EXHIBIT 4.1






 


SECURITIES
PURCHASE AGREEMENT


 


This
Securities Purchase Agreement (this “Agreement”) is dated as of October 16, 2014, between Windstream Technologies,
Inc., a Wyoming corporation (the “Company”), and each purchaser identified on the signature pages hereto (each,
including its successors and assigns, a “Purchaser” and collectively, the “Purchasers”).


 


WHEREAS,
subject to the terms and conditions set forth in this Agreement and pursuant to Section 4(a)(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 each Purchaser, and each Purchaser, severally and not jointly, 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 each Purchaser agree as follows:


 


ARTICLE
I.


DEFINITIONS


 


1.1
Definitions. In addition to the terms defined elsewhere in this Agreement: (a) capitalized terms that are not otherwise
defined herein have the meanings given to such terms in the 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 4.6.


 


“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
Date” means the Trading Day on which all of the Transaction Documents have been executed and delivered by the applicable
parties thereto in connection with the Closing, and all conditions precedent to (i) the Purchasers’ obligations to pay the
Purchase Price and (ii) the Company’s obligations to deliver the Debentures have been satisfied or waived.


 


“Closing”
means the closing of the purchase and sale of the Debentures pursuant to Section 2.2.


 




    	 



    	 



    

  


“Closing
Statement” means the Closing Statement in the form of Annex A attached hereto.


 


“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.


 


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


 


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


 


“Debentures”
means the Original Issue Discount Senior Secured Convertible Debentures due, subject to the terms therein, 12 months from their
date of issuance, issued by the Company to the Purchasers 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(q).


 


“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, consultants or directors
of the Company pursuant to any stock or option plan duly adopted for such purpose, by the Board of Directors, (b) securities issuable
pursuant to the Transaction Documents or 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, and (c) securities
issued pursuant to acquisitions or strategic transactions, 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,
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, (d) securities issued for consideration other than cash pursuant
to a merger, consolidation, acquisition, or similar business combination approved by the Board of Directors, (e) securities issued
pursuant to an equipment loan or leasing arrangement, real property leasing arrangement or debt financing from a bank or similar
financial institution approved by the Board of Directors, and (f) securities with respect to which the holders of the majority
of the outstanding principal under the Debentures have waived their anti-dilution rights.


 




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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).


 


“Initial
Cash Purchase Price” shall have the meaning ascribed to such term in Section 2.1.


 


“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.


 


“Pledge
Agreement” shall have the meaning ascribed to such term in Section 2.1.


 


“Principal
Amount” means, as to each Purchaser, the amounts set forth below such Purchaser’s signature block on the signature
pages hereto next to the heading “Principal Amount,” in United States Dollars, which shall equal such Purchaser’s
Subscription Amount multiplied by (20/19).


 


“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.


 




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


 


“Public
Information Failure Payments” 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 4.9.


 


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


 


“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 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 100% 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.


 


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


 


“Securities”
means the Debentures and the Underlying Shares.


 


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


 


“Security
Agreement” means the Security Agreement between the Company and the Collateral Agent named therein, substantially in
the form of Exhibit D hereto.


 


“Short
Sales” means all “short sales” as defined in Rule 200 of Regulation SHO under the Exchange Act.


 


“Subscription
Amount” means, as to each Purchaser, the aggregate amount to be paid for Debentures purchased hereunder as specified
below such Purchaser’s name on the signature page of this Agreement and next to the heading “Subscription Amount,”
(which will be paid in the form of the Initial Cash Purchase Price and the Secured Purchaser Notes in accordance with Section
2.1 and 2.2 hereof)


 


“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


 




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“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 MKT, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the
New York Stock Exchange, OTCQB, or the OTC Bulletin Board (or any successors to any of the foregoing).


 


“Tranche(s)”
shall have the meaning ascribed to such term in Section 2.2.


 


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


 


“Transfer
Agent” means OTC Stock Transfer Inc., the current transfer agent of the Company, with a mailing address of 6364 South
Highland Dr Ste 201, SLC, UT 84121, and a phone number of 801-272-7272, and any successor transfer agent of the Company.


 


“Transfer
Agent Instruction Letter” means the letter from the Company to the Transfer Agent which instructs the Transfer Agent
to issue Underlying Shares pursuant to the Transaction Documents, in the form of Exhibit B attached hereto.


 


“Underlying
Shares” means the shares of Common Stock issued and issuable upon conversion or redemption of the Debentures 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 Common Stock is not then listed
or quoted for trading on a Trading Market and if prices for the Common Stock are then reported on OTC Pink the daily volume weighted
average price of the Common Stock for such date (or the nearest preceding date) on OTC Pink, or (c) 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 Purchasers of
a majority in interest of the Securities then outstanding and reasonably acceptable to the Company, the fees and expenses of which
shall be paid by the Company.


 




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ARTICLE
II.


