Document:

Exhibit
10.1

 

SECURITIES
PURCHASE AGREEMENT

This Securities
Purchase Agreement (this “Agreement”) is dated as of May 11, 2011, between Dataram Corporation, a New Jersey
corporation (the “Company”), and each purchaser identified on the signature pages hereto (each, including its
successors and assigns, a “Purchaser” and collectively the “Purchasers”).

WHEREAS, subject
to the terms and conditions set forth in this Agreement and pursuant to an effective registration statement under the Securities
Act of 1933, as amended (the “Securities Act”), the Company desires to issue and sell to each Purchaser, and
each Purchaser, severally and not jointly, desires to purchase from the Company, securities of the Company as more fully described
in this Agreement.

NOW, THEREFORE,
IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration the receipt
and adequacy of which are hereby acknowledged, the Company and each Purchaser agree as follows:

ARTICLE I.

DEFINITIONS

1.1
Definitions. In addition to the terms defined elsewhere in this Agreement, for all purposes of this Agreement, the following
terms have the meanings set forth in this Section 1.1:

“Acquiring
Person” shall have the meaning ascribed to such term in Section 4.5.

“Action”
shall have the meaning ascribed to such term in Section 3.1(j).

“Affiliate”
means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common
control with a Person as such terms are used in and construed under Rule 405 under the Securities Act.

“Board
of Directors” means the board of directors of the Company.

“Business
Day” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or
any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to
close.

“Closing”
means the closing of the purchase and sale of the Securities pursuant to Section 2.1.

“Closing
Date” means the Trading Day on which all of the Transaction Documents have been executed and delivered by the applicable
parties thereto, and all conditions precedent to (i) the Purchasers’ obligations to pay the Subscription Amount and (ii)
the Company’s obligations to deliver the Securities, in each case, have been satisfied or waived, but in no event later than
the third Trading Day following the date hereof.

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“Closing
Statement” means the Closing Statement in the form on Annex A attached hereto.

“Commission”
means the United States Securities and Exchange Commission.

“Common
Stock” means the common stock of the Company, par value $1.00 per share, and any other class of securities into which
such securities may hereafter be reclassified or changed.

“Common
Stock Equivalents” means any securities of the Company or the Subsidiaries which would entitle the holder thereof to
acquire at any time Common Stock, including, without limitation, any debt, preferred stock, right, option, warrant or other instrument
that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common
Stock.

“Company
Counsel” means Dillon, Bitar & Luther, L.L.C., with offices located at 200 Park Avenue, Suite 301, Florham Park,
NJ 07932.

“Disclosure
Schedules” means the Disclosure Schedules of the Company delivered concurrently herewith.

“EGS”
means Ellenoff Grossman & Schole LLP, with offices located at 150 East 42nd Street, New York, New York 10017.

“Escrow
Agent” means Signature Bank, a New York State chartered bank, with offices at 261 Madison Avenue, New York, New York
10016.

“Escrow
Agreement” means the escrow agreement entered into prior to the date hereof, by and among the Company, the Escrow Agent
and Aegis Capital Group LLC pursuant to which the Purchasers shall deposit Subscription Amounts with the Escrow Agent to be applied
to the transactions contemplated hereunder.

“Evaluation
Date” shall have the meaning ascribed to such term in Section 3.1(r).

“Exchange
Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

 

“Exempt
Issuance” means the issuance of (a) shares of Common Stock or options to employees, officers or directors of the Company
pursuant to any stock or option plan that (i) has been duly adopted for such purpose, by the Board of Directors or (ii) shall be
duly adopted for such purpose, by a majority of the non-employee members of the Board of Directors or a majority of the members
of a committee of non-employee directors established for such purpose, including, without limitation, the Dataram Corporation 2001
Stock Option Plan, or (iii) up to 100,000 shares of Common Stock to consultants or new employees or new directors, outside of any
adopted stock option plan, (b) securities upon the exercise of the Warrants, (c) securities upon the exercise or exchange of or
conversion of any Securities issued hereunder and/or any options or other securities exercisable or exchangeable for or convertible
into shares of Common Stock issued and

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outstanding on the date of this
Agreement, provided that such securities have not been amended since the date of this Agreement to increase the number of such
securities or to decrease the exercise price, exchange price or conversion price of such securities, and (d) securities issued
pursuant to acquisitions or strategic transactions approved by a majority of the disinterested directors of the Company, provided
that any such issuance shall only be to a Person (or to the equityholders of a Person) which is, itself or through its subsidiaries,
an operating company or an owner of an asset in a business synergistic with the business of the Company and shall provide to the
Company additional benefits in addition to the investment of funds, but shall not include a transaction in which the Company is
issuing securities primarily for the purpose of raising capital or to an entity whose primary business is investing in securities.

“FCPA”
means the Foreign Corrupt Practices Act of 1977, as amended.

“GAAP”
shall have the meaning ascribed to such term in Section 3.1(h).

“Indebtedness”
shall have the meaning ascribed to such term in Section 3.1(z).

“Intellectual
Property Rights” shall have the meaning ascribed to such term in Section 3.1(o).

“Liens”
means a lien, charge, pledge, security interest, encumbrance, right of first refusal, preemptive right or other restriction.

“Material
Adverse Effect” shall have the meaning assigned to such term in Section 3.1(b).

“Material
Permits” shall have the meaning ascribed to such term in Section 3.1(m).

“Participation
Maximum” shall have the meaning ascribed to such term in Section 4.11(a).

“Per
Share Purchase Price” equals $1.88, subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations and other similar transactions
of the Common Stock that occur after the date of this Agreement.

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

“Pre-Notice”
shall have the meaning ascribed to such term in Section 4.11(b).

“Pro
Rata Portion” shall have the meaning ascribed to such term in Section 4.11(e).

 

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“Proceeding”
means an action, claim, suit, investigation or proceeding (including, without limitation, an informal investigation or partial
proceeding, such as a deposition), whether commenced or threatened.

“Prospectus”
means the final prospectus filed for the Registration Statement.

“Prospectus
Supplement” means the supplement to the Prospectus complying with Rule 424(b) of the Securities Act that is filed with
the Commission and delivered by the Company to each Purchaser at the Closing.

“Purchaser
Party” shall have the meaning ascribed to such term in Section 4.8.

“Registration
Statement” means the effective registration statement with Commission file No. 333-173212 which registers the sale of
the Shares, the Warrants and the Warrant Shares to the Purchasers.

“Required
Approvals” shall have the meaning ascribed to such term in Section 3.1(e).

“Required
Purchasers” means the Purchasers holding at least a majority in interest of the aggregate number of Shares outstanding
based on the initial Subscription Amounts hereunder.

“Rule
144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted
from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose
and effect as such Rule.

“Rule
424” means Rule 424 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted
from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose
and effect as such Rule.

“SEC
Reports” shall have the meaning ascribed to such term in Section 3.1(h).

“Securities”
means the Shares, the Warrants and the Warrant Shares.

“Securities
Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

“Shares”
means the shares of Common Stock issued or issuable to each Purchaser pursuant to this Agreement.

“Short
Sales” means all “short sales” as defined in Rule 200 of Regulation SHO under the Exchange Act (but
shall not be deemed to include the location and/or reservation of borrowable shares of Common Stock). 

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“Subscription
Amount” means, as to each Purchaser, the aggregate amount to be paid for Shares and Warrants purchased hereunder as specified
below such Purchaser’s name on the signature page of this Agreement and next to the heading “Subscription Amount,”
in United States dollars and in immediately available funds.

“Subsequent
Financing” shall have the meaning ascribed to such term in Section 4.11(a).

“Subsequent
Financing Notice” shall have the meaning ascribed to such term in Section 4.11(b).

“Subsidiary”
means any subsidiary of the Company as set forth on Schedule 3.1(a), and shall, where applicable, also include any
direct or indirect subsidiary of the Company formed or acquired after the date hereof.

“Trading
Day” means a day on which the principal Trading Market is open for trading.

“Trading
Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on
the date in question: the NYSE AMEX, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the
New York Stock Exchange or the OTC Bulletin Board (or any successors to any of the foregoing).

“Transaction
Documents” means this Agreement, the Warrants and any other documents or agreements executed in connection with the transactions
contemplated hereunder.

“Transfer
Agent” means American Stock Transfer and Trust Company, the current transfer agent of the Company, with a mailing
address of 10150 Mallard Creek Drive, Suite 307, Charlotte, North Carolina 28262 and a facsimile number
of (718) 765-8742, and any successor transfer agent of the Company.

“Variable
Rate Transaction” shall have the meaning ascribed to such term in Section 4.12(b).

“Warrants”
means, collectively, the Common Stock purchase warrants delivered to the Purchasers at the Closing in accordance with Section 2.2(a)
hereof, which Warrants shall be exercisable immediately and have a term of exercise equal to 5 years from their Initial Exercise
Date (as defined therein), in the form of Exhibit A attached hereto.

“Warrant
Shares” means the shares of Common Stock issuable upon exercise of the Warrants.

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ARTICLE II.

PURCHASE AND SALE

2.1Closing.
On the Closing Date, upon the terms and subject to the conditions set forth herein, the Company agrees to sell, and the Purchasers,
severally and not jointly, agree to purchase, up to an aggregate of $3,000,000 of Shares and Warrants. Each Purchaser shall deliver
to the Escrow Agent, via wire transfer, immediately available funds equal to such Purchaser’s Subscription Amount as set
forth on the signature page hereto executed by such Purchaser. On the Closing Date, the Company and each Purchaser shall deliver
the other items set forth in Section 2.2 deliverable at the Closing. Upon satisfaction of the covenants and conditions set forth
in Sections 2.2 and 2.3, the Closing shall occur at the offices of EGS or such other location as the parties shall mutually agree.

2.2Deliveries.

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

(i)a
legal opinion of Company Counsel, substantially in the form of Exhibit B attached hereto;

(ii)a
copy of the irrevocable instructions to the Transfer Agent instructing the Transfer Agent to deliver on an expedited basis via
The Depository Trust Company Deposit or Withdrawal at Custodian system (“DWAC”) Shares equal to such Purchaser’s
Subscription Amount divided by the Per Share Purchase Price, registered in the name of such Purchaser;

(iii)a
Warrant registered in the name of such Purchaser to purchase up to a number of shares of Common Stock equal to 75% of such Purchaser’s
Shares, with an exercise price equal to $2.26, subject to adjustment therein (such Warrant certificate may be delivered within three Trading Days of the Closing Date); and

(iv)the
Prospectus and Prospectus Supplement (which may be delivered in accordance with Rule 172 under the Securities Act).

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

(i)to
Escrow Agent, such Purchaser’s Subscription Amount by wire transfer to the account specified in the Escrow Agreement.

2.3Closing
Conditions.

(a)The
obligations of the Company hereunder in connection with the Closing are subject to the following conditions being met:

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(i)the
accuracy in all material respects on the Closing Date of the representations and warranties of the Purchasers contained herein
(unless as of a specific date therein in which case they shall be accurate as of such date);

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

(iii)the
delivery by each Purchaser of the items set forth in Section 2.2(b) of this Agreement.

(b)The
respective obligations of the Purchasers hereunder in connection with the Closing are subject to the following conditions being
met:

(i)the
accuracy in all material respects when made and on the Closing Date of the representations and warranties of the Company contained
herein (unless as of a specific date therein);

(ii)all
obligations, covenants and agreements of the Company required to be performed at or prior to the Closing Date shall have been performed;

(iii)the
delivery by the Company of the items set forth in Section 2.2(a) of this Agreement;

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

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

ARTICLE III.

REPRESENTATIONS AND WARRANTIES

3.1Representations
and Warranties of the Company. Except as set forth in the Registration Statement, the Prospectus, the Prospectus Supplements
or any documents incorporated by reference therein, which such filings, writings and documents shall qualify such representations
and warranties to the extent of the disclosures contained therein, or in the Disclosure Schedules, which Disclosure Schedules
shall be deemed a part hereof and shall qualify any representation or otherwise made herein to the extent of the disclosure contained
in the corresponding section of the Disclosure Schedules, the Company hereby makes the following representations and warranties
to each Purchaser:

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(a)Subsidiaries.
All of the direct and indirect subsidiaries of the Company are set forth on Schedule 3.1(a). The Company owns, directly
or indirectly, all of the capital stock or other equity interests of each Subsidiary free and clear of any Liens, and all of the
issued and outstanding shares of capital stock of each Subsidiary are validly issued and are fully paid, non-assessable and free
of preemptive and similar rights to subscribe for or purchase securities. If the Company has no subsidiaries, all other references
to the Subsidiaries or any of them in the Transaction Documents shall be disregarded.

(b)Organization
and Qualification. The Company and each of the Subsidiaries is an entity duly incorporated or otherwise organized, validly
existing and in good standing under the laws of the jurisdiction of its incorporation or organization, with the requisite power
and authority to own and use its properties and assets and to carry on its business as currently conducted. Neither the Company
nor any Subsidiary is in violation nor default of any of the provisions of its respective certificate or articles of incorporation,
bylaws or other organizational or charter documents. Each of the Company and the Subsidiaries is duly qualified to conduct business
and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted
or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as
the case may be, could not have or reasonably be expected to result in: (i) a material adverse effect on the legality, validity
or enforceability of any Transaction Document, (ii) a material adverse effect on the results of operations, assets, business, prospects
or condition (financial or otherwise) of the Company and the Subsidiaries, taken as a whole, or (iii) a material adverse effect
on the Company’s ability to perform in any material respect on a timely basis its obligations under any Transaction Document
(any of (i), (ii) or (iii), a “Material Adverse Effect”) and no Proceeding has been instituted in any such jurisdiction
revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification.

(c)Authorization;
Enforcement. The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated
by this Agreement and each of the other Transaction Documents and otherwise to carry out its obligations hereunder and thereunder.
The execution and delivery of this Agreement and each of the other Transaction Documents by the Company and the consummation by
it of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of the Company
and no further action is required by the Company, the Board of Directors or the Company’s stockholders in connection herewith
or therewith other than in connection with the Required Approvals. This Agreement and each other Transaction Document to which
it is a party has been (or upon delivery will have been) duly executed by the Company and, when delivered in accordance with the
terms hereof and thereof, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance
with its terms, except (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium
and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating
to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification
and contribution provisions may be limited by applicable law.

