Document:

Exhibit

Exhibit 10.85
    
AMENDMENT NO. 1 TO REGISTRATION RIGHTS AGREEMENT

This Amendment No. 1, dated as of August 24, 2015 (this “Amendment”), to the Registration Rights Agreement dated as of June 2, 2015 (the “Agreement”), is by and among American Power Group Corporation, a Delaware corporation (the “Company”), and the other parties thereto. Capitalized terms that are used in this Amendment without definition, but which are defined in the Agreement, shall have the meanings given them in the Agreement.

WHEREAS, on June 2, 2015, the Company issued certain Promissory Notes to the Purchasers and, pursuant to the Agreement, granted certain registration rights to the Purchasers; 

WHEREAS, pursuant a Secured Financing Agreement dated as of the date hereof, by and among the Company, American Power Group, Inc. and WPU Leasing, LLC, a Delaware limited liability company (“WPU”), the Company has issued warrants to purchase an aggregate of 3,250,000 shares of Common Stock to certain designees of WPU (the “Investors”); and

WHEREAS, the parties wish to extend the rights under the Agreement to the Investors; 

NOW, THEREFORE, in consideration of the agreements of the parties herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Company and each Purchaser agree as follows:

1.Amendment. Each of the Investors, upon such Investor’s execution of a counterpart signature page to this Amendment, is hereby made a party to the Agreement, with all of the rights, and subject to all of the obligations, of a Purchaser. 

1.Registrable Securities. For the avoidance of doubt, all shares of Common Stock issued or issuable pursuant to the exercise of the warrants referred to in the recitals to this Amendment shall be deemed to be Registrable Securities. 

2.Agreement to Remain in Force. Except as expressly amended by this Amendment, the terms of the Agreement shall remain in full force and effect hereafter.

3.Effectiveness of Amendment.  This Amendment shall be effective upon its execution by the Company and by the other parties to the Agreement holding (immediately prior to the execution of this Amendment) a majority of the Registrable Securities, at which time it shall become binding on all of the parties to the Agreement. 

4.Counterparts. This Amendment may be executed and delivered by original or facsimile signatures and in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

[Remainder of page intentionally left blank - signature page follows]

IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1 to Registration Rights Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.

American Power Group Corporation 

By: /s/ Charles E. Coppa
     Name: Charles E. Coppa
     Title:   Chief Financial Officer

[THE SIGNATURE PAGES TO AMENDMENT NO. 1 TO THE AMERICAN POWER GROUP CORPORATION REGISTRATION RIGHTS AGREEMENT ARE ON FILE WITH AMERICAN POWER GROUP CORPORATION AND ARE INTENTIONALLY OMITTED]
	
		
	 
	 

	 
	 

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COUNTERPART SIGNATURE PAGE TO

AMENDMENT NO. 1 TO

REGISTRATION RIGHTS AGREEMENT

The undersigned agrees to become a “Purchaser” party to that certain Registration Rights Agreement (the “Agreement”), dated as of June 2, 2015, as amended, by and among American Power Group Corporation and the other parties named therein, and agrees to be bound by all of the provisions of the Agreement that apply to the Purchasers.  

All defined terms used but not defined herein shall have the meaning set forth in the Agreement.

IN WITNESS WHEREOF, this counterpart signature page has been duly executed by or on behalf of the undersigned as of the date below written.

                        
                                                
Name:______________________________

    
Address:  ___________________________

___________________________
                        

3Exhibit

Exhibit 10.86

SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this “Agreement”) is dated as of January 8, 2016, between American Power Group Corporation, a Delaware corporation (the “Company”), and each purchaser identified on the signature pages hereto (each, a “Purchaser” and collectively the “Purchasers”). The Purchasers and Company individually and jointly may also be referred to as “Party” or “Parties”
WHEREAS, subject to the terms and conditions set forth in this Agreement and pursuant to Section 4(2) of the Securities Act of 1933, as amended, and Rule 506 of Regulation D promulgated thereunder, the Company desires to issue and sell to each Purchaser, and each Purchaser desires to purchase from the Company, securities of the Company, as more fully described in this Agreement; and
WHEREAS, each Purchaser is an “Accredited Investor”, as such term is defined in Rule 501(a) of Regulation D;
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the Company and each Purchaser agree as follows:
ARTICLE I.
DEFINITIONS

1.1    Definitions. In addition to the terms defined elsewhere in this Agreement, (a) capitalized terms that are not otherwise defined herein have the meanings given to such terms in the Certificate of Designation (as defined herein) (without regard to any changes or amendments thereto after the date hereof) and (b) the following terms have the meanings set forth in this Section 1.1:

“Action” shall have the meaning ascribed to such term in Section 3.1(j).
“Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person as such terms are used in and construed under Rule 405 under the Securities Act. 
“Amended and Restated Voting Agreement” means the Amended and Restated Voting Agreement in the form of Exhibit A attached hereto.
“Board of Directors” means the board of directors of the Company.
“Business Day” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close.
“Certificate of Amendment” shall have the meaning ascribed to such term in Section 4.16.
“Certificate of Designation” means the Certificate of Designation of Preferences, Rights and Limitations of Series D Convertible Preferred Stock, to be filed by the Company with the Secretary of State of Delaware, in the form of Exhibit B attached hereto. 

“Certificate of Incorporation” means the Company’s Restated Certificate of Incorporation, as in effect on the date hereof and as amended from time to time.
“Closing” means the closing of the purchase and sale of the Securities pursuant to Section 2.1.
“Closing Date” means the Trading Day on which all of the Transaction Documents have been executed and delivered by the applicable parties thereto, and all conditions precedent to (i) the Purchasers’ obligations to pay the Subscription Amount and (ii) the Company’s obligations to deliver the Securities in each case, have been satisfied or waived.
“Commission” means the United States Securities and Exchange Commission.
“Common Stock” means the common stock of the Company, par value $0.01 per share, and any other class of securities into which such securities may hereafter be reclassified or changed.
“Common Stock Equivalents” means any securities of the Company or the Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, rights, options, warrants or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.
“Evaluation Date” shall have the meaning assigned to such term in Section 3.1(r). 
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

 “GAAP” shall have the meaning ascribed to such term in Section 3.1(h).
“Indebtedness” shall have the meaning ascribed to such term in Section 3.1(y).
 “Intellectual Property Rights” shall have the meaning ascribed to such term in Section 3.1(o).
“Lien” means a lien, charge, security interest, encumbrance, right of first refusal, preemptive right or other restriction.
“Material Adverse Effect” shall have the meaning assigned to such term in Section 3.1(b).
“Material Permit” shall have the meaning assigned to such term in Section 3.1(m).
“Operations Committee” shall have the meaning assigned to such term in Section 4.19.
“Option Plan” shall have the meaning assigned to such term in Section 2.3(c). 
“Person” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.