PURCHASE
AND SALE


 


2.1
Purchase. The Purchasers will purchase an aggregate of up to $3,344,000 in Subscription Amount corresponding to an aggregate
of up to $3,520,000 in Principal Amount of Debentures, in the amounts for each Purchaser set forth on the signature pages hereto.
In consideration thereof, each Purchaser shall (i) pay the amount designated as the initial cash purchase price on such Purchaser’s
signature page to this Agreement (the “Initial Cash Purchase Price”), and (ii) issue to Company such Purchaser’s
Secured Purchaser Note (the initial principal amount of the Secured Purchaser Note together with the Initial Cash Purchase Price,
as set forth on the signature pages hereto as to each Purchaser, the “Purchase Price”). The Secured Purchaser
Notes shall be secured by the Membership Interest Pledge Agreement substantially in the form attached hereto as Exhibit E, as
the same may be amended from time to time (the “Pledge Agreement”).


 


2.2
Form of Payment. On the Closing Date, (i) each Purchaser shall pay the Purchase Price to Company by delivering the following
at the Closing: (A) the Initial Cash Purchase Price (which will be in the aggregate amount of $622,500, corresponding to the Subscription
Amount of $712,500), which shall be delivered by wire transfer of immediately available funds in United States dollars to Company,
in accordance with Company’s written wiring instructions; and (B) the Secured Purchaser Notes in the aggregate principal
amount of $2,631,500 duly executed and substantially in the form attached hereto as Exhibit E (“Secured Purchaser
Notes”); and (ii) Company shall deliver the duly executed Debentures in the aggregate Principal Amount of $3,520,000,
to Purchasers, against delivery of such Purchase Price, each allocated among the Purchasers as set forth on the signature pages
hereto. $1,919,000 in principal amount of the Secured Purchaser Notes will be prepaid in four (4) tranches (each a “Tranche”
and collectively the “Tranches”) which will occur on each of the first four monthly anniversaries of the Closing
Date, provided the Company is not in default of the Debentures, subject to the terms of the Secured Purchaser Notes. Upon satisfaction
of the covenants and conditions set forth in Sections 2.3 for Closing, the Closing shall occur at the offices of the Company or
such other location as the parties shall mutually agree.


 


2.3
Deliveries.


 


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


 


(i)
this Agreement duly executed by the Company;




 


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


 


(iii)
the Transfer Agent Instruction Letter duly executed by the Company and the Transfer Agent, substantially in the form of Exhibit
B;


 


(iv)
the Closing Statement;




 


(v)
a Debenture with a principal amount equal to such Purchaser’s Principal Amount, registered in the name of such Purchaser;




 


(vi)
the Pledge Agreement duly executed by the Company; and




 


(vii)
the Security Agreement, duly executed by the Company.


 




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


 


(i)
this Agreement duly executed by such Purchaser;


 


(ii)
such Purchaser’s Initial Cash Purchase Price by wire transfer to the account specified in writing by the Company pursuant
to the Closing Statement;


 


(iii)
the Security Agreement, duly executed by the Collateral Agent thereunder;


 


(iv)
such Purchaser’s Secured Purchaser Note, duly executed by such Purchaser; and


 


(v)
the Pledge Agreement, duly executed by the Pledgors thereunder.


 


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 each Purchaser:


 


(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 or default of any of the provisions of its respective certificate or articles of incorporation,
bylaws or other organizational or charter documents. Each of the Company and the Subsidiaries is duly qualified to conduct business
and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted
or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as
the case may be, could not 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.


 




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(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.


 


(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.


 




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(e)
Filings, Consents and Approvals. The Company is not required to obtain any consent, waiver, authorization or order of,
give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority
or other Person in connection with the execution, delivery and performance by the Company of the Transaction Documents, other
than the filing of Form D and 8-K 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 300% of the Required Minimum on the date hereof.


 


(g)
Capitalization. The capitalization of the Company is as set forth in 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. The issuance and sale of the Securities will not obligate the Company to issue shares of Common Stock or other securities
to any Person (other than the Purchasers) and will not result in a right of any holder of Company securities to adjust the exercise,
conversion, exchange or reset price under any of such securities. All of the outstanding shares of capital stock of the Company
are 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.


 




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(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”). 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 Company has never been an issuer subject to Rule 144(i) under the Securities Act. 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.


 


(i)
Material Changes; Undisclosed Events, Liabilities or Developments. Since the date of the latest 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, and (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. 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.


 




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(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.


 


(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.


 


(1)
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.


 




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


 


(n)
Title to Assets. The Company and the Subsidiaries have good and marketable title in fee simple to all real property owned
by them and good and marketable title in all personal property owned by them that is material to the business of the Company and
the Subsidiaries, in each case free and clear of all Liens, except for (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.


 




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(p)
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.


 


(q)
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 applicable 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.


