SECURITIES PURCHASE
AGREEMENT


 


THIS SECURITIES PURCHASE
AGREEMENT, dated as of October 18, 2011 (this “Agreement”), is entered into by and between SUNVALLEY
SOLAR, INC., a Nevada corporation (the “Company”), and Tonaquint, Inc., a Utah corporation, its successors
or assigns (the “Buyer”).


 


W I T N E S S E T H:


 


WHEREAS, the Company
and the Buyer are executing and delivering this Agreement in reliance upon the exemption from securities registration for offers
and sales to accredited investors afforded, inter alia, under Regulation D (“Regulation D”) as
promulgated by the United States Securities and Exchange Commission (the “SEC”) under the Securities Act of
1933, as amended (the “1933 Act”), and/or Section 4(2) of the 1933 Act; and


 


WHEREAS, the Buyer
wishes to acquire from the Company, and the Company desires to issue and sell to the Buyer and the Note (as defined below), which
Note will be convertible into shares of common stock of the Company, par value $0.001 per share (the “Common Stock”),
upon the terms and subject to the conditions of the Note, this Agreement and the other Transaction Documents (as defined below).


 


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


 


1.CERTAIN DEFINITIONS. As
used herein, each of the following terms has the meaning set forth below, unless the context otherwise requires:


 


“Affiliate”
means, with respect to a specific Person referred to in the relevant provision, another Person who or which controls or is controlled
by or is under common control with such specified Person.


 


“Buyer’s
Counsel” means Carman Lehnhof Israelsen LLP.


 


“Buyer Control
Person” means each manager, executive officer, promoter, and such other Persons as may be deemed in control of the Buyer
pursuant to Rule 405 under the 1933 Act or Section 20 of the 1934 Act (as defined below).


 


“Certificate of
Incorporation” means the certificate of incorporation, articles of incorporation or other charter document (howsoever
denominated) of the Company, as amended to date.


 


“Closing Date”
means the date of the closing of the purchase and sale of the Securities.


 


“Company Control
Person” means each director, executive officer, promoter, and such other Persons as may be deemed in control of the Company
pursuant to Rule 405 under the 1933 Act or Section 20 of the 1934 Act.


 


“Company Counsel”
means Cane Clark LLP.


 


“Company’s
SEC Documents” means the Company’s filings on the SEC’s EDGAR system.


 



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“Conversion Date”
means the date a Holder submits a Notice of Conversion, as provided in the Note.


 


“Conversion Shares”
means the shares of Common Stock issuable upon conversion of the Note and/or in payment of accrued interest, as contemplated in
the Note.


 


“Delivery Date”
has the meaning ascribed to it in the Note (with respect to Conversion Shares).


 


“Holder”
means the Person holding the relevant Securities at the relevant time.


 


“Last Audited
Date” means December 31, 2010.


 


“Material Adverse
Effect” means an event or combination of events, which individually or in the aggregate, would reasonably be expected
to (a) adversely affect the legality, validity or enforceability of the Note, or any of the Transaction Documents, (b) have or
result in a material adverse effect on the results of operations, assets, or financial condition of the Company and its subsidiaries,
taken as a whole, or (c) adversely impair the Company’s ability to perform fully on a timely basis its material obligations
under any of the Transaction Documents or the transactions contemplated thereby.


 


“Maturity Date”
has the meaning ascribed to it in the Note.


 


“Person”
means any living person or any entity, such as, but not necessarily limited to, a corporation, partnership or trust.


 


“Principal
Trading Market” means (a) NYSE Amex, (b) the New York Stock Exchange, (c) the Nasdaq Global Market, (d) the Nasdaq
Capital Market, (e) the OTC Bulletin Board, (f) the OTCQX or OTCQB, or (g) such other market on which
the Common Stock is principally traded at the relevant time, but shall not include the “pink sheets.”


 


“Rule 144”
means (a) Rule 144 promulgated under the 1933 Act or (b) any other similar rule or regulation of the SEC that may at any time permit
a Holder to sell securities of the Company to the public without registration under the 1933 Act.


 


“Securities” means the
Note and the Shares.


 


“Shares”
means the shares of Common Stock representing any or all of the Conversion Shares.


 


“State of Incorporation”
means Nevada.


 


“Subsidiary”
means, as of the relevant date, any subsidiary of the Company (whether or not included in the Company’s SEC Documents) whether
now existing or hereafter acquired or created.


 


“Trading Day”
means any day during which the Principal Trading Market shall be open for business.


 


“Transaction Documents”
means this Agreement, the Note, the Transfer Agent Letter (defined below), the Confession (defined below), and all other certificates,
documents, agreements, resolutions and instruments delivered to any party under or in connection with this Agreement, as the same
may be amended from time to time.


 



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“Transfer Agent”
means, at any time, the transfer agent for the Common Stock.


 


“Wire Instructions”
means the wire instructions for the Purchase Price (as defined below), as provided by the Company, set forth on Annex I.


 


2.AGREEMENT TO PURCHASE; PURCHASE PRICE.


 


a.Purchase.


 


(i)Subject to the terms
and conditions of this Agreement and the other Transaction Documents, the undersigned Buyer hereby agrees to purchase from the
Company a Convertible Promissory Note in the principal amount of $200,000.00 substantially in the form attached hereto as Annex
II (the “Note”). In consideration thereof, the Buyer shall pay the amount set forth on the Buyer’s
signature page to this Agreement designated as the “Purchase Price”. The Purchase Price shall be paid in accordance
with the Wire Instructions.





 


(ii)In consideration for the Purchase
Price, the Company shall also execute and deliver to the Buyer the Consent to Judgment by Confession substantially in the form
attached hereto as Annex III (the “Confession”).


 


(iii)The Company shall also execute
and deliver to the Transfer Agent, and the Transfer Agent shall execute to indicate its acceptance thereof, the irrevocable transfer
agent instruction letter substantially in the form attached hereto as Annex IV (the “Transfer Agent Letter”).


 


(iv)At the Closing (as defined below),
the Buyer shall deliver to the Company the Purchase Price.


 


(v)The tender of the
Purchase Price and the issuance and sale of the Note to the Buyer are sometimes referred to herein and in the other Transaction
Documents as the purchase and sale of the Securities.


 


b.Form
of Payment; Delivery of Securities. The purchase and sale of the Securities shall take place at a closing (the “Closing”)
to be held at the offices of the Buyer on the Closing Date. At the Closing, the Company will deliver the Transaction Documents
to the Buyer against delivery by the Buyer to the Company of the Purchase Price.


 


3.BUYER REPRESENTATIONS AND WARRANTIES.


 


The Buyer represents and
warrants to, and covenants and agrees with, the Company, as of the date hereof and as of the Closing Date, as follows:


 


a.Binding Obligation.
The Transaction Documents to which the Buyer is a party, and the transactions contemplated hereby and thereby, have been duly and
validly authorized by the Buyer. This Agreement has been executed and delivered by the Buyer, and this Agreement is, and each of
the other Transaction Documents to which the Buyer is a party, when executed and delivered by the Buyer (if necessary), will be
valid and binding obligations of the Buyer enforceable in accordance with their respective terms, subject as to enforceability
to general principles of equity and to bankruptcy, insolvency, moratorium and other similar laws affecting the enforcement of creditors’
rights generally.


 



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b.Accredited
Investor Status. The Buyer is an “accredited investor” as that term is defined in Regulation D. 


 


4.COMPANY REPRESENTATIONS AND WARRANTIES.
 The Company represents and warrants to the Buyer as of the date hereof and as of the Closing Date that:


 


a.Rights of Others Affecting the
Transactions. There are no preemptive rights of any stockholder of the Company, as such, to acquire the Securities. Other than
the Asher Right of First Refusal (as defined herein), no other party has a currently exercisable right of first refusal which would
be applicable to any or all of the transactions contemplated by the Transaction Documents.


 


b.Status. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the State of Incorporation and has the requisite corporate
power to own its properties and to carry on its business as now being conducted. The Company is duly qualified as a foreign corporation
to do business and is in good standing in each jurisdiction where the nature of the business conducted or property owned by it
makes such qualification necessary, other than those jurisdictions in which the failure to so qualify would not have or result
in a Material Adverse Effect. The Company is obligated to file reports pursuant to Section 15(d) of the 1934 Act. The Company has
not taken any action designed to terminate, or which to its knowledge is likely to have the effect of, terminating the registration
of the Common Stock under the 1934 Act, nor has the Company received any notification that the SEC is contemplating terminating
such registration. The Common Stock is quoted on the Principal Trading Market. The Company has received no notice, either oral
or written, with respect to the continued eligibility of the Common Stock for quotation on the Principal Trading Market, and the
Company has maintained all requirements on its part for the continuation of such quotation. The Company has not, in the twelve
(12) months preceding the date hereof, received notice from the Principal 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 Principal
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.


