Document:

bonds-ex10_1.htm

Exhibit 10.1

 

EXECUTION COPY

 

 

BONDS.COM GROUP, INC.

UNIT PURCHASE AGREEMENT

August 28, 2009

  

  

  

EXECUTION COPY

 

 

BONDS.COM HOLDINGS, INC.

UNIT PURCHASE AGREEMENT

This Unit Purchase Agreement (the “Agreement”) is made as of August 28, 2009 (the “Effective Date”) by and between Bonds.com Group, Inc., a Delaware
corporation (the “Company”) and Fund Holdings LLC, a Florida limited liability company (the “Purchaser”).

 

RECITALS

Subject to the terms and conditions set forth in this Agreement and pursuant to Sections 4(2) and 4(6) of the Securities Act of 1933, as amended (the "Securities Act"), and Rule 506 promulgated thereunder, the Company desires to issue and sell to Purchaser,
and Purchaser desires to purchase from the Company, Units (as defined below) of securities of the Company, as more fully described in this Agreement. As used herein, each “Unit” shall consist of: (i) 2,667 shares of common stock of the Company (the “Common Stock”); (ii) the right, within three years of the applicable Closing Date (as defined below) upon which the Unit is purchased, to purchase 9,597 (as equitably adjusted
for stock splits, combinations and the like) additional shares of Common Stock at a purchase price of $0.375 (as equitably adjusted for stock splits, combinations and the like) per share (the “Ordinary Purchase Rights”), and (iii) in the event that the Closing Requirements (as defined below) are achieved, the Additional Rights (as defined below).  The Units, the Common Stock, the Ordinary Purchase Rights, the Additional Purchase
Rights, the Special Purchase Rights (as defined below, and together with the Ordinary Purchase Rights, the Additional Purchase Rights, the “Rights”) and the shares of Common Stock to be issued pursuant to the exercise of the Rights are referred to herein as the “Securities”.

 

AGREEMENT

In consideration of the mutual promises contained herein and other good and valuable consideration, receipt of which is hereby acknowledged, the parties to this Agreement agree as follows:

 

1.         Purchase and Sale of Securities.

 

(a)           Purchase of Units.

 

   (i)          Units.  Subject to the satisfaction (or waiver) of the conditions set forth herein, the Company shall issue and sell to the Purchaser, and the Purchaser agrees to purchase
from the Company on the applicable Closing Date (as defined below), the number of Units set forth below.

 

   (ii)          Closings.  The time of each Closing shall be 10:00 A.M., Eastern Standard Time or such later time as is mutually agreed to by the Company and Purchaser.

 

     (A)           Initial Closing.  In one or more closings starting on the Effective Date (the “Initial
Closing Date”) and ending on September 2, 2009 (the “Final Initial Closing Date”), the Purchaser shall purchase 1,000 Units (the “Initial Closing”) and the Company shall sell to the Purchaser 1,000 Units.

 

  

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     (B)           Second Closing.  Within
45 days following the Effective Date (the “Second Closing Date”), the Purchaser shall purchase an additional 1,000 Units (the “Second Closing”) and the Company shall sell to the Purchaser an additional 1,000 Units.  As a condition to the Second Closing, the Company will update the Disclosure Schedule and the representations and warranties set forth
in Section 2 hereof.

 

     (C)           Third Closing.  Within 90 days following the Effective Date (the “Third Closing Date”,
and together with each of the Initial Closing Dates and the Second Closing Date, the “Unit Closing Dates”), the Purchaser shall purchase an additional 3,000 Units (the “Third Closing”, and together with the Initial Closing and the Second Closing, the “Unit Closings”) and the Company
shall sell to the Purchaser an additional 3,000 Units.  As a condition to the Third Closing, the Company will update the Disclosure Schedule and the representations and warranties set forth in Section 2 hereof.

 

   (iii)         Purchase Price.  The purchase price for each Unit (the “Purchase Price”) shall be One Thousand
Dollars ($1,000).

 

(iv)         Closing Requirements.  The consummation of the Second Closing within 45 days following the Effective Date and the consummation of the Third Closing within 90 days following the Effective
Date  shall be referred to herein as the “Closing Requirements”.

 

(v)         Form of Payment.  On each respective Unit Closing Date, subject to the satisfaction of the conditions to closing, each Purchaser shall deliver by wire transfer to an account designated
by the Company, no later than the close of business on such respective Unit Closing Date, the aggregate Purchase Price for the Units purchased on such respective Unit Closing Date.

 

(vi)         Location of Closing.  Each Closing shall take place at the offices of Becker Legal Group LLC, 1178 Broadway, Suite 331, New York, New York 10001.  Alternatively, the Unit Closings
can take place by the exchange of final executed closing documents between legal counsel for the Company and Purchaser.

 

(vii)        Deliverables of Company at Closing. On the applicable Unit Closing Date, the Company shall deliver to the Purchaser: (i) a certificate representing the number of shares of Common Stock to be purchased
at such Unit Closing Date by the Purchaser, and (ii) an executed copy of this Agreement.

 

(viii)       Deliverables of Purchaser at Closing.  On the applicable Unit Closing Date, the Purchaser shall deliver to the Company: (i) an executed copy of this Agreement, and (ii) the applicable consideration
provided for in Section 1(a)(iii) hereof.

 

(ix)         Fractional Units.  No fractional Units shall be sold by the Company.

 

(x)         Use of Proceeds. The proceeds from the sale of the Units will be for general working capital of the Company.

 

(b)           Additional Purchase Rights.

 

  

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(i)           Definitions.  In addition to the terms defined above and herein, the following terms used in this Agreement shall have the meanings set forth below:

 

  (A)          “Additional Rights Exercise Period” shall mean, with respect to any Additional Purchase Rights, the period beginning on the Trigger Date and ending on the date that is three
years following the Trigger Date.

 

  (B)           “Adjusted Number of Convertible Shares” shall mean 26,893,580 (as equitably adjusted for stock splits, combinations and the like), less the amount of Convertible Securities (as equitably adjusted for stock splits, combinations
and the like) that have expired, terminated or otherwise become unissuable pursuant to the terms of the relevant promissory note, warrant or option.

 

  (C)           “Converted Shares” shall mean shares of Common Stock actually issued and outstanding upon the conversion or exercise (as applicable) of the Existing Convertible Securities.

 

  (D)           “Existing Convertible Securities” shall mean each outstanding convertible promissory note, warrant and option of the Company set forth on Schedule I.

 

  (E)           “Trigger Date” shall mean the date, if any, upon which Converted Shares are issued upon the conversion or exercise (as applicable) of Existing Convertible Securities.

 

(ii)          Additional Rights.  Following the date on which the Closing Requirements are met and as of each Trigger Date, the Purchaser shall automatically, without any further action upon the
part of the Purchaser or the Company, be entitled to purchase (an “Additional Purchase Right”) at a price of $0.375 per share (as equitably adjusted for stock splits, combinations and the like) during the applicable Additional Rights Exercise Period such number of shares of Common Stock as is equal to the Converted Shares  issued by the Company on such Trigger Date.  In no event shall the aggregate number of shares
purchasable (including any shares previously purchased) under the Additional Purchase Rights exceed the Adjusted Number of Convertible Shares.

 

(iii)         Calculation of Shares Underlying Additional Purchase Rights.  Upon reasonable request by the Purchaser, but in no event more than one time in any calendar quarter, the Company shall prepare
a statement indicating the amount of Additional Purchase Rights currently exercisable as of such date and the applicable time period for which such Additional Purchase Rights may be exercised.

 

(iv)         Termination of Additional Purchase Rights.  Notwithstanding the foregoing, in the event that less than 5,000 Units have been purchased by the Purchaser as of the date that is 120 days
following the Initial Closing, all Additional Purchase Rights shall immediately terminate and the provisions contained in this Section 1(b) shall be of no further force or effect.

 

  

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(c)           Special Purchase Rights.  Upon the Final Initial Closing Date, in addition to the Ordinary Purchase Rights and the Additional Purchase Rights, the Purchaser shall be granted
the right (the “Special Purchase Rights”) to purchase 1,000,000 (as equitably adjusted for stock splits, combinations and the like) shares of Common Stock at a price per share equal to $0.375 per share (as equitably adjusted for stock splits, combinations and the like).

 

(d)           Exercise of Rights. Subject to the terms and provisions contained herein,

 

(i)          The Ordinary Purchase Rights may be exercised at any time from the applicable Closing Date upon which the Unit pertaining to such Ordinary Purchase Rights is purchased until the date which is three years from such date (the "Ordinary
Rights Exercise Period").

 

(ii)          The Additional Purchase Rights may be exercised at any time within the applicable Additional Rights Exercise Period.

 

(iii)         The Special Purchase Rights may be exercised at any time from the Final Initial Closing Date until the date that is three years from the Final Initial Closing Date (the "Special Rights Exercise Period”
and together with the Ordinary Rights Exercise Period and Additional Exercise Period, the “Exercise Period”).

 

(iv)         Within the applicable Exercise Period as the case may be, the Rights may be exercised in whole or in part at the price per share of $0.375 per share of Common Stock (each, the “Rights Exercise Price”),
such number of shares of Common Stock and Rights Exercise Price subject to equitable adjustment for stock splits, combinations and the like, payable by certified wire transfer to an account designated by the Company.  Upon delivery of a Notice of Exercise Form duly executed in the form attached as Schedule II hereto (which Notice of Exercise Form may be submitted by delivery to the Company), together with payment of
the aggregate Rights Exercise Price for the shares of Common Stock purchased, the Purchaser shall be entitled to receive a certificate or certificates for the shares of Common Stock so purchased.

 

2.         Representations and Warranties of the Company.  The Company hereby represents and warrants to each Purchaser as
of the Effective Date, as follows:

 

(a)           Organization and Qualification.  The Company and its Subsidiaries (as set forth on Schedule 2(a) hereto) are
entities duly organized and validly existing and, to the extent legally applicable, in good standing under the laws of the State of Delaware and have the requisite power and authorization to own their properties and to carry on their business as now being conducted.  Each of the Company and its Subsidiaries is duly qualified as a foreign entity to do business and to the extent legally applicable, is in good standing in every jurisdiction in which its ownership of property or the nature of the business
conducted by it makes such qualification necessary, except to the extent that the failure to be so qualified or be in good standing would not reasonably be expected to have a Material Adverse Effect (as defined below).  As used in this Agreement, “Material Adverse Effect” means any material adverse effect on the business, properties, assets, operations, results of operations, or condition (financial or otherwise) of the Company and its Subsidiaries, taken as a whole, or on the transactions
contemplated hereby or the other Transaction Documents (as defined below) or the other instruments to be entered into in connection herewith or therewith, or on the authority or ability of the Company to perform its obligations under the Transaction Documents

 

  

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(b)           Authorization; Enforcement; Validity.  The Company has the requisite corporate power and authority to enter into and perform its obligations under this Agreement and each of
the other agreements entered into by the parties hereto in connection with the transactions contemplated by this Agreement (collectively, the "Transaction Documents") and to issue the Securities in accordance with the terms hereof and thereof.  The execution and delivery of the Transaction Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby, including, without limitation, the
issuance of the Units, the Ordinary Purchase Rights, the Additional Purchase Rights, the Special Purchase Rights and the reservation for issuance and the issuance of the shares (the “Underlying Shares”) upon exercise of the the Ordinary Purchase Rights, the Additional Purchase Rights, and the Special Purchase Rights, have been duly authorized by the Company's Board of Directors and no further filing, consent, or authorization is required
by the Company, its Board of Directors or its stockholders.  This Agreement and the other Transaction Documents have been duly executed and delivered by the Company, and constitute the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their respective terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting
generally, the enforcement of applicable creditors' rights and remedies.

