Lithium Exploration Group, Inc.: Exhibit 10.1 - Filed by newsfilecorp.com






SECURITIES PURCHASE AGREEMENT

     This Securities Purchase
Agreement (this “Agreement”) is dated as of March 28, 2012, between
Lithium Exploration Group, Inc., a Nevada corporation (the “Company”),
and the purchaser identified on the signature page hereto (including its
successors and assigns, the “Purchaser”).

     WHEREAS, subject to the terms and
conditions set forth in this Agreement and pursuant to Section 4(2) of the
Securities Act of 1933, as amended (the “Securities Act”), and Rule 506
promulgated thereunder, the Company desires to issue and sell to the Purchaser,
and the Purchaser desires to purchase from the Company, securities of the
Company as more fully described in this Agreement.

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

ARTICLE I. 
DEFINITIONS

     1.1 Definitions. In
addition to the terms defined elsewhere in this Agreement: (a) capitalized terms
that are not otherwise defined herein have the meanings given to such terms in
the Debentures (as defined herein), and (b) the following terms have the
meanings set forth in this Section 1.1:

     “Acquiring Person” shall have
the meaning ascribed to such term in Section 4.7.

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

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

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

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

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

     “Closing Date” means the
Trading Day on which all of the Transaction Documents have been executed and
delivered by the applicable parties thereto, and all conditions precedent to (i)
the Purchaser’s obligations to pay the Subscription Amount and (ii) the
Company’s obligations to deliver the Securities, in each case, have been satisfied or waived. If all conditions
  precedent to the Purchaser’s obligation to pay the Subscription Amount and the
  Company’s obligation to deliver the Securities have been satisfied, the
  Purchaser shall send the Subscription Amount no later than 45 calendar days
following the date hereof. 




  
  

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

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

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

     “Company Counsel” means
Macdonald Tuskey, with offices located at 400-570 Granville St., Vancouver, BC
V6C 3P1.

     “Conversion Price” shall have
the meaning ascribed to such term in the Debentures.

     “Debentures” means the
Original Issue Discount Senior Convertible Debentures due, subject to the terms
therein, 12 months from their date of issuance, issued by the Company to the
Purchaser hereunder, in the form of Exhibit A attached hereto.

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

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

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

     “Exempt Issuance” means the
issuance of (a) shares of Common Stock or options to employees, officers or
directors of the Company pursuant to any stock or option plan duly adopted for
such purpose, by a majority of the non-employee members of the Board of
Directors or a majority of the members of a committee of non-employee directors
established for such purpose, (b) securities upon the exercise or exchange of or
conversion of any Securities issued hereunder and/or other securities
exercisable or exchangeable for or convertible into shares of Common Stock
issued and outstanding on the date of this Agreement, provided that such
securities have not been amended since the date of this Agreement to increase
the number of such securities or to decrease the exercise price, exchange price
or conversion price of such securities, (c) securities issued pursuant to
acquisitions or strategic transactions approved by a majority of the
disinterested directors of the Company, provided that any such issuance shall
only be to a Person (or to the equityholders of a
Person) which is, itself or through its subsidiaries, an operating company or an
owner of an asset in a business synergistic with the business of the Company and
shall provide to the Company additional benefits in addition to the investment
of funds, but shall not include a transaction in which the Company is issuing
securities primarily for the purpose of raising capital or to an entity whose
primary business is investing in securities, and (d) Common Stock issued or
issuable at a price no lower than the then current market price for such shares
on the Trading Market.

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     “FCPA” means the Foreign
Corrupt Practices Act of 1977, as amended.

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

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

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

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

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

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

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

     “Maximum Rate” shall have the
meaning ascribed to such term in Section 5.17.

     “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.

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

     “Public Information Failure”
shall have the meaning ascribed to such term in Section 4.3(b) .

     “Purchaser Party” shall have
the meaning ascribed to such term in Section 4.10.

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

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     “Required Minimum” means, as
of any date, the maximum aggregate number of shares of Common Stock then issued
or potentially issuable in the future pursuant to the Transaction Documents,
including any Underlying Shares issuable upon exercise in full of all Warrants
or conversion in full of all Debentures (including Underlying Shares issuable as
payment of interest on the Debentures), ignoring any conversion or exercise
limits set forth therein, and assuming that the Conversion Price is at all times
on and after the date of determination 75% of the then Conversion Price on the
Trading Day immediately prior to the date of determination.