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“Preferred Stock” means the Series A Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock, the Series D Preferred Stock, the Series D-2 Preferred Stock and the Series D-3 Preferred Stock, each having the rights, preferences and privileges set forth in the Certificate of Incorporation, as amended from time to time.. 
“Prior Warrants” shall mean the Common Stock purchase warrants issued in connection with the issuance of the Series A Preferred Stock, the Series B Preferred Stock and the Series C Preferred Stock.
“Proxy Statement” shall have the meaning ascribed to such term in Section 4.16.
“Prior Warrant Amendments” means the amendments to the Prior Warrants, in the form of Exhibit C attached hereto. 
 “Purchased Shares” means the 22.5 shares of Series D Preferred Stock purchased by the Purchasers pursuant to this Agreement.
“Purchaser Warrant Amendment” means the amendment to all Prior Warrants that are held or subsequently acquired by any of the Purchasers, or their assignees, Affiliates, family members or related trusts, in the form of Exhibit D attached hereto.
“Registration Rights Agreement” means the Registration Rights Agreement dated as of June 1, 2015, as amended on August 24, 2015, among the Company and certain of the Purchasers, as the same may be amended from time to time.
“Registration Rights Amendment” means the amendment to the Registration Rights Agreement, in the form of Exhibit E attached hereto. 
“Required Approvals” shall have the meaning ascribed to such term in Section 3.1(e).
“Rule 144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule. 
“SEC Reports” shall have the meaning ascribed to such term in Section 3.1(h).
“Securities” means the Purchased Shares, the Warrants, the Series D-2 Preferred Stock, the Series D-3 Preferred Stock and the Underlying Shares.
“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“Series A Preferred Stock” means the Company’s 10% Convertible Preferred Stock, par value $1.00 per share.
“Series B Preferred Stock” means the Company’s Series B 10% Convertible Preferred Stock, par value $1.00 per share.
“Series C Preferred Stock” means the Company’s Series C Convertible Preferred Stock, par value $1.00 per share.
“Series D Designee” shall have the meaning assigned to such term in Section 4.19.

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“Series D Preferred Stock” means the Company’s Series D Convertible Preferred Stock, par value $1.00 per share, the terms of which are set forth in the Certificate of Designation.
“Series D-2 Certificate of Designation” means the Certificate of Designation of Preferences, Rights and Limitations of Series D-2 Convertible Preferred Stock, to be filed by the Company with the Secretary of State of Delaware, in the form of Exhibit F attached hereto.
 “Series D-2 Preferred Stock” means the Company’s Series D-2 Convertible Preferred Stock, par value $1.00 per share, the terms of which are set forth in the Series D-2 Certificate of Designation.
 “Series D-3 Certificate of Designation” means the Certificate of Designation of Preferences, Rights and Limitations of Series D-3 Convertible Preferred Stock, to be filed by the Company with the Secretary of State of Delaware, in the form of Exhibit G attached hereto.
“Series D-3 Preferred Stock” means the Company’s Series D-3 Convertible Preferred Stock, par value $1.00 per share, the terms of which are set forth in the Series D-3 Certificate of Designation.
“Short Sales” means all “short sales” as defined in Rule 200 of Regulation SHO under the Exchange Act (but shall not be deemed to include the location and/or reservation of borrowable shares of Common Stock). 
“Stated Value” means $100,000 per share of Series D Preferred Stock.
“Subscription Amount” means, as to each Purchaser, the aggregate amount to be paid for the Purchased Shares and the Warrant purchased hereunder as specified below such Purchaser’s name on the signature pages of this Agreement, in United States dollars and in immediately available funds.
“Subsidiary” means any subsidiary of the Company as set forth on Exhibit 21.1 to the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2014 and shall, where applicable, also include any direct or indirect subsidiary of the Company formed or acquired after the date thereof.
“Trading Day” means a day on which the principal Trading Market is open for trading.
 “Trading Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE Alternext, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange or the OTC Bulletin Board (or any successors to any of the foregoing).
“Transaction Documents” means this Agreement, the Certificate of Designation, the Warrants, the Registration Rights Amendment, the Amended and Restated Voting Agreement, all exhibits and schedules thereto and hereto and any other documents or agreements executed in connection with the transactions contemplated hereunder.
“Transfer Agent” means American Stock Transfer & Trust Company, LLC, the current transfer agent of the Company, with a mailing address of 6201 15th Avenue
Brooklyn, New York 11219, and a facsimile number of (718) 765-8712, and any successor transfer agent of the Company.

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“Underlying Shares” means the shares of Common Stock issuable upon conversion of the Purchased Shares, the Series D-2 Preferred Stock and the Series D-3 Preferred Stock, upon exercise of the Warrants and issuable in lieu of the cash payment of dividends on the Purchased Shares in accordance with the terms of the Certificate of Designation. 
“Units” means the units being purchased by the Purchasers hereby, each of which is comprised of one share of Series D Preferred Stock and a Warrant to purchase 2,000,000 shares of Common Stock, subject to adjustment.
“Voting Agreement” means the Voting Agreement dated as of April 30, 2012, among the Company and the parties thereto, as the same may be amended from time to time.
“WPU Leasing” shall have the meaning ascribed to such term in Section 2.4(b)(x).
“Warrants” means the Common Stock purchase warrants to be delivered to the Purchasers, in the form of Exhibit H attached hereto.

ARTICLE II
PURCHASE AND SALE

2.1Closing. On the Closing Date, upon the terms and subject to the conditions set forth herein, substantially concurrent with the execution and delivery of this Agreement by the parties hereto, the Company agrees to sell, and the Purchasers, severally and not jointly, agree to purchase, 22 Units. At the Closing, each Purchaser shall deliver to the Company, via wire transfer or a certified check of immediately available funds, an amount equal to such Purchaser’s Subscription Amount and the Company shall deliver to each Purchaser a certificate representing the Purchased Shares and the Warrant comprising the Units for which such Purchaser has subscribed and paid; and the Company and the Purchasers shall deliver the other items as set forth herein that are deliverable at the Closing. Upon satisfaction of the covenants and conditions set forth in Sections 2.2 and 2.3, the Closing shall occur at the offices of the Company’s counsel or such other location as the Parties shall mutually agree. 

2.2Deliverables.

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

(i)a copy of this Agreement duly executed by the Company;

(ii)a certificate evidencing the number of shares of Series D Preferred Stock equal to such Purchaser’s Subscription Amount, divided by the Stated Value, registered in the name of such Purchaser; 

(iii)a Warrant, registered in the name of such Purchaser, to purchase up to that number of shares of Common Stock which equals (x) two times such Purchaser’s Subscription Amount divided by (y) the Conversion Price, duly executed by the Company;

(iv)a copy of the Purchaser Warrant Amendment, duly executed by the Company;

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(v)a copy of the Registration Rights Amendment, duly executed by the Company and such parties thereto as may be required to amend the Registration Rights Agreement as contemplated hereby; 

(vi)a copy of the Amended and Restated Voting Agreement, duly executed by the Company and such parties thereto as may be required to amend the Voting Agreement as contemplated hereby; and

(vii)evidence of the filing and acceptance of the Certificate of Designation, Series D-2 Certificate of Designation and the Series D-3 Certificate of Designation from the Secretary of State of Delaware.

