Document:

Form Securities Purchase Agreement

 Exhibit 10.4 
 SECURITIES PURCHASE AGREEMENT 
 This Securities Purchase Agreement (this
“Agreement”) is dated as of July 24, 2007 between North American Technologies Group, Inc., a Delaware 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 Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”), and Rule 506 promulgated thereunder, the Company desires to issue and sell to 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:
(a) capitalized terms that are not otherwise defined herein have the meanings given to such terms in the Debentures (as defined herein), and (b) the following terms have the meanings set forth in this Section 1.1: 
 “Action” shall have the meaning ascribed to such term in Section 3.1(j). 
 “Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled
by or is under common control with a Person, as such terms are used in and construed under Rule 405 under the Securities Act. With respect to a Purchaser, any investment fund or managed account that is managed on a discretionary basis by the same
investment manager as such Purchaser will be deemed to be an Affiliate of such Purchaser. 
 “Board of
Directors” means the board of directors of the Company. 
 “Business Day” means any day except any
Saturday, any Sunday, any day which is a federal legal holiday in the United States or any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close. 
 “Certificate of Amendment” means the Certificate of Amendment to the Company’s Certificate of Incorporation for the
purpose of effecting a 1:20 reverse stock split of the Common Stock. 

 “Closing” means the closing of the purchase and sale of the Securities
pursuant to Section 2.1. 
 “Closing Date” means the Trading Day when 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 have
been satisfied or waived. 
 “Commission” means the Securities and Exchange Commission. 
 “Common Stock” means the common stock of the Company, par value $0.001 per share, and any other class of securities into
which such securities may hereafter be reclassified or changed into. 
 “Common Stock Equivalents” means any
securities of the Company or the Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, rights, options, warrants or other instrument that is at any time
convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock. 
 “Company Counsel” means Boyer & Ketchand, with offices located at Nine Greenway Plaza, Suite 3100, Houston, TX 77046. 
 “Conversion Price” shall have the meaning ascribed to such term in the Debentures. 
 “Debentures” means the 8% Convertible Debentures due, subject to the terms therein, 3 years from their date of issuance, issued by the Company to the Purchasers hereunder, in the form of Exhibit A attached hereto.

 “Disclosure Schedules” shall have the meaning ascribed to such term in Section 3.1. 
 “Effective Date” means the date that the initial Registration Statement filed by the Company pursuant to the Registration
Rights Agreement is first declared effective by the Commission. 
 “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 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, (b) securities upon the exercise or exchange of or 

  

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conversion of or as payment of interest on any Securities issued hereunder and/or other securities exercisable or exchangeable for or convertible into shares
of Common Stock issued and 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, exchange or conversion
price of such securities, and (c) 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 which is,
itself or through its subsidiaries, an operating company in a business synergistic with the business of the Company and in which the Company receives 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. 
 “FWS” means Feldman Weinstein & Smith LLP with offices located at 420 Lexington Avenue, Suite 2620, New York, New York 10170-0002. 
 “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(aa). 
 “Intellectual Property Rights” shall have the meaning ascribed to such term in Section 3.1(o). 
 “Legend Removal Date” shall have the meaning ascribed to such term in Section 4.1(c). 
 “Liens” means a lien, charge, security interest, encumbrance, right of first refusal, preemptive right or other
restriction. 
 “Material Adverse Effect” shall have the meaning assigned to such term in
Section 3.1(b). 
 “Material Permits” shall have the meaning ascribed to such term in
Section 3.1(m). 
 “Maximum Rate” shall have the meaning ascribed to such term in Section 5.17.

 “Opus” means Opus 5949 LLC, a Texas limited liability company, formerly known as TIE Investors, LLC.

 “Opus Loan” means that certain loan by Opus to TIETEK LLC, a Delaware limited liability company, TIETEK
Technologies, Inc., a Texas corporation, North American Technologies Group, Inc., a Delaware corporation, in the original principal amount of $14,000,000 as evidenced by that certain Construction Loan Agreement, dated as of February 5, 2004, as
amended, supplemented, extended, refinanced or otherwise modified from time to time, and the Promissory Note and security agreements executed pursuant thereto, as amended, replaced or restated from time to time. 
  

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 “Permitted Lien” means (a) Liens securing repayment of the Opus
Loan and (b) 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 Liens for the payment of federal, state
or other taxes, the payment of which is neither delinquent nor subject to penalties. 
 “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. 
 “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. 
 “Purchaser
Party” shall have the meaning ascribed to such term in Section 4.10. 
 “Registration Rights
Agreement” means the Fourth Amended and Restated Registration Rights Agreement, dated the date hereof, among the Company and the Purchasers, in the form of Exhibit B attached hereto. 
 “Registration Statement” means a registration statement meeting the requirements set forth in the Registration Rights
Agreement and covering the resale of the Underlying Shares by each Purchaser as provided for in the Registration Rights Agreement. 
 “Required Approvals” shall have the meaning ascribed to such term in Section 3.1(e). 
 “Required Minimum” means, as of any date, the maximum aggregate number of shares of Common Stock then issued or potentially issuable in the future pursuant to the Transaction Documents, including any Underlying Shares
issuable upon exercise or conversion in full of all Warrants and Debentures (including Underlying Shares issuable as payment of interest), ignoring any conversion or exercise limits set forth therein, and assuming that the Conversion Price is at all
times on and after the date of determination 75% of the then Conversion Price on the Trading Day immediately prior to the date of determination. 
 “Rule 144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the
Commission having substantially the same effect as such Rule. 
 “SEC Reports” shall have the meaning
ascribed to such term in Section 3.1(h). 
 “Securities” means the Debentures, the Warrants, the Warrant
Shares and the Underlying Shares. 
  

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 “Securities Act” means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder. 
 “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).
 “Subscription Amount” means, as to each Purchaser, the aggregate amount to be paid for Debentures 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. 
 “Subsidiary” means any subsidiary of the Company as set forth on Schedule 3.1(a) and shall, where applicable,
include any direct or indirect subsidiary of the Company formed or acquired after the date hereof. 
 “Trading
Day” means a day on which the New York Stock Exchange is open for trading. 
 “Trading Market” means
the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the American Stock Exchange, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York
Stock Exchange or the OTC Bulletin Board. 
 “Transaction Documents” means this Agreement, the Debentures,
the Warrants, the Registration Rights Agreement, all exhibits and schedules thereto and hereto and any other documents or agreements executed in connection with the transactions contemplated hereunder. 
 “Transfer Agent” means Continental Stock Transfer & Trust Company, the current transfer agent of the Company
with a mailing address of Two Broadway, New York, NY 10004 and a facsimile number of 212-509-5150, and any successor transfer agent of the Company. 
 “Underlying Shares” means the shares of Common Stock issued and issuable upon conversion or redemption of the Debentures and upon exercise of the Warrants and issued and issuable in lieu of the cash
payment of interest on the Debentures in accordance with the terms of the Debentures. 
 “Variable Rate
Transaction” shall have the meaning ascribed to such term in Section 4.12(b). 
 “VWAP” means,
for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the
nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. 

  

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New York City time to 4:02 p.m. New York City time); (b) if the Common Stock is not then listed or quoted on the OTC Bulletin Board and if prices for
the Common Stock are then reported in the “Pink Sheets” published by Pink Sheets, LLC (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so
reported; or (c) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Purchasers of a majority in interest of the Securities then outstanding and reasonably
acceptable to the Company, the fees and expenses of which shall be paid by the Company. 
 “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 4 years, in the form of
Exhibit C attached hereto. 
 “Warrant Shares” means the shares of Common Stock issuable upon
exercise of the Warrants. 
 ARTICLE II. 
 PURCHASE AND SALE 
 2.1 Closing. On the Closing Date, upon the terms and subject to the
conditions set forth herein, substantially concurrent with the execution and delivery of this Agreement by the parties hereto, the Company agrees to sell, and the Purchasers, severally and not jointly, agree to purchase, up to an aggregate of
$3,000,000 in principal amount of the Debentures. Each Purchaser shall deliver to the Company, via wire transfer in immediately available funds, and/or promissory notes of the Company dated June 28, 2007 and due November 30, 2008
(“Bridge Notes”), together having a principal amount equal to such Purchaser’s Subscription Amount equal to its Subscription Amount and the Company shall deliver to each Purchaser its respective Debenture and a Warrant, as determined
pursuant to Section 2.2(a), and the Company and each Purchaser shall deliver the other items set forth in Section 2.2 deliverable at the Closing. Upon satisfaction of the conditions set forth in Sections 2.2 and 2.3, the Closing shall
occur at the offices of FWS or such other location as the parties shall mutually agree. 
 2.2 Deliveries. 
 (a) On the Closing Date, the Company shall deliver or cause to be delivered to each Purchaser the following: 
 (i) this Agreement duly executed by the Company; 
 (ii) a Debenture with a principal amount equal to such Purchaser’s Subscription Amount, 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 50%
of such Purchaser’s Subscription Amount divided by the Conversion Price, with an exercise price equal to $0.20, subject to adjustment as set forth in Section 3 therein; 
  

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 (iv) the Registration Rights Agreement duly executed by the Company; 
 (v) the Third Amendment to Amended and Restated Promissory Note with Opus, and the Fourth Amendment to Construction Loan Agreement with
Opus in which Opus consents to the transactions contemplated hereby, such amendments to be in form and substance reasonably satisfactory to the Purchasers; 
 (vi) the Company shall have filed an Information Statement with the Commission with respect to the proposed Amendment to the Certificate of Incorporation for the purpose of effecting a 1:20 reverse stock split of its
Common Stock; and 
 (vii) director resignation letters from each of
John Corcia, Kenneth Scott and Henry Sullivan, effective upon execution and delivery of this Agreement, and from Joseph Christian effective upon the 10th
calendar day after the mailing of the Schedule 14(f) to the Company’s shareholders. 
 (b) On the Closing Date,
each Purchaser shall deliver or cause to be delivered to the Company the following: 
 (i) this Agreement duly executed by
such Purchaser; 
 (ii) such Purchaser’s Subscription Amount by wire transfer to the account as specified in writing by
the Company or by delivery of a Bridge Note of equivalent principal amount, or a combination thereof; and 
 (iii) the
Registration Rights Agreement duly executed by such Purchaser. 
 (c) Not later than 30 days after the Closing Date, the Company shall
provide the Purchasers the following documents in a form satisfactory to the Purchasers: 
  

	 	(i)	Evidence that the Company is current on all installment payments under any and all valid installment agreements for 2006 personal property tax due Harris County, Texas
(“Personal Property Tax”) or that the Company has paid such Personal Property Tax in full; and 

  

	 	(ii)	To the extent the Company has a good faith dispute of any portion of the Personal Property Taxes, evidence that the Company has filed the necessary documents to validly dispute such
Personal Property Tax. 

  

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

(i) the accuracy in all material respects on the Closing Date of the representations and warranties of the Purchasers contained herein;

 (ii) all obligations, covenants and agreements of each Purchaser required to be performed at or prior to the Closing Date
shall have been performed; 
 (iii) each holder of a Company promissory note dated March 7, 2007 and due October 31,
2007 shall have agreed to the Consent and Notice of Extension in the form attached hereto as Exhibit D, and Opus shall have consented thereto; and 
 (iv) 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; 
 (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) Opus shall have consented to the transactions contemplated by the Transaction Documents; 
 (iv) the delivery by the Company of the items set forth in Section 2.2(a) of this Agreement; 
 (v) the Board of Directors shall have appointed Pat Long, Bruce Leadbetter, Joseph
Etheridge and Michel Amsalem to be directors of the Company, effective upon the 10th calendar day after the distribution of a Schedule 14(f), the Company
shall have filed with the Commission and mailed to its stockholders of record a Schedule 14(f) concerning the appointment of new directors of the Company, and Alex Rankin shall have been appointed Chief Executive Officer of the Company;

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

  

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

 ARTICLE III. 
 REPRESENTATIONS AND WARRANTIES 
 3.1 Representations and Warranties of the Company. Except as set forth 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: 
 (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 (as applicable), with
the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted. Neither the Company nor any Subsidiary is in violation or default of any of the provisions of its respective certificate
or articles of incorporation, bylaws or other organizational or charter documents. Each of the Company and the Subsidiaries is duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each jurisdiction
in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, could not 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 

  

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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 each of the Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of each of the 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
therewith other than in connection with the Required Approvals. Each Transaction Document 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. 
 (d) No Conflicts. The execution,
delivery and performance of the Transaction Documents by the Company and the consummation by the Company of the other 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. 
  