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

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

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

     “Securities” means the
Debentures, the Warrants, the Warrant Shares and the Underlying Shares.

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

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

     “SRFF” means Sichenzia Ross
Friedman Ference LLP with offices located at 61 Broadway, New York, New York
10006.

     “Subscription Amount” means,
as to the Purchaser, the aggregate amount to be paid for Debentures and Warrants
purchased hereunder.

     “Subsidiary” means any
subsidiary of the Company as set forth on Schedule 3.1(a) and
shall, where applicable, also include any direct or indirect subsidiary of the
Company formed or acquired after the date hereof.

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

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

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

     “Transfer
Agent” means VStock Transfer, LLC 77 Spruce Street, Suite 201, Cederhurst, NY
11516 and any successor transfer agent of the Company.

     “Underlying Shares” means the
shares of Common Stock issued and issuable upon conversion of the Debentures and
upon exercise of the Warrants and issued and issuable in lieu of the cash
payment of interest on the Debentures in accordance with the terms of the
Debentures.

     “VWAP” means, for any date,
the price determined by the first of the following clauses that applies: (a) if
the Common Stock is then listed or quoted on a Trading Market, the daily volume
weighted average price 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 as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m.
(New York City time) to 4:02 p.m. (New York City time)), (b) if the OTC Bulletin
Board is not a Trading Market, the volume weighted average price of the Common
Stock for such date (or the nearest preceding date) on the OTC Bulletin Board,
(c) if the Common Stock is not then listed or quoted for trading on the OTC
Bulletin Board and if prices for the Common Stock are then reported in the “Pink
Sheets” published by Pink OTC Markets, Inc. (or a similar organization or agency
succeeding to its functions of reporting prices), the most recent bid price per
share of the Common Stock so reported, or (d) in all other cases, the fair
market value of a share of Common Stock as determined by an independent
appraiser selected in good faith by the Purchaser and reasonably acceptable to
the Company, the fees and expenses of which shall be paid by the Company.

     “Warrants” means,
collectively, the Common Stock purchase warrants purchased by the Purchaser
hereunder in accordance with Section 2.2(a) hereof, which Warrants shall be
exercisable immediately and have a term of exercise equal to five years, in the
form of Exhibit B attached hereto.

     “Warrant Shares” means the
shares of Common Stock issuable upon exercise of the Warrants.

ARTICLE II.
 PURCHASE AND SALE

     2.1 Closing. On the
Closing Date, upon the terms and subject to the conditions set forth herein,
substantially concurrent with the execution and delivery of this Agreement by
the parties hereto, the Company agrees to sell, and the Purchaser agrees to
purchase $1,500,000 in 

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     2.2 Deliveries.

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

     (i) this
Agreement duly executed by the Company;

     (ii) a
legal opinion of Company Counsel, substantially in the form of Exhibit C
attached hereto; 

     (iii) a
Debenture with a principal amount the Purchaser’s Subscription Amount,
registered in the name of the Purchaser;

     (iv) a
Warrant registered in the name of the Purchaser to purchase up to a number of
shares of Common Stock equal to 100% of the Purchaser’s Subscription Amount
divided by the conversion price of the Debenture, set at $0.45 per share; and


     (v) an
Officer’s Closing Certificate dated as of the Closing Date in a form that is
reasonably acceptable to the Investor;

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

     (i) this
Agreement duly executed by the Purchaser; and

     (ii) the
Purchaser’s Subscription Amount by wire transfer to the account as specified in
writing by the Company;

     2.3 Closing Conditions.

     (a) The
obligations of the Company hereunder in connection with the Closing are subject
to the following conditions being met:

     (i) the
accuracy in all material respects on the Closing Date of the representations and
warranties of the Purchaser contained herein (unless as of a specific date
therein in which case they shall be accurate as of such date);

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

     (iii)
the delivery by the Purchaser of the items set forth in Section 2.2(b) of this
Agreement.

