Document:

Securities Purchase Agreement

 Exhibit 10.1 
  
 COACH INDUSTRIES GROUP, INC. 
  

SECURITIES PURCHASE AGREEMENT 
  
 October     , 2005 

 TABLE OF CONTENTS 
  

							
	 	 	 	  	 	  	Page

	 1.
	 	Agreement to Sell and Purchase	  	2
			
	 2.
	 	Fees and Warrant	  	2
			
	 3.
	 	Closing, Delivery and Payment	  	3
	 	 	 3.1
	  	Closing	  	3
	 	 	 3.2
	  	Delivery	  	3
			
	 4.
	 	Representations and Warranties of the Company	  	3
	 	 	 4.1
	  	Organization, Good Standing and Qualification	  	3
	 	 	 4.2
	  	Subsidiaries	  	4
	 	 	 4.3
	  	Capitalization; Voting Rights	  	4
	 	 	 4.4
	  	Authorization; Binding Obligations	  	5
	 	 	 4.5
	  	Liabilities	  	6
	 	 	 4.6
	  	Agreements; Action	  	6
	 	 	 4.7
	  	Obligations to Related Parties	  	7
	 	 	 4.8
	  	Changes	  	8
	 	 	 4.9
	  	Title to Properties and Assets; Liens, Etc.	  	9
	 	 	 4.10
	  	Intellectual Property	  	10
	 	 	 4.11
	  	Compliance with Other Instruments	  	10
	 	 	 4.12
	  	Litigation	  	11
	 	 	 4.13
	  	Tax Returns and Payments	  	11
	 	 	 4.14
	  	Employees	  	11
	 	 	 4.15
	  	Registration Rights and Voting Rights	  	12
	 	 	 4.16
	  	Compliance with Laws; Permits	  	12
	 	 	 4.17
	  	Environmental and Safety Laws	  	13
	 	 	 4.18
	  	Valid Offering	  	13
	 	 	 4.19
	  	Full Disclosure	  	13
	 	 	 4.20
	  	Insurance	  	14
	 	 	 4.21
	  	SEC Reports	  	14
	 	 	 4.22
	  	Listing	  	14
	 	 	 4.23
	  	No Integrated Offering	  	14
	 	 	 4.24
	  	Stop Transfer	  	14
	 	 	 4.25
	  	Dilution	  	14
	 	 	 4.26
	  	Patriot Act	  	15
			
	 5.
	 	Representations and Warranties of the Purchaser	  	15
	 	 	 5.1
	  	No Shorting	  	15
	 	 	 5.2
	  	Requisite Power and Authority	  	15
	 	 	 5.3
	  	Investment Representations	  	16
	 	 	 5.4
	  	Purchaser Bears Economic Risk	  	16
	 	 	 5.5
	  	Acquisition for Own Account	  	16
	 	 	 5.6
	  	Purchaser Can Protect Its Interest	  	16
	 	 	 5.7
	  	Accredited Investor	  	16
	 	 	 5.8
	  	Legends	  	17

  

 i 

							
	 6.
	 	 Covenants of the Company
	  	18
	 	 	 6.1
	  	 Stop-Orders
	  	18
	 	 	 6.2
	  	 Listing
	  	18
	 	 	 6.3
	  	 Market Regulations
	  	18
	 	 	 6.4
	  	 Reporting Requirements
	  	18
	 	 	 6.5
	  	 Use of Funds
	  	18
	 	 	 6.6
	  	 Access to Facilities
	  	18
	 	 	 6.7
	  	 Taxes
	  	19
	 	 	 6.8
	  	 Insurance
	  	19
	 	 	 6.9
	  	 Intellectual Property
	  	20
	 	 	 6.10
	  	 Properties
	  	20
	 	 	 6.11
	  	 Confidentiality
	  	20
	 	 	 6.12
	  	 Required Approvals
	  	21
	 	 	 6.13
	  	 Reissuance of Securities
	  	22
	 	 	 6.14
	  	 Opinion
	  	22
	 	 	 6.15
	  	 Margin Stock
	  	22
	 	 	 6.16
	  	 Restricted Cash Disclosure
	  	22
	 	 	 6.17
	  	 Financing Right of First Refusal
	  	22
			
	 7.
	 	 Covenants of the Purchaser
	  	23
	 	 	 7.1
	  	 Confidentiality
	  	23
	 	 	 7.2
	  	 Non-Public Information
	  	23
	 	 	 7.3
	  	 Sale Restriction
	  	23
			
	 8.
	 	 Covenants of the Company and Purchaser Regarding Indemnification
	  	24
	 	 	 8.1
	  	 Company Indemnification
	  	24
	 	 	 8.2
	  	 Purchaser’s Indemnification
	  	24
			
	 9.
	 	 Conversion of Convertible Note
	  	 
	 	 	 9.1
	  	 Mechanics of Conversion
	  	 
			
	 10.
	 	 Registration Rights.
	  	24
	 	 	 10.1
	  	 Registration Rights Granted
	  	24
	 	 	 10.2
	  	 Offering Restrictions
	  	24
			
	 11.
	 	 Miscellaneous
	  	24
	 	 	 11.1
	  	 Governing Law
	  	24
	 	 	 11.2
	  	 Survival
	  	25
	 	 	 11.3
	  	 Successors
	  	25
	 	 	 11.4
	  	 Entire Agreement
	  	25
	 	 	 11.5
	  	 Severability
	  	25
	 	 	 11.6
	  	 Amendment and Waiver
	  	25
	 	 	 11.7
	  	 Delays or Omissions
	  	26
	 	 	 11.8
	  	 Notices
	  	26
	 	 	 11.9
	  	 Attorneys’ Fees
	  	27
	 	 	 11.10
	  	 Titles and Subtitles
	  	27
	 	 	 11.11
	  	 Facsimile Signatures; Counterparts
	  	27
	 	 	 11.12
	  	 Broker’s Fees
	  	28
	 	 	 11.13
	  	 Construction
	  	28

  

 ii 

 SECURITIES PURCHASE AGREEMENT 
  
 THIS SECURITIES PURCHASE AGREEMENT (this “Agreement”) is made and entered into as of October __, 2005, by and
between Coach Industries Group, Inc., a Nevada corporation (the “Company”), and Laurus Master Fund, Ltd., a Cayman Islands company (the “Purchaser”). 
  
 RECITALS 
  
 WHEREAS, on September 29, 2004, the Company issued to the Purchaser a Convertible Term Note in the aggregate principal amount of Six Million Dollars
($6,000,000) (as amended, modified or supplemented to the date hereof, the “2004 Note”), which 2004 Note is convertible into shares of the Company’s common stock, $0.001 par value per share (the “Common Stock”) at the Fixed
Conversion Price set forth in the 2004 Note; 
  
 WHEREAS, the
Company wishes to prepay the Amortizing Redemption Amount (as such term is defined in the 2004 Note), and in order to do so, has authorized (i) the issuance to the Purchaser of a Term Note in the aggregate principal amount of Seven Million
Dollars ($7,000,000) (as amended, modified or supplemented from time to time, the “Note”); (ii) the payment of $739,042.21 (the “Cash Portion”), and (iii) the issuance of 985,389 shares of the Company’s Common
Stock (the “Shares”) to the Purchaser; and 
  
 WHEREAS,
the Company also wishes to amend and restate that certain Warrant issued to the Purchaser on September 29, 2004, which has been registered for resale on a currently effective registration statement No. 333 122135, substantially in the form
attached hereto as Exhibit B (the “Amended Warrant”); and 
  
 WHEREAS, the Company wishes to issue, and has authorized the issuance of, a warrant to the Purchaser to purchase up to 762,399 shares of the Company’s Common Stock (subject to adjustment as set forth therein)
substantially in the form attached hereto as Exhibit C (the “Warrant”); and 
  
 WHEREAS, the Company desires to issue and sell the Note, the Shares and the Warrant to Purchaser and to amend the Amended Warrant on the terms and conditions set forth herein. 

 AGREEMENT 
  

NOW, THEREFORE, in consideration of the foregoing recitals and the mutual promises, representations, warranties and covenants hereinafter set forth and
for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 
  
 1. Agreement to Sell and Purchase. Pursuant to the terms and conditions set forth in this Agreement, on the Closing Date (as defined in
Section 3), the Company agrees to sell to the Purchaser, and the Purchaser hereby agrees to purchase from the Company, a Note in the aggregate principal amount of $7,000,000. The Note purchased on the Closing Date shall be known as the
“Offering.” A form of the Note is annexed hereto as Exhibit A. The Note will mature on the Maturity Date (as defined in the Note). Collectively, the Note, the Shares, the Warrant, the Amended Warrant and Common Stock issuable upon exercise
of the Warrant and the Amended Warrant are referred to as the “Securities.” 
  
 2. Cash Portion, Closing Fees, Warrant and Amended Warrant. On the Closing Date: 
  

	 	(a)	The Company will deliver the Shares to the Purchaser. 

  

	 	(b)	The Company will issue and deliver to the Purchaser the Warrant and the Amended Warrant pursuant to Section 1 hereof. The Warrant and the Amended Warrant must be delivered on
the Closing Date. A form of Warrant is annexed hereto as Amended and a form of the Warrant is annexed hereto as Exhibit C. All the representations, covenants, warranties, undertakings, and indemnification, and other rights made or granted to or for
the benefit of the Purchaser by the Company are hereby also made and granted in respect of the Warrant and the Amended Warrant and shares of the Company’s Common Stock issuable upon exercise of the Warrant and the Amended Warrant (collectively,
the “Warrant Shares”). 

  

	 	(c)	Subject to the terms of Section 2(e) below, the Company shall pay to Laurus Capital Management, L.L.C., the manager of the Purchaser, (i) a closing payment in an amount
equal to $30,000 (the “Closing Payment.”) and (ii) the Cash Portion. 

  

	 	(d)	The Company shall reimburse the Purchaser $10,000 on the Closing Date for its reasonable expenses (including legal fees and expenses) incurred in connection with the preparation and
negotiation of this Agreement and the Related Agreements (as hereinafter defined), and expenses incurred in connection with the Purchaser’s due diligence review of the Company and its Subsidiaries (as defined in Section 6.8) and all
related matters. 

  

	 	(e)	The Closing Payment, the Cash Portion and the other expenses referred to in the preceding clause (c) shall be paid at closing out of funds held pursuant to an Escrow Agreement
(as defined below) and a disbursement letter (the “Disbursement Letter”). 

  

	 	(i)	The Purchaser shall deliver the original 2004 Note to the Company for cancellation; and 

  

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	 	(ii)	The Company shall deliver a payoff letter to the Purchaser, dated as of the date hereof, substantially in the form of Exhibit F hereto (the “Payoff Letter”).

