EXHIBIT 10.1

 

SECURITIES PURCHASE AGREEMENT

 

THIS SECURITIES PURCHASE AGREEMENT (this “Agreement”), dated as of _____________
___, 2012, entered into by and among Rackwise, Inc., a Nevada corporation (the
“Company”), and the Buyer(s) set forth on the signature pages affixed hereto
(individually, a “Buyer” or collectively the “Buyers”).

 

WITNESSETH:

 

WHEREAS, the Company and the Buyer(s) are executing and delivering this
Agreement in reliance upon an exemption from securities registration pursuant to
Section 4(2) and/or Rule 506 of Regulation D (“Regulation D”) and/or Regulation
S (“Regulation S”) as promulgated by the U.S. Securities and Exchange Commission
(the “SEC”) under the Securities Act of 1933, as amended (the “Securities Act”);

 

WHEREAS, the parties desire that, upon the terms and subject to the conditions
contained herein, the Company shall sell to the Buyers, as provided herein, and
the Buyers shall purchase up to Two Million Five Hundred Thousand Dollars
($2,500,000) (“the “Maximum Amount”) with the option to sell an additional Five
Hundred Thousand Dollars ($500,000) of units (the “Bridge Units”) at a purchase
price of One Thousand Dollars ($1,000) (the “Purchase Price”) per Bridge Unit
(the “Offering”). Each Bridge Unit consists of: (i) an 8% Convertible Promissory
Note of the Company with a term of twelve (12) months (each a “Note”, and
collectively the “Notes”) in denominations of One Thousand Dollars ($1,000),
which, simultaneously upon the closing of the Subsequent Offering (as defined
below), shall automatically be converted into Units (as defined below) of the
Company at the conversion price per Unit equal to Sixty Five Percent (65%) of
the Subsequent Offering Price (as defined below) (as converted, the “Conversion
Securities”); and (ii) Warrants of the Company (the “Bridge Warrants”) initially
exercisable to purchase a certain number of shares of common stock, $0.0001 par
value per share (the “Common Stock”), at an exercise price equal to the Bridge
Warrant Exercise Price (as defined below), subject to adjustment (including an
adjustment to One Hundred Fifty Percent (150%) of the Subsequent Offering Price
upon the closing date of any Subsequent Offering), for a period of three (3)
years from the closing date of the Subsequent Offering; and the total Purchase
Price shall be allocated among the Buyer(s) in the respective amounts set forth
on the Buyer Counterpart Signature Page(s), affixed hereto (the “Subscription
Amount”);

 

WHEREAS, all of the total principal amount of the Notes, subject to the
deduction of any and all applicable fees and expenses, shall be utilized by the
Company as general working capital; and

 

WHEREAS, after the date hereof the Company intends to consummate a sale of its
equity (or any convertible) securities first sold after the date hereof yielding
aggregate gross proceeds to the Company of greater than $4,000,000 (the
“Subsequent Offering”). “Subsequent Offering Price” means the price per share of
common stock (or the conversion price of any security convertible into common
stock) of the Company comprising or included in the units (the “Units”) the
Company sells in the Subsequent Offering.

 

NOW, THEREFORE, in consideration of the mutual covenants and other agreements
contained in this Agreement the Company and the Buyer(s) hereby agree as
follows:

 

1.PURCHASE AND SALE OF NOTES.

 

(a)          Purchase of Bridge Units. Subject to the satisfaction (or waiver)
of the terms and conditions of this Agreement, each Buyer agrees, severally and
not jointly, to purchase at Closing (as defined below), and the Company agrees
to sell and issue to each Buyer, severally and not jointly, at Closing, the
Bridge Units for the Subscription Amounts set forth on the Buyer Counterpart
Signature Page, attached hereto as Annex A, of each Buyer affixed hereto. The
Notes shall be substantially in the form attached as Exhibit A to this
Agreement. The Bridge Warrants shall be substantially in the form attached as
Exhibit B to this Agreement. Upon Buyer’s execution of this Agreement on the
Buyer Counterpart Signature Page and Buyer’s completion of the Accredited
Investor Certification, the Investor Profile, the Anti-Money Laundering
Information Form, in the form attached as Annex A to this Agreement, and any
other documents, agreements, supplements and additions thereto required by the
Company (collectively, the “Subscription Documents”) to be completed by a Buyer,
the Buyer shall wire transfer the Subscription Amount set forth on its Buyer
Counterpart Signature Page, in same-day funds, in accordance with the
instructions set forth immediately below, which Subscription Amount shall be
held in escrow pursuant to the terms of the Escrow Agreement, in the form
attached as Exhibit C to this Agreement, and disbursed in accordance therewith.

 

 

 

 

Wire Instructions

 

PNC Bank

300 Delaware Avenue

Wilmington DE 19899

ABA# 031100089

Account Name:  CSC Trust Company of Delaware

Account Number:  5605012373

FFC:  Rackwise, Inc.; 79-1741; [insert Subscriber’s name]

 

(b)          Closing Date. The initial closing of the purchase and sale of the
Bridge Units (the “Closing”) shall take place as soon as practicable following
the satisfaction of the conditions to the Closing set forth herein. There may be
multiple Closings until such time as all the Bridge Units offered pursuant to
this Agreement are sold, subject to over-allotment (the date of any such Closing
is hereinafter referred to as a “Closing Date”). The last of such Closings will
occur on or before July 31, 2012, which date may be mutually extended by the
Company and the Placement Agent in writing until August 31, 2012 (the
“Termination Date”). Each Closing shall occur on a Closing Date at the offices
of Gottbetter & Partners, LLP, 488 Madison Avenue, 12th Floor, New York, New
York 10022 (or such other place as is mutually agreed to by the Company and the
Buyer(s)).

 

(c)          Escrow Arrangements; Form of Payment. Upon execution hereof by the
Buyer and pending the Closing, the Purchase Price shall be deposited in a
non-interest bearing escrow account with CSC Trust Company of Delaware, as
escrow agent (the “Escrow Agent”), pursuant to the terms of the Escrow
Agreement. Subject to the satisfaction of the terms and conditions of this
Agreement, on the Closing Date, (i) the Escrow Agent shall deliver to the
Company in accordance with the terms of the Escrow Agreement the Purchase Price
for the Bridge Units to be issued and sold to the Buyer(s) on such Closing Date,
and (ii) the Company shall, as soon thereafter as is practicable, deliver
directly to the Buyer(s), the Note and Bridge Warrants, duly executed on behalf
of the Company.

 

(d)          The Placement Agent (as defined below), a licensed broker dealer
with the Financial Industry Regulatory Authority (“FINRA”), has been engaged as
the exclusive Placement Agent for the Offering on a best efforts basis pursuant
to the terms of a placement agency agreement (the “Placement Agency Agreement),
dated as of June 22, 2012, entered into between the Company and the Placement
Agent. The Placement Agent together with other participating broker dealers,
including sub-agents and/co-agents, if any, will be paid a cash commission of up
to Ten Percent (10%) of the funds raised in the Offering with respect to the
Bridge Units sold to clients of the Placement Agent (the “PA Clients”) and up to
Five Percent (5%) of the funds raised in the Offering with respect to the Bridge
Units sold to Buyer(s) referred to by the Company (the “Company Investors”)
(collectively, the ““Broker Cash Fee”), plus broker warrants identical in all
material respects to the Bridge Warrants, to purchase a number of shares of the
Company’s Common Stock equal to Ten Percent (10%) of the number of Units into
which the Notes are converted with respect to the Bridge Units sold to the PA
Clients, with an exercise price per share equal to the Exercise Price (subject
to automatic adjustments as provided therein) (the “Broker Warrants); provided
that if the Notes are not converted into Units per the terms of the Note (the
“Note Conversion”), the Placement Agent shall receive the Broker Warrants to
purchase an aggregate number of shares of the Company’s Common Stock equal to
Ten Percent (10%) for the PA Clients of the number of shares of the Company’s
Common Stock into which the Notes are voluntary converted under Section 1.02 of
the Note (the “Voluntary Note Conversion”), with an exercise price per share
equal to the Exercise Price (subject to automatic adjustments as provided
therein); provided further that if the Note Conversion does not occur and (i)
the Voluntary Note Conversion does not occur, the Placement Agent shall receive
the Broker Warrants to purchase an aggregate number of shares of the Company’s
Common Stock equal to Ten Percent (10%) for the PA Clients of the number of
Warrant Shares, or (ii) partial Voluntary Note Conversion occurs, the Placement
Agent shall receive the Broker Warrants to purchase an aggregate number of
shares of the Company’s Common Stock equal to Ten Percent (10%) for the PA
Clients of (A) of the number of shares of the Company’s Common Stock resulting
from the Voluntary Note Conversion and (B) the number of Warrant Shares with
respect to the remaining balance of the Notes not converted, all with an
exercise price per share equal to the Exercise Price (subject to automatic
adjustments as provided therein). The Broker Cash Fee and the Broker Warrants
are sometimes referred to collectively as the “Brokers’ Fee”.

 

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(e)          The Buyer understands and agrees that the Company, in its sole and
absolute discretion, reserves the right to accept or reject this or any other
subscription for the Bridge Units, in whole or in part, notwithstanding prior
receipt by the Buyer of notice of acceptance of this subscription. If the
subscription is rejected in whole or the Offering of Bridge Units is terminated,
all funds received from the Buyer will be returned without interest or offset,
and this subscription shall thereafter be of no further force or effect. If this
subscription is rejected in part, the funds for the rejected portion of this
subscription will be returned without interest or offset, and this subscription
will continue in full force and effect to the extend this subscription was
accepted.

 

2.BUYER’S REPRESENTATIONS AND WARRANTIES.