     (b) The
obligations of the Purchaser hereunder in connection with the Closing are
subject to the following conditions being met:

     (i) the
accuracy in all material respects when made and on the Closing Date of the
representations and warranties of the Company contained herein (unless as of a
specific date therein);

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

     (iii)
the delivery by the Company of the items set forth in Section 2.2(a) of this
Agreement; 

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

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

ARTICLE III. 
REPRESENTATIONS AND WARRANTIES

     3.1 Representations and
Warranties of the Company. Except as set forth in the Disclosure Schedules,
which Disclosure Schedules shall be deemed a part hereof and shall qualify any
representation or otherwise made herein to the extent of the disclosure
contained in the corresponding section of the Disclosure Schedules, the Company
hereby makes the following representations and warranties to the Purchaser as of
the date hereof and as of the Closing Date:

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     (a)Subsidiaries. All of the
direct and indirect subsidiaries of the Company are set forth on Schedule
3.1(a). The Company owns, directly or indirectly, all of the capital stock
or other equity interests of each Subsidiary free and clear of any Liens, and
all of the issued and outstanding shares of capital stock of each Subsidiary are
validly issued and are fully paid, non-assessable and free of preemptive and
similar rights to subscribe for or purchase securities. If the Company has no
subsidiaries, all other references to the Subsidiaries or any of them in the
Transaction Documents shall be disregarded.

     (b)
Organization and Qualification. The Company and each of the Subsidiaries
is an entity duly incorporated or otherwise organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation or
organization, with the requisite power and authority to own and use its
properties and assets and to carry on its business as currently conducted.
Neither the Company nor any Subsidiary is in violation nor default of any of the
provisions of its respective certificate or articles of incorporation, bylaws or
other organizational or charter documents. Each of the Company and the
Subsidiaries is duly qualified to conduct business and is in good standing as a
foreign corporation or other entity in each jurisdiction in which the nature of
the business conducted or property owned by it makes such qualification
necessary, except where the failure to be so qualified or in good standing, as
the case may be, could not have or reasonably be expected to result in: (i) a
material adverse effect on the legality, validity or enforceability of any
Transaction Document, (ii) a material adverse effect on the results of
operations, assets, business, prospects or condition (financial or otherwise) of
the Company and the Subsidiaries, taken as a whole, or (iii) a material adverse
effect on the Company’s ability to perform in any material respect on a timely
basis its obligations under any Transaction Document (any of (i), (ii) or (iii),
a “Material Adverse Effect”) and no Proceeding has been instituted
in any such jurisdiction revoking, limiting or curtailing or seeking to revoke,
limit or curtail such power and authority or qualification.

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

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

     (e)Filings, Consents and
Approvals. The Company is not required to obtain any consent, waiver,
authorization or order of, give any notice to, or make any filing or
registration with, any court or other federal, state, local or other
governmental authority or other Person in connection with the execution,
delivery and performance by the Company of the Transaction Documents, other
than: (i) the notice and/or application(s) to each applicable Trading Market for
the issuance and sale of the Securities and the listing of the Shares and
Warrant Shares for trading thereon in the time and manner required thereby and
(ii) the filing of Form D with the Commission and such filings as are required
to be made under applicable state securities laws (collectively, the
“Required Approvals”).

     (f)Issuance of the
Securities. The Securities are duly authorized and, when issued and paid for
in accordance with the applicable Transaction Documents, will be duly and
validly issued, fully paid and nonassessable, free and clear of all Liens
imposed by the Company other than restrictions on transfer provided for in the
Transaction Documents. The Underlying Shares, when issued in accordance with the
terms of the Transaction Documents, will be validly issued, fully paid and
nonassessable, free and clear of all Liens imposed by the Company other than
restrictions on transfer provided for in the Transaction Documents. The Company
has reserved from its duly authorized capital stock a number of shares of Common
Stock for issuance of the Underlying Shares at least equal to the Required
Minimum on the date hereof.

