Document:

B2Gold Corp.: Exhibit 4.2 - Filed by newsfilecorp.com

B2GOLD CORP.

INCENTIVE STOCK OPTION PLAN 
(AMENDED AND
RESTATED)

	1. 	
      Name and Purpose of the Plan

	 	 	 
	1.1 	
      The stock option plan constituted hereby for directors,
      officers and Service Providers (as defined below) of B2Gold Corp. (the
      “Company”) and its subsidiaries shall be known as the Stock Option Plan
      (Amended and Restated) (the “Plan”). This Plan, effective May 6, 2011,
      amends, restates and replaces the Stock Option Plan adopted on May 6,
      2010.

	 	 	 
	1.2 	
      The purpose of the Plan is to provide Eligible Persons
      with an opportunity to purchase Common Shares and to benefit from the
      appreciation in the value thereof. This will provide an increased
      incentive for the Eligible Persons to contribute to the future success and
      prosperity of the Company, thus enhancing the value of the Common Shares
      for the benefit of all the shareholders and increasing the ability of the
      Company and its associated, affiliated, controlled and subsidiary
      companies to attract and retain individuals of exceptional
skill.

	 	 	 
	2. 	
      Interpretation

	 	 	 
	2.1 	
      Where used herein, the following terms shall have the
      following meanings, respectively:

	 	 	 
		(a) 	
      “Associate” means an associate as defined in the
      Securities Act;

	 	 	 
		(b) 	
      “Blackout Period” has the meaning ascribed to such term
      in Section 19;

	 	 	 
		(c) 	
      “Board” or “Board of Directors” means the board of
      directors of the Company, as such may be constituted from time to
    time;

	 	 	 
		(d) 	
      “Code” means the U.S. Internal Revenue Code of 1986, as
      amended;

	 	 	 
		(e) 	
      “Common Shares” means the common shares of the Company
      or, in the event of an adjustment contemplated by Section 10 hereof, such
      other shares to which a Participant may be entitled upon the exercise of
      an Option as a result of such adjustment;

	 	 	 
		(f) 	
      “Company” means B2Gold Corp., and includes any successor
      company thereof;

	 	 	 
		(g) 	
      “Disability” means, with respect to any U.S. Participant,
      that such U.S. Participant is unable to engage in any substantial gainful
      activity by reason of any medically determinable physical or mental
      impairment that can be expected to result in death or that has lasted, or
      can be expected to last, for a continuous period of not less than twelve
      (12) months. The preceding definition of the term “Disability” is intended
      to comply with, and will be interpreted consistently with, sections
      22(e)(3) and 422(c)(6) of the Code;

	 	 	 
		(h) 	
      “Eligible Person” means, subject to all applicable laws,
      any director, officer, employee or Service Provider of the Company or any
      of its associated, affiliated, controlled and subsidiary
  companies;

	 	(i) 	
      “Employee” means a person who is an employee of the
      Company (or any Parent or Subsidiary) for purposes of section 422 of the
      Code;

	 	 	 	 
	 	(j) 	
      “Exchange” means the Toronto Stock Exchange or, if the
      Common Shares are not then listed and posted for trading on the Toronto
      Stock Exchange, on such stock exchange in Canada on which such shares are
      listed and posted for trading as may be selected for such purpose by the
      Board;

	 	 	 	 
	 	(k) 	
      “Fair Market Value” as of any date, means, with respect
      to any property (including, without limitation, any Common Share), the
      fair market value, as of such date, of such property, determined by such
      methods or procedures as are established from time to time by the Board.
      Unless otherwise determined by the Board, the fair market value of a
      Common Share as of a given date will be the closing sale price of the
      Common Shares on the Exchange (or, if such Common Shares are not then
      listed and posted for trading on the Exchange, on such stock exchange on
      which such Common Shares are listed and posted for trading as may be
      selected for such purpose by the Board) on the trading day immediately
      preceding such date;

	 	 	 	 
	 	(l) 	
      “Grant Date” means, with respect to any Option, the date
      on which the Board makes the determination to grant such Option or any
      later date specified by the Board;

	 	 	 	 
	 	(m) 	
      “Incentive Stock Option” means an Option granted to a
      U.S. Participant that is intended to qualify as an “incentive stock
      option” pursuant to Section 422 of the Code;

	 	 	 	 
	 	(n) 	
      “Insider” means:

	 	 	 	 
	 		(i) 	
      an insider as defined in the Securities Act, other
      than a person who is an insider solely by virtue of being a director or
      senior officer of a subsidiary company; and

	 	 	 	 
	 		(ii) 	
      an Associate of any person who is an insider under
      paragraph (i) of this definition;

	 	 	 	 
	 	(o) 	
      “Market Price” of Common Shares at any Grant Date means
      the closing price per Common Share on the Exchange for the last day Common
      Shares were traded prior to the Grant Date;

	 	 	 	 
	 	(p) 	
      “Non-Employee Director” means any director of the Company
      or any of its associated, affiliated, controlled or subsidiary companies
      who does not have an employment or consulting agreement with the Company
      or one of its associated, affiliated, controlled or subsidiary
      companies;

	 	 	 	 
	 	(q) 	
      “Nonqualified Stock Option” means an Option that is not
      an Incentive Stock Option;

	 	 	 	 
	 	(r) 	
      “Option” means an option to purchase Common Shares
      granted by the Board to a Participant, subject to the provisions contained
      herein;

	 	 	 	 
	 	(s) 	
      “Option Price” means the price per share at which Common
      Shares may be purchased under the Option, as the same may be adjusted in
      accordance with Sections 4 and 10 hereof;

	 	 	 	 
	 	(t) 	
      “Parent” means any corporation (other than the Company)
      in an unbroken chain of corporations ending with the Company, if each
      corporation in such chain (other than the Company) owns stock possessing
      fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other
      corporations in such chain. The preceding definition of the term “Parent”
      is intended to comply with, and will be interpreted consistently with,
section 424(e) of the Code;

2

	 	(u) 	
      “Participant” means an Eligible Person to whom Options
      are granted by the Board pursuant to the Plan and which Options or a
      portion thereof remain unexercised;

	 	 	 
	 	(v) 	
      “Plan” means this Stock Option Plan of the Company, as
      the same may be amended or varied from time to time;

	 	 	 
	 	(w) 	
      “Securities Act” means the Securities Act
      (Ontario), as amended or replaced from time to time;

	 	 	 
	 	(x) 	
      “Service Provider” means:

	 	(i) 	
      an employee (including full-time and part-time employees)
      of the Company or any of its subsidiary company’s;

	 	 	 
	 	(ii) 	
      any other individual, corporation, partnership or other
      entity engaged on a bona fide basis to provide ongoing management
      or consulting services to the Company, to a subsidiary company controlled
      company for an initial, renewable or extended period of twelve months or
      more; and

	 	 	 
	 	(iii) 	
      any individual who is providing ongoing management or
      consulting services to the Company, to a subsidiary company or controlled
      company indirectly through a corporation, partnership or other entity that
      is a Service Provider under section (ii) of this
  definition;

	 	(y) 	
      “Subsidiary” means any corporation (other than the
      Company) in an unbroken chain of corporations beginning with the Company,
      if each corporation (other than the last corporation) in such chain owns
      stock possessing fifty percent (50%) or more of the total combined voting
      power of all classes of stock in one of the other corporations in such
      chain. The preceding definition of the term “Subsidiary” is intended to
      comply with, and will be interpreted consistently with, Section 424(f) of
      the Code;

	 	 	 
	 	(z) 	
      “U.S. Participant” means a Participant who is a citizen
      of the United States or a resident of the United States, as defined in
      Section 7701(a)(30)(A) and Section 7701(b)(1)of the Code; and

	 	 	 
	 	(aa) 	
      “10% Shareholder” means any U.S. Participant who owns,
      taking into account the constructive ownership rules set forth in Section
      424(d) of the Code, more than ten percent (10%) of the total combined
      voting power of all classes of stock of the Company (or of any Parent or
      Subsidiary).

	2.2 	
      For the purposes of the Plan, associated companies,
      affiliated companies, controlled companies and subsidiary companies have
      the meanings set forth under Section 1 of the Securities
  Act.

	 	 
	3. 	
      Shares Subject to Plan and Granting of
    Options

	 	 
	3.1 	
      The Board of Directors may, from time to time, in its
      discretion grant Options to Eligible Persons subject to the conditions
      contained herein and such additional conditions as may be determined by
      the Board from time to time.

3

	3.2 	
      The maximum number of Common Shares that may be issuable
      pursuant to Options granted under the Plan, which Options are outstanding
      but unexercised and whether or not they are vested, and all of the
      Company’s other previously established and outstanding or proposed share
      compensation arrangements, shall be a number equal to 7.5% of the number
      issued and outstanding Common Shares on a non-diluted basis at any
      time.

	 	 	 
	3.3 	
      The Common Shares in respect of which Options are
      terminated, cancelled or expired unexercised shall be available for
      subsequent Options pursuant to Section 21. No fractional Common Shares may
      be purchased or issued hereunder.

	 	 	 
	3.4 	
      Any grant of Options under the Plan shall be subject to
      the following restrictions, unless approved by a majority of the
      disinterested shareholders of the Company:

	 	 	 
		(a) 	
      the aggregate number of Common Shares issuable pursuant
      to Options granted to Insiders, at any time, pursuant to the Plan and all
      of the Company’s other previously established and outstanding or proposed
      share compensation arrangements may not exceed 7.5% of the issued and
      outstanding Common Shares (on a non-diluted basis) at the time of
      grant;

	 	 	 
		(b) 	
      the aggregate number of Common Shares issued to Insiders
      pursuant to the Plan and all of the Company’s other previously established
      and outstanding or proposed share compensation arrangements within any
      one-year period may not exceed 7.5% of the issued and outstanding Common
      Shares (on a non-diluted basis) at the time of grant;

	 	 	 
		(c) 	
      the aggregate number of Common Shares issuable to any one
      individual Participant pursuant to the Plan and all of the Company’s other
      previously established and outstanding or proposed share compensation
      arrangements within any one-year period may not exceed 5% of the
      outstanding Common Shares (on a non-diluted basis) at the time of the
      grant; and

	 	 	 
		(d) 	
      the aggregate number of Common Shares issuable pursuant
      to Options granted to Non-Employee Directors, as a group, at any time,
      pursuant to the Plan and all of the Company’s other previously established
      and outstanding or proposed share compensation arrangements may not exceed
      1% of the outstanding Common Shares (on a non-diluted basis) at the time
      of grant.

The aforementioned limits of Common Shares reserved for
issuance may be formulated on a diluted basis with the consent of the
Exchange.

	4. 	
      Purchase Price

	 	 
	4.1 	
      The Option Price of any Option granted shall be fixed by
      the Board of Directors but shall not be less than the Market Price on the
      Grant Date or such other minimum price as the Exchange may require.
      Notwithstanding any other term in this Plan to the contrary, the Option
      Price of any Option granted to a U.S. Participant shall not be less than
      100% of the Fair Market Value of a Common Share on the applicable Grant
      Date.

	 	 
	5. 	
      Option Term

	 	 
	5.1 	
      Common Shares subject to each Option shall become
      purchasable in whole or in part at such time or times as may be determined
      by the Board of Directors. Subject to Sections 16 and 19, each Option
      shall not be exercisable after the expiration of ten (10) years from the
      date of the granting of the Option and may expire on such earlier date or
      dates as may be fixed by the Board of Directors. Any Common Shares not
      purchased prior to the expiration of an Option granted hereunder may
      thereafter be reallocated in accordance with the provisions of the
  Plan.

4

	6. 	
      Non-Transferable

	 	 
	6.1 	
      Options granted to Participants under the Plan shall be
      non-transferable and non-assignable by the Participant to whom it was
      granted, other than by will or the laws of descent and distribution and,
      shall be exercisable during the Participant’s lifetime only by the
      Participant, provided that, subject to the prior approval of the Board and
      the Exchange, an Option may be assigned to a corporation controlled by the
      Participant and 100% beneficially owned by the Participant, which control
      and ownership shall continue for so long as any part of the Option remains
      unexercised. However, see Section 16 for applicable restrictions on
      transferability for Incentive Stock Options granted to U.S.
      Participants.

	 	 
	7. 	
      Employees and Service Providers

	 	 
	7.1 	
      The Company represents and warrants that, with respect to
      the grant of Options under the Plan to Employees or Service Providers,
      each such the Eligible Person is a bona fide Employee or Service Provider
      of the Company, as applicable.

	 	 
	7.2 	
      The Plan does not confer upon a Participant any right
      with respect to continuation of employment by the Company or any of its
      associated, affiliated, controlled or subsidiary companies.

	 	 
	8. 	
      Effect of Termination of Employment or
  Death

	 	 
	8.1 	
      In the event of death of a Participant, any Option held
      by such Participant at the date of death shall become exercisable in whole
      or in part, only if and to the extent that the Participant was entitled to
      exercise the Option at the date of the Participant’s death, by the
      person(s) to whom the Participant’s rights under the Option shall pass by
      the Participant’s will or the laws of descent and distribution and Options
      shall be exercisable for a period of one (1) year after the date of death
      or prior to the expiration of the Option period in respect thereof,
      whichever is sooner.

	 	 
	8.2 	
      If a Participant ceases to be employed or retained by the
      Company or its associated, affiliated, controlled or subsidiary companies,
      as the case may be, for cause or if a Participant is removed from office
      as a director or becomes disqualified from being a director by law, any
      Option or the unexercised portion thereof granted to such Participant
      shall terminate forthwith. If a Participant ceases to be employed or
      retained by the Company or its associated, affiliated, controlled or
      subsidiary companies, as the case may be, other than by reason of death or
      termination for cause, or if a Participant ceases to be a director other
      than by reason of death, removal or disqualification, any Option or
      unexercised portion thereof held by such Participant at the effective date
      thereof may be exercised in whole or in part for a period that is the
      earlier of: (i) ninety (90) days after the Participant ceases active
      employment with the Company; (ii) ninety (90) days after the date of
      delivery of written notice of retirement, resignation or termination;
      (iii) the expiration date fixed by the Board; or (iv) the date the Option
      expires in accordance with its terms.

5

	9. 	
      No Rights As Shareholder

	 	 
	9.1 	
      No Participant shall have any of the rights as a
      shareholder of the Company in respect of the Common Shares subject to an
      Option until such Common Shares have been paid for in full and
    issued.

	 	 
	10. 	
      Adjustment to Shares

	 	 
	10.1 	
      Following the date an Option is granted, the exercise
      price for and the number of Common Shares which are subject to an Option
      will be adjusted, with respect to the then unexercised portion thereof, by
      the Board from time to time (on the basis of such advice as the Board
      considers appropriate, including, if considered appropriate by the Board,
      a certificate of the auditor of the Company) in the events and in
      accordance with the provisions set out in this Section 10, with the intent
      that the rights of Participants under their Options are, to the extent
      possible, preserved notwithstanding the occurrence of such events. Any
      dispute that arises at any time with respect to any adjustment pursuant to
      such provisions will be conclusively determined by the Board, and any such
      determination will be binding on the Company, the Participant and all
      other affected parties.