 

Each Buyer represents and warrants, severally and not jointly, as to such Buyer,
that:

 

(a)          Investment Purpose. Each Buyer is acquiring the Notes (and upon
conversion of the Notes, if applicable, the Units; and upon conversion or
exercise of the Units, if applicable, the securities issuable upon conversion or
exercise thereof (collectively, the “Unit Securities”)), the Bridge Warrants
and/or the shares of Common Stock issuable upon exercise of the Bridge Warrants
(the “Warrant Shares” and, together with the Notes, the Bridge Warrants, the
Units and the Unit Securities, to the extent applicable, the “Securities”)), for
its own account for investment only and not with a view towards, or for resale
in connection with, the public sale or distribution thereof, except pursuant to
sales registered or exempted under the Securities Act; provided, however, that
by making the representations herein, such Buyer reserves the right to dispose
of the Securities at any time in accordance with or pursuant to an effective
registration statement covering the Securities, or an available exemption under
the Securities Act. The Buyer agrees not to sell, hypothecate or otherwise
transfer the Buyer’s securities unless such securities are registered under the
federal and applicable state securities laws or unless, in the opinion of
counsel satisfactory to the Company, an exemption from such law is available.

 

(b)          Residence of Buyer. Each Buyer resides in the jurisdiction set
forth on the Buyer Counterpart Signature Page affixed hereto.

 

(c)          Non-US Person. If a Buyer is not a person in the United States or a
U.S. Person (as defined in Rule 902(k) of Regulation S) or is not purchasing
Securities on behalf of a person in the United States or a U.S. Person:

 

(i)          neither the Buyer nor any disclosed principal is a U.S. Person nor
are they subscribing for Securities for the account of a U.S. Person or for
resale in the United States and the Buyer confirms that the Securities have not
been offered to the Buyer in the United States and that this Agreement has not
been signed in the United States;

 

(ii)         the Buyer acknowledges that the Securities have not been registered
under the Securities Act and may not be offered or sold in the United States or
to a U.S. Person unless the securities are registered under the Securities Act
and all applicable state securities laws or an exemption from such registration
requirements is available, and further agrees that hedging transactions
involving such securities may not be conducted unless in compliance with the
Securities Act;

 

(iii)        the Buyer and if applicable, the disclosed principal for whom the
Buyer is acting, understands that the Company is the seller of the Securities
and that, for purposes of Regulation S, a “distributor” is any underwriter,
dealer or other person who participates pursuant to a contractual arrangement in
the distribution of securities sold in reliance on Regulation S and that an
“affiliate” is any partner, officer, director or any person directly or
indirectly controlling, controlled by or under common control with any person in
question. Except as otherwise permitted by Regulation S, the Buyer and if
applicable, the disclosed principal for whom the Buyer is acting, agrees that it
will not, during a one year distribution compliance period, act as a
distributor, either directly or through any affiliate, or sell, transfer,
hypothecate or otherwise convey the Securities other than to a non-U.S. Person;

 

(iv)        the Buyer and if applicable, the disclosed principal for whom the
Buyer is acting, acknowledges and understands that in the event the Securities
are offered, sold or otherwise transferred by the Buyer or if applicable, the
disclosed principal for whom the Buyer is acting, to a non-U.S Person prior to
the expiration of a one year distribution compliance period, the purchaser or
transferee must agree not to resell any such Securities except in accordance
with the provisions of Regulation S, pursuant to registration under the
Securities Act, or pursuant to an available exemption from registration; and
must further agree not to engage in hedging transactions with regard to such
securities unless in compliance with the Securities Act; and

 

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(v)         neither the Buyer nor any disclosed principal will offer, sell or
otherwise dispose of any Securities in the United States or to a U.S. Person
unless (A) the Company has consented to such offer, sale or disposition and such
offer, sale or disposition is made in accordance with an exemption from the
registration requirements under the Securities Act and the securities laws of
all applicable states of the United States or (B) the SEC has declared effective
a registration statement in respect of such securities.

 

(d)          Accredited Investor Status. The Buyer meets the requirements of at
least one of the suitability standards for an “Accredited Investor” as that term
is defined in Rule 501(a)(3) of Regulation D, and as set forth on the Accredited
Investor Certification attached hereto.

 

(e)          Accredited Investor Qualifications. The Buyer (i) if a natural
person, represents that the Buyer has reached the age of 21 and has full power
and authority to execute and deliver this Agreement and all other related
agreements or certificates and to carry out the provisions hereof and thereof;
(ii) if a corporation, partnership, or limited liability company or partnership,
or association, joint stock company, trust, unincorporated organization or other
entity, represents that such entity was not formed for the specific purpose of
acquiring any of the Securities, such entity is duly organized, validly existing
and in good standing under the laws of the state of its organization, the
consummation of the transactions contemplated hereby is authorized by, and will
not result in a violation of state law or its charter or other organizational
documents, such entity has full power and authority to execute and deliver this
Agreement and all other related agreements or certificates and to carry out the
provisions hereof and thereof and to purchase and hold the Securities, the
execution and delivery of this Agreement has been duly authorized by all
necessary action, this Agreement has been duly executed and delivered on behalf
of such entity and is a legal, valid and binding obligation of such entity; or
(iii) if executing this Agreement in a representative or fiduciary capacity,
represents that it has full power and authority to execute and deliver this
Agreement in such capacity and on behalf of the subscribing individual, ward,
partnership, trust, estate, corporation, or limited liability company or
partnership, or other entity for whom the Buyer is executing this Agreement, and
such individual, partnership, ward, trust, estate, corporation, or limited
liability company or partnership, or other entity has full right and power to
perform pursuant to this Agreement and make an investment in the Company, and
represents that this Agreement constitutes a legal, valid and binding obligation
of such entity. The execution and delivery of this Agreement will not violate or
be in conflict with any order, judgment, injunction, agreement or controlling
document to which the Buyer is a party or by which it is bound;

 

(f)          Buyer Relationship with Brokers. The Buyer’s substantive
relationship with any broker for the transactions contemplated hereby or
subagent thereof (collectively, “Brokers”) through which the Buyer is
subscribing for the Securities predates such Broker’s contact with the Buyer
regarding an investment in the Securities;

 

(g)          Solicitation. The Buyer is unaware of, is in no way relying on, and
did not become aware of the offering of the Securities through or as a result
of, any form of general solicitation or general advertising including, without
limitation, any article, notice, advertisement or other communication published
in any newspaper, magazine or similar media or broadcast over television or
radio, in connection with the offering and sale of the Securities and is not
subscribing for the Securities and did not become aware of the offering of any
Securities through or as a result of any seminar or meeting to which the Buyer
was invited by, or any solicitation of a subscription by, a person not
previously known to the Buyer in connection with investments in securities
generally;

 

(h)          Brokerage Fees. The Buyer has taken no action that would give rise
to any claim by any person for brokerage commissions, finders’ fees or the like
relating to this Agreement or the transaction contemplated hereby (other than
commissions to be paid by the Company to the Brokers);

 

(i)          Buyer’s Advisors. The Buyer and the Buyer’s attorney, accountant,
and/or tax advisor, if any (collectively, the “Advisors”), as the case may be,
has such knowledge and experience in financial, tax, and business matters, and,
in particular, investments in securities, so as to enable it to utilize the
information made available to it in connection with the Securities to evaluate
the merits and risks of an investment in the Securities and the Company and to
make an informed investment decision with respect thereto.

 

(j)          Buyer Liquidity. Each Buyer has adequate means of providing for
such Buyer’s current financial needs and foreseeable contingencies and has no
need for liquidity of its investment in the Notes for an indefinite period of
time. The Buyer must bear and acknowledges the substantial economic risks of the
investment in the Bridge Units.

 

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(k)          High Risk Investment; Review of Risk Factors. The Buyer is aware
that an investment in the Securities involves a number of very significant risks
and has carefully reviewed and understands the risks of, and other
considerations relating to, the purchase of the Securities and in particular,
acknowledges that the Company has a history of losses and has not yet achieved
profitability and that the Company may ultimately be unable to repay the Notes.

 

(l)          Reliance on Exemptions. Each Buyer understands that the Securities
are being offered and sold to it in reliance on specific exemptions from the
registration requirements of United States federal and state securities laws and
that the Company is relying in part upon the truth and accuracy of, and such
Buyer’s compliance with, the representations, warranties, agreements,
acknowledgments and understandings of such Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of such Buyer
to acquire such securities.

 

(m)          Information. Each Buyer and its Advisors have been furnished with
all documents and materials relating to the business, finances and operations of
the Company and all such other information that Buyer and/or its Advisors have
requested and deemed material to making an informed investment decision
regarding its the Securities. Each Buyer and its Advisors have been afforded the
opportunity to review such documents and materials, as well as the Company’s SEC
Filings, as such term is defined below (hard copies of which were made available
to the Buyer upon request to the Company or were otherwise accessible to the
Buyer via the SEC’s EDGAR system), and the information contained therein. Each
Buyer and its Advisors have been afforded the opportunity to ask questions of
the Company and its management. Each Buyer understands that such discussions, as
well as any written information provided by the Company, were intended to
describe the aspects of the Company’s business and prospects which the Company
believes to be material, but were not necessarily a thorough or exhaustive
description, and except as expressly set forth in this Agreement, the Company
makes no representation or warranty with respect to the completeness of such
information and makes no representation or warranty of any kind with respect to
any information provided by any entity other than the Company. Some of such
information may include projections as to the future performance of the Company,
which projections may not be realized, may be based on assumptions which may not
be correct and may be subject to numerous factors beyond the Company’s control.
Additionally, the Buyer understands and represents that he is purchasing the
Securities notwithstanding the fact that the Company may disclose in the future
certain material information the Buyer has not received, including its financial
results for its current fiscal quarter and information regarding the Company.
Neither such inquiries nor any other due diligence investigations conducted by
such Buyer or its Advisors shall modify, amend or affect such Buyer’s right to
rely on the Company’s representations and warranties contained in Section 3
below. Each Buyer has sought such accounting, legal and tax advice as it has
considered necessary to make an informed investment decision with respect to its
investment in Securities.

