Exhibit 10.1

SECURITIES PURCHASE AGREEMENT

This SECURITIES PURCHASE AGREEMENT (the “Agreement”), dated as of December 13,
2015, is by and among Patriot National, Inc., a Delaware corporation with
offices located at 401 East Las Olas Boulevard, Suite 1650, Fort Lauderdale,
Florida 33301 (the “Company”), Steven M. Mariano, (the “Selling Stockholder”)
and each of the investors listed on the Schedule of Buyers attached hereto
(individually, a “Buyer” and collectively, the “Buyers”).

RECITALS

A. The Company, the Selling Stockholder and each Buyer is executing and
delivering this Agreement in reliance upon the exemption from securities
registration afforded by Section 4(a)(2) of the Securities Act of 1933, as
amended (the “1933 Act”) as promulgated by the United States Securities and
Exchange Commission (the “SEC”) under the 1933 Act.

B. Each Buyer wishes to purchase, and the Company wishes to sell, upon the terms
and conditions stated in this Agreement, (i) such aggregate number of shares of
Common Stock of the Company, par value $0.001 per share (the “Common Stock”), as
set forth opposite such Buyer’s name in column (3) on the Schedule of Buyers
(which aggregate amount for all Buyers shall be 666,666 shares of Common Stock
and shall collectively be referred to herein as the “Company Common Shares”),
(ii) a warrant to initially acquire that aggregate number of additional shares
of Common Stock set forth opposite such Buyer’s name in column (5) on the
Schedule of Buyers, substantially in the form attached hereto as Exhibit B-1
(the “Series A Warrants”) (as exercised, collectively, the “Series A Warrant
Shares”) and (iii) a warrant to initially acquire that aggregate number of
additional shares of Common Stock set forth opposite such Buyer’s name in column
(6) on the Schedule of Buyers, substantially in the form attached hereto as
Exhibit B-2 (the “Series B Warrants”, and together with the Series A Warrants,
the “Warrants”) (as exercised, collectively, the “Series A Warrant Shares”, and
together with the Series B Warrant Shares, the “Warrant Shares”).

C. Each Buyer also wishes to purchase, and the Selling Stockholder wishes to
sell, upon the terms and conditions stated in this Agreement, (i) such aggregate
number of shares of Common Stock as set forth opposite such Buyer’s name in
column (4) on the Schedule of Buyers (which aggregate amount for all Buyers
shall be 2,500,000 shares of Common Stock and shall collectively be referred to
herein as the “Stockholder Common Shares”, and together with the Company Common
Shares, the “Common Shares”).

D. At the Closing, the parties hereto shall execute and deliver a Registration
Rights Agreement, in the form attached hereto as Exhibit C (the “Registration
Rights Agreement”), pursuant to which the Company has agreed to provide certain
registration rights with respect to the Registrable Securities (as defined in
the Registration Rights Agreement), under the 1933 Act and the rules and
regulations promulgated thereunder, and applicable state securities laws.

D. The Common Shares, the Warrants and the Warrant Shares are collectively
referred to herein as the “Securities.”

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AGREEMENT

NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and each Buyer hereby
agree as follows:

1. PURCHASE AND SALE OF COMMON SHARES AND WARRANTS.

(a) Purchase of Common Shares and Warrants. Subject to the satisfaction (or
waiver) of the conditions set forth in Sections 6 and 7 below, (x) the Company
shall issue and sell to each Buyer, and each Buyer severally, but not jointly,
agrees to purchase from the Company on the Closing Date (as defined below)
(i) such aggregate number of Company Common Shares as is set forth opposite such
Buyer’s name in column (3) on the Schedule of Buyers, (ii) Series A Warrants to
initially acquire up to that aggregate number of Series A Warrant Shares as is
set forth opposite such Buyer’s name in column (5) on the Schedule of Buyers and
(iii) Series B Warrants to initially acquire up to such aggregate number of
Series B Warrant Shares as is set forth opposite such Buyer’s name in column
(6) on the Schedule of Buyers and (y) the Selling Stockholder shall sell to each
Buyer, and each Buyer severally, but not jointly, agrees to purchase from the
Company on the Closing Date such aggregate number of Stockholder Common Shares
as is set forth opposite such Buyer’s name in column (4) on the Schedule of
Buyers.

(b) Closing. The closing (the “Closing”) of the purchase of the Common Shares
and the Warrants by the Buyers shall occur at the offices of Kelley Drye &
Warren LLP, 101 Park Avenue, New York, NY 10178. The date and time of the
Closing (the “Closing Date”) shall be 10:00 a.m., New York time, on the first
(1st) Business Day on which the conditions to the Closing set forth in Sections
6 and 7 below are satisfied or waived (or such other date as is mutually agreed
to by the Company and each Buyer). As used herein “Business Day” means any day
other than a Saturday, Sunday or other day on which commercial banks in New
York, New York are authorized or required by law to remain closed.

(c) Purchase Price. The aggregate purchase price for the Company Common Shares
and the Warrants to be purchased by each Buyer (the “Company Purchase Price”)
shall be the amount set forth opposite such Buyer’s name in column (7) on the
Schedule of Buyers. The aggregate purchase price for the Stockholder Common
Shares to be purchased by each Buyer (the “Stockholder Purchase Price”, and
together with the Company Purchase Price, the “Purchase Price”) shall be the
amount set forth opposite such Buyer’s name in column (8) on the Schedule of
Buyers.

(d) Form of Payment. On the Closing Date, (i) each Buyer shall pay (x) its
respective Company Purchase Price (less, in the case of any Buyer, the amounts
withheld pursuant to Section 4.(g)) to the Company for the Company Common Shares
and the Warrants to be issued and sold to such Buyer at the Closing and (y) its
respective Stockholder Purchase Price to the Stockholder for the Stockholder
Common Shares to be sold to such Buyer at the Closing, in each case, by wire
transfer of immediately available funds in accordance with the Flow of Funds
Letter (as defined below), (ii) the Stockholder shall deliver to the Company a
stock certificate of the Company (or a lost certificate affidavit in form and
substance satisfactory to the Company)

 

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for such aggregate number of Stockholder Common Shares being sold to Buyers
hereunder for cancellation and (iii) the Company shall deliver to each Buyer
(A) a stock certificate of the Company for such aggregate number of Company
Common Shares as is set forth opposite such Buyer’s name in column (3) of the
Schedule of Buyers, (B) a stock certificate of the Company for such aggregate
number of Stockholder Common Shares as is set forth opposite such Buyer’s name
in column (4) of the Schedule of Buyers and (B) each of (x) a Series A Warrant
pursuant to which such Buyer shall have the right to initially acquire up to
that aggregate number of Series A Warrant Shares as is set forth opposite such
Buyer’s name in column (5) on the Schedule of Buyers and (y) a Series B Warrant
pursuant to which such Buyer shall have the right to initially acquire up to
such aggregate number of Series B Warrant Shares as is set forth opposite such
Buyer’s name in column (6) on the Schedule of Buyers, in each case, duly
executed on behalf of the Company and registered in the name of such Buyer or
its designee.

2. BUYER’S REPRESENTATIONS AND WARRANTIES.

Each Buyer, severally and not jointly, represents and warrants to the Company
and the Stockholder with respect to only itself that, as of the date hereof and
as of the Closing Date:

(a) Organization; Authority. Such Buyer is an entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization with the requisite power and authority to enter into and to
consummate the transactions contemplated by the Transaction Documents (as
defined below) to which it is a party and otherwise to carry out its obligations
hereunder and thereunder.

(b) No Public Sale or Distribution. Such Buyer (i) is acquiring its Common
Shares and Warrants, and (ii) upon exercise of its Warrants (other than pursuant
to a Cashless Exercise (as defined in the Warrants)) will acquire the Warrant
Shares issuable upon exercise thereof, in each case, for its own account and not
with a view towards, or for resale in connection with, the public sale or
distribution thereof in violation of applicable securities laws, except pursuant
to sales registered or exempted under the 1933 Act; provided, however, by making
the representations herein, such Buyer does not agree, or make any
representation or warranty, to hold any of the Securities for any minimum or
other specific term and reserves the right to dispose of the Securities at any
time in accordance with or pursuant to a registration statement or an exemption
from registration under the 1933 Act. Such Buyer does not presently have any
agreement or understanding, directly or indirectly, with any Person to
distribute any of the Securities in violation of applicable securities laws. For
purposes of this Agreement, “Person” means an individual, a limited liability
company, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization, any other entity and any Governmental Entity or any
department or agency thereof

(c) Accredited Investor Status. Such Buyer is an “accredited investor” as that
term is defined in Rule 501(a) of Regulation D of the 1933 Act (“Regulation D”).

(d) Reliance on Exemptions. Such 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,

 

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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 the Securities.

(e) Information. Such Buyer and its advisors, if any, have been furnished with
all materials relating to the business, finances and operations of the Company
and materials relating to the offer and sale of the Securities that have been
requested by such Buyer. Such Buyer and its advisors, if any, have been afforded
the opportunity to ask questions of the Company. Neither such inquiries nor any
other due diligence investigations conducted by such Buyer or its advisors, if
any, or its representatives shall modify, amend or affect such Buyer’s right to
rely on the Company’s representations and warranties contained herein. The Buyer
has, in connection with the Buyer’s decision to purchase Securities, not relied
upon any representations or other information (whether oral or written) other
than as set forth in the representations and warranties of the Company and the
Selling Stockholder contained herein and the information disclosed in the SEC
Documents, and the Buyer has, with respect to all matters relating to this
Agreement and the offer and sale of the Securities, relied solely upon the
advice of such Buyer’s own sources of information, investment analysis and due
diligence (including professional advice it deems appropriate) and has not
relied upon or consulted any counsel to the Placement Agent or counsel to the
Company. Such Buyer understands that its investment in the Securities involves a
high degree of risk. Such Buyer has sought such accounting, legal and tax advice
as it has considered necessary to make an informed investment decision with
respect to its acquisition of the Securities.

(f) No Governmental Review. Such 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 the Securities nor have such authorities passed
upon or endorsed the merits of the offering of the Securities.

(g) Transfer or Resale. Such Buyer understands that except as provided in the
Registration Rights Agreement and Section 4.(h) hereof: (i) the Securities have
not been and are not being registered under the 1933 Act or any state securities
laws, and may not be offered for sale, sold, assigned or transferred unless
(A) subsequently registered thereunder, (B) such Buyer shall have delivered to
the Company (if requested by the Company) an opinion of counsel, in a form
reasonably acceptable to the Company, 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, or (C) such Buyer provides the Company with
reasonable assurance that such Securities can be sold, assigned or transferred
pursuant to Rule 144 or Rule 144A promulgated under the 1933 Act (or a successor
rule thereto) (collectively, “Rule 144”); (ii) any sale of the Securities made
in reliance on 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 the 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 1933
Act) may require compliance with some other exemption under the 1933 Act or the
rules and regulations of the SEC promulgated thereunder; and (iii) neither the
Company nor any other Person is under any obligation to register the Securities
under the 1933 Act or any state securities laws or to comply with the terms and
conditions of any exemption thereunder. Notwithstanding the foregoing, the
Securities may be

 

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pledged in connection with a bona fide margin account or other loan or financing
arrangement secured by the Securities and such pledge of Securities shall not be
deemed to be a transfer, sale or assignment of the Securities hereunder, and no
Buyer effecting a pledge of Securities shall be required to provide the Company
with any notice thereof or otherwise make any delivery to the Company pursuant
to this Agreement or any other Transaction Document (as defined in
Section 3.(a)(i)), including, without limitation, this Section 2.(g).

(h) Validity; Enforcement. This Agreement and the Registration Rights Agreement
have been duly and validly authorized, executed and delivered on behalf of such
Buyer and shall constitute the legal, valid and binding obligations of such
Buyer enforceable against such Buyer in accordance with their respective terms,
except as such enforceability may be limited by general principles of equity or
to applicable bankruptcy, insolvency, reorganization, moratorium, liquidation
and other similar laws relating to, or affecting generally, the enforcement of
applicable creditors’ rights and remedies.