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

(i).a copy of this Agreement duly executed by such Purchaser; 

(ii).such Purchaser’s Subscription Amount by wire transfer or a certified check of immediately available funds;

(iii).a copy of the Purchaser Warrant Amendment, duly executed by such Purchaser;

(iv).a copy of the Registration Rights Amendment, duly executed by such Purchaser; 

(v).a copy of the Amended and Restated Voting Agreement, duly executed by such Purchaser.

(c)    Effective at the Closing, each outstanding share of Series A Preferred Stock and Series B Preferred Stock held by a Purchaser shall be exchanged for an equal number of shares of Series D-2 Preferred Stock, and each outstanding share of Series C Preferred Stock held by a Purchaser shall be exchanged for an equal number of shares of Series D-3 Preferred Stock. Such exchanges shall be deemed to occur automatically, without any further action by the Purchasers and whether or not the certificates representing such Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock are surrendered to the Company; provided, however, that the Company shall not be obligated to issue any certificate evidencing the shares of Series D-2 Preferred Stock or Series D-3 Preferred Stock issuable to a Purchaser upon such exchanges unless and until such Purchaser either (i) surrenders to the Company such Purchaser’s certificates evidencing the shares of Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock so exchanged or (ii) notifies the Company that such certificates have been lost, stolen or destroyed and executes an agreement satisfactory to the Company to indemnify the Company from any loss incurred by it in connection therewith.  

2.3    Closing Conditions.

(a)    The obligations of the Company to each of the Purchasers, severally and not jointly, hereunder in connection with the Closing are subject to the following conditions being met:
(i)each of the representations and warranties made by such Purchaser in this Agreement is true and correct in all material respects on and as of the Closing, as though each 

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such representation or warranty had been made on and as of the Closing, except that those representations and warranties that address matters only as of a particular date shall remain true and correct as of such date; 

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

(iii)the holders of not less than 70% of the Prior Warrants issued in connection with the issuance of the Series A Preferred Stock and the holders of 100% of the Prior Warrants issued in connection with the issuance of the Series B Preferred Stock shall have executed and delivered the Prior Warrant Amendments; and

(iv)the delivery by such Purchaser of the items as set forth herein.

(b).    The respective obligations of each Purchaser, severally and not jointly, hereunder in connection with the Closing are subject to the following conditions being met:

(i)each of the representations and warranties of the Company in this Agreement shall be true and correct in all material respects on and as of the Closing as though each such representation or warranty had been made on and as of the Closing, except that those representations and warranties that address matters only as a particular date shall remain true and correct as of such date;

(ii)all obligations, covenants and agreements of the Company required to be performed at or prior to the Closing shall have been performed in all material respects;
 
(iii)the delivery by the Company of the items as set forth herein; 

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

(v)the Securities Purchase Agreement dated as of April 30, 2012, pursuant to which the Company issued shares of its Series A Preferred Stock and certain of the Prior Warrants, shall have been amended to include within the definition of “Exempt Issuance” the issuance or deemed issuance of the Conversion Shares, the Warrants, the Underlying Shares and all other equity and debt securities approved for issuance by the Board of Directors

(vi)the Securities Purchase Agreement dated as of November 26, 2014, pursuant to which the Company issued shares of its Series B Preferred Stock and certain of the Prior Warrants, shall have been amended to include within the definition of “Exempt Issuance” the issuance or deemed issuance of the Conversion Shares, the Warrants, the Underlying Shares and all other equity and debt securities approved for issuance by the Board of Directors; 

(vii)the holders of the Company’s Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock shall have waived all antidilution adjustments otherwise applicable to the issuance or deemed issuance of the Purchased Shares, the Warrants and the Underlying Shares;

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(viii)the Company shall have obtained such additional waivers and consents from the holders of the Series A Preferred Stock, the Series B Preferred Stock and the Series C Preferred Stock as the Purchasers may reasonably request to effectuate the transactions contemplated by this Agreement;

(ix)the Company shall have obtained the written agreement of the holders of not less than 72% of the combined voting power of the Series A Preferred Stock and the Series B Preferred Stock to defer the payment of all cash dividends currently payable and subsequently to become payable in respect of the Series A Preferred Stock and the Series B Preferred Stock until such time as the Board of Directors, in its sole discretion, determines that such dividends may be paid; provided, however, that, during the deferral period, dividends on the Series A Preferred Stock and Series B Preferred Stock may be paid in shares of Common Stock in the discretion of the Board of Directors.

(x)the Company shall have obtained the written agreement of WPU Leasing, LLC (“WPU Leasing”) to defer until December 31, 2016 the payment of all principal and interest payments currently payable and subsequently to become payable to WPU Leasing in respect of promissory notes in the aggregate principal amount of not less than $1,500,000; and

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

(c)    The Board of Directors shall have adopted the Company’s 2016 Stock Option Plan (the “Option Plan”), the terms and conditions of which shall be substantially similar to the terms of the Company’s 2005 Stock Option Plan, together with such non-material changes and additions as may be approved by the Board of Directors, which Option Plan shall provide for the issuance of options to purchase up to 10% of the outstanding shares of Common Stock. 

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ARTICLE 111.
REPRESENTATIONS AND WARRANTIES

3.1Representations and Warranties of the Company. The Company hereby makes the following representations and warranties to each Purchaser:

(a)Subsidiaries. Exhibit 21.1 to the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2014 sets forth a list of all of direct and indirect Subsidiaries of the Company existing during such fiscal year. The Company owns, directly or indirectly, all of the capital stock or other equity interests of each Subsidiary, including any direct or indirect subsidiary of the Company formed or acquired subsequent to the filing of the above-referenced annual report, free and clear of any Liens, and all of the issued and outstanding shares of capital stock of each Subsidiary are validly issued and are fully paid, non-assessable and free of preemptive and similar rights to subscribe for or purchase securities. 

