Document:

Unassociated Document

     

    THIS WARRANT AND THE SHARES OF COMMON
STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. THIS WARRANT
AND THE COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID ACT AND ANY APPLICABLE
STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO
PETROALGAE INC. THAT SUCH REGISTRATION IS NOT REQUIRED.

     

    Right to
Purchase up to 357,143 Shares of Common Stock of

    PetroAlgae
Inc.

    (subject
to adjustment as provided herein)

     

    COMMON
STOCK PURCHASE WARRANT

     

    
      	
              No. 13

            	
              Issue
      Date:  December 24, 2009

            

    

     

    PETROALGAE
INC., a corporation organized under the laws of the State of Delaware (the
“Company”), hereby
certifies that, for value received, Green Science Energy LLC, or assigns (the
“Holder”), is entitled,
subject to the terms set forth below, to purchase from the Company (as defined
herein) from and after the Issue Date of this Warrant and at any time prior to
December 24, 2014, up to three hundred fifty-seven thousand one hundred
forty-three (357,143) (subject to adjustment as provided herein) fully paid and
nonassessable shares of Common Stock (as hereinafter defined), par value $0.001,
at the applicable Exercise Price per share (as defined below).  The
number and character of such shares of Common Stock and the applicable Exercise
Price per share are subject to adjustment as provided herein.

     

    As used
herein the following terms, unless the context otherwise requires, have the
following respective meanings:

     

    (a)           The
term “Common Stock”
includes (i) the Company’s Common Stock, par value $0.001; and (ii) any other
securities into which or for which any of the securities described in the
preceding clause (i) may be converted or exchanged pursuant to a plan of
recapitalization, reorganization, merger, sale of assets or
otherwise.

     

    (b)           The
term “Company” shall
include PetroAlgae Inc. and any person or entity which shall succeed, or assume
the obligations of, PetroAlgae Inc. hereunder.

     

    (c)           The
“Exercise Price”
applicable under this Warrant shall be $15.00 per share, subject to adjustment
as provided herein.

     

    (d)           The
term “Other Securities”
refers to any stock (other than Common Stock) and other securities of the
Company or any other person (corporate or otherwise) which the holder of the
Warrant at any time shall be entitled to receive, or shall have received, on the
exercise of the Warrant, in lieu of or in addition to Common Stock, or which at
any time shall be issuable or shall have been issued in exchange for or in
replacement of Common Stock or Other Securities pursuant to Section 4 or
otherwise.

     

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

     

    1.           Exercise of
Warrant.

     

    1.1           Number of Shares Issuable
upon Exercise.  From and after the date hereof, the Holder
shall be entitled to receive, upon exercise of this Warrant in whole or in part,
by delivery of an original or fax copy of an exercise notice in the form
attached hereto as Exhibit A (the “Exercise Notice”), three hundred fifty-seven
thousand one hundred forty-three (357,143) shares of Common Stock of the
Company, subject to adjustment pursuant to Section 4.

     

    1.2           Fair Market
Value.  For purposes hereof, the “Fair Market Value” of a share
of Common Stock as of a particular date (the “Determination Date”) shall
mean:

     

    (a)           If
the Company’s Common Stock is traded on the American Stock Exchange or another
national exchange or is quoted on the Global Market, the Global Select Market or
the Capital Market of The Nasdaq Stock Market, Inc. (“Nasdaq”), then the closing
or last sale price, respectively, reported for the last business day immediately
preceding the Determination Date.

     

    (b)           If
the Company’s Common Stock is not traded on the American Stock Exchange or
another national exchange or on the Nasdaq but is traded on the NASDAQ Over The
Counter Bulletin Board, then the mean of the average of the closing bid and
asked prices reported for the last business day immediately preceding the
Determination Date.

     

    (c)           Except
as provided in clause (d) below, if the Company’s Common Stock is not publicly
traded, then as the Holder and the Company agree or in the absence of agreement
by arbitration in accordance with the rules then in effect of the American
Arbitration Association, before a single arbitrator to be chosen from a panel of
persons qualified by education and training to pass on the matter to be
decided.

     

    (d)           If
the Determination Date is the date of a liquidation, dissolution, winding up, or
any event deemed to be a liquidation, dissolution or winding up pursuant to the
Company’s charter, then all amounts to be payable per share to holders of the
Common Stock pursuant to the charter in the event of such liquidation,
dissolution or winding up, plus all other amounts to be payable per share in
respect of the Common Stock in liquidation under the charter, assuming for the
purposes of this clause (d) that all of the shares of Common Stock then issuable
upon exercise of the Warrant are outstanding at the Determination
Date.

     

    1.3           Company
Acknowledgment.  The Company will, at the time of the exercise
of this Warrant, upon the request of the holder hereof acknowledge in writing
its continuing obligation to afford to such holder any rights to which such
holder shall continue to be entitled after such exercise in accordance with the
provisions of this Warrant. If the holder shall fail to make any such request,
such failure shall not affect the continuing obligation of the Company to afford
to such holder any such rights.

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

     

    1.4           Trustee for Warrant
Holders.  In the event that a bank or trust company shall have
been appointed as trustee for the holders of this Warrant pursuant to Subsection
3.2, such bank or trust company shall have all the powers and duties of a
warrant agent (as hereinafter described) and shall accept, in its own name for
the account of the Company or such successor person as may be entitled thereto,
all amounts otherwise payable to the Company or such successor, as the case may
be, on exercise of this Warrant pursuant to this Section 1.

     

    2.           Procedure for
Exercise.

     

    2.1           Delivery of Stock
Certificates, Etc., on Exercise.  The Company agrees that the
shares of Common Stock purchased upon exercise of this Warrant shall be deemed
to be issued to the Holder as the record owner of such shares as of the close of
business on the date on which this Warrant shall have been surrendered and
payment made for such shares in accordance herewith.  As soon as
practicable after the exercise of this Warrant in full or in part, and in any
event within three (3) business days thereafter, the Company at its expense
(including the payment by it of any applicable issue taxes) will cause to be
issued in the name of and delivered to the Holder, or as such Holder (upon
payment by such Holder of any applicable transfer taxes) may direct in
compliance with applicable securities laws, a certificate or certificates for
the number of duly and validly issued, fully paid and nonassessable shares of
Common Stock (or Other Securities) to which such Holder shall be entitled on
such exercise, plus, in lieu of any fractional share to which such holder would
otherwise be entitled, cash equal to such fraction multiplied by the then Fair
Market Value of one full share, together with any other stock or other
securities and property (including cash, where applicable) to which such Holder
is entitled upon such exercise pursuant to Section 1 or otherwise.

     

    2.2           Exercise.

     

    (a)           Payment
may be made either (i) in cash of immediately available funds or by certified or
official bank check payable to the order of the Company equal to the applicable
aggregate Exercise Price, (ii) by delivery of this Warrant, or shares of Common
Stock and/or Common Stock receivable upon exercise of this Warrant in accordance
with the formula set forth in subsection (b) below, or (iii) by a combination of
any of the foregoing methods, for the number of Common Shares specified in such
Exercise Notice (as such exercise number shall be adjusted to reflect any
adjustment in the total number of shares of Common Stock issuable to the Holder
per the terms of this Warrant) and the Holder shall thereupon be entitled to
receive the number of duly authorized, validly issued, fully-paid and
non-assessable shares of Common Stock (or Other Securities) determined as
provided herein.

