Document:

Unassociated Document

    

    
      SECURITIES
PURCHASE AGREEMENT

    

     

    This
Securities Purchase Agreement (this “Agreement”) is dated
as of March 8, 2010, between ZBB Energy Corporation, a Wisconsin corporation
(the “Company”), and each
purchaser identified on the signature pages hereto (each, including its
successors and assigns, a “Purchaser” and
collectively the “Purchasers”).

     

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

     

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

     

    ARTICLE
I.

    DEFINITIONS

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

    
      
         

      

      
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     “Closing Price” means
on any particular date (a) the last reported closing bid price per share of
Common Stock on such date on the Trading Market (as reported by Bloomberg L.P.
at 4:15 p.m. (New York City time)), (b) if there is no such price on such date,
then the closing bid price on the Trading Market on the date nearest preceding
such date (as reported by Bloomberg L.P. at 4:15 p.m. (New York City time)),
(c)  if the Common Stock is not then listed or quoted on a Trading Market
and if prices for the Common Stock are then reported in the “pink sheets”
published by Pink OTC Markets, Inc. (or a similar organization or agency
succeeding to its functions of reporting prices), the most recent bid price per
share of the Common Stock so reported, or (d) if the shares of Common Stock
are not then publicly traded the fair market value as of such date of a share of
Common Stock as determined by an independent appraiser selected in good faith by
the Purchasers of a majority in interest of the Shares then outstanding and
reasonably acceptable to the Company, the fees and expenses of which shall be
paid by the Company.

     

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

     

    “Common Stock” means
the common stock of the Company, par value $0.01per share, and any other class
of securities into which such securities may hereafter be reclassified or
changed.

     

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

     

    “Company Counsel”
means K&L Gates, with offices located at 214 N. Tryon Street, 47th Floor,
Charlotte, NC 28202.

     

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

     

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

     

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

    

    “Exempt Issuance”
means the issuance of (a) shares of Common Stock or options to employees,
officers, directors or consultants of the Company pursuant to any stock or
option plan duly adopted for such purpose, by a majority of the non-employee
members of the Board of Directors or a majority of the members of a committee of
non-employee directors established for such purpose, (b) securities upon the
exercise or exchange of or conversion of any Securities issued hereunder and/or
other securities exercisable or exchangeable for or convertible into shares of
Common Stock issued and outstanding on the date of this Agreement, provided that
such securities have not been amended since the date of this Agreement to
increase the number of such securities or to decrease the exercise price,
exchange price or conversion price of such securities, and (c) securities issued
pursuant to acquisitions or strategic transactions approved by a majority of the
disinterested directors of the Company, provided that any such issuance shall
only be to a Person (or to the equityholders of a Person) which is, itself or
through its subsidiaries, an operating company or an owner of an asset in a
business synergistic with the business of the Company and shall provide to the
Company additional benefits in addition to the investment of funds, but shall
not include a transaction in which the Company is issuing securities primarily
for the purpose of raising capital or to an entity whose primary business is
investing in securities.

    
      
         

      

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    “Per Share Purchase
Price” equals $0.80, subject to adjustment for reverse and forward stock
splits, stock dividends, stock combinations and other similar transactions of
the Common Stock that occur after the date of this Agreement.

     

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

     

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

     

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

     

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

     

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

    
      
         

      

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

     

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

     

    “Registration
Statement” means the effective registration statement with Commission
file No. 333-156941 which registers the sale of the Shares, the Warrants and the
Warrant Shares to the Purchasers.

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

    
      
         

      

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

     

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

     

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

     

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

     

    “Transfer Agent” means
Computershare, the current transfer agent of the Company, with a mailing address
of 2 North LaSalle Street, Chicago, IL 60602 and a facsimile number of
312-601-4348, and any successor transfer agent of the Company.

     

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

     

    “Warrants” means,
collectively, the Common Stock purchase warrants delivered to the Purchasers at
the Closing in accordance with Section 2.2(a) hereof, which Warrants shall be
exercisable commencing 181 days following the date hereof and have a term of
exercise equal to 5 years, in the form of Exhibit A attached
hereto.

     

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

     

    “WS” means Weinstein
Smith LLP with offices located at 420 Lexington Avenue, Suite 2620, New York,
New York 10170-0002.

     

    ARTICLE
II.

    PURCHASE
AND SALE

     

    2.1          Closing.  On the Closing Date, upon
the terms and subject to the conditions set forth herein, substantially
concurrent with the execution and delivery of this Agreement by the parties
hereto, the Company agrees to sell, and the Purchasers, severally and not
jointly,  agree to purchase, up to an aggregate of $1,795,000 of
Shares and Warrants.  Each Purchaser shall deliver to the Company, via
wire transfer or a certified check of immediately available funds equal to such
Purchaser’s Subscription Amount as set forth on the signature page hereto
executed by such Purchaser and the Company shall deliver to each Purchaser its
respective Shares and a Warrant as determined pursuant to Section 2.2(a), and
the Company and each Purchaser shall deliver the other items set forth in
Section 2.2 deliverable at the Closing.  Upon satisfaction of the
covenants and conditions set forth in Sections 2.2 and 2.3, the Closing shall
occur at the offices of WS or such other location as the parties shall mutually
agree.

    
      
         

      

      
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    2.2         Deliveries.

     

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

     

    (i)           this
Agreement duly executed by the Company;

     

    (ii)          a
legal opinion of Company Counsel and of local Wisconsin counsel, in form and
substance reasonably acceptable to the placement agent;

     

    (iii)         a
copy of the irrevocable instructions to the Company’s transfer agent instructing
the transfer agent to deliver via the Depository Trust Company Deposit
Withdrawal Agent Commission System (“DWAC”) Shares equal
to such Purchaser’s Subscription Amount divided by the Per Share Purchase Price,
registered in the name of such Purchaser;

     

    (iv)        a
Warrant registered in the name of such Purchaser to purchase up to a number of
shares of Common Stock equal to 50% of the Shares issuable to the Purchaser on
the Closing Date, with an exercise price equal to $1.04, subject to adjustment
therein (such Warrant certificate may be delivered within three Trading Days of
the Closing Date); and

     

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

     

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

     

    (i)         
 this Agreement duly executed by such Purchaser; and

     

    (ii)         such
Purchaser’s Subscription Amount by wire transfer to the account as specified in
writing by the Company.

     

    2.3          Closing
Conditions.

     

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

     

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

     

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

    
      
         

      

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    ARTICLE
III.