(b)     Organization and Qualification. The Company and each of the Subsidiaries is an entity duly incorporated or otherwise organized, validly existing and in good standing under the laws of the jurisdiction of its formation, with the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted. Neither the Company nor any Subsidiary is in violation or default of any of the provisions of its respective certificate or articles of incorporation, bylaws or other organizational or charter documents. Each of the Company and the Subsidiaries is duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, could not reasonably be expected to result in: (i) a material adverse effect on the legality, validity or enforceability of any Transaction Document and the transactions contemplated thereby, (ii) a material adverse effect on the results of operations, assets, business or condition (financial or otherwise) of the Company and the Subsidiaries, taken as a whole, or (iii) a material adverse effect on the Company’s ability to perform in any material respect on a timely basis its obligations under any Transaction Document (any of (i), (ii) or (iii), a “Material Adverse Effect”) and no action, claim, suit, investigation or proceeding (including, without limitation, an informal investigation or partial proceeding, such as a deposition) has been instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification.
(c)    Authorization; Enforcement.  The Company or any Subsidiary of the Company that is a party to this Agreement or any other Transaction Document has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by each of the Transaction Documents to which it is a party and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of each of the Transaction Documents and the consummation by the Company and each Subsidiary of the transactions contemplated hereby and thereby have been duly authorized by all required corporate or other action on the part of the Company and each Subsidiary other than in connection with the Required Approvals. Each Transaction Document to which the Company and each Subsidiary is a party has been (or upon delivery will have been) duly executed by the Company or such Subsidiary, as the case may be, and, when delivered in accordance with the terms hereof and thereof, will constitute the valid and binding obligation of, and will be enforceable against, the Company or the Subsidiary, as the case may be, in accordance with its terms, except (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other 

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equitable remedies and (iii) insofar as the Company’s indemnification obligations under the provisions of Section 4.9 may be limited by applicable law.

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

(e)    Filings, Consents and Approvals. The Company is not required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Company of the Transaction Documents, other than: (i) the filings required pursuant to Section 4.5 of this Agreement, (ii) application(s) to each applicable Trading Market for the issuance and sale of the Securities and the listing of the Underlying Shares for trading thereon in the time and manner required thereby, (iii) such filings as are required to be made under applicable state securities laws, and (iv) certain stockholder approvals as contemplated by Section 4.16 of this Agreement (collectively, the “Required Approvals”).

(f)    Issuance of the Securities. Subject to the effectiveness of the filing of the Certificate of Designation, the Series D-2 Certificate of Designation, the Series D-3 Certificate of Designation and the Certificate of Amendment with the Secretary of State of Delaware, (i) 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 in the Transaction Documents, (ii) the Underlying Shares, when issued in accordance with the terms of the Securities and the Warrants, 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, and (iii) the Company has reserved from its duly authorized capital stock the maximum number of shares of Common Stock issuable upon the conversion of the Securities and the exercise of the Warrants.
    
(g)    Capitalization. The Company has not issued any capital stock since its most recently filed periodic report under the Exchange Act, other than pursuant to the exercise of employee stock options under the Company’s stock option plans, the issuance of shares of Common Stock to employees pursuant to the Company’s employee stock purchase plans and pursuant to the conversion and/or exercise of Common Stock Equivalents outstanding as of the date of the most recently filed 

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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. The issuance and sale of the Securities will not obligate the Company to issue shares of Common Stock or other securities to any Person (other than the Purchasers) and will not result in a right of any holder of Company securities to adjust the exercise, conversion, exchange or reset price under any of such securities. All of the outstanding shares of capital stock of the Company are validly issued, fully paid and nonassessable, have been issued in compliance with all federal and state securities laws, and none of such outstanding shares was issued in violation of any preemptive rights or similar rights to subscribe for or purchase securities. Except as contemplated by Section 4.16 of this Agreement, no further approval or authorization of any stockholder, the Board of Directors or other Persons is required for the issuance and sale of the Securities. Other than the Voting Agreement and the Amended and Restated Voting Agreement, and as contemplated hereby, there are no stockholders agreements, voting agreements or other similar agreements with respect to the Company’s capital stock to which the Company is a party or, to the knowledge of the Company, between or among any of the Company’s stockholders.

(h)    SEC Reports; Financial Statements. The Company has filed all reports, schedules, forms, statements and other documents required to be filed by the Company under the Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the two years preceding the date hereof (or such shorter period as the Company was required by law or regulation to file such material) (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein, being collectively referred to herein as the “SEC Reports”) on a timely basis or has received a valid extension of such time of filing and has filed any such SEC Reports prior to the expiration of any such extension. As of their respective dates, and except as may have been corrected and/or restated by subsequently filed SEC Reports, the SEC Reports complied in all material respects with the requirements of the Securities Act and the Exchange Act, as applicable, except that the Company may not have furnished to the Commission and posted on its corporate Web site every Interactive Data File required to be submitted and posted within the timeframes required by Rule 405 of Regulation S-T, and none of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The Company has never been an issuer subject to Rule 144(i) under the Securities Act. Except as may have been subsequently corrected and/or restated by subsequently filed SEC Reports, the financial statements of the Company included in the SEC Reports complied 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 have been subsequently corrected and/or restated by subsequently filed SEC Reports and 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 indicated therein, subject, in the case of unaudited statements, to normal, year-end audit adjustments.

(i)    Material Changes; Undisclosed Events, Liabilities or Developments. Since the date of the latest audited financial statements included within the SEC Reports, except as otherwise disclosed in the SEC Reports (including amended and/or restated SEC Reports) or as identified in Section 3.1(g), (i) there has been no event, occurrence or development that has had or that could 

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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, other than dividends paid on outstanding shares of the Series A Preferred Stock and/or Series B Preferred Stock, or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock and (v) the Company has not issued any equity securities to any officer, director or Affiliate, except pursuant to existing Company stock option plans. The Company does not have pending before the Commission any request for confidential treatment of information. Except for the issuance of the Securities contemplated by this Agreement, no event, liability or development that could reasonably be expected to result in a Material Adverse Effect 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 one Trading Day prior to the date that this representation is made.

(j)    Litigation. 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 transactions contemplated thereby or the Securities or (ii) could, if there were an unfavorable decision, reasonably be expected to result in a Material Adverse Effect. Neither the Company nor any Subsidiary, to the knowledge of the Company, nor any director or officer thereof, is or has been the subject of any Action involving a claim of violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty. There has not been, and to the knowledge of the Company, there is not pending or contemplated, any investigation by the Commission involving the Company or any current or former officer or any current director of the Company. The Commission has not issued any stop order or other order suspending the effectiveness of any registration statement filed by the Company or any Subsidiary under the Exchange Act or the Securities Act. 

(k)    Labor Relations. No material labor dispute exists or, to the knowledge of the Company, is imminent with respect to any of the employees of the Company.  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. No executive officer, to the knowledge of the Company, is now or is expected to be in violation of any material term of any employment contract, confidentiality, disclosure or proprietary information agreement or non-competition agreement, or any other contract or agreement or any restrictive covenant in favor of any third party, and the continued employment of each such executive officer does not subject the Company or any of its Subsidiaries to any liability with respect to any of the foregoing matters. The Company and its Subsidiaries are in compliance in all material respects with all U.S. federal, state, local laws and regulations relating to employment and employment practices, terms and conditions of employment and wages and hours.

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(l)    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 judgment, decree or order of any court, arbitrator or governmental body or (iii) except as disclosed in the Company’s Current Report on Form 8-K filed with the Commission on May 21, 2015, is or has been in violation of any statute, rule, ordinance or regulation of any governmental authority, including without limitation all foreign, federal, state and local laws applicable to its business and all such laws that affect the environment, except in each case as could not reasonably be expected to result in a Material Adverse Effect.