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

     

    (b)           Notwithstanding
any provisions herein to the contrary, if the Fair Market Value of one share of
Common Stock is greater than the Exercise Price (at the date of calculation as
set forth below), in lieu of exercising this Warrant for cash, the Holder may
elect to receive shares equal to the value (as determined below) of this Warrant
(or the portion thereof being exercised) by surrender of this Warrant at the
principal office of the Company together with the properly endorsed Exercise
Notice in which event the Company shall issue to the Holder a number of shares
of Common Stock computed using the following formula:

     

    
      	
               
      

            	
              X=

            	
               
      Y(A-B)  

            

    

     

    
      	
               
      

            	
                   A

            

    

     

    
      	
              Where
      X =

            	
              the
      number of shares of Common Stock to be issued to the
  Holder

            

    

     

    
      	
               
      

            	
              Y
      =

            	
              the
      number of shares of Common Stock purchasable under this Warrant or, if
      only a portion of this Warrant is being exercised, the portion of this
      Warrant being exercised (at the date of such
  calculation)

            

    

     

    
      	
               
      

            	
              A
      =

            	
              the
      Fair Market Value of one share of the Company’s Common Stock (at the date
      of such calculation)

            

    

     

    
      	
               
      

            	
              B
      =

            	
              the
      Exercise Price per share (as adjusted to the date of such
      calculation)

            

    

     

    3.           Effect of Reorganization,
Etc.; Adjustment of Exercise Price.

     

    3.1           Reorganization,
Consolidation, Merger, Etc.  If there occurs any capital
reorganization or any reclassification of the Common Stock of the Company, the
consolidation or merger of the Company with or into another person or entity
(other than a merger or consolidation of the Company in which the Company is the
continuing entity and which does not result in any reorganization or
reclassification of its outstanding Common Stock) or the sale or conveyance of
all or substantially all of the assets of the Company to another person or
entity, then, as a condition precedent to any such reorganization,
reclassification, consolidation, merger, sale or conveyance, the Holder will be
entitled to receive upon surrender of this Warrant to the Company (x) to the
extent there are cash proceeds resulting from the consummation of such
reorganization, reclassification, consolidation, merger, sale or conveyance, in
exchange for this Warrant, cash in an amount equal to the cash proceeds that
would have been payable to the Holder had the Holder exercised this Warrant in
its entirety immediately prior to the consummation of such reorganization,
reclassification, consolidation, merger, sale or conveyance, less the aggregate
exercise price payable upon exercise of this Warrant in its entirety, and (y) to
the extent that the Holder would be entitled to receive securities (in addition
to or in lieu of cash in connection with any such reorganization,
reclassification, consolidation, merger, sale or conveyance), the same kind and
amounts of securities or other assets, or both, that are issuable or
distributable to the holders of outstanding Common Stock of the Company with
respect to their Common Stock upon such reorganization, reclassification,
consolidation, merger, sale or conveyance, as would have been deliverable to the
Holder had the Holder exercised this Warrant in its entirety immediately prior
to the consummation of such reorganization, reclassification, consolidation,
merger, sale or conveyance less an amount of such securities having a value
equal to the aggregate exercise price payable upon exercise of this Warrant in
its entirety.

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

     

    3.2           Dissolution.  In
the event of any dissolution of the Company following the transfer of all or
substantially all of its properties or assets, the Company, concurrently with
any distributions made to holders of its Common Stock, shall at its expense
deliver or cause to be delivered to the Holder the stock and other securities
and property (including cash, where applicable) receivable by the Holder
pursuant to Section 3.1, or, if the Holder shall so instruct the Company, to a
bank or trust company specified by the Holder and having its principal office in
New York, NY as trustee for the Holder.

     

    3.3           Continuation of
Terms.  Upon any reorganization, consolidation, merger or
transfer (and any dissolution following any transfer) referred to in this
Section 3, this Warrant shall continue in full force and effect and the terms
hereof shall be applicable to the shares of stock and other securities and
property receivable on the exercise of this Warrant after the consummation of
such reorganization, consolidation or merger or the effective date of
dissolution following any such transfer, as the case may be, and shall be
binding upon the issuer of any such stock or other securities, including, in the
case of any such transfer, the person acquiring all or substantially all of the
properties or assets of the Company, whether or not such person shall have
expressly assumed the terms of this Warrant as provided in Section
4.  In the event this Warrant does not continue in full force and
effect after the consummation of the transactions described in this Section 3,
then the Company’s securities and property (including cash, where applicable)
receivable by the Holder will be delivered to the Holder or the Trustee as
contemplated by Section 3.2.

     

    3.4           Restricted
Securities.  The Holder understands that this Warrant and the
shares of Common Stock issuable upon exercise of this Warrant, will not be
registered at the time of their issuance under the Securities Act of 1933 (the
“Securities Act”) for the reason that the sale provided for herein is exempt
based on the representations of the Holder set forth herein.  The
Holder represents that it is experienced in evaluating companies such as the
Company, has such knowledge and experience in financial and business matters as
to be capable of evaluating the merits and risks of its investment, and has the
ability to suffer the total loss of the investment.  The Holder
further represents that it has had the opportunity to ask questions of and
receive answers from the Company concerning the terms and conditions of this
Warrant, the business of the Company, and to obtain additional information to
such Holder’s satisfaction.  The Holder further represents that it is
an “accredited investor” within the meaning of Regulation D under the Securities
Act, as presently in effect.  The Holder further represents that this
Warrant is being acquired for the account of the Holder for investment only and
not with a view to, or with any intention of, a distribution or resale thereof,
in whole or in part, or the grant of any participation therein.

     

    3.5           Compliance with the
Securities Act.  The Holder, by acceptance hereof, agrees that
this Warrant, and the shares of Common Stock issuable upon exercise of this
Warrant, are being acquired for investment and that such Holder will not offer,
sell or otherwise dispose of this Warrant, or any shares of Common Stock
issuable upon exercise of this Warrant, except under circumstances which will
not result in a violation of the Securities Act, or any applicable state
securities laws.

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

     

    4.           Extraordinary Events
Regarding Common Stock.  In the event that the Company shall
(a) issue additional shares of the Common Stock as a dividend or other
distribution on outstanding Common Stock or any preferred stock issued by the
Company, (b) subdivide its outstanding shares of Common Stock, (c) combine its
outstanding shares of the Common Stock into a smaller number of shares of the
Common Stock, then, in each such event, (i) the number of shares of Common Stock
that the Holder shall thereafter, on the exercise hereof as provided in Section
1, be entitled to receive shall be adjusted to a number determined by
multiplying the number of shares of Common Stock that would otherwise (but for
the provisions of this Section 4) be issuable on such exercise by a fraction of
which (a) the numerator is the number of issued and outstanding shares of Common
Stock immediately after such any such event, and (b) the denominator is the
number of issued and outstanding shares of Common Stock immediately prior to any
such event, and (ii) the Exercise Price shall be accordingly adjusted so that
the aggregate Exercise Price prior to such adjustment shall equal to the
aggregate Exercise Price following such adjustment.

     

    5.           Certificate as to
Adjustments.  In each case of any adjustment or readjustment
(i) in the shares of Common Stock (or Other Securities) issuable on the exercise
of this Warrant, (ii) of the Exercise Price, or (iii) the Effective Per Share
Price, the Company at its expense will promptly cause its Chief Financial
Officer or other appropriate designee to compute such adjustment or readjustment
in accordance with the terms of this Warrant and prepare a certificate setting
forth such adjustment or readjustment and showing in detail the facts upon which
such adjustment or readjustment is based, including a statement of (a) the
consideration received or receivable by the Company for any additional shares of
Common Stock (or Other Securities) issued or sold or deemed to have been issued
or sold, (b) the number of shares of Common Stock (or Other Securities)
outstanding or deemed to be outstanding, and (c) the Exercise Price, the
Effective Per Share Price and the number of shares of Common Stock to be
received upon exercise of this Warrant, in effect immediately prior to such
adjustment or readjustment and as adjusted or readjusted as provided in this
Warrant.  The Company will forthwith mail a copy of each such
certificate to the holder and any warrant agent of the Company (appointed
pursuant to Section 9 hereof).

     

    6.           Reservation of Stock, Etc.,
Issuable on Exercise of Warrant.  The Company will at all times
reserve and keep available, solely for issuance and delivery on the exercise of
this Warrant, shares of Common Stock (or Other Securities) from time to time
issuable on the exercise of this Warrant.

     

    7.           Assignment; Exchange of
Warrant.  Subject to compliance with applicable securities
laws, this Warrant, and the rights evidenced hereby, may be transferred by any
registered holder hereof (a “Transferor”) in whole or in part.  On the
surrender for exchange of this Warrant, with the Transferor’s endorsement in the
form of Exhibit B attached hereto (the “Transferor Endorsement Form”) and
together with evidence reasonably satisfactory to the Company demonstrating
compliance with applicable securities laws, which shall include, without
limitation, a legal opinion from the Transferor’s counsel (at the Company’s
expense) that such transfer is exempt from the registration requirements of
applicable securities laws, the Company at its expense (but with payment by the
Transferor of any applicable transfer taxes) will issue and deliver to or on the
order of the Transferor thereof a new Warrant of like tenor, in the name of the
Transferor and/or the transferee(s) specified in such Transferor Endorsement
Form (each a “Transferee”), calling in the aggregate on the face or faces
thereof for the number of shares of Common Stock called for on the face or faces
of the Warrant so surrendered by the Transferor.

     

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

     

    8.           Replacement of
Warrant.  On receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant and, in
the case of any such loss, theft or destruction of this Warrant, on delivery of
an indemnity agreement or security reasonably satisfactory in form and amount to
the Company or, in the case of any such mutilation, on surrender and
cancellation of this Warrant, the Company at its expense will execute and
deliver, in lieu thereof, a new Warrant of like tenor.