	 	 
	10.2 	
      The number of Common Shares to be issued on the exercise
      of an Option shall be adjusted from time to time to account for each
      dividend of Common Shares (other than a dividend in lieu of cash dividends
      paid in the ordinary course), so that upon exercise of the Option for a
      Common Share the Participant shall receive, in addition to such Common
      Share, an additional number of Common Shares (“Additional Shares”), at no
      further cost, to adjust for each such dividend of Common Shares. The
      adjustment shall take into account every dividend of Common Shares which
      occurs between the date of the grant of the Option and the date of
      exercise of the Option for such Common Share. If there has been more than
      one such dividend, the adjustment shall also take into account that the
      dividends which are later in time would have been distributed not only on
      the Common Share had it been outstanding, but also on all Additional
      Shares which would have been outstanding as a result of previous
      dividends.

	 	 
	10.3 	
      If the outstanding Common Shares are changed into or
      exchanged for a different number of shares or into or for other securities
      of the Company or securities of another company or entity, whether through
      an arrangement, amalgamation or other similar procedure or otherwise, or a
      share recapitalization, subdivision or consolidation, then on each
      exercise of the Option which occurs following such events, for each Common
      Share for which the Option is exercised, the Participant shall instead
      receive the number and kind of shares or other securities of the Company
      or other company into which such Common Share would have been changed or
      for which such Common Share would have been exchanged if it had been
      outstanding on the date of such event.

	 	 
	10.4 	
      If the outstanding Common Shares are changed into or
      exchanged for a different number of shares or into or for other securities
      of the Company or securities of another company or entity, in a manner
      other than as specified in Sections 10.2 or 10.3, then the Board, in its
      sole discretion, may make such adjustment to the securities to be issued
      pursuant to any exercise of the Option and the exercise price to be paid
      for each such security following such event as the Board in its sole and
      absolute discretion determines to be equitable to give effect to the
      adjustment described in Section 10.1, and such adjustments shall be
      effective and binding upon the Company and the Participant for all
      purposes.

	 	 
	10.5 	
      If the Company distributes, by way of a dividend or
      otherwise, to all or substantially all holders of Common Shares, property,
      evidences of indebtedness or shares or other securities of the Company
      (other than Common Shares) or rights, options or warrants to acquire
      Common Shares or securities convertible into or exchangeable for Common
      Shares or other securities or property of the Company, other than as a
      dividend in the ordinary course, then, if the Board, in its sole
      discretion, determines that such action equitably requires an adjustment
      in the exercise price under any outstanding Option or in the number(s) of
      Common Shares subject to any such Option, or both, such adjustment may be
      made by the Board and shall be effective and binding on the Company and
  the Participant for all purposes.

6

	10.6 	
      No adjustment or substitution provided for in this
      Section 10 shall require the Company to issue a fractional share in
      respect of any Option. Fractional shares shall be eliminated.

	 	 	 
	10.7 	
      The grant or existence of an Option shall not in any way
      limit or restrict the right or power of the Company to effect adjustments,
      reclassifications, reorganizations, arrangements or changes of its capital
      or business structure, or to amalgamate, merge, consolidate, dissolve or
      liquidate, or to sell or transfer all or any part of its business or
      assets.

	 	 	 
	10.8 	
      Any adjustment with respect to the exercise price for and
      number of Common Shares subject to an Option granted to a U.S. Participant
      pursuant to this Section 10 will be made so as to comply with, and not
      create any adverse consequences under, Sections 424 and 409A of the
      Code.

	 	 	 
	11. 	
      Effect of Take-Over Bid

	 	 	 
	11.1 	
      If a bona fide offer (the “Offer”) for Common Shares is
      made to a Participant or to shareholders generally or to a class of
      shareholders which includes Participants, which Offer, if accepted in
      whole or in part, would result in the offeror acquiring control of more
      than 20% of the voting rights attached to all the outstanding voting
      securities of the Company, then the Company shall, immediately upon
      receipt of notice of the Offer, notify each Participant currently holding
      an Option of the Offer, with full particulars thereof; whereupon such
      Option may be exercised in whole or in part by the Participant so as to
      permit the Participant to tender the Common Shares received upon such
      exercise (the “Optioned Shares”) pursuant to the Offer.

	 	 	 
	11.2 	
      Any such notice of exercise may be made conditional upon
      the effectiveness or completion of such Offer so that if:

	 	 	 
		(a) 	
      the Offer is not completed within the time specified
      therein; or

	 	 	 
		(b) 	
      the Participant does not tender the Optioned Shares
      pursuant to the Offer; or

	 	 	 
		(c) 	
      all of the Optioned Shares tendered by the Participant
      pursuant to the Offer are not taken up and paid for by the offeror in
      respect thereof;

	 	 	 
		
      then the Optioned Shares to have been received or, in the
      case of clause (c) above, the Optioned Shares that are not taken up and
      paid for, shall be returned to the Company and reinstated as authorized
      but unissued Common Shares and the terms of the Option set forth in the
      Plan shall again apply to the Option. If any Optioned Shares are returned
      to the Company under this Section 11.2, the Company shall refund the
      exercise price to the Participant for such Optioned Shares. In no event
      shall the Participant be entitled to sell the Optioned Shares otherwise
      than pursuant to the Offer.

	 	 	 
	12. 	
      Written Agreement

	 	 	 
	12.1 	
      A written agreement shall be entered into between the
      Company and each Participant, which agreement shall set out the Option
      Price and the terms and conditions on which the Option
  may be exercised, all in accordance with the provisions of
      the Plan. The agreement shall be in such form as the Board may from time
      to time approve and may contain such terms as may be considered necessary
      in order that the Option will comply with any provisions respecting stock
      options in the income tax or other laws in force in any country or
      jurisdiction or which the person to whom the Option is granted may from
  time to time be a resident or citizen.

7

	13. 	
      Amendment of the Plan

	 	 	 	 
	13.1 	
      The Board may from time to time, subject to applicable
      law and to the prior approval, if required, of the Exchange or any other
      regulatory body having authority over the Company, the Plan or the
      shareholders of the Company, suspend, terminate, or discontinue the Plan
      at any time except with respect to any Option then outstanding under the
      Plan.

	 	 	 	 
	13.2 	
      The Board may amend or revise the terms of the Plan or of
      any Option granted under the Plan and/or the option agreement relating
      thereto at any time without the consent of the Participants provided that
      such amendment shall:

	 	 	 	 
		(a) 	
      not adversely alter or impair any Option previously
      granted except as permitted by the adjustment provisions of Section
    10;

	 	 	 	 
		(b) 	
      be subject to any regulatory approvals including, where
      required, the approval of the Exchange; and

	 	 	 	 
		(c) 	
      be subject to shareholder approval, where required, by
      law or the requirements of the Exchange, provided that shareholder
      approval shall not be required for the following amendments and the Board
      may make any changes, which may include but are not limited to:

	 	 	 	 
			(i) 	
      amendments of a typographical, grammatical, clerical or
      administrative nature or which are required to comply with regulatory
      requirements;

	 	 	 	 
			(ii) 	
      a change to the vesting provision of the Plan or any
      Options;

	 	 	 	 
			(iii) 	
      a change to the termination provision of any Option that
      does not entail an extension beyond the original expiration date (as such
      date may be extended by virtue of Section 19 for a Blackout Period);
      and

	 	 	 	 
			(iv) 	
      a change to the Eligible Persons of the Plan.

	 	 	 	 
	13.3 	
      Notwithstanding this Section 13, the Board shall not be
      permitted to amend the Option Price except as set out in Section 10 of the
      Plan. If the Plan is terminated, the provisions of the Plan and any
      administrative guidelines and other rules and regulations adopted by the
      Board and in force on the date of termination will continue in effect as
      long as any Option or any rights pursuant thereto remain outstanding and,
      notwithstanding the termination of the Plan, the Board shall remain able
      to make such amendments to the Plan or the Options as they would have been
      entitled to make if the Plan were still in effect.

	 	 	 	 
	13.4 	
      The Board, absent prior approval of the shareholders of
      the Company and of the Exchange or any other regulatory body having
      authority over the Company, will not be entitled to:

	 	 	 	 
		(a) 	
      increase the maximum percentage of Shares issuable by the
      Company pursuant to the Plan;

8

		(b) 	
      amend an Option grant for an Option held by an Insider to
      effectively reduce the Exercise Price or extend the Expiry Date;

	 	 	 
		(c) 	
      make a change to the class of Eligible Persons which
      would have the potential of broadening or increasing participation by
      Insiders;

	 	 	 
		(d) 	
      add any form of financial assistance;

	 	 	 
		(e) 	
      amend the Plan in order to permit Options to be
      transferable or assignable other than as provided for in Section 6.1;
      or

	 	 	 
		(f) 	
      amend this Section 13.4.

	 	 	 
	13.5 	
      Notwithstanding any provision in the Plan to the
      contrary, any revision to the terms of an Option granted to a U.S.
      Participant shall be made only if it complies with, and does not create
      adverse tax consequences under, Sections 424 and/or 409A of the Code, as
      applicable.

	 	 	 
	14. 	
      Administration of the Plan

	 	 	 
	14.1 	
      Within the foregoing limitations and subject to Section
      14.3, the Plan shall be administered by the Board of Directors. The
      Company shall effect the grant of Options under the Plan, in accordance
      with determinations made by the Board of Directors, pursuant to the
      provisions of the Plan, as to those individuals eligible to be
      Participants and the number of Common Shares which shall be the subject of
      each Option, by the execution and delivery of a stock option agreement in
      such form which is consistent with the provisions of the Plan as may be
      approved by the Board.

	 	 	 
	14.2 	
      All decisions and interpretations of the Board of
      Directors respecting the Plan or Options granted thereunder shall be
      conclusive and binding on the Company and the Participants and their
      respective legal personal representatives and beneficiaries and on all
      directors, officers, employees and Service Providers of the Company who
      are eligible under the provisions of the Plan to participate therein. No
      member of the Board shall be liable for any action taken or for any
      determination made in good faith in the administration, interpretation,
      construction or application of the Plan.

	 	 	 
	14.3 	
      All of the powers exercisable hereunder by the Board of
      Directors may, to the extent permitted by applicable law and authorized by
      resolution of the Board of Directors, be exercised by a duly appointed
      committee of the Board of Directors (in which case, all references to the
      Board of Directors will be deemed to be references to such
    committee).

	 	 	 
	15. 	
      Effective Date and Necessary Approvals

	 	 	 
	15.1 	
      No Options granted pursuant to the Plan or any amendment
      may be exercised by the Participants until the shareholders of the Company
      have approved the Plan or any amendment by the affirmative vote of a
      majority of the voting Common Shares of the Company at a general meeting
      of shareholders.

	 	 	 
	15.2 	
      The obligations of the Company to sell and deliver the
      Common Shares on the exercise of the Options is subject to the approval of
      any securities regulatory authority or Exchange, which may be required in
      connection with the authorization, issuance or sale of such Common Shares
      by the Company.

9

	16. 	
      U.S. Provisions

	 	 
	16.1 	
      Common Shares shall not be issued with respect to an
      Option unless the exercise of such Option and the issuance and delivery of
      such Common Shares shall comply with all relevant provisions of law,
      including, without limitation, any applicable state securities laws, the
      United States Securities Act of 1933, as amended (the “1933 Act”),
      the rules and regulations thereunder and the requirements of any stock
      exchange or automated inter-dealer quotation system of a registered
      national securities association upon which such Common Shares may then be
      listed, and such issuance shall be further subject to the approval of
      counsel for the Company with respect to such compliance, including the
      availability of an exemption from registration for the issuance and sale
      of such Common Shares. The inability of the Company to obtain from any
      regulatory body the authority deemed by the Company to be necessary for
      the lawful issuance and sale of any Common Shares under the Plan, or the
      unavailability of an exemption from registration for the issuance and sale
      of any Common Shares under the Plan, shall relieve the Company of any
      liability with respect to the non-issuance or sale of such Common
      Shares.

	 	 
	16.2 	
      If the Common Shares issuable upon exercise of the
      Options have not been registered under the 1933 Act, as a condition to the
      exercise of an Option, the Company may require the Participant to
      represent and warrant in writing at the time of such exercise that the
      Common Shares are being purchased only for investment and without any then
      present intention to sell or distribute such Common Shares. At the option
      of the Company, a stop-transfer order against such Common Shares may be
      placed on the shareholder register and records of the Company, and a
      legend indicating that the Common Share(s) may not be pledged, sold or
      otherwise transferred unless an opinion of counsel is provided stating
      that such transfer is not in violation of any applicable law or
      regulation, may be stamped on the certificates representing such Common
      Shares in order to assure an exemption from registration. The Company also
      may require such other documentation as may from time to time be necessary
      to comply with federal and state securities laws. The Company has no
      obligation to undertake registration of Options or the Common Shares of
      stock issuable upon the exercise of Options.

	 	 
	16.3 	
      Incentive Stock Options

	 	(a) 	
      Maximum Number of Shares for Incentive Stock Options.
      Notwithstanding any other provision of this Plan to the contrary, the
      aggregate number of Common Shares available for Incentive Stock Options is
      13,000,000, subject to adjustment pursuant to Section 10 of this Plan and
      subject to the provisions of Sections 422 and 424 of the Code.

	 	 	 
	 	(b) 	
      Designation of Options. Each option agreement with
      respect to an Option granted to a U.S. Participant shall specify whether
      the related Option is an Incentive Stock Option or a Nonqualified Stock
      Option. If no such specification is made in the option agreement, the
      related Option will be a Nonqualified Stock Option.

	 	 	 
	 	(c) 	
      Special Requirements for Incentive Stock Options.
      In addition to the other terms and conditions of this Plan (and
      notwithstanding any other term or condition of this Plan to the contrary,
      except Section 17, which shall take precedence over this Section 16.3(c)
      in the event of any conflict between such Sections), the following
      limitations and requirements will apply to an Incentive Stock
    Option:

	 	(i) 	
      An Incentive Stock Option may be granted only to an
      Employee.

	 	 	 
	 	(ii) 	
      The aggregate Fair Market Value of the Common Shares
      (determined as of the applicable Grant Date) with respect to which
      Incentive Stock Options are exercisable for the first time by any U.S. Participant
      during any calendar year (pursuant to this Plan and all other plans of the
      Company and of any Parent or Subsidiary) will not exceed one hundred
      thousand United States dollars (U.S.$100,000) or any other limitation
  subsequently set forth in Section 422(d) of the Code.

10

	 	(iii) 	
      The exercise price per Common Share payable upon exercise
      of an Incentive Stock Option will be not less than one hundred percent
      (100%) of the Fair Market Value of a Common Share on the applicable Grant
      Date; provided, however, that the exercise price per Common Share
      payable upon exercise of an Incentive Stock Option granted to a U.S.
      Participant who is a 10% Shareholder on the applicable Grant Date will be
      not less than one hundred ten percent (110%) of the Fair Market Value of a
      Common Share on the applicable Grant Date.

	 	 	 
	 	(iv) 	
      No Incentive Stock Option may be granted more than ten
      (10) years after the earlier of (i) the date on which this Plan is adopted
      by the Board or (ii) the date on which this Plan is approved by the
      shareholders of the Company.

	 	 	 
	 	(v) 	
      An Incentive Stock Option will terminate and no longer be
      exercisable no later than ten (10) years after the applicable Grant Date;
      provided, however, that an Incentive Stock Option granted to a U.S.
      Participant who is a 10% Shareholder on the applicable Grant Date will
      terminate and no longer be exercisable no later than five (5) years after
      the applicable Grant Date.