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

(e)Filings,
Consents and Approvals. The Company is not required to obtain any consent, waiver, authorization or order of, give any notice
to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other
Person in connection with the execution, delivery and performance by the Company of the Transaction Documents, other than: (i)
the filings required pursuant to Section 4.4 of this Agreement, (ii) the filing with the Commission of the Prospectus Supplement,
(iii) those filings or consents that have already been made or obtained prior to the date of this Agreement, (iv) application(s)
to each applicable Trading Market for the listing of the Shares and Warrant Shares for trading thereon in the time and manner required
thereby and (v) such filings as are required to be made under applicable state securities laws (collectively, the “Required
Approvals”).

(f)Issuance
of the Securities; Registration. The Securities are duly authorized and, when issued and paid for in accordance with the applicable
Transaction Documents, will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the
Company. The Warrant Shares, when issued in accordance with the terms of the Warrants, will be validly issued, fully paid and nonassessable,
free and clear of all Liens imposed by the Company. The Company has reserved from its duly authorized capital stock the maximum
number of shares of Common Stock issuable pursuant to this Agreement and the Warrants. The Company has prepared and filed the

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Registration Statement in conformity
with the requirements of the Securities Act, which became effective on April 28, 2011 (the “Effective Date”),
including the Prospectus, and such amendments and supplements thereto as may have been required to the date of this Agreement.
The Registration Statement is effective under the Securities Act and no stop order preventing or suspending the effectiveness of
the Registration Statement or suspending or preventing the use of the Prospectus has been issued by the Commission and no proceedings
for that purpose have been instituted or, to the knowledge of the Company, are threatened by the Commission. The Company, if required
by the rules and regulations of the Commission, proposes to file the Prospectus, with the Commission pursuant to Rule 424(b). At
the time the Registration Statement and any amendments thereto became effective, at the date of this Agreement and at the Closing
Date, the Registration Statement and any amendments thereto conformed and will conform in all material respects to the requirements
of the Securities Act and did not and will not contain any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein not misleading; and the Prospectus and any amendments
or supplements thereto, at time the Prospectus or any amendment or supplement thereto was issued and at the Closing Date, conformed
and will conform in all material respects to the requirements of the Securities Act and did not and will not contain an untrue
statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.

(g)Capitalization.
The capitalization of the Company is as set forth in the Prospectus. The Company has not issued any capital stock since its most
recently filed periodic report under the Exchange Act, other than pursuant to the exercise of employee stock options under
the Company’s stock option plans, the issuance of shares of Common Stock to employees pursuant to the Company’s employee
stock purchase plans and pursuant to the conversion and/or exercise of Common Stock Equivalents outstanding as of the date of the
most recently filed periodic report under the Exchange Act. No Person has any right of first refusal, preemptive right, right of
participation, or any similar right to participate in the transactions contemplated by the Transaction Documents. Except as described
in the SEC Reports, or except a result of the purchase and sale of the Securities, there are no outstanding options, warrants,
scrip rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities, rights or obligations
convertible into or exercisable or exchangeable for, or giving any Person any right to subscribe for or acquire, any shares of
Common Stock, or contracts, commitments, understandings or arrangements by which the Company or any Subsidiary is or may become
bound to issue additional shares of Common Stock or Common Stock Equivalents. The issuance and sale of the Securities will not
obligate the Company to issue shares of Common Stock or other securities to any Person (other than the Purchasers) and will not
result in a right of any holder of Company securities to adjust the exercise, conversion, exchange or reset price under any of
such securities. All of the outstanding shares of capital stock of the Company are duly authorized, validly issued, fully paid
and nonassessable, have been issued in compliance with all federal and state securities laws, and none of such outstanding shares
was issued in violation of any preemptive rights or similar rights to subscribe for or purchase securities. No further approval
or authorization of any stockholder, the Board of Directors or others is required for the issuance and sale of the Securities.
There are no stockholders agreements, voting agreements or other similar agreements with respect to the Company’s capital
stock to which the Company is a party or, to the knowledge of the Company, between or among any of the Company’s stockholders
that are not described in the SEC Reports.

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(h)SEC
Reports; Financial Statements. The Company has filed all reports, schedules, forms, statements and other documents required
to be filed by the Company under the Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof,
for the two years preceding the date hereof (or such shorter period as the Company was required by law or regulation to file such
material) (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein, together with
the Prospectus and the Prospectus Supplement, being collectively referred to herein as the “SEC Reports”) on
a timely basis or has received a valid extension of such time of filing and has filed any such SEC Reports prior to the expiration
of any such extension. As of their respective dates, the SEC Reports complied in all material respects with the requirements of
the Securities Act and the Exchange Act, as applicable, and none of the SEC Reports, when filed, contained any untrue statement
of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not misleading. The Company has never been an issuer subject
to Rule 144(i) under the Securities Act. The financial statements of the Company included in the SEC Reports comply in all material
respects with applicable accounting requirements and the rules and regulations of the Commission with respect thereto as in effect
at the time of filing. Such financial statements have been prepared in accordance with United States generally accepted accounting
principles applied on a consistent basis during the periods involved (“GAAP”), except as may be otherwise specified
in such financial statements or the notes thereto and except that unaudited financial statements may not contain all footnotes
required by GAAP, and fairly present in all material respects the financial position of the Company and its consolidated Subsidiaries
as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of
unaudited statements, to normal, immaterial, year-end audit adjustments.

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

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(j)Litigation.
There is no action, suit, inquiry, notice of violation, proceeding or investigation pending or, to the knowledge of the Company,
threatened against or affecting the Company, any Subsidiary or any of their respective properties before or by any court, arbitrator,
governmental or administrative agency or regulatory authority (federal, state, county, local or foreign) (collectively, an “Action”)
which (i) adversely affects or challenges the legality, validity or enforceability of any of the Transaction Documents or the Securities
or (ii) could, if there were an unfavorable decision, have or reasonably be expected to result in a Material Adverse Effect. Neither
the Company nor any Subsidiary, nor any director or officer thereof, is or has been the subject of any Action involving a claim
of violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty. There has not been,
and to the knowledge of the Company, there is not pending or contemplated, any investigation by the Commission involving the Company
or any current or former director or officer of the Company. The Commission has not issued any stop order or other order suspending
the effectiveness of any registration statement filed by the Company or any Subsidiary under the Exchange Act or the Securities
Act.

(k)Labor
Relations. No labor dispute exists or, to the knowledge of the Company, is imminent with respect to any of the employees of
the Company, which could reasonably be expected to result in a Material Adverse Effect. None of the Company’s or its Subsidiaries’
employees is a member of a union that relates to such employee’s relationship with the Company or such Subsidiary, and neither
the Company nor any of its Subsidiaries is a party to a collective bargaining agreement, and the Company and its Subsidiaries believe
that their relationships with their employees are good. To the knowledge of the Company, no executive officer of the Company or
any Subsidiary, is, or is now expected to be, in violation of any material term of any employment contract, confidentiality, disclosure
or proprietary information agreement or non-competition agreement, or any other contract or agreement or any restrictive covenant
in favor of any third party, and the continued employment of each such executive officer does not subject the Company or any of
its Subsidiaries to any liability with respect to any of the foregoing matters. The Company and its Subsidiaries are in compliance
with all U.S. federal, state, local and foreign laws and regulations relating to employment and employment practices, terms and
conditions of employment and wages and hours, except where the failure to be in compliance could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.

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(l)Compliance.
Neither the Company nor any Subsidiary: (i) is in default under or in violation of (and no event has occurred that has not been
waived that, with notice or lapse of time or both, would result in a default by the Company or any Subsidiary under), nor has the
Company or any Subsidiary received notice of a claim that it is in default under or that it is in violation of, any indenture,
loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is
bound (whether or not such default or violation has been waived), (ii) is in violation of any judgment, decree or order of any
court, arbitrator or other governmental authority or (iii) is or has been in violation of any statute, rule, ordinance or regulation
of any governmental authority, including without limitation all foreign, federal, state and local laws relating to taxes, environmental
protection, occupational health and safety, product quality and safety and employment and labor matters, except in each case as
could not have or reasonably be expected to result in a Material Adverse Effect.

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

(n)Title
to Assets. The Company and the Subsidiaries have good and marketable title in fee simple to all real property owned by them
and good and marketable title in all personal property owned by them that is material to the business of the Company and the Subsidiaries,
in each case free and clear of all Liens, except for (i) Liens as do not materially affect the value of such property and do not
materially interfere with the use made and proposed to be made of such property by the Company and the Subsidiaries and (ii) Liens
for the payment of federal, state or other taxes, for which appropriate reserves have been made in accordance with GAAP and, the
payment of which is neither delinquent nor subject to penalties. Any real property and facilities held under lease by the Company
and the Subsidiaries are held by them under valid, subsisting and enforceable leases with which the Company and the Subsidiaries
are in compliance.

(o)Intellectual
Property. The Company and the Subsidiaries have, or have rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, trade secrets, inventions, copyrights, licenses and other intellectual property rights
and similar rights necessary or required for use in connection with their respective businesses as described in the SEC Reports
and which the failure to so have could have a Material Adverse Effect (collectively, the “Intellectual Property Rights”).
None of, and neither the Company nor any Subsidiary has received a notice (written or otherwise) that any of, the Intellectual
Property Rights has expired, terminated or been abandoned, or is expected to expire or terminate or be abandoned, within two (2)
years from the date of this Agreement. Neither the Company nor any Subsidiary has received, since the date of the latest audited
financial statements included within the SEC Reports, a written notice of a claim or otherwise has any knowledge that the Intellectual
Property Rights violate or infringe upon the rights of any Person, except as could not have or reasonably be expected to not have
a Material Adverse Effect. To the knowledge of the

    	13

    	 

    

Company,
all such Intellectual Property Rights are enforceable and there is no existing infringement by another Person of any of the Intellectual
Property Rights. The Company and its Subsidiaries have taken reasonable security measures to protect the secrecy, confidentiality
and value of all of their intellectual properties, except where failure to do so could not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect.

(p)Insurance.
The Company and the Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and
in such amounts as are prudent and customary in the businesses in which the Company and the Subsidiaries are engaged, including,
but not limited to, directors and officers insurance coverage at least equal to the aggregate Subscription Amount. Neither the
Company nor any Subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and when
such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business without
a significant increase in cost.

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

(r)Sarbanes-Oxley;
Internal Accounting Controls. The Company and the Subsidiaries are in compliance with any and all applicable requirements of
the Sarbanes-Oxley Act of 2002 that are effective as of the date hereof, and any and all applicable rules and regulations promulgated
by the Commission thereunder that are effective as of the date hereof and as of the Closing Date. The
Company and the Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that:
(i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management’s general or specific authorization, and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect
to any differences. The Company and the Subsidiaries have established disclosure controls and procedures (as defined in Exchange
Act Rules 13a-15(e) and 15d-15(e)) for the Company and the Subsidiaries and designed such disclosure controls and procedures to
ensure that 

    	14

    	 

    

information
required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized
and reported, within the time periods specified in the Commission’s rules and forms. The Company’s certifying officers
have evaluated the effectiveness of the disclosure controls and procedures of the Company and the Subsidiaries as of the end of
the period covered by the most recently filed periodic report under the Exchange Act (such date, the “Evaluation Date”).
The Company presented in its most recently filed periodic report under the Exchange Act the conclusions of the certifying officers
about the effectiveness of the disclosure controls and procedures based on their evaluations as of the Evaluation Date. Since the
Evaluation Date, there have been no changes in the internal control over financial reporting (as such term is defined in the Exchange
Act) of the Company and its Subsidiaries that have materially affected, or is reasonably likely to materially affect, the internal
control over financial reporting of the Company and its Subsidiaries.

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

(t)Investment
Company. The Company is not, and is not an Affiliate of, and immediately after receipt of payment for the Securities, will
not be or be an Affiliate of, an “investment company” within the meaning of the Investment Company Act of 1940, as
amended. The Company shall conduct its business in a manner so that it will not become an “investment company” subject
to registration under the Investment Company Act of 1940, as amended.

(u)Registration
Rights. Except as set forth on Schedule 3.1(u), no Person has any right to cause the Company or any Subsidiary to effect
the registration under the Securities Act of any securities of the Company or any Subsidiary.

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

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

(x)Disclosure.
Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents, the Company
confirms that neither it nor any other Person acting on its behalf has provided any of the Purchasers or their agents or counsel
with any information that it believes constitutes or might constitute material, non-public information which is not otherwise disclosed
in the Prospectus Supplement. The Company understands and confirms that the Purchasers will rely on the foregoing representation
in effecting transactions in securities of the Company. All of the disclosure furnished by or on behalf of the Company to the Purchasers
regarding the Company and its Subsidiaries, their respective businesses and the transactions contemplated hereby, including the
Disclosure Schedules to this Agreement, is true and correct and does not contain any untrue statement of a material fact or omit
to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they
were made, not misleading. The press releases disseminated by the Company during the twelve months preceding the date of this Agreement
taken as a whole do not contain any untrue statement of a material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of the circumstances under which they were made and when
made, not misleading. The Company acknowledges and agrees that no Purchaser makes or has made any representations or warranties
with respect to the transactions contemplated hereby other than those specifically set forth in Section 3.2 hereof.

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

(z)Solvency.
Based on the consolidated financial condition of the Company as of the Closing Date, after giving effect to the receipt by the
Company of the proceeds from the sale of the Securities hereunder, (i) the fair saleable value of the Company’s assets exceeds
the amount that will be required to be paid on or in respect of the Company’s existing debts and other liabilities (including
known contingent liabilities) as they mature, (ii) the Company’s assets do not constitute unreasonably small capital to carry
on its business as now conducted and as proposed to be conducted including its

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capital
needs taking into account the particular capital requirements of the business conducted by the Company, consolidated and projected
capital requirements and capital availability thereof, and (iii) the current cash flow of the Company, together with the proceeds
the Company would receive, were it to liquidate all of its assets, after taking into account all anticipated uses of the cash,
would be sufficient to pay all amounts on or in respect of its liabilities when such amounts are required to be paid. The Company
does not intend to incur debts beyond its ability to pay such debts as they mature (taking into account the timing and amounts
of cash to be payable on or in respect of its debt). The Company has no knowledge of any facts or circumstances which lead it to
believe that it will file for reorganization or liquidation under the bankruptcy or reorganization laws of any jurisdiction within
one year from the Closing Date. Except as may be described in the SEC Reports, there is no outstanding secured or unsecured Indebtedness
of the Company or any Subsidiary, or for which the Company or any Subsidiary has commitments. For the purposes of this Agreement,
“Indebtedness” means (x) any liabilities for borrowed money or amounts owed in excess of $50,000 (other than
trade accounts payable incurred in the ordinary course of business), (y) all guaranties, endorsements and other contingent obligations
in respect of indebtedness of others, whether or not the same are or should be reflected in the Company’s consolidated balance
sheet (or the notes thereto), except guaranties by endorsement of negotiable instruments for deposit or collection or similar transactions
in the ordinary course of business; and (z) the present value of any lease payments in excess of $50,000
due under leases required to be capitalized in accordance with GAAP. Neither the Company nor any Subsidiary is in default with
respect to any Indebtedness.