     

    9.           Warrant
Agent.  The Company may, by written notice to the each Holder
of the Warrant, appoint an agent for the purpose of issuing Common Stock (or
Other Securities) on the exercise of this Warrant pursuant to Section 1,
exchanging this Warrant pursuant to Section 7, and replacing this Warrant
pursuant to Section 8, or any of the foregoing, and thereafter any such
issuance, exchange or replacement, as the case may be, shall be made at such
office by such agent.

     

    10.           Transfer on the Company’s
Books.  Until this Warrant is transferred on the books of the
Company, the Company may treat the registered holder hereof as the absolute
owner hereof for all purposes, notwithstanding any notice to the
contrary.

     

    11.           Rights of
Shareholders.  No Holder shall be entitled to vote or receive
dividends or be deemed the holder of the shares of Common Stock or any other
securities of the Company which may at any time be issuable upon exercise of
this Warrant for any purpose (the “Warrant Shares”), nor shall
anything contained herein be construed to confer upon the Holder, as such, any
of the rights of a shareholder of the Company or any right to vote for the
election of directors or upon any matter submitted to shareholders at any
meeting thereof, or to give or withhold consent to any corporate action (whether
upon the recapitalization, issuance of shares, reclassification of shares,
change of nominal value, consolidation, merger, conveyance or otherwise) or to
receive notice of meetings, or to receive dividends or subscription rights or
otherwise, in each case, until the earlier to occur of (x) the date of actual
delivery to Holder (or its designee) of the Warrant Shares issuable upon the
exercise hereof or (y) the third business day following the date such Warrant
Shares first become deliverable to Holder, as provided herein.

     

    12.           Notices,
Etc.  All notices and other communications from the Company to
the Holder shall be mailed by first class registered or certified mail, postage
prepaid, at such address as may have been furnished to the Company in writing by
such Holder or, until any such Holder furnishes to the Company an address, then
to, and at the address of, the last Holder who has so furnished an address to
the Company.

     

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

     

    13.           Miscellaneous.  This
Warrant and any term hereof may be changed, waived, discharged or terminated
only by an instrument in writing signed by the party against which enforcement
of such change, waiver, discharge or termination is sought. THIS WARRANT SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.  ANY ACTION
BROUGHT CONCERNING THE TRANSACTIONS CONTEMPLATED BY THIS WARRANT SHALL BE
BROUGHT ONLY IN STATE COURTS OF NEW YORK OR IN THE FEDERAL COURTS LOCATED IN THE
STATE OF NEW YORK; PROVIDED, HOWEVER, THAT THE HOLDER MAY CHOOSE TO WAIVE THIS
PROVISION AND BRING AN ACTION OUTSIDE THE STATE OF NEW YORK.  The
individuals executing this Warrant on behalf of the Company agree to submit to
the jurisdiction of such courts and waive trial by jury.  The
prevailing party shall be entitled to recover from the other party its
reasonable attorneys’ fees and costs.  In the event that any provision
of this Warrant is invalid or unenforceable under any applicable statute or rule
of law, then such provision shall be deemed inoperative to the extent that it
may conflict therewith and shall be deemed modified to conform with such statute
or rule of law.  Any such provision which may prove invalid or
unenforceable under any law shall not affect the validity or enforceability of
any other provision of this Warrant.  The headings in this Warrant are
for purposes of reference only, and shall not limit or otherwise affect any of
the terms hereof.  The invalidity or unenforceability of any provision
hereof shall in no way affect the validity or enforceability of any other
provision hereof.  The Company acknowledges that legal counsel
participated in the preparation of this Warrant and, therefore, stipulates that
the rule of construction that ambiguities are to be resolved against the
drafting party shall not be applied in the interpretation of this Warrant to
favor any party against the other party.

     

     

    [BALANCE
OF PAGE INTENTIONALLY LEFT BLANK;

     

    SIGNATURE
PAGE FOLLOWS]

     

    
      
         

      

      
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    IN
WITNESS WHEREOF, the Company has executed this Warrant as of the date first
written above.

     

    
      
        	 	      
                PETROALGAE
      INC.

              	 
	      
                WITNESS:

              	 	 	 
	
                 

              	
                By:
      

              	      
                /s/
      David Szostak

              	 
	      
                /s/
      Susan Canipe

              	      
                Name:

              	      
                David
      Szostak

              	 
	      
                
      	      
                Title:

              	      
                President

              	 
	 	 	 	 

      

    

     

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

    EXHIBIT
A TO WARRANT

     

    FORM
OF SUBSCRIPTION

    (To Be
Signed Only On Exercise Of Warrant)

     

    
      	
              TO:

            	
              PETROALGAE
      INC.

            
	 
      	
              _____________________

            
	 
      	
              _____________________

            
	 
      	 
      

    

     

    Attention: Chief
Financial Officer

     

    The
undersigned, pursuant to the provisions set forth in the attached Warrant
(No.____), hereby irrevocably elects to purchase (check applicable
box):

     

    
      	
              ________

            	
              ________
      shares of the common stock covered by such warrant; or

            
	 	 
	
              ________

            	
              the
      maximum number of shares of common stock covered by such warrant pursuant
      to the cashless exercise procedure set forth in Section
  2.

            

    

     

    The
undersigned herewith makes payment of the full Exercise Price for such shares at
the price per share provided for in such Warrant, which is
$___________.  Such payment takes the form of (check applicable box or
boxes):

     

    
      	
              ________

            	
              $__________
      in lawful money of the United States; and/or

            
	 	 
	
              ________

            	
              the
      cancellation of such portion of the attached Warrant as is exercisable for
      a total of _______ shares of Common Stock (using a Fair Market Value of
      $_______ per share for purposes of this calculation);
    and/or

            
	 	 
	
              ________

            	
              the
      cancellation of such number of shares of Common Stock as is necessary, in
      accordance with the formula set forth in Section 2.2, to exercise this
      Warrant with respect to the maximum number of shares of Common Stock
      purchasable pursuant to the cashless exercise procedure set forth in
      Section 2.

            

    

     

    The
undersigned requests that the certificates for such shares be issued in the name
of, and delivered to ______________________________________________ whose
address is
___________________________________________________________________________.

     

    The
undersigned represents and warrants that all offers and sales by the undersigned
of the securities issuable upon exercise of the within Warrant shall be made
pursuant to registration of the Common Stock under the Securities Act of 1933,
as amended (the “Securities Act”) or pursuant to an exemption from registration
under the Securities Act.

     

    
      	
              Dated:

            	 
      	 	  
      
	 
      	 
      	 	
              (Signature
      must conform to name of holder as specified on the face of the
      Warrant)

            
	 	 	 	 	 
	 
      	 
      	 	
              Address:

            	  
      
	 
      	 
      	 	 
      	  
      

    

     

    
      
         

      

      
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    EXHIBIT
B

     

    FORM
OF TRANSFEROR ENDORSEMENT

    (To Be
Signed Only On Transfer Of Warrant)

     

    For value
received, the undersigned hereby sells, assigns, and transfers unto the
person(s) named below under the heading “Transferees” the right represented by
the within Warrant to purchase the percentage and number of shares of Common
Stock of PetroAlgae Inc. into which the within Warrant relates specified under
the headings “Percentage Transferred” and “Number Transferred,” respectively,
opposite the name(s) of such person(s) and appoints each such person Attorney to
transfer its respective right on the books of PetroAlgae Inc. with full power of
substitution in the premises.

     

    
      	
              Transferees

            	 	
              Address

            	 	
              Percentage
      Transferred

            	 	
              Number

              Transferred

            
	 
      	 	 
      	 	 
      	 	 
      
	 
      	 	 
      	 	 
      	 	 
      
	 
      	 	 
      	 	 
      	 	 
      
	 
      	 	 
      	 	 
      	 	 
      

    

    

    
      	
              Dated:

            	 
      	 	 
      
	 
      	 
      	 	
              (Signature
      must conform to name of holder as specified on the face of the
      Warrant)

            
	 	 	 	 	 
	 
      	 
      	 	
              Address:

            	 
      
	 
      	 
      	 	 
      	 
      
	 	 	 	 
	 	 	 	 
	 
      	 
      	 	
              SIGNED
      IN THE PRESENCE OF:

            
	 	 	 	 
	 
      	 
      	 	 
      
	 
      	 
      	 	
              (Name)

            
	 	 	 	 
	ACCEPTED
      AND AGREED:	 	 
	[TRANSFEREE]	 	 
	 	 	 
	 	 	 
	
              (Name)

            	 	 

    

     

    
      
         

      

      
        11Unassociated Document

    
      
         

      

      SECURITIES
PURCHASE AGREEMENT

       

      This
SECURITIES PURCHASE AGREEMENT (this “Agreement”) is
entered into as of the 1st day of
March, 2010, by and between PETROALGAE INC., a Delaware corporation (“Seller,” or the
“Company”), and
VALENS U.S. SPV I, LLC, a Delaware limited liability company (“Purchaser”).

