Securities Purchase Agreement



 EXHIBIT 10.1 
 SERIES C CONVERTIBLE PREFERRED STOCK PURCHASE 
 AGREEMENT 
 Dated as of September 24, 2007 
 among 
 AVICENA GROUP, INC. 
 and 
 THE PURCHASERS LISTED ON EXHIBIT A 







 SERIES C CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT 
 This SERIES C CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT (the “Agreement”) is dated as of September 24, 2007 by and among
Avicena Group, Inc., a Delaware corporation (the “Company”), and each of the Purchasers of shares of Series C Convertible Preferred Stock of the Company whose names are set forth on Exhibit A hereto (individually, a
“Purchaser” and collectively, the “Purchasers”). 
 The parties hereto agree as follows: 
 ARTICLE I 
 Purchase and Sale of
Preferred Stock 
 Section 1.1 Purchase and Sale of Stock. Upon the
following terms and conditions, the Company shall issue and sell to the Purchasers and each of the Purchasers shall purchase from the Company the number of shares (the “Preferred Shares”) of the Company’s Series C Convertible
Preferred Stock, par value $0.001 per share, at a purchase price of $1,000 per Preferred Share, convertible into shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”), set forth opposite such
Purchaser’s name on Exhibit A hereto. The designation, rights, preferences and other terms and provisions of the Series C Convertible Preferred Stock are set forth in the Certificate of Designation of the Relative Rights and Preferences
of the Series C Convertible Preferred Stock attached hereto as Exhibit B (the “Certificate of Designation”). The Company and the Purchasers are executing and delivering this Agreement in accordance with and in reliance upon
the exemption from securities registration afforded by Rule 506 of Regulation D (“Regulation D”), as promulgated by the United States Securities and Exchange Commission (the “Commission”), under the Securities Act
of 1933, as amended (the “Securities Act”), or Section 4(2) of the Securities Act. 
 Section 1.2 Warrants. Upon
the following terms and conditions and for no additional consideration, each of the Purchasers shall be issued (i) a Series C-1 Warrant, in substantially the form attached hereto as Exhibit C-1 (the “Series C-1
Warrants”), to purchase the number of shares of Common Stock equal to seventy five percent (75%) of the number of Conversion Shares (as defined in Section 1.3 hereof) initially issuable upon conversion of the Preferred Shares
acquired by such Purchaser pursuant to the terms of this Agreement (such Purchaser’s “Underlying Common Shares”), as set forth opposite such Purchaser’s name on Exhibit A hereto, (ii) a Series C-2 Warrant, in
substantially the form attached hereto as Exhibit C-2 (the “Series C-2 Warrant”) to purchase up to 72.7% of such Purchaser’s Underlying Common Shares, and (iii) a Series C-3 Warrant, in substantially the form
attached hereto as Exhibit C-3 (the “Series C-3 Warrant” and, together with the Series C-1 Warrants and the Series C-2 Warrant, the “Warrants”), to purchase up to a number of shares of Common Stock equal to
seventy-five percent (75%) of the number of shares actually purchased by such Purchaser pursuant to exercises of its Series C-2 Warrant. The Warrants shall expire five (5) years following the Initial Closing Date, except for the Series C-2
Warrants issued to each Purchaser purchasing fewer than 4,000 Preferred Shares, which shall expire twelve (12) months following the Initial Closing Date (provided that the Series C-2 Warrants issued to each Purchaser purchasing 4,000 or more









 
Preferred Shares shall expire twenty-four (24) months following the Initial Closing Date). Each of the Warrants shall have an exercise price per share
equal to its respective Warrant Price (as defined in the applicable Warrant). 
 Section 1.3 Conversion Shares. The Company has
authorized and has reserved and covenants to continue to reserve, free of preemptive rights and other similar contractual rights of stockholders, a number of shares of Common Stock equal to one hundred fifty percent (150%) of the number of
shares of Common Stock as shall from time to time be sufficient to effect the conversion of all of the Preferred Shares and exercise of all of the Warrants then outstanding. Any shares of Common Stock issuable upon conversion of the Preferred Shares
and exercise of the Warrants (and such shares when issued) are herein referred to as the “Conversion Shares” and the “Warrant Shares”, respectively. The Preferred Shares, the Conversion Shares and the Warrant Shares
are sometimes collectively referred to as the “Shares”. 
 Section
1.4 Purchase Price and Closings. In consideration of and in express reliance upon the representations, warranties, covenants, terms and conditions of this Agreement, the Company agrees to issue and sell to the Purchasers and, in consideration
of and in express reliance upon the representations, warranties, covenants, terms and conditions of this Agreement, the Purchasers, severally but not jointly, agree to purchase the numbers of Preferred Shares and Warrants set forth opposite their
respective names on Exhibit A. The minimum purchase price paid at the Initial Closing (as defined below) will be $3,000,000 (excluding any Purchase Price paid by cancellation of Series A Convertible Preferred Stock) and the maximum aggregate
purchase price paid at all closings (including by cancellation of Series A Convertible Preferred Stock) will be $19,800,000 (the aggregate of all such purchase prices paid at any Closing, the “Purchase Price”). The Shares shall be
sold and funded in separate closings (each, a “Closing”), in each case pursuant to terms of this Agreement and provided that each Purchaser executes a signature page hereto and to each of the other Transaction Documents (as defined
in Section 2.1(b) hereof) to which the Purchasers are a party, and thereby agrees to be bound by and subject to the terms and conditions hereof and thereof. The initial Closing under this Agreement (the “Initial
Closing”) shall take place on or about September 24, 2007, or as soon thereafter as the Company has identified Purchasers to purchase at least 3,000 Preferred Shares and all other conditions to closing have been satisfied or waived
(the “Initial Closing Date”). Each subsequent Closing under this Agreement (each, a “Subsequent Closing”) shall take place upon the mutual agreement of the Company and the Purchasers participating in such Subsequent
Closing, but in no event later than October 26, 2007 (each, a “Subsequent Closing Date”). The Initial Closing Date and each Subsequent Closing Date are sometimes referred to in this Agreement as the “Closing
Date”. Each Closing under this Agreement shall take place at the offices of Sadis & Goldberg LLP, 551 Fifth Avenue, 21st Floor, New York,
New York 10176 at 10:00 a.m., New York time, or at such other time and place as may be mutually agreed upon. Subject to the terms and conditions of this Agreement, at each Closing the Company shall deliver or cause to be delivered to each Purchaser
participating in such Closing (x) a certificate for the number of Shares set forth opposite the name of such Purchaser on Exhibit A hereto and (y) any other documents required to be delivered pursuant to Article IV hereof. At
each Closing, each Purchaser participating in such Closing shall deliver its portion of the Purchase Price by wire transfer to the Company. Notwithstanding the foregoing, in lieu of paying in cash, the holders of the Company’s Series A
Convertible Preferred Stock and associated warrants (the “Series A 

  

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Holders”) shall pay their respective portion of the Purchase Price hereunder through the cancellation of such holders’ Series A Convertible
Preferred Stock (and associated warrants) in the respective individual amounts set forth on Exhibit A hereto; provided, however, that such payments shall not be considered for purposes of determining whether the minimum purchase
price obligation has been satisfied. The portion of the Purchase Price to be paid by the Series A Holders by virtue of the cancellation of such Purchasers’ Series A Convertible Preferred Stock (and associated warrants) shall be the original
cash purchase price paid by such Purchasers under the Securities Purchase Agreement dated as of November 27, 2006 plus any unpaid dividends accrued thereunder. 
 ARTICLE II 
 Representations and Warranties 
 Section 2.1 Representations and Warranties of the Company. The Company hereby represents and warrants to each Purchaser, as of the date hereof
(except as set forth on the Schedule of Exceptions attached hereto with each numbered Schedule corresponding to the section number herein), as follows: 
 (a) Organization, Good Standing and Power. The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware and has the requisite corporate power to
own, lease and operate its properties and assets and to conduct its business as it is now being conducted. Except as set forth on Schedule 2.1(a), the Company and each of its subsidiaries is duly qualified as a foreign corporation to do
business and is in good standing in every jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except for any jurisdiction(s) (alone or in the aggregate) in which the failure to be so
qualified could not reasonably be expected to have a Material Adverse Effect (as defined in Section 2.1(c) hereof) on the Company’s financial condition. 
 (b) Authorization; Enforcement. The Company has the requisite corporate power and authority to enter into and perform this
Agreement, the Registration Rights Agreement in the form attached hereto as Exhibit D (the “Registration Rights Agreement”), the Lock-Up Agreement (as defined in Section 3.20 hereof) in the form attached hereto as
Exhibit E, the Irrevocable Transfer Agent Instructions (as defined in Section 3.13), the Certificate of Designation, and the Warrants (collectively, the “Transaction Documents”) and to issue and sell the Shares
and the Warrants in accordance with the terms hereof. The execution, delivery and performance of the Transaction Documents by the Company, and the consummation by it of the transactions contemplated hereby and thereby, have been duly and validly
authorized by all necessary corporate action, and no further consent or authorization of the Company or its Board of Directors or stockholders is required. This Agreement has been duly executed and delivered by the Company. The other Transaction
Documents will have been duly executed and delivered by the Company at the Closing. Each of the Transaction Documents constitutes, or shall constitute when executed and delivered, a valid and binding obligation of the Company enforceable against the
Company in accordance with its terms, except as such enforceability may 

  