 

(c)           Issuance of Securities.  The Securities are duly authorized and, when issued and paid for in accordance with the applicable Transaction Documents, will be duly and validly issued,
fully paid and nonassessable, free and clear of all liens imposed by the Company other than restrictions on transfer provided for in the Transaction Documents. The Underlying Shares, when issued in accordance with the terms of the Transaction Documents, will be validly issued, fully paid and nonassessable, free and clear of all liens imposed by the Company other than restrictions on transfer provided for in the Transaction Documents.

 

(d)           No Conflicts.  The execution, delivery and performance of the Transaction Documents by the Company and the consummation by the Company of the transactions contemplated hereby
and thereby (including, without limitation, the issuance of the Securities) will not (i) result in a violation of any certificate of incorporation, certificate of formation, any certificate of designations or other constituent documents of the Company or any of its Subsidiaries, any capital stock of the Company or any of its Subsidiaries or bylaws of the Company or any of its Subsidiaries or (ii) conflict with, or constitute a default or breach (or an event which with notice or lapse of time or both would become
a default or breach) in any respect under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Company or any of its Subsidiaries is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including foreign, 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
is bound or affected, except in the case of clauses (ii) and (iii) above, to the extent that such violations conflict, default or right would not reasonably be expected to have a Material Adverse Effect.

 

  

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(e)           Consents.  Neither the Company nor any of its Subsidiaries is required to obtain any consent, authorization or order of, or make any filing or registration with, any court, governmental
agency or any regulatory or self-regulatory agency or any other Person (as defined below) in order for it to execute, deliver or perform any of its obligations under or contemplated by the Transaction Documents, in each case in accordance with the terms hereof or thereof.  “Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization and a government or any department or agency thereof

 

(f)           Capitalization. The Company has not issued any capital stock since its most recently filed periodic report under the Exchange Act, other than capital stock issued: (i) pursuant to the
terms hereof, (ii) by the Company and reported by the Company pursuant to a Current Report filed on Form 8K under the Securities and Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder (the “Exchange Act”), (iii) pursuant to stock options under the Company’s stock option plans and/or the issuance of shares of Common Stock to employees pursuant to the Company’s employee stock purchase plans
or (iv) upon the conversion or exercise of securities of the Company outstanding as of the date of the most recently filed periodic report under the Exchange Act. No Person has any right of first refusal, preemptive right, right of participation, or any similar right to participate in the transactions contemplated by the Transaction Documents.

 

(g)           SEC Reports; Financial Statements. The Company has filed all reports, schedules, forms, statements and other documents required to be filed by the Company under the Securities Act and
the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the two years preceding the date hereof (or such shorter period as the Company was required by law or regulation to file such material) (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein, being collectively referred to herein as the “SEC Reports”) on a timely basis or has received a valid extension of such
time of filing and has filed any such SEC Reports prior to the expiration of any such extension. As of their respective dates, except as disclosed in Schedule 2(g), the SEC Reports complied in all material respects with the requirements of the Securities Act and the Exchange Act, as applicable, and none of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. Except as disclosed in Schedule 2(g), the financial statements of the Company included in the SEC Reports comply in all material respects with applicable accounting requirements and the rules and regulations of the Commission with respect thereto as in effect at the time of filing. Such financial statements have been
prepared in accordance with United States generally accepted accounting principles applied on a consistent basis during the periods involved (“GAAP”), except as may be otherwise specified in such financial statements or the notes thereto and except that unaudited financial statements may not contain all footnotes required by GAAP, and fairly present in all material respects the financial position of the Company and its consolidated Subsidiaries
as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments.

 

 

 

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(h)          Material Changes. Except as set forth on Schedule 2(h) or elsewhere on the schedules hereto, since the date of the latest audited
financial statements included within the SEC Reports, except as specifically disclosed in a subsequent SEC Report filed prior to the date hereof: (i) there has been no event, occurrence, development or regulatory action that has had or that could reasonably be expected to result in a Material Adverse Effect, (ii) the Company has not incurred any liabilities (contingent or otherwise) other than (A) trade payables and accrued expenses incurred in the ordinary course of business consistent with past practice and
(B) liabilities not required to be reflected in the Company’s financial statements pursuant to GAAP or disclosed in filings made with the Commission, (iii) the Company has not altered its method of accounting, (iv) the Company has not declared or made any dividend or distribution of cash or other property to its stockholders or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock and (v) the Company has not issued any equity securities to any officer, director
or Affiliate, except pursuant to existing Company stock option plans. Except as set forth on Schedule 2(h), the Company does not have pending before the Commission any request for confidential treatment of information. Except for the issuance of the Securities contemplated by this Agreement or as set forth on Schedule 2(h) or elsewhere on the Schedules hereto, no event, liability or
development has occurred or exists with respect to the Company or its Subsidiaries or their respective business, properties, operations or financial condition, that would be required to be disclosed by the Company under applicable securities laws at the time this representation is made or deemed made that has not been publicly disclosed at least 1 trading day prior to the date that this representation is made.

 

(i)            Litigation. Except as disclosed within the SEC Reports or in Schedule 2(i), there is no action, suit, inquiry, notice
of violation, proceeding or investigation pending or, to the knowledge of the Company, threatened against or affecting the Company, any Subsidiary or any of their respective properties before or by any court, arbitrator, governmental or administrative agency or regulatory authority (federal, state, county, local or foreign) (collectively, an “Action”) which (i) adversely affects or challenges the legality, validity or enforceability
of any of the Transaction Documents or the Securities or (ii) could, if there were an unfavorable decision, have or reasonably be expected to result in a Material Adverse Effect.

 

(j)            Labor Relations. No material labor dispute exists or, to the knowledge of the Company, is imminent with respect to any of the employees of the Company which could reasonably be expected
to result in a Material Adverse Effect. None of the Company’s or its Subsidiaries’ employees is a member of a union that relates to such employee’s relationship with the Company or such Subsidiary, and neither the Company nor any of its Subsidiaries is a party to a collective bargaining agreement, and the Company and its Subsidiaries believe that their relationships with their employees are good.

 

(k)           Compliance. Neither the Company nor any Subsidiary: (i) is in default under or in violation of (and no event has occurred that has not been waived that, with notice or lapse of time or
both, would result in a default by the Company or any Subsidiary under), nor has the Company or any Subsidiary received notice of a claim that it is in default under or that it is in violation of, any indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is bound (whether or not such default or violation has been waived), (ii) is in violation of any order of any court, arbitrator or governmental body or (iii) is or has been in violation
of any statute, rule or regulation of any governmental authority, including without limitation all foreign, federal, state and local laws applicable to its business and all such laws that affect the environment, except in each case as could not have or reasonably be expected to result in a Material Adverse Effect.

 

 

 

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

 

(m)          Title to Assets. The Company and the Subsidiaries have good and marketable title in fee simple to all real property owned by them and good and marketable title in all personal property owned
by them that is material to the business of the Company and the Subsidiaries, in each case free and clear of all security interests, liens, claims, charge or encumbrances (“Liens”), except for (i) liens for current taxes not yet due, (ii) minor imperfections
of title, if any, not material in amount and not materially detracting from the value or impairing the use of the property subject thereto or impairing the operations of the Company or (iii) Permitted Liens (as defined below).

 

(n)           Patents and Trademarks. The Company and the Subsidiaries have, or have rights to use, all patents, patent applications, trademarks, trademark applications, service marks, trade names,
trade secrets, inventions, copyrights, licenses and other intellectual property rights and similar rights as described in the SEC Reports as necessary or material for use in connection with their respective businesses and which the failure to so have could have a Material Adverse Effect (collectively, the “Intellectual Property Rights”). Neither the Company nor any Subsidiary has received a notice (written or otherwise) that any of the
Intellectual Property Rights used by the Company or any Subsidiary violates or infringes upon the rights of any third party. To the knowledge of the Company, all such Intellectual Property Rights are enforceable and there is no existing infringement by any third party of any of the Intellectual Property Rights. The Company and its Subsidiaries have taken reasonable security measures to protect the secrecy, confidentiality and value of all of their intellectual properties, except where failure to do so could not,
individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

(o)           Intentionally Omitted.

 

(p)           Private Placement. Assuming the accuracy of the Purchasers’ representations and warranties set forth in Section 3 hereof, no registration under the Securities Act is required for
the offer and sale of the Securities by the Company to the Purchasers as contemplated hereby.

 

(q)           Transactions With Affiliates and Employees. Other than as contemplated herein or described in SEC Reports, and except as set forth on Schedule
2(q), none of the officers, directors, employees and/or affiliates of Company or the Subsidiaries is a party to any transaction with Company or any Subsidiary (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director employee or such affiliate or, to the knowledge of
Company, any entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee, partner or affiliate other than (a) for payment of salary or consulting fees for services rendered, (b) reimbursement for expenses incurred on behalf of Company and (c) for other employee benefits, including stock option agreements under any stock option plan of Company, which in the aggregate (for the total amount in (a), (b) and (c) combined) does not exceed
the amount of $25,000 for any officer, director, employee or affiliate.

 

 

 

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(r)           Registration Rights. Except as provided herein or as set forth in Schedule 2(r), no Person has any right to cause the Company
to effect the registration under the Securities Act of any securities of the Company.

 

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

 

(t)            Disclosure. All disclosure furnished by or on behalf of the Company to the Purchasers regarding the Company, its business and the transactions contemplated hereby, including the Schedules
to this Agreement, is true and correct and does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading.

 

3.         Representations and Warranties of the Purchaser.  The Purchaser hereby represents, warrants and covenants to the
Company that:

 

(a)           Authorization. Such Purchaser has full power and authority to enter into this Agreement.  This Agreement,  when
executed and delivered by the Purchaser, will constitute a valid and legally binding obligation of the Purchaser, enforceable in accordance with its terms, except as limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, and any other laws of general application affecting enforcement of creditors’ rights generally, and as limited by laws relating to the availability of a specific performance, injunctive relief, or other equitable remedies.