 


c.Authorized Shares.


 


(i) The authorized capital stock
of the Company consists of 1,500,000,000 shares of Common Stock, of which approximately 845,053,992 are outstanding. Of the outstanding
shares of Common Stock, approximately 214,124,700 shares are beneficially owned by Affiliates of the Company.


 


(ii)Other than as set forth in
the Company’s SEC Documents, there are no outstanding securities which are convertible into or exchangeable for shares of
Common Stock, whether such conversion is currently exercisable or exercisable only upon some future date or the occurrence of some
event in the future.


 


(iii)All issued and outstanding
shares of Common Stock have been duly authorized and validly issued and are fully paid and non-assessable. After considering all
other commitments that may require the issuance of Common Stock, the Company has sufficient authorized and unissued shares of Common
Stock as may be necessary to effect the issuance of the Shares on the Closing Date, were the Note issued and fully converted on
that date.


 


(iv)The Shares have been duly authorized
by all necessary corporate action on the part of the Company, and, when issued (1) on conversion of, or in payment of interest
on the Note in accordance with the terms thereof, or (2) at the Closing in accordance with the terms of this Agreement, as applicable,
will have been duly and validly issued, fully paid and non-assessable, free from all taxes, liens, claims, pledges, mortgages,
restrictions, obligations, security interests and encumbrances of any kind, nature and description, and will not subject the Holder
thereof to personal liability by reason of being a Holder.


 



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(v)The
Conversion Shares are enforceable against the Company and the Company presently has no claims or defenses of any nature whatsoever
with respect to the Conversion Shares.


 


d.Transaction Documents and Stock.
This Agreement and each of the other Transaction Documents, and the transactions contemplated hereby and thereby, have been duly
and validly authorized by the Company. This Agreement has been duly executed and delivered by the Company and this Agreement is,
and the Note, and each of the other Transaction Documents, when executed and delivered by the Company (if necessary), will be,
valid and binding obligations of the Company enforceable in accordance with their respective terms, subject as to enforceability
to general principles of equity and to bankruptcy, insolvency, moratorium, and other similar laws affecting the enforcement of
creditors’ rights generally.


 


e.Non-contravention. The execution
and delivery of this Agreement and each of the other Transaction Documents by the Company, the issuance of the Securities in accordance
with the terms hereof and thereof, and the consummation by the Company of the other transactions contemplated by this Agreement,
the Note, and the other Transaction Documents do not and will not conflict with or result in a breach by the Company of any of
the terms or provisions of, or constitute a default under (i) the Certificate of Incorporation or bylaws of the Company, each as
currently in effect, (ii) any indenture, mortgage, deed of trust, or other material agreement or instrument to which the Company
is a party or by which it or any of its properties or assets are bound, including any listing agreement for the Common Stock except
as herein set forth, or (iii) to its knowledge, any existing applicable law, rule, or regulation or any applicable decree, judgment,
or order of any court, United States federal or state regulatory body, administrative agency, or other governmental body having
jurisdiction over the Company or any of its properties or assets, except such conflict, breach or default which would not have
or result in a Material Adverse Effect.


 


f.Approvals. No authorization,
approval or consent of any court, governmental body, regulatory agency, self-regulatory organization, or stock exchange or market
or the stockholders of the Company is required to be obtained by the Company for the issuance and sale of the Securities to the
Buyer as contemplated by this Agreement, except such authorizations, approvals and consents that have been obtained.


 


g.Filings; Financial Statements.
None of the Company’s SEC Documents contained, at the time they were filed, any untrue statement of a material fact or omitted
to state any material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances
under which they were made, not misleading. The Company has filed all reports, schedules, forms, statements and other documents
required to be filed by the Company with the SEC under the 1934 Act on a timely basis or has received a valid extension of such
time of filing and has filed any such report, schedule, form, statement or other document prior to the expiration of any such extension.
As of their respective dates, the financial statements of the Company included in the Company’s SEC Documents complied as
to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with
respect thereto. Such financial statements have been prepared in accordance with generally accepted accounting principles, consistently
applied, during the periods involved (except (i) as may be otherwise indicated in such financial statements or the notes thereto,
or (ii) in the case of unaudited interim statements, to the extent they may exclude footnotes or may be condensed or summary statements)
and fairly present in all material respects the financial position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments).
No other information provided by or on behalf of the Company to the Buyer which is not included in the Company’s SEC Documents,
including, without limitation, information referred to in this Agreement, contains any untrue statement of a material fact or omits
to state any material fact necessary in order to make the statements therein, in the light of the circumstance under which they
are or were made, not misleading.


 



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h.Absence
of Certain Changes. Since the Last Audited Date, there has been no Material Adverse Effect, except as disclosed in the Company’s
SEC Documents. Since the Last Audited Date, except as provided in the Company’s SEC Documents, the Company has not (i) incurred
or become subject to any material liabilities (absolute or contingent) except liabilities incurred in the ordinary course of business
consistent with past practices; (ii) discharged or satisfied any material lien or encumbrance or paid any material obligation
or liability (absolute or contingent), other than current liabilities paid in the ordinary course of business consistent with
past practices; (iii) declared or made any payment or distribution of cash or other property to stockholders with respect to its
capital stock, or purchased or redeemed, or made any agreements to purchase or redeem, any shares of its capital stock; (iv) sold,
assigned or transferred any other material tangible assets, or canceled any material debts owed to the Company by any third party
or material claims of the Company against any third party, except in the ordinary course of business consistent with past practices;
(v) waived any rights of material value, whether or not in the ordinary course of business, or suffered the loss of any material
amount of existing business; (vi) made any increases in employee compensation, except in the ordinary course of business consistent
with past practices; or (vii) experienced any material problems with labor or management in connection with the terms and conditions
of their employment.


 


i.Full Disclosure. There is
no fact known to the Company or that the Company should know after having made all reasonable inquiries (other than conditions
known to the public generally or as disclosed in the Company’s SEC Documents) that has not been disclosed in writing to the
Buyer that would reasonably be expected to have or result in a Material Adverse Effect.


 


j.Absence of Litigation. There
is no action, suit, proceeding, inquiry or investigation before or by any court, public board or body pending or, to the knowledge
of the Company, threatened against or affecting the Company before or by any governmental authority or non-governmental department,
commission, board, bureau, agency or instrumentality or any other person, wherein an unfavorable decision, ruling or finding would
have a Material Adverse Effect or which would adversely affect the validity or enforceability of, or the authority or ability of
the Company to perform its obligations under, any of the Transaction Documents. The Company is not aware of any valid basis for
any such claim that (either individually or in the aggregate with all other such events and circumstances) could reasonably be
expected to have a Material Adverse Effect. There are no outstanding or unsatisfied judgments, orders, decrees, writs, injunctions
or stipulations to which the Company is a party or by which it or any of its properties is bound, that involve the transactions
contemplated herein or that, alone or in the aggregate, could reasonably be expected to have a Material Adverse Effect.


 


k.Absence
of Events of Default. Neither the Company nor any of its Subsidiaries is in violation of or in default with respect
to (i) its Certificate of Incorporation or bylaws or other organizational documents, each
as currently in effect, or any material judgment, order, writ, decree, statute, rule or regulation applicable to such entity; or
(ii) any material mortgage, indenture, agreement, instrument or contract to which such entity is a party or by which it or
any of its properties or assets are bound (nor is there any waiver in effect which, if not in effect, would result in such
a violation or default), except such breach or default which would not have or result in a Material
Adverse Effect.


 


l.Absence of Certain Company Control
Person Actions or Events. Other than as set forth in the Company’s SEC Documents, none of the following has occurred
during the past five (5) years with respect to a Company Control Person:


 


(i) A petition under the
federal bankruptcy laws or any state insolvency law was filed by or against, or a receiver, fiscal agent or similar officer was
appointed by a court for the business or property of such Company Control Person, or any partnership in which he or she was a general
partner at or within two (2) years before the time of such filing, or any corporation or business association of which he or she
was an executive officer at or within two (2) years before the time of such filing;


 


(ii) Such Company Control
Person was convicted in a criminal proceeding or is a named subject of a pending criminal proceeding (excluding traffic violations
and other minor offenses);



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(iii) Such Company Control
Person was the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent
jurisdiction, permanently or temporarily enjoining him or her from, or otherwise limiting, the following activities:


 


A. acting, as an
investment advisor, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment
company, bank, savings and loan association or insurance company, as a futures commission merchant, introducing broker, commodity
trading advisor, commodity pool operator, floor broker, any other Person regulated by the Commodity Futures Trading Commission
(“CFTC”) or engaging in or continuing any conduct or practice in connection with such activity;


 


B. engaging in any
type of business practice; or


 


C. engaging in any
activity in connection with the purchase or sale of any security or commodity or in connection with any violation of federal or
state securities laws or federal commodities laws;


 


(iv) Such Company Control
Person was the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any federal or state
authority barring, suspending or otherwise limiting for more than sixty (60) days the right of such Company Control Person to engage
in any activity described in subsection (iii) immediately above, or to be associated with Persons engaged in any such activity;
or


 


(v) Such Company Control
Person was found by a court of competent jurisdiction in a civil action or by the CFTC or SEC to have violated any federal or state
securities law, and the judgment in such civil action or finding by the CFTC or SEC has not been subsequently reversed, suspended,
or vacated.


