Exhibit 10.3

 

PLACEMENT AGENCY AGREEMENT

 

March 19, 2015

 

Introduction. Subject to the terms and conditions herein (this "Agreement"),
Pershing Gold Corp., a Nevada corporation (the "Company"), hereby agrees to sell
up to an aggregate of a minimum of $1,000,000 of its units (the "Minimum
Offering") and a maximum of $15,000,000 of its units (the "Maximum Offering"),
which may be increased at the election of the Company up to $30,000,000 (the
“Increased Maximum Offering”), with each unit (a "Unit") consisting of: (i) one
share of common stock, par value $0.0001 per share (the "Unit Shares"), and (ii)
one warrant (an "Investor Warrant") to purchase 0.4 of one share of Common Stock
at an exercise price of $0.44 per share (the "Investor Warrant Shares" and,
together with the Unit Shares and the Investor Warrants, the "Securities"). The
Securities are being sold directly to a limited number of "accredited investors"
(each, an "Investor" and, collectively, the "Investors") as such term is defined
in Rule 501 of Regulation D ("Regulation D") promulgated under the Securities
Act of 1933, as amended (the "Securities Act") through Noble Financial Capital
Markets (the "Placement Agent"). The purchase price to the Investors for each
Unit is $0.325. Each Investor Warrant will be exercisable on a cash or cashless
basis (at the sole discretion of the holder) until a registration statement
covering the shares of Common Stock underlying the Investor Warrants has been
declared effective and thereafter for cash only; provided that if such
registration statement is no longer effective, then the holders will again have
the option (at their sole discretion) to exercise on a cashless or cash basis.
The Investor Warrants expire twenty four (24) months from issuance.

 

The Placement Agent may retain other brokers or dealers to act as sub-agents or
selected-dealers on its behalf in connection with the Offering (as defined
below). The Securities are being offered pursuant to an Amended and Restated
Confidential Private Placement Memorandum, dated March 9, 2015, together with
the exhibits and attachments thereto and any amendments or supplements thereto
prepared and furnished by the Company (the "Memorandum"). The Subscription
Agreement, Registration Rights Agreement and Warrant attached to the Memorandum
are referred to herein collectively as the “Subscription Documents”.

 

The Company and the Placement Agent hereby confirm their agreement as follows:

 

Section 1. Agreement to Act as Placement Agent.

 

(a)          On the basis of the representations, warranties and agreements of
the Company herein contained, and subject to all the terms and conditions of
this Agreement, the Placement Agent shall be the exclusive Placement Agent
(together with the subagents engaged by Placement Agent as set forth on Exhibit
A (the “Subagents”)) in connection with the offering and sale by the Company of
the Securities pursuant to the Subscription Documents (collectively, the
"Offering"), with the terms of the Offering to be set forth in the Memorandum
and the Subscription Documents. The Placement Agent will act on a reasonable
"best efforts basis" and the Company agrees and acknowledges that there is no
guarantee of the successful placement of the Securities, or any portion thereof,
in the prospective Offering. Under no circumstances will the Placement Agent or
any of its "Affiliates" (as defined below) be obligated to underwrite or
purchase any of the Securities for its own account or otherwise provide any
financing. The Placement Agent shall act solely as the Company's agent and not
as principal. The Placement Agent shall have no authority to bind the Company
with respect to any prospective offer to purchase the Securities and the Company
shall have the sole right to accept offers to purchase Securities and may reject
any such offer, in whole or in part. Subject to the terms and conditions hereof,
payment of the purchase price for, and delivery of, the Securities shall be made
at one or more closings (each a "Closing" and the date on which each Closing
occurs, a "Closing Date") provided the Minimum Offering is met. As compensation
for services rendered, on each Closing Date, the Company shall pay to or on
behalf of the Placement Agent the fees and expenses set forth below:

 

- 1 -

 

 

1.          To the Placement Agent, $25,000.00 non-refundable cash retainer due
immediately upon execution of the Engagement Letter between the Placement Agent
and the Company dated February 20, 2015 (the “Engagement Letter”).

 

2.          To the Placement Agent, $200,000 cash fee (the “Placement Fee”),
payable by wire, at the first closing of a sale of the Securities.

 

3.          At each closing (“Closing”) of any sale of the Securities to
purchasers,

 

(i)          on behalf of the Placement Agent, a cash fee to each Subagent (the
“Subagent Fee”), payable by wire, equal to 8% of the aggregate gross proceeds
received from a sale of the Securities to any purchasers introduced by such
Subagent, other than the Company Investors and the Honig Investors, each as
defined below, provided that Subagents shall receive no fees in respect of the
funds raised from Barry Honig, his family and affiliated entities or Dr. Frost
as listed on Schedule 1 hereto (the “Honig Investors”) or from investors
introduced by the Company (the “Company Investors”); and

 

(ii)         to the Placement Agent, one or more warrants (the “Placement Agent
Warrants”) to purchase common stock equal to 2% of the number of shares of the
Company’s common stock issued and sold to investors other than the Company
Investors and the Honig Investors and, on behalf of the Placement Agent, one or
more warrants to each Subagent (the “Subagent Warrants”) equal to 8% of the
number of shares of the Company’s common stock issued and sold to any purchasers
introduced by such Subagent provided that Placement Agent and Subagents shall
not be entitled to warrant coverage for shares purchased by the Honig Investors
or the Company Investors. The Placement Agent Warrants and the Subagent Warrants
will have a term of 30 months and have an exercise price equal to that of the
shares issued in the Placement. The Placement Agent Warrants and the Subagent
Warrants will be exercisable on a cash or cashless basis until a registration
statement covering the shares underlying the Placement Agent Warrants and the
Subagent Warrants has been declared effective, and thereafter for cash only;
provided that if such registration statement is no longer effective, the holder
will again have the option to exercise on a cashless or cash basis. The
Placement Agent Warrants and the Subagent Warrants will not be transferable for
one year from the date of issuance, except as permitted by the Financial
Industry Regulatory Authority (“FINRA”) Rule 5110(g)(1). Placement Agent shall
also be granted one time piggyback registration rights with respect to the
shares underlying the Placement Agent Warrants and Subagent Warrants.