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be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation, conservatorship, receivership or similar laws relating to, or
affecting generally the enforcement of, creditor’s rights and remedies or by other equitable principles of general application. 
 (c) Capitalization. The authorized capital stock of the Company and the shares thereof currently issued and outstanding as of September 24, 2007, are set forth on Schedule 2.1(c) hereto. All of the outstanding shares of
the Common Stock and the Preferred Shares have been duly and validly authorized. Except as set forth on Schedule 2.1(c) hereto, no shares of Common Stock are entitled to preemptive rights or registration rights and there are no outstanding
options, warrants, scrip, rights to subscribe to, call relating to, or securities or rights convertible into, any shares of capital stock of the Company. Except as set forth on Schedule 2.1(c) hereto, there are no contracts, commitments,
understandings, or arrangements by which the Company is or may become bound to issue additional shares of the capital stock of the Company or options, securities or rights convertible into shares of capital stock of the Company. Except as set forth
on Schedule 2.1(c) hereto, the Company is not a party to any agreement granting registration or anti-dilution rights to any person with respect to any of its equity or debt securities. The Company is not a party to, and it has no knowledge
of, any agreement restricting the voting or transfer of any shares of the capital stock of the Company. The offer and sale of all capital stock, convertible securities, rights, warrants, or options of the Company issued prior to the Closing complied
with all applicable Federal and state securities laws, and no stockholder has a right of rescission or claim for damages with respect thereto which would have a Material Adverse Effect (as defined below). The Company has furnished or made available
to the Purchasers true and correct copies of the Company’s Certificate of Incorporation as in effect on the date hereof (the “Certificate”), and the Company’s Bylaws as in effect on the date hereof (the
“Bylaws”). For the purposes of this Agreement, “Material Adverse Effect” means any material adverse effect on the business, operations, properties, prospects, or financial condition of the Company and its
subsidiaries and/or any condition, circumstance, or situation that would prohibit or otherwise interfere with the ability of the Company to perform any of its obligations under this Agreement in any material respect. 
 (d) Issuance of Shares. The Preferred Shares and the Warrants to be issued at the Closing have been duly authorized by all
necessary corporate action and the Preferred Shares, when paid for and issued in accordance with the terms hereof, shall be validly issued and outstanding, fully paid and nonassessable and entitled to the rights and preferences set forth in the
Certificate of Designation. When the Conversion Shares and the Warrant Shares are paid for and issued in accordance with the terms of the Certificate of Designation and the Warrants, respectively, such shares will be duly authorized by all necessary
corporate action and validly issued and outstanding, fully paid and nonassessable, and the holders shall be entitled to all rights accorded to a holder of Common Stock. 
 (e) No Conflicts. Except as set forth on Schedule 2.1(e) hereto, the execution, delivery and performance of the Transaction
Documents by the Company, the performance by the Company of its obligations thereunder and the consummation by the Company of the transactions contemplated herein and therein do not and will not (i) violate any provision of the Company’s
Certificate or Bylaws, (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights 

  

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of termination, amendment, acceleration or cancellation of, any agreement, mortgage, deed of trust, indenture, note, bond, license, lease agreement,
instrument or obligation to which the Company is a party or by which it or its properties or assets are bound, (iii) create or impose a lien, mortgage, security interest, charge or encumbrance of any nature on any property of the Company under
any agreement or any commitment to which the Company is a party or by which the Company is bound or by which any of its respective properties or assets are bound, or (iv) result in a violation of any federal, state, local or foreign statute,
rule, regulation, order, judgment or decree (including Federal and state securities laws and regulations) applicable to the Company or any of its subsidiaries or by which any property or asset of the Company or any of its subsidiaries are bound or
affected, except, in all cases other than violations pursuant to clauses (i) and (iv) above, for such conflicts, defaults, terminations, amendments, accelerations, cancellations and violations as would not, individually or in the
aggregate, have a Material Adverse Effect. The business of the Company and its subsidiaries is not being conducted in violation of any laws, ordinances or regulations of any governmental entity, except for possible violations which singularly or in
the aggregate do not and will not have a Material Adverse Effect. The Company is not required under Federal, state or local law, rule or regulation to obtain any consent, authorization or order of, or make any filing or registration with, any court
or governmental agency in order for it to execute, deliver or perform any of its obligations under the Transaction Documents, or issue and sell the Preferred Shares, the Warrants, the Conversion Shares and the Warrant Shares in accordance with the
terms hereof or thereof (other than (x) any consent, authorization or order that has been obtained as of the date hereof, (y) any filing or registration that has been made as of the date hereof or (z) any filings which may be required
to be made by the Company with the Commission or state securities administrators subsequent to the Closing, any registration statement which may be filed pursuant hereto, and the Certificate of Designation); provided that, for purposes of the
representation made in this sentence, the Company is assuming and relying upon the accuracy of the relevant representations and agreements of the Purchasers herein. 
 (f) Commission Documents, Financial Statements. Except as indicated on Schedule 2.1(u)(B), the Company has timely filed all
reports, schedules, forms, statements and other documents required to be filed by it with the Commission pursuant to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), including
material filed pursuant to Section 13(a) or 15(d) of the Exchange Act (all of the foregoing including filings incorporated by reference therein being referred to herein as the “Commission Documents”). The Company has delivered
or made available to each of the Purchasers true and complete copies of the Commission Documents. The Company has not provided to the Purchasers any material non-public information or other information which, according to applicable law, rule or
regulation, was required to have been disclosed publicly by the Company but which has not been so disclosed, other than with respect to the transactions contemplated by this Agreement. At the times of their respective filings, the Company’s
Form 10-KSB for the year ended December 31, 2006, including the accompanying financial statements (the “Form 10-KSB”) and the Company’s Form 10-QSB for the fiscal quarter ended March 31, 2007 (the “Form
10-QSB”) complied in all material respects with the requirements of the Exchange Act and the rules and regulations of the Commission promulgated thereunder and other federal, state and local laws, rules and regulations applicable to such
documents, and, as of their respective dates, neither of the Form 10-KSB and the Form 10-QSB contained any untrue 

  

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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 light
of the circumstances under which they were made, not misleading. The financial statements of the Company included in the Commission Documents comply as to form in all material respects with applicable accounting requirements and the published rules
and regulations of the Commission or other applicable rules and regulations with respect thereto. Such financial statements have been prepared in accordance with United States generally accepted accounting principles (“GAAP”)
applied on a consistent basis during the periods involved (except (i) as may be otherwise indicated in such financial statements or the notes thereto or (ii) in the case of unaudited interim statements, to the extent they may not include
footnotes), and fairly present in all material respects the financial position of the Company and its subsidiaries as of 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 year-end audit adjustments). 
 (g) Subsidiaries. The Company has no subsidiaries. For the
purposes of this Agreement, “subsidiary” shall mean any corporation or other entity of which at least a majority of the securities or other ownership interest having ordinary voting power (absolutely or contingently) for the
election of directors or other persons performing similar functions are at the time owned directly or indirectly by the Company and/or any of its other subsidiaries. 
 (h) No Material Adverse Change. Other than as disclosed in the Company’s Commission Documents, since December 31, 2006,
the Company has not experienced or suffered any Material Adverse Effect. 
 (i) No Undisclosed Liabilities. Except as
set forth on Schedule 2.1(i), neither the Company nor any of its subsidiaries has any liabilities, obligations, claims or losses (whether liquidated or unliquidated, secured or unsecured, absolute, accrued, contingent or otherwise) other than
those incurred in the ordinary course of the Company’s or its subsidiaries respective businesses since December 31, 2006, and which, individually or in the aggregate, do not or would not have a Material Adverse Effect on the Company or its
subsidiaries. 
 (j) No Undisclosed Events or Circumstances. No event or circumstance has occurred or exists with
respect to the Company or its subsidiaries or their respective businesses, properties, prospects, operations or financial condition, which, under applicable law, rule or regulation, requires public disclosure or announcement by the Company but which
has not been so publicly announced or disclosed. 
 (k) Indebtedness. Schedule 2.1(k) hereto sets forth as of a
recent date all outstanding secured and unsecured Indebtedness of the Company or any subsidiary, or for which the Company or any subsidiary has commitments, in each case that have not previously been set forth in the Form 10-KSB or Form 10-QSB. For
the purposes of this Agreement, “Indebtedness” shall mean (a) any liabilities for borrowed money or amounts owed in excess of $100,000 (other than trade accounts payable incurred in the ordinary course of business),
(b) all guaranties, endorsements and other contingent obligations in respect of Indebtedness of others, whether or not the same are or should be reflected in the Company’s balance sheet (or the notes thereto), except guaranties by
endorsement of negotiable instruments for deposit or collection or similar 

  

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transactions in the ordinary course of business; and (c) the present value of any lease payments in excess of $25,000 due under leases required to be
capitalized in accordance with GAAP. Except as set forth on Schedule 2.1(k), neither the Company nor any subsidiary is in default with respect to any Indebtedness. 
 (l) Title to Assets. Except as set forth on Schedule 2.1(l), each of the Company and the subsidiaries has good and
marketable title to all of its real and personal property reflected in the Form 10-KSB, free and clear of any mortgages, pledges, charges, liens, security interests or other encumbrances, except for those disclosed in the Form 10-KSB or such that,
individually or in the aggregate, do not cause a Material Adverse Effect. Except as set forth on Schedule 2.1(l), all leases of the Company and each of its subsidiaries are valid and subsisting and in full force and effect. 
 (m) Actions Pending. There is no action, suit, claim, investigation, arbitration, alternate dispute resolution proceeding or any
other proceeding pending or, to the knowledge of the Company, threatened against the Company or any subsidiary which questions the validity of this Agreement or any of the other Transaction Documents or the transactions contemplated hereby or
thereby or any action taken or to be taken pursuant hereto or thereto. There is no action, suit, claim, investigation, arbitration, alternate dispute resolution proceeding or any other proceeding pending or, to the knowledge of the Company,
threatened, against or involving the Company, any subsidiary or any of their respective properties or assets. There are no outstanding orders, judgments, injunctions, awards or decrees of any court, arbitrator or governmental or regulatory body
against the Company or any subsidiary or any officers or directors of the Company or subsidiary in their capacities as such. 
 (n) Compliance with Law. The business of the Company and the subsidiaries has been and is presently being conducted in accordance with all applicable federal, state and local governmental laws, rules, regulations and ordinances,
except for such noncompliance that, individually or in the aggregate, would not cause a Material Adverse Effect. The Company and each of its subsidiaries have all franchises, permits, licenses, consents and other governmental or regulatory
authorizations and approvals necessary for the conduct of its business as now being conducted by it unless the failure to possess such franchises, permits, licenses, consents and other governmental or regulatory authorizations and approvals,
individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. 
 (o) Taxes. The
Company and each of the subsidiaries has accurately prepared and filed all federal, state and other tax returns required by law to be filed by it, has paid or made provisions for the payment of all taxes shown to be due and all additional
assessments, and adequate provisions have been and are reflected in the financial statements of the Company and the subsidiaries for all current taxes and other charges to which the Company or any subsidiary is subject and which are not currently
due and payable. None of the federal income tax returns of the Company or any subsidiary have been audited by the Internal Revenue Service. The Company has no knowledge of any additional assessments, adjustments or contingent tax liability (whether
federal or state) of any nature whatsoever, whether pending or threatened against the Company or any subsidiary for any period, nor of any basis for any such assessment, adjustment or contingency. 
  