       

      WITNESSETH:

       

      WHEREAS,
Seller desires to sell to Purchaser, and Purchaser desires to purchase from
Seller, 171,562 shares (the “Shares”) of common
stock, par value $0.001 per share, of the Company (the “Common Stock”) and a
warrant to purchase 171,562 shares of Common Stock, in the form attached hereto
as Exhibit A (the “Warrant”, and
together with the Shares, the “Securities”) upon the
terms and subject to the conditions set forth herein.

       

      NOW,
THEREFORE, in consideration of the foregoing and the respective representations,
warranties, covenants, agreements, undertakings and obligations set forth
herein, and intending to be legally bound hereby, the parties hereto agree as
follows:

       

      ARTICLE 1

       

      SALE
AND PURCHASE OF THE SECURITIES

       

      Section
1.1        Sale and Purchase of the
Securities.  Upon the terms and subject to the conditions set
forth in this Agreement and on the basis of the representations, warranties,
covenants, agreements, undertakings and obligations contained herein, at the
Closing (as defined in Section 2.1 hereof),
Seller hereby agrees to sell to Purchaser, and Purchaser hereby agrees to
purchase from Seller, the Securities, free and clear of any and all Liens (as
defined in Section
8.11 hereof), for the consideration specified in this Article 1.

       

      Section
1.2        Purchase
Price.  The purchase price for the Securities (the “Purchase Price”)
shall be $1,372,500.00.

       

      Section
1.3        Payment of Purchase
Price.  Purchaser agrees to pay to Seller the Purchase Price at
the Closing by wire transfer or delivery of other immediately available funds to
an account of Seller designated to Purchaser prior to the Closing. For purposes
of this Agreement, the term “Business Day” shall
mean any day, other than a Saturday or a Sunday, that is neither a legal holiday
nor a day on which banking institutions are generally authorized or required by
law or regulation to close in the City of New York.

       

      ARTICLE 2

       

      CLOSING
AND DELIVERY

       

      Section
2.1        Closing
Date.  The closing (the “Closing”) of the sale
and purchase of the Securities (the “Securities Purchase”)
shall take place at the offices of Torys LLP, 237 Park Avenue, New York, New
York 10017 at 10:00 A.M. (New York City time) on the third (3rd) Business Day
following satisfaction or, if permissible, waiver of the conditions set forth in
Article 6
of this Agreement (excluding those conditions which by their nature are to be
satisfied as a part of the Closing) or at such other place, time or date as the
parties hereto may agree (the time and date of the Closing being herein referred
to as the “Closing
Date”).

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      Section
2.2        Deliveries by Seller to
Purchaser.  On the Closing Date, Seller shall deliver, or cause
to be delivered, to Purchaser the following:

       

      (a) 
   a certificate or certificates evidencing all of the Shares and
the duly executed Warrant;

       

      (b)  
  the certificates and other documents and instruments to be delivered
pursuant to Section
6.2 hereof;

       

      and

       

      (c)   
 such other closing documents as Seller and Purchaser shall reasonably
agree.

       

      Section
2.3        Deliveries by Purchaser to
Seller.  On the Closing Date, Purchaser shall deliver, or cause
to be delivered, to Seller the following:

       

      (a)  
  the Purchase Price, in accordance with Section 1.3
hereof;

       

      (b)  
  the certificates and other documents and instruments to be delivered
pursuant to Section
6.3 hereof; and

       

      (c)  
  such other closing documents as Seller and Purchaser shall
reasonably agree.

       

      ARTICLE 3

       

      REPRESENTATIONS
AND WARRANTIES OF THE COMPANY

       

      As used
herein (i) any reference to any event, change or effect being “material” with
respect to the Company means an event, change or effect which is material in
relation to the condition (financial or otherwise), properties, business,
operations, prospects, assets or results of operations of the Company, and (ii)
the term “Material
Adverse Effect” on the Company means a material adverse effect on (x) the
condition (financial or otherwise), properties, business, operations, prospects,
assets, nature of assets, liabilities, or results of operations of the Company
and its subsidiaries taken individually and/or as whole, or (y) the ability of
the Company to perform its obligations under this Agreement.

       

      The
Company hereby represents and warrants to Purchaser as follows:

      
        
           

        

        
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      Section
3.1        Organization and Good
Standing.  The Company is a corporation duly organized, validly
existing and in good standing under the laws of its respective jurisdiction of
incorporation with full corporate power and authority to conduct its business as
it is now being conducted.  The Company is duly qualified or licensed
to do business as a foreign corporation and is in good standing as a foreign
corporation in each jurisdiction in which either the ownership or use of the
properties owned or used by it, or the nature of the activities conducted by it,
requires such licensing, qualification or good standing, except for any failure
to so license, qualify or be in such good standing, which, when taken together
with all other such failures, has not had, does not have and could not
reasonably be expected to have a Material Adverse Effect on the
Company.

       

      Section
3.2        Capitalization.

       

      (a) 
   The authorized capital stock of the Company consists solely of
300,000,000 shares of Common Stock, and 25,000,000 shares of Preferred Stock, of
which 106,235,606 shares of Common Stock are issued and outstanding and of which
no shares of Preferred Stock are issued and outstanding.  Except as
set forth on Schedule 3.2(a) hereto for outstanding stock options to purchase
1,072,500 shares of Common Stock, that certain Warrant exercisable for 68,625
shares of Common Stock issued by the Company to Purchaser on August 28, 2009,
that certain Warrant exercisable for 56,375 shares of Common Stock issued by the
Company to Valens Offshore SPV I, Ltd. on August 28, 2009, that certain Warrant
exercisable for 34,313 shares of Common Stock issued by the Company to Purchaser
on September 4, 2009, that certain Warrant exercisable for 28,187 shares of
Common Stock issued by the Company to Valens Offshore SPV I, Ltd. on September
4, 2009, that certain Warrant exercisable for 68,625 shares of Common Stock
issued by the Company to Purchaser on September 14, 2009, that certain Warrant
exercisable for 56,375shares of Common Stock issued by the Company to Valens
Offshore SPV I, Ltd. on September 14, 2009, that certain Warrant exercisable for
68,625 shares of Common Stock issued by the Company to Purchaser on September
29, 2009, that certain Warrant exercisable for 56,375shares of Common Stock
issued by the Company to Valens Offshore SPV I, Ltd. on September 29, 2009, and
certain warrants granted to third party investors who purchased shares of Common
Stock in connection with a private offering currently being conducted by the
Company,, there are no options to purchase or rights to subscribe for shares of
Common Stock, securities by their terms convertible into, exercisable or
exchangeable for shares of Common Stock, or options to purchase or rights to
subscribe for such convertible, exercisable or exchangeable securities issued or
outstanding. All of the issued and outstanding shares of capital stock of the
Company have been duly authorized and are validly issued, fully paid and
nonassessable and have been issued in compliance with all foreign, federal and
state securities laws.

       

      (b)  
  The Securities and the shares issuable upon exercise of the Warrant
to be issued and sold by the Company to the Purchaser hereunder and thereunder
have been duly and validly authorized and, when issued and delivered against
payment therefore as provided herein and therein, will be duly and validly
issued and fully paid and non-assessable.

      
        
           

        

        
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      Section
3.3        Corporate
Authority.  The Company has taken all corporate action
necessary in order to execute, deliver and perform fully, its obligations under
this Agreement and to consummate the Securities Purchase contemplated
hereby.  The execution and delivery by the Company of this Agreement
and the consummation by the Company of the Securities Purchase contemplated
hereby have been duly authorized and approved by the Board of Directors of the
Company and no other corporate proceeding with respect to the Company is
necessary to authorize this Agreement or the Securities Purchase contemplated
hereby.  This Agreement has been duly executed and delivered by the
Company and constitutes a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms.

