Exhibit 10.1


 


SECURITIES PURCHASE AGREEMENT


 


This Securities Purchase
Agreement (this “Agreement”) is dated as of November 25, 2014, by and between PositiveID Corporation, a Delaware
corporation (the “Company”), and the purchaser identified on the signature pages hereto (including its successors
and assigns, the “Purchaser”).


 


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


 


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


 


 


ARTICLE I.


DEFINITIONS


 


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


 


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


 


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


 


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


 


“BakerHostetler”
means Baker & Hostetler LLP, with offices located at 600 Anton Blvd., Suite 900, Costa Mesa, California 92626.


 


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


 


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


 


“Closing
Dates” means the Trading Day(s) on which all of the Transaction Documents have been executed and delivered by the applicable
parties thereto in connection with a Closing, and all conditions precedent to (i) the Purchasers’ obligations to pay the
Subscription Amount as to such Closing and (ii) the Company’s obligations to deliver the Securities as to such Closing, in
each case, have been satisfied or waived.


 




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“Closing(s)”
means the one or more closings of the purchase and sale of the Securities pursuant to Section 2.2.


 


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


 


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


 


“Common
Stock” means the common stock of the Company, par value $0.01 per share, and any other class of securities into which
such securities may hereafter be reclassified or changed.


 


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


 


“Company
Counsel” means Szaferman, Lakind, Blumstein & Blader, P.C., with offices located at 101 Grovers Mill Road, Suite
200, Lawrenceville, New Jersey 08648.


 


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


 


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


 


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


 


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


 


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


 


“Exempt
Issuance” means the issuance of (a) shares of Common Stock, options or that class of Series I preferred stock that the
Company issues to employees, officers, or directors of the Company pursuant to any stock or option plan duly adopted for such purpose,
by a majority of the Board of Directors, (b) securities upon the exercise of or exchange of or conversion of any Securities issued
hereunder and/or other securities exercisable or exchangeable for or convertible into shares of Common Stock issued and outstanding
on the date of this Agreement, provided that such securities have not been amended since the date of this Agreement to increase
the number of such securities or to decrease the exercise price, exchange price or conversion price of such securities, (c) shares
issued pursuant to any equipment loan or leasing arrangement, reap property leasing arrangement or debt financing from a bank or
similar institution approved by a majority of the disinterested directors of the Company, (d) securities issued pursuant to acquisitions
or strategic transactions approved by a majority of the disinterested directors of the Company, and (e) shares issuable to a Person
(or to the equity holders of a Person) that is, itself or through its subsidiaries, an operating company or an owner of an asset
in a business synergistic with the business of the Company and shall provide to the Company additional benefits in addition to
the investment of funds, but shall not include a transaction in which the Company is issuing securities primarily for the purpose
of raising capital or to an entity whose primary business is investing in securities.


 




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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


“Note”
means the 4% Original Issue Discount Senior Secured Convertible Promissory Notes payable subject to the specific amortization schedule
(as defined therein) over an 18-month period from their date of issuance, issued by the Company to the Purchaser hereunder, in
the form of Exhibit A attached hereto.


 


“Participation
Maximum” shall have the meaning ascribed to such term in Section 4.12(a).


 


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


 


“Pre-Notice”
shall have the meaning ascribed to such term in Section 4.12(b).


 


“Principal
Amount” means, as to the Purchaser, the amounts set forth below such Purchaser’s signature block on the signature
pages hereto next to the heading “Principal Amount,” in United States Dollars, which shall equal such Purchaser’s
Subscription Amount as to the Closing divided by 0.96.


 


“Pro
Rata Portion” shall have the meaning ascribed to such term in Section 4.12(e).


 




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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


“Securities”
means the Note and the Underlying Shares.


 


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


 


“Security
Agreement” means the Security Agreement, dated the date hereof, among the Company and the Purchasers, in the form of
Exhibit D attached hereto.


 


“Security
Documents” shall mean the Security Agreement, the Subsidiary Guarantee, and any other documents and filing required thereunder
in order to grant the Purchasers a first priority security interest in the assets of the Company and the Subsidiaries as provided
in the Security Agreement, including all UCC-1 filing receipts.


 


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


 


“Subscription
Amount” means, as to the Purchaser, the aggregate amount to be paid for the Note purchased hereunder as specified below
such Purchaser’s name on the signature page of this Agreement and next to the heading “Subscription Amount,”
in United States dollars and in immediately available funds.


 




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“Subsequent
Financing” shall have the meaning ascribed to such term in Section 4.12(a).


 


“Subsequent
Financing Notice” shall have the meaning ascribed to such term in Section 4.12(b).


 


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


 


“Subsidiary
Guarantee” means the Subsidiary Guarantee, dated the date hereof, by each Subsidiary in favor of the Purchasers, in the
form of Exhibit E attached hereto.


 


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


 


“Trading
Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on
the date in question: the NYSE MKT, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New
York Stock Exchange, the OTC Bulletin Board, or the OTC Markets Group Inc.’s OTCQX, OTCQB, or OTC Pink marketplaces (or any
successors to any of the foregoing).


 


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


 


“Transfer
Agent” means Registrar and Transfer Company, the current transfer agent of the Company, with a mailing address of 10
Commerce Drive, Cranford, New Jersey 07016, and a facsimile number of (908) 272-9481, and any successor transfer agent of the Company.


 


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


 


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


 


“Variable
Rate Transaction” shall have the meaning ascribed to such term in Section 4.13(b).


 




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


 


ARTICLE II.


PURCHASE AND SALE


 


2.1          Purchase.
The Purchaser will purchase a series of Notes with an initial, aggregate principal amount $4,000,000.00. Subject to the terms and
conditions contained herein and as set forth in Section 2.2, below, the Subscription Amount shall be tendered in eight (8) equal
monthly installments in the amount of $480,000 (each a “Closing”). At the first Closing, (i) $25,000.00 shall
be deducted by the Purchaser as a non-accountable expense allowance and (ii) $20,000.00 shall be tendered to BakerHostetler in
connection with the Purchaser’s legal fees (the parties acknowledging that the Company had previously tendered an additional
$5,000.00 to or on behalf of BakerHostetler also in connection with the Purchaser’s legal fees).