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 (p) Certain Fees. Except as set forth on Schedule 2.1(p) hereto, no
brokers, finders or financial advisory fees or commissions will be payable by the Company or any subsidiary or any Purchaser with respect to the transactions contemplated by this Agreement. 
 (q) Disclosure. Neither this Agreement or the Schedules hereto nor any other documents, certificates or instruments furnished to
the Purchasers by or on behalf of the Company or any subsidiary in connection with the transactions contemplated by this Agreement contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the
statements made herein or therein, in the light of the circumstances under which they were made herein or therein, not misleading. 
 (r) Operation of Business. Except as set forth in Schedule 2.1(r), the Company and each of the subsidiaries owns or possesses all patents, trademarks, domain names (whether or not registered) and any patentable improvements or
copyrightable derivative works thereof, websites and intellectual property rights relating thereto, service marks, trade names, copyrights, licenses and authorizations, and all rights with respect to the foregoing, which are necessary for the
conduct of its business as now conducted without any conflict with the rights of others. 
 (s) Environmental
Compliance. The Company and each of its subsidiaries have obtained all material approvals, authorization, certificates, consents, licenses, orders and permits or other similar authorizations of all governmental authorities, or from any other
person, that are required under any Environmental Laws. Except as set forth on Schedule 2.1(s), the Form 10-KSB or Form 10-QSB describes all material permits, licenses and other authorizations issued under any Environmental Laws to the
Company or its subsidiaries. “Environmental Laws” shall mean all applicable laws relating to the protection of the environment including, without limitation, all requirements pertaining to reporting, licensing, permitting,
controlling, investigating or remediating emissions, discharges, releases or threatened releases of hazardous substances, chemical substances, pollutants, contaminants or toxic substances, materials or wastes, whether solid, liquid or gaseous in
nature, into the air, surface water, groundwater or land, or relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of hazardous substances, chemical substances, pollutants, contaminants or
toxic substances, material or wastes, whether solid, liquid or gaseous in nature. The Company has all necessary governmental approvals required under all Environmental Laws and used in its business or in the business of any of its subsidiaries. The
Company and each of its subsidiaries are also in compliance with all other limitations, restrictions, conditions, standards, requirements, schedules and timetables required or imposed under all Environmental Laws. Except for such instances as would
not individually or in the aggregate have a Material Adverse Effect, there are no past or present events, conditions, circumstances, incidents, actions or omissions relating to or in any way affecting the Company or its subsidiaries that violate or
may violate any Environmental Law after the Closing Date or that may give rise to any environmental liability, or otherwise form the basis of any claim, action, demand, suit, proceeding, hearing, study or investigation (i) under any
Environmental Law, or (ii) based on or related to the manufacture, processing, distribution, use, treatment, storage (including without limitation underground storage tanks), disposal, transport or handling, or the emission, discharge, release
or threatened release of any hazardous substance. 
  

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 (t) Books and Record Internal Accounting Controls. The books and records of the
Company and its subsidiaries accurately reflect in all material respects the information relating to the business of the Company and the subsidiaries, the location and collection of their assets, and the nature of all transactions giving rise to the
obligations or accounts receivable of the Company or any subsidiary. The Company and each of its subsidiaries maintain a system of internal accounting controls sufficient, in the judgment of the Company, 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. 
 (u) Material Agreements. Except as set forth on
Schedule 2.1(u), neither the Company nor any subsidiary is a party to any written or oral contract, instrument, agreement, commitment, obligation, plan or arrangement, a copy of which would be required to be filed with the Commission as an
exhibit to a registration statement on Form S-3 or other applicable form (collectively, “Material Agreements”) if the Company or any subsidiary were registering securities under the Securities Act. Except as set forth on Schedule
2.1(u), the Company and each of its subsidiaries has in all material respects performed all the obligations required to be performed by them to date under the foregoing agreements, have received no notice of default and are not in default under
any Material Agreement now in effect, the result of which could cause a Material Adverse Effect. Except as set forth on Schedule 2.1(u), no written or oral contract, instrument, agreement, commitment, obligation, plan or arrangement of the
Company or of any subsidiary limits or shall limit the payment of dividends on the Company’s Preferred Shares, other preferred stock, if any, or its Common Stock. 
 (v) Transactions with Affiliates. Except as set forth in the Commission Documents, there are no loans, leases, agreements,
contracts, royalty agreements, management contracts or arrangements or other continuing transactions between (a) the Company or any subsidiary on the one hand, and (b) on the other hand, any officer, employee, consultant or director of the
Company, or any of its subsidiaries, or any person owning any capital stock of the Company or any subsidiary or any member of the immediate family of such officer, employee, consultant, director or stockholder or any corporation or other entity
controlled by such officer, employee, consultant, director or stockholder, or a member of the immediate family of such officer, employee, consultant, director or stockholder. 
 (w) Securities Act of 1933. Based in material part upon the representations herein of the Purchasers, the Company has complied and
will comply with all applicable federal and state securities laws in connection with the offer, issuance and sale of the Shares and the Warrants hereunder. Neither the Company nor anyone acting on its behalf, directly or indirectly, has or will
sell, offer to sell or solicit offers to buy any of the Shares, the Warrants or similar securities to, or solicit offers with respect thereto from, or enter into any preliminary conversations or negotiations relating thereto with, any person, or has
taken or will take any action, so as to bring the issuance and sale of any of the Shares and the Warrants under the registration provisions of the Securities Act and applicable state securities laws, and neither the 

  

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Company nor any of its affiliates, nor any person acting on its or their behalf, has engaged in any form of general solicitation or general advertising
(within the meaning of Regulation D under the Securities Act) in connection with the offer or sale of any of the Shares and the Warrants. 
 (x) Governmental Approvals. Except for the filing of any notice prior or subsequent to the Closing Date that may be required under applicable state and/or federal securities laws (which if required, shall be
filed on a timely basis), including the filing of a Form D and a registration statement or statements pursuant to the Registration Rights Agreement, and the filing of the Certificate of Designation with the Secretary of State for the State of
Delaware, no authorization, consent, approval, license, exemption of, filing or registration with any court or governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, is or will be necessary for, or in
connection with, the execution or delivery of the Preferred Shares and the Warrants, or for the performance by the Company of its obligations under the Transaction Documents. 
 (y) Employees. Neither the Company nor any subsidiary has any collective bargaining arrangements or agreements covering any of its
employees. Except as set forth on Schedule 2.1(y), neither the Company nor any subsidiary has any employment contract, agreement regarding proprietary information, non-competition agreement, non-solicitation agreement, confidentiality
agreement, or any other similar contract or restrictive covenant, relating to the right of any officer, employee or consultant to be employed or engaged by the Company or such subsidiary. No officer, consultant or key employee of the Company or any
subsidiary whose termination, either individually or in the aggregate, could have a Material Adverse Effect, has terminated or, to the knowledge of the Company, has any present intention of terminating his or her employment or engagement with the
Company or any subsidiary. 
 (z) Absence of Certain Developments. Except as set forth on Schedule 2.1(z), since
December 31, 2006, neither the Company nor any subsidiary has: 
 (i) issued any stock, bonds or other corporate
securities or any rights, options or warrants with respect thereto; 
 (ii) borrowed any amount or incurred or become subject
to any liabilities (absolute or contingent) except current liabilities incurred in the ordinary course of business which are comparable in nature and amount to the current liabilities incurred in the ordinary course of business during the comparable
portion of its prior fiscal year, as adjusted to reflect the current nature and volume of the Company’s or such subsidiary’s business; 
 (iii) discharged or satisfied any lien or encumbrance or paid any obligation or liability (absolute or contingent), other than current liabilities paid in the ordinary course of business; 
 (iv) declared or made any payment or distribution of cash or other property to stockholders with respect to its stock, or purchased or
redeemed, or made any agreements so to purchase or redeem, any shares of its capital stock; 
  

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 (v) sold, assigned or transferred any other tangible assets, or canceled any debts or
claims, except in the ordinary course of business; 
 (vi) sold, assigned or transferred any patent rights, trademarks, trade
names, copyrights, trade secrets or other intangible assets or intellectual property rights, or disclosed any proprietary confidential information to any person except to customers in the ordinary course of business or to the Purchasers or their
representatives; 
 (vii) suffered any substantial losses or waived any rights of material value, whether or not in the
ordinary course of business, or suffered the loss of any material amount of prospective business; 
 (viii) made any changes
in employee compensation except in the ordinary course of business and consistent with past practices; 
 (ix) made capital
expenditures or commitments therefor that aggregate in excess of $100,000; 
 (x) entered into any other transaction other
than in the ordinary course of business, or entered into any other material transaction, whether or not in the ordinary course of business; 
 (xi) made charitable contributions or pledges in excess of $25,000; 
 (xii) suffered any
material damage, destruction or casualty loss, whether or not covered by insurance; 
 (xiii) experienced any material
problems with labor or management in connection with the terms and conditions of their employment; 
 (xiv) effected any two
or more events of the foregoing kind which in the aggregate would be material to the Company or its subsidiaries; or 
 (xv)
entered into an agreement, written or otherwise, to take any of the foregoing actions. 
 (aa) Public Utility Holding
Company Act and Investment Company Act Status. The Company is not a “holding company” or a “public utility company” as such terms are defined in the Public Utility Holding Company Act of 1935, as amended. The Company is not,
and as a result of and immediately upon the Closing will not be, an “investment company” or a company “controlled” by an “investment company,” within the meaning of the Investment Company Act of 1940, as amended.