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 (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) filings required pursuant to Section 4.6, (ii) the filing with the Commission of the Registration Statement, (iii) the notice and/or application(s) to each
applicable Trading Market for the issuance and sale of the Securities and the listing of the Underlying Shares for trading thereon in the time and manner required thereby, and (iv) the filing of a Certificate of Amendment to the Company’s
Certificate of Incorporation with the Delaware Secretary of State to effect a 1:20 reverse stock split, following the distribution of an Information Statement to the Company’s stockholders which complies with Rule 14 under the Exchange Act
(collectively, the “Required Approvals”). 
 (f) Issuance of the Securities. The Securities are duly
authorized and, when issued and paid for in accordance with the applicable Transaction Documents, will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the Company other than restrictions on transfer
provided for in the Transaction Documents. The Underlying Shares, when issued in accordance with the terms of the Transaction Documents, will be validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the Company other
than restrictions on transfer provided for in the Transaction Documents. Subject to the Company filing a Certificate of Amendment to its Certificate of Incorporation with the Delaware Secretary of State with respect to its previously approved
reverse stock split, the Company has reserved from its duly authorized capital stock a number of shares of Common Stock for issuance of the Underlying Shares at least equal to the Required Minimum on the date hereof. 
 (g) Capitalization. The capitalization of the Company is as set forth on Schedule 3.1(g), which Schedule 3.1(g) shall
also include the number of shares of Common Stock owned beneficially, and of record, by Affiliates of the Company as of the date hereof. 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 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 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 

  

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Person (other than the Purchasers) and will not result in a right of any holder of Company securities to adjust the exercise, conversion, exchange or reset
price under any of such securities. All of the outstanding shares of capital stock of the Company are validly issued, fully paid and nonassessable, have been issued in compliance with all federal and state securities laws, and none of such
outstanding shares was issued in violation of any preemptive rights or similar rights to subscribe for or purchase securities. 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. 
 (h) SEC Reports; Financial Statements. The Company has filed all reports,
schedules, forms, statements and other documents required to be filed by the Company under the Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the two years preceding the date hereof (or such
shorter period as the Company was required by law or regulation to file such material) (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein, being collectively referred to herein as the
“SEC Reports”) on a timely basis or has received a valid extension of such time of filing and has filed any such SEC Reports prior to the expiration of any such extension. As of their respective dates, 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 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. 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 

  

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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 or as set forth on Schedule 3.1(i), no event, liability or development has occurred or exists with respect to the Company or its Subsidiaries or their respective business, properties, operations or financial condition, that would be
required to be disclosed by the Company under applicable securities laws at the time this representation is made or deemed made that has not been publicly disclosed at least one Trading Day prior to the date that this representation is made.

 (j) Litigation. There is no action, suit, inquiry, notice of violation, proceeding or investigation pending or, to
the knowledge of the Company, threatened against or affecting the Company, any Subsidiary or any of their respective properties before or by any court, arbitrator, governmental or administrative agency or regulatory authority (federal, state,
county, local or foreign) (collectively, an “Action”) which (i) adversely affects or challenges the legality, validity or enforceability of any of the Transaction Documents or the 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 material labor dispute exists or, to the knowledge of the Company, is
imminent with respect to any of the employees of the Company which could reasonably be expected to result in a Material Adverse Effect. None of the Company’s or its Subsidiaries’ employees is a member of a union that relates to such
employee’s relationship with the Company or such Subsidiary, and neither the Company nor any of its Subsidiaries is a party to a collective bargaining agreement, and the Company and its Subsidiaries believe that their relationships with their
employees are good. No executive officer, to the knowledge of the Company, 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 

  

 13 

 
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. 
 (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 order of any court, arbitrator or governmental body, or (iii) is or has been in violation of any statute, rule or regulation of any governmental authority, including without
limitation all foreign, federal, state and local laws applicable to its business and all such laws that affect the environment, except in each case as could not have or reasonably be expected to result in a Material Adverse Effect. 
 (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 Permitted Liens and such 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 Liens for the payment of federal, state or other taxes, the payment of which is
neither delinquent nor subject to penalties. Any real property and facilities held under lease by the Company and the Subsidiaries are held by them under valid, subsisting and enforceable leases with which the Company and the Subsidiaries are in
compliance. 
 (o) Patents and Trademarks. The Company and the Subsidiaries have, or have rights to use, all patents,
patent applications, trademarks, trademark applications, service marks, trade names, trade secrets, inventions, copyrights, licenses and other intellectual property rights and similar rights necessary or material for use in connection with their
respective businesses as described in the SEC Reports and which the failure to so have could have a Material Adverse Effect (collectively, the “Intellectual Property Rights”). Neither the Company nor any Subsidiary has received a
notice (written or otherwise) that any of the Intellectual Property Rights used by the Company or any Subsidiary violates or infringes upon the rights of any Person. To the knowledge of the Company, all such 

  

 14 

 
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 and, to the knowledge of the Company, none of the employees of the Company is presently a party
to any transaction with the Company or any Subsidiary (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of
real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Company, any entity in which any officer, director, or any such employee has a substantial interest
or is an officer, director, trustee or partner, in each case in excess of $60,000 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. The Company further represents that in the 30 calendar days prior to June 25, 2007; it has not increased the compensation or
created any obligation to compensate, or to increase the benefits of, any officer, director or management employee, directly or indirectly, through any employment agreement, change in control agreement, severance agreement, stock grant, stock option
grant or repricing or any other means whatsoever, excepting only increases in the ordinary salaries or routine employee benefits of non-management employees in the ordinary course of business. 
 (r) Sarbanes-Oxley; Internal Accounting Controls. The Company is in material compliance with all provisions of the Sarbanes-Oxley
Act of 2002 which are applicable to it 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 

  

 15 

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

 (t) Private Placement. Assuming the accuracy of the Purchasers’ representations and warranties set forth in
Section 3.2, no registration under the Securities Act is required for the offer and sale of the Securities by the Company to the Purchasers as contemplated hereby. The issuance and sale of the Securities hereunder does not contravene the rules
and regulations of the Trading Market. 
 (u) 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 subject to the Investment Company Act of 1940, as amended. 
 (v) Registration Rights. Other
than the signatories to the Fourth Amended and Restated Registration Rights Agreement, no Person has any right to cause the Company to effect the registration under the Securities Act of any securities of the Company. 
 (w) 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. 
 (x) 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. 
  

 16 

 (y) Disclosure. All disclosure furnished by or on behalf of the Company to the
Purchasers regarding the Company, its business and the transactions contemplated hereby, including the 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. 
 (z) No Integrated Offering. Assuming the accuracy of the Purchasers’ representations
and warranties set forth in Section 3.2, neither the Company, nor any of its Affiliates, nor any Person acting on its or their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any
security, under circumstances that would cause this offering of the Securities to be integrated with prior offerings by the Company for purposes of (i) the Securities Act which would require the registration of any such securities under the
Securities Act, or (ii) any applicable shareholder approval provisions of any Trading Market on which any of the securities of the Company are listed or designated. 
 (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 each Subsidiary has filed all necessary federal, state and foreign income and franchise tax returns and has paid or accrued all taxes shown as due thereon, and the Company has no knowledge of a tax deficiency
which has been asserted or threatened against the Company or any Subsidiary. 
 (bb) No General Solicitation. Neither
the Company nor any person acting on behalf of the Company has offered or sold any of the Securities by any form of general solicitation or general advertising. The Company has offered the Securities for sale only to the Purchasers and certain other
“accredited investors” within the meaning of Rule 501 under the Securities Act. 
 (cc) Foreign Corrupt
Practices. Neither the Company, nor to the knowledge of the Company, any agent or other person acting on behalf of the Company, has (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 made by any person acting on its behalf of which the Company is aware) which is in violation of law, or (iv) violated in any material respect any provision of the
Foreign Corrupt Practices Act of 1977, as amended. 
  

 17 

 (dd) Accountants. The Company’s accounting firm is set forth on Schedule
3.1(dd) of the Disclosure Schedule. 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 on Form 10-KSB for the year ending September 30, 2007. 
 (ee) Seniority. Except for the Opus Loan, as of the Closing Date, no Indebtedness or other claim against the Company is senior to the Debentures in right of payment, whether with respect to interest or upon liquidation or
dissolution, or otherwise, other than indebtedness secured by purchase money security interests (which is senior only as to underlying assets covered thereby) and capital lease obligations (which is senior only as to the property covered thereby).

 (ff) No Disagreements with Accountants and Lawyers. There are no disagreements of any kind presently existing, or
reasonably anticipated by the Company to arise, between the Company and the accountants and lawyers formerly or presently employed by the Company and the Company is current with respect to any fees owed to its accountants and lawyers which could
affect the Company’s ability to perform any of its obligations under any of the Transaction Documents. 
 (gg)
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. 
 (hh) Acknowledgment Regarding Purchasers’ Trading
Activity. Notwithstanding anything in this Agreement or elsewhere herein to the contrary (except for Sections 3.2(f) hereof), it is understood and acknowledged by the Company that (i) none of the Purchasers has been asked to agree by the
Company, 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, may presently have a “short” position in the 

  

 18 

 
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 (a) one or more Purchasers may engage in hedging activities at various times during the period that the Securities are outstanding, including, without
limitation, during the periods that the value of the Underlying Shares deliverable with respect to Securities are being determined and (b) 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. 
 (ii) 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 of the Company 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. 
 3.2 Representations 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: 
 (a) Organization; Authority. Such Purchaser is an entity duly organized, validly existing and in good standing under the laws of
the jurisdiction of its organization with full right, corporate or partnership power and authority to enter into and to consummate the transactions contemplated by the Transaction Documents and otherwise to carry out its obligations hereunder and
thereunder. The execution and delivery of the Transaction Documents and performance by such Purchaser of the transactions contemplated by the Transaction Documents have been duly authorized by all necessary corporate or similar action 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) Own Account. Such Purchaser understands that the Securities are “restricted
securities” and have not been registered under the Securities Act or any applicable state securities law and is acquiring the Securities as principal for its own account and not with a view to or for distributing or reselling such Securities or
any part 

  

 19 

 
thereof in violation of the Securities Act or any applicable state securities law, has no present intention of distributing any of such Securities in
violation of the Securities Act or any applicable state securities law and has no direct or indirect arrangement or understandings with any other persons to distribute or regarding the distribution of such Securities (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) in violation of the Securities Act or any applicable state
securities law. 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 at the date hereof it is, and on each date on which it exercises any Warrants or converts any Debentures 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. 
 (e) General Solicitation. Such Purchaser is not purchasing the Securities as a result of any advertisement, article, notice or
other communication regarding the Securities published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or any other general solicitation or general advertisement. 
 (f) Short Sales and Confidentiality Prior To The Date Hereof. Other than consummating the transactions contemplated hereunder, such
Purchaser has not directly or indirectly, nor has any Person acting on behalf of or pursuant to any understanding with such Purchaser, executed any purchases or sales, including Short Sales, of the securities of the Company during the period
commencing from the time that such Purchaser first received a term sheet (written or oral) from the Company or any other Person representing the Company setting forth the material terms of the transactions contemplated hereunder until the date
hereof (“Discussion Time”). 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). 
  

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 ARTICLE IV. 
 OTHER AGREEMENTS OF THE PARTIES 
 4.1 Transfer Restrictions. 
 (a) The Securities may only be disposed of in compliance with state and federal securities laws. In connection with any transfer of
Securities other than pursuant to an effective registration statement or Rule 144, to the Company or to an Affiliate of a Purchaser or in connection with a pledge as contemplated in Section 4.1(b), the Company may require the transferor thereof
to provide to the Company an opinion of counsel selected by the transferor and reasonably acceptable to the Company, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not
require registration of such transferred Securities under the Securities Act. As a condition of transfer, any such transferee shall agree in writing to be bound by the terms of this Agreement and shall have the rights of a Purchaser under this
Agreement and the Registration Rights Agreement. 
 (b) The Purchasers agree to the imprinting, so long as is required by this
Section 4.1, of a legend on any of the Securities in the following form: 
 [NEITHER] THIS SECURITY [NOR THE SECURITIES INTO WHICH THIS
SECURITY IS [EXERCISABLE] [CONVERTIBLE]] HAS [NOT] BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. THIS SECURITY [AND THE SECURITIES ISSUABLE UPON [EXERCISE] [CONVERSION] OF THIS SECURITY] MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES. 
 The Company acknowledges and agrees that a Purchaser may from time to time pledge pursuant to a bona fide margin agreement with a
registered broker-dealer or grant a security interest in some or all of the Securities to a financial institution that is an “accredited investor” as defined in Rule 501(a) under the Securities Act and who agrees to be bound by the
provisions of this Agreement and the Registration Rights Agreement 

  

 21 

 
and, if required under the terms of such arrangement, such Purchaser may transfer pledged or secured Securities to the pledgees or secured parties. Such a
pledge or transfer would not be subject to approval of the Company and no legal opinion of legal counsel of the pledgee, secured party or pledgor shall be required in connection therewith. Further, no notice shall be required of such pledge. At the
appropriate Purchaser’s expense, the Company will execute and deliver such reasonable documentation as a pledgee or secured party of Securities may reasonably request in connection with a pledge or transfer of the Securities, including, if the
Securities are subject to registration pursuant to the Registration Rights Agreement, the preparation and filing of any required prospectus supplement under Rule 424(b)(3) under the Securities Act or other applicable provision of the Securities Act
to appropriately amend the list of Selling Stockholders thereunder. 
 (c) Certificates evidencing the Underlying Shares shall
not contain any legend (including the legend set forth in Section 4.1(b) hereof): (i) while a registration statement (including the Registration Statement) covering the resale of such security is effective under the Securities Act, or
(ii) following any sale of such Underlying Shares pursuant to Rule 144, or (iii) if such Underlying Shares are eligible for sale under Rule 144(k), or (iv) if such legend is not required under applicable requirements of the Securities
Act (including judicial interpretations and pronouncements issued by the staff of the Commission). The Company shall cause its counsel to issue a legal opinion to the Transfer Agent promptly after the Effective Date if required by the Transfer Agent
to effect the removal of the legend hereunder. If all or any portion of a Debenture or Warrant is converted or exercised (as applicable) at a time when there is an effective registration statement to cover the resale of the Underlying Shares, or if
such Underlying Shares may be sold under Rule 144(k) or if such legend is not otherwise required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the staff of the Commission) then
such Underlying Shares shall be issued free of all legends. The Company agrees that following the Effective Date or at such time as such legend is no longer required under this Section 4.1(c), it will, no later than six Trading Days following
the delivery by a Purchaser to the Company or the Transfer Agent of a certificate representing Underlying Shares, as applicable, issued with a restrictive legend (such sixth Trading Day, the “Legend Removal Date”), deliver or cause
to be delivered to such Purchaser a certificate representing such shares that is free from all restrictive and other legends. The Company may not make any notation on its records or give instructions to the Transfer Agent that enlarge the
restrictions on transfer set forth in this Section. Certificates for Underlying Shares subject to legend removal hereunder shall be transmitted by the Transfer Agent to the Purchaser by crediting the account of the Purchaser’s prime broker with
the Depository Trust Company System as directed by such Purchaser. 
 (d) Nothing herein shall limit such Purchaser’s
right to pursue actual damages for the Company’s failure to deliver certificates representing any Securities as required by the Transaction Documents, and such Purchaser shall have the right to pursue all remedies available to it at law or in
equity including, without limitation, a decree of specific performance and/or injunctive relief. 
  