	 	 	 
	 	(vi) 	
      If a U.S. Participant who has been granted an Incentive
      Stock Option ceases to be an Employee, the Option Agreement with respect
      to such Incentive Stock Option may provide that it is exercisable as
      follows:

	 	(1) 	
      If a U.S. Participant who has been granted an Incentive
      Stock Option ceases to be an Employee due to the death of such U.S.
      Participant, such Incentive Stock Option may be exercised (to the extent
      such Incentive Stock Option was exercisable on the date of death) by the
      estate of such U. S. Participant, or by any person to whom such Incentive
      Stock Option was transferred in accordance with Section (c)(viii) below,
      for a period of one (1) year after the date of death (but in no event
      beyond the term of such Incentive Stock Option).

	 	 	 
	 	(2) 	
      If a U.S. Participant who has been granted an Incentive
      Stock Option ceases to be an Employee due to the Disability of such U.S.
      Participant, such Incentive Stock Option may be exercised (to the extent
      such Incentive Stock Option was exercisable on the date of Disability) by
      such U. S. Participant for a period of ninety (90) days after the date of
      Disability (but in no event beyond the term of such Incentive Stock
      Option).

	 	 	 
	 	(3) 	
      If a U.S. Participant who has been granted an Incentive
      Stock Option ceases to be an Employee due to termination for cause, such
      Incentive Stock Option will terminate and become null and void.

	 	 	 
	 	(4) 	
      If a U.S. Participant who has been granted an Incentive
      Stock Option ceases to be an Employee for any reason other than the death
      or Disability of such U.S. Participant or termination for
      cause, such Incentive Stock Option may be exercised (to the extent such
      Incentive Stock Option was exercisable on the date of termination) by such
      U.S. Participant for a period ninety (90) days after the date of
      termination (but in no event beyond the term of such Incentive Stock
  Option).

11

	 	(5) 	
      For purposes of this Section (c)(vi) and any option
      agreement relating to an Incentive Stock Option issued to a U.S.
      Participant, the employment of a U.S. Participant who has been granted and
      Incentive Stock Option will not be considered interrupted or terminated
      upon (a) sick leave, military leave or any other leave of absence approved
      by the Board that does not exceed ninety (90) days in the aggregate;
      provided, however, that if reemployment upon the expiration of any
      such leave is guaranteed by contract or applicable law, such ninety (90)
      day limitation will not apply, or (b) a transfer from one office of the
      Company (or of any Parent or Subsidiary) to another office of the Company
      (or of any Parent or Subsidiary) or a transfer between the Company and any
      Parent or Subsidiary.

	 	(vii) 	
      An Incentive Stock Option granted to a U.S. Participant
      may be exercised during such U.S. Participant’s lifetime only by such U.S.
      Participant.

	 	 	 
	 	(viii) 	
      An Incentive Stock Option granted to a U.S. Participant
      may not be transferred, assigned, pledged, hypothecated or otherwise
      disposed of by such U.S. Participant, except by will or by the laws of
      descent and distribution.

	 	 	 
	 	(ix) 	
      In the event that this Plan is not approved by the
      shareholders of the Company within twelve (12) months before or after the
      date on which this Plan is adopted by the Board, any Incentive Stock
      Option granted under this Plan will automatically be deemed to be a
      Nonqualified Stock Option.

	17. 	
      Options to California
Residents

	17.1 	
      Notwithstanding any other provision of this Plan or any
      option agreement, if the Company grants an Option to a Participant that is
      a resident of the State of California and such Option grant is not exempt
      from qualification under the California securities laws other than
      pursuant to Section 25102(o) of the California Corporations Code, or any
      successor thereto, the following provisions shall apply:

	 	 	 
		(a) 	
      If such a Participant’s employment is terminated other
      than for cause (as defined by applicable law, the terms of the Plan, the
      terms of the award agreement or the terms of a contract of employment),
      such Option shall continue to be exercisable, to the extent that the
      Participant is entitled to exercise on the date employment terminates,
      until a date not earlier than the earliest to occur of (i) the Option
      expiration date or (ii)(x) at least six (6) months from the date of
      termination if termination was caused by death or Disability, or (y) at
      least thirty (30) days from the date of termination if termination was
      caused by other than death or Disability;

	 	 	 
		(b) 	
      Each Option shall not be exercisable after the expiration
      of ten (10) years from the date of the granting of the Option;
  and

12

	 	(c) 	
      No Option shall be granted to such a Participant after
      ten years from the earlier of the date of adoption of the Plan by the
      Board or the date of shareholder approval or any earlier date of
      discontinuation or termination established pursuant to Section
  13.

	18. 	
      Withholding

	18.1 	
      As a condition of and prior to participation in the Plan,
      each Participant authorizes the Company to withhold from any amount
      otherwise payable to him or her any amounts required by any taxing
      authority to be withheld for taxes of any kind as a consequence of his or
      her participation in the Plan. The Company shall also have the right in
      its discretion to satisfy any such liability for withholding or other
      required deduction amounts by retaining or acquiring any Option Shares, or
      retaining any amount payable, which would otherwise be issued or
      delivered, provided or paid to a Participant under the Plan. The Company
      may require a Participant, as a condition to exercise of an Option to pay
      or reimburse the Company for any such withholding or other required
      deduction amounts related to the exercise of
Options.

	19. 	
      Extension of Expiry Date of Options Expiring During a
      Trading Ban

	19.1 	
      If the term of an Option held by a Participant expires
      during a restricted trading period imposed by the Company pursuant to
      which the Company’s management and directors are prohibited from trading
      in the Company’s securities (the “Blackout Period”), then the term of such
      Option or unexercised portion thereof shall be extended and shall expire
      ten (10) business days after the end of the Blackout Period.

	 	 
	19.2 	
      Notwithstanding the foregoing, if at the time the
      Participant ceases to be a director, officer, employee or Service Provider
      due to early retirement, voluntary resignation or termination by the
      Company for reasons other than Cause, there is a Blackout Period, or if at
      any time during the ninety (90) day period set out in Section 8.2, there
      is a Blackout Period, then in calculating the time that the Option then
      held by the Participant shall be exercisable to acquire any Common Shares
      that have vested, the portion of such ninety (90) day period that remains
      upon commencement of a Blackout Period shall be in addition to any such
      blackout period.

	20. 	
      Government/Exchange
Requirements

	20.1 	
      The Company’s obligation to issue and deliver Common
      Shares under any Option is subject to:

	 	 	 
		(a) 	
      the satisfaction of all requirements under applicable
      securities laws in respect thereof and obtaining all regulatory approvals
      as the Company shall determine to be necessary or advisable in connection
      with the authorization, issuance or sale thereof;

	 	 	 
		(b) 	
      the admission of such Common Shares to listing on any
      stock exchange on which such Common Shares may then be listed;
  and

	 	 	 
		(c) 	
      the receipt by the Company from the Participant of such
      representations, warranties, agreements and undertakings as to future
      dealings in such Common Shares as the Company determines to be necessary
      or advisable in order to safeguard against the violation of the securities
      laws of any jurisdiction.

The Company shall take all reasonable
steps to obtain such approvals and registrations as may be necessary for the
issuance of such Common Shares in compliance with applicable securities laws
and for the listing of such Common Shares on any stock
exchange on which such Common Shares are then listed.

13

	21. 	
      Common Shares not Acquired

	 	 
	21.1 	
      Any Common Shares not acquired by a Participant under an
      Option, which have been cancelled or expired in accordance with their
      terms, may be made the subject of a further Option grant pursuant to the
      provisions of the Plan.

	 	 
	22. 	
      Exchange Rules

	 	 
	22.1 	
      All Options granted pursuant to the Plan will be subject
      to the rules and policies of the Exchange and any other regulatory body
      having jurisdiction over the Company.

	 	 
	23. 	
      No Representation or Warranty

	 	 
	23.1 	
      The Company makes no representation or warranty as to the
      future market value of any Common Shares issued in accordance with the
      provisions of the Plan.

	 	 
	24. 	
      General Provisions

	 	 
	24.1 	
      Nothing contained in the Plan shall prevent the Company
      or any of its affiliates from adopting or continuing in effect other
      compensation arrangements (subject to shareholder approval if such
      approval is required by the Exchange) and such arrangements may be either
      generally applicable or applicable only in specific cases.

	 	 
	24.2 	
      The validity, construction and effect of the Plan, the
      grants of Options, the issue of Common Shares, any rules and regulations
      relating to the Plan any written agreement, and all determinations made
      and actions taken pursuant to the Plan, shall be governed by and
      determined in accordance with the laws of the Province of British
      Columbia.

	 	 
	24.3 	
      If any provision of the Plan or any written agreement is
      or becomes or is deemed to be invalid, illegal or unenforceable in any
      jurisdiction or as to any person or Option, or would disqualify the Plan
      or any Option under any law deemed applicable by the Board, such provision
      shall be construed or deemed amended to conform to the applicable laws, or
      if it cannot be construed or deemed amended without, in the determination
      of the Board, materially altering the intent of the Plan or the Option,
      such provision shall be stricken as to such jurisdiction, person, or
      Option and the remainder of the Plan and any such written agreement shall
      remain in full force and effect.

	 	 
	24.4 	
      Neither the Plan nor any Option shall create or be
      construed to create a trust or separate fund of any kind or a fiduciary
      relationship between the Company or any of its affiliates and a
      Participant or any other person.

	 	 
	24.5 	
      Headings are given to the sections of the Plan solely as
      a convenience to facilitate reference. Such headings shall not be deemed
      in any way material or relevant to the construction or interpretation of
      the Plan or any provision thereof.

	 	 
	25. 	
      Effective Date

	 	 
	25.1 	
      The Plan shall become effective upon being adopted by the
      Board.

14ex10-1.htm

  

SECURITIES PURCHASE AGREEMENT

AGREEMENT, dated as of November 18, 2013, between Liberty Star Uranium & Metal Corporation (“Company”), and GCA Strategic Investment Fund Limited (“Purchaser”).

R E C I T A L S:

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 (the “Securities Act”), and Rule 506 promulgated thereunder, the Company desires to issue and sell to the Purchaser up to $250,000.00 aggregate face amount of Company’s Convertible Note due twelve (12) months from the respective date of issuance (the

“Convertible Note”), with terms and conditions as set forth in the form of Convertible Note attached hereto as Exhibit A, and

WHEREAS, the Convertible Note may be convertible, exercised into shares of the Company’s common stock, $0.00001 par value per share (the “ Common Stock”), pursuant to Rule 144 (the “Conversion Shares”) upon the terms and conditions set forth herein and in the Convertible Note.

NOW, THEREFORE, in consideration of the foregoing promises, the covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

ARTICLE 1.   DEFINITIONS

1 .1             Definitions.  The following terms, as used herein, have the following meanings:

“Affiliate” means, with respect to any Person (the “Subject Person”), (i) any other Person (a “Controlling Person”) that directly, or indirectly through one or more intermediaries, Controls the Subject Person or (ii) any other Person (other than the Subject Person or a Consolidated Subsidiary of the Subject Person) which is Controlled by or is under common Control with a Controlling Person.

“Agreement” means this Securities Purchase Agreement, as amended, supplemented or otherwise modified from time to time in accordance with its terms.

“Balance Sheet Date” has the meaning set forth in Section 4.7.

“Business Day” means any day except a Saturday, Sunday or other day on which commercial banks in the City of New York are authorized or required by law to close.

“Capital Reorganization” has the meaning set forth in Section 11.5.

  

  

  

“Change in Control” means (i) after the date of this Agreement, any person or group of persons (within the meaning of Sections 13 and 14 of the Exchange Act and the rules and regulations of the Commission relating to such sections) other than Purchaser shall have acquired beneficial ownership (within the meaning of Rules 13d-3 and 13d-5 promulgated by the Commission pursuant to the Exchange Act) of 50% or more of the outstanding shares of Common Stock of the Company without the prior written consent of Purchaser; (ii) any sale or other disposition (other than by reason of death or disability) to any Person of more than 50% of the  issued and outstanding shares of Common Stock of the Company by any executive officers and/or employee directors of the Company without the prior written consent of Purchaser; (iii) individuals constituting the Board of Directors of the Company on the date hereof (together with any new Directors whose election by such Board of Directors or whose nomination for election by the stockholders of the Company was approved by a vote of at least 50.1% of the Directors still in office who are either Directors as of the date hereof or whose election or nomination for election was previously so approved), cease for any reason to constitute at least one-third of the Board of Directors of the Company then in office.

“VWAP” shall mean for any security as of any date, the Volume Weighted Average Price as reported by Bloomberg, L.P. (“ Bloomberg”) on the principal securities exchange or trading market where such security is listed or traded or, if the foregoing does not apply, the Volume Weighted Average Price of such security in the over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg, or, if no Volume Weighted Average Price is reported for such security by Bloomberg, then the average of the bid prices of any market makers for such securities as reported in the “Pink Sheets” by the National Quotation Bureau, Inc.  If the lowest closing bid price cannot be calculated for such security on such date on any of the foregoing bases, the lowest closing bid price of such security on such date shall be the fair market value as mutually determined by Purchaser and the Company for which the calculation of the closing bid price requires, and in the absence of such mutual determination, as determined by the Board of Directors of the Company in good faith.

“Closing Date” means the date on which all of the conditions set forth in Sections 6.1 and 6.2 shall have been satisfied and Convertible Note, in the aggregate principal amount of $250,000.00 are issued by the Company to Purchaser.

“Code” means the Internal Revenue Code of 1986, as amended.

“Commission” means the Securities and Exchange Commission or any entity succeeding to all of its material functions.

“Common Stock” means common stock, $0.00001 par value per share, of the Company.

“Company” means Liberty Star Uranium and Metal Corporation, a Nevada corporation and its successors.

“Company Corporate Documents” means the certificate of incorporation and bylaws of the Company.

  

2

  

“Consolidated Net Worth” means at any date the total shareholder’s equity which would appear on a consolidated balance sheet of the Company prepared as of such date.

“Consolidated Subsidiary” means at any date with respect to any Person or Subsidiary or other entity, the accounts of which would be consolidated with those of such Person in its consolidated financial statements if such statements were prepared as of such date.

“Control” (including, with correlative meanings, the terms “Controlling,” “Controlled by” and under “common Control with”), as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that Person, whether through the ownership of voting securities, by contract or otherwise.

“Conversion Date” shall mean the date of delivery (including delivery via telecopy or email) of a Notice of Conversion for all or a portion of a Convertible Note by the holder thereof to the Company as specified in Convertible Note.

“Conversion Price” has the meaning set forth in the Convertible Note.

“Conversion Shares” has the meaning set forth in the Recitals.

“Convertible Note” means the Company’s Convertible Note substantially in the form set forth as Exhibit A hereto.

“Deadline” has the meaning set forth in Section 10.1.

“Debt” of any Person means at any date, without duplication, (i) all obligations of such Person for borrowed money, (ii) all obligations of such Person evidenced by bonds, debentures, notes, or other similar instruments issued by such Person, (iii) all obligations of such Person as lessee which (y) are capitalized in accordance with GAAP or (z) arise pursuant to sale-leaseback transactions, (iv) all reimbursement obligations of such Person in respect of letters of credit or other similar instruments, (v) all Debt of others secured by a Lien on any asset of such Person, whether or not such Debt is otherwise an obligation of such Person and (vi) all Debt of others Guaranteed by such Person.

