EX-10.1






SECURITIES PURCHASE AGREEMENT




This SECURITIES PURCHASE AGREEMENT (the “Agreement”), dated as of January 3, 2012, is by and
among Converted Organics Inc., a Delaware corporation (the “Company”), each of the investors listed
on the Schedule of Buyers attached hereto (individually, a “Buyer” and collectively, the “Buyers”),
and, solely for purposes of the last two sentences of Section 4(s), Iroquois Capital Opportunity
Fund LP (“ICOP”).



RECITALS




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



B. The Company has authorized the issuance of (i) senior secured convertible notes in the
aggregate original principal amount of $2,861,100, which Notes (as defined below) shall be
convertible into shares of Common Stock (as defined in the Notes) (as converted, collectively, the
“Conversion Shares”), in accordance with the terms of the Notes and (ii) warrants to acquire shares
of Common Stock, in the form attached hereto as Exhibit A (the “Warrants”) (as exercised,
collectively, the “Warrant Shares”).



C. Upon the terms and conditions stated in this Agreement, on the Initial Closing Date (as
defined below), each Buyer wishes to purchase, and the Company wishes to sell, (i) the aggregate
original principal amount of Notes set forth opposite such Buyer’s name in column (3) on the
Schedule of Buyers (Initial Closing) (which aggregate amount for all Buyers for the Initial Closing
shall be $247,500), in the form attached hereto as Exhibit B-1 (the “Initial Notes”), and
(ii) Warrants to initially acquire up to the aggregate number of Warrant Shares set forth opposite
such Buyer’s name in column (4) on the Schedule of Buyers (Initial Closing).



D. Upon the terms and conditions stated in this Agreement, on each Additional Closing Date (as
defined below), each Buyer wishes to purchase, and the Company wishes to sell, (i) the aggregate
original principal amount of Notes set forth opposite such Buyer’s name in column (3) on the
Schedule of Buyers (Additional Closing) (which aggregate amount for all Buyers for each Additional
Closing shall be $237,600), in the form attached hereto as Exhibit B-2 (the “Additional
Notes” and collectively with the Initial Notes, the “Notes”), and (ii) Warrants to initially
acquire up to the aggregate number of shares of Common Stock as determined pursuant to the terms
thereof.



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



F. The Notes will be secured by a first priority perfected security interest in all of the
assets of the Company and its Subsidiaries (as defined below) as evidenced by an amended and
restated security agreement as the Buyers shall require in form and substance acceptable to each
Buyer (the “Security Agreement” and together with the other security documents and agreements
entered into in connection with this Agreement and each of such other documents and agreements, as
each may be amended or modified from time to time, collectively, the “Security Documents”), and
each of its Subsidiaries (as defined below) will execute a guaranty in favor of each Buyer
(collectively, the “Guaranties”) pursuant to which each of them guarantees the obligations of the
Company under the Transaction Documents (as defined below).



AGREEMENT




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




	1.	 	PURCHASE AND SALE OF NOTES AND WARRANTS.






	 	(a)	 	Purchase of Notes and Warrants.






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




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




(iii) Closing. The Initial Closing and each Additional Closing are each
referred to in this Agreement as a “Closing.” Each Closing shall occur on the applicable
Closing Date (as defined below) at the offices of Greenberg Traurig, LLP, 77 W. Wacker
Drive, Suite 3100, Chicago, Illinois 60601.




(iv) Purchase Price. The aggregate purchase price for the Initial Notes and
Warrants to be purchased by each Buyer at the Initial Closing (the “Initial Purchase Price”)
shall be the amount set forth opposite such Buyer’s name in column (5) on the Schedule of
Buyers (Initial Closing). The aggregate purchase price for the Additional Notes and Warrants
to be purchased by each Buyer at each Additional Closing (the “Additional Purchase Price”)
shall be the amount set forth opposite such Buyer’s name in column (4) on the Schedule of
Buyers (Additional Closing).



(b) Initial Closing Date. The date and time of the Initial Closing (the “Initial
Closing Date”) shall be 10:00 a.m., New York time, on the first (1st) Business Day on
which the conditions to the Initial Closing set forth in Sections 6(a) and 7(a) below are satisfied
or waived (or such later date as is mutually agreed to by the Company and each Buyer). As used
herein “Business Day” means any day other than a Saturday, Sunday or other day on which commercial
banks in New York, New York are authorized or required by law to remain closed.



(c) Additional Closing Date. The date and time of each Additional Closing (the
“Additional Closing Date” and together with the Initial Closing Date, each a “Closing Date” and
collectively, the “Closing Dates”) shall be 10:00 a.m., New York time, on the first
(1st) Business Day of each calendar month of 2012 (other than January) so long as the
conditions to such Additional Closing set forth in Sections 6(b) and 7(b) below are satisfied or
waived on each such Business Day (or such later time or date as is mutually agreed to by the
Company and each Buyer).



(d) Payment of Purchase Price; Delivery of Notes and Warrants.




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




(ii) On each Additional Closing Date, (A) each Buyer shall pay its respective
Additional Purchase Price (less, in the case of Iroquois (as defined below), the amounts
withheld pursuant to Section 4(g) with respect to each Additional Closing) to the Company
for the Additional Notes and Warrants to be issued and sold to such Buyer at such Additional
Closing, by wire transfer of immediately available funds in accordance with the Company’s
written wire instructions and (B) the Company shall deliver to each Buyer (i) Additional
Notes (in such original principal amount as is set forth opposite such Buyer’s name in
column (3) on the Schedule of Buyers (Additional Closing)) and (ii) Warrants to initially
acquire up to the aggregate number of Warrant Shares as determined pursuant to the terms
thereof, in each case, duly executed on behalf of the Company and registered in the name of
such Buyer or its designee.




	2.	 	BUYER’S REPRESENTATIONS AND WARRANTIES.





Each Buyer, severally and not jointly, represents and warrants to the Company with respect to
only itself that:



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



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



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



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



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



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



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



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



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



(j) Certain Trading Activities. As of the time of execution of this Agreement by such
Buyer, such Buyer has not directly or indirectly, nor has any Person acting on behalf of or
pursuant to any understanding with such Buyer, engaged in any transactions in the securities of the
Company (including, without limitation, any Short Sales (as defined below) involving the Company’s
securities) during the period commencing on December 28, 2011, and ending immediately prior to the
execution of this Agreement by such Buyer (it being understood and agreed that for all purposes of
this Agreement, and without implication that the contrary would otherwise be true, transactions
shall not include the location and/or reservation of borrowable shares of Common Stock). “Short
Sales” means all “short sales” as defined in Rule 200 promulgated under Regulation SHO under the
Securities Exchange Act of 1934, as amended (the “1934 Act”).




	3.	 	REPRESENTATIONS AND WARRANTIES OF THE COMPANY.





The Company represents and warrants to each of the Buyers that:



(a) Organization and Qualification. Each of the Company and each of its Subsidiaries
are entities duly organized and validly existing and in good standing under the laws of the
jurisdiction in which they are formed, and have the requisite power and authorization to own their
properties and to carry on their business as now being conducted and as presently proposed to be
conducted. Each of the Company and each of its Subsidiaries is duly qualified as a foreign entity
to do business and is in good standing in every jurisdiction in which its ownership of property or
the nature of the business conducted by it makes such qualification necessary, except to the extent
that the failure to be so qualified or be in good standing would not have a Material Adverse
Effect. “Material Adverse Effect” means any material adverse effect on (i) the business,
properties, assets, liabilities, operations (including results thereof), condition (financial or
otherwise) or prospects of the Company and its Subsidiaries, taken as a whole, (ii) the
transactions contemplated hereby or in any of the other Transaction Documents or (iii) the
authority or ability of the Company or any of its Subsidiaries to perform any of their respective
obligations under any of the Transaction Documents (as defined below). Other than the Persons (as
defined below) set forth on Schedule 3(a), the Company has no Subsidiaries. “Subsidiaries” means
any Person in which the Company, directly or indirectly, (I) owns any of the outstanding capital
stock or holds any equity or similar interest of such Person or (II) controls or operates any part
of the business, operations or administration of such Person, and each of the foregoing, is
individually referred to herein as a “Subsidiary”; provided that, except with respect to Section
3(m), Converted Organics of Woodbridge, LLC shall not be considered to be a Subsidiary.