(aa)Tax
Status. Except for matters that would not, individually or in the aggregate, have or reasonably be expected to result in
a Material Adverse Effect, the Company and its Subsidiaries each (i) has made or filed all United States federal, state and local
income and all foreign income and franchise tax returns, reports and declarations required by any jurisdiction to which it is subject,
(ii) has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due
on such returns, reports and declarations and (iii) has set aside on its books provision reasonably adequate for the payment of
all material taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid
taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company or
of any Subsidiary know of no basis for any such claim.

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

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(cc)Accountants.
The Company’s accounting firm is set forth on Schedule 3.1(cc) of the Disclosure Schedules. To the knowledge
and belief of the Company, such accounting firm (i) is a registered public accounting firm as required by the Exchange Act and
(ii) shall express its opinion with respect to the financial statements to be included in the Company’s Annual Report for
the fiscal year ending April 30, 2011.

(dd)
Acknowledgment Regarding Purchasers’ Purchase of Securities. The Company acknowledges and agrees that each of the
Purchasers is acting solely in the capacity of an arm’s length purchaser with respect to the Transaction Documents and the
transactions contemplated thereby. The Company further acknowledges that no Purchaser is acting as a financial advisor or fiduciary
of the Company (or in any similar capacity) with respect to the Transaction Documents and the transactions contemplated thereby
and any advice given by any Purchaser or any of their respective representatives or agents in connection with the Transaction Documents
and the transactions contemplated thereby is merely incidental to the Purchasers’ purchase of the Securities. The Company
further represents to each Purchaser that the Company’s decision to enter into this Agreement and the other Transaction Documents
has been based solely on the independent evaluation of the transactions contemplated hereby by the Company and its representatives.

(ee)Acknowledgement
Regarding Purchaser’s Trading Activity. Anything in this Agreement or elsewhere herein to the contrary notwithstanding
(except for Sections 3.2(e) and 4.14 hereof), it is understood and acknowledged by the Company that: (i) none of the Purchasers
has been asked by the Company to agree, nor has any Purchaser agreed, to desist from purchasing or selling, long and/or short,
securities of the Company, or “derivative” securities based on securities issued by the Company or to hold the Securities
for any specified term; (ii) past or future open market or other transactions by any Purchaser, specifically including, without
limitation, Short Sales or “derivative” transactions, before or after the closing of this or future private placement
transactions, may negatively impact the market price of the Company’s publicly-traded securities; (iii) any Purchaser, and
counter-parties in “derivative” transactions to which any such Purchaser is a party, directly or indirectly, presently
may have a “short” position in the Common Stock, and (iv) each Purchaser shall not be deemed to have any affiliation
with or control over any arm’s length counter-party in any “derivative” transaction. The Company further
understands and acknowledges that (y) one or more Purchasers may engage in hedging activities at various times during the period
that the Securities are outstanding, including, without limitation, during the periods that the value of the Warrant Shares deliverable
with respect to Securities are being determined, and (z) such hedging activities (if any) could reduce the value of the existing
stockholders' equity interests in the Company at and after the time that the hedging activities are being conducted.  The
Company acknowledges that such aforementioned hedging activities do not constitute a breach of any of the Transaction Documents.

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

(gg)[RESERVED]

(hh)Office
of Foreign Assets Control. Neither the Company nor any Subsidiary nor, to the Company's knowledge, any director, officer, agent,
employee or affiliate of the Company or any Subsidiary is currently subject to any U.S. sanctions administered by the Office of
Foreign Assets Control of the U.S. Treasury Department (“OFAC”).

(ii)U.S.
Real Property Holding Corporation. The Company is not and has never been a U.S. real property holding corporation within the
meaning of Section 897 of the Internal Revenue Code of 1986, as amended, and the Company shall so certify upon Purchaser’s
request.

(jj)Bank
Holding Company Act. Neither the Company nor any of its Subsidiaries or Affiliates is subject to the Bank Holding Company Act
of 1956, as amended (the “BHCA”) and to regulation by the Board of Governors of the Federal Reserve System (the
“Federal Reserve”). Neither the Company nor any of its Subsidiaries or Affiliates owns or controls, directly
or indirectly, five percent (5%) or more of the outstanding shares of any class of voting securities or twenty-five percent or
more of the total equity of a bank or any entity that is subject to the BHCA and to regulation by the Federal Reserve. Neither
the Company nor any of its Subsidiaries or Affiliates exercises a controlling influence over the management or policies of a bank
or any entity that is subject to the BHCA and to regulation by the Federal Reserve.

(kk)Money
Laundering. The operations of the Company and its Subsidiaries are and have been conducted at all times in compliance with
applicable financial record-keeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970,
as amended, applicable money laundering statutes and applicable rules and regulations thereunder (collectively, the “Money
Laundering Laws”), and no action, suit or proceeding by or before any court or governmental agency, authority or body
or any arbitrator involving the Company or any Subsidiary with respect to the Money Laundering Laws is pending or, to the knowledge
of the Company or any Subsidiary, threatened.

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

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(a)Organization;
Authority. Such Purchaser is either an individual or an entity duly incorporated or formed, validly existing and in good standing
under the laws of the jurisdiction of its incorporation or formation with full right, corporate, partnership, limited liability
company or similar power and authority to enter into and to consummate the transactions contemplated by this Agreement and otherwise
to carry out its obligations hereunder and thereunder. The execution and delivery of this Agreement and performance by such Purchaser
of the transactions contemplated by this Agreement have been duly authorized by all necessary corporate, partnership, limited
liability company or similar action, as applicable, on the part of such Purchaser. Each Transaction Document to which it is a
party has been duly executed by such Purchaser, and when delivered by such Purchaser in accordance with the terms hereof, will
constitute the valid and legally binding obligation of such Purchaser, enforceable against it in accordance with its terms, except:
(i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws
of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability
of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions
may be limited by applicable law.

(b)Understandings
or Arrangements. Such Purchaser is acquiring the Securities as principal for its own account and has no direct or indirect
arrangement or understandings with any other persons to distribute or regarding the distribution of such Securities (this representation
and warranty not limiting such Purchaser’s right to sell the Securities pursuant to the Registration Statement or otherwise
in compliance with applicable federal and state securities laws). Such Purchaser is acquiring the Securities hereunder in the
ordinary course of its business.

(c)Purchaser
Status. At the time such Purchaser was offered the Securities, it was, and as of the date hereof it is, and on each date on
which it exercises any Warrants, it will be either: (i) an “accredited investor” as defined in Rule 501(a)(1), (a)(2),
(a)(3), (a)(7) or (a)(8) under the Securities Act or (ii) a “qualified institutional buyer” as defined in Rule 144A(a)
under the Securities Act. Such Purchaser is not required to be registered as a broker-dealer under Section 15 of the Exchange
Act.

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

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(e)Certain
Transactions and Confidentiality. Other than consummating the transactions contemplated hereunder, such Purchaser has not,
nor has any Person acting on behalf of or pursuant to any understanding with such Purchaser, directly or indirectly executed any
purchases or sales, including Short Sales, of the securities of the Company during the period commencing as of the time that
such Purchaser first received a term sheet (written or oral) from the Company or any other Person representing the Company setting
forth the material terms of the transactions contemplated hereunder and ending immediately prior to the execution hereof.
Notwithstanding the foregoing, in the case of a Purchaser that is a multi-managed investment vehicle whereby separate portfolio
managers manage separate portions of such Purchaser’s assets and the portfolio managers have no direct knowledge of the
investment decisions made by the portfolio managers managing other portions of such Purchaser’s assets, the representation
set forth above shall only apply with respect to the portion of assets managed by the portfolio manager that made the investment
decision to purchase the Securities covered by this Agreement. Other than to other Persons party to this Agreement, such Purchaser
has maintained the confidentiality of all disclosures made to it in connection with this transaction (including the existence
and terms of this transaction). Notwithstanding the foregoing, for avoidance of doubt, nothing contained herein shall constitute
a representation or warranty, or preclude any actions, with respect to the identification of the availability of, or securing
of, available shares to borrow in order to effect Short Sales or similar transactions in the future.

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

ARTICLE IV.

OTHER AGREEMENTS OF THE PARTIES

4.1Warrant
Shares. If all or any portion of a Warrant is exercised at a time when there is an effective registration statement to cover
the issuance or resale of the Warrant Shares or if the Warrant is exercised via cashless exercise, the Warrant Shares issued pursuant
to any such exercise shall be issued free of all legends. If at any time following the date hereof the Registration Statement
(or any subsequent registration statement registering the sale or resale of the Warrant Shares) is not effective or is not otherwise
available for the sale or resale of the Warrant Shares, the Company shall immediately notify the holders of the Warrants in writing
that such registration statement is not then effective and thereafter shall promptly notify such holders when the registration
statement is effective again and available for the sale or resale of the Warrant Shares (it being understood and agreed that the
foregoing shall not limit the ability of the Company to issue, or any Purchaser to sell, any of the Warrant Shares in compliance
with applicable federal and state securities laws). The Company shall use best efforts to keep a registration statement (including
the Registration Statement) registering the issuance or resale of the Warrant Shares effective during the term of the Warrants.

4.2Furnishing
of Information. Until the earliest of the time that (i) no Purchaser owns Securities or (ii) the Warrants have expired, the
Company covenants to timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to the Exchange Act even if the Company is not then subject
to the reporting requirements of the Exchange Act.

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4.3Integration.
The Company shall not sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined
in Section 2 of the Securities Act) that would be integrated with the offer or sale of the Securities for purposes of the rules
and regulations of any Trading Market such that it would require shareholder approval prior to the closing of such other transaction
unless shareholder approval is obtained before the closing of such subsequent transaction.

4.4Securities
Laws Disclosure; Publicity. The Company shall (a) by 9:00 a.m. (New York City time) on the Trading Day immediately following
the date hereof, issue a press release disclosing the material terms of the transactions contemplated hereby, and (b) file a Current
Report on Form 8-K, including the Transaction Documents as exhibits thereto, with the Commission within the time required by the
Exchange Act. From and after the issuance of such press release, the Company represents to the Purchasers that it shall have publicly
disclosed all material, non-public information delivered to any of the Purchasers by the Company or any of its Subsidiaries, or
any of their respective officers, directors, employees or agents in connection with the transactions contemplated by the Transaction
Documents. The Company and each Purchaser shall consult with each other in issuing any other press releases with respect to the
transactions contemplated hereby, and neither the Company nor any Purchaser shall issue any such press release nor otherwise make
any such public statement without the prior consent of the Company, with respect to any press release of any Purchaser, or without
the prior consent of each Purchaser, with respect to any press release of the Company, which consent shall not unreasonably be
withheld or delayed, except if such disclosure is required by law, in which case the disclosing party shall promptly provide the
other party with prior notice of such public statement or communication. Notwithstanding the foregoing, the Company shall not
publicly disclose the name of any Purchaser, or include the name of any Purchaser in any filing with the Commission or any regulatory
agency or Trading Market, without the prior written consent of such Purchaser, except (a) as required by federal securities law
in connection with the filing of final Transaction Documents with the Commission and (b) to the extent such disclosure is required
by law or Trading Market regulations, in which case the Company shall provide the Purchasers with prior notice of such disclosure
permitted under this clause (b).

4.5Shareholder
Rights Plan. No claim will be made or enforced by the Company or, with the consent of the Company, any other Person, that
any Purchaser is an “Acquiring Person” under any control share acquisition, business combination, poison pill (including
any distribution under a rights agreement) or similar anti-takeover plan or arrangement in effect or hereafter adopted by the
Company, or that any Purchaser could be deemed to trigger the provisions of any such plan or arrangement, by virtue of receiving
Securities under the Transaction Documents or under any other agreement between the Company and the Purchasers.

4.6Non-Public
Information. Except with respect to the material terms and conditions of the transactions contemplated by the Transaction
Documents, the Company covenants and agrees that neither it, nor any other Person acting on its behalf will provide any Purchaser
or its agents or counsel with any information that the Company believes constitutes material non-public information, unless prior
thereto such Purchaser shall have entered into a written agreement with the Company regarding the confidentiality and use of such
information. The Company understands and confirms that each Purchaser shall be relying on the foregoing covenant in effecting
transactions in securities of the Company.

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4.7Use
of Proceeds. The Company shall use the net proceeds from the sale of the Securities hereunder for working capital purposes
and shall not use such proceeds: (a) for the satisfaction of any portion of the Company’s debt (other than payment of trade
payables in the ordinary course of the Company’s business and prior practices), (b) for the redemption of any Common Stock
or Common Stock Equivalents, (c) for the settlement of any outstanding litigation or (d) in violation of FCPA or OFAC regulations.