 

(b)           Purchase Entirely for Own Account.  This Agreement is made with the Purchaser in reliance upon the Purchaser’s representation to the Company, which by the Purchaser’s
execution of this Agreement, the Purchaser hereby confirms, that the Securities to be acquired by the Purchaser will be acquired for investment for the Purchaser’s own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and that the Purchaser has no present intention of selling, granting any participation in, or otherwise distributing the same.  By executing this Agreement, the Purchaser further represents that the Purchaser does not presently
have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participations to such person or to any third person, with respect to any of the Securities. The Purchaser has not been formed for the specific purpose of acquiring any of the Securities.

 

 

 

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(c)           Knowledge.  The Purchaser is aware of the Company’s business affairs and financial condition and has acquired sufficient information about the Company to reach an informed
and knowledgeable decision to acquire the Securities. The Purchaser has had the opportunity to review and read the SEC Reports, including without limitation the “Risk Factors” set forth therein, and hereby acknowledge that they understand the disclosures made in such SEC Reports and the existence of such “Risk Factors”.

 

(d)           Restricted Securities.  The Purchaser understands that the Securities have not been, and will not be, registered under the Securities Act, by reason of a specific exemption from
the registration provisions of the Securities Act which depends upon, among other things, the bona fide nature of the investment intent and the accuracy of the Purchaser’s representations as expressed herein.  The Purchaser understands that the Securities are “restricted securities” under applicable U.S. federal, state and province securities laws and that, pursuant to these laws, the Purchaser must hold the Securities indefinitely
unless they are registered with the Securities and Exchange Commission and qualified by state authorities, or an exemption from such registration and qualification requirements is available.  Other than as set forth herein, the Purchaser acknowledges that the Company has no obligation to register or qualify the Securities for resale.  The Purchaser further acknowledges that if an exemption from registration or qualification is available, it may be conditioned on various requirements including,
but not limited to, the time and manner of sale, the holding period for the Securities, and on requirements relating to the Company which are outside of the Purchaser’s control, and which the Company is under no obligation and may not be able to satisfy.

 

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

 

(f)           Short Sales and Confidentiality Prior To The Date Hereof. Other than consummating the transactions contemplated hereunder, such Purchaser has not directly or indirectly, nor has any person
or entity acting on behalf of or pursuant to any understanding with such Purchaser, executed any purchases or sales, including “short sales" as defined in Rule 200 of Regulation SHO under the Exchange Act, of the securities of the Company (“Stock Transactions”) during the period commencing from the time that such Purchaser first received a term sheet (written or oral) from the Company or any other person or entity representing
the Company setting forth the material terms of the transactions contemplated hereunder until the date hereof (“Discussion Time”). The Purchaser further agrees not to engage in any Stock Transactions until the Company files a Current Report on Form 8K under the Exchange Act which annexes copies of the Transaction Documents thereto.  The Company covenants to file such Current Report on Form 8K under the Exchange Act within five
trading days of the Effective Date.

 

(g)           Accredited Investor.  The Purchaser is an accredited investor as defined in Rule 501(a) of Regulation D promulgated under
the Securities Act and has accurately and truthfully completed the Accredited and FINRA Questionnaire attached hereto as Exhibit A.

 

 

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4.         Intentionally Omitted.

 

5.         Other Agreements of the Parties.

 

(a)           Transfer Restrictions.

 

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

 

(ii)          The Purchaser agrees to the imprinting, so long as is required by this Section 5(a), of a legend on any of the Securities in the following form:

 

[NEITHER] THIS SECURITY [NOR THE SECURITIES INTO WHICH THIS SECURITY IS [EXERCISABLE] HAS [NOT] BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.

 

(b)           Removal of Legend. Certificates evidencing the Securities shall not contain any legend (including the legend set forth in Section 4(a) hereof): (i) while a registration statement covering
the resale of such security is effective under the Securities Act, or (ii) following any sale of such Underlying Shares pursuant to Rule 144, or (iii) if such Securities are eligible for sale under Rule 144, without the requirement for the Company to be in compliance with the current public information required under Rule 144 as to such Securities and without volume or manner-of-sale restrictions, or (iv) if such legend is not required under applicable requirements of the Securities Act (including judicial interpretations
and pronouncements issued by the staff of the Commission).  The Company agrees that at such time as such legend is no longer required under this Section 4(b), it will, no later than three trading days following the delivery by a Purchaser to the Company or the Company’s transfer agent of a certificate representing the Securities, as applicable, issued with a restrictive legend (such third trading day, the "Legend Removal Date"), along with an acceptable legal opinion and broker representation
letter, deliver or cause to be delivered to such Purchaser a certificate representing such shares that is free from all restrictive and other legends.  The Company may not make any notation on its records or give instructions to the Company’s transfer agent that enlarge the restrictions on transfer set forth in this Section.

 

 

 

11

 

 

(c)           Compliance with Securities Act.  Purchaser agrees that such Purchaser will sell any Securities pursuant to either the registration requirements of the Securities Act, including
any applicable prospectus delivery requirements, or an exemption therefrom, and that if Securities are sold pursuant to a registration statement, they will be sold in compliance with the plan of distribution set forth therein, and acknowledges that the removal of the restrictive legend from certificates representing Securities as set forth in Section 4(b) is predicated upon the Company's reliance upon this understanding.

 

(d)           Furnishing of Information.  Until the time that Purchaser no longer owns Securities, the Company covenants to timely file (or obtain extensions in respect thereof and file within
the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to the Exchange Act even if the Company is not then subject to the reporting requirements of the Exchange Act.  As long as Purchaser owns Securities, if the Company is not required to file reports pursuant to the Exchange Act, it will prepare and furnish to the Purchasers and make publicly available in accordance with Rule 144(c) such information as is required for the Purchasers to sell the Securities
under Rule 144.  The Company further covenants that it will take such further action as any holder of Securities may reasonably request, to the extent required from time to time to enable such Person to sell such Securities without registration under the Securities Act within the requirements of the exemption provided by Rule 144.

 

(e)           Disclosure; Publicity.  Purchaser shall not issue any other press release or other public disclosure with respect to the transactions contemplated hereby, and neither the Company
nor Purchaser shall issue any such press release or otherwise make any such public statement without the prior consent of the Company.

 

(f)            Form D and Blue Sky. If required, Company shall file a Form D with respect to the issuance of the Rights (or the issuance of the underlying Common Stock) as required under Regulation D
under the Securities Act and, upon written request, provide a copy thereof to Purchaser promptly after such filing. The Company shall take such action as the Company shall reasonably determine is necessary in order to obtain an exemption for or to qualify the Securities for sale to Purchaser pursuant to the terms hereof under applicable securities or “Blue Sky” laws of the states of the United States, and shall provide evidence of any such action so taken to Purchaser promptly after such filing.  However,
the Company shall not be required to execute any general consent to service of process in order to obtain such blue sky clearance, except in a jurisdiction where the Company is already subject to such process.

 

(g)           Lock Up.  Provided that the Closing Requirements have been satisfied, for a period of 30 days after the Third Closing, the Company shall not, and shall use its reasonable efforts
to cause its officers, employees, advisors, consultants and agents to not (i) solicit, encourage, entertain, initiate or engage in any discussions or negotiations with, or provide any information to, or take any other action with the intent to facilitate the efforts of, any third party relating to any possible agreement or other arrangement involving the sale of its capital stock for the purpose of raising capital for the Company (a “Company Prohibited
Transaction”), or (ii) authorize, execute, consummate, enter into an agreement or commitment with respect to a Company Prohibited Transaction.  Notwithstanding the foregoing, this Section 5(g) shall not be violated if the Company's board of directors must take any of the foregoing actions in connection with a Company Prohibited Transaction in order to avoid breaching their fiduciary obligations to the Company.

 

 

 

12

 

 

(h)           Reverse Stock Split.  As soon as reasonably practicable following the Third Closing Date, the Company shall take all commercially reasonable efforts to effectuate a reverse stock
split on such terms as determined by the Board, including the affirmative vote of Chairman Knetzger (to the extent that Mr. Knetzger remains on the Board of Directors of the Company).

 

(i)            Expenditures.  For a period of three years following the Effective Date, the Company shall take such actions necessary to ensure that (i) the Company’s annual operating budget
(the “Company Operating Budget”) shall require the approval of the Board of Directors and the affirmative vote of Chairman Knetzger (to the extent that Mr. Knetzger remains on the Board of Directors of the Company), (ii) any expenditure in excess of $10,000 which has not previously been approved as part of the Company’s Operating Budget shall require the consent of the Board of Directors and the affirmative vote of Chairman Knetzger  (to
the extent that Mr. Knetzger remains on the Board of Directors of the Company) and (iii) the Purchaser is notified in advance of any dividends or distributions paid to Stockholders of the Company.

 

(j)            Board Observer.  Immediately following the Final Initial Closing Date, Mark G. Hollo shall be appointed as a non-voting Special Advisor to the Board of Directors for a
period of three (3) years from the Final Initial Closing Date, subject to Mr. Hollo’s execution of a confidentiality agreement and assignment of inventions agreement reasonably acceptable to the Company and Mr. Hollo.  After the date of his appointment, Mr. Hollo shall be entitled to the same expense reimbursement and compensation, if any, that is provided to the entire board of directors.

 

(k)           Directors’ and Officers’ Insurance. The Company will maintain directors’ and officers’ insurance for the directors and officers of the Company on terms acceptable
to the Board of Directors, including the affirmative vote of Chairman Knetzger (to the extent that Mr. Knetzger remains on the Board of Directors of the Company).

 

(l)            Termination of Covenants.  In the event that less than 5,000 Units have been purchased by the Purchaser prior to the date that is 120 days following the Effective Date,  the
covenants contained in Sections 5(h), (i) and (j) shall terminate and be of no further force or effect.

 

6.         Registration Rights.

 

(a)           Definitions.  In addition to the terms defined above and herein, the term “Registrable
Securities”, at any point in time, shall mean the shares of Common Stock issued and outstanding to the Purchaser hereunder, and all shares of Common Stock issued or issuable pursuant to Rights issued under Units purchased hereunder; provided, however, that the foregoing definition shall exclude in all cases any Registrable Securities sold by a person in a transaction in
which his or her rights under this Agreement are not assigned. Notwithstanding anything contained herein to the contrary, securities shall cease to be Registrable Securities when (a) a Registration Statement covering such Registrable Securities has been declared effective by the Securities and Exchange Commission and it has been disposed of pursuant to such effective Registration Statement or (b) such Registrable Securities may be sold pursuant to Rule 144 under the
Securities Act of 1933, as amended (the “Securities Act”), without volume restriction.

 

 

13

 

 

 

(b)           Demand Registration.  If the Company shall receive at any time after the Second Closing Date, a written request
from the Purchaser that the Company file a registration statement under the Securities Act covering the registration of at least 50% of the Registrable Securities then outstanding, then the Company shall use its best efforts to file, as soon as practicable, a registration statement under the Securities Act covering all Registrable Securities which the Purchaser requests to be registered.  The Company shall ensure that such registration remains effective for a period
of not less than two years (2) years.