  
 3. Closing, Delivery and Payment.

  
 3.1 Closing. Subject to the terms and
conditions herein, the closing of the transactions contemplated hereby (the “Closing”), shall take place on the date hereof, at such time or place as the Company and Purchaser may mutually agree (such date is hereinafter referred to as the
“Closing Date”). 
  
 3.2
Delivery. Pursuant to the Escrow Agreement, at the Closing on the Closing Date, the Company will deliver to the Purchaser, among other things, a Note in the form attached as Exhibit A representing the aggregate principal amount of $7,000,000,
the Shares, an Amended Warrant in the form attached hereto as Exhibit B in the Purchaser’s name representing 1,487,601 Warrant Shares, a Warrant in the form attached hereto as Exhibit C in the Purchaser’s name representing 762,399 Warrant
Shares, and the Purchaser will deliver to the Company, among other things, the amounts set forth in the Disbursement Letter by certified funds or wire transfer and the Payoff Letter. 
  
 4. Representations and Warranties of the Company. The Company hereby represents and warrants to the Purchaser as
follows (which representations and warranties are supplemented by the Company’s filings under the Securities Exchange Act of 1934 made prior to the date of this Agreement (collectively, the “Exchange Act Filings”), copies of which
have been provided to the Purchaser): 
  
 4.1
Organization, Good Standing and Qualification. Each of the Company and each of its Subsidiaries is a corporation, partnership or limited liability company, as the case may be, duly organized, validly existing and in good standing under the
laws of its jurisdiction of organization. Each of the Company and each of its Subsidiaries has the corporate power and authority to own and operate its properties and assets, to execute and deliver the following agreements or instruments to which it
is a party: (i) this Agreement, (ii) the Note, the Shares, the Warrant and the Amended Warrant to be issued in connection with this Agreement, (iii) the Reaffirmation and Ratification Agreement and Amendment dated as of the date
hereof between the Company, certain Subsidiaries of the Company and the Purchaser (as amended, modified or supplemented from time to time, the “Reaffirmation Agreement”), pursuant to which the Company and certain Subsidiaries of the
Company reaffirm that their obligations under (A) the Master Security Agreement dated as of September 29, 2004 between the Company, certain Subsidiaries of the Company and the Purchaser (as amended, modified or supplemented from time to
time, the “Master Security Agreement”), (B) the Subsidiary Guaranty dated as of September 29, 2004 made by certain Subsidiaries of the Company (as amended, modified or supplemented from time to time, the “Subsidiary
Guaranty”), and (C) the Stock Pledge Agreement dated as of September 29, 2004 among the Company, certain Subsidiaries of the Company and the Purchaser (as amended, modified or supplemented from time to time, the “Stock Pledge
Agreement”), (iv) the Registration Rights Agreement relating to the Securities dated as of the date hereof between the Company and the Purchaser (as amended, modified or 

  

 3 

 
supplemented from time to time, the “Registration Rights Agreement”), (v) the Escrow Agreement dated as of the date hereof among the Company,
the Purchaser and the escrow agent referred to therein, substantially in the form of Exhibit D hereto (as amended, modified or supplemented from time to time, the “Escrow Agreement”), (vi) the Payoff Letter and (vii) all other
agreements related to this Agreement and the Note and referred to herein (the preceding clauses (ii) through (vi), collectively, the “Related Agreements”), to issue and sell the Note, to issue and sell the Shares, to issue and sell
the Warrant, the Amended Warrant and the Warrant Shares, and to carry out the provisions of this Agreement and the Related Agreements and to carry on its business as presently conducted. Each of the Company and each of its Subsidiaries is duly
qualified and is authorized to do business and is in good standing as a foreign corporation, partnership or limited liability company, as the case may be, in all jurisdictions in which the nature or location of its activities and of its properties
(both owned and leased) makes such qualification necessary, except for those jurisdictions in which failure to do so has not, or could not reasonably be expected to have, individually or in the aggregate, a material adverse effect on the business,
assets, liabilities, condition (financial or otherwise), properties, operations or prospects of the Company and its Subsidiaries, taken individually and as a whole (a “Material Adverse Effect”). 
  
 4.2 Subsidiaries. Each direct and indirect Subsidiary
of the Company, the direct owner of such Subsidiary and its percentage ownership thereof, is set forth on Schedule 4.2. For the purpose of this Agreement, a “Subsidiary” of any person or entity means (a) a corporation or other
entity whose shares of stock or other ownership interests having ordinary voting power (other than stock or other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the directors of such
corporation, or other persons or entities performing similar functions for such person or entity, are owned, directly or indirectly, by such person or entity or (b) a corporation or other entity in which such person or entity owns, directly or
indirectly, more than 50% of the equity interests at such time. 
  
 4.3 Capitalization; Voting Rights. 
  

	 	(a)	The authorized capital stock of the Company, as of the date hereof consists of 50,000,000 shares, of which all are shares of Common Stock, par value $0.01 per share, 19,623,348
shares of which are issued and outstanding and no shares of preferred stock are authorized, issued or outstanding. The authorized capital stock of each Subsidiary of the Company is set forth on Schedule 4.2. 

  

	 	(b)	 Except as disclosed on Schedule 4.3, other than: (i) the shares reserved for issuance under the Company’s stock option plans; and (ii) shares which
may be granted pursuant to this Agreement and the Related Agreements, there are no outstanding options, warrants, rights (including conversion or preemptive rights and rights of first refusal), proxy or stockholder agreements, or arrangements or
agreements of any kind for the purchase or acquisition from the Company of any of its securities. Except as disclosed on Schedule 4.3, neither the offer, issuance or sale of any of the Note, the Shares, the Warrant or the Amended Warrant, or the
issuance of any of the 

  

 4 

	 	 
Warrant Shares, nor the consummation of any transaction contemplated hereby will result in a change in the exercise or conversion price or number of any
securities of the Company issuable upon exercise or conversion of any options, warrants, rights or other convertible securities outstanding, under anti-dilution or other similar provisions contained in or affecting any such securities.

  

	 	(c)	All issued and outstanding shares of the Company’s Common Stock: (i) have been duly authorized and validly issued and are fully paid and nonassessable; and (ii) were
issued in compliance with all applicable state and federal laws concerning the issuance of securities. 

  

	 	(d)	The rights, preferences, privileges and restrictions of the shares of the Common Stock are as stated in the Company’s Certificate of Incorporation (the “Charter”).
The Warrant Shares have been duly and validly reserved for issuance. The Warrant Shares issuable upon the exercise of the Amended Warrant have been registered pursuant to an effective registration statement no. 333-122135. When issued in compliance
with the provisions of this Agreement and the Company’s Charter, the Securities will be validly issued, fully paid and nonassessable, and will be free of any liens or encumbrances; provided, however, that the Securities may be subject to
restrictions on transfer under state and/or federal securities laws as set forth herein or as otherwise required by such laws at the time a transfer is proposed. 

  
 4.4 Authorization; Binding Obligations. All corporate, partnership or limited liability company, as
the case may be, action on the part of the Company and each of its Subsidiaries (including their respective officers and directors) necessary for the authorization of this Agreement and the Related Agreements, the performance of all obligations of
the Company and its Subsidiaries hereunder and under the other Related Agreements at the Closing and, the authorization, sale, issuance and delivery of the Note, the Shares, the Warrant, the Amended Warrant and the Warrant Shares has been taken or
will be taken prior to the Closing. This Agreement and the Related Agreements, when executed and delivered and to the extent it is a party thereto, will be valid and binding obligations of each of the Company and each of its Subsidiaries,
enforceable against each such person in accordance with their terms, except: 
  

	 	(a)	as limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting enforcement of creditors’ rights; and

  

	 	(b)	general principles of equity that restrict the availability of equitable or legal remedies. 

  
 The sale of the Note is not and will not be subject to any preemptive rights or rights of first refusal that have not been properly waived
or complied with. The issuance of the Shares, the 

  

 5 

 
Warrant and the Amended Warrant and the subsequent exercise of the Warrant and the Amended Warrant for Warrant Shares are not and will not be subject to any
preemptive rights or rights of first refusal that have not been properly waived or complied with. 
  
 4.5 Liabilities. Neither the Company nor any of its Subsidiaries has any contingent liabilities that could result in payments by
the Company or any of its Subsidiaries in excess of $50,000 in the aggregate, except current liabilities incurred in the ordinary course of business and liabilities disclosed in any Exchange Act Filings. 
  
 4.6 Agreements; Action. Except as set forth on
Schedule 4.6 or as disclosed in any Exchange Act Filings: 
  

	 	(a)	there are no agreements, understandings, instruments, contracts, proposed transactions, judgments, orders, writs or decrees to which the Company or any of its Subsidiaries is a
party or by which it is bound which may involve: (i) obligations (contingent or otherwise) of, or payments to, the Company or any Subsidiary in excess of $50,000 (other than obligations of, or payments to, the Company or any Subsidiary arising
from purchase or sale agreements, or service agreements entered into in the ordinary course of business); or (ii) the transfer or license of any patent, copyright, trade secret or other proprietary right to or from the Company or any Subsidiary
(other than licenses arising from the purchase of “off the shelf” or other standard products); or (iii) provisions restricting the development, manufacture or distribution of the Company’s or any Subsidiary’s products or
services; or (iv) indemnification by the Company or any Subsidiary with respect to infringements of proprietary rights. 

  

	 	(b)	Since December 31, 2004, neither the Company nor any of its Subsidiaries has: (i) declared or paid any dividends, or authorized or made any distribution upon or with
respect to any class or series of its capital stock; (ii) incurred any indebtedness for money borrowed or any other liabilities (other than ordinary course obligations) individually in excess of $100,000 or, in the case of indebtedness and/or
liabilities individually less than $100,000 in excess of $250,000 in the aggregate; (iii) made any loans or advances to any person not in excess, individually or in the aggregate, of $100,000, other than ordinary course advances for travel
expenses; or (iv) sold, exchanged or otherwise disposed of any assets or rights which have a fair market value in excess of $100,000 in the aggregate, other than the sale of its inventory in the ordinary course of business.

  

	 	(c)	 For the purposes of subsections (a) and (b) above, all indebtedness, liabilities, agreements, understandings, instruments, contracts and proposed
transactions involving the same person or entity (including persons or entities the Company or any Subsidiary has reason to 

  

 6 

	 	 
believe are affiliated therewith) shall be aggregated for the purpose of meeting the individual minimum dollar amounts of such subsections.

  

	 	(d)	The Company maintains disclosure controls and procedures (“Disclosure Controls”) designed to ensure that information required to be disclosed by the Company in the reports
that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the Securities and Exchange Commission (“SEC”). 