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

(n)    Title to Assets. The Company and the Subsidiaries have good and marketable title in fee simple to all real property owned by them and good and marketable title in all personal property owned by them that is material to the business of the Company and the Subsidiaries, in each case free and clear of all Liens, except for Liens in favor of Iowa State Bank and WPU Leasing, Liens reflected in the Company’s financial statements and Liens for the payment of federal, state or other taxes, the payment of which is neither delinquent nor subject to penalties. Any real property and facilities held under lease by the Company and the Subsidiaries are held by them under valid, subsisting and enforceable leases with which the Company and the Subsidiaries are in compliance.

(o)    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 necessary or material for use in connection with their respective businesses as described in the SEC Reports and which the failure to so have could reasonably be expected to result in 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 Person. To the knowledge of the Company, all Intellectual Property Rights that the Company owns or has rights to are enforceable and there is no existing infringement by another Person of any of the Intellectual Property Rights. The Company and its Subsidiaries have taken reasonable security measures to protect the secrecy, confidentiality and value of their intellectual property that consist of trade secrets.

(p)    Insurance. The Company and the Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as are, to the knowledge of the Company, prudent and customary in the businesses in which the Company and the Subsidiaries are engaged, including, but not limited to, directors and officers insurance coverage at least equal to the aggregate Subscription Amount. Neither the Company nor any Subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage 

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expires or to obtain similar coverage from similar insurers as may be necessary to continue its business without a significant increase in cost.

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

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

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

(t)    Investment Company. The Company is not, and is not an Affiliate of, and immediately after receipt of payment for the Securities, will not be or be an Affiliate of, an “investment company” within the meaning of the Investment Company Act of 1940, as amended. The Company shall conduct 

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its business in a manner so that it will not become an “investment company” subject to registration under the Investment Company Act of 1940, as amended.

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

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

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

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

(y)    Solvency. The Company has no knowledge of any facts or circumstances which lead it to believe that it will file for reorganization or liquidation under the bankruptcy or reorganization laws of any jurisdiction within one year from the Closing Date. The SEC Reports describe all 

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outstanding secured and unsecured Indebtedness of the Company and all Subsidiaries, or for which the Company or any Subsidiary has commitments. For the purposes of this Agreement, “Indebtedness” means (x) any liabilities for borrowed money or amounts owed in excess of $100,000 (other than trade accounts payable incurred in the ordinary course of business), (y) all guaranties, endorsements and other contingent obligations in respect of indebtedness of others, whether or not the same are or should be reflected in the Company’s balance sheet (or the notes thereto), except guaranties by endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business; and (z) the present value of any lease payments in excess of $100,000 due under leases required to be capitalized in accordance with GAAP. Neither the Company nor any Subsidiary is in default with respect to any Indebtedness.

(z)    Tax Status. The Company and each Subsidiary has filed all necessary federal, state and foreign income and franchise tax returns and has paid or accrued all taxes shown as due thereon, and the Company has no knowledge of a tax deficiency which has been asserted or threatened against the Company or any Subsidiary.

(aa)Foreign Corrupt Practices. Neither the Company, nor to the knowledge of the Company, any agent or other person acting on behalf of the Company has, directly or indirectly, (i) used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses related to foreign or domestic political activity, (ii) made any unlawful payment to foreign or domestic government officials or employees or to any foreign or domestic political parties or campaigns from corporate funds, (iii) failed to disclose fully any contribution made by the Company (or made by any person acting on its behalf of which the Company is aware) which is in violation of law, or (iv) violated in any material respect any provision of the Foreign Corrupt Practices Act of 1977, as amended.

(bb)    Accountants. The Company’s accounting firm is set forth in the SEC Reports. To the knowledge and belief of the Company, such accounting firm (i) is a registered public accounting firm as required by the Exchange Act and (ii) shall express its opinion with respect to the financial statements to be included in the Company’s Annual Report for the fiscal year ending September 30, 2015.
    
(cc)    Acknowledgment Regarding Purchasers’ Purchase of Securities. The Company acknowledges and agrees that each of the Purchasers is acting solely in the capacity of an arm’s length purchaser with respect to the Transaction Documents and the transactions contemplated thereby. The Company further acknowledges that no Purchaser is acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to the Transaction Documents and the transactions contemplated thereby and any advice given by any Purchaser or any of their respective representatives or agents in connection with the Transaction Documents and the transactions contemplated thereby is merely incidental to the Purchasers’ purchase of the Securities. The Company further represents to each Purchaser that the Company’s decision to enter into this Agreement and the other Transaction Documents has been based solely on the independent evaluation of the transactions contemplated hereby and thereby by the Company and its representatives.

(dd)    Acknowledgment Regarding Purchasers’ Trading Activity. Anything in this Agreement or elsewhere herein to the contrary notwithstanding (except for Sections 3.2(e) and 4.12 hereof), it is understood and acknowledged by the Company that: (i) none of the Purchasers have been asked by the Company to agree, nor has any Purchaser agreed, to desist from purchasing or selling, long and/or short, securities of the Company, or “derivative” securities based on securities 

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issued by the Company or to hold the Securities for any specified term; (ii) past or future open market or other transactions by any Purchaser, specifically including, without limitation, Short Sales or “derivative” transactions, before or after the closing of this or future private placement transactions, may negatively impact the market price of the Company’s publicly-traded securities; (iii) any Purchaser, and counter-parties in “derivative” transactions to which any such Purchaser is a party, directly or indirectly, presently may have a “short” position in the Common Stock, and (iv) no Purchaser shall be deemed to have any affiliation with or control over any arm’s length counter-party in any “derivative” transaction. The Company further understands and acknowledges that (y) one or more Purchasers may engage in hedging activities at various times during the period that the Securities are outstanding, including, without limitation, during the periods that the value of the Underlying Shares deliverable with respect to Securities are being determined, and (z) such hedging activities (if any) could reduce the value of the existing stockholders’ equity interests in the Company at and after the time that the hedging activities are being conducted. The Company acknowledges that such aforementioned hedging activities do not constitute a breach of any of the Transaction Documents.

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

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

(gg)    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.

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

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

(a)Organization; Authority. Such Purchaser is either an individual or an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization with full right, corporate or partnership power and authority to enter into and to consummate the transactions contemplated by this Agreement and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of this Agreement and performance by such Purchaser of the transactions contemplated by this Agreement have been duly authorized by all necessary corporate, 

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partnership, limited liability company or similar action, as applicable, on the part of such Purchaser. Each Transaction Document to which such Purchaser is a party has been duly executed by such Purchaser, and when delivered by such Purchaser in accordance with the terms hereof, will constitute the valid and legally binding obligation of such Purchaser, enforceable against such Purchaser in accordance with its terms, except: (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, and (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies.

