, except insofar as (A) the Investor, its agents and counsel, as applicable, has executed a written
agreement regarding the confidentiality and use of such information, (B) the existence and terms of the proposed Transactions may
constitute such information and (C) the Investor Directors are in possession of, and have provided to the Investor, such information.
The Company understands and confirms that the Investor will rely on the foregoing representations and covenants in effecting transactions
in securities of the Company. All disclosure provided to the Investor regarding the Company, the Subsidiaries or their respective
businesses and the Transactions, furnished by or on behalf of the Company (including the Company’s representations and warranties
set forth in this Agreement and any business plan or investor presentation provided by the Company or any Person acting on the
Company’s behalf) are true and correct in all material respects and do not contain any untrue statement of a material fact
or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under
which they were made, not misleading.


 


The Investor acknowledges
and agrees that the Company makes no representations or warranties with respect to the Transactions other than those specifically
set forth in this Section 3.1.


 


3.2           Representations
and Warranties of the Investor. The Investor hereby represents and warrants to the Company as follows:


 


(a)          Organization;
Authority. The Investor is an entity duly organized, validly existing and in good standing under the laws of the jurisdiction
of its organization with the requisite corporate or partnership power and authority to enter into and to consummate the Transactions
and otherwise to carry out its obligations thereunder. The execution, delivery and performance by the Investor of the transactions
contemplated by this Agreement has been duly authorized by all necessary corporate or, if the Investor is not a corporation, such
partnership, limited liability company or other applicable like action, on the part of the Investor. Each of this Agreement, the
Registration Rights Agreement, the Warrant Amendment and the License Agreement has been duly executed by the Investor, and when
delivered by the Investor in accordance with the terms hereof, will constitute the valid and legally binding obligation of the
Investor, enforceable against it in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, or similar laws relating to, or affecting generally the enforcement of, creditors’ rights and remedies or by
other equitable principles of general application.


 



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(b)          Investment
Intent. The Investor is acquiring the Securities for its own account for investment purposes only and not with a view to or
for distributing or reselling such Securities or any part thereof, without prejudice, however, to the Investor’s right at
all times to sell or otherwise dispose of all or any part of such Securities in compliance with applicable federal and state securities
laws. Subject to the immediately preceding sentence, nothing contained herein shall be deemed a representation or warranty by the
Investor to hold the Securities for any period of time. The Investor is acquiring the Securities hereunder in the ordinary course
of its business. The Investor does not have any agreement or understanding, directly or indirectly, with any Person to distribute
any of the Securities.


 


(c)          Investor
Status. At the time the Investor was offered the Securities, it was, and at the date hereof it is, and on each date on which
it converts the Note it will be, an “accredited investor” as defined in Rule 501(a) under the Securities Act. The Investor
is not a registered broker-dealer under Section 15 of the Exchange Act. The Investor has such experience in business and financial
matters that it is capable of evaluating the merits and risks of an investment in the Securities. The Investor acknowledges that
an investment in the Securities involves a high degree of risk.


 


(d)          General
Solicitation. The Investor is not purchasing the Securities as a result of any advertisement, article, notice or other communication
regarding the Securities published in any newspaper, magazine or similar media or broadcast over television or radio or presented
at any seminar or any other general solicitation or general advertisement.


 


(e)          Access
to Information. The Investor acknowledges that it has reviewed the Disclosure Materials and has been afforded (i) the opportunity
to ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Company concerning the
terms and conditions of the offering of the Securities and the merits and risks of investing in the Securities; (ii) access to
information about the Company and the Subsidiaries and their respective financial condition, results of operations, business, properties,
management and prospects sufficient to enable it to evaluate its investment; and (iii) the opportunity to obtain such additional
information that the Company possesses or can acquire without unreasonable effort or expense that is necessary to make an informed
investment decision with respect to the investment. Neither such inquiries nor any other investigation conducted by or on behalf
of the Investor or its representatives or counsel shall modify, amend or affect the Investor’s right to rely on the truth,
accuracy and completeness of the Disclosure Materials and the Company’s representations and warranties contained in the Transaction
Documents.