       

      Section
3.4        No Violations; No
Consents.  The execution and delivery by the Company of this
Agreement does not, and the performance and consummation by the Company of the
Securities Purchase contemplated hereby will not, directly or indirectly (with
or without the giving of notice or the lapse of time or both):

       

      (a)  
  contravene, conflict with, or constitute or result in a breach or
violation of, or a default under (i) any provision of the Company’s Certificate
of Incorporation or By-laws or (ii) any resolution adopted by the Board of
Directors (or similar governing body) of the Company;

       

      (b)   
 contravene, conflict with, or constitute or result in a breach or
violation of any Law (as defined below), award, decision, injunction, judgment,
decree, settlement, order, process, ruling, subpoena or verdict (whether
temporary, preliminary or permanent) entered, issued, made or rendered by any
court, administrative agency, arbitrator, Governmental Entity or other tribunal
of competent jurisdiction (“Order”) or give any
Governmental Entity or any other Person the right to challenge the Securities
Purchase contemplated hereby; or

       

      (c)    
require the consent or approval of any Governmental Entity or any third party
which has not already been obtained.

       

      For
purposes of this Agreement, the term “Law” shall mean any
federal, state, local, municipal, foreign, international, multinational, or
other constitution, law, rule, standard, requirement, administrative ruling,
order, ordinance, principle of common law, legal doctrine, code, regulation,
statute, treaty or process.

       

      Section
3.5        Actions.  There
are no civil, criminal, administrative, investigative or informal actions,
audits, demands, suits, claims, arbitrations, hearings, litigations, disputes,
investigations or other proceedings of any kind or nature (“Actions”) or Orders
issued, pending or, to the knowledge of the Company, threatened, against the
Company or any of its assets, at law, in equity or otherwise, in, before, by, or
otherwise involving, any Governmental Entity, arbitrator or other Person that
individually or in the aggregate, (i) have had, do have or could reasonably be
expected to have a Material Adverse Effect on the Company or (ii) question or
challenge the validity or legality of, or have the effect of prohibiting,
preventing, restraining, restricting, delaying, making illegal or otherwise
interfering with, this Agreement, the consummation of the Securities Purchase
contemplated hereby or any action taken or proposed to be taken by the Company
pursuant hereto or in connection with the Securities Purchase contemplated
hereby.  To the knowledge of the Company, no event has occurred or
circumstance exists that could reasonably be expected to give rise to or serve
as a basis for the commencement of any such Action or the issuance of any such
Order.

      
        
           

        

        
          4

          
            

          

        

        
           

        

      

       

      Section
3.6        SEC
Reports.  The Company has filed all reports required to be
filed by it under the Securities Act and the Securities Exchange Act of 1934, as
amended (the “Exchange
Act”), including pursuant to Section 13(a) or 15(d) thereof (the
foregoing materials being collectively referred to herein as the “SEC Reports”), on a
timely basis or has received a valid extension of such time of filing and has
filed any such SEC Reports prior to the expiration of any such
extension.  As of their respective dates, the SEC Reports complied in
all material respects with the requirements of the Securities Act and the
Exchange Act and the rules and regulations of the Securities and Exchange
Commission (the “Commission”)
promulgated thereunder, 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
light of the circumstances under which they were made, not misleading. There has
been no material change in the financial condition or results of operations of
the Company and its subsidiaries taken individually and/or as whole since the
last audited financial statements of the Company included in the SEC
Reports.

       

      Section
3.7        No Material Adverse
Effect. There has been no Material Adverse Effect on the Company since
September 30, 2009.

       

      Section
3.8        Internal Accounting
Controls; Sarbanes-Oxley Act of 2002.  The Company maintains a
system of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with management’s
general or specific authorizations, (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with GAAP and to
maintain asset accountability, (iii) access to assets is permitted only in
accordance with management’s general or specific authorization, and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.  The Company has established disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the Company and designed such disclosures controls
and procedures and internal control over financial reporting to ensure that
material information relating to the Company, is made known to the certifying
officers by others within those entities, particularly during the period in
which the Company’s Form 10-K or 10-Q, as the case may be, is being prepared,
and to provide reasonable assurance regarding the financial reporting and
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles.  The Company’s certifying
officers have evaluated the effectiveness of the Company’s controls and
procedures and internal control over financial reporting as of the date of its
most recently filed periodic report (such date, the “Evaluation
Date”).  The Company presented in its most recently filed
periodic report the conclusions of the certifying officers about the
effectiveness of the disclosure controls and procedures and internal control
over financial reporting based on their evaluations as of the Evaluation
Date.

       

      
        
           

        

        
          5

          
            

          

        

        
           

        

      

      Section
3.9        Trading With the Enemy Act;
Patriot Act.  To the knowledge of the Company, no sale of the
Company’s securities by the Company nor the Company’s use of the proceeds from
such sale has violated the Trading with the Enemy Act, as amended, or any of the
foreign assets control regulations of the United States Treasury Department (31
CFR, Subtitle B, Chapter V, as amended) or any enabling legislation or executive
order relating thereto.  Without limiting the foregoing, the Company
(a) is not a person whose property or interests in property are blocked
pursuant to Section 1 of Executive Order 13224 of September 23, 2001
Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten
to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)) and (b) to the
knowledge of the Company, does not engage in any dealings or transactions, or be
otherwise associated, with any such person.  The Company is in
compliance with the USA Patriot Act of 2001 (signed into law October 26,
2001).

       

      Section
3.10      Listing of Common
Stock.  The Common Stock is eligible to trade and be quoted on,
and is quoted on, the over-the-counter Bulletin Board market maintained by The
Nasdaq Stock Market (the “OTCBB”) and the
Company has received no notice or other communication indicating that such
eligibility is subject to challenge or review by any applicable regulatory
agency, electronic market administrator, or exchange. The Company has not, and
shall not take any action that would preclude, or otherwise jeopardize, the
inclusion of the Common Stock for quotation on the OTCBB.  The Company
is, and has no reason to believe that it will not in the foreseeable future
continue to be, in compliance with all listing requirements of the
OTCBB.

       

      ARTICLE 4

       

      REPRESENTATIONS
AND WARRANTIES OF PURCHASER

       

      Purchaser
hereby represents and warrants to Seller as follows:

       

      Section
4.1        Organization and Good
Standing.  Purchaser is a limited liability company duly
organized, validly existing and in good standing under the laws of the State of
Delaware.

       

      Section
4.2        Corporate
Authority.  Purchaser has the full legal right, requisite
corporate power and authority and has taken all corporate action necessary in
order to execute, deliver and perform fully, its obligations under this
Agreement and to consummate the Securities Purchase.  The execution
and delivery by Purchaser of this Agreement and the consummation by Purchaser of
the Securities Purchase have been duly authorized and approved by the governing
body of Purchaser and no other corporate proceeding with respect to Purchaser is
necessary to authorize this Agreement or the Securities Purchase contemplated
hereby.  This Agreement has been duly executed and delivered by
Purchaser and constitutes a valid and binding agreement of Purchaser,
enforceable against Purchaser in accordance with its terms.

       

      Section
4.3        No
Violations.    The execution and delivery by
Purchaser of this Agreement does not, and the performance and consummation by
Purchaser of the Securities Purchase will not, with respect to Purchaser,
directly or indirectly (with or without the giving of notice or the lapse of
time or both):

       

      (i)        contravene,
conflict with, or constitute or result in a breach or violation of, or a default
under (A) any provision of the Certificate of Incorporation or By-laws (or
equivalent documents) of Purchaser or (B) any resolution adopted by the Board of
Directors (or similar governing body) of Purchaser; or

       

      
        
           

        

        
          6

          
            

          

        

        
           

        

      

       

      (ii)       contravene,
conflict with, or constitute or result in a breach or violation of, any material
Law or Order to which Purchaser, or any of the assets owned or used by
Purchaser, are subject.

       

      Section
4.4        Securities
Act.  Purchaser is acquiring the Securities, and will acquire
the shares of Common Stock issuable upon exercise of the Warrant (“Warrant Shares”), for
its own account and not with a view to their distribution within the meaning of
Section 2(a)(11) of the Securities Act of 1933, as amended (the “Securities Act”) in
any manner that would be in violation of the Securities Act.

       

      Section
4.5        Purchaser
Status.  At the time Purchaser was offered the Securities, it
was, and at the date hereof it is, an “accredited investor” as defined in Rule
501(a) under the Securities Act.

       

      Section
4.6        Experience of
Purchaser.  Purchaser, either alone or together with its
representatives, has such knowledge, sophistication and experience in business
and financial matters so as to be capable of evaluating the merits and risks of
the prospective investment in the Securities, and has so evaluated the merits
and risks of such investment. Purchaser understands that it must be able to bear
the economic risk of this investment in the Securities indefinitely, and is able
to bear such risk and is able to afford a complete loss of such
investment.