  

	 	(e)	The Company makes and keeps books, records and accounts that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the Company’s assets. The
Company maintains internal control over financial reporting (“Financial Reporting Controls”) designed by, or under the supervision of, the Company’s principal executive and principal financial officers, and effected by the
Company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles (“GAAP”), including that: 

  

	 	(i)	transactions are executed in accordance with management’s general or specific authorization; 

  

	 	(ii)	unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements are prevented or timely detected;

  

	 	(iii)	transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that the Company’s receipts and expenditures are being made
only in accordance with authorizations of the Company’s management and board of directors; 

  

	 	(iv)	transactions are recorded as necessary to maintain accountability for assets; 

  

	 	(v)	the recorded accountability for assets is compared with the existing assets at reasonable intervals, and appropriate action is taken with respect to any differences.

  

	 	(f)	There is no weakness in any of the Company’s Disclosure Controls or Financial Reporting Controls that is required to be disclosed in any of the SEC Reports (as hereinafter
defined), except as so disclosed. 

  
 4.7 Obligations to Related Parties. Except as set forth on Schedule 4.7, there are no obligations of the Company or any of its Subsidiaries to officers, directors, stockholders or employees of the Company or any of its Subsidiaries
other than: 
  

	 	(a)	for payment of salary for services rendered and for bonus payments; 

  

 7 

	 	(b)	reimbursement for reasonable expenses incurred on behalf of the Company and its Subsidiaries; 

  

	 	(c)	for other standard employee benefits made generally available to all employees (including stock option agreements outstanding under any stock option plan approved by the Board of
Directors of the Company); and 

  

	 	(d)	obligations listed in the Company’s financial statements or disclosed in any of its Exchange Act Filings. 

  
 Except as described above or set forth on Schedule 4.7, none of the officers, directors or,
to the best of the Company’s knowledge, key employees or stockholders of the Company or any members of their immediate families, are indebted to the Company, individually or in the aggregate, in excess of $50,000 or have any direct or indirect
ownership interest in any firm or corporation with which the Company is affiliated or with which the Company has a business relationship, or any firm or corporation which competes with the Company, other than passive investments in publicly traded
companies (representing less than one percent (1%) of such company) which may compete with the Company. Except as described above, no officer, director or stockholder, or any member of their immediate families, is, directly or indirectly,
interested in any material contract with the Company and no agreements, understandings or proposed transactions are contemplated between the Company and any such person. Except as set forth on Schedule 4.7, the Company is not a guarantor or
indemnitor of any indebtedness of any other person, firm or corporation (other than its wholly-owned Subsidiaries organized in the United States). 
  
 4.8 Changes. Since December 31, 2004, except as disclosed in any Exchange Act Filing or in any Schedule to this Agreement or
to any of the Related Agreements, there has not been: 
  

	 	(a)	any change in the business, assets, liabilities, condition (financial or otherwise), properties, operations or prospects of the Company or any of its Subsidiaries, which
individually or in the aggregate has had, or could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect; 

  

	 	(b)	any resignation or termination of any officer, key employee or group of employees of the Company or any of its Subsidiaries; 

  

	 	(c)	any material change, except in the ordinary course of business, in the contingent obligations of the Company or any of its Subsidiaries by way of guaranty, endorsement, indemnity,
warranty or otherwise; 

  

	 	(d)	any damage, destruction or loss, whether or not covered by insurance, has had, or could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect;

  

 8 

	 	(e)	any waiver by the Company or any of its Subsidiaries of a valuable right or of a material debt owed to it; 

  

	 	(f)	any direct or indirect loans made by the Company or any of its Subsidiaries to any stockholder, employee, officer or director of the Company or any of its Subsidiaries, other than
advances made in the ordinary course of business; 

  

	 	(g)	any material change in any compensation arrangement or agreement with any employee, officer, director or stockholder of the Company or any of its Subsidiaries;

  

	 	(h)	any declaration or payment of any dividend or other distribution of the assets of the Company or any of its Subsidiaries; 

  

	 	(i)	any labor organization activity related to the Company or any of its Subsidiaries; 

  

	 	(j)	any sale, assignment or transfer of any patents, trademarks, copyrights, trade secrets or other intangible assets owned by the Company or any of its Subsidiaries;

  

	 	(k)	any change in any material agreement to which the Company or any of its Subsidiaries is a party or by which either the Company or any of its Subsidiaries is bound which either
individually or in the aggregate has had, or could reasonably be expected to have, a Material Adverse Effect; 

  

	 	(l)	any other event or condition of any character that, either individually or in the aggregate, has had, or could reasonably be expected to have, a Material Adverse Effect; or

  

	 	(m)	any arrangement or commitment by the Company or any of its Subsidiaries to do any of the acts described in subsection (a) through (l) above. 

  
 4.9 Title to Properties and Assets; Liens, Etc.
Except as set forth on Schedule 4.9, each of the Company and each of its Subsidiaries has good and marketable title to its properties and assets, and good title to its leasehold estates, in each case subject to no mortgage, pledge, lien, lease,
encumbrance or charge (collectively, an “Encumbrance”), other than: 
  

	 	(a)	(i) non-consensual Encumbrances being contested in good faith and by appropriate proceedings for which adequate reserves have been established to the extent required by generally
accepted accounting principles and (ii) those Encumbrances resulting from taxes which have not yet become delinquent; 

  

 9 

	 	(b)	liens and encumbrances which do not materially detract from the value of the property subject thereto or materially impair the operations of the Company or any of its Subsidiaries;
and 

  

	 	(c)	those that have otherwise arisen in the ordinary course of business. 

  
 All facilities, machinery, equipment, fixtures, vehicles and other properties owned, leased or used by the Company and its Subsidiaries are in good operating condition
and repair, reasonable wear and tear expected, and are reasonably fit and usable for the purposes for which they are being used. Except as set forth on Schedule 4.9, the Company and its Subsidiaries are in compliance with all material terms of each
lease to which it is a party or is otherwise bound. 
  
 4.10 Intellectual Property. 
  

	 	(a)	Each of the Company and each of its Subsidiaries owns or possesses sufficient legal rights to all patents, trademarks, service marks, trade names, copyrights, trade secrets,
licenses, information and other proprietary rights and processes necessary for its business as now conducted and to the Company’s knowledge, as presently proposed to be conducted (the “Intellectual Property”), without any known
infringement of the rights of others. There are no outstanding options, licenses or agreements of any kind relating to the foregoing proprietary rights, nor is the Company or any of its Subsidiaries bound by or a party to any options, licenses or
agreements of any kind with respect to the patents, trademarks, service marks, trade names, copyrights, trade secrets, licenses, information and other proprietary rights and processes of any other person or entity other than such licenses or
agreements arising from the purchase of “off the shelf” or standard products. 

  

	 	(b)	Neither the Company nor any of its Subsidiaries has received any written communications alleging that the Company or any of its Subsidiaries has violated any of the patents,
trademarks, service marks, trade names, copyrights or trade secrets or other proprietary rights of any other person or entity, nor is the Company or any of its Subsidiaries aware of any basis therefor. 

  

	 	(c)	The Company does not believe it is or will be necessary to utilize any inventions, trade secrets or proprietary information of any of its employees made prior to their employment by
the Company or any of its Subsidiaries, except for inventions, trade secrets or proprietary information that have been rightfully assigned to the Company or any of its Subsidiaries. 

  
 4.11 Compliance with Other Instruments. Neither the
Company nor any of its Subsidiaries is in violation or default of (x) any term of its Charter or Bylaws, or (y) of any provision of any indebtedness, mortgage, indenture, contract, agreement or instrument to which 

  

 10 

 
it is party or by which it is bound or of any judgment, decree, order or writ, which violation or default, in the case of this clause (y), has had, or could
reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect. The execution, delivery and performance of and compliance with this Agreement and the Related Agreements to which it is a party, and the issuance and
sale of the Note by the Company and the other Securities by the Company each pursuant hereto and thereto, will not, with or without the passage of time or giving of notice, result in any violation, or be in conflict with or constitute a default
under any such term or provision, or result in the creation of any mortgage, pledge, lien, encumbrance or charge upon any of the properties or assets of the Company or any of its Subsidiaries or the suspension, revocation, impairment, forfeiture or
nonrenewal of any permit, license, authorization or approval applicable to the Company, its business or operations or any of its assets or properties, in each case, which could reasonably be expected to have, either individually or in the aggregate,
a Material Adverse Effect. 
  
 4.12
Litigation. Except as set forth on Schedule 4.12 hereto, there is no action, suit, proceeding or investigation pending or, to the Company’s knowledge, currently threatened against the Company or any of its Subsidiaries that prevents the
Company or any of its Subsidiaries from entering into this Agreement or the other Related Agreements, or from consummating the transactions contemplated hereby or thereby, or which has had, or could reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect or any change in the current equity ownership of the Company or any of its Subsidiaries, nor is the Company aware that there is any basis to assert any of the foregoing. Neither the Company
nor any of its Subsidiaries is a party or subject to the provisions of any order, writ, injunction, judgment or decree of any court or government agency or instrumentality. There is no action, suit, proceeding or investigation by the Company or any
of its Subsidiaries currently pending or which the Company or any of its Subsidiaries intends to initiate. 
  
 4.13 Tax Returns and Payments. Except as set forth on Schedule 4.13, each of the Company and each of its Subsidiaries has timely
filed all tax returns (federal, state and local) required to be filed by it. All taxes shown to be due and payable on such returns, any assessments imposed, and all other taxes due and payable by the Company or any of its Subsidiaries on or before
the Closing, have been paid or will be paid prior to the time they become delinquent. Except as set forth on Schedule 4.13, neither the Company nor any of its Subsidiaries has been advised: 
  

	 	(a)	that any of its returns, federal, state or other, have been or are being audited as of the date hereof; or 

  

	 	(b)	of any deficiency in assessment or proposed judgment to its federal, state or other taxes. 

  
 The Company has no knowledge of any liability of any tax to be imposed upon its properties or assets as of the date of this Agreement that
is not adequately provided for. 
  
 4.14
Employees. Except as set forth on Schedule 4.14, neither the Company nor any of its Subsidiaries has any collective bargaining agreements with any of its employees. There is no labor union organizing activity pending or, to the Company’s
knowledge, threatened 

  

 11 

 
with respect to the Company or any of its Subsidiaries. Except as disclosed in the Exchange Act Filings or on Schedule 4.14, neither the Company nor any of
its Subsidiaries is a party to or bound by any currently effective employment contract, deferred compensation arrangement, bonus plan, incentive plan, profit sharing plan, retirement agreement or other employee compensation plan or agreement. To the
Company’s knowledge, no employee of the Company or any of its Subsidiaries, nor any consultant with whom the Company or any of its Subsidiaries has contracted, is in violation of any term of any employment contract, proprietary information
agreement or any other agreement relating to the right of any such individual to be employed by, or to contract with, the Company or any of its Subsidiaries because of the nature of the business to be conducted by the Company or any of its
Subsidiaries; and to the Company’s knowledge the continued employment by the Company or any of its Subsidiaries of its present employees, and the performance of the Company’s and its Subsidiaries’ contracts with its independent
contractors, will not result in any such violation. Neither the Company nor any of its Subsidiaries is aware that any of its employees is obligated under any contract (including licenses, covenants or commitments of any nature) or other agreement,
or subject to any judgment, decree or order of any court or administrative agency, that would interfere with their duties to the Company or any of its Subsidiaries. Neither the Company nor any of its Subsidiaries has received any notice alleging
that any such violation has occurred. Except for employees who have a current effective employment agreement with the Company or any of its Subsidiaries, no employee of the Company or any of its Subsidiaries has been granted the right to continued
employment by the Company or any of its Subsidiaries or to any material compensation following termination of employment with the Company or any of its Subsidiaries. Except as set forth on Schedule 4.14, the Company is not aware that any officer,
key employee or group of employees intends to terminate his, her or their employment with the Company or any of its Subsidiaries, nor does the Company or any of its Subsidiaries have a present intention to terminate the employment of any officer,
key employee or group of employees. 
  