 


2.2          Closings.
On the Closing Date, upon the terms and subject to the conditions set forth herein, substantially concurrently with the execution
and delivery of this Agreement by the parties hereto, the Company agrees to sell, and the Purchaser agrees to purchase, such Purchaser’s
Closing Subscription Amount as set forth on the signature page hereto executed by such Purchaser (an aggregate of up to $4,000,000.00
in Subscription Amount in connection with the Principal Amount of the Note, to be tendered in eight (8) equal monthly installments,
payable in the gross amount of $480,000 each, as of (i) the first Closing, which shall be on or about the date hereof and (ii)
the second (2nd) through eighth (8th) Closings, each of which shall be thirty (30) days after the immediately prior
Closing. At each such Closing, the Purchaser shall deliver to the Company, via wire transfer or a certified check, immediately
available funds equal to such Purchaser’s Subscription Amount, less any deductions therefrom as noted herein and as otherwise
set forth on the signature page hereto executed by such Purchaser, and, the Company shall deliver to the Purchaser its Note for
the allocated Principal Amount attributable to the specific Subscription Amount for each Closing. At the first Closing, the Company
and the Purchaser shall deliver the other items set forth in Section 2.3. Upon satisfaction of the covenants and conditions set
forth in Sections 2.3 and 2.4 for the Closing, the Closing shall occur at the offices of BakerHostetler or such other location
as the parties shall mutually agree.


 


2.3          Deliveries.


 


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


 


(i)          this
Agreement duly executed by the Company;


 


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


 




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(iii)        the
Transfer Agent Instruction Letter duly executed by the Company and the Transfer Agent;


 


(iv)        a
Note with a principal amount equal to such Purchaser’s Principal Amount as to each Closing, i.e., $500,000
for each of eight (8) consecutive Closings, registered in the name of such Purchaser; and


 


(v)         the
Security Agreement, duly executed by the Company and each Subsidiary, along with all of the Security Documents, including the Subsidiary
Guarantee, duly executed by the parties thereto.


 


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


 


(i)          this
Agreement duly executed by the Purchaser;


 


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


 


(iii)        the
Security Agreement duly executed by such Purchaser.


 


2.4          Closing
Conditions. 


 


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


 


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


 


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


 


(iii)        the
delivery by the Purchaser of the items set forth in Section 2.3(b) of this Agreement; and


 


(iv)        the
Company must have complied with SEC Reports and filings as described in Section 3.1(h).


 


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


 


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


 


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


 




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(iii)        the
delivery by the Company of the items set forth in Section 2.3(a) of this Agreement;


 


(iv)        there
is no existing Event of Default (as defined in the Note) and no existing event that, with the passage of time or the giving of
notice, would constitute an Event of Default;


 


(v)         the
Company shall be fully current on all SEC filings and reports and there shall be no adverse proceeding initiated, ongoing, or threatened
by any governmental or regulatory body;


 


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


 


(vii)       the
Common Stock is DWAC Eligible (as defined in the Note); and


 


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


 


 


ARTICLE III.


REPRESENTATIONS AND WARRANTIES


 


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


 


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


 




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


 


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


 


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


 




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(e)          Filings,
Consents and Approvals. Except as set forth on Schedule 3.1(e), the Company is not required to obtain any consent, waiver,
authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local
or other governmental authority or other Person in connection with the execution, delivery and performance by the Company of the
Transaction Documents, other than: (i) the filings required pursuant to Section 4.6 of this Agreement, (ii) the notice and/or application(s)
to each applicable Trading Market for the issuance and sale of the Securities and the listing of the Conversion Shares for trading
thereon in the time and manner required thereby and (iii) the filing of Form D with the Commission and such filings as are required
to be made under applicable state securities laws (collectively, the “Required Approvals”).


 


(f)          Issuance
of the Securities. The Securities are duly authorized and, when issued and paid for in accordance with the applicable Transaction
Documents, will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the Company other
than restrictions on transfer provided for in the Transaction Documents. The Underlying Shares, when issued in accordance with
the terms of the Transaction Documents, will be validly issued, fully paid and nonassessable, free and clear of all Liens imposed
by the Company other than restrictions on transfer provided for in the Transaction Documents. The Company has reserved from its
duly authorized capital stock a number of shares of Common Stock for issuance of the Underlying Shares at least equal to 300% of
the Required Minimum on the date hereof.


 


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


 




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(h)          SEC
Reports; Financial Statements. The Company has filed all reports, schedules, forms, statements and other documents required
to be filed by the Company under the Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof,
for the two years preceding the date hereof (or such shorter period as the Company was required by law or regulation to file such
material) (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein, being collectively
referred to herein as the “SEC Reports”) on a timely basis or has received a valid extension of such time of
filing and has filed any such SEC Reports prior to the expiration of any such extension. As of their respective dates, the SEC
Reports complied in all material respects with the requirements of the Securities Act and the Exchange Act, as applicable, and
none of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were
made, not misleading. The Company has never been an issuer subject to Rule 144(i) under the Securities Act. The financial statements
of the Company included in the SEC Reports comply in all material respects with applicable accounting requirements and the rules
and regulations of the Commission with respect thereto as in effect at the time of filing. Such financial statements have been
prepared in accordance with United States generally accepted accounting principles applied on a consistent basis during the periods
involved (“GAAP”), except as may be otherwise specified in such financial statements or the notes thereto and
except that unaudited financial statements may not contain all footnotes required by GAAP, and fairly present in all material respects
the financial position of the Company and its consolidated Subsidiaries as of and for the dates thereof and the results of operations
and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit
adjustments.


 


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


 




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(j)          Litigation.
Except as set forth on Schedule 3.1(j), there is no action, suit, inquiry, notice of violation, proceeding or investigation pending
or, to the knowledge of the Company, threatened against or affecting the Company, any Subsidiary or any of their respective properties
before or by any court, arbitrator, governmental or administrative agency or regulatory authority (federal, state, county, local
or foreign) (collectively, an “Action”) that (i) adversely affects or challenges the legality, validity or enforceability
of any of the Transaction Documents or the Securities or (ii) could, if there were an unfavorable decision, have or reasonably
be expected to result in a Material Adverse Effect. Neither the Company nor any Subsidiary, nor any director or officer thereof,
is or has been the subject of any Action involving a claim of violation of or liability under federal or state securities laws
or a claim of breach of fiduciary duty. There has not been, and to the knowledge of the Company, there is not pending or contemplated,
any investigation by the Commission involving the Company or any current or former director or officer of the Company. The Commission
has not issued any stop order or other order suspending the effectiveness of any registration statement filed by the Company or
any Subsidiary under the Exchange Act or the Securities Act. 


 


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


 




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(l)          Compliance.
Except as set forth on Schedule 3.1(l), neither the Company nor any Subsidiary: (i) is in default under or in violation of (and
no event has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Company
or any Subsidiary under), nor has the Company or any Subsidiary received notice of a claim that it is in default under or that
it is in violation of, any indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by
which it or any of its properties is bound (whether or not such default or violation has been waived), (ii) is in violation of
any judgment, decree or order of any court, arbitrator or other governmental authority or (iii) is or has been in violation of
any statute, rule, ordinance or regulation of any governmental authority, including without limitation all foreign, federal, state
and local laws relating to taxes, environmental protection, occupational health and safety, product quality and safety and employment
and labor matters, except in each case as could not have or reasonably be expected to result in a Material Adverse Effect.