       

      Section
4.7        Access to
Information.  Purchaser acknowledges that it has been afforded:
(i) the opportunity to ask such questions as it has deemed necessary of, and to
receive answers from, representatives of the Company concerning the terms and
conditions of the offering of the Securities and the merits and risks of
investing in the Securities; (ii) access to information (other than material
non-public information) about the Company and its financial condition, results
of operations, business, properties, management and prospects sufficient to
enable it to evaluate its investment; and (iii) the opportunity to obtain such
additional information that the Company possesses or can acquire without
unreasonable effort or expense that is necessary to make an informed investment
decision with respect to the investment.

       

      Section
4.8        Restricted
Securities.  Purchaser understands that the Securities are, and
the Warrant Shares will be, characterized as “restricted securities” under the
U.S. federal securities laws inasmuch as they are being acquired from the
Company in a transaction not involving a public offering and that under such
laws and applicable regulations such securities may be resold without
registration under the Securities Act only in certain limited
circumstances.

      
        
           

        

        
          7

          
            

          

        

        
           

        

      

      ARTICLE 5

       

      COVENANTS

       

      Section
5.1        Public
Announcements.  Each of the parties hereto shall consult with
each other before issuing any press release or making any public statement with
respect to this Agreement or the Securities Purchase contemplated hereby and,
except as may be required by applicable law, will not issue any such press
release or make any such public statement prior to such consultation and without
the consent of the other parties.

       

      Section
5.2        Notices of Certain
Events.  In addition to any other notice required to be given
by the terms of this Agreement, each of the parties shall promptly notify the
other parties hereto of:

       

      (a)  
  any notice or other communication from any Person alleging that the
consent of such Person is or may be required in connection with the Securities
Purchase contemplated by this Agreement;

       

      (b)   
 any notice or other communication from any governmental or regulatory
agency or authority in connection with the Securities Purchase contemplated by
this Agreement; and

       

      (c)    
any actions, suits, claims, investigations or proceedings commenced or, to its
knowledge threatened against, relating to or involving or otherwise affecting
such party or that relate to the consummation of the Securities Purchase
contemplated by this Agreement.

       

      Section
5.3        Issuance of Additional
Shares.

       

      (a)     If
the Company shall, at any time or from time to time after the issuance of the
Shares and until such time as the Purchaser no longer owns any shares of Common
Stock issued pursuant to this Agreement (including shares issued pursuant to
this Section 5.3) or six (6) months after the date of this Agreement, whichever
occurs first, issue shares of Common Stock, options to purchase or rights to
subscribe for shares of Common Stock, securities by their terms convertible
into, exercisable or exchangeable for shares of Common Stock, or options to
purchase or rights to subscribe for such convertible, exercisable or
exchangeable securities without consideration or for consideration per share
(including, in the case of such options, rights, or securities, the additional
consideration required to be paid to the Company upon exercise, conversion or
exchange) less than the Effective Price Per Share (as hereinafter defined) (each
such issuance, a “Triggering
Issuance”), then (i) the Company shall issue to the Purchaser, for no
additional consideration, such number of shares of Common Stock which when
aggregated with the Shares issued hereunder to Purchaser prior to the applicable
Triggering Issuance would result in an effective purchase price per share of
Common Stock to the Purchaser (calculated by dividing the Purchase Price by such
aggregate number of shares) equal to the effective price per share of Common
Stock of the Triggering Issuance (calculated by dividing the total consideration
received by the Company for such issuance (as determined below) divided by the
number of shares issued (as determined below)), and (ii) the Effective Price Per
Share shall be adjusted to equal the effective price per share of Common Stock
of the Triggering Issuance. “Effective Price Per
Share” shall mean $8.00, as subsequently adjusted pursuant to this
Section 5.3.  Notwithstanding the foregoing, a Triggering Issuance
shall not include any options to purchase shares of Common Stock (or any shares
issued in connection therewith) or other form of incentive equity granted or
issued under the Company’s 2009 Equity Compensation Plan, or any shares of
Common Stock issued to a strategic partner or licensee in connection with a
joint venture, strategic alliance, licensing agreement, or other similar form of
agreement.

      
        
           

        

        
          8

          
            

          

        

        
           

        

      

       

      (b)     For
the purposes of calculating the number of shares of Common Stock issuable and
the adjustment in the Effective Price Per Share pursuant to paragraph (a) of
this Section 5.3, the following provisions shall be applicable:

       

      (i)           In
the case of the issuance of shares of Common Stock for cash in a public offering
or private placement, the consideration shall be deemed to be the amount of cash
paid therefor before deducting therefrom any discounts, commissions or placement
fees payable by the Company to any underwriter or placement agent in connection
with the issuance and sale thereof.

       

      (ii)          In
the case of the issuance of shares of Common Stock for a consideration in whole
or in part other than cash, the consideration other than cash shall be deemed to
be the Fair Market Value (as defined in the Warrant) thereof.

       

      (iii)         In
the case of the issuance of options to purchase or rights to subscribe for
shares of Common Stock, securities by their terms convertible into, exercisable
or exchangeable for shares of Common Stock, or options to purchase or rights to
subscribe for such convertible, exercisable or exchangeable
securities:

       

      (1)           the
aggregate maximum number of shares of Common Stock deliverable upon exercise of
such options to purchase or rights to subscribe for shares of Common Stock shall
be deemed to have been issued at the time such options or rights were issued and
for a consideration equal to the consideration, if any, received by the Company
upon the issuance of such options or rights plus the minimum purchase price
provided in such options or rights for the shares of Common Stock covered
thereby;

       

      (2)           the
aggregate maximum number of shares of Common Stock deliverable upon conversion
of, exercise, or in exchange for any such convertible or exchangeable securities
or upon the exercise of options to purchase or rights to subscribe for such
convertible, exercisable or exchangeable securities and subsequent conversion,
exercise or exchange thereof shall be deemed to have been issued at the time
such securities, options, or rights were issued and for a consideration equal to
the consideration received by the Company for any such securities and related
options or rights (excluding any cash received on account of accrued interest or
accrued dividends), plus the additional consideration, if any, to be received by
the Company upon the conversion or exchange of such securities or the exercise
of any related options or rights;

       

      (3)           no
further adjustment of the Effective Price Per Share adjusted upon the issuance
of any such options, rights, convertible securities or exchangeable securities
shall be made as a result of the actual issuance of shares of Common Stock or
the exercise of any such rights or options or any conversion or exchange of any
such securities.

       

      
        
           

        

        
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      Section
5.4        Extraordinary Events
Regarding Common Stock.  In the event that the Company shall
(a) issue additional shares of the Common Stock as a dividend or other
distribution on outstanding Common Stock or any preferred stock issued by the
Company, (b) subdivide its outstanding shares of Common Stock, (c) combine its
outstanding shares of the Common Stock into a smaller number of shares of the
Common Stock, then, in each such event, the Effective Price Per Share shall be
adjusted to a number determined by multiplying the Effective Price Per Share
immediately prior to any such event by a fraction of which (a) the numerator is
the number of issued and outstanding shares of Common Stock immediately prior to
any such event, and (b) the denominator is the number of issued and outstanding
shares of Common Stock immediately after to any such event.

       

      Section
5.5        Lock Up
Agreement.  The parties acknowledge and agree that the Shares,
the Warrant Shares, and any additional shares issuable in connection with this
Agreement or the Warrant, shall be “Common Stock” under, and subject to, that
certain Lock-Up Letter Agreement executed on or about February 17, 2010 by the
Purchaser in favor of the Company for effectiveness as of December 30,
2009.

       

      ARTICLE 6

       

      CONDITIONS
PRECEDENT

       

      Section
6.1        Conditions to Each Party’s
Obligations to Consummate.  The respective obligations of each
party to consummate the Securities Purchase contemplated by this Agreement shall
be subject to the fulfillment or waiver at or prior to the Closing of the
following conditions:

       

      (a)
    No
Termination.  This Agreement shall not have been terminated
pursuant to Section
7.1.

       

      (b) 
   Absence of Litigation; No
Orders.  No formal or informal action or proceeding shall have
been instituted on or before the Closing Date before any court or governmental
body or authority pertaining to the Securities Purchase, the result of which
would prevent or make illegal the consummation of such Securities Purchase or
which could have a Material Adverse Effect on the Company.  Neither
the Company nor Purchaser shall be subject to any order, decree or injunction of
a court or agency of competent jurisdiction which either enjoins or prohibits
the consummation of the Securities Purchase.