4.8Indemnification
of Purchasers. Subject to the provisions of this Section 4.8, the Company will indemnify and hold each Purchaser and its directors,
officers, shareholders, members, partners, employees and agents (and any other Persons with a functionally equivalent role of
a Person holding such titles notwithstanding a lack of such title or any other title), each Person who controls such Purchaser
(within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, shareholders,
agents, members, partners or employees (and any other Persons with a functionally equivalent role of a Person holding such titles
notwithstanding a lack of such title or any other title) of such controlling persons (each, a “Purchaser Party”)
harmless from any and all losses, liabilities, obligations, claims, contingencies, damages, costs and expenses, including all
judgments, amounts paid in settlements, court costs and reasonable attorneys’ fees and costs of investigation that any such
Purchaser Party may suffer or incur as a result of or relating to (a) any breach of any of the representations, warranties, covenants
or agreements made by the Company in this Agreement or in the other Transaction Documents or (b) any action instituted against
the Purchaser Parties in any capacity, or any of them or their respective Affiliates, by any stockholder of the Company who is
not an Affiliate of such Purchaser Party, with respect to any of the transactions contemplated by the Transaction Documents (unless
such action is based upon a breach of such Purchaser Party’s representations, warranties or covenants under the Transaction
Documents or any agreements or understandings such Purchaser Party may have with any such stockholder or any violations by such
Purchaser Party of state or federal securities laws or any conduct by such Purchaser Party which constitutes fraud, gross negligence,
willful misconduct or malfeasance). If any action shall be brought against any Purchaser Party in respect of which indemnity may
be sought pursuant to this Agreement, such Purchaser Party shall promptly notify the Company in writing, and the Company shall
have the right to assume the defense thereof with counsel of its own choosing reasonably acceptable to the Purchaser Party. Any
Purchaser Party shall have the right to employ separate counsel in any such action and participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of such Purchaser Party except to the extent that (i) the employment
thereof has been specifically authorized by the Company in writing, (ii) the Company has failed after a reasonable period of time
to assume such defense and to employ counsel or (iii) in such action there is, in the reasonable opinion of counsel, a material
conflict on any material issue between the position of the Company and the position of such Purchaser Party, in which case the
Company shall be responsible for the reasonable fees and expenses of no more than one such separate counsel. The Company will
not be liable to any Purchaser Party under this Agreement (y) for any settlement by a Purchaser Party effected without the Company’s
prior written consent, which shall not be unreasonably withheld or delayed; or (z) to the extent, but only to the extent that
a loss, claim, damage or liability is attributable to any Purchaser Party’s breach of any of the representations, warranties,
covenants or agreements made by such Purchaser Party in this Agreement or in the other Transaction Documents. The indemnification required by this Section 4.8 shall be made by periodic payments
of the amount thereof during the course of the investigation or defense, as and when bills are received or are incurred. The indemnity
agreements contained herein shall be in addition to any cause of action or similar right of any Purchaser Party against the Company
or others and any liabilities the Company may be subject to pursuant to law.

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4.9Reservation
of Common Stock. As of the date hereof, the Company has reserved and the Company shall continue to reserve and keep available
at all times, free of preemptive rights, a sufficient number of shares of Common Stock for the purpose of enabling the Company
to issue Shares pursuant to this Agreement and Warrant Shares pursuant to any exercise of the Warrants.

4.10Listing
of Common Stock. The Company hereby agrees to use best efforts to maintain the listing or quotation of the Common Stock
on the Trading Market on which it is currently listed, and concurrently with the Closing, the Company shall apply to list or quote
all of the Shares and Warrant Shares on such Trading Market and promptly secure the listing of all of the Shares and Warrant Shares
on such Trading Market. The Company further agrees, if the Company applies to have the Common Stock traded on any other Trading
Market, it will then include in such application all of the Shares and Warrant Shares, and will take such other action as is necessary
to cause all of the Shares and Warrant Shares to be listed or quoted on such other Trading Market as promptly as possible. The
Company will then take all action reasonably necessary to continue the listing and trading of its Common Stock on a Trading Market
and will comply in all material respects with the Company’s reporting, filing and other obligations under the bylaws or
rules of the Trading Market.

4.11Participation
in Future Financing.

(a)From
the date hereof until the date that is the twelve (12) month anniversary of the Closing Date, upon any issuance by the
Company of Common Stock or Common Stock Equivalents for cash consideration, Indebtedness or a combination of units hereof (a
“Subsequent Financing”), each Purchaser shall have the right, on a pro-rata basis, to participate in up to
an amount of the Subsequent Financing equal to an aggregate of 50% of the Subsequent Financing (the “Participation
Maximum”) on the same terms, conditions and price provided for in the Subsequent Financing. 

(b)At
least five (5) Trading Days prior to the closing of the Subsequent Financing, the Company shall deliver to each Purchaser a written
notice of its intention to effect a Subsequent Financing (“Pre-Notice”), which Pre-Notice shall ask such Purchaser
if it wants to review the details of such financing (such additional notice, a “Subsequent Financing Notice”). 
Upon the request of a Purchaser, and only upon a request by such Purchaser, for a Subsequent Financing Notice, the Company shall
promptly, but no later than one (1) Trading Day after such request, deliver a Subsequent Financing Notice to such Purchaser. 
The Subsequent Financing Notice shall describe in reasonable detail the proposed terms of such Subsequent Financing, the amount
of proceeds intended to be raised thereunder and shall include a term sheet or similar document relating thereto as an attachment.   

(c)Any
Purchaser desiring to participate in such Subsequent Financing must provide written notice to the Company by not later than 5:30
p.m. (New York City time) on the fifth (5th) Trading Day after the Company has delivered such Pre-Notice that such Purchaser
is willing to participate in the Subsequent Financing, the amount of such Purchaser’s participation, and representing and
warranting that such Purchaser has such funds ready, willing, and available for investment on the terms set forth in the Subsequent
Financing Notice. If the Company receives no such notice from a Purchaser as of such fifth (5th) Trading Day, such Purchaser
shall be deemed to have notified the Company that it does not elect to participate. 

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(d)If
by 5:30 p.m. (New York City time) on the fifth (5th) Trading Day after the Company has delivered such Pre-Notice, notifications
by the Purchasers of their willingness to participate in the Subsequent Financing (or to cause their designees to participate)
is, in the aggregate, less than the total amount of the Participation Maximum, then the Company may effect the remaining portion
of such Subsequent Financing on the terms set forth in the Subsequent Financing Notice. 

(e)If
by 5:30 p.m. (New York City time) on the fifth (5th) Trading Day after the Company has delivered such Pre-Notice, the
Company receives responses to a Subsequent Financing Notice from Purchasers seeking to purchase more than the aggregate amount
of the Participation Maximum, each such Purchaser shall have the right to purchase its Pro Rata Portion (as defined below) of the
Participation Maximum.  “Pro Rata Portion” means the ratio of (x) the Subscription Amount of Securities
purchased on the Closing Date by a Purchaser participating under this Section 4.11 and (y) the sum of the aggregate Subscription
Amounts of Securities purchased on the Closing Date by all Purchasers participating under this Section 4.11.

(f)The
Company must provide the Purchasers with a second Subsequent Financing Notice, and the Purchasers will again have the right of
participation set forth above in this Section 4.11, if the Subsequent Financing subject to the initial Subsequent Financing Notice
is not consummated for any reason on the terms set forth in such Subsequent Financing Notice within thirty (30) Trading Days after
the date of the initial Subsequent Financing Notice.

(g)The
Company and each Purchaser agree that if any Purchaser elects to participate in the Subsequent Financing, the transaction documents
related to the Subsequent Financing shall not include any term or provision whereby such Purchaser shall be required to agree to
any restrictions on trading as to any of the Securities purchased hereunder or be required to consent to any amendment to or termination
of, or grant any waiver, release or the like under or in connection with, this Agreement, without the prior written consent of
such Purchaser.

(h)Notwithstanding
the foregoing, this Section 4.11 shall not apply in respect of (i) an Exempt Issuance,
(ii) indebtedness incurred to a state or nationally chartered commercial bank, provided that such indebtedness
is not convertible into Common Stock or (iii) pursuant to any bona fide firm commitment underwritten public offering with a nationally
recognized underwriter, which generates gross proceeds to the Company in excess of $10,000,000 (other than an “at-the-market
offering” as defined in Rule 415(a)(4) under the Securities Act and “equity lines”).

4.12Subsequent
Equity Sales.

(a)From
the date hereof until ninety (90) days after the Closing Date, neither the Company nor any Subsidiary shall issue, enter into any
agreement to issue or announce the issuance or proposed issuance of any shares of Common Stock or Common Stock Equivalents without
the prior consent of the Required Purchasers.

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(b)From
the date hereof until three (3) years after the Closing Date, the Company shall be prohibited from effecting or entering into an
agreement to effect any issuance by the Company or any of its Subsidiaries of Common Stock or Common Stock Equivalents for cash
consideration (or a combination of units hereof) involving a Variable Rate Transaction. “Variable Rate Transaction”
means a transaction in which the Company (i) issues or sells any debt or equity securities that are convertible into, exchangeable
or exercisable for, or include the right to receive additional shares of Common Stock either (A) at a conversion price, exercise
price or exchange rate or other price that is based upon and/or varies with the trading prices of or quotations for the shares
of Common Stock at any time after the initial issuance of such debt or equity securities, or (B) with a conversion, exercise or
exchange price that is subject to being reset at some future date after the initial issuance of such debt or equity security or
upon the occurrence of specified or contingent events directly or indirectly related to the business of the Company or the market
for the Common Stock (but not including any routine anti-dilution protections in any warrant or convertible security) or (ii) enters
into any agreement, including, but not limited to, an equity line of credit, whereby the Company may sell securities at a future
determined price. Further, for a period of one (1) year after the Closing Date, the Company shall not initiate any “at-the-market
offering” as defined in Rule 415(a)(4) under the Securities Act. Any Purchaser shall be entitled to obtain injunctive relief
against the Company to preclude any such issuance, which remedy shall be in addition to any right to collect damages.

(c)Notwithstanding
the foregoing, this Section 4.12 shall not apply in respect of an Exempt Issuance, except that no Variable Rate Transaction shall
be an Exempt Issuance.

4.13Equal
Treatment of Purchasers. No consideration (including any modification of any Transaction Document) shall be offered or paid
to any Person to amend or consent to a waiver or modification of any provision of any of the Transaction Documents unless the
same consideration is also offered to all of the parties to the Transaction Documents. For clarification purposes, this provision
constitutes a separate right granted to each Purchaser by the Company and negotiated separately by each Purchaser, and is intended
for the Company to treat the Purchasers as a class and shall not in any way be construed as the Purchasers acting in concert or
as a group with respect to the purchase, disposition or voting of Securities or otherwise.

4.14Certain
Transactions and Confidentiality. Each Purchaser, severally and not jointly with the other Purchasers, covenants that neither
it nor any Affiliate acting on its behalf or pursuant to any understanding with it will execute any purchases or sales, including
Short Sales of any of the Company’s securities during the period commencing with the execution of this Agreement and ending
at such time that the transactions contemplated by this Agreement are first publicly announced pursuant to the initial press release
as described in Section 4.4.  Each Purchaser, severally and not jointly with the other
Purchasers, covenants that until such time as the transactions contemplated by this Agreement are publicly disclosed by the Company
pursuant to the initial press release as described in Section 4.4, such Purchaser will maintain the confidentiality of the existence
and terms of this transaction and the information included in the Disclosure Schedules.  Notwithstanding
the foregoing and notwithstanding anything contained in this Agreement to the contrary, the Company expressly acknowledges and
agrees that (i) no 

    	26

    	 

    

Purchaser
makes any representation, warranty or covenant hereby that it will not engage in effecting transactions in any securities of the
Company after the time that the transactions contemplated by this Agreement are first publicly announced pursuant to the initial
press release as described in Section 4.4, (ii) no Purchaser shall be restricted or prohibited from effecting any transactions
in any securities of the Company in accordance with applicable securities laws from and after the time that the transactions contemplated
by this Agreement are first publicly announced pursuant to the initial press release as described in Section 4.4 and (iii) no Purchaser
shall have any duty of confidentiality to the Company or its Subsidiaries after the issuance of the initial press release as described
in Section 4.4.  Notwithstanding the foregoing, in the case of a Purchaser that is a multi-managed investment vehicle
whereby separate portfolio managers manage separate portions of such Purchaser’s assets and the portfolio managers have no
direct knowledge of the investment decisions made by the portfolio managers managing other portions of such Purchaser’s assets,
the covenant set forth above shall only apply with respect to the portion of assets managed by the portfolio manager that made
the investment decision to purchase the Securities covered by this Agreement.

ARTICLE V.

MISCELLANEOUS

5.1Termination. 
This Agreement may be terminated by any Purchaser, as to such Purchaser’s obligations hereunder only and without any effect
whatsoever on the obligations between the Company and the other Purchasers, by written notice to the other parties, if the Closing
has not been consummated on or before May 19, 2011; provided, however, that no such termination will affect the
right of any party to sue for any breach by any other party (or parties).

5.2Fees
and Expenses. Except as expressly set forth in the Transaction Documents to the contrary, each party shall pay the fees and
expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident
to the negotiation, preparation, execution, delivery and performance of this Agreement. The Company shall pay all Transfer Agent
fees (including, without limitation, any fees required for same-day processing of any instruction letter delivered by the Company
and any exercise notice delivered by a Purchaser), stamp taxes and other taxes and duties levied in connection with the delivery
of any Securities to the Purchasers.

5.3Entire
Agreement. The Transaction Documents, together with the exhibits and schedules thereto, the Prospectus and the Prospectus
Supplement, contain the entire understanding of the parties with respect to the subject matter hereof and thereof and supersede
all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been
merged into such documents, exhibits and schedules.

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

    	27

    	 

    

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

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

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

5.8No
Third-Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective successors
and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, except as
otherwise set forth in Section 4.8.

5.9Governing
Law. All questions concerning the construction, validity, enforcement and interpretation of the Transaction Documents shall
be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the
principles of conflicts of law thereof. Each party agrees that all legal proceedings concerning the interpretations, enforcement
and defense of the transactions contemplated by this Agreement and any other Transaction Documents (whether brought against a
party hereto or its respective affiliates, directors, officers, shareholders, partners, members, employees or agents) shall be
commenced exclusively in the state and federal courts sitting in the City of New York. Each party hereby irrevocably submits to
the exclusive jurisdiction of the state and federal courts sitting in the City of New York, Borough of Manhattan for the adjudication
of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including
with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert
in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such
suit, action or proceeding is improper or is an inconvenient venue for such proceeding. Each party hereby irrevocably waives personal
service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered
or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under
this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing
contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law. If either
party shall commence an action, suit or proceeding to enforce any provisions of the Transaction Documents, then, in addition to
the obligations of the Company under Section 4.8, the prevailing party in such action, suit or proceeding shall be reimbursed
by the other party for its reasonable attorneys’ fees and other costs and expenses incurred with the investigation, preparation
and prosecution of such action or proceeding.