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 (e) Each Purchaser, severally and not jointly with the other Purchasers, agrees that such
Purchaser will sell any Securities pursuant to either the registration requirements of the Securities Act, including any applicable prospectus delivery requirements, or an exemption therefrom, and that if Securities are sold pursuant to a
Registration Statement, they will be sold in compliance with the plan of distribution set forth therein, and acknowledges that the removal of the restrictive legend from certificates representing Securities as set forth in this Section 4.1 is
predicated upon the Company’s reliance upon this understanding. 
 4.2 Acknowledgment of Dilution. The Company acknowledges that
the issuance of the Securities may result in dilution of the outstanding shares of Common Stock, which dilution may be substantial under certain market conditions. The Company further acknowledges that its obligations under the Transaction
Documents, including without limitation its obligation to issue the Underlying Shares pursuant to the Transaction Documents, are unconditional and absolute and not subject to any right of set off, counterclaim, delay or reduction, regardless of the
effect of any such dilution or any claim the Company may have against any Purchaser and regardless of the dilutive effect that such issuance may have on the ownership of the other stockholders of the Company. 
 4.3 Furnishing of Information. 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. As long as any Purchaser owns Securities, if the Company is not required to file reports pursuant to the Exchange Act, it will prepare and furnish to the Purchasers and make publicly
available in accordance with Rule 144(c) such information as is required for the Purchasers to sell the Securities under Rule 144. The Company further covenants that it will take such further action as any holder of Securities may reasonably
request, to the extent required from time to time to enable such Person to sell such Securities without registration under the Securities Act within the requirements of the exemption provided by Rule 144. 
 4.4 Integration. The Company shall not sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined
in Section 2 of the Securities Act) that would be integrated with the offer or sale of the Securities to the Purchasers in a manner that would require the registration under the Securities Act of the sale of the Securities to the Purchasers or
that would be integrated with the offer or sale of the Securities for purposes of the rules and regulations of any Trading Market. 
 4.5
Conversion and Exercise Procedures. The form of Notice of Exercise included in the Warrants and the form of Notice of Conversion included in the Debentures set forth the totality of the procedures required of the Purchasers in order to
exercise the Warrants or convert the Debentures. No additional legal opinion or other information or instructions shall be required of the Purchasers to exercise their Warrants or convert their Debentures. The Company shall honor exercises of the
Warrants and conversions of the Debentures and shall deliver Underlying Shares in accordance with the terms, conditions and time periods set forth in the Transaction Documents. 
  

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 4.6 Securities Laws Disclosure; Publicity. The Company shall, by 8:30 a.m. (New York City time) on
the fourth Trading Day following the date hereof, file a Current Report on Form 8-K disclosing the material terms of the transactions contemplated hereby and attaching the Transaction Documents as exhibits thereto. 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 or 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 (i) as required by federal
securities law in connection with (A) any registration statement contemplated by the Registration Rights Agreement and (B) the filing of final Transaction Documents (including signature pages thereto) with the Commission and (ii) 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 (ii). 
 4.7 Shareholder Rights Plan. No claim will be made or enforced by the Company or, with the consent of the Company, any other Person, that any
Purchaser is an “Acquiring Person” under any control 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.

 4.8 Intentionally Omitted. 
 4.9 Use of Proceeds. Except as set forth on Schedule 4.9 attached hereto, the Company shall use the net proceeds from the sale of the Securities hereunder for working capital purposes and shall not use such proceeds for
(a) 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) the redemption of any Common Stock or Common Stock
Equivalents or (c) the settlement of any outstanding litigation. 
 4.10 Indemnification of Purchasers. Subject to the provisions
of this Section 4.10, 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, 

  

 24 

 
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 person (each, a “Purchaser Party”) harmless from any and all losses, liabilities, obligations, claims, contingencies, damages, costs and expenses, including all judgments, amounts paid in
settlements, court costs and reasonable attorneys’ fees and costs of investigation that any such Purchaser Party may suffer or incur as a result of or relating to (a) any breach of any of the representations, warranties, covenants or
agreements made by the Company in this Agreement or in the other Transaction Documents or (b) any action instituted against a Purchaser 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, with respect to any of the transactions contemplated by the Transaction Documents (unless such action is based upon a breach of such Purchaser’s representations, warranties or covenants under the Transaction
Documents or any agreements or understandings such Purchaser may have with any such stockholder or any violations by the Purchaser of state or federal securities laws or any conduct by such Purchaser 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 such separate 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
(i) for any settlement by a Purchaser Party effected without the Company’s prior written consent, which shall not be unreasonably withheld or delayed; or (ii) to the extent, but only to the extent that a loss, claim, damage or
liability is attributable to any Purchaser Party’s breach of any of the representations, warranties, covenants or agreements made by such Purchaser Party in this Agreement or in the other Transaction Documents. 
 4.11 Reservation and Listing of Securities. 
 (a) The Company shall file the Certificate of Amendment within 45 days of the Closing Date, and provide each Purchaser with evidence thereof, and shall maintain a reserve from its duly authorized shares of Common
Stock for issuance pursuant to the Transaction Documents in such amount as may be required to fulfill its obligations in full under the Transaction Documents. 
 (b) If, on any date, the number of authorized but unissued (and otherwise unreserved) shares of Common Stock is less than the Required
Minimum on such date, then the Board of Directors shall use commercially reasonable efforts to amend the Company’s certificate or articles of incorporation to increase the number of authorized but unissued shares of Common Stock to at least the
Required Minimum at such time, as soon as possible and in any event not later than the 75th day after such date. 
  

 25 

 (c) The Company shall, if applicable: (i) in the time and manner required by the
principal Trading Market, prepare and file with such Trading Market an additional shares listing application covering a number of shares of Common Stock at least equal to the Required Minimum on the date of such application, (ii) take all steps
necessary to cause such shares of Common Stock to be approved for listing on such Trading Market as soon as possible thereafter, (iii) provide to the Purchasers evidence of such listing, and (iv) maintain the listing of such Common Stock
on any date at least equal to the Required Minimum on such date on such Trading Market or another Trading Market. 
 4.12 Subsequent
Equity Sales. From the date hereof until such time as no Purchaser holds any of the Securities, the Company shall be prohibited from effecting or entering into an agreement to effect any Subsequent Financing involving a Variable Rate
Transaction. “Variable Rate Transaction” means a transaction in which the Company issues or sells (i) 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, exercise 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 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. 
 4.13 Equal Treatment of Purchasers. No consideration 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. Further, the Company shall not make any
payment of principal or interest on the Debentures in amounts which are disproportionate to the respective principal amounts outstanding on the Debentures at any applicable time. 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. 
 ARTICLE V. 
 MISCELLANEOUS 
 5.1
Termination. 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 

  

 26 

 
Closing has not been consummated on or before August 15, 2007; provided, however, that such termination will not affect the right of any
party to sue for any breach by the other party (or parties). 
 5.2 Fees and Expenses. The Company shall pay the reasonable fees and
expenses of FWS in connection with its representation of Midsummer Investment Ltd. 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, stamp taxes and other taxes and duties
levied in connection with the delivery of any Securities to the Purchasers. 
 5.3 Entire Agreement. The Transaction Documents,
together with the exhibits and schedules thereto, contain the entire understanding of the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, with respect to such matters, which
the parties acknowledge have been merged into such documents, exhibits and schedules. 
 5.4 Notices. Any and all notices or other
communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (a) the date of transmission, if such notice or communication is delivered via facsimile
at the facsimile number set forth on the signature pages attached hereto prior to 5:30 p.m. (New York City time) on a Trading Day, (b) the next Trading Day after the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile number set forth on the signature pages attached hereto on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (c) the second 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. 
 5.5 Amendments; Waivers. No provision of this Agreement may be waived, modified, supplemented or amended except in
a written instrument signed, in the case of an amendment, by the Company and [the Purchasers of at least 85% in interest of the Securities still held by 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. 
 5.6 Headings. The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof. 
 5.7 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted
assigns. The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of each 

  

 27 

 
Purchaser (other than by merger). Any Purchaser may assign any or all of its rights under this Agreement to any Person to whom such Purchaser assigns or
transfers any Securities, provided that such transferee agrees in writing to be bound, with respect to the transferred Securities, by the provisions of the Transaction Documents that apply to the “Purchasers.” 
 5.8 No Third-Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, except as otherwise set forth in Section 4.10. 
 5.9 Governing 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 conflict of laws thereof. Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense of the transactions contemplated by any of the
Transaction Documents (whether brought against a party hereto or its respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the state and federal courts sitting in either the City of New York, Borough of
Manhattan (the “New York Courts”) or the state and federal courts sitting in Dallas, Texas (the “Texas Courts”). Each party hereto hereby irrevocably submits to the jurisdiction of the New York Courts and the Texas
Courts 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 such New York Courts or the Texas Courts, or such New York Courts or Texas Courts are improper or 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 Debenture 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 applicable law. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal
proceeding arising out of or relating to the Transaction Documents or the transactions contemplated hereby. If either party shall commence an action or proceeding to enforce any provisions of any of the Transaction Documents, then the prevailing
party in such action or proceeding shall be reimbursed by the other party for its attorneys fees and other costs and expenses incurred in the investigation, preparation and prosecution of such action or proceeding. 
 5.10 Survival. The representations and warranties shall survive the Closing and the delivery of the Securities for the applicable statue of
limitations. 
 5.11 Execution. This Agreement may be executed in two or more counterparts, all of which when taken together shall be
considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any

  

 28 

 
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. 
 5.12 Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use
their commercially reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable. 
 5.13 Rescission and Withdrawal Right. Notwithstanding anything to the contrary contained in (and without limiting any similar provisions of) any
of the other Transaction Documents, whenever any Purchaser exercises a right, election, demand or option under a Transaction Document and the Company does not timely perform its related obligations within the periods therein provided, then such
Purchaser may rescind or withdraw, in its sole discretion from time to time upon written notice to the Company, any relevant notice, demand or election in whole or in part without prejudice to its future actions and rights; provided,
however, in the case of a rescission of a conversion of a Debenture or exercise of a Warrant, the Purchaser shall be required to return any shares of Common Stock delivered in connection with any such rescinded conversion or exercise notice.

 5.14 Replacement of Securities. If any certificate or instrument evidencing any Securities is mutilated, lost, stolen or destroyed,
the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof (in the case of mutilation), or in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence
reasonably satisfactory to the Company of such loss, theft or destruction. The applicant for a new certificate or instrument under such circumstances shall also pay any reasonable third-party costs (including customary indemnity) associated with the
issuance of such replacement Securities. 
 5.15 Remedies. In addition to being entitled to exercise all rights provided herein or
granted by law, including recovery of damages, each of the Purchasers and the Company will be entitled to specific performance under the Transaction Documents. The parties agree that monetary damages may not be adequate compensation for any loss
incurred by reason of any breach of obligations contained in the Transaction Documents and hereby agrees to waive and not to assert in any action for specific performance of any such obligation the defense that a remedy at law would be adequate.