(i) No Conflicts. The execution, delivery and performance by such Buyer of this
Agreement and the Registration Rights Agreement and the consummation by such
Buyer of the transactions contemplated hereby and thereby will not (i) result in
a violation of the organizational documents of such Buyer, or (ii) conflict
with, 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 such Buyer is a party, or (iii) result in a violation of any
law, rule, regulation, order, judgment or decree (including federal and state
securities laws) applicable to such Buyer, except in the case of clauses
(ii) and (iii) above, for such conflicts, defaults, rights or violations which
could not, individually or in the aggregate, reasonably be expected to have a
material adverse effect on the ability of such Buyer to perform its obligations
hereunder.

(j) Certain Trading Activities. Such Buyer has not directly or indirectly, nor
has any Person acting on behalf of or pursuant to any understanding with such
Buyer, engaged in any transactions in the securities of the Company (including,
without limitation, any Short Sales (as defined below) involving the Company’s
securities) during the period commencing as of the time that such Buyer was
first contacted by the Company or the Placement Agent (as defined below), as
applicable, regarding the specific investment in the Company contemplated by
this Agreement and ending immediately prior to the execution of this Agreement
by such Buyer. “Short Sales” means all “short sales” as defined in Rule 200
promulgated under Regulation SHO under the 1934 Act (as defined below) (but
shall not be deemed to include the location and/or reservation of borrowable
shares of Common Stock). Such Buyer is aware that Short Sales and other hedging
activities may be subject to applicable federal and state securities laws, rules
and regulations and such Buyer acknowledges that the responsibility of
compliance with any such federal or state securities laws, rules and regulations
is solely the responsibility of such Buyer.

(k) Abandoned Registered Offering. Each Buyer acknowledges and agrees that a
registration statement on Form S-1 to relating to a terminated offering was
filed by the Company and withdrawn on October 20, 2015 (the “Withdrawn
Registration Statement”). Each Buyer acknowledges and agrees that it does not
have the benefit of Section 11 of the Securities Act with respect to the
Withdrawn Registration Statement.

 

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3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE STOCKHOLDER.

(a) The Company represents and warrants to each of the Buyers that, as of the
date hereof and as of the Closing Date:

(i) Organization and Qualification. Each of the Company and each of its
Subsidiaries are entities duly organized and validly existing and in good
standing under the laws of the jurisdiction in which they are formed, and have
the requisite power and authority to own their properties and to carry on their
business as now being conducted and as presently proposed to be conducted. Each
of the Company and each of its Subsidiaries is duly qualified as a foreign
entity to do business and is in good standing in every jurisdiction in which its
ownership of property or 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 reasonably be expected to have a
Material Adverse Effect (as defined below). As used in this Agreement, “Material
Adverse Effect” means any material adverse effect on (A) the business,
properties, assets, liabilities, operations (including results thereof) or
condition (financial or otherwise) of the Company or any Subsidiary,
individually or taken as a whole, (B) the transactions contemplated hereby or in
any of the other Transaction Documents or any other agreements or instruments to
be entered into in connection herewith or therewith or (C) the authority or
ability of the Company or any of its Subsidiaries to perform any of their
respective obligations under any of the Transaction Documents (as defined
below). Other than the Persons (as defined below) set forth on Schedule 3.(a),
the Company has no Subsidiaries. “Subsidiaries” means any Person in which the
Company, directly or indirectly, (I) owns any of the outstanding capital stock
or holds any equity or similar interest of such Person or (II) controls or
operates all or any part of the business, operations or administration of such
Person, and each of the foregoing, is individually referred to herein as a
“Subsidiary.”

(ii) Legal Capacity; Authorization; Enforcement; Validity. The Selling
Stockholder has the legal capacity and requisite power and authority to enter
into each of the Transaction Documents to which it is a party and the consummate
the transactions contemplated hereby, including, without limitation, the sale of
the Stockholder Common Shares. The Company has the requisite power and authority
to enter into and perform its obligations under this Agreement and the other
Transaction Documents and to issue the Securities in accordance with the terms
hereof and thereof. The execution and delivery of this Agreement and the other
Transaction Documents by the Company and its Subsidiaries, and the consummation
by the Company and its Subsidiaries of the transactions contemplated hereby and
thereby (including, without limitation, the issuance of the Company Common
Shares and the issuance of the Warrants and the reservation for issuance and
issuance of the Warrant Shares issuable upon exercise of the Warrants) have been
duly authorized by the Company’s board of directors and (other than the filing
with the SEC of one or more Registration Statements in accordance with the
requirements of the Registration Rights Agreement, a Form D with the SEC and any
other filings as may be required by any state securities agencies) no further
filing, consent or authorization is required by the Company, its Subsidiaries,
their respective boards of directors or their

 

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stockholders or other governing body. This Agreement has been, and the other
Transaction Documents to which it is a party will be prior to the Closing, duly
executed and delivered by the Company and the Stockholder, and each constitutes
the legal, valid and binding obligations of the Company and the Stockholder,
enforceable against the Company and the Stockholder in accordance with its
respective 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 applicable creditors’ rights and remedies and except as rights to
indemnification and to contribution may be limited by federal or state
securities law. “Transaction Documents” means, collectively, this Agreement, the
Common Shares, the Warrants, the Registration Rights Agreement, the Irrevocable
Transfer Agent Instructions (as defined below) and each of the other agreements
and instruments entered into or delivered by any of the parties hereto in
connection with the transactions contemplated hereby and thereby, as may be
amended from time to time.

(iii) Issuance of Securities; Valid Title to Shares. The issuance of the Company
Common Shares and the Warrants are duly authorized and upon issuance in
accordance with the terms of the Transaction Documents shall be validly issued,
fully paid and non-assessable and free from all preemptive or similar rights,
mortgages, defects, claims, liens, pledges, charges, taxes, rights of first
refusal, encumbrances, security interests and other encumbrances (collectively
“Liens”) with respect to the issuance thereof. As of the Closing, the Company
shall have reserved from its duly authorized capital stock not less than 100% of
the maximum number of Warrant Shares initially issuable upon exercise of the
Warrants (without taking into account any limitations on the exercise of the
Warrants set forth therein). Upon issuance or exercise in accordance with the
Warrants, the Warrant Shares, when issued, will be validly issued, fully paid
and nonassessable and free from all preemptive or similar rights or Liens with
respect to the issue thereof, with the holders being entitled to all rights
accorded to a holder of Common Stock. Subject to the accuracy of the
representations and warranties of the Buyers in this Agreement, the offer and
issuance by the Company of the Securities is exempt from registration under the
1933 Act. The Selling Stockholder now is and, at the time of delivery of the
Stockholder Common Shares to be sold by the Selling Stockholder pursuant to this
Agreement will be the lawful owner of such Stockholder Common Shares and has
and, at the time of delivery of such Stockholder Common Shares, will have good
and valid title to such Stockholder Common Shares, and upon delivery of and
payment for such Stockholder Common Shares, the Buyers will acquire good and
valid title to such Shares free and clear of any taxes, liens, and charges
created by the Selling Stockholder.

(iv) No Conflicts. The execution, delivery and performance of the Transaction
Documents by the Company and the Stockholder and the consummation by the Company
and the Stockholder of the transactions contemplated hereby and thereby
(including, without limitation, the issuance of the Company Common Shares, the
Warrants and the Warrant Shares and the reservation for issuance of the Warrant
Shares) will not (A) result in a violation of the Certificate of Incorporation
(as defined below) (including, without limitation, any certificate of
designation contained therein), By-Laws (as defined below), certificate of
formation, memorandum of association, articles of association, bylaws or

 

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other organizational documents of the Company or any of its Subsidiaries, or any
capital stock or other securities of the Company or any of its Subsidiaries,
(B) conflict with, or constitute a default (or an event which with notice or
lapse of time or both would become a default) in any respect under, or give to
others any rights of termination, amendment, acceleration or cancellation of,
any agreement, indenture or instrument to which the Stockholder, the Company or
any of its Subsidiaries is a party, or (C) result in a violation of any law,
rule, regulation, order, judgment or decree (including, without limitation,
foreign, federal and state securities laws and regulations and the rules and
regulations of The New York Stock Exchange (the “Principal Market”) and
including all applicable foreign, federal and state laws, rules and regulations)
applicable to the Company or any of its Subsidiaries or by which any property or
asset of the Company or any of its Subsidiaries is bound or affected except in
the case of the foregoing clause (B) and (C) for any conflicts, defaults, rights
or violations that would not, individually or in the aggregate, have a Material
Adverse Effect or prevent or materially interfere with the consummation of the
transactions contemplated hereby.

(v) Consents. Neither the Stockholder, the Company nor any Subsidiary is
required to obtain any consent from, authorization or order of, or make any
filing or registration with (other than the filing with the SEC of one or more
Registration Statements in accordance with the requirements of the Registration
Rights Agreement, a Form D with the SEC and any other filings as may be required
by any state securities agencies), any Governmental Entity (as defined below) or
any regulatory or self-regulatory agency (other than any listing application and
related consents or any notices required by the NYSE) or any other Person in
order for it to execute, deliver or perform any of its respective obligations
under or contemplated by the Transaction Documents, in each case, in accordance
with the terms hereof or thereof. All consents, authorizations, orders, filings
and registrations which the Stockholder, the Company or any Subsidiary is
required to obtain pursuant to the preceding sentence have been or will be
obtained or effected on or prior to the Closing Date, and neither the
Stockholder, the Company nor any of its Subsidiaries are aware of any facts or
circumstances which might prevent the Stockholder, the Company or any of its
Subsidiaries from obtaining or effecting any of the registration, application or
filings contemplated by the Transaction Documents. The Company is not in
violation in any material respects of the requirements of the Principal Market
and has no knowledge of any facts or circumstances which could reasonably lead
to delisting or suspension of the Common Stock in the foreseeable future.
“Governmental Entity” means any nation, state, county, city, town, village,
district, or other political jurisdiction of any nature, federal, state, local,
municipal, foreign, or other government, governmental or quasi-governmental
authority of any nature (including any governmental agency, branch, department,
official, or entity and any court or other tribunal), multi-national
organization or body; or body exercising, or entitled to exercise, any
administrative, executive, judicial, legislative, police, regulatory, or taxing
authority or power of any nature or instrumentality of any of the foregoing,
including any entity or enterprise owned or controlled by a government or a
public international organization or any of the foregoing.

(vi) Acknowledgment Regarding Buyer’s Purchase of Securities. Each of the
Stockholder and the Company acknowledges and agrees that each Buyer is acting
solely

 

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in the capacity of an arm’s length purchaser with respect to the Transaction
Documents and the transactions contemplated hereby and thereby and that no Buyer
is (i) an officer or director of the Company or any of its Subsidiaries, (ii) an
“affiliate” (as defined in Rule 144) of the Company or any of its Subsidiaries
or (iii) to its knowledge, a “beneficial owner” of more than 10% of the shares
of Common Stock (as defined for purposes of Rule 13d-3 of the Securities
Exchange Act of 1934, as amended (the “1934 Act”)). Each of the Stockholder and
the Company further acknowledges that no Buyer is acting as a financial advisor
or fiduciary of the Stockholder, the Company or any of its Subsidiaries (or in
any similar capacity) with respect to the Transaction Documents and the
transactions contemplated hereby and thereby, and any advice given by a Buyer or
any of its representatives or agents in connection with the Transaction
Documents and the transactions contemplated hereby and thereby is merely
incidental to such Buyer’s purchase of the Securities. Each of the Stockholder
and the Company further represents to each Buyer that the Stockholder’s, the
Company’s and each Subsidiary’s decision to enter into the Transaction Documents
to which it is a party has been based solely on the independent evaluation by
the Stockholder, the Company, each Subsidiary and their respective
representatives.