 




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(r)
Certain Fees. Other than as set forth on Schedule
3.1(r), no brokerage or finder’s fees or commissions are or will be payable by the Company or any Subsidiaries 13 to
any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to
the transactions contemplated by the Transaction Documents, The Purchasers shall have no obligation with respect to any fees or
with respect to any claims made by or on behalf of other Persons for fees of a type contemplated in this Section that may be due
in connection with the transactions contemplated by the Transaction Documents.


 


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


 


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


 


(u)
Registration Rights. 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.


 


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


 


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


 




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(x)
Disclosure. Except with respect to the material terms and conditions of the transactions
contemplated by the Transaction Documents, the Company confirms that neither it nor any other Person acting on its behalf has
provided any of the Purchasers or their agents or counsel with any information that it believes constitutes or might constitute
material, non-public information. The Company understands and confirms that the Purchasers will rely on the foregoing representation
in effecting transactions in securities of the Company. All of the disclosure furnished by or on behalf of the Company to the
Purchasers 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 no Purchaser makes or has made any representations
or warranties with respect to the transactions contemplated hereby other than those specifically set forth in Section 3.2 hereof


 


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


 


(z)
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 Purchasers and certain other “accredited investors” within the meaning
of Rule 501 under the Securities Act.


 


(aa)
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 FCPA.


 




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(bb)
Accountants. The Company’s accounting firm is set forth on Schedule
3.1(bb) of the Disclosure Schedules. To the knowledge and belief of the Company, such accounting firm is a registered
public accounting firm as required by the Exchange Act.


 


(cc)
No Disagreements with Accountants and Lawyers. 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.


 


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


 


(ee)
Intentionally Omitted.


 


(ff)
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.


 


(gg)
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.


 




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(hh)
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”).


 


(ii)
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.


 


(jj)
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.


 


(kk)
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 Purchasers. Each Purchaser, for itself and
for no other 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. Such Purchaser is either an individual or an entity duly
incorporated or formed, validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation
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 such Purchaser of the transactions contemplated by
the Transaction Documents have been duly authorized by all necessary corporate, partnership, limited liability company or similar
action, as applicable, on the part of such Purchaser. Each Transaction Document to which it is a party has been duly executed
by such Purchaser, and when delivered by such Purchaser in accordance with the terms hereof, will constitute the valid and legally
binding obligation of such Purchaser, enforceable against 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.


 




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(b)Own
Account. Such 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 such Purchaser’s right to sell the Securities in compliance with applicable
federal and state securities laws). Such Purchaser is acquiring the Securities hereunder in the ordinary course of its business.


 


(c)Purchaser
Status. At the time such Purchaser was offered the Securities, it was, and as of the date hereof it is, and on each
date on which it converts any Debentures it will be an “accredited investor” as defined in Rule 501(a)(1), (a)(2),
(a)(3), (a)(7) or (a)(8) under the Securities Act.


 


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


 


(e)General
Solicitation. Such 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.


 




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(f)Certain
Transactions and Confidentiality. Other than consummating the transactions contemplated hereunder, such Purchaser
has not directly or indirectly, nor has any Person acting on behalf of or pursuant to any understanding with such Purchaser, executed
any purchases or sales, including Short Sales, of the securities of the Company during the period commencing as of the time that
such 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 Notwithstanding
the foregoing, in the case of a Purchaser that is a multi-managed investment vehicle whereby separate portfolio managers manage
separate portions of such Purchaser’s assets and the portfolio managers have no direct knowledge of the investment decisions
made by the portfolio managers managing other portions of such Purchaser’s assets, the representation set forth above shall
only apply with respect to the portion of assets managed by the portfolio manager that made the investment decision to purchase
the Securities covered by this Agreement. Other than to other Persons party to this Agreement, such Purchaser has maintained the
confidentiality of all disclosures made to it in connection with this transaction (including the existence and terms of this transaction).
Notwithstanding the foregoing, but subject to Section 4.12 of this Agreement, for avoidance of doubt, nothing contained herein
shall constitute a representation or warranty, or preclude any actions, with respect to the identification of the availability
of, or securing of, available shares to borrow in order to effect Short Sales or similar transactions in the future.


 


The
Company acknowledges and agrees that the representations contained in Section 3.2 shall not modify, amend or affect such Purchaser’s
right to rely on the Company’s representations and warranties contained in this Agreement or any representations and warranties
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.


 


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


 


[NEITHER]
THIS SECURITY [NOR THE SECURITIES INTO WHICH THIS SECURITY IS [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 [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, UNLESS OTHERWISE PROHIBITED BY FEDERAL
OR STATE SECURITIES LAWS.


 




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The
Company acknowledges and agrees that a 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, such 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 appropriate Purchaser’s expense, the Company will execute and deliver such reasonable documentation as a
pledgee or secured party of Securities may reasonably request in connection with a pledge or transfer of the Securities.