 


(f)          Certain
Trading Activities. The Investor has not directly or indirectly, nor has any Person acting on behalf of or pursuant to any
understanding with the Investor, engaged in any transactions in the securities of the Company (including, without limitations,
any Short Sales involving the Company’s securities) since November 1, 2011. The Investor covenants that neither it nor any
Person acting on its behalf or pursuant to any understanding with it will engage in any transactions in the securities of the Company
(including Short Sales) prior to the time that the transactions contemplated by this Agreement are publicly disclosed.


 


(g)          Independent
Investment Decision. The Investor has independently evaluated the merits of its decision to purchase Securities pursuant to
the Transaction Documents. The Investor has not relied on the business or legal advice of the Company or its agents, counsel or
Affiliates in making its investment decision hereunder.


 



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The Company acknowledges
and agrees that the Investor makes no representations or warranties with respect to the Transactions other than those specifically
set forth in this Section 3.2.


 


ARTICLE
4.


OTHER
AGREEMENTS OF THE PARTIES


 


4.1           Securities
Law Matters.


 


(a)          Restrictions
on Transfer. The Conversion Shares may only be disposed of in compliance with state and federal securities Laws. In connection
with any transfer of the Conversion Shares other than pursuant to an effective registration statement, to the Company, to an Affiliate
of the Investor or in connection with a pledge as contemplated in Section 4.1(b)(iii), the Company may require the transferor
thereof to provide to the Company an opinion of counsel selected by the transferor, the form and substance of which opinion shall
be reasonably satisfactory to the Company, to the effect that such transfer does not require registration of such transferred Conversion
Shares under the Securities Act. 


 


(b)          Legends.


 


(i)          The
Note will contain the following legend, until such time as it is not required under Section 4.1(c):


 


NEITHER THIS SECURITY NOR THE SECURITIES
ISSUABLE UPON CONVERSION OF THIS SECURITY HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION
OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH
EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY IS ISSUED PURSUANT TO THE CONVERTIBLE
NOTE PURCHASE AGREEMENT, DATED MARCH 13, 2012.


 


(ii)         Certificates
representing the Conversion Shares will contain the following legend, until such time as they are not required under Section
4.1(c):


 



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


 


(iii)        The
Company acknowledges and agrees that the Investor may from time to time pledge, and/or grant a security interest in some or all
of the Conversion Shares pursuant to a bona fide margin agreement in connection with a bona fide margin account and, if required
under the terms of such agreement or account, the Investor may transfer pledged or secured Conversion Shares to the pledgees or
secured parties. Such a pledge or transfer would not be subject to approval or consent of the Company and no legal opinion of legal
counsel to the pledgee, secured party or pledgor shall be required in connection with the pledge, but such legal opinion may be
required in connection with a subsequent transfer following default by the Investor transferee of the pledge. No notice shall be
required of such pledge. At the Investor’s expense, the Company will execute and deliver such reasonable documentation as
a pledgee or secured party of Securities may reasonably request in connection with a pledge or transfer thereof including the preparation
and filing of any required prospectus supplement under Rule 424(b)(3) of the Securities Act or other applicable provision of the
Securities Act to appropriately amend the list of selling stockholders thereunder. Except as otherwise provided in Section 4.1(c),
any Conversion Shares subject to a pledge or security interest as contemplated by this Section 4.1(b) shall continue to
bear the legend set forth in this Section 4.1(b) and be subject to the restrictions on transfer set forth in Section
4.1(a).