    REPRESENTATIONS
AND WARRANTIES

     

    3.1          Representations
and Warranties of the Company.  Except as otherwise
disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended
June 30, 2009 as amended by the Company’s Amendment No. 1 on Form 10-K/A for the
fiscal year ended June 30, 2009, any Company Quarterly Report on Form 10-Q filed
since September 18, 2009, the filing date of the Company’s Annual Report on Form
10-K for the fiscal year ended June 30, 2009, or any of the Company’s Current
Reports on Form 8-K filed since such date (including any exhibit thereto and
document incorporated by reference therein), and except as set forth in the
Disclosure Schedules, which Disclosure Schedules shall be deemed a part hereof,
the Company hereby makes the following representations and warranties to each
Purchaser:

    
      
         

      

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

     

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

     

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

    
      
         

      

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

     

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

    
      
         

      

      
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    (f)      
     Issuance of the Securities;
Registration.  The Securities are duly authorized and, when
issued and paid for in accordance with the applicable Transaction Documents,
will be duly and validly issued, fully paid and nonassessable, free and clear of
all Liens imposed by the Company.  The Warrant Shares, when issued in
accordance with the terms of the Warrants, will be validly issued, fully paid
and nonassessable, free and clear of all Liens imposed by the
Company.  The Company has reserved from its duly authorized capital
stock the maximum number of shares of Common Stock issuable pursuant to this
Agreement and the Warrants. The Company has prepared and filed the Registration
Statement in conformity with the requirements of the Securities Act, which
became effective on May 13, 2009 (the “Effective Date”),
including the Prospectus, and such amendments and supplements thereto as may
have been required to the date of this Agreement.  The Registration
Statement is effective under the Securities Act and no stop order preventing or
suspending the effectiveness of the Registration Statement or suspending or
preventing the use of the Prospectus has been issued by the Commission and no
proceedings for that purpose have been instituted or, to the knowledge of the
Company, are threatened by the Commission.  The Company, if required
by the rules and regulations of the Commission, proposes to file the Prospectus,
with the Commission pursuant to Rule 424(b).  At the time the
Registration Statement and any amendments thereto became effective, at the date
of this Agreement and at the Closing Date, the Registration Statement and any
amendments thereto conformed and will conform in all material respects to the
requirements of the Securities Act and did not and will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading; and
the Prospectus and any amendments or supplements thereto, at time the Prospectus
or any amendment or supplement thereto was issued and at the Closing Date,
conformed and will conform in all material respects to the requirements of the
Securities Act and did not and will not contain an untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.

     

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

    
      
         

      

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

     

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

    
      
         

      

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

     

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

     

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

    
      
         

      

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

     

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

     

    (o)           Patents and
Trademarks.  The Company and the Subsidiaries have, or have
rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, trade secrets, inventions, copyrights,
licenses and other intellectual property rights and similar rights necessary or
material for use in connection with their respective businesses as described in
the SEC Reports and which the failure to so have could have a Material Adverse
Effect (collectively, the “Intellectual Property
Rights”).  None of, and neither the Company nor any Subsidiary
has received a notice (written or otherwise) that any of, the Intellectual
Property Rights has expired, terminated or been abandoned, or is expected to
expire or terminate or be abandoned, within two (2) years from the date of this
Agreement.  Neither the Company nor any Subsidiary has received, since
the date of the latest audited financial statements included within the SEC
Reports, a written notice of a claim or otherwise has any knowledge that the
Intellectual Property Rights violate or infringe upon the rights of any Person,
except as would not have a Material Adverse Effect.  To the knowledge
of the Company, all such Intellectual Property Rights are enforceable and there
is no existing infringement by another Person of any of the Intellectual
Property Rights.  The Company and its Subsidiaries have taken
reasonable security measures to protect the secrecy, confidentiality and value
of all of their intellectual properties, except where failure to do so could
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.

     

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

    
      
         

      

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

     

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

    
      
         

      

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

     

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

     

    (u)           Registration
Rights.  No Person has any right to cause the Company to effect
the registration under the Securities Act of any securities of the
Company.

     

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

     

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

     

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

    
      
         

      

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

     

    (z)           Solvency.  Based
on the consolidated financial condition of the Company as of the Closing Date,
after giving effect to the receipt by the Company of the proceeds from the sale
of the Securities hereunder, (i) the fair saleable value of the Company’s assets
exceeds the amount that will be required to be paid on or in respect of the
Company’s existing debts and other liabilities (including known contingent
liabilities) as they mature, (ii) the Company’s assets do not constitute
unreasonably small capital to carry on its business as now conducted and as
proposed to be conducted including its capital needs taking into account the
particular capital requirements of the business conducted by the Company, and
projected capital requirements and capital availability thereof, and (iii) the
current cash flow of the Company, together with the proceeds the Company would
receive, were it to liquidate all of its assets, after taking into account all
anticipated uses of the cash, would be sufficient to pay all amounts on or in
respect of its liabilities when such amounts are required to be
paid.  The Company does not intend to incur debts beyond its ability
to pay such debts as they mature (taking into account the timing and amounts of
cash to be payable on or in respect of its debt).  The Company has no
knowledge of any facts or circumstances which lead it to believe that it will
file for reorganization or liquidation under the bankruptcy or reorganization
laws of any jurisdiction within one year from the Closing Date.  Schedule 3.1(z) sets
forth as of the date hereof all outstanding secured and unsecured Indebtedness
of the Company or any Subsidiary, or for which the Company or any Subsidiary has
commitments.  For the purposes of this Agreement, “Indebtedness” means
(x) any liabilities for borrowed money or amounts owed in excess of $50,000
(other than trade accounts payable incurred in the ordinary course of business),
(y) all guaranties, endorsements and other contingent obligations in respect of
indebtedness of others, whether or not the same are or should be reflected in
the Company’s balance sheet (or the notes thereto), except guaranties by
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business; and (z) the present value of
any lease payments in excess of $50,000 due under leases required to be
capitalized in accordance with GAAP.  Neither the Company nor any
Subsidiary is in default with respect to any Indebtedness.

    
      
         

      

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

     

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

     

    (cc)     
   Accountants.  The
Company’s accounting firm is set forth on Schedule 3.1(cc) of
the Disclosure Schedules.  To the knowledge and belief of the Company,
such accounting firm (i) is a registered public accounting firm as required by
the Exchange Act and (ii) shall express its opinion with respect to the
financial statements to be included in the Company’s Annual Report for the year
ending June 30, 2010.

     

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

    
      
         

      

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

     

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

     

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

     

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

    
      
         

      

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

     

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

     

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

     

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

     

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

    
      
         

      

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

     

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

     

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

     

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

    
      
         

      

      
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    ARTICLE
IV.