 

(n)          No Other Representations or Information. In evaluating the
suitability of an investment in the Securities, the Buyer has not relied upon
any representation or information (oral or written) other than as stated in this
Agreement. No oral or written representations have been made, or oral or written
information furnished, to the Buyer or its Advisors, if any, in connection with
the offering of the Securities.

 

(o)          No Governmental Review. Each Buyer understands that no United
States federal or state agency or any other government or governmental agency
has passed on or made any recommendation or endorsement of the Securities or the
fairness or suitability of the investment in Securities nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.

 

(p)          Transfer or Resale. (A) Each Buyer understands that: (i) the
Securities have not been and are not being registered under the Securities Act
or any state securities laws, and may not be offered for sale, sold, assigned or
transferred unless (A) subsequently registered thereunder, or (B) such Buyer
shall have delivered to the Company an opinion of counsel, in a generally
acceptable form, to the effect that such securities to be sold, assigned or
transferred may be sold, assigned or transferred pursuant to an exemption from
such registration requirements; (ii) any sale of such securities made in
reliance on Rule 144 under the Securities Act (or a successor rule
thereto) (“Rule 144”) may be made only in accordance with the terms of Rule 144
and further, if Rule 144 is not applicable, any resale of such securities under
circumstances in which the seller (or the person through whom the sale is made)
may be deemed to be an underwriter (as that term is defined in the Securities
Act) may require compliance with some other exemption under the Securities Act
or the rules and regulations of the SEC thereunder; and (iii) except as
otherwise set forth in this Agreement, neither the Company nor any other person
is under any obligation to register such securities under the Securities Act or
any state securities laws or to comply with the terms and conditions of any
exemption thereunder. The Company reserves the right to place stop transfer
instructions against the Securities (if applicable). There can be no assurance
that there will be any market or resale for the Securities, nor can there be any
assurance that any of the Securities will be freely transferable at any time in
the foreseeable future.

 

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(B) Each Buyer understands that on September 27, 2011, the Company ceased to be
a “shell company” as defined in Rule 12b-2 under the Securities Exchange Act of
1934, as amended (the “Exchange Act”).  Pursuant to Rule 144(i), securities
issued by a current or former shell company (such as the Securities) that
otherwise meet the holding period and other requirements of Rule 144
nevertheless cannot be sold in reliance on Rule 144 until one year after the
Company (a) is no longer a shell company; and (b) has filed current “Form 10
information” (as defined in Rule 144(i)) with the SEC reflecting that it is no
longer a shell company, and provided that at the time of a proposed sale
pursuant to Rule 144, the Company is subject to the reporting requirements of
section 13 or 15(d) of the Exchange Act and has filed all reports and other
materials required to be filed by section 13 or 15(d) of the Exchange Act, as
applicable, during the preceding 12 months (or for such shorter period that the
issuer was required to file such reports and materials), other than Form 8-K
reports.  As a result, the restrictive legends on certificates for the
securities cannot be removed except in connection with an actual sale meeting
the foregoing requirements or pursuant to an effective registration statement.

 

(q)          Legends. Each Buyer understands that the certificates or other
instruments representing Securities shall bear a restrictive legend in
substantially the following form (and a stop transfer order may be placed
against transfer of such stock certificates):

 

For U.S. Persons:

 

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”). THESE
SECURITIES MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (A) TO
THE COMPANY, (B) OUTSIDE THE UNITED STATES IN COMPLIANCE WITH RULE 904 OF
REGULATION S UNDER THE SECURITIES ACT, (C) IN COMPLIANCE WITH RULE 144 OR 144A
THEREUNDER, IF AVAILABLE, AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES
LAWS, (D) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT, OR (E) IN A
TRANSACTION THAT DOES NOT REQUIRE REGISTRATION UNDER THE SECURITIES ACT OR ANY
APPLICABLE STATE SECURITIES LAWS, AND THE HOLDER HAS, PRIOR TO SUCH SALE,
FURNISHED TO THE COMPANY AN OPINION OF COUNSEL OR OTHER EVIDENCE OF EXEMPTION,
IN EITHER CASE REASONABLY SATISFACTORY TO THE COMPANY. HEDGING TRANSACTIONS
INVOLVING THESE SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE
SECURITIES ACT.

 

For Non-U.S. Persons:

 

THESE SECURITIES REPRESENTED HEREBY WERE ISSUED IN AN OFFSHORE TRANSACTION TO
PERSONS WHO ARE NOT U.S. PERSONS (AS DEFINED IN REGULATION S) PURSUANT TO
REGULATION S PROMULGATED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS
AMENDED (THE “SECURITIES ACT”). ACCORDINGLY, NONE OF THE SECURITIES REPRESENTED
BY HEREBY HAVE BEEN REGISTERED UNDER THE SECURITIES ACT, OR ANY U.S. STATE
SECURITIES LAWS, AND, UNLESS SO REGISTERED, NONE MAY BE OFFERED OR SOLD IN THE
UNITED STATES OR, DIRECTLY OR INDIRECTLY, TO U.S. PERSONS EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT OR PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT,
AND IN EACH CASE ONLY IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. IN
ADDITION, HEDGING TRANSACTIONS INVOLVING THE SECURITIES MAY NOT BE CONDUCTED
UNLESS IN ACCORDANCE WITH THE SECURITIES ACT.

 

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The legend set forth above shall be removed and the Company within three (3)
business days shall issue a certificate without such legend to the holder of the
applicable Securities upon which it is stamped, if, unless otherwise required by
state securities laws, (i) the Buyer or its broker make the necessary
representations and warranties to the transfer agent for such security that it
has complied with the prospectus delivery requirements in connection with a sale
transaction, provided the applicable Securities are registered under the
Securities Act or (ii) following a sale transaction, in connection with which
such holder provides the Company with an opinion of counsel satisfactory to the
Company, which opinion shall be in form, substance and scope customary for
opinions of counsel in comparable transactions, to the effect that a public
sale, assignment or transfer of the applicable Securities may be made without
registration under the Securities Act.

 

(r)          Authorization, Enforcement. This Agreement has been duly and
validly authorized, executed and delivered on behalf of such Buyer and is a
valid and binding agreement of such Buyer enforceable in accordance with its
terms, except as such enforceability may be limited by general principles of
equity or applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation and other similar laws relating to, or affecting generally, the
enforcement of applicable creditors’ rights and remedies.

 

(s)          Receipt of Documents. Each Buyer, its counsel and/or its Advisors
have received and read in their entirety: (i) this Agreement and each
representation, warranty and covenant set forth herein; and (ii) all due
diligence and other information necessary to verify the accuracy and
completeness of such representations, warranties and covenants; each Buyer has
received answers to all questions such Buyer submitted to the Company regarding
an investment in the Company; and each Buyer has relied on the information
contained therein and has not been furnished any other documents, literature,
memorandum or prospectus.

 

(t)          Trading Activities. The Buyer’s trading activities with respect to
the Company’s Common Stock shall be in compliance with all applicable federal
and state securities laws, rules and regulations and the rules and regulations
of the principal market on which the Company’s Common Stock is listed or traded.
Neither the Buyer nor its affiliates will have an open short position in the
Company’s Common Stock and, except as set forth below, the Buyer shall not, and
shall not cause any of its affiliates under common control with the Buyer, to
engage in any short sale as defined in any applicable SEC or FINRA rules or
regulations on any hedging transactions with respect to the Company’s Common
Stock until the earlier to occur of (i) the third anniversary of the Closing
Date and (ii) the date when none of the Notes remain outstanding. Without
limiting the foregoing, the Buyer agrees not to engage in any naked short
transactions in excess of the amount of shares owned (or an offsetting long
position) by the Buyer.

 

(u)          Regulation FD. Each Buyer acknowledges and agrees that all of the
information received by it in connection with the transactions contemplated by
this Agreement is of a confidential nature and may be regarded as material
non-public information under Regulation FD promulgated by the SEC and that such
information has been furnished to the Buyer for the sole purpose of enabling the
Buyer to consider and evaluate an investment in the Securities. The Buyer agrees
that it will treat such information in a confidential manner, will not use such
information for any purpose other than evaluating an investment in the
Securities, will not, directly or indirectly, trade or permit the Buyer’s
agents, representatives or affiliates to trade in any securities of the Company
while in possession of such information and will not, directly or indirectly,
disclose or permit the Buyer’s agents, representatives or affiliates to disclose
any of such information without the Company’s prior written consent. The Buyer
shall make its agents, affiliates and representatives aware of the confidential
nature of the information contained herein and the terms of this section
including the Buyer’s agreement to not disclose such information, to not trade
in the Company’s securities while in the possession of such information and to
be responsible for any disclosure or other improper use of such information by
such agents, affiliates or representatives. Likewise, without the Company’s
prior written consent, the Buyer will not, directly or indirectly, make any
statements, public announcements or other release or provision of information in
any form to any trade publication, to the press or to any other person or entity
whose primary business is or includes the publication or dissemination of
information related to the transactions contemplated by this Agreement. In the
event the Subsequent Offering (or other similar offering or transaction) is not
entered into, the Company acknowledges that the information covered by this
Section 2(u) will no longer be deemed material, non public information under
Regulation FD.

 

(v)         No Legal Advice from the Company. Each Buyer acknowledges that it
had the opportunity to review this Agreement and the transactions contemplated
by this Agreement with its own legal counsel and investment and tax advisors.
Each Buyer is relying solely on such Advisors and not on any statements or
representations of the Company, the Placement Agent or any of their respective
employees or agents with respect to the legal, tax, economic and related
considerations with respect to this investment, the transactions contemplated by
this Agreement or the securities laws of any jurisdiction.

 

7

 

 

(w)          No Group Participation. Each Buyer and its affiliates is not a
member of any group, nor is any Buyer acting in concert with any other person,
including any other Buyer, with respect to its acquisition of the Securities.