 



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(c)          Removal
of Legends. Certificates evidencing Conversion Shares shall not contain any legend (including the legend set forth in Section
4.1(b)(ii)): (i) while a registration statement (including the Registration Statement) covering such Conversion Shares is then
effective, or (ii) following a sale or transfer of such Conversion Shares pursuant to Rule 144 (assuming the transferee is not
an Affiliate of the Company), or (iii) while such Conversion Shares are eligible for sale by the selling Investor without volume
restrictions under Rule 144. The Company agrees that following the Effective Date or such other time as legends are no longer required
to be set forth on certificates representing Conversion Shares under this Section 4.1(c), it will, no longer than three
Trading Days following the delivery by the Investor to the Company or the Company’s transfer agent of a certificate representing
such Conversion Shares containing a restrictive legend, deliver or cause to be delivered to the Investor Conversion Shares which
are free of all restrictive and other legends. If the Company is then eligible, certificates for Conversion Shares subject to legend
removal hereunder shall be transmitted by the Company’s transfer agent to the Investor by crediting the prime brokerage account
of the Investor with the Depository Trust Company System as directed by the Investor. If the Investor shall make a sale or transfer
of Conversion Shares either (x) pursuant to Rule 144 or (y) pursuant to a registration statement and in each case shall have
delivered to the Company or the Company’s transfer agent the certificate representing the applicable Conversion Shares containing
a restrictive legend which are the subject of such sale or transfer and a representation letter in customary form (the date of
such sale or transfer and Conversion Share delivery being the “Share Delivery Date”) and (1) the Company shall
fail to deliver or cause to be delivered to the Investor a certificate representing such Conversion Shares that is free from all
restrictive or other legends by the third Trading Day following the Share Delivery Date and (2) following such third Trading Day
after the Share Delivery Date and prior to the time such Conversion Shares are received free from restrictive legends, the Investor,
or any third party on behalf of the Investor, purchases (in an open market transaction or otherwise) shares of Common Stock to
deliver in satisfaction of a sale by the Investor of such Conversion Shares (a “Buy-In”), then, in addition
to any other rights available to the Investor under the Transaction Documents and applicable law, the Company shall pay in cash
to the Investor (for costs incurred either directly by the Investor or on behalf of a third party) the amount by which the total
purchase price paid for Common Stock as a result of the Buy-In (including brokerage commissions, if any) exceed the proceeds received
by the Investor as a result of the sale to which such Buy-In relates. The Investor shall provide the Company written notice indicating
the amounts payable to the Investor in respect of the Buy-In. The Company may not make any notation on its records or give instructions
to any transfer agent of the Company that enlarge the restrictions on transfer set forth in this Section.


 


4.2           Furnishing
of Information. Until the end of the Effectiveness Period (as defined in the Registration Rights Agreement), the Company covenants
to timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be
filed by the Company after the date hereof pursuant to the Exchange Act. As long as the Investor owns Securities, if the Company
is not required to file reports with the Commission pursuant to such laws, it will prepare and furnish to the Investor and make
publicly available in accordance with Rule 144(c) such information as is required for the Investor to sell the Securities under
Rule 144. The Company further covenants that it will take such further action as any holder of Securities may reasonably request,
all to the extent required from time to time to enable such Person to sell the Securities without registration under the Securities
Act within the limitation of the exemptions provided by Rule 144.


 


4.3           Integration.
The Company shall not, and shall use its best efforts to ensure that no Affiliate of the Company shall, sell, offer for sale or
solicit offers to buy or otherwise negotiate in respect of any security (as defined in Section 2 of the Securities Act) that would
be integrated with the offer or sale of the Securities in a manner that would require the registration under the Securities Act
of the sale of the Securities to the Investor, or that would be integrated with the offer or sale of the Securities for purposes
of the rules and regulations of any Trading Market in a manner that would require stockholder approval of the sale of the Securities
to the Investor.


 






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4.4           Subsequent
Registrations. Other than a Registration Statement pursuant to the Registration Rights Agreement, prior to the first to occur
of (a) the Effective Date of a Registration Statement resulting in all Registrable Securities (as defined in the Registration Rights
Agreement) being registered for resale pursuant to one or more effective Registration Statements or (b) such time as all Registrable
Securities may be sold by the Investor without volume restrictions pursuant to Rule 144, the Company may not file any registration
statement (other than on Form S-4 or Form S-8) with the Commission with respect to any securities of the Company.