 5.16 Payment Set Aside. To the extent that the Company makes a payment or payments to any Purchaser pursuant to any Transaction
Document or a Purchaser enforces or exercises its rights thereunder, and such payment or payments or the proceeds of such 

  

 29 

 
enforcement or exercise or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from, disgorged by
or are required to be refunded, repaid or otherwise restored to the Company, a trustee, receiver or any other person under any law (including, without limitation, any bankruptcy law, state or federal law, common law or equitable cause of action),
then to the extent of any such restoration the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not
occurred. 
 5.17 Usury. To the extent it may lawfully do so, the Company hereby agrees not to insist upon or plead or in any manner
whatsoever claim, and will resist any and all efforts to be compelled to take the benefit or advantage of, usury laws wherever enacted, now or at any time hereafter in force, in connection with any claim, action or proceeding that may be brought by
any Purchaser in order to enforce any right or remedy under any Transaction Document. Notwithstanding any provision to the contrary contained in any Transaction Document, it is expressly agreed and provided that the total liability of the Company
under the Transaction Documents for payments in the nature of interest shall not exceed the maximum lawful rate authorized under applicable law (the “Maximum Rate”), and, without limiting the foregoing, in no event shall any rate of
interest or default interest, or both of them, when aggregated with any other sums in the nature of interest that the Company may be obligated to pay under the Transaction Documents exceed such Maximum Rate. It is agreed that if the maximum contract
rate of interest allowed by law and applicable to the Transaction Documents is increased or decreased by statute or any official governmental action subsequent to the date hereof, the new maximum contract rate of interest allowed by law will be the
Maximum Rate applicable to the Transaction Documents from the effective date forward, unless such application is precluded by applicable law. If under any circumstances whatsoever, interest in excess of the Maximum Rate is paid by the Company to any
Purchaser with respect to indebtedness evidenced by the Transaction Documents, such excess shall be applied by such Purchaser to the unpaid principal balance of any such indebtedness or be refunded to the Company, the manner of handling such excess
to be at such Purchaser’s election. 
 5.18 Independent 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 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 their review and negotiation of the Transaction Documents. For reasons of administrative convenience only, Purchasers and their respective
counsel have chosen to communicate with the Company through FWS. FWS does not represent all of the Purchasers but only Midsummer Investment Ltd. The Company has 

  

 30 

 
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 the Purchasers. 
 5.19 Liquidated Damages. The Company’s obligations to pay any partial liquidated damages
or other amounts owing under the Transaction Documents is a continuing obligation of the Company and shall not terminate until all unpaid partial liquidated damages and other amounts have been paid notwithstanding the fact that the instrument or
security pursuant to which such partial liquidated damages or other amounts are due and payable shall have been canceled. 
 5.20
Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then such action may be taken or such right may be exercised
on the next succeeding Business Day. 
 5.21 Construction. The parties agree that each of them and/or their respective counsel has
reviewed and had an opportunity to revise the Transaction Documents and, therefore, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of the
Transaction Documents or any amendments hereto. 
 5.22 Waiver of Jury Trial. In any action, suit or proceeding in any
jurisdiction brought by any party against any other party, the parties each knowingly and intentionally, to the greatest extent permitted by applicable law, hereby absolutely, unconditionally, irrevocably and expressly waives forever trial by jury.

 (Signature Pages Follow) 
  

 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. 
  

									
	 NORTH AMERICAN TECHNOLGIES GROUP, INC.
	 		 	 Address for Notice:
 429
Memory Lane
 Marshall, TX 75672
	 	
	 By:
	 	  
	 		 	Fax:	 	
	 Name:
	 		 		 		 	
	 Title:
	 		 		 		 	

 With a copy to (which shall not constitute notice): 
 [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK 
 SIGNATURE PAGE FOR PURCHASER FOLLOWS]

  

 32 

 [PURCHASER SIGNATURE PAGES TO NATK JULY 2007 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 Purchaser:
                                        
                                        
                                        
                                        
      
 Facsimile Number of Purchaser:
                                        
                                        
                                        
                                        

Address for Notice of Purchaser: 
 Address for Delivery of Securities for
Purchaser (if not same as address for notice): 
 Total Subscription Amount:
                                        
                    
 Cash:
$                                        
                                        
                  
 Bridge Loan Tendered:
$                                        
                           
 Warrant Shares:
                                        
                                        

 Please check here if you do NOT WANT the beneficial ownership limitation found in Section 2(d) of the form of Warrant and Section 4(c) of
the Debenture included in your Debenture and Warrant /    / 
 EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]

 [SIGNATURE PAGES CONTINUE] 
  

 33 

 DISCLOSURE SCHEDULES TO 
 SECURITIES PURCHASE AGREEMENT 
 AMONG 
 NORTH AMERICAN TECHNOLOGIES GROUP, INC. 
 AND THE PURCHASERS SET FORTH THEREIN 
 DATED JULY 25, 2007 
 The representations and warranties of the Company in the Securities Purchase Agreement dated as of July 25, 2007 (the “Agreement”) are
made, given and undertaken subject to the disclosures in this Disclosure Statement and subject to the terms and provision of the Agreement. Items set forth below are disclosed in connection with the corresponding numbered sections of the Agreement
to which this Disclosure Schedule is attached and made a part. Capitalized terms not otherwise defined herein have the meanings ascribed to them in the Agreement. 
 Schedule 3.1(a). Capital Stock of Subsidiaries 
 The Company’s subsidiaries are: 
 TieTek Technologies, Inc., a Texas corporation 
 TieTek LLC, a Delaware
limited liability company 
 EET Holdings, Inc., a Texas corporation 
 GAIA Technologies, Inc., a Texas corporation 
 NATK RII, Inc., a Texas corporation 
 NATK IPF, Inc., a Texas corporation 
 The capital stock or other equity interest of each Subsidiary is
subject to the blanket Lien held by and in favor of OPUS 5949 LLC (“Opus”) to secure the Company’s obligations under $14,000,000 Promissory Note from the Company and its Subsidiaries to Opus (the “Construction Loan”).

 Schedule 3.1(d) – No Conflicts 
 Certain portions of this Agreement would result in a default under the Construction Loan, absent the consents obtained from Opus. 
 The holders of the Company’s promissory notes due October 31, 2007, aggregating $2,000,000, absent their consent to the terms of this transaction would have the right to accelerate the payments due under the promissory notes.
Therefore, the holders, have as of this date (i) consented to the transactions contemplated by the Debentures, (ii) agreed that the Maturity Date of the Notes shall be extended to October 31, 2008, (iii) waived any provision
under the Notes that would prohibit the transactions contemplated by the Agreement, and (iv) agreed that the right of payment of the Notes shall be subordinate to the prior right of payment of the July 2010 Debentures, and (v) agreed that
the funding of the July 2010 Debentures shall not accelerate the maturity of the Notes. 

 Schedule 3.1(e) – Filings, Consents and Approvals 
 Pursuant to Section 2.3 (b)(v) the Company is required to file with the Commission a Schedule 14 (f). The filing of such Schedule is necessary for
the persons whose names are set forth in section 2.3 (b)(v) to become directors of the Company. 
 Schedule 3.1(g) – Capitalization 

1. The capitalization of the Company as set forth in the Company’s Form 10-QSB for the fiscal quarter ended April 1, 2007, has been increased
by 1,302,363 shares of Common Stock issued to Opus on July 3, 2007 in payment of interest under the Construction Loan. 
 2. The
Capitalization Table as of July 25, 2007: 
  

			
	 Shares
	  	No. of Common stock Equivalents
	 Authorized Capital:
	  	270,000,000
	 Authorized Common
	  	250,000,000
	 Authorized Preferred
	  	20,000,000
	 Issued
	  	
	 Common stock
	  	184,745,199
	 Series CC Preferred stock, 54,364 shares
	  	50,037,041
	 Warrants to purchase Series CC Preferred stock 9,158 shares
	  	8,479,630
	 Warrants to purchase Common stock
	  	36,454,667
	 Options to purchase Common stock
	  	10,021,111
	 Restricted Stock
	  	1,680,000
	 Total
	  	291,417,649

 3. The number of shares of Common Stock owned beneficially, and of record by Affiliates of the
Company are as follows: 
 North American Technologies Group, inc 
 Cap Table Summary 
  

													
	 	  	Total	  	Sammons	  	Crestview	  	Midsummer	  	Islandia	  	Big Bend
	 Number of shares outstanding
	  	184,745,199	  	67,225,495	  	25,132,127	  	19,406,508	  	9,071,315	  	17,892,473
	 Employee Options
	  	10,021,111	  		  		  		  		  	
	 Preferred stock plus preferred warrants
	  	58,516,671	  	43,860,189	  	7,212,964	  	3,703,704	  		  	2,119,445
	 Warrants
	  	36,454,667	  	12,921,124	  	8,778,652	  	4,776,153	  	1,250,439	  	
		  	 	  	 	  	 	  	 	  	 	  	 
	 Total
	  	289,737,649	  	124,006,808	  	41,123,743	  	27,886,365	  	10,321,754	  	20,011,918
		  	 	  	 	  	 	  	 	  	 	  	 

 4. (a) The Royalty Agreement between the Company and the Royalty Holders dated February 11,
2004 requires the Company to issue shares of Company stock by May 1 of each calendar year to the Royalty Holders in an amount equal to the value of any deficiency in the royalty payments to be paid by TieTek to the Royalty Holders under the
Royalty Agreement between TieTek and the Royalty Holders. The TieTek Royalty Agreement caps the royalty payments due the Royalty Holders at $1 million per year, so any royalty payments in excess of that amount would be payable by the Company in
shares of its Common Stock. 
 (b) The Company will be obligated to adjust the exercise price of certain outstanding warrants upon the
issuance of the Debentures and may be obligated to further adjust the exercise price of such warrants upon the adjustment of the Conversion Price of the Debentures and the Exercise Price of the Warrants subsequent to the Company’s 1 for 20
reverse split of its Common Stock. 
 (c) The Company has elected to pay interest to Opus in the form of Common Stock, in lieu of cash.

 5. Since its most recent periodic report filed under the Exchange Act, the Company issued 1,302,363 shares of its Common Stock in payment
of accrued interest, under the Construction Loan, accruing during the period from April 1, 2007 to June 30, 2007. 
 6. The Company
is obligated to issue additional shares of Common Stock to the persons and in the amounts shown in Note 7 of the Notes to Consolidated Financial Statements in the Form 10-QSB of the Company for the fiscal period ended April 1, 2007. 

7. Pursuant to the terms of the Conversion Agreement governing the terms of the conversion of the July and December Debentures, the former holders of
those debentures (“Holders”) are entitled to receive additional shares of Company stock as follows: if the Company shall, in connection with its proposed financing in the amount of no less than $11.6 million (the “Financing”),
sell or grant any option to purchase, or otherwise dispose of or issue any Common Stock or Common Stock Equivalents entitling any Person to acquire shares of Common Stock, at an effective price per share less than the conversion price set forth in
the Conversion Agreement (such lower price, the “Base Price”), then, upon consummation of the Financing, the Company shall issue to the Holders, pro rata, the number of shares of Common Stock equal to the difference between (i) the
number of shares of Common Stock received pursuant to the Conversion Agreement and (ii) the number of shares of Common Stock to which the Holders would have been entitled if the conversion price on the date of the Conversion Agreement had been
equal to the Base Price. 
 8. The Company’s knowledge of voting agreements among the Company’s security holders is described in
the Proxy Statement filed with the SEC on February 1, 2007. 

 Schedule 3.1(h) – SEC Reports; Financial Statements 
 The Company filed its Form 10-QSB for the period of operation ended March 26, 2006 on May 17, 2006. This filing was not timely. Big Bend filed
on July 27, 2006 its Form 3 that was due in November 2004, and Mr. Scott filed on January 3, 2007 a Form 4 reporting the acquisition of options to purchase 50,000 shares on January 2, 2006. Mr. Neal Kaufman filed on
June 25, 2007 his Form 4 which was due on June 3, 2007. 
 Schedule 3.1(i) – Material Changes 
 1. (a) The Houston facility was idled on or about May 15, 2007. The idling of this facility could have a Material Adverse Effect on the Company
since it would be unable to satisfy an order for ties in excess of the manufacturing capacity of the Marshall facility. 
 (b) Currently
there is no backlog of orders from customers other than from the Company’s one major customer. The Company’s inability to sell ties to customers other than the Company’s one major customer may have a Material Adverse Effect.

 (c) The Company has the following personal property tax bills for the tax year 2006:. 
  

					
	 Harris County & City of Houston (Hardy Road Location)
	  	$	22,676.58	*
	 Aldine Bender Independent School District
	  	$	31,333.61	**
	 Houston County & City of Houston (Brittmoore Location)
	  	$	48,718.19	***

	*	The Company entered into an installment agreement to pay this tax and did pay $5,510.67. The Harris County Tax Assessor set up and applied the payment to the wrong account (see
Brittmoore Location tax explanation). The Company did not make the April May and June installments. Believing that it had not received any payments on the Hardy Road Location, the Harris County Tax Assessor sent a bill for the full $22,676.58 to the
Company. The Company has entered into a new installment agreement for this amount and will pay $7,754.06 on July 26, 2007 and $5,170.00 until the balance of $15,509.00 is paid. 

	**	The Company did not make the April, May and June, under an installment agreement, but will bring these installment payments current within the next two weeks.

	***	The Company is disputing this amount because the appraisal district for Harris County incorrectly assessed the property as being at this location. The Company did not have equipment
at this location until May of 2006. The date for assessing personal property tax is January 1st of each year. Therefore, no tax is due for this location. The Company has contacted the Harris County Appraisal District to extinguish the tax bill.

 2. Since its most recently filed periodic report filed under the Exchange Act, the Company issued 1,302,363 shares of its
Common Stock in payment of accrued interest under the Construction Loan, accruing during the period from April 1, 2007 to June 30, 2007. 
 Schedule 3.1(n) – Title to Assets. 
 The Company’s assets are encumbered by a blanket Lien on the Company’s
assets in favor of Opus to secure the Construction Loan. 