 (bb) ERISA. No liability to the Pension Benefit Guaranty Corporation has been incurred with respect to any Plan (as
defined below) by the Company or any of its subsidiaries which is or would be materially adverse to the Company and its subsidiaries. The execution and delivery of this Agreement and the issuance and sale of the Preferred Shares will 

  

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not involve any transaction which is subject to the prohibitions of Section 406 of the Employee Retirement Income Security Act of 1974, as amended
(“ERISA”), or in connection with which a tax could be imposed pursuant to Section 4975 of the Internal Revenue Code of 1986, as amended (the “Code”), provided that, if any of the Purchasers, or any person or
entity that owns a beneficial interest in any of the Purchasers, is an “employee pension benefit plan” (within the meaning of Section 3(2) of ERISA) with respect to which the Company is a “party in interest” (within the
meaning of Section 3(14) of ERISA), the requirements of Sections 407(d)(5) and 408(e) of ERISA, if applicable, are met. As used in this Section 2.1(bb), the term “Plan” shall mean an “employee pension benefit
plan” (as defined in Section 3 of ERISA) which is or has been established or maintained, or to which contributions are or have been made, by the Company or any subsidiary or by any trade or business, whether or not incorporated, which,
together with the Company or any subsidiary, is under common control, as described in Section 414(b) or (c) of the Code. 
 (cc) Dilutive Effect. The Company understands and acknowledges that its obligation to issue Conversion Shares upon conversion of the Preferred Shares in accordance with this Agreement and the Certificate of Designation and its
obligations to issue the Warrant Shares upon the exercise of the Warrants in accordance with this Agreement and the Warrants, is, in each case, absolute and unconditional regardless of the dilutive effect that such issuance may have on the ownership
interest of other stockholders of the Company. 
 (dd) No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has directly or indirectly made any offers or sales of any security or solicited any offers to buy any security under circumstances that would cause the offering of the Shares pursuant to
this Agreement to be integrated with prior offerings by the Company for purposes of the Securities Act which would prevent the Company from selling the Shares pursuant to Rule 506 under the Securities Act, or any applicable exchange-related
stockholder approval provisions, nor will the Company or any of its affiliates or subsidiaries take any action or steps that would cause the offering of the Shares to be so integrated with other offerings. The Company does not have any registration
statement pending before the Commission or currently under the Commission’s review and since May 1, 2006, the Company has not publicly offered or sold any of its equity securities or debt securities convertible into shares of Common Stock.

 (ee) Independent Nature of Purchasers. The Company acknowledges that the obligations of each Purchaser under the
Transaction Documents are several and not joint with the obligations of any other Purchaser, and no Purchaser shall be responsible in any way for the performance of the obligations of any other Purchaser under the Transaction Documents. The Company
acknowledges that the decision of each Purchaser to purchase securities pursuant to this Agreement has been made by such Purchaser independently of any other purchase and independently of any information, materials, statements or opinions as to the
business, affairs, operations, assets, properties, liabilities, results of operations, condition (financial or otherwise) or prospects of the Company or of its Subsidiaries which may have made or given by any other Purchaser or by any agent or
employee of any other Purchaser, and no Purchaser or any of its agents or employees shall have any liability to any Purchaser (or any other person) relating to or arising from any such information, materials, statements or opinions. The Company


  

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acknowledges that nothing contained herein, or in any Transaction Document, and no action taken by any Purchaser pursuant hereto or thereto, shall be deemed
to constitute the Purchasers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Purchasers are in any way acting in concert or as a group with respect to such obligations or the
transactions contemplated by the Transaction Documents. The Company acknowledges that each Purchaser shall be entitled to independently protect and enforce its rights, including without limitation, the rights arising out of this Agreement or out of
the other Transaction Documents, and it shall not be necessary for any other Purchaser to be joined as an additional party in any proceeding for such purpose. The Company acknowledges that for reasons of administrative convenience only, the
Transaction Documents have been prepared by counsel for one of the Purchasers and such counsel does not represent all of the Purchasers but only such Purchaser and the other Purchasers have retained their own individual counsel with respect to the
transactions contemplated hereby. The Company acknowledges that it has elected to provide all Purchasers with the same terms and Transaction Documents for the convenience of the Company and not because it was required or requested to do so by
the Purchasers. 
 (ff) Transfer Agent. The name, address, telephone number, fax number, contact person and email
address of the Company’s current transfer agent is set forth on Schedule 2.1(ff) hereto. 
 Section 2.2 Representations,
Warranties and Covenants of the Purchasers. Each Purchaser hereby makes the following representations, warranties and covenants to the Company with respect solely to itself and not with respect to any other Purchaser: 
 (a) Organization and Standing of the Purchasers. If the Purchaser is an entity, such Purchaser is a corporation, partnership or
limited liability company duly incorporated or organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization. 
 (b) Authorization and Power. Each Purchaser has the requisite power and authority to enter into and perform this Agreement and to
purchase the Preferred Shares and Warrants being sold to it hereunder. The execution, delivery and performance of this Agreement and the Registration Rights Agreement by such Purchaser and the consummation by it of the transactions contemplated
hereby and thereby have been duly authorized by all necessary corporate or partnership action, and no further consent or authorization of such Purchaser or its Board of Directors, stockholders, members, managers or partners, as the case may be, is
required. Each of this Agreement and the Registration Rights Agreement has been duly authorized, executed and delivered by such Purchaser and constitutes, or shall constitute when executed and delivered, a valid and binding obligation of the
Purchaser enforceable against the Purchaser in accordance with the terms thereof, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation, conservatorship, receivership or similar
laws relating to, or affecting generally the enforcement of, creditor’s rights and remedies or by other equitable principles of general application. 
  

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 (c) No Conflicts. The execution, delivery and performance of this Agreement and
the Registration Rights Agreement by such Purchaser and the consummation by such Purchaser of the transactions contemplated hereby and thereby or relating hereto do not and will not (i) result in a violation of such Purchaser’s charter
documents or bylaws or other organizational documents or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of any agreement, indenture or instrument or obligation to which such Purchaser is a party or by which its properties or assets are bound, or result in a violation of any law, rule, or regulation, or any order, judgment
or decree of any court or governmental agency applicable to such Purchaser or its properties (except for such conflicts, defaults and violations as would not, individually or in the aggregate, have a material adverse effect on such Purchaser’s
ability to perform its obligations hereunder). Such Purchaser is not required to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental agency in order for it to execute, deliver or perform
any of its obligations under this Agreement or the Registration Rights Agreement or to purchase the Preferred Shares or acquire the Warrants in accordance with the terms hereof, provided that for purposes of the representation made in this sentence,
such Purchaser is assuming and relying upon the accuracy of the relevant representations and agreements of the Company herein. 
 (d) Acquisition for Investment. Each Purchaser is acquiring the Preferred Shares and the Warrants solely for its own account for the purpose of investment and not as a nominee or with a view to or for sale in connection with
distribution. Each Purchaser does not have a present intention to sell the Preferred Shares or the Warrants, nor a present arrangement (whether or not legally binding) or intention to effect any distribution of the Preferred Shares or the Warrants
to or through any person or entity; provided, however, that by making the representations herein and subject to Section 2.2(h) below, such Purchaser does not agree to hold the Shares or the Warrants for any minimum or other
specific term and reserves the right to dispose of the Shares or the Warrants at any time in accordance with Federal and state securities laws applicable to such disposition. Each Purchaser acknowledges that it is able to bear the financial risks
associated with an investment in the Preferred Shares and the Warrants and that it has been given full access to such records of the Company and the subsidiaries and to the officers of the Company and the subsidiaries and received such information
as it has deemed necessary or appropriate to conduct its due diligence investigation and has sufficient knowledge and experience in investing in companies similar to the Company in terms of the Company’s stage of development so as to be able to
evaluate the risks and merits of its investment in the Company. 
 (e) Status of Purchasers. Each Purchaser is an
“accredited investor” as defined in Regulation D promulgated under the Securities Act. Such Purchaser is not required to be registered as a broker-dealer under Section 15 of the Exchange Act and such Purchaser is not a broker-dealer.

 (f) Opportunities for Additional Information. Subject to Section 7.3 hereof, each Purchaser acknowledges
that such Purchaser has had the opportunity to ask questions of and receive answers from, or obtain additional information from, the executive officers of the Company concerning the financial and other affairs of the Company, and to the extent
deemed necessary in light of such Purchaser’s personal knowledge of the Company’s affairs, such Purchaser has asked such questions and received answers to the full satisfaction of such Purchaser, and such Purchaser desires to invest in the
Company. 
  

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 (g) No General Solicitation. Each Purchaser acknowledges that the Preferred Shares
and the Warrants were not offered to such Purchaser by means of any form of general or public solicitation or general advertising, or publicly disseminated advertisements or sales literature, including (i) any advertisement, article, notice or
other communication published in any newspaper, magazine, or similar media, or broadcast over television or radio, or (ii) any seminar or meeting to which such Purchaser was invited by any of the foregoing means of communications. 

(h) Rule 144. Such Purchaser understands that the Shares must be held indefinitely unless such Shares are registered under the
Securities Act or an exemption from registration is available. Such Purchaser acknowledges that such Purchaser is familiar with Rule 144 of the rules and regulations of the Commission, as amended, promulgated pursuant to the Securities Act
(“Rule 144”), and that such person has been advised that Rule 144 permits resales only under certain circumstances. Such Purchaser understands that to the extent that Rule 144 is not available, such Purchaser will be unable to sell
any Shares without either registration under the Securities Act or the existence of another exemption from such registration requirement. 
 (i) General. Such Purchaser understands that the Shares are being offered and sold in reliance on a transactional exemption from the registration requirement of Federal and state securities laws and the Company
is relying upon the truth and accuracy of the representations, warranties, agreements, acknowledgments and understandings of such Purchaser set forth herein in order to determine the applicability of such exemptions and the suitability of such
Purchaser to acquire the Shares. 
 (j) Independent Investment. Except as may be disclosed in any filings with the
Commission by the Purchasers under Section 13 and/or Section 16 of the Exchange Act, no Purchaser has agreed to act with any other Purchaser for the purpose of acquiring, holding, voting or disposing of the Shares purchased hereunder for
purposes of Section 13(d) under the Exchange Act, and each Purchaser is acting independently with respect to its investment in the Shares. 
 (k) Trading Activities. Each Purchaser agrees that it shall not, directly or indirectly, in its own capacity or through an agent, engage in any short sales (as defined in Rule 200 of Regulation SHO under the
Exchange Act) with respect to the Common Stock, or any hedging transaction or securitization, including obtaining shares of Common Stock to borrow, which establishes any short position with respect to the Common Stock, whether on a U.S. domestic
exchange or any foreign exchange. 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 from the time that such Purchaser first received from the Company or any other person (i) a term sheet (written or oral) or
(ii) a draft of any Transaction Document, in each case setting forth the material terms of the transactions contemplated hereunder, until the date hereof. 
  