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



(c) Issuance of Securities. The issuance of the Notes and the Warrants is duly
authorized, and after receipt of Shareholder Approval and upon issuance in accordance with the
terms of the Transaction Documents, will be validly issued, fully paid and non-assessable and free
from all preemptive or similar rights, taxes, liens, charges and other encumbrances with respect to
the issue thereof. As of the first (1st) Business Day immediately following the date on
which Shareholder Approval is obtained, the Company shall have reserved from its duly authorized
capital stock not less than 100% of the sum of (i) the maximum number of Conversion Shares issuable
upon conversion of the Notes (assuming for purposes hereof that the Notes are convertible at the
initial Conversion Price (as defined in the Notes) and without taking into account any limitations
on the conversion of the Notes set forth therein) and (ii) the maximum number of Warrant Shares
issuable upon exercise of the Warrants (without taking into account any limitations on the exercise
of the Warrants set forth therein). Upon conversion in accordance with the Notes or exercise in
accordance with the Warrants (as the case may be), the Conversion Shares and the Warrant Shares,
respectively, when issued, will be validly issued, fully paid and non-assessable and free from all
preemptive or similar rights, taxes, liens, charges and other encumbrances with respect to the
issue thereof, with the holders being entitled to all rights accorded to a holder of Common Stock.
Subject to the accuracy of the representations and warranties of the Buyers in this Agreement, the
offer and issuance by the Company of the Securities is exempt from registration under the 1933 Act.



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



(e) Consents. Neither the Company nor any Subsidiary is required to obtain any
consent from, authorization or order of, or make any filing or registration with (other than the
filing with the SEC of a Form D with the SEC and any other filings as may be required by any state
securities agencies), any court, governmental agency or any regulatory or self-regulatory agency or
any other Person in order for it to execute, deliver or perform any of its respective obligations
under, or contemplated by, the Transaction Documents, in each case, in accordance with the terms
hereof or thereof. All consents, authorizations, orders, filings and registrations which the
Company or any Subsidiary is required to obtain at or prior to the applicable Closing have been
obtained or effected on or prior to the applicable Closing Date, and neither the Company nor any of
its Subsidiaries are aware of any facts or circumstances which might prevent the Company or any
Subsidiary from obtaining or effecting any of the registration, application or filings contemplated
by the Transaction Documents. Except as disclosed in the SEC Documents, the Company is not in
violation of the requirements of the Principal Market and has no knowledge of any facts or
circumstances which could reasonably lead to delisting or suspension of the Common Stock in the
foreseeable future.



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



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



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



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



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



(k) SEC Documents; Financial Statements. During the two (2) years prior to the date
hereof, the Company has timely filed all reports, schedules, forms, proxy statements, statements
and other documents required to be filed by it with the SEC pursuant to the reporting requirements
of the 1934 Act (all of the foregoing filed prior to the date hereof and all exhibits and
appendices included therein and financial statements, notes and schedules thereto and documents
incorporated by reference therein being hereinafter referred to as the “SEC Documents”). The
Company has delivered to the Buyers or their respective representatives true, correct and complete
copies of each of the SEC Documents not available on the EDGAR system. As of their respective
dates, the SEC Documents complied in all material respects with the requirements of the 1934 Act
and the rules and regulations of the SEC promulgated thereunder applicable to the SEC Documents,
and, except with respect to the restatement of the financials disclosed by the Company in the
Current Report on Form 8-K filed by the Company with the SEC on October 19, 2011 (the “Restatement
8-K”), none of the SEC Documents, at the time they were filed with the SEC, contained any untrue
statement of a material fact or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the circumstances under which
they were made, not misleading. As of their respective dates, except as disclosed in the
Restatement 8-K, the financial statements of the Company included in the SEC Documents complied as
to form in all material respects with applicable accounting requirements and the published rules
and regulations of the SEC with respect thereto as in effect as of the time of filing. Except as
disclosed in the Restatement 8-K, such financial statements have been prepared in accordance with
generally accepted accounting principles, consistently applied, during the periods involved (except
(i) as may be otherwise indicated in such financial statements or the notes thereto, or (ii) in the
case of unaudited interim statements, to the extent they may exclude footnotes or may be condensed
or summary statements) and fairly present in all material respects the financial position of the
Company as of the dates thereof and the results of its operations and cash flows for the periods
then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments
which will not be material, either individually or in the aggregate). No other information provided
by or on behalf of the Company to any of the Buyers which is not included in the SEC Documents
(including, without limitation, information referred to in Section 2(e) of this Agreement) contains
any untrue statement of a material fact or omits to state any material fact necessary in order to
make the statements therein not misleading, in the light of the circumstance under which they are
or were made.



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



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



(n) Conduct of Business; Regulatory Permits. Neither the Company nor any of its
Subsidiaries is in violation of any term of or in default under its Articles of Incorporation, any
certificate of designation, preferences or rights of any other outstanding series of preferred
stock of the Company or any of its Subsidiaries or Bylaws or their organizational charter,
certificate of formation or certificate of incorporation or bylaws, respectively. Neither the
Company nor any of its Subsidiaries is in violation of any judgment, decree or order or any
statute, ordinance, rule or regulation applicable to the Company or any of its Subsidiaries, and
neither the Company nor any of its Subsidiaries will conduct its business in violation of any of
the foregoing, except in all cases for possible violations which could not, individually or in the
aggregate, have a Material Adverse Effect. Without limiting the generality of the foregoing, except
as disclosed in the SEC Documents, the Company is not in violation of any of the rules, regulations
or requirements of the Principal Market and has no knowledge of any facts or circumstances that
could reasonably lead to delisting or suspension of the Common Stock by the Principal Market in the
foreseeable future. Since July 7, 2011, (i) the Common Stock has been listed or designated for
quotation on the Principal Market, (ii) trading in the Common Stock has not been suspended by the
SEC or the Principal Market and (iii) the Company has received no communication, written or oral,
from the SEC or the Principal Market regarding the suspension or delisting of the Common Stock from
the Principal Market. The Company and each of its Subsidiaries possess all certificates,
authorizations and permits issued by the appropriate regulatory authorities necessary to conduct
their respective businesses, except where the failure to possess such certificates, authorizations
or permits would not have, individually or in the aggregate, a Material Adverse Effect, and neither
the Company nor any such Subsidiary has received any notice of proceedings relating to the
revocation or modification of any such certificate, authorization or permit.



(o) Foreign Corrupt Practices. Neither the Company nor any of its Subsidiaries nor
any director, officer, agent, employee or other Person acting on behalf of the Company or any of
its Subsidiaries has, in the course of its actions for, or on behalf of, the Company or any of its
Subsidiaries (i) used any corporate funds for any unlawful contribution, gift, entertainment or
other unlawful expenses relating to political activity; (ii) made any direct or indirect unlawful
payment to any foreign or domestic government official or employee from corporate funds; (iii)
violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as
amended; or (iv) made any unlawful bribe, rebate, payoff, influence payment, kickback or other
unlawful payment to any foreign or domestic government official or employee.