 


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


 


(n)          Title
to Assets. Except as set forth on Schedule 3.1(n), the Company and the Subsidiaries have good and marketable title in fee simple
to all real property owned by them and good and marketable title in all personal property owned by them that is material to the
business of the Company and the Subsidiaries, in each case free and clear of all Liens, except for (i) Liens as do not materially
affect the value of such property and do not materially interfere with the use made and proposed to be made of such property by
the Company and the Subsidiaries and (ii) Liens for the payment of federal, state or other taxes, for which appropriate reserves
have been made therefor in accordance with GAAP and, the payment of which is neither delinquent nor subject to penalties. Any real
property and facilities held under lease by the Company and the Subsidiaries are held by them under valid, subsisting, and enforceable
leases with which the Company and the Subsidiaries are in compliance.


 


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


 




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


 


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


 


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


 




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


 


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


 


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


 


(v)          Reserved.


 


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


 


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


 




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(y)          Disclosure.
Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents, the Company
confirms that neither it nor any other Person acting on its behalf has provided any of the Purchasers or their agents or counsel
with any information that it believes constitutes or might constitute material, non-public information. The Company understands
and confirms that the Purchasers will rely on the foregoing representation in effecting transactions in securities of the Company.
All of the disclosure furnished by or on behalf of the Company to the Purchasers regarding the Company and its Subsidiaries, their
respective businesses and the transactions contemplated hereby, including the Disclosure Schedules to this Agreement, is true and
correct and does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make
the statements made therein, in light of the circumstances under which they were made, not misleading. The press releases disseminated
by the Company during the twelve months preceding the date of this Agreement taken as a whole do not contain any untrue statement
of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made and when made, not misleading. The Company acknowledges and agrees
that no Purchaser makes or has made any representations or warranties with respect to the transactions contemplated hereby other
than those specifically set forth in Section 3.2 hereof.


 


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


 


(aa)        Reserved.



 


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


 


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


 




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


 


(ee)        Accountants.
The Company’s accounting firm is set forth on Schedule 3.1(ee) of the Disclosure Schedules. To the knowledge and belief
of the Company, such accounting firm: (i) is a registered public accounting firm as required by the Exchange Act and (ii) shall
express its opinion with respect to the financial statements to be included in the Company’s Annual Report for the fiscal
year ending December 31, 2014.


 


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


 


(gg)       No
Disagreements with Accountants and Lawyers. There are no disagreements of any kind presently existing, or reasonably anticipated
by the Company to arise, between the Company and the accountants and lawyers formerly or presently employed by the Company and
the Company is current with respect to any fees owed to its accountants and lawyers that could affect the Company’s ability
to perform any of its obligations under any of the Transaction Documents.


 


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


 




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(ii)         Acknowledgment
Regarding Purchaser’s Trading Activity. Anything in this Agreement or elsewhere herein to the contrary notwithstanding
(except for Sections 3.2(f) and 4.15 hereof), it is understood and acknowledged by the Company that: (i) the Purchaser has not
been asked by the Company to agree, nor has the Purchaser agreed, to desist from purchasing or selling, long and/or short, securities
of the Company, or “derivative” securities based on securities issued by the Company or to hold the Securities for
any specified term, (ii) past or future open market or other transactions by the Purchaser, specifically including, without limitation,
Short Sales or “derivative” transactions, before or after the closing of this or future private placement transactions,
may negatively impact the market price of the Company’s publicly-traded securities, (iii) the Purchaser, and counter-parties
in “derivative” transactions to which any such Purchaser is a party, directly or indirectly, may presently have a “short”
position in the Common Stock and (iv) the Purchaser shall not be deemed to have any affiliation with or control over any arm’s
length counter-party in any “derivative” transaction. The
Company further understands and acknowledges that (y) one or more Purchasers may engage in hedging activities at various times
during the period that the Securities are outstanding, including, without limitation, during the periods that the value of the
Underlying Shares deliverable with respect to Securities are being determined, and (z) such hedging activities (if any) could reduce
the value of the existing stockholders’ equity interests in the Company at and after the time that the hedging activities
are being conducted. The Company acknowledges that such aforementioned hedging activities do not constitute a breach of any of
the Transaction Documents.


 


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


 


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


 


(ll)         Office
of Foreign Assets Control. Neither the Company nor any Subsidiary nor, to the Company’s knowledge, any director, officer,
agent, employee or affiliate of the Company or any Subsidiary is currently subject to any U.S. sanctions administered by the Office
of Foreign Assets Control of the U.S. Treasury Department (“OFAC”).


 


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


 




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


 


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


 


(pp)       Representations
and Warranties and Information Provided by the Company Is Not Materially Misleading. The representations and warranties contained
herein and the information otherwise provided by the Company to the Purchaser at any time prior to any Closing did not and will
not, contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading.


 


3.2          Representations
and Warranties of the Purchaser. The Purchaser, for itself and for no other Purchaser, hereby represents and warrants as of
the date hereof and as of the Closing Date to the Company as follows (unless as of a specific date therein):


 


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


 




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


 


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


 


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


 


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


 


(f)          Opportunity
to Obtain Information. Such Purchaser acknowledges that representatives of the Company have made available to such Purchaser
the opportunity to review the books and records of the Company and its Subsidiaries and to ask questions of and receive answers
from such representatives concerning the business and affairs of the Company and its Subsidiaries.


 


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


 




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


 


ARTICLE IV.


OTHER AGREEMENTS OF THE PARTIES


 


4.1          Transfer
Restrictions.


 


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


 


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


 


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


 




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


 


(c)          Certificates
evidencing the Underlying Shares shall not contain any legend (including the legend set forth in Section 4.1(b) hereof): (i) while
a registration statement (including the Registration Statement) covering the resale of such security is effective under the Securities
Act, (ii) following any sale of such Underlying Shares pursuant to Rule 144, (iii) if such Underlying Shares are eligible for sale
under Rule 144 or (iv) if such legend is not required under applicable requirements of the Securities Act (including judicial interpretations
and pronouncements issued by the staff of the Commission). The Company shall cause its counsel to issue a legal opinion to the
Transfer Agent promptly after any of the events described in (i)-(iv) in the preceding sentence if required by the Transfer Agent
to effect the removal of the legend hereunder (with a copy to the applicable Purchaser and its broker). If all or any portion of
a Note is converted at a time when there is an effective registration statement to cover the resale of the Underlying Shares, or
if such Underlying Shares may be sold under Rule 144 or if such legend is not otherwise required under applicable requirements
of the Securities Act (including judicial interpretations and pronouncements issued by the staff of the Commission) then such Underlying
Shares shall be issued free of all legends. The Company agrees that following the Effective Date or at such time as such legend
is no longer required under this Section 4.1(c), it will, no later than three (3) Trading Days following the delivery by the Purchaser
to the Company or the Transfer Agent of a certificate representing Underlying Shares, as applicable, issued with a restrictive
legend (such third Trading Day, the “Legend Removal Date”), deliver or cause to be delivered to such Purchaser
a certificate representing such shares that is free from all restrictive and other legends. The Company may not make any notation
on its records or give instructions to the Transfer Agent that enlarge the restrictions on transfer set forth in this Section 4.
Certificates for Underlying Shares subject to legend removal hereunder shall be transmitted by the Transfer Agent to the Purchaser
by crediting the account of the Purchaser’s prime broker with the Depository Trust Company System as directed by such Purchaser.