(vii) No General Solicitation; Placement Agent’s Fees. Neither the Stockholder,
the Company, nor any of its Subsidiaries or 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 the Securities. The Company shall be responsible for the payment of any
placement agent’s fees, financial advisory fees, or brokers’ commissions (other
than for Persons engaged by any Buyer or its investment advisor) relating to or
arising out of the transactions contemplated hereby, including, without
limitation, placement agent fees payable to J.P. Morgan Securities LLC, as
placement agent (the “Placement Agent”) in connection with the sale of the
Securities. The fees and expenses of the Placement Agent to be paid by the
Company or any of its Subsidiaries are as set forth on Schedule 3.(a)(vi)
attached hereto. The Company shall pay, and hold each Buyer harmless against,
any liability, loss or expense (including, without limitation, attorney’s fees
and out-of-pocket expenses) arising in connection with any such claim. The
Company acknowledges that it has engaged the Placement Agent in connection with
the sale of the Securities. Other than the Placement Agent, neither the
Stockholder, the Company nor any of its Subsidiaries has engaged any placement
agent or other agent in connection with the offer or sale of the Securities.

(viii) No Integrated Offering. Assuming the accuracy of Buyer’s representations
and warranties, none of the Company, its Subsidiaries or any of their
affiliates, nor any Person acting on 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 issuance of
any of the Securities under the 1933 Act, whether through integration with prior
offerings or otherwise, or cause this offering of the Securities to require
approval of stockholders of the Company for purposes of the 1933 Act or under
any applicable stockholder approval provisions, including, without limitation,
under the rules and regulations of any exchange or automated quotation system on
which any of the securities of the Company are listed or

 

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designated for quotation. Assuming the accuracy of Buyer’s representations and
warranties, none of the Company, its Subsidiaries, their affiliates nor any
Person acting on their behalf will take any action or steps that would require
registration of the issuance of any of the Securities under the 1933 Act or
cause the offering of any of the Securities to be integrated with other
offerings of securities of the Company.

(ix) Dilutive Effect. The Company understands and acknowledges that the number
of Warrant Shares will increase in certain circumstances. The Company further
acknowledges that its obligation to issue the Warrant Shares upon exercise of
the Warrants in accordance with this Agreement and the Warrants is absolute and
unconditional regardless of the dilutive effect that such issuance may have on
the ownership interests of other stockholders of the Company.

(x) Application of Takeover Protections; Rights Agreement. The Company and its
board of directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, interested stockholder, business
combination, poison pill (including, without limitation, any distribution under
a rights agreement), stockholder rights plan or other similar anti-takeover
provision under the Certificate of Incorporation, Bylaws or other organizational
documents or the laws of the jurisdiction of its incorporation or otherwise
which is or could become applicable to any Buyer as a result of the transactions
contemplated by this Agreement, including, without limitation, the Company’s
issuance of the Securities and any Buyer’s ownership of the Securities. The
Company and its board of directors have taken all necessary action, if any, in
order to render inapplicable any stockholder rights plan or similar arrangement
relating to accumulations of beneficial ownership of shares of Common Stock or a
change in control of the Company or any of its Subsidiaries.

(xi) Licenses and Permits. Except as would not individually or in the aggregate,
have a Material Adverse Effect (A) each of the Company and the Subsidiaries has
all necessary licenses, authorizations, consents and approvals and has made all
necessary filings required under any applicable law, regulation or rule,
including but not limited to state and federal workers compensation, health
care, insurance and insurance-related laws, regulations and rules, and has
obtained all necessary licenses, authorizations, consents and approvals from
other persons, in order to conduct their respective businesses, and (B) neither
the Company nor any of the Subsidiaries is in violation of, or in default under,
or has received notice of any proceedings relating to revocation or modification
of, any such license, authorization, consent or approval or any federal, state,
local or foreign law, regulation or rule or any decree, order or judgment
applicable to the Company or any of the Subsidiaries.

(xii) Absence of Litigation. There are no actions, suits, claims, investigations
or proceedings pending or, to the Company’s knowledge, threatened to which the
Company or any of the Subsidiaries or any of their respective directors or
officers is or would be a party or of which any of their respective properties
is or would be subject at law or in equity, before or by any federal, state,
local or foreign governmental or regulatory commission, board, body, authority
or agency, or before or by any self-regulatory organization or other
non-governmental regulatory authority (including,

 

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without limitation, the Principal Market) except any such action, suit, claim,
investigation or proceeding which would not, individually or in the aggregate,
have a Material Adverse Effect or prevent or materially interfere with the
consummation of the transactions contemplated hereby.

(xiii) Accountants.

(1) BDO USA LLP, whose report on the consolidated financial statements of the
Company and the Subsidiaries is included in the Company’s Annual Report on Form
10-K for the year ended December 31, 2014, are independent registered public
accountants as required by the 1933 Act and by the rules of the Public Company
Accounting Oversight Board.

(2) Mayer Hoffman McCann P.C. whose report on the consolidated financial
statements of Patriot Care Holdings, Inc. (f/k/a MCRS Holdings, Inc.) and its
subsidiaries is included in the Company’s registration statement on Form S-1/A
filed with the SEC on January 14, 2015, are independent auditors as required by
the 1933 Act and by the rules of the American Institute of Certified Public
Accountants.

(3) Goldstein Schechter Koch, P.C. whose report on the consolidated financial
statements of Global HR Research, LLC and its subsidiaries is included in the
Company’s definitive information statement on Schedule 14C filed with the SEC on
October 28, 2015, are independent auditors as required by the 1933 Act and by
the rules of the American Institute of Certified Public Accountants.

(xiv) Financial Statements. (1) The financial statements of the Company and its
Subsidiaries included in the SEC Documents, together with the related notes,
present fairly in all material respects the combined financial position of the
Company and the Subsidiaries as of the dates indicated and the combined results
of operations, cash flows and changes in stockholders’ equity of the Company and
the Subsidiaries for the periods specified and have been prepared in compliance
with the requirements of the 1933 Act and 1934 Act and in conformity with U.S.
generally accepted accounting principles applied on a consistent basis during
the periods involved, and, in the case of unaudited, interim financial
statements, subject to normal year-end audit adjustments and the exclusion of
certain footnotes; all pro forma financial statements or data included in the
SEC Documents comply with the applicable requirements of the 1933 Act and the
1934 Act in all material respects, and the assumptions used in the preparation
of such pro forma financial statements and data are reasonable, the pro forma
adjustments used therein are appropriate to give effect to the transactions or
circumstances described therein and the pro forma adjustments have been properly
applied to the historical amounts in the compilation of those statements and
data; the other financial and statistical data contained in the SEC Documents
are accurately and fairly presented in all material respects and prepared on a
basis consistent with the financial statements and books and records of the
Company; there are no financial statements (historical or pro forma) that are
required to be included in the SEC Documents that are not included as required;
the

 

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Company and the Subsidiaries do not have any material liabilities or
obligations, direct or contingent (including any off-balance sheet obligations),
not described in the SEC Documents; and all disclosures contained in the SEC
Documents regarding “non-GAAP financial measures” (as such term is defined by
the rules and regulations of the Commission) comply with Regulation G of the
1934 Act and Item 10 of Regulation S-K under the 1933 Act, to the extent
applicable.

(2) The consolidated financial statements of Patriot Care Holdings, Inc. (f/k/a
MCRS Holdings, Inc.) and Global HR Research, LLC included in the SEC Documents,
together with the respective related notes to such consolidated financial
statements, present fairly in all material respects the consolidated financial
position of Patriot Care Holdings, Inc. (f/k/a MCRS Holdings, Inc.) and Global
HR Research, LLC and their respective subsidiaries as of the dates indicated and
the consolidated results of their respective operations, cash flows and changes
in stockholder’s equity for the periods specified and have been prepared in
compliance with the requirements of the 1933 Act and 1934 Act and have been
prepared in conformity with accounting principles generally accepted in the
United States of America applied on a consistent basis during the periods
involved, and, in the case of unaudited, interim financial statements, subject
to normal year-end audit adjustments and the exclusion of certain footnotes.

(xv) No Material Adverse Change. Except as described in the SEC Documents,
subsequent to the respective dates as of which information is given in the SEC
Documents, in each case excluding any amendments or supplements to the foregoing
made after the execution of this Agreement, there has not been (i) any material
adverse change, or any development involving a prospective material adverse
change, in the business, properties, management, financial condition or results
of operations of the Company and the Subsidiaries taken as a whole, (ii) any
transaction to which the Company or a Subsidiary is a party which is material to
the Company and the Subsidiaries taken as a whole, (iii) any obligation or
liability, direct or contingent (including any off-balance sheet obligations),
incurred by the Company or any Subsidiary, which is material to the Company and
the Subsidiaries taken as a whole, (iv) any change in the capital stock or
outstanding indebtedness of the Company or any Subsidiaries (other than the
issuance of shares of Common Stock issuable upon exercise of warrants or options
disclosed as outstanding in Section 2.1 above) or (v) any dividend or
distribution of any kind declared, paid or made on the capital stock of the
Company or any Subsidiary.

(xvi) Investment Company. The Company is not and, after giving effect to the
offering and sale of the Shares to be sold by it and the application of the
proceeds thereof, will not be, an “investment company” or an entity “controlled”
by an “investment company,” as such terms are defined in the Investment Company
Act of 1940, as amended (the “Investment Company Act”).

(xvii) Real and Personal Property. Except as described in the SEC Documents,
neither the Company nor any Subsidiary owns any real property, and except as
would

 

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not, individually or in the aggregate, have a Material Adverse Effect (i) the
Company and each of the Subsidiaries have good and marketable title to all
personal property (excluding for the purposes of this Section 3(t), IP (as
defined below)) described in the SEC Documents as being owned by any of them,
free and clear of all liens, claims, security interests or other encumbrances,
and (ii) all the property described in the SEC Documents as being held under
lease by the Company or a Subsidiary is held thereby under valid, subsisting and
enforceable leases.

(xviii) Intellectual Property Rights. Except as disclosed in the SEC Documents
(excluding any exhibits thereto), (i) except as would not, individually or in
the aggregate, have a Material Adverse Effect, the Company and the Subsidiaries
own all IP described in the SEC Documents as being owned by them, and all such
items are valid and enforceable (collectively, the “Company-Owned IP”) and own
or have obtained valid and enforceable licenses or rights (except as
enforceability may be limited by bankruptcy, insolvency or similar laws
affecting creditors generally or general equitable principles) to use all IP
described in the SEC Documents as being owned or licensed by them or which is
used in or necessary for the conduct of their respective businesses as currently
conducted or as currently proposed to be conducted (all such IP used in, or
necessary for the conduct of the Company’s and its Subsidiaries business being
collectively referred to as the “Company IP”); (ii) to the Company’s knowledge,
there is no infringement, misappropriation or other violation by third parties
of any Company-Owned IP or any material Company IP that is exclusively licensed
to the Company or any of its Subsidiaries; (iii) there is no pending or, to the
Company’s knowledge, threatened action, suit, proceeding or claim by others
challenging the Company’s or any of its Subsidiaries’ ownership rights in or to,
or the validity, enforceability or scope of, any Company-Owned IP or the
Company’s exclusive rights in any material Company IP that is exclusively
licensed to the Company or any of its Subsidiaries; (v) there is no pending or,
to the Company’s knowledge, threatened action, suit, proceeding or claim by
others that the Company or any Subsidiary infringes, misappropriates or
otherwise violates any IP of others; and (vi) the Company and the Subsidiaries
do not have any agreements pursuant to which material IP has been licensed to
the Company or any Subsidiary; for purposes hereof, the term “IP” means all
United States and foreign patents, patent applications, utility models,
trademarks and service marks (whether registered or unregistered), trade names,
trade dress, rights associated with databases, copyrights (whether registered or
unregistered), inventions, discoveries, trade secrets, domain names, technology,
know-how, including any applications or registrations with respect to any of the
foregoing, and any other intellectual property of any kind or nature.