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

(c)Purchaser Status. At the time such Purchaser was offered the Securities, it was, and as of the date hereof it is, and on each date on which it exercises the Warrant or converts any of the Purchased Shares, it will be either: (i) an “accredited investor” as defined in Rule 501(a) under the Securities Act or (ii) a “qualified institutional buyer” as defined in Rule 144A(a) under the Securities Act. Such Purchaser is not required to be registered as a broker-dealer under Section 15 of the Exchange Act. 

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

(e)No General Solicitation. Such Purchaser is not purchasing the Securities as a result of any press release, Form D or other filing made by the Company under federal or state securities laws, 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)Speculative Investment. Such Purchaser understands and recognizes that the purchase of the Securities is highly speculative and involves a high degree of risk and that only investors who can afford the loss of their entire investment should consider investing in the Company. Such Purchaser has reviewed the risk factors in the SEC Reports.

(g)Principal Place of Business. The address of such Purchaser furnished by such Purchaser on the signature page hereto is such Purchaser’s principal business address.

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(h)U.S. Person. Such Purchaser is a United States Person.

(i)No Reliance on Other Statements. No statements, promises, warranties or representations have been made to such Purchaser concerning the Securities or the Company, its business or prospects, or other matters, by the Company, by the Company’s representatives, or by any other persons or entities, except as set forth in the Transaction Documents and the SEC Reports. Such Purchaser has not relied on any representation, written or oral, not contained in the Transaction Documents or the SEC Reports in deciding to purchase the Securities. 

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

ARTICLE IV
OTHER AGREEMENTS OF THE PARTIES

4.1Transfer Restrictions.

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

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

[NEITHER] THIS SECURITY [NOR THE SECURITIES INTO WHICH THIS SECURITY IS [EXERCISABLE] [CONVERTIBLE]] HAS [NOT] BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. SUCH SECURITIES MAY BE TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY AND THE REGISTERED HOLDER OF SUCH SECURITIES, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY. THIS SECURITY [AND THE 

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SECURITIES ISSUABLE UPON [EXERCISE] [CONVERSION] OF THIS SECURITY] MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH SECURITIES.
(c)The Company acknowledges and agrees that Purchasers may from time to time pledge pursuant to a bona fide margin agreement with a registered broker-dealer or grant a security interest in some or all of the Securities to a financial institution that is an “accredited investor” as defined in Rule 501(a) under the Securities Act and who agrees to be bound by the provisions of this Agreement and, if required under the terms of such arrangement, such Purchaser may transfer pledged or secured Securities to the pledgees or secured parties. Such a pledge or transfer would not be subject to approval of the Company and no legal opinion of legal counsel of the pledgee, secured party or pledgor shall be required in connection therewith. Further, no notice shall be required of such pledge. At the appropriate Purchaser’s expense, the Company will execute and deliver such reasonable documentation as a pledgee or secured party of Securities may reasonably request in connection with a pledge or transfer of the Securities, including, if the Securities are subject to an effective registration statement under the Securities Act, the preparation and filing of any required prospectus supplement under Rule 424(b)(3) promulgated by the Commission under the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule, or any other applicable provision of the Securities Act to appropriately amend the list of selling stockholders thereunder.

(d)Certificates evidencing the Underlying Shares shall not contain any legend (including the legend set forth in Section 4.1(b) hereof): (i) while a registration statement covering the resale of such security is effective under the Securities Act, (ii) following any sale of such Underlying Shares pursuant to Rule 144, (iii) if such Underlying Shares are eligible for sale under Rule 144, without the requirement for the Company to be in compliance with the current public information required under Rule 144 as to such Underlying Shares 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 shall cause its counsel to issue a legal opinion to the Transfer Agent if required by the Transfer Agent to effect the removal of the legend hereunder. If all or any of the Purchased Shares are converted or any portion of a Warrant is exercised at a time when there is an effective registration statement to cover the resale of the Underlying Shares, or if such Underlying Shares may be sold under Rule 144 and the Company is then in compliance with the current public information required under Rule 144, or if the Underlying Shares may be sold 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 Underlying Shares and without volume or manner-of-sale restrictions or if such legend is not otherwise required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the staff of the Commission) then such Underlying Shares shall be issued free of all legends. The Company agrees that at such time as such legends are no longer required under this Section 4.1(d), it will, no later than three Trading Days following the delivery by a Purchaser to the Company or the Transfer Agent of a certificate representing Underlying Shares, as applicable, issued with a restrictive legend, deliver or cause to be delivered to such Purchaser a certificate representing such shares that is free from all restrictive and other legends. The Company may not make any notation on its records or give instructions to the Transfer Agent that enlarge the restrictions on transfer set forth in this Section 4. Certificates for Underlying Shares subject to legend removal hereunder shall be transmitted by the Transfer Agent to the Purchaser by crediting the account of the Purchaser’s prime broker with 

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the Depository Trust Company System as directed by such Purchaser.
(e)Each Purchaser, severally and not jointly with the other Purchasers, agrees with the Company 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 an effective 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 this Section 4.1 is predicated upon the Company’s reliance upon this understanding.

4.2    Acknowledgment of Dilution. The Company acknowledges that the issuance of the Securities may result in dilution of the outstanding shares of Common Stock, which dilution may be substantial under certain market conditions. The Company further acknowledges that its obligations under the Transaction Documents, including, without limitation, its obligation to issue the Underlying Shares pursuant to the Transaction Documents, are unconditional and absolute and not subject to any right of set off, counterclaim, delay or reduction, regardless of the effect of any such dilution or any claim the Company may have against any Purchaser and regardless of the dilutive effect that such issuance may have on the ownership of the other stockholders of the Company.

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

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

4.5    Securities Laws Disclosure; Publicity. The Company shall, by the close of business (New York City time) on the second day after the Closing, file a Current Report on Form 8-K, disclosing the material terms of the transactions contemplated hereby and including the Transaction Documents as exhibits thereto. From and after the filing of such Form 8-K, the Company shall have publicly disclosed all material, non-public information delivered to any of the Purchasers by the Company or any of its Subsidiaries, or any of their respective officers, directors, employees or agents in connection with the transactions contemplated by the Transaction Documents. The Company and each Purchaser shall consult with each other in issuing any press releases with respect to the transactions contemplated hereby, and neither the Company nor any Purchaser shall issue any press release nor otherwise make any such public statement without the prior consent of the Company, with respect to any press release of any Purchaser, or without the prior consent of such Purchaser, with respect to any press release of the Company, which consent shall not unreasonably be withheld or delayed, except if such disclosure is required by law, in which case the disclosing party shall promptly provide the other party with prior notice of such public statement or communication. 

4.6    Shareholder Rights Plan. No claim will be made or enforced by the Company or, with the consent of the Company, any other Person, that any Purchaser is an “Acquiring Person” under any control 

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share acquisition, business combination, poison pill (including any distribution under a rights agreement) or similar anti-takeover plan or arrangement in effect or hereafter adopted by the Company, or that any Purchaser could be deemed to trigger the provisions of any such plan or arrangement, by virtue of receiving Securities under the Transaction Documents or under any other agreement between the Company and any Purchaser.