 




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


 


4.2           Acknowledgment
of Dilution. The Company acknowledges that the issuance of the Securities may result in dilution of the outstanding shares
of Common Stock, which dilution may be substantial under certain market conditions. The Company further acknowledges that its obligations
under the Transaction Documents, including, without limitation, its obligation to issue the Underlying Shares pursuant to the Transaction
Documents, are unconditional and absolute and not subject to any right of set off, counterclaim, delay or reduction, regardless
of the effect of any such dilution or any claim the Company may have against any Purchaser and regardless of the dilutive effect
that such issuance may have on the ownership of the other stockholders of the Company. In the event of an issuance of stock involving
tranches or other multiple closings, the anti-dilution adjustment shall be calculated as if all stock was issued at the Closing.


 


4.3           Furnishing
of Information; Public Information.


 


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


 


(b)          At
any time during the period commencing from the six (6) month anniversary of the date hereof and ending at such time that all of
the Securities may be sold without the requirement for the Company to be in compliance with Rule 144(c)(1) and otherwise without
restriction or limitation pursuant to Rule 144, if the Company shall fail for any reason to satisfy the current public information
requirement under Rule 144(c) (a “Public Information Failure”) then, in addition to such Purchaser’s other
available remedies, the Company shall pay to the Purchaser, in cash, as partial liquidated damages and not as a penalty, by reason
of any such delay in or reduction of its ability to sell the Securities, an amount in cash equal to two percent (2.0%) of the aggregate
amount of the Note eligible to be converted at the time of the Public Information Failure of such Purchaser’s Securities
on the day of a Public Information Failure and on every thirtieth (30th) day (pro-rated for periods totaling less than
thirty days) thereafter until the earlier of (a) the date such Public Information Failure is cured and (b) such time that such
public information is no longer required for the Purchasers to transfer the Underlying Shares pursuant to Rule 144. The payments
to which the Purchaser shall be entitled pursuant to this Section 4.3(b) are referred to herein as “Public Information
Failure Payments.” Public Information Failure Payments shall be paid on the earlier of (i) the last day of the
calendar month during which such Public Information Failure Payments are incurred and (ii) the third (3rd) Business
Day after the event or failure giving rise to the Public Information Failure Payments is cured. In the event the Company
fails to make Public Information Failure Payments in a timely manner, such Public Information Failure Payments shall
bear interest at the rate of two percent (2.0%) per month (prorated for partial months) until paid in full. Nothing herein shall
limit such Purchaser’s right to pursue actual damages for the Public Information Failure, and such Purchaser shall have the
right to pursue all remedies available to it at law or in equity including, without limitation, a decree of specific performance
and/or injunctive relief.


 




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


 


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


 


4.6           Securities
Laws Disclosure; Publicity. The Company shall (a) by 9:30 a.m. (New York City time) on the Trading Day immediately following
the date hereof, issue a press release disclosing the material terms of the transactions contemplated hereby, and (b) file a Current
Report on Form 8-K, including the Transaction Documents as exhibits thereto, with the Commission within the time required by the
Exchange Act. From and after the issuance of such press release, the Company represents to the Purchaser that it shall have publicly
disclosed all material, non-public information delivered to the Purchaser by the Company or any of its Subsidiaries, or any of
their respective officers, directors, employees, or agents in connection with the transactions contemplated by the Transaction
Documents. The Company and the Purchaser shall consult with each other in issuing any other press releases with respect to the
transactions contemplated hereby, and neither the Company nor any Purchaser shall issue any such press release nor otherwise make
any such public statement without the prior consent of the Company, with respect to any press release of any Purchaser, or without
the prior consent of the Purchaser, with respect to any press release of the Company, which consent shall not unreasonably be withheld,
delayed, denied, or conditioned except if such disclosure is required by law, in which case the disclosing party shall promptly
provide the other party with prior notice of such public statement or communication. Notwithstanding the foregoing, the Company
shall not publicly disclose the name of any Purchaser, or include the name of any Purchaser in any filing with the Commission or
any regulatory agency or Trading Market, without the prior written consent of such Purchaser, except to the extent such disclosure
is required by law or Trading Market regulations, in which case the Company shall provide the Purchasers with prior notice of such
disclosure permitted hereunder.


 


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


 




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


 


4.9           Use
of Proceeds. The Company shall use the net proceeds hereunder as set forth on Schedule 4.9 attached hereto.


 


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


 




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4.11        Reservation
and Listing of Securities.


 


(a)          As
of the first Closing, the Company shall reserve 50,000,000 shares of common stock from its duly authorized shares of Common Stock
for issuance and on or before January 31, 2015, the Company shall maintain a reserve from its duly authorized shares of Common
Stock for issuance pursuant to the Transaction Documents in such amount as may then be required to fulfill its obligations in full
under the Transaction Documents. On a monthly basis, the Company will adjust the reserve as necessary to make sure that 300% of
the Required Minimum is available. However, at no point should the reserve be adjusted downwards.


 


(b)          If,
on any date, the number of authorized but unissued (and otherwise unreserved) shares of Common Stock is less than 300% of the Required
Minimum on such date, then the Board of Directors shall use commercially reasonable efforts to amend the Company’s certificate
or articles of incorporation to increase the number of authorized but unissued shares of Common Stock to at least 300% of the Required
Minimum at such time, as soon as possible and in any event not later than the 75th day after such date.