 

(c)           Underwriting. If the Purchaser intends to distribute the Registrable Securities covered by their request by means of
an underwriting, they shall so advise the Company as a part of their request made pursuant to this Section 6.  The underwriter will be selected by the Purchaser and shall be reasonably acceptable to the Company.  In such event, the right of any holder of Common Stock (each, a “Holder”) to include his own registrable securities (each, a “Holder’s Registrable Securities”)
in such registration shall be conditioned upon such Holder’s participation in such underwriting and the inclusion of such Holder’s Registrable Securities in the underwriting (unless otherwise mutually agreed by a majority in interest of the Purchaser and such Holder) to the extent provided herein.  All Holders proposing to distribute their securities through such underwriting shall enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such
underwriting.  Notwithstanding the foregoing, if a registration involves an underwritten offering, and the lead managing underwriter shall advise Company that the amount of securities to be included in the offering exceeds the amount which can be sold in the offering, the number of securities owned by Purchaser to be included in the offering shall be eliminated or reduced as required by the managing underwriter.

 

(d)           Delay in Filing. Notwithstanding the foregoing, if the Company shall furnish to Purchaser and the Holders requesting
a registration statement pursuant to this section, a certificate signed by the Chief Executive Officer or President of the Company stating that in the good faith judgment of the Board of Directors of the Company, it would be seriously detrimental to the Company and its stockholders for such registration statement to be filed and it is therefore essential to defer the filing of such registration statement, the Company shall have the right to defer such filing for the period of time which the Board of Directors
of the Company, in consultation with its legal counsel determine, to be the shortest period reasonably necessary to avoid such detriment to the Company, which in any event shall not exceed 120 days following receipt of the request of the Purchaser.

 

(e)           Limitations. In addition, the Company shall not be obligated to effect, or to take any action to effect, any registration
pursuant to this Section 6 after the Company has already effected one (1) registration pursuant to this Section 6 and such registration has been declared or ordered effective.

 

(f)           Obligations of Company. The Company shall: (i) prepare and file with the Securities and Exchange Commission such
amendments and supplements to such registration statement as may be necessary to keep such registration statement effective until the disposition of all securities covered by such registration statement; (ii) register and qualify the securities covered by such registration statement under applicable state securities and blue sky laws; (iii) cause the securities covered by such registration statement to be listed or quoted on the trading market on which Company’s securities are then listed or quoted and
(iv) take all reasonable actions required to ensure such shares of Common Stock are DTC eligible.  In addition, the Company shall pay all registration expenses, filing fees and printing expenses incurred in connection with any registration statement filed pursuant to Sections 6(b) or 6(h).

 

 

14

 

 

(g)           Obligations of Purchaser. As a condition to the Company filing the registration statement, Purchaser shall furnish to the Company such information regarding itself, the Registrable Securities
held by it, and the intended method of disposition of such securities as shall be required to effect the registration of such Holder’s Registrable Securities, and such Purchaser shall represent and warrant that such information provided in connection herewith by such Purchaser shall be full, accurate and complete.

 

(h)           Piggyback Registration Rights. If, at any time, there is not an effective registration statement covering the resale all of the Registrable Securities, and Company shall determine to prepare
and file with the Securities and Exchange Commission (the “Commission”) a registration statement relating to an offering for its own account or the account of others under the Securities Act, of any of its equity securities (other than: (i) on Form S-4 (as promulgated under the Securities Act), (ii) Form S-8 (as promulgated under the Securities Act), (iii) on Form S-1A with respect to equity securities
that have already been registered under the Securities Act as of the date hereof, or (iv) the then equivalents of Form S-4 or S-8 relating to equity securities to be issued solely in connection with any acquisition of any entity or business or equity securities issuable in connection with stock option or other employee benefit plans), then Company shall send to Purchasers a written notice of such determination and, if within ten (10) days after receipt by Purchasers of such notice, Company shall receive a request
in writing from Purchasers, Company shall include in such registration statement all or any part of such Registrable Securities holders requests to be registered at no cost to Holders (other than underwriting discounts, fees and commissions).  Notwithstanding the foregoing, if a registration involves an underwritten offering, and the lead managing underwriter shall advise Company that the amount of securities to be included in the offering
exceeds the amount which can be sold in the offering, the number of securities owned by Purchaser to be included in the offering shall be eliminated or reduced as required by the managing underwriter.  Notwithstanding anything contained herein to the contrary, securities shall cease to be Registrable Securities when (a) a Registration Statement covering such Registrable Securities has been declared effective by the Commission and it has been disposed of pursuant
to such effective Registration Statement or (b) such Registrable Securities may be sold pursuant to Rule 144 under the Securities Act without volume restriction.

 

(i)            Indemnification for Registration Statements.  To
the extent permitted by law, the Company will indemnify and hold harmless Purchaser, and the partners, members, officers and directors of Purchaser, against any losses, claims, damages, or liabilities to which they may become subject under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations (collectively a “Violation”)
by the Company: (i) any untrue statement or alleged untrue statement of a material fact contained in such registration statement or incorporated by reference therein, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading, or (iii) any violation or alleged violation by the Company of the Securities
Act, the Exchange Act, any state securities law or any rule or regulation promulgated under the Securities Act, the Exchange Act or any state securities law in connection with the offering covered by such registration statement; and the Company will reimburse Purchaser, and/or its partners, members, officers, or directors for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided however,
that the indemnity contained in this Section 6(i) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Company, which consent shall not be unreasonably withheld, nor shall the Company be liable in any such case for any such loss, claim, damage, liability or action to the extent that it arises out of or is based upon a Violation which occurs in reliance upon and in conformity with written information furnished
expressly for inclusion in such registration statement by Purchaser, or its partners, members, officers, or directors, or any other holder of Common Stock registering its shares in connection with such registration statement.

 

7.         Adjustments to Purchase Price of and Number of Shares Issuable pursuant to the Rights. 

 

(i)          The number and kind of securities purchasable upon the exercise of the Rights if any, and the Rights Exercise Price, if any, shall be subject to adjustment from time to time upon the occurrences and terms set forth herein.  In case the Company
shall (i) pay a dividend in shares of Common Stock or make a distribution in shares of Common Stock to holders of its outstanding Common Stock, (ii) subdivide its outstanding shares of Common Stock into a greater number of shares, (iii) combine its outstanding shares of Common Stock into a smaller number of shares of Common Stock, (iv) issue any shares of its capital stock in a reclassification of the Common Stock, then the number of shares of Common Stock purchasable upon exercise of the Rights, if any, immediately
prior thereto shall be adjusted so that the Purchaser shall be entitled to receive the kind and number of shares of Common Stock or other securities of the Company which it would have owned or have been entitled to receive had such Rights, if any, been exercised in advance thereof.  Upon each such adjustment of the kind and number of shares of Common Stock or other securities of the Company which are purchasable pursuant to exercise of the Rights, if any, the Purchaser shall thereafter be entitled to
purchase the number of shares of Common Stock or other securities resulting from such adjustment at a purchase price per share of Common Stock or other security obtained by multiplying the purchase price in effect immediately prior to such adjustment by the number of shares of Common Stock purchasable pursuant hereto immediately prior to such adjustment and dividing by the number of shares of Common Stock or other securities of the Company resulting from such adjustment. An adjustment made pursuant to this paragraph
shall become effective immediately after the effective date of such event retroactive to the record date, if any, for such event.

 

(ii)          Prior to the exercise of the Rights, if any, in the event that the Company shall sell any shares of Common Stock to any person or entity other then pursuant to an Excluded Transaction
(as defined below) at a price less than $0.375 per share (the “Lesser Price”), the Purchaser shall be entitled to purchase the shares of Common Stock underlying the Rights, as the case may be, at the Lesser Price.  For the purposes hereof, the term Exempted Transaction shall mean: (i) the issuance of options and/or restricted stock to employees and consultants of the Company and approved by the board of directors of the Company;
and (ii) warrants issued to third parties in strategic transactions and approved by the board of directors of the Company and the affirmative vote of Chairman Knetzger (to the extent that Mr. Knetzger remains on the Board of Directors of the Company).

 

 

15

 

 

8.         Additional Conditions to Closing.

 

(a)           Conditions to Purchaser’s Obligations at the Closing.  Purchaser’s obligation to purchase the Units is subject to the satisfaction (or waiver by
the Purchaser) of the following conditions:

 

(i)           Expenses; Legal Fees.  On the dates of each of the Unit Closings, the Company shall be responsible for the following legal and other associated costs of the Purchaser in connection
with this Agreement and the transactions contemplated hereunder, to be paid from the proceeds upon each respective Unit Closing: (i) 5% of the gross investment amount as a non accountable due diligence fee and expense reimbursement payable to Radnor Research & Advisory Co., LLC, Member NYSE (ii) legal fees of: (A) up to $10,000 for the Initial Closing; (B) up to $5,000 for the Second Closing; and (C) up to $5,000 for the Third Closing.  Subject to the foregoing clause, each of the parties shall
be responsible for their own legal and other associated costs of this transaction.

 

(ii)          Financial Advisory Agreement.  On or prior to the Final Initial Closing Date, the Company shall have entered into a Financial Advisory Agreement with The Fund LLC pursuant to which
The Fund LLC shall provide services related to financial advice, mergers and acquisitions, capital formation and corporate finance, business advisory and related matters to the Company.

 

(b)           Conditions to Obligations of the Company.  The Company’s obligation to issue and sell the Units at each Initial Closing Date is subject to the satisfaction,
on or prior to the Closing, of the following conditions:

 

(i)           Waiver and Release.                                           A
Waiver and Release in a form reasonably acceptable to the Company shall have been received from Radnor Research with regard to the waiver of any brokerage or other fees in connection or related to or arising from this Agreement.

 

9.         Miscellaneous.

 

(a)           Successors and Assigns.  The terms and conditions of this Agreement shall inure to the benefit of and
be binding upon the respective successors and assigns of the parties.  Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.  The Purchaser shall be entitled to assign any rights it may have under this Agreement by providing written notice to the Company.
The Purchaser shall provide any information regarding any assignee reasonably requested by the Company.

 

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

 

 

16

 

 

(c)           Counterparts.  This Agreement may be executed in two or more counter­parts, each of which shall
be deemed an original and all of which together shall constitute one instrument.

 

(d)           Titles and Subtitles.  The titles and subtitles used in this Agreement are used for convenience only
and are not to be considered in construing or interpreting this Agreement.

 

(e)           Notices.  Any notice required or permitted by this Agreement shall be in writing and shall be deemed
sufficient upon receipt, when delivered personally or by courier, overnight delivery service, or 48 hours after being deposited in the U.S. mail as certified or registered mail with postage prepaid and return receipt requested, if such notice is addressed to the party to be notified at such party’s address as set forth below or as subsequently modified by written notice.