 

(b)          The Company will pay Placement Agent up to $25,000 for its
reasonably incurred and documented placement agent legal fees. Other reasonably
incurred transaction related expenses, including out of pocket expenses, will
also be reimbursed.

 

(c)          The term of the Placement Agent's exclusive engagement will be
until the earlier of the completion of the Offering or April 21, 2015 (the
"Term"), which term may be extended for an additional 30 days at the sole
discretion of the Company; provided, however, that either party hereto may
terminate the engagement at any time upon 10 days written notice to the other
party. Notwithstanding anything to the contrary contained herein, the provisions
concerning confidentiality, indemnification and contribution contained herein
and the Company's obligations contained in the indemnification provisions will
survive any expiration or termination of this Agreement, and the Company's
obligation to pay fees actually earned and payable and to reimburse expenses
actually incurred and reimbursable pursuant to Section 1 hereof and which are
permitted to be reimbursed under FINRA rules, will survive any expiration or
termination of this Agreement. Nothing in this Agreement shall be construed to
limit the ability of the Placement Agent or its Affiliates to pursue,
investigate, analyze, invest in, or engage in investment banking, financial
advisory or any other business relationship with Persons (as defined below)
other than the Company. As used herein (i) "Persons" 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 and (ii) "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 of 1933, as amended (the "Securities Act").

 

- 2 -

 

 

(d)          Until each Closing is held, all subscription funds received shall
be held by an escrow agent to be selected by Placement Agent, subject to the
approval of Company (the "Escrow Agent"). Placement Agent shall not have any
independent obligation to verify the accuracy or completeness of any information
contained in any Subscription Documents or the authenticity, sufficiency or
validity of any check delivered by any prospective Investor in payment for the
Securities, nor shall Placement Agent incur any liability with respect to any
such verification or failure to verify, unless it had actual knowledge that any
information in the Subscription Documents was untrue. All subscription checks
and funds shall be promptly and directly delivered without offset or deduction
to the Escrow Agent.

 

Section 2. Representations, Warranties and Covenants of the Company. The Company
hereby represents, warrants and covenants to the Placement Agent as of the date
hereof, and as of each Closing Date, as follows:

 

(a)          Offering Materials. Neither the Company nor any of its directors
and officers has distributed and none of them will distribute, prior to each
Closing Date, any offering material in connection with the offering and sale of
the Securities other than the Memorandum and materials that have been approved
by the Placement Agent and its counsel.

 

(b)          Subsidiaries. All of the direct and indirect subsidiaries of the
Company (the "Subsidiaries") are set forth in the Memorandum. The Company owns,
directly or indirectly, all of the capital stock or other equity interests of
each Subsidiary free and clear of any liens, charges, security interests,
encumbrances, rights of first refusal, preemptive rights or other restrictions
(collectively, "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.

 

(c)          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 in 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
this Agreement or any other agreement entered into between the Company and the
Investors, (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 this Agreement or the transactions contemplated under the
Memorandum (any of(i), (ii) or (iii), a "Material Adverse Effect") and no
action, claim, suit, investigation or proceeding (including, without limitation,
an informal investigation or partial proceeding, such as a deposition), whether
commenced or threatened ("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.

 

- 3 -

 

 

(d)          Authorization; Enforcement. The Company has the requisite corporate
power and authority to enter into and to consummate the transactions
contemplated by this Agreement and the Subscription Documents and otherwise to
carry out its obligations hereunder and thereunder. The execution and delivery
of each of this Agreement by the Company and the consummation by it of the
transactions contemplated hereby and thereby and under the Subscription
Documents have been (or, prior to the commencement of the offering, will have
been) duly authorized by all necessary action on the part of the Company and no
further action is required by the Company, the Company's Board of Directors (the
"Board of Directors") or the Company's stockholders in connection therewith
other than in connection with the Required Approvals (as defined below). This
Agreement has been duly executed by the Company and, when delivered in
accordance with the terms hereof, 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.

 

(e)          No Conflicts. The execution, delivery and performance by the
Company of this Agreement and the transactions contemplated pursuant to the
Subscription 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 and
bylaws, or other organizational or charter documents (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.

 

(f)          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 this Agreement and the
transactions contemplated pursuant to the Subscription Documents, other than
such filings as are required to be made under applicable state securities laws a
set forth in Section 4(b) (collectively, the "Required Approvals").

 

(g)          Issuance of the Securities; Registration. The Securities are duly
authorized and, when issued and paid for in accordance with the Subscription
Documents, will be duly and validly issued, fully paid and non-assessable, and
the Securities shall be free and clear of all Liens imposed by the Company. The
Investor Warrant Shares and the shares underlying the Placement Agent Warrants
and Subagent Warrants when issued in accordance with their respective terms,
will be validly issued, fully paid and non-assessable, 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
the Subscription Documents.

 

- 4 -

 

 

(h)          Capitalization. The capitalization of the Company is as set forth
in the Memorandum. The Company has not issued any capital stock since its most
recently filed periodic report under the Exchange Act, other than the issuance
of Common Stock or other equity grants to officers, directors, employees and/or
consultants under existing equity compensation plans of the Company, the
issuance of 150,000 warrants to consultants, and Common Stock issued pursuant to
the exercise of securities of the Company or the Subsidiaries which would
entitle the holder thereof to acquire at any time any 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 ("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 this Agreement and the
transactions contemplated pursuant to the Memorandum, except for Laidlaw’s
rights pursuant to the Engagement Letter between Laidlaw and the Company dated
July 22, 2014. Except as a result of the purchase and sale of the Securities and
as otherwise set forth in Memorandum or the SEC Reports (as defined below),
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 Investors) 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 non-assessable, 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. Except as otherwise described in
the SEC Reports or the Memorandum, 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.

 

(i)          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 12 months preceding the date hereof
(or such shorter period as the Company was required by law or regulation to file
such material) (the foregoing materials 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 aggregate and in the light of the circumstances under which they were made,
not misleading. The financial statements of the Company included in the SEC
Reports comply in all material respects with applicable accounting requirements
and the rules and regulations of Commission (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.

 

- 5 -

 

 

(j)          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 equity
compensation 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 the Offering, 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, prospects, properties, operations, assets or
financial condition that would be required to be disclosed by the Company under
applicable securities laws as of the date of each Closing that has not been
publicly disclosed at least one Trading Day prior to such Closing.