    OTHER
AGREEMENTS OF THE PARTIES

     

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

     

    4.2           Furnishing
of Information.  Until the earliest of the
time that (i) no Purchaser owns Securities or (ii) the Warrants have expired,
the Company covenants to timely file (or obtain extensions in respect thereof
and file within the applicable grace period) all reports required to be filed by
the Company after the date hereof pursuant to the Exchange Act even if the
Company is not then subject to the reporting requirements of the Exchange
Act.  As long as any Purchaser owns Securities, if the Company is not
required to file reports pursuant to the Exchange Act, it will prepare and
furnish to the Purchasers and make publicly available in accordance with Rule
144(c) such information as is required for the Purchasers to sell the
Securities, including without limitation, under Rule 144. The Company further
covenants that it will take such further action as any holder of Securities may
reasonably request, to the extent required from time to time to enable such
Person to sell such Securities without registration under the Securities Act,
including without limitation, within the requirements of the exemption provided
by Rule 144.

     

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

     

    4.4           Securities
Laws Disclosure; Publicity.  The Company shall by 8:30
a.m. (New York City time) on the Trading Day immediately following the date
hereof, issue a Current Report on Form 8-K, and including the Transaction
Documents as exhibits thereto, within the time required by the Exchange
Act.  From and after the issuance of such Form 8-K, the Company shall
have publicly disclosed all material, non-public information delivered to any of
the Purchasers by the Company or any of its subsidiaries, or any of their
respective officers, directors, employees or agents in connection with the
transactions contemplated by the Transaction Documents.  The Company
and each Purchaser shall consult with each other in issuing any other public
disclosures with respect to the transactions contemplated hereby, and neither
the Company nor any Purchaser shall issue any press release nor otherwise make
any such public statement without the prior consent of the Company, with respect
to any press release of any Purchaser, or without the prior consent of each
Purchaser, with respect to any press release of the Company, which consent shall
not unreasonably be withheld or delayed, except if such disclosure is required
by law, in which case the disclosing party shall promptly provide the other
party with prior notice of such public statement or
communication.  Notwithstanding the foregoing, the Company shall not
publicly disclose the name of any Purchaser, or include the name of any
Purchaser in any filing with the Commission or any regulatory agency or Trading
Market, without the prior written consent of such Purchaser, except (a) as
required by federal securities law in connection with the filing of final
Transaction Documents (including signature pages thereto) with the Commission,
(b) to the extent such disclosure is required by law, in which case the Company
shall provide the Purchasers with prior notice of such disclosure permitted
under this clause (b), and (c) to the extent such disclosure is required by
Trading Market regulations.

    
      
         

      

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

     

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

     

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

    
      
         

      

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

     

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

     

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

    
      
         

      

      
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    4.11        Participation
in Future Financing.

     

    (a)           From
the date hereof until the date that is the six (6) month anniversary of the
Closing Date, upon any issuance by the Company or any of its Subsidiaries of
Common Stock or Common Stock Equivalents for cash consideration, Indebtedness or
a combination of units hereof (a “Subsequent
Financing”), each Purchaser shall have the right to participate in up to
an amount of the Subsequent Financing equal to 50% of the Subsequent Financing
(the “Participation
Maximum”) on the same terms, conditions and price provided for in the
Subsequent Financing, unless the Subsequent Financing is a registered public
offering, in which case the Company shall offer each Purchaser the right to
participate in such public offering when it is lawful for the Company to do so,
but no Purchaser shall be entitled to purchase any particular amount of such
public offering. 

     

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

     

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

     

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

    
      
         

      

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

     

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

     

    (g)           Notwithstanding
the foregoing, this Section 4.11 shall not apply in respect of (i) an Exempt
Issuance or (ii) an underwritten public offering of Common Stock.

     

    4.12        Subsequent
Equity Sales.

     

    (a)           From
the date hereof until 60 days after the Closing Date, neither the Company nor
any Subsidiary shall issue, enter into any agreement to issue or announce the
issuance or proposed issuance of any shares of Common Stock or Common Stock
Equivalents; provided, however, that the 60
day period set forth in this Section 4.12 shall be extended for the number of
Trading Days during such period in which (i) trading in the Common Stock is
suspended by any Trading Market, or (ii) the Registration Statement is not
effective or the prospectus included in the Registration Statement may not be
used by the Purchasers for the resale of the Shares and Warrant
Shares.

     

    (b)           From
the date hereof until the earlier of (i) such time as no Purchaser holds any of
the Securities and (ii) 180 days from the Closing Date, the Company shall be
prohibited from effecting or entering into an agreement to effect any issuance
by the Company or any of its Subsidiaries of Common Stock or Common Stock
Equivalents for cash consideration (or a combination of units hereof) involving
a Variable Rate Transaction.  “Variable Rate
Transaction” means a transaction in which the Company (i) issues or sells
any debt or equity securities that are convertible into, exchangeable or
exercisable for, or include the right to receive additional shares of Common
Stock either (A) at a conversion price, exercise price or exchange rate or other
price that is based upon and/or varies with the trading prices of or quotations
for the shares of Common Stock at any time after the initial issuance of such
debt or equity securities, or (B) with a conversion, exercise or exchange price
that is subject to being reset at some future date after the initial issuance of
such debt or equity security or upon the occurrence of specified or contingent
events directly or indirectly related to the business of the Company or the
market for the Common Stock or (ii) enters into any agreement, including, but
not limited to, an equity line of credit, whereby the Company may sell
securities at a future determined price.  Any Purchaser shall be
entitled to obtain injunctive relief against the Company to preclude any such
issuance, which remedy shall be in addition to any right to collect
damages.

    
      
         

      

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

     

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

     

    4.14         Certain
Transactions and Confidentiality. Each Purchaser, severally and not
jointly with the other Purchasers, covenants that neither it nor any Affiliate
acting on its behalf or pursuant to any understanding with it will execute any
purchases or sales, including Short Sales of any of the Company’s securities
during the period commencing with the execution of this Agreement and ending at
such time that the transactions contemplated by this Agreement are first
publicly announced pursuant to the Form 8-K as described in Section
4.4.  Each Purchaser,
severally and not jointly with the other Purchasers, covenants that until such
time as the transactions contemplated by this Agreement are publicly disclosed
by the Company pursuant to the Form 8-K as described in Section 4.4, such
Purchaser will maintain the confidentiality of the existence and terms of this
transaction and the information included in the Disclosure Schedules. 
Notwithstanding the foregoing and notwithstanding anything contained in
this Agreement to the contrary, the Company expressly acknowledges and agrees
that (i) no Purchaser makes any representation, warranty or covenant hereby that
it will not engage in effecting transactions in any securities of the Company
after the time that the transactions contemplated by this Agreement are first
publicly announced pursuant to the Form 8-K as described in Section 4.4, (ii) no
Purchaser shall be restricted or prohibited from effecting any transactions in
any securities of the Company in accordance with applicable securities laws from
and after the time that the transactions contemplated by this Agreement are
first publicly announced pursuant to the Form 8-K as described in Section 4.4
and (iii) no Purchaser shall have any duty of confidentiality to the Company or
its Subsidiaries after the issuance of the Form 8-K as described in Section
4.4.  Notwithstanding the
foregoing, in the case of a Purchaser that is a multi-managed investment vehicle
whereby separate portfolio managers manage separate portions of such Purchaser’s
assets and the portfolio managers have no direct knowledge of the investment
decisions made by the portfolio managers managing other portions of such
Purchaser’s assets, the covenant set forth above shall only apply with respect
to the portion of assets managed by the portfolio manager that made the
investment decision to purchase the Securities covered by this
Agreement.