 


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


 


4.12        Participation
in Future Financing.


 


(a)          For
so long as any portion of any of the Notes is outstanding, upon any issuance by the Company or any of its Subsidiaries of Common
Stock, Common Stock Equivalents, or debt for cash consideration, Indebtedness, assignment, or any combination of units hereof (a
“Subsequent Financing”), the Purchaser shall have the right to participate in up to an amount of the Subsequent
Financing equal to 100% of the Subsequent Financing (the “Participation Maximum”) on the same terms, conditions
and price provided for in the Subsequent Financing. In addition to such Purchaser’s other available remedies, the Company
shall pay to the Purchaser, as partial liquidated damages and not as a penalty, the sum of $100,000.00 (either in cash or in the
form of a convertible note on terms and conditions substantially similar to the terms and conditions of the Notes, in each case
at the sole option of the Purchaser).


 




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(b)          At
least five (5) Trading Days prior to the closing of the Subsequent Financing, the Company shall deliver to the Purchaser a written
notice of its intention to effect a Subsequent Financing (“Pre-Notice”), which Pre-Notice shall ask such Purchaser
if it wants to review the details of such financing (such additional notice, a “Subsequent Financing Notice”).
Upon the request of the Purchaser, and only upon a request by such Purchaser, for a Subsequent Financing Notice, the Company shall
promptly, but no later than one (1) Trading Day after such request, deliver a Subsequent Financing Notice to such Purchaser. The
Subsequent Financing Notice shall describe in reasonable detail the proposed terms of such Subsequent Financing, the amount of
proceeds intended to be raised thereunder and the Person or Persons through or with whom such Subsequent Financing is proposed
to be effected and shall include a term sheet or similar document relating thereto as an attachment.


 


(c)          Any
Purchaser desiring to participate in such Subsequent Financing must provide written notice to the Company by not later than 5:30
p.m. (New York City time) on the fifth (5th) Trading Day after the Purchaser has received the Pre-Notice that such Purchaser
is willing to participate in the Subsequent Financing, the amount of such Purchaser’s participation, and representing and
warranting that such Purchaser has such funds ready, willing, and available for investment on the terms set forth in the Subsequent
Financing Notice. If the Company receives no such notice from the Purchaser as of such fifth (5th) Trading Day, such
Purchaser shall be deemed to have notified the Company that it does not elect to participate.


 


(d)          If
by 5:30 p.m. (New York City time) on the fifth (5th) Trading Day after the Purchaser has received the Pre-Notice, notifications
by the Purchaser of its willingness to participate in the Subsequent Financing (or to cause their designees to participate) is,
in the aggregate, less than the total amount of the Subsequent Financing, then the Company may effect the remaining portion of
such Subsequent Financing on the terms and with the Persons set forth in the Subsequent Financing Notice. 


 


(e)          If
by 5:30 p.m. (New York City time) on the fifth (5th) Trading Day after the Purchaser has received the Pre-Notice, the
Company receives responses to a Subsequent Financing Notice from the Purchaser seeking to purchase more than the aggregate amount
of the Participation Maximum, the Purchaser shall have the right to purchase its Pro Rata Portion (as defined below) of the Participation
Maximum. “Pro Rata Portion” means the ratio of (x) the Subscription Amount of Securities purchased by the Purchaser
participating under this Section 4.12 and (y) the sum of the aggregate Subscription Amounts of Securities purchased by all Purchasers
participating under this Section 4.12.


 


(f)          The
Company must provide the Purchaser with a second Subsequent Financing Notice, and the Purchaser will again have the right of participation
set forth above in this Section 4.12, if the Subsequent Financing subject to the initial Subsequent Financing Notice is not consummated
for any reason on the terms set forth in such Subsequent Financing Notice within thirty (30) Trading Days after the date of the
initial Subsequent Financing Notice.


 




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(g)          The
Company and the Purchaser agree that if any Purchaser elects to participate in the Subsequent Financing, the transaction documents
related to the Subsequent Financing shall not include any term or provision whereby such Purchaser shall be required to agree to
any restrictions on trading as to any of the Securities purchased hereunder 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, this Agreement, without the prior written consent of
such Purchaser.


 


(h)          Notwithstanding
anything to the contrary in this Section 4.12 and unless otherwise agreed to by such Purchaser, the Company shall either confirm
in writing to such Purchaser that the transaction with respect to the Subsequent Financing has been abandoned or shall publicly
disclose its intention to issue the securities in the Subsequent Financing, in either case in such a manner such that such Purchaser
will not be in possession of any material, non-public information, by the tenth (10th) Business Day following delivery
of the Subsequent Financing Notice. If by such tenth (10th) Business Day, no public disclosure regarding a transaction
with respect to the Subsequent Financing has been made, and no notice regarding the abandonment of such transaction has been received
by such Purchaser, such transaction shall be deemed to have been abandoned and such Purchaser shall not be deemed to be in possession
of any material, non-public information with respect to the Company or any of its Subsidiaries.


 


(i)          Notwithstanding
the foregoing, this Section 4.12 shall not apply in respect of an Exempt Issuance.


 


4.13        Subsequent
Equity Sales.


 


(a)          From
the date hereof until such time that the Purchaser no longer holds the Note, in the event the Company or any of its Subsidiaries
has received and wishes to accept a bona fide offer from a Person(s) other than the Purchaser (the “Third-Party Offer”),
to effect or enter into an agreement to effect any issuance by the Company or any of its Subsidiaries of Common Stock or Common
Stock Equivalents (or a combination of units thereof) involving a Variable Rate Transaction (the “Offered Securities”),
the Company shall give notice thereof to the Purchaser, which notice shall include a description of the material economic terms
and conditions of such Third-Party Offer in connection with the Offered Securities (the “Sale Notice”). “Variable
Rate Transaction” means a transaction in which the Company (i) issues or sells any debt or equity securities that are
convertible into, exchangeable or exercisable for, or include the right to receive, additional shares of Common Stock either (A)
at a conversion price, exercise price 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 debt or equity securities at a price
that is less than the Conversion Price in effect as of the date of such transaction or the date of any such conversion, exchange,
or exercise 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 debt or equity security 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 at a price that is less than the Conversion Price in
effect as of the date of such transaction or the date of any such reset or (ii) enters into any agreement, including, but not limited
to, an equity line of credit, whereby the Company may issue securities at a future determined price that is less than the Conversion
Price in effect as of the date of entry into such agreement or the date of any such issuance thereunder. In the event the Company
or any of its Subsidiaries does not follow the provisions of this Section 4.13, then the Purchaser shall be entitled to obtain
injunctive relief against the Company to preclude any such issuance, which remedy shall be in addition to any right to collect
damages.


 




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(b)          The
Purchaser shall have the option for a period of two (2) days from the giving of the Sale Notice (the “Two-Day Period”)
to elect to purchase the Offered Securities at the same price and subject to the same material terms and conditions as described
in the Sales Notice. The Purchaser may exercise such right by notifying the Company in writing, before expiration of the Two-Day
Period.