(xix) Labor Disputes. No labor dispute with the employees of the Company or any
Subsidiary exists or, to the knowledge of the Company, is imminent that may
reasonably be expected, individually or in the aggregate, to result in a
Material Adverse Effect.

(xx) Environmental Laws. Except as described in the SEC Documents (excluding any
exhibits thereto), the Company and the Subsidiaries and their respective
properties, assets and operations are in compliance with, and the Company and
each of the Subsidiaries hold all permits, authorizations and approvals required
under,

 

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Environmental Laws (as defined below), except to the extent that failure to so
comply or to hold such permits, authorizations or approvals would not,
individually or in the aggregate, have a Material Adverse Effect; there are no
past, present or, to the Company’s knowledge, reasonably anticipated future
events, conditions, circumstances, activities, practices, actions, omissions or
plans that would reasonably be expected to give rise to any costs or liabilities
to the Company or any Subsidiary under, or to interfere with or prevent
compliance by the Company or any Subsidiary with, Environmental Laws, except as
would not, in each case, individually or in the aggregate, have a Material
Adverse Effect; neither the Company nor any of the Subsidiaries (i) is the
subject of any investigation, (ii) has received any notice or claim, (iii) is a
party to or affected by any pending or, to the Company’s knowledge, threatened
action, suit or proceeding, (iv) is bound by any judgment, decree or order or
(v) has entered into any agreement, in each case relating to any alleged
violation of any Environmental Law or any actual or alleged release or
threatened release or cleanup at any location of any Hazardous Materials (as
defined below), except, in each case, as would not, individually or in the
aggregate, have a Material Adverse Effect. As used herein, “Environmental Law”
means any federal, state, local or foreign law, statute, ordinance, rule,
regulation, order, decree, judgment, injunction, permit, license, authorization
or other binding requirement, or common law, relating to health, safety or the
protection, cleanup or restoration of the environment or natural resources,
including those relating to the distribution, processing, generation, treatment,
storage, disposal, transportation, other handling or release or threatened
release of Hazardous Materials, and “Hazardous Materials” means any material
(including, without limitation, pollutants, contaminants, hazardous or toxic
substances or wastes) that is regulated by or may give rise to liability under
any Environmental Law.

(xxi) Taxes. Except as described in the SEC Documents (excluding any exhibits
thereto), all tax returns required to be filed by the Company or any of the
Subsidiaries have been timely filed (within any applicable time limit extensions
permitted by the relevant tax authority), and all taxes and other assessments of
a similar nature (whether imposed directly or through withholding) including any
interest, additions to tax or penalties applicable thereto due or claimed to be
due from such entities have been timely paid, other than (i) those being
contested in good faith and for which adequate reserves have been provided or
(ii) where the failure to file such returns or pay such taxes or assessments
would not, individually or in the aggregate, have a Material Adverse Effect.

(xxii) Insurance. Except as would not, individually or in the aggregate, have a
Material Adverse Effect, (i) the Company and each of the Subsidiaries maintain
insurance covering their respective properties, operations, personnel and
businesses as the Company reasonably deems adequate; (ii) such insurance insures
against such losses and risks to an extent which is adequate in accordance with
customary industry practice to protect the Company and the Subsidiaries and
their respective businesses; (iii) all such insurance is fully in force on the
date hereof and will be fully in force at the Closing Date and each additional
time of purchase, if any; and (iv) neither the Company nor any Subsidiary has
reason to believe that it will not be able to (A) renew any such insurance as
and when such insurance expires or (B) obtain comparable coverage from similar
institutions as may be necessary or appropriate to conduct its business as now
conducted.

 

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(xxiii) Accounting Controls. The Company and each of the Subsidiaries maintain a
system of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with management’s
general or specific authorization; (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain accountability for assets;
(iii) access to assets is permitted only in accordance with management’s general
or specific authorization; (iv) the recorded accountability for assets is
compared with existing assets at reasonable intervals and appropriate action is
taken with respect to any differences; and (v) the interactive data in
eXtensible Business Reporting Language included in the SEC Documents fairly
presents the information called for in all material respects and has been
prepared in accordance with the SEC’s rules and guidelines applicable thereto.

(xxiv) Disclosure Controls and Procedures. The Company has established and
maintains and evaluates “disclosure controls and procedures” (as such term is
defined in Rule 13a-15 and 15d-15 under the 1934 Act) within the meaning of
Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) within
the periods required under applicable law; such disclosure controls and
procedures are designed to ensure that material information relating to the
Company, including its consolidated subsidiaries, is made known to the Company’s
Chief Executive Officer and its Chief Financial Officer by others within those
entities, and such disclosure controls and procedures are effective to perform
the functions for which they were established; the Company’s independent
registered public accountants and the Audit Committee of the Board of Directors
of the Company have been advised of: (i) all significant deficiencies, if any,
in the design or operation of internal controls which could adversely affect the
Company’s ability to record, process, summarize and report financial data; and
(ii) all fraud, if any, whether or not material, that involves management or
other employees who have a role in the Company’s internal controls; all
“significant deficiencies” and “material weaknesses” (as such terms are defined
in Rule 1-02(a)(4) of Regulation S-X under the 1933 Act) of the Company, if any,
have been identified to the Company’s independent registered public accountants,
and, with respect to “material weaknesses,” are disclosed in the SEC Documents;
except as disclosed in the SEC Documents, since the date of the most recent
evaluation of such disclosure controls and procedures and internal controls,
there have been no significant changes in internal controls or in other factors
that could significantly affect internal controls, including any corrective
actions with regard to significant deficiencies and material weaknesses; and the
Company has taken all necessary actions to ensure that the Company and the
Subsidiaries and their respective officers and directors, in their capacities as
such, will be in compliance in all material respects with the applicable
provisions of the Sarbanes-Oxley Act and the rules and regulations promulgated
thereunder.

(xxv) Foreign Corrupt Practices. Neither the Company nor any of the Subsidiaries
nor any director, officer, nor, to the knowledge of the Company, any agent,
employee or affiliate of the Company or any of the Subsidiaries is aware of or
has (i) used any corporate funds for any unlawful contribution, gift,
entertainment or other unlawful expense relating to political activity;
(ii) made or taken an act in furtherance of an offer, promise or authorization
of any direct or indirect unlawful payment or benefit to

 

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any foreign or domestic government official or employee, including of any
government-owned or controlled entity or of a public international organization,
or any person acting in an official capacity for or on behalf of any of the
foregoing, or any political party or party official or candidate for political
office; or (iii) made, offered, agreed, requested or taken an act in furtherance
of any unlawful bribe or other unlawful benefit, including, without limitation,
any rebate, payoff, influence payment, kickback or other unlawful or improper
payment or benefit, or (iv) taken any action, directly or indirectly, that would
result in a violation by such persons of the Foreign Corrupt Practices Act of
1977, as amended, and the rules and regulations thereunder (the “Foreign Corrupt
Practices Act”) or any other applicable anti-bribery law; and the Company, the
Subsidiaries and, to the knowledge of the Company, its affiliates have
instituted and maintain and enforce policies and procedures designed to ensure
continued compliance therewith.

(xxvi) Compliance with Anti-Money Laundering Laws. The operations of the Company
and the Subsidiaries are and have been conducted at all times in compliance with
applicable financial recordkeeping and reporting requirements of the Currency
and Foreign Transactions Reporting Act of 1970, as amended, the USA Patriot Act,
the Bank Secrecy Act of 1970, as amended, the money laundering statutes of all
applicable jurisdictions, the rules and regulations thereunder and any related
or similar rules, regulations or guidelines, issued, administered or enforced by
any governmental agency (collectively, the “Money Laundering Laws”); and no
action, suit or proceeding by or before any court or governmental agency,
authority or body or any arbitrator or non-governmental authority involving the
Company or any of the Subsidiaries with respect to the Money Laundering Laws is
pending or, to the Company’s knowledge, threatened.

(xxvii) Sanctions. Neither the Company nor any of the Subsidiaries nor any
director, officer, nor, to the knowledge of the Company, any agent, employee or
affiliate of the Company or any of the Subsidiaries is currently subject to or
target of any sanctions administered or enforced by the Office of Foreign Assets
Control of the U.S. Treasury Department, the United Nations Security Council,
the European Union, Her Majesty’s Treasury or any other relevant sanctions
authority; neither the Company nor any of its Subsidiaries are organized, or
resident in any country or territory that is the subject or target of any
sanctions by such sanctions authorities and the Company will not directly or
indirectly use the proceeds of the Offering contemplated hereby, or lend,
contribute or otherwise make available such proceeds to any Subsidiary, joint
venture partner or other person or entity for the purpose of financing or
facilitating the activities of any person or country or territory currently
subject to any sanctions administered or enforced by such authorities, or in any
other manner that will result in a violation by any person of sanctions. For the
past five years, the Company and its Subsidiaries have not knowingly engaged in,
are not now knowingly engaged in, and will not engaged in, any dealings or
transactions with any person that at the time of the dealing or transaction is
or was the subject to the target of sanctions or with any sanctioned country.

(xxviii) Sarbanes-Oxley Compliance. There is and has been no failure on the part
of the Company and any of the Company’s directors or officers, in their
capacities as such, to comply with any provision of the Sarbanes-Oxley Act to
the extent applicable to the Company on the date hereof, including Section 402
relating to loans and Sections 302 and 906 related to certifications.

 

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(xxix) SEC Documents. Except for the filing of the Forms 8-K filed on August 24,
2015, October 14, 2015 and October 16, 2015, the Company has timely filed all
reports, schedules, forms, statements and other documents required to be filed
by it with the SEC, pursuant to the reporting requirements of the 1934 Act. The
Company has delivered to each Buyer, or each Buyer has had access to, true and
complete copies of the SEC Documents. As of their respective dates, the SEC
Documents complied in all material respects with the requirements of the 1934
Act or the 1933 Act, as the case may be, and the rules and regulations of the
SEC promulgated thereunder applicable to the SEC Documents, and none of the SEC
Documents, 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.

(xxx) Disclosure. Except with respect to such disclosure set forth in the 8-K
Filing (as defined below), the Company confirms that neither it nor any other
Person acting on its behalf has provided any of the Buyers or their agents or
counsel with any information that constitutes or could reasonably be expected to
constitute material, non-public information concerning the Company or any of its
Subsidiaries, other than the existence of the transactions contemplated by this
Agreement and the other Transaction Documents. The Company understands and
confirms that each of the Buyers will rely on the foregoing representations in
effecting transactions in securities of the Company. All disclosure provided to
the Buyers regarding the Company and its Subsidiaries, their businesses and the
transactions contemplated hereby, including the schedules to this Agreement,
furnished by or on behalf of the Company or any of its Subsidiaries taken
together with the SEC Documents does not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading. All of the written information furnished after the date
hereof by or on behalf of the Company or any of its Subsidiaries to each Buyer
pursuant to or in connection with this Agreement and the other Transaction
Documents, taken together with the SEC Documents does not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading. The Company acknowledges and agrees
that no Buyer makes or has made any representations or warranties with respect
to the transactions contemplated hereby other than those specifically set forth
in Section 2.

(xxxi) Related Party Transactions. All transactions that have occurred between
or among the Company or any of its Subsidiaries, on the one hand, and any of
their respective officers or directors, or any affiliate or affiliates of any
such officer or director, on the other hand, prior to the date hereof have been
disclosed in the SEC Documents; provided that on the date hereof, the
Stockholder has executed an agreement with the Company relating to the transfer
to the Company of a number of shares equal to 50% of the Warrant Shares.