     

    4.15         Delivery of
Warrants After Closing.  The Company shall deliver,
or cause to be delivered, the respective Warrant certificates purchased by each
Purchaser to such Purchaser within 3 Trading Days of the Closing
Date.

    
      
         

      

      
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    ARTICLE
V.

    MISCELLANEOUS

     

    5.1           Termination.  This Agreement may be terminated
by any Purchaser, as to such Purchaser’s obligations hereunder only and without
any effect whatsoever on the obligations between the Company and the other
Purchasers, by written notice to the other parties, if the Closing has not been
consummated on or before March 15, 2010; provided, however, that no such termination will affect
the right of any party to sue for any breach by the other party (or
parties).

     

    5.2           Fees and
Expenses.  Except
as expressly set forth in the Transaction Documents to the contrary, each party
shall pay the fees and expenses of its advisers, counsel, accountants and other
experts, if any, and all other expenses incurred by such party incident to the
negotiation, preparation, execution, delivery and performance of this
Agreement.  The Company shall pay all Transfer Agent fees, stamp taxes
and other taxes and duties levied in connection with the delivery of any
Securities to the Purchasers.

     

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

     

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

     

    5.5           Amendments;
Waivers.  No
provision of this Agreement may be waived, modified, supplemented or amended
except in a written instrument signed, in the case of an amendment, by the
Company and the Purchasers holding at least 67% in interest of the Shares based
on the initial Subscription Amounts hereunder or, in the case of a waiver, by
the party against whom enforcement of any such waived provision is
sought.  No waiver of any default with respect to any provision,
condition or requirement of this Agreement shall be deemed to be a continuing
waiver in the future or a waiver of any subsequent default or a waiver of any
other provision, condition or requirement hereof, nor shall any delay or
omission of any party to exercise any right hereunder in any manner impair the
exercise of any such right.

     

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

    
      
         

      

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

     

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

     

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

     

    5.10         Survival.  The representations and
warranties contained herein shall survive the Closing and the delivery of the
Securities for twelve (12)
months.

     

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

    
      
         

      

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

     

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

     

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

     

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

    
      
         

      

      
        29

        
          

        

      

      
         

      

    

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

     

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

     

    5.18         Liquidated
Damages.  The
Company’s obligations to pay any partial liquidated damages or other amounts
owing under the Transaction Documents is a continuing obligation of the Company
and shall not terminate until all unpaid partial liquidated damages and other
amounts have been paid notwithstanding the fact that the instrument or security
pursuant to which such partial liquidated damages or other amounts are due and
payable shall have been canceled.

     

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

    
      
         

      

      
        30

        
          

        

      

      
         

      

    

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

     

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

     

    (Signature
Pages Follow)

    
      
         

      

      
        31

        
          

        

      

      
         

      

    

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

    

    
      
        
          
            
              
                	
                        ZBB
      ENERGY CORPORATION

                      	
                        Address for Notice:

                      
	 	 
	
                        By:

                      	 	 
      	
                        Fax:

                      
	 
      	
                        Name:

                      	 
      
	 
      	
                        Title:

                      	 
      
	
                        With
      a copy to (which shall not constitute notice):

                      	 
      

              

            

          

        

      

    

    

    [REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK

    SIGNATURE
PAGE FOR PURCHASER FOLLOWS]

    
      
         

      

      
        32

        
          

        

      

      
         

      

    

    [PURCHASER
SIGNATURE PAGES TO ZBB SECURITIES PURCHASE AGREEMENT]

    

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

     

    Name of
Purchaser: ________________________________________________________

     

    Signature of Authorized Signatory of
Purchaser: _________________________________

     

    Name of
Authorized Signatory:
_______________________________________________

     

    Title of
Authorized Signatory:
________________________________________________

     

    Email
Address of Authorized
Signatory:_________________________________________

     

    Facsimile
Number of Authorized Signatory:
__________________________________________

      

    Address
for Notice of Purchaser:

    

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

    

    DWAC
Instructions: ______________________________________________________________

     

    Subscription
Amount: $_________________

    

    Shares:
_________________

    

    Warrant
Shares: __________________

     

    Please set the Beneficial Ownership Limitation in the Warrant at ___
4.99% or ___ 9.99%.

     

    EIN
Number:  [PROVIDE
THIS UNDER SEPARATE COVER]

    

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

    

    [SIGNATURE
PAGES CONTINUE]

    
      
         

      

      
        33March 1,
2010

      

      CONFIDENTIAL

      

      Eric C.
Apfelbach

      Chief
Executive Officer

      ZBB
Energy Corporation

      N93
W14475 Whittaker Way

      Menomonee
Falls, WI 53051

      

      This
letter (the “Agreement”)
constitutes the agreement between Sutter Securities Incorporated (“Sutter Securities” or
the “Placement
Agent”) and ZBB Energy Corporation, a Wisconsin corporation (the “Company”), that
Sutter Securities shall serve as the exclusive placement agent for the Company,
on a “reasonable best efforts” basis, in connection with the proposed placement
(the “Placement”) of
registered securities (the “Securities”) of the
Company, including shares (the “Shares”) of the
Company’s common stock (the “Common Stock”), and
warrants (the “Warrants”) to
purchase shares of Common Stock and debt. The Company’s Common Stock is traded
on the NYSE AMEX, (ZBB).  The terms of such Placement and the
Securities shall be mutually agreed upon by the Company and the purchasers
(each, a “Purchaser” and
collectively, the “Purchasers”) and
nothing herein constitutes that Sutter Securities would have the power or
authority to bind the Company or any Purchaser or an obligation for the Company
to issue any Securities or complete the Placement. This Agreement and the
documents executed and delivered by the Company and the Purchasers in connection
with the Placement shall be collectively referred to herein as the “Transaction Documents.”  The
date of the closing of the Placement shall be referred to herein as the “Closing
Date.”  The Company expressly acknowledges and agrees that
Sutter Securities’ obligations hereunder are on a reasonable best efforts basis
only and that the execution of this Agreement does not constitute a commitment
by Sutter Securities to purchase the Securities and does not ensure the
successful placement of the Securities or any portion thereof or the success of
Sutter Securities with respect to securing any other financing on behalf of the
Company.