 4.15
Registration Rights and Voting Rights. Except as set forth on Schedule 4.15 and except as disclosed in Exchange Act Filings, neither the Company nor any of its Subsidiaries is presently under any obligation, and neither the Company nor any of
its Subsidiaries has granted any rights, to register any of the Company’s or its Subsidiaries’ presently outstanding securities or any of its securities that may hereafter be issued. Except as set forth on Schedule 4.15 and except as
disclosed in Exchange Act Filings, to the Company’s knowledge, no stockholder of the Company or any of its Subsidiaries has entered into any agreement with respect to the voting of equity securities of the Company or any of its Subsidiaries.

  
 4.16 Compliance with Laws; Permits.
Neither the Company nor any of its Subsidiaries is in violation of any applicable statute, rule, regulation, order or restriction of any domestic or foreign government or any instrumentality or agency thereof in respect of the conduct of its
business or the ownership of its properties which has had, or could reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect. No governmental orders, permissions, consents, approvals or authorizations are
required to be obtained and no registrations or declarations are required to be filed in connection with the execution and delivery of this Agreement or any other Related Agreement and the issuance of any of the Securities, except such as has been
duly and validly obtained or filed, or with respect to any filings that must be made after the execution of this Agreement or any other Related 

  

 12 

 
Agreement or after the Closing, as will be filed in a timely manner. Each of the Company and its Subsidiaries has all material franchises, permits, licenses
and any similar authority necessary for the conduct of its business as now being conducted by it, the lack of which could, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. 
  
 4.17 Environmental and Safety Laws. Neither the
Company nor any of its Subsidiaries is in violation of any applicable statute, law or regulation relating to the environment or occupational health and safety, except for such violations which have not had, or could not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect, and to its knowledge, no material expenditures are or will be required in order to comply with any such existing statute, law or regulation,. Except as set forth on Schedule 4.17, no
Hazardous Materials (as defined below) are used or have been used, stored, or disposed of by the Company or any of its Subsidiaries or, to the Company’s knowledge, by any other person or entity on any property owned, leased or used by the
Company or any of its Subsidiaries. For the purposes of the preceding sentence, “Hazardous Materials” shall mean: 
  

	 	(a)	materials which are listed or otherwise defined as “hazardous” or “toxic” under any applicable local, state, federal and/or foreign laws and regulations that
govern the existence and/or remedy of contamination on property, the protection of the environment from contamination, the control of hazardous wastes, or other activities involving hazardous substances, including building materials; or

  

	 	(b)	any petroleum products or nuclear materials. 

  
 4.18 Valid Offering. Assuming the accuracy of the representations and warranties of the Purchaser contained in this Agreement, the
offer, sale and issuance of the Securities by the Company will be exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), and will have been registered or qualified (or are exempt from
registration and qualification) under the registration, permit or qualification requirements of all applicable state securities laws. 
  
 4.19 Full Disclosure. Each of the Company and each of its Subsidiaries has provided the Purchaser with all information requested by
the Purchaser in connection with its decision to purchase the Note, the Shares, the Warrant and to amend the Amended Warrant, including all information the Company and its Subsidiaries believe is reasonably necessary to make such investment
decision. Neither this Agreement, the Related Agreements, the exhibits and schedules hereto and thereto nor any other document delivered by the Company or any of its Subsidiaries to Purchaser or its attorneys or agents in connection herewith or
therewith or with the transactions contemplated hereby or thereby, contain any untrue statement of a material fact nor omit to state a material fact necessary in order to make the statements contained herein or therein, in light of the circumstances
in which they are made, not misleading. Any financial projections and other estimates provided to the Purchaser by the Company or any of its Subsidiaries were based on the Company’s and its Subsidiaries’ experience in the industry and on
assumptions of fact and opinion as to future events which the Company or any of its Subsidiaries, at the date of the issuance of such projections or estimates, believed to be reasonable. 
  

 13 

 4.20 Insurance. Each of the Company and each of its Subsidiaries has general
commercial, product liability, fire and casualty insurance policies with coverages which the Company believes are customary for companies similarly situated to the Company and its Subsidiaries in the same or similar business. 
  
 4.21 SEC Reports. Except as set forth on Schedule
4.21, the Company has filed all proxy statements, reports and other documents required to be filed by it under the Securities Exchange Act 1934, as amended (the “Exchange Act”). The Company has furnished the Purchaser with copies of:
(i) its Annual Reports on Form 10-KSB for its fiscal year ended December 31, 2004; and (ii) its Quarterly Reports on Form 10-QSB for its fiscal quarters ended March 31, 2005, and June 30, 2005 and the Form 8-K filings which
it has made during the fiscal year 2005 to date (collectively, the “SEC Reports”). Except as set forth on Schedule 4.21, each SEC Report was, at the time of its filing, in substantial compliance with the requirements of its respective form
and none of the SEC Reports, nor the financial statements (and the notes thereto) included in the SEC Reports, as of their respective filing dates, contained any untrue statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, except in each case where any defect was cured, prior to the Closing, by the filing of an amendment to any such SEC
Report. 
  
 4.22 Listing. The
Company’s Common Stock is listed for trading on the National Association of Securities Dealers Over the Counter Bulletin Board (“NASD OTCBB”) and satisfies all requirements for the continuation of such trading. The Company has not
received any notice that its Common Stock will not be eligible to be traded on the NASD OTCBB or that its Common Stock does not meet all requirements for such trading. 
  
 4.23 No Integrated Offering. Neither the Company, nor any of its Subsidiaries or 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 the offering of the Securities pursuant to this Agreement or
any of the Related Agreements to be integrated with prior offerings by the Company for purposes of the Securities Act which would prevent the Company from selling the Securities pursuant to Rule 506 under the Securities Act, or any applicable
exchange-related stockholder approval provisions, nor will the Company or any of its affiliates or Subsidiaries take any action or steps that would cause the offering of the Securities to be integrated with other offerings. 
  
 4.24 Stop Transfer. The Securities are restricted
securities as of the date of this Agreement. Neither the Company nor any of its Subsidiaries will issue any stop transfer order or other order impeding the sale and delivery of any of the Securities at such time as the Securities are registered for
public sale or an exemption from registration is available, except as required by state and federal securities laws. 
  
 4.25 Dilution. The Company specifically acknowledges that its obligation to issue the shares of Common Stock upon exercise of the
Warrant and the Amended Warrant is binding upon the Company and enforceable regardless of the dilution such issuance may have on the ownership interests of other shareholders of the Company. 
  

 14 

 4.26 Patriot Act. The Company certifies that, to the best of Company’s
knowledge, neither the Company nor any of its Subsidiaries has been designated, and is not owned or controlled, by a “suspected terrorist” as defined in Executive Order 13224. The Company hereby acknowledges that the Purchaser seeks to
comply with all applicable laws concerning money laundering and related activities. In furtherance of those efforts, the Company hereby represents, warrants and agrees that: (i) none of the cash or property that the Company or any of its
Subsidiaries will pay or will contribute to the Purchaser has been or shall be derived from, or related to, any activity that is deemed criminal under United States law; and (ii) no contribution or payment by the Company or any of its
Subsidiaries to the Purchaser, to the extent that they are within the Company’s and/or its Subsidiaries’ control shall cause the Purchaser to be in violation of the United States Bank Secrecy Act, the United States International Money
Laundering Control Act of 1986 or the United States International Money Laundering Abatement and Anti-Terrorist Financing Act of 2001. The Company shall promptly notify the Purchaser if any of these representations ceases to be true and accurate
regarding the Company or any of its Subsidiaries. The Company agrees to provide the Purchaser any additional information regarding the Company or any of its Subsidiaries that the Purchaser deems necessary or convenient to ensure compliance with all
applicable laws concerning money laundering and similar activities. The Company understands and agrees that if at any time it is discovered that any of the foregoing representations are incorrect, or if otherwise required by applicable law or
regulation related to money laundering similar activities, the Purchaser may undertake appropriate actions to ensure compliance with applicable law or regulation, including but not limited to segregation and/or redemption of the Purchaser’s
investment in the Company. The Company further understands that the Purchaser may release confidential information about the Company and its Subsidiaries and, if applicable, any underlying beneficial owners, to proper authorities if the Purchaser,
in its sole discretion, determines that it is in the best interests of the Purchaser in light of relevant rules and regulations under the laws set forth in subsection (ii) above. 
  
 5. Representations and Warranties of the Purchaser. The Purchaser hereby represents and warrants to the Company as
follows (such representations and warranties do not lessen or obviate the representations and warranties of the Company set forth in this Agreement): 
  
 5.1 No Shorting. The Purchaser or any of its affiliates and investment partners has not, will not and will not cause any person or
entity to directly or indirectly engage in “short sales” of the Company’s Common Stock as long as the Note shall be outstanding. 
  
 5.2 Requisite Power and Authority. The Purchaser has all necessary power and authority under all applicable provisions of law to
execute and deliver this Agreement and the Related Agreements and to carry out their provisions. All corporate action on Purchaser’s part required for the lawful execution and delivery of this Agreement and the Related Agreements have been or
will be effectively taken prior to the Closing. Upon their execution and delivery, this Agreement and the Related Agreements will be valid and binding obligations of Purchaser, enforceable in accordance with their terms, except: 
  

	 	(a)	as limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting enforcement of creditors’ rights; and

  

 15 

	 	(b)	as limited by general principles of equity that restrict the availability of equitable and legal remedies. 