 


4.5           Securities
Laws Disclosure; Publicity. By 9:00 a.m. (New York City time) on the Trading Day following the execution of this Agreement,
and by 9:00 a.m. (New York City time) on the Trading Day following the Closing Date, the Company shall issue press releases disclosing
the Transactions and the Closing. On the Trading Day following the execution of this Agreement, the Company will file a Current
Report on Form 8-K disclosing the material terms of the Transaction Documents (and attach as exhibits thereto the Transaction Documents),
and on the Trading Day following the Closing Date the Company will file an additional Current Report on Form 8-K to disclose the
Closing. In addition, the Company will make such other filings and notices in the manner and time required by the Commission and
the Trading Market on which the Common Stock is listed, if any.


 


4.6           Indemnification
of Investor. In addition to the indemnity provided in the Registration Rights Agreement, the Company will indemnify and hold
the Investor and its directors, officers, stockholders, partners, employees and agents, each Person who controls the Investor (within
the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act) and the directors, officers, stockholders,
partners, employees and agents of each such controlling person (each, an “Investor Party”) harmless from any
and all losses, liabilities, obligations, claims, contingencies, damages, costs and expenses, including all judgments, amounts
paid in settlements, court costs and reasonable attorneys’ fees and costs of investigation (collectively, “Losses”)
that any such Investor Party may suffer or incur as a result of or relating to (a) any misrepresentation, breach or inaccuracy
of any representation, warranty, covenant or agreement made by the Company in any Transaction Document, or (b) any action instituted
against an Investor Party, by any third party with respect to any of the Transactions (unless such action is based upon a breach
of the Investor’s representations, warranties or covenants under the Transaction Documents or any agreements or understandings
the Investor may have with any such stockholder or any violations by the Investor of state or federal securities Laws or any conduct
by the Investor which constitutes fraud or willful misconduct). In addition to the indemnity contained herein, the Company will
reimburse each Investor Party for its reasonable legal and other expenses (including the cost of any investigation, preparation
and travel in connection therewith) incurred in connection therewith, as such expenses are incurred. Except as otherwise set forth
herein, the mechanics and procedures with respect to the rights and obligations under this Section 4.6 shall be the same
as those set forth in Section 6(a) of the Registration Rights Agreement.


 


4.7           Indemnification
of the Company. In addition to the indemnity provided in the Registration Rights Agreement, the Investor will indemnify and
hold the Company and its directors, officers, stockholders, partners, employees and agents (each, a “Company Party”)
each Person who controls the Company (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act)
and the directors, officers, stockholders, partners, employees and agents of each such controlling person harmless from any and
all Losses that any such Company Party may suffer or incur as a result of or relating to any misrepresentation, breach or inaccuracy
of any representation, warranty, covenant or agreement made by the Investor in any Transaction Document and any violation of federal
or state securities Laws in connection with the Transaction, or any conduct in connection with the Transaction that constitutes
fraud or willful misconduct. In addition to the indemnity contained herein, the Investor will reimburse each Company Party for
its reasonable legal and other expenses (including the cost of any investigation, preparation and travel in connection therewith)
incurred in connection therewith, as such expenses are incurred. Except as otherwise set forth herein, the mechanics and procedures
with respect to the rights and obligations under this Section 4.7 shall be the same as those set forth in Section 6(b)
of the Registration Rights Agreement.