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

     (h)
SEC Reports; Financial Statements. The Company has filed all reports,
schedules, forms, statements and other documents required to be filed by the
Company under the Securities Act and the Exchange Act, including pursuant to
Section 13(a) or 15(d) thereof, for the two years preceding the date hereof (or
such shorter period as the Company was required by law or regulation to file
such material) (the foregoing materials, including the exhibits thereto and
documents incorporated by reference therein, being collectively referred to
herein as the “SEC Reports”) on a timely basis or has received a valid
extension of such time of filing and has filed any such SEC Reports prior to the
expiration of any such extension. As of their respective dates, the SEC Reports
complied in all material respects with the requirements of the Securities Act
and the Exchange Act, as applicable, and none of the SEC Reports, when filed,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. The financial statements of the Company included in the SEC Reports
comply in all material respects with applicable accounting requirements and the rules
and regulations of the Commission with respect thereto as in effect at the time
of filing. Such financial statements have been prepared in accordance with
United States generally accepted accounting principles applied on a consistent
basis during the periods involved (“GAAP”), except as may be otherwise
specified in such financial statements or the notes thereto and except that
unaudited financial statements may not contain all footnotes required by GAAP,
and fairly present in all material respects the financial position of the
Company and its consolidated Subsidiaries as of and for the dates thereof and
the results of operations and cash flows for the periods then ended, subject, in
the case of unaudited statements, to normal, immaterial, year-end audit
adjustments.

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

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

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

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

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

12




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

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

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

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

13




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

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

14




     (t)
Private Placement. Assuming the accuracy of the Purchaser’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 Securities by the
Company to the Purchaser as contemplated hereby. The issuance and sale of the
Securities hereunder does not contravene the rules and regulations of the
Trading Market.

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

     (v)
Registration Rights. Other than as set forth on Schedule 3.1(v), no
Person has any right to cause the Company to effect the registration under the
Securities Act of any securities of the Company or any Subsidiaries.

     (w)
Listing and Maintenance Requirements. The Common Stock is registered
pursuant to Section 12(b) or 12(g) of the Exchange Act or the Company is
obligated to file reports with the SEC pursuant to Section 15(d) of the Exchange
Act, and the Company has taken no action designed to, or which to its knowledge
is likely to have the effect of, terminating the registration of the Common
Stock under the Exchange Act nor has the Company received any notification that
the Commission is contemplating terminating such registration. The Company has
not, in the 12 months preceding the date hereof, received notice from any
Trading Market on which the Common Stock is or has been listed or quoted to the
effect that the Company is not in compliance with the listing or maintenance
requirements of such Trading Market. The Company is, and has no reason to
believe that it will not in the foreseeable future continue to be, in compliance
with all such listing and maintenance requirements.

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

15




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

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

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

16




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

     (cc)
No General Solicitation. Neither the Company nor any person acting on
behalf of the Company has offered or sold any of the Securities by any form of
general solicitation or general advertising. The Company has offered the
Securities for sale only to the Purchaser and certain other “accredited
investors” within the meaning of Rule 501 under the Securities Act.

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

17




     (ee)
Accountants. The Company’s accounting firm is set forth on
Schedule 3.1(ee) of the Disclosure Schedules. To the knowledge and
belief of the Company, such accounting firm: (i) is a registered public
accounting firm as required by the Exchange Act and (ii) shall express its
opinion with respect to the financial statements to be included in the Company’s
Annual Report for the fiscal year ending June 30, 2011.

     (ff)
Seniority. Other than as set forth on Schedule 3.1(ff), as of the Closing
Date, no Indebtedness or other claim against the Company is senior to the
Debentures in right of payment, whether with respect to interest or upon
liquidation or dissolution, or otherwise, other than indebtedness secured by
purchase money security interests (which is senior only as to underlying assets
covered thereby) and capital lease obligations (which is senior only as to the
property covered thereby).

     (gg)
No Disagreements with Accountants and Lawyers; Outstanding SEC
Comments. There are no disagreements of any kind presently existing, or
reasonably anticipated by the Company to arise, between the Company and the
accountants and lawyers formerly or presently employed by the Company and the
Company is current with respect to any fees owed to its accountants and lawyers
which could affect the Company’s ability to perform any of its obligations under
any of the Transaction Documents. There are no comments outstanding with respect
to any review of the Company’s Exchange Act filings by the SEC, or any other
review by the SEC.