  
 5.3 Investment Representations. Purchaser understands
that the Securities are being offered and sold pursuant to an exemption from registration contained in the Securities Act based in part upon Purchaser’s representations contained in the Agreement, including, without limitation, that the
Purchaser is an “accredited investor” within the meaning of Regulation D under the Securities Act of 1933, as amended (the “Securities Act”). The Purchaser confirms that it has received or has had full access to all the
information it considers necessary or appropriate to make an informed investment decision with respect to the Note, the Shares, the Warrant and the Amended Warrant to be purchased by it under this Agreement and the Warrant Shares acquired by it upon
the exercise of the Warrant and the Amended Warrant. The Purchaser further confirms that it has had an opportunity to ask questions and receive answers from the Company regarding the Company’s and its Subsidiaries’ business, management and
financial affairs and the terms and conditions of the Offering, the Note, the Shares, the Warrant, the Amended Warrant and the Securities and to obtain additional information (to the extent the Company possessed such information or could acquire it
without unreasonable effort or expense) necessary to verify any information furnished to the Purchaser or to which the Purchaser had access. 
  
 5.4 Purchaser Bears Economic Risk. The Purchaser has substantial experience in evaluating and investing in private placement
transactions of securities in companies similar to the Company so that it is capable of evaluating the merits and risks of its investment in the Company and has the capacity to protect its own interests. The Purchaser must bear the economic risk of
this investment until the Securities are sold pursuant to: (i) an effective registration statement under the Securities Act; or (ii) an exemption from registration is available with respect to such sale. 
  
 5.5 Acquisition for Own Account. The Purchaser is
acquiring the Note, the Shares, the Warrant and the Amended Warrant and the Warrant Shares for the Purchaser’s own account for investment only, and not as a nominee or agent and not with a view towards or for resale in connection with their
distribution. The Purchaser shall not effect sales of the Shares or the Warrant Shares in a manner that would cause the Purchaser to be deemed an “underwriter” as defined in the Securities Act. 
  
 5.6 Purchaser Can Protect Its Interest. The Purchaser
represents that by reason of its, or of its management’s, business and financial experience, the Purchaser has the capacity to evaluate the merits and risks of its investment in the Note, the Shares, the Warrant, the Amended Warrant and the
Securities and to protect its own interests in connection with the transactions contemplated in this Agreement and the Related Agreements. Further, Purchaser is aware of no publication of any advertisement in connection with the transactions
contemplated in the Agreement or the Related Agreements. 
  
 5.7 Accredited Investor. Purchaser represents that it is an accredited investor within the meaning of Regulation D under the Securities Act. 
  

 16 

 5.8 Legends. 
  

	 	(a)	The Note shall bear substantially the following legend: 

  
 “THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE, STATE SECURITIES LAWS. THIS NOTE MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO COACH INDUSTRIES GROUP, INC. THAT
SUCH REGISTRATION IS NOT REQUIRED.” 
  

	 	(b)	The Shares and the Warrant Shares, if not issued by DWAC system (as hereinafter defined), shall bear a legend which shall be in substantially the following form until such shares
are covered by an effective registration statement filed with the SEC: 

  
 “THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS. THESE SHARES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED
OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT AND APPLICABLE STATE LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO COACH INDUSTRIES GROUP, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.”

  

	 	(c)	The Warrant and the Amended Warrant shall bear substantially the following legend: 

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

 17 

 6. Covenants of the Company. The Company covenants and agrees with the Purchaser as follows:

  
 6.1 Stop-Orders. As long as the Note
and all obligations related thereto and Warrant remains outstanding, the Company will advise the Purchaser, promptly after it receives notice of issuance by the Securities and Exchange Commission (the “SEC”), any state securities
commission or any other regulatory authority of any stop order or of any order preventing or suspending any offering of any securities of the Company, or of the suspension of the qualification of the Common Stock of the Company for offering or sale
in any jurisdiction, or the initiation of any proceeding for any such purpose. 
  
 6.2 Listing. The Company shall promptly secure the listing of the Shares and the shares of Common Stock issuable upon the exercise
of the Warrant and the Amended Warrant on the NASD OTCBB (the “Principal Market”) upon which shares of Common Stock are listed (subject to official notice of issuance) and shall maintain such listing so long as any other shares of Common
Stock shall be so listed. The Company will maintain the listing of its Common Stock on the Principal Market, and will comply in all material respects with the Company’s reporting, filing and other obligations under the bylaws or rules of the
National Association of Securities Dealers (“NASD”) and such exchanges, as applicable. 
  
 6.3 Market Regulations. The Company shall notify the SEC, NASD and applicable state authorities, in accordance with their
requirements, of the transactions contemplated by this Agreement, and shall take all other necessary action and proceedings as may be required and permitted by applicable law, rule and regulation, for the legal and valid issuance of the Securities
to the Purchaser and promptly provide copies thereof to the Purchaser. 
  
 6.4 Reporting Requirements. The Company will timely file with the SEC all reports required to be filed pursuant to the Exchange Act and refrain from terminating its status as an issuer required by the Exchange
Act to file reports thereunder even if the Exchange Act or the rules or regulations thereunder would permit such termination. 
  
 6.5 Use of Funds. The Company agrees that it will use (i) up to $6,000,000 of the proceeds of the Note to prepay the
Amortizing Redemption Amount and (ii) the remainder of the proceeds of the sale of the Note and the proceeds of the sale of the Warrant and the Amended Warrant for general corporate purposes only. 
  
 6.6 Access to Facilities. As long as the Note remains
outstanding , each of the Company and each of its Subsidiaries will permit any representatives designated by the Purchaser (or any successor of the Purchaser), upon reasonable notice and during normal business hours, at such person’s expense
and accompanied by a representative of the Company, to: 
  

	 	(a)	visit and inspect any of the properties of the Company or any of its Subsidiaries; 

  

	 	(b)	 examine the corporate and financial records of the Company or any of its Subsidiaries (unless such examination is not permitted by 

  

 18 

	 	 
federal, state or local law or by contract) and make copies thereof or extracts therefrom; and 

  

	 	(c)	discuss the affairs, finances and accounts of the Company or any of its Subsidiaries with the directors, officers and independent accountants of the Company or any of its
Subsidiaries. 

  
 Notwithstanding the foregoing, neither the Company
nor any of its Subsidiaries will provide any material, non-public information to the Purchaser unless the Purchaser signs a confidentiality agreement and also complies with Regulation FD, under the federal securities laws. 
  
 6.7 Taxes. Each of the Company and each of its
Subsidiaries will promptly pay and discharge, or cause to be paid and discharged, when due and payable, all lawful taxes, assessments and governmental charges or levies imposed upon the income, profits, property or business of the Company and its
Subsidiaries; provided, however, that any such tax, assessment, charge or levy need not be paid if the validity thereof shall currently be contested in good faith by appropriate proceedings and if the Company and/or such Subsidiary shall have set
aside on its books adequate reserves with respect thereto, and provided, further, that the Company and its Subsidiaries will pay all such taxes, assessments, charges or levies forthwith upon the commencement of proceedings to foreclose any lien
which may have attached as security therefor. 
  
 6.8 Insurance. As long as the Note and all obligations related thereto remains outstanding, each of the Company and its Subsidiaries will keep its assets which are of an insurable character insured by financially sound and reputable
insurers against loss or damage by fire, explosion and other risks customarily insured against by companies in similar business similarly situated as the Company and its Subsidiaries; and the Company and its Subsidiaries will maintain, with
financially sound and reputable insurers, insurance against other hazards and risks and liability to persons and property to the extent and in the manner which the Company reasonably believes is customary for companies in similar business similarly
situated as the Company and its Subsidiaries and to the extent available on commercially reasonable terms. The Company, and each of its Subsidiaries will jointly and severally bear the full risk of loss from any loss of any nature whatsoever with
respect to the assets pledged to the Purchaser as security for its obligations hereunder and under the Related Agreements. At the Company’s and each of its Subsidiaries’ joint and several cost and expense in amounts and with carriers
reasonably acceptable to Purchaser, the Company and each of its Subsidiaries shall (i) keep all its insurable properties and properties in which it has an interest insured against the hazards of fire, flood, sprinkler leakage, those hazards
covered by extended coverage insurance and such other hazards, and for such amounts, as is customary in the case of companies engaged in businesses similar to the Company’s or the respective Subsidiary’s including business interruption
insurance; (ii) maintain a bond in such amounts as is customary in the case of companies engaged in businesses similar to the Company’s or the respective Subsidiary’s insuring against larceny, embezzlement or other criminal
misappropriation of insured’s officers and employees who may either singly or jointly with others at any time have access to the assets or funds of the Company or any of its Subsidiaries either directly or through governmental authority to draw
upon such funds or to direct generally the disposition of such assets; (iii) maintain public and product liability insurance against claims for personal injury, death or property damage suffered by others; (iv)

  

 19 

 
maintain all such worker’s compensation or similar insurance as may be required under the laws of any state or jurisdiction in which the Company or the
respective Subsidiary is engaged in business; and (v) furnish Purchaser with (x) copies of all policies and evidence of the maintenance of such policies at least thirty (30) days before any expiration date, (y) excepting the
Company’s workers’ compensation policy, endorsements to such policies naming Purchaser as “co-insured” or “additional insured” and appropriate loss payable endorsements in form and substance satisfactory to Purchaser,
naming Purchaser as loss payee, and (z) evidence that as to Purchaser the insurance coverage shall not be impaired or invalidated by any act or neglect of the Company or any Subsidiary and the insurer will provide Purchaser with at least thirty
(30) days notice prior to cancellation. The Company and each Subsidiary shall instruct the insurance carriers that in the event of any loss thereunder, the carriers shall make payment for such loss to the Company and/or the Subsidiary and
Purchaser jointly. In the event that as of the date of receipt of each loss recovery upon any such insurance, the Purchaser has not declared an event of default with respect to this Agreement or any of the Related Agreements, then the Company and/or
such Subsidiary shall be permitted to direct the application of such loss recovery proceeds toward investment in property, plant and equipment that would comprise “Collateral” secured by Purchaser’s security interest granted by the
Company pursuant to the Master Security Agreement and reaffirmed by the Company pursuant to the Reaffirmation Agreement, any Related Agreement and/or such other security agreement as shall be required by the Purchaser. with any surplus funds to be
used by the Company and/or such Subsidiary (x) as may be required by law or (y) at the Purchaser’s option, either (i) for general corporate purposes or (ii) applied toward payment of the obligations of the Company to
Purchaser. In the event that Purchaser has properly declared an event of default with respect to this Agreement or any of the Related Agreements, then all loss recoveries received by Purchaser upon any such insurance thereafter may be applied to the
obligations of the Company hereunder and under the Related Agreements, in such order as the Purchaser may determine. Any surplus (following satisfaction of all Company obligations to Purchaser) shall be paid by Purchaser to the Company or applied as
may be otherwise required by law. 
  
 6.9
Intellectual Property. Each of the Company and each of its Subsidiaries shall maintain in full force and effect its existence, rights and franchises and all licenses and other rights to use Intellectual Property owned or possessed by it and
reasonably deemed to be necessary to the conduct of its business. 
  