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

4.8    Use of Proceeds. The Company shall use the net proceeds from the sale of the Securities hereunder for working capital purposes, as approved by the Board of Directors. Any single expenditure by the Company, and any series of related expenditures by the Company, that exceeds $10,000 shall require the written approval of the Series D Designee.

4.9    Indemnification of Purchasers. Subject to the provisions of this Section 4.9, the Company will indemnify and hold each Purchaser and its directors, officers, shareholders, members, partners, employees and agents (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title), each Person who controls such Purchaser (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, shareholders, agents, members, partners or employees (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title) of such controlling persons (each, a “Purchaser Party”) harmless from any and all losses, liabilities, obligations, claims, contingencies, damages, costs and expenses, including all judgments, amounts paid in settlements, court costs and reasonable attorneys’ fees and costs of investigation that any such Purchaser Party may suffer or incur as a result of or relating to (a) any breach of any of the representations, warranties, covenants or agreements made by the Company in this Agreement or in the other Transaction Documents or (b) any action instituted against a Purchaser Party in any capacity, or any of them or their respective Affiliates, by any stockholder of the Company who is not an Affiliate of such Purchaser Party, with respect to any of the transactions contemplated by the Transaction Documents (unless such action is based upon a breach of such Purchaser Party’s representations, warranties or covenants under the Transaction Documents or any agreements or understandings such Purchaser Party may have with any such stockholder or any violations by such Purchaser Party of state or federal securities laws or any conduct by such Purchaser Party which constitutes fraud, gross negligence, willful misconduct or malfeasance). If any action shall be brought against any Purchaser Party in respect of which indemnity may be sought pursuant to this Agreement, such Purchaser Party shall promptly notify the Company in writing, and the Company shall have the right to assume the defense thereof with counsel of its own choosing reasonably acceptable to the Purchaser Party. Any Purchaser Party shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Purchaser Party except to the extent that (i) the employment thereof has been specifically authorized by the Company in writing, (ii) the Company has failed after a reasonable period of time to assume such defense and to employ counsel or (iii) in such action there is, in the reasonable opinion of counsel, a material conflict on any material issue between the position of the Company and the position of such Purchaser Party, in which case the Company shall be responsible for the reasonable fees and expenses of no more than one such separate counsel. The Company will not be liable to any Purchaser Party under this Agreement (y) for any settlement by a Purchaser Party effected without the Company’s prior written consent, which shall not be unreasonably withheld or delayed; 

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or (z) to the extent, but only to the extent that a loss, claim, damage or liability is attributable to any Purchaser Party’s breach of any of the representations, warranties, covenants or agreements made by such Purchaser Party in this Agreement or in the other Transaction Documents.

4.10    Reservation of Common Stock. As of the date hereof, and subject to the effectiveness of the filing of the Certificate of Designation, the Series D-2 Certificate of Designation, the Series D-3 Certificate of Designation and the Certificate of Amendment with the Secretary of State of Delaware, the Company has reserved and the Company shall continue to reserve and keep available at all times, free of preemptive rights, a sufficient number of shares of Common Stock for the purpose of enabling the Company to issue all of the Underlying Shares.

4.11    Listing of Common Stock. The Company hereby agrees to use all commercially reasonable efforts to maintain the listing or quotation of the Common Stock on the Trading Market on which it is currently listed, and concurrently with the Closing, the Company shall apply to list or quote all of the Underlying Shares on such Trading Market and promptly secure the listing of all of the Underlying Shares on such Trading Market. The Company further agrees, if the Company applies to have the Common Stock traded on any other Trading Market, it will then include in such application all of the Underlying Shares, and will take such other action as is necessary to cause all of the Underlying Shares to be listed or quoted on such other Trading Market as promptly as possible. The Company will then take all action reasonably necessary to continue the listing and trading of its Common Stock on a Trading Market and will comply in all respects with the Company’s reporting, filing and other obligations under the bylaws or rules of the Trading Market.

4.12    Certain Transactions and Confidentiality. Each Purchaser, severally and not jointly with any other Purchaser, covenants that neither it nor any Affiliate acting on behalf of or pursuant to any understanding with the Company will execute any purchases or sales, including Short Sales of any of the Company’s securities during the period commencing with the execution of this Agreement and ending at such time that the transactions contemplated by this Agreement are first publicly announced pursuant to the Form 8-K as described in Section 4.5. Each Purchaser, severally and not jointly with any other Purchaser, covenants that until such time as the transactions contemplated by this Agreement are publicly disclosed by the Company pursuant to the Form 8-K as described in Section 4.5, such Purchaser will maintain the confidentiality of the existence and terms of this transaction and the information included in the Transaction Documents. Notwithstanding the foregoing and notwithstanding anything contained in this Agreement to the contrary, the Company expressly acknowledges and agrees that (i) no Purchaser makes any representation, warranty or covenant hereby that it will not engage in effecting transactions in any securities of the Company after the time that the transactions contemplated by this Agreement are first publicly announced pursuant to the Form 8-K as described in Section 4.5, (ii) no Purchaser shall be restricted or prohibited from effecting any transactions in any securities of the Company in accordance with applicable securities laws from and after the time that the transactions contemplated by this Agreement are first publicly announced pursuant to the Form 8-K as described in Section 4.5 and (iii) no Purchaser shall have any duty of confidentiality to the Company or its Subsidiaries after the issuance of the Form 8-K as described in Section 4.5.

4.13    Conversion and Exercise Procedures. Each of the form of Notice of Exercise included in the Warrants and the form of Notice of Conversion included in the Certificate of Designation set forth the totality of the procedures required of the Purchasers in order to exercise the Warrants or convert the Purchased Shares. No additional legal opinion, other information or instructions shall be required of the Purchasers to exercise the Warrants or convert the Purchased Shares. The Company shall honor exercises of the Warrants and conversions of the Purchased Shares and shall deliver Underlying Shares in accordance with the terms, conditions and time periods set forth in the Transaction Documents.

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4.14    Form D; Blue Sky Filings. The Company agrees to timely file a Form D with respect to the Securities as required under Regulation D and to provide to Purchaser a copy thereof, promptly upon request of any Purchaser. The Company shall take such action as the Company shall reasonably determine is necessary in order to obtain an exemption for, or to qualify the Securities for, sale to the Purchasers at each Closing under applicable securities or “Blue Sky” laws of the states of the United States, and shall provide evidence of such actions promptly upon request of any Purchaser; provided, however, that the Company shall not be required to qualify generally to do business in any jurisdiction where it is not then so qualified, subject the Company to any material tax in any such jurisdiction where it is not then so subject or file a general consent to service of process in any such jurisdiction.