 

(k)          Litigation. Except as disclosed in the SEC Reports, 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 this Agreement and the transactions contemplated pursuant to the Memorandum
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 final determination of violation of or
liability under federal or state securities laws or of breach of fiduciary duty.
To the knowledge of the Company, there has not been and 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.

 

(l)          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 and local 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.

 

- 6 -

 

 

(m)          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.

 

(n)          Regulatory Permits. The Company and the Subsidiaries possess all
certificates, authorizations, permits, and licenses issued by the appropriate
federal, state, local or foreign regulatory authorities necessary to conduct
their respective businesses as currently conducted, except where the failure to
possess such permits or licenses 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.

 

(o)          Title to Real Property; Liens, Etc. Except as described in the SEC
Reports, each of the Company and the Company's subsidiary, Gold Acquisition
Corp., a Nevada corporation ("GAC") has record title to the unpatented mining
claims ("Mining Claims") and unpatented millsites ("Millsites") it owns, and
record title to its leasehold and subleasehold interests in real property (the
"Leasehold Estates"), in each case subject to no Encumbrances, other than (a)
the material production royalties disclosed in the SEC Reports or in the
Memorandum, (b) Encumbrances resulting from taxes which have not yet become
delinquent; and (c) Encumbrances which do not materially detract from the value
of the property subject thereto or materially impair the operations of the
Company; and (d) those that have otherwise arisen in the ordinary course of
business, none of which are material; and, with respect to the Mining Claims and
Millsites, subject to the paramount title of the United States of America and
the statutory rights of third parties to use the surface of the Mining Claims
and Millsites and to explore for and develop federal leasable minerals. Each of
the Company and GAC is in compliance with all material terms of each lease or
sublease of real property to which it is a party or is otherwise bound. Nothing
in this Section, however, shall be deemed to be a representation or a warranty
that any of the Mining Claims contains a discovery of valuable minerals. The
Company has good and marketable title to the personal property owned by it.

 

(p)          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"). To the knowledge of
the Company, all such Intellectual Property Rights are enforceable. 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.

 

(q)          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. 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.

 

- 7 -

 

 

(r)          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.

 

(s)          Sarbanes-Oxley; Internal Accounting Controls. The Company is in
compliance with any and all applicable requirements of the Sarbanes-Oxley Act of
2002 that are effective as of the date hereof, and any and all applicable rules
and regulations promulgated by the Commission thereunder that are effective as
of the date hereof and as of each Closing Date except where failure to do so
could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect. Under the supervision and with the participation of
management, including the Company's Chief Executive Officer and Vice President
of Finance, the Company assessed the effectiveness of its internal control over
financial reporting as of December 31, 2013. In making this assessment,
management used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission in Internal Control—Integrated
Framework. Based on the Company's assessment, and as set forth in its Annual
Report on Form 10-K for the year ended December 31, 2013 filed with the SEC on
March 26, 2014, management has concluded that, as of December 31, 2013 (the
"Evaluation Date"), the Company's internal control over financial reporting is
effective based upon these criteria. 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.

 

(t)          Certain Fees. Except to the Placement Agent and any subagent, 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 this Agreement and the transactions contemplated pursuant to the
Memorandum. The Investors 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 this Agreement and the transactions contemplated
pursuant to the Memorandum.

 

(u)          Investment Company. The Company is not, and is not an Affiliate of,
and immediately after receipt of payment for the Securities, will not be or
become 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.

 

(v)         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, except as set forth in the SEC Reports or the Memorandum.

 

(w)          Listing and Maintenance Requirements. The Common Stock is
registered pursuant to Section 12(b) or 12(g) of the Exchange Act, and the
Company has taken no action designed to, or which to its knowledge is likely to
have the effect of, terminating the registration of the Common Stock under the
Exchange Act nor has the Company received any notification that the Commission
is contemplating terminating such registration. The Company has not, in the 12
months preceding the date hereof, received notice from the OTCQB to the effect
that the Company is not in compliance with the rules or regulations of the
OTCQB. To the Company's knowledge it is, and has no reason to believe that it
will not in the foreseeable future continue to be, in compliance with all such
rules and regulations of the OTCQB.

 

- 8 -

 

 

(x)          Application of Takeover Protections. The Company has 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 Investors as a
result of the Investors and the Company fulfilling their obligations or
exercising their rights in connection with the transactions contemplated
pursuant to the Memorandum, including without limitation as a result of the
Company's issuance of the Securities and the Investors' ownership of the
Securities.

 

(y)          Disclosure. Except with respect to the material terms and
conditions of the Offering, the Company confirms that neither it nor to its
knowledge any other Person acting on its behalf has provided any of the
Investors 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 SEC Reports. The Company understands and confirms
that the Investors will rely on the foregoing representation in purchasing the
Units. All of the disclosure furnished by or on behalf of the Company to the
Investors regarding the Company, its business and the transactions contemplated
hereby is true and correct and, when taken in the aggregate, 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 together with the SEC Reports 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, in light of the
circumstances under which they were made and when made, not misleading.

 

(z)          No Integrated Offering. 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 the OTCQB.

 

(aa)         Tax Status. Each of the Company and its Subsidiaries has filed all
U.S. federal, state, local and foreign tax returns which are required to be
filed by each of them and all such returns are true and correct in all material
respects, except for such failures to file which could not reasonably be
expected to have a Material Adverse Effect. The Company and each Subsidiary has
paid all taxes pursuant to such returns or pursuant to any assessments received
by any of them or by which any of them is obligated to withhold from amounts
owing to any employee, creditor or third party except where not reasonably
expected to have a Material Adverse Effect. The Company and each Subsidiary has
properly accrued all taxes required to be accrued and/or paid, except where the
failure to accrue would not have a Material Adverse Effect. To the knowledge of
the Company, the tax returns of the Company and its Subsidiaries are not
currently being audited by any state, local or federal authorities. Neither the
Company nor any Subsidiary has waived any statute of limitations with respect to
taxes or agreed to any extension of time with respect to any tax assessment or
deficiency. The Company has set aside on its books adequate provision for the
payment of any unpaid taxes except where not reasonably expected to have a
Material Adverse Effect.