 6.10 Properties. Each of the Company and each of its Subsidiaries will keep its properties in good repair, working order and condition, reasonable wear and tear excepted, and from time to time make all needful
and proper repairs, renewals, replacements, additions and improvements thereto; and each of the Company and each of its Subsidiaries will at all times comply with each provision of all leases to which it is a party or under which it occupies
property if the breach of such provision could, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. 
  
 6.11 Confidentiality. The Company agrees that it will not disclose, and will not include in any public announcement, the name of
the Purchaser, unless expressly agreed to by the Purchaser or unless and until such disclosure is required by law or applicable regulation, and then only to the extent of such requirement. Notwithstanding the foregoing, the Company may 

  

 20 

 
disclose Purchaser’s identity and the terms of this Agreement to its current and prospective debt and equity financing sources. 
  
 6.12 Required Approvals. For so long as twenty-five
percent (25%) of the original principal amount of the Note is outstanding, the Company, without the prior written consent of the Purchaser, shall not, and shall not permit any of its Subsidiaries to: 
  

	 	(a)	(i) directly or indirectly declare or pay any cash dividends, other than dividends paid to the Company or paid by any of its direct or indirect wholly-owned Subsidiaries to its
parent; or (ii) redeem any of its preferred stock or other equity interests. 

  

	 	(b)	liquidate, dissolve or effect a material reorganization (it being understood that in no event shall the Company dissolve, liquidate or merge with any other person or entity (unless
(i) the Company is the surviving entity or (ii) pursuant to a transaction consummated for the sole purpose of reincorporating the Company or a wholly-owned Subsidiary of the Company organized in the United States under the laws of a
different United States jurisdiction); 

  

	 	(c)	become subject to (including, without limitation, by way of amendment to or modification of) any agreement or instrument which by its terms would (under any circumstances) restrict
the Company’s or any of its Subsidiaries right to perform the provisions of this Agreement, any Related Agreement or any of the agreements contemplated hereby or thereby; 

  

	 	(d)	materially alter or change the scope of the business of the Company and its Subsidiaries taken as a whole; 

  

	 	(e)	 (i) create, incur, assume or suffer to exist any indebtedness (exclusive of trade debt and debt incurred to finance the purchase of equipment not in excess of ten
percent (10%) of the fair market value of the Company’s and its Subsidiaries’ assets) whether secured or unsecured other than (w) unsecured indebtedness not to exceed an aggregate principal amount outstanding of $200,000,
(x) the Company’s indebtedness to the Purchaser, (y) indebtedness set forth on Schedule 6.12(e) attached hereto and made a part hereof and any refinancings or replacements thereof on terms no less favorable to the Purchaser
than the indebtedness being refinanced or replaced, and (z) any debt incurred in connection with the purchase of assets or equipment in the ordinary course of business, or any refinancings or replacements thereof on terms no less favorable to
the Purchaser than the indebtedness being refinanced or replaced; (ii) cancel any debt owing to it in excess of $50,000 in the aggregate during any 12 month period; (iii) assume, guarantee, endorse or otherwise become directly or
contingently liable in connection with any obligations of 

  

 21 

	 	 
any other Person other than, solely in the case of the Company or a Subsidiary of the Company which is party to the Subsidiaries Guaranty, the Company or
another Subsidiary (in the case of a Subsidiary) or a Subsidiary (in the case of the Company), except the endorsement of negotiable instruments by the Company or any Subsidiary thereof for deposit or collection or similar transactions in the
ordinary course of business or guarantees of indebtedness otherwise permitted to be outstanding pursuant to this clause (e); and 

  

	 	(f)	create or acquire any Subsidiary after the date hereof unless (i) such Subsidiary is a wholly-owned Subsidiary of the Company and (ii) such Subsidiary becomes party to the
Master Security Agreement, the Stock Pledge Agreement and the Subsidiary Guaranty (either by executing a counterpart thereof or an assumption or joinder agreement in respect thereof) and, to the extent required by the Purchaser, satisfies each
condition of this Agreement and the Related Agreements as if such Subsidiary were a Subsidiary on the Closing Date. 

  
 6.13 Reissuance of Securities. The Company agrees to reissue certificates representing the Securities without the legends set forth
in Section 5.8 above at such time as: 
  

	 	(a)	the holder thereof is permitted to dispose of such Securities pursuant to Rule 144(k) under the Securities Act; or 

  

	 	(b)	upon resale subject to an effective registration statement after such Securities are registered under the Securities Act. 

  
 The Company agrees to cooperate with the Purchaser in connection with all resales pursuant to
Rule 144(d) and Rule 144(k) and provide legal opinions necessary to allow such resales provided the Company and its counsel receive reasonably requested representations from the selling Purchaser and broker, if any, and all factual conditions that
would be required to render such opinions have been satisfied. 
  
 6.14 Opinion. On the Closing Date, the Company will deliver to the Purchaser an opinion acceptable to the Purchaser from the Company’s acceptable legal counsel. The Company will provide, at the
Company’s expense, such other legal opinions in the future as are deemed reasonably necessary by the Purchaser (and acceptable to the Purchaser) in and exercise of the Warrant. 
  
 6.15 Margin Stock. The Company will not permit any of the proceeds of the Note or the Warrant to be
used directly or indirectly to “purchase” or “carry” “margin stock” or to repay indebtedness incurred to “purchase” or “carry” “margin stock” within the respective meanings of each of the
quoted terms under Regulation U of the Board of Governors of the Federal Reserve System as now and from time to time hereafter in effect. 
  
 6.16 Financing Right of First Opportunity. (a) The Company hereby grants to the Purchaser a right of first opportunity to
provide any Additional Financing (as defined below) 

  

 22 

 
to be issued by the Company and/or any of its Subsidiaries, subject to the following terms and conditions. From and after the date hereof, if the Company
intends to incur any additional indebtedness (other than indebtedness permitted under Section 6.12(e)) and/or the sale or issuance of any equity interests of the Company or any of its Subsidiaries (other than as consideration for the purchase
of assets or property, a business or another entity or other than issuances or sales to employees, officers, directors or consultants) (an “Additional Financing”), the Company and/or any Subsidiary of the Company, as the case may be, shall
notify the Purchaser of its intention to enter into such Additional Financing. In connection therewith, the Company and/or the applicable Subsidiary thereof shall submit a term sheet or other writing (a “Proposed Term Sheet”) to the
Purchaser setting forth the terms, conditions and pricing of any such Additional Financing (such financing to be negotiated on “arm’s length” terms and the terms thereof to be negotiated in good faith) proposed to be entered into by
the Company and/or such Subsidiary. The Purchaser shall have the opportunity, but not the obligation, to deliver its own proposed term sheet (the “Purchaser Term Sheet”) setting forth the terms and conditions upon which Purchaser would be
willing to provide such Additional Financing to the Company and/or such Subsidiary. The Purchaser Term Sheet shall contain terms and conditions no less favorable to the Company and/or such Subsidiary than those outlined in the Proposed Term Sheet.
The Purhcaser shall deliver such Purchaser Term Sheet within ten business days of receipt of each such Proposed Term Sheet. If the provisions of the Purchaser Term Sheet are at least as favorable to the Company and/or such Subsidiary, as the case
may be, as the provisions of the Proposed Term Sheet, the Company and/or such Subsidiary shall enter into and consummate the Additional Financing transaction outlined in the Purchaser Term Sheet. 
  
 Otherwise, if the Purchaser elects not to provide Additional Financing within 5 business days
the Company shall be free to consummate the Additional Financing with another party upon terms no less favorable to the Company than those set forth in the Proposed Term Sheet. 
  
 (b) The Company will not, and will not permit its Subsidiaries to, agree, directly or indirectly, to any
restriction with any person or entity which limits the ability of the Purchaser to consummate an Additional Financing with the Company or any of its Subsidiaries. 
  
 7. Covenants of the Purchaser. The Purchaser covenants and agrees with the Company as follows: 
  
 7.1 Confidentiality. The Purchaser agrees that it
will not disclose, and will not include in any public announcement, the name of the Company, unless expressly agreed to by the Company or unless and until such disclosure is required by law or applicable regulation, and then only to the extent of
such requirement. 
  
 7.2 Non-Public
Information. The Purchaser agrees not to effect any sales in the shares of the Company’s Common Stock while in possession of material, non-public information regarding the Company if such sales would violate applicable securities law.

  
 7.3 Sale Restriction. The Purchaser
agrees that it will not sell any Warrant Shares prior to February 1, 2006. 
  

 23 

 8. Covenants of the Company and Purchaser Regarding Indemnification. 
  
 8.1 Company Indemnification. The Company agrees to
indemnify, hold harmless, reimburse and defend the Purchaser, each of the Purchaser’s officers, directors, agents, affiliates, control persons, and principal shareholders, against any claim, cost, expense, liability, obligation, loss or damage
(including reasonable legal fees) of any nature, incurred by or imposed upon the Purchaser which results, arises out of or is based upon: (i) any misrepresentation by the Company or any of its Subsidiaries or breach of any warranty by the
Company or any of its Subsidiaries in this Agreement, any other Related Agreement or in any exhibits or schedules attached hereto or thereto; or (ii) any breach or default in performance by Company or any of its Subsidiaries of any covenant or
undertaking to be performed by Company or any of its Subsidiaries hereunder, under any other Related Agreement or any other agreement entered into by the Company and/or any of its Subsidiaries and Purchaser relating hereto or thereto. 
  
 8.2 Purchaser’s Indemnification. Purchaser
agrees to indemnify, hold harmless, reimburse and defend the Company and each of the Company’s officers, directors, agents, affiliates, control persons and principal shareholders, at all times against any claim, cost, expense, liability,
obligation, loss or damage (including reasonable legal fees) of any nature, incurred by or imposed upon the Company which results, arises out of or is based upon: (i) any misrepresentation by Purchaser or breach of any warranty by Purchaser in
this Agreement, any Related Agreement or in any exhibits or schedules attached hereto or thereto; or (ii) any breach or default in performance by Purchaser of any covenant or undertaking to be performed by Purchaser hereunder, under any other
Related Agreement, or any other agreement entered into by the Company and Purchaser relating hereto. 
  
 9. [INTENTIONALLY OMITTED.]. 
  
 10. Registration Rights. 
  
 10.1 Registration Rights Granted. The Company hereby grants registration rights to the Purchaser pursuant to a Registration Rights
Agreement dated as of even date herewith between the Company and the Purchaser. 
  
 10.2 Offering Restrictions. Except as previously disclosed in the SEC Reports or in the Exchange Act Filings, or stock or stock
options granted to employees or directors of the Company or its Subsidiaries (these exceptions hereinafter referred to as the “Excepted Issuances”), neither the Company nor any of its Subsidiaries will issue any securities with a
continuously variable/floating conversion feature which are or could be (by conversion or registration) free-trading securities (i.e. common stock subject to a registration statement) prior to the full repayment of the Note (together with all
accrued and unpaid interest and fees related thereto) (the “Exclusion Period”). 
  