 


m.No Undisclosed Liabilities
or Events. The Company has no liabilities or obligations other than those disclosed in the Transaction Documents or the Company’s
SEC Documents or those incurred in the ordinary course of the Company’s business since the Last Audited Date, or which individually
or in the aggregate, do not or would not have a Material Adverse Effect. No event or circumstance has occurred or exists with respect
to the Company or its properties, business, operations, condition (financial or otherwise), or results of operations, which, under
applicable laws, rules or regulations, requires public disclosure or announcement prior to the date hereof by the Company but which
has not been so publicly announced or disclosed. There are no proposals currently under consideration or currently anticipated
to be under consideration by the Board of Directors or the executive officers of the Company which proposal would (i) change the
Certificate of Incorporation or bylaws of the Company, each as currently in effect, with or without stockholder approval, which
change would reduce or otherwise adversely affect the rights and powers of the stockholders of the Common Stock or (ii) materially
or substantially change the business, assets or capital of the Company, including its interests in Subsidiaries.


 


n.No Integrated Offering. Neither
the Company nor any of its Affiliates nor any Person acting on its or their behalf has, directly or indirectly, made any offer
or sale of any security of the Company or solicited any offer to buy any such security under circumstances that would eliminate
the availability of the exemption from registration under Regulation D in connection with the offer and sale of the Securities
as contemplated hereby.


 


o.Dilution. Each of the Company
and its executive officers and directors is aware that the number of shares of Common Stock issuable upon the execution of this
Agreement, the conversion of the Note, or pursuant to the other terms of the Transaction Documents may have a dilutive effect on
the ownership interests of the other stockholders (and Persons having the right to become stockholders) of the Company. The Company
specifically acknowledges that its obligation to issue the Conversion Shares upon conversion of the Note is binding upon the Company
and enforceable regardless of the dilution such issuance may have on the ownership interests of other stockholders of the Company,
and the Company will honor such obligations, including honoring every Notice of Conversion (or “Conversion Notice”
as contemplated by the Note), unless the Company is subject to an injunction (which injunction was not sought by the Company or
any of its directors or executive officers) prohibiting the Company from doing so.



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p.Fees to Brokers, Placement
Agents and Others. The Company has taken no action which would give rise to any claim by any Person for a brokerage
commission, placement agent or finder’s fees or similar payments by the Buyer relating to this Agreement or the
transactions contemplated hereby. Except for such fees arising as a result of any agreement or arrangement entered into by
the Buyer without the knowledge of the Company (a “Buyer’s Fee”), the Buyer shall have no obligation
with respect to such fees or with respect to any claims made by or on behalf of other Persons for fees of a type contemplated
in this subsection that may be due in connection with the transactions contemplated hereby. The Company shall indemnify and
hold harmless each of the Buyer, its employees, officers, directors, stockholders, managers, agents, and partners, and their
respective Affiliates, from and against all claims, losses, damages, costs (including the costs of preparation and
attorneys’ fees) and expenses suffered in respect of any such claimed or existing fees (other than a Buyer’s Fee,
if any).


 


q.Disclosure. All information
relating to or concerning the Company set forth in the Transaction Documents or in the Company’s SEC Documents or other public
filings provided by or on behalf of the Company to the Buyer is true and correct in all material respects and the Company has not
omitted to state any material fact necessary in order to make the statements made, in light of the circumstances under which they
were made, not misleading. No event or circumstance has occurred or exists with respect to the Company or its business, properties,
prospects, operations or financial conditions, which under applicable laws, rules or regulations, requires public disclosure or
announcement by the Company.


 


r.Confirmation. The Company
agrees that, if, to the knowledge of the Company, any events occur or circumstances exist prior to the payment of the Purchase
Price by the Buyer to the Company which would make any of the Company’s representations or warranties set forth herein materially
untrue or materially inaccurate as of such date, the Company shall immediately notify the Buyer in writing prior to such date of
such events or circumstances, specifying which representations or warranties are affected and the reasons therefor.


 


s.
Title. The Company and the Subsidiaries, if applicable, own and have good and marketable title in fee simple
absolute to, or a valid leasehold interest in, all their respective real properties and good title to their other respective assets
and properties, subject to no liens, claims or encumbrances except as have been disclosed to the Buyer.


 


t.Intellectual
Property. 


 


(i)Ownership.
The Company owns or possesses or can obtain on commercially reasonable terms sufficient legal rights to all patents, trademarks,
service marks, trade names, copyrights, trade secrets, licenses (software or otherwise), information, know-how, inventions, discoveries,
published and unpublished works of authorship, processes and any and all other proprietary rights (“Intellectual Property”)
necessary to the business of the Company as presently conducted, the lack of which could reasonably be expected to have a Material
Adverse Effect. Except for agreements with its own employees or consultants, standard end-user license agreements, support/maintenance
agreements and agreements entered in the ordinary course of the Company’s business, all of which have been made available
for review by the Buyer, there are no outstanding options, licenses or agreements relating to the Intellectual Property of the
Company, and the Company is not bound by or a party to any options, licenses or agreements with respect to the Intellectual Property
of any other person or entity. The Company has not received any written communication alleging that the Company has violated or,
by conducting its business as currently conducted, would violate any of the Intellectual Property of any other person or entity,
nor is the Company aware of any basis therefor. The Company is not obligated to make any payments by way of royalties, fees or
otherwise to any owner or licensor of or claimant to any Intellectual Property with respect to the use thereof in connection with
the present conduct of its business other than in the ordinary course of its business. There are no agreements, understandings,
instruments, contracts, judgments, orders or decrees to which the Company is a party or by which it is bound which involve indemnification
by the Company with respect to infringements of Intellectual Property, other than in the ordinary course of its business.


 



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(ii)No Breach
by Employees. The Company is not aware that any of its employees is obligated under any contract or other agreement, or subject
to any judgment, decree or order of any court or administrative agency, that would materially interfere with the use of his or
her efforts to promote the interests of the Company or that would conflict with the Company’s business as presently conducted.
Neither the execution nor delivery of this Agreement, nor the carrying on of the Company’s business by the employees of the
Company, nor the conduct of the Company’s business as presently conducted, will, to the Company’s knowledge, conflict
with or result in a breach of the terms, conditions or provisions of, or constitute a default under, any contract, covenant or
instrument under which any such employee is now obligated. The Company does not believe it is or will be necessary to use any inventions
of any of its employees made prior to their employment by the Company of which it is aware.


 


u.
Opinion. Counsel to the Company has delivered to the Buyer an opinion letter attached hereto as Annex V
(the “Opinion Letter”) stating that (i) the Company is not a “Shell Company” as such term
is defined in Rule 144, (ii) the Company has not been a Shell Company for the preceding twelve (12) months, (iii) the Company is
in compliance with all filing requirements under Rule 144 as of the date hereof, and (iv) the Shares may
be sold by the Buyer without any restrictions pursuant to Rule 144, so long as the applicable
holding period specified by Rule 144 is satisfied.


 


v.Environmental Matters.


 


(i)                  
No Violation. There are, to the Company’s knowledge, with respect to the 


Company or any of its Subsidiaries or any predecessor
of the Company, no past or present violations of Environmental Laws (as defined below), releases of any material into the environment,
actions, activities, circumstances, conditions, events, incidents, or contractual obligations which may give rise to any common
law environmental liability or any liability under the Comprehensive Environmental Response, Compensation and Liability Act of
1980 or similar federal, state, local or foreign laws and neither the Company nor any of its Subsidiaries has received any notice
with respect to any of the foregoing, nor is any action pending or, to the Company’s knowledge, threatened in connection
with any of the foregoing. The term “Environmental Laws” means all federal, state, local or foreign laws relating
to pollution or protection of human health or the environment (including, without limitation, ambient air, surface water, groundwater,
land surface or subsurface strata), including, without limitation, laws relating to emissions, discharges, releases or threatened
releases of chemicals, pollutants contaminants, or toxic or hazardous substances or wastes (collectively, “Hazardous Materials”)
into the environment, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport
or handling of Hazardous Materials, as well as all authorizations, codes, decrees, demands or demand letters, injunctions, judgments,
licenses, notices or notice letters, orders, permits, plans or regulations issued, entered, promulgated or approved thereunder.