 



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4.8           Non-Public
Information. Except with regard to the Transactions, the Company covenants and agrees that neither it nor any other Person
acting on its behalf will provide the Investor or its agents or counsel with any information that the Company believes constitutes
material non-public information, unless prior thereto the Investor, shall have executed a written agreement regarding the confidentiality
and use of such information. The Company understands and confirms that the Investor shall be relying on the foregoing representations
in effecting transactions in securities of the Company. Notwithstanding the foregoing, the Investor Directors will not be restricted
from receiving material non-public information in connection with their duties as directors of the Company;


 


4.9           Access
to Information. From the date of this Agreement and through the Closing upon reasonable notice, the Company shall, subject
to applicable Law, afford the Investor and its officers, employees, agents, accountants, counsel and representatives reasonable
access, during normal business hours, to the offices, personnel, books and records of the Company. All confidential information
furnished to a party or its advisor by a party or its advisor in connection with the Transactions shall be subject to, and the
recipient of such information shall hold all such information in confidence in accordance with, the provisions of the Confidentiality
Agreement.


 


4.10         Listing
of Conversion Shares. The Company agrees, (i) if the Company applies to have the Common Stock traded on any other Trading Market,
it will include in such application the Conversion Shares, and will take such other action as is necessary or desirable to cause
the Conversion Shares to be listed on such other Trading Market as promptly as possible, and (ii) it will take all action reasonably
necessary to continue the listing and trading of its Common Stock on a Trading Market and will comply in all material respects
with the Company’s reporting, filing and other obligations under the bylaws or rules of the Trading Market.


 


4.11         Use
of Proceeds. The Company will use the net proceeds from the sale of the Note for working capital purposes and not for the satisfaction
of any portion of the Company’s debt or for the redemption of any Common Stock or Common Stock Equivalents.


 


4.12         Cost
Accounting Requirements.  The Company shall use reasonable best efforts to cooperate with the Defense Contract Audit Agency
and any other Governmental Authority with respect to correcting (a) any identified deficiencies in the Company’s estimating,
accumulating, recording, segregating, reporting and invoicing of costs under any Government Contract or Government Assistance Agreement,
or (b) any deficiencies in the Company’s internal control systems related thereto.


 



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4.13        Restriction
on Indebtedness. Until the Note has been converted, redeemed or otherwise satisfied in full in accordance with its terms, the
Company shall not, and the Company shall cause each of its Subsidiaries not to, directly or indirectly, incur or guarantee, assume
or suffer to exist any Indebtedness other than the following (“Permitted Indebtedness”):


 


(a)          Indebtedness
incurred by the Company or any of its Subsidiaries that is made expressly subordinate in right of payment to the Indebtedness evidenced
by the Note;


 


(b)          Indebtedness
secured by Permitted Liens;


 


(c)          Senior
Indebtedness in an aggregate principal amount not to exceed $10,000,000;


 


(d)          Indebtedness
incurred by the Company or any of its Subsidiaries from Harris Bank in the ordinary course of business under the Merchant Services
Agreement dated November 29, 2011;


 


(e)          Indebtedness,
whether or not secured by a Lien, of any wholly-owned Subsidiary of the Company to the Company or to another wholly-owned Subsidiary
of the Company;


 


(f)          Operating
leases incurred by the Company or any of its Subsidiaries in the ordinary course of business; and


 


(g)          Any
extensions, refinancings and renewals of any items in clauses (a)-(f) above; provided, however, that any such Indebtedness (i)
does not have an aggregate principal amount that exceeds the principal amount of, plus any accrued and unpaid interest on, the
Indebtedness being so extended, renewed or refinanced, and (ii) to the extent such Indebtedness extends, renews or refinances Indebtedness
subordinated or pari passu in right of payment to the Note, such Indebtedness is subordinated or pari passu in right of payment
to the Note at least to the same extent as the Indebtedness being extended, renewed or refinanced.


 


ARTICLE
5.