 11. Miscellaneous. 
  
 11.1 Governing Law. THIS AGREEMENT AND EACH RELATED AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF 

  

 24 

 
CONFLICTS OF LAWS. ANY ACTION BROUGHT BY EITHER PARTY AGAINST THE OTHER CONCERNING THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT AND EACH RELATED AGREEMENT
SHALL BE BROUGHT ONLY IN THE STATE COURTS OF NEW YORK OR IN THE FEDERAL COURTS LOCATED IN THE STATE OF NEW YORK. BOTH PARTIES AND THE INDIVIDUALS EXECUTING THIS AGREEMENT AND THE RELATED AGREEMENTS ON BEHALF OF THE COMPANY AGREE TO SUBMIT TO THE
JURISDICTION OF SUCH COURTS AND WAIVE TRIAL BY JURY. IN THE EVENT THAT ANY PROVISION OF THIS AGREEMENT OR ANY RELATED AGREEMENT DELIVERED IN CONNECTION HEREWITH IS INVALID OR UNENFORCEABLE UNDER ANY APPLICABLE STATUTE OR RULE OF LAW, THEN SUCH
PROVISION SHALL BE DEEMED INOPERATIVE TO THE EXTENT THAT IT MAY CONFLICT THEREWITH AND SHALL BE DEEMED MODIFIED TO CONFORM WITH SUCH STATUTE OR RULE OF LAW. ANY SUCH PROVISION WHICH MAY PROVE INVALID OR UNENFORCEABLE UNDER ANY LAW SHALL NOT AFFECT
THE VALIDITY OR ENFORCEABILITY OF ANY OTHER PROVISION OF THIS AGREEMENT OR ANY RELATED AGREEMENT. 
  
 11.2 Survival. The representations, warranties, covenants and agreements made herein shall survive any investigation made by the
Purchaser and the closing of the transactions contemplated hereby to the extent provided therein. All statements as to factual matters contained in any certificate or other instrument delivered by or on behalf of the Company pursuant hereto in
connection with the transactions contemplated hereby shall be deemed to be representations and warranties by the Company hereunder solely as of the date of such certificate or instrument. 
  
 11.3 Successors. Except as otherwise expressly
provided herein, the provisions hereof shall inure to the benefit of, and be binding upon, the successors, heirs, executors and administrators of the parties hereto and shall inure to the benefit of and be enforceable by each person who shall be a
holder of the Securities from time to time, other than the holders of Common Stock which has been sold by the Purchaser or any transferee pursuant to Rule 144 or an effective registration statement. Purchaser may not assign its rights hereunder to a
competitor of the Company. 
  
 11.4 Entire
Agreement. This Agreement, the Related Agreements, the exhibits and schedules hereto and thereto and the other documents delivered pursuant hereto constitute the full and entire understanding and agreement between the parties with regard to the
subjects hereof and no party shall be liable or bound to any other in any manner by any representations, warranties, covenants and agreements except as specifically set forth herein and therein. 
  
 11.5 Severability. In case any provision of the
Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. 
  
 11.6 Amendment and Waiver. 
  

	 	(a)	This Agreement may be amended or modified only upon the written consent of the Company and the Purchaser. 

  

 25 

	 	(b)	The obligations of the Company and the rights of the Purchaser under this Agreement may be waived only with the written consent of the Purchaser. 

  

	 	(c)	The obligations of the Purchaser and the rights of the Company under this Agreement may be waived only with the written consent of the Company. 

  
 11.7 Delays or Omissions. It is agreed that no delay
or omission to exercise any right, power or remedy accruing to any party, upon any breach, default or noncompliance by another party under this Agreement or the Related Agreements, shall impair any such right, power or remedy, nor shall it be
construed to be a waiver of any such breach, default or noncompliance, or any acquiescence therein, or of or in any similar breach, default or noncompliance thereafter occurring. All remedies, either under this Agreement or the Related Agreements,
by law or otherwise afforded to any party, shall be cumulative and not alternative. 
  
 11.8 Notices. All notices required or permitted hereunder shall be in writing and shall be deemed effectively given: 
  

	 	(a)	upon personal delivery to the party to be notified; 

  

	 	(b)	when sent by confirmed facsimile if sent during normal business hours of the recipient, if not, then on the next business day; 

  

	 	(c)	three (3) business days after having been sent by registered or certified mail, return receipt requested, postage prepaid; or 

  

	 	(d)	one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. 

  
 All communications shall be sent as follows: 
  

			
	 If to the Company, to:
	  	 Coach Industries Group, Inc.
 12330 Southwest
53rd St. Suite 704
 Cooper City, Florida 33330
 Attention: Chief Financial Officer
 Facsimile: 954-206-0680

  

 26 

			
	 	  	with a copy to:
	 	  	 Richardson & Patel, LLP
 10900 Wilshire Blvd.,
Suite 500
 Los Angeles, CA 90024
 Attention: Mark Abdou,
Esq.
 Facsimile: (310) 208-1182

		
	 	  	 Joseph I. Emas, Esq.
 1224 Washington
Avenue
 Miami Beach, Florida 33139
 Facsimile:
305-531-1274

		
	If to the Purchaser, to:	  	 Laurus Master Fund, Ltd.
 c/o M&C Corporate
Services Limited
 P.O. Box 309 GT
 Ugland House, George
Town
 South Church Street
 Grand Cayman, Cayman
Islands
 Facsimile: 345-949-8080

		
	 	  	with a copy to:
		
	 	  	 John E. Tucker, Esq.
 825 Third Avenue 14th
Floor
 New York, NY 10022
 Facsimile:
212-541-4434

  
 or at such other address as the
Company or the Purchaser may designate by written notice to the other parties hereto given in accordance herewith. 
  
 11.9 Attorneys’ Fees. In the event that any suit or action is instituted to enforce any provision in this Agreement, the
prevailing party in such dispute shall be entitled to recover from the losing party all fees, costs and expenses of enforcing any right of such prevailing party under or with respect to this Agreement, including, without limitation, such reasonable
fees and expenses of attorneys and accountants, which shall include, without limitation, all fees, costs and expenses of appeals. 
  
 11.10 Titles and Subtitles. The titles of the sections and subsections of this Agreement are for convenience of reference only and
are not to be considered in construing this Agreement. 
  
 11.11 Facsimile Signatures; Counterparts. This Agreement may be executed by facsimile signatures and in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument.

  

 27 

 11.12 Broker’s Fees. Except as set forth on Schedule 11.12 hereof, each party
hereto represents and warrants that no agent, broker, investment banker, person or firm acting on behalf of or under the authority of such party hereto is or will be entitled to any broker’s or finder’s fee or any other commission directly
or indirectly in connection with the transactions contemplated herein. Each party hereto further agrees to indemnify each other party for any claims, losses or expenses incurred by such other party as a result of the representation in this
Section 11.12 being untrue. 
  
 11.13
Construction. Each party acknowledges that its legal counsel participated in the preparation of this Agreement and the Related Agreements and, therefore, stipulates that the rule of construction that ambiguities are to be resolved against the
drafting party shall not be applied in the interpretation of this Agreement to favor any party against the other. 
  
 [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK] 
  

 28 

 IN WITNESS WHEREOF, the parties hereto have executed the SECURITIES PURCHASE AGREEMENT as of the date set
forth in the first paragraph hereof. 
  

									
	COMPANY:	 	 	 	PURCHASER:
			
	COACH INDUSTRIES GROUP, INC.	 	 	 	LAURUS MASTER FUND, LTD.
					
	 By:
	 	 	 	 	 	 By:
	 	 
					
	 Name:
	 	 	 	 	 	 Name:
	 	 
					
	 Title:
	 	 	 	 	 	 Title:
	 	 

  

 29Secured Term Note

 Exhibit 10.2 
  
 THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. THIS NOTE MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO COACH INDUSTRIES GROUP, INC.
THAT SUCH REGISTRATION IS NOT REQUIRED. 
  
 SECURED TERM NOTE

  
 FOR VALUE RECEIVED, COACH INDUSTRIES GROUP, INC., a
Nevada corporation (the “Borrower”), hereby promises to pay to LAURUS MASTER FUND, LTD., c/o M&C Corporate Services Limited, P.O. Box 309 GT, Ugland House, South Church Street, George Town, Grand Cayman, Cayman Islands, Fax:
345-949-8080 (the “Holder”) or its registered assigns or successors in interest, on order, the sum of Seven Million Dollars ($7,000,000), together with any accrued and unpaid interest hereon, on October
    , 2009 (the “Maturity Date”) if not sooner paid. The original principal amount of this Note is hereinafter referred to as the “Principal Amount”. 
  
 Capitalized terms used herein without definition shall have the meanings
ascribed to such terms in that certain Securities Purchase Agreement dated as of the date hereof between the Borrower and the Holder (the “Purchase Agreement”). 
  
 The following terms shall apply to this Secured Term Note (this “Note”): 
  
 ARTICLE I 
 INTEREST & AMORTIZATION 
  
 1.1 (a) Interest Rate. Subject to Sections 1.1(b), 4.12 and 5.6 hereof, interest payable on the outstanding Principal Amount of this Note shall accrue at a rate per annum (the “Interest Rate”)
equal to the “prime rate” published in The Wall Street Journal from time to time, plus one and one-half percent (1.5%). The prime rate shall be increased or decreased as the case may be for each increase or decrease in the prime
rate in an amount equal to such increase or decrease in the prime rate; each change to be effective as of the day of the change in such rate. The Interest Rate shall not be less than seven percent (7.0%). Interest shall be calculated on the basis of
a 360 day year. Interest on the outstanding Principal Amount shall be payable monthly, in arrears, commencing on December 1, 2005 and on the first day of each consecutive calendar month thereafter (each, a “Repayment Date”) and
on the Maturity Date, whether by acceleration or otherwise, or, in the event of the redemption of all or any portion of the Principal Amount, accrued interest on the amount so redeemed shall be paid on the date of redemption. 
  

 1 of 7 

 1.2 Minimum Monthly Principal Payments. Amortizing payments of the outstanding Principal Amount
shall begin on April 1, 2006 and shall recur on each succeeding Repayment Date thereafter until the Principal Amount has been repaid in full. On each Repayment Date, the Borrower shall make payments to the Holder in the amount of $162,790.70
(the “Monthly Principal Amount”), together with any accrued and unpaid interest then due on such portion of the Principal Amount plus any and all other amounts which are then owing under this Note that have not been paid (the
Monthly Principal Amount, together with such accrued and unpaid interest and such other amounts, collectively, the “Monthly Amount”). Any Principal Amount, together with any accrued and unpaid interest and any and all other unpaid
amounts that are then owing by the Borrower or its subsidiaries under this Note, the Purchase Agreement and/or any other Related Agreement that remain outstanding on the Maturity Date shall be due and payable on the Maturity Date. 
  