 

(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.

 

- 9 -

 

 

(cc)         Accountants. The Company's accounting firm is set forth in the SEC
Reports. Such accounting firm is a registered public accounting firm as required
by the Exchange Act.

 

(dd)         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 Placement Agent in connection with the Offering.

 

(ee)         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").

 

(ff)          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 Investor's request.

 

(gg)         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.

 

(hh)         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.

 

(ii)           Certificates. Any certificate signed by an officer of the Company
and delivered to the Placement Agent or to counsel for the Placement Agent shall
be deemed to be a representation and warranty by the Company to the Placement
Agent as to the matters set forth therein.

 

(jj)           Reliance. The Company acknowledges that the Placement Agent will
rely upon the accuracy and truthfulness of the foregoing representations and
warranties and hereby consents to such reliance.

 

(kk)        General Solicitation Materials. In connection with the Offering, the
Company has not published, distributed, issued, posted or otherwise used or
employed and shall not publish, distribute, issue, post or otherwise use or
employ (i) any form of general solicitation or advertising within the meaning of
Rule 502 under the Securities Act ("General Solicitation"), or (ii) any General
Solicitation that constitutes a written communication within the meaning of Rule
405 under the Securities Act.

 

- 10 -

 

 

(ll)          Amendments or Supplements to Written General Solicitation
Materials. The Company will furnish a copy of any amendment or supplement to a
Written General Solicitation Material to the Placement Agent and counsel for the
Placement Agent and obtain the Placement Agent's written consent prior to any
publication, distribution, issuance, posting or other use or employment of any
such amendment or supplement.

 

(mm)       Notice to Placement Agent. If at any time after the date hereof and
prior to a Closing, any event shall have occurred as a result of which any
Written General Solicitation Material, as then amended or supplemented, would
conflict with the information in the Memorandum, or would include an untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading, or, if for any other reason it shall
become necessary to amend or supplement any Written General Solicitation
Material, the Company shall promptly notify the Placement Agent and upon its
request, shall use its best efforts to ensure that all purchasers or expected
purchasers of the Securities receive corrected Written General Solicitation
Materials.

 

(nn)         Investors. The Company represents, warrants and agrees that all
sales of Securities shall be made only to "accredited investors" (as such term
is defined in Rule 501 of Regulation D under the Securities Act), and that it
will obtain from each Investor a Subscription Agreement that contains Investor
representations concerning each Investor's status as an accredited investor.

 

(oo)         No Disqualification Events. To the knowledge of the Company, none
of the Company, any of its predecessors, any affiliated issuer, any director,
executive officer, other officer of the Company participating in the Offering,
any beneficial owner of 20% or more of the Company's outstanding voting equity
securities, calculated on the basis of voting power, any promoter (as that term
is defined in Rule 405 under the Securities Act) connected with the Company in
any capacity at the time of sale nor any compensated solicitor or any director,
executive officer, other officer of the compensated solicitor participating in
the Offering, (each, an "Issuer Covered Person" and, together, "Issuer Covered
Persons") is subject to any of the "Bad Actor" disqualifications described in
Rule 506(d)(1 )(i) to (viii) under the Securities Act (a "Disqualification
Event"), except for a Disqualification Event covered by Rule 506(d)(2) or
(d)(3). The Company has exercised reasonable care to determine whether any
Issuer Covered Person is subject to a Disqualification Event. The Company has
complied, to the extent applicable, with its disclosure obligations under Rule
506(e), and has furnished to the Placement Agent a copy of any disclosures
provided thereunder.

 

(pp)         Notice of Disqualification Events. The Company will notify the
Placement Agent in writing, prior to a Closing Date of any Disqualification
Event relating to any Issuer Covered Person and (ii) any event that would, with
the passage of time, become a Disqualification Event relating to any Issuer
Covered Person.

 

(qq)         Sufficient Capital. The Company's directors and executive officers
have determined that the proceeds from the Offering, assuming receipt of the
Maximum Offering or Increased Maximum Offering, plus cash on hand, will provide
sufficient working capital for the Company's ongoing operations at approximately
current expenditure levels for 6 to 18 months from the Closing of the Offering.

 

(rr)           FINRA Affiliations. 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.

 

- 11 -

 

 

(ss)         Solvency. Based on the consolidated financial condition of the
Company as of each Closing Date, after giving effect to the receipt by the
Company of the proceeds from the sale of the Securities pursuant to the
Memorandum, (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, and (ii) 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 each Closing Date. The SEC Reports
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.

 

Section 3.           Delivery and Payment. Each Closing shall occur at such
place as shall be agreed upon by the Placement Agent and the Company). Subject
to the terms and conditions hereof, at each Closing payment of the purchase
price for the Securities sold on such Closing Date shall be made by Federal
Funds wire transfer or check against delivery of such Securities, and such
Securities shall be registered in such name or names and shall be in such
denominations, as the Placement Agent may request at least one business day
before the time of purchase.

 

Deliveries of the documents with respect to the purchase of the Securities, if
any, shall be made at the offices of Placement Agent. All actions taken at a
Closing shall be deemed to have occurred simultaneously.

 

Section 4.           Covenants and Agreements of the Company. The Company
further covenants and agrees with the Placement Agent as follows:

 

(a)          Blue Sky Compliance. The Company will cooperate with the Placement
Agent and the Investors in endeavoring to qualify the Securities for sale under
the securities laws of such United States jurisdictions as the Placement Agent
and the Investors may reasonably request and will make such applications, file
such documents, and furnish such information as may be reasonably required for
that purpose, provided the Company shall not be required to qualify as a foreign
corporation or to file a general consent to service of process in any
jurisdiction where it is not now so qualified or required to file such a
consent, and provided further that the Company shall not be required to produce
any new disclosure documents. The Company will, from time to time, prepare and
file such statements, reports and other documents as are or may be required to
continue such qualifications in effect for so long a period as the Placement
Agent may reasonably request for distribution of the Securities. The Company
will advise the Placement Agent promptly after the Company is notified (or other
has knowledge of) of the suspension of the qualification or registration of (or
any such exemption relating to) the Securities for offering, sale or trading in
any jurisdiction or any initiation or threat of any proceeding for any such
purpose, and in the event of the issuance of any order suspending such
qualification, registration or exemption, the Company shall use its best efforts
to obtain the withdrawal thereof at the earliest possible moment.