 


(ii)                
No Hazardous Materials. Other than those that are or were stored, used or 


disposed of in compliance with applicable law,
no Hazardous Materials are contained on or about any real property currently owned, leased or used by the Company or any of its
Subsidiaries, and no Hazardous Materials were released on or about any real property previously owned, leased or used by the Company
or any of its Subsidiaries during the period the property was owned, leased or used by the Company or any of its Subsidiaries,
except in the normal course of the Company’s or any of its Subsidiaries’ business.


 


(iii)               
No Storage Tanks. There are no underground storage tanks on or under any real 


property owned, leased or used by the Company
or any of its Subsidiaries that are not in compliance with applicable law.


 



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5.CERTAIN COVENANTS AND ACKNOWLEDGMENTS.


 


a.Covenants and Acknowledgements
of the Buyer.


 


(i)Transfer Restrictions.
The Buyer acknowledges that (1) the Securities have not been and are not being registered under the provisions of the 1933 Act
and, except as included in an effective registration statement, the Shares have not been and are not being registered under the
1933 Act, and may not be transferred unless (A) subsequently registered thereunder, or (B) the Buyer shall have delivered to the
Company an opinion of counsel, reasonably satisfactory in form, scope and substance to the Company, to the effect that the Securities
to be sold or transferred may be sold or transferred pursuant to an exemption from such registration; (2) any sale of the Securities
made in reliance on Rule 144 may be made only in accordance with the terms of such Rule and further, if such Rule is not applicable,
any resale of such Securities under circumstances in which the seller, or the Person through whom the sale is made, may be deemed
to be an underwriter, as that term is used in the 1933 Act, may require compliance with some other exemption under the 1933 Act
or the rules and regulations of the SEC thereunder; and (3) neither the Company nor any other Person is under any obligation to
register the Securities under the 1933 Act or to comply with the terms and conditions of any exemption thereunder.


 


(ii)Restrictive
Legend. The Buyer acknowledges and agrees that, until such time as the relevant Securities have been registered under the
1933 Act, and may be sold in accordance with an effective registration statement, or until such Securities can otherwise be
sold without restriction, whichever is earlier, the certificates and other instruments representing any of the Securities
shall bear a restrictive legend in substantially the following form (and a stop-transfer order may be placed against transfer
of any such Securities):


 


THESE SECURITIES HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OFFERED FOR SALE IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES OR AN OPINION OF COUNSEL OR OTHER EVIDENCE ACCEPTABLE TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.


 


(iii)Confession
of Judgment. The Buyer agrees it will not file the Confession unless and until an Event of Default (as defined in the
Note) under the Note has occurred; provided, however, that upon such an Event of Default, the Buyer shall be entitled to
immediately file such the Confession in an ex parte fashion.


 


b.Covenants,
Acknowledgements and Agreements of the Company. As a condition to the Buyer’s obligation to purchase the Securities
contemplated by this Agreement, and as a material inducement for the Buyer to enter into this Agreement and the other Transaction
Documents, until all of the Company’s obligations hereunder and the Note are paid and performed in full, or within the timeframes
otherwise specifically set forth below, the Company shall comply with the following covenants:


 


(i)Filings.
From the date hereof until the date that is six (6) months after all the Conversion Shares either have been sold by the Buyer,
or may permanently be sold by the Buyer without any restrictions pursuant to Rule 144 (the “Registration
Period”), the Company shall timely make all filings required to be made by it under the 1933 Act, the 1934 Act, Rule
144 or any United States state securities laws and regulations thereof applicable to the Company or by the rules and regulations
of the Principal Trading Market, and such filings shall conform to the requirements of applicable laws, regulations and government
agencies, and, unless such filings are publicly available on the SEC’s EDGAR system (via the SEC’s web site at no additional
charge), the Company shall provide a copy thereof to the Buyer promptly after such filings. Without limiting the foregoing, the
Company agrees to file a Form D with respect to the Securities as required under Regulation D and to provide a copy thereof to
the Buyer promptly after such filing. Additionally, within four (4) business days following the date of this Agreement,
the Company shall file a current report on Form 8-K describing the terms of the transactions contemplated by the Transaction Documents
in the form required by the 1934 Act and approved by the Buyer and attaching the material Transaction Documents as exhibits to
such filing. The Company shall further redact all confidential information from such Form 8-K.  Additionally,
the Company shall furnish to the Buyer, so long as the Buyer owns any Securities, promptly upon request, (1) a written statement
by the Company that it has complied with the reporting requirements of Rule 144, the 1933 Act and the 1934 Act, (2) a copy of the
most recent annual or quarterly report of the Company, and (3) such other information as may be reasonably requested to permit
the Buyer to sell such Securities pursuant to Rule 144 without registration.



    	10



    	 



    

(ii)Reporting
Status. So long as the Buyer beneficially owns Securities and for at least twenty (20) Trading Days thereafter, the Company
shall file all reports required to be filed with the SEC pursuant to Sections 13 or 15(d) of the 1934 Act, and shall take all reasonable
action under its control to ensure that adequate current public information with respect to the Company, as required in accordance
with Rule 144, is publicly available, and shall not terminate its status as an issuer required to file reports under the 1934 Act
even if the 1934 Act or the rules and regulations thereunder would permit such termination. 


 


(iii)Listing.
The Common Stock shall be listed or quoted for trading on any of (1) NYSE Amex, (2) the New York Stock Exchange, (3) the Nasdaq
Global Market, (4) the Nasdaq Capital Market, (5) the OTC Bulletin Board, or (6) the OTCQX or OTCQB.
The Company shall promptly secure the listing of all of the Conversion Shares upon each national securities exchange and automated
quotation system, if any, upon which the Common Stock is then listed (subject to official notice of issuance) and shall maintain
such listing of all securities from time to time issuable under the terms of the Transaction Documents. The Company shall comply
in all material respects with the Company’s reporting, filing and other obligations under the bylaws or rules of the Principal
Trading Market and/or the Financial Industry Regulatory Authority, Inc. (“FINRA”) or any successor thereto,
as the case may be, applicable to it at least through the date which is sixty (60) days after the date on which the Note has been
converted or paid in full.


 


(iv)Use of Proceeds. The
Company shall use the net proceeds received hereunder for working capital and general corporate purposes only; provided, however,
the Company will not use such proceeds to pay fees payable (1) to any broker or finder relating to the offer and sale of the Note,
or (2) to any other party relating to any financing transaction effected prior to the Closing Date.


 


(v)Publicity, Filings, Releases,
Etc. Neither party shall disseminate any information relating to the Transaction Documents or the transactions contemplated
thereby, including issuing any press releases, holding any press conferences or other forums, or filing any reports (collectively,
“Publicity”), without giving the other party reasonable advance notice and an opportunity to comment on the
contents thereof. Neither party will include in any such Publicity any statement or statements or other material to which the other
party reasonably objects, unless in the reasonable opinion of counsel to the party proposing such statement, such statement is
legally required to be included. In furtherance of the foregoing, the Company shall provide to the Buyer’s Counsel a draft
of the first current report on Form 8-K or a quarterly or annual report on Form 10-Q or 10-K, as the case may be, intended to be
made with the SEC which refers to the Transaction Documents or the transactions contemplated thereby as soon as practicable (but
at least two (2) Trading Days before such filing will be made) and shall not include in such filing (or any other filing filed
before then) any statement or statements or other material to which the other party reasonably objects, unless in the reasonable
opinion of counsel to the party proposing such statement, such statement is legally required to be included. Notwithstanding the
foregoing, each of the parties hereby consents to the inclusion of the text of the Transaction Documents in filings made with the
SEC (but any descriptive text accompanying or part of such filing shall be subject to the other provisions of this subsection).


 


(vi)FINRA Rule 5110.
In the event that the Corporate Financing Rule 5110 of FINRA is or becomes applicable to the transactions contemplated by the Transaction
Documents or to the sale by a Holder of any of the Securities, then the Company shall, to the extent required by such rule, timely
make any filings and cooperate with any broker or selling stockholder in respect of any consents, authorizations or approvals that
may be necessary for FINRA to timely and expeditiously permit the Holder to sell the Securities.


 


(vii)Keeping of Records
and Books of Account. The Company shall keep and cause each Subsidiary to keep adequate records and books of account, in which
complete entries shall be made in accordance with GAAP consistently applied, reflecting all financial transactions of the Company
and such Subsidiaries, and in which, for each fiscal year, all proper reserves for depreciation, depletion, obsolescence, amortization,
taxes, bad debts and other purposes in connection with its business shall be made.