 

(x)          Reliance. Any information which the Buyer has heretofore furnished
or is furnishing herewith to the Company or any Broker is complete and accurate
and may be relied upon by the Company and any Broker in determining the
availability of an exemption from registration under federal and state
securities laws in connection with the offering of securities as described in
the Transmittal Letter. The Buyer further represents and warrants that it will
notify and supply corrective information to the Company immediately upon the
occurrence of any change therein occurring prior to the Company’s issuance of
Bridge Units. Within five (5) days after receipt of a request from the Company
or any Broker, the Buyer will provide such information and deliver such
documents as may reasonably be necessary to comply with any and all laws and
ordinances to which the Company or any Broker is subject.

 

(y)          (For ERISA plan Buyers only). The fiduciary of the ERISA plan
represents that such fiduciary has been informed of and understands the
Company’s investment objectives, policies and strategies, and that the decision
to invest “plan assets” (as such term is defined in ERISA) in the Company is
consistent with the provisions of ERISA that require diversification of plan
assets and impose other fiduciary responsibilities. The Buyer fiduciary or Plan
(a) is responsible for the decision to invest in the Company; (b) is independent
of the Company or any of its affiliates; (c) is qualified to make such
investment decision; and (d) in making such decision, the Buyer fiduciary or
Plan has not relied primarily on any advice or recommendation of the Company or
any of its affiliates;

 

(z)          [The Buyer should check the Office of Foreign Assets Control
(“OFAC”) website at http://www.treas.gov/ofac before making the following
representations.] The Buyer represents that the amounts invested by it in the
Company in the Notes were not and are not directly or indirectly derived from
activities that contravene federal, state or international laws and regulations,
including anti-money laundering laws and regulations. Federal regulations and
Executive Orders administered by OFAC prohibit, among other things, the
engagement in transactions with, and the provision of services to, certain
foreign countries, territories, entities and individuals. The lists of OFAC
prohibited countries, territories, persons and entities can be found on the OFAC
website at http://www.treas.gov/ofac. In addition, the programs administered by
OFAC (the “OFAC Programs”) prohibit dealing with individuals1 or entities in
certain countries regardless of whether such individuals or entities appear on
the OFAC lists;

 

(aa)         To the best of the Buyer’s knowledge, none of: (1) the Buyer; (2)
any person controlling or controlled by the Buyer; (3) if the Buyer is a
privately-held entity, any person having a beneficial interest in the Buyer; or
(4) any person for whom the Buyer is acting as agent or nominee in connection
with this investment is a country, territory, individual or entity named on an
OFAC list, or a person or entity prohibited under the OFAC Programs. Please be
advised that the Company may not accept any amounts from a prospective investor
if such prospective investor cannot make the representation set forth in the
preceding paragraph. The Buyer agrees to promptly notify the Company should the
Buyer become aware of any change in the information set forth in these
representations. The Buyer understands and acknowledges that, by law, the
Company may be obligated to “freeze the account” of the Buyer, either by
prohibiting additional subscriptions from the Buyer, declining any redemption
requests and/or segregating the assets in the account in compliance with
governmental regulations, and a Broker may also be required to report such
action and to disclose the Buyer’s identity to OFAC. The Buyer further
acknowledges that the Company may, by written notice to the Buyer, suspend the
redemption rights, if any, of the Buyer if the Company reasonably deems it
necessary to do so to comply with anti-money laundering regulations applicable
to the Company or any Broker or any of the Company’s other service providers.
These individuals include specially designated nationals, specially designated
narcotics traffickers and other parties subject to OFAC sanctions and embargo
programs;

 

 

1These individuals include specially designated nationals, specially designated
narcotics traffickers and other parties subject to OFAC sanctions and embargo
programs.

 

8

 

  

(bb)         To the best of the Buyer’s knowledge, none of: (1) the Buyer; (2)
any person controlling or controlled by the Buyer; (3) if the Buyer is a
privately-held entity, any person having a beneficial interest in the Buyer; or
(4) any person for whom the Buyer is acting as agent or nominee in connection
with this investment is a senior foreign political figure2, or any immediate
family3 member or close associate4 of a senior foreign political figure, as such
terms are defined in the footnotes below; and

 

(cc)         If the Buyer is affiliated with a non-U.S. banking institution (a
“Foreign Bank”), or if the Buyer receives deposits from, makes payments on
behalf of, or handles other financial transactions related to a Foreign Bank,
the Buyer represents and warrants to the Company that: (1) the Foreign Bank has
a fixed address, other than solely an electronic address, in a country in which
the Foreign Bank is authorized to conduct banking activities; (2) the Foreign
Bank maintains operating records related to its banking activities; (3) the
Foreign Bank is subject to inspection by the banking authority that licensed the
Foreign Bank to conduct banking activities; and (4) the Foreign Bank does not
provide banking services to any other Foreign Bank that does not have a physical
presence in any country and that is not a regulated affiliate.

 

3.REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

 

Except as previously disclosed herein or in the Company’s SEC Filings, the
Company represents and warrants to each of the Buyers that:

 

(a)          Organization and Qualification. The Company is a corporation duly
organized and validly existing in good standing under the laws of the State of
Nevada, and has the requisite corporate power to own its properties and to carry
on its business as now being conducted. The Company is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction
in which the nature of the business conducted by it makes such qualification
necessary, except to the extent that the failure to be so qualified or be in
good standing would not have a Material Adverse Effect, as defined below. Except
as set forth on Schedule 3(a), the Company has no subsidiaries.

 

(b)          Authorization, Enforcement, Compliance with Other Instruments.
(i) The Company has the requisite corporate power and authority to enter into
and perform this Agreement and the Escrow Agreement and all other documents
necessary or desirable to effect the transactions contemplated hereby
(collectively the “Transaction Documents”) to which it is a party and to issue
the Notes in accordance with the terms hereof and thereof, (ii) the execution
and delivery of the Transaction Documents by the Company and the consummation by
it of the transactions contemplated hereby and thereby, including, without
limitation, the issuance of the Notes have been duly authorized by the Company’s
Board of Directors (the “Board of Directors”) and no further consent or
authorization is required by the Company, the Board of Directors or the
Company’s stockholders, (iii) the Transaction Documents will be duly executed
and delivered by the Company, (iv) the Transaction Documents when executed will
constitute the valid and binding obligations of the Company enforceable against
the Company in accordance with their terms, except as such enforceability may be
limited by general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of creditors’ rights and remedies.

 

(c)          Capitalization. The authorized and outstanding capital stock of the
Company is described on Schedule 3(c) attached hereto. Except as set forth on
Schedule 3(c) or as contemplated by the Transactions, there are no
subscriptions, convertible securities, options, warrants or other rights
(contingent or otherwise) currently outstanding to purchase any of the
authorized but unissued capital stock of the Company. Except as set forth in
Schedule 3(c) or as contemplated by the Transactions, the Company has no
obligation to issue shares of its capital stock, or subscriptions, convertible
securities, options, warrants, or other rights (contingent or otherwise) to
purchase any shares of its capital stock or to distribute to holders of any of
its equity securities, any evidence of indebtedness or asset. No shares of the
Company’s capital stock are subject to a right of withdrawal or a right of
rescission under any applicable securities law. Except as set forth in Schedule
3(c), there are no outstanding or authorized stock appreciation, phantom stock
or similar rights with respect to the Company. To the knowledge of the Company,
except as described in Schedule 3(c) or otherwise contemplated by this
Agreement, there are no agreements to which the Company is a party or by which
it is bound with respect to the voting (including without limitation voting
trusts or proxies), registration under any applicable securities laws, or sale
or transfer (including without limitation agreements relating to pre-emptive
rights, rights of first refusal, co-sale rights or “drag-along” rights) of any
securities of the Company. Except as provided in Schedule 3(c), to the knowledge
of the Company, there are no agreements among other parties, to which the
Company is not a party and by which it is not bound, with respect to the voting
(including without limitation voting trusts or proxies) or sale or transfer
(including without limitation agreements relating to rights of first refusal,
co-sale rights or “drag-along” rights) of any securities of the Company.

 

 

2A “senior foreign political figure” is defined as a senior official in the
executive, legislative, administrative, military or judicial branches of a
foreign government (whether elected or not), a senior official of a major
foreign political party, or a senior executive of a foreign government-owned
corporation. In addition, a “senior foreign political figure” includes any
corporation, business or other entity that has been formed by, or for the
benefit of, a senior foreign political figure.

 

3“Immediate family” of a senior foreign political figure typically includes the
figure’s parents, siblings, spouse, children and in-laws.

 

4A “close associate” of a senior foreign political figure is a person who is
widely and publicly known to maintain an unusually close relationship with the
senior foreign political figure, and includes a person who is in a position to
conduct substantial domestic and international financial transactions on behalf
of the senior foreign political figure.

 

9

 

 

(d)          Issuance of Securities. The Bridge Units, the Notes, the Bridge
Warrants, the shares of Common Stock underlying the Notes and the Warrant Shares
are duly authorized and, upon issuance in accordance with the terms hereof,
shall be duly issued, fully paid and nonassessable, are free from all taxes,
liens and charges with respect to the issue thereof.

 

(e)          No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated hereby will not (i) result in a violation of the
Articles of Incorporation of the Company (the “Articles of Incorporation”), any
certificate of designations of any outstanding series of preferred stock of the
Company or the By-Laws of the Company (the “By-Laws”) or (ii) violate or
conflict with, or result in a breach of any provision of, or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to which
the Company is a party, or result in a violation of any law, rule, regulation,
order, judgment or decree (including federal and state securities laws and
regulations) applicable to the Company or by which any property or asset of the
Company is bound or affected except for those which could not reasonably be
expected to have a material adverse effect on the assets, business, condition
(financial or otherwise), results of operations or future prospects of the
Company (a “Material Adverse Effect”). Except those which could not reasonably
be expected to have a Material Adverse Effect, the Company is not in violation
of any term of or in default under its Articles of Incorporation or By-Laws.
Except those which could not reasonably be expected to have a Material Adverse
Effect, the Company is not in violation of any term of or in default under any
material contract, agreement, mortgage, indebtedness, indenture, instrument,
judgment, decree or order or any statute, rule or regulation applicable to the
Company. The business of the Company is not being conducted, and shall not be
conducted in violation of any material law, ordinance, or regulation of any
governmental entity, except to the extent it could reasonably be expected not to
have a Material Adverse Effect. Except as specifically contemplated by this
Agreement and as required under the Securities Act and any applicable state
securities laws, the Company is not required to obtain any consent,
authorization or order of, or make any filing or registration with, any court or
governmental agency in order for it to execute, deliver or perform any of its
obligations under or contemplated by this Agreement or the Escrow Agreement in
accordance with the terms hereof or thereof. All consents, authorizations,
orders, filings and registrations which the Company is required to obtain
pursuant to the preceding sentence have been obtained or effected on or prior to
the date hereof. The Company is unaware of any facts or circumstance, which
might give rise to any of the foregoing.