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

     (ii)
Acknowledgment Regarding Purchaser’s Trading Activity. Anything in this
Agreement or elsewhere herein to the contrary notwithstanding (except for
Sections 3.2(f) and 4.16 hereof), it is understood and acknowledged by the
Company that: (i) the Purchaser has not been asked by the Company to agree, nor
has the Purchaser agreed, to desist from purchasing or selling, long, securities
of the Company, or “derivative” securities based on securities issued by the
Company or to hold the Securities for any specified term, (ii) past or future
open market or other transactions by the Purchaser, other than Short Sales,
which may negatively impact the market price of the Company’s publicly-traded
securities, (iii) the Purchaser shall not be deemed to have any affiliation with
or control over any arm’s length counter-party in any “derivative” transaction.
The Company further understands and acknowledges that (y) the Purchaser may
engage in hedging activities at various times
during the period that the Securities are outstanding, including, without
limitation, during the periods that the value of the Underlying Shares
deliverable with respect to Securities are being determined, and (z) such
hedging activities (if any) could reduce the value of the existing stockholders'
equity interests in the Company at and after the time that the hedging
activities are being conducted. The Company acknowledges that such
aforementioned hedging activities do not constitute a breach of any of the
Transaction Documents.

18




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

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

     (ll)
Office of Foreign Assets Control. Neither the Company nor any Subsidiary
nor, to the Company's knowledge, any director, officer, agent, employee or
affiliate 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”).

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

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

19




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

     3.2 Representations and
Warranties of the Purchaser. The Purchaser hereby represents and warrants as
of the date hereof and as of the Closing Date to the Company as follows (unless
as of a specific date therein):

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

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

20




     (c)Purchaser Status. At the
time the Purchaser was offered the Securities, it was, and as of the date hereof
it is, and on each date on which it exercises any Warrants or converts any
Debentures it will be either: (i) an “accredited investor” as defined in Rule
501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities Act or (ii) a
“qualified institutional buyer” as defined in Rule 144A(a) under the Securities
Act. The Purchaser is not required to be registered as a broker-dealer under
Section 15 of the Exchange Act.

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

     (e)General Solicitation. The
Purchaser 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.

     (f)Certain Transactions.
Other than consummating the transactions contemplated hereunder, the Purchaser
has not directly or indirectly, nor has any Person acting on behalf of or
pursuant to any understanding with the Purchaser, executed any purchases or
sales, including Short Sales, of the securities of the Company during the period
commencing as of the time that the Purchaser first received a term sheet
(written or oral) from the Company or any other Person representing the Company
setting forth the material terms of the transactions contemplated hereunder and
ending immediately prior to the execution hereof. The Purchaser agrees not to
engage in any Short Sales of the Company’s securities while any Debentures
remain outstanding.

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

ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES

     4.1 Transfer Restrictions.

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

21




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

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

     The
Company acknowledges and agrees that the Purchaser may from time to time pledge
pursuant to a bona fide margin agreement with a registered broker-dealer or
grant a security interest in some or all of the Securities to a financial
institution that is an “accredited investor” as defined in Rule 501(a) under the
Securities Act and who agrees to be bound by the provisions of this Agreement
and, if required under the terms of such arrangement, the Purchaser may transfer
pledged or secured Securities to the pledgees or secured parties. Such a pledge
or transfer would not be subject to approval of the Company and no legal opinion
of legal counsel of the pledgee, secured party or pledgor shall be required in
connection therewith. Further, no notice shall be required of such pledge. At
the Purchaser’s expense, the Company will execute and deliver such reasonable
documentation as a pledgee or secured party of Securities may reasonably request
in connection with a pledge or transfer of the Securities.

22




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

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

23




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

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

     4.3 Furnishing of Information;
Public Information.

     (a)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, until such time as
the Purchaser does not own any Debentures, Warrants or other Securities. The
Company further covenants that it will take such further action as any holder of
Securities may reasonably request, to the extent required from time to time to
enable such Person to sell such Securities without registration under the
Securities Act, including without limitation, within the requirements of the
exemption provided by Rule 144, including but not limited to the furnishing of
opinions of counsel by Company counsel for the benefit of the Purchaser, without
cost to the Purchaser.

     (b) At
any time during the period commencing on the date hereof and ending at such time
that all of the Securities may be sold without the requirement for the Company
to be in compliance with Rule 144(c)(1) and otherwise without restriction or
limitation pursuant to Rule 144, if the Company shall fail for any reason to
satisfy the current public information requirement under Rule 144(c) (a
“Public Information Failure”) then, if such Public Information
Failure shall cause Rule 144 to be unavailable to the Purchaser in the
reasonable opinion of counsel to the Purchaser, in addition to the Purchaser’s
other available remedies, such Public Information Failure shall constitute an
Event of Default under the Debentures. Nothing herein shall limit the
Purchaser’s right to pursue actual damages for the Public Information Failure,
and the Purchaser shall have the right to pursue all remedies available to it at
law or in equity including, without limitation, a decree of specific
performance and/or injunctive relief.