 

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

 

(g)           Amendments and Waivers.  Any term of this Agreement may be amended or waived only with the written
consent of the Company and the Purchaser. Any amendment or waiver effected in accordance with this Section 9(g) shall be binding upon Purchaser and each transferee of the Securities, each future holder of all such Securities, and the Company.

 

 

17

 

 

(h)           Severability.  If one or more provisions of this Agreement are held to be unenforceable
under applicable law, the parties agree to renegotiate such provision in good faith, in order to maintain the economic position enjoyed by each party as close as possible to that under the provision rendered unenforceable.  In the event that the parties cannot reach a mutually agreeable and enforceable replacement for such provision, then (i) such provision shall be excluded from this Agreement, (ii) the balance of the Agreement shall be interpreted as if such provision were so excluded and
(iii) the balance of the Agreement shall be enforceable in accordance with its terms.

 

(i)            Entire Agreement.  This Agreement, and the documents referred to herein constitute the entire agreement
between the parties hereto pertaining to the subject matter hereof, and any and all other written or oral agreements existing between the parties hereto are expressly canceled.

 

(j)            Survival of Representations, Warranties and Covenants. The representations and warranties contained in Sections
2 hereof shall survive until such time as the date on which all the Securities, if any, have been exercised in full or expired.

 

(k)           Exculpation Among Purchasers.  Purchaser acknowledges that it is not relying upon any person, firm
or corporation, other than the Company and its officers and directors, in making its investment or decision to invest in the Company.

 

[Signature Pages Follow]

  

18

  

 

 

EXECUTION COPY

The parties have executed this Unit Purchase Agreement as of the date first written above.

 

	  	  	
COMPANY:

	  	  	  
	  	  	
BONDS.COM GROUP, INC.

	  	  	  
	  	  	
By:
	

/s/

	  	  	  	
Name:

	  	  	  	
Title:

	  	  	  	  

	  	  	
Address:

	  	  	  
	  	  	  
	  	  	
Facsimile Number:

	  	  	  
	  	  	  
	  	  	
PURCHASER:

	  	  	  
	  	  	
FUND HOLDINGS LLC

	  	  	  

	  	  	
By:
	

/s/

	  	  	  	
Name:

	  	  	  	
Title:

	  	  	  	  

	  	  	
Address:

	  	  	  
	  	  	  
	  	  	
Facsimile Number:

SIGNATURE PAGE TO UNIT PURCHASE AGREEMENT

  

  

  

 

EXECUTION COPY

 

Exhibits

Exhibit A                           Accredited Investor and FINRA Questionnaire

  

  

  

 

Exhibit A

 

Accredited Investor and FINRA Questionnaire

 

  

  

  

BONDS.COM GROUP, INC.

INVESTOR SUITABILITY QUESTIONNAIRE

The following is an investor questionnaire to be completed by the Purchaser to qualify the Purchaser as a suitable investor in the Corporation under the Federal and state securities and blue-sky law.

1.           Accredited Investor Certification.  The Purchaser represents and warrants that he comes within one category marked below, and that for any category marked, he has
truthfully set forth, where applicable, the factual basis or reason the Purchaser comes within that category.  ALL INFORMATION IN RESPONSE TO THIS SECTION WILL BE KEPT STRICTLY CONFIDEN­TIAL.  The undersigned agrees to furnish any additional information which the Corporation deems necessary in order to verify the answers set forth below.

 

 

	
Category A _____
	
The undersigned is an individual (not a partnership, corporation, etc.) whose individual net worth, or joint net worth with his or her spouse, presently exceeds $1,000,000.

 

Explanation: In calculating net worth you may include equity in personal property and real estate, including your principal residence, cash, short-term investments, stock and securities.  Equity in personal property and real estate should be based on the fair market value of such property less debt secured by
such property.

 

	
Category B _____
	
The undersigned is an individual (not a partnership, corporation, etc.) who had an income in excess of $200,000 in each of the two most recent years, or joint income with his or her spouse in excess of $300,000 in each of those years (in each case including foreign income, tax exempt income and full amount of capital gains and losses but excluding any income of other family members and any unrealized capital appreciation)
and has a reasonable expectation of reaching the same income level in the current year.

 

	
Category C _____
	
The undersigned is a director or executive officer of the Corporation.

 

	
Category D _____
	
The undersigned is a bank, a savings and loan association, insurance company, registered investment company, registered business development company, licensed small business investment company ("SBIC"), or employee benefit plan within the meaning of Title 1 of ERISA and (a) the investment decision is made by a plan fiduciary which is either a bank. savings and loan association. insurance company or registered investment
advisor, or (b) the plan has total assets in excess of $5,000,000 or is a self directed plan with investment decisions made solely by persons that are accredited investors.

 

__________________

 

__________________

 

(describe entity)

 

	
Category E _____
	
The undersigned is a private business development company as defined in Section 202(a)(22) of the Investment Advisors Act of 1940.

 

__________________

 

__________________

 

(describe entity)

 

 

 

 

 

	
Category F _____
	
The undersigned is a corporation, partnership, business trust, or non-profit organization within the meaning of Section 501(c)(3) of the Internal Revenue Code, in each case not formed for the specific purpose of acquiring the Securities and with total assets in excess of $5,000,000.

 

__________________

 

__________________

 

(describe entity)

 

	
Category G _____
	
The undersigned is a trust with total assets in excess of $5,000,000, not formed for the spe­cific purpose of acquiring the Securities, where the purchase is directed by a "sophisticated person" as defined in Regulation 506 (b)(2)(ii).

 

	
Category H _____
	
The undersigned is an entity all the equity owners of which are "accredited investors" (as such term is defined in Rule 501(a) as promulgated under the Securities Act of 1933, as amended (the "Securities Act")) within one or more of the above categories.  If relying upon this Category alone, each equity owner must complete a separate copy of this Agreement.

 

__________________

 

__________________

 

(describe entity)

 

	
Category I _____
	
The undersigned is not within any of the categories above and is therefore not an "accredited investor".

2.           Manner In Which Title To Be Held. (circle one)

 

	
(a)
	
Individual Ownership

	
(b)
	
Community Property

	
(c)
	
Joint Tenant with Right of Survivorship (both parties must sign)

	
(d)
	
Partnership

	
(e)
	
Tenants in Common

	
(f)
	
Company

	
(g)
	
Trust

	
(h)
	
Other

  

  

  

	
 

 

__________________________________

   Signature
	
 

 

__________________________________

   Signature (if purchasing jointly)

	
 

 

__________________________________

   Name (Typed or Printed)
	
 

 

__________________________________

   Name (Typed or Printed)

	
 

 

__________________________________

Residence (Typed or Printed)
	
 

 

__________________________________

Residence (Typed or Printed)

	
 

 

__________________________________

City, State and Zip Code
	
 

 

__________________________________

City, State and Zip Code

	
 

 

__________________________________

Tax Identification or Social Security Number
	
 

 

__________________________________

Tax Identification or Social Security Number

	
 

Telephone No.:

Business __________________________________

Home ____________________________________

 
	
 

Telephone No.:

Business __________________________________

Home ____________________________________

 

	
Name in which securities should be issued: ______________________________________________________

 
	  
	
Dated: ____________

 
	
Dated: ____________

 

  

  

  

FINRA QUESTIONNAIRE

DEFINITIONS FOR FINRA QUESTIONNAIRE

 

	
Member of the FINRA:

 
	
A "Member of the FINRA" is any broker or dealer admitted to membership in the FINRA.

	
Affiliate:
	
An Affiliate of any person (for purposes hereof a "person" includes a partnership, corporation or other legal entity such as a trust or estate) is a person which controls, is controlled by or is under common control with such person.  For purposes of this definition:

 

(i)     a person should be presumed to control a Member of the FINRA if the person beneficially owns 10% or more of the outstanding voting securities of a Member of the FINRA which is a corporation, or beneficially owns a partnership interest in 10% or more of the distributable profits or losses of a
Member of the FINRA which is a partnership;

 

(ii)    a Member of the FINRA should be presumed to control a person if the Member of the FINRA and Persons Associated with a Member of the FINRA beneficially own 10% or more of the outstanding voting securities of a person which is a corporation, or beneficially own a partnership interest in 10% or
more of the distributable profits or losses of a person which is a partnership; and

 

(iii)   a person should be presumed to be under common control with a Member of the FINRA if:

 

(1)     the same person controls both the Member of the FINRA and such person by beneficially owning 10% or more of the outstanding voting securities of the Member of the FINRA and other such person which is a corporation, or by beneficially owning a partnership interest in 10% or more of the distributable
profits or losses of the Member of the FINRA and other such person which is a partnership; or

 

(2)     a person having the power to direct or cause the direction of the management or policies of the Member of the FINRA also has the power to direct or cause the direction of the management or policies of the other entity in question.

 

	
Immediate Family:
	
The "Immediate Family" of any person, including an employee of or Person Associated with a Member of the FINRA, includes the parents, mother-in-law, father-in-law, husband or wife, brother or sister, brother-in-law or sister-in-law, son-in-law or daughter-in-law, and children of such person or any other individual who is
supported, directly or indirectly, to a material extent by such person.

 

	
FINRA:
	
The Financial Industry Regulatory Authority

	
 

Person

Associated

with a Member

of the FINRA:
	
 

A "Person Associated with a Member of the FINRA" is every sole proprietor, partner, officer, director or branch manager of any Member of the FINRA, or any natural person occupying a similar status or performing similar functions, or any natural person engaged in the investment banking or securities business who is directly
or indirectly controlling or controlled by such Member of the FINRA (for example, any employee, Registered Representative or Registered Principal), whether or not any such person is registered or exempt from registration with the FINRA.

 

 

 

 

 

FINRA QUESTIONNAIRE

1.           State whether you or any of your Affiliates or any members of your Immediate Family are

(a)           a Member of the FINRA;

	
 ̈
	
Yes
	
 ̈
	
No

 

(b)           an Affiliate of a Member of the FINRA; or

	
 ̈
	
Yes
	
 ̈
	
No

 

(c)           a Person Associated with a Member of the FINRA.

 

	
 ̈
	
Yes
	
 ̈
	
No

 

2.           State whether you or any of your Affiliates own stock or other securities of any Member of the FINRA or an Affiliate of a Member of the FINRA or of Bonds.com Group, Inc.

	
 ̈
	
Yes
	
 ̈
	
No

 

3.           State whether you or any of your Affiliates have made a subordinated loan to any Member of the FINRA.

	
 ̈
	
Yes
	
 ̈
	
No

 

4.           If you marked "Yes" to any of the questions above, please briefly describe the facts below, giving the names of the Members of the FINRA to which your answer refers (including, for example, percentage of ownership, amount of loan and interest payable, applicable
dates, names of Affiliates, immediate family, etc.).

___________________________________________________________________________________________________________________________________________________________________

___________________________________________________________________________________________________________________________________________________________________ 

5.           State whether you are an Immediate Family Member of a partner of Rele & Becker, LLC, counsel to Bonds.com Group, Inc.