“Default” means any event or condition which constitutes an Event of Default or which with the giving of notice or lapse of time or both would, unless cured or waived, become an Event of Default.

“Directors” means the individuals then serving on the Board of Directors or similar such management council of the Company.

“Environmental Laws” means any and all federal, state, local and foreign statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises, licenses, agreements or other governmental restrictions relating to the environment or to emissions, discharges or releases of pollutants, contaminants, petroleum or petroleum products, chemicals or industrial, toxic or hazardous substances or wastes into the environment, including, without limitation, ambient air, surface water, ground water, or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, petroleum or petroleum products, chemicals or industrial, toxic or hazardous substances or wastes or the cleanup or other remediation thereof.

  

3

  

“Event of Default” has the meaning set forth in Article 12 hereof.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Expense Reimbursement Fee” has the meaning set forth in Section 13.4.

“Financing” means a public or private financing consummated (meaning closing and funding) through the issuance of debt or equity securities (or securities convertible into or exchangeable for debt or equity securities) of the Company, other than Permitted Financings.

“Fixed Price(s)” has the meaning set forth in Section 11.1.

“GAAP” has the meaning set forth in Section 1.2.

“Guarantee” by any Person means any obligation, contingent or otherwise, of such Person directly or indirectly guaranteeing (whether by virtue of partnership arrangements, by agreement to keep well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain a minimum net worth, financial ratio or similar requirements, or otherwise) any Debt of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Debt or (ii) entered into for the purpose of assuring in any other manner the holder of such Debt of the payment thereof or to protect such holder against loss in respect thereof (in whole or in part); provided that the term Guarantee shall not include endorsements for collection or deposit in the ordinary course of business.  The term Guarantee used as a verb has a corresponding meaning.

“Hazardous Materials” means any hazardous materials, hazardous wastes, hazardous constituents, hazardous or toxic substances or petroleum products (including crude oil or any derivative or fraction thereof), defined or regulated as such in or under any Environmental Laws.

“Investment” means any investment in any Person, whether by means of share purchase, partnership interest, capital contribution, loan, time deposit or otherwise.

“Lien” means any lien, mechanic’s lien, material men’s lien, lease, easement, charge, encumbrance, mortgage, conditional sale agreement, title retention agreement, agreement to sell or convey, option, claim, title imperfection, encroachment or other survey defect, pledge, restriction, security interest or other adverse claim, whether arising by contract or under law or otherwise (including, without limitation, any financing lease having substantially the same economic effect as any of the foregoing, and the filing of any financing statement under the Uniform Commercial Code or comparable law of any jurisdiction in respect of any of the foregoing).

  

4

  

“Majority Holders” means (i) as of the Closing Date, Purchaser.

“Market Price” shall mean the Closing Bid Price of the Common Stock preceding the date of determination.

“Material Plan” means at any time a Plan or Plans having aggregate Unfunded Liabilities in excess of $250,000.

“Maturity Date” shall mean the date of maturity of the Convertible Note.

“Maximum Number of Shares” shall mean that percentage that the Company may issue without shareholder approval under the applicable rules of the National Market or the applicable OTC Bulletin Board or equivalent entity, of the then issued and outstanding shares of Common Stock of the Company as of the applicable date of determination, or such greater number of shares as the stockholders of the Company may have previously approved.

“NASDAQ Market” means the NASDAQ Stock Market’s National Market System.

“National Market” means the NASDAQ Market, the NASDAQ Small Cap Market, the New York Stock Exchange, Inc. or the American Stock Exchange, Inc. or other automated quotation system or exchange on which the Common Stock is then traded.

“Net Cash Proceeds” means, with respect to any transaction, the total amount of cash proceeds received by the Company or any Subsidiary less (i) reasonable underwriters’ fees, brokerage commissions, reasonable professional fees and other customary out-of-pocket expenses payable in connection with such transaction, and (ii) in the case of dispositions of assets, (A) actual transfer taxes (but not income taxes) payable with respect to such dispositions, and (B) the amount of Debt, if any, secured by a Lien on the asset or assets disposed of and required to be, and actually repaid by the Company or any Subsidiary in connection therewith, and any trade payables specifically relating to such asset or assets sold by the Company or any Subsidiary that are not assumed by the purchaser of such asset or assets.

“Notice of Conversion” means the form to be delivered by a holder of a Convertible Note upon conversion of all or a portion thereof to the Company substantially in the form of Exhibit A to the form of Convertible Note.

“Officer’s Certificate” shall mean a certificate executed by the President, chief executive officer or chief financial officer of the Company in the form of Exhibit D attached hereto.

"OTC Bulletin Board" means the over-the-counter bulletin board operated by the NASD.

“Outstanding Debt” means any debt securities or payables of the Company outstanding as of the Closing Date and the obligations and commitments of the Company.

  

5

  

“PBGC” means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA.

“Permits” means all domestic and foreign licenses, franchises, grants, authorizations, permits, easements, variances, exemptions, consents, certificates, orders and approvals necessary to own, lease and operate the properties of, and to carry on the business of the Company and the Subsidiaries.

“Permitted Financings” means a secondary registered offering of securities of the Company, the extension or conversion into Common Stock of Outstanding Debt, a private placement financing in which the Company raises minimum gross proceeds of $50,000 and  maximum gross proceeds of $10,000,000 or other financing transactions specifically consented to in writing by Purchaser.

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

“Purchase Price” means the purchase price for the Securities set forth in Section 2.2 hereof.

“Purchaser” means the entity listed on the signature page hereto and its successors and assigns, including holders from time to time of the Convertible Note.

“Recourse Financing” means Debt of the Company or any Subsidiary which, by its terms, does not bar the lender thereof from action against the Company or any Subsidiary, as borrower or guarantor, if the security value of the project or asset pledged in respect thereof falls below the amount required to repay such Debt.

“Redemption Event” has the meaning set forth in Section 3.4.

“Restricted Payment” means, with respect to any Person, (i) any dividend or other distribution on any shares of capital stock of such Person (except dividends payable solely in shares of capital stock of the same or junior class of such Person and dividends from a wholly-owned direct or indirect Subsidiary of the Company to its parent corporation), (ii) any payment on account of the purchase, redemption, retirement or acquisition of (a) any shares of such Person’s capital stock or (b) any option, warrant or other right to acquire shares of such Person’s capital stock or (iii) any loan, or advance or capital contribution to any Person (a “ Stockholder”) owning any capital stock of such Person other than relocation, travel or like advances to officers and employees in the ordinary course of business, and other than reasonable compensation as determined by the Board of Directors.

“Rights Offering” has the meaning set forth in Section 11.3.

“Sale Event” has the meaning set forth in Section 3.3.

“Securities” means the Convertible Note, as applicable, the Conversion Shares.

  

6

  

“Securities Act” means the Securities Act of 1933, as amended.

“Share Reorganization” has the meaning set forth in Section 11.2.

“Solvency Certificate” shall mean a certificate executed by the treasurer of the Company as to the solvency of the Company, the adequacy of its capital and its ability to pay its debts, all after giving effect to the issuance and sale of the Convertible Note and the completion of the offering (including without limitation the payment of any fees or expenses in connection therewith), which such Solvency Certificate shall be in the form of Exhibit C attached hereto.

“Special Distribution” has the meaning set forth in Section 11.4.

“Subsidiary” means, with respect to any Person, any corporation or other entity of which (x) a majority of the capital stock or other ownership interests having ordinary voting power to elect a majority of the Board of Directors or other persons performing similar functions are at the time directly or indirectly owned by such Person or (y) the results of operations, the assets and the liabilities of which are consolidated with such Person under GAAP.

“Subsidiary Corporate Documents” means the certificates of incorporation and bylaws of each Subsidiary.

“Taxes” has the meaning set forth in Section 3.5.

“Trading Day” shall mean any Business Day in which the OTC Bulletin Board, National Market or other automated quotation system or exchange on which the Common Stock is then traded is open for trading for at least four (4) hours.

“Transaction Agreements” means this Agreement, the Convertible Note and the any other agreements contemplated by this Agreement.

“Transfer” means any disposition of Securities that would constitute a sale thereof under the Securities Act.

“Unfunded Liabilities” means, with respect to any Plan at any time, the amount (if any) by which (i) the present value of all benefits under Plan exceeds (ii) the fair market value of all Plan assets allocable to such benefits (excluding any accrued but unpaid contributions), all determined as of the then most recent valuation date for such Plan, but only to the extent that such excess represents a potential liability of a member of the ERISA Group to the PBGC or any other Person under Title IV of ERISA.

 

1.2             Accounting Terms and Determinations.  Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared, in accordance with generally accepted accounting principles as in effect from time to time, applied on a consistent basis (except for changes concurred in by the Company’s independent public accountants) (“ GAAP”).  All references to “dollars,” “Dollars” or “$” are to United States dollars unless otherwise indicated.

  

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ARTICLE 2.   PURCHASE AND SALE OF SECURITIES

2.1             Purchase and Sale of Convertible Note.

(a)           Subject to the terms and conditions set forth herein, the Company agrees to issue and sell to Purchaser, and Purchaser agrees to purchase from the Company, Convertible Note up to the aggregate principal amount.

(b)           Purchaser shall acquire Convertible Note on the Closing Date in an aggregate principal amount of Two Hundred Fifty Thousand Dollars ($250,000.00).

2.2             Purchase Price.  The purchase price for the Convertible Note on the Closing Date is $225,000.00 (the “ Purchase Price”).

2.3             Closing and Mechanics of Payment.

(a) The Purchase Price shall be paid on the Closing Date by wire transfer of immediately available funds.

(b)           The Convertible Note issued on the Closing Date shall be dated the date hereof.

 

ARTICLE 3.   PAYMENT TERMS OF CONVERTILE BRIDGE NOTES

3.1             Payment of Principal and Interest; Payment Mechanics.  The Company will pay all amounts due on the Convertible Note  by the method and at the address specified for such purpose by Purchaser in writing, without the presentation or surrender of any Convertible Note or the making of any notation thereon, except that upon written request of the Company made concurrently with or reasonably promptly after payment or prepayment in full of this Convertible Note, the holder shall surrender the Convertible Note for cancellation, reasonably promptly after any such request, to the Company at its principal executive office.  Prior to any sale or other disposition of the Convertible Note, the holder thereof will, at its election, either endorse thereon the amount of principal paid thereon and the last date to which interest has been paid thereon or surrender the Convertible Note to the Company in exchange for a new Convertible Note.  The Company will afford the benefits of this Section 3.1 to any direct or indirect transferee of the Convertible Note purchased under this Agreement and that has made the same agreement relating to this Convertible Note as Purchaser has in this Section 3.1; provided that such transferee is an “accredited investor” under Rule 501 of the Securities Act.

  

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3.2             Voluntary Prepayment.   For so long as no Event of Default shall have occurred and is continuing, the Company may, at its option, repay, in whole or in part, the Convertible Note, per the formula set forth in Section 5.1 of Exhibit A hereto, thereof following at least five (5) Business Days prior written notice to Purchaser (the expiration of such five (5) Business Day period being referred to as the “prepayment date”); provided, however, that if such date is not a Business Day, the prepayment date shall be the next Business Day thereafter.

3.3             Mandatory Prepayments.

(a) Upon (i) the occurrence of a Change in Control of the Company, (ii) a transfer of all or substantially all of the assets of the Company to any Person in a single transaction or series of related transactions, or (iii) a consolidation, merger or amalgamation of the Company with or into another Person in which the Company is not the surviving entity (other than a merger which is effected solely to change the jurisdiction of incorporation of the Company and results in a reclassification, conversion or exchange of outstanding shares of Common Stock solely into shares of Common Stock) (each of items (i), (ii) and (iii) being referred to as a “ Sale Event”) , then, in each case, the Company shall, upon request of the Majority Holders, redeem the Convertible Note   subject to the provisions of Section 5 of the Convertible Note.  The redemption price payable upon any such redemption shall be the Redemption Price in Section 5 of the Convertible Note (referred to herein as the "Formula Price").

 

	
3.4  

	
       Prepayment Procedures.

(a)           Any permitted prepayment or redemption of the Convertible Note , as applicable pursuant to Sections 3.2 or 3.3 above shall be deemed to be effective and consummated (for purposes of determining the Formula Price and the time at which Purchaser shall thereafter not be entitled to deliver a Notice of Conversion for the Convertible Note ) as follows:

(i)           A prepayment pursuant to Section 3.2, the “prepayment date” specified therein;

(ii)           A redemption pursuant to Section 3.3(a), the date of consummation of the applicable Sale Event; and

(b)           On the Maturity Date and on the effective date of a repayment or redemption of the Convertible Note  as specified in Section 3.4(a) above, the Company shall deliver by wire transfer of funds the repayment/redemption price to Purchaser of the Convertible Note  subject to redemption.  Should Purchaser not receive payment of any amounts due on redemption of its Convertible Note  by reason of the Company’s failure to make payment at the times prescribed above for any reason, the Company shall pay to the applicable holder on demand (x) interest on the sums not paid when due at an annual rate equal to the maximum lawful rate compounded at the end of each thirty (30) days, until the applicable holder is paid in full and (y) all costs of collection, including, but not limited to, reasonable attorneys’ fees and costs, whether or not suit or other formal proceedings are instituted.

  

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(c)           The Company shall select the Convertible Note to be redeemed in any redemption in which not all of the Convertible Note are to be redeemed so that the ratio of the Convertible Note of each holder selected for redemption to the total Convertible Note owned by that holder shall be the same as the ratio of all such Convertible Note selected for redemption bears to the total of all then outstanding Convertible Note.  Should any Convertible Note required to be redeemed under the terms hereof not be redeemed solely by reason of limitations imposed by law, the applicable Convertible Note shall be redeemed on the earliest possible dates thereafter to the maximum extent permitted by law.

(d)           Any Notice of Conversion delivered by Purchaser to the Company prior to the (x) Maturity Date or (y) effective date of a voluntary repayment pursuant to Section 3.2 or a mandatory prepayment pursuant to Section 3.3 as specified in Section 3.4(a) above), shall be honored by the Company and the conversion of the Convertible Note shall be deemed effected on the Conversion Date.  In addition, between the effective date of a voluntary prepayment pursuant to Section 3.2 or a mandatory prepayment pursuant to Section 3.3 as specified in Section 3.4(a) above and the date the Company is required to deliver the redemption proceeds in full to Purchaser, Purchaser may deliver a Notice of Conversion to the Company.  Such notice will be (x) of no force or effect if the Company timely pays the redemption proceeds to Purchaser when due or (y) honored on or as of the date of the Notice of Conversion if the Company fails to timely pay the redemption proceeds to Purchaser when due.

	
3.5  

	
       Payment of Additional Amounts.