24




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

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

     4.6 Securities Laws
Disclosure; Publicity. The Company shall, by 9:00 a.m. (New York City time)
on the second Trading Day immediately following the date hereof, file a Current
Report on Form 8-K disclosing the material terms of the transactions
contemplated hereby, including the Transaction Documents as exhibits thereto.
From and after the issuance of such Form 8-K, the Company represents to the
Purchaser that it shall have publicly disclosed all material, non-public
information delivered to the Purchaser by the Company or any of its
Subsidiaries, or any of their respective officers, directors, employees or
agents in connection with the transactions contemplated by the Transaction
Documents. The Company and the Purchaser shall consult with each other in
issuing any press releases with respect to the transactions contemplated hereby,
and neither the Company nor the Purchaser shall issue any such press release nor
otherwise make any such public statement without the prior consent of the
Company, with respect to any press release of the Purchaser, or without the
prior consent of the Purchaser, with respect to any press release of the
Company, which consent shall not unreasonably be withheld or delayed, except if
such disclosure is required by law, in which case the disclosing party shall
promptly provide the other party with prior notice of such public statement or
communication.

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

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

25




     4.9 Use of Proceeds.
Except as set forth on Schedule 4.9 attached hereto, the Company shall
use the net proceeds from the sale of the Securities hereunder for working
capital purposes and shall not use such proceeds: (a) for the satisfaction of
any portion of the Company’s debt (other than payment of trade payables in the
ordinary course of the Company’s business and prior practices), (b) for the
redemption of any Common Stock or Common Stock Equivalents, (c) for the
settlement of any outstanding litigation or (d) in violation of FCPA or OFAC
regulations.

     4.10 Indemnification of
Purchaser. Subject to the provisions of this Section 4.10, the Company will
indemnify and hold the Purchaser and its directors, officers, shareholders,
members, partners, employees and agents (and any other Persons with a
functionally equivalent role of a Person holding such titles notwithstanding a
lack of such title or any other title), each Person who controls the Purchaser
(within the meaning of Section 15 of the Securities Act and Section 20 of the
Exchange Act), and the directors, officers, shareholders, agents, members,
partners or employees (and any other Persons with a functionally equivalent role
of a Person holding such titles notwithstanding a lack of such title or any
other title) of such controlling persons (each, a “Purchaser Party”)
harmless from any and all losses, liabilities, obligations, claims,
contingencies, damages, costs and expenses, including all judgments, amounts
paid in settlements, court costs and reasonable attorneys’ fees and costs of
investigation that any the Purchaser Party may suffer or incur as a result of or
relating to (a) any breach of any of the representations, warranties, covenants
or agreements made by the Company in this Agreement or in the other Transaction
Documents or (b) any action instituted against the Purchaser Parties in any
capacity, or any of them or their respective Affiliates, by any stockholder of
the Company who is not an Affiliate of Purchaser Party, with respect to any of
the transactions contemplated by the Transaction Documents (unless such action
is based upon a breach of the Purchaser Party’s representations, warranties or
covenants under the Transaction Documents or any agreements or understandings
the Purchaser Party may have with any such stockholder or any violations by such
Purchaser Party of state or federal securities laws or any conduct by the
Purchaser Party which constitutes fraud, gross negligence, willful misconduct or
malfeasance). If any action shall be brought against any Purchaser Party in
respect of which indemnity may be sought pursuant to this Agreement, the
Purchaser Party shall promptly notify the Company in writing, and the Company
shall have the right to assume the defense thereof with counsel of its own
choosing reasonably acceptable to the Purchaser Party. Any Purchaser Party shall
have the right to employ separate counsel in any such action and participate in
the defense thereof, but the fees and expenses of such counsel shall be at the
expense of the Purchaser Party except to the extent that (i) the employment
thereof has been specifically authorized by the Company in writing, (ii) the
Company has failed after a reasonable period of time to assume such defense and
to employ counsel or (iii) in such action there is, in the reasonable opinion of
counsel, a material conflict on any material issue between the position of the
Company and the position of the Purchaser Party, in which case the Company shall be responsible
for the reasonable fees and expenses of no more than one such separate counsel.
The Company will not be liable to any Purchaser Party under this Agreement (y)
for any settlement by a Purchaser Party effected without the Company’s prior
written consent, which shall not be unreasonably withheld or delayed; or (z) to
the extent, but only to the extent that a loss, claim, damage or liability is
attributable to any Purchaser Party’s breach of any of the representations,
warranties, covenants or agreements made by the Purchaser Party in this
Agreement or in the other Transaction Documents. The indemnification required by
this Section 4.10 shall be made by periodic payments of the amount thereof
during the course of the investigation or defense, as and when bills are
received or are incurred. The indemnity agreements contained herein shall be in
addition to any cause of action or similar right of any Purchaser Party against
the Company or others, and (y) any liabilities the Company may be subject to
pursuant to law.