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



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



(r) Equity Capitalization. As of December 22, 2011, the authorized capital stock of
the Company consists of (i) 500,000,000 shares of Common Stock, of which, 103,445,560 were issued
and outstanding and (ii) 10,000,000 shares of preferred stock, of which 17,500 shares of 1% Series
A Convertible Preferred Stock were previously issued. No shares of Common Stock are held in
treasury. All of such outstanding shares are duly authorized and have been, or upon issuance will
be, validly issued and are fully paid and non-assessable. To the Company’s knowledge, no Person
owns 10% or more of the Company’s issued and outstanding shares of Common Stock (calculated based
on the assumption that all Convertible Securities (as defined below), whether or not presently
exercisable or convertible, have been fully exercised or converted (as the case may be) taking
account of any limitations on exercise or conversion (including “blockers”) contained therein
without conceding that such identified Person is a 10% stockholder for purposes of federal
securities laws). (i) None of the Company’s or any Subsidiary’s capital stock is subject to
preemptive rights or any other similar rights or any liens or encumbrances suffered or permitted by
the Company or any Subsidiary; (ii) except as disclosed in the SEC Documents, there are no
outstanding options, warrants, scrip, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into, or exercisable or exchangeable
for, any capital stock of the Company or any of its Subsidiaries, or contracts, commitments,
understandings or arrangements by which the Company or any of its Subsidiaries is or may become
bound to issue additional capital stock of the Company or any of its Subsidiaries or options,
warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating
to, or securities or rights convertible into, or exercisable or exchangeable for, any capital stock
of the Company or any of its Subsidiaries; (iii) except as disclosed in the SEC Documents, there
are no outstanding debt securities, notes, credit agreements, credit facilities or other
agreements, documents or instruments evidencing Indebtedness of the Company or any of its
Subsidiaries or by which the Company or any of its Subsidiaries is or may become bound; (iv) there
are no financing statements securing obligations in any amounts filed in connection with the
Company or any of its Subsidiaries; (v) except as disclosed in the SEC Documents, there are no
agreements or arrangements under which the Company or any of its Subsidiaries is obligated to
register the sale of any of their securities under the 1933 Act; (vi) other than Convertible
Securities held by Iroquois and ICOP, there are no outstanding securities or instruments of the
Company or any of its Subsidiaries which contain any redemption or similar provisions, and there
are no contracts, commitments, understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to redeem a security of the Company or any of its Subsidiaries;
(vii) except as disclosed in the SEC Documents, there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of the Securities;
(viii) neither the Company nor any Subsidiary has any stock appreciation rights or “phantom stock”
plans or agreements or any similar plan or agreement; and (ix) neither the Company nor any of its
Subsidiaries have any liabilities or obligations required to be disclosed in the SEC Documents
which are not so disclosed in the SEC Documents, other than those incurred in the ordinary course
of the Company’s or its Subsidiaries’ respective businesses and which, individually or in the
aggregate, do not or could not have a Material Adverse Effect. The Company has furnished to the
Buyers true, correct and complete copies of the Company’s Certificate of Incorporation, as amended
and as in effect on the date hereof (the “Articles of Incorporation”), and the Company’s bylaws, as
amended and as in effect on the date hereof (the “Bylaws”), and the terms of all Convertible
Securities and the material rights of the holders thereof in respect thereto.



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



(t) Absence of Litigation(a) . Except as disclosed in the SEC Documents, there is no
action, suit, proceeding, inquiry or investigation before or by the Principal Market, any court,
public board, government agency, self-regulatory organization or body pending or, to the knowledge
of the Company, threatened against or affecting the Company or any of its Subsidiaries, the Common
Stock or any of the Company’s or its Subsidiaries’ officers or directors which is outside of the
ordinary course of business or individually or in the aggregate material to the Company or any of
its Subsidiaries. There has not been, and to the knowledge of the Company, there is not pending or
contemplated, any investigation by the SEC involving the Company, any of its Subsidiaries or any
current or former director or officer of the Company or any of its Subsidiaries that has not been
previously resolved with no consequences to the Company or any of its Subsidiaries. The SEC has not
issued any stop order or other order suspending the effectiveness of any registration statement
filed by the Company under the 1933 Act or the 1934 Act.



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



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



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



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



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



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



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



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



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



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



(ee) Acknowledgement Regarding Buyers’ Trading Activity. It is understood and
acknowledged by the Company that (i) following the initial public disclosure of the transactions
contemplated by the Transaction Documents pursuant to the Initial 8-K Filing (as defined below),
none of the Buyers have been asked by the Company or any of its Subsidiaries to agree, nor has any
Buyer agreed with the Company or any of its Subsidiaries, to desist from effecting any transactions
in or with respect to (including, without limitation, purchasing or selling, long and/or short) any
securities of the Company, or “derivative” securities based on securities issued by the Company or
to hold any of the Securities for any specified term; (ii) any Buyer, and counterparties in
“derivative” transactions to which any such Buyer is a party, directly or indirectly, presently may
have a “short” position in the Common Stock which was established prior to such Buyer’s knowledge
of the transactions contemplated by the Transaction Documents; and (iii) each Buyer shall not be
deemed to have any affiliation with or control over any arm’s length counterparty in any
“derivative” transaction. The Company further understands and acknowledges that following the
initial public disclosure of the transactions contemplated by the Transaction Documents pursuant to
the Initial 8-K Filing one or more Buyers may engage in hedging and/or trading activities at
various times during the period that the Securities are outstanding, including, without limitation,
during the periods that the value and/or number of the Conversion Shares or Warrant Shares
deliverable with respect to the Securities are being determined and such hedging and/or trading
activities, if any, can reduce the value of the existing stockholders’ equity interest in the
Company both at and after the time the hedging and/or trading activities are being conducted. The
Company acknowledges that such aforementioned hedging and/or trading activities do not constitute a
breach of this Agreement or any other Transaction Document or any of the documents executed in
connection herewith or therewith.



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



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



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



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



(jj) Shell Company Status. The Company is not, and has never been, an issuer
identified in, or subject to, Rule 144(i).



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



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



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



(nn) Real Property. Each of the Company and its Subsidiaries holds good title to all
real property, leases in real property, or other interests in real property owned or held by the
Company or any of its Subsidiaries (the “Real Property”) owned by the Company or any of its
Subsidiaries (as applicable). The Real Property is free and clear of all mortgages, defects,
claims, liens, pledges, charges, taxes, rights of first refusal, encumbrances, security interests
and other encumbrances (collectively “Encumbrances”) and is not subject to any rights of way,
building use restrictions, exceptions, variances, reservations, or limitations of any nature except
for (a) liens for current taxes not yet due and (b) zoning laws and other land use restrictions
that do not impair the present or anticipated use of the property subject thereto.



(oo) Fixtures and Equipment. Each of the Company and its Subsidiaries (as applicable)
has good title to, or a valid leasehold interest in, the tangible personal property, equipment,
improvements, fixtures, and other personal property and appurtenances that are used by the Company
or its Subsidiary in connection with the conduct of its business (the “Fixtures and Equipment”).
The Fixtures and Equipment are structurally sound, are in good operating condition and repair, are
adequate for the uses to which they are being put, are not in need of maintenance or repairs except
for ordinary, routine maintenance and repairs and are sufficient for the conduct of the Company’s
and/or its Subsidiaries’ businesses (as applicable) in the manner as conducted prior to the
Closing. Each of the Company and its Subsidiaries owns all of its Fixtures and Equipment free and
clear of all Encumbrances except for (a) liens for current taxes not yet due and (b) zoning laws
and other land use restrictions that do not impair the present or anticipated use of the property
subject thereto.



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



(qq) Money Laundering. The Company and its Subsidiaries are in compliance with, and
have not previously violated, the USA Patriot Act of 2001 and all other applicable U.S. and
non-U.S. anti-money laundering laws and regulations, including, without limitation, the laws,
regulations and Executive Orders and sanctions programs administered by the U.S. Office of Foreign
Assets Control, including, without limitation, (i) Executive Order 13224 of September 23, 2001
entitled, “Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to
Commit, or Support Terrorism” (66 Fed. Reg. 49079 (2001)); and (ii) any regulations contained in 31
CFR, Subtitle B, Chapter V.



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



(ss) Disclosure. The Company confirms that neither it nor any other Person acting on
its behalf has provided any of the Buyers or their agents or counsel with any information that
constitutes or could reasonably be expected to constitute material, non-public information
concerning the Company or any of its Subsidiaries, other than the existence of the transactions
contemplated by this Agreement and the other Transaction Documents. The Company understands and
confirms that each of the Buyers will rely on the foregoing representations in effecting
transactions in securities of the Company. All disclosure provided to the Buyers regarding the
Company and its Subsidiaries, their businesses and the transactions contemplated hereby, including
the schedules to this Agreement, furnished by or on behalf of the Company or any of its
Subsidiaries is true and correct and does not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading. Each press release issued by
the Company or any of its Subsidiaries during the twelve (12) months preceding the date of this
Agreement did not at the time of release contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they are made, not misleading. No event or
circumstance has occurred or information exists with respect to the Company or any of its
Subsidiaries or its or their business, properties, liabilities, prospects, operations (including
results thereof) or conditions (financial or otherwise), which, under applicable law, rule or
regulation, requires public disclosure at or before the date hereof or announcement by the Company
but which has not been so publicly disclosed. The Company acknowledges and agrees that no Buyer
makes or has made any representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in Section 2.




	4.	 	COVENANTS.





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



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



(c) Reporting Status. Until the date on which no Notes or Warrants are outstanding
(the “Reporting Period”), the Company shall timely file all reports required to be filed with the
SEC pursuant to the 1934 Act, and the Company shall not terminate its status as an issuer required
to file reports under the 1934 Act even if the 1934 Act or the rules and regulations thereunder
would no longer require or otherwise permit such termination.