      

      SECTION
1.    COMPENSATION AND OTHER
FEES.

      

      As
compensation for the services provided by Sutter Securities hereunder, the
Company agrees to pay to Sutter Securities:

      

      (A)     The
fee set forth below with respect to the Placement:

      

      
        1. 
 A cash
fee payable immediately upon the closing of the Placement and equal to 7% of the
aggregate
gross proceeds raised in the Placement.

      

      
        
           

        

        
          
          

          
            

          

        

        
           

        

      

      

      (B)      The
Company also agrees to reimburse Sutter Securities’ expenses (with supporting
invoices/receipts) up to a maximum of 1% of the aggregate gross proceeds raised
in the placement, but in no event more than $15,000. Such reimbursement shall be
payable immediately upon (but only in the event of) the closing of the
Placement.

      

      SECTION
2.     REGISTRATION
STATEMENT.

      

      The
Company represents and warrants to and agrees with the Placement Agent
that:

       

      (A)     The
Company has filed with the Securities and Exchange Commission (the “Commission”)
a registration statement on Form S-3 (Registration File No. 333-156941) under
the Securities Act of 1933, as amended (the “Securities Act”), which became
effective on (March 1, 2009), for the registration under the Securities Act of
the Shares. At the time of such filing, the Company met the requirements of Form
S-3 under the Securities Act.  Such registration statement meets the
requirements set forth in Rule 415(a)(1)(x) under the Securities Act and
complies with said Rule. The Company will file with the Commission pursuant to
Rule 424(b) under the Securities Act, and the rules and regulations (the “Rules
and Regulations”) of the Commission promulgated thereunder, a supplement to the
form of prospectus included in such registration statement relating to the
placement of the Shares and the plan of distribution thereof and has advised the
Placement Agent of all further information (financial and other) with respect to
the Company required to be set forth therein. Such registration statement,
including the exhibits thereto, as amended at the date of this Agreement, is
hereinafter called the “Registration Statement”; such prospectus in the form in
which it appears in the Registration Statement is hereinafter called the “Base
Prospectus”; and the supplemented form of prospectus, in the form in which it
will be filed with the Commission pursuant to Rule 424(b) (including the Base
Prospectus as so supplemented) is hereinafter called the “Prospectus
Supplement.” Any reference in this Agreement to the Registration Statement, the
Base Prospectus or the Prospectus Supplement shall be deemed to refer to and
include the documents incorporated by reference therein (the “Incorporated
Documents”) pursuant to Item 12 of Form S-3 which were filed under the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), on or before
the date of this Agreement, or the issue date of the Base Prospectus or the
Prospectus Supplement, as the case may be; and any reference in this Agreement
to the terms “amend,” “amendment” or “supplement” with respect to the
Registration Statement, the Base Prospectus or the Prospectus Supplement shall
be deemed to refer to and include the filing of any document under the Exchange
Act after the date of this Agreement, or the issue date of the Base Prospectus
or the Prospectus Supplement, as the case may be, deemed to be incorporated
therein by reference. All references in this Agreement to financial statements
and schedules and other information which is “contained,” “included,”
“described,” “referenced,” “set forth” or “stated” in the Registration
Statement, the Base Prospectus or the Prospectus Supplement (and all other
references of like import) shall be deemed to mean and include all such
financial statements and schedules and other information which is or is deemed
to be incorporated by reference in the Registration Statement, the Base
Prospectus or the Prospectus Supplement, as the case may be.  No stop
order suspending the effectiveness of the Registration Statement or the use of
the Base Prospectus or the Prospectus Supplement has been issued, and no
proceeding for any such purpose is pending or has been initiated or, to the
Company's knowledge, is threatened by the Commission. For purposes of this
Agreement, “free writing prospectus” has the meaning set forth in Rule 405 under
the Securities Act and the “Time of Sale Prospectus” means the preliminary
prospectus, if any, together with the free writing prospectuses, if any, used in
connection with the Placement, including any documents incorporated by reference
therein.

      
        
           

        

        
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      (B)      The
Registration Statement (and any further documents to be filed with the
Commission) contains all exhibits and schedules as required by the Securities
Act. Each of the Registration Statement and any post-effective amendment
thereto, at the time it became effective, complied in all material respects with
the Securities Act and the Exchange Act and the applicable Rules and Regulations
and did not and, as amended or supplemented, if applicable, will not, contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading. The Base Prospectus, the Time of Sale Prospectus, if any, and the
Prospectus Supplement, each as of its respective date, comply in all material
respects with the Securities Act and the Exchange Act and the applicable Rules
and Regulations. Each of the Base Prospectus, the Time of Sale Prospectus, if
any, and the Prospectus Supplement, as amended or supplemented, did not and will
not contain as of the date thereof any untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements therein,
in light of the circumstances under which they were made, not misleading. The
Incorporated Documents, when they were filed with the Commission, conformed in
all material respects to the requirements of the Exchange Act and the applicable
Rules and Regulations, and none of such documents, when they were filed with the
Commission, contained any untrue statement of a material fact or omitted to
state a material fact necessary to make the statements therein (with respect to
Incorporated Documents incorporated by reference in the Base Prospectus or
Prospectus Supplement), in light of the circumstances under which they were made
not misleading; and any further documents so filed and incorporated by reference
in the Base Prospectus, the Time of Sale Prospectus, if any, or Prospectus
Supplement, when such documents are filed with the Commission, will conform in
all material respects to the requirements of the Exchange Act and the applicable
Rules and Regulations, as applicable, and will not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. No post-effective amendment to the Registration Statement
reflecting any facts or events arising after the date thereof which represent,
individually or in the aggregate, a fundamental change in the information set
forth therein is required to be filed with the Commission.  There are
no documents required to be filed with the Commission in connection with the
transaction contemplated hereby that (x) have not been filed as required
pursuant to the Securities Act or (y) will not be filed within the requisite
time period. There are no contracts or other documents required to be described
in the Base Prospectus, the Time of Sale Prospectus, if any, or Prospectus
Supplement, or to be filed as exhibits or schedules to the Registration
Statement, which have not been described or filed as required.

       

      (C)      The
Company will not prepare, use or refer to, any free writing prospectus without
providing prior notice and a copy to the Placement Agent.