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4.11 Reservation and Listing of Securities.

     (a)The
Company shall maintain a reserve from its duly authorized shares of Common Stock
for issuance pursuant to the Transaction Documents in such amount as may then be
required to fulfill its obligations in full under the Transaction Documents.

     (b) If,
on any date, the number of authorized but unissued (and otherwise unreserved)
shares of Common Stock is less than the Required Minimum on such date, then the
Board of Directors shall use commercially reasonable efforts to amend the
Company’s certificate or articles of incorporation to increase the number of
authorized but unissued shares of Common Stock to at least the Required Minimum
at such time, as soon as possible and in any event not later than the 75th day
after such date.

     (c)The
Company shall, if applicable: (i) in the time and manner required by the
principal Trading Market, prepare and file with such Trading Market an
additional shares listing application covering a number of shares of Common
Stock at least equal to the Required Minimum on the date of such application,
(ii) take all steps necessary to cause such shares of Common Stock to be
approved for listing or quotation on such Trading Market as soon as possible
thereafter, (iii) provide to the Purchaser evidence of such listing or quotation
and (iv) maintain the listing or quotation of such Common Stock on any date at
least equal to the Required Minimum on such date on such Trading Market or
another Trading Market.

     4.12 Subsequent Equity
Sales. From the date hereof until such time as the Purchaser holds no
Debentures, the Company shall be prohibited from effecting or entering into an
agreement to effect any issuance by the Company or any of its Subsidiaries of
Common Stock or Common Stock Equivalents for cash consideration (or a
combination of units thereof), other than with respect to an Exempt
Issuance.

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

27




ARTICLE V.
 MISCELLANEOUS

     5.1 Termination. This
Agreement may be terminated by the Purchaser by written notice to the Company,
if the Company has not satisfied its Closing obligations on or before May _____
, 2012.

     5.2 Fees and Expenses. At
the Closing, the Company has agreed to reimburse the Purchaser the
non-accountable sum of $25,000 for its legal fees and expenses. Except as
expressly set forth in the Transaction Documents to the contrary, 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 this Agreement.
The Company shall pay all Transfer Agent fees, stamp taxes and other taxes and
duties levied in connection with the delivery of any Securities to the
Purchaser.

     5.3 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 thereof and supersede all prior agreements and understandings, oral
or written, with respect to such matters, which the parties acknowledge have
been merged into such documents, exhibits and schedules.

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

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

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

     5.7 Successors and
Assigns. This Agreement shall be binding upon and inure to the benefit of
the parties and their successors and permitted assigns. The Company may not
assign this Agreement or any rights or obligations hereunder without the prior
written consent of the Purchaser (other than by merger). The Purchaser may
assign any or all of its rights under this Agreement to any Person to whom the
Purchaser assigns or transfers any Securities, provided that such transferee
agrees in writing to be bound, with respect to the transferred Securities, by
the provisions of the Transaction Documents that apply to the “Purchaser”,
further provided that the Purchaser may not assign this Agreement and its
obligation to purchase an aggregate of $1,500,000 principal amount of
Debentures, until all of such Debentures have been purchased by the
Purchaser.

     5.8 No Third-Party
Beneficiaries. This Agreement is intended for the benefit of the parties
hereto and their respective successors and permitted assigns and is not for the
benefit of, nor may any provision hereof be enforced by, any other Person,
except as otherwise set forth in Section 4.10.