(d) Use of Proceeds. The Company shall use the net proceeds from the sale of the
Securities hereunder solely for general working capital purposes. Without limiting the foregoing,
none of such proceeds shall be used, directly or indirectly, (i) for the satisfaction of any debt
of the Company or any of its Subsidiaries (other than payment of trade payables incurred after the
date hereof in the ordinary course of business of the Company and its Subsidiaries and consistent
with prior practices) or (ii) for the redemption of any securities of the Company (other than the
Securities).



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



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



(g) Fees. The Company shall reimburse Iroquois Master Fund Ltd. (“Iroquois”) or its
designee(s) for all costs and expenses incurred by it or its affiliates in connection with the
transactions contemplated by the Transaction Documents (including, without limitation, all legal
fees and disbursements in connection therewith, structuring, documentation and implementation of
the transactions contemplated by the Transaction Documents and due diligence and regulatory filings
in connection therewith) with respect to the Initial Closing in a non-accountable amount equal to
$25,000, which amount shall be withheld by Iroquois from its Initial Purchase Price at the Initial
Closing or paid by the Company on demand by Iroquois if Iroquois terminates its obligations under
this Agreement in accordance with Section 8(a) (as the case may be). In addition to the foregoing,
the Company shall reimburse Iroquois or its designee(s) for all costs and expenses incurred by it
or its affiliates in connection with the transactions contemplated by the Transaction Documents
(including, without limitation, all legal fees and disbursements in connection therewith,
structuring, documentation and implementation of the transactions contemplated by the Transaction
Documents and due diligence and regulatory filings in connection therewith) with respect to each
Additional Closing in a non-accountable amount equal to $16,000, which amount shall be withheld by
Iroquois from its applicable Additional Purchase Price at the applicable Additional Closing or paid
by the Company on demand by Iroquois if Iroquois terminates its obligations under this Agreement in
accordance with Section 8(b) with respect to the applicable Additional Closing (as the case may
be). The Company shall be responsible for the payment of any placement agent’s fees, financial
advisory fees, or broker’s commissions (other than for Persons engaged by any Buyer) relating to or
arising out of the transactions contemplated hereby (including, without limitation, any fees
payable to the Placement Agent, who is the Company’s sole placement agent in connection with the
transactions contemplated by this Agreement). The Company shall pay, and hold each Buyer harmless
against, any liability, loss or expense (including, without limitation, reasonable attorneys’ fees
and out-of-pocket expenses) arising in connection with any claim relating to any such payment.
Except as otherwise set forth in the Transaction Documents, each party to this Agreement shall bear
its own expenses in connection with the sale of the Securities to the Buyers.



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



(i) Disclosure of Transactions and Other Material Information. The Company shall, on
or before 8:00 a.m. New York time, on the date of this Agreement, file a Current Report on Form 8-K
describing all the material terms of the transactions contemplated by the Transaction Documents in
the form required by the 1934 Act and attaching all the material Transaction Documents (including,
without limitation, this Agreement (and all schedules to this Agreement), the form of the Notes and
the form of the Warrants) (including all attachments, the “Initial 8-K Filing”). The Company shall,
on or before 8:00 a.m., New York time, on the first (1st) Business Day immediately
following each Additional Closing Date, (x) issue a press release reasonably acceptable to the
Buyers disclosing the occurrence of such Additional Closing and (y) file a Current Report on Form
8-K disclosing the occurrence of such Additional Closing in the form required by the 1934 Act
(each, an “Additional 8-K Filing” and collectively with the Initial 8-K Filing, the “8-K Filings”).
From and after the filing of the Initial 8-K Filing, the Company shall have disclosed all material,
non-public information (if any) delivered to any of the Buyers by the Company or any of its
Subsidiaries, or any of their respective officers, directors, employees or agents in connection
with the transactions contemplated by the Transaction Documents. The Company shall not, and the
Company shall cause each of its Subsidiaries and each of its and their respective officers,
directors, employees and agents, not to, provide any Buyer with any material, non-public
information regarding the Company or any of its Subsidiaries from and after the filing of the
Initial 8-K Filing without the express prior written consent of such Buyer. In the event of a
breach of any of the foregoing covenants or any of the covenants contained in Section 4(o) by the
Company, any of its Subsidiaries, or any of its or their respective officers, directors, employees
and agents (as determined in the reasonable good faith judgment of such Buyer), in addition to any
other remedy provided herein or in the Transaction Documents, such Buyer shall have the right to
make a public disclosure, in the form of a press release, public advertisement or otherwise, of
such material, non-public information without the prior approval by the Company, any of its
Subsidiaries, or any of its or their respective officers, directors, employees or agents. No Buyer
shall have any liability to the Company, any of its Subsidiaries, or any of its or their respective
officers, directors, employees, stockholders or agents, for any such disclosure. Subject to the
foregoing, neither the Company, its Subsidiaries nor any Buyer shall issue any press releases or
any other public statements with respect to the transactions contemplated hereby; provided,
however, the Company shall be entitled, without the prior approval of any Buyer, to make any press
release or other public disclosure with respect to such transactions (i) in substantial conformity
with the 8-K Filings and contemporaneously therewith and (ii) as is required by applicable law and
regulations (provided that in the case of clause (i) each Buyer shall be consulted by the Company
in connection with any such press release or other public disclosure prior to its release). Without
the prior written consent of the applicable Buyer, the Company shall not (and shall cause each of
its Subsidiaries and affiliates to not) disclose the name of such Buyer in any filing (other than
the 8-K Filings), announcement, release or otherwise. Notwithstanding anything contained in this
Agreement to the contrary and without implication that the contrary would otherwise be true, the
Company expressly acknowledges and agrees that no Buyer has had, and no Buyer shall have (unless
expressly agreed to by a particular Buyer after the date hereof in a written definitive and binding
agreement executed by the Company and such particular Buyer (it being understood and agreed that no
Buyer may bind any other Buyer with respect thereto)), any duty of confidentiality with respect to,
or a duty not to trade on the basis of, any information regarding the Company or any of its
Subsidiaries.



(j) Registration Statements. Until the six (6) month anniversary of the final Closing
to occur under this Agreement and at any time thereafter while the Company is not in compliance
with Rule 144(c)(1), the Company shall not file a registration statement under the 1933 Act
relating to securities that are not the Conversion Shares and Warrant Shares (other than (i)
registration statements on Form S-8 related to an Approved Share Plan and (ii) post-effective
amendments to registration statements that are effective as of the date of this Agreement solely to
update the information contained therein).