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 ARTICLE III 
 Covenants 
 The Company covenants with each of the Purchasers as follows, which covenants are for the
benefit of the Purchasers and their permitted assignees hereunder. 
 Section 3.1 Securities Compliance. The Company shall notify the
Commission in accordance with its rules and regulations of the transactions contemplated by any of the Transaction Documents, including filing a Form D with respect to the Preferred Shares, Warrants, Conversion Shares and Warrant Shares as required
under Regulation D and applicable “blue sky” laws, and shall take all other necessary action and proceedings as may be required and permitted by applicable law, rule and regulation, for the legal and valid issuance of the Preferred Shares,
the Warrants, the Conversion Shares and the Warrant Shares to the Purchasers or subsequent holders. 
 Section 3.2 Registration and
Listing. The Company shall (a) either (i) cause its Common Stock to continue to be registered under Section 12(b) or 12(g) of the Exchange Act, or (ii) continue to voluntarily file all reports required to be filed as if the
Company were so registered, and in any event shall comply in all respects with its reporting and filing obligations under the Exchange Act, (b) comply with all requirements related to any registration statement filed pursuant to this Agreement,
and (c) not take any action or file any document (whether or not permitted by the Securities Act or the rules promulgated thereunder) to terminate or suspend such registration or to terminate or suspend its reporting and filing obligations
under the Exchange Act or Securities Act, except as permitted herein. The Company will take all action necessary to continue the listing or trading of its Common Stock on the OTC Bulletin Board or other exchange or market on which the Common Stock
is trading or may be traded in the future. Subject to the terms of the Transaction Documents, the Company further covenants that it will take such further action as the Purchasers may reasonably request, all to the extent required from time to time,
to enable the Purchasers to sell the Shares without registration under the Securities Act within the limitation of the exemptions provided by Rule 144. Upon the request of the Purchasers, the Company shall deliver to the Purchasers a written
certification of a duly authorized officer as to whether it has complied with such requirements. 
 Section 3.3 Inspection Rights. The
Company shall permit, during normal business hours and upon reasonable request and reasonable notice, each Purchaser or any employees, agents or representatives thereof, so long as such Purchaser shall be obligated hereunder to purchase the
Preferred Shares or shall beneficially own any Preferred Shares, or shall own Conversion Shares which, in the aggregate, represent more than 2% of the total combined voting power of all voting securities then outstanding, for purposes reasonably
related to such Purchaser’s interests as a stockholder, to examine and make reasonable copies of and extracts from the records and books of account of, and visit and inspect the properties, assets, operations and business of the Company and any
subsidiary, and to discuss the affairs, finances and accounts of the Company and any subsidiary with any of its officers, consultants, directors, and key employees. 
  

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 Section 3.4 Compliance with Laws. The Company shall comply, and cause each subsidiary to comply,
with all applicable laws, rules, regulations and orders, noncompliance with which could have a Material Adverse Effect. 
 Section 3.5
Keeping of Records and Books of Account. The Company shall keep and cause each subsidiary to keep adequate records and books of account, in which complete entries will be made in accordance with GAAP consistently applied, reflecting all
financial transactions of the Company and its subsidiaries, and in which, for each fiscal year, all proper reserves for depreciation, depletion, obsolescence, amortization, taxes, bad debts and other purposes in connection with its business shall be
made. 
 Section 3.6 Reporting Requirements. If the Commission ceases making periodic reports filed under the Exchange Act available
via the Internet, then at a Purchaser’s request the Company shall furnish the following to such Purchaser so long as such Purchaser shall be obligated hereunder to purchase the Preferred Shares or shall beneficially own any Shares: 

(a) Quarterly Reports filed with the Commission on Form 10-QSB as soon as practical after the document is filed with the Commission,
and in any event within five (5) days after the document is filed with the Commission; 
 (b) Annual Reports filed with
the Commission on Form 10-KSB as soon as practical after the document is filed with the Commission, and in any event within five (5) days after the document is filed with the Commission; and 
 (c) Copies of all notices and information, including without limitation notices and proxy statements in connection with any meetings, that
are provided to holders of shares of Common Stock, contemporaneously with the delivery of such notices or information to such holders of Common Stock. 
 Section 3.7 Amendments. The Company shall not amend or waive any provision of the Certificate or Bylaws of the Company in any way that would adversely affect the liquidation preferences, dividends rights,
conversion rights, voting rights or redemption rights of the Preferred Shares; provided, however, that any creation and issuance of another series of Junior Stock (as defined in the Certificate of Designation) shall not be deemed to
materially and adversely affect such rights, preferences or privileges. 
 Section 3.8 Other Agreements. The Company shall not enter
into any agreement in which the terms of such agreement would restrict or impair the right or ability of the Company or any subsidiary to perform under any Transaction Document. 
 Section 3.9 Distributions. So long as any Preferred Shares remain outstanding, the Company agrees that it shall not (i) declare or pay any
dividends or make any distributions to any holder(s) of Common Stock or (ii) purchase or otherwise acquire for value, directly or indirectly, any Common Stock or other equity security of the Company. 
  

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 Section 3.10 Status of Dividends. The Company covenants and agrees that (i) no Federal income
tax return or claim for refund of Federal income tax or other submission to the Internal Revenue Service (the “Service”) will adversely affect the Preferred Shares, any other series of its Preferred Stock, or the Common Stock, and
no deduction shall operate to jeopardize the availability to Purchasers of the dividends received deduction provided by Section 243(a)(1) of the Code or any successor provision, (ii) in no report to shareholders or to any governmental body
having jurisdiction over the Company or otherwise will it treat the Preferred Shares other than as equity capital or the dividends paid thereon other than as dividends paid on equity capital unless required to do so by a governmental body having
jurisdiction over the accounts of the Company or by a change in generally accepted accounting principles required as a result of action by an authoritative accounting standards setting body, and (iii) it will take no action which would result
in the dividends paid by the Company on the Preferred Shares out of the Company’s current or accumulated earnings and profits being ineligible for the dividends received deduction provided by Section 243(a)(1) of the Code. The preceding
sentence shall not be deemed to prevent the Company from designating the Preferred Stock as “Convertible Preferred Stock” in its annual and quarterly financial statements in accordance with its prior practice concerning other series of
preferred stock of the Company. In the event that the Purchasers have reasonable cause to believe that dividends paid by the Company on the Preferred Shares out of the Company’s current or accumulated earnings and profits will not be treated as
eligible for the dividends received deduction provided by Section 243(a)(1) of the Code, or any successor provision, the Company will, at the reasonable request of the Purchasers of 51% of the outstanding Preferred Shares, join with the
Purchasers in the submission to the Service of a request for a ruling that dividends paid on the Shares will be so eligible for Federal income tax purposes, at the Purchasers expense. In addition, the Company will reasonably cooperate with the
Purchasers (at Purchasers’ expense) in any litigation, appeal or other proceeding challenging or contesting any ruling, technical advice, finding or determination that earnings and profits are not eligible for the dividends received deduction
provided by Section 243(a)(1) of the Code, or any successor provision to the extent that the position to be taken in any such litigation, appeal, or other proceeding is not contrary to any provision of the Code. Notwithstanding the foregoing,
nothing herein contained shall be deemed to preclude the Company from claiming a deduction with respect to such dividends if (i) the Code shall hereafter be amended, or final Treasury regulations thereunder are issued or modified, to provide
that dividends on the Preferred Shares or Conversion Shares should not be treated as dividends for Federal income tax purposes or that a deduction with respect to all or a portion of the dividends on the Shares is allowable for Federal income tax
purposes, or (ii) in the absence of such an amendment, issuance or modification and after a submission of a request for ruling or technical advice, the Service shall issue a published ruling or advise that dividends on the Shares should not be
treated as dividends for Federal income tax purposes. If the Service specifically determines that the Preferred Shares or Conversion Shares constitute debt, the Company may file protective claims for refund. 
 Section 3.11 Use of Proceeds. The net proceeds from the sale of the Shares hereunder shall be used by the Company for working capital and general
corporate purposes and not to redeem any Common Stock or securities convertible, exercisable or exchangeable into Common Stock or to settle any outstanding litigation. 
  