4.15    Application for Exchange Listing of Common Stock. The Company shall apply to have the Common Stock listed on a Trading Market other than the OTC Bulletin Board as soon as reasonably practicable after the Company qualifies for listing pursuant to the minimal applicable listing standards of such Trading Market. The Company shall use its reasonable best efforts to qualify for listing pursuant to the minimal applicable listing standards of such Trading Market. 

4.16    Stockholders Meeting.  The Company shall take all action reasonably necessary in accordance with applicable law to convene a meeting of its stockholders to be held at the earliest practicable time after the date of this Agreement for the purpose of approving a certificate of amendment to the Certificate of Incorporation increasing the number of authorized shares of Common Stock from 200,000,000 to 350,000,000 shares (the “Certificate of Amendment”) and ratifying the adoption of the Option Plan. Without limiting the generality of the foregoing, (i) within 45 days after the Closing Date, the Company shall file with the Commission a preliminary proxy statement with respect to such meeting and (ii) the Company shall use its reasonable commercial efforts to file a definitive proxy statement (the “Proxy Statement”) with respect to such meeting, and to distribute the Proxy Statement to its stockholders, as soon as practicable thereafter. The Proxy Statement shall satisfy all requirements of applicable state and federal securities laws and the Delaware General Corporation Law. The Company’s Board of Directors shall recommend to the stockholders the adoption of the Certificate of Amendment.
4.17    Certain Liquidated Damages. The Company agrees that, if the Certificate of Amendment shall not have been filed with the Secretary of State of the State of Delaware under the Delaware General Corporation Law prior to the second anniversary of the Closing Date, then on such anniversary and every six months thereafter until the Certificate of Amendment shall have been so filed or, if earlier, until such time as the Company is otherwise legally able to permit the exercise of the Warrants in full, the Company shall pay the holder of each Warrant, as liquidated damages and not as a penalty, the sum of $0.01 for each Underlying Share for which such Warrant cannot be exercised.
4.18    Dividend Deferral. The Company shall use its commercially reasonable efforts to obtain, within 60 days after the Closing Date, the written agreement of the holders of 100% of the Series A Preferred Stock and Series B Preferred Stock to defer the payment of all cash dividends currently payable and subsequently to become payable in respect of the Series A Preferred Stock and the Series B Preferred Stock until such time as the Board of Directors, in its sole discretion, determines that such dividends may be paid. During the deferral period, dividends on the Series A Preferred Stock and Series B Preferred Stock may be paid in shares of Common Stock in the discretion of the Board of Directors.
4.19    Operations Committee. The Board of Directors shall appoint an Operations Committee (the “Operations Committee”), consisting of one designee of the holders of the Series D Preferred Stock (the “Series D Designee”), the Company’s Chief Executive Officer and the Company’s Chief Financial Officer. Unless the Chief Financial Officer is also a member of the Board of Directors, he shall serve on the Operations 

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Committee in a non-voting capacity. To the extent permitted by the Delaware General Corporation Law and the Company’s Certificate of Incorporation and By-Laws, the Operations Committee shall oversee the general management of the business and affairs of the Company. The Operations Committee shall report to, and be subject to the authority of, the Board of Directors.

ARTICLE V.
MISCELLANEOUS

5.1Fees and Expenses. The Company shall pay all of the expenses incurred by it in connection with the transactions contemplated by this Agreement, including the fees and expenses of its advisers, counsel, accountants and other experts, if any. The Company shall pay all of the expenses incurred by Arrow, LLC, Matthew Van Steenwyk and their Affiliates in connection with the transactions contemplated by this Agreement, including the fees and expenses of their advisers, counsel, accountants and other experts, if any. The Company shall pay all Transfer Agent fees, stamp taxes and other taxes and duties levied in connection with the delivery of any Securities to the Purchasers. Each other party to this Agreement shall be responsible for the payment of all of the expenses incurred by it in connection with the transactions contemplated by this Agreement, including the fees and expenses of its advisers, counsel, accountants and other experts, if any.

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

5.3    Governing Agreement. Should any provision of this Agreement conflict with the provisions of any other Transaction Document, the terms of this Agreement shall govern.

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

5.5    Amendments; Waivers. No provision of this Agreement may be waived, modified, supplemented or amended except in a written instrument signed, in the case of an amendment, by the Company and the Purchasers holding a majority of the Purchased Shares then outstanding (or, if no Purchased Shares are outstanding, a majority of the Underlying Shares then outstanding or issuable) or, in the case of a waiver, by the party against whom enforcement of any such waived provision is sought. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right.

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

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

5.8    No Third-Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, except as otherwise set forth in Section 4.9.

5.9    Governing Law. With exception of the Certificate of Designation, the Series D-2 Certificate of Designation and the Series D-3 Certificate of Designation, which shall be governed by the laws of the State of Delaware, all questions concerning the construction, validity, enforcement and interpretation of the Transaction Documents shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof. Each party agrees that all legal proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Agreement and any other Transaction Documents (whether brought against a party hereto or its respective affiliates, directors, officers, shareholders, employees or agents) shall be commenced exclusively in the state and federal courts sitting in the City of New York. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the City of New York, borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or is an inconvenient venue for such proceeding. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law. If any party shall commence an action or proceeding to enforce any provisions of the Transaction Documents, then, in addition to the obligations of the Company under Section 4.9, 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.

5.10    Survival. The representations and warranties contained herein shall survive the Closing and the delivery of the Securities. 

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

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

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

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

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

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

5.17    Liquidated Damages. The Company’s obligations to pay any partial liquidated damages or other amounts owing under the Transaction Documents is a continuing obligation of the Company and shall 

27

not terminate until all unpaid partial liquidated damages and other amounts have been paid notwithstanding the fact that the instrument or security pursuant to which such partial liquidated damages or other amounts are due and payable shall have been canceled.

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

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

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

(Signature Pages Follow)

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

	
		
	American Power Group Corporation 
	Address for Notice:

	By: /s/ Charles E. Coppa
     Name: Charles E. Coppa
     Title:   Chief Financial Officer

With a copy to (which shall not constitute notice):
	American Power Group Corporation
7 Kimball Lane, Building A
Lynnfield, Massachusetts 01940
Attention: Charles E. Coppa
Fax: (781) 224-0114

	

Morse, Barnes-Brown & Pendleton, P.C.
CityPoint
230 Third Avenue
Waltham, Massachusetts 02451
Attention: Carl F. Barnes
Fax (781) 622-5933

	 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.
SIGNATURE PAGES FOR PURCHASERS FOLLOW.]

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[PURCHASER SIGNATURE PAGES TO 
AMERICAN POWER GROUP CORPORATION
SECURITIES PURCHASE AGREEMENT]

[PURCHASER SIGNATURE PAGES TO AMERICAN POWER GROUP CORPORATION SECURITIES PURCHASE AGREEMENT ARE ON FILE WITH AMERICAN POWER GROUP CORPORATION AND ARE INTTENTIONALLY OMITTED]

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