    	28

    	 

    

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

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

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

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

    	29

    	 

    

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

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

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

5.17Independent
Nature of Purchasers’ Obligations and Rights. The obligations of each Purchaser under any Transaction Document are several
and not joint with the obligations of any other Purchaser, and no Purchaser shall be responsible in any way for the performance
or non-performance of the obligations of any other Purchaser under any Transaction Document. Nothing contained herein or in any
other Transaction Document, and no action taken by any Purchaser pursuant hereto or thereto, shall be deemed to constitute the
Purchasers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Purchasers
are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction
Documents. Each Purchaser shall be entitled to independently protect and enforce its rights including, without limitation, the
rights arising out of this Agreement or out of the other Transaction Documents, and it shall not be necessary for any other Purchaser
to be joined as an additional party in any proceeding for such purpose. Each Purchaser has been represented by its own separate
legal counsel in its review and negotiation of the Transaction Documents. For reasons of administrative convenience only, each
Purchaser and its respective counsel have chosen to communicate with the Company through EGS. EGS does not represent any of the
Purchasers and only represents Aegis Capital Group LLC, the placement agent. The Company has elected to provide all Purchasers
with the same terms and Transaction Documents for the convenience of the Company and not because it was required or requested
to do so by any of the Purchasers. It is expressly understood and agreed that each provision contained in this Agreement and in
each other Transaction Document is between the Company and a Purchaser, solely, and not between the Company and the Purchasers
collectively and not between and among the Purchasers.

    	30

    	 

    

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

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

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

 

(Signature Pages Follow)

 

    	31

    	 

    

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

 

	
        dataram corporation

         

         
	Address for Notice:
	
        By: /s/ Mark Maddocks

              Name: Mark Maddocks

              Title: Vice President, Finance

         

        With a copy to (which shall not constitute notice):
	186
    Princeton-Heightstown Road

West Windsor, NJ 08550

Facsimile: (609) 936-1689
	
         

         

         

         
	 

 

 

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGE FOR PURCHASER FOLLOWS]

 

 

 

 

 

 

 

 

[COMPANY SIGNATURE PAGE TO SECURITIES PURCHASE
AGREEMENT]

 

 

    	 

    	 

    

[PURCHASER SIGNATURE PAGES TO dram
SECURITIES PURCHASE AGREEMENT]

 

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

Name of Purchaser: ________________________________________________________

 

Signature of Authorized Signatory of Purchaser:
_________________________________

 

Name of Authorized Signatory: _______________________________________________

 

Title of Authorized Signatory: ________________________________________________

 

Email Address of Authorized Signatory:________________________________________

 

Facsimile Number of Authorized Signatory: _____________________________________

 

Address for Notice to Purchaser:

 

 

 

Address for Delivery of Securities to Purchaser (if not same as
address for notice):

 

 

 

 

Subscription Amount: $_________________

 

Shares: _________________

 

Warrant Shares: __________________

 

EIN Number: _______________________

 

[o
Notwithstanding anything contained in this Agreement to the contrary, by checking this box (i) the obligations of the above-signed
to purchase the securities set forth in this Agreement to be purchased from the Company by the above-signed, and the obligations
of the Company to sell such securities to the above-signed, shall be unconditional and all conditions to Closing shall be disregarded,
(ii) the Closing shall occur on the third (3rd) Trading Day following the date of this Agreement and (iii) any condition
to Closing contemplated by this Agreement (but prior to being disregarded by clause (i) above) that required delivery by the Company
or the above-signed of any agreement, instrument, certificate or the like or purchase price (as applicable) shall no longer be
a condition and shall instead be an unconditional obligation of the Company or the above-signed (as applicable) to deliver such
agreement, instrument, certificate or the like or purchase price (as applicable) to such other party on the Closing Date.]

 

[SIGNATURE PAGES CONTINUE]investmentagreementfairmount.htm

  

1

  

 

 

 

CONVERTIBLE PREFERRED SECURITIES AGREEMENT

 

 

 

DATED AS OF MARCH 7, 2011

 

 

between

 

 

ECOLOGY COATINGS, INC.

 

 

and

 

 

FAIRMOUNT FIVE, LLC

  

2

  

 

CONVERTIBLE PREFERRED SECURITIES AGREEMENT (this “Agreement”), dated as of March 7, 2011, between Ecology Coatings, Inc., a corporation organized under the laws of the state of Nevada (the “Company”), and Fairmount Five, LLC, a limited liability company organized under the laws of the state of Michigan (the “Purchaser”).

 

RECITALS

 

WHEREAS, the Company desires to sell to the Purchaser, and the Purchaser desires to purchase from the Company, 2400 5% Cumulative Convertible Preferred Shares, Series C of the Company at a price per share of $1000 (the “Convertible Preferred Shares, Series C”).

 

NOW, THEREFORE, in consideration of the mutual promises herein made, and in consideration of the representations, warranties, and covenants herein contained, the Company and the Purchaser agree as follows:

 

All capitalized terms used and not otherwise defined in this Agreement shall have the definitions set forth on Annex I.

 

ARTICLE I

Sale of the Convertible Preferred Shares, Series C

 

Section 1.1 Authorization of Issuance and Sale and Delivery of the Convertible Preferred Shares, Series C. Subject to the terms and conditions hereof, including, but not limited to, the conditions precedent set forth in Section 1.2(2) and the satisfaction of the conditions set forth in Section 1.2(4), the Purchaser agrees to purchase and the Company agrees to sell and issue to the Purchaser, at separate unrelated Closings, up to 2400 5% Convertible Preferred Shares, Series C, at a price per share of $1,000, for a potential total investment of up to $2,400,000. The Convertible Preferred Shares, Series C shall be convertible into common shares at the Conversion Price.

 

Section 1.2 The Closing of the Sale of the Convertible Preferred Shares, Series C.

 

(1) The initial closing (the “Closing”) shall take place at Company’s offices at a time selected by the parties, at 8:00 p.m., New York time, on the date hereof, or such other time and date as the parties may agree upon (the date that the Closing occurs, the “Closing Date”). Thereafter, subject to the terms and conditions hereof including, but not limited to, the conditions precedent set forth in Section 1.2(2) and the satisfaction of the conditions set forth in Section 1.2(4), there shall be separate unrelated closings for additional investments when Company requests additional funds until the $2,400,000 investment limit is satisfied.

 

(2) Conditions Precedent to Closings. On or prior to the initial Closing, the following shall occur:

 

a. The shareholders of the Company shall have approved a 1 for 5 reverse stock split while retaining 90,000,000 authorized common shares;

 

b. The Company shall have settled or resolved no less than 90% of the Company’s outstanding debt obligations for an aggregate amount not to exceed $750,000; provided, however, that such debt obligations shall be deemed not to include (i) debts owed to Mitch Shaheen pursuant to a promissory note or notes, (ii) debts owed to Richard Stromback pursuant to a promissory note and a consulting agreement, and (iii) debts owed to Douglas and/or Deanna Stromback pursuant to a promissory note or notes;

 

c. The Company shall have extended the maturity date by 1 year of the $600,000 promissory note made by the Company in favor of John Salpietra (the “Salpietra Note”);

 

  

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d. The Company shall have entered into an agreement with Mr. Salpietra granting him the right to convert the Salpietra Note into the common stock of the Company at a purchase price of $0.06 per share;

 

e. The Company shall have delivered stock certificates representing 1,355 5% Convertible Preferred Shares, Series C to Flagstar Bank (the “Escrow Agent”) to be held in escrow until released pursuant to the terms hereof (2,400 certificates in total, less 1,045 certificates delivered at the initial closing); and

 

f. The Purchaser shall have deposited the sum of $1,355,000 in cash with the Escrow Agent.  Notwithstanding anything contained herein to the contrary, Purchaser has no obligation to make an additional investment under the terms of this Agreement unless the conditions set forth in Section 1.2(4) have been satisfied, each and every time a request for an additional investment is made in accordance with the terms of Section 1.2(4).

 

(3) At the initial Closing, Company shall tender a stock certificate representing 1,045 5% Convertible Preferred Shares, Series C representing amounts previously loaned to Company by Purchaser’s members.  The 1,045 certificates represent $1,045,000 provided at or prior to the initial closing ($100,000 Juliano note, $120,000 Salpietra note, $125,000 Salpietra wire for payment of creditor settlements, $125,000 Nirta wire for payment of creditor settlements, $100,000 Cipa wire for payment of creditor settlements and $475,000 Nirta wire for payment of creditor settlements).

 

(4) Subsequent Closings. Upon the satisfaction of the terms and conditions set forth in Sections 1.2(2) and (3), the Company may request an additional investment (an “Additional Tranche”) upon delivery to the Purchaser and the Escrow Agent of a request for investment disbursement (a “Request”) executed by a person previously authorized (in a writing delivered to the Purchaser) by the Company to execute such Request, which request shall satisfy or contain the following:

 

a. Each such Request shall set forth the necessary information, including, but not limited to, (i) the amount of the Additional Tranche (which must be in even increments of $1,000), (ii) the date on which such Additional Tranche shall be made, and (iii) the account to which the Additional Tranche funds shall be wired by the Escrow Agent;

 

b. On the proposed date of the Additional Tranche, after giving effect to the Request, the sum of (x) the aggregate principal amount of all investments made by the Purchaser up to and including such date plus (y) unconverted value of the stock certificate issued pursuant to Section 1.2(3) hereof, shall not exceed the maximum investment amount of $2,400,000;

 

c. Each Request shall include a certification by the Company, as of the date thereof, that

 

	
i.  

	
the Company has not been dissolved or liquidated (or any judgment, order or decree therefor shall have been entered); nor has a creditors’ committee been appointed for the Company; nor has the Company made a general assignment for the benefit of creditors or been adjudicated bankrupt (or such adjudication has been dismissed within thirty (30) days); nor has the Company filed a voluntary petition in bankruptcy, or for reorganization, or to effect a plan or arrangement with creditors, or failed to pay its debts generally as such debts become due in the ordinary course of business (except as contested in good faith and for which adequate reserves are made in such party’s financial statements); nor has the Company filed an answer to a creditor’s petition or other petition filed against it, admitting the material allegations thereof for an adjudication in bankruptcy or for reorganization; nor has the Company applied for or permitted the appointment of a receiver or trustee or custodian for any of its property or assets; nor has any receiver, trustee or custodian been appointed for any of its property or assets; nor has an order been entered approving any petition for reorganization of the Company which has not been reversed or dismissed within thirty (30) days; nor has the Company taken any action (corporate or other) authorizing or in furtherance of any of the actions described above in this subsection;

 

  

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ii.  

	
No judgment(s) for the payment of money remains unpaid, unvacated, unbonded or unstayed by appeal or otherwise for a period of fifteen (15) consecutive days, except as covered by adequate insurance with a reputable carrier as to which the relevant insurance company has acknowledged coverage, nor has any creditors’ exam been requested or scheduled by any person against the Company; and

 

	
iii.  

	
the representations and warranties contained in this Agreement are true and correct in all material respects and shall be true and correct in all material respects as of the making of such Additional Tranche (both before and after giving effect to such Additional Tranche); and

 

d. In the event the conditions set forth in Section 1.2(4)have been met to the satisfaction of Purchaser, in its sole and absolute discretion, the Purchaser shall deliver instructions to the Escrow Agent to disburse the Additional Tranche, and the Escrow Agent shall deliver to the Purchaser one share of 5% Convertible Preferred Shares, Series C stock for each $1,000 of the Additional Tranche.

 

(5) Termination by Purchaser. If the Company requests an Additional Tranche, and the Company does not or is unable to deliver to the Purchaser a Request that satisfies the conditions of Section 1.2(4), as determined by the Purchaser in its sole and absolute discretion, then Purchaser may deliver to the Escrow Agent, without any prejudice or penalty whatsoever, a written notice terminating this Agreement and any further obligation or commitment to fund any further Additional Tranches (the “Termination Notice”). Upon its receipt of the Termination Notice, the Escrow Agent shall immediately wire to the Purchaser any remaining funds deposited with the Escrow Agent pursuant to Section 1.2(2)(f) and return to the Company the remaining stock certificates placed into escrow pursuant to Section 1.2(2)(e), at which time all obligations and duties owed by any party hereto shall be terminated and of no further force and effect.

 

Section 1.3 Restrictive Legend.

 

The certificate representing each of the Convertible Preferred Shares, Series C shall be stamped or otherwise imprinted with a legend substantially in the following form (in addition to any legend required by applicable state securities Laws), upon issuance thereof, and until such time as the same is no longer required under the applicable requirements of the Securities Act:

 

THE 5% CUMULATIVE CONVERTIBLE PREFERRED SHARES, SERIES C REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS OR ANY OTHER APPLICABLE SECURITIES LAWS, AND ECOLOGY COATINGS, INC. (THE “COMPANY”) HAS NOT BEEN REGISTERED UNDER THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED (THE “INVESTMENT COMPANY ACT”). NEITHER SUCH 5% CUMULATIVE CONVERTIBLE PREFERRED SHARES, SERIES C NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE OFFERED, RESOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION.

 

  

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THE HOLDER, BY ITS ACCEPTANCE HEREOF, AGREES TO OFFER, RESELL OR OTHERWISE TRANSFER THE 5% CUMULATIVE CONVERTIBLE PREFERRED SHARES, SERIES C REPRESENTED HEREBY, UNLESS SUCH 5% CUMULATIVE CONVERTIBLE PREFERRED SHARES, SERIES C NO LONGER CONSTITUTE “RESTRICTED SECURITIES” WITHIN THE MEANING OF RULE 144 UNDER THE SECURITIES ACT, ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) TO ONE OR MORE PERSONS, EACH OF WHICH IS AN “ACCREDITED INVESTOR” (AS DEFINED IN RULE 501 UNDER THE SECURITIES ACT) THAT IS ACQUIRING SUCH 5% CUMULATIVE CONVERTIBLE PREFERRED SHARES, SERIES C FOR ITS OWN ACCOUNT FOR INVESTMENT AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT OR OTHER APPLICABLE SECURITIES LAWS OR (D) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, IN EACH CASE SUBJECT TO ANY REQUIREMENT OF LAW THAT THE DISPOSITION OF ITS PROPERTY OR THE PROPERTY OF SUCH ACCREDITED INVESTOR BE AT ALL TIMES WITHIN ITS OR THEIR CONTROL.

 

TO THE FULLEST EXTENT PERMITTED BY LAW, ANY TRANSFER IN VIOLATION OF THE FOREGOING WILL BE OF NO FORCE AND EFFECT, WILL BE VOID AB INITIO, AND WILL NOT OPERATE TO TRANSFER ANY RIGHTS TO THE TRANSFEREE, NOTWITHSTANDING ANY INSTRUCTION TO THE CONTRARY TO THE COMPANY, THE TRANSFER AGENT OR ANY INTERMEDIARY.