CONDITIONS
PRECEDENT TO CLOSING


 


5.1           Conditions
Precedent to the Obligations of the Investor to Purchase Securities. The obligation of the Investor to purchase Securities
at the Closing is subject to the fulfillment, to the Investor’s satisfaction, at or before the Closing, of each of the following
conditions (any of which may be waived by the Investor):


 



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(a)          Representations
and Warranties. The representations and warranties of the Company contained herein that are qualified as to materiality shall
be true and correct as of the date hereof and on the Closing Date, except to the extent any such representation or warranty expressly
speaks as of an earlier date, in which case such representation or warranty shall be true and correct as of such earlier date,
and the representations and warranties of the Company contained herein not qualified as to materiality shall be true and correct
in all material respects as of the date hereof and as of the Closing as though made on and as of such date, except to the extent
any such representation or warranty expressly speaks as of an earlier date, in which case such representation or warranty shall
be true and correct in all material respects as of such earlier date, except that the representations and warranties in Sections
3.1(c), (f) and (g) shall be true and correct in all respects as of the date hereof and the Closing Date;


 


(b)          Performance.
The Company shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions
required by the Transaction Documents to be performed, satisfied or complied with by it at or prior to the Closing;


 


(c)          No
Injunction. No statute, rule, regulation, executive order, judgment, decree, ruling or injunction shall have been enacted,
entered, promulgated or endorsed by any Governmental Authority of competent jurisdiction that enjoins or prohibits the consummation
of any of the Transactions, and no Action or Proceeding shall have been instituted that seeks to enjoin or prohibit the consummation
of any of the Transactions;


 


(d)          Adverse
Changes. Since the date of execution of this Agreement, no event or series of events shall have occurred that has resulted
in a Material Adverse Effect;


 


(e)          No
Suspensions of Trading in Common Stock. Trading in the Common Stock shall not have been suspended by the Commission or any
Trading Market (except for any suspensions of trading of not more than one Trading Day solely to permit dissemination of material
information regarding the Company) at any time since the date of execution of this Agreement;


 


(f)          No
Material Adverse Change. Except as reflected or reserved against in the consolidated balance sheets (or the notes thereto)
of the Company and its Subsidiaries included in the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 2011, filed with the Commission on November 10, 2011, there shall not have occurred a Material Adverse Effect since
December 31, 2010;


 


(g)          Company
Deliverables. The Company shall have delivered the Company Deliverables in accordance with Section 2.2(a).


 


5.2           Conditions
Precedent to the Obligations of the Company to sell Securities. The obligation of the Company to sell Securities at the Closing
is subject to the satisfaction or waiver by the Company, at or before the Closing, of each of the following conditions:


 


(a)          Representations
and Warranties. The representations and warranties of the Investor contained herein, other than the representations and warranties
contained in Sections 3.2(b), (c), (d) and (f) (the “Investment Representations”)
shall be true and correct in all material respects as of the date when made and as of the Closing Date as though made on and as
of such date. The Investment Representations shall be true and correct in all respects as of the date hereof and the Closing Date;


 



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(b)          Performance.
The Investor shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions
required by the Transaction Documents to be performed, satisfied or complied with by the Investor at or prior to the Closing;


 


(c)          No
Injunction. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated
or endorsed by any court or governmental authority of competent jurisdiction that prohibits the consummation of any of the Transactions;
and


 


(d)          Investor
Deliverables. The Investor shall have delivered the Investor Deliverables in accordance with Section 2.2(b).


 


ARTICLE
6.

MISCELLANEOUS


 


6.1           Fees
and Expenses. The Company shall reimburse the Investor for legal fees and expenses incurred in connection with the negotiation,
preparation, execution, delivery and performance of the Transaction Documents up to a maximum aggregate amount of $25,000. Except
as set forth in the immediately preceding sentence, each party shall pay the fees and expenses of its advisers, counsel, accountants
and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery
and performance of the Transaction Documents. The Company shall pay all stamp and other taxes and duties levied in connection with
the issuance of the Securities.