 

(b)          Amendments, Supplements and Other Matters. The Company will comply
with the Securities Act and the Exchange Act, and the rules and regulations of
the Commission thereunder, so as to permit the completion of the distribution of
the Securities and other shares of Common Stock as contemplated in this
Agreement and the Subscription Documents.

 

- 12 -

 

 

The Company represents and warrants to Placement Agent that all information
concerning the Company contained in the Memorandum is true, complete and
accurate in all material respects and does not contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements therein not misleading in light of the circumstances under which such
statements are made. If at any time during the Term an event occurs which would
cause the Memorandum to contain an untrue statement of a material fact or to
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
Company will notify Placement Agent immediately of such event, and promptly
prepare an appropriate amendment or supplement to the Memorandum. Before
finalizing any amendment to the Memorandum, the Company will furnish the
Placement Agent with a copy of such proposed amendment or supplement and will
not distribute any such amendment or supplement to which the Placement Agent
reasonably objects. If the Placement Agent unreasonably objects to any amendment
that the Company deems necessary, the Company has the right to terminate the
Term, and to terminate the sale of any Securities and in the event of a material
change the investors will have the right to rescind their subscription and the
Placement Agent may terminate the Offering.

 

(c)          Copies of any Amendments and Supplements to the Memorandum. The
Company will furnish the Placement Agent, without charge, during the Term, as
many copies of the Memorandum as the Placement Agent may reasonably request.

 

(d)          Periodic Reporting Obligations. For as long as the Investor
Warrants remain outstanding, the Company will duly file, on a timely basis, with
the Commission all reports and documents required to be filed under the Exchange
Act within the time periods and in the manner required by the Exchange Act.

 

(e)          Transfer Agent. The Company will maintain, at its expense, a DWAC,
fast-

eligible registrar and transfer agent for the Common Stock.

 

(f)           Additional Documents. The Company will enter into a subscription
agreement with each Investor (the "Subscription Agreement") and other
transaction documents to be entered into pursuant to the Subscription Agreement,
which form of subscription agreement has been reviewed by and is acceptable to
the Placement Agent and the Company. The Company agrees that the Placement Agent
may rely upon, and is a third party beneficiary of, the representations and
warranties, and applicable covenants, set forth in the Subscription Agreement.

 

(g)          No Manipulation of Price. The Company will not take, directly or
indirectly, any action designed to cause or result in, or that has constituted
or might reasonably be expected to constitute, the stabilization or manipulation
of the price of any securities of the Company during the Term.

 

(h)          Acknowledgment. The Company acknowledges that any advice given by
the Placement Agent to the Company is solely for the benefit and use of the
management and Board of Directors of the Company and may not be used,
reproduced, disseminated, quoted or referred to, without the Placement Agent's
prior written consent.

 

Section 5.           Conditions of the Obligations of the Placement Agent. The
obligations of the Placement Agent hereunder shall be subject to the accuracy of
the representations and warranties on the part of the Company set forth in
Section 2 hereof, in each case as of the date hereof and as of each Closing Date
as though then made, to the timely performance by each of the Company of its
covenants and other obligations hereunder on and as of such dates, and to each
of the following additional conditions:

 

- 13 -

 

 

(a)          Corporate Proceedings. All corporate proceedings and other legal
matters in connection with this Agreement the Memorandum, and the sale and
delivery of the Securities, shall have been completed or resolved in a manner
reasonably satisfactory to the Placement Agent, and the Placement Agent shall
have been furnished with such papers and information as it may reasonably have
requested in writing before the date of this Agreement to enable such Placement
Agent to pass upon the matters referred to in this Section 5.

 

(b)          No Material Adverse Change. Subsequent to the execution and
delivery of this Agreement and prior to each Closing Date, in the Placement
Agent's sole judgment after consultation with the Company, there shall not have
occurred any Material Adverse Change or Material Adverse Effect.

 

(c)          Opinion of Counsel for the Company. The Placement Agent shall have
received on each Closing Date the favorable opinion of US legal counsel to the
Company, dated as of such Closing Date, addressed to the Placement Agent and the
Investor(s) whose subscription are included in the Closing, and in form and
substance satisfactory to the Placement Agent.

 

(d)          Officers' Certificate. The Placement Agent shall have received on
each Closing Date a certificate of the Company, dated as of such Closing Date,
signed by the Chief Executive Officer and Chief Financial Officer of the
Company, to the effect that, and the Placement Agent shall be satisfied that,
the signers of such certificate have reviewed Memorandum and this Agreement and
to the further effect (but not limited to) that:

 

(i)          The representations and warranties of the Company in this Agreement
are true and correct, as if made on and as of such Closing Date, and the Company
has complied with all the agreements and satisfied all the conditions on its
part to be performed or satisfied at or prior to such Closing Date;

 

(ii)         No order having the effect of ceasing or suspending the
distribution of the Securities or any other securities of the Company has been
issued by the SEC and no proceedings for that purpose have been instituted or
are pending or, to the knowledge of the Company, contemplated by the SEC; and

 

(iii)        Subsequent to the respective dates as of which information is given
in the Memorandum, there has not been: (a) any Material Adverse Change; (b) any
transaction that is material to the Company and the Subsidiaries taken as a
whole, except transactions entered into in the ordinary course of business; (c)
any obligation, direct or contingent, that is material to the Company and the
Subsidiaries taken as a whole, incurred by the Company or any Subsidiary, except
obligations incurred in the ordinary course of business; (d) any material change
in the capital stock (except changes thereto resulting from the exercise of
outstanding stock options or warrants) or outstanding indebtedness of the
Company or any Subsidiary; (e) any dividend or distribution of any kind
declared, paid or made on the capital stock of the Company; or (f) any loss or
damage (whether or not insured) to the property of the Company or any Subsidiary
which has been sustained or will have been sustained which has a Material
Adverse Effect.