 


(c)Certificates
evidencing the Underlying Shares shall not contain any legend (including the legend set forth in Section 4.1(b) hereof): (i) following
any sale of such Underlying Shares pursuant to Rule 144, or (ii) if such Underlying Shares are eligible for sale under Rule 144
without the need for current public information or (iii) 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). If all or any portion of a
Debenture is converted 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 without the need for current public information 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, subject to the terms hereof, issued free of all legends.
The Company agrees that 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 together with such seller and broker representation letter and other documents and instruments as the Company may reasonably
request, as applicable, issued with a restrictive legend (such third Trading Day, the “Legend
Removal Date”), deliver or cause to be delivered to such Purchaser a certificate representing such shares that
is free from all restrictive and other legends. The Company may not make any notation on its records or give instructions to the
Transfer Agent that enlarge the restrictions on transfer set forth in this Section 4. Certificates for Underlying Shares subject
to legend removal hereunder shall be transmitted by the Transfer Agent to the Purchaser by crediting the account of the Purchaser’s
prime broker with the Depository Trust Company System as directed by such Purchaser.


 




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(d)
In addition to such 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 such 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 such 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.


 


4.2Acknowledgment
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 except as otherwise provided in the Transaction Documents, including but not limited to Section 4(a) of the Debentures,
regardless of the effect of any such dilution or any claim the Company may have against any Purchaser and regardless of the dilutive
effect that such issuance may have on the ownership of the other stockholders of the Company.


 


4.3Furnishing
of Information; Public Information.


 


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


 


(b)At
any time during the period commencing from the six (6) month anniversary of 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,
in addition to such Purchaser’s other available remedies, the Company shall pay to a Purchaser, in cash, as partial liquidated
damages and not as a penalty, by reason of any such delay in or reduction of its ability to sell the Securities, an amount in
cash equal to two percent (2.0%) of the aggregate Subscription Amount of such Purchaser’s Securities on the day of a Public
Information Failure and on every thirtieth (30th) day (pro rated for periods totaling less than thirty days) thereafter
until the earlier of (a) the date such Public Information Failure is cured and (b) such time that such public information is no
longer required for the Purchasers to transfer the Underlying Shares pursuant to Rule 144. The payments to which a Purchaser shall
be entitled pursuant to this Section 4.3(b) are referred to herein as “Public Information
Failure Payments” Public Information Failure Payments shall be paid on the earlier of (i) the last day of the
calendar month during which such Public Information Failure Payments are incurred and (ii) the third (3rd) Business
Day after the event or failure giving rise to the Public Information Failure Payments is cured. In the event the Company fails
to make Public Information Failure Payments in a timely manner, such Public Information Failure Payments shall bear interest at
the rate of 1.5% per month (prorated for partial months) until paid in full. Nothing herein shall limit such Purchaser’s
right to pursue actual damages for the Public Information Failure, and such Purchaser shall have the right to pursue all remedies
available to it at Jaw or in equity including, without limitation, a decree of specific performance and/or injunctive relief.


 




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4.4Integration.
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.


 


4.5Conversion
and Exercise Procedures. The form of Notice of Conversion included in the Debentures sets forth the totality of the
procedures required of the Purchasers in order to convert the Debentures. Without limiting the preceding sentences, no ink-original
Notice of Conversion shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any
Notice of Conversion form be required in order to convert the Debenture. No additional legal opinion, other information or instructions
shall be required of the Purchasers to convert their Debentures. The Company shall honor conversions of the Debentures and shall
deliver Underlying Shares in accordance with the terms, conditions and time periods set forth in the Transaction Documents.


 


4.6Shareholder
Rights Plan. The Company covenants and agrees that no claim will be made or enforced by the Company or, with
the consent of the Company, any other Person, that any Purchaser is an “Acquiring Person” under any control share
acquisition, business combination, poison pill (including any distribution under a rights agreement) or similar antitakeover plan
or arrangement in effect or hereafter adopted by the Company, or that any Purchaser could be deemed to trigger the provisions
of any such plan or arrangement, by virtue of receiving Securities under the Transaction Documents or under any other agreement
between the Company and the Purchasers.


 


4.7
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 any Purchaser or its agents or counsel with any information that the Company
believes constitutes material nonpublic information, unless prior thereto such 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 each Purchaser
shall be relying on the foregoing covenant in effecting transactions in securities of the Company.


 




    	22



    	 



    

 


4.8Use
of Proceeds. The Company shall use the net proceeds hereunder at its sole discretion.