 


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


 


6.3           Notices.
Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and
shall be deemed given and effective on the earliest of (a) the date of transmission, if such notice or communication is delivered
via email or facsimile (provided the sender receives a machine-generated confirmation of successful transmission) at the facsimile
number specified in this Section (b) the Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight
courier service, or (c) upon actual receipt by the party to whom such notice is required to be given. The address for such notices
and communications shall be as follows:


 


	 	If to the Company:	ECOtality, Inc. 
	 	 	Post Montgomery Center
	 	 	One Montgomery Street, Suite 2525
	 	 	San Francisco, CA 94104
	 	 	Facsimile:  (415) 992-3001
	 	 	Attn: Chief Executive Officer


 



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	 	With a copy to:	Farella Braun + Martel LLP
	 	 	Russ Building
	 	 	235 Montgomery Street, 17th floor
	 	 	San Francisco, CA  94104
	 	 	Facsimile:  (415) 954-4480
	 	 	Attn:    Samuel Dibble / Bruce Maximov
	 	 	 
	 	If to the Investor:	ABB Technology Ventures Ltd
	 	 	Affolternstrasse 44
	 	 	P.O. Box
	 	 	CH-8050
	 	 	Zurich/Switzerland
	 	 	Attn:   Girish Nadkarni
	 	 	 
	 	With a copy to:	ABB Ltd.
	 	 	EC-LC
	 	 	Affolternstrasse 44
	 	 	8050 Zurich
	 	 	SWITZERLAND
	 	 	Attn:    Diane Desaintvictor, Executive Vice President, 

            General Counsel & Secretary
	 	 	 
	 	And:	Kirkland & Ellis LLP
	 	 	601 Lexington Avenue
	 	 	New York, NY 10022
	 	 	Facsimile: (212) 446-4900
	 	 	Attn:    Thomas Christopher /
	 	 	             Christopher Kitchen


 


or such other address as may be designated
in writing hereafter, in the same manner, by such Person.


 


6.4           Amendments;
Waivers; No Additional Consideration. No provision of this Agreement may be waived or amended except in a written instrument
signed by the Company and the Investor. No waiver of any default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other
provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in
any manner impair the exercise of any such right.


 


6.5           Termination.
This Agreement may be terminated prior to Closing:


 


(a)          upon
the mutual written consent of the Company and the Investor;


 


(b)          by
the Company if any of the conditions set forth in Section 5.2 shall have become incapable of fulfillment, and shall not
have been waived by the Company;


 



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(c)          by
the Investor if any of the conditions set forth in Section 5.1 shall have become incapable of fulfillment, and shall not
have been waived by the Investor; or


 


(d)          by
the Company or the Investor upon written notice to the other, if the Closing shall not have taken place by 6:30 p.m. Eastern time
on the Outside Date;


 


provided, however,
that, except in the case of clause (a) above, the party seeking to terminate its obligation to effect the Closing shall not then
be in breach of any of its representations, warranties, covenants or agreements contained in this Agreement or the other Transaction
Documents if such breach has resulted in the circumstances giving rise to such party’s seeking to terminate its obligation
to effect the Closing.


 


Upon a termination
in accordance with this Section 6.5, the Company and the Investor shall not have any further obligation or liability (including
as arising from such termination) to the other under the Transaction Documents as a result therefrom. Any proper termination of
this Agreement pursuant to this Section 6.5 shall be effective immediately upon the delivery of written notice of the terminating
party to the other party hereto.


 


6.6           Construction.
The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof. 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. This Agreement shall be construed as
if drafted jointly by the parties, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue
of the authorship of any provisions of this Agreement or any of the Transaction Documents.


 


6.7           Successors
and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted
assigns. The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of
the Investor. The Investor may assign any or all of its rights under this Agreement to any Person to whom the Investor assigns
or transfers the Note in accordance with its terms or, with respect to Conversion Shares, any Person to whom the Investor assigns
or transfers Conversion Shares representing at least 75% of the Conversion Shares issuable upon conversion of the Note, provided
that (1) such transferee agrees in writing to be bound, with respect to the transferred Securities, by the provisions hereof that
apply to the “Investor,” and (2) such transfer shall be subject to the consent of the Company, which shall not be unreasonably
withheld or delayed, it being understood that it shall be deemed reasonable for the Company to withhold its consent to any assignment
or transfer to any Person whose primary business is the manufacture of electric vehicle charging stations.