(k) Additional Issuance of Securities. The Company agrees that for the period
commencing on the date hereof and ending on the date immediately following the six (6) month
anniversary of the final Closing to occur under this Agreement (the “Restricted Period”), neither
the Company nor any of its Subsidiaries shall directly or indirectly issue, offer, sell, grant any
option or right to purchase, or otherwise dispose of (or announce any issuance, offer, sale, grant
of any option or right to purchase or other disposition of) any equity security or any
equity-linked or related security (including, without limitation, any “equity security” (as that
term is defined under Rule 405 promulgated under the 1933 Act), any Convertible Securities, any
debt, any preferred stock or any purchase rights) (any such issuance, offer, sale, grant,
disposition or announcement (whether occurring during the Restricted Period or at any time
thereafter) is referred to as a “Subsequent Placement”). Notwithstanding the foregoing, this
Section 4(j) shall not apply in respect of the issuance of (A) shares of Common Stock or standard
options to purchase Common Stock to directors, officers, consultants (it being expressly understood
and agreed that lawyers, law firms, accountants, accounting firms and other similar professional
advisors and professional advisory firms are not consultants) or employees of the Company or any of
its Subsidiaries in their capacity as such pursuant to an Approved Share Plan (as defined below),
provided that (1) all such issuances (taking into account the shares of Common Stock issuable upon
exercise of such options) after the date hereof pursuant to this clause (A) do not, in the
aggregate, exceed more than 650,000 shares of Common Stock (adjusted for stock splits, stock
combinations and other similar transactions occurring after the date of this Agreement) and (2) the
exercise price of any such options is not lowered, none of such options are amended to increase the
number of shares issuable thereunder and none of the terms or conditions of any such options are
otherwise materially changed in any manner that adversely affects any of the Buyers; (B) shares of
Common Stock issued upon the conversion or exercise of Convertible Securities (other than standard
options to purchase Common Stock issued pursuant to an Approved Share Plan that are covered by
clause (A) above) issued prior to the date hereof, provided that the conversion or exercise price
of any such Convertible Securities (other than standard options to purchase Common Stock issued
pursuant to an Approved Share Plan that are covered by clause (A) above) is not lowered, none of
such Convertible Securities (other than standard options to purchase Common Stock issued pursuant
to an Approved Share Plan that are covered by clause (A) above) are amended to increase the number
of shares issuable thereunder and none of the terms or conditions of any such Convertible
Securities (other than standard options to purchase Common Stock issued pursuant to an Approved
Share Plan that are covered by clause (A) above) are otherwise materially changed in any manner
that adversely affects any of the Buyers; (C) up to 1,599,207 shares of Common Stock (adjusted for
stock splits, stock combinations and other similar transactions occurring after the date of this
Agreement) to be issued to TerraSphere members as disclosed in the SEC Documents; (D) shares of
Common Stock issued in connection with strategic alliances, strategic mergers and acquisitions and
strategic partnerships, provided that (1) the primary purpose of such issuance is not to raise
capital as determined in good faith by the Buyers, (2) the purchaser or acquirer of such shares of
Common Stock in such issuance solely consists of either (I) the actual participants in such
strategic alliance or strategic partnership, (II) the actual owners of such assets or securities
acquired in such merger or acquisition or (III) the stockholders, partners or members of the
foregoing Persons in the immediately preceding clauses (I) and (II), (3) the number or amount (as
the case may be) of such shares of Common Stock issued to such Person by the Company shall not be
disproportionate to such Person’s actual participation in such strategic alliance or strategic
partnership or ownership of such assets or securities to be acquired by the Company (as applicable)
and (4) all such issuances of Common Stock after the date hereof pursuant to this clause (D) do
not, in the aggregate, exceed more than 1,600,000 shares of Common Stock (adjusted for stock
splits, stock combinations and other similar transactions occurring after the date of this
Agreement); (E) the Notes; (F) the Conversion Shares; (G) the Warrants; (H) the Warrant Shares; (I)
the shares of Common Stock issuable upon exercise of the Warrants (as defined in each of the Prior
Purchase Agreements (as defined below)); and (J) shares of unregistered Common Stock to be issued
to the Placement Agent in connection with services rendered to the Company (each of the foregoing
in clauses (A) through (J) collectively the “Excluded Securities”). “Approved Share Plan” means any
employee benefit plan which has been approved by the board of directors of the Company prior to or
subsequent to the date hereof pursuant to which shares of Common Stock and standard options to
purchase Common Stock may be issued to any employee, officer, consultants or director for services
provided to the Company or any of its Subsidiaries in their capacity as such. “Convertible
Securities” means any capital stock or other security of the Company or any of its Subsidiaries
that is at any time and under any circumstances directly or indirectly convertible into,
exercisable or exchangeable for, or which otherwise entitles the holder thereof to acquire, any
capital stock or other security of the Company (including, without limitation, Common Stock) or any
of its Subsidiaries. “Prior Purchase Agreements” means, collectively, (x) that certain Securities
Purchase Agreement, dated as of December 17, 2010, by and among the Company and the investors party
thereto, as may be amended from time to time (the “December Purchase Agreement”) and (y) that
certain Securities Purchase Agreement, dated as of April 1, 2011, by and among the Company and the
investors party thereto, as may be amended from time to time (the “April Purchase Agreement”).



(l) Reservation of Shares. From and after the date on which Shareholder Approval is
obtained, so long as any of the Notes or Warrants remain outstanding, the Company shall take all
action necessary to at all times have authorized, and reserved for the purpose of issuance, no less
than 100% of (i) the maximum number of shares of Common Stock issuable upon conversion of all the
Notes (without regard to any limitations on the conversion of the Notes set forth therein) and (ii)
the maximum number of shares of Common Stock issuable upon exercise of all the Warrants (without
regard to any limitations on the exercise of the Warrants set forth therein).



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



(n) Variable Rate Transaction. Until none of the Notes or Warrants are outstanding,
the Company and each Subsidiary shall be prohibited from effecting or entering into an agreement to
effect any Subsequent Placement involving a Variable Rate Transaction. “Variable Rate Transaction”
means a transaction in which the Company or any Subsidiary (i) issues or sells any Convertible
Securities either (A) at a conversion, exercise or exchange rate or other price that is based upon
and/or varies with the trading prices of, or quotations for, the shares of Common Stock at any time
after the initial issuance of such Convertible Securities or (B) with a conversion, exercise or
exchange price that is subject to being reset at some future date after the initial issuance of
such Convertible Securities or upon the occurrence of specified or contingent events directly or
indirectly related to the business of the Company or the market for the Common Stock, other than
pursuant to a customary “weighted average” or “full-ratchet” anti-dilution provisions similar to
those set forth in the Warrants, or (ii) enters into any agreement (including, without limitation,
an “equity line of credit” or an “at-the-market offering”) whereby the Company or any Subsidiary
may sell securities at a future determined price (other than standard and customary “preemptive” or
“participation” rights). Each Buyer shall be entitled to obtain injunctive relief against the
Company and its Subsidiaries to preclude any such issuance, which remedy shall be in addition to
any right to collect damages.



(o) Participation Right. From the date hereof through the one (1) year anniversary of
the final Closing to occur under this Agreement, neither the Company nor any of its Subsidiaries
shall, directly or indirectly, effect any Subsequent Placement unless the Company shall have first
complied with this Section 4(o). The Company acknowledges and agrees that the right set forth in
this Section 4(o) is a right granted by the Company, separately, to each Buyer. The Company and
each Buyer agree that from and after the Initial Closing Date Section 4(o) of the April Purchase
Agreement will no longer be in effect and this Section 4(o) supersedes Section 4(o) of the April
Purchase Agreement.




(i) At least five (5) Trading Days prior to any proposed or intended Subsequent
Placement, the Company shall deliver to each Buyer a written notice of its proposal or
intention to effect a Subsequent Placement (each such notice, a “Pre-Notice”), which
Pre-Notice shall not contain any information (including, without limitation, material,
non-public information) other than: (i) a statement that the Company proposes or intends to
effect a Subsequent Placement, (ii) a statement that the statement in clause (i) above does
not constitute material, non-public information and (iii) a statement informing such Buyer
that it is entitled to receive an Offer Notice (as defined below) with respect to such
Subsequent Placement upon its written request. Upon the written request of a Buyer within
three (3) Trading Days after the Company’s delivery to such Buyer of such Pre-Notice, and
only upon a written request by such Buyer, the Company shall promptly, but no later than one
(1) Trading Day after such request, deliver to such Buyer an irrevocable written notice (the
“Offer Notice”) of any proposed or intended issuance or sale or exchange (the “Offer”) of
the securities being offered (the “Offered Securities”) in a Subsequent Placement, which
Offer Notice shall (w) identify and describe the Offered Securities, (x) describe the price
and other terms upon which they are to be issued, sold or exchanged, and the number or
amount of the Offered Securities to be issued, sold or exchanged, (y) identify the Persons
(if known) to which or with which the Offered Securities are to be offered, issued, sold or
exchanged and (z) offer to issue and sell to or exchange with such Buyer in accordance with
the terms of the Offer all of the Offered Securities, provided that the number of Offered
Securities which such Buyer shall have the right to subscribe for under this Section 4(o)
shall be (a) based on such Buyer’s pro rata portion of the aggregate original principal
amount of the Notes purchased hereunder by all Buyers (the “Basic Amount”), and (b) with
respect to each Buyer that elects to purchase its Basic Amount, any additional portion of
the Offered Securities attributable to the Basic Amounts of other Buyers as such Buyer shall
indicate it will purchase or acquire should the other Buyers subscribe for less than their
Basic Amounts (the “Undersubscription Amount”).




(ii) To accept an Offer, in whole or in part, such Buyer must deliver a written notice
to the Company prior to the end of the fifth (5th) Business Day after such
Buyer’s receipt of the Offer Notice (the “Offer Period”), setting forth the portion of such
Buyer’s Basic Amount that such Buyer elects to purchase and, if such Buyer shall elect to
purchase all of its Basic Amount, the Undersubscription Amount, if any, that such Buyer
elects to purchase (in either case, the “Notice of Acceptance”). If the Basic Amounts
subscribed for by all Buyers are less than the total of all of the Basic Amounts, then such
Buyer who has set forth an Undersubscription Amount in its Notice of Acceptance shall be
entitled to purchase, in addition to the Basic Amounts subscribed for, the Undersubscription
Amount it has subscribed for; provided, however, if the Undersubscription Amounts subscribed
for exceed the difference between the total of all the Basic Amounts and the Basic Amounts
subscribed for (the “Available Undersubscription Amount”), such Buyer who has subscribed for
any Undersubscription Amount shall be entitled to purchase only that portion of the
Available Undersubscription Amount as the Basic Amount of such Buyer bears to the total
Basic Amounts of all Buyers that have subscribed for Undersubscription Amounts, subject to
rounding by the Company to the extent it deems reasonably necessary. Notwithstanding the
foregoing, if the Company desires to modify or amend the terms and conditions of the Offer
prior to the expiration of the Offer Period, the Company may deliver to each Buyer a new
Offer Notice and the Offer Period shall expire on the fifth (5th) Business Day
after such Buyer’s receipt of such new Offer Notice.