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 Section 3.12 Reservation of Shares. So long as any of the Preferred Shares or Warrants remain
outstanding, the Company shall take all action necessary to at all times have authorized, and reserved for the purpose of issuance, no less than one hundred fifty percent (150%) of the aggregate number of shares of Common Stock needed to
provide for the issuance of the Conversion Shares and the Warrant Shares. 
 Section 3.13 Transfer Agent Instructions. The Company
shall issue irrevocable instructions to its transfer agent, and any subsequent transfer agent, to issue certificates, registered in the name of each Purchaser or its respective nominee(s), for the Conversion Shares and the Warrant Shares in such
amounts as specified from time to time by each Purchaser to the Company upon conversion of the Preferred Shares or exercise of the Warrants in the form of Exhibit F attached hereto (the “Irrevocable Transfer Agent
Instructions”). Prior to registration of the Conversion Shares and the Warrant Shares under the Securities Act, all such certificates shall bear the restrictive legend specified in Section 5.1 of this Agreement. The Company warrants
that no instruction other than the Irrevocable Transfer Agent Instructions referred to in this Section 3.13 will be given by the Company to its transfer agent and that the Shares shall otherwise be freely transferable on the books and records
of the Company as and to the extent provided in this Agreement and the Registration Rights Agreement. If a Purchaser provides the Company with an opinion of counsel, in a generally acceptable form, to the effect that a public sale, assignment or
transfer of the Shares may be made without registration under the Securities Act or the Purchaser provides the Company with reasonable assurances that such Shares can be sold pursuant to Rule 144 without any restriction as to the number of
securities acquired as of a particular date that can then be immediately sold, the Company shall permit the transfer, and, in the case of the Conversion Shares and the Warrant Shares, promptly instruct its transfer agent to issue one or more
certificates in such name and in such denominations as specified by such Purchaser and without any restrictive legend. The Company acknowledges that a breach by it of its obligations under this Section 3.13 will cause irreparable harm to the
Purchasers by vitiating the intent and purpose of the transactions contemplated hereby. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Section 3.13 will be inadequate and agrees, in the
event of a breach or threatened breach by the Company of the provisions of this Section 3.13, that the Purchasers shall be entitled, in addition to all other available remedies, to an order and/or injunction restraining any breach and requiring
immediate issuance and transfer, without the necessity of showing economic loss and without any bond or other security being required. 
 Section 3.14 Disposition of Assets. So long as any Preferred Shares remain outstanding, neither the Company nor any Subsidiary shall sell, transfer or otherwise dispose of any of its properties, assets and rights including, without
limitation, its software and intellectual property, to any person except for licenses or sales to customers in the ordinary course of business or with the prior written consent of the holders of a majority of the Preferred Shares then outstanding.

 Section 3.15 Reporting Status. So long as a Purchaser beneficially owns any of the Shares, the Company shall timely file all
reports required to be filed with the Commission pursuant to the Exchange Act, and the Company shall not cease filing reports under the Exchange Act even if the Exchange Act or the rules and regulations thereunder would permit such termination.

  

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 Section 3.16 Disclosure of Transaction. The Company shall issue a press release describing the
material terms of the transactions contemplated hereby (the “Press Release”) as soon as practicable after the Initial Closing but in no event later than 9:00 A.M. Eastern Time on the first Trading Day following the Initial Closing.
The Company shall also file with the Commission a Current Report on Form 8-K (the “Form 8-K”) describing the material terms of the transactions contemplated hereby (and attaching as exhibits thereto this Agreement, the Registration
Rights Agreement, the Certificate of Designation, the Lock-Up Agreement, the form of each series of Warrant and the Press Release) as soon as practicable following the Closing Date but in no event more than four (4) Trading Days following the
Closing Date, which Press Release and Form 8-K shall be subject to prior review and comment by counsel for the Purchasers. “Trading Day” means any day during which the OTC Bulletin Board (or other quotation venue or principal
exchange on which the Common Stock is traded) shall be open for trading. 
 Section 3.17 Disclosure of Material Information. The
Company covenants and agrees that neither it nor any other person acting on its behalf has provided or will provide any Purchaser or its agents or counsel with any information that the Company believes constitutes material non-public information
(other than with respect to the transactions contemplated by this Agreement), unless prior thereto such Purchaser shall have executed a written agreement regarding the confidentiality and use of such information. The Company understands and
confirms that each Purchaser shall be relying on the foregoing representations in effecting transactions in securities of the Company. 
 Section 3.18 Pledge of Securities. The Company acknowledges and agrees that the Shares may be pledged by a Purchaser in connection with a bona fide margin agreement or other loan or financing arrangement that is secured
by the Common Stock. The pledge of Common Stock shall not be deemed to be a transfer, sale or assignment of the Common Stock hereunder, and no Purchaser effecting a pledge of Common Stock shall be required to provide the Company with any notice
thereof or otherwise make any delivery to the Company pursuant to this Agreement or any other Transaction Document; provided that a Purchaser and its pledgee shall be required to comply with the provisions of Article V hereof in order to effect a
sale, transfer or assignment of Common Stock to such pledgee. At the Purchasers’ expense, the Company hereby agrees to execute and deliver such documentation as a pledgee of the Common Stock may reasonably request in connection with a pledge of
the Common Stock to such pledgee by a Purchaser. 
 Section 3.19 Form SB-2 Eligibility. The Company currently meets the
“registrant eligibility” and transaction requirements set forth in the general instructions to Form SB-2 applicable to “resale” registrations on Form SB-2. 
 Section 3.20 Lock-Up Agreement. The persons listed on Schedule 3.20 attached hereto shall be subject to the terms and provisions of a
lock-up agreement in substantially the form as Exhibit E hereto (the “Lock-Up Agreement”), which shall provide the manner in which such persons will sell, transfer or dispose of their shares of Common Stock. 
  

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 Section 3.21 DTC. Not later than the effective date of the Registration Statement (as defined in
the Registration Rights Agreement), the Company shall cause its Common Stock to be eligible for transfer with its transfer agent pursuant to the Depository Trust Company Fast Automated Securities Transfer Program. 
 Section 3.22 Issuance of Variable Securities. So long as any Preferred Stock remains outstanding, the Company agrees that it shall not issue any
“Variable Rate Securities” for a period of two (2) years from the Initial Closing Date. “Variable Rate Securities” shall mean 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, exercise or exchange rate or other price that is based upon, 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 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 based
solely upon the occurrence of specified or contingent events directly or indirectly related to the operations of the Company or the market for the Common Stock. 
 Section 3.23 Sarbanes-Oxley Act. The Company shall use its best efforts to be in compliance with the applicable provisions of the Sarbanes-Oxley Act of 2002, and the rules and regulations promulgated
thereunder, as required under such Act. 
 Section 3.24 No Commissions in connection with Conversion of Preferred Shares. In
connection with the conversion of the Preferred Shares into Conversion Shares, neither the Company nor any Person acting on its behalf will take any action that would result in the Conversion Shares being exchanged by the Company other than with the
then existing holders of the Preferred Shares exclusively where no commission or other remuneration is paid or given directly or indirectly for soliciting the exchange in compliance with Section 3(a)(9) of the Securities Act. 
 ARTICLE IV 
 Conditions

 Section 4.1 Conditions Precedent to the Obligation of the Company to Sell the Shares. The obligation hereunder of the Company
to issue and sell the Preferred Shares and the Warrants to the Purchasers is subject to the satisfaction or waiver, at or before the Closing, of each of the conditions set forth below. These conditions are for the Company’s sole benefit and may
be waived by the Company at any time in its sole discretion. 
 (a) Accuracy of Each Purchaser’s Representations and
Warranties. The representations and warranties of each Purchaser shall be true and correct in all material respects as of the date when made and as of the Closing Date applicable to such Purchaser as though made at that time, except for
representations and warranties that are expressly made as of a particular date, which shall be true and correct in all material respects as of such date. 
 (b) Performance by the Purchasers. Each Purchaser shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by this Agreement to be performed,
satisfied or complied with by such Purchaser at or prior to the Closing. 
  

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 (c) No Injunction. No statute, rule, regulation, executive order, decree, ruling
or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction which prohibits the consummation of any of the transactions contemplated by this Agreement. 
 (d) Delivery of Purchase Price. The Purchase Price for the Preferred Shares and Warrants has been delivered to the Company.

 (e) Delivery of Transaction Documents. The Transaction Documents have been duly executed and delivered by the
Purchasers to the Company. 
 Section 4.2 Conditions Precedent to the Obligation of the Purchasers to Purchase the Shares. The
obligation hereunder of each Purchaser to acquire and pay for the Preferred Shares and the Warrants is subject to the satisfaction or waiver, at or before the Closing, of each of the conditions set forth below. These conditions are for each
Purchaser’s sole benefit and may be waived by such Purchaser at any time in its sole discretion. 
 (a) Accuracy of
the Company’s Representations and Warranties. Each of the representations and warranties of the Company in this Agreement and the Registration Rights Agreement shall be true and correct in all respects as of the date when made and shall be
true and correct in all material respects as of the Closing Date applicable to such Purchaser as though made at that time (except for representations and warranties that are expressly made as of a particular date, which shall be true and correct in
all material respects as of such date). 
 (b) Performance by the Company. The Company shall have performed, satisfied
and complied in all respects with all covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Company at or prior to the Closing. 
 (c) No Suspension, Etc. Trading in the Company’s Common Stock shall not have been suspended by the Commission or the OTC
Bulletin Board (except for any suspension of trading of limited duration agreed to by the Company, which suspension shall be terminated prior to the applicable Closing), and, at any time prior to the Closing Date applicable to such Purchaser,
trading in securities generally as reported by Bloomberg Financial Markets (“Bloomberg”) shall not have been suspended or limited, or minimum prices shall not have been established on securities whose trades are reported by
Bloomberg, or on the New York Stock Exchange, 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 or crisis of such magnitude in its effect on, or any material adverse change in any financial market which, in each case, in the judgment of such Purchaser, makes it impracticable or inadvisable to purchase the
Preferred Shares. 
  

 22 








 (d) No Injunction. No statute, rule, regulation, executive order, decree, ruling
or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction which prohibits the consummation of any of the transactions contemplated by this Agreement. 
 (e) No Proceedings or Litigation. No action, suit or proceeding before any arbitrator or any governmental authority shall have been
commenced, and no investigation by any governmental authority shall have been threatened, against the Company or any subsidiary, or any of the officers, directors or affiliates of the Company or any subsidiary seeking to restrain, prevent or change
the transactions contemplated by this Agreement, or seeking damages in connection with such transactions. 
 (f)
Certificate of Designation of Rights and Preferences. Prior to the Closing, the Certificate of Designation in the form of Exhibit B attached hereto shall have been filed with the Secretary of State of Delaware. 
 (g) Opinion of Counsel, Etc. At the Closing, the Purchasers shall have received an opinion of counsel to the Company, dated the
date of the Closing, in substantially the form of Exhibit G hereto, and such other certificates and documents as the Purchasers or their respective counsel shall reasonably require incident to the Closing. 
 (h) Registration Rights Agreement. At the Closing, the Company shall have executed and delivered the Registration Rights Agreement
to such Purchaser. 
 (i) Certificates. The Company shall have executed and delivered to the Purchasers the
certificates for the Preferred Shares and the Warrants being acquired by such Purchaser at the Closing (in each case, in such denominations as such Purchaser shall request). 
 (j) Resolutions. The Board of Directors of the Company shall have adopted resolutions consistent with Section 2.1(b) hereof in
a form reasonably acceptable to such Purchaser (the “Resolutions”). 
 (k) Waivers, etc. The Company
shall have received appropriate waivers executed by the holder of the Company’s Series B Preferred Stock in a form reasonably acceptable to such Purchaser (the “Waiver”). 
 (l) Reservation of Shares. As of the Closing Date, the Company shall have reserved out of its authorized and unissued Common Stock,
solely for the purpose of effecting the conversion of the Preferred Shares and the exercise of the Warrants, a number of shares of Common Stock equal to one hundred fifty percent (150%) of the aggregate number of Conversion Shares issuable upon
conversion of the Preferred Shares issued or to be issued pursuant to this Agreement and the number of Warrant Shares issuable upon exercise of the number of Warrants issued or to be issued pursuant to this Agreement. 
  