 

(f)          SEC Filings; Financial Statements. Since September 27, 2011, the
Company has filed (and, except for certain Current Reports on Form 8-K), has
timely filed (subject to 12b-25 filings with respect to certain periodic
filings) all reports, schedules, forms, statements and other documents required
to be filed by it with the SEC pursuant to the reporting requirements of the
Exchange Act (all of the foregoing and all other documents filed with the SEC
prior to the date hereof and all exhibits included therein and financial
statements and schedules thereto and documents incorporated by reference
therein, being hereinafter referred to herein as the “SEC Filings”). The SEC
Filings are available to the Buyers via the SEC’s EDGAR system. As of their
respective dates, the SEC Filings complied in all material respects with the
requirements of the Exchange Act and the rules and regulations of the SEC
promulgated thereunder, and none of the SEC Filings, at the time they were filed
with the SEC, 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 light of the circumstances under which they were
made, not misleading. As of their respective dates, the audited financial
statements of the Company included in the Company’s SEC Filings for the fiscal
years ended December 31, 2011 and December 31, 2010, and the subsequent
unaudited interim financial statements included in the Company’s SEC Filings
(collectively, the “Financial Statements”) complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Such financial statements were
prepared in accordance with generally accepted accounting principles,
consistently applied, during the periods involved (except (i) as may be
otherwise indicated in such Financial Statements or the notes thereto, or (ii)
in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements), and fairly present in all
material respects the financial position of the Company as of the dates thereof
and the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments). As of the date hereof, there are no outstanding or unresolved
comments in comment letters received from the staff of the SEC with respect to
any of the SEC Filings. No other information provided by or on behalf of the
Company to the Buyer including, without limitation, information referred to in
this Agreement, contains any untrue statement of a material fact or omits 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.

 

10

 

 

(g)          Absence of Litigation. There is no action, suit, proceeding,
inquiry or investigation before or by any court, public board, government
agency, self-regulatory organization or body pending against or affecting the
Company, wherein an unfavorable decision, ruling or finding would (i) adversely
affect the validity or enforceability of, or the authority or ability of the
Company to perform its obligations under, this Agreement or any of the documents
contemplated herein, or (ii) have a Material Adverse Effect.

 

(h)          Acknowledgment Regarding Buyer’s Purchase of the Securities. The
Company acknowledges and agrees that each Buyer is acting solely in the capacity
of an arm’s length purchaser with respect to this Agreement and the transactions
contemplated hereby. The Company further acknowledges that each Buyer is not
acting as a financial advisor or fiduciary of the Company (or in any similar
capacity) with respect to this Agreement and the transactions contemplated
hereby and any advice given by such Buyer or any of their respective
representatives or agents in connection with this Agreement and the transactions
contemplated hereby is merely incidental to such Buyer’s purchase of the
Securities. The Company further represents to the Buyers that the Company’s
decision to enter into this Agreement has been based solely on the independent
evaluation by the Company and its representatives.

 

(i)          No General Solicitation. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D) in connection with the offer or sale of any of the Securities.

 

(j)          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 require registration of the
Securities under the Securities Act or cause this offering of the Securities to
be integrated with prior offerings by the Company for purposes of the Securities
Act.

 

(k)          Employee Relations. The Company is not involved in any labor
dispute nor, to the knowledge of the Company, is any such dispute threatened.
None of the Company’s employees is a member of a union, and the Company believes
that its relations with its one employee are good.

 

(l)          Intellectual Property Rights. The Company has no proprietary
intellectual property. The Company has not received any notice of infringement
of, or conflict with, the asserted rights of others with respect to any
intellectual property that it utilizes.

 

(m)          Environmental Laws.

 

(i)          The Company has complied with all applicable Environmental Laws (as
defined below), except for violations of Environmental Laws that, individually
or in the aggregate, have not had and would not reasonably be expected to have a
Material Adverse Effect. There is no pending or, to the knowledge of the
Company, threatened civil or criminal litigation, written notice of violation,
formal administrative proceeding, or investigation, inquiry or information
request, relating to any Environmental Law involving the Company, except for
litigation, notices of violations, formal administrative proceedings or
investigations, inquiries or information requests that, individually or in the
aggregate, have not had and would not reasonably be expected to have a Material
Adverse Effect. For purposes of this Agreement, “Environmental Law” means any
federal, state or local law, statute, rule or regulation or the common law
relating to the environment or occupational health and safety, including without
limitation any statute, regulation, administrative decision or order pertaining
to (i) treatment, storage, disposal, generation and transportation of
industrial, toxic or hazardous materials or substances or solid or hazardous
waste; (ii) air, water and noise pollution; (iii) groundwater and soil
contamination; (iv) the release or threatened release into the environment of
industrial, toxic or hazardous materials or substances, or solid or hazardous
waste, including without limitation emissions, discharges, injections, spills,
escapes or dumping of pollutants, contaminants or chemicals; (v) the protection
of wild life, marine life and wetlands, including without limitation all
endangered and threatened species; (vi) storage tanks, vessels, containers,
abandoned or discarded barrels, and other closed receptacles; (vii) health and
safety of employees and other persons; and (viii) manufacturing, processing,
using, distributing, treating, storing, disposing, transporting or handling of
materials regulated under any law as pollutants, contaminants, toxic or
hazardous materials or substances or oil or petroleum products or solid or
hazardous waste. As used above, the terms “release” and “environment” shall have
the meaning set forth in the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended (“CERCLA”).

 

11

 

 

(ii)         To the knowledge of the Company there is no material environmental
liability with respect to any solid or hazardous waste transporter or treatment,
storage or disposal facility that has been used by the Company.

 

(iii)        Except to the extent it could reasonably be expected not to have a
Material Adverse Effect, the Company (i) has received all permits, licenses or
other approvals required of them under applicable Environmental Laws to conduct
its business and (ii) is in compliance with all terms and conditions of any such
permit, license or approval.

 

(n)          Title to Property and Assets. The Company does not own any real
property. Except as set forth on Schedule 3(n), the Company has good and
marketable title to all of its personal property and assets free and clear of
any material restriction, mortgage, deed of trust, pledge, lien, security
interest or other charge, claim or encumbrance which would have a Company
Material Adverse Effect. Except as set forth on Schedule 3(n), with respect to
properties and assets it leases, the Company is in material compliance with such
leases and holds a valid leasehold interest free of any liens, claims or
encumbrances which would have a Material Adverse Effect.

 

(o)          No Material Adverse Breaches, etc. The Company is not subject to
any charter, corporate or other legal restriction, or any judgment, decree,
order, rule or regulation which in the judgment of the Company’s officers has or
is expected in the future to have a Material Adverse Effect.

 

(p)          Tax Status. Except as set forth in Schedule 3(p), the Company has
made and filed all federal and state income and all other tax returns, reports
and declarations required by any jurisdiction to which it is subject and (unless
and only to the extent that the Company has set aside on its books provisions
reasonably adequate for the payment of all unpaid and unreported taxes) 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 has set aside on its books provision reasonably adequate for the payment of
all taxes for periods subsequent to the periods to which such returns, reports
or declarations apply. Except as set forth in Schedule 3(p), 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 know of no basis for any such
claim.

 

(q)          Certain Transactions. Except for arm’s length transactions pursuant
to which the Company makes payments in the ordinary course of business upon
terms no less favorable than the Company could obtain from third parties, none
of the officers, directors, or employees of the Company is presently a party to
any transaction with the Company (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
corporation, partnership, trust or other entity in which any officer, director,
or any such employee has a substantial interest or is an officer, director,
trustee or partner.

 

(r)          Rights of First Refusal. The Company is not obligated to offer the
securities offered hereunder on a right of first refusal basis or otherwise to
any third parties including, but not limited to, current or former stockholders
of the Company, underwriters, brokers, agents or other third parties.

 

(s)          Reliance. The Company acknowledges that the Buyers are relying on
the representations and warranties made by the Company hereunder and in the
Company’s SEC Filings and that such representations and warranties are a
material inducement to the Buyer purchasing the Notes. The Company further
acknowledges that without such representations and warranties of the Company
made hereunder, the Buyers would not enter into this Agreement.

 

12

 

 

(t)          Brokers’ Fees. The Company does not have any liability or
obligation to pay any fees or commissions to any broker, finder or agent with
respect to the transactions contemplated by this Agreement, except for
applicable brokerage and consulting fees.

 

4.COVENANTS.

 

(a)          Best Efforts. Each party shall use its best efforts timely to
satisfy each of the conditions to be satisfied by it as provided in Sections 5
and 6 of this Agreement.

 

(b)          Form D. The Company agrees to file a Form D with respect to the
offer and sale of the Notes and the Bridge Warrants and if applicable, the Units
and the Unit Securities, as required under Regulation D. The Company shall, on
or before the Closing Date, take such action as the Company shall reasonably
determine is necessary to qualify the Notes, the Bridge Warrants and the Warrant
Shares or obtain an exemption for the Notes, the Bridge Warrants and the Warrant
Shares for sale to the Buyers at the Closing pursuant to this Agreement under
applicable securities or “Blue Sky” laws of the states of the United States, and
shall provide evidence of any such action so taken to the Buyers on or prior to
the Closing Date.