 Schedule 3.1(dd) – Accountants 
 The Company’s accounting firm is KBA Group, LLP.Form of 8% Convertible Debenture

 Exhibit 10.5 
 NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM,
OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL
BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES. 
 Original Issue Date: July 30, 2007 
 Original Conversion Price (subject
to adjustment herein): $0.20 
 $                                 
 8% CONVERTIBLE DEBENTURE 
 DUE JULY
30, 2010 
 THIS 8% Convertible Debenture is one of a series of duly authorized and validly issued 8% Convertible Debentures of North
American Technologies Group, Inc., a Delaware corporation, having its principal place of business at 429 Memory Lane, Marshall, TX 75672 (the “Company”), designated as its 8% Convertible Debenture due July 30, 2010 (this
debenture, the “Debenture” and, collectively with the other such series of debentures, the “Debentures”). 
 FOR VALUE RECEIVED, the Company promises to pay to
                                        
or its registered assigns (the “Holder”), or shall have paid pursuant to the terms hereunder, the principal sum of
$                     by July 30, 2010 (the “Maturity Date”) or such earlier date as this Debenture is required or
permitted to be repaid as provided hereunder, and to pay interest to the Holder on the aggregate unconverted and then outstanding principal amount of this Debenture in accordance with the provisions hereof. This Debenture is subject to the following
additional provisions: 
 Section 1. Definitions. For the purposes hereof, in addition to the terms defined elsewhere in
this Debenture, (a) capitalized terms not otherwise defined herein shall have the meanings set forth in the Purchase Agreement and (b) the following terms shall have the following meanings: 
 “Alternate Consideration” shall have the meaning set forth in Section 5(e). 
  

 1 

 “Bankruptcy Event” means any of the following events: (a) the
Company or any Significant Subsidiary (as such term is defined in Rule 1-02(w) of Regulation S-X) thereof commences a case or other proceeding under any bankruptcy, reorganization, arrangement, adjustment of debt, relief of debtors, dissolution,
insolvency or liquidation or similar law of any jurisdiction relating to the Company or any Significant Subsidiary thereof; (b) there is commenced against the Company or any Significant Subsidiary thereof any such case or proceeding that is not
dismissed within 60 days after commencement; (c) the Company or any Significant Subsidiary thereof is adjudicated insolvent or bankrupt or any order of relief or other order approving any such case or proceeding is entered; (d) the Company
or any Significant Subsidiary thereof suffers any appointment of any custodian or the like for it or any substantial part of its property that is not discharged or stayed within 60 calendar days after such appointment; (e) the Company or any
Significant Subsidiary thereof makes a general assignment for the benefit of creditors; (f) the Company or any Significant Subsidiary thereof calls a meeting of its creditors with a view to arranging a composition, adjustment or restructuring
of its debts; or (g) the Company or any Significant Subsidiary thereof, by any act or failure to act, expressly indicates its consent to, approval of or acquiescence in any of the foregoing or takes any corporate or other action for the purpose
of effecting any of the foregoing. 
 “Base Conversion Price” shall have the meaning set forth in
Section 5(b). 
 “Business Day” means any day except Saturday, Sunday, any day which shall be 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. 
 “Buy-In” shall have the meaning set forth in Section 4(d)(v). 
 “Change of Control Transaction” means the occurrence after the date hereof of any of (i) an acquisition after the
date hereof by an individual or legal entity or “group” (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of effective control (whether through legal or beneficial ownership of capital stock of the Company, by contract
or otherwise) of in excess of 33% of the voting securities of the Company (other than by means of conversion or exercise of the Debentures and the Securities issued together with the Debentures), or (ii) the Company merges into or consolidates
with any other Person, or any Person merges into or consolidates with the Company and, after giving effect to such transaction, the stockholders of the Company immediately prior to such transaction own less than 66% of the aggregate voting power of
the Company or the successor entity of such transaction, or (iii) the Company sells or transfers all or substantially all of its assets to another Person and the stockholders of the Company immediately prior to such transaction own less than
66% of the aggregate voting power of the acquiring entity immediately after the transaction, or (iv) a replacement at one time or within a three year period of more than one-half of the 

  

 2 

 
members of the Company’s board of directors which is not approved by a majority of those individuals who are members of the board of directors on the
date hereof (or by those individuals who are serving as members of the board of directors on any date whose nomination to the board of directors was approved by a majority of the members of the board of directors who are members on the date hereof),
or (v) the execution by the Company of an agreement to which the Company is a party or by which it is bound, providing for any of the events set forth in clauses (i) through (iv) above; provided, that none of the foregoing events
which occur as part of the transactions contemplated by the Purchase Agreement shall constitute a Change of Control Transaction. 
 “Common Stock” means the common stock, par value $0.001 per share, of the Company and stock of any other class of securities into which such securities may hereafter be reclassified or changed into. 
 “Conversion Date” shall have the meaning set forth in Section 4(a). 
 “Conversion Price” shall have the meaning set forth in Section 4(b). 
 “Conversion Shares” means, collectively, the shares of Common Stock issuable upon conversion of this Debenture in
accordance with the terms hereof. 
 “Debenture Register” shall have the meaning set forth in
Section 2(c). 
 “Dilutive Issuance” shall have the meaning set forth in Section 5(b). 

“Dilutive Issuance Notice” shall have the meaning set forth in Section 5(b). 
 “Effectiveness Period” shall have the meaning set forth in the Registration Rights Agreement. 
 “Enforcement Action” shall mean (a) to take from or for the account of the Company by set-off or in any other
manner, the whole or any part of any monies which may now or hereafter be owing by the Company with respect to the Debenture, (b) to sue for payment of, or to initiate or participate with others in any suit, action or proceeding against the
Company to (i) enforce payment of or to collect the whole or any part of the Debenture or (ii) commence judicial enforcement of any of the rights and remedies under the Debenture or applicable law with respect to the Debenture, (c) to
accelerate the Debenture, (d) to cause the Company to honor any conversion or mandatory prepayment obligation under the Debenture or (e) to take any action under the provisions of any state or federal law, including, without limitation,
the Uniform Commercial Code, or under any contract or agreement to enforce, foreclose upon, take possession of or sell any property or assets of the Company. 
 “Equity Conditions” shall mean, during the period in question, (i) the Company shall have duly honored all
conversions and redemptions scheduled to occur or occurring by virtue of one or more Notices of Conversion of the Holder, if any, (ii) the Company 

  

 3 

 
shall have paid or shall pay in kind all liquidated damages and other amounts owing to the Holder in respect of this Debenture, (iii) the Common Stock
is trading on a Trading Market (and the Company believes, in good faith, that trading of the Common Stock on a Trading Market will continue uninterrupted for the foreseeable future), (iv) there is a sufficient number of authorized but unissued
and otherwise unreserved shares of Common Stock for the issuance of all of the shares issuable pursuant to the Transaction Documents, (v) there is no existing Event of Default or no existing event which, with the passage of time or the giving
of notice, would constitute an Event of Default, (vi) the issuance of the shares in question to the Holder would not violate the limitations set forth in Section 4(c) herein, and (vii) there has been no public announcement of a
pending or proposed Fundamental Transaction or Change of Control Transaction that has not been consummated. 
 “Event
of Default” shall have the meaning set forth in Section 8. 
 “Exchange Act” means the
Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder. 
 “Fundamental
Transaction” shall have the meaning set forth in Section 5(e). 
 “Interest Conversion Rate”
means the lesser of (a) the Conversion Price or (b) 100% of the average of the VWAPs for the 20 consecutive Trading Days ending on the Trading Day that is immediately prior to the applicable Interest Payment Date. 
 “Interest Notice Period” shall have the meaning set forth in Section 2(a). 
 “Interest Payment Date” shall have the meaning set forth in Section 2(a). 
 “Interest Share Amount” shall have the meaning set forth in Section 2(a). 
 “Late Fees” shall have the meaning set forth in Section 2(d). 
 “Mandatory Default Amount” means the sum of (i) the greater of (A) 110% of the outstanding principal amount of
this Debenture, plus all accrued and unpaid interest hereon, or (B) the outstanding principal amount of this Debenture, plus all accrued and unpaid interest hereon, divided by the Conversion Price on the date the Mandatory Default Amount is
either (a) demanded (if demand or notice is required to create an Event of Default) or otherwise due or (b) paid in full, whichever has a lower Conversion Price, multiplied by the VWAP on the date the Mandatory Default Amount is either
(x) demanded or otherwise due or (y) paid in full, whichever has a higher VWAP, and (ii) all other amounts, costs, expenses and liquidated damages due in respect of this Debenture. 
 “New York Courts” shall have the meaning set forth in Section 9(d). 
 “Notice of Conversion” shall have the meaning set forth in Section 4(a). 
  

 4 

 “Obligations” means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any indebtedness. 
 “Opus” means Opus 5949 LLC, a Texas limited liability company, formerly known as TIE Investors, LLC. 
 “Opus Loan” means that certain loan by Opus to TIETEK LLC, a Delaware limited liability company, TIETEK Technologies, Inc., a Texas corporation, North American Technologies Group, Inc., a Delaware corporation, in the
original principal amount of $14,000,000 as evidenced by that certain Construction Loan Agreement, dated as of February 5, 2004, as amended, supplemented, extended, refinanced or otherwise modified from time to time, and the Promissory Note and
security agreements executed pursuant thereto, as amended, replaced or restated from time to time. 
 “Original Issue
Date” means the date of the first issuance of the Debentures, regardless of any transfers of any Debenture and regardless of the number of instruments which may be issued to evidence such Debentures. 
 “Permitted Indebtedness” means (a) the Indebtedness existing on the Original Issue Date and set forth on the
Disclosure Schedules attached to the Purchase Agreement, (b) lease obligations and purchase money indebtedness incurred in connection with the acquisition of capital assets and lease obligations with respect to newly acquired or leased assets,
and (c) the Opus Loan. 
 “Permitted Lien” means the individual and collective reference to the
following: (a) Liens for taxes, assessments and other governmental charges or levies not yet due or Liens for taxes, assessments and other governmental charges or levies being contested in good faith and by appropriate proceedings for which
adequate reserves (in the good faith judgment of the management of the Company) have been established in accordance with GAAP; (b) Liens imposed by law which were incurred in the ordinary course of the Company’s business, such as
carriers’, warehousemen’s and mechanics’ Liens, statutory landlords’ Liens, and other similar Liens arising in the ordinary course of the Company’s business, and which (x) do not individually or in the aggregate
materially detract from the value of such property or assets or materially impair the use thereof in the operation of the business of the Company and its consolidated Subsidiaries or (y) are being contested in good faith by appropriate
proceedings, which proceedings have the effect of preventing for the foreseeable future the forfeiture or sale of the property or asset subject to such Lien; (c) Liens incurred in connection with Permitted Indebtedness under clause
(a) thereunder; and (d) Liens incurred in connection with Permitted Indebtedness under clause (b) thereunder, provided that such Liens are not secured by assets of the Company or its Subsidiaries other than the assets so acquired or
leased. 
 “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. 
  

 5 

 “Purchase Agreement” means the Securities Purchase Agreement, dated as
of July 24, 2007, among the Company and the original Holders, as amended, modified or supplemented from time to time in accordance with its terms. 
 “Registration Rights Agreement” means the Fourth Amended and Restated Registration Rights Agreement, dated as of the date of the Purchase Agreement, among the Company and the various Persons signatory
thereto, as amended, modified or supplemented from time to time in accordance with its terms. 
 “Registration
Statement” means a registration statement that registers the resale of all Conversion Shares and Interest Conversion Shares of the Holder, names such Holder as a “selling stockholder” therein, and meets the requirements of the
Registration Rights Agreement. 
 “Securities Act” means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder. 
 “Share Delivery Date” shall have the meaning set forth in
Section 4(d). 
 “Subsidiary” shall have the meaning set forth in the Purchase Agreement. 
 “Trading Day” means a day on which the principal Trading Market is open for business. 
 “Trading Market” means the following markets or exchanges on which the Common Stock is listed or quoted for trading on
the date in question: the American Stock Exchange, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange or the OTC Bulletin Board. 
 “Transaction Documents” shall have the meaning set forth in the Purchase Agreement. 
 Section 2. Interest. 
 a) Payment of Interest in Cash or Kind. The Company shall pay interest to the Holder on the aggregate unconverted and then outstanding principal amount of this Debenture at the rate of 8% per annum,
payable quarterly on January 1, April 1, July 1 and October 1, beginning on the first such date after the Original Issue Date, on each Conversion Date (as to that principal amount then being converted), and on the
Maturity Date (each such date, an “Interest Payment Date”) (if any Interest Payment Date is not a Business Day, then the applicable payment shall be due on the next succeeding Business Day), in cash or duly authorized, validly
issued, fully paid and non-assessable shares of Common Stock at the Interest Conversion Rate (the dollar amount to be paid in shares, the “Interest Share Amount”) or a combination thereof; provided, however, that
payment in shares of Common Stock may only occur if (i) all of the Equity Conditions have been 

  