 


6.8           No
Third-Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective successors
and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, except as otherwise
set forth in Section 4.6 (as to each Investor Party) and Section 4.7 (as to each Company Party).


 



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6.9           Governing
Law; Consent to Jurisdiction; Waiver of Jury Trial. All questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by and construed and enforced in accordance with the laws of the State of New York applicable
to contracts executed in and to be performed in that State, without regard to the principles of conflicts of law thereof or of
any other jurisdiction. Each party agrees that all Proceedings concerning the interpretations, enforcement and defense of the transactions
contemplated by this Agreement and any other Transaction Documents (whether brought against a party hereto or its respective Affiliates,
employees or agents) shall be commenced exclusively in the New York Courts. Each party hereto hereby irrevocably submits to the
exclusive jurisdiction of the New York Courts for the adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect to the enforcement of the any of the Transaction Documents),
and hereby irrevocably waives, and agrees not to assert in any Proceeding, any claim that it is not personally subject to the jurisdiction
of any such New York Court, or that such Proceeding has been commenced in an improper or inconvenient forum. Each party hereto
hereby irrevocably waives personal service of process and consents to process being served in any such Proceeding by mailing a
copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in
effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process
and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted
by law. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO
TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY AND
REPRESENTS AND WARRANTS THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER. If either party shall commence a Proceeding
to enforce any provisions of a Transaction Document, then the prevailing party in such Proceeding shall be reimbursed by the other
party for its reasonable attorneys’ fees and other costs and expenses incurred with the investigation, preparation and prosecution
of such Proceeding.


 


6.10         Survival.
The representations, warranties, agreements and covenants contained herein shall survive the Closing and the delivery of the Securities
until the expiration of the applicable statute of limitations.


 


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


 


6.12         Severability.
If any provision of this Agreement is held to be invalid or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Agreement shall not in any way be affected or impaired thereby and the parties will attempt
to agree upon a valid and enforceable provision that is a reasonable substitute therefor, and upon so agreeing, shall incorporate
such substitute provision in this Agreement.


 



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


 


6.14         Replacement
of Securities. If any certificate or instrument evidencing any Securities is mutilated, lost, stolen or destroyed, the Company
shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof, or in lieu of and substitution
therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory to the Company of such loss,
theft or destruction and customary and reasonable indemnity, if requested. The applicants for a new certificate or instrument under
such circumstances shall also pay any reasonable third-party costs associated with the issuance of such replacement Securities.
If a replacement certificate or instrument evidencing any Securities is requested due to a mutilation thereof, the Company may
require delivery of such mutilated certificate or instrument as a condition precedent to any issuance of a replacement.


 


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


 


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


 


6.17         Limitation
of Liability. Notwithstanding anything herein to the contrary, the Company acknowledges and agrees that the liability of the
Investor arising directly or indirectly, under any Transaction Document of any and every nature whatsoever shall be satisfied solely
out of the assets of the Investor, and that no trustee, officer, other investment vehicle or any other Affiliate of the Investor
or any investor, stockholder or holder of shares of beneficial interest of such a Investor shall be personally liable for any liabilities
of the Investor.


 


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SIGNATURE PAGES FOLLOW]


 



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


 


	 	ECOTALITY, INC.
	 	 	 
	 	By:	/s/ Jonathan Read
	 	 	Name: 	Jonathan Read
	 	 	Title:	Chief Executive Officer


 


[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK;

SIGNATURE PAGES FOR INVESTOR FOLLOWS]


 



    	 



    	 



    

 


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


 


	 	ABB TECHNOLOGY VENTURES LTD
	 	 	 
	 	By:	/s/ Girish Nadkarni
	 	 	Name:	Girish Nadkarni
	 	 	Title:	Managing Director
	 	 	 
	 	By:	/s/ Andrew Tang
	 	 	Name:	Andrew Tang
	 	 	Title:	Managing Director