 


(c)          Notwithstanding
the foregoing, if the Purchaser has not elected to purchase the Offered Securities within the Two-Day Period, the Purchaser shall
be deemed to have forfeited any right to purchase the Offered Securities, and the Company or the Subsidiary shall be free to sell
all, but not less than all, of the Offered Securities on terms and conditions substantially similar to (and in no event more favorable
to the Person(s) identified in the Sale Notice) the terms and conditions set forth in the Sale Notice, provided that such sale
is consummated within ninety (90) days after receipt of the Sale Notice (if such sale is not consummated within such ninety (90)
day period, such sale again becoming subject to the provisions of this Section 4.13).


 


(d)          Section
4.13 shall not apply in respect of an Exempt Issuance, except that no Variable Rate Transaction shall be an Exempt Issuance.


 


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


 


4.15        Certain
Transactions and Confidentiality. The Purchaser covenants that neither it, nor any Affiliate acting on its behalf or pursuant
to any understanding with it will (i) execute any Short Sales, of any of the Company’s securities during the period commencing
with the execution of this Agreement and ending at such time that the transactions contemplated by this Agreement are first publicly
announced pursuant to the initial press release as described in Section 4.6 and (ii) execute any Short Sales of the Common Stock
from the date hereof until the earlier of (x) 5 month anniversary of the date hereof and (y) the date that the Note is no longer
outstanding (provided that this provision shall not prohibit any sales made where a corresponding Notice of Conversion or Notice
of Exercise is tendered to the Company and the shares received upon such conversion or exercise are used to close out such sale)
(a “Prohibited Short Sale”). The Purchaser covenants that until such time as the transactions contemplated by
this Agreement are publicly disclosed by the Company pursuant to the initial press release as described in Section 4.6, such Purchaser
will maintain the confidentiality of the existence and terms of this transaction and the information included in the Transaction
Documents and the Disclosure Schedules. Notwithstanding the foregoing, and notwithstanding anything contained in this Agreement
to the contrary, the Company expressly acknowledges and agrees that (i) no Purchaser makes any representation, warranty or covenant
hereby that it will not engage in effecting transactions in any securities of the Company after the time that the transactions
contemplated by this Agreement are first publicly announced pursuant to the initial press release as described in Section 4.6,
(ii) except for a Prohibited Short Sale, no Purchaser shall be restricted or prohibited from effecting any transactions in any
securities of the Company in accordance with applicable securities laws from and after the time that the transactions contemplated
by this Agreement are first publicly announced pursuant to the initial press release as described in Section 4.6 and (iii) no Purchaser
shall have any duty of confidentiality to the Company or its Subsidiaries after the issuance of the initial press release as described
in Section 4.6. Notwithstanding the foregoing, in the case of the Purchaser that is a multi-managed investment vehicle whereby
separate portfolio managers manage separate portions of such Purchaser’s assets and the portfolio managers have no direct
knowledge of the investment decisions made by the portfolio managers managing other portions of such Purchaser’s assets,
the covenant set forth above shall only apply with respect to the portion of assets managed by the portfolio manager that made
the investment decision to purchase the Securities covered by this Agreement.


 




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


 


4.17         Other
Limitations on Additional Financings. During the thirty (30)-day period that commences upon the final Closing, the Company
shall not engage in any other equity or debt financing transactions of any nature, including transactions similar to those referenced
in Sections 4.12 and 4.13.


 


4.18         Purchase
Right. For so long as any amount is outstanding on any of the Notes, the Purchaser has the right, but not the obligation, to
discuss, negotiate, and acquire from otherwise unaffiliated third-party creditors of the Company up to an aggregate of $250,000.00
per month of debt owed by the Company to all such parties in one or more transactions on terms and conditions acceptable to the
Purchaser and such third parties. The Company shall not have any obligation to facilitate such discussions, negotiations, or acquisitions
and will not be asked to be involved in such transaction. Notwithstanding the above, the Company shall, from time to time upon
the reasonable request of the Purchaser, promptly provide to it full and accurate information in respect of such third-party creditors
and the Company’s debts thereto. Subsequent to any such acquisition and upon the Purchaser’s request therefor, the
Company shall convert such obligations into Common Stock on the terms and conditions previously agreed between the Company and
such third party or, if no such agreement is extant as of the date on which the Purchaser acquired such obligations, on terms and
conditions substantially equivalent to those of the Notes, e.g., the conversion price thereof to be calculated in
the same manner as that of the Notes, with the Daily VWAP being as of the Trading Day immediately preceding such acquisition, all
as subject to applicable federal and state securities laws.


 






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ARTICLE V.


MISCELLANEOUS


 


5.1           Termination.
This Agreement may be terminated by the Purchaser, as to such Purchaser’s obligations hereunder, by written notice to the
other parties, if the Closing has not been consummated on or before November 30, 2014; provided, however, that such
termination will not affect the right of any party to sue for any breach by any other party (or parties).


 


5.2           Fees
and Expenses. At the first Closing, the Company shall reimburse the Purchaser the sums of (i) $25,000.00, on a non-accountable
basis, for expenses associated with the transactions contemplated hereby and (ii) $20,000.00 for its legal fees, which shall be
paid or offset at the first Closing. The Purchaser acknowledges having received the sum of $5,000.00 for its legal fees prior to
the first Closing. The Company shall deliver to the Purchaser, prior to each Closing, as relevant, a completed and executed copy
of the Closing Statement, the Statement for the first Closing is attached hereto as Annex A. Except as expressly set forth
in the Transaction Documents to the contrary, each party shall pay the fees and expenses of its advisers, counsel, accountants
and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery
and performance of this Agreement. The Company shall pay all Transfer Agent fees (including, without limitation, any fees required
for same-day processing of any instruction letter delivered by the Company and any conversion or exercise notice delivered by the
Purchaser), stamp taxes and other taxes and duties levied in connection with the delivery of any Securities to the Purchasers.


 


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


 


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


 


5.5           Amendments;
Waivers. No provision of this Agreement may be waived, modified, supplemented or amended except in a written instrument signed,
in the case of an amendment, by the Company and the Purchasers holding at least two-thirds (2/3) in interest of the Securities
then outstanding or, in the case of a waiver, by the party against whom enforcement of any such waived provision is sought. No
waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing
waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof,
nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right.


 






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


 


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


 


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


 


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


 


5.10         Survival.
The representations and warranties contained herein shall survive the Closings and the delivery of the Securities and shall continue
to survive for a period of two years from the last Closing.


 






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


 


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


 


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


 


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


 


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


 






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


 


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


 


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


 


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


 


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


 






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


 


(Signature Pages Follow)


 




    	35



    	 



    

 


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


 


	POSITIVEID CORPORATION	 	Address for Notice:
	 	 	 	 	 
	By:	/s/ William J Caragol	 	Fax:
	 	Name:	William J Caragol	 	 
	 	Title:	CEO	 	 


 


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


 


Szaferman, Lakind, Blumstein & Blader, P.C.