       

      Section
6.2        Conditions Precedent to
Purchaser’s Obligations.  The obligations of Purchaser to
consummate the Securities Purchase contemplated hereby shall be subject to the
fulfillment or waiver (in whole or in part by Purchaser) at or prior to the
Closing of the following conditions:

       

      (a)   
 Representations and
Warranties.  Each of the representations and warranties of the
Company set forth in this Agreement shall in each case be true and correct in
all material respects (if not qualified by “materiality” or “Material Adverse
Effect”) and in all respects (if qualified by “materiality” or “Material Adverse
Effect”) as of the date of this Agreement and as of the Closing Date, with the
same effect as though such representations and warranties had been made on and
as of the Closing Date;

      
        
           

        

        
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      (b)  
  Covenants.  All of
the covenants, agreements, undertakings and obligations that the Company is
required to perform or to comply with pursuant to this Agreement at or prior to
the Closing, shall have been duly performed and complied with; the Company must
have delivered to Purchaser each of the documents required to be delivered by
Seller pursuant to Section 2.2
hereof;

       

      (c)    
Officer’s
Certificate.  The Company shall have delivered to Purchaser a
certificate, dated as of the Closing Date and signed by the Chief Executive
Officer of the Company, representing that the conditions referred to in Section 6.2(a) and
Section 6.2(b)
hereof have been satisfied;

       

      (d)    
Good Standing
Certificate.  The Company shall have furnished Purchaser with a
recently dated good standing and existence certificate for the Company in its
jurisdiction of incorporation and any jurisdictions in which it is qualified to
do business as Purchaser reasonably requests; and

       

      (e)    
Other
Documentation.  Purchaser shall have received such other
documents, certificates, opinions or statements as Purchaser may reasonably
request, including legal opinions from the Company’s counsel covering such
matters requested by the Purchaser.

       

      Section
6.3        Conditions Precedent to the
Company’s Obligations.  The obligations of the Company to
consummate the transactions contemplated hereby shall be subject to the
fulfillment or waiver (in whole or in part by the Company) at or prior to the
Closing of the following conditions:

       

      (a)    
Representations and
Warranties.  Each of the representations and warranties of
Purchaser set forth in this Agreement shall in each case be true and correct in
all material respects (if qualified by “Materiality” or “Material Adverse
Effect”) as of the date of this Agreement and as of the Closing Date, with the
same effect as though such representations and warranties had been made on and
as of the Closing Date;

       

      (b)    
Covenants.  All of
the covenants, agreements, undertakings and obligations that Purchaser is
required to perform or to comply with pursuant to this Agreement at or prior to
the Closing, shall have been duly performed and substantially complied with.
Purchaser must have delivered to the Company each of the documents required to
be delivered by Purchaser pursuant to Section 2.3
hereof;

       

      (c)     
Officer’s
Certificate.  Purchaser shall have delivered to the Company a
certificate, dated as of the Closing Date and signed by a senior executive
officer or officers of Purchaser, representing that the conditions referred to
in  Section
6.3(a) and Section 6.3(b) hereof
have been satisfied; and

       

      
        
           

        

        
          11

          
            

          

        

        
           

        

      

       

      (d)  
  Payment of
Purchase Price.  The Company shall have received the Purchase
Price in accordance with Section
1.3.

       

      ARTICLE 7

       

      TERMINATION

       

      Section
7.1        Termination.  This
Agreement may be terminated and the sale of Securities may be abandoned at any
time prior to the Closing:

       

      (a)  
  by mutual written consent of the parties hereto;

       

      (b)   
 by either the Company or Purchaser if the Closing shall not have occurred
on or before March 15, 2010 (unless the failure to consummate the transactions
by such date shall be due to the action or failure to act of the party seeking
to terminate this Agreement);

       

      (c)    
by Purchaser if:  (i) the Company shall have failed to comply in any
material respect with any of the covenants or agreements contained in this
Agreement to be complied with or performed by the Company; or (ii) any
representations and warranties of Seller contained in this Agreement shall not
have been true when made, or on and as of the Closing Date as if made on and as
of the Closing Date (except to the extent it relates to a particular date);
or

       

      (d)    
by the Company if:  (i) Purchaser shall have failed to comply in any
material respect with any of the covenants or agreements contained in this
Agreement to be complied with or performed by Purchaser; or (ii) any
representations and warranties of Purchaser contained in this Agreement shall
not have been true when made, or on and as of the Closing Date as if made on and
as of the Closing Date (except to the extent it relates to a particular
date).

       

      Section
7.2        Effect of
Termination.  In the event of the termination and abandonment
of this Agreement pursuant to Section 7.1 of this
Agreement, this Agreement (other than Section 8.3 (Fees and
Expenses), Section
8.5 (Governing Law) and Section 8.6 (Consent
to Jurisdiction; Waiver of Jury Trial), which shall remain in full force and
effect) shall forthwith become null and void and no party hereto shall have any
Liability or further obligation to any other party hereto, except as provided in
this Section
7.2; provided, however, that if this
Agreement is terminated by a party because of the breach of this Agreement by
the other party or because one or more of the conditions of the terminating
party’s obligations under this Agreement is not satisfied as a result of the
other party’s failure to fully comply with its obligations under this Agreement,
the terminating party’s rights to pursue all legal remedies will survive such
termination unimpaired.

       

      
        
           

        

        
          12

          
            

          

        

        
           

        

      

      ARTICLE 8

       

      MISCELLANEOUS

       

      Section
8.1        Notices.  All
notices and other communications hereunder shall be in writing and shall be
deemed to have been duly given (a) on the date received if delivered personally
or by facsimile or (b) on the date received if mailed by registered or certified
mail (return receipt requested), to the parties at the following addresses (or
at such other address for a party as shall be specified by like
notice):

       

      If to
Seller:

       

      PetroAlgae
Inc.

      1901 S.
Harbor City Boulevard

      Suite
300

      Melbourne,
Florida   32901

      Attn:     David
Szostak

      Facsimile:  (321)
723-7047

       

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

       

      Torys
LLP

      237 Park
Avenue

      20th
Floor

      New York,
New York   10017

      Attn:       Andrew
J. Beck

      Daniel P. Raglan

      Facsimile:  (212)  682-0200

       

      If to
Purchaser:

       

      Valens
U.S. SPV I, LLC.

      c/o
Valens Capital Management LLC

      335
Madison Avenue

      10th
Floor

      New York,
New York   10017

      Attn:       Pat
Regan

      Facsimile:  (212)
541-4410

       

      Section
8.2        Amendments; No
Waivers.

       

      (a) 
    Any provision of this Agreement may be amended or waived
if, but only if, such amendment or waiver is in writing and is signed, in the
case of an amendment, by the Company and Purchaser; or in the case of a waiver,
by the party against whom the waiver is to be effective.

       

      (b)  
   No failure or delay by any party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege.  The
rights and remedies herein provided shall be cumulative and not exclusive of any
rights or remedies provided by law.

       

      
        
           

        

        
          13

          
            

          

        

        
           

        

      

       

      Section
8.3        Fees and
Expenses.  Except as otherwise expressly provided herein, all
costs and expenses incurred in connection with this Agreement and the
obligations contemplated hereby shall be paid by the party incurring such cost
or expense.  In the event of termination of this Agreement, the
obligation of each party to pay its own expenses will be subject to any rights
of such party arising from a breach of this Agreement by another
party.

       

      Section
8.4        Successors and Assigns; No
Third-Party Beneficiaries.  The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; provided that no
party may assign, delegate or otherwise transfer any of its rights or
obligations under this Agreement without the consent of each other party hereto,
but any such transfer or assignment will not relieve the appropriate party of
its obligations hereunder.  Nothing in this Agreement, express or
implied, is intended to confer upon any other Person any rights or remedies of
any nature whatsoever under or by reason of this Agreement or any provision of
this Agreement.

       

      Section
8.5        Governing
Law.  This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to the
principles of conflicts of law thereof.

       

      Section
8.6        Consent to Jurisdiction;
Waiver of Jury Trial.

       

      (a)    
Any suit, action or proceeding seeking to enforce any provision of, or based on
any matter arising out of or in connection with, this Agreement or the
Securities Purchase contemplated hereby may be brought in any federal or state
court located in the City of New York, Borough of Manhattan, and each of the
parties hereby consents to the jurisdiction of such courts (and of the
appropriate appellate courts therefrom) in any such suit, action or proceeding
and irrevocably waives, to the fullest extent permitted by law, any objection
which it may now or hereafter have to the laying of the venue of any such suit,
action or proceeding in any such court or that any such suit, action or
proceeding which is brought in any such court has been brought in an
inconvenient forum.  Process in any such suit, action or proceeding
may be served on any party anywhere in the world, whether within or without the
jurisdiction of any such court.  Without limiting the foregoing, each
party agrees that service of process on such party as provided in Section 8.1 shall be
deemed effective service of process on such party.