 


4.9Indemnification
of Purchasers. Subject to the provisions of this Section 4.9, the Company will indemnify
and hold each Purchaser and its directors, officers, shareholders, members, partners, employees and agents (and any other Persons
with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title),
each Person who controls such Purchaser (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange
Act), and the directors, officers, shareholders, agents, members, partners or employees (and any other Persons with a functionally
equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title) of such controlling persons
(each, a “Purchaser Party”) harmless from any and all losses, liabilities,
obligations, claims, contingencies, damages, costs and expenses, including all judgments, amounts paid in settlements, court costs
and reasonable attorneys’ fees and costs of investigation that any such Purchaser Party may suffer or incur as a result
of or relating to (a) any breach of any of the representations, warranties, covenants or agreements made by the Company in this
Agreement or in the other Transaction Documents or (b) any action instituted against 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 such Purchaser Party,
with respect to any of the transactions contemplated by the Transaction Documents (unless such action is based upon a breach of
such Purchaser Party’s representations, warranties or covenants under the Transaction Documents or any agreements or understandings
such Purchaser Party may have with any such stockholder or any violations by such Purchaser Party of state or federal securities
laws or any conduct by such Purchaser Party which constitutes fraud, gross negligence, willful misconduct or malfeasance). If
any action shall be brought against any Purchaser Party in respect of which indemnity may be sought pursuant to this Agreement,
such Purchaser Party shall promptly notify the Company in writing, and the Company shall have the right to assume the defense
thereof with counsel of its own choosing reasonably acceptable to the Purchaser Party. Any Purchaser Party shall have the right
to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of such Purchaser Party except to the extent that (i) the employment thereof has been specifically authorized
by the Company in writing, (ii) the Company has failed after a reasonable period of time to assume such defense and to employ
counsel or (iii) in such action there is, in the reasonable opinion of counsel, a material conflict on any material issue between
the position of the Company and the position of such Purchaser Party, in which case the Company shall be responsible for the reasonable
fees and expenses of no more than one such separate counsel. The Company will not be liable to any Purchaser Party under this
Agreement (y) for any settlement by a Purchaser Party effected without the Company’s prior written consent, which shall
not be unreasonably withheld or delayed; or (z) to the extent, but only to the extent that a loss, claim, damage or liability
is attributable to any Purchaser Party’s breach of any of the representations, warranties, covenants or agreements made
by such Purchaser Party in this Agreement or in the other Transaction Documents. The indemnification required by this Section
4.9 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 any liabilities the Company may be subject to pursuant to law.


 




    	23



    	 



    

 


4.10Reservation
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 300% of 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
300% of 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 Purchasers 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.


 


4.11Equal
Treatment of Purchasers. No consideration (including any modification
of any Transaction Document) shall be offered or paid to any Person to amend or consent to a waiver or modification of any provision
of this Agreement unless the same consideration is also offered to all of the parties to this Agreement Further, the Company shall
not make any payment of principal or interest on the Debentures in amounts which are disproportionate to the respective principal
amounts outstanding on the Debentures at any applicable time. For clarification purposes, this provision constitutes a separate
right granted to each Purchaser by the Company and negotiated separately by each Purchaser, and is intended for the Company to
treat the Purchasers as a class and shall not in any way be construed as the Purchasers acting in concert or as a group with respect
to the purchase, disposition or voting of Securities or otherwise.


 


4.12Certain
Transactions and Confidentiality.
Each Purchaser, severally and not jointly with the other Purchasers, covenants that neither it, nor any Affiliate acting on its
behalf or pursuant to any understanding with it will execute any Short Sales, of any of the Company’s securities during
the period commencing with the execution of this Agreement and ending on the date that the Debentures are no longer outstanding
(provided that this provision shall not prohibit any sales made where a corresponding Notice of Conversion is tendered to the
Company and the shares received upon such conversion or exercise are used to close out such sale).


 




    	24



    	 



    

 


4.13
Right of First Refusal. Commencing on the Closing Date and until twenty (20)
months thereafter, the Company shall provide the Purchasers not less than three (3) Business Days prior written notice of any
proposed sale by the Company for cash of its common stock or other securities or debt obligations, except in connection with an
Exempt Issuance. The Purchasers will have the right during the three (3) Business Days following receipt of the notice to purchase
such offered common stock, debt or other securities in accordance with the terms and conditions set forth in the notice of sale
in the same proportion to each other as their purchase of Securities hereunder. Notwithstanding the foregoing, the parties acknowledge
and agree that the Company has previously entered into an investment banking agreement with Burnham Securities that may require
the Company to grant a right of first refusal with respect to any proposed sales of securities. Any right of right first refusal
granted to the Purchasers under this Section 4.13 shall be subordinated to the rights of Burnham, if any.


 


ARTICLE
V.


MISCELLANEOUS


 


5.1
Termination. This Agreement may be terminated by any Purchaser, as to such Purchaser’s
obligations hereunder only and without any effect whatsoever on the obligations between the Company and the other Purchasers,
by written notice to the other parties, if the Closing has not been consummated on or before October 31, 2014; provided,
however, that such termination will not affect the right of any party to
sue for any breach by any other party (or parties).