 

(c)          Use of Proceeds. The Company shall use the net proceeds from the
sale of the Bridge Units as general working capital.

 

(d)          Corporate Existence. So long as any of the Notes remain
outstanding, the Company shall not directly or indirectly consummate any merger,
reorganization, restructuring, reverse stock split, consolidation, sale of all
or substantially all of the Company’s assets, enter into a change of control
transaction, or any similar transaction or related transactions (each such
transaction, an “Organizational Change”), other than the Subsequent Offering,
unless, prior to the consummation of an Organizational Change, the Company
obtains the written consent of each Buyer. In any such case, the Company will
make appropriate provision with respect to such holders’ rights and interests to
insure that the provisions of this Section 4(d) will thereafter be applicable to
the Notes.

 

(e)          Resales absent Effective Registration Statement. Each of the Buyers
understands and acknowledges that (i) this Agreement and the agreements
contemplated hereby may require the Company to issue and deliver the Securities
to the Buyers with legends restricting their transferability under the
Securities Act, and (ii) it is aware that resales of such Securities may not be
made unless, at the time of resale, there is an effective registration statement
under the Securities Act covering such Buyer’s resale(s) or an applicable
exemption from registration.

 

(f)          Disclosure of Information in Form 8-K. The Company will disclose in
a Current Report on Form 8-K filed with the SEC within four business days of the
Closing Date all of the confidential information, if any, provided to Buyers as
described in Section 2(u) of this Agreement so that Buyers will not be privy to
any confidential information not made generally available to the public (it
being understood that information not disclosed in the Current Report on Form
8-K filing will no longer be deemed material non-public information under
Regulation FD).

 

5.CONDITIONS TO THE COMPANY’S OBLIGATION TO SELL.

 

The obligation of the Company hereunder to issue and sell the Notes to the
Buyer(s) at the Closing is subject to the satisfaction, at or before the Closing
Date, of each of the following conditions, provided that these conditions are
for the Company’s sole benefit and may be waived by the Company at any time in
its sole discretion:

 

(a)          Each Buyer shall have executed the required Subscription Documents
and delivered them to the Company.

 

(b)          The Buyer(s) shall have delivered to the Escrow Agent the Purchase
Price for the Bridge Units in the respective amounts as set forth on the
signature pages affixed hereto and the Escrow Agent shall have delivered the net
proceeds to the Company by wire transfer of immediately available U.S. funds
pursuant to the wire instructions provided by the Company.

 

13

 

 

(c)          The representations and warranties of the Buyer(s) contained in
this Agreement shall be true and correct in all material respects as of the date
when made and as of the Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date), and the
Buyer(s) shall have performed, satisfied and complied in all material respects
with the covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by the Buyer(s) at or prior to the Closing
Date.

 

6.CONDITIONS TO THE BUYER’S OBLIGATION TO PURCHASE.

 

(a)          The obligation of the Buyer(s) hereunder to purchase the Bridge
Units at the Closing is subject to the satisfaction, at or before the Closing
Date, of each of the following conditions:

 

(i)          The representations and warranties of the Company contained in this
Agreement (when read without regard to any qualification as to materiality or
Material Adverse Effect contained therein) shall be true and correct as of the
date of this Agreement and as of the Closing Date with the same effect as though
such representations and warranties had been made on and as of the Closing Date
(except for representations and warranties that speak as of a specific date),
except for any untrue or incorrect representation and warranty that,
individually or in the aggregate, does not have a Material Adverse Effect, and
the Company shall have performed, satisfied and complied in all material
respects with the covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by the Company at or prior
to the Closing Date.

 

(ii)         The Company shall have executed a certificate, executed on behalf
of the Company by its Secretary, dated as of the Closing Date, certifying the
resolutions adopted by the Board of Directors approving the transactions
contemplated by this Agreement and the issuance of the Bridge Units, the Notes,
the Bridge Warrants and the Warrant Shares, certifying the current versions of
the Articles of Incorporation and By-Laws of the Company and certifying as to
the signatures and authority of persons signing this Agreement on behalf of the
Company. The foregoing certificate shall only be required to be delivered on the
first Closing Date, unless any information contained in the certificate has
changed.

 

7.INDEMNIFICATION.

 

(a)          INDEMNIFICATION OF BUYERS. In consideration of the Buyer’s
execution and delivery of this Agreement and acquiring the Securities hereunder,
and in addition to all of the Company’s other obligations under this Agreement,
the Company shall defend, protect, indemnify and hold harmless the Buyer(s) and
each other holder of the Securities and all of their officers, directors,
employees and agents (including, without limitation, those retained in
connection with the transactions contemplated by this Agreement) (collectively,
the “Buyer Indemnitees”) from and against any and all actions, causes of action,
suits, claims, losses, costs, penalties, fees, liabilities and damages, and
expenses in connection therewith (irrespective of whether any such Buyer
Indemnitee is a party to the action for which indemnification hereunder is
sought), and including reasonable attorneys’ fees and disbursements (the
“Indemnified Liabilities”), incurred by the Buyer Indemnitees or any of them as
a result of, or arising out of, or relating to (a) any material breach of any
covenant, agreement or obligation of the Company contained in this Agreement, or
(b) any cause of action, suit or claim brought or made against such Buyer
Indemnitee and arising out of or resulting from the execution, delivery,
performance or enforcement of this Agreement by any of the Buyer Indemnitees. To
the extent that the foregoing undertaking by the Company may be unenforceable
for any reason, the Company shall make the maximum contribution to the payment
and satisfaction of each of the Indemnified Liabilities, which is permissible
under applicable law.

 

(b)          INDEMNIFICATION OF THE COMPAN AND THE PLACEMENT AGENT. Each of the
Buyers agrees to indemnify and hold harmless the Company, the Placement Agent,
and their respective officers, directors, employees, agents, control persons and
affiliates from and against all losses, liabilities, claims, damages, costs,
fees and expenses whatsoever (including, but not limited to, any and all
expenses incurred in investigating, preparing or defending against any
litigation commenced or threatened) based upon or arising out of any actual or
alleged false acknowledgment, representation or warranty, or misrepresentation
or omission to state a material fact, or breach by the Buyer of any covenant or
agreement made by the Buyer herein or in any other document delivered in
connection with this Agreement.

 

8.          CONFLICT WAIVER

 

The Buyers hereby acknowledge that Adam S. Gottbetter is the owner of Gottbetter
Capital Group, Inc., Gottbetter & Partners, LLP and Gottbetter Capital Markets,
LLC. Gottbetter Capital Group, Inc. owns shares of the Company. Gottbetter &
Partners, LLP is counsel to the Company and receives legal fees in accordance
with an executed retainer agreement. Gottbetter Capital Markets, LLC is a
placement agent for the Offering (the “Placement Agent”), for which it may
receive placement agent fees in accordance with the Placement Agency Agreement.

 

14

 

 

9.          GOVERNING LAW: MISCELLANEOUS.

 

(a)          Governing Law. This Agreement shall be governed by and interpreted
in accordance with the laws of the State of New York without regard to the
principles of conflict of laws.

 

(b)          THE PARTIES HERETO AGREE TO SUBMIT ALL CONTROVERSIES TO THE
EXCLUSIVE JURISDICTION OF FINRA ARBITRATION IN ACCORDANCE WITH THE PROVISIONS
SET FORTH BELOW AND UNDERSTAND THAT (A) ARBITRATION IS FINAL AND BINDING ON THE
PARTIES, (B) THE PARTIES ARE WAIVING THEIR RIGHTS TO SEEK REMEDIES IN COURT,
INCLUDING THE RIGHT TO A JURY TRIAL, (C) PRE-ARBITRATION DISCOVERY IS GENERALLY
MORE LIMITED AND DIFFERENT FROM COURT PROCEEDINGS, (D) THE ARBITRATOR’S AWARD IS
NOT REQUIRED TO INCLUDE FACTUAL FINDINGS OR LEGAL REASONING AND ANY PARTY’S
RIGHT TO APPEAL OR TO SEEK MODIFICATION OF RULES BY ARBITRATORS IS STRICTLY
LIMITED, (E) THE PANEL OF FINRA ARBITRATORS WILL TYPICALLY INCLUDE A MINORITY OF
ARBITRATORS WHO WERE OR ARE AFFILIATED WITH THE SECURITIES INDUSTRY, AND (F) ALL
CONTROVERSIES WHICH MAY ARISE BETWEEN THE PARTIES CONCERNING THIS AGREEMENT
SHALL BE DETERMINED BY ARBITRATION PURSUANT TO THE RULES THEN PERTAINING TO
FINRA. ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND
INTERPRETATION OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. JUDGMENT ON ANY AWARD OF
ANY SUCH ARBITRATION MAY BE ENTERED IN THE SUPREME COURT OF THE STATE OF NEW
YORK OR IN ANY OTHER COURT HAVING JURISDICTION OVER THE PERSON OR PERSONS
AGAINST WHOM SUCH AWARD IS RENDERED. THE PARTIES AGREE THAT THE DETERMINATION OF
THE ARBITRATORS SHALL BE BINDING AND CONCLUSIVE UPON THEM. THE PREVAILING PARTY,
AS DETERMINED BY SUCH ARBITRATORS, IN A LEGAL PROCEEDING SHALL BE ENTITLED TO
COLLECT ANY COSTS, DISBURSEMENTS AND REASONABLE ATTORNEY’S FEES FROM THE OTHER
PARTY. PRIOR TO FILING AN ARBITRATION, THE PARTIES HEREBY AGREE THAT THEY WILL
ATTEMPT TO RESOLVE THEIR DIFFERENCES FIRST BY SUBMITTING THE MATTER FOR
RESOLUTION TO A MEDIATOR, ACCEPTABLE TO ALL PARTIES, AND WHOSE EXPENSES WILL BE
BORNE EQUALLY BY ALL PARTIES. THE MEDIATION WILL BE HELD IN THE COUNTY OF NEW
YORK, STATE OF NEW YORK, ON AN EXPEDITED BASIS. IF THE PARTIES CANNOT
SUCCESSFULLY RESOLVE THEIR DIFFERENCES THROUGH MEDIATION, THE MATTER WILL BE
RESOLVED BY ARBITRATION. THE ARBITRATION SHALL TAKE PLACE IN THE COUNTY OF NEW
YORK, THE STATE OF NEW YORK, ON AN EXPEDITED BASIS.