     5.9 Governing Law. All
questions concerning the construction, validity, enforcement and interpretation
of the Transaction Documents shall be governed by and construed and enforced in
accordance with the internal laws of the State of New York, without regard to
the principles of conflicts of law thereof. Each party agrees that all legal
proceedings concerning the interpretations, enforcement and defense of the
transactions contemplated by this Agreement and any other Transaction Documents
(whether brought against a party hereto or its respective affiliates, directors,
officers, shareholders, partners, members, employees or agents) shall be
commenced exclusively in the state and federal courts sitting in the City of New
York. Each party hereby irrevocably submits to the exclusive jurisdiction of the
state and federal courts sitting in the City of New York, Borough of Manhattan
for the adjudication of any dispute hereunder or in connection herewith or with
any transaction contemplated hereby or discussed herein (including with respect
to the enforcement of any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper or is an inconvenient venue for such
proceeding. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof via registered or certified mail or overnight delivery
(with evidence of delivery) to such party at the address in effect for notices
to it under this Agreement and agrees that such service shall constitute good
and sufficient service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any other
manner permitted by law. If either party shall commence an action, suit or
proceeding to enforce any provisions of the Transaction Documents, then, in
addition to the obligations of the Company under Section 4.10, the prevailing
party in such action, suit or proceeding shall be reimbursed by the other party
for its reasonable attorneys’ fees and other costs and expenses incurred with
the investigation, preparation and prosecution of such action or proceeding.

29




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

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

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

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

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

30




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

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

     5.17 Usury. To the extent
it may lawfully do so, the Company hereby agrees not to insist upon or plead or
in any manner whatsoever claim, and will resist any and all efforts to be
compelled to take the benefit or advantage of, usury laws wherever enacted, now
or at any time hereafter in force, in connection with any claim, action or
proceeding that may be brought by any Purchaser in order to enforce any right or
remedy under any Transaction Document. Notwithstanding any provision to the
contrary contained in any Transaction Document, it is expressly agreed and
provided that the total liability of the Company under the Transaction Documents
for payments in the nature of interest shall not exceed the maximum lawful rate
authorized under applicable law (the “Maximum Rate”), and, without
limiting the foregoing, in no event shall any rate of interest or default
interest, or both of them, when aggregated with any other sums in the nature of
interest that the Company may be obligated to pay under the Transaction
Documents exceed such Maximum Rate. It is agreed that if the maximum contract
rate of interest allowed by law and applicable to the Transaction Documents is
increased or decreased by statute or any official governmental action subsequent
to the date hereof, the new maximum contract rate of interest allowed by law
will be the Maximum Rate applicable to the Transaction Documents from the
effective date thereof forward, unless such application is precluded by
applicable law. If under any circumstances whatsoever, interest in excess of the
Maximum Rate is paid by the Company to any Purchaser with respect to
indebtedness evidenced by the Transaction Documents, such excess shall be
applied by the Purchaser to the unpaid principal balance of any such
indebtedness or be refunded to the Company, the manner of handling such excess
to be at the Purchaser’s election.

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

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

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

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

(Signature Pages Follow)

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

	LITHIUM EXPLORATION GROUP,
      INC. 	 	Address for Notice: 
	 	  	 	3200 N. Hayden Road Suite 300 
	 	  	 	Scottsdale, AZ 85251 
	 	  	 	  
	By: 	/s/
      Alexander Walsh	 	Fax: 480 641 4794 
	 	Name: Alexander Walsh 	 	  
	 	Title: CEO 	 	  


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

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK 
SIGNATURE PAGE
FOR PURCHASER FOLLOWS]

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[PURCHASER SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT]

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

	Name of Purchaser: 	Hagen Investments Ltd. 
	 	 
	Signature of Authorized Signatory of
      Purchaser: 	/s/ Hugh O’Neill
	 	 
	Name of Authorized Signatory: 	Hugh O’Neill
	 	 
	Title of Authorized Signatory: 	President
	 	 
	Email Address of Authorized Signatory:	hugh.oneill@hgoneillco.te
	 	 
	Facsimile Number of Authorized Signatory:	+1-649-946-4955
	 	 
	Address for Notice to Purchaser: 	Hibernian House 
	  	P.O. Box 267 
	  	Leeward Highway 
	  	Providencales 
	  	Turks and Caicos Islands 


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

Fedex delivery only

Subscription Amount: $1,500,000

Warrant Shares: _________________

 

EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]

[SIGNATURE PAGES CONTINUE]

34