 

Furthermore, the Convertible Preferred Share certificate will contain a legend substantially to the following effect:

 

THE COMPANY WILL FURNISH TO ANY SHAREHOLDER ON REQUEST AND WITHOUT CHARGE A FULL STATEMENT OF (1) ANY RESTRICTIONS, LIMITATIONS, PREFERENCES OR REDEMPTION PROVISIONS CONCERNING THE 5% CUMULATIVE CONVERTIBLE PREFERRED SHARES, SERIES C AND (2) THE DESIGNATIONS AND ANY PREFERENCES, CONVERSION AND OTHER RIGHTS, VOTING POWERS, RESTRICTIONS, LIMITATIONS AS TO DISTRIBUTIONS, AND OTHER QUALIFICATIONS AND TERMS AND CONDITIONS OF REDEMPTION OF THE 5% CUMULATIVE CONVERTIBLE PREFERRED SHARES, SERIES C, THE DIFFERENCES IN THE RELATIVE RIGHTS AND PREFERENCES BETWEEN THE SHARES OF EACH SERIES OF SUCH CLASS TO THE EXTENT THEY HAVE BEEN SET, AND THE AUTHORITY OF THE BOARD OF DIRECTORS OF THE COMPANY TO SET THE RELATIVE RIGHTS AND PREFERENCES OF SUBSEQUENT SERIES OF 5% CUMULATIVE CONVERTIBLE PREFERRED SHARES, SERIES C. 5% CUMULATIVE CONVERTIBLE PREFERRED SHARES, SERIES C WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN WHOLE SHARES.

 

ARTICLE II

Representations and Warranties of the Company

 

As a material inducement to the Purchaser to enter into and perform its obligations under this Agreement, the Company hereby represents and warrants to the Purchaser as follows:

 

Section 2.1 Due Creation, Good Standing and Due Qualification. The Company has been duly created and is validly existing corporation in good standing under the laws of the state of Nevada, and pursuant to the resolutions of the Board (or a duly authorized committee thereof) has full power and authority to own, lease and operate its properties and conduct its business as presently being conducted and to enter into and perform its obligations under, or as contemplated under, this Agreement; and the Company is duly qualified to transact business as a foreign entity and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure so to qualify or to be in good standing would not result in a material adverse change in the business, Assets, liabilities, operations, condition (financial or otherwise) or operating results of the Company and its Subsidiaries (as defined herein), taken as a whole (a “Material Adverse Effect”).

  

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Section 2.2 Authorization; Enforceability; Corporate and Other Proceedings. 

 

(1) The Company has all requisite power and authority to execute and deliver each Document to which it is a party and to perform its obligations under each such Document. Each Document to which the Company is a party has been duly authorized by all necessary action on the part of the Company, and each Document to which the Company is a party has been duly executed and delivered by the Company, and, assuming the due authorization, execution and delivery by the other parties thereto, constitutes the valid and legally binding obligation of the Company, enforceable in accordance with its terms and conditions, except that the enforcement thereof may be subject to (i) bankruptcy, insolvency, reorganization, receivership, moratorium, fraudulent conveyance or other similar laws now or hereafter in effect relating to creditors’ rights generally and (ii) general principles of equity (whether applied by a court of law or equity) and the discretion of the court before which any proceeding therefor may be brought.

 

(2) The authorization, issuance, sale and delivery of the Convertible Preferred Shares, Series C have been duly authorized by all requisite action of the Board. Notwithstanding anything contained on the schedules attached hereto, the Convertible Preferred Shares, Series C being issued as of the Closing Date, if and when issued, will be duly and validly issued and outstanding, fully paid and nonassessable interests in the Company, with no personal liability attaching to the ownership thereof, free and clear of any Liens and will not be subject to preemptive rights or other similar rights of any security holder of the Company. The underlying Common Shares issuable upon conversion of the Convertible Preferred Shares, Series C have been duly authorized by all requisite action of the Board and, when issued upon such conversion and delivered against surrender of the Convertible Preferred Shares, Series C, will be duly and validly issued, fully paid and nonassessable interests in the Company and will not be subject to any preemptive right, resale right, right of first refusal or other similar rights of any security holder of the Company.

 

Section 2.3. Non Contravention. Notwithstanding anything contained on the schedules attached hereto, the execution, delivery and performance by the Company of the Documents, the consummation of the transactions contemplated hereby and thereby and compliance with the provisions hereof and thereof, including the issuance, sale and delivery of the Convertible Preferred Shares, Series C have not, do not and shall not (whether with or without the giving of notice or passage of time or both), (a) violate any Law to which the Company or any of its Subsidiaries is subject, (b) violate any provision of the Fundamental Documents of the Company or the Fundamental Documents of the Company’s Subsidiaries, (c) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, require the repurchase, redemption or repayment of, terminate, modify or cancel, or require any notice under any material contract to which the Company or any of its Subsidiaries is a party, or (d) result in the imposition of any Lien upon any of the Assets of the Company or any of its Subsidiaries.

 

Section 2.4 Absence of Defaults. Except as disclosed in SEC filings, and except for the judgment granted in NY and held by Investment Hunter, LLC (Gary Evans), the Company is not in violation of its respective Fundamental Documents and neither the Company nor any of its Subsidiaries are in default in the performance or observance of any obligation, agreement, covenant or condition contained in any contract, indenture, mortgage, deed of trust, loan or credit agreement, note, lease or other agreement or instrument to which the Company or any of its Subsidiaries is a party or by which any of them may be bound or to which any of the property or assets of the Company or any of its Subsidiaries is subject, except for such violations or defaults that would not result in a Material Adverse Effect.

 

  

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Section 2.5 Capitalization of the Company. All of the issued and outstanding beneficial interests in the Company have been duly and validly authorized and issued and are fully paid and nonassessable interests in the Company, have been issued in compliance with all federal and state securities laws and were not issued in violation of any preemptive right, resale right, right of first refusal or other similar right.

 

Section 2.6 Offering Exemption. Based upon and assuming the accuracy of the representations of the Purchaser in Article VI, the offering, sale and issuance of the Convertible Preferred Shares, Series C do not require registration under the Securities Act or applicable state securities and “blue sky” Laws. The Company has made or shall make all requisite filings and has taken or will take all action necessary to be taken to comply with such federal and state securities or “blue sky” Laws.

 

Section 2.7 SEC Reports. The Company’s Annual Report on Form 10-K most recently filed with the SEC (the “Annual Report”) and (ii) each subsequent report filed with the SEC pursuant to the Exchange Act (together with the Annual Report, the “SEC Reports”), as of their respective dates, did not include any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. Such documents, when they were filed with the SEC, conformed in all material respects to the requirements of the Exchange Act and the rules and regulations of the SEC thereunder. Since the date of the filing of the Annual Report with the SEC, the Company has made all filings with the SEC required to be made by the Company under the Exchange Act.

 

Section 2.8 Financial Statements. The consolidated financial statements of the Company contained in the SEC Reports (the “Financial Statements”) complied as to form in all material respects with the published rules and regulations of the SEC with respect thereto, were prepared in accordance with GAAP applied on a consistent basis during the periods involved and fairly present, in all material respects, in conformity with GAAP, the consolidated financial position of the Company and its consolidated Subsidiaries as of the dates thereof and their consolidated results of operations and changes in financial position for the periods then ended (except, in each case, as may be indicated in the notes thereto and subject, in each case, to normal year-end adjustments in the case of any unaudited interim financial statements).

 

Section 2.9 No Material Adverse Change. Since September 30, 2010 (the date of the most recent financial statements of the Company filed with the SEC), except as otherwise stated therein or in the SEC Reports, there has not been (i) any change resulting in a Material Adverse Effect, (ii) any transaction which is material to the Company or its Subsidiaries, except transactions in the ordinary course of business, (iii) any obligation, direct or contingent, which is material to the Company and its Subsidiaries taken as a whole, incurred by the Company or its Subsidiaries, except obligations incurred in the, ordinary course of business, (iv) any change in the beneficial interests in or outstanding indebtedness of the Company or its Subsidiaries, except changes in the ordinary course of business or (v) except for dividends issued in lieu of cash to holders of the Company’s preferred shares, there has been no dividend or distribution of any kind declared, paid or made on the beneficial interests in the Company or its Subsidiaries. Neither the Company or its Subsidiaries has any material contingent obligation which is not disclosed in this Agreement or the SEC Reports.

 

Section 2.10 No Consent or Approval Required. No consent, approval or authorization of, or declaration to or filing with, any Person, including pursuant to the Hart Scott Rodino Antitrust Improvements Act of 1976, as amended, is required by the Company for the valid authorization, execution and delivery by the Company of any Document or for its consummation of the transactions contemplated thereby or for the valid authorization, issuance and delivery of the Convertible Preferred Shares, Series C, other than those consents, approvals, authorizations, declarations or filings which have been obtained or made, as the case may be, and such as may be required under state securities or “blue sky” laws in connection with the purchase and resale of the Convertible Preferred Shares, Series C.

 

Section 2.11 Absence of Proceedings. Except as disclosed in the SEC Reports, there is no Proceeding now pending, or, to the knowledge of the Company, threatened, against or affecting the Company or any of its Subsidiaries which, singly or in the aggregate, would result in a Material Adverse Effect, or which might reasonably be expected to materially and adversely affect the consummation of the transactions contemplated herein or the performance by the Company of its obligations hereunder.

 

  

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Section 2.12 Possession of Licenses and Permits. The Company and its Subsidiaries possess such permits, licenses, approvals, consents and other authorizations (collectively, “Governmental Licenses”) issued by the appropriate federal, state, local or foreign, regulatory agencies or bodies necessary to conduct the businesses now operated by them; the Company and its Subsidiaries are in compliance with the terms and conditions of all such Governmental Licenses, except where the failure so to comply would not, singly or in the aggregate, result in a Material Adverse Effect; all of the Governmental Licenses are valid and in full force and effect, except where the invalidity of Governmental Licenses or the failure of such Governmental Licenses to be in full force and effect would not, singly or in the aggregate, result in a Material Adverse Effect; and neither the Company nor any of its Subsidiaries has received any notice of proceedings relating to the revocation or modification of any Governmental Licenses which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would result in a Material Adverse Effect.

 

Section 2.13 Title to Property. The Company and its Subsidiaries do not own any real property; the Company and its Subsidiaries have good and marketable title to the investments described in the SEC Reports, in each case, free and clear of all Liens of any kind except such as (i) are described in the SEC Reports, including the secured loans from John M. Salpietra and from James Juliano, or (ii) do not, singly or in the aggregate, materially affect the value of any such investments; and neither the Company nor any of its Subsidiaries has any notice of any material claim of any sort that has been asserted by anyone adverse to the rights of the Company or any of its Subsidiaries under any of such investments, or affecting or questioning the rights of the Company or any Subsidiary thereof to the continued possession of the investments.

 

Section 2.14 Investment Company Act. The Company is not, and upon the issuance and sale of the Convertible Preferred Shares, Series C as herein contemplated and the application of the net proceeds therefrom will not be, an “investment company” or an entity “controlled” by an “investment company”, as such terms are defined in the Investment Company Act of 1940, as amended.

 

 

Section 2.15 Limitation of Personal Liability. The holders of the Convertible Preferred Shares, Series C will be entitled to the same limitation of personal liability as that extended to stockholders of private corporations for profit organized under the General Corporation Law of the State of Nevada; provided, however, that pursuant to the terms of this Agreement, the Purchaser will indemnify the Company against any liability resulting from any inaccuracy in or breach of any such investor’s representations and warranties in accordance with the terms hereof; and provided.

 

Section 2.16 Similar Offerings. None of the Company, its Affiliates, or any Person acting on its or any of their behalf (in each case other than the Purchaser, as to which the Company makes no representation), has, directly or indirectly, solicited any offer to buy, sold or offered to sell or otherwise negotiated in respect of, or will solicit any offer to buy, sell or offer to sell or otherwise negotiate in respect of, in the United States or to any United States citizen or resident, any security which is or would be integrated with the sale of the Convertible Preferred Shares, Series C in a manner that would require the Convertible Preferred Shares, Series C to be registered under the Securities Act.

 

Section 2.17 No General Solicitation. None of the Company, its Affiliates or any person acting on its or any of their behalf (in each case other than the Purchaser, as to whom the Company makes no representation) has engaged or will engage, in connection with the offering of the Convertible Preferred Shares, Series C, in any form of general solicitation or general advertising within the meaning of Rule 502(c) under the Securities Act.

 

  

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Section 2.18 Maintenance of Controls and Procedures. The Company has established and maintains “disclosure controls and procedures” (as such term is defined in Rules 13a-15 and 15d-15 under the Exchange Act) that (A) are designed to ensure that material information relating to the Company , including its Subsidiaries, is made known to the Company ’s Chief Executive Officer and its Chief Financial Officer by others within those entities, particularly during the periods in which the filings made by the Company with the SEC which it may make under Section 13(a), 13(c), 14 or 15(d) of the Exchange Act are being prepared and (B) have been evaluated for effectiveness as of the end of the Company ’s most recent quarterly report on Form 10-Q filed with the SEC. The Company’s accountants and the audit committee of the Board have been advised of (x) any significant deficiencies in the design or operation of internal controls that could adversely affect the Company’s ability to record, process, summarize, and report financial data and (y) any fraud, whether or not material, that involves management or other employees who have a role in the Company’s internal controls.

 

 

Section 2.19 Brokers or Finders. The Company has not retained any investment banker, broker or finder in connection with this Agreement or the transactions contemplated hereby (including the sale of the Convertible Preferred Shares, Series C) or incurred any liability for any brokerage or finders’ fees, agent commissions or any similar charges in connection with this Agreement or the transactions contemplated hereby.

 

ARTICLE III

Representations and Warranties of the Purchaser

 

As a material inducement to the Company to enter into and perform its obligations under this Agreement, the Purchaser represents, warrants and covenants to the Company as follows:

 

Section 3.1 Experience. The Purchaser is an “accredited investor” within the meaning of Regulation D promulgated under the Securities Act and, by virtue of its experience in evaluating and investing in private placement transactions of securities in companies similar to the Company, the Purchaser is capable of evaluating the merits and risks of its investment in the Company and has the capacity to protect its own interests. The Purchaser has had access to the Company’s senior management and has had the opportunity to conduct such due diligence review as it has deemed appropriate.