	
 ̈
	
Yes
	
 ̈
	
No

 

6.           (a)           State (i) whether you provide any consulting or other services to, or have had any position, office or material relationship within the past three years with, the Company or its subsidiaries,
(ii) if you are the beneficial owner of any other securities of the Company, or (iii) if you have made or are aware of any arrangements relating to the distribution of securities of the Company pursuant to the Registration Statement.

	
 ̈
	
Yes
	
 ̈
	
No

 

If you marked "Yes", please briefly describe (i) such services or relationships, including cash and non-cash compensation received and attach copies of written agreements or correspondence describing such services or relationships, (ii) the nature and amount of any such ownership of Company securities, and/or (iii) any
such securities distribution arrangements.

___________________________________________________________________________________________________________________________________________________________________

___________________________________________________________________________________________________________________________________________________________________ 

 

 

 

7.           State whether you have any oral and/or written agreements with any Member of the FINRA or Person Associated with a Member of the FINRA concerning the disposition of your securities of Bonds.com Group, Inc. 

	
 ̈
	
Yes
	
 ̈
	
No

  

If you marked "Yes", please briefly describe such agreement and attach copies of written agreements or correspondence describing such arrangement.

___________________________________________________________________________________________________________________________________________________________________

___________________________________________________________________________________________________________________________________________________________________ 

8.           State whether you have been granted or have received any selling concessions, discounts or other allowances in connection with the Company’s securities

	
 ̈
	
Yes
	
 ̈
	
No

If you marked "Yes", please briefly describe such agreement and attach copies of written agreements or correspondence describing such arrangement.

___________________________________________________________________________________________________________________________________________________________________

___________________________________________________________________________________________________________________________________________________________________ 

 

9.           State whether you or any Immediate Family Members is currently, or has at any time in the past been prohibited or restricted by FINRA (or any of its predecessor regulatory bodies) from being affiliated or otherwise participating in the ownership, operation
or control of a registered broker dealer entity

	
 ̈
	
Yes
	
 ̈
	
No

 

If you marked "Yes", please briefly describe such agreement and attach copies of written agreements or correspondence describing such arrangement.

___________________________________________________________________________________________________________________________________________________________________

___________________________________________________________________________________________________________________________________________________________________ 

 

I hereby affirm that the answers to the above FINRA Questionnaire are true and correct as of the date set forth below.

Date: __________________, 2009

_____________________________________

Print Name of Investor

_____________________________________

Signature

 

 

 

 

 

 

 

 

Schedule I

 

 

Existing Convertible Securities

 

 

 

 

 

 

Schedule II 

NOTICE OF EXERCISE OF ORDINARY RIGHTS, ADDITIONAL RIGHTS OR SPECIAL RIGHTS

The undersigned hereby irrevocably elects to exercise the following Rights, as set forth in the Unit Purchase Agreement dated as of __________, 2009, to purchase an aggregate of ________ shares of the Common Stock of BONDS.COM
GROUP, INC. at an Exercise Price of $__________ per share, for an aggregate price of $___________ and tenders herewith payment in accordance with Section 1 of said Purchase Agreement.

For clarity, the undersigned is electing to purchase:

__________  shares underlying the Ordinary Rights

__________ shares underlying the Additional Rights

__________ shares underlying the Special Rights.

Please deliver the stock certificate to:

Dated: ______________________

___________________________

Fund Holdings LLC

By: ________________________ex4-1.htm

Exhibit 4.1

 

ARTICLES OF AMENDMENT

TO THE

RESTATED ARTICLES OF INCORPORATION

OF

FIRST GUARANTY BANCSHARES, INC.

 

Pursuant to Section 33 of the Louisiana Business Corporation Law and Article III, Section 3 of the Restated Articles of Incorporation, First Guaranty Bancshares, Inc., a Louisiana corporation (the “Corporation”), acting through its undersigned President and Secretary, does hereby
certify that the Board of Directors of the Company, pursuant to a duly called meeting of the Board of Directors on August 14, 2009, at which a quorum was present, duly adopted by unanimous vote resolutions approving an amendment to the Company’s Restated Articles of Incorporation to remove Article III, Section 4 of the Corporation’s Restated Articles of Incorporation and to replace Article III, Section 4 of the Corporation’s Restated Article of Incorporation with the following:

Section 4. Fixed Rate Cumulative Perpetual Preferred Stock, Series A.  Pursuant
to the provisions of the Restated Articles of Incorporation and the bylaws of the Corporation and applicable law, a series of Preferred Stock, par value $1,000.00 per share, of the Corporation be and hereby is created, and the designation and
number of shares of such series, and the voting and other powers, preferences and relative, participating, optional or other rights, and the qualifications, limitations and restrictions thereof, of the shares of such series, are as follows:

(a) Designation and Number of Shares. There is hereby created out of the authorized and unissued shares of preferred stock of the Corporation a series of preferred stock designated as the “Fixed Rate Cumulative Perpetual
Preferred Stock, Series A” (the “Designated Preferred Stock”). The authorized number of shares of Designated Preferred Stock shall be 2,070.

(b) Definitions. The following terms are used in this Article III, Section 4 (including the Standard Provisions in Article III, Section 4 (d) below):

(i) “Common Stock” means the common stock, par value $1.00 per
share, of the

Corporation.

(ii) “Dividend Payment Date” means February 15, May 15, August 15 and November 15 of each year.

(iii) “Junior Stock” means the Common Stock and any other class or series of stock of the Corporation the terms of which expressly provide that it ranks junior to Designated Preferred Stock as to dividend rights and/or
as to rights on liquidation, dissolution or winding up of the Corporation.

(iv) “Liquidation Amount” means $10,000 per share of Designated Preferred Stock.

(v) “Minimum Amount” means $ 5,174,750.

(vi) “Parity Stock” means any class or series of stock of the Corporation (other than Designated Preferred Stock) the terms of which do not expressly provide that such class or series will rank senior or junior to Designated
Preferred Stock as to dividend rights and/or as to rights on liquidation, dissolution or winding up of the Corporation (in each case without regard to whether dividends accrue cumulatively or non-cumulatively). 

(vii) “Signing Date” means August 28, 2009.

(c) Certain Voting Matters. Holders of shares of Designated Preferred
Stock will be entitled to one vote for each such share on any matter on which holders of Designated Preferred Stock are entitled to vote, including any action by written consent.

(d) Standard Provisions.

(i) General Matters. Each share of Designated Preferred Stock shall be identical in all respects to every other share of Designated Preferred Stock. The Designated Preferred Stock shall be perpetual, subject to the provisions of
Article III, Section 4(d) (v). The Designated Preferred Stock shall rank equally with Parity Stock and shall rank senior to Junior Stock with respect to the payment of dividends and the distribution of assets in the event of any dissolution, liquidation or winding up of the Corporation.

(ii) Standard Definitions. As used herein with respect to Designated Preferred 

Stock:

(1) “Applicable Dividend Rate” means (i) during the period from the Original Issue Date to, but excluding, the first day of the first Dividend Period commencing on or
after the fifth anniversary of the Original Issue Date, 5% per annum and (ii) from and after the first day of the first Dividend Period commencing on or after the fifth anniversary of the Original Issue Date, 9% per annum.

(2) “Appropriate Federal Banking Agency” means the “appropriate Federal banking agency” with respect to the Corporation as defined in Section 3(q) of the
Federal Deposit Insurance Act (12 U.S.C. Section 1813(q)), or any successor provision.

(3) “Business Combination” means a merger, consolidation, statutory share exchange or similar transaction that requires the approval of the Corporation’s stockholders.

(4) “Business Day” means any day except Saturday, Sunday and any day on which banking institutions in the State of New York generally are authorized or required by law
or other governmental actions to close.

(5) “Bylaws” means the bylaws of the Corporation, as they may be amended from time to time.

(6) “Charter” means the Corporation’s certificate or articles of incorporation, articles of association, or similar organizational document.

(7) “Dividend Period” has the meaning set forth in Article III, Section 4 (d) (iii) (1).

(8) “Dividend Record Date” has the meaning set forth in Article III, Section 4 (d) (iii) (1).

(9) “Liquidation Preference” has the meaning set forth in Article III, Section 4 (d) (iv) (1).

(10) “Original Issue Date” means the date on which shares of Designated Preferred Stock are first issued.

(11) “Preferred Director” has the meaning set forth in Article III, Section 4 (d) (vii) (2).

(12) “Preferred Stock” means any and all series of preferred stock of the Corporation,

including the Designated Preferred Stock.

(13) “Qualified Equity Offering” means the sale and issuance for cash by the Corporation to persons other than the Corporation or any of its subsidiaries after the Original
Issue Date of shares of perpetual Preferred Stock, Common Stock or any combination of such stock, that, in each case, qualify as and may be included in Tier 1 capital of the Corporation at the time of issuance under the applicable risk-based capital guidelines of the Corporation’s Appropriate Federal Banking Agency (other than any such sales and issuances made pursuant to agreements or arrangements entered into, or pursuant to financing plans which were publicly announced, on or prior to November 17, 2008).

(14) “Standard Provisions” mean these Standard Provisions.

(15) “Successor Preferred Stock” has the meaning set forth in Article III, Section 4 (d) (v) (1).

(16) “Voting Parity Stock” means, with regard to any matter as to which the holders of Designated Preferred Stock are entitled to vote as specified in Article III, Section
4 (d) (vii) (1) and Article III, Section 4 (d) (vii) (2) of these Standard Provisions, any and all series of Parity Stock upon which like voting rights have been conferred and are exercisable with respect to such matter.

(iii) Dividends.

(1) Rate. Holders of Designated Preferred Stock shall be entitled to receive, on each share of Designated Preferred Stock if, as and when declared by the Board of Directors or any
duly authorized committee of the Board of Directors, but only out of assets legally available therefor, cumulative cash dividends with respect to each Dividend Period (as defined below) at a rate per annum equal to the Applicable Dividend Rate on (i) the Liquidation Amount per share of Designated Preferred Stock and (ii) the amount of accrued and unpaid dividends for any prior Dividend Period on such share of Designated Preferred Stock, if any. Such dividends shall begin to accrue and be cumulative from the Original
Issue Date, shall compound on each subsequent Dividend Payment Date (i.e., no dividends shall accrue on other dividends unless and until the first Dividend Payment Date for such other dividends has passed without such other dividends having been paid on such date) and shall be payable quarterly in arrears on each Dividend Payment Date, commencing with the first such Dividend Payment Date to occur at least 20 calendar days after
the Original Issue Date. In the event that any Dividend Payment Date would otherwise fall on a day that is not a Business Day, the dividend payment due on that date will be postponed to the next day that is a Business Day and no additional dividends will accrue as a result of that postponement. The period from and including any Dividend Payment Date to, but excluding, the next Dividend Payment Date is a “Dividend Period”, provided that the initial Dividend Period shall be the period from and including
the Original Issue Date to, but excluding, the next Dividend Payment Date.