       

      (D)      The
Company has delivered, or will as promptly as practicable deliver, to the
Placement Agent complete conformed copies of the Registration Statement and of
each consent and certificate of experts, as applicable, filed as a part thereof,
and conformed copies of the Registration Statement (without exhibits), the Base
Prospectus, the Time of Sale Prospectus, if any, and the Prospectus Supplement,
as amended or supplemented, in such quantities and at such places as the
Placement Agent reasonably requests.  Neither the Company nor any of
its directors and officers has distributed and none of them will distribute,
prior to the Closing Date, any offering material in connection with the offering
and sale of the Shares other than the Base Prospectus, the Time of Sale
Prospectus, if any, the Prospectus Supplement, the Registration Statement,
copies of the documents incorporated by reference therein and any other
materials permitted by the Securities Act.

      
        
           

        

        
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      SECTION
3.     REPRESENTATIONS AND
WARRANTIES. The Company hereby makes the same representations and
warranties to the Placement Agent that it makes to the investors in their
respective purchase agreements, as if made directly to the Placement Agent, and
further represents to the Placement Agent that there are no affiliations with
any FINRA member firm among the Company’s officers, directors or, to the
knowledge of the Company, any five percent (5%) or greater stockholder of the
Company, except as set forth in the Base Prospectus.

       

      SECTION
4.     INDEMNIFICATION. The
Company agrees to the indemnification and other agreements set forth in the
Indemnification Provisions (the “Indemnification”)
attached hereto as Addendum A, the provisions of which are incorporated herein
by reference and shall survive the termination or expiration of this
Agreement.

      

      SECTION
5.     ENGAGEMENT
TERM.  Sutter Securities’ engagement hereunder will be for the
period of 90 days. The engagement may be terminated by either the Company or
Sutter Securities at any time upon 10 days’ written notice. Notwithstanding
anything to the contrary contained herein, the provisions concerning
confidentiality, indemnification, contribution contained herein and the
Company’s obligations contained in the Indemnification Provisions, and the
Company’s obligations to pay fees actually earned and reimburse expenses
actually incurred pursuant to this Agreement will survive any expiration or
termination of this Agreement.  Sutter Securities agrees not to use
any confidential information concerning the Company provided to them by the
Company for any purposes other than those contemplated under this
Agreement.

      

      SECTION
6.     SUTTER SECURITIES
INFORMATION.  The Company agrees that any information or advice
rendered by Sutter Securities in connection with this engagement is for the
confidential use of the Company only in their evaluation of the Placement and,
except as otherwise required by law, the Company will not disclose or otherwise
refer to the advice or information in any manner without Sutter Securities’
prior written consent.

      

      SECTION
7.     NO FIDUCIARY
RELATIONSHIP.  This Agreement does not create, and shall not be
construed as creating rights enforceable by any person or entity not a party
hereto, except those entitled hereto by virtue of the Indemnification Provisions
hereof.  The Company acknowledges and agrees that Sutter Securities is
not and shall not be construed as a fiduciary of the Company and shall have no
duties or liabilities to the equity holders or the creditors of the Company or
any other person by virtue of this Agreement or the retention of Sutter
Securities hereunder, all of which are hereby expressly waived.

       

      SECTION
8.     CLOSING.   The
obligations of the Placement Agent and the closing of the sale of the Securities
hereunder are subject to the accuracy, when made and on the Closing Date, of the
representations and warranties on the part of the Company and its Subsidiaries
contained herein, to the accuracy of the statements of the Company and its
Subsidiaries made in any certificates pursuant to the provisions hereof, to the
performance by the Company and its Subsidiaries of their obligations hereunder,
and to each of the following additional terms and
conditions:

       

      (A)     No
stop order suspending the effectiveness of the Registration Statement shall have
been issued and no proceedings for that purpose shall have been initiated or
threatened by the Commission, and any request for additional information on the
part of the Commission (to be included in the Registration Statement, the Base
Prospectus or the Prospectus Supplement or otherwise) shall have been complied
with to the reasonable satisfaction of the Placement Agent.

      
        
          
             

          

          
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      (B)      The
Placement Agent shall not have discovered and disclosed to the Company on or
prior to the Closing Date that the Registration Statement, the Base Prospectus
or the Prospectus Supplement or any amendment or supplement thereto contains
statement that Sutter or a Purchaser , in their sole judgment, believe to be an
untrue statement of fact, which, in the opinion of counsel for the Placement
Agent or such Purchaser, is material or omits to state any fact which, in the
opinion of such counsel, is material and is required to be stated therein or is
necessary to make the statements therein not misleading.

       

      (C)      All
corporate proceedings and other legal matters incident to the authorization,
form, execution, delivery and validity of each of this Agreement, the
Securities, the Registration Statement, the Base Prospectus and the Prospectus
Supplement and all other legal matters relating to this Agreement and the
transactions contemplated hereby shall be reasonably satisfactory in all
material respects to counsel for the Placement Agent, and the Company shall have
furnished to such counsel all documents and information that they may reasonably
request to enable them to pass upon such matters.

       

      (D)      The
Placement Agent shall have received from outside counsel to the Company such
counsel’s written opinion, addressed to the Placement Agent and the Purchasers
dated as of the Closing Date, in form and substance reasonably satisfactory to
the Placement Agent, which opinion shall include a “10b-5” representation from
such counsel.

       

      (E)      Neither
the Company nor any of its Subsidiaries shall have sustained since the date of
the latest audited financial statements included or incorporated by reference in
the Base Prospectus, any loss or interference with its business from fire,
explosion, flood, terrorist act or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action, order or
decree, otherwise than as set forth in or contemplated by the Base Prospectus
and (ii) since such date there shall not have been any change in the capital
stock or long-term debt of the Company or any of its Subsidiaries or any change,
or any development involving a prospective change, in or affecting the business,
general affairs, management, financial position, stockholders’ equity, results
of operations or prospects of the Company and its Subsidiaries, otherwise than
as set forth in or contemplated by the Base Prospectus, the effect of which, in
any such case described in clause (i) or (ii), is, in the judgment of the
Placement Agent, so material and adverse as to make it impracticable or
inadvisable to proceed with the sale or delivery of the Securities on the terms
and in the manner contemplated by the Base Prospectus, the Time of Sale
Prospectus, if any, and the Prospectus Supplement.

       

      (F)      The
Common Stock is registered under the Exchange Act and, as of the Closing Date,
the Shares shall be listed and admitted and authorized for trading on NYSE-Amex,
and satisfactory evidence of such actions shall have been provided to the
Placement Agent.  The Company shall have taken no action designed to,
or likely to have the effect of terminating the registration of the Common Stock
under the Exchange Act or delisting or suspending from trading the Common Stock
from NYSE-Amex, nor has the Company received any information suggesting that the
Commission or NYSE-Amex is contemplating terminating such registration or
listing.