 


(viii)Corporate Existence.
The Company shall (1) do all things necessary to preserve and keep in full force and effect its corporate existence, including,
without limitation, preserving and keeping in full force and effect all licenses or similar qualifications required by it to engage
in its business in all jurisdictions in which it is at the time so engaged; (2) continue to engage in business of the same general
type as conducted as of the date hereof; and (3) continue to conduct its business substantially as now conducted or as otherwise
permitted hereunder.



    	11



    	 



    

(ix) Taxes. The Company
shall pay and discharge promptly when due all taxes, assessments and governmental charges or levies imposed upon it or upon its
income or profits or in respect of its property before the same shall become delinquent or in default, which, if unpaid, might
reasonably be expected to give rise to liens or charges upon such properties or any part thereof, unless, in each case, the validity
or amount thereof is being contested in good faith by appropriate proceedings and the Company has maintained adequate reserves
with respect thereto in accordance with GAAP.


 


(x)Compliance. The Company
shall comply in all material respects with all federal, state and local laws and regulations, orders, judgments, decrees, injunctions,
rules, regulations, permits, licenses, authorizations and requirements (collectively, “Requirements”) of all
governmental bodies, insurers, departments, commissions, boards, courts, authorities, officials or officers which are applicable
to the Company, its business, operations, or any of its properties, except where the failure to so comply would not have a Material
Adverse Effect on the Company or any of its properties; provided, however, that nothing provided herein shall prevent the
Company from contesting in good faith the validity or the application of any Requirements.


 


(xi)3(a)(10) Shares. In
the event the Company, in violation of the covenants contained herein, ever ceases to be a reporting company for purposes of the
1934 Act for any period of time, then the Company, for so long as Rule 144 is not available to the Buyer as an exemption from registration,
shall cause any of its stockholders who at such time are in possession of Common Stock tradable under Section 3(a)(10) of the Securities
Act (“3(a)(10) Shares”) to cease to sell such 3(a)(10) Shares.


 


(xii)Litigation. From and
after the date hereof and until all of the Company’s obligations hereunder and the Note is paid and performed in full, the
Company shall notify the Buyer in writing, promptly upon learning thereof, of any litigation or administrative proceeding commenced
or threatened against the Company involving a claim in excess of $100,000.00.


 


(xiii)Performance of Obligations.
The Company shall promptly and in a timely fashion perform and honor all demands, notices, requests and obligations that exist
or may arise under the Transaction Documents.


 


(xiv)Failure to Make Timely
Filings. The Company agrees that, if the Company fails to timely file on the SEC’s EDGAR system any information required
to be filed by it, whether on a Form 10-K, Form 10-Q, Form 8-K, Proxy Statement or otherwise so as to be deemed a “reporting
issuer” with current public information under the 1934 Act, the Company shall be liable to pay to the Holder an amount based
on the following schedule (where “No. Business Days Late” refers to each Trading Day after the latest due date
for the relevant filing):



    	12



    	 



    

 


	No. Business Days Late	
        Late Filing Payment For

        Each $10,000.00 of

        Outstanding Principal of the Note

	1	$100.00
	2	$200.00
	3	$300.00
	4	$400.00
	5	$500.00
	6	$600.00
	7	$700.00
	8	$800.00
	9	$900.00
	10	$1,000.00
	>10	
        $1,000.00 + $200.00 for each Trading

        Day Late beyond 10 days



 


The Company shall pay any payments incurred
under this subsection in immediately available funds upon demand by the Holder; provided, however, that the Holder making
the demand may specify that the payment shall be made in shares of Common Stock at the Conversion Price (as defined in the Note)
applicable to the date of such demand. If the payment is to be made in shares of Common Stock, such shares shall be considered
Conversion Shares under the Note, with the “Delivery Date” for such shares being determined from the date of
such demand. The demand for payment of such amount in shares of Common Stock shall be considered a “Conversion Notice”
(but the delivery of such shares shall be in payment of the amount contemplated by this subsection and not in payment of any principal
or interest on the Note).


(xv)Authorized
Shares. The Company shall take all action necessary to at all times have authorized, and reserved for the purpose of issuance,
such number of shares of Common Stock as shall be necessary to effect the full conversion of the Note multiplied by two (2) (the
“Share Reserve”). If at any time the Share Reserve is insufficient to effect the full conversion of the Note,
the Company shall immediately increase the Share Reserve accordingly. If the Company does not have sufficient authorized and unissued
shares of Common Stock available to increase the Share Reserve, the Company shall call and hold a special meeting of the stockholders
within thirty (30) days of such occurrence, for the sole purpose of increasing the number of authorized shares of Common Stock.
The Company’s management shall recommend to the Company’s stockholders to vote in favor of increasing the number of
authorized shares of Common Stock. Management shall also vote all of its shares in favor of increasing the number of authorized
shares of Common Stock. The Company shall use its best efforts to cause such additional shares of Common Stock to be authorized
so as to comply with the requirements of this Section.


 


(xvi)DWAC Eligibility. For so
long as any portion of the Note remains outstanding, the Company shall use its best efforts to maintain DWAC eligibility. In the
event the Company is not DWAC eligible or does not otherwise deliver Shares to the Buyer pursuant to a conversion of all or any
portion of the Note, the outstanding principal balance of the Note shall increase by an amount equal to the decline in value of
the Shares, if any, between the time the applicable Conversion Notice (a “Notice of Exercise”) was delivered
to the Company and the time such Shares are freely tradeable in the Buyer’s brokerage account.


 


(xvii)Anti-Dilution Certification.
For so long as any portion of the Note remains outstanding, the Company shall deliver to the Buyer on or before the 10th
day of each month a certification in the form attached hereto as Annex VI whereby the Company
shall notify the Buyer of any events that occurred during the previous month that trigger anti-dilution protection or other adjustments
to the applicable Conversion Price (as defined in the Note) (“Adjustment Events”) under the Note or, if no Adjustment
Events occurred, certifying to the Buyer that no Adjustment Events occurred during the previous month.



    	13



    	 



    

 


(xviii)Future
Financing Arrangement. Unless it shall have first delivered to the Buyer, at least seventy two (72) hours prior to the closing
of such Future Offering (as defined herein), written notice describing the proposed Future Offering, including the terms and conditions
thereof and proposed definitive documentation to be entered into in connection therewith, and providing the Buyer an option during
the seventy two (72) hour period following delivery of such notice to purchase the securities being offered in the Future Offering
on the same terms as contemplated by such Future Offering (the limitations referred to in this sentence and the preceding sentence
are collectively referred to as the “Right of First Refusal”) (and subject to the exceptions described below),
the Company will not conduct any equity financing (including debt with an equity component) (“Future Offerings”)
during the period beginning on the Closing Date and ending at such time as the debt herein is fully satisfied. In the event the
terms and conditions of a proposed Future Offering are amended in any respect after delivery of the notice to the Buyer concerning
the proposed Future Offering, the Company shall deliver a new notice to the Buyer describing the amended terms and conditions of
the proposed Future Offering and the Buyer thereafter shall have an option during the seventy two (72) hour period following delivery
of such new notice to purchase the securities being offered on the same terms as contemplated by such proposed Future Offering,
as amended. The foregoing sentence shall apply to successive amendments to the terms and conditions of any proposed Future Offering.
The Right of First Refusal shall not apply to any transaction involving (i) issuances of securities in a firm commitment underwritten
public offering (excluding a continuous offering pursuant to Rule 415 under the 1933 Act) or (ii) issuances of securities as consideration
for a merger, consolidation or purchase of assets, or in connection with any strategic partnership or joint venture (the primary
purpose of which is not to raise equity capital), or in connection with the disposition or acquisition of a business, product or
license by the Company. The Right of First Refusal also shall not apply to the issuance of securities upon exercise or conversion
of the Company’s options, warrants or other convertible securities outstanding as of the date hereof or to the grant of additional
options or warrants, or the issuance of additional securities, under any Company stock option or restricted stock plan approved
by the stockholders of the Company. Buyer’s right to exercise the Right of First Refusal shall
be subordinate to exercise of a right of first refusal (“Asher Right of First Refusal”) by Asher Enterprises,
Inc., a Delaware corporation (“Asher”) set forth in that certain Securities Purchase Agreement dated July 12,
2011, by and between the Company and Asher; provided, however, that such subordination shall only be effective for
so long as the Asher Right of First Refusal is effective and valid. Consequently, the Right of First Refusal granted to
the Buyer under this section only applies to those Future Offerings that are declined by Asher while the Asher Right of First Refusal
is effective and valid.