Dividends that are payable on Designated Preferred Stock in respect of any Dividend Period shall be computed on the basis of a 360-day year consisting of twelve 30-day months. The amount of dividends payable on Designated Preferred Stock on any date prior to the end of a Dividend Period, and
for the initial Dividend Period, shall be computed on the basis of a 360-day year consisting of twelve 30-day months, and actual days elapsed over a 30-day month.

Dividends that are payable on Designated Preferred Stock on any Dividend Payment Date will be payable to holders of record of Designated Preferred Stock as they appear on the stock register of the Corporation on the applicable record date, which shall be the 15th calendar day immediately preceding
such Dividend Payment Date or such other record date fixed by the Board of Directors or any duly authorized committee of the Board of Directors that is not more than 60 nor less than 10 days prior to such Dividend Payment Date (each, a “Dividend Record Date”). Any such day that is a Dividend Record Date shall be a Dividend Record Date whether or not such day is a Business Day.

Holders of Designated Preferred Stock shall not be entitled to any dividends, whether payable in cash, securities or other property, other than dividends (if any) declared and payable on Designated Preferred Stock as specified in this Article III, Section 4 (d) (iii) (1),  (subject
to the other provisions of this Article III, Section 4 (d) (iii)).

(2) Priority of Dividends. So long as any share of Designated Preferred Stock remains outstanding, no dividend or distribution shall be declared or paid on the Common Stock or any
other shares of Junior Stock (other than dividends payable solely in shares of Common Stock) or Parity Stock, subject to the immediately following paragraph in the case of Parity Stock, and no Common Stock, Junior Stock or Parity Stock shall be, directly or indirectly, purchased, redeemed or otherwise acquired for consideration by the Corporation or any of its subsidiaries unless all accrued and unpaid dividends for all past Dividend Periods, including the latest completed Dividend Period (including, if applicable
as provided in Article III, Section 4(d)(iii)(1) above, dividends on such amount), on all outstanding shares of Designated Preferred Stock have been or are contemporaneously declared and paid in full (or have been declared and a sum sufficient for the payment thereof has been set aside for the benefit of the holders of shares of Designated Preferred Stock on the applicable record date). The foregoing limitation shall not apply to (i) redemptions, purchases or other acquisitions of shares of Common Stock or other
Junior Stock in connection with the administration of any employee benefit plan in the ordinary course of business and consistent with past practice; (ii) the acquisition by the Corporation or any of its subsidiaries of record ownership in Junior Stock or Parity Stock for the beneficial ownership of any other persons (other than the Corporation or any of its subsidiaries), including as trustees or custodians; and (iii) the exchange or conversion of Junior Stock for or into other Junior Stock or of Parity Stock
for or into other Parity Stock (with the same or lesser aggregate liquidation amount) or Junior Stock, in each case, solely to the extent required pursuant to binding contractual agreements entered into prior to the Signing Date or any subsequent agreement for the accelerated exercise, settlement or exchange thereof for Common Stock.

When dividends are not paid (or declared and a sum sufficient for payment thereof set aside for the benefit of the holders thereof on the applicable record date) on any Dividend Payment Date (or, in the case of Parity Stock having dividend payment dates different from the Dividend Payment Dates,
on a dividend payment date falling within a Dividend Period related to such Dividend Payment Date) in full upon Designated Preferred Stock and any shares of Parity Stock, all dividends declared on Designated Preferred Stock and all such Parity Stock and payable on such Dividend Payment Date (or, in the case of Parity Stock having dividend payment dates different from the Dividend Payment Dates, on a dividend payment date falling within the Dividend Period related to such Dividend Payment Date) shall be declared pro
rata so that the respective amounts of such dividends declared shall bear the same ratio to each other as all accrued and unpaid dividends per share on the shares of Designated Preferred Stock (including, if applicable as provided in Article III, Section 4(d)(iii)(1) above, dividends on such amount) and all Parity Stock payable on such Dividend Payment Date (or, in the case of Parity Stock having dividend payment dates different from the Dividend Payment Dates, on a dividend payment date falling within
the Dividend Period related to such Dividend Payment Date) (subject to their having been declared by the Board of Directors or a duly authorized committee of the Board of Directors out of legally available funds and including, in the case of Parity Stock that bears cumulative dividends, all accrued but unpaid dividends) bear to each other. If the Board of Directors or a duly authorized committee of the Board of Directors determines not to pay any dividend or a full dividend on a Dividend Payment Date, the Corporation
will provide written notice to the holders of Designated Preferred Stock prior to such Dividend Payment Date.

Subject to the foregoing, and not otherwise, such dividends (payable in cash, securities or other property) as may be determined by the Board of Directors or any duly authorized committee of the Board of Directors may be declared and paid on any securities, including Common Stock and other Junior
Stock, from time to time out of any funds legally available for such payment, and holders of Designated Preferred Stock shall not be entitled to participate in any such dividends.

(iv) Liquidation Rights.

(1) Voluntary or Involuntary Liquidation. In the event of any liquidation, dissolution or winding up of the affairs of the Corporation, whether voluntary or involuntary, holders
of Designated Preferred Stock shall be entitled to receive for each share of Designated Preferred Stock, out of the assets of the Corporation or proceeds thereof (whether capital or surplus) available for distribution to stockholders of the Corporation, subject to the rights of any creditors of the Corporation, before any distribution of such assets or proceeds is made to or set aside for the holders of Common Stock and any other stock of the Corporation ranking junior to Designated Preferred Stock as to such
distribution, payment in full in an amount equal to the sum of (i) the Liquidation Amount per share and (ii) the amount of any accrued and unpaid dividends (including, if applicable as provided in Article III, Section 4 (d) (iii)(1) above, dividends on such amount), whether or not declared, to the date of payment (such amounts collectively, the “Liquidation Preference”).

(2) Partial Payment. If in any distribution described in Article III, Section 4 (d) (iv)(1) above the assets of the Corporation or proceeds thereof are not sufficient to pay in full
the amounts payable with respect to all outstanding shares of Designated Preferred Stock and the corresponding amounts payable with respect of any other stock of the Corporation ranking equally with Designated Preferred Stock as to such distribution, holders of Designated Preferred Stock and the holders of such other stock shall share ratably in any such distribution in proportion to the full respective distributions to which they are entitled.

(3) Residual Distributions. If the Liquidation Preference has been paid in full to all holders of Designated Preferred Stock and the corresponding amounts payable with respect of
any other stock of the Corporation ranking equally with Designated Preferred Stock as to such distribution has been paid in full, the holders of other stock of the Corporation shall be entitled to receive all remaining assets of the Corporation (or proceeds thereof) according to their respective rights and preferences.

(4) Merger, Consolidation and Sale of Assets Not Liquidation. For purposes of this Article III, Section 4 (d) (iv), the merger or consolidation of the Corporation with any other
corporation or other entity, including a merger or consolidation in which the holders of Designated Preferred Stock receive cash, securities or other property for their shares, or the sale, lease or exchange (for cash, securities or other property) of all or substantially all of the assets of the Corporation, shall not constitute a liquidation, dissolution or winding up of the Corporation.

(v) Redemption.

(1) Optional Redemption. Except as provided below, the Designated Preferred Stock may not be redeemed prior to the first Dividend Payment Date falling on or after the third anniversary
of the Original Issue Date. On or after the first Dividend Payment Date falling on or after the third anniversary of the Original Issue Date, the Corporation, at its option, subject to the approval of the Appropriate Federal Banking Agency, may redeem, in whole or in part, at any time and from time to time, out of funds legally available therefor, the shares of Designated Preferred Stock at the time outstanding, upon notice given as provided in Article III, Section 4 (d) (v)(3) below, at a redemption price equal
to the sum of (i) the Liquidation Amount per share and (ii) except as otherwise provided below, any accrued and unpaid dividends (including, if applicable as provided in Article III, Section 4 (d) (iii)(1) above, dividends on such amount) (regardless of whether any dividends are actually declared) to, but excluding, the date fixed for redemption.

Notwithstanding the foregoing, prior to the first Dividend Payment Date falling on or after the third anniversary of the Original Issue Date, the Corporation, at its option, subject to the approval of the Appropriate Federal Banking Agency, may redeem, in whole or in part, at any time and from
time to time, the shares of Designated Preferred Stock at the time outstanding, upon notice given as provided in Article III, Section 4 (d) (v)(3) below, at a redemption price equal to the sum of (i) the Liquidation Amount per share and (ii) except as otherwise provided below, any accrued and unpaid dividends (including, if applicable as provided in Article III, Section 4 (d) (iii)(1) above, dividends on such amount) (regardless of whether any dividends are actually declared) to, but excluding, the date fixed
for redemption; provided that (x) the Corporation (or any successor by Business Combination) has received aggregate gross proceeds of not less than the Minimum Amount (plus the “Minimum Amount” as defined in the relevant certificate of designations for each other outstanding series of preferred stock of such successor that was originally issued to the United States Department of the Treasury (the “Successor
Preferred Stock”) in connection with the Troubled Asset Relief Program Capital Purchase Program) from one or more Qualified Equity Offerings (including Qualified Equity Offerings of such successor), and (y) the aggregate redemption price of the Designated Preferred Stock (and any Successor Preferred Stock) redeemed pursuant to this paragraph may not exceed the aggregate net cash proceeds received by the Corporation (or any successor by Business Combination) from such Qualified Equity Offerings (including
Qualified Equity Offerings of such successor).

The redemption price for any shares of Designated Preferred Stock shall be payable on the redemption date to the holder of such shares against surrender of the certificate(s) evidencing such shares to the Corporation or its agent. Any declared but unpaid dividends payable on a redemption date
that occurs subsequent to the Dividend Record Date for a Dividend Period shall not be paid to the holder entitled to receive the redemption price on the redemption date, but rather shall be paid to the holder of record of the redeemed shares on such Dividend Record Date relating to the Dividend Payment Date as provided in Article III, Section 4 (d) (iii) (1) above.

(2) No Sinking Fund. The Designated Preferred Stock will not be subject to any mandatory redemption, sinking fund or other similar provisions. Holders of Designated Preferred Stock
will have no right to require redemption or repurchase of any shares of Designated Preferred Stock.

(3) Notice of Redemption. Notice of every redemption of shares of Designated Preferred Stock shall be given by first class mail, postage prepaid, addressed to the holders of record
of the shares to be redeemed at their respective last addresses appearing on the books of the Corporation. Such mailing shall be at least 30 days and not more than 60 days before the date fixed for redemption. Any notice mailed as provided in this Subsection shall be conclusively presumed to have been duly given, whether or not the holder receives such notice, but failure duly to give such notice by mail, or any defect in such notice or in the mailing thereof, to any holder of shares of Designated Preferred Stock
designated for redemption shall not affect the validity of the proceedings for the redemption of any other shares of Designated Preferred Stock. Notwithstanding the foregoing, if shares of Designated Preferred Stock are issued in book-entry form through The Depository Trust Company or any other similar facility, notice of redemption may be given to the holders of Designated Preferred Stock at such time and in any manner permitted by such facility. Each notice of redemption given to a holder shall state: (1) the
redemption date; (2) the number of shares of Designated Preferred Stock to be redeemed and, if less than all the shares held by such holder are to be redeemed, the number of such shares to be redeemed from such holder; (3) the redemption price; and (4) the place or places where certificates for such shares are to be surrendered for payment of the redemption price.