      
        
           

        

        
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      (G)      Subsequent
to the execution and delivery of this Agreement, there shall not have occurred
any of the following: (i) trading in securities generally on the New York Stock
Exchange, the Nasdaq National Market or the NYSE Amex or in the over-the-counter
market, or trading in any securities of the Company on any exchange or in the
over-the-counter market, shall have been suspended or minimum or maximum prices
or maximum ranges for prices shall have been established on any such exchange or
such market by the Commission, by such exchange or by any other regulatory body
or governmental authority having jurisdiction, (ii) a banking moratorium shall
have been declared by federal or state authorities or a material disruption has
occurred in commercial banking or securities settlement or clearance services in
the United States, (iii) the United States shall have become engaged in
hostilities in which it is not currently engaged, the subject of an act of
terrorism, there shall have been an escalation in hostilities involving the
United States, or there shall have been a declaration of a national emergency or
war by the United States, or (iv) there shall have occurred any other calamity
or crisis or any change in general economic, political or financial conditions
in the United States or elsewhere, if the effect of any such event in clause
(iii) or (iv) makes it, in the sole judgment of the Placement Agent,
impracticable or inadvisable to proceed with the sale or delivery of the
Securities on the terms and in the manner contemplated by the Base Prospectus
and the Prospectus Supplement.

       

      (H)      No
action shall have been taken and no statute, rule, regulation or order shall
have been enacted, adopted or issued by any governmental agency or body which
would, as of the Closing Date, prevent the issuance or sale of the Securities or
materially and adversely affect or potentially and adversely affect the business
or operations of the Company; and no injunction, restraining order or order of
any other nature by any federal or state court of competent jurisdiction shall
have been issued as of the Closing Date which would prevent the issuance or sale
of the Securities or materially and adversely affect or potentially and
adversely affect the business or operations of the Company.

       

      (I)       The
Company shall have prepared and filed with the Commission a Current Report on
Form 8-K with respect to the Placement, including as an exhibit thereto this
Agreement.

       

      (J)       The
Company shall have entered into subscription agreements with each of the
Purchasers and such agreements shall be in full force and effect and shall
contain representations and warranties of the Company as agreed between the
Company and the Purchasers.

       

      (K)      FINRA
shall have raised no objection to the fairness and reasonableness of the terms
and arrangements of this Agreement.  In addition, the Company shall,
if requested by the Placement Agent, make or authorize Placement Agent’s counsel
to make on the Company’s behalf, an Issuer Filing with FINRA pursuant to FINRA
Rule 5110 with respect to the Registration Statement and pay all filing fees
required in connection therewith.

      

      (L)      Prior
to the Closing Date, the Company shall have furnished to the Placement Agent
such further information, certificates and documents as the Placement Agent may
reasonably request.

       

      All
opinions, letters, evidence and certificates mentioned above or elsewhere in
this Agreement shall be deemed to be in compliance with the provisions hereof
only if they are in form and substance reasonably satisfactory to counsel for
the Placement Agent.

      
        
           

        

        
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        SECTION
9.    GOVERNING
LAW.  This Agreement will be governed by, and construed in
accordance with, the laws of the State of California applicable to agreements
made and to be performed entirely in such State.  This Agreement may
not be assigned by either party without the prior written consent of the other
party.  This Agreement shall be binding upon and inure to the benefit
of the parties hereto, and their respective successors and permitted assigns.
The parties agree that this Agreement and all controversies, which may arise
between the Placement Agent and the Company, whether occurring prior, on or
subsequent to the date of this Agreement, will be determined by arbitration. The
parties understand that:

      

       

      
        	
                 
      

              	
                a.

              	
                Arbitration
      is final and binding on the
parties.

              

      

       

      
        	
                 
      

              	
                b.

              	
                The
      parties are waiving their right to seek remedies in court, including the
      right to a jury trial.

              

      

       

      
        	
                 
      

              	
                c.

              	
                Pre-arbitration
      discovery is generally more limited than and different from court
      proceedings.

              

      

       

      
        	
                 
      

              	
                d.

              	
                The
      arbitrators’ award is not required to include factual findings or legal
      reasoning and any party’s right to appeal or to seek modification or
      rulings by the arbitrators is strictly
limited.

              

      

       

      
        	
                 
      

              	
                e.

              	
                The
      panel of arbitrators will typically include a minority of arbitrators who
      were or are affiliated with the securities
  industry.

              

      

       

      The
parties agree that any arbitration under this Agreement will be held at the
facilities of and before an Arbitration Panel appointed by the Financial
Industry Regulatory Authority (“FINRA”), or if the FINRA refuses to accept
jurisdiction, then before JAMS/ENDISPUTE in San Francisco, California. The award
of the arbitrators, or of the majority of them, will be final, and judgments
upon the award may be entered in any court, state or federal, having
jurisdiction. The parties hereby submit themselves and their personal
representatives to the jurisdiction of any state or federal court for the
purpose of such arbitration and entering such judgment.

       

      Any
forbearance to enforce an agreement to arbitrate will not constitute a waiver of
any rights under this Agreement except to the extent stated
herein.

       

      THIS
AGREEMENT IS GOVERNED BY A PRE-DISPUTE ARBITRATION CLAUSE CONTAINED IN SECTION 9
OF THIS AGREEMENT

       

      If either
party shall commence an action or proceeding to enforce any provisions of a
Transaction Document, then the prevailing party in such action or proceeding
shall be reimbursed by the other party for its attorneys fees and other costs
and expenses incurred with the investigation, preparation and prosecution of
such action or proceeding.

      

      SECTION
10.  ENTIRE
AGREEMENT/MISC.  This Agreement (including the attached
Indemnification Provisions) embodies the entire agreement and understanding
between the parties hereto, and supersedes all prior agreements and
understandings, relating to the subject matter hereof.  If any
provision of this Agreement is determined to be invalid or unenforceable in any
respect, such determination will not affect such provision in any other respect
or any other provision of this Agreement, which will remain in full force and
effect.  This Agreement may not be amended or otherwise modified or
waived except by an instrument in writing signed by both Sutter Securities and
the Company.  The representations, warranties, agreements and
covenants contained herein shall survive the closing of the Placement and
delivery and/or exercise of the Securities, as applicable.  This
Agreement may be executed in two or more counterparts, all of which when taken
together shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to the
other party, it being understood that both parties need not sign the same
counterpart.  In the event that any signature is delivered by
facsimile transmission or a .pdf format file, such signature shall create a
valid and binding obligation of the party executing (or on whose behalf such
signature is executed) with the same force and effect as if such facsimile or
..pdf signature page were an original thereof.