(a)           Any and all payments by the Company hereunder or under the Convertible Note to Purchaser and each “qualified assignee” thereof shall be made free and clear of and without deduction or withholding for any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto (all such taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as “ Taxes”) unless such Taxes are required by law or the administration thereof to be deducted or withheld.  If the Company shall be required by law or the administration thereof to deduct or withhold any Taxes from or in respect of any sum payable under the Convertible Note (i) the holders of the Convertible Note subject to such Taxes shall have the right, but not the obligation, for a period of thirty (30) days commencing upon the day it shall have received written notice from the Company that it is required to withhold Taxes to transfer all or any portion of the Convertible Note to a qualified assignee to the extent such transfer can be effected in accordance with the other provisions of this Agreement and applicable law; (ii) the Company shall make such deductions or withholdings; (iii) the sum payable shall be increased as may be necessary so that after making all required deductions or withholdings (including deductions or withholdings applicable to additional amounts paid under this Section 3.5) Purchaser receives an amount equal to the sum it would have received if no such deduction or withholding had been made; and (iv) the Company shall forthwith pay the full amount deducted or withheld to the relevant taxation or other authority in accordance with applicable.  A “qualified assignee” of a Purchaser is a Person that is organized under the laws of (i) the United States or (II) any jurisdiction other than the United States or any political subdivision thereof and that (y) represents and warrants to the Company that payments of the Company to such assignee under the laws in existence on the date of this Agreement would not be subject to any Taxes and (z) from time to time, as and when requested by the Company, executes and delivers to the Company and the Internal Revenue Service forms, and provides the Company with any information necessary to establish such assignee’s continued exemption from Taxes under applicable law.

(b)           The Company shall forthwith pay any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies (all such taxes, charges and levies hereinafter referred to as “Other Taxes”) which arise from any payment made under any of the Transaction Agreements or from the execution, delivery or registration of, or otherwise with respect to, this Agreement other than Taxes payable solely as a result of the transfer from Purchaser to a Person of any Security.

  

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(c)           The Company shall indemnify Purchaser, or qualified assignee, for the full amount of Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this Section 3.5) paid by Purchaser, or qualified assignee, and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted.  Payment under this indemnification shall be made within 30 days from the date Purchaser or assignee makes written demand therefor.  A certificate as to the amount of such Taxes or Other Taxes submitted to the Company by Purchaser or assignee shall be conclusive evidence of the amount due from the Company to such party.

(d)           Within 30 days after the date of any payment of Taxes, the Company will furnish to Purchaser the original or a certified copy of a receipt evidencing payment thereof.

(e)           Purchaser shall provide to the Company a form W-8, stating that it is a non-U.S. person, together with any additional tax forms which may be required under the Code, as amended after the date hereof, to allow interest payments to be made to it without  deduction.

 

ARTICLE 4.   REPRESENTATIONS AND WARRANTIES

The Company represents and warrants to Purchaser:

4.1             Organization and Qualification.  The Company and each Subsidiary is a corporation (or other legal entity) duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation, with full power and authority to own, lease, use and operate its properties and to carry on its business as and where now owned, leased, used, operated and conducted.  The Company is qualified to conduct business as a foreign corporation and is in good standing in every jurisdiction in which the nature of the business conducted by it makes such qualification necessary, except where such failure would not have a Material Adverse Effect.  A “Material Adverse Effect” means any material adverse effect on the operations, results of operations, properties, assets or condition  (financial or otherwise) of the Company or the Company and its Subsidiaries, taken as a whole, or on the transactions contemplated hereby or by the agreements or instruments to be entered into in connection herewith.

  

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4.2             Authorization and Execution.

(a) The Company has all requisite corporate power and authority to enter into and perform each Transaction Agreement and to consummate the transactions contemplated hereby and thereby and to issue the Securities in accordance with the terms hereof and thereof.

(b) The execution, delivery and performance by the Company of each Transaction Agreement and the issuance by the Company of the Securities have been duly and validly authorized and no further consent or authorization of the Company, its Board of Directors or its shareholders is required.

(c) This Agreement has been duly executed and delivered by the Company.

(d) This Agreement constitutes, and upon execution and delivery thereof by the Company, each of the Transaction Agreements will constitute, a valid and binding agreement of the Company, in each case enforceable against the Company in accordance with its respective terms.

4.3             Capitalization.  As of the date hereof, the authorized, issued and outstanding capital stock of the Company is as set forth in the Company’s public record and except as set forth in the Company’s public record no other shares of capital stock of the Company will be outstanding as of the Closing Date.  All of such outstanding shares of capital stock are, or upon issuance will be, duly authorized, validly issued, fully paid and nonassessable.  No shares of capital stock of the Company are subject to preemptive rights or similar rights of the stockholders of the Company or any liens or encumbrances imposed through the actions or failure to act of the Company.  Other than as disclosed in the Company’s public record , as of the date hereof, (i) there are no outstanding options, warrants, scrip, rights to subscribe for, puts, calls, rights of first refusal, agreements, understandings, claims or other commitments or rights of any character whatsoever relating to, or securities or rights convertible into or exchangeable for any shares of capital stock of the Company or any of its Subsidiaries, or arrangements by which the Company or any of its Subsidiaries is or may become bound to issue additional shares of capital stock of the Company or any of its Subsidiaries, and (ii) there are no agreements or arrangements under which the Company or any of its Subsidiaries are obligated to register the sale of any of its or their securities under the Securities Act and (iii) there are no anti-dilution or price adjustment provisions contained in any security issued by the Company (or in any agreement providing rights to security holders) that will be triggered by the issuance of the Convertible Note or Conversion Shares.  The Company has furnished to Purchaser true and correct copies of the Company’s Corporate Documents, and the terms of all securities convertible into or exercisable for Common Stock and the material rights of the holders thereof in respect thereto.

  

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4.4             Governmental Authorization.  The execution and delivery by the Company of the Transaction Agreements does not and will not, the issuance and sale by the Company of the Securities does not and will not, and the consummation of the transactions contemplated hereby and by the other Transaction Agreements will not, require any action by or in respect of, or filing with, any governmental body, agency or governmental official except (a) such actions or filings that have been undertaken or made prior to the date hereof and that will be in full force and effect (or as to  which all applicable waiting periods have expired) on and as of the date hereof or which are not required to be filed on or prior to the Closing Date and (b) such actions or filings that, if not obtained, would not result in a Material Adverse Effect.

4.5             Issuance of Shares.  Upon conversion in accordance with the terms of the Convertible Note, the Conversion Shares shall be duly and validly issued and outstanding, fully paid and nonassessable, free and clear of any Taxes, Liens and charges with respect to issuance and shall not be subject to preemptive rights or similar rights of any other stockholders of the Company.  Assuming the representations and warranties of Purchaser herein are true and correct in all material respects, each of the Securities will have been issued in material compliance with all applicable U.S. federal and state securities laws.  The Company understands and acknowledges that, in certain circumstances, the issuance of Conversion Shares could dilute the ownership interests of other stockholders of the Company.  The Company further acknowledges that its obligation to issue Conversion Shares upon conversion of the Convertible Note is absolute and unconditional regardless of the dilutive effect that such issuance may have on the ownership interests of other stockholders of the Company.

4.6             No Conflicts.  The execution and delivery by the Company of the Transaction Agreements to which it is a party did not and will not, the issuance and sale by the Company of the Securities did not and will not and the consummation of the transactions contemplated hereby and by the other Transaction Agreements will not, contravene or constitute a default under or violation of (i) any provision of applicable law or regulation, (ii) the Company Corporate Documents, (iii) any agreement, judgment, injunction, order, decree or other instrument binding upon the Company or any Subsidiary or any of their respective assets, or result in the creation or imposition of any Lien on any asset of the Company or any Subsidiary.  The Company and each Subsidiary is in compliance with and conforms to all statutes, laws, ordinances, rules, regulations, orders, restrictions and all other legal requirements of any domestic or foreign government or any instrumentality thereof having jurisdiction over the conduct of its businesses or the ownership of its properties, except where such failure would not have a Material Adverse Effect.

  

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4.7             Financial Information. Since July 31, 2013 (the “Balance Sheet Date”), except as disclosed in the Company’s public filings there has been (x) no material adverse change in the assets or liabilities, or in the business or condition, financial or otherwise, or in the results of operations or prospects, of the Company and its Subsidiaries, whether as a result of any legislative or regulatory change, revocation of any license or rights to do business, fire, explosion, accident, casualty, labor  trouble, flood, drought, riot, storm, condemnation, act of God, public force or otherwise and (y) no material adverse change in the assets or liabilities, or in the business or condition, financial or otherwise, or in the results of operations or prospects, of the Company and its subsidiaries except in the ordinary course of business; and no fact or condition exists or is contemplated or threatened which might cause such a change in the future.  The unaudited consolidated balance sheets of the Company and its Subsidiaries for the periods ending July 31, 2011, 2012 and 2013, and the related consolidated statements of income, changes in stockholders’ equity and changes in cash flows for the periods then ended, including the footnotes thereto, except as indicated therein, (i) complied in all material respects with applicable accounting requirements and (ii) have been prepared in accordance with GAAP consistently applied throughout the periods indicated, except that the unaudited financial statements do not contain notes and may be subject to normal audit adjustments and normal annual adjustments.  Such financial statements fairly present the financial condition of the Company and its Subsidiaries at the dates indicated and the consolidated results of their operations and cash flows for the periods then ended and, except as indicated therein, reflect all claims against and all Debts and liabilities of the Company and its Subsidiaries, fixed or contingent.

4.8             Litigation.  Except as set forth in the Company’s public filings, there is no action, suit or proceeding pending or, to the knowledge of the Company, threatened against the Company or any Subsidiary, before any court or arbitrator or any governmental body, agency or official in which there is a reasonable possibility of an adverse decision which could materially adversely affect the business, condition (financial or otherwise), operations, performance, properties or prospects of the Company or which challenges the validity of any Transaction Agreements.

4.9             Omitted

4.10             Environmental Matters.  The costs and liabilities associated with Environmental Laws (including the cost of compliance therewith) are unlikely to have a material adverse effect on the business, condition (financial or otherwise), operations, performance, properties or prospects of the Company or any Subsidiary.  Each of the Company and the Subsidiaries conducts its businesses in compliance in all material respects with all applicable Environmental Laws.

4.11             Taxes.  All United States federal, state, county, municipality, local or foreign income tax returns and all other material tax returns (including foreign tax returns) which are required to be filed by or on behalf of the Company and each Subsidiary have been filed and all material taxes due pursuant to such returns or pursuant to any assessment received by the Company and each Subsidiary have been paid except those being disputed in good faith and for which adequate reserves have been established and except where such failure would not have a Material Adverse Effect.  The charges, accruals and reserves on the books of the Company and each Subsidiary in respect of taxes and other governmental charges have been established in accordance with GAAP.

4.12             Investments, Joint Ventures.  Other than as set forth in the Company’s public filings, the Company has no Subsidiaries or other direct or indirect Investment in any Person, and the Company is not a party to any partnership, management, shareholders’ or joint venture or similar agreement.

  

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4.13             Not an Investment Company.  Neither the Company nor any Subsidiary is an “Investment Company” within the meaning of Investment Company Act of 1940, as amended.

4.14             Full Disclosure.  The information heretofore furnished by the Company to Purchaser for purposes of or in connection with this Agreement or any transaction contemplated hereby does not, and all such information hereafter furnished by the Company or any Subsidiary to Purchaser will not (in each case taken together and on the date as of which such information is furnished), contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained therein, in the light of the circumstances under which they are made, not misleading except where such disclosure or omission would not have a Material Adverse Effect.

4.15             No Solicitation; No Integration with Other Offerings.  No form of general solicitation or general advertising was used by the Company or, to the best of its actual knowledge, any other Person acting on behalf of the Company, in connection with the offer and sale of the Securities.  Neither the Company, nor, to its knowledge, any Person acting on behalf of the Company, has, either directly or indirectly, sold or offered for sale to any Person (other than Purchaser) any of the Securities or, within the six months prior to the date hereof, any other similar security of the Company except as contemplated by this Agreement, and the Company represents that neither itself nor any Person authorized to act on its behalf (except that the Company makes no representation as to Purchaser and their Affiliates) will sell or offer for sale any such security to, or solicit any offers to buy any such security from, or otherwise approach or negotiate in respect thereof with, any Person or Persons so as thereby to cause the issuance or sale of any of the Securities to be in violation of any of the provisions of Section 5 of the Securities Act.  The issuance of the Securities to Purchaser will not be integrated with any other issuance of the Company’s securities (past, current or future) which requires stockholder approval.

4.16             Permits.  (a) Each of the Company and its Subsidiaries has all material Permits; (b) all such Permits are in full force and effect, and each of the Company and its Subsidiaries has fulfilled and performed all material obligations with respect to such Permits; (c) no event has occurred which allows, or after notice of lapse of time would allow, revocation or termination by the issuer thereof or which results in any other material impairment of the rights of the holder of any such Permit; and (d) the Company has no reason to believe that any governmental body or agency is considering limiting, suspending or revoking any such Permit.

4.17             Leases.  Other than as set forth in the Company’s public filings, neither the Company nor any Subsidiary is a party to any capital lease obligation with a value greater than $100,000 or to any operating lease with an aggregate annual rental greater than $100,000 during the life of such lease.

4.18             Absence of Any Undisclosed Liabilities or Capital Calls.  There are no liabilities of the Company or any Subsidiary of any kind whatsoever, whether accrued, contingent, absolute, determined, determinable or otherwise, and there is no existing condition, situation or set of circumstances which would reasonably be expected to result in such a liability, other than (i) those liabilities provided for in the financial statements delivered pursuant to Section 4.7 and (ii) other undisclosed liabilities which, individually or in the aggregate, would not have a Material Adverse Effect.

  

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4.19             Public Utility Holding Company.  Neither the Company nor any Subsidiary is, or will be upon issuance and sale of the Securities and the use of the proceeds described herein, subject to regulation under the Public Utility Holding Company Act of 1935, as amended, the Federal Power Act, the Interstate Commerce Act or to any federal or state statute or regulation limiting its ability to issue and perform its obligations under any Transaction Agreement.

4.20             Intellectual Property Rights.  Each of the Company and its Subsidiaries owns, or is licensed under, and has the rights to use, all material patents, trademarks, trade names, copyrights, technology, know-how and processes (collectively, “Intellectual Property”) used in, or necessary for the conduct of its business; no claims have been asserted by any Person to the use of any such Intellectual Property or challenging or questioning the validity or effectiveness of any license or agreement related thereto.  To the best of Company’s and its Subsidiaries’ knowledge, there is no valid basis for any such claim and the use of such Intellectual Property by the Company and its Subsidiaries will not infringe upon the rights of any Person.

4.21             Insurance.  The Company and its Subsidiaries maintain, with financially sound and reputable insurance companies, insurance in at least such amounts and against such risks such that any uninsured loss would not have a Material Adverse Effect.  All insurance coverages of the Company and its Subsidiaries are in full force and effect and there are no past due premiums in respect of any such insurance.

4.22             Title to Properties.  Other than as set forth in the Company’s public filings, the Company and its Subsidiaries have good and marketable title to all their respective properties free and clear of all Liens.

4.23             Internal Accounting Controls.  The Company and each of its Subsidiaries maintain a system of internal accounting controls sufficient, in the judgment of the Company’s Board of Directors, to provide reasonable assurance that (i) transactions are executed in accordance with managements’ 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.

4.24             Foreign Practices.  Neither the Company nor any of its Subsidiaries nor, to the Company’s knowledge, any employee or agent of the Company or any Subsidiary has made any payments of funds of the Company or Subsidiary, or received or retained any funds, in each case in violation of any law, rule or regulation.