 

(c)          Irrevocable Subscription. Each of the Buyers hereby acknowledges
and agrees that the subscription hereunder is irrevocable by such Buyer, except
as required by applicable law, and that this Agreement shall survive the death
or disability of the Buyer and shall be binding upon and inure to the benefit of
the parties and their heirs, executors, administrators, successors, legal
representatives, and permitted assigns. If the Buyer is more than one person,
the obligations of the Buyer hereunder shall be joint and several and the
agreements, representations, warranties, and acknowledgments herein shall be
deemed to be made by and be binding upon each such person and such person’s
heirs, executors, administrators, successors, legal representatives, and
permitted assigns.

 

(d)          Expenses. Each of the parties hereto shall pay its own fees and
expenses (including the fees of any attorneys, accountants, appraises or others
engaged by such party) in connection with this Agreement and the transactions
contemplated hereby whether or not the transactions contemplated hereby are
consummated.

 

(e)          Counterparts. This Agreement may be executed in two or more
identical counterparts, all of which 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. Facsimile and e-mailed copies of
signatures shall be deemed to be originals for purposes of the effectiveness of
this Agreement.

 

(f)          Headings. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.

 

15

 

 

(g)          Severability. If any provision of this Agreement shall be invalid
or unenforceable in any jurisdiction, such invalidity or unenforceability shall
not affect the validity or enforceability of the remainder of this Agreement in
that jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.

 

(h)          Entire Agreement, Amendments. This Agreement supersedes all other
prior oral or written agreements between the Buyer(s), the Company, their
affiliates and persons acting on their behalf with respect to the matters
discussed herein (including any term sheet), and this Agreement and the
instruments referenced herein contain the entire understanding of the parties
with respect to the matters covered herein and therein and, except as
specifically set forth herein or therein, neither the Company nor any Buyer
makes any representation, warranty, covenant or undertaking with respect to such
matters. No provision of this Agreement may be waived or amended other than by
an instrument in writing signed by the party to be charged with enforcement.

 

(i)          Notices. Any notices, consents, waivers, or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered (i) upon receipt, when
delivered personally; (ii) upon confirmation of receipt, when sent by facsimile;
(iii) upon receipt when sent by U.S. certified mail, return receipt requested,
or (iv) one (1) day after deposit with a nationally recognized overnight
delivery service, in each case properly addressed to the party to receive the
same. The addresses and facsimile numbers for such communications shall be:

 

If to the Company, to: Rackwise, Inc.   2365 Iron Point Road, Suite 190  
Folsom, CA 95630   Attention:  Guy A. Archbold, Chairman and CEO  
Facsimile:  415-358-4665     With a copy to: Gottbetter & Partners, LLP   488
Madison Avenue, 12th Floor   New York, New York 10022   Attention:  Adam S.
Gottbetter, Esq.   Facsimile:  212.400.6901

 

If to the Buyer(s), to its address and facsimile number set forth on the Buyer
Counterpart Signature Page affixed hereto. Each party shall provide five (5)
days’ prior written notice to the other party of any change in address or
facsimile number.

 

(j)          Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and assigns.
Neither the Company nor any Buyer shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other party
hereto. Notwithstanding the foregoing, the Company may assign the Notes without
consent of the other party hereto.

 

(k)          No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.

 

(l)          Survival. Unless this Agreement is terminated under Section 9(o),
the representations and warranties of the Company and the Buyer(s) contained in
Sections 2 and 3, the agreements and covenants set forth in Sections 4, 5 and 9,
and the indemnification provisions set forth in Section 7, shall survive the
Closing for a period of two (2) years following the date on which the Notes are
repaid in full. The Buyer(s) shall be responsible only for its own
representations, warranties, agreements and covenants hereunder.

 

(m)          Publicity. The Company shall have the right to approve, before
issuance any press release or any other public statement with respect to the
transactions contemplated hereby made by any other party; and the Company shall
be entitled, without the prior approval of any Buyer, to issue any press release
or other public disclosure with respect to such transactions required under
applicable securities or other laws or regulations or as it otherwise deems
appropriate.

 

16

 

 

(n)          Further Assurances. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.

 

(o)          Termination. In the event that the Closing shall not have occurred
with respect to the Buyers due to the Company’s or the Buyer’s failure to
satisfy the conditions set forth in Sections 5 and 6 above (and the
non-breaching party’s failure to waive such unsatisfied condition(s)), the
non-breaching party shall have the option to terminate this Agreement with
respect to such breaching party by providing five (5) days’ written notice to
such breaching party of the non-breaching party’s intent to terminate this
Agreement (and if the non-breaching party is the Buyer, to also withdraw its
subscription) at the close of business on such date without liability of any
party to any other party.

 

(p)          No Strict Construction. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent,
and no rules of strict construction will be applied against any party.

 

(q)          Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, the Buyer and
the Company will be entitled to specific performance under this Agreement. The
parties agree that monetary damages may not be adequate compensation for any
loss incurred by reason of any breach of obligations described in the foregoing
sentence and hereby agree to waive in any action for specific performance of any
such obligation the defense that a remedy at law would be adequate.

 

(r)          ANTI MONEY LAUNDERING REQUIREMENTS

 

The USA PATRIOT Act 

  What is money laundering?   How big is the problem and why is it important?  
        The USA PATRIOT Act is designed to detect, deter, and punish terrorists
in the United States and abroad.  The Act imposes new anti-money laundering
requirements on brokerage firms and financial institutions.  Since April 24,
2002 all brokerage firms have been required to have new, comprehensive
anti-money laundering programs.   Money laundering is the process of disguising
illegally obtained money so that the funds appear to come from legitimate
sources or activities.  Money laundering occurs in connection with a wide
variety of crimes, including illegal arms sales, drug trafficking, robbery,
fraud, racketeering, and terrorism.   The use of the U.S. financial system by
criminals to facilitate terrorism or other crimes could well taint our financial
markets.  According to the U.S. State Department, one recent estimate puts the
amount of worldwide money laundering activity at $1 trillion a year.          
To help you understand these efforts, we want to provide you with some
information about money laundering and our steps to implement the USA PATRIOT
Act.        

 

What are we required to do to eliminate money laundering?

 

Under new rules required by the USA PATRIOT Act, our anti-money laundering
program must designate a special compliance officer, set up employee training,
conduct independent audits, and establish policies and procedures to detect and
report suspicious transaction and ensure compliance with the new laws.

 

As part of our required program, we may ask you to provide various
identification documents or other information. Until you provide the information
or documents we need, we may not be able to effect any transactions for you.

 

17

 

 

(s)          Definitions. For purposes of this Agreement, the following
capitalized terms shall have the definitions ascribed to them below.

 

(i)          “Bridge Warrant Exercise Price” means (a) the average of the daily
volume weighted average prices, as quoted on the primary national or regional
stock exchange on which the Common Stock is listed, or, if not listed, the OTC
Bulletin Board if quoted thereon or reported in the “Pink Sheets” published by
the National Quotation Bureau Incorporated (or a similar organization or agency
succeeding to its functions of reporting prices) (as applicable), for the twenty
(20) consecutive Trading Days immediately preceding the applicable date of the
exercise of this Warrant, as proportionately adjusted to reflect any stock
splits, stock dividends, combination of shares or like events, or (b) if the
Common Stock is not publicly traded as set forth above, as reasonably and in
good faith determined by the Board of Directors of the Company as of the
applicable date of the exercise of this Warrant;

 

(ii)         “Trading Day” means any day on which the Common Stock is traded (or
available for trading) on its principal trading market.

 

[REMAINDER PAGE INTENTIONALLY LEFT BLANK]

 

18

 

 

IN WITNESS WHEREOF, the Buyers and the Company have caused this Agreement to be
duly executed as of the date first written above.

  

  COMPANY:       RACKWISE, INC.       By:          

  Name: Guy A. Archbold   Title: Chairman and CEO

 

  BUYERS:       The Buyers executing the Signature Page and the Subscription
Documents in the form attached hereto as Annex A and delivering the same to the
Company or its agents shall be deemed to have executed this Agreement and agreed
to the terms hereof.

 

[SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT]

 

19

 

 

ANNEX A

 

Securities Purchase Agreement

Buyer Counterpart Signature Page

 

The undersigned, desiring to: (i) enter into the Securities Purchase Agreement,
dated as of ______________ ___, 20121 (the “Agreement”), between the
undersigned, Rackwise, Inc., a Nevada corporation (the “Company”), and the other
parties thereto, in or substantially in the form furnished to the undersigned
and (ii) purchase the Bridge Units of the Company as set forth below, hereby
agrees to purchase such Bridge Units from the Company and further agrees to join
the Agreement as a party thereto, with all the rights and privileges pertaining
thereto, and to be bound in all respects by the terms and conditions thereof.
The undersigned specifically acknowledges having read the representations
section in the Agreement entitled “Buyer’s Representations and Warranties,” and
hereby represents that the statements contained therein are complete and
accurate with respect to the undersigned as a Buyer.

 

The Buyer hereby elects to purchase $____________ of Bridge Units (to be
completed by the Buyer) under the Agreement.

 

  Name of Buyer:       If an entity:       Print Name of Entity: 

 

              By:       Name:     Title:

 

  If an individual:       Print Name:         Signature:         All Buyers:   

  

  Address:                           Telephone No.:            Facsimile No.:  
        Email Address:  

  

 

1Will reflect the Closing Date. Not to be completed by Buyer.

 

 

 

 

RACKWISE, INC.