 

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(xxxii) Acknowledgment Regarding Buyers’ Trading Activity. Except as provided in
Section 4.(t) below, it is understood and acknowledged by the Company that
(i) following the public disclosure of the transactions contemplated by the
Transaction Documents, in accordance with the terms thereof, none of the Buyers
have been asked by the Company or any of its Subsidiaries to agree, nor has any
Buyer agreed with the Company or any of its Subsidiaries, to desist from
effecting any transactions in or with respect to (including, without limitation,
purchasing or selling, long and/or short) any securities of the Company, or
“derivative” securities based on securities issued by the Company or to hold any
of the Securities for any specified term; (ii) any Buyer, and counterparties in
“derivative” transactions to which any such Buyer is a party, directly or
indirectly, presently may have a “short” position in the Common Stock which was
established prior to such Buyer’s knowledge of the transactions contemplated by
the Transaction Documents; and (iii) each Buyer shall not be deemed to have any
affiliation with or control over any arm’s length counterparty in any
“derivative” transaction. The Company further understands and acknowledges that
following the public disclosure of the transactions contemplated by the
Transaction Documents pursuant to the Press Release (as defined below) one or
more Buyers may engage in hedging and/or trading activities at various times
during the period that the Securities are outstanding, including, without
limitation, during the periods that the value and/or number of the Warrant
Shares deliverable with respect to the Securities are being determined and such
hedging and/or trading activities, if any, can reduce the value of the existing
stockholders’ equity interest in the Company both at and after the time the
hedging and/or trading activities are being conducted. The Company acknowledges
that such aforementioned hedging and/or trading activities do not constitute a
breach of this Agreement, the Warrants or any other Transaction Document or any
of the documents executed in connection herewith or therewith.

(xxxiii) Manipulation of Price. Neither the Company nor any of its Subsidiaries
has, and, to the knowledge of the Company, no Person acting on their behalf has,
directly or indirectly, (i) taken any action designed to cause or to result in
the stabilization or manipulation of the price of any security of the Company or
any of its Subsidiaries to facilitate the sale or resale of any of the
Securities, (ii) sold, bid for, purchased, or paid any compensation for
soliciting purchases of, any of the Securities (other than the Placement Agent),
(iii) paid or agreed to pay to any Person any compensation for soliciting
another to purchase any other securities of the Company or any of its
Subsidiaries or (iv) paid or agreed to pay any Person for research services with
respect to any securities of the Company or any of its Subsidiaries.

(xxxiv) Management. During the past five year period, no former officer or
director, current or former officer or director or, to the knowledge of the
Company, current ten percent (10%) or greater stockholder of the Company or any
of its Subsidiaries has been the subject of:

(1) a petition under bankruptcy laws or any other insolvency or moratorium law
or the appointment by a court of a receiver, fiscal agent or similar officer for
such Person, or any partnership in which such person was a general partner at or
within two years before the filing of such petition or such

 

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appointment, or any corporation or business association of which such person was
an executive officer at or within two years before the time of the filing of
such petition or such appointment;

(2) a conviction in a criminal proceeding or a named subject of a pending
criminal proceeding (excluding traffic violations that do not relate to driving
while intoxicated or driving under the influence);

(3) any order, judgment or decree, not subsequently reversed, suspended or
vacated, of any court of competent jurisdiction, permanently or temporarily
enjoining any such person from, or otherwise limiting, the following activities:

a) Acting as a futures commission merchant, introducing broker, commodity
trading advisor, commodity pool operator, floor broker, leverage transaction
merchant, any other person regulated by the United States Commodity Futures
Trading Commission or an associated person of any of the foregoing, or as an
investment adviser, underwriter, broker or dealer in securities, or as an
affiliated person, director or employee of any investment company, bank, savings
and loan association or insurance company, or engaging in or continuing any
conduct or practice in connection with such activity;

b) Engaging in any particular type of business practice; or

c) Engaging in any activity in connection with the purchase or sale of any
security or commodity or in connection with any violation of securities laws or
commodities laws;

(4) any order, judgment or decree, not subsequently reversed, suspended or
vacated, of any authority barring, suspending or otherwise limiting for more
than sixty (60) days the right of any such person to engage in any activity
described in the preceding sub paragraph, or to be associated with persons
engaged in any such activity;

(5) a finding by a court of competent jurisdiction in a civil action or by the
SEC or other authority to have violated any securities law, regulation or decree
and the judgment in such civil action or finding by the SEC or any other
authority has not been subsequently reversed, suspended or vacated; or

(6) a finding by a court of competent jurisdiction in a civil action or by the
Commodity Futures Trading Commission to have violated any federal commodities
law, and the judgment in such civil action or finding has not been subsequently
reversed, suspended or vacated.

 

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(xxxv) No Disagreements with Accountants and Lawyers. There are no material
disagreements of any kind presently existing, or to the Company to arise,
between the Company and the accountants and lawyers formerly or presently
employed by the Company and the Company is current with respect to any fees owed
to its accountants and lawyers which could affect the Company’s ability to
perform any of its obligations under any of the Transaction Documents. In
addition, the Company has had discussions with its accountants about its
financial statements as of and for the two years ended December 31, 2014 and as
of and for the quarters ended March 31, 2014 and 2015, June 30, 2014 and 2015
and September 31, 2014 and 2015, in each case as filed with the SEC and based on
those discussions, the Company has no reason to believe that it will need to
restate any such financial statements or any part thereof.

(xxxvi) No Disqualification Events. With respect to Securities to be offered and
sold hereunder in reliance on Rule 506(b) under the 1933 Act (“Regulation D
Securities”), none of the Company, any of its predecessors, any affiliated
issuer, any director, executive officer, other officer of the Company
participating in the offering contemplated hereby, any beneficial owner of 20%
or more of the Company’s outstanding voting equity securities, calculated on the
basis of voting power, nor any promoter (as that term is defined in Rule 405
under the 1933 Act) connected with the Company in any capacity at the time of
sale (each, an “Issuer Covered Person” and, together, “Issuer Covered Persons”)
is subject to any of the “Bad Actor” disqualifications described in Rule
506(d)(1)(i) to (viii) under the 1933 Act (a “Disqualification Event”), except
for a Disqualification Event covered by Rule 506(d)(2) or (d)(3). The Company
has exercised reasonable care to determine whether any Issuer Covered Person is
subject to a Disqualification Event. The Company has complied, to the extent
applicable, with its disclosure obligations under Rule 506(e), and has furnished
to the Buyers a copy of any disclosures provided thereunder.

(xxxvii) Other Covered Persons. The Company is not aware of any Person (other
than the Placement Agent) that has been or will be paid (directly or indirectly)
remuneration for solicitation of Buyers or potential purchasers in connection
with the sale of any Regulation D Securities.

(xxxviii) Capitalization. As of November 12, 2015, the authorized capital stock
of the Company consisted of 1,000,000,000 shares of Common Stock, $0.001 par
value per share, of which 27,050,694 shares of Common Stock were issued
outstanding, and 100,000,000 shares of preferred stock, $0.001 par value per
share, none of which were issued and outstanding. The number of shares of Common
Stock issued and outstanding in the preceding sentence does not reflect (i)
144,855 shares of Common Stock that may be issued upon the exercise of
outstanding warrants at an exercise price of $2.67 per share; (ii) 94,451 shares
of common stock issued in connection with the acquisition of Global HR Research
LLC (“Global HR”) on August 21, 2015 (the “Global HR Acquisition”) that are held
in escrow pending Global HR meeting certain post-acquisition performance goals;
(iii) 618,478 additional shares of Common Stock that were issued on our about
November 18, 2015 as deferred compensation in connection with the Global HR
Acquisition; (iv) 573,651 outstanding restricted shares of Common Stock subject
to time- or performance-based vesting requirements, (v) 179,890 outstanding
restricted stock units to acquire shares of Common Stock, with a weighted
average remaining contractual life of 2.5 years, (vi) outstanding stock options
to acquire 1,237,778 shares of Common Stock, with a weighted average exercise
price of $14.40 per share, granted under the Company’s 2014 Omnibus Incentive
Plan; and (vii) an additional 522,997 shares of Common Stock available for
future issuance under the Company’s Omnibus Incentive Plan. Except as described
in this Section 2.1, neither the Company nor any of its Subsidiaries have any
outstanding options to purchase, or any preemptive rights or other rights to
subscribe for or to purchase, any securities or obligations convertible into, or
any contracts or commitments to issue or sell, shares of its capital stock or
any such options, rights, convertible securities or obligations other than
options granted under the Company’s Omnibus Incentive Plan. All of the issued
and outstanding shares of capital stock, including the Common Stock, of the
Company have been duly authorized and validly issued and are fully paid and
non-assessable, have been issued in compliance with all applicable securities
laws and were not issued in violation of any preemptive right, resale right,
right of first refusal or similar right.

(b) Stockholder Representations and Warranties. The Stockholder represents and
warrants to each of the Buyers that, as of the date hereof and as of the Closing
Date:

(i) Legal Capacity. The Stockholder has the legal capacity and right to execute,
deliver, enter into, consummate and perform this Agreement.

(ii) Title to Stockholder Common Shares. The Stockholder is the sole record and
beneficial owner of the Stockholder Common Shares to be sold by it pursuant to
this Agreement and owns such shares free from all taxes, liens, claims,
encumbrances and charges. Other than restrictions described in Section 2(g)
above, there are no outstanding rights, options, subscriptions or other
agreements or commitments obligating the Seller to sell or transfer the
Stockholder Common Shares and the Stockholder Common Shares are not subject to
any lock-up or other restriction on their transfer or on the ability of the
Buyers to sell or transfer the Stockholder Common Shares.

 

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(iii) Authority. The Stockholder has the requisite power and authority to
execute and deliver this Agreement and to carry out and perform all of its
obligations under the terms of this Agreement, including, without limitation,
the full power and authority to sell and transfer such Stockholder Common Shares
held jointly by the Stockholder and any child of the Stockholder. This Agreement
has been duly executed and delivered by the Stockholder, and this Agreement
constitutes the valid and legally binding obligation of the Stockholder
enforceable against the Stockholder in accordance with its terms, except as such
enforceability may be limited by general principles of equity or to applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation and other
similar laws relating to, or affecting generally, the enforcement of applicable
creditors’ rights and remedies.

(iv) Accredited Investor Status. The Stockholder is an “accredited investor” as
that term is defined in Rule 501(a) of Regulation D under the 1933 Act.

(v) Noncontravention. The execution, delivery and performance by the Stockholder
of this Agreement and the consummation by the Stockholder of the transactions
contemplated hereby will not (a) conflict with, 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 Stockholder
is a party, or (b) result in a violation of any law, rule, regulation, order,
judgment or decree (including federal and state securities laws) applicable to
the Stockholder, except for such conflicts, defaults, rights or violations which
would not, individually or in the aggregate, reasonably be expected to have a
material adverse effect on the ability of the Stockholder to perform its
obligations hereunder.

(vi) Consents. No consent, approval, permit, order, notification or
authorization of, or any exemption from registration, declaration or filing
with, any person (governmental or private) is required in connection with the
execution, delivery and performance by the Stockholder of this Agreement or the
consummation by the Stockholder of the transactions contemplated hereby.

(vii) Seller Status. The Stockholder (a) is a sophisticated person with respect
to the sale of the Stockholder Common Shares; (b) has adequate information
concerning the business and financial condition of the Company to make an
informed decision regarding the sale of the Stockholder Common Shares; and
(c) has independently and without reliance upon the Buyers, and based on such
information as the Stockholder has deemed appropriate, made its own analysis and
decision to enter into this Agreement, except that the Stockholder has relied
upon each Buyer’s express representations, warranties and covenants in this
Agreement. The Stockholder acknowledges that the Buyers has not given the
Stockholder any investment advice, credit information or opinion on whether the
sale of the Stockholder Common Shares is prudent.

(viii) Absence of Litigation. There is no action, suit, claim, proceeding,
inquiry or investigation before or by any court, public board, government agency
or self regulatory organization or body pending or, to the knowledge of the
Stockholder,

 

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threatened against or affecting the Stockholder that could reasonably be
expected to have a material adverse affect on the ability of the Stockholder to
perform its obligations hereunder.