(iii) The Company shall have five (5) days from the expiration of the Offer Period
above (i) to offer, issue, sell or exchange all or any part of such Offered Securities as to
which a Notice of Acceptance has not been given by a Buyer (the “Refused Securities”)
pursuant to a definitive agreement(s) (the “Subsequent Placement Agreement”), but only to
the offerees described in the Offer Notice (if so described therein) and only upon terms and
conditions (including, without limitation, unit prices and interest rates) that are not more
favorable to the acquiring Person or Persons or less favorable to the Company than those set
forth in the Offer Notice and (ii) to publicly announce (a) the execution of such Subsequent
Placement Agreement, and (b) either (x) the consummation of the transactions contemplated by
such Subsequent Placement Agreement or (y) the termination of such Subsequent Placement
Agreement, which shall be filed with the SEC on a Current Report on Form 8-K with such
Subsequent Placement Agreement and any documents contemplated therein filed as exhibits
thereto.




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




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




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




(vii) The Company and each Buyer agree that if any Buyer elects to participate in the
Offer, neither the Subsequent Placement Agreement with respect to such Offer nor any other
transaction documents related thereto (collectively, the “Subsequent Placement Documents”)
shall include any term or provision whereby such Buyer shall be required to agree to any
restrictions on trading as to any securities of the Company (other than restrictions
required by applicable securities laws on the resale of the specific “restricted securities”
(as that term is defined under Rule 144) being issued in the Subsequent Placement) or be
required to consent to any amendment to or termination of, or grant any waiver, release or
the like under or in connection with, any agreement previously entered into with the Company
or any instrument received from the Company.




(viii) Notwithstanding anything to the contrary in this Section 4(o) and unless
otherwise agreed to by such Buyer, the Company shall either confirm in writing to such Buyer
that the transaction with respect to the Subsequent Placement has been abandoned or shall
publicly disclose its intention to issue the Offered Securities, in either case in such a
manner such that such Buyer will not be in possession of any material, non-public
information, by the fifth (5th) Business Day following delivery of the Offer
Notice. If by such fifth (5th) Business Day, no public disclosure regarding a
transaction with respect to the Offered Securities has been made, and no notice regarding
the abandonment of such transaction has been received by such Buyer, such transaction shall
be deemed to have been abandoned and such Buyer shall not be in possession of any material,
non-public information with respect to the Company or any of its Subsidiaries. Should the
Company decide to again pursue such transaction with respect to the Offered Securities, the
Company shall provide such Buyer with another Offer Notice in accordance with, and subject
to, the terms of this Section 4(o) and such Buyer will again have the right of participation
set forth in this Section 4(o). The Company shall not be permitted to deliver more than one
Offer Notice to such Buyer in any forty-five (45) day period, except as expressly
contemplated by the last sentence of Section 4(o)(ii).




(ix) The restrictions contained in this Section 4(o) shall not apply in connection with
the issuance of any Excluded Securities. The Company shall not circumvent the provisions of
this Section 4(o) by providing terms or conditions to one Buyer that are not provided to
all.



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



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



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



(s) Waiver of Certain Anti-Dilution Rights. Each Buyer who holds Class C warrants
issued by the Company, Class D warrants issued by the Company, Class E warrants issued by the
Company, Class F warrants issued by the Company, Class G warrants issued by the Company, Class I
warrants issued by the Company and Warrants (as defined in each of the Prior Purchase Agreements)
hereby agrees with the Company that no adjustment to any of the exercise prices thereunder shall
occur solely as a result of the issuance of any of the Securities or any of the Securities (as
defined in each of the Prior Purchase Agreements). Each Buyer who is party to either of the Prior
Purchase Agreements consents to the transactions contemplated by this Agreement with respect to the
Transaction Documents (as defined in each of the Prior Purchase Agreements) and expressly
acknowledges and agrees that the consummation of the transactions contemplated by the Transaction
Documents and the issuance of the Securities shall not constitute a breach of any of the
Transaction Documents (as defined in each of the Prior Purchase Agreements). ICOP hereby agrees
with the Company that no adjustment to any of the exercise prices under the Warrants (as defined in
the December Purchase Agreement) held by ICOP shall occur solely as a result of the issuance of any
of the Securities or any of the Securities (as defined in each of the Prior Purchase Agreements).
ICOP consents to the transactions contemplated by this Agreement with respect to the Transaction
Documents (as defined in the December Purchase Agreement) and expressly acknowledges and agrees
that the consummation of the transactions contemplated by the Transaction Documents and the
issuance of the Securities shall not constitute a breach of any of the Transaction Documents (as
defined in the December Purchase Agreement). Notwithstanding the foregoing or anything else
contained in this Agreement to the contrary and without implication that the contrary would
otherwise be true, it is expressly understood and agreed that each issuance of Notes and each
issuance of Conversion Shares will result in anti-dilution adjustments under Section 7(a) of each
of the April Notes.



(t) Shareholder Approval. The Company shall provide each shareholder entitled to vote
at a special or annual meeting of shareholders of the Company (the “Shareholder Meeting”), which
meeting shall be held no later than February 17, 2012 (the “Shareholder Meeting Deadline”)), a
proxy statement, substantially in a form which has been previously reviewed by each of the Buyers
and each of their counsel at the expense of the Company, soliciting each such shareholder’s
affirmative vote at the Shareholder Meeting for approval of resolutions (the “Resolutions”)
authorizing a 1 for 500 reverse split of the Common Stock (such affirmative approval is referred to
herein as the “Shareholder Approval”), and the Company shall use its best efforts to solicit its
shareholders’ approval of the Resolutions (which efforts shall include, without limitation, the
requirement to hire a reputable proxy solicitor acceptable to Iroquois) and to cause the board of
directors of the Company to recommend to the shareholders that they approve the Resolutions. The
Company shall be obligated to seek to obtain the Shareholder Approval by the Shareholder Meeting
Deadline. If, despite the Company’s best efforts the Shareholder Approval is not obtained on or
prior to the Shareholder Meeting Deadline, the Company shall cause an additional Shareholder
Meeting to be held every three (3) months thereafter until such Shareholder Approval is obtained.




	5.	 	REGISTER; TRANSFER AGENT INSTRUCTIONS; LEGENDS.





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



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



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



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



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



(e) Failure to Timely Deliver; Buy-In. If the Company fails to (i) issue and deliver
(or cause to be delivered) to a Buyer by the Required Delivery Date a certificate representing the
Securities so delivered to the Company by such Buyer that is free from all restrictive and other
legends or (ii) credit the balance account of such Buyer’s or such Buyer’s nominee with DTC for
such number of Conversion Shares or Warrant Shares so delivered to the Company, then, in addition
to all other remedies available to such Buyer, the Company shall pay in cash to such Buyer on each
day after the Required Delivery Date that the issuance or credit of such shares is not timely
effected an amount equal to 2% of the aggregate original principal amount of such Buyer’s Notes. In
addition to the foregoing, if the Company fails to so properly deliver such unlegended certificates
or so properly credit the balance account of such Buyer’s or such Buyer’s nominee with DTC by the
Required Delivery Date, and if on or after the Required Delivery Date such Buyer (or any other
Person in respect, or on behalf, of such Buyer) purchases (in an open market transaction or
otherwise) shares of Common Stock to deliver in satisfaction of a sale by such Buyer of all or any
portion of the number of shares of Common Stock, or a sale of a number of shares of Common Stock
equal to all or any portion of the number of shares of Common Stock, that such Buyer so anticipated
receiving from the Company without any restrictive legend, then, in addition to all other remedies
available to such Buyer, the Company shall, within three (3) Trading Days after such Buyer’s
request and in such Buyer’s sole discretion, either (i) pay cash to such Buyer in an amount equal
to such Buyer’s total purchase price (including brokerage commissions and other out-of-pocket
expenses, if any) for the shares of Common Stock so purchased (including brokerage commissions and
other out-of-pocket expenses, if any) (the “Buy-In Price”), at which point the Company’s obligation
to so deliver such certificate or credit such Buyer’s balance account shall terminate and such
shares shall be cancelled, or (ii) promptly honor its obligation to so deliver to such Buyer a
certificate or certificates or credit such Buyer’s DTC account representing such number of shares
of Common Stock that would have been so delivered if the Company timely complied with its
obligations hereunder and pay cash to such Buyer in an amount equal to the excess (if any) of the
Buy-In Price over the product of (A) such number of shares of Conversion Shares or Warrant Shares
(as the case may be) that the Company was required to deliver to such Buyer by the Required
Delivery Date multiplied by (B) the lowest Closing Sale Price (as defined in the Warrants) of the
Common Stock on any Trading Day during the period commencing on the date of the delivery by such
Buyer to the Company of the applicable Conversion Shares or Warrant Shares (as the case may be) and
ending on the date of such delivery and payment under this clause (ii).