      
        
           

        

        
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      SECTION
11.   NOTICES.  Any
and all notices or other communications or deliveries required or permitted to
be provided hereunder shall be in writing and shall be deemed given and
effective on the earliest of (a) the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number specified on
the signature pages attached hereto prior to 6:30 p.m. (New York City time) on a
business day, (b) the next business day after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile number on
the signature pages attached hereto on a day that is not a business day or later
than 6:30 p.m. (New York City time) on any business day, (c) the business day
following the date of mailing, if sent by U.S. nationally recognized overnight
courier service, or (d) upon actual receipt by the party to whom such notice is
required to be given.  The address for such notices and communications
shall be as set forth on the signature pages hereto.

      
        
           

        

        
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      Please
confirm that the foregoing correctly sets forth our agreement by signing and
returning to Sutter Securities the enclosed copy of this Agreement.

      

      
        
          
            
              	 
      	
                      Very
      truly yours,

                    
	 
      	 
      
	 
      	
                      SUTTER
      SECURITIES INCORPORATED

                    
	 
      	 
      
	 
      	
                      By:

                    	
                         

                    
	 
      	 
      
	 
      	
                      Name:
      Gilbert E. Matthews

                    
	 
      	
                      Title:
      Senior Managing
Director

                    

            

          

        

      

      

      Address for
notice:

      

      Robert A.
Muh, CEO

      Sutter
Securities Incorporated

      220
Montgomery Street, Suite 1700

      San
Francisco, CA 94104

      Phone:
415-352-6310

      Fax:
415-352-3611

      E-mail:bob@suttersf.com

      

      Accepted
and Agreed to as of

      the date
first written above:

      

      ZBB
Energy Corporation

      

      
        
          	
                  By:

                	
                     

                
	 
      	 
      
	 
      	
                  Name:
      Eric C. Apfelbach

                
	 
      	
                  Title:
      Chief Executive Officer

                

        

      

      

      Address for
notice:

      Eric C.
Apfelbach

      Chief
Executive Officer

      ZBB
Energy Corporation

      N93
W14475 Whittaker Way

      Menomonee
Falls, WI 53051

      Phone:
262-253-9800

      Fax:
262-253-9822

      E-Mail:
eapfelbach@zbbenergy.com

      
        
           

        

        
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      ADDENDUM
A

      

      INDEMNIFICATION
PROVISIONS

      

      In connection with the engagement of
Sutter Securities Incorporated (“Sutter Securities”) ZBB Energy Corporation the
“Company”)
pursuant to a letter agreement dated [January 26, 2010], between the Company and
Sutter Securities, as it may be amended from time to time in writing (the “Agreement”), the
Company hereby agrees as follows:

      

      
        	
                1.

              	
                To
      the extent permitted by law, the Company will indemnify Sutter Securities
      and its affiliates, stockholders, directors, officers, employees and
      controlling persons (within the meaning of Section 15 of the Securities
      Act of 1933, as amended, or Section 20 of the Securities Exchange Act of
      1934, as amended) against all losses, claims, damages, expenses and
      liabilities, as the same are incurred (including the reasonable fees and
      expenses of counsel), relating to or arising out of its activities
      hereunder or pursuant to the Agreement, except to the extent that any
      losses, claims, damages, expenses or liabilities (or actions in respect
      thereof) are found in a final judgment (not subject to appeal) by a court
      of law to have resulted primarily and directly from Sutter Securities’
      willful misconduct or gross negligence in performing the services
      described herein.

              

      

      

      
        	
                2.

              	
                Promptly
      after receipt by Sutter Securities of notice of any claim or the
      commencement of any action or proceeding with respect to which Sutter
      Securities is entitled to indemnity hereunder, Sutter Securities will
      notify the Company in writing of such claim or of the commencement of such
      action or proceeding, and the Company will assume the defense of such
      action or proceeding and will employ counsel reasonably satisfactory to
      Sutter Securities and will pay the fees and expenses of such
      counsel.  Notwithstanding the preceding sentence, Sutter
      Securities will be entitled to employ counsel separate from counsel for
      the Company and from any other party in such action if counsel for Sutter
      Securities reasonably determines that it would be inappropriate under the
      applicable rules of professional responsibility for the same counsel to
      represent both the Company and Sutter Securities.  In such
      event, the reasonable fees and disbursements of no more than one such
      separate counsel will be paid by the Company.  The Company will
      have the exclusive right to settle the claim or proceeding provided that
      the Company will not settle any such claim, action or proceeding without
      the prior written consent of Sutter Securities, which will not be
      unreasonably withheld.

              

      

      

      
        	
                3.

              	
                The
      Company agrees to notify Sutter Securities promptly of the assertion
      against it or any other person of any claim or the commencement of any
      action or proceeding relating to a transaction contemplated by the
      Agreement.

              

      

      
        
           

        

        
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                4.

              	
                If
      for any reason the foregoing indemnity is unavailable to Sutter Securities
      or insufficient to hold Sutter Securities harmless, then the Company shall
      contribute to the amount paid or payable by Sutter Securities as a result
      of such losses, claims, damages or liabilities in such proportion as is
      appropriate to reflect not only the relative benefits received by the
      Company on the one hand and Sutter Securities on the other, but also the
      relative fault of the Company on the one hand and Sutter Securities on the
      other that resulted in such losses, claims, damages or liabilities, as
      well as any relevant equitable considerations.  The amounts paid
      or payable by a party in respect of losses, claims, damages and
      liabilities referred to above shall be deemed to include any legal or
      other fees and expenses incurred in defending any litigation, proceeding
      or other action or claim.  Notwithstanding the provisions
      hereof, Sutter Securities’ share of the liability hereunder shall not be
      in excess of the amount of fees actually received, or to be received, by
      Sutter Securities under the Agreement (excluding any amounts received as
      reimbursement of expenses incurred by Sutter
  Securities).

              

      

      

      
        	
                5.

              	
                These
      Indemnification Provisions shall remain in full force and effect whether
      or not the transaction contemplated by the Agreement is completed and
      shall survive the termination of the Agreement, and shall be in addition
      to any liability that the Company might otherwise have to any indemnified
      party under the Agreement or
otherwise.

              

      

      

      
        
          
            
              	 	SUTTER
      SECURITIES INCORPORATED	 
      
	 
      	 
      	 
      
	 
      	
                      By:

                    	
                         

                    	 
      
	 
      	 
      	
                      Name:
      Gilbert E. Matthews

                    
	 
      	 
      	
                      Title:
      Senior Managing
Director

                    

            

          

        

      

      

      Accepted
and Agreed to as of

      the date
first written above:

      

      ZBB
Energy Corporation

       

      
        
          	
                  By:

                	
                     

                
	 
      	
                  Name:
      Eric C. Apfelbach

                
	 
      	
                  Title:
      Chief Executive Officer

                

        

      

      
        
           

        

        
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