 ARTICLE II 
 OPTIONAL PREPAYMENT 
  
 2.1 Optional Redemption of Principal Amount. The Borrower will have the option of prepaying the outstanding Principal Amount (“Optional Redemption”), in whole or in part, by paying to the
Holder a sum of money equal to one hundred percent (100%) of the outstanding Principal Amount to be redeemed, together with accrued but unpaid interest thereon and any and all other sums due, accrued or payable to the Holder arising under this
Note, the Purchase Agreement or any Related Agreement (the “Redemption Amount”) on the day written notice of redemption (the “Notice of Redemption”) is given to the Holder. The Notice of Redemption shall specify the
date for such Optional Redemption (the “Redemption Payment Date”), which date shall be not less than seven (7) business days after the date of the Notice of Redemption (the “Redemption Period”). On the
Redemption Payment Date, the Redemption Amount shall be paid in good funds to the Holder. 
  
 2.2 Mandatory Redemption. The total outstanding Principal Amount, together with any accrued and unpaid interest and any and all other unpaid amounts that are then owing by Borrower and its subsidiaries to
Holder under this Note, the Purchase Agreement and/or any Related Agreement shall be due and payable on the Maturity Date. 
  
 ARTICLE III 
 [INTENTIONALLY OMITTED]

  
 ARTICLE IV 
 EVENTS OF DEFAULT 
  
 Upon the occurrence and continuance of an Event of Default beyond any applicable grace period, the Holder may make all sums of principal, interest and
other fees then remaining unpaid hereon and all other amounts payable hereunder immediately due and payable. In the event of such an acceleration, the amount due and owing to the Holder shall be 110% of the outstanding principal 

  

 2 of 7 

 
amount of the Note (plus accrued and unpaid interest and fees, if any) (the “Default Payment”). The Default Payment shall be applied first
to any fees due and payable to Holder pursuant to this Note, the Purchase Agreement or the Related Agreements, second to accrued and unpaid interest due on the Note third, to outstanding principal balance of the Note and forth, any balance to
Borrower. 
  
 The occurrence of any of the following events set
forth in Sections 4.1 through 4.10, inclusive, is an “Event of Default”: 
  
 4.1 Failure to Pay Principal, Interest or other Fees. The Borrower fails to pay when due any installment of principal, interest or other fees hereon in accordance herewith, or the Borrower fails to pay when due
any amount due under any of the Obligations, as such term is defined in the Master Security Agreement as amended, modified and reaffirmed by the Reaffirmation Agreement or under the Indebtedness, as such term is defined in the Stock Pledge Agreement
as amended, modified and reaffirmed by the Reaffirmation Agreement or under any other promissory note issued by Borrower, and in any such case, such failure shall continue for a period of three (3) days following the date upon which any such
payment was due in the case of this Note, or the applicable grace period thereunder, in the case of any other promissory note. 
  
 4.2 Breach of Covenant. The Borrower breaches any covenant or any other term or condition of this Note or the Purchase Agreement in any material
respect, or the Borrower or any of its Subsidiaries breaches any covenant or any other term or condition of any Related Agreement in any material respect and, in such case, such breach, continues for a period of fifteen (15) days after the
occurrence thereof. 
  
 4.3 Breach of Representations and
Warranties. Any representation or warranty made by the Borrower in this Note or the Purchase Agreement, or by the Borrower or any of its Subsidiaries in any Related Agreement, shall, in any such case, be false or misleading in any material
respect on the date that such representation or warranty was made or deemed made. 
  
 4.4 Receiver or Trustee. The Borrower or any of its Subsidiaries shall make an assignment for the benefit of creditors, or apply for or consent to the appointment of a receiver or trustee for it or for a
substantial part of its property or business; or such a receiver or trustee shall otherwise be appointed. 
  
 4.5 Judgments. Any money judgment, writ or similar final process shall be entered or filed against the Borrower or any of its Subsidiaries or any
of their respetive property or other assets for more than $100,000, and shall remain unpaid, unvacated, unbonded or unstayed for a period of thirty (30) days. 
  
 4.6 Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings or relief
under any bankruptcy law or any law for the relief of debtors shall be instituted by or against the Borrower or any of its Subsidiaries. 
  

 3 of 7 

 4.7 Stop Trade. An SEC stop trade order or Principal Market trading suspension of the Common Stock
shall be in effect for five (5) consecutive days or five (5) days during a period of ten (10) consecutive days, excluding in all cases a suspension of all trading on a Principal Market, provided that the Borrower shall not have
been able to cure such trading suspension within thirty (30) days of the notice thereof or list the Common Stock, on another Principal Market within sixty (60) days of such notice. The “Principal Market” for the Common Stock
shall include the NASD OTC Bulletin Board, NASDAQ SmallCap Market, NASDAQ National Market System, American Stock Exchange, or New York Stock Exchange (whichever of the foregoing is at the time the principal trading exchange or market for the Common
Stock, or any securities exchange or other securities market on which the Common Stock is then being listed or traded. 
  
 4.8 Failure to Deliver Common Stock or Replacement Note. The Borrower shall fail (i) to timely deliver Common Stock to the Holder pursuant to
and in the form required by the Warrant or the Penny Warrant, if such failure to timely deliver Common Stock shall not be cured within two (2) business days. 
  
 4.9 Default Under Related Agreements or Other Agreements. The occurrence and continuance of any Event of Default (as
defined in the Purchase Agreement or any Related Agreement) or any event of default (or similar term) under any other indebtedness of the Borrower or any of its Subsidiaries. 
  
 4.10 Change in Control. (i) Any “Person” or “group” (as such terms are defined in Sections
13(d) and 14(d) of the Exchange Act, as in effect on the date hereof) is or becomes the “beneficial owner” (as defined in Rules 13(d)-3 and 13(d)-5 under the Exchange Act), directly or indirectly, of 35% or more on a fully diluted basis of
the then outstanding voting equity interest of the Borrower or (ii) the Board of Directors of the Borrower shall cease to consist of a majority of the Board of Directors of the Borrower on the date hereof (or directors appointed by a majority
of the Board of Directors in effect immediately prior to such appointment). 
  
 DEFAULT RELATED PROVISIONS 
  
 4.11 Default Interest Rate. Following the occurrence and during the continuance of an Event of Default, the Borrower shall pay additional interest on this Note in an amount equal to two percent (2%) per month, and all
outstanding obligations under this Note, including unpaid interest, shall continue to accrue such additional interest from the date of such Event of Default until the date such Event of Default is cured or waived. 
  
 4.12 Cumulative Remedies. The remedies under this Note shall be
cumulative. 
  

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 ARTICLE V 
 MISCELLANEOUS 
  
 5.1
Failure or Indulgence Not Waiver. No failure or delay on the part of the Holder hereof in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power,
right or privilege preclude other or further exercise thereof or of any other right, power or privilege. All rights and remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available. 
  
 5.2 Notices. Any notice herein required or permitted to be given shall
be in writing and shall be deemed effectively given: (a) upon personal delivery to the party notified, (b) when sent by confirmed telex or facsimile if sent during normal business hours of the recipient, if not, then on the next business
day, (c) five days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written
verification of receipt. All communications shall be sent to the Borrower at the address provided in the Purchase Agreement executed in connection herewith, and to the Holder at the address provided in the Purchase Agreement for such Holder, with a
copy to John E. Tucker, Esq., 825 Third Avenue, 14th Floor, New York, New York 10022, facsimile number
(212) 541-4434, or at such other address as the Borrower or the Holder may designate by ten days advance written notice to the other parties hereto. A Notice of Conversion shall be deemed given when made to the Borrower pursuant to the Purchase
Agreement. 
  
 5.3 Amendment Provision. The term
“Note” and all reference thereto, as used throughout this instrument, shall mean this instrument as originally executed, or if later amended or supplemented, then as so amended or supplemented, and any successor instrument issued pursuant
to Section 3.5 hereof, as it may be amended or supplemented. 
  
 5.4 Assignability. This Note shall be binding upon the Borrower and its successors and assigns, and shall inure to the benefit of the Holder and its successors and assigns, and may be assigned by the Holder in accordance with the
requirements of the Purchase Agreement. This Note shall not be assigned by the Borrower without the consent of the Holder. 
  
 5.5 Governing Law. This Note shall be governed by and construed in accordance with the laws of the State of New York, without regard to principles
of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Agreement shall be brought only in the state courts of New York or in the federal courts located in the state of New York.
Both parties and the individual signing this Note on behalf of the Borrower agree to submit to the jurisdiction of such courts. The prevailing party shall be entitled to recover from the other party its reasonable attorney’s fees and costs. In
the event that any provision of this Note is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform
with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or unenforceability of any other provision of this Note. Nothing contained herein shall be deemed or operate to
preclude the Holder from bringing suit or taking other legal action against the Borrower in any other jurisdiction to collect on the Borrower’s obligations to Holder, to realize on any collateral or any other security for such obligations, or
to enforce a judgment or other court in favor of the Holder. 
  

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 5.6 Maximum Payments. Nothing contained herein shall be deemed to establish or require the payment
of a rate of interest or other charges in excess of the maximum permitted by applicable law. In the event that the rate of interest required to be paid or other charges hereunder exceed the maximum permitted by such law, any payments in excess of
such maximum shall be credited against amounts owed by the Borrower to the Holder and thus refunded to the Borrower. 
  
 5.7 Security Interest and Guarantee. Pursuant to the terms of the Master Security Agreement dated as of September 29, 2005, as amended,
modified and reaffirmed by the Reaffirmation Agreement and the Stock Pledge Agreement, dated as of September 29, 2005, as amended, modified and reaffirmed by the Reaffirmation Agreement, Holder has been granted a security interest in certain
assets of the Borrower and its Subsidiaries. The obligations of the Borrower under this Note are guaranteed by certain Subsidiaries of the Borrower pursuant to the Subsidiary Guaranty dated as of September 29, 2005, as amended, modified and
reaffirmed by the Reaffirmation Agreement. 
  
 5.8
Construction. Each party acknowledges that its legal counsel participated in the preparation of this Note and, therefore, stipulates that the rule of construction that ambiguities are to be resolved against the drafting party shall not be
applied in the interpretation of this Note to favor any party against the other. 
  
 5.9 Cost of Collection. If default is made in the payment of this Note, the Borrower shall pay to Holder reasonable costs of collection, including reasonable attorney’s fees. 
  
 [Balance of page intentionally left blank; signature page follows.]

  

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 IN WITNESS WHEREOF, the Borrower has caused this Note to be signed in its name effective as of
this      day of October, 2005. 
  

			
	COACH INDUSTRIES GROUP, INC.
		
	 By:
	 	 
	 	 	 Name:

	 	 	 Title:

  

			
	WITNESS:
		
	 	 	 
	 	 	 

  

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