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





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




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




(ii) Such Buyer and each other Buyer shall have delivered to the Company the Initial
Purchase Price (less, in the case of Iroquois, the amounts withheld pursuant to Section 4(g)
with respect to the Initial Closing) for the Initial Notes and Warrants being purchased by
such Buyer at the Closing by wire transfer of immediately available funds pursuant to the
wire instructions provided by the Company.




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



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




(i) Such Buyer shall have delivered to the Company the Additional Purchase Price (less,
in the case of Iroquois, the amounts withheld pursuant to Section 4(g) with respect to such
Additional Closing) for the Additional Notes and Warrants being purchased by such Buyer at
such Additional Closing by wire transfer of immediately available funds pursuant to the wire
instructions provided by the Company.




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




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





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




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




(ii) Such Buyer shall have received the opinion of Cozen O’Connor, the
Company’s counsel, dated as of the Initial Closing Date, in the form previously provided to
the Company.




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




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




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




(vi) The Company shall have delivered to such Buyer a certified copy of the Articles of
Incorporation as certified by the Secretary of State of the Company’s jurisdiction of
incorporation within ten (10) days of the Initial Closing Date.




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




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




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




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




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




(xii) The Company shall have obtained all governmental, regulatory or third party
consents and approvals, if any, necessary for the sale of the Securities, including without
limitation, those required by the Principal Market.




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




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




(xv) The Security Documents shall have been amended and restated in form and substance
acceptable to each of the Buyers (in their sole discretion) so that the Notes are secured by
a first priority perfected security interest in all of the assets of the Company and its
Subsidiaries and each Subsidiary is a guarantor thereof.




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



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




(i) No Event of Default (as defined in the Notes) has occurred and no circumstance or
event exists or has occurred that, with or without the passage of time, could reasonably be
expected to result in an Event of Default.




(ii) The Company and each Subsidiary (as the case may be) shall have duly executed and
delivered to such Buyer the Additional Note (in such original principal amount as is set
forth across from such Buyer’s name in column (3) on the Schedule of Buyers (Additional
Closing)) and the related Warrants, in each case, being purchased by such Buyer at such
Additional Closing pursuant to this Agreement.




(iii) Such Buyer shall have received the opinion of Cozen O’Connor, the
Company’s counsel, dated as of such Additional Closing Date, in the form previously provided
to the Company.




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




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




(vi) The Company shall have delivered to such Buyer a certified copy of the Articles of
Incorporation as certified by the Secretary of State of the Company’s jurisdiction of
incorporation within ten (10) days of such Additional Closing Date.




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




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




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




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




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




(xii) The Company shall have obtained all governmental, regulatory or third party
consents and approvals, if any, necessary for the sale of the Securities, including without
limitation, those required by the Principal Market.




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




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




(xv) No event or circumstance shall exist or have occurred with respect to the Company
or any of its Subsidiaries such that such Buyer shall believe in its good faith discretion
that the prospect of payment of all or any part of any Indebtedness owed to such Buyer by
the Company and/or any of its Subsidiaries (including, without limitation, under any of the
Notes (whether then outstanding or to be issued) or any of the April Notes) is impaired or
is unlikely to occur.




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




	8.	 	TERMINATION.





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



(b) Termination with respect to an Additional Closing. If (i) a Buyer did not
terminate its obligations under this Agreement pursuant to Section 8(a) and (ii) an Additional
Closing shall not have occurred with respect to such Buyer by the fifth (5th) calendar
day of the calendar month in which such Additional Closing is scheduled to occur pursuant to the
terms of this Agreement, then such Buyer shall have the right to terminate its obligations under
this Agreement relating to such Additional Closing and the Additional Notes and Warrants to be
purchased by such Buyer at such Additional Closing with respect to itself at any time on or after
the close of business on such date without liability of such Buyer to any other party; provided,
however, (i) the right of such Buyer to terminate its obligations under this Agreement with respect
such Additional Closing under this Section 8(b) shall not be available to such Buyer if the failure
of such Additional Closing to have been consummated by such date is the result of such Buyer’s
breach of this Agreement and (ii) the abandonment of the sale and purchase of the applicable
Additional Notes and the Warrants shall be applicable only to such Buyer providing such written
notice, provided further that no such termination shall affect any obligation of the Company under
this Agreement to reimburse such Buyer for the expenses described in Section 4(g) above with
respect to such Additional Closing. Nothing contained in this Section 8(b) shall be deemed to
release any party from any liability for any breach by such party of the terms and provisions of
this Agreement or the other Transaction Documents or to impair the right of any party to compel
specific performance by any other party of its obligations under this Agreement or the other
Transaction Documents.




	9.	 	MISCELLANEOUS.





(a) Governing Law; Jurisdiction; Jury Trial. All questions concerning the construction,
validity, enforcement and interpretation of this Agreement and the other Transaction Documents
shall be governed by the internal laws of the State of New York, without giving effect to any
choice of law or conflict of law provision or rule (whether of the State of New York or any other
jurisdictions) that would cause the application of the laws of any jurisdictions other than the
State of New York. Each party hereby irrevocably submits to the exclusive jurisdiction of the state
and federal courts sitting in The City of New York, Borough of Manhattan, for the adjudication of
any dispute hereunder or under any of the other Transaction Documents or in connection herewith or
therewith or with any transaction contemplated hereby or thereby or discussed herein or therein,
and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any
claim that it is not personally subject to the jurisdiction of any such court, that such suit,
action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or
proceeding is improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by mailing a copy thereof
to such party at the address for such notices to it under this Agreement and agrees that such
service shall constitute good and sufficient service of process and notice thereof. Nothing
contained herein shall be deemed to limit in any way any right to serve process in any manner
permitted by law. Nothing contained herein (i) shall be deemed or operate to preclude any Buyer
from bringing suit or taking other legal action against the Company in any other jurisdiction to
collect on the Company’s obligations to such Buyer or to enforce a judgment or other court ruling
in favor of such Buyer or (ii) shall limit, or shall be deemed or construed to limit, any provision
of Section 21 of the Notes or Section 13 of the Warrants. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY
RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE
HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED
HEREBY.



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



(c) Headings; Gender. The headings of this Agreement are for convenience of reference
and shall not form part of, or affect the interpretation of, this Agreement. Unless the context
clearly indicates otherwise, each pronoun herein shall be deemed to include the masculine,
feminine, neuter, singular and plural forms thereof. The terms “including,” “includes,” “include”
and words of like import shall be construed broadly as if followed by the words “without
limitation.” The terms “herein,” “hereunder,” “hereof” and words of like import refer to this
entire Agreement instead of just the provision in which they are found. For purposes of this
Agreement for each Buyer’s benefit, the word “state” or “states” includes any “province” or
“provinces” in Canada and the concept of “law, rules or regulations” includes laws, rules and
regulations under applicable law, rules and regulations in Canada.