(xix)Certain
Negative Covenants of the Company. From and after the date hereof and until all of the Company’s
obligations hereunder and the Note are paid and performed in full, the Company shall not:


A.Incur
any new indebtedness for borrowed money that includes an equity conversion component without complying with the Right of First
Refusal set forth in Section 5(b)(xvii) hereof; provided, however, that if the Company is in breach of any of its obligations
under this Agreement, then Buyer shall also have the right, in its sole and absolute discretion, to disallow any new indebtedness
for borrowed money without the prior written consent of Buyer, notwithstanding the Right of First Refusal.


 


B.Grant or permit any
security interest (or other lien or other encumbrance) in or on any of its assets; provided, however, that such restriction
shall not restrict the Company’s right to factor receivables or engage in similar types of limited secured financing arrangements;


 



    	14



    	 



    

C.Enter into any transaction,
including, without limitation, any purchase, sale, lease or exchange of property or the rendering of any service, with any Affiliate
of the Company, or amend or modify any agreement related to any of the foregoing, except on terms that are no less favorable, in
any material respect, than those obtainable from any person or entity who is not an Affiliate of the Company; or


 


D.Enter into any debt
or equity financing transaction without giving the Buyer at least ten (10) Trading Days notice of such prospective financing transaction
(the “Transaction Notice”) and the pre-emptive right to provide such financing on substantially similar terms
within five (5) Trading Days of receiving the Transaction Notice. The Buyer may also elect, in its sole discretion, to convert
then then-outstanding balance of the Note (including all default interest, penalties and fee) into securities issued in any such
subsequent financing transactions on the same terms and conditions as the other investors in such financing transaction. The Buyer
shall make such election by giving the Company written notice of its election within five (5) Trading Days of receiving the Transaction
Notice.


 


6.TRANSFER AGENT INSTRUCTIONS. 


 


a.The
Company warrants that, with respect to the Securities, other than the stop transfer instructions to give effect to Section 5(a)(i)
hereof, it will give the Transfer Agent no instructions inconsistent with instructions to issue Common Stock upon conversion of
the Note, as may be applicable from time to time, in such amounts as specified from time to time by the Company to the Transfer
Agent, bearing the restrictive legend specified in Section 5(a)(ii) of this Agreement prior to registration of the Shares under
the 1933 Act, registered in the name of the Holder or its designee and in such denominations to be specified by the Holder in connection
therewith. Except as so provided, the Shares shall otherwise be freely transferable on the books and records of the Company as
and to the extent provided in this Agreement and the other Transaction Documents. Nothing in this Section shall affect in any way
the Buyer’s obligations and agreement to comply with all applicable securities laws upon resale of the Securities. If the
Buyer provides the Company with an opinion of counsel reasonably satisfactory to the Company that registration of a resale by the
Buyer of any of the Securities in accordance with clause (1)(B) of Section 5(a)(i) of this Agreement is not required under the
1933 Act or upon request from a Holder while an applicable registration statement is effective, the Company shall (except as provided
in clause (2) of Section 5(a)(i) of this Agreement) permit the transfer of the Securities and, in the case of the Conversion Shares,
use its best efforts to cause the Transfer Agent to promptly electronically transmit to the Holder via DWAC
such Conversion Shares. The Company specifically covenants that, as of the Closing Date, the Transfer Agent shall be (a) participating
in the DWAC program, and (b) DWAC eligible. Moreover, the Company shall notify the Buyer in writing if the Company at any time
while the Holder holds Securities becomes aware of any plans of the Transfer Agent to terminate such DWAC participation or eligibility.
While any Holder holds Securities, the Company shall at all times after the Closing Date maintain a transfer agent which participates
in the DWAC program and is DWAC eligible, and the Company shall not appoint any transfer agent which does not both participate
in the DWAC program and maintain DWAC eligibility. Nevertheless, if at any time that the Company receives a Conversion Notice the
Transfer Agent is not participating in the DWAC program or the Conversion Shares are not otherwise transferable via the DWAC program,
then the Company shall instruct the Transfer Agent to issue one or more certificates for Common Stock without legend in such name
and in such denominations as specified by the Holder. In the event the Transfer Agent is not DWAC eligible on any Conversion Date,
and consequently the Company issues Conversion Shares pursuant to a Notice of Conversion or Notice of Exercise in certificated
rather than electronic form, then in such event the amount set forth in Section 5(b)(xvi) shall be added to the principal balance
of the Note. 


 


b.(i)The Company understands
that a delay in the delivery of Conversion Shares, whether on conversion of all or any portion of the Note and/or in payment of
accrued interest, beyond the relevant Delivery Date (as defined in the Note) could result in economic loss to the Holder. As compensation
to the Holder for such loss, in addition to any other available remedies in the Transactions Documents or at law or equity, the
Company shall pay late payments to the Holder for late delivery of the Shares in accordance with the following schedule (where
“No. Business Days Late” is defined as the number of Trading Days beyond three (3) Trading Days after the Delivery
Date):



    	15



    	 



    

 


	No. Business Days Late	
        Late Payment For Each $10,000.00

        of Principal or Interest Being Converted

	1	$100.00
	2	$200.00
	3	$300.00
	4	$400.00
	5	$500.00
	6	$600.00
	7	$700.00
	8	$800.00
	9	$900.00
	10	$1,000.00
	>10	
        $1,000.00 + $200.00 for each

        Business Day Late beyond 10 days



 


As elected by the Holder, the amount of any
payments incurred under this Section 6(b)(i) shall either be automatically added to the principal balance of the Note or otherwise
paid by the Company in immediately available funds upon demand. Nothing herein shall limit the Holder’s right to pursue additional
damages for the Company’s failure to issue and deliver the Shares to the Holder within a reasonable time. Furthermore, in
addition to any other remedies which may be available to a Holder, in the event that the Company fails for any reason to effect
delivery of such Shares within three (3) Trading Days after the Delivery Date, the Holder will be entitled to revoke the relevant
Notice of Conversion or Notice of Exercise by delivering a notice to such effect to the Company prior to such Holder’s receipt
of the relevant Shares, whereupon the Company and the Holder shall each be restored to their respective positions immediately prior
to delivery of such Notice of Conversion or Notice of Exercise, as the case may be; provided, however, that any payments
contemplated by this Section 6(b)(i) which have accrued through the date of such revocation notice shall remain due and owing to
the Holder notwithstanding such revocation.


 


(ii)If, by the fifth Trading Day after
the relevant Delivery Date, the Company fails for any reason to deliver the Shares, but at any time after the Delivery Date, the
Holder purchases, in an arm’s-length open market transaction or otherwise, shares of Common Stock (the “Covering
Shares”) in order to make delivery in satisfaction of a sale of Common Stock by the Holder (the “Sold Shares”),
which delivery such Holder anticipated to make using the shares of Common Stock to be issued upon such conversion or exercise (a
“Buy-In”), the Holder shall have the right to require the Company to pay to the Holder, in addition to and not
in lieu of the amounts contemplated in other provisions of the Transaction Documents, including, but not limited to, the provisions
of the immediately preceding Section 6(b)(i), the Buy-In Adjustment Amount (as defined below). The “Buy-In Adjustment
Amount” is the amount equal to the number of Sold Shares multiplied by the excess, if any, of (1) the Holder’s
total purchase price per share (including brokerage commissions, if any) for the Covering Shares over (2) the net proceeds per
share (after brokerage commissions, if any) received by the Holder from the sale of the Sold Shares. The Company shall pay the
Buy-In Adjustment Amount to the Holder in immediately available funds immediately upon demand by the Holder. By way of illustration
and not in limitation of the foregoing, if the Holder purchases shares of Common Stock having a total purchase price (including
brokerage commissions) of $11,000.00 to cover a Buy-In with respect to shares of Common Stock the Holder sold for net proceeds
of $10,000.00, the Buy-In Adjustment Amount which Company will be required to pay to the Holder will be $1,000.00.



    	16



    	 



    

 


c. The Company shall assume
any fees or charges of the Transfer Agent or Company Counsel regarding (i) the removal of a legend or stop transfer instructions
with respect to the Securities, and (ii) the issuance of certificates or DWAC registration to or in the name of the Holder or the
Holder’s designee or to a transferee as contemplated by an effective registration statement. Notwithstanding the foregoing,
it shall be the Holder’s responsibility to obtain all needed formal requirements (specifically: medallion guarantee and prospectus
delivery compliance) in connection with any electronic issuance of shares of Common Stock.


 


d.The Holder of the Note shall
be entitled to exercise its conversion privilege with respect to such Note, notwithstanding the commencement of any case under
11 U.S.C. §101 et seq. (the “Bankruptcy Code”). In the event the Company is a debtor under
the Bankruptcy Code, the Company hereby waives, to the fullest extent permitted, any rights to relief it may have under 11 U.S.C.
§362 in respect of such Holder’s exercise privilege. The Company hereby waives, to the fullest extent permitted, any
rights to relief it may have under 11 U.S.C. §362 in respect of the conversion of such Note. The Company agrees, without cost
or expense to such Holder, to take or to consent to any and all action necessary to effectuate relief under 11 U.S.C. §362.