(4) Partial Redemption. In case of any redemption of part of the shares of Designated Preferred Stock at the time outstanding, the shares to be redeemed shall be selected either pro
rata or in such other manner as the Board of Directors or a duly authorized committee thereof may determine to be fair and equitable. Subject to the provisions hereof, the Board of Directors or a duly authorized committee thereof shall have full power and authority to prescribe the terms and
conditions upon which shares of Designated Preferred Stock shall be redeemed from time to time. If fewer than all the shares represented by any certificate are redeemed, a new certificate shall be issued representing the unredeemed shares without charge to the holder thereof.

(5) Effectiveness of Redemption. If notice of redemption has been duly given and if on or before the redemption date specified in the notice all funds necessary for the redemption
have been deposited by the Corporation, in trust for the pro rata benefit of the holders of the shares called for redemption, with a bank or trust company doing business in the Borough of Manhattan, The City of New York, and having a capital and surplus of at least $500 million and selected by the Board of Directors, so as to be and continue to be available solely therefor, then, notwithstanding that any certificate for any
share so called for redemption has not been surrendered for cancellation, on and after the redemption date dividends shall cease to accrue on all shares so called for redemption, all shares so called for redemption shall no longer be deemed outstanding and all rights with respect to such shares shall forthwith on such redemption date cease and terminate, except only the right of the holders thereof to receive the amount payable on such redemption from such bank or trust company, without interest. Any funds unclaimed
at the end of three years from the redemption date shall, to the extent permitted by law, be released to the Corporation, after which time the holders of the shares so called for redemption shall look only to the Corporation for payment of the redemption price of such shares.

(6) Status of Redeemed Shares. Shares of Designated Preferred Stock that are redeemed, repurchased or otherwise acquired by the Corporation shall revert to authorized but unissued
shares of Preferred Stock (provided that any such cancelled shares of Designated Preferred Stock may be reissued only as shares of any series of Preferred Stock other than Designated Preferred

Stock).

(vi) Conversion. Holders of Designated Preferred Stock shares shall have no right to exchange or convert such shares into any other securities.

(vii) Voting Rights.

(1) General. The holders of Designated Preferred Stock shall not have any voting rights except as set forth below or as otherwise from time to time required by law.

(2) Preferred Stock Directors. Whenever, at any time or times, dividends payable on the shares of Designated Preferred Stock have not been paid for an aggregate of six quarterly
Dividend Periods or more, whether or not consecutive, the authorized number of directors of the Corporation shall automatically be increased by two and the holders of the Designated Preferred Stock shall have the right, with holders of shares of any one or more other classes or series of Voting Parity Stock outstanding at the time, voting together as a class, to elect two directors (hereinafter the “Preferred Directors” and
each a “Preferred Director”) to fill such newly created directorships at the Corporation’s next annual meeting of stockholders (or at a special meeting called for that purpose prior to such next annual meeting) and at each subsequent annual meeting of stockholders until all accrued and unpaid dividends for all past Dividend
Periods, including the latest completed Dividend Period (including, if applicable as provided in Article III, Section 4 (d) (iii) (1) above, dividends on such amount), on all outstanding shares of Designated Preferred Stock have been declared and paid in full at which time such right shall terminate with respect to the Designated Preferred Stock, except as herein or by law expressly provided, subject to revesting in the event of each and every subsequent default of the character above mentioned; provided that
it shall be a qualification for election for any Preferred Director that the election of such Preferred Director shall not cause the Corporation to violate any corporate governance requirements of any securities exchange or other trading facility on which securities of the Corporation may then be listed or traded that listed or traded companies must have a majority of independent directors. Upon any termination of the right of the holders of shares of Designated Preferred Stock and Voting Parity Stock as a class
to vote for directors as provided above, the Preferred Directors shall cease to be qualified as directors, the term of office of all Preferred Directors then in office shall terminate immediately and the authorized number of directors shall be reduced by the number of Preferred Directors elected pursuant hereto. Any Preferred Director may be removed at any time, with or without cause, and any vacancy created thereby may be filled, only by the affirmative vote of the holders a majority of the shares of Designated
Preferred Stock at the time outstanding voting separately as a class together with the holders of shares of Voting Parity Stock, to the extent the voting rights of such holders described above are then exercisable. If the office of any Preferred Director becomes vacant for any reason other than removal from office as aforesaid, the remaining Preferred Director may choose a successor who shall hold office for the unexpired term in respect of which such vacancy occurred.

(3) Class Voting Rights as to Particular Matters. So long as any shares of Designated Preferred Stock are outstanding, in addition to any other vote or consent of stockholders required
by law or by the Charter, the vote or consent of the holders of at least 66 2/3% of the shares of Designated Preferred Stock at the time outstanding, voting as a separate class, given in person or by proxy, either in writing without a meeting or by vote at any meeting called for the purpose, shall be necessary for effecting or validating:

(A) Authorization of Senior Stock. Any amendment or alteration of the Charter to authorize or create or increase the authorized amount of, or any issuance of, any shares of, or any securities convertible into or exchangeable or
exercisable for shares of, any class or series of capital stock of the Corporation ranking senior to Designated Preferred Stock with respect to either or both the payment of dividends and/or the distribution of assets on any liquidation, dissolution or winding up of the Corporation;

(B) Amendment of Designated Preferred Stock. Any amendment, alteration or repeal of any provision of the Charter (including, unless no vote on such merger or consolidation is required by Article III, Section 4 (d) (vii) (3) (A)
below, any amendment, alteration or repeal by means of a merger, consolidation or otherwise) so as to adversely affect the rights, preferences, privileges or voting powers of the Designated Preferred Stock; or

(C) Share Exchanges, Reclassifications, Mergers and Consolidations. Any consummation of a binding share exchange or reclassification involving the Designated Preferred Stock, or of a merger or consolidation of the Corporation
with another corporation or other entity, unless in each case (x) the shares of Designated Preferred Stock remain outstanding or, in the case of any such merger or consolidation with respect to which the Corporation is not the surviving or resulting entity, are converted into or exchanged for preference securities of the surviving or resulting entity or its ultimate parent, and (y) such shares remaining outstanding or such preference securities, as the case may be, have such rights, preferences, privileges and
voting powers, and limitations and restrictions thereof, taken as a whole, as are not materially less favorable to the holders thereof than the rights, preferences, privileges and voting powers, and limitations and restrictions thereof, of Designated Preferred Stock immediately prior to such consummation, taken as a whole;

provided, however, that for all purposes of this Article III, Section 4 (d) (vii) (3), any increase in the amount of the authorized Preferred Stock, including any increase
in the authorized amount of Designated Preferred Stock necessary to satisfy preemptive or similar rights granted by the Corporation to other persons prior to the Signing Date, or the creation and issuance, or an increase in the authorized or issued amount, whether pursuant to preemptive or similar rights or otherwise, of any other series of Preferred Stock, or any securities convertible into or exchangeable or exercisable for any other series of Preferred Stock, ranking equally with and/or junior to Designated
Preferred Stock with respect to the payment of dividends (whether such dividends are cumulative or non-cumulative) and the distribution of assets upon liquidation, dissolution or winding up of the Corporation will not be deemed to adversely affect the rights, preferences, privileges or voting powers, and shall not require the affirmative vote or consent of, the holders of outstanding shares of the Designated Preferred Stock.

(4) Changes after Provision for Redemption. No vote or consent of the holders of Designated Preferred Stock shall be required pursuant to Section 4 (d) (vii) (3) above if, at or
prior to the time when any such vote or consent would otherwise be required pursuant to such Section, all outstanding shares of the Designated Preferred Stock shall have been redeemed, or shall have been called for redemption upon proper notice and sufficient funds shall have been deposited in trust for such redemption, in each case pursuant to Article III, Section 4(d)(v) above.

(5) Procedures for Voting and Consents. The rules and procedures for calling and conducting any meeting of the holders of Designated Preferred Stock (including, without limitation,
the fixing of a record date in connection therewith), the solicitation and use of proxies at such a meeting, the obtaining of written consents and any other aspect or matter with regard to such a meeting or such consents shall be governed by any rules of the Board of Directors or any duly authorized committee of the Board of Directors, in its discretion, may adopt from time to time, which rules and procedures shall conform to the requirements of the Charter, the Bylaws, and applicable law and the rules of any
national securities exchange or other trading facility on which Designated Preferred Stock is listed or traded at the time.

(viii) Record Holders. To the fullest extent permitted by applicable law, the Corporation and the transfer agent for Designated Preferred Stock may deem and treat the record holder of any share of Designated Preferred Stock as
the true and lawful owner thereof for all purposes, and neither the Corporation nor such transfer agent shall be affected by any notice to the contrary.

(ix) Notices. All notices or communications in respect of Designated Preferred Stock shall be sufficiently given if given in writing and delivered in person or by first class mail, postage prepaid, or if given in such other manner
as may be permitted in this Article III, Section 4, in the Charter or Bylaws or by applicable law. Notwithstanding the foregoing, if shares of Designated Preferred Stock are issued in book-entry form through The Depository Trust Company or any similar facility, such notices may be given to the holders of Designated Preferred Stock in any manner permitted by such facility.

(x) No Preemptive Rights. No share of Designated Preferred Stock shall have any rights of preemption whatsoever as to any securities of the Corporation, or any warrants, rights or options issued or granted with respect thereto,
regardless of how such securities, or such warrants, rights or options, may be designated, issued or granted.

(xi) Replacement Certificates. The Corporation shall replace any mutilated certificate at the holder’s expense upon surrender of that certificate to the Corporation. The Corporation shall replace certificates that become
destroyed, stolen or lost at the holder’s expense upon delivery to the Corporation of reasonably satisfactory evidence that the certificate has been destroyed, stolen or lost, together with any indemnity that may be reasonably required by the Corporation.

(xii) Other Rights. The shares of Designated Preferred Stock shall not have any rights, preferences, privileges or voting powers or relative, participating, optional or other special rights, or qualifications, limitations or restrictions
thereof, other than as set forth herein or in the Charter or as provided by applicable law.

These Articles of Amendment are executed as of the 28th day of August, 2009.

FIRST GUARANTY BANCSHARES, INC.

By:             /s/ Michael R. Sharp

Name:Michael R. Sharp

Title:  President and Chief Executive Officer

By:       /s/ Michele E. LoBianco

Name:Michele E. LoBianco

Title:  Secretary

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