 

Section 3.2 Investment. The Purchaser is not making this investment with the view to, or for resale in connection with, any distribution of any part thereof in violation of, or in a manner that would require registration of the Convertible Preferred Shares, Series C being purchased hereby under, the Securities Act. The Purchaser understands that the Convertible Preferred Shares, Series C have not been registered under the Securities Act or applicable state securities or “blue sky” Laws by reason of a specific exemption from the registration provisions of the Securities Act and applicable state securities or “blue sky” Laws, the availability of which depends upon, among other things, the bona fide nature of the investment intent and the accuracy of the Purchaser’s representations as expressed herein and the Purchaser will not take any actions that would have caused the Convertible Preferred Shares, Series C being purchased hereby to be registered under the Securities Act. Notwithstanding the foregoing, the use of the proceeds thereof shall not be deemed to be a violation of this representation, warranty and covenant.

 

Section 3.3 Transfer Restrictions. The Purchaser acknowledges and understands that it must bear the economic risk of this investment for an indefinite period of time because the Convertible Preferred Shares, Series C must be held indefinitely unless subsequently registered under the Securities Act and applicable state securities or “blue sky” Laws or unless an exemption from such registration is available. The Purchaser understands that any transfer agent of the Company will be issued stop transfer instructions with respect to the Convertible Preferred Shares, Series C unless any transfer thereof is subsequently registered under the Securities Act and applicable state securities or “blue sky” Laws or unless an exemption from such registration is available.

 

Section 3.4 Brokers or Finders. The Purchaser has not retained any investment banker, broker or finder in connection with this Agreement or the transactions contemplated hereby (including the sale of the Convertible Preferred Shares, Series C) or incurred any liability for any brokerage or finders’ fees, agent commissions or any similar charges in connection with this Agreement or the transactions contemplated hereby.

 

  

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Section 3.5 Organization; Good Standing; Qualification and Power. The Purchaser has all requisite power to carry on his business as presently being conducted and is qualified to do business in Michigan.

 

Section 3.6 Authorization; Enforceability; Corporate and Other Proceedings. The Purchaser has all requisite power and authority to execute and deliver each Document to which it is a party and to perform its obligations under each such Document. Each Document to which the Purchaser is a party has been duly authorized by all necessary action on the part of the Purchaser, and each Document to which the Purchaser is a party has been duly executed and delivered by the Purchaser, and assuming the due authorization, execution and delivery by the other parties thereto constitutes the valid and legally binding obligation of the Purchaser, enforceable in accordance with its terms and conditions, except that the enforcement thereof may be subject to (i) bankruptcy, insolvency, reorganization, receivership, moratorium, fraudulent conveyance or other similar laws now or hereafter in effect relating to creditors’ rights generally and (ii) general principles of equity (whether applied by a court of law or equity) and the discretion of the court before which any proceeding therefor may be brought.

 

Section 3.7 Non-Contravention. The execution, delivery and performance by the Purchaser of the Documents, the consummation of the transactions contemplated thereby and compliance with the provisions thereof, including the purchase of the Convertible Preferred Shares, Series C have not, do not and shall not, (a) violate any Law to which the Purchaser or any of its subsidiaries is subject, (b) violate any provision of the Fundamental Documents of the Purchaser or any of its subsidiaries, (c) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, require the repurchase of, terminate, modify or cancel, or require any notice under any material contract to which the Purchaser or any of its subsidiaries is a party or (d) result in the imposition of any Lien upon any of the Assets of the Purchaser or any of its subsidiaries, except in the case of (a), (c) and (d), as would not have a Purchaser Material Adverse Effect.

 

Section 3.8 No Consent or Approval Required. No consent, approval or authorization of, or declaration to or filing with, any Person is required by the Purchaser for the valid authorization, execution and delivery by the Purchaser of any Document or for its consummation of the transactions contemplated thereby or for the purchase of the Convertible Preferred Shares, Series C, other than those consents, approvals, authorizations, declarations or filings which have been obtained or made, as the case may be, and such as may be required under state securities or “blue sky” laws in connection with the purchase and resale of the Convertible Preferred Shares, Series C.

 

Section 3.9 Similar Offerings. None of the Purchaser, its Affiliates or any Person acting on its or any of their behalf (in each case other than the Company( as to which the Purchaser makes no representation), has, directly or indirectly, solicited any offer to buy, sold or offered to sell or otherwise negotiated in respect of, or will solicit any offer to buy, sell or offer to sell or otherwise negotiate in respect of, in the United States or to any United States citizen or resident, any security which is or would be integrated with the sale of the Convertible Preferred Shares, Series C in a manner that would require the Convertible Preferred Shares, Series C to be registered under the Securities Act.

 

Section 3.10 No General Solicitation. None of the Purchaser, its Affiliates or any person acting on its or any of their behalf (in each case other than the Company, as to whom the Purchaser makes no representation) has engaged or will engage, in connection with the offering of the Convertible Preferred Shares, Series C, in any form of general solicitation or general advertising within the meaning of Rule 502(c) under the Securities Act.

 

 

ARTICLE IV

Covenants

 

Section 4.1 Governance Rights.

 

(1) For a period of three years, the Company shall, acting through the Board, consistent with and subject to its duties under Nevada law, take all actions necessary allow the Purchaser to nominate individuals (the “Designees”) to hold two seats on behalf of the Purchaser on the Company’s Board of Directors.

 

 

  

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(2) In the event that a Designee ceases to serve as a Board member of the Company due to incapacity or removal, the Purchaser may submit written notice to the Board designating an individual to replace him during Purchaser’s term. The Board shall, consistent with and subject to their duties under Nevada law, promptly recommend that the Board appoint such replacement designee as a Board member of the Company to fill any vacancy resulting from the death, resignation or removal of a Designee.

 

Section 4.2 Dividends. Dividends will be cumulative and will accrue daily from the date of Closing of this offering at the annual rate of 5% of the stated value of the Convertible Preferred Shares, Series C, payable semi-annually on each June 1 and December 1, commencing June 1, 2011. The initial stated value of the preferred stock is $1,000 per share. Any dividends must be declared by the Company’s Board of Directors and must come from funds that are legally available for dividend payments. In the event that funds are not legally available to pay any dividend on the convertible preferred stock, or if the Company chooses to not pay the dividend in cash, the amount of the stated value of the stock shall be increased by the amount of such unpaid dividend. Dividends on the Convertible Preferred Shares, Series C will accrue regardless of whether or not earned or declared and regardless of whether or not the Company has profits, surplus or other funds legally available for the payment of dividends. Except as stated in this Agreement, Company shall not issue or declare any dividends with respect to any class of its respective capital stock or purchase, acquire, or redeem any such stock, without the prior written consent of Purchaser.

Section 4.3                      Conversion. The Convertible Preferred Shares, Series C can be converted at the Purchaser’s option at any time into shares of the Company’s common stock at the Conversion Price of $.06 per share. The number of common shares will be determined by dividing the amount of the investment in the Convertible Preferred Shares, Series C to be converted by the Conversion Price. On or after May 15, 2012, the Company may require the Purchaser to convert up to 100% of its shares of convertible preferred stock if the volume weighted average price of the Company’s common stock price exceeds $2.00 per share for a continuous 30-day period.

Section 4.4                      Liquidation Preference. In the event of a voluntary or involuntary dissolution, liquidation or winding up of the Company, the Purchaser will be entitled to be paid a liquidation preference equal to the stated value of the Convertible Preferred Shares, Series C, plus accrued and unpaid dividends and any other payments that may be due on such shares, before any distribution of assets may be made to holders of capital stock ranking junior to the Convertible Preferred Shares, Series C.

Section 4.5                      Optional Redemption. On or after May 15, 2014 the Company may redeem the Convertible Preferred Shares, Series C, in whole or in part, at its option for the stated value at the time of such redemption, together with accrued but unpaid dividends and other payments that may be due on such shares. On or after May 15, 2016 the Purchaser may redeem the Convertible Preferred Shares, Series C, in whole or in part, at its option for the stated value at the time of such redemption, together with accrued but unpaid dividends and other payments that may be due on such shares.

Section 4.6                      Voting Rights. The Convertible Preferred Shares, Series C will vote on an as-converted basis with the common stock. However, the Company cannot alter or adversely change the rights of the convertible preferred stock, authorize or create any class of senior or parity preferred stock, amend its articles of incorporation or other charter documents in such a way that it would adversely affect the rights of the convertible preferred stock, or increase the number of authorized shares of the convertible preferred stock without the approval of holders of a majority of the convertible preferred stock.

Section 4.7 Distributions Upon Redemption. Upon redemption of the Purchaser’s Convertible Preferred Shares, Series C, the Company hereby confirms that the Purchaser shall be entitled to accrued and unpaid distributions at an annual rate of 5% (computed on the basis of a 360-day year consisting of twelve 30-day months as provided in the Certificate of Designation) from the issue date thereof to, but excluding, the redemption date, whether or not declared by the Board, as set forth in the Certificate of Designation.

  

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Section 4.8 Registration Rights.

If Purchaser has converted its Convertible Preferred Shares, Series C to common stock of the Company and such shares have not been otherwise registered within the first six (6) months of this Agreement and at any time the Company proposes to file a registration statement with the SEC, whether or not for sale for the Company’s own account, on a form and in a manner that would also permit registration of shares (other than in connection with a registration statement on Forms S-4 or S-8 or any similar or successor form), Company shall give to Purchaser, written notice of such proposed filing promptly, but in any case at least twenty (20) days before the anticipated filing. The notice referred to in the preceding sentence shall offer the holder(s) holding the Conversion Shares the opportunity to register such amount of the Conversion Shares as he may request (a “Piggyback Registration”). Subject to this Section, Company will include in each such Piggyback Registration (and any related qualification under state blue sky laws and other compliance filings, and in any underwriting involved therein) that portion of the Conversion Shares with respect to which Company has received written requests for inclusion therein within twenty (20) days after the written notice from Company is given. The holders holding any portion of the Conversion Shares will be permitted to withdraw all or part of the Conversion Shares from a Piggyback Registration at any time prior to the effective date of such Piggyback Registration.

Section 4.9 Non-Disclosure. Purchaser agrees to treat all material, non-public information received from Company as confidential information and not disclose such information to any third party. Purchaser agrees that it will not trade in Company’s stock based on any material, non-public information.

ARTICLE V

Indemnification

 

Section 5.1 Indemnification Generally. The Company shall indemnify the Purchaser and its Affiliates, and their respective directors, officers, shareholders and other equity holders, partners, members, attorneys, accountants, agents, advisors, representatives and employees and, as applicable, their respective heirs, successors and permitted assigns (each of the foregoing, in such capacity (as applicable), a “Purchaser Indemnified Party”) from and against any and all losses, damages, liabilities, fines, costs, claims, charges, actions, proceedings, demands, judgments, settlement costs and expenses of any nature whatsoever (including, without limitation, reasonable attorneys’ fees and out-of-pocket expenses), whether joint or several (any of the foregoing, a “Loss”) resulting from any breach of a representation, warranty or covenant by the Company. The Purchaser shall indemnify the Company and its Affiliates, and their respective directors, trustees, officers, shareholders and other equity holders, partners, members, attorneys, accountants, agents, advisors, representatives and employees and, as applicable, their respective heirs, successors and permitted assigns (each of the foregoing, in such capacity (as applicable), a “Company Indemnified Party”; each Company Indemnified Party and Purchaser Indemnified Party, (an “Indemnified Party”) from and against any and all Losses resulting from any breach of a representation, warranty or covenant by the Purchaser.

 

 

  

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Section 5.2 Indemnification Procedures For Third-Party Claims. If a claim by a third party (including claims for breaches of fiduciary duties) is made against an Indemnified Party and such Indemnified Party intends to seek indemnity with respect thereto from the Company (in the case of a Purchaser Indemnified Party seeking such indemnity) or the Purchaser (in the case of a Company Indemnified Party seeking indemnity) (each of the Company or the Purchaser, as the case may be, in such capacity, an “Indemnifying Party”), such Indemnified Party shall give notice in writing as promptly as reasonably practicable to such Indemnifying Party of any Proceeding commenced against or by it in respect of which indemnity may be sought hereunder, but failure to so notify such Indemnifying Party shall not relieve such Indemnifying Party from any liability that it may have on account of this Article V, so long as such failure shall not have materially prejudiced the position of such Indemnifying Party. Upon such notification, the Indemnifying Party shall assume the defense of such Proceeding brought by a third party, and, after such assumption, the Indemnified Party shall not be entitled to reimbursement of any expenses thereafter incurred by it in connection with such Proceeding, except as described below. In any such Proceeding, any Indemnified Party shall have the right to retain its own counsel (including local counsel), but the fees and expenses of such counsel shall be at the expense of such Indemnified Party unless (i) the Indemnifying Party shall have failed to promptly assume and thereafter conduct such defense, (ii) the Indemnifying Party and the Indemnified Party shall have mutually agreed to the contrary, (iii) in the reasonable determination of counsel for the Indemnified Party, representation of such Indemnified Party by counsel obtained by the Indemnifying Party would be inappropriate due to actual or potential conflicting interests between such Indemnified Party and any other party represented by such counsel in such proceeding. No Indemnifying Party, in the defense of a third-party claim, shall, except with the consent of the Indemnified Party, consent to entry of any judgment or enter into any settlement that does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect of such claim. The Indemnifying Party shall not be liable for any settlement of any Proceeding effected without its written consent (which shall not be unreasonably withheld, delayed or conditioned by such Indemnifying Party), but if settled with such consent or if there be final judgment for the plaintiff, the Indemnifying Party shall indemnify the Indemnified Party from and against any Loss by reason of such settlement or judgment. The Indemnifying Party will advance expenses to an Indemnified Party as reasonably incurred so long as such indemnified party shall have provided the indemnifying party with a written undertaking to reimburse the indemnifying party for all amounts so advanced if it is ultimately determined that the indemnified party is not entitled to indemnification hereunder (which shall include breaches of fiduciary duty if permitted above).

 

Section 5.3 Survival of Representations, Warranties and Covenants. All representations and warranties and covenants contained in this Agreement or made in writing by or on behalf of the Company or the Purchaser in connection with the transactions contemplated by this Agreement shall survive, for the duration of any statutes of limitation applicable thereto, the execution and delivery of this Agreement, any investigation at any time made by the Company, the Purchaser or on such party’s behalf, the purchase of the Convertible Preferred Shares, Series C by the Purchaser under this Agreement and any disposition of or payment on the Convertible Preferred Shares, Series C. All statements contained in any certificate or other instrument delivered to the Purchaser or the Company by or on behalf of the Company or the Purchaser pursuant to this Agreement shall be deemed representations and warranties of the Company or the Purchaser, respectively, under this Agreement.