 


7.CLOSING DATE.


 


a. The Closing Date shall occur
on the date which is the first Trading Day after each of the conditions contemplated by Sections 8 and 9 hereof shall have either
been satisfied or been waived by the party in whose favor such conditions run.


 


b.Closing of the purchase and
sale of the Securities, which the parties anticipate shall occur concurrently with the execution of this Agreement, shall occur
at the offices of the Buyer and shall take place no later than 3:00 P.M., Eastern Time, or on such day or such other time as is
mutually agreed upon by the Company and the Buyer.


 


8.CONDITIONS TO THE COMPANY’S
OBLIGATION TO SELL. The Company’s obligation to sell the Securities to the Buyer pursuant to this Agreement on the Closing
Date is conditioned upon and subject to the fulfillment, on or prior to the Closing Date, of all of the following conditions, any
of which may be waived in whole or in part by the Company:


 


a.The execution and delivery
of this Agreement, and, as applicable, the other Transaction Documents by the Buyer;


 


b.Delivery by the Buyer of good
funds as payment in full of an amount equal to the Purchase Price in accordance with this Agreement;


 


c.The accuracy on the Closing
Date of the representations and warranties of the Buyer contained in this Agreement, each as if made on such date, and the performance
by the Buyer on or before such date of all covenants and agreements of the Buyer required to be performed on or before such date;
and


 


d.There shall not be in effect
any law, rule or regulation prohibiting or restricting the transactions contemplated hereby, or requiring any consent or approval
which shall not have been obtained.


 


9.CONDITIONS TO THE BUYER’S OBLIGATION
TO PURCHASE. The Buyer’s obligation to purchase the Securities from the Company pursuant to this Agreement on the Closing
Date is conditioned upon and subject to the fulfillment, on or prior to the Closing Date, of all of the following conditions, any
of which may be waived in whole or in part by the Buyer:



    	17



    	 



    




a.The execution and delivery of this Agreement, the
Confession, the Transfer Agent Letter, and, as applicable, the other Transaction Documents by the Company;


 


b.The delivery by the Company to the Buyer of the
Note in original form, duly executed by the Company, in accordance with this Agreement;


 


c.The delivery by the Company
to the Buyer of the Opinion Letter, which Opinion Letter is in a form reasonably satisfactory to the Buyer;






 


d.On the Closing Date, each
of the Transaction Documents executed by the Company on or before such date shall be in full force and effect and the Company shall
not be in default thereunder;


 


e.The
Share Reserve shall be sufficient to effect the full conversion of the Note as of the Closing Date;


 


f.The accuracy in all material
respects on the Closing Date of the representations and warranties of the Company contained in this Agreement and the other Transaction
Documents, each as if made on such date, and the performance by the Company on or before such date of all covenants and agreements
of the Company required to be performed on or before such date;


 


g.There shall not be in effect
any law, rule or regulation prohibiting or restricting the transactions contemplated hereby, or requiring any consent or approval
which shall not have been obtained;


 


h.From and after the date hereof
up to and including the Closing Date, each of the following conditions will remain in effect: (i) the trading of the Common Stock
shall not have been suspended by the SEC or on the Principal Trading Market; (ii) trading in securities generally on the Principal
Trading Market shall not have been suspended or limited; (iii) no minimum prices shall been established for securities traded on
the Principal Trading Market; (iv) there shall not have been any material adverse change in any financial market; and (v) there
shall not have occurred any Material Adverse Effect;


 


i.Except for any notices required
or permitted to be filed after the Closing Date with certain federal and state securities commissions, the Company shall have obtained
(i) all governmental approvals required in connection with the lawful sale and issuance of the Securities, and (ii) all third party
approvals required to be obtained by the Company in connection with the execution and delivery of the Transaction Documents by
the Company or the performance of the Company’s obligations thereunder;


 





j.All corporate and other proceedings
in connection with the transactions contemplated at the Closing and all documents and instruments incident to such transactions
shall be reasonably satisfactory in substance and form to the Buyer;


 


k.A written consent and waiver
(“Waiver”) executed by Asher Enterprises, Inc. (“Asher”) regarding the Transaction
Documents, as required by Section 2.3 (borrowings) of that certain Convertible Promissory Note dated July 12, 2011, issued by the
Company in favor of Asher; and as required by Section 4(d) (right of first refusal) of that certain Securities Purchase Agreement
dated July 12, 2011, between the Company and Asher. The form of the Waiver must be acceptable to Buyer in Buyer’s sole discretion;
and.


 


l.A fully executed written consent
of directors or secretary’s certificate, in form acceptable to Buyer in its sole discretion, evidencing the Company’s
approval of the Transaction Documents.







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10.INDEMNIFICATION.


 


a. The Company agrees to defend,
indemnify and forever hold harmless the Buyer and its stockholders, directors, officers, managers, members, partners, Affiliates,
employees, and agents, and each Buyer Control Person (collectively, the “Buyer Parties”) from and against any
losses, claims, damages, liabilities or expenses incurred (collectively, “Damages”), joint or several, and any
action in respect thereof to which the Buyer or any of the other Buyer Parties becomes subject, resulting from, arising out of
or relating to any misrepresentation, breach of warranty or nonfulfillment of or failure to perform any covenant or agreement on
the part of the Company contained in this Agreement or any of the other Transaction Documents, as such Damages are incurred. The
Buyer Parties with the right to be indemnified under this Section (the “Indemnified Parties”) shall have the
right to defend any such action or proceeding with attorneys of their own selection, and the Company shall be solely responsible
for all costs and expenses related thereto. If the Indemnified Parties opt not to retain their own counsel, the Company shall defend
any such action or proceeding with attorneys of its choosing at its sole cost and expense, provided that such attorneys have been
pre-approved by the Indemnified Parties, which approval shall not be unreasonably withheld, and provided further that the Company
may not settle any such action or proceeding without first obtaining the written consent of the Indemnified Parties.


 


b.The indemnity contained in
this Agreement shall be in addition to (i) any cause of action or similar rights of the Buyer Parties against the Company or others,
and (ii) any other liabilities the Company may be subject to.


 


11.SPECIFIC PERFORMANCE. The Company
and the Buyer acknowledge and agree that irreparable damage would occur in the event that any provision of this Agreement or any
of the other Transaction Documents were not performed in accordance with its specific terms or were otherwise breached. It is accordingly
agreed that the parties (including any Holder) shall be entitled to an injunction or injunctions, without the necessity to post
a bond (except as specified below), to prevent or cure breaches of the provisions of this Agreement or any of the other Transaction
Documents and to enforce specifically the terms and provisions hereof or thereof, this being in addition to any other remedy to
which any of them may be entitled by law or equity; provided, however, that the Company, upon receipt of a Notice of Conversion
or a Notice of Exercise, may not fail or refuse to deliver certificates representing shares of Common Stock and the related legal
opinions, if any, or if there is a claim for a breach by the Company of any other provision of this Agreement or any of the other
Transaction Documents, the Company shall not raise as a legal defense any claim that the Holder or anyone associated or affiliated
with the Holder has violated any provision hereof or any of the other Transaction Documents or has engaged in any violation of
law or any other claim or defense, unless the Company has first posted a bond for one hundred fifty percent (150%) of the principal
amount and, if relevant, then obtained a court order specifically directing it not to deliver such certificates to the Holder.
The proceeds of such bond shall be payable to the Holder to the extent that the Holder obtains judgment or its defense is recognized.
Such bond shall remain in effect until the completion of the relevant proceeding and, if the Holder appeals therefrom, until all
such appeals are exhausted. This provision is deemed incorporated by reference into each of the Transaction Documents as if set
forth therein in full.


 


12.OWNERSHIP
LIMITATION. If at any time after the Closing, the Buyer shall or would receive shares of Common Stock in payment of
interest or principal under the Note or upon conversion of the Note, so that the Buyer would, together with other shares of Common
Stock held by it or its Affiliates, hold by virtue of such action or receipt of additional shares of Common Stock a number of shares
exceeding 9.99% of the number of shares of Common Stock outstanding on such date (the “9.99% Cap”), the Company
shall not be obligated and shall not issue to the Buyer shares of Common Stock which would exceed the 9.99% Cap, but only until
such time as the 9.99% Cap would no longer be exceeded by any such receipt of shares of Common Stock by the Buyer. The foregoing
limitations are enforceable, unconditional and non-waivable and shall apply to all Affiliates and assigns of the Buyer.