101 Grovers Mill Road, Suite 200


Lawrenceville, New Jersey 08648





	E-mail:	gjaclin@szaferman.com	 	 	 
	Attn:	Gregg Jaclin		 	 


 


[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK


SIGNATURE PAGE FOR PURCHASER FOLLOWS]


 




    	36



    	 



    

 


[PURCHASER
SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT]


 


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


  


	Name of Purchaser:	 Dominion
    Capital LLC


 


	Signature of Authorized Signatory of Purchaser:	 /s/
    Mikhail Gurevich





	Name of Authorized Signatory:	
    Mikhail Gurevich





	Title of Authorized Signatory:	 Managing Member





	E-mail Address of Authorized Signatory:	mikhail@domcapllc.com





	 	 





	Facsimile Number of Authorized Signatory:	 





	Address for Notice to Purchaser:	 





	 Dominion
    Capital LLC, 341 West 38th Street
	 8th Floor,
    NewYork, NY 10018





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





	Closing Subscription Amount:   $	 3,840,000.00	 






	Closing Principal Amount:     $	 4,000,000.00	 


 


	EIN Number:	45-2571126 	 


 




    	37



    	 



    

 


Annex A 


 


CLOSING STATEMENT


 


Pursuant to the attached Securities Purchase
Agreement, dated as of the date hereto, the purchasers shall purchase Note from Positive ID Corporation (the “Company”).
All funds will be wired into an account maintained by the Company. All funds will be disbursed in accordance with this Closing
Statement.


 


First
Disbursement Date:November __, 2014





	 


 


	
        I.   PURCHASE PRICE

         
	 	 
	 	Gross Proceeds to be Received 	 	$480,000
	 	 	 
	
        II.   DISBURSEMENTS 
	 	 
	 	 	 
	 	
        Baker & Hostetler LLP – legal fees

        ($5,000 of the $25,000 having been advanced by the
Company prior to Closing) 
	 	$20,000
	 	 	 	 
	 	
        Dominion Capital LLC – non-accountable
expense allowance 
	 	$25,000
	 	 	 	 
	 	Aegis Capital LLC 	 	$48,000
	 	 	 
	Total Amount Disbursed:	 	$_______


 


	WIRE INSTRUCTIONS:	 
	 	 	 	 
	Bank Name: 	 	 	Account Number:
	 	 	 	
	 	 	 	 
	 	 	 	Beneficiary:
	 	 	 	Positive ID Corporation


 


	Routing Number: 	 	 	Beneficiary Address:
	 	 	 	1690 South Congress Avenue Suite 201
	 	 	 	Delray Beach, Florida 33445



 


	Duly executed this ___ day of November, 2014:	 
	 	 
	POSITIVEID CORPORATION	 
	 	 
	By:	 	 
	 	Name:	 	 
	 	Title:	 	 


 




    	38



    	 



    

 


Schedule 3.1(a)


 


Subsidiaries


 


Steel Vault Security, LLC


 


MicroFluidic Systems


 


VeriGreen Energy Corporation


 


Steel Vault Corporation


 


IFTH NY Sub, Inc. (formerly Information Technology Services,
Inc. (D/B/A InfoTech))


 


IFTH NJ Sub, Inc. (formerly InfoTech USA, Inc. (D/B/A InfoTech))


 


PositiveID Medical Devices Ltd.


 




    	39



    	 



    

 


Schedule 3.1(e)


 


Filings, Consents and Approvals


 


The following are a list of convertible
notes that that Company has issued whereby those convertible notes require prior notice of a future financing.


 


	 	 	 	 	 	 	 	Interest	 	 	Close	 	Aging	 	Prepay	 	 	Conversion	 	 	Ratchet	 	Notice of
	 	 	Investors	 	Principal	 	 	Rate	 	 	Date	 	Date	 	Premium	 	 	Discount	 	 	Provision	 	Subsequent Transaction
	1	 	Vista	 	 	55,000	 	 	 	0.0	%	 	6/18/2014	 	12/17/2014	 	 	40	%	 	 	40	%	 	Yes	 	Yes
	2	 	Macallan	 	 	110,000	 	 	 	10.0	%	 	7/8/2014	 	1/6/2015	 	 	25	%	 	 	40	%	 	Yee	 	Yes
	3	 	Macallan	 	 	110,000	 	 	 	10.0	%	 	8/21/2014	 	2/19/2015	 	 	25	%	 	 	40	%	 	Yes	 	Yes
	4	 	JMJ	 	 	110,000	 	 	 	0.0	%	 	9/3/2014	 	3/4/2015	 	 	0	%	 	 	40	%	 	Yes	 	Yes
	5	 	Vista	 	 	55,000	 	 	 	0.0	%	 	9/19/2014	 	3/20/2015	 	 	20	%	 	 	40	%	 	Yes	 	Yes
	6	 	Auctus	 	 	54,750	 	 	 	8.0	%	 	9/22/2014	 	3/23/2015	 	 	30	%	 	 	40	%	 	No	 	Yes



 


The Company has not provided the required
notice per the terms of each specific note.


 




    	40



    	 



    

 


Schedule 3.1(g)


 


Capitalization


 


As of November 25, 2014:


 


Common Stock, Options and Warrants


 


		·	470,000,000 shares of Company Common Stock, par value $0.01, are authorized



		·	168,293,330 shares of Company Common Stock are issued and outstanding



		·	2,856,732 shares of Company Common Stock are reserved for issuance
upon the exercise of options issued



		·	4,490,000 shares of Company Common stock are reserved for issuance
upon the exercise of warrants issued



 


Preferred Stock 


 


		·	5,000,000 shares of Company Preferred Stock, par value $0.001, are
authorized



		·	2,500 shares of Company Series F Preferred Stock are authorized



		o	No shares of Series F are issued and outstanding



		·	1,000 shares of Company Series I Preferred Stock are authorized



		o	1,000 shares of Company Series I Preferred Stock are issued and outstanding



 


Affiliates


 


		·	Company affiliates (board and management) own 4,591,890 shares of
Company Common Stock



		·	Company affiliates (board and management) beneficially own 40,176,175
shares of Company Common Stock (which includes Series I Preferred Stock on an as converted basis).