ACCREDITED INVESTOR CERTIFICATION

 

For Individual Investors Only

(all Individual Investors must INITIAL where appropriate):

 

Initial _______ I have a net worth of at least $1 million either individually or
through aggregating my individual holdings and those in which I have a joint,
community property or other similar shared ownership interest with my spouse.
The net value of an individual’s primary residence must be excluded from the
calculation of “net worth” for purposes of this calculation. Initial _______ I
have had an annual gross income for the past two years of at least $200,000 (or
$300,000 jointly with my spouse) and expect my income (or joint income, as
appropriate) to reach the same level in the current year. Initial _______ I am a
director or executive officer of ____________________.

 

For Non-Individual Investors

(all Non-Individual Investors must INITIAL where appropriate):

 

Initial _______ The investor certifies that it is a partnership, corporation,
limited liability company or business trust that is 100% owned by persons who
meet at least one of the criteria for Individual Investors set forth above.
Initial _______ The investor certifies that it is a partnership, corporation,
limited liability company or business trust that has total assets of at least $5
million and was not formed for the purpose of investing the Company. Initial
_______ The investor certifies that it is an employee benefit plan whose
investment decision is made by a plan fiduciary (as defined in ERISA §3(21))
that is a bank, savings and loan association, insurance company or registered
investment advisor. Initial _______ The investor certifies that it is an
employee benefit plan whose total assets exceed $5,000,000 as of the date of
this Agreement. Initial _______ The undersigned certifies that it is a
self-directed employee benefit plan whose investment decisions are made solely
by persons who meet at least one of the criteria for Individual Investors.
Initial _______ The investor certifies that it is a U.S. bank, U.S. savings and
loan association or other similar U.S. institution acting in its individual or
fiduciary capacity. Initial _______ The undersigned certifies that it is a
broker-dealer registered pursuant to §15 of the Securities Exchange Act of 1934.
Initial _______ The investor certifies that it is an organization described in
§501(c)(3) of the Internal Revenue Code with total assets exceeding $5,000,000
and not formed for the specific purpose of investing in the Company. Initial
_______ The investor certifies that it is a trust with total assets of at least
$5,000,000, not formed for the specific purpose of investing in the Company, and
whose purchase is directed by a person with such knowledge and experience in
financial and business matters that such person is capable of evaluating the
merits and risks of the prospective investment. Initial _______ The investor
certifies that it is a plan established and maintained by a state or its
political subdivisions, or any agency or instrumentality thereof, for the
benefit of its employees, and which has total assets in excess of $5,000,000.
Initial _______ The investor certifies that it is an insurance company as
defined in §2(13) of the Securities Act of 1933, or a registered investment
company.

  

For Non-U.S. Person Investors

(all Investors who are not a U.S. Person must INITIAL this section):

 

Initial _______ The investor is not a “U.S. Person” as defined in Regulation S;
and specifically the investor is not:

 

  A. a natural person resident in the United States of America, including its
territories and possessions (“United States”);

 

 

 

        B. a partnership or corporation organized or incorporated under the laws
of the United States;         C. an estate of which any executor or
administrator is a U.S. Person;         D. a trust of which any trustee is a
U.S. Person;         E. an agency or branch of a foreign entity located in the
United States;         F. a non-discretionary account or similar account (other
than an estate or trust) held by a dealer or other fiduciary for the benefit or
account of a U.S. Person;         G. a discretionary account or similar account
(other than an estate or trust) held by a dealer or other fiduciary organized,
incorporated, or (if an individual) resident in the United States; or         H.
a partnership or corporation: (i) organized or incorporated under the laws of
any foreign jurisdiction; and (ii) formed by a U.S. Person principally for the
purpose of investing in securities not registered under the Securities Act,
unless it is organized or incorporated, and owned, by accredited investors (as
defined in Rule 501(a) under the Securities Act) who are not natural persons,
estates or trusts.

 

And, in addition:

 

  I. the investor was not offered the securities in the United States;        
J. at the time the buy-order for the securities was originated, the investor was
outside the United States; and         K. the investor is purchasing the
securities for its own account and not on behalf of any U.S. Person (as defined
in Regulation S) and a sale of the securities has not been pre-arranged with a
purchaser in the United States.

 

 

 

 

RACKWISE, INC.

Investor Profile

 (Must be completed by Investor)

 

Section A - Personal Investor Information

 

Investor Name(s):   Individual executing Profile or Trustee:   Social Security
Numbers / Federal I.D. Number:  

Date of Birth:       Marital Status:   Joint Party Date of Birth:      
Investment Experience (Years):   Annual Income:       Liquid Net Worth:  

Net Worth (excluding value of primary residence):  

Tax Bracket:     15% or below     25% - 27.5%     Over 27.5%

Home Street Address:  

Home City, State & Zip Code:  

Home Phone:   Home Fax:   Home Email:  

Employer:  

Employer Street Address:  

Employer City, State & Zip Code:  

Bus. Phone:   Bus. Fax:   Bus. Email:  

Type of Business:  

(PLACEMENT AGENT) Account Executive / Outside Broker/Dealer:   If you are a
United States citizen, please list the number and jurisdiction of issuance of
any other government-issued document evidencing residence and bearing a
photograph or similar safeguard (such as a driver’s license or passport), and
provide a photocopy of each of the documents you have listed.   If you are NOT a
United States citizen, for each jurisdiction of which you are a citizen or in
which you work or reside, please list (i) your passport number and country of
issuance or (ii) alien identification card number AND (iii) number and country
of issuance of any other government-issued document evidencing nationality or
residence and bearing a photograph or similar safeguard, and provide a photocopy
of each of these documents you have listed.  These photocopies must be certified
by a lawyer as to authenticity. 

 

 

 

 

Section B – Certificate Delivery Instructions  

 

    Please deliver certificate to the Employer Address listed in Section A.    
Please deliver certificate to the Home Address listed in Section A.     Please
deliver certificate to the following address:  

 

Section C – Form of Payment – Check or Wire Transfer

 

    Check payable to CSC Trust Company of Delaware , as Escrow Agent for Max
Cash Media, Inc.     Wire funds from my outside account according to Section
1(a) of the Securities Purchase Agreement.     The funds for this investment are
rolled over, tax deferred from __________ within the allowed 60 day window.  
Please check if you are a FINRA member or affiliate of a FINRA member firm:
________

 

      Investor Signature   Date

 

 

 

 

ANTI MONEY LAUNDERING REQUIREMENTS

 

The USA PATRIOT Act

 

The USA PATRIOT Act is designed to detect, deter, and punish terrorists in the
United States and abroad. The Act imposes new anti-money laundering requirements
on brokerage firms and financial institutions. Since April 24, 2002 all
brokerage firms have been required to have new, comprehensive anti-money
laundering programs.

 

To help you understand these efforts, we want to provide you with some
information about money laundering and our steps to implement the USA PATRIOT
Act.

 

What is money laundering?

 

Money laundering is the process of disguising illegally obtained money so that
the funds appear to come from legitimate sources or activities. Money laundering
occurs in connection with a wide variety of crimes, including illegal arms
sales, drug trafficking, robbery, fraud, racketeering, and terrorism.

 

How big is the problem and why is it important?

 

The use of the U.S. financial system by criminals to facilitate terrorism or
other crimes could well taint our financial markets. According to the U.S. State
Department, one recent estimate puts the amount of worldwide money laundering
activity at $1 trillion a year.

 

What are we required to do to eliminate money laundering?

 

Under rules required by the USA PATRIOT Act, our anti-money laundering program
must designate a special compliance officer, set up employee training, conduct
independent audits, and establish policies and procedures to detect and report
suspicious transaction and ensure compliance with such laws. As part of our
required program, we may ask you to provide various identification documents or
other information. Until you provide the information or documents we need, we
may not be able to effect any transactions for you.

 

 

 

 

[pg26.jpg]

 

MEMBER: FINRA, SIPC

 

ANTI-MONEY LAUNDERING INFORMATION FORM

The following is required in accordance with the AML provision of the USA
PATRIOT ACT.

(Please fill out and return with requested documentation.)

 

INVESTOR NAME:       LEGAL ADDRESS:               SSN# or TAX ID#  OF INVESTOR:
 

 

FOR INVESTORS WHO ARE INDIVIDUALS: 

 

YEARLY INCOME:     AGE:  

 

NET WORTH (excluding value of primary residence):  

 

OCCUPATION:  

 

ADDRESS OF EMPLOYER:          

 

INVESTMENT OBJECTIVE(S):  

 

IDENTIFICATION & DOCUMENTATION AND SOURCE OF FUNDS:

 

1.Please submit a copy of non-expired identification for the authorized
signatory(ies) on the investment documents, showing name, date of birth, address
and signature. The address shown on the identification document MUST match the
Investor’s address shown on the Investor Signature Page.

 

  Current Driver’s License or Valid Passport or Identity Card

(Circle one or more)

 

2.If the Investor is a corporation, limited liability company, trust or other
type of entity, please submit the following requisite documents: (i) Articles of
Incorporation, By-Laws, Certificate of Formation, Operating Agreement, Trust or
other similar documents for the type of entity; and (ii) Corporate Resolution or
power of attorney or other similar document granting authority to signatory(ies)
and designating that they are permitted to make the proposed investment.

 

3.Please advise where the funds were derived from to make the proposed
investment:

 

  Investments Savings Proceeds of Sale Other ____________  

 

(Circle one or more)

 

Signature:           Print Name:           Title (if applicable):          
Date:    

 

488 Madison Ave., 12th Fl., New York, NY 10022-5718

T 212.400.6990 F 212.400.6999

  

 

 

 

SCHEDULE I

 

SCHEDULE OF BUYERS

 

Name   Subscription Amounts ($) of Bridge Units                              

 

 

 

 

EXHIBIT A

 

Form of Note

 

[See Exhibit 4.1]

 

 

 

 

EXHIBIT B

 

Form of Bridge Warrants

 

[See Exhibit 4.2]

 

 

 

 

EXHIBIT C

 

Escrow Agreement

 

[See Exhibit 10.2]