 

(e)          Registration Rights. The Company will be required to file within 45
days of the date of the final closing of the Offering (the "Filing Deadline") a
registration statement (the "Registration Statement") registering for resale all
shares of Common Stock of the Company issued as part of the Units and all shares
of shares of Common Stock of the Company issuable upon exercise of the Investor
Warrants. The Company agrees to use its reasonable best efforts to have the
Registration Statement declared effective within 30 days of being notified by
the SEC that the Registration Statement will not be reviewed by the SEC (and in
such case of no SEC review, not later than 60 days after the Filing Deadline) or
within 180 days after the Filing Deadline in the event the SEC provides comments
to the Registration Statement. The Company shall not have taken any action
designed to terminate, 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 the OTCQB.

 

- 14 -

 

 

(f)          Additional Documents. On or before each Closing Date, the Placement
Agent shall have received such information and documents as it may require for
the purposes of enabling them to pass upon the issuance and sale of the
Securities as contemplated herein, or in order to evidence the accuracy of any
of the representations and warranties, or the satisfaction of any of the
conditions or agreements, herein contained.

 

If any condition specified in this Section 5 is not satisfied when and as
required to be satisfied, this Agreement may be terminated by the Placement
Agent by notice to the Company at any time on or prior to a Closing Date, which
termination shall be without liability on the part of any party to any other
party, except that Section 7 (Payment of Expenses), Section 8 (Indemnification
and Contribution) and Section 9 (Representations and Indemnities to Survive
Delivery) shall at all times be effective and shall survive such termination.

 

Section 6. Covenants and Agreements of the Placement Agent. The Placement Agent
represents, warrants, covenants and agrees with the Company:

 

(a)          (i)          Offers of the Securities by the Placement Agent for
sale by the Company have been and will be made only in such jurisdictions in
which: (i) the Placement Agent is a registered broker-dealer or exempted from
the jurisdiction's broker-dealer registration requirements; and (ii) the
Placement Agent has been advised by its counsel that the offering and sale of
the Securities is registered under, or is exempt from registration under,
applicable laws.

 

(ii)         Offers of the Securities by the Placement Agent for sale by the
Company will be made (A) in the United States to solely "accredited investors"
(as such term is defined in Rule 501(a) of Regulation D under the Securities
Act) ("U.S. Accredited Investor") in compliance with the provisions of Rule 506
of Regulation D under the Securities Act and Section 4(a)(2) of the Securities
Act and (B) outside the United States in compliance with the provisions of Rule
903 of Regulation S under the Securities Act. Immediately prior to making any
offer of Securities to any person in the United States, based solely upon
information provided to the Placement Agent by each offeree, the Placement Agent
had reasonable grounds to believe and did believe that each offeree was a U.S.
Accredited Investor. All offers will only be made to accredited investors as
such term is defined under National Instrument 45-106 - Prospectus and
Registration Exemptions. The Placement Agent shall furnish to each Investor a
copy of the Memorandum at the time it offers the Securities to such Investor.

 

(b)          Placement Agent has not distributed and will not distribute, prior
to each Closing Date, any offering material in connection with the offering and
sale of the Securities other than the Memorandum and materials that have been
approved by the Company and its counsel.

 

(c)          The Placement Agent was and will be, on the date of each offer of
Securities and subsequent sale of Securities by the Company: (i) a registered
broker-dealer under the Securities Exchange Act of 1934, as amended; (ii) a
member in good standing of FINRA; and (iii) registered as a broker-dealer in
each jurisdiction in which it is required to be registered as such in order to
offer the Securities for sale by the Company in such jurisdiction.

 

(d)          The Placement Agent will periodically notify the Company of the
jurisdictions in which it intends the Securities to be offered by it or will be
offered by it pursuant to this Agreement, and will periodically notify the
Company of the status of the Offering conducted pursuant to this Agreement.

 

- 15 -

 

 

(e)          The Placement Agent has not entered, and will not enter, into any
other contractual arrangement with respect to the offer of the Securities with
any third party without the written consent of the Company, such consent not to
be unreasonably withheld.

 

(f)          Offers of Securities by the Placement Agent have not been and shall
not be made (i) by any form of "general solicitation or general advertising" (as
such term is used in Rule 502(c) of Regulation D under the Securities Act), or
(ii) in any manner involving a public offering within the meaning of Section
4(a)(2) of the Securities Act.

 

(f)          The Placement Agent represents and warrants that none of it, or any
of its directors, executive officers, general partners, managing members or
other officers participating in the offering of the Securities (each, an "Agent
Covered Person" and, together, "Agent Covered Persons"), is subject to any of
the "Bad Actor" disqualification described in Rule 506(d)(1) of Regulation D
under the Securities Act (a "Disqualification Event") except for a
Disqualification Event (i) covered by Rule 506(d)(2)(i) of Regulation D under
the Securities Act and (ii) a description of which has been furnished in writing
to the Company prior to the date hereof or, in the case of a Disqualification
Event occurring after the date hereof, prior to any closing date of the
Offering.

 

(g)          The Placement Agent represents and warrants that it is not aware of
any person (other than any Agent Covered Person) that has been or will be paid
(directly or indirectly) remuneration for solicitation of purchasers in
connection with the sale of any Securities pursuant to Rule 506(b) of Regulation
D under the Securities Act. The Placement Agent agrees that it will notify the
Company, prior to any closing of the Offering, of any agreement entered into
between the Placement Agent and any such person in connection with such sale.

 

(h)          The Placement Agent agrees that it will notify the Company, in
writing, prior to any closing of the Offering, of (i) any Disqualification Event
relating to any Agent Covered Person not previously disclosed to the Company in
accordance with the immediately preceding two paragraphs, and (ii) any event
that would, with the passage of time, become a Disqualification Event relating
to any Agent Covered Person.

 

(i)           (i)          The Placement Agent acknowledges that the Placement
Agent Warrants and Subagent Warrants and the underlying shares have not been
registered under the Securities Act or the securities laws of any state of the
United States, will be "restricted securities" (as such term is defined in Rule
144(a)(3) under the Securities Act) and may not be transferred unless registered
under the Securities Act or an exemption from such registration is available,
and will bear a legend to that effect. The Placement Agent also confirms that it
is a U.S. Accredited Investor.