  

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ARTICLE 5.   REPRESENTATIONS AND WARRANTIES OF PURCHASER

5.1             Purchaser.  Purchaser hereby represents and warrants to the Company that:

(a) Purchaser is an “accredited investor” within the meaning of Rule 501(a) under the Securities Act and the Securities to be acquired by it pursuant to this Agreement are being acquired for its own account and, as of the date hereof, not with a view toward, or for sale in connection with, any distribution thereof except in compliance with applicable United States federal and state securities law; provided that the disposition of Purchaser’s property shall at all times be and remain within its control;

(b) the execution, delivery and performance of this Agreement and the purchase of the Securities pursuant thereto are within Purchaser’s corporate or partnership powers, as applicable, and have been duly and validly authorized by all requisite corporate or partnership action;

(c) this Agreement has been duly executed and delivered by Purchaser;

(d) the execution and delivery by Purchaser of the Transaction Agreements to which it is a party does not, and the consummation of the transactions contemplated hereby and thereby will not, contravene or constitute a default under or violation of (i) any provision of applicable law or regulation, or (ii) any agreement, judgment, injunction, order, decree or other instrument binding upon Purchaser;

(e) Purchaser understands that the Securities have not been registered under the Securities Act and may not be transferred or sold except as specified in this Agreement or the remaining Transaction Agreements;

(f) this Agreement constitutes a valid and binding agreement of Purchaser enforceable in accordance with its terms, subject to (i) applicable bankruptcy, insolvency or similar laws affecting the enforceability of creditors rights generally and (ii) equitable principles of general applicability;

(g) Purchaser has such knowledge and experience in financial and business matters so as to be capable of evaluating the merits and risks of its investment in the Securities and Purchaser is capable of bearing the economic risks of such investment;

(h) Purchaser is knowledgeable, sophisticated and experienced in business and financial matters; Purchaser has previously invested in securities similar to the Securities and fully understands the limitations on transfer described herein; Purchaser has been afforded access to information about the Company and the financial condition, results of operations, property, management and prospects of the Company sufficient to enable it to evaluate its investment in the Securities; Purchaser has been afforded the opportunity to ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Company concerning the terms and conditions of the offering of the Securities and the merits and the risks of investing in the Securities; and Purchaser has been afforded the opportunity to obtain such additional information which the Company possesses or can acquire that is necessary to verify the accuracy and completeness of the information given to Purchaser concerning the Company.  The foregoing does not in any way relieve the Company of its representations and other undertakings hereunder, and shall not limit Purchaser’s ability to rely thereon;

  

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(i) no part of the source of funds used by Purchaser to acquire the Securities constitutes assets allocated to any separate account maintained by Purchaser in which any employee benefit plan (or its related trust) has any interest; and

(j) Purchaser is a corporation organized under the laws of Bermuda.

ARTICLE 6.   CONDITIONS PRECEDENT TO PURCHASE OF SECURITIES

6.1             Conditions Precedent to Purchaser’s Obligations to Purchase.  The obligation of Purchaser hereunder to purchase the Convertible Note   at the Closing is subject to the satisfaction, on or before the Closing Date, of each of the following conditions, provided that these conditions are for Purchaser’s sole benefit and may be waived by Purchaser at any time in its sole discretion:

(a) The Company shall have duly executed this Agreement, and all other appropriate financing statements, and delivered the same to Purchaser;

(b) The Company shall have delivered to Purchaser duly executed certificates representing the Convertible Note in accordance with Section 2.1 hereof;

(c) The Company shall have delivered the Solvency Certificate;

(d) The representations and warranties of the Company contained in each Transaction Agreement shall be true and correct in all material respects as of the date when made and as of the Closing Date as though made at such time (except for representations and warranties that speak as of a specified date) and the Company shall have performed, satisfied and complied with all covenants, agreements and conditions required by such Transaction Agreements to be performed, satisfied or complied with by it at or prior to the Closing Date.  Purchaser shall have received an Officer’s Certificate executed by the chief executive officer of the Company, dated as of the Closing Date, to the foregoing effect and as to such other matters as may be reasonably requested by Purchaser, including but not limited to certificates with respect to the Company Corporate Documents, resolutions relating to the transactions contemplated hereby and the incumbencies of certain officers and Directors of the Company.  The form of such certificate is attached hereto as Exhibit D;

  

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(e) The Company shall have received all governmental, Board of Directors, shareholders and third party consents and approvals necessary or desirable in connection with the issuance and sale of the Securities and the consummation of the transactions contemplated by the Transaction Agreements;

(f) All applicable waiting periods in respect to the issuance and sale of the Securities shall have expired without any action having been taken by any competent authority that could restrain, prevent or impose any materially adverse conditions thereon or that could seek or threaten any of the foregoing;

(g) No law or regulation shall have been imposed or enacted that, in the judgment of Purchaser, could adversely affect the transactions set forth herein or in the other Transaction Agreements, and no law or regulation shall have been proposed that in the reasonable judgment of Purchaser could reasonably have any such effect;

(h) Omitted

(i) All fees and expenses due and payable by the Company on or prior to the Closing Date shall have been paid;

(j) The Company Corporate Documents and the Subsidiary Corporate Documents, if any, shall be in full force and effect and no term or condition thereof shall have been amended, waived or otherwise modified without the prior written consent of Purchaser;

(k) Other than as set forth in the Company’s public filings, there shall have occurred no material adverse change in the business, condition (financial or otherwise), operations, performance, properties or prospects of the Company or any Subsidiary since July  31, 2013;

Other than as set forth in the Company’s public filings, there shall exist no action, suit, investigation, litigation or proceeding pending or threatened in any court or before any arbitrator or governmental instrumentality that challenges the validity of or purports to affect this Agreement or any other Transaction Agreement, or other transaction contemplated hereby or thereby or that could reasonably be expected to have a Material Adverse Effect, or any material adverse effect on the enforceability of the Transaction Agreements or the Securities or the rights of the holders of the Securities or Purchaser hereunder

(l) Purchaser shall have confirmed the receipt of the Convertible Note to be issued, duly executed by the Company in the denominations and registered in the name of Purchaser;

(m) There shall not have occurred any disruption or adverse change in the financial or capital markets generally, or in the market for the Common Stock (including but not limited to any suspension or delisting), which Purchaser reasonably deems material in connection with the purchase of the Securities;

  

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(n) Immediately before and after the Closing Date, no Default or Event of Default shall have occurred and be continuing;

(o)                Purchaser shall have received all other opinions, resolutions, certificates, instruments, agreements or other documents as they shall reasonably request;

6.2             Conditions to the Company’s Obligations.  The obligations of the Company to issue and sell the Securities to Purchaser pursuant to this Agreement are subject to the satisfaction, at or prior to any Closing Date, of the following conditions:

(a)           The representations and warranties of Purchaser contained herein shall be true and correct in all material respects on the Closing Date and Purchaser shall have performed and complied in all material respects with all agreements required by this Agreement to be performed or complied with by Purchaser at or prior to the Closing Date;

(b)           The issue and sale of the Securities by the Company shall not be prohibited by any applicable law, court order or governmental regulation;

(c)           Receipt by the Company of duly executed counterparts of this Agreement signed by Purchaser;

(d)           The Company shall have received payment of Purchase Price, less the Expense Reimbursement Fee.

ARTICLE 7.   AFFIRMATIVE COVENANTS

The Company hereby agrees that, from and after the date hereof for so long as any Convertible Note and Warrant remain outstanding and for the benefit of Purchaser:

7.1            Information.  Unless such information is disclosed in the public filings of the Company, the Company will deliver, or make available to each holder of the Convertible Note:

(a) within 30 days of the end of each fiscal quarter copies of the Company’s balance sheet and income statements all as prepared in accordance with GAAP;

  

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(b) within five (5) days after any officer of the Company obtains knowledge of a Default or Event of Default, or that any Person has given any notice or taken any action with respect to a claimed Default hereunder, a certificate of the chief financial officer of the Company setting forth the details thereof and the action which the Company is taking or proposed to take with respect thereto; unless Edgar published within 5 business days. Promptly upon the mailing thereof to the shareholders of the Company generally, copies of all financial statements, reports and proxy statements so mailed and any other document generally distributed to shareholders;

(c) at least five (5) Business Days prior to the consummation of any Financing or other event requiring a repayment of the Convertible Note under Section 3.4, notice thereof together with a summary of all material terms thereof and copies of all documents and instruments associated therewith, unless Edgar published within 5 business days.

(d) notice promptly upon the occurrence of any event by which the Reserved Amount becomes less than 1.5 times the maximum number of Conversion Shares issuable pursuant to the Transaction Agreements; and

(e) promptly following the commencement thereof, notice and a description in reasonable detail of any litigation or proceeding to which is material to the Company or any Subsidiary is a party and not covered by insurance or in which injunctive or similar relief is sought; unless published by the company’s filings such as 8-K Edgar.

7.2             Payment of Obligations.  The Company will, and will cause each Subsidiary to, pay and discharge, at or before maturity, all their respective material obligations, including, without limitation, tax liabilities, except where the same may be contested in good faith by appropriate proceedings and will maintain, in accordance with GAAP, appropriate reserves for the accrual of any of the same.

7.3            Maintenance of Property; Insurance.  The Company will, and will cause each Subsidiary to, keep all property useful and necessary in its business in good working order and condition, ordinary wear and tear excepted.  In addition, the Company and each Subsidiary will maintain insurance in at least such amounts and against such risks as it has insured against as of the Closing Date.

7.4            Maintenance of Existence.  The Company will, and will cause each Subsidiary to, continue to engage in business of the same general type as now conducted by the Company and such Subsidiaries, and will preserve, renew and keep in full force and effect its respective corporate existence and their respective material rights, privileges and franchises necessary or desirable in the normal conduct of business.

7.5            Compliance with Laws.  The Company will, and will cause each Subsidiary to, comply, in all material respects, with all federal, state, municipal, local or foreign applicable laws, ordinances, rules, regulations, municipal by-laws, codes and requirements of governmental authorities (including, without limitation, Environmental Laws and the rules and regulations thereunder) except (i) where compliance therewith is contested in good faith by appropriate proceedings or (ii) where non-compliance therewith could not reasonably be expected, in the aggregate, to have a material adverse effect on the business, condition (financial or otherwise), operations, performance, properties or prospects of the Company or such Subsidiary.

  

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7.6             Inspection of Property, Books and Records.  The Company will, and will cause each Subsidiary to, keep proper books of record and account in which full, true and correct entries shall be made of all dealings and transactions in relation to their respective businesses and activities; only in the event of default that has occurred and is continuing, the company will permit, during normal business hours, Purchaser’ Representative or an affiliate thereof, as representatives of Purchaser, to visit and inspect any of their respective properties, upon reasonable prior notice, to examine and make abstracts from any of their respective books and records and to discuss their respective affairs, finances and accounts with their respective executive officers and independent public accountants (and by this provision the Company authorizes its independent public accountants to disclose and discuss with Purchaser the affairs, finances and accounts of the Company and its Subsidiaries in the presence of a representative of the Company; provided, however, that such discussions will not result in any unreasonable expense to the Company, without Company consent), all at such reasonable times.

7.7             Investment Company Act.  The Company will not be or become an open-end investment trust, unit investment trust or face-amount certificate company that is or is required to be registered under Section 8 of the Investment Company Act of 1940, as amended.

7.8            Use of Proceeds.  The proceeds from the issuance and sale of the Convertible Note by the Company shall be used as working capital and other general corporate purposes.  None of the proceeds from the issuance and sale of the Convertible Note by the Company pursuant to this Agreement will be used directly or indirectly for the purpose, whether immediate, incidental or ultimate, of purchasing or carrying any “margin stock” within the meaning of Regulation G of the Board of Governors of the Federal Reserve System.

7.9             Compliance with Terms and Conditions of Material Contracts.  The Company will, and will cause each Subsidiary to, comply, in all material respects, with all terms and conditions of all material contracts to which it is subject.

7.10             Transfer Agent Instructions.  Upon receipt of a Notice of Conversion the Company shall immediately direct the Company's transfer agent to issue certificates, registered in the name of Purchaser or its nominee, for the Conversion Shares, in such amounts as specified from time to time by Purchaser to the Company upon conversion of the Convertible Note in accordance with the terms thereof (the “Irrevocable Transfer Agent Instructions”).  Upon conversion of any Convertible Note in accordance with their terms, the Company will cause its transfer agent to, issue one or more certificates representing shares of Common Stock in such name or names and in such denominations specified by a Purchaser in a Notice of Conversion or Exercise. The Company further warrants and agrees that (i) no instructions other than other than the Irrevocable Transfer Agent Instructions referred to in this Section will be given to its transfer agent and unless repaid prior to conversion. (ii) it will not fail to remove (or directs its transfer agent not to remove or impairs, delays, and/or hinders its transfer agent from removing) any restrictive legend on any certificate for any Conversion Shares issued to the Holder upon conversion of or otherwise pursuant to the Note.  Nothing in this Section 7.10 shall affect in any way a Purchaser’s obligation to comply with all securities laws applicable to Purchaser upon resale of such shares of Common Stock, including any prospectus delivery requirements. Legends will only be removed if permitted under applicable securities legislation.

  

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7.11             Form D; Blue Sky Laws.  The Company agrees to file a “Form D” with respect to the Securities as required under Regulation D of the Securities Act and to provide a copy thereof to the Purchaser promptly after such filing.  The Company shall, on or before the Closing Date, take such action as the Company shall reasonably determine is necessary to qualify the Securities for sale to Purchaser at the Closing pursuant to this Agreement under applicable securities or “blue sky” laws of the states of the United States (or to obtain an exemption from such qualification), and shall provide evidence of any such action so taken to Purchaser on or prior to the Closing Date.

ARTICLE 8.   NEGATIVE COVENANTS

The Company hereby agrees that after the date hereof for so long as any Convertible Note remains outstanding and for the benefit of Purchaser:

8.1             Limitations on Debt or Other Liabilities.  The Company and any Subsidiary may create, incur, assume or suffer to exist (at any time after the Closing Date and until repayment or conversion of the Convertible Note , after giving effect to the application of the proceeds of the issuance of the Securities) (i) ( any Permitted Financing, (ii) Debt incurred in connection with equipment leases to which the Company or its Subsidiaries are a party incurred in the ordinary course of business; and (iii) Debt incurred in connection with trade accounts payable, imbalances and refunds arising in the ordinary course of business and (iv) any equity securities (including Derivative Securities).

 

8.2             Transactions with Affiliates.  The Company and each Subsidiary will not, directly or indirectly, pay any material amounts of funds to or for the account of, make any material investment (whether by acquisition or stock or indebtedness, by loan, advance, transfer of property, guarantee or other agreement to pay, purchase or service, directly or indirectly, and Debt, or otherwise) in, lease, sell, transfer or otherwise dispose of any material assets, tangible or intangible, to, or participate in, or effect any transaction in connection with any joint enterprise or other joint arrangement with, any Affiliate, except, (1) pursuant to those agreements specifically identified in the Company’s public filings, and (2) on terms to the Company or such Subsidiary no less favorable than terms that could be obtained by the Company or such Subsidiary from a Person that is not an Affiliate of the Company upon negotiation at arms’ length, as determined in good faith by the Board of Directors of the Company; provided that no determination of the Board of Directors shall be required with respect to any such transactions entered into in the ordinary course of business.