(ix) No Brokers. Except with respect to the Placement Agent, the Stockholder has
taken no action that would give rise to any claim by any person for brokerage
commissions, finder’s fees or similar payments relating to this Agreement or the
transactions contemplated hereby.

(x) Outstanding Amounts. The Stockholder has paid any and all amounts and
charges due and owing to the Company with respect to the Stockholder Common
Shares and there are no unpaid amounts or charges claimed to be due to the
Company from the Stockholder with respect to the Stockholder Common Shares.

4. COVENANTS.

(a) Reasonable Best Efforts. Each Buyer shall use its reasonable best efforts to
timely satisfy each of the covenants hereunder and conditions to be satisfied by
it as provided in Section 6 of this Agreement. Each of the Company and the
Stockholder shall use its reasonable best efforts to timely satisfy each of the
covenants hereunder and conditions to be satisfied by it as provided in
Section 7 of this Agreement.

(b) Blue Sky. The Company shall, on or before the Closing Date, take such action
as the Company shall reasonably determine is necessary in order to obtain an
exemption for, or to, qualify the Securities 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 (or to obtain an exemption from such
qualification), and shall provide evidence of any such action so taken to the
Buyers on or prior to the Closing Date. Without limiting any other obligation of
the Company under this Agreement, the Company shall timely make all filings and
reports relating to the offer and sale of the Securities required under all
applicable securities laws (including, without limitation, all applicable
federal securities laws and all applicable “Blue Sky” laws), and the Company
shall comply with all applicable foreign, federal, state and local laws,
statutes, rules, regulations and the like relating to the offering and sale of
the Securities to the Buyers.

(c) Reporting Status. Until the date on which the Buyers shall not hold any
Registrable Securities (the “Reporting Period”), the Company shall timely file
all reports required to be filed with the SEC pursuant to the 1934 Act, and the
Company shall not terminate its status as an issuer required to file reports
under the 1934 Act even if the 1934 Act or the rules and regulations thereunder
would no longer require or otherwise permit such termination.

(d) Use of Proceeds. The Company will use the proceeds from the sale of the
Securities for general corporate purposes, but not, directly or indirectly, for
(i) the satisfaction of any indebtedness of the Company or any of its
Subsidiaries, (ii) the redemption or repurchase of any securities of the Company
or any of its Subsidiaries, or (iii) the settlement of any outstanding
litigation.

(e) Financial Information. The Company agrees to send the following to each
Investor (as defined in the Registration Rights Agreement) during the Reporting
Period (i) unless

 

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the following are filed with the SEC through EDGAR and are available to the
public through the EDGAR system, within one (1) Business Day after the filing
thereof with the SEC, a copy of its Annual Reports on Form 10-K and Quarterly
Reports on Form 10-Q, any interim reports or any consolidated balance sheets,
income statements, stockholders’ equity statements and/or cash flow statements
for any period other than annual, any Current Reports on Form 8-K and any
registration statements (other than on Form S-8) or amendments filed pursuant to
the 1933 Act, (ii) unless the following are either filed with the SEC through
EDGAR or are otherwise widely disseminated via a recognized news release service
(such as PR Newswire), on the same day as the release thereof, facsimile copies
of all press releases issued by the Company or any of its Subsidiaries and
(iii) unless the following are filed with the SEC through EDGAR, copies of any
notices and other information made available or given to the stockholders of the
Company generally, contemporaneously with the making available or giving thereof
to the stockholders.

(f) Listing. The Company shall promptly secure the listing or designation for
quotation (as the case may be) of all of the Registrable Securities upon each
national securities exchange and automated quotation system, if any, upon which
the Common Stock is then listed or designated for quotation (as the case may be)
(subject to official notice of issuance) and shall maintain such listing or
designation for quotation (as the case may be) of all Registrable Securities
from time to time issuable under the terms of the Transaction Documents on such
national securities exchange or automated quotation system. The Company shall
maintain the Common Stock’s listing or authorization for quotation (as the case
may be) on the Principal Market, The New York Stock Exchange, the NYSE MKT, the
Nasdaq Capital Market, the Nasdaq Global Market or the Nasdaq Global Select
Market (each, an “Eligible Market”). Neither the Company nor any of its
Subsidiaries shall take any action which could be reasonably expected to result
in the delisting or suspension of the Common Stock on an Eligible Market. The
Company shall pay all fees and expenses in connection with satisfying its
obligations under this Section 4(f).

(g) Fees. The Company shall reimburse the lead Buyer for a non-accountable
expense allowance of $25,000 for expenses incurred by it or its affiliates in
connection with the structuring, documentation, negotiation and closing of the
transactions contemplated by the Transaction Documents (including, without
limitation, as applicable, all reasonable legal fees of outside counsel and
disbursements of Kelley Drye & Warren LLP, counsel to the lead Buyer, any other
reasonable fees and expenses in connection with the structuring, documentation,
negotiation and closing of the transactions contemplated by the Transaction
Documents and due diligence and regulatory filings in connection therewith) (the
“Transaction Expenses”) and shall be withheld by the lead Buyer from its
Purchase Price at the Closing; provided, that the Company shall promptly
reimburse Kelley Drye & Warren LLP on demand for all Transaction Expenses not so
reimbursed through such withholding at the Closing. The Company shall be
responsible for the payment of any placement agent’s fees, financial advisory
fees, transfer agent fees, DTC (as defined below) fees or broker’s commissions (
in each case other than for Persons engaged by any Buyer) relating to or arising
out of the transactions contemplated hereby (including, without limitation, any
fees or commissions payable to the Placement Agent, who is the Company’s sole
placement agent in connection with the transactions contemplated by this
Agreement). The Company shall pay, and hold each Buyer harmless against, any
liability, loss or expense (including, without limitation, reasonable attorneys’
fees and out-of-pocket expenses) arising in connection with any claim relating
to any such payment. Except as otherwise set forth in the Transaction Documents,
each party to this Agreement shall bear its own expenses in connection with the
sale of the Securities to the Buyers.

 

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(h) Pledge of Securities. Notwithstanding anything to the contrary contained in
this Agreement, the Company acknowledges and agrees that the Securities may be
pledged by an Investor in connection with a bona fide margin agreement or other
loan or financing arrangement that is secured by the Securities. The pledge of
Securities shall not be deemed to be a transfer, sale or assignment of the
Securities hereunder, and no Investor effecting a pledge of Securities shall be
required to provide the Company with any notice thereof or otherwise make any
delivery to the Company pursuant to this Agreement or any other Transaction
Document, including, without limitation, Section 2(g) hereof; provided that an
Investor and its pledgee shall be required to comply with the provisions of
Section 2(g) hereof in order to effect a sale, transfer or assignment of
Securities to such pledgee. The Company hereby agrees to execute and deliver
such documentation as a pledgee of the Securities may reasonably request in
connection with a pledge of the Securities to such pledgee by a Buyer.

(i) Disclosure of Transactions and Other Material Information.

(i) Disclosure of Transaction. The Company shall, on or before 9:30 a.m., New
York time, on the first (1st) Business Day after the date of this Agreement,
issue a press release (the “Press Release”) reasonably acceptable to the lead
Buyer disclosing all the material terms of the transactions contemplated by the
Transaction Documents. On or before 9:30 a.m., New York time, on the first
(1st) Business Day after the date of this Agreement, the Company shall file a
Current Report on Form 8-K describing all the material terms of the transactions
contemplated by the Transaction Documents in the form required by the 1934 Act
and attaching all the material Transaction Documents (including, without
limitation, this Agreement (and all schedules to this Agreement), the form of
the Warrants and the form of the Registration Rights Agreement) (including all
attachments, the “8-K Filing”). From and after the filing of the 8-K Filing, the
Company shall have disclosed all material, non-public information (if any)
provided to any of the Buyers by the Company or any of its Subsidiaries or any
of their respective officers, directors, employees or agents in connection with
the transactions contemplated by the Transaction Documents. In addition,
effective upon the filing of the 8-K Filing, the Company acknowledges and agrees
that any and all confidentiality or similar obligations under any agreement,
whether written or oral, between the Company, any of its Subsidiaries or any of
their respective officers, directors, affiliates, employees or agents, on the
one hand, and any of the Buyers or any of their affiliates, on the other hand,
shall terminate.

(ii) Limitations on Disclosure. The Company shall not, and the Company shall
cause each of its Subsidiaries and each of its and their respective officers,
directors, employees and agents not to, provide any Buyer with any material,
non-public information regarding the Company or any of its Subsidiaries from and
after the date hereof without the express prior written consent of such Buyer
(which may be granted or withheld in such Buyer’s sole discretion). In the event
of a breach of any of the foregoing covenants in this Section 4(i)(ii), or any
of the covenants or agreements contained in any other Transaction Document, by
the Company, any of its Subsidiaries,

 

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or any of its or their respective officers, directors, employees and agents (as
determined in the reasonable good faith judgment of such Buyer), in addition to
any other remedy provided herein or in the Transaction Documents, such Buyer
shall have the right to make a public disclosure, in the form of a press
release, public advertisement or otherwise, of such breach or such material,
non-public information, as applicable, without the prior approval by the
Company, any of its Subsidiaries, or any of its or their respective officers,
directors, employees or agents. No Buyer shall have any liability to the
Company, any of its Subsidiaries, or any of its or their respective officers,
directors, employees, affiliates, stockholders or agents, for any such
disclosure in breach of this Section 4(i)(ii). To the extent that the Company
delivers any material, non-public information to a Buyer without such Buyer’s
consent, the Company hereby covenants and agrees that such Buyer shall not have
any duty of confidentiality with respect to, or a duty not to trade on the basis
of, such material, non-public information. Subject to the foregoing, neither the
Company, its Subsidiaries nor any Buyer shall issue any press releases or any
other public statements with respect to the transactions contemplated hereby;
provided, however, the Company shall be entitled, without the prior approval of
any Buyer, to make the Press Release and any press release or other public
disclosure with respect to such transactions (i) in substantial conformity with
the 8-K Filing and contemporaneously therewith and (ii) as is required by
applicable law and regulations (provided that in the case of clause (i) the lead
Buyer shall be consulted by the Company in connection with any such press
release or other public disclosure prior to its release). Without the prior
written consent of the applicable Buyer (which may be granted or withheld in
such Buyer’s sole discretion), the Company shall not (and shall cause each of
its Subsidiaries and affiliates to not) disclose the name of such Buyer in any
filing, announcement, release or otherwise unless required by a Governmental
Authority or by law. Notwithstanding anything contained in this Agreement to the
contrary and without implication that the contrary would otherwise be true, the
Company expressly acknowledges and agrees that no Buyer shall have (unless
expressly agreed to by a particular Buyer after the date hereof in a written
definitive and binding agreement executed by the Company and such particular
Buyer (it being understood and agreed that no Buyer may bind any other Buyer
with respect thereto)), any duty of confidentiality with respect to, or a duty
not to trade on the basis of, any material, non-public information disclosed by
the Company or any of its Subsidiaries regarding the Company or any of its
Subsidiaries.

(j) Additional Registration Statements. Until the Applicable Date (as defined
below) and at any time thereafter while any Registration Statement is not
effective or the prospectus contained therein is not available for use or any
Current Public Information Failure (as defined in the Registration Rights
Agreement) exists, the Company shall not file a registration statement under the
1933 Act relating to securities that are not the Registrable Securities (other
than a registration statement on Form S-8 or S-4, or such supplements or
amendments to registration statements that are outstanding and have been
declared effective by the SEC as of the date hereof (solely to the extent
necessary to keep such registration statements effective and available and not
with respect to any Subsequent Placement)). “Applicable Date” means the earlier
of (x) the first date on which the resale by the Buyers of all the Registrable
Securities required to be filed on the initial Registration Statement (as
defined in the Registration Rights Agreement) pursuant to the Registration
Rights Agreement is declared effective by the SEC (and each prospectus

 

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contained therein is available for use on such date) or (y) the first date on
which all of the Registrable Securities are eligible to be resold by the Buyers
pursuant to Rule 144 (or, if a Current Public Information Failure has occurred
and is continuing, such later date after which the Company has cured such
Current Public Information Failure).