 6 

 
met (unless waived by the Holder in writing) during the 20 Trading Days immediately prior to the applicable Interest Payment Date (the “Interest
Notice Period”) and through and including the date such shares of Common Stock are issued to the Holder, (ii) the Company shall have given the Holder notice in accordance with the notice requirements set forth below. 
 b) Company’s Election to Pay Interest in Kind. Subject to the terms and conditions herein, the decision whether to pay
interest hereunder in cash, shares of Common Stock or a combination thereof shall be at the discretion of the Company. Prior to the commencement of any Interest Notice Period, the Company shall deliver to the Holder a written notice of its election
to pay interest hereunder on the applicable Interest Payment Date either in cash, shares of Common Stock or a combination thereof and the Interest Share Amount as to the applicable Interest Payment Date, provided that the Company may indicate in
such notice that the election contained in such notice shall apply to future Interest Payment Dates until revised by a subsequent notice. During any Interest Notice Period, the Company’s election (whether specific to an Interest Payment Date or
continuous) shall be irrevocable as to such Interest Payment Date. Subject to the aforementioned conditions, failure to timely deliver such written notice to the Holder shall be deemed an election by the Company to pay the interest on such Interest
Payment Date in cash. 
 c) Interest Calculations. Interest shall be calculated on the basis of a 360-day year,
consisting of twelve 30 calendar day periods, and shall accrue daily commencing on the Original Issue Date until payment in full of the principal sum, together with all accrued and unpaid interest, liquidated damages and other amounts which may
become due hereunder, has been made. Payment of interest in shares of Common Stock shall otherwise occur pursuant to Section 4(d)(ii) herein and, solely for purposes of the payment of interest in shares, the Interest Payment Date shall be
deemed the Conversion Date. Interest shall cease to accrue with respect to any principal amount converted, provided that the Company actually delivers the Conversion Shares within the time period required by Section 4(d)(ii) herein. Interest
hereunder will be paid to the Person in whose name this Debenture is registered on the records of the Company regarding registration and transfers of this Debenture (the “Debenture Register”). Except as otherwise provided herein, if
at any time the Company pays interest partially in cash and partially in shares of Common Stock to the holders of the Debentures, then such payment of cash shall be distributed ratably among the holders of the then-outstanding Debentures based on
their respective outstanding balances. 
 d) Late Fee. All overdue accrued and unpaid interest to be paid hereunder
shall entail a late fee at an interest rate equal to the lesser of 18% per annum or the maximum rate permitted by applicable law (“Late Fees”) which shall accrue daily from the date such interest is due hereunder through and
including the date of payment in full. Notwithstanding anything to the contrary contained herein, if on any Interest Payment Date the Company has elected to pay accrued interest in the form of Common Stock but the Company is not permitted to pay
accrued interest in Common Stock because it fails to satisfy the conditions for payment in Common Stock set forth in Section 2(a) herein, 

  

 7 

 
then, at the option of the Holder, the Company, in lieu of delivering either shares of Common Stock pursuant to this Section 2 or paying the regularly
scheduled interest payment in cash, shall deliver, within three Trading Days of each applicable Interest Payment Date, an amount in cash equal to the product of (x) the number of shares of Common Stock otherwise deliverable to the Holder in
connection with the payment of interest due on such Interest Payment Date multiplied by (y) the highest VWAP during the period commencing on the Interest Payment Date and ending on the Trading Day prior to the date such payment is made. If any
Interest Conversion Shares are issued to the Holder in connection with an Interest Payment Date and are not applied against an Interest Share Amount, then the Holder shall promptly return such excess shares to the Company. 
 e) Prepayment. Except as otherwise set forth in this Debenture, the Company may not prepay any portion of the principal amount of
this Debenture without the prior written consent of the Holder. 
 Section 3. Registration of Transfers and Exchanges.

 a) Different Denominations. This Debenture is exchangeable for an equal aggregate principal amount of Debentures of
different authorized denominations, as requested by the Holder surrendering the same. No service charge will be payable for such registration of transfer or exchange. 
 b) Investment Representations. This Debenture has been issued subject to certain investment representations of the original Holder
set forth in the Purchase Agreement and may be transferred or exchanged only in compliance with the Purchase Agreement and applicable federal and state securities laws and regulations. 
 c) Reliance on Debenture Register. Prior to due presentment for transfer to the Company of this Debenture, the Company and any
agent of the Company may treat the Person in whose name this Debenture is duly registered on the Debenture Register as the owner hereof for the purpose of receiving payment as herein provided and for all other purposes, whether or not this Debenture
is overdue, and neither the Company nor any such agent shall be affected by notice to the contrary. 
 Section 4.
Conversion. 
 a) Voluntary Conversion. At any time after the Original Issue Date until this Debenture is no
longer outstanding, this Debenture shall be convertible, in whole or in part, into shares of Common Stock at the option of the Holder, at any time and from time to time (subject to the conversion limitations set forth in Section 4(c) hereof).
The Holder shall effect conversions by delivering to the Company a Notice of Conversion, the form of which is attached hereto as Annex A (a “Notice of Conversion”), specifying therein the principal amount of this Debenture to
be converted and the date on which such conversion shall be effected (such date, the “Conversion Date”). If no Conversion Date is specified in a Notice of Conversion, the Conversion Date shall be the date that 

  

 8 

 
such Notice of Conversion is deemed delivered hereunder. To effect conversions hereunder, the Holder shall not be required to physically surrender this
Debenture to the Company unless the entire principal amount of this Debenture, plus all accrued and unpaid interest thereon, has been so converted. Conversions hereunder shall have the effect of lowering the outstanding principal amount of this
Debenture in an amount equal to the applicable conversion. The Holder and the Company shall maintain records showing the principal amount(s) converted and the date of such conversion(s). The Company may deliver an objection to any Notice of
Conversion within 1 Business Day of delivery of such Notice of Conversion. In the event of any dispute or discrepancy, the records of the Holder shall be controlling and determinative in the absence of manifest error. The Holder, and any assignee
by acceptance of this Debenture, acknowledge and agree that, by reason of the provisions of this paragraph, following conversion of a portion of this Debenture, the unpaid and unconverted principal amount of this Debenture may be less than the
amount stated on the face hereof. 
 b) Conversion Price. The conversion price in effect on any Conversion Date
shall be equal to $0.20 (subject to adjustment herein) (the “Conversion Price”). 
 c) Conversion
Limitations. The Company shall not effect any conversion of this Debenture, and a Holder shall not have the right to convert any portion of this Debenture, to the extent that after giving effect to the conversion set forth on the applicable
Notice of Conversion, such Holder (together with such Holder’s Affiliates, and any other person or entity acting as a group together with such Holder or any of such Holder’s Affiliates) would beneficially own in excess of the Beneficial
Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by such Holder and its Affiliates shall include the number of shares of Common Stock issuable upon
conversion of this Debenture with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which are issuable upon (A) conversion of the remaining, unconverted principal amount of this Debenture
beneficially owned by such Holder or any of its Affiliates and (B) exercise or conversion of the unexercised or unconverted portion of any other securities of the Company subject to a limitation on conversion or exercise analogous to the
limitation contained herein (including, without limitation, any other Debentures or the Warrants) beneficially owned by such Holder or any of its Affiliates. Except as set forth in the preceding sentence, for purposes of this Section 4(c),
beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. To the extent that the limitation contained in this Section 4(c) applies, the determination
of whether this Debenture is convertible (in relation to other securities owned by such Holder together with any Affiliates) and of which principal amount of this Debenture is convertible shall be in the sole discretion of such Holder, and the
submission of a Notice of Conversion shall be deemed to be such Holder’s determination of whether this Debenture may be converted (in relation to other securities owned by such Holder together with any Affiliates) and which principal amount of
this Debenture is convertible, in each case subject to such aggregate percentage limitations. To ensure compliance with this restriction, each Holder will be deemed to represent to the Company each time it delivers 

  

 9 

 
a Notice of Conversion that such Notice of Conversion has not violated the restrictions set forth in this paragraph and the Company shall have no obligation
to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations
promulgated thereunder. For purposes of this Section 4(c), in determining the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as stated in the most recent of the following:
(A) the Company’s most recent Form 10-QSB or Form 10-KSB, as the case may be; (B) a more recent public announcement by the Company; or (C) a more recent notice by the Company or the Company’s transfer agent setting forth the
number of shares of Common Stock outstanding. Upon the written or oral request of a Holder, the Company shall within two Trading Days confirm orally and in writing to such Holder the number of shares of Common Stock then outstanding. In
any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Debenture, by such Holder or its Affiliates since the date as of which such
number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be 4.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common
Stock issuable upon conversion of this Debenture held by the Holder. The Beneficial Ownership Limitation provisions of this Section 4(c) may be waived by such Holder, at the election of such Holder, upon not less than 61 days’ prior notice
to the Company, to change the Beneficial Ownership Limitation to 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon conversion of this Debenture held by the
Holder and the provisions of this Section 4(c) shall continue to apply. Upon such a change by a Holder of the Beneficial Ownership Limitation from such 4.99% limitation to such 9.99% limitation, the Beneficial Ownership Limitation may not be
further waived by such Holder. The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 4(c) to correct this paragraph (or any portion hereof) which may
be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall
apply to a successor holder of this Debenture. 
 d) Mechanics of Conversion. 
 i. Conversion Shares Issuable Upon Conversion of Principal Amount. The number of shares of Common Stock issuable upon a conversion
hereunder shall be determined by the quotient obtained by dividing (x) the outstanding principal amount of this Debenture to be converted by (y) the Conversion Price. 
 ii. Delivery of Certificate Upon Conversion. Not later than three Trading Days after each Conversion Date (the “Share
Delivery Date”), the Company shall deliver, or cause to be delivered, to the Holder (A) a certificate or 

  

 10 

 
certificates representing the Conversion Shares which, on or after the effective date of a Registration Statement, shall be free of restrictive legends and
trading restrictions (other than those which may then be required by the Purchase Agreement) representing the number of shares of Common Stock being acquired upon the conversion of this Debenture (including, if the Company has given continuous
notice pursuant to Section 2(b) for payment of interest in shares of Common Stock at least 20 Trading Days prior to the date on which the Conversion Notice is delivered to the Company, shares of Common Stock representing the payment of accrued
interest otherwise determined pursuant to Section 2(a) but assuming that the Interest Payment Period is the 20 Trading Days period immediately prior to the date on which the Conversion Notice is delivered to the Company and excluding for such
issuance the condition that the Company deliver Interest Conversion Shares as to such interest payment) and (B) a bank check in the amount of accrued and unpaid interest (if the Company has elected or is required to pay accrued interest in
cash). On or after the effective date of a Registration Statement, the Company shall use its best efforts to deliver any certificate or certificates required to be delivered by the Company under this Section 4 electronically through the
Depository Trust Company or another established clearing corporation performing similar functions. 
 iii. Failure to
Deliver Certificates. If in the case of any Notice of Conversion such certificate or certificates are not delivered to or as directed by the applicable Holder by the third Trading Day after the Conversion Date, the Holder shall be entitled to
elect by written notice to the Company at any time on or before its receipt of such certificate or certificates, to rescind such Conversion, in which event the Company shall promptly return to the Holder any original Debenture delivered to the
Company and the Holder shall promptly return the Common Stock certificates representing the principal amount of this Debenture tendered for conversion to the Company. 
 iv. Obligation Absolute; Partial Liquidated Damages. The Company’s obligations to issue and deliver the Conversion Shares upon
conversion of this Debenture in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by the Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of
any judgment against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder or any other Person of any obligation to the Company or any
violation or alleged violation of law by the Holder or any other Person, and irrespective of any other circumstance which might otherwise limit such obligation of the Company to the Holder in connection with the issuance of such Conversion Shares;
provided, however, that such delivery shall not operate as a waiver by the Company of any such action the Company may have against the Holder. In the event the Holder of this Debenture shall elect to convert any or all of the
outstanding principal amount hereof, the Company may not refuse 

  

 11 

 
conversion based on any claim that the Holder or anyone associated or affiliated with the Holder has been engaged in any violation of law, agreement or for
any other reason, unless an injunction from a court, on notice to Holder, restraining and or enjoining conversion of all or part of this Debenture shall have been sought and obtained, and the Company posts a surety bond for the benefit of the Holder
in the amount of 150% of the outstanding principal amount of this Debenture, which is subject to the injunction, which bond shall remain in effect until the completion of arbitration/litigation of the underlying dispute and the proceeds of which
shall be payable to such Holder to the extent it obtains judgment. In the absence of such injunction, the Company shall issue Conversion Shares or, if applicable, cash, upon a properly noticed conversion. If the Company fails for any reason to
deliver to the Holder such certificate or certificates pursuant to Section 4(d)(ii) by the third Trading Day after the Conversion Date, the Company shall pay to such Holder, in cash, as liquidated damages and not as a penalty, for each $1000 of
principal amount being converted, $10 per Trading Day (increasing to $20 per Trading Day on the fifth Trading Day after such liquidated damages begin to accrue) for each Trading Day after such third Trading Day until such certificates are delivered.
Nothing herein shall limit a Holder’s right to pursue actual damages or declare an Event of Default pursuant to Section 8 hereof for the Company’s failure to deliver Conversion Shares within the period specified herein and such Holder
shall have the right to pursue all remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief. The exercise of any such rights shall not prohibit the Holder from
seeking to enforce damages pursuant to any other Section hereof or under applicable law. 
 v. Compensation for Buy-In on
Failure to Timely Deliver Certificates Upon Conversion. In addition to any other rights available to the Holder, if the Company fails for any reason to deliver to the Holder such certificate or certificates by the Share Delivery Date pursuant to
Section 4(d)(ii), and if after such Share Delivery Date the Holder is required by its brokerage firm to purchase (in an open market transaction or otherwise), or the Holder’s brokerage firm otherwise purchases, shares of Common Stock to
deliver in satisfaction of a sale by such Holder of the Conversion Shares which the Holder was entitled to receive upon the conversion relating to such Share Delivery Date (a “Buy-In”), then the Company shall (A) pay in cash to
the Holder (in addition to any other remedies available to or elected by the Holder) the amount by which (x) the Holder’s total purchase price (including any brokerage commissions) for the Common Stock so purchased exceeds (y) the
product of (1) the aggregate number of shares of Common Stock that such Holder was entitled to receive from the conversion at issue multiplied by (2) the actual sale price at which the sell order giving rise to such purchase obligation was
executed (including any brokerage commissions) and (B) at the option of the Holder, either reissue (if surrendered) this Debenture in a principal amount equal to the principal amount of the attempted conversion or deliver to the Holder the
number of shares of Common Stock that would have 