8.3             Merger or Consolidation.  The Company will not, unless consented to by Purchaser, in a single transaction or a series of related transactions (i) consolidate with or merge with or into any other Person, or (ii) permit any other Person to consolidate with or merge into it, unless the Company shall be the survivor of such merger or consolidation and (x) immediately before and immediately after given effect to such transaction (including any indebtedness incurred or anticipated to be incurred in connection with the transaction), no Default or Event of Default shall have occurred and be continuing; and (y) the Company has delivered to Purchaser an Officer’s Certificate stating that such consolidation, merger or transfer complies with this Agreement, and that all conditions precedent in this Agreement relating to such transaction have been satisfied.

  

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8.4             Restrictions on Certain Amendments.  Neither the Company nor any Subsidiary will waive any provision of, amend, or suffer to be amended, any provision of such entity’s existing Debt, any Company Corporate Document or Subsidiary Corporate Document if such amendment, in the Company’s reasonable judgment, would materially adversely affect Purchaser or the holders of the Securities without the prior written consent of Purchaser.

ARTICLE 9.   RESTRICTIVE LEGENDS

9.1             Restrictions on Transfer.  From and after their respective dates of issuance, none of the Securities shall be transferable except upon the conditions specified in this Article IX, which conditions are intended to ensure compliance with the provisions of the Securities Act in respect of the Transfer of any of such Securities or any interest therein. Purchaser will use its best efforts to cause any proposed transferee of any Securities held by it to agree to take and hold such Securities subject to the provisions and upon the conditions specified in this Article IX.

9.2             Legends.   The Conversion Shares may be sold pursuant to Rule 144 or Regulation S without any restriction as to the number of securities as of a particular date that can then be immediately sold. The Conversion Shares may bear a restrictive legend in substantially the following form:

“NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.”

The legend set forth above shall be removed and the Company shall issue a certificate without such legend to the Purchaser of any Security upon which it is stamped, and, unless otherwise required by applicable state securities laws, may be sold pursuant to Rule 144 or Regulation S without any restriction as to the number of securities as of a particular date that can then be immediately sold.  The Company will provide, at its expense, an opinion of counsel, in substantially the form of the Form of Opinion attached hereto as Exhibit B to the effect that a public sale or transfer of such Security may be made without registration under the 1933 Act, including but not limited to pursuant to Rule 144, which opinion shall be accepted by the Company’s Transfer Agent so that the sale or transfer is effected.  The Purchaser agrees to sell all Securities, including those represented by a certificate(s) from which the legend has been removed, in compliance with applicable prospectus delivery requirements, if any.

  

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9.3             Notice of Proposed Transfers.  Prior to any proposed Transfer of the Securities (other than a Transfer (i) registered or exempt from registration under the Securities Act, (ii) to an  affiliate of a Purchaser which is an “accredited investor” within the meaning of Rule 501(a) under the Securities Act, provided that any such transferee shall agree to be bound by the terms of this Agreement, or (iii) to be made in reliance on Rule 144 under the Securities Act), the holder thereof shall give written notice to the Company of such holder’s intention to effect such Transfer, setting forth the manner and circumstances of the proposed Transfer, which shall be accompanied by (a) an opinion of counsel reasonably acceptable to the Company, confirming that such transfer does not give rise to a violation of the Securities Act, (B) representation letters in form and substance reasonably satisfactory to the Company to ensure compliance with the provisions of the Securities Act and (C) letters in form and substance reasonably satisfactory to the Company from each such transferee stating such transferee’s agreement to be bound by the terms of this Agreement.  Such proposed Transfer may be effected only if the Company shall have received such notice of transfer, opinion of counsel, representation letters and other letters referred to in the immediately preceding sentence, whereupon the holder of such Securities shall be entitled to Transfer such Securities in accordance with the terms of the notice delivered by the holder to the Company.

ARTICLE 10 ADDITIONAL AGREEMENTS AMONG THE PARTIES

10.1             Liquidated Damages.

(a) The Company shall cause its transfer agent to, issue and deliver shares of Common Stock consistent with Section 7.11 hereof within three (3) Trading Days of delivery of a Notice of Conversion (the “Deadline”) to Purchaser (or any party receiving Securities by transfer from Purchaser) at the address of Purchaser set forth in the Notice of Conversion or Notice of Exercise, as the case may be.  The Company understands that a delay in the issuance of such certificates after the Deadline could result in economic loss to Purchaser.

(b) Without in any way limiting Purchaser’s right to pursue other remedies, including actual damages and/or equitable relief, the Company agrees that if delivery of the Conversion Shares is more than two (2) Business Day after the Deadline (other than a failure due to the circumstances described in Section 4.3 of the Convertible Note , which failure shall be governed by such Section) the Company shall pay to Purchaser, as liquidated damages and not as a penalty, $500 for each $100,000 of Convertible Note  then outstanding per day in cash, for each of the first ten (10) days beyond the Deadline, and $1,000 for each $100,000 of Convertible Note  then outstanding per day in cash for each day thereafter that the Company fails to deliver such Common Stock.  Such cash amount shall be paid to Purchaser by the last day of the calendar week following the week in which it has accrued or, at the option of Purchaser (by written notice to the Company by the first day of the week following the week in which it has accrued), shall be added to the principal amount of the Convertible Note  (if then outstanding) payable to Purchaser, in which event interest shall accrue thereon in accordance with the terms of the Convertible Note  and such additional principal amount shall be convertible into Common Stock in accordance with the terms of the Convertible Note.

  

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10.2             Conversion Notice.  The Company agrees that, in addition to any other remedies which may be available to Purchaser, including, but not limited to, the remedies available under Section 10.1, in the event the Company fails for any reason (other than as a result of actions taken by a Purchaser in breach of this Agreement) to effect delivery to a Purchaser of certificates with or without restrictive legends as contemplated by Article IX representing the shares of Common Stock on or prior to the Deadline after conversion of any Convertible Note , Purchaser will be entitled, if prior to the delivery of such certificates, to revoke the Notice of Conversion, by delivering a notice to such effect to the Company whereupon the Company and Purchaser shall each be restored to their respective positions immediately prior to delivery of such Notice of Conversion.

10.3             Conversion Limit.  Notwithstanding the conversion rights under the Convertible Note, unless Purchaser delivers a waiver in accordance with the immediately following sentence, in no event shall Purchaser be entitled to convert any portion of the Convertible Note, in excess of that portion of the Convertible Note, as applicable, of which the sum of (i) the number of shares of Common Stock beneficially owned by Purchaser and its Affiliates (other than shares of Common Stock which may be deemed beneficially owned through the ownership of the unconverted portion of the Convertible Note or other Derivative Securities convertible into or exchangeable for shares of Common Stock which contain a limitation similar to that set forth in this Section 10.3), and (ii) the number of shares of Common Stock issuable upon the conversion of the portion of the Convertible Note with respect to which this determination is being made, would result in beneficial ownership by Purchaser and its Affiliates of more than 9.99% of the outstanding shares of Common Stock.  For purposes of Section 10.3(i) beneficial ownership shall be determined in accordance with Rule 13d-3 of the Exchange Act and Regulations 13 D-G thereunder, except as otherwise provided in this Section 10.3.  The foregoing limitation shall not apply and shall be of no further force or effect (i) immediately preceding and upon the occurrence of any voluntary or mandatory redemption or repayment transaction described herein or in the Convertible Note, (ii) immediately preceding and upon any Sale Event, (iii) on the Maturity Date or (iv) following the occurrence of any Event of Default which is not cured for a period of ten (10) calendar days.

10.4            Conversion Mechanics- Rule 144.  The Purchaser may convert any or all of the Convertible Note at any time following the 183rd day following the Closing date pursuant to Rule 144 of the Act. Upon receipt by the Company of a Notice of Conversion, by transmission either by facsimile or electronic mail, to the Company from the Purchaser of the Notice of Conversion substantially in the form of Annex A attached hereto, the Company will, at the Company’s expense, instruct its counsel to issue an omnibus opinion covering the resale of the Conversion Shares. Such Opinion will be in the form and substance which is acceptable to the Company’s counsel and Transfer Agent and which opinion shall be accepted by the Company’s Transfer Agent so that the sale or transfer is effected.

  

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ARTICLE 11 ADJUSTMENT OF FIXED PRICE

11.1             Reorganization.  The Conversion Price (the “Fixed Prices”) shall be adjusted, as applicable, as hereafter provided.

11.2             Share Reorganization.  If and whenever the Company shall:

(a) subdivide the outstanding shares of Common Stock into a greater number of shares;

(b) consolidate the outstanding shares of Common Stock into a smaller number of shares;

(c) issue Common Stock or securities convertible into or exchangeable for shares of Common Stock as a stock dividend to all or substantially all the holders of Common Stock; or

(d) make a distribution on the outstanding Common Stock to all or substantially all the holders of Common Stock payable in Common Stock or securities convertible into or exchangeable for Common Stock;

any of such events being herein called a “Share Reorganization”, then in each such case the applicable Fixed Price shall be adjusted, effective immediately after the record date at which the holders of Common Stock are determined for the purposes of the Share Reorganization or, if no record date is fixed, the effective date of the Share Reorganization, by multiplying the applicable Fixed Price in effect on such record or effective date, as the case may be, by a fraction of which:

(i.) the numerator shall be the number of shares of Common Stock outstanding on such record or effective date (without giving effect to the transaction); and

(ii.) the denominator shall be the number of shares of Common Stock outstanding after giving effect to such Share Reorganization, including, in the case of a distribution of securities convertible into or exchangeable for shares of Common Stock, the number of shares of Common Stock that would have been outstanding if such securities had been converted into or exchanged for Common Stock on such record or effective date.

11.3             Rights Offering.  If and whenever the Company shall issue to all or substantially all the holders of Common Stock, rights, options or warrants under which such holders are entitled, during a period expiring not more than forty five (45) days after the record date of such issue, to subscribe for or purchase Common Stock (or Derivative Securities), at a price per share (or, in the case of securities convertible into or exchangeable for Common Stock, at an exchange or conversion price per share at the date of issue of such securities) of less than 95% of the Market Price of the Common Stock on such record date (any such event being herein called a “Rights Offering”), then in each such case the applicable Fixed Price shall be adjusted, effective immediately after the record date at which holders of Common Stock are determined for the purposes of the Rights Offering, by multiplying the applicable Fixed Price in effect on such record date by a fraction of which:

  

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(a) the numerator shall be the sum of:

(i.) the number of shares of Common Stock outstanding on such record date; and

(ii.) a number obtained by dividing:

(A.) either,

(x)           the product of the total number of shares of Common Stock so offered for subscription or purchase and the price at which such shares are so offered, or

(y)           the product of the maximum number of shares of Common Stock into or for which the convertible or exchangeable securities so offered for subscription or purchase may be converted or exchanged and the conversion or exchange price of such securities, or, as the case may be, by

(B.) the Market Price of the Common Stock on such record date; and

(b) the denominator shall be the sum of:

 (i)           the number of shares of Common Stock outstanding on such record date; and

(ii)           the number of shares of Common Stock so offered for subscription or purchase (or, in the case of Derivative Securities, the maximum number of shares of Common Stock for or into which the securities so offered for subscription or purchase may be converted or exchanged).

To the extent that such rights, options or warrants are not exercised prior to the expiry time thereof, the applicable Fixed Price shall be readjusted effective immediately after such expiry time to the applicable Fixed Price which would then have been in effect upon the number of shares of Common Stock (or Derivative Securities) actually delivered upon the exercise of such rights, options or warrants.

11.4                        Special Distribution.  If and whenever the Company shall issue or distribute to all or substantially all the holders of Common Stock:

(i)           shares of the Company of any class, other than Common Stock;

  

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(ii)           rights, options or warrants; or

(iii)           any other assets (excluding cash dividends and equivalent dividends in shares paid in lieu of cash dividends in the ordinary course);

and if such issuance or distribution does not constitute a Share Reorganization or a Rights Offering (any such event being herein called a “Special Distribution”), then in each such case the applicable Fixed Price shall be adjusted, effective immediately after the record date at which the holders of Common Stock are determined for purposes of the Special Distribution, by multiplying the applicable Fixed Price in effect on such record date by a fraction of which:

(i) the numerator shall be the difference between:

(A) the product of the number of shares of Common Stock outstanding on such record date and the Market Price of the Common Stock on such date; and

(B) the fair market value, as determined by the Directors (whose determination shall be conclusive), to the holders of Common Stock of the shares, rights, options, warrants, evidences of indebtedness or other assets issued or distributed in the Special Distribution (net of any consideration paid therefor by the holders of Common Stock), and

(ii) the denominator shall be the product of the number of shares of Common Stock outstanding on such record date and the Market Price of the Common Stock on such date.

 

11.5            Capital Reorganization.  If and whenever there shall occur:

(i) a reclassification or redesignation of the shares of Common Stock or any change of the shares of Common Stock into other shares, other than in a Share Reorganization;

(ii) a consolidation, merger or amalgamation of the Company with, or into another body corporate; or

(iii) the transfer of all or substantially all of the assets of the Company to another body corporate;

(any such event being herein called a “Capital Reorganization”), then in each such case the holder who exercises the right to convert Convertible Note after the effective date of such Capital Reorganization shall be entitled to receive and shall accept, upon the exercise of such right, in lieu of the number of shares of Common Stock to which such holder was theretofore entitled upon the exercise of the conversion privilege, the aggregate number of shares or other securities or property of the Company or of the body corporate resulting from such Capital Reorganization that such holder would have been entitled to receive as a result of such Capital Reorganization if, on the effective date thereof, such holders had been the holder of the number of shares of Common Stock to which such holder was theretofore entitled upon conversion; provided, however, that no such Capital Reorganization shall be consummated in effect unless all necessary steps shall have been taken so that such holders shall thereafter be entitled to receive such number of shares or other securities of the Company or of the body corporate resulting from such Capital Reorganization, subject to adjustment thereafter in accordance with provisions the same, as nearly as may be possible, as those contained above.

  

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11.6             Adjustment Rules. The following rules and procedures shall be applicable to adjustments made in this Article XI:

(a) no adjustment in the applicable Fixed Price shall be required unless such adjustment would result in a change of at least 5% in the applicable Fixed Price then in effect, provided, however, that any adjustments which, but for the provisions of this clause would otherwise have been required to be made, shall be carried forward and taken into account in any subsequent adjustment;

(b) if any event occurs of the type contemplated by the adjustment provisions of this Article XI but not expressly provided for by such provisions, the Company will give notice of such event as provided herein, and the Company’s board of directors will make an appropriate adjustment in the Fixed Price so that the rights of the holders of the applicable Security shall not be diminished by such event; and

(c) if a dispute shall at any time arise with respect to any adjustment of the applicable Fixed Price, such dispute shall be conclusively determined by a firm of independent chartered accountants selected by the Purchaser and any such determination shall be binding upon the Company and Purchaser.

11.7             Certificate as to Adjustment.  The Company shall from time to time promptly after the occurrence of any event which requires an adjustment in the applicable Fixed Price deliver to Purchaser a certificate specifying the nature of the event requiring the adjustment, the amount of the adjustment necessitated thereby, the applicable Fixed Price after giving effect to such adjustment and setting forth, in reasonable detail, the method of calculation and the facts upon which such calculation is based.