 

Section 7. Payment of Expenses. The Company agrees to pay all costs, fees and
expenses incurred by the Company in connection with the performance of its
obligations hereunder and in connection with the transactions contemplated by
Offering, including, without limitation: (i) all expenses incident to the
issuance, delivery and qualification of the Securities (including all printing
and engraving costs); (ii) all fees and expenses of the registrar and transfer
agent of the Common Stock; (iii) all necessary issue, transfer and other stamp
taxes in connection with the issuance and sale of the Securities; (iv) all fees
and expenses of the Company's counsel, independent public or certified public
accountants and other advisors; (v) all costs and expenses incurred in
connection with the preparation, printing, filing, shipping and distribution of
the Memorandum, and all amendments and supplements thereto; and (vi) all filing
fees, reasonable attorneys' fees and expenses incurred by the Company and/or the
Placement Agent in connection with qualifying or registering (or obtaining
exemptions from the qualification or registration of) all or any part of the
Securities for offer and sale under the state securities or blue sky laws or the
securities laws of any other country, and any supplements thereto.

 

- 16 -

 

 

Section 8. Indemnification and Contribution.

 

(a)          The Company agrees to indemnify and hold harmless the Placement
Agent, its affiliates and each person controlling the Placement Agent (within
the meaning of Section 15 of the Securities Act), and the directors, officers,
agents and employees of the Placement Agent, its affiliates and each such
controlling person (the Placement Agent, and each such entity or person, an
"Indemnified Person") from and against any losses, claims, damages, judgments,
assessments, costs and other liabilities (collectively, the "Liabilities"), and
shall reimburse each Indemnified Person for all fees and expenses (including the
reasonable fees and expenses of one counsel for all Indemnified Persons, except
as otherwise expressly provided herein) (collectively, the "Expenses") as they
are incurred by an Indemnified Person in investigating, preparing, pursuing or
defending any Actions, whether or not any Indemnified Person is a party thereto,
(i) caused by a breach by the Company of any of its representations, warranties
or covenants contained in this Agreement or in any certificate delivered by or
on behalf of the Company to Placement Agent or its affiliates in connection with
this Agreement, (ii) caused by, or arising out of or in connection with, any
untrue statement or alleged untrue statement of a material fact contained in the
Memorandum or by any omission or alleged omission to state therein a material
fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading (other than untrue statements or
alleged untrue statements in, or omissions or alleged omissions from,
information relating to an Indemnified Person furnished in writing by or on
behalf of such Indemnified Person expressly for use in such documents) or (iii)
otherwise arising out of or in connection with advice or services rendered or to
be rendered by any Indemnified Person pursuant to this Agreement, the
transactions contemplated thereby or any Indemnified Person's actions or
inactions in connection with any such advice, services or transactions;
provided, however, that, in the case of clause (iii) only, the Company shall not
be responsible for any Liabilities or Expenses of any Indemnified Person that
have resulted primarily from such Indemnified Person's (x) gross negligence, bad
faith, willful misconduct or violation of law in connection with any of the
advice, actions, inactions or services referred to above or (y) use of any
offering materials or information concerning the Company in connection with the
offer or sale of the Securities in the Offering which were not authorized for
such use by the Company. The Company also agrees to reimburse each Indemnified
Person for all Expenses as they are incurred in connection with enforcing such
Indemnified Person's rights under this Agreement.

 

(b)          Upon receipt by an Indemnified Person of actual notice of an Action
against such Indemnified Person with respect to which indemnity may be sought
under this Agreement, such Indemnified Person shall promptly notify the Company
in writing; provided that failure by any Indemnified Person so to notify the
Company shall not relieve the Company from any liability which the Company may
have on account of this indemnity or otherwise to such Indemnified Person,
except to the extent the Company shall have been prejudiced by such failure. The
Company shall, if requested by the Placement Agent, assume the defense of any
such Action including the employment of counsel reasonably satisfactory to the
Placement Agent, which counsel may also be counsel to the Company. Any
Indemnified Person 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 Indemnified Person unless: (i) the
Company has failed promptly to assume the defense and employ counsel or (ii) the
named parties to any such Action include such Indemnified Person, and such
Indemnified Person shall have been advised in the opinion of counsel that there
is a conflict of interest that prevents such counsel from representing both the
Company or another client of such counsel and such Indemnified Person. The
Company shall not be liable for any settlement of any Action effected without
its written consent (which shall not be unreasonably withheld). In addition, the
Company shall not, without the prior written consent of the Placement Agent
(which shall not be unreasonably withheld), settle, compromise or consent to the
entry of any judgment in or otherwise seek to terminate any pending or
threatened Action in respect of which indemnification or contribution may be
sought hereunder (whether or not such Indemnified Person is a party thereto)
unless such settlement, compromise, consent or termination includes an
unconditional release of each Indemnified Person from all Liabilities arising
out of such Action for which indemnification or contribution may be sought
hereunder. The indemnification required hereby shall be made by periodic
payments of the amount thereof during the course of the investigation or
defense, as such expense, loss, damage or liability is incurred and is due and
payable.

 

- 17 -

 

 

(c)          In the event that the foregoing indemnity is unavailable to an
Indemnified Person other than in accordance with this Agreement, the Company
shall contribute to the Liabilities and Expenses paid or payable by such
Indemnified Person in such proportion as is appropriate to reflect (i) the
relative benefits to the Company, on the one hand, and to the Placement Agent
and any other Indemnified Person, on the other hand, of the matters contemplated
by this Agreement or (ii) if the allocation provided by the immediately
preceding clause is not permitted by applicable law, not only such relative
benefits but also the relative fault of the Company, on the one hand, and the
Placement Agent and any other Indemnified Person, on the other hand, in
connection with the matters as to which such Liabilities or Expenses relate, as
well as any other relevant equitable considerations; provided that in no event
shall the Company contribute less than the amount necessary to ensure that all
Indemnified Persons, in the aggregate, are not liable for any Liabilities and
Expenses in excess of the amount of fees actually received by the Placement
Agent pursuant to this Agreement. For purposes of this paragraph, the relative
benefits to the Company, on the one hand, and to the Placement Agent on the
other hand, of the matters contemplated by this Agreement shall be deemed to be
in the same proportion as (a) the total value paid or contemplated to be paid to
or received or contemplated to be received by the Company in the transaction or
transactions that are within the scope of this Agreement, whether or not any
such transaction is consummated, bears to (b) the fees paid to the Placement
Agent under this Agreement. Notwithstanding the above, no person guilty of
fraudulent misrepresentation within the meaning of Section 1 1(f) of the
Securities Act, as amended, shall be entitled to contribution from a party who
was not guilty of fraudulent misrepresentation.