 23 








 (m) Transfer Agent Instructions. As of the Closing Date, the Irrevocable Transfer
Agent Instructions shall have been delivered to and acknowledged in writing by the Company’s transfer agent. 
 (n)
Lock-Up Agreement. As of the Closing Date, the persons listed on Schedule 3.20 hereto shall have delivered to the Purchasers a fully executed Lock-Up Agreement. 
 (o) Secretary’s Certificate. The Company shall have delivered to such Purchaser a secretary’s certificate, dated as of
the Closing Date, as to (i) the Resolutions, (ii) the Certificate, (iii) the Bylaws, (iv) the Certificate of Designation, each as in effect at the Closing, and (v) the authority and incumbency of the officers of the Company
executing the Transaction Documents and any other documents required to be executed or delivered in connection therewith. 
 (p) Officer’s Certificate. The Company shall have delivered to the Purchasers a certificate of an executive officer of the Company, dated as of the Closing Date, confirming the accuracy of the Company’s representations,
warranties and covenants as of the Closing Date and confirming the compliance by the Company with the conditions precedent set forth in this Section 4.2 as of the Closing Date. 
 (q) Material Adverse Effect. There have been no events or occurrences on or before the Closing Date which, individually or in the
aggregate, have had or could reasonably be expected to have a Material Adverse Effect. 
 ARTICLE V 
 Stock Certificate Legend 
 Section 5.1
Legend. Each certificate representing the Preferred Shares and the Warrants, and, if appropriate, securities issued upon conversion thereof, shall be stamped or otherwise imprinted with a legend substantially in the following form (in
addition to any legend required by applicable state securities or “blue sky” laws): 
 THESE SECURITIES REPRESENTED BY THIS
CERTIFICATE (THE “SECURITIES”) HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED
UNDER THE SECURITIES ACT AND UNDER APPLICABLE STATE SECURITIES LAWS OR THE COMPANY SHALL HAVE RECEIVED AN OPINION OF COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS
IS NOT REQUIRED. 
  

 24 








 The Company agrees to reissue certificates representing any of the Conversion Shares and the Warrant
Shares, without the legend set forth above if at such time, prior to making any transfer of any such securities, such holder thereof shall give written notice to the Company describing the manner and terms of such transfer and removal as the Company
may reasonably request. Such proposed transfer and removal will not be effected until: (a) either (i) the Company has received an opinion of counsel reasonably satisfactory to the Company, to the effect that the registration of the
Conversion Shares or the Warrant Shares under the Securities Act is not required in connection with such proposed transfer, (ii) a registration statement under the Securities Act covering such proposed disposition has been filed by the Company
with the Commission and has become effective under the Securities Act, (iii) the Company has received other evidence reasonably satisfactory to the Company that such registration and qualification under the Securities Act and state securities
laws are not required, or (iv) the holder provides the Company with reasonable assurances that such security can be sold pursuant to Rule 144 under the Securities Act; and (b) either (i) the Company has received an opinion of counsel
reasonably satisfactory to the Company, to the effect that registration or qualification under the securities or “blue sky” laws of any state is not required in connection with such proposed disposition, or (ii) compliance with
applicable state securities or “blue sky” laws has been effected or a valid exemption exists with respect thereto. The Company will respond to any such notice from a holder within five (5) business days. In the case of any proposed
transfer under this Section 5.1, the Company will use reasonable efforts to comply with any such applicable state securities or “blue sky” laws, but shall in no event be required, (x) to qualify to do business in any state where
it is not then qualified, (y) to take any action that would subject it to tax or to the general service of process in any state where it is not then subject, or (z) to comply with state securities or “blue sky” laws of any state
for which registration by coordination is unavailable to the Company. The restrictions on transfer contained in this Section 5.1 shall be in addition to, and not by way of limitation of, any other restrictions on transfer contained in any other
section of this Agreement. Whenever a certificate representing the Conversion Shares or Warrant Shares is required to be issued to a Purchaser without a legend, in lieu of delivering physical certificates representing the Conversion Shares or
Warrant Shares (provided that a registration statement under the Securities Act providing for the resale of the Warrant Shares and Conversion Shares is then in effect), the Company shall cause its transfer agent to electronically transmit the
Conversion Shares or Warrant Shares to a Purchaser by crediting the account of such Purchaser or such Purchaser’s Prime Broker with the Depository Trust Company (“DTC”) through its Deposit Withdrawal Agent Commission
(“DWAC”) system (to the extent not inconsistent with any provisions of this Agreement). 
 ARTICLE VI 
 Indemnification 
 Section 6.1
Indemnification of Purchasers. The Company agrees to indemnify and hold harmless the Purchasers (and their respective directors, officers, managers, partners, members, shareholders, affiliates, agents, successors and assigns) from and against
any and all losses, liabilities, deficiencies, costs, damages and expenses (including, without limitation, reasonable attorneys’ fees, charges and disbursements) incurred by the Purchasers as a result of any inaccuracy in or breach of the
representations, warranties or covenants made by the Company herein. 
  

 25 








 Section 6.2 Indemnification of Company. Each Purchaser agrees, severally and not jointly, to
indemnify and hold harmless the Company (and its directors, officers, managers, partners, members, shareholders, affiliates, agents, successors and assigns) from and against any and all losses, liabilities, deficiencies, costs, damages and expenses
(including, without limitation, reasonable attorneys’ fees, charges and disbursements) incurred by the Company as a result of any inaccuracy in or breach of the representations, warranties or covenants made by such Purchaser herein;
provided, however, that no Purchaser shall have any liability pursuant to this Section 6.2 in an amount exceeding the aggregate purchase price paid to the Company by such Purchaser in connection with this Agreement and the
securities issued hereunder. 
 Section 6.3 Indemnification Procedure. Any party entitled to indemnification under this Article VI (an
“indemnified party”) will give prompt written notice to the party required to provide indemnification under this Article VI (the “indemnifying party”) of any matters giving rise to a claim for indemnification; provided, that the
failure of any party entitled to indemnification hereunder to give notice as provided herein shall not relieve the indemnifying party of its obligations under this Article VI except to the extent that the indemnifying party is actually prejudiced by
such failure to give prompt notice. In case any action, proceeding or claim is brought against an indemnified party in respect of which indemnification is sought hereunder, the indemnifying party shall be entitled to participate in and, unless in
the reasonable judgment of the indemnified party a conflict of interest between it and the indemnifying party may exist with respect of such action, proceeding or claim, to assume the defense thereof with counsel reasonably satisfactory to the
indemnified party. In the event that the indemnifying party advises an indemnified party that it will contest such a claim for indemnification hereunder, or fails, within thirty (30) days of receipt of any indemnification notice to notify, in
writing, such person of its election to defend, settle or compromise, at its sole cost and expense, any action, proceeding or claim (or discontinues its defense at any time after it commences such defense), then the indemnified party may, at its
option, defend, settle or otherwise compromise or pay such action or claim. In any event, unless and until the indemnifying party elects in writing to assume and does so assume the defense of any such claim, proceeding or action, the indemnified
party’s costs and expenses arising out of the defense, settlement or compromise of any such action, claim or proceeding shall be losses subject to indemnification hereunder. The indemnified party shall cooperate fully with the indemnifying
party in connection with any negotiation or defense of any such action or claim by the indemnifying party and shall furnish to the indemnifying party all information reasonably available to the indemnified party which relates to such action or
claim. The indemnifying party shall keep the indemnified party fully apprised at all times as to the status of the defense or any settlement negotiations with respect thereto. If the indemnifying party elects to defend any such action or claim, then
the indemnified party shall be entitled to participate in such defense with counsel of its choice at its sole cost and expense. The indemnifying party shall not be liable for any settlement of any action, claim or proceeding effected without its
prior written consent. Notwithstanding anything in this Article VI to the contrary, the indemnifying party shall not, without the indemnified party’s prior written consent, settle or compromise any claim or consent to entry of any judgment in
respect thereof 

  