 


Convertible Debt


 


	 	 	 	 	 	 	 	Interest	 	 	Prepay	 	 	Conversion	 
	 	 	 	 	Principal	 	 	Rate	 	 	Premium	 	 	Discount	 
	1	 	Ironridge	 	$	425,000	 	 	 	3.4	%	 	 	7	%	 	 	15	%
	2	 	Union	 	 	35,000	 	 	 	8.0	%	 	 	NA	 	 	 	40	%
	3	 	KBM	 	 	63,000	 	 	 	8.0	%	 	 	40	%	 	 	39	%
	4	 	Vista	 	 	55,000	 	 	 	0.0	%	 	 	40	%	 	 	40	%
	5	 	Adar Bay	 	 	25,000	 	 	 	8.0	%	 	 	NA	 	 	 	40	%
	6	 	LG Capital	 	 	40,000	 	 	 	8.0	%	 	 	40	%	 	 	40	%
	7	 	Blue Citi	 	 	115,000	 	 	 	0.0	%	 	 	40	%	 	 	40	%
	8	 	KBM	 	 	53,000	 	 	 	8.0	%	 	 	30	%	 	 	39	%
	9	 	Macallan	 	 	110,000	 	 	 	10.0	%	 	 	25	%	 	 	40	%
	10	 	JDF	 	 	115,000	 	 	 	10.0	%	 	 	40	%	 	 	40	%
	11	 	Toledo	 	 	66,000	 	 	 	8.0	%	 	 	40	%	 	 	40	%
	12	 	Macallan	 	 	110,000	 	 	 	10.0	%	 	 	25	%	 	 	40	%
	13	 	JMJ	 	 	110,000	 	 	 	0.0	%	 	 	0	%	 	 	40	%
	14	 	Vista	 	 	55,000	 	 	 	0.0	%	 	 	20	%	 	 	40	%
	15	 	Auctus	 	 	54,750	 	 	 	8.0	%	 	 	30	%	 	 	40	%
	16	 	Union	 	 	50,000	 	 	 	8.0	%	 	 	30	%	 	 	40	%
	17	 	KBM	 	 	53,000	 	 	 	8.0	%	 	 	20	%	 	 	40	%
	18	 	JSJ Investments	 	 	107,500	 	 	 	10.0	%	 	 	40	%	 	 	40	%
	19	 	LG Capital	 	 	36,500	 	 	 	8.0	%	 	 	30	%	 	 	40	%
	20	 	Blue Citi	 	 	161,000	 	 	 	8.0	%	 	 	30	%	 	 	40	%
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Totals	 	$	1,839,750	 	 	 	 	 	 	 	 	 	 	 	 	 



 


Other


 


The Company filed a Definitive 14C on November
7, 2014, to increase the Company’s authorized capital stock from 475,000,000 shares to 975,000,000 shares, such that the
capital stock of the Company will consist of 970,000,000 shares of Common Stock, par value $0.01 per share, and 5,000,000 shares
of Preferred Stock, par value $0.01 per share. The increase in authorized shares is expected to occur on or about December 9, 2014.


 




    	41



    	 



    

 


Schedule 3.1(i)


 


Material Changes; Undisclosed Events,
Liabilities or Developments


 


On November 24, 2014, the Company received
a Notice of Default from Ironridge Global IV, LTD, pursuant to a certain Senior Secured Convertible Redeemable Debenture issued
to TCA Global Credit Master Fund, LP (filed as exhibit 4.4 to Form 10-K on April 16, 2013) and acquired by Ironridge Global IV
on April 3, 2014. This notice of default claims multiple events of default by the Company and notifies the Company of the Ironridge
Global IV’s intention to foreclose upon and sell all assets of the Company and each of its Guarantors (as defined in the
Guaranty Agreement filed as exhibit 10.96 to Form 10-K on April 16, 2013). The Company intends
to dispute and fully defend against Ironridge’s claim of default.


 




    	42



    	 



    

 


Schedule 3.1(j) Litigation / Schedule
3.1(l) Compliance


 


On November 24, 2014, the Company received
a Notice of Default from Ironridge Global IV, LTD, pursuant to a certain Senior Secured Convertible Redeemable Debenture issued
to TCA Global Credit Master Fund, LP (filed as exhibit 4.4 to Form 10-K on April 16, 2013) and acquired by Ironridge Global IV
on April 3, 2014. This notice of default claims multiple events of default by the Company and notifies the Company of the Ironridge
Global IV’s intention to foreclose upon and sell all assets of the Company and each of its Guarantors (as defined in the
Guaranty Agreement filed as exhibit 10.96 to Form 10-K on April 16, 2013). The Company intends
to dispute and fully defend against Ironridge’s claim of default.


 




    	43



    	 



    

 


Schedule 3.1(n)


 


Title to Assets


 


The Company has granted The Boeing Company
a first priority secured interest in all assets related to its M-BAND product. This security interest is documented in the Security
Agreement, dated December 19, 2012, between PositiveID Corporation and The Boeing Company (filed as exhibit 10.91 to Form 10-K
on April 16, 2013).


 


The Company has granted TCA Global a second
priority secured interest in all assets related to its M-BAND product, and a first priority interest in the remainder of the Company’s
assets. This security interest is documented in Security Agreement, dated January 16, 2013,
between PositiveID Corporation and TCA Global Credit Master Fund, LP (filed as exhibit 10.94 to Form 10-K on April 16, 2013). This
secured interest was assumed by Ironridge Global IV on April 3, 2014, when it acquired TCA’s underlying note. On November
24, 2014, the Company received a Notice of Default from Ironridge Global IV, LTD, pursuant to a certain Senior Secured Convertible
Redeemable Debenture issued to TCA Global Credit Master Fund, LP (filed as exhibit 4.4 to Form 10-K on April 16, 2013) and acquired
by Ironridge Global IV on April 3, 2014. This notice of default claims multiple events of default by the Company and notifies the
Company of the Ironridge Global IV’s intention to foreclose upon and sell all assets of the Company and each of its Guarantors
(as defined in the Guaranty Agreement filed as exhibit 10.96 to Form 10-K on April 16, 2013).
The Company intends to dispute and fully defend against Ironridge’s claim of default.


 




    	44



    	 



    

 


Schedule 3.1(s)


 


Certain Fees


 


Aegis Capital Corp. is entitled to a cash fee of 10% of gross
proceeds.


 




    	45



    	 



    

 


Schedule 3.1(ee)


 


Accountants


 


Salberg & Company, P.A.


 




    	46



    	 



    

 


Schedule 4.9


 


Use of Proceeds


 


	Engineering costs of building Firefly breadboard prototype	 	$	600,000	 
	–	 	 	 	 
	Debt retirements	 	 	850,000	 
	Payroll – twelve months	 	 	1,100,000	 
	Other overhead (rent, etc.) – twelve months	 	 	906,000	 
	Fees to Aegis Capital LLC	 	 	384,000	 
	 	 	 	 	 
	Net Proceeds	 	$	3,840,000	 



 




    	47