 


5.2Fees
and Expenses. The Company shall pay the legal expenses of counsel to the Purchasers, up to $15,000. The Company shall
pay the due diligence expenses of the Purchasers in connection with the Transaction Documents, upon submission of receipts by
the Purchasers, subject to the Company’s pre-approval for any expenses greater than $1,500, and subject to aggregate due
diligence expenses of $5,000. 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 (including, without limitation, any fees required for same-day processing of any instruction letter delivered
by the Company and any conversion or exercise notice delivered by a Purchaser), stamp taxes and other taxes and duties levied
in connection with the delivery of any Securities to the Purchasers.


 


5.3Entire
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.


 





 




    	25



    	 



    

 




5.4Notices.
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 12:00 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 12:00 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 Purchasers holding at least 67% in interest of the Securities
then outstanding 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.


 


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


 


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


 


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 4.9.


 


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 4.9, 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.


 




    	26



    	 



    

  


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


 


5.11
Execution. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered
one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to 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
such Purchaser may rescind or withdraw, in its sole discretion from time to time upon written notice to the Company, any relevant
notice, demand or election in whole or in part without prejudice to its future actions and rights; provided, however,
that in the case of a rescission of a conversion of a Debenture, the applicable Purchaser shall be required to return any shares
of Common Stock subject to any such rescinded conversion notice concurrently with the return to such Purchaser of the aggregate
exercise price paid to the Company for such shares.


 




    	27



    	 



    

  


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 he 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.


 


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


 


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


 


5.17
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 such 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 such Purchaser’s election.


 




    	28



    	 



    

  


5.18
Independent Nature of Purchasers’ Obligations and Rights. The obligations of each Purchaser under any Transaction
Document are several and not joint with the obligations of any other Purchaser, and no Purchaser shall be responsible in any way
for the performance or non-performance of the obligations of any other Purchaser under any Transaction Document. Nothing contained
herein or in any other Transaction Document, and no action taken by any Purchaser pursuant hereto or thereto, shall be deemed
to constitute the Purchasers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption
that the Purchasers are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated
by the Transaction Documents. Each Purchaser shall be entitled to independently protect and enforce its rights, including, without
limitation, the rights arising out of this Agreement or out of the other Transaction Documents, and it shall not be necessary
for any other Purchaser to be joined as an additional party in any proceeding for such purpose. Each Purchaser has been represented
by its own separate legal counsel in its review and negotiation of the Transaction Documents. The Company has elected to provide
all Purchasers with the same terms and Transaction Documents for the convenience of the Company and not because it was required
or requested to do so by any of the Purchasers.


 


5.19
Liquidated Damages. The Company’s obligations to pay any partial liquidated damages or other amounts owing under
the Transaction Documents is a continuing obligation of the Company and shall not terminate until all unpaid partial liquidated
damages and other amounts have been paid notwithstanding the fact that the instrument or security pursuant to which such partial
liquidated damages or other amounts are due and payable shall have been canceled.


 


5.20
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 in the Transaction Documents shall not be a Business Day, then such action may be taken or such right may
be exercised on the next succeeding Business Day.


 


5.21
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.


 


5.22
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)


 




    	29



    	 



    

 


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.


 


	WINDSTREAM
    TECHNOLOGIES, INC.	Address
    for Notice:
	 	 
	 	Fax:
    (812) 953-1238





	By:	/s/
    Dan Bates	 
	Name:
    	Dan
    Bates	 
	Title:
    	President	 


 


[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK


SIGNATURE
PAGE FOR PURCHASERS FOLLOWS]


 




    	 



    	 



    

  


 






    	 



    	 



    

 





  


  



    	 



    	 



    




 


  



    	 



    	 



    




 


CLOSING STATEMENT


 


Pursuant
to the attached Securities Purchase Agreement, dated as of the date hereto, the Purchasers shall purchase Debentures from Windstream
Technologies, Inc. (the “Company”).
All funds will be disbursed in accordance with this Closing Statement.


 


Disbursement Date:
October__, 2014


_______________________________________________________________________________________________





 


I.
PURCHASE PRICE


 




	Gross Proceeds to be Received	$
	 	 
	II. DISBURSEMENTS	 
	 	 
	Windstream Technologies, Inc.	$
		 
	Total Amount Disbursed:	$
	 	 
	WIRE INSTRUCTIONS:	 



 


	To:	 	 	 
	 	 	 	 
	Duly executed this __ day of October, 2014:	 	
	 	 	 	 
	Windstream Technologies, Inc.	 	 
	 	 	 	 
	By:	 	 	 
	Name:	 	 	 
	Title:	 	 	 







 






    	 



    	 



    

 


Schedule 3.1(a)
Subsidiaries 


 


Windstream has
a 99.9% owned subsidiary company, in India, WindStream Energy Technologies India Private Limited.


 


The Company has
a 100% owned subsidiary in Peru, Windstream Technologies Latin America S.A.