 26 








 
which imposes any future obligation on the indemnified party or which does not include, as an unconditional term thereof, the giving by the claimant or the
plaintiff to the indemnified party of a release from all liability in respect of such claim. The indemnification required by this Article VI shall be made by periodic payments of the amount thereof during the course of investigation or defense, as
and when bills are received or expense, loss, damage or liability is incurred, so long as the indemnified party irrevocably agrees to refund such moneys if it is ultimately determined by a court of competent jurisdiction that such party was not
entitled to indemnification. The indemnity agreements contained herein shall be in addition to (a) any cause of action or similar rights of the indemnified party against the indemnifying party or others, and (b) any liabilities the
indemnifying party may be subject to pursuant to the law. 
 ARTICLE VII 
 Miscellaneous 
 Section 7.1 Fees and Expenses. Except as otherwise set
forth in this Agreement and the other Transaction Documents, each party shall pay the fees and expenses of its advisors, 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, provided that the Company shall pay all reasonable and itemized attorneys’ fees and expenses (including disbursements and out-of-pocket expenses) incurred by the
Purchasers in connection with (i) the preparation, negotiation, execution and delivery of this Agreement and the other Transaction Documents and the transactions contemplated thereunder, which payment shall be made at the Closing, (ii) the
filing and declaration of effectiveness by the Commission of the Registration Statement and (iii) any amendments, modifications or waivers of this Agreement or any of the other Transaction Documents. The Company shall also pay to Vision
Opportunity Master Fund, Ltd. at the Closing in connection with reasonably documented due diligence expenses incurred by Vision Opportunity Master Fund, Ltd. an amount up to $30,000 (to the extent not already paid). The Company shall pay all
reasonable fees and expenses incurred by the Purchasers in connection with the enforcement of this Agreement or any of the other Transaction Documents, including, without limitation, all reasonable attorneys’ fees and expenses but only if the
Purchasers are successful in any litigation or arbitration relating to such enforcement. 
 Section 7.2 Specific Enforcement, Consent to
Jurisdiction. 
 (a) The Company and the Purchasers acknowledge and agree that irreparable damage would occur in the event
that any of the provisions of this Agreement or the other Transaction Documents were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent or cure breaches of the provisions of this Agreement or the Registration Rights Agreement and to enforce specifically the terms and provisions hereof or thereof, this being in addition to any other remedy to which any of them
may be entitled by law or equity. 
 (b) Each of the Company and the Purchasers (i) hereby irrevocably submits to the
jurisdiction of the United States District Court sitting in the Southern District of New York and the courts of the State of New York located in New York county for the purposes of any suit, 

  

 27 








 
action or proceeding arising out of or relating to this Agreement or any of the other Transaction Documents or the transactions contemplated hereby or
thereby and (ii) hereby waives, and agrees not to assert in any such suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such court, that the suit, action or proceeding is brought in an inconvenient
forum or that the venue of the suit, action or proceeding is improper. Each of the Company and the Purchasers consents to process being served in any such suit, action or proceeding by mailing a copy thereof 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 in this Section 7.2 shall affect or limit any right to serve process in any other manner
permitted by law. 
 Section 7.3 Entire Agreement; Amendment. This Agreement and the Transaction Documents collectively contain the
entire understanding and agreement of the parties with respect to the matters covered hereby and, except as specifically set forth herein or in the Transaction Documents, neither the Company nor any of the Purchasers makes any representations,
warranty, covenant or undertaking with respect to such matters and they supersede all prior understandings and agreements with respect to said subject matter, all of which are merged herein. No provision of this Agreement may be waived or amended
other than by a written instrument signed by the Company and the holders of at least seventy-five percent (75%) of the Preferred Shares then outstanding, and no provision hereof may be waived other than by an a written instrument signed by the
party against whom enforcement of any such amendment or waiver is sought. No such amendment shall be effective to the extent that it applies to less than all of the holders of the Preferred Shares then outstanding. No consideration shall be offered
or paid to any person to amend or consent to a waiver or modification of any provision of any of the Transaction Documents unless the same consideration is also offered to all of the parties to the Transaction Documents or holders of Preferred
Shares, as the case may be. 
 Section 7.4 Notices. Any notice, demand, request, waiver or other communication required or permitted
to be given hereunder shall be in writing and shall be effective (a) upon hand delivery by telex (with correct answer back received), telecopy or facsimile at the address or number designated below (if delivered on a business day during normal
business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business
day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be: 
  

			
	If to the Company:	  	 228 Hamilton Avenue
 3rd Floor
 Palo Alto, CA 94301
 Attn: Belinda Tsao Nivaggioli
 Facsimile: (415) 397-2898


  

 28 









			
		
	with copies to:	  	 Barack Ferrazzano Kirschbaum & Nagelberg LLP
 200
W. Madison Street, Suite 3900
 Chicago, Illinois 60606
 Attn:
Lance R. Rogers
 Facsimile: (312) 984-3220

		
	If to any Purchaser:	  	At the address of such Purchaser set forth on Exhibit A to this Agreement, with copies to Purchaser’s counsel as set forth on Exhibit A or as specified in writing by such
Purchaser with copies to:

 Any party hereto may from time to time change its address for notices by giving at least ten
(10) days written notice of such changed address to the other party hereto. 
 Section 7.5 Waivers. No waiver by either party 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 other provisions, 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 accruing to it thereafter. 
 Section 7.6
Headings. The article, section and subsection headings in this Agreement are for convenience only and shall not constitute a part of this Agreement for any other purpose and shall not be deemed to limit or affect any of the provisions hereof.

 Section 7.7 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their
successors and assigns. 
 Section 7.8 No Third Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto
and their respective permitted successors and assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other person (other than the indemnified parties under Article VI). 
 Section 7.9 Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York,
without giving effect to any of the conflicts of law principles which would result in the application of the substantive law of another jurisdiction. This Agreement shall not be interpreted or construed with any presumption against the party causing
this Agreement to be drafted. 
 Section 7.10 Survival. The representations and warranties of the Company and the Purchasers shall
survive the execution and delivery hereof and the Closings hereunder for a period of two years following the Closing Date. 
 Section 7.11
Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same Agreement and shall become
effective when 

  

 29 








 
counterparts have been signed by each party and delivered to the other parties hereto, it being understood that all parties need not sign the same
counterpart. In the event that any signature is delivered by facsimile or electronic transmission, such signature shall create a valid binding obligation of the party executing (or on whose behalf such signature is executed) the same with the same
force and effect as if such facsimile or electronic signature were the original thereof. 
 Section 7.12 Publicity. The Company agrees
that it will not disclose, and will not include in any public announcement, the name of the Purchasers without the consent of the Purchasers unless and until such disclosure is required by law or applicable regulation, and then only to the extent of
such requirement. 
 Section 7.13 Severability. The provisions of this Agreement and the Transaction Documents are severable and, in
the event that any court of competent jurisdiction shall determine that any one or more of the provisions or part of the provisions contained in this Agreement or the Transaction Documents shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision or part of a provision of this Agreement or the Transaction Documents and such provision shall be reformed and construed as if such
invalid or illegal or unenforceable provision, or part of such provision, had never been contained herein, so that such provisions would be valid, legal and enforceable to the maximum extent possible. 
 Section 7.14 Further Assurances. From and after the date of this Agreement, upon the request of any Purchaser or the Company, each of the Company
and the Purchasers shall execute and deliver such instrument, documents and other writings as may be reasonably necessary or desirable to confirm and carry out and to effectuate fully the intent and purposes of this Agreement, the Preferred Shares,
the Conversion Shares, the Warrants, the Warrant Shares, the Certificate of Designation, the Registration Rights Agreement and the other Transaction Documents. 
 Section 7.15 Termination. Prior to the Initial Closing, this Agreement may be terminated and the sale and purchase of the Preferred Stock and the Warrants abandoned at any time by either the Company, upon
written notice to the Purchasers, or by any Purchaser (with respect to itself only), upon written notice to the Company, if the Initial Closing has not been consummated on or prior to 5:00 p.m. (New York City time) on September 31, 2007;
provided, however, that the right to terminate this Agreement under this Section 7.15 shall not be available to any Person whose failure to comply with its obligations under this Agreement has been the cause of or resulted in the
failure of the Closing to occur on or before such time. Nothing in this Section 7.15 shall be deemed to release any party from any liability for any breach by such party of the terms and provisions of this Agreement or the other Transaction
Documents or to impair the right of any party to compel specific performance by any other party of its obligations under this Agreement or the other Transaction Documents. In the event of a termination pursuant to this Section 7.15, the Company
shall promptly notify all non-terminating Purchasers. Upon a termination in accordance with this Section 7.15, the Company and the terminating Purchaser(s) shall not have any further obligation or liability (including arising from such
termination) to the other, and no Purchaser will have any liability to any other Purchaser under the Transaction Documents as a result therefrom. 
  

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 [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 
  

 31 








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

					
	AVICENA GROUP, INC.
		
	By:	 	/s/ Belinda Tsao Nivaggioli
		 	Name:	 	Belinda Tsao Nivaggioli
		 	Title:	 	President and Chief Executive Officer
	
	PURCHASERS:
	
	OUSSAMA SALAM
		
	By:	 	/s/ Oussama Salam
		 		 	
	
	PROMED PARTNERS, L.P.
		
	By:	 	/s/ Barry Kurokawa
		 	Name:	 	Barry Kurokawa
		 	Title:	 	Managing Director
	
	PROMED OFFSHORE FUND, LTD.
		
	By:	 	/s/ Barry Kurokawa
		 	Name:	 	Barry Kurokawa
		 	Title:	 	Managing Director
	
	CRESCENT INTERNATIONAL LTD.:
		
	By:	 	/s/ Bachir Taleb-Ibrahimi
		 	Name:	 	Bachir Taleb-Ibrahimi
		 	Title:	 	Authorized Signatory


 [Signature Page to Series C Stock Purchase Agreement] 







 EXHIBIT A to the 
 SERIES C CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR 
 AVICENA GROUP, INC. 
  

						
	 Names and Addresses of Purchasers and Purchasers’ Counsel
	  	 Number of Preferred Shares Purchased
	  	Dollar Amount
Of Investment
	 Crescent International Ltd.
 c/o Cantara (Switzerland)
S.A.
 84, Avenue Louis-Casaï
 CH-1216
Cointrin/Geneva
 Switzerland
  
 Feldman Weinstein & Smith LLP
 The Graybar Building
 420 Lexington Avenue
 New York, New York 10170-0002
 Attn: Robert Charron
	  	510 Shares of Preferred Stock	  	$	510,000
			
	 Oussama Salam
 Kettaneh Building
 May Ziadeh Street
 Mina el Hosn
 Beirut
 Lebanon
	  	1,800 Shares of Preferred Stock	  	$	1,800,000
			
	 ProMed Offshore Fund, Ltd.
 237 Park Avenue, 9th Floor
 New York, New York 10017
 Attn: Barry Kurokawa
	  	132 Shares of Preferred Stock	  	$	132,000
			
	 ProMed Partners, L.P.
 237 Park Avenue, 9th Floor
 New York, New York 10017
 Attn: Barry Kurokawa
	  	668 Shares of Preferred Stock	  	$	668,000
		  		  	$	3,110,000.00

  

 A-1