  

 12 

 
been issued if the Company had timely complied with its delivery requirements under Section 4(d)(ii). For example, if the Holder purchases Common Stock
having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted conversion of this Debenture with respect to which the actual sale price of the Conversion Shares (including any brokerage commissions) giving rise to such
purchase obligation was a total of $10,000 under clause (A) of the immediately preceding sentence, the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the
Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount of such loss. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without
limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver certificates representing shares of Common Stock upon conversion of this Debenture as required pursuant to the terms
hereof. 
 vi. Reservation of Shares Issuable Upon Conversion. Subject to filing the Certificate of Amendment, the
Company covenants that it will at all times reserve and keep available out of its authorized and unissued shares of Common Stock for the sole purpose of issuance upon conversion of this Debenture and payment of interest on this Debenture, each as
herein provided, free from preemptive rights or any other actual contingent purchase rights of Persons other than the Holder (and the other holders of the Debentures), not less than such aggregate number of shares of the Common Stock as shall
(subject to the terms and conditions set forth in the Purchase Agreement) be issuable (taking into account the adjustments and restrictions of Section 5) upon the conversion of the outstanding principal amount of this Debenture and payment of
interest hereunder. The Company covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly authorized, validly issued, fully paid and nonassessable and, if the Registration Statement is then effective under the
Securities Act, shall be registered for public sale in accordance with such Registration Statement. 
 vii. Fractional
Shares. Upon a conversion hereunder the Company shall not be required to issue stock certificates representing fractions of shares of Common Stock, but may if otherwise permitted, make a cash payment in respect of any final fraction of a share
based on the VWAP at such time. If the Company elects not, or is unable, to make such a cash payment, the Holder shall be entitled to receive, in lieu of the final fraction of a share, 1 whole share of Common Stock. 
 viii. Transfer Taxes. The issuance of certificates for shares of the Common Stock on conversion of this Debenture shall be made
without charge to the Holder hereof for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such certificates, provided that the Company shall not be required to pay any tax that may be payable in
respect of any transfer 

  

 13 

 
involved in the issuance and delivery of any such certificate upon conversion in a name other than that of the Holder of this Debenture so converted and the
Company shall not be required to issue or deliver such certificates unless or until the person or persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the
Company that such tax has been paid. 
 Section 5. Certain Adjustments. 
 a) Stock Dividends and Stock Splits. If the Company, at any time while this
Debenture is outstanding: (A) pays a stock dividend or otherwise makes a distribution or distributions payable in shares of Common Stock on shares of Common Stock or any Common Stock Equivalents (which, for avoidance of doubt, shall not include
any shares of Common Stock issued by the Company upon conversion of, or payment of interest on, this Debenture or on the Opus Loan); (B) subdivides outstanding shares of Common Stock into a larger number of shares; (C) combines (including
by way of a reverse stock split) outstanding shares of Common Stock into a smaller number of shares; or (D) issues, in the event of a reclassification of shares of the Common Stock, any shares of capital stock of the Company, then the
Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding any treasury shares of the Company) outstanding immediately before such event and of which the denominator shall be
the number of shares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to this Section shall become effective immediately after the record date for the determination of stockholders entitled to receive such
dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification. Further, in addition to and not in place of any of the foregoing, the Conversion Price shall be
adjusted on the 90th calendar day following the first reverse stock split to take effect after the Original Issue Date to equal the average of the VWAPs on
the 22 Trading Days immediately preceding such 90th calendar day. 
 b) Subsequent Equity Sales. If, at any time while this Debenture is outstanding, the Company or any Subsidiary, as applicable,
sells or grants any option to purchase or sells or grants any right to reprice, or otherwise disposes of or issues (or announces any sale, grant or any option to purchase or other disposition), any Common Stock or Common Stock Equivalents entitling
any Person to acquire shares of Common Stock at an effective price per share that is lower than the then Conversion Price (such lower price, the “Base Conversion Price” and such issuances, collectively, a “Dilutive
Issuance”) (if the holder of the Common Stock or Common Stock Equivalents so issued shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or
due to warrants, options or rights per share which are issued in connection with such issuance, be entitled to receive shares of Common Stock at an effective price per share that is lower than the Conversion Price, such issuance shall be deemed to
have occurred for less than the Conversion Price on such date of the Dilutive Issuance), then the Conversion Price shall 

  

 14 

 
be reduced to equal the Base Conversion Price. Such adjustment shall be made whenever such Common Stock or Common Stock Equivalents are issued.
Notwithstanding the foregoing, no adjustment will be made under this Section 5(b) in respect of an Exempt Issuance. The Company shall notify the Holder in writing, no later than 1 Business Day following the issuance of any Common Stock or
Common Stock Equivalents subject to this Section 5(b), indicating therein the applicable issuance price, or applicable reset price, exchange price, conversion price and other pricing terms (such notice, the “Dilutive Issuance
Notice”). For purposes of clarification, whether or not the Company provides a Dilutive Issuance Notice pursuant to this Section 5(b), upon the occurrence of any Dilutive Issuance, the Holder is entitled to receive a number of
Conversion Shares based upon the Base Conversion Price on or after the date of such Dilutive Issuance, regardless of whether the Holder accurately refers to the Base Conversion Price in the Notice of Conversion. 
 c) Subsequent Rights Offerings. If the Company, at any time while the Debenture is outstanding, shall issue rights, options or
warrants to all holders of Common Stock (and not to Holders) entitling them to subscribe for or purchase shares of Common Stock at a price per share that is lower than the VWAP on the record date referenced below, then the Conversion Price shall be
multiplied by a fraction of which the denominator shall be the number of shares of the Common Stock outstanding on the date of issuance of such rights or warrants plus the number of additional shares of Common Stock offered for subscription or
purchase, and of which the numerator shall be the number of shares of the Common Stock outstanding on the date of issuance of such rights or warrants plus the number of shares which the aggregate offering price of the total number of shares so
offered (assuming delivery to the Company in full of all consideration payable upon exercise of such rights, options or warrants) would purchase at such VWAP. Such adjustment shall be made whenever such rights or warrants are issued, and shall
become effective immediately after the record date for the determination of stockholders entitled to receive such rights, options or warrants. 
 d) Pro Rata Distributions. If the Company, at any time while this Debenture is outstanding, distributes to all holders of Common Stock (and not to the Holders) evidences of its indebtedness or assets (including
cash and cash dividends) or rights or warrants to subscribe for or purchase any security (other than the Common Stock, which shall be subject to Section 5(b)), then in each such case the Conversion Price shall be adjusted by multiplying such
Conversion Price in effect immediately prior to the record date fixed for determination of stockholders entitled to receive such distribution by a fraction of which the denominator shall be the VWAP determined as of the record date mentioned above,
and of which the numerator shall be such VWAP on such record date less the then fair market value at such record date of the portion of such assets or evidence of indebtedness so distributed applicable to 1 outstanding share of the Common Stock as
determined by the Board of Directors of the Company in good faith. In either case the adjustments shall be described in a statement delivered to the Holder describing the portion of assets or evidences of indebtedness so distributed or such
subscription rights applicable to 1 share of Common Stock. Such adjustment shall be made whenever any such distribution is made and shall become effective immediately after the record date mentioned above. 
  

 15 

 e) Fundamental Transaction. If, at any time while this Debenture is outstanding,
(A) the Company effects any merger or consolidation of the Company with or into another Person, (B) the Company effects any sale of all or substantially all of its assets in one transaction or a series of related transactions, (C) any
tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to tender or exchange their shares for other securities, cash or property, or (D) the Company effects
any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property (in any such case, a “Fundamental
Transaction”), then, upon any subsequent conversion of this Debenture, the Holder shall have the right to receive, for each Conversion Share that would have been issuable upon such conversion immediately prior to the occurrence of such
Fundamental Transaction, the same kind and amount of securities, cash or property as it would have been entitled to receive upon the occurrence of such Fundamental Transaction if it had been, immediately prior to such Fundamental Transaction, the
holder of 1 share of Common Stock (the “Alternate Consideration”). For purposes of any such conversion, the determination of the Conversion Price shall be appropriately adjusted to apply to such Alternate Consideration based on the
amount of Alternate Consideration issuable in respect of 1 share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Conversion Price among the Alternate Consideration in a reasonable manner reflecting the relative
value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as
to the Alternate Consideration it receives upon any conversion of this Debenture following such Fundamental Transaction. To the extent necessary to effectuate the foregoing provisions, any successor to the Company or surviving entity in such
Fundamental Transaction shall issue to the Holder a new debenture consistent with the foregoing provisions and evidencing the Holder’s right to convert such debenture into Alternate Consideration. The terms of any agreement pursuant to which a
Fundamental Transaction is effected shall include terms requiring any such successor or surviving entity to comply with the provisions of this Section 5(e) and insuring that this Debenture (or any such replacement security) will be similarly
adjusted upon any subsequent transaction analogous to a Fundamental Transaction. 
 f) Calculations. All calculations
under this Section 5 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 5, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall
be the sum of the number of shares of Common Stock (excluding any treasury shares of the Company) issued and outstanding. 
  

 16 

 g) Notice to the Holder. 
 i. Adjustment to Conversion Price. Whenever the Conversion Price is adjusted pursuant to any provision of this Section 5, the
Company shall promptly mail to each Holder a notice setting forth the Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment. If the Company issues a variable rate security, despite the
prohibition thereon in the Purchase Agreement, the Company shall be deemed to have issued Common Stock or Common Stock Equivalents at the lowest possible conversion or exercise price at which such securities may be converted or exercised in the case
of a Variable Rate Transaction (as defined in the Purchase Agreement). 
 ii. Notice to Allow Conversion by Holder. If
(A) the Company shall declare a dividend (or any other distribution in whatever form) on the Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the Company
shall authorize the granting to all holders of the Common Stock of rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Company shall be required
in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, of any compulsory share exchange whereby the
Common Stock is converted into other securities, cash or property or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause
to be filed at each office or agency maintained for the purpose of conversion of this Debenture, and shall cause to be delivered to the Holder at its last address as it shall appear upon the Debenture Register, at least 20 calendar days prior to the
applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the
date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer
or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property
deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange, provided that the failure to deliver such notice or any defect therein or in the delivery thereof shall not affect the validity of the corporate action
required to be specified in such notice. The Holder is entitled to convert this Debenture during the 20-day period commencing on the date of such notice through the effective date of the event triggering such notice. 
  

 17 

 Section 6. The Opus Loan. 
 a) Payment Restrictions. The Company hereby agrees that it may not make, and the Holder hereby agrees that it will not
accept, any payment or distribution with respect to the Debenture (other than the Interest Share Amount) until the Opus Loan is indefeasibly paid in full in cash.  
 b) Standstill Provisions. Until the Opus Loan is indefeasibly paid in full in cash, Holder shall not, without the prior written
consent of Opus, take any Enforcement Action with respect to the Debenture. Notwithstanding the foregoing, (a) Holder may file proofs of claim against the Company in any bankruptcy, reorganization, insolvency, receivership or similar proceeding
relating to the Company or its property and (b) Holder may accelerate the Debenture to the extent the Opus Loan has been accelerated; provided, that if the acceleration of the Opus Loan has been rescinded, Holder shall be deemed to have
automatically rescinded its acceleration of the Debenture. Any payments or distributions or other proceeds of any Enforcement Action obtained by Holder in violation of the foregoing prohibition shall in any event be held in trust by Holder for the
benefit of Opus and promptly paid or delivered to Opus in the form received until the Opus Loan is indefeasibly paid in full in cash. 
 c) When Distribution Must Be Paid Over. In the event that the Holder receives any payment of any Obligations not permitted to be made by the Company or accepted by the Holder with respect to this Debenture,
such payment shall not be commingled with any of the assets of the Holder, shall be held in trust by such Holder for the benefit of Opus and shall be paid forthwith over and delivered to Opus as their interests may appear or any representative of
Opus for application to the payment of all Obligations with respect to the Opus Loan remaining unpaid to the extent necessary to pay such Obligations in full in accordance with their terms, after giving effect to any concurrent payment or
distribution to or for Opus. 
 d) Relative Rights. This Section 6 defines the relative rights of the Holder and
Opus. Nothing in this Debenture will: 
 i. impair, as between the Company and the Holder, the obligation of the Company,
which is absolute and unconditional, to pay principal of and interest on this Debenture in accordance with its terms; or 
 ii. affect the relative rights of the Holder and creditors of the Company other than their rights in relation to Opus. 
 e) Modification, Renewal, Sale or Release of the Opus Loan. Opus may, at any time and from time to time, without the consent of or notice to the Holder, without incurring responsibility to the Holder and without impairing or
releasing the Obligations hereunder of the Holder, do any one or more of the following: (a) change the manner, place or terms of payment or extend the time or payment of, or renew or alter, the Opus Loan or any instrument evidencing the same or
any agreement under which the Opus Loan is outstanding; (b) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing the Opus Loan; (c) release any Person in any manner for the collection of the
Opus Loan; and (d) exercise or refrain from exercising any rights against the Company or any other Person. 
  