(k) Additional Issuance of Securities. The Company agrees that for the period
commencing on the date hereof and ending on the date immediately following the
later of (x) ninety (90) calendar days after the Closing Date and (y) twenty
(20) Trading Days after the Applicable Date (provided that such period shall be
extended by the number of calendar days during such period and any extension
thereof contemplated by this proviso on which any Registration Statement is not
effective or any prospectus contained therein is not available for use or any
Current Public Information Failure exists) (the “Restricted Period”), neither
the Company nor any of its Subsidiaries shall directly or indirectly issue,
offer, sell, grant any option or right to purchase, or otherwise dispose of (or
announce any issuance, offer, sale, grant of any option or right to purchase or
other disposition of) any equity security or any equity-linked or related
security (including, without limitation, any “equity security” (as that term is
defined under Rule 405 promulgated under the 1933 Act), any Convertible
Securities (as defined below), any debt, any preferred stock or any purchase
rights) (any such issuance, offer, sale, grant, disposition or announcement
(whether occurring during the Restricted Period or at any time thereafter) is
referred to as a “Subsequent Placement”). Notwithstanding the foregoing, this
Section 4(k) shall not apply in respect of the issuance of (i) shares of Common
Stock or options to purchase Common Stock to directors, officers or employees of
the Company in their capacity as such pursuant to an Approved Stock Plan (as
defined below), provided that (1) all such issuances (taking into account the
shares of Common Stock issuable upon exercise of such options) after the date
hereof pursuant to this clause (i) do not, in the aggregate, exceed more than
10% of the Common Stock issued and outstanding immediately prior to the date
hereof and (2) the exercise price of any existing options is not lowered, none
of such options are amended to increase the number of shares issuable thereunder
and none of the terms or conditions of any such options are otherwise materially
changed in any manner that adversely affects any of the Buyers; (ii) shares of
Common Stock issued upon the conversion or exercise of Convertible Securities
(other than options to purchase Common Stock issued pursuant to an Approved
Stock Plan that are covered by clause (i) above) issued prior to the date
hereof, provided that the conversion, exercise or other method of issuance (as
the case may be) of any such Convertible Security is made solely pursuant to the
conversion, exercise or other method of issuance (as the case may be) provisions
of such Convertible Security that were in effect on the date immediately prior
to the date of this Agreement, the conversion, exercise or issuance price of any
such Convertible Securities (other than options to purchase Common Stock issued
pursuant to an Approved Stock Plan that are covered by clause (i) above) is not
lowered, none of such Convertible Securities (other than standard options to
purchase Common Stock issued pursuant to an Approved Stock Plan that are covered
by clause (i) above) are amended to increase the number of shares issuable
thereunder and none of the terms or conditions of any such Convertible
Securities (other than standard options to purchase Common Stock issued pursuant
to an Approved Stock Plan that are covered by clause (i) above) are otherwise
materially changed in any manner that adversely affects any of the Buyers;
(iii) the Warrant Shares; and (iv) shares of Common Stock and Convertible
Securities issued pursuant to equipment strategic mergers or acquisitions of
other assets or businesses, or strategic licensing or development transactions;
provided that (x) the primary purpose of such issuance is not to raise capital,
(y) the

 

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purchaser or acquirer of such shares of Common Stock in such issuance solely
consists of either (1) the actual participants in such strategic licensing or
development transactions, (2) the actual owners of such assets or securities
acquired in such merger or acquisition or (3) the shareholders, partners or
members of the foregoing Persons, and (z) the number or amount (as the case may
be) of such shares of Common Stock issued to such Person by the Company shall
not be disproportionate to such Person’s actual participation in such strategic
licensing or development transactions or ownership of such assets or securities
to be acquired by the Company (as applicable) (each of the foregoing in clauses
(i) through (iv), collectively the “Excluded Securities”). “Approved Stock Plan”
means any employee benefit plan which has been approved by the board of
directors of the Company prior to or subsequent to the date hereof pursuant to
which shares of Common Stock and options to purchase Common Stock may be issued
to any employee, officer, director or consultant for services provided to the
Company in their capacity as such. “Convertible Securities” means any capital
stock or other security of the Company or any of its Subsidiaries that is at any
time and under any circumstances directly or indirectly convertible into,
exercisable or exchangeable for, or which otherwise entitles the holder thereof
to acquire, any capital stock or other security of the Company (including,
without limitation, Common Stock) or any of its Subsidiaries.

(l) Passive Foreign Investment Company. Until the Buyers do not hold Registrable
Securities, the Company shall conduct its business, and shall cause its
Subsidiaries to conduct their respective businesses, in such a manner as will
ensure that the Company will not be deemed to constitute a passive foreign
investment company within the meaning of Section 1297 of the Code.

(m) Corporate Existence. So long as any Buyer beneficially owns any Warrants,
the Company shall not be party to any Fundamental Transaction (as defined in the
Warrants) unless the Company is in compliance with the applicable provisions
governing Fundamental Transactions set forth in the Warrants.

(n) Exercise Procedures. The form of Exercise Notice (as defined in the
Warrants) included in the Warrants sets forth the totality of the procedures
required of the Buyers in order to exercise the Warrants. No legal opinion or
other information or instructions shall be required of the Buyers to exercise
their Warrants. The Company shall honor exercises of the Warrants and shall
deliver the Warrant Shares in accordance with the terms, conditions and time
periods set forth in the Warrants. Without limiting the preceding sentences, no
ink-original Exercise Notice shall be required, nor shall any medallion
guarantee (or other type of guarantee or notarization) of any Exercise Notice
form be required in order to exercise the Warrants.

(o) Regulation M. The Company will not take any action prohibited by Regulation
M under the 1934 Act, in connection with the distribution of the Securities
contemplated hereby.

(p) General Solicitation. None of the Company, any of its affiliates (as defined
in Rule 501(b) under the 1933 Act) or any person acting on behalf of the Company
or such affiliate will solicit any offer to buy or offer or sell the Securities
by means of any form of general solicitation or general advertising within the
meaning of Regulation D, including: (i) any advertisement, article, notice or
other communication published in any newspaper, magazine or similar medium or
broadcast over television or radio; and (ii) any seminar or meeting whose
attendees have been invited by any general solicitation or general advertising.

 

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(q) Integration. So long as any Registrable Securities are held by any Investor,
none of the Company, any of its affiliates (as defined in Rule 501(b) under the
1933 Act), or any person acting on behalf of the Company or such affiliate will
sell, offer for sale, or solicit offers to buy or otherwise negotiate in respect
of any security (as defined in the 1933 Act) which will be integrated with the
sale of the Securities in a manner which would require the registration of the
Securities under the 1933 Act or require stockholder approval under the rules
and regulations of the Principal Market and the Company will take all action
that is appropriate or necessary to assure that its offerings of other
securities will not be integrated for purposes of the 1933 Act or the rules and
regulations of the Principal Market, with the issuance of Securities
contemplated hereby.

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

(s) Closing Documents. On or prior to fourteen (14) calendar days after the
Closing Date, the Company agrees to deliver, or cause to be delivered, to each
Buyer and Kelley Drye & Warren LLP a complete closing set of the executed
Transaction Documents, Securities and any other document required to be
delivered to any party pursuant to Section 7 hereof or otherwise.

(t) Trading in Common Stock.

(i) During the period commencing on the date hereof and ending on the
[Adjustment Time (as defined in the Warrants], each Buyer hereby agrees solely
with the Company, severally and not jointly, and not with any other Buyer, for
so long as such Buyer owns any Securities, such Buyer shall not maintain a Net
Short Position (as defined below).

(ii) For purposes hereof, a “Net Short Position” by a person means a position
whereby such person has executed one or more sales of Common Stock that is
marked as a short sale (but not including any sale marked “short exempt”) and
that is executed at a time when such Buyer has no equivalent offsetting long
position in the Common Stock (or is deemed to have a long position hereunder or
otherwise in accordance with Regulation SHO of the 1934 Act). For purposes of
determining whether a Buyer has an equivalent offsetting long position in the
Common Stock, all Common Stock (A) that is owned by such Buyer, or (B) that
would be issuable upon exercise in full of all Series A Warrants issuable to
such Buyer or then held by such Buyer, as applicable, (assuming that such Series
A Warrants were then fully exercisable, notwithstanding any provisions to the
contrary, and giving effect to any conversion or exercise price adjustments that
would take effect given only the passage of time) shall be deemed to be held
long by such Buyer.

 

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5. REGISTER; TRANSFER AGENT INSTRUCTIONS; LEGEND.

(a) Register. The Company shall maintain at its principal executive offices (or
such other office or agency of the Company as it may designate by notice to each
holder of Warrants), a register for the Warrants in which the Company shall
record the name and address of the Person in whose name the Warrants have been
issued (including the name and address of each transferee) and the number of
Warrant Shares issuable upon exercise of the Warrants held by such Person. The
Company shall keep the register open and available at all times during business
hours for inspection of any Buyer or its legal representatives.

(b) Transfer Agent Instructions. The Company shall issue irrevocable
instructions to its transfer agent and any subsequent transfer agent (as
applicable, the “Transfer Agent”) in a form acceptable to each of the Buyers
(the “Irrevocable Transfer Agent Instructions”) to issue certificates (or create
a book entry on the stock register of the Company with the Transfer Agent, as
applicable, a “Book Entry”)) or credit shares to the applicable balance accounts
at The Depository Trust Company (“DTC”), registered in the name of each Buyer or
its respective nominee(s), for the Common Shares and the Warrant Shares in such
amounts as specified from time to time by each Buyer to the Company upon the
exercise of the Warrants (as the case may be). The Company represents and
warrants that no instruction other than the Irrevocable Transfer Agent
Instructions referred to in this Section 5(b), and stop transfer instructions to
give effect to Section 2(g) hereof, will be given by the Company to its transfer
agent with respect to the Securities, and that the Securities shall otherwise be
freely transferable on the books and records of the Company, as applicable, to
the extent provided in this Agreement and the other Transaction Documents. If a
Buyer effects a sale, assignment or transfer of the Securities in accordance
with Section 2(g), the Company shall permit the transfer and shall promptly
instruct its transfer agent to issue one or more certificates (or Book Entry) or
credit shares to the applicable balance accounts at DTC in such name and in such
denominations as specified by such Buyer to effect such sale, transfer or
assignment. In the event that such sale, assignment or transfer involves Common
Shares or Warrant Shares sold, assigned or transferred pursuant to an effective
registration statement or in compliance with Rule 144, the transfer agent shall
issue such shares to such Buyer, assignee or transferee (as the case may be)
without any restrictive legend in accordance with Section 5(d) below. The
Company acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to a Buyer. Accordingly, the Company acknowledges that the
remedy at law for a breach of its obligations under this Section 5(b) will be
inadequate and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Section 5(b), that a Buyer shall be entitled,
in addition to all other available remedies, to an order and/or injunction
restraining any breach and requiring immediate issuance and transfer, without
the necessity of showing economic loss and without any bond or other security
being required. The Company shall cause its counsel to issue the legal opinion
referred to in the Irrevocable Transfer Agent Instructions to the Company’s
transfer agent on each Effective Date (as defined in the Registration Rights
Agreement). Any fees (with respect to the transfer agent, counsel to the Company
or otherwise) associated with the issuance of such opinion or the removal of any
legends on any of the Securities shall be borne by the Company.