       

      (b) 
   Each party hereto hereby acknowledges and agrees that any
controversy which may arise under this Agreement is likely to involve
complicated and difficult issues, and therefore each such party hereby
irrevocably and unconditionally waives any right such party may have to a trial
by jury in respect of any litigation directly or indirectly arising out of or
relating to this Agreement, any document referred to in this Agreement or the
Securities Purchase contemplated hereby.

       

      Section
8.7        Counterparts;
Effectiveness.  This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.  This
Agreement shall become effective when each party hereto shall have received
counterparts hereof signed by all of the other parties hereto.  No
provision of this Agreement is intended to confer upon any Person other than the
parties hereto any rights or remedies hereunder.

       

      
        
           

        

        
          14

          
            

          

        

        
           

        

      

       

      Section
8.8        Entire
Agreement.  This Agreement constitutes the entire agreement
between the parties with respect to the subject matter of this Agreement and
supersedes all prior agreements and understandings, both oral and written,
between the parties with respect to the subject matter hereof.

       

      Section
8.9        Captions.  The
captions herein are included for convenience of reference only and shall be
ignored in the construction or interpretation hereof.

       

      Section
8.10      Severability.  If
any term, provision, covenant or restriction of this Agreement is held by a
court of competent jurisdiction or other authority to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated so long as the economic or legal
substance of the Securities Purchase contemplated hereby is not affected in any
manner materially adverse to any parties.  Upon such a determination,
the parties shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible in an
acceptable manner in order that the transactions contemplated hereby be
consummated as originally contemplated to the fullest extent
possible.

       

      Section
8.11      Definition and
Usage.

       

      For
purposes of this Agreement:

       

      “Governmental Entity”
means any foreign, federal, state, local, municipal, county or other
governmental, quasi-governmental, administrative or regulatory authority, body,
agency, court, tribunal, commission or other similar entity (including any
branch, department or official thereof).

       

      “Liability” means any
debt, liability, commitment or obligation of any kind, character or nature
whatsoever, whether known or unknown, choate or inchoate, secured or unsecured,
accrued, fixed, absolute, contingent or otherwise, and whether due or to become
due.

       

      “Lien” means any
charges, claims, community property interests, conditions, conditional sale or
other title retention agreements, covenants, easements, encumbrances, equitable
interests, exceptions, liens, mortgages, options, pledges, reservations, rights
of first refusal, security interests, or restrictions of any kind, including any
restrictions on use, voting, transfer, alienation, receipt of income, or
exercise of any other attribute of ownership.

       

      Section
8.12      Survival.  All
covenants contained herein shall survive the Closing.  The
representations and warranties contained herein shall not survive the Closing;
provided that the
representations and warranties of the Company set forth in Section 3.1, Section 3.2 and Section 3.3, and the
representations and warranties of the Purchaser set forth in Section 4.4, Section 4.5, Section 4.6, Section 4.7 and Section 4.8, shall
each survive the Closing.

       

      
        
           

        

        
          15

          
            

          

        

        
           

        

      

       

      Section
8.13      Further
Assurances.   From time to time, each party hereto will
execute such additional instruments and take such actions as may be reasonably
required to carry out the intent and purposes of this Agreement.

       

      Section
8.14      Review of
Agreement.  Each party hereto acknowledges that it has had time
to review this Agreement and, as desired, consult with counsel.  In
the interpretation of this Agreement, no adverse presumption shall be made
against any party on the basis that it has prepared, or participated in the
preparation of, this Agreement.

       

      Section
8.15      Brokerage.  Each
party hereto represents and warrants to the other that there are no claims for
brokerage commissions or finder’s fees or agent’s commissions or other like
payment in connection with this Agreement or the transactions contemplated
hereby, except for such commissions and fees incurred by reason of any action
taken by a party hereto that will be paid by and be the responsibility of such
party.

       

      [SIGNATURE
PAGE FOLLOWS]

      
        
           

        

        
          16

          
            

          

        

        
           

        

      

      IN
WITNESS WHEREOF, this Agreement has been duly executed and delivered as of the
day and year first above written by the duly authorized officers of Seller and
Purchaser.

       

      
        
          
            
              
                	 
      	
                        SELLER:

                      
	 
      	 
      
	 
      	
                        PETROALGAE
      INC.

                      
	 
      	 
      
	 
      	
                        By:

                      	
                        /s/
      David Szostak

                      
	 
      	 
      	
                        Name:
      David Szostak

                      
	 
      	 
      	
                        Title:  President

                      
	 
      	 
      	 
      
	 
      	
                        PURCHASER:

                      
	 	 
	 
      	
                        VALENS
      U.S. SPV I, LLC

                      
	 
      	 
      	 
      
	 
      	
                        By:

                      	
                        Valens
      Capital Management, LLC

                      
	 
      	 
      	
                        its
      investment manager

                      
	 
      	 
      	 
      
	 
      	
                        By:

                      	
                        /s/
      Patrick Regan

                      
	 
      	 
      	
                        Name:
      Patrick Regan

                      
	 
      	 
      	
                        Title:
      Authorized
Signatory

                      

              

            

          

        

      

       

      [SIGNATURE
PAGE TO SECURITES PURCHASE AGREEMENT]

      
        
           

        

        
          17

          
            

          

        

        
           

        

      

      Schedule
3.2(a)

       

      
        	
                 
      

              	
                1.

              	
                Outstanding
      employee stock options to purchase 1,369,000 shares of Common
      Stock.

              

      

       

      
        	
                 
      

              	
                2.

              	
                That
      certain Warrant exercisable for 68,625 shares of Common Stock issued by
      the Company to Valens U.S. SPV I, LLC on August 28,
  2009.

              

      

       

      
        	
                 
      

              	
                3.

              	
                That
      certain Warrant exercisable for 56,375 shares of Common Stock issued by
      the Company to Valens Offshore SPV I, Ltd. on August 28,
    2009.

              

      

       

      
        	
                 
      

              	
                4.

              	
                That
      certain Warrant exercisable for 34,313 shares of Common Stock issued by
      the Company to Valens U.S. SPV I, LLC on September 4,
  2009.

              

      

       

      
        	
                 
      

              	
                5.

              	
                That
      certain Warrant exercisable for 28,187 shares of Common Stock issued by
      the Company to Valens Offshore SPV I, Ltd. on September 4,
      2009.

              

      

       

      
        	
                 
      

              	
                6.

              	
                That
      certain Warrant exercisable for 68,625 shares of Common Stock issued by
      the Company to Valens U.S. SPV I, LLC on September 14,
    2009.

              

      

       

      
        	
                 
      

              	
                7.

              	
                That
      certain Warrant exercisable for 56,375shares of Common Stock issued by the
      Company to Valens Offshore SPV I, Ltd. on September 14,
    2009.

              

      

       

      
        	
                 
      

              	
                8.

              	
                That
      certain Warrant exercisable for 68,625 shares of Common Stock issued by
      the Company to Valens U.S. SPV I, LLC on September 29,
    2009.

              

      

       

      
        	
                 
      

              	
                9.

              	
                That
      certain Warrant exercisable for 56,375 shares of Common Stock issued by
      the Company to Valens Offshore SPV I, Ltd. on September 29,
      2009.

              

      

       

      
        	
              	
                10.

              	
                That
      certain Warrant exercisable for 68,625 shares of Common Stock issued by
      the Company to Valens U.S. SPV I, LLC on October 13,
  2009.

              

      

       

      
        	
              	
                11.

              	
                That
      certain Warrant exercisable for 56,375 shares of Common Stock issued by
      the Company to Valens Offshore SPV I, Ltd. on October 13,
      2009.

              

      

       

      
        	
              	
                12.

              	
                That
      certain Warrant exercisable for 375,000 shares of Common Stock issued by
      the Company to Green Alternative Energy USA, LLC on October 9,
      2009.

              

      

       

      
        	
              	
                13.

              	
                That
      certain Warrant exercisable for 500,000 shares of Common Stock issued by
      the Company to UBS AG on October 16,
2009.

              

      

       

      
        	
              	
                14.

              	
                That
      certain Warrant exercisable for 375,000 shares of Common Stock issued by
      the Company to Green Science Energy LLC on December 24,
    2009.

              

      

       

      
        	
              	
                15.

              	
                That
      certain Warrant exercisable for 6,250 shares of Common Stock issued by the
      Company to Lynn C. November on February 12,
  2010.

              

      

       

      
        	
              	
                16.

              	
                Amended
      and Restated Convertible Note outstanding in favor of PetroTech Holdings,
      Corp., a Delaware corporation, with a principal balance of ten million
      dollars ($10,000,000), an interest rate of 12%, and a maturity date of
      June 30, 2012.

              

      

       

      
        
           

        

        
          18

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