 18 

 f) Benefit. The provisions of this Section 6 are for the benefit of Opus.

 g) Amendments. The provisions of this Section 6 may not be amended or modified without the written consent of
Opus. 
 Section 7. Negative Covenants. As long as any portion of this Debenture remains outstanding, the Company shall
not, and shall not permit any of its Subsidiaries to, without the prior written consent of a majority in interest of the Holders of the Debentures, directly or indirectly: 
 a) other than Permitted Indebtedness, enter into, create, incur, assume, guarantee or suffer to exist any indebtedness for borrowed money
of any kind, including but not limited to, a guarantee, on or with respect to any of its property or assets now owned or hereafter acquired or any interest therein or any income or profits therefrom; 
 b) other than Permitted Liens, enter into, create, incur, assume or suffer to exist any Liens of any kind, on or with respect to any of
its property or assets now owned or hereafter acquired or any interest therein or any income or profits therefrom; 
 c) amend
its charter documents, including, without limitation, the certificate of incorporation and bylaws, in any manner that materially and adversely affects any rights of the Holder; 
 d) repay, repurchase or offer to repay, repurchase or otherwise acquire more than a de minimis number of shares of its
Common Stock or Common Stock Equivalents other than as to (a) the Conversion Shares or Warrant Shares as permitted or required under the Transaction Documents and (b) repurchases of Common Stock or Common Stock Equivalents of departing
officers and directors of the Company, provided that such repurchases shall not exceed an aggregate of $100,000 for all officers and directors during the term of this Debenture); 
 e) enter into any agreement with respect to any of the foregoing; or 
 f) pay cash dividends or distributions on any equity securities of the Company. 
 Section 8. Events of Default. 
 a) “Event of Default” means, wherever used herein, any of the following events (whatever the reason for such event and whether such event shall be voluntary or involuntary or effected by operation of
law or pursuant to any judgment, decree or order of any court, or any order, rule or regulation of any administrative or governmental body): 
 i. any default in the payment of (A) the principal amount of any Debenture or (B) interest, liquidated damages and other amounts owing to a Holder on any Debenture, as and when the same shall become due and
payable (whether on a Conversion Date or the Maturity Date or by acceleration or otherwise) which default, solely in the case of an interest payment or other default under clause (B) above, is not cured within 3 Trading Days; 
  

 19 

 ii. the Company shall fail to observe or perform any other covenant or agreement
contained in the Debentures (other than a breach by the Company of its obligations to deliver shares of Common Stock to the Holder upon conversion, which breach is addressed in clause (xi) below) which failure is not cured, if possible to cure,
within the earlier to occur of (A) 5 Trading Days after notice of such failure sent by the Holder or by any other Holder and (B) 10 Trading Days after the Company has become or should have become aware of such failure; 
 iii. a default or event of default (subject to any grace or cure period provided in the applicable agreement, document or instrument)
shall occur under (A) any of the Transaction Documents or (B) any other material agreement, lease, document or instrument to which the Company or any Subsidiary is obligated (and not covered by clause (vi) below); 
 iv. any representation or warranty made in this Debenture, any other Transaction Documents, any written statement pursuant hereto or
thereto or any other report, financial statement or certificate made or delivered to the Holder or any other Holder shall be untrue or incorrect in any material respect as of the date when made or deemed made; 
 v. the Company or any Significant Subsidiary shall be subject to a Bankruptcy Event; 
 vi. the Company or any Subsidiary shall default on any of its obligations under any mortgage, credit agreement or other facility,
indenture agreement, factoring agreement or other instrument under which there may be issued, or by which there may be secured or evidenced, any indebtedness for borrowed money or money due under any long term leasing or factoring arrangement that
(a) involves an obligation greater than $250,000, whether such indebtedness now exists or shall hereafter be created, and (b) results in such indebtedness becoming or being declared due and payable prior to the date on which it would
otherwise become due and payable; 
 vii. the Company shall de-register the Common Stock under Section 12 of the Exchange
Act or cease filing the periodic reports required thereunder; 
  

 20 

 viii. the Company shall be a party to any Change of Control Transaction or Fundamental
Transaction or shall agree to sell or dispose of all or in excess of 33% of its assets in one transaction or a series of related transactions (whether or not such sale would constitute a Change of Control Transaction); 
 ix. the Company shall fail for any reason to deliver certificates to a Holder prior to the ninth Trading Day after a Conversion Date
pursuant to Section 4(d) or the Company shall provide at any time notice to the Holder, including by way of public announcement, of the Company’s intention to not honor requests for conversions of any Debentures in accordance with the
terms hereof; or 
 x. any monetary judgment, writ or similar final process shall be entered or filed against the Company, any
Subsidiary or any of their respective property or other assets for more than $250,000, and such judgment, writ or similar final process shall remain unvacated, unbonded or unstayed for a period of 45 calendar days. 
 b) Remedies Upon Event of Default. If any Event of Default occurs, the outstanding principal amount of this Debenture, plus accrued
but unpaid interest, liquidated damages and other amounts owing in respect thereof through the date of acceleration, shall become, at the Holder’s election, immediately due and payable in cash at the Mandatory Default Amount. Commencing 5 days
after the occurrence of any Event of Default that results in the eventual acceleration of this Debenture, the interest rate on this Debenture shall accrue at an interest rate equal to the lesser of 18% per annum or the maximum rate permitted
under applicable law. Upon the payment in full of the Mandatory Default Amount, the Holder shall promptly surrender this Debenture to or as directed by the Company. In connection with such acceleration described herein, the Holder need not provide,
and the Company hereby waives, any presentment, demand, protest or other notice of any kind, and the Holder may immediately and without expiration of any grace period enforce any and all of its rights and remedies hereunder and all other remedies
available to it under applicable law. Such acceleration may be rescinded and annulled by Holder at any time prior to payment hereunder and the Holder shall have all rights as a holder of the Debenture until such time, if any, as the Holder receives
full payment pursuant to this Section 8(b). No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon. 
 Section 9. Miscellaneous. 
 a) Notices. Any and all notices or
other communications or deliveries to be provided by the Holder hereunder, including, without limitation, any Notice of Conversion, shall be in writing and delivered personally, by facsimile, or sent by a nationally recognized overnight courier
service, addressed to the Company, 429 Memory Lane, Marshall, TX 75672, fax: 903-923-3299, Attn: Chief Financial Officer, with a copy to Boyer & Ketchand, P.C., Nine Greenway Plaza, Suite 3100, Houston, TX 77046, Attn: 

  

 21 

 
Rita Leader, Fax: 713-871-2024 (which shall not constitute notice), at or such other facsimile number or address as the Company may specify for such purpose
by notice to the Holder delivered in accordance with this Section 9. Any and all notices or other communications or deliveries to be provided by the Company hereunder shall be in writing and delivered personally, by facsimile, or sent by a
nationally recognized overnight courier service addressed to each Holder at the facsimile number or address of such Holder appearing on the books of the Company, or if no such facsimile number or address appears, at the principal place of business
of the Holder. Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number
specified in this Section 9 prior to 5:30 p.m. (New York City time), (ii) the date immediately following the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in this
Section 9 between 5:30 p.m. (New York City time) and 11:59 p.m. (New York City time) on any date, (iii) the second Business Day following the date of mailing, if sent by nationally recognized overnight courier service, or (iv) upon
actual receipt by the party to whom such notice is required to be given. 
 b) Absolute Obligation. Except as expressly
provided herein, no provision of this Debenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of, liquidated damages and accrued interest, as applicable, on this Debenture at the time,
place, and rate, and in the coin or currency, herein prescribed. This Debenture is a direct debt obligation of the Company. This Debenture ranks pari passu with all other Debentures now or hereafter issued under the terms set forth herein.

 c) Lost or Mutilated Debenture. If this Debenture shall be mutilated, lost, stolen or destroyed, the Company shall
execute and deliver, in exchange and substitution for and upon cancellation of a mutilated Debenture, or in lieu of or in substitution for a lost, stolen or destroyed Debenture, a new Debenture for the principal amount of this Debenture so
mutilated, lost, stolen or destroyed, but only upon receipt of evidence of such loss, theft or destruction of such Debenture, and of the ownership hereof, reasonably satisfactory to the Company. 
 d) Governing Law. All questions concerning the construction, validity, enforcement and interpretation of this Debenture 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 conflict of laws thereof. Each party agrees that all legal proceedings concerning the interpretation,
enforcement and defense of the transactions contemplated by any of the Transaction Documents (whether brought against a party hereto or its respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the
state and federal courts sitting in either the City of New York, Borough of Manhattan (the “New York Courts”) or the state and federal courts sitting in Dallas, Texas (the “Texas Courts”). Each party hereto hereby
irrevocably submits to the jurisdiction of the New York Courts and the Texas Courts for the adjudication of any 

  

 22 

 
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 such New York Courts or the Texas Courts, or such New York
Courts or Texas Courts are improper or 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 Debenture 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 applicable law. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law,
any and all right to trial by jury in any legal proceeding arising out of or relating to this Debenture or the transactions contemplated hereby. If either party shall commence an action or proceeding to enforce any provisions of this Debenture, then
the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorneys fees and other costs and expenses incurred in the investigation, preparation and prosecution of such action or proceeding. 
 e) Waiver. Any waiver by the Company or the Holder of a breach of any provision of this Debenture shall not operate as or be
construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Debenture. The failure of the Company or the Holder to insist upon strict adherence to any term of this Debenture on one or more occasions
shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Debenture. Any waiver by the Company or the Holder must be in writing. 
 f) Severability. If any provision of this Debenture is invalid, illegal or unenforceable, the balance of this Debenture shall
remain in effect, and if any provision is inapplicable to any Person or circumstance, it shall nevertheless remain applicable to all other Persons and circumstances. If it shall be found that any interest or other amount deemed interest due
hereunder violates the applicable law governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum rate of interest permitted under applicable law. The Company covenants (to the extent that it
may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law or other law which would prohibit or forgive the Company from paying all or
any portion of the principal of or interest on this Debenture as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this indenture, and the Company (to the extent it
may lawfully do so) hereby expressly waives all benefits or advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or impeded the execution of any power herein granted to the Holder, but will suffer and
permit the execution of every such as though no such law has been enacted. 
  

 23 

 g) Next Business Day. Whenever any payment or other obligation hereunder shall be
due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day. 
 h) Headings.
The headings contained herein are for convenience only, do not constitute a part of this Debenture and shall not be deemed to limit or affect any of the provisions hereof. 
 i) Assumption. Any successor to the Company or any surviving entity in a Fundamental Transaction shall (i) assume, prior
to such Fundamental Transaction, all of the obligations of the Company under this Debenture and the other Transaction Documents pursuant to written agreements in form and substance satisfactory to the Holder (such approval not to be unreasonably
withheld or delayed) and (ii) issue to the Holder a new debenture of such successor entity evidenced by a written instrument substantially similar in form and substance to this Debenture, including, without limitation, having a principal amount
and interest rate equal to the principal amount and the interest rate of this Debenture and having similar ranking to this Debenture, which shall be satisfactory to the Holder (any such approval not to be unreasonably withheld or delayed). The
provisions of this Section 9(i) shall apply similarly and equally to successive Fundamental Transactions and shall be applied without regard to any limitations of this Debenture. 
 ********************* 
  

 24 

 IN WITNESS WHEREOF, the Company has caused this Debenture to be duly executed by a duly authorized
officer as of the date first above indicated. 
  

			
	 North American Technologies Group, Inc.

		
	 By:
	 	  

	 Name:
	 	
	 Title:
	 	

  

 25 

 ANNEX A 
 NOTICE OF CONVERSION 
 The undersigned hereby elects to convert principal under the 8% Convertible
Debenture due July 30, 2010 of North American Technologies Group, Inc., a Delaware corporation (the “Company”), into shares of common stock, par value $0.001 per share (the “Common Stock”), of the Company
according to the conditions hereof, as of the date written below. If shares of Common Stock are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is
delivering herewith such certificates and opinions as reasonably requested by the Company in accordance therewith. No fee will be charged to the holder for any conversion, except for such transfer taxes, if any. 
 By the delivery of this Notice of Conversion the undersigned represents and warrants to the Company that its ownership of the Common Stock does not
exceed the amounts specified under Section 4 of this Debenture, as determined in accordance with Section 13(d) of the Exchange Act. 
 The undersigned agrees to comply with the prospectus delivery requirements under the applicable securities laws in connection with any transfer of the aforesaid shares of Common Stock. 
 Conversion calculations: 
  

					
		  	Date to Effect Conversion:	  	
			
		  	Principal Amount of Debenture to be Converted:	  	
			
		  	Payment of Interest in Common Stock      yes      no	  	
		  	 If yes, $             of Interest Accrued on Account of

 Conversion at Issue.
	  	
			
		  	Number of shares of Common Stock to be issued:	  	
			
		  	Signature:	  	
			
		  	Name:	  	
			
		  	Address:	  	

  

 26 

 Schedule 1 
 CONVERSION SCHEDULE 
 The 8% Convertible Debentures due on July 30, 2010 in the aggregate principal amount of
$3,000,000 issued by North American Technologies Group, Inc. This Conversion Schedule reflects conversions made under Section 4 of the above referenced Debenture. 
 Dated: 
  

							
	 Date of Conversion
 (or for first entry,
 Original
Issue Date)
	  	 Amount of
 Conversion
	  	 Aggregate Principal Amount
Remaining Subsequent to

Conversion (or original Principal
 Amount)
	  	 Company Attest

  

 27

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