11.8           Notices to Holders.  If the Company shall fix a record date for:

(a) any Share Reorganization (other than the subdivision of outstanding Common Stock into a greater number of shares or the consolidation of outstanding Common Stock into a smaller number of shares),

(b) any Rights Offering,

(c) any Special Distribution,

  

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(d) any Capital Reorganization (other than a reclassification or redesignation of the Common Stock into other shares),

(e) Sale Event; or

(f) any cash dividend,

the Company shall, not less than ten (10) days prior to such record date or, if no record date is fixed, prior to the effective date of such event, give to Purchaser notice of the particulars of the proposed event or the extent that such particulars have been determined at the time of giving the notice.

 

ARTICLE 12 EVENTS OF DEFAULT

12.1             Events of Default.   If one or more of the following events (each an “Event of Default”) shall have occurred and be continuing:

(a) failure by the Company to pay or repay when due, all or any part of the principal on any of the Convertible Note (whether by virtue of the agreements specified in this Agreement or the Convertible Note);

(b) failure by the Company to pay (i) within five (5) Business Days of the due date thereof any interest on any Convertible Note or (ii) within five (5) Business Days following the delivery of notice to the Company of any fees or any other amount payable (not otherwise referred to in (a) above or this clause (b)) by the Company under this Agreement or any other Transaction Agreement;

(c) failure by the Company to timely comply with the requirements of Section 7.11 or 10.1 hereof, which failure is not cured within five (5) Business Days of such failure;

(d) failure on the part of the Company to observe or perform any covenant contained in Section 7.10 or Article VIII of this Agreement;

(e) failure on the part of the Company to observe or perform any covenant or agreement contained in any Transaction Agreement (other than those covered by clauses (a), (b), (c), or (d) above) for 30) days from the date of such occurrence;

(f) the Company or any Subsidiary has commenced a voluntary case or other proceeding seeking liquidation, winding-up, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency, moratorium or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, or has consented to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, or has made a general assignment for the benefit of creditors, or has failed generally to pay its debts as they become due, or has taken any corporate action to authorize any of the foregoing;

  

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(g) an involuntary case or other proceeding has been commenced against the Company or any Subsidiary seeking liquidation, winding-up, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency, moratorium or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of sixty (60) days, or an order for relief has been entered against the Company or any Subsidiary under the federal bankruptcy laws as now or hereafter in effect;

(h) default in any provision (including payment) or any agreement governing the terms of any Debt of the Company or any Subsidiary in excess of $500,000, which has not been cured within any applicable period of grace associated therewith;

(i) judgments or orders, other than Outstanding Debt for the payment of money which in the aggregate at any one time exceed $100,000 and are not covered by insurance have been rendered against the Company or any Subsidiary by a court of competent jurisdiction and such judgments or orders shall continue unsatisfied and unstayed for a period of sixty (60) days; or

(j) any representation, warranty, certification or statement made by the Company in any Transaction Agreement or which is contained in any certificate, document or financial or other statement furnished at any time under or in connection with any Transaction Agreement shall prove to have been untrue in any material respect when made.

then, and in every such occurrence, Purchaser may, with respect to any Event of Default specified above, by notice to the Company, declare the Convertible Note to be due and payable.  The Company shall then have five (5) business days from the date of receipt of such notice to the Company to pay the amount owing under the Convertible Note.

12.2             Powers and Remedies Cumulative.  No right or remedy herein conferred upon or reserved to Purchaser is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now hereafter existing at law or in equity or otherwise.  The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy.  Every power and remedy given by the Convertible Note or by law may be exercised from time to time, and as often as shall be deemed expedient, by Purchaser.

  

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ARTICLE 13.   MISCELLANEOUS

13.1             Notices.  All notices, demands and other communications to any party hereunder shall be in writing (including facsimile, email or similar writing) and shall be given to such party at its address set forth on the signature pages hereof, or such other address as such party may hereafter specify for the purpose to the other parties.  Each such notice, demand or other communication shall be effective (i) if given by telecopy, when such telecopy is transmitted to the telecopy number specified on the signature page hereof, (ii) if given by mail, four days after such communication is deposited in the mail with first class postage prepaid, addressed as aforesaid or (iii) if given by any other means, when delivered at the address specified in or pursuant to this Section.

13.2             No Waivers; Amendments.

(a) No failure or delay on the part of any party in exercising any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy.

(b) Any provision of this Agreement may be amended, supplemented or waived if, but only if, such amendment, supplement or waiver is in writing and is signed by the Company and the Majority Holders; provided, that without the consent of each holder of any Convertible Note affected thereby, an amendment or waiver may not (a) reduce the aggregate principal amount of Convertible Note whose holders must consent to an amendment or waiver, (b) reduce the rate or extend the time for payment of interest on any Convertible Note, (c) reduce the principal amount of or extend the stated maturity of any Convertible Note  or (d) make any Convertible Note payable in money or property other than as stated in such Convertible Note.  In determining whether the holders of the requisite principal amount of Convertible Note have concurred in any direction, consent, or waiver as provided in any Transaction Agreement, Convertible Note which are owned by the Company or any other obligor on or guarantor of the Convertible Note, or by any Person Controlling, Controlled by, or under common Control with any of the foregoing, shall be disregarded and deemed not to be outstanding for the purpose of any such determination; and provided further that no such amendment, supplement or waiver which affects the rights of Purchaser and their affiliates otherwise than solely in their capacities as holders of Convertible Note shall be effective with respect to them without their prior written consent.

  

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13.3  

	
   Indemnification.

(a)           The Company agrees to indemnify and hold harmless Purchaser, its Affiliates, and each Person, if any, who controls Purchaser, or any of its Affiliates, within the meaning of the Securities Act or the Exchange Act (each, a “Controlling Person”), and the respective partners, agents, employees, officers and Directors of Purchaser, their Affiliates and any such Controlling Person (each an “Indemnified Party”) and collectively, the “Indemnified Parties”), from and against any and all losses, claims, damages, liabilities and expenses (including, without limitation and as incurred, reasonable costs of investigating, preparing or defending any such claim or action, whether or not such Indemnified Party is a party thereto, provided that the Company shall not be obligated to advance such costs to any Indemnified Party other than Purchaser unless it has received from such Indemnified Party an undertaking to repay to the Company the costs so advanced if it should be determined by final judgment of a court of competent jurisdiction that such Indemnified Party was not entitled to indemnification hereunder with respect to such costs) which may be incurred by such Indemnified Party in connection with any investigative, administrative or judicial proceeding brought or threatened that relates to or arises out of, or is in connection with any activities contemplated by any Transaction Agreement or any other services rendered in connection herewith; provided that the Company will not be responsible for any claims, liabilities, losses, damages or expenses that are determined by final judgment of a court of competent jurisdiction to result from such Indemnified Party’s gross negligence, willful misconduct or bad faith.

(b)           If any action shall be brought against an Indemnified Party with respect to which indemnity may be sought against the Company under this Agreement, such Indemnified Party shall promptly notify the Company in writing and the Company, at its option, may, assume the defense thereof, including the employment of counsel reasonably satisfactory to such Indemnified Party and payment of all reasonable fees and expenses.  The failure to so notify the Company shall not affect any obligations the Company may have to such Indemnified Party under this Agreement or otherwise unless the Company is materially adversely affected by such failure.  Such Indemnified Party shall have the right to employ separate counsel in such action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party, unless (i) the Company has failed to assume the defense and employ counsel or (ii) the named parties to any such action (including any impleaded parties) include such Indemnified Party and the Company, and such Indemnified Party shall have been advised by counsel that there may be one or more legal defenses available to it which are different from or additional to those available to the Company, in which case, if such Indemnified Party notifies the Company in writing that it elects to employ separate counsel at the expense of the Company, the Company shall not have the right to assume the defense of such action or proceeding on behalf of such Indemnified Party, provided, however, that the Company shall not, in connection with any one such action or proceeding or separate but substantially similar or related actions or proceedings in the same jurisdiction arising out of the same general allegations or circumstances, be responsible hereunder for the reasonable fees and expenses of more than one such firm of separate counsel, in addition to any local counsel, which counsel shall be designated by Purchaser.  The Company shall not be liable for any settlement of any such action effected without the written consent of the Company (which shall not be unreasonably withheld) and the Company agrees to indemnify and hold harmless each Indemnified Party from and against any loss or liability by reason of settlement of any action effected with the consent of the Company.  In addition, the Company will not, without the prior written consent of Purchaser, settle or compromise or consent to the entry of any judgment in or otherwise seek to terminate any pending or threatened action, claim, suit or proceeding in respect to which indemnification or contribution may be sought hereunder (whether or not any Indemnified Party is a party thereto) unless such settlement, compromise, consent or termination includes an express unconditional release of Purchaser and the other Indemnified Parties, satisfactory in form and substance to Purchaser, from all liability arising out of such action, claim, suit or proceeding.

  

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(c) If for any reason the foregoing indemnity is unavailable (otherwise than pursuant to the express terms of such indemnity) to an Indemnified Party or insufficient to hold an Indemnified Party harmless, then in lieu of indemnifying such Indemnified Party, the Company shall contribute to the amount paid or payable by such Indemnified Party as a result of such claims, liabilities, losses, damages, or expenses (i) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and by Purchaser on the other from the transactions contemplated by this Agreement or (ii) if the allocation provided by clause (i) is not permitted under applicable law, in such proportion as is appropriate to reflect not only the relative benefits received by the Company on the one hand and Purchaser on the other, but also the relative fault of the Company and Purchaser as well as any other relevant equitable considerations.  Notwithstanding the provisions of this Section 13.3, the aggregate contribution of all Indemnified Parties shall not exceed the amount of interest and fees actually received by Purchaser pursuant to this Agreement.  It is hereby further agreed that the relative benefits to the Company on the one hand and Purchaser on the other with respect to the transactions contemplated hereby shall be determined by reference to, among other things, whether any untrue or alleged untrue statement of material fact or the omission or alleged omission to state a material fact related to information supplied by the Company or by Purchaser and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.  No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation.

(d) The indemnification, contribution and expense reimbursement obligations set forth in this Section 13.3 (i) shall be in addition to any liability the Company may have to any Indemnified Party at common law or otherwise; (ii) shall survive the termination of this Agreement and the other Transaction Agreements and the payment in full of the Convertible Note and (iii) shall remain operative and in full force and effect regardless of any investigation made by or on behalf of Purchaser or any other Indemnified Party.

13.4             Expenses:  Documents, Due Diligence, Legal. The Company agrees to pay to Global Capital Advisors, Inc. (“GCA”), a fee of $10,000.00 (the “Expense Reimbursement Fee”) in full satisfaction of all obligations of the Company to Purchaser and its agents in connection with the negotiation and preparation of the Transaction Agreements, relevant due diligence, and fees and disbursements of legal counsel. The Company has prepaid $5,000.00 of the fee with the remaining balance of $5,000.00 due at closing. In addition, the Company agrees to pay any and all stamp, transfer and other similar taxes, assessments or charges payable in connection with the execution and delivery of any Transaction Agreement or the issuance of the Securities to Purchaser, excluding their assigns.

  

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13.5             Payment.  The Company agrees that, so long as Purchaser shall own any Convertible Note purchased by it from the Company hereunder, the Company will make payments to Purchaser of all amounts due thereon by wire transfer by 4:00 P.M. (E.S.T.).

13.6             Successors and Assigns.  This Agreement shall be binding upon the Company and upon Purchaser and its respective successors and assigns; provided that the Company shall not assign or otherwise transfer its rights or obligations under this Agreement to any other Person without the prior written consent of the Majority Holders.  All provisions hereunder purporting to give rights to Purchaser and its affiliates or to holders of Securities are for the express benefit of such Persons and their successors and assigns.

13.7             Brokers.  Except for a fee payable to Carter Terry & Associates the Company represents and warrants that it has not employed any broker, finder, financial advisor or investment banker who would be entitled to any brokerage, finder’s or other fee or commission payable by the Company or Purchaser in connection with the sale of the Securities in regard to the Global Capital Promissory Note.

13.8            Georgia Law; Submission to Jurisdiction; Waiver of Jury Trial; Appointment of Agent.  THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF GEORGIA.  EACH PARTY HERETO HEREBY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF GEORGIA AND OF ANY FEDERAL DISTRICT COURT SITTING IN ATLANTA, GEORGIA FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.  EACH PARTY HERETO IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH PARTY TO THIS AGREEMENT IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS IN ANY SUCH PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO SUCH PARTY AT ITS ADDRESS SET FORTH HEREIN.  NOTHING HEREIN SHALL AFFECT THE RIGHT OF ANY PARTY TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.  EACH PARTY WAIVES ITS RIGHT TO A TRIAL BY JURY.

13.9              Entire Agreement.  This Agreement, the Exhibits or Schedules hereto, which include the Convertible Note, set forth the entire agreement and understanding of the parties relating to the subject matter hereof and supersedes all prior and contemporaneous agreements, negotiations and understandings between the parties, both oral and written relating to the subject matter hereof. The terms and conditions of all Exhibits and Schedules to this Agreement are incorporated herein by this reference and shall constitute part of this Agreement as is fully set forth herein.

  

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13.10              Survival; Severability.  The representations, warranties, covenants and agreements of the parties hereto shall survive the Closing hereunder. In the event that any provision of this Agreement becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement shall continue in full force and effect without said provision; provided that such severability shall be ineffective if it materially changes the economic benefit of this Agreement to any party.

13.11              Title and Subtitles.  The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.

13.12              Reporting Entity for the Common Stock.   The reporting entity relied upon for the determination of the trading price or trading volume of the Common Stock on any given Trading Day for the purposes of this Agreement and all Exhibits shall be Bloomberg, L.P or Stock Charts or any successor thereto. The written mutual consent of the Purchaser and the Company shall be required to employ any other reporting entity.

13.13              Publicity.   The Company and the Purchaser shall consult with each other in issuing any press releases or otherwise making public statements with respect to the transactions contemplated hereby and no party shall issue any such press release or otherwise make any such public statement without the prior written consent of the other parties, which consent shall not be unreasonably withheld or delayed, except that no prior consent shall be required if such disclosure is required by law, in which such case the disclosing party shall provide the other parties with prior notice of such public statement.  Notwithstanding the foregoing, the Company shall not publicly disclose the name of Purchaser without the prior written consent of Purchaser, except to the extent required by law, in which case the Company shall provide Purchaser with prior written notice of such public disclosure.

[Signature page follows]

  

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

Liberty Star Uranium & Metal Corporation

By:/s/ James Briscoe                                                                

Name: James A Briscoe

Title:  Chairman & CEO

Address: 5610 E. Sutler Lane, Tucson, AZ 857121

GCA STRATEGIC INVESTMENT FUND LIMITED

By:  /s/ Lewis Lester, Sr.                                                                

Name: Lewis N. Lester, Sr.

Title: Director

Address: c/o Global Capital Advisors

               72 Estate River, #47

               Kingshill USVI, 00851

 

  

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LIST OF EXHIBITS

Exhibit A- Convertible Note

Exhibit B- Rule 144 Opinion

Exhibit C- Solvency Certificate

Exhibit D- Officers Certificate

Exhibit E- Article of Incorporation and By-Laws

Form of Legal Opinion

  

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