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13.MISCELLANEOUS. 


 


a.Governing Law and Venue.
This Agreement shall be governed by and interpreted in accordance with the laws of the State of Utah for contracts to be wholly
performed in such state and without giving effect to the principles thereof regarding the conflict of laws. Each of the parties
consents to the exclusive personal jurisdiction of the federal courts whose districts encompass any part of Salt Lake County or
the state courts of the State of Utah sitting in Salt Lake County in connection with any dispute arising under this Agreement,
and hereby waives, to the maximum extent permitted by law, any objection, including any objection based on forum non conveniens,
to the bringing of any such proceeding in such jurisdictions or to any claim that such venue of the suit, action or proceeding
is improper. Nothing in this subsection shall affect or limit any right to serve process in any other manner permitted by law.


 


b.No Waiver. Failure
of any party to exercise any right or remedy under this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.


 


c.Successors and Assigns.
This Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of each of the parties hereto.


 


d.Pronouns. All pronouns
and any variations thereof in this Agreement refer to the masculine, feminine or neuter, singular or plural, as the context may
permit or require.


 


e.Counterparts.
This Agreement may be signed in one or more counterparts, each of which shall be deemed an original, but all of which together
shall be deemed to constitute one instrument. Facsimile and email copies of signed signature pages will be deemed binding originals.


 


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


 


g.Severability. Whenever
possible, each provision of this Agreement shall be interpreted in such a manner as to be effective and valid under applicable
law, but if any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such provision shall be modified
to achieve the objective of the parties to the fullest extent permitted and such invalidity or unenforceability shall not affect
the validity or enforceability of the remainder of this Agreement or the validity or enforceability of this Agreement in any other
jurisdiction.


 


h.Amendment. This Agreement
may be amended only by an instrument in writing signed by the Company and the Buyer.


 


i.Entire Agreement. This
Agreement together with the other Transaction Documents constitutes and contains the entire agreement between the Company and the
Buyer and supersedes all prior agreements and understandings among the parties hereto with respect to the subject matter hereof.


 


j.Currency. All dollar
amounts referred to or contemplated by this Agreement or any other Transaction Documents shall be deemed to refer to US Dollars,
unless otherwise explicitly stated to the contrary.


 


k.Buyer’s
Expenses. In the event the Company or the Buyer elects not to effect the Closing for any reason, the Company shall pay
$10,000 in cash to the Buyer for the Buyer’s legal, administrative and due diligence expenses. Except as provided in the
immediately preceding sentence, and except for $5,000 which has been previously paid to the Buyer for the Buyer’s legal,
administrative and due diligence expenses, the Company and the Buyer shall be responsible for paying such party’s own fees
and expenses (including legal expenses) incurred in connection with the preparation and negotiation of this Agreement and the other
Transaction Documents and the closing of the transactions contemplated hereby and thereby.



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l.Assignment by the Company.
Notwithstanding anything to the contrary herein, the rights, interests or obligations of the Company hereunder may not be assigned,
by operation of law or otherwise, in whole or in part, by the Company without the prior written consent of the Buyer, which consent
may be withheld at the sole discretion of the Buyer; provided, however, that in the case of a merger, sale of substantially
all of the Company’s assets or other corporate reorganization, the Buyer shall not unreasonably withhold, condition or delay
such consent.


 


m.Advice of Counsel. In connection
with the preparation of this Agreement and all other Transaction Documents, each of the Company, its stockholders, officers, agents,
and representatives acknowledges and agrees that the attorney that prepared this Agreement and all of the other Transaction Documents
acted as legal counsel to the Buyer only. Each of the Company, its stockholders, officers, agents, and representatives (i) hereby
acknowledges that he/she/it has been, and hereby is, advised to seek legal counsel and to review this Agreement and all of the
other Transaction Documents with legal counsel of his/her/its choice, and (ii) either has sought such legal counsel or hereby waives
the right to do so.


 


n.No
Strict Construction. The language used in this Agreement is the language chosen mutually
by the parties hereto and no doctrine of construction shall be applied for or against any party.


 


o. Attorney’s
Fees. In the event of any action at law or in equity to enforce or interpret the terms of this Agreement or any of the
other Transaction Documents, the Prevailing Party (as defined hereafter) shall be entitled to reasonable attorneys’ fees,
court costs and collection costs in addition to any other relief to which such party may be entitled. “Prevailing Party”
shall mean the party in any litigation or enforcement action that prevails in the highest number of final rulings, counts or judgments
adjudicated by a court of competent jurisdiction.


 


p.Replacement of the Note. Subject
to any restrictions on or conditions to transfer set forth in the Note, the Holder of the Note, at its option, may in person or
by duly authorized attorney surrender the same for exchange at the Company’s principal corporate office, and promptly thereafter
and at the Company’s expense, except as provided below, receive in exchange therefor one or more new convertible promissory
note(s), each in the principal amount requested by such Holder, dated the date to which interest shall have been paid on the Note
so surrendered or, if no interest shall have yet been so paid, dated the date of the Note so surrendered and registered in the
name of such person or persons as shall have been designated in writing by such Holder or its attorney for the same principal amount
as the then unpaid principal amount of the Note so surrendered. As applicable, upon receipt by the Company of evidence reasonably
satisfactory to it of the ownership of and the loss, theft, destruction or mutilation of the Note and (i) in the case of loss,
theft or destruction, of indemnity reasonably satisfactory to it; or (ii) in the case of mutilation, upon surrender thereof,
the Company, at its expense, will execute and deliver in lieu thereof a new convertible promissory note executed in the same manner
as the Note being replaced, in the same principal amount as the unpaid principal amount of such Note and dated the date to which
interest shall have been paid on the Note or, if no interest shall have yet been so paid, dated the date of the Note.


 


q.Notices. Any notice required
or permitted hereunder shall be given in writing (unless otherwise specified herein) and shall be deemed effectively given on the
earliest of


 


(i) the date delivered, if delivered
by personal delivery as against written receipt therefor or by confirmed facsimile or electronic mail transmission,


 


(ii) the fifth Trading Day after
deposit, postage prepaid, in the United States Postal Service by registered or certified mail, or



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(iii) the third Trading Day after
mailing by domestic or international express courier, with delivery costs and fees prepaid,


 


in each case, addressed to each of the other
parties thereunto entitled at the following addresses (or at such other addresses as such party may designate by ten (10) days’
advance written notice similarly given to each of the other parties hereto):


 


If to the Company:


 


Sunvalley Solar, Inc.


Attn: _________________


398 Lemon Creek Dr., Suite A


Walnut, CA 91789


 


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


 


Cane Clark LLP


Attn: Joe Laxague


3273 E. Warm Springs Rd.


Las Vegas, Nevada 89120


Telephone: (702) 312-6255


 


If to the Buyer:


 


Tonaquint, Inc.


Attn: John M.
Fife


303 East Wacker
Drive, Suite 1200


Chicago, Illinois
60601


 


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


 


Carman Lehnhof Israelsen LLP


Attn: Jonathan K. Hansen


4626 North 300 West, Suite 160


Provo, Utah 84604


Telephone: (801) 209-5558


 


r.Further Assurance. Each party
to this Agreement agrees to perform any further acts and execute and deliver any documents that may be reasonably necessary to
carry out the provisions of this Agreement and the other Transaction Documents.


 


14.SURVIVAL OF COVENANTS, REPRESENTATIONS
AND WARRANTIES. The Company’s and the Buyer’s covenants, agreements, representations and warranties contained herein
shall survive the execution and delivery of this Agreement and the other Transaction Documents and the Closing hereunder, and shall
inure to the benefit of the Buyer and the Company and their respective successors and permitted assigns.


 


[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]






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IN WITNESS WHEREOF, each of the undersigned represents that the foregoing statements made by it above are true and correct
and that it has caused this Agreement to be duly executed on its behalf (if an entity, by one of its officers thereunto duly authorized)
as of the date first above written.


 


	PURCHASE PRICE:	$200,000.00
		 
		THE BUYER:
		 
		TONAQUINT, INC.
		 
		By: /s/ John M. Fife
		John M. Fife, President
		 
		THE COMPANY:
		 
		SUNVALLEY SOLAR, INC.
		 
		By: /s/ Zhijian Zhang



		Name: Zhijian Zhang
		Title: CEO



    	23



    	 



    

 


	ANNEX I	WIRE INSTRUCTIONS
		 
	ANNEX II	NOTE
	 	
	ANNEX III	CONSENT TO CONFESSION
	 	
	ANNEX IV	TRANSFER AGENT INSTRUCTION LETTER
	 	
	ANNEX V	OPINION LETTER
	 	
	ANNEX VI	FORM OF ANTI-DILUTION CERTIFICATE


 



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