 


Schedule
3.1(g) Capitalization


 


Common
stock; $0.001 par value; unlimited shares authorized; 87,857,589 shares issued and outstanding, respectively as of September 30,
2014.


 


	Warrants for shares of common stock outstanding at September 30, 2014	 	 	8,970,068	 
	 	 	 	 	 
	Options for purchase of common stock outstanding at September 30, 2014	 	 	10,160,640	 



 


Shares
of common stock owned by affiliates, all executives officers and directors, as of September 30, 2014 17,342,980 and shares underlying
convertible securities, principally options, 5,450,120.


 


Shares
of common stock owned by affiliates, Vanguard Financial Trust, as of September 30, 2014 9,760,000 and shares underlying convertible
securities, principally warrants, 2,800,000.


 


Schedule
3.1(i) Material Changes 


 


NONE


 


Schedule 3.1(a)
Brokerage or Finder’s Fees or Commissions


 


Fees
payable to Carter Terry and Company, 3060 Peachtree Road, Suite 1200, Atlanta, Georgia 30305, at 8% of total fundings, payable
as fundings are received by Windstream from Redwood Management LLC and its affiliates.


 


Schedule 3.1(a)
Accounting Firm


 


Hartley Moore
Accountancy Corporation


2400 Bast Katella
Ave, Suite 800


Anaheim, CA. 92806


 






    	 



    	 



    

 


ANNEX
1


 


FILING
DETAILS


 


[See
Sections 2.01 and 2.02 and 5.07]


 


Windstream Technologies,
Inc.


 


819 Buckeye Street


North Vernon, Indiana 47265


 


Phone number: 812-953-1481


 


IRS Employer Number: 98-0178621


 






    	 



    	 



    

 


ANNEX 2


 


NEW
DEBTOR EVENTS


 


[See
Section 2.02]


 


On
June 1, 2014, the Company entered into a subscription agreement with one accredited investor for the issuance of a convertible
promissory note in the aggregate principal amount of $400,000, which is convertible into shares of common stock of the Company
at $0.40 per share, and a warrant entitling the holder to purchase up to an aggregate of 50,000 of shares of common stock of the
Company at $0.40 per share. The warrant has a term of three years and vested immediately. The note bears interest at 12% for the
first ninety days of the term and then bears interest at 18% for the next nine months. The note is due in one year. In connection
with this transaction, a major shareholder and a related party (the “Pledgor”) signed a pledge and security agreement,
which grants a security interest in one million shares of the Company’s common stock owned by the Pledgor.


 


On
September 26, 2014, the Company entered into a subscription agreement with an accredited investor for the issuance of a convertible
promissory note in the aggregate principal amount of $550,000, in exchange for $250,000 in cash at closing, investor notes payable
to the Company of $250,000 and $50,000 of original issue discount interest. The note is convertible into shares of common stock
of the Company at $0.80 per share or a price determined by a formula using the lowest bid price of the Company’s common
stock for a period preceding the date of conversion. In addition, warrants entitling the accredited investor to purchase shares
of common stock at a price of the investors’ notes, $250,000, plus original issue discount interest of $25,000 at a price
driven by the market price of the Company’s common stock at the time of conversion. The warrants have a term of five years
and vest immediately. Principal payments on the note are due starting six months from the date of the note in the amount of $68,750
and will be paid in cash or by converting the amount due in to common shares of the Company’s stock. The note bears interest
at 10% per annum and any unpaid principal and accrued interest is due in full in thirteen months.


 


On
October 9, 2014, the Company entered into a subscription agreement with an accredited investor for the issuance of a convertible
promissory note in the aggregate principal amount of $200,000, in exchange for $100,000 in cash at closing, additional amounts
due to the Company at the accredited investor’s discretion and $20,000 of original issue discount interest. The note is
convertible into shares of common stock of the Company at $0.80 per share or a price determined by a formula using the lowest
bid price of the Company’s common stock for a period preceding the date of conversion. In addition, warrants entitling the
accredited investor to purchase 199,396 shares of the Company’s common stock at a price driven by the market price of the
Company’s common stock at the time of conversion. The warrants have a term of five years and vest immediately. The note
bears interest at 10% per annum and any unpaid principal and accrued interest is due in full in one year.


 


The
Company is currently evaluating the embedded conversion features within these two convertible debt agreements under ASC 815 “Derivatives
and Hedging” and will determine whether the embedded conversion feature or the warrants qualify for derivative accounting.
Additionally, both instruments will be evaluated under ASC 470-20 “Debt with Conversion and Other Options” for consideration
of any beneficial conversion features.