 

ARTICLE VI

Miscellaneous

 

Section 6.1 Expenses and Taxes.

 

(1) Each party to this Agreement shall bear its own respective costs and expenses incurred in connection with the preparation, execution and delivery of this Agreement and the agreements and transactions contemplated hereby, except that the Company shall reimburse the Purchaser for its reasonable legal fees and disbursements incurred in connection with the negotiation and documentation of the purchase of the Convertible Preferred Shares, Series C.

 

(2) All transfer, stamp (including documentary stamp taxes, if any), and other similar taxes (including, in each case, any penalties, interest or additions thereto) with respect to the initial purchase and sale of the Convertible Preferred Shares, Series C, shall be borne by the Company.

 

Section 6.2 Further Assurances. Purchaser and the Company shall duly execute and deliver, or cause to be duly executed and delivered, at its own cost and expense, such further instruments and documents and to take all such action, in each case as may be necessary or proper in the reasonable judgment of each Company or the Purchaser, respectively, upon the reasonable advice of counsel, to carry out the provisions and purposes of this Agreement and the other Documents.

 

Section 6.3 Securities Law Disclosure; Public Announcement. The Company shall issue a current report on Form 8-K within the time periods required thereby disclosing the material terms of the transactions contemplated hereby and attaching this Agreement as an exhibit thereto. Except as set forth below, no public release or announcement concerning the transactions contemplated hereby shall be issued by the Company or any of its Subsidiaries without the prior consent of the Purchaser (which consents shall not be unreasonably withheld), except as such release or announcement may be required by law or the applicable rules or regulations of any securities exchange or securities market, in which case the Company shall allow the Purchaser to the extent reasonably practicable under the circumstances, reasonable time to comment on such release or announcement in advance of such issuance.

 

  

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Section 6.4 No Third-Party Beneficiaries. Except as expressly provided herein, this Agreement shall not and is not intended to confer any rights or remedies upon any Person other than the Company and the Purchaser and their respective successors and permitted assigns.

 

Section 6.5 Entire Agreement. This Agreement and the other Documents constitute the entire agreement among the parties hereto and supersede any prior understandings, agreements or representations by or among such parties, written or oral, that may have related in any way to the subject matter of any Document.

 

Section 6.6 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. The Company may not assign either this Agreement or any of its rights, interests, or obligations hereunder without the prior written approval of the Purchaser. The rights and obligations of the Purchaser hereunder shall be binding upon and inure to the benefit of any and all Persons to whom the Purchaser transfers any Convertible Preferred Shares, Series C in each case with the same force and effect as if the foregoing Persons were named herein as Purchaser parties hereto; provided, that any such transferee of the Convertible Preferred Shares, Series C has executed and delivered to the Company an Instrument of Accession in the form of Exhibit E. References herein to Convertible Preferred Shares, Series C sold by the Company and purchased by the Purchaser shall be deemed to include Convertible Preferred Shares, Series C held or owned by any transferees of the Purchaser, and references to the Purchaser herein (including, without limitation, such references contained in Article V) shall be deemed to include such transferees. Notwithstanding the foregoing, the Purchaser may not transfer or assign any of its rights or obligations hereunder or the Convertible Preferred Shares, Series C in violation of the provisions of the Certificate of Designation (including the restrictive legends contained therein) or in violation of the Securities Act or any other manner that would have resulted in a requirement to register the Convertible Preferred Shares, Series C purchased on the date hereof. Purchaser may assign, transfer or delegate its obligations and rights under this Agreement to any affiliate.

 

Section 6.7 Counterparts. This Agreement may be executed in one or more counterparts (including via facsimile or similar instantaneous electronic transmission devices pursuant to which the signature of or on behalf of such party can be seen), each of which shall be deemed an original but all of which together shall constitute one and the same instrument.

 

Section 6.8 Notices. All notices, requests, demands, claims and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered personally, telecopied, sent by internationally-recognized overnight courier or mailed by registered or certified mail (return receipt requested), postage prepaid, to the parties at the following addresses (or at such other address for a party as shall be specified by like notice):

 

If to the Company, to:

 

Ecology Coatings, Inc.

24663 Mound Road

Warren, MI 48091

Telephone: (586) 486-5308

Telecopy: (586) 486-5283

Attention: General Counsel

 

  

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If to the Purchaser, to:

 

Fairmount Five, LLC

24663 Mound Road

Warren, MI 48091

Telephone: (586) 759-4000

 

All such notices and other communications shall be deemed to have been given and received (i) in the case of personal delivery, on the date of such delivery, (ii) in the case of delivery by telecopy, on the date of such delivery, (iii) in the case of delivery by internationally-recognized overnight courier, on the third Business Day following dispatch and (iv) in the case of mailing, on the seventh Business Day following such mailing.

 

Section 6.9 Governing Law. This agreement shall be governed by and construed in accordance with the internal laws of the state of Michigan, without regard to the principles of conflicts of laws thereof.

 

Section 6.10 Submission to Jurisdiction. Except as otherwise set forth in this Section 6.10, no claim under this Agreement by a party against the other party may be commenced, prosecuted or continued in any court other than the courts of the State of Michigan located in Pontiac, Michigan in Oakland County or in the United States District Court for the Southern District of Michigan located in the City of Detroit, Michigan, which courts shall have exclusive jurisdiction over the adjudication of such matters, and the parties hereto consent to personal jurisdiction, service and venue in any court in which any claim arising out of or in any way relating to this Agreement is brought by any third party against the Company or any Indemnified Party. The parties hereto agree that a final judgment in any such action, proceeding or counterclaim brought in any such court shall be conclusive and binding upon the parties and may be enforced in any other courts in the jurisdiction of which the parties is or may be subject, by suit upon such judgment.

 

Section 6.11 Specific Performance. The parties hereto acknowledge that there would be no adequate remedy at law if any party fails to perform any of its obligations hereunder, and accordingly agree that each party, in addition to any other remedy to which it may be entitled at law or in equity, shall be entitled to compel specific performance of the obligations of any other party under this Agreement in accordance with the terms and conditions of this Agreement and immediate injunctive relief, without the necessity of proving the inadequacy of money damages as a remedy, in any court of the United States or any State thereof having jurisdiction.

 

Section 6.12 Amendments and Waivers. No amendment of any provision of this Agreement shall be valid unless the same shall be in writing and signed by both parties hereto. No waiver by any party of any default, misrepresentation, or breach of representation, warranty or covenant hereunder, whether intentional or not, shall be deemed to extend to any prior or subsequent default, misrepresentation, or breach of representation, warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent such occurrence. No such waiver shall be effective unless signed by the party against which the waiver is to be effective.

 

Section 6.13 Incorporation of Schedules and Exhibits. The Annex, Schedules and Exhibits identified in this Agreement are incorporated herein by reference and made a part hereof.

 

Section 6.14 Construction. Where specific language is used to clarify by example a general statement contained herein, such specific language shall not be deemed to modify, limit or restrict in any manner the construction of the general statement to which it relates. The use in this Agreement of the term “including” means “including, without limitation.” The language used in this Agreement shall be deemed to be the language chosen by the parties to express their mutual intent, and no rule of strict construction shall be applied against any party.

 

Section 6.15 Interpretation. Unless otherwise indicated, references to “$” are references to the U.S. dollar. Accounting terms used but not otherwise defined herein shall have the meanings given to them under GAAP. As used in this Agreement (including all Annexes, Schedules, Exhibits and amendments hereto), the masculine, feminine and neuter gender and the singular or plural number shall be deemed to include the others whenever the context so requires. References to Articles and Sections refer to articles and sections of this Agreement. Similarly, references to Annexes, Schedules and Exhibits refer to schedules and exhibits, respectively, attached to this Agreement. Unless the content requires otherwise, words such as “hereby,” “herein,” “hereinafter,” “hereof,” “hereto,” “hereunder” and words of like import refer to this Agreement. The article and section headings contained in this Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Agreement.

 

  

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Section 6.16 Severability. It is the desire and intent of the parties that the provisions of this Agreement be enforced to the fullest extent permissible under the Laws and public policies applied in each jurisdiction in which enforcement is sought. Accordingly, if any particular provision of this Agreement shall be adjudicated by a court of competent jurisdiction to be invalid, prohibited or unenforceable for any reason, such provision, as to such jurisdiction, shall be ineffective, without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction. Notwithstanding the foregoing, if such provision could be more narrowly written so as not to be invalid, prohibited or unenforceable in such jurisdiction, it shall, as to such jurisdiction, be deemed to be so narrowly written, to the minimum extent necessary to prevent the rendering of such provision from being invalid or unenforceable, without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction.

Section 6.17 Waiver of Jury Trial.

EACH OF THE PARTIES HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER DOCUMENT.

 

Remainder of page left blank intentionally. Signature page to follow.

  

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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first above written.

 

	  	
ECOLOGY COATINGS, INC.

	  
	  	
 

By: /s/ Robert G. Crockett

	  
	  	
       Robert G. Crockett

	  
	  	
Its: CEO

	  

 

 

	  	  	  

                              FAIRMOUNT FIVE, LLC

                              By:  /s/ James Juliano

                             James Juliano

                              Its:  Manager

  

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Annex I

 

CERTAIN DEFINITIONS

 

“Assets” means, with respect to any Person, all of the assets, rights, interests and other properties, real, personal and mixed, tangible and intangible, owned by such Person.

 

“Business Day” means any day that is not a Saturday, Sunday, legal holiday or other day on which banks are required to be closed in New York, New York.

“Conversion Price” shall mean $.06 per share.

 

 “Documents” means this Agreement and the Certificate of Designation, collectively.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

 

“Fundamental Documents” means, with respect to a corporation, the charter and bylaws (each as amended) or, with respect to any other Person, the documents by which such Person (other than an individual) establishes its legal existence or which govern its internal affairs.

 

“GAAP” means, at any time, generally accepted accounting principles in the jurisdiction in which the Person to which such principles are applied is organized at such time.

 

“Governmental Entity” means any court, administrative agency or commission or other governmental authority or instrumentality, domestic or foreign, federal, state or local.

 

“Law” means any constitution, law, statute, treaty, rule, directive, requirement or regulation or Order, domestic or foreign, of any Governmental Entity or any rules or regulations of any self-regulatory organization.

 

“Lien” means any security interest, pledge, bailment (in the nature of a pledge or for purposes of security), mortgage, deed of trust, the grant of a power to confess judgment, conditional sale, trust receipt or other title retention agreement (including any lease in the nature thereof), lien, charge, encumbrance, claim, equity, easement, reservation, restriction, cloud, right of first refusal or first offer, option, equity or adverse claim or other similar arrangement or interest in real or personal property.

 

 “Order” means any order, writ, judgment, injunction, decree, determination or award issued by a Governmental Entity.

 “Person” means any individual, corporation, partnership, limited liability company, trust, estate, or unincorporated organization, or other entity or Governmental Entity or other juridical entity.

 

 “Proceeding” means any action, suit, claim, inquiry, investigation or proceeding by or before any Governmental Entity.

 

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

“Subsidiary” means any entity in which the Company directly or indirectly, through one or more intermediaries, (a) holds beneficially or of record securities that would entitle the Company to exercise 50% or more of the votes that could be cast in the election of members to the board of directors, board of managers or other governing body of such entity, or (b) possesses, directly or indirectly, power (whether through the ownership of voting securities or, through membership on the board of directors, managers or other governing body, by contract (including, without limitation, a limited partnership agreement or general partnership agreement) or otherwise) to direct or cause the direction of the management and policies of such entity.

 

  

19

  

 

 

ANNEX TO

CERTIFICATE OF DESIGNATION

 

NOTICE OF CONVERSION

 

To:     Ecology Coatings, Inc.

 

Reference is made to that certain Certificate of Designation of 5% Cumulative Convertible Preferred Shares, Series C (the “5% Designation”). Capitalized terms used but not defined herein have the meanings set forth in the 5% Designation. Pursuant to the 5% Designation, the undersigned, being a holder of 5% Cumulative Convertible Preferred Shares, Series C (an “Exercising Holder”), hereby elects to exercise its conversion rights as to a portion or portions of its 5% Cumulative Convertible Preferred Shares, Series C, all as specified opposite its signature below:

 

Dated:

 

 

 

 

 

 

	
 

EXERCISING HOLDER

	
NUMBER OF 5%

CUMULATIVE

CONVERTIBLE

PREFERRED SHARES,

SERIES C TO BE

CONVERTED TO

COMMON SHARES

	
Name

	
Signature

	  	  	
 

[Missing Graphic Reference]

  

20

  

EXHIBIT E

 

Instrument of Accession

 

Reference is made to the Securities Purchase Agreement (the “Purchase Agreement”), dated as of ________, 20__, between Ecology Coatings, Inc., a statutory corporation created under the laws of the state of Nevada, and _______________, a _____________. Capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to them in the Purchase Agreement.

 

The undersigned,_______________________, as a condition precedent to becoming the owner or holder of record of _____________(_________) Convertible Preferred Shares, Series C hereby agrees to become a Purchaser party to and to be bound by all of the obligations of the Purchaser under the Convertible Preferred Securities Agreement (other than with respect to Section 2.1 thereof), and shall be the recipient of all the rights of the Purchaser under the Purchase Agreement (other than with respect to Sections 7.1, 9.1 and 9.3 thereof). The undersigned hereby makes to the Company (as of the date written below) the representations and warranties of the Purchaser contained in Article VI of the Purchase Agreement. The Company hereby makes (as of the date of the Convertible Preferred Securities Agreement) the representations and warranties of the Company contained in Article V of the Purchase Agreement, and the Company hereby agrees that the undersigned shall have all of the rights of the Purchaser under the Purchase Agreement (other than any rights provided to the Purchaser under Sections 2.1, 7.1, 9.1 and 9.3 thereof). This Instrument of Accession shall take effect and shall become an integral part of the Purchase Agreement immediately upon execution and delivery to the Company of this Instrument of Accession.

 

The address for notification to the undersigned for purposes of Section 7.8 of the Purchase Agreement is as follows:

 

 _______________

 

Telephone: _______________

Telecopy: _______________

Attention: _______________

 

IN WITNESS WHEREOF, the undersigned has caused this Instrument of Accession to be signed as of the date below written.

 

____________________

 

By:__________________

Name:

Title:

 

Agreed to and Accepted

 

ECOLOGY COATINGS, INC.

 

 

By:______________________________

Name:

Its:

  

21

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