 

(d)          The Company also agrees that no Indemnified Person shall have any
liability (whether direct or indirect, in contract or tort or otherwise) to the
Company for or in connection with advice or services rendered or to be rendered
by any Indemnified Person pursuant to this Agreement, the transactions
contemplated hereby or any Indemnified Person's actions or inactions in
connection with any such advice, services or transactions except for Liabilities
(and related Expenses) of the Company that have resulted primarily from such
Indemnified Person's gross negligence, bad faith or willful misconduct in
connection with any such advice, actions, inactions or services.

 

(e)          The reimbursement, indemnity and contribution obligations of the
Company set forth herein shall apply to any modification of this Agreement and
shall remain in full force and effect regardless of any termination of, or the
completion of any Indemnified Person's services under or in connection with,
this Agreement.

 

Section 9. Representations and Indemnities to Survive Delivery.      The
respective indemnities, agreements, representations, warranties and other
statements of the Company or any person controlling the Company, of its
officers, and of the Placement Agent set forth in or made pursuant to this
Agreement will remain in full force and effect, regardless of any investigation
made by or on behalf of the Placement Agent, the Company, or any of its or their
partners, officers or directors or any controlling person, as the case may be,
and will survive delivery of and payment for the Securities sold hereunder and
any termination of this Agreement. A successor to a Placement Agent, or to the
Company, its directors or officers or any person controlling the Company, shall
be entitled to the benefits of the indemnity, contribution and reimbursement
agreements contained in this Agreement.

 

Section 10. Notices. All communications hereunder shall be in writing and shall
be mailed or hand delivered as follows:

 

- 18 -

 

 

If to the Placement Agent to:

 

Noble Financial Capital Markets

951 Yamato Road, Suite 210

Boca Raton, FL 33431

Attention: Francisco Penafiel

 

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

 

Broad and Cassel

2 South Biscayne Blvd, 21st Floor

Miami, FL 33131

Attention: Carlos E. Loumiet

 

If to the Company:

 

Pershing Gold Corporation

1658 Cole Boulevard

Building 6, Suite 200

Lakewood, Colorado 80401

Attn: Stephen Alfers, President & CEO

 

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

 

Davis Graham & Stubbs LLP

1550 Seventeenth Street, Suite 500

Denver, Colorado 80202

Attn: Deborah Friedman, Esq.

 

Any party hereto may change the address for receipt of communications by giving
written notice to the others.

 

Section 11. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto, and to the benefit of the employees, officers
and directors and controlling persons referred to in Section 8 hereof, and to
their respective successors, and personal representative, and no other person
will have any right or obligation hereunder.

 

Section 12. Partial Unenforceability. The invalidity or unenforceability of any
section, paragraph or provision of this Agreement shall not affect the validity
or enforceability of any other section, paragraph or provision hereof. If any
Section, paragraph or provision of this Agreement is for any reason determined
to be invalid or unenforceable, there shall be deemed to be made such minor
changes (and only such minor changes) as are necessary to make it valid and
enforceable.

 

Section 13. Governing Law Provisions. This Agreement shall be governed by the
internal laws of the State of Florida, without regard to the conflict of laws
principles thereof.

 

Section 14. General Provisions.

 

(a)          This Agreement constitutes the entire agreement of the parties to
this Agreement and supersedes all prior written or oral and all contemporaneous
oral agreements, understandings and negotiations with respect to the subject
matter hereof. This Agreement may be executed in two or more counterparts, each
one of which shall be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument. This Agreement may not be
amended or modified unless in writing by all of the parties hereto, and no
condition herein (express or implied) may be waived unless waived in writing by
each party whom the condition is meant to benefit. Section headings herein are
for the convenience of the parties only and shall not affect the construction or
interpretation of this Agreement.

 

- 19 -

 

 

(b)          The Company acknowledges that in connection with the offering of
the Securities: (i) the Placement Agent has acted at arm's-length and owes no
fiduciary duties to the Company or any other person, (ii) the Placement Agent
owes the Company only those duties and obligations set forth in this Agreement
and (iii) the Placement Agent may have interests that differ from those of the
Company. The Company waives to the full extent permitted by applicable law any
claims it may have against the Placement Agent arising from an alleged breach of
fiduciary duty in connection with the offering of the Securities.

 

(c)          If, during a period of twelve (12) months following the termination
of the Placement Agent’s exclusive engagement pursuant to Section 1(c) hereof,
the Company engages in a financing transaction involving the sale or issuance of
equity or debt securities (a “Subsequent Transaction”), the Company shall ask
the Placement Agent to serve as one of the Company’s representatives in the
Subsequent Transaction. If the Placement Agent participates as one of the
Company’s representatives in the Subsequent Transaction, the Placement Agent
shall be compensated with respect to the aggregate gross proceeds received from
a sale of the securities offered in such transaction to any purchaser in such
Subsequent Transaction that is listed on Exhibit B hereto, at the then
applicable rate of compensation, without regard to whether such purchaser was
introduced to the transaction by the Placement Agent. For the avoidance of
doubt, this Section 14(c) shall survive termination of this Agreement.

 

(d)          This Agreement shall replace and supersede the Engagement Letter in
all respects, and upon execution hereof the Engagement Letter shall be of no
further force or effect.

 

[The remainder of this page has been intentionally left blank.]

 

- 20 -

 

 

The foregoing Placement Agency Agreement is hereby confirmed and accepted as of
the date first above written.

 

NOBLE FINANCIAL CAPITAL MARKETS

 

By: /s/ Richard H. Giles     Name: Richard Giles     Title: Head of Investment
Banking         PERSHING GOLD CORPORATION   a Nevada corporation         By: /s/
Stephen D. Alfers     Name: Stephen D. Alfers     Title: President and Chief
Executive Office  

 

- 21 -