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



(e) Entire Agreement; Amendments. This Agreement, the other Transaction Documents and
the schedules and exhibits attached hereto and thereto and the instruments referenced herein and
therein supersede all other prior oral or written agreements between the Buyers, the Company, its
Subsidiaries, their affiliates and Persons acting on their behalf solely with respect to the
matters contained herein and therein, and this Agreement, the other Transaction Documents, the
schedules and exhibits attached hereto and thereto and the instruments referenced herein and
therein contain the entire understanding of the parties solely with respect to the matters covered
herein and therein; provided, however, nothing contained in this Agreement or any other Transaction
Document shall (or shall be deemed to), except as expressly set forth in Section 4(s) and the third
sentence of Section 4(o), (i) have any effect on any agreements any Buyer has entered into with, or
any instruments any Buyer has received from, the Company or any of its Subsidiaries prior to the
date hereof with respect to any prior investment made by such Buyer in the Company or (ii) waive,
alter, modify or amend in any respect any obligations of the Company or any of its Subsidiaries, or
any rights of or benefits to any Buyer or any other Person, in any agreement entered into prior to
the date hereof between or among the Company and/or any of its Subsidiaries and any Buyer, or any
instruments any Buyer received from the Company and/or any of its Subsidiaries prior to the date
hereof, and all such agreements and instruments shall continue in full force and effect. Except as
specifically set forth herein or therein, neither the Company nor any Buyer makes any
representation, warranty, covenant or undertaking with respect to such matters. For clarification
purposes, the Recitals are part of this Agreement. No provision of this Agreement may be amended
other than by an instrument in writing signed by the Company and each of the Buyers. No waiver
shall be effective unless it is in writing and signed by an authorized representative of the
waiving party. No consideration shall be offered or paid to any Person to amend or consent to a
waiver or modification of any provision of any of the Transaction Documents unless the same
consideration also is offered to all of the parties to the Transaction Documents, all holders of
the Notes or all holders of the Warrants (as the case may be). The Company has not, directly or
indirectly, made any agreements with any Buyers relating to the terms or conditions of the
transactions contemplated by the Transaction Documents except as set forth in the Transaction
Documents. Without limiting the foregoing, the Company confirms that, except as set forth in this
Agreement, no Buyer has made any commitment or promise or has any other obligation to provide any
financing to the Company, any Subsidiary or otherwise. As a material inducement for each Buyer to
enter into this Agreement, the Company expressly acknowledges and agrees that (i) no due diligence
or other investigation or inquiry conducted by a Buyer, any of its advisors or any of its
representatives shall affect such Buyer’s right to rely on, or shall modify or qualify in any
manner or be an exception to any of, the Company’s representations and warranties contained in this
Agreement or any other Transaction Document and (ii) unless a provision of this Agreement or any
other Transaction Document is expressly preceded by the phrase “except as disclosed in the SEC
Documents,” nothing contained in any of the SEC Documents shall affect such Buyer’s right to rely
on, or shall modify or qualify in any manner or be an exception to any of, the Company’s
representations and warranties contained in this Agreement or any other Transaction Document.



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



If to the Company:




Converted Organics Inc.


137A Lewis Wharf


Boston MA 02110


Facsimile: (617) 624-0333


Attention: Edward J. Gildea, President




With a copy (for informational purposes only) to:




Cozen O’Connor


1900 Market Street


Philadelphia, PA 19103


Facsimile: (215) 701-2478


Attention: Ralph De Martino, Esq.




Cavas S. Pavri, Esq.




If to the Transfer Agent:




Computershare Inc.


250 Royall St


Canton, Massachusetts 02021


Facsimile: (781) 575.2549


Attention: Kim Crimi



If to a Buyer, to its address or facsimile number (as the case may be) set forth on the Schedule of
Buyers (Initial Closing), with copies to such Buyer’s representatives as set forth on the Schedule
of Buyers (Initial Closing),




with a copy (for informational purposes only) to:




Greenberg Traurig, LLP


77 W. Wacker Drive, Suite 3100


Chicago, Illinois 60601


Facsimile: (312) 456-8435


Attention: Peter H. Lieberman, Esq.




Todd A. Mazur, Esq.



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



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



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



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



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



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



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



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



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



(o) Payment Set Aside; Currency1.1 . To the extent that the Company makes a payment or
payments to any Buyer hereunder or pursuant to any of the other Transaction Documents or any of the
Buyers enforce or exercise their rights hereunder or thereunder, and such payment or payments or
the proceeds of such enforcement or exercise or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside, recovered from, disgorged by or are required
to be refunded, repaid or otherwise restored to the Company, a trustee, receiver or any other
Person under any law (including, without limitation, any bankruptcy law, foreign, state or federal
law, common law or equitable cause of action), then to the extent of any such restoration the
obligation or part thereof originally intended to be satisfied shall be revived and continued in
full force and effect as if such payment had not been made or such enforcement or setoff had not
occurred. Unless otherwise expressly indicated, all dollar amounts referred to in this Agreement
and the other Transaction Documents are in United States Dollars (“U.S. Dollars”), and all amounts
owing under this Agreement and all other Transaction Documents shall be paid in U.S. Dollars. All
amounts denominated in other currencies (if any) shall be converted into the U.S. Dollar equivalent
amount in accordance with the Exchange Rate on the date of calculation. “Exchange Rate” means, in
relation to any amount of currency to be converted into U.S. Dollars pursuant to this Agreement,
the U.S. Dollar exchange rate as published in the Wall Street Journal on the relevant date of
calculation.



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




	 	(q)	 	Judgment Currency.





(i) If for the purpose of obtaining or enforcing judgment against the Company in any court in
any jurisdiction it becomes necessary to convert into any other currency (such other currency being
hereinafter in this Section 9(q) referred to as the “Judgment Currency”) an amount due in U.S.
Dollars under this Agreement or any other Transaction Document, the conversion shall be made at the
Exchange Rate prevailing on the Trading Day immediately preceding: (1) the date actual payment of
the amount due, in the case of any proceeding in the courts of Illinois or in the courts of any
other jurisdiction that will give effect to such conversion being made on such date or (2) the date
on which the foreign court determines, in the case of any proceeding in the courts of any other
jurisdiction (the date as of which such conversion is made pursuant to this Section 9(q)(i) being
hereinafter referred to as the “Judgment Conversion Date”).



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



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



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



	 
	COMPANY:

	CONVERTED ORGANICS INC.
By:

	 

	Name: __________________
Title: __________________







1




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



	 
	BUYER:

	IROQUOIS MASTER FUND LTD.

By: Iroquois Capital Management, L.L.C.

Its: Investment Manager

     

By: Joshua Silverman, Authorized Signatory







2




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



	 
	IROQUOIS CAPITAL OPPORTUNITY FUND LP







	 
	By: Iroquois Opportunity Management, LLC

Its: Investment Manager

     

By: Joshua Silverman, Authorized Signatory







SCHEDULE OF BUYERS

Schedule of Buyers (Initial Closing) 




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	(1)	 	(2)	 	(3)	 	(4)	 	(5)	 	(6)
	 	 	 	 	 	 	 	 	Number of
	 	

	 	


	 	 	 	 	 	 	 	 	 	 	 	 	

	 	


	Buyer
	 	Address and Facsimile Number
	 	Original Principal

Amount of Initial

Notes to be issued

at Initial Closing
	 	Warrant Shares

underlying Warrants

—

to be issued

—

at Initial Closing
	 	

Initial Purchase

—

Price to be paid at

—

Initial Closing
	 	





Legal Representative’s

—

Address and Facsimile Number

	 
	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 

	Iroquois Master Fund Ltd.
	 	641 Lexington Avenue, 26th Floor

New York, New York 10022

Facsimile: (212) 207-3452
	 	$	247,500	 	 	 	41,250,000	 	 	$	225,000	 	 	Greenberg Traurig, LLP

77 W. Wacker Drive, Suite 3100

Chicago, Illinois 60601

Attention: Peter H. Lieberman

Todd A. Mazur

Facsimile: (312) 456-8435







SCHEDULE OF BUYERS (CONTINUED)

Schedule of Buyers (Additional Closing) 




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

Amount of

Additional Notes to

be issued at each

Additional Closing
	 	Additional

—

Purchase Price to

be paid at each

Additional Closing
	 	



Legal Representative’s

—

Address and Facsimile Number

	 
	 	 
	 	 	 	 	 	 	 	 	 	 

	Iroquois Master Fund Ltd.
	 	641 Lexington Avenue, 26th Floor

New York, New York 10022

Facsimile: (212) 207-3452
	 	$	237,600	 	 	$	216,000	 	 	Greenberg Traurig, LLP

77 W. Wacker Drive, Suite 3100

Chicago, Illinois 60601

Attention: Peter H. Lieberman

Todd A. Mazur

Facsimile: (312) 456-8435








3