 


Annex
2 to Security Purchase Agreement


 






    	 



    	 



    









  


ANNEX 3


 


PLEDGED SHARES AND PROMISSORY NOTES


 


[See definition of “Issuers” in Section 1.03 and Sections
2.03, 3(j), 3(k) and 5.01(b)]


 





	 	 	Balances
    

    at

    9/30/2014	 
	Line of
    Credit	 	 	 	 
	GBC
    International Bank	 	$	1,849,757	 
	 	 	 	 	 
	ST Convertible
    Notes Payable	 	 	 	 
	Chester
    F. Griffiths and Luis Eduardo Cardoso	 	$	-	 
	Fahim
    Boulos	 	$	-	 
	Howard
    R. Krauss	 	$	-	 
	Philip
    H Bowman IRA LLC	 	$	-	 
	Lion
    Order LLC	 	$	350,000	 
	Orberal
    InternationaL Inc.	 	$	400,000	 
	Typenex
    Co-investors, LLC	 	$	550,000	 
	SUBTOTAL	 	$	1,300,000	 
	 	 	 	 	 
	Discount	 	 	 	 
	Chester
    F. Griffiths and Luis Eduardo Cardoso	 	$	-	 
	Fahim
    Boulos	 	$	-	 
	Howard
    R. Krauss	 	$	-	 
	Philip
    H Bowman IRA LLC	 	$	-	 
	Lion
    Order LLC	 	$	(0	)
	Orbel
    International Inc.	 	$	(266,668	)
	   SUBTOTAL	 	$	(266,668	)
	           TOTAL	 	$	1,033,332	 
	 	 	 	 	 
	Related Party Notes
    Payable	 	 	 	 
	Dan Bates	 	$	182,500	 
	 	 	 	 	 
	Third Party Notes
    Payable	 	 	 	 
	Steve Brown Lacksis	 	$	50,000	 
	Typenex Co Investments LLC	 	$	-	 
	Blue Sky Projects	 	$	250,000	 
	Rick Sackheim	 	$	50,000	 
	Ryan Keating	 	$	50,000	 
	Brad Stewart—CHI
    GROUP	 	$	200,000	 
	TOTAL	 	$	600,000	 
	 	 	 	 	 
	Notes Payable	 	 	 	 
	City of North Vernon	 	$	1,340,000	 


 


 Annex
3 to Security Purchase Agreement        



  



    	 



    	 



    




  


ANNEX 4


 


LIST
OF COPYRIGHTS, COPYRIGHT REGISTRATIONS AND


APPLICATIONS
FOR COPYRIGHT REGISTRATIONS


 


[See
definition of “Copyright Collateral” in Section 1.02 and Section 2.04]


 


NONE


 


Annex
4 to Security Purchase Agreement


 






    	 



    	 



    

 


ANNEX 5


 






LIST
OF PATENTS AND PATENT APPLICATIONS


 


[See
definition of “Patent Collateral” in Section 1.02 and Section 2.05]


 


United
States Patent:       8,536,720


September
17, 2013


 


Modular
wind energy unit with simple electronic connections.


 


United
States Patent:       8,823,194


September
2, 2014


  


Modular
alternative energy unit.


 


 Annex
5 to Security Purchase Agreement


 




    	 



    	 



    


 


 ANNEX
6


 


LIST
OF TRADE NAMES, TRADEMARKS, SERVICES MARKS,


TRADEMARK
AND SERVICE MARK REGISTRATIONS AND


APPLICATIONS
FOR TRADEMARK AND SERVICE MARK REGISTRATIONS


 


[See
definition of  “Trademark Collateral” in Section 1.02 and Section 2.04]


 





	Windstream
    Technologies
	Word
    mark	 
	Filing Date:	October 17,
    2013
	 	 
	Solar
    Mill	 
	Word mark	 
	Filing Date:	September
    23, 2013
	Registration
    Date:	June 3, 2014
	 	 
	TowerMill	 
	Word mark	 
	Filing Date:	January 13,
    2014
	 	 
	TurboMills	 
	Word mark	 
	Filing Date:	November
                                         11, 2009

        

	Registration
    Date:	March 20,
    2012
	 	 
	TurboMill	 
	Word mark	 
	Filing Date:	November
    11, 2009
	Registration
    Date:	June 28,
    2011




 





 Annex 6 to Security
Purchase Agreement


 






    	 



    	 



    

 


ANNEX 7


 


LIST
OF DEPOSIT ACCOUNTS, AND SECURITIES ACCOUNTS AND COMMODITY ACCOUNTS


 


[See
Sections 2.03 and 2.06]


 


Account
Number: 9002061622


Old
National Bank


P.O.
Box 718


Evansville,
Indiana 47705


 


Account
Number: 26838312


GBC
International Bank


5670
Wilshire Boulevard


Suite
1780


Los
Angeles, Ca. 90036


 


Annex 7 to Security
Purchase Agreement


 






    	 



    	 



    

 


ANNEX 8


  


LIST
OF COMMERCIAL TORT CLAIMS


 


[See
Sections 2.07 and 3(p)]


 


NONE


 


Annex 8 to Security
Purchase Agreement