(c) Legends. Each Buyer understands that the Securities have been issued (or
will be issued in the case of the Warrant Shares) pursuant to an exemption from
registration or qualification under the 1933 Act and applicable state securities
laws, and except as set forth

 

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below, the Securities shall bear any legend as required by the “blue sky” laws
of any state and a restrictive legend in substantially the following form (and a
stop-transfer order may be placed against transfer of such stock certificates):

[NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN][THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN] REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE
ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL TO THE HOLDER
(IF REQUESTED BY THE COMPANY), IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY,
THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD OR ELIGIBLE
TO BE SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE
FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

(d) Removal of Legends. Certificates (or Book Entry) evidencing Securities shall
not be required to contain the legend set forth in Section 5(c) above or any
other legend (i) following a resale pursuant to an effective registration
statement (including a Registration Statement) covering the resale of such
Securities under the 1933 Act, (ii) following any sale of such Securities
pursuant to Rule 144 (assuming the transferor is not an affiliate of the
Company), (iii) if such Securities are eligible to be sold, assigned or
transferred under Rule 144 (provided that a Buyer provides the Company with
reasonable assurances that such Securities are eligible for sale, assignment or
transfer under Rule 144 which shall not include an opinion of Buyer’s counsel),
(iv) in connection with a sale, assignment or other transfer (other than under
Rule 144), provided that such Buyer provides the Company with an opinion of
counsel to such Buyer, in a generally acceptable form, to the effect that such
sale, assignment or transfer of the Securities may be made without registration
under the applicable requirements of the 1933 Act or (v) if such legend is not
required under applicable requirements of the 1933 Act (including, without
limitation, controlling judicial interpretations and pronouncements issued by
the SEC). If a legend is not required pursuant to the foregoing, the Company
shall no later than three (3) Trading Days (or such earlier date as required
pursuant to the 1934 Act or other applicable law, rule or regulation for the
settlement of a trade initiated on the date such Buyer delivers such legended
certificate (or evidence of Book Entry) representing such Securities to the
Company) following the delivery by a Buyer to the Company or the transfer agent
(with notice to the Company) of a legended certificate (or evidence of Book
Entry) representing such Securities (endorsed or with stock powers attached,
signatures guaranteed, and otherwise in form necessary to affect the reissuance
and/or transfer, if applicable), together with any other deliveries from such
Buyer as may be required above in this Section 5(d), as directed by such Buyer,
either: (A) provided that the Company’s transfer agent is participating in the
DTC Fast Automated

 

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Securities Transfer Program and such Securities are Common Shares or Warrant
Shares, credit the aggregate number of shares of Common Stock to which such
Buyer shall be entitled to such Buyer’s or its designee’s balance account with
DTC through its Deposit/Withdrawal at Custodian system or (B) if the Company’s
transfer agent is not participating in the DTC Fast Automated Securities
Transfer Program, issue and deliver (via reputable overnight courier) to such
Buyer, a certificate representing such Securities that is free from all
restrictive and other legends, registered in the name of such Buyer or its
designee (the date by which such credit is so required to be made to the balance
account of such Buyer’s or such Buyer’s designee with DTC or such certificate is
required to be delivered to such Buyer pursuant to the foregoing is referred to
herein as the “Required Delivery Date”, and the date such shares of Common Stock
are actually delivered without restrictive legend to such Buyer or such Buyer’s
designee with DTC, as applicable, the “Share Delivery Date”). The Company shall
be responsible for any transfer agent fees or DTC fees with respect to any
issuance of Securities or the removal of any legends with respect to any
Securities in accordance herewith.

(e) Failure to Timely Deliver; Buy-In. If the Company fails to, for any reason
or for no reason (other than failure of a Buyer to comply with Section 5(d)),
issue and deliver (or cause to be delivered) to a Buyer (or its designee) by the
Required Delivery Date, either (I) if the Transfer Agent is not participating in
the DTC Fast Automated Securities Transfer Program or the applicable Common
Shares or Warrant Shares (as the case may be) are not eligible to be resold
pursuant to an effective registration statement or pursuant to Rule 144
(assuming a Cashless Exercise of the Warrants, as applicable), a certificate for
the number of Common Shares or Warrant Shares (as the case may be) to which such
Buyer is entitled and register such Common Shares or Warrant Shares (as the case
may be) on the Company’s share register or, if the Transfer Agent is
participating in the DTC Fast Automated Securities Transfer Program, to credit
the balance account of such Buyer or such Buyer’s designee with DTC for such
number of Common Shares or Warrant Shares (as the case may be) submitted for
legend removal by such Buyer pursuant to Section 5(d) above or (II) if the
Registration Statement covering the resale of the Common Shares or Warrant
Shares (as the case may be) submitted for legend removal by such Buyer pursuant
to Section 5(d) above (the “Unavailable Shares”) is not available for the resale
of such Unavailable Shares and the Company fails to as required pursuant to the
Registration Rights Agreement, (x) so notify such Buyer and (y) deliver the
Common Shares or Warrant Shares, as applicable, electronically without any
restrictive legend by crediting such aggregate number of Common Shares or
Warrant Shares (as the case may be) submitted for legend removal by such Buyer
pursuant to Section 5(d) above to such Buyer’s or its designee’s balance account
with DTC through its Deposit/Withdrawal At Custodian system (the event described
in the immediately foregoing clause (II) is hereinafter referred as a “Notice
Failure” and together with the event described in clause (I) above, a “Delivery
Failure”), and if on or after such Trading Day such Buyer purchases (in an open
market transaction or otherwise) shares of Common Stock to deliver in
satisfaction of a sale by such Buyer of shares of Common Stock submitted for
legend removal by such Buyer pursuant to Section 5(d) above that such Buyer
anticipated receiving from the Company (a “Buy-In”), then the Company shall,
within three (3) Trading Days after such Buyer’s request and in such Buyer’s
discretion, either (i) pay cash to such Buyer in an amount equal to such Buyer’s
total purchase price (including brokerage commissions and other out-of-pocket
expenses, if any, for the shares of Common Stock so purchased) (the “Buy-In
Price”), at which point the Company’s obligation to so deliver such certificate
or credit such Buyer’s balance account shall terminate and such shares shall be

 

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cancelled, or (ii) promptly honor its obligation to so deliver to such Buyer a
certificate or certificates or credit the balance account of such Buyer or such
Buyer’s designee with DTC representing such number of shares of Common Stock
that would have been so delivered if the Company timely complied with its
obligations hereunder and pay cash to such Buyer in an amount equal to the
excess (if any) of the Buy-In Price over the product of (A) such number of
shares of Common Shares or Warrant Shares (as the case may be) that the Company
was required to deliver to such Buyer by the Required Delivery Date multiplied
by (B) the lowest Closing Sale Price (as defined in the Warrants) of the Common
Stock on any Trading Day during the period commencing on the date of the
delivery by such Buyer to the Company of the applicable Common Shares or Warrant
Shares (as the case may be) and ending on the date of such delivery and payment
under this clause (ii). Nothing shall limit such Buyer’s right to pursue any
other remedies available to it hereunder, at law or in equity, including,
without limitation, a decree of specific performance and/or injunctive relief
with respect to the Company’s failure to timely deliver certificates
representing shares of Common Stock (or to electronically deliver such shares of
Common Stock) as required pursuant to the terms hereof. Notwithstanding anything
herein to the contrary, with respect to any given Notice Failure and/or Delivery
Failure, this Section 5(e) shall not apply to the applicable Buyer the extent
the Company has already paid such amounts in full to such Buyer with respect to
such Notice Failure and/or Delivery Failure, as applicable, pursuant to the
analogous sections of the Note or Warrant, as applicable, held by such Buyer.

(f) FAST Compliance. While any Warrants remain outstanding, the Company shall
maintain a transfer agent that participates in the DTC Fast Automated Securities
Transfer Program.

6. CONDITIONS TO THE COMPANY’S AND THE STOCKHOLDER’S OBLIGATION TO SELL.

(a) The obligation of the Company hereunder to issue and sell the Company Common
Shares and the related Warrants and the Stockholder to sell the Stockholder
Common Shares to each Buyer 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 by providing each Buyer with prior
written notice thereof:

(i) Such Buyer shall have executed each of the other Transaction Documents to
which it is a party and delivered the same to the Company and the Stockholder.

(ii) Such Buyer and each other Buyer shall have delivered to (x) the Company the
Company Purchase Price (less, in the case of any Buyer, the amounts withheld
pursuant to Section 4(g)) for the Company Common Shares and the related Warrants
and (y) the Stockholder the Stockholder Purchase Price for the Stockholder
Common Shares, in each case, being purchased by such Buyer at the Closing by
wire transfer of immediately available funds in accordance with the Flow of
Funds Letter.

(iii) The representations and warranties of such Buyer shall be true and correct
in all material respects as of the date when made and as of the Closing Date as
though

 

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originally made at that time (except for representations and warranties that
speak as of a specific date, which shall be true and correct as of such specific
date), and such Buyer 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 such Buyer at or prior
to the Closing Date.

7. CONDITIONS TO EACH BUYER’S OBLIGATION TO PURCHASE.

(a) The obligation of each Buyer hereunder to purchase the Common Shares and its
related Warrants 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 each Buyer’s sole benefit and may be waived by such Buyer at
any time in its sole discretion by providing the Company with prior written
notice thereof:

(i) The Company and the Stockholder shall have duly executed and delivered to
such Buyer each of the Transaction Documents to which it is a party and the
Company shall have duly executed and delivered to such Buyer (w) such aggregate
number of Company Common Shares set forth across from such Buyer’s name in
column (3) of the Schedule of Buyers, (x) such aggregate number of Stockholder
Common Shares set forth across from such Buyer’s name in column (4) of the
Schedule of Buyers, (y) Series A Warrants (initially for such aggregate number
of Series A Warrant Shares as is set forth across from such Buyer’s name in
column (5) of the Schedule of Buyers) and (z) Series B Warrants (initially for
such aggregate number of Series B Warrant Shares as is set forth across from
such Buyer’s name in column (6) of the Schedule of Buyers), in each case, as
being purchased by such Buyer at the Closing pursuant to this Agreement.

(ii) The Company and the Selling Stockholder shall have delivered to such Buyer
an opinion, dated as of the Closing Date, from Simpson Thacher & Bartlett LLP,
counsel to the Company and the Selling Stockholder, in substantially the form
attached hereto as Exhibit D-1 hereto.

(iii) The Company shall have delivered to such Buyer an opinion, dated as of the
Closing Date, of Christopher A. Pesch, Executive Vice President, General Counsel
and Chief Legal Officer and Secretary of the Company, in substantially the form
attached hereto as Exhibit D-2 hereto.

(iv) The Company shall have delivered to such Buyer a copy of the Irrevocable
Transfer Agent Instructions, in the form acceptable to such Buyer, which
instructions shall have been delivered to and acknowledged in writing by the
Company’s transfer agent.

(v) The Company shall have delivered to such Buyer a certificate evidencing the
formation and good standing of the Company issued by the Secretary of State of
Delaware as of a date within ten (10) days of the Closing Date.

(vi) The Company shall have delivered to such Buyer a certified copy of the
Certificate of Incorporation as certified by the Delaware Secretary of State
within ten (10) days of the Closing Date.

 

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(vii) The Company shall have delivered to such Buyer a certificate, in the form
acceptable to such Buyer, executed by the Secretary of the Company and dated as
of the Closing Date, as to (i) the resolutions consistent with Section 3(a)(i)
as adopted by the Company’s board of directors in a form reasonably acceptable
to such Buyer, (ii) the Certificate of Incorporation of the Company and
(iii) the Bylaws of the Company, each as in effect at the Closing.

(viii) Each and every representation and warranty of the Company and the
Stockholder shall be true and correct as of the date when made and as of the
Closing Date as though originally made at that time (except for representations
and warranties that speak as of a specific date, which shall be true and correct
as of such specific date) and the Company shall have performed, satisfied and
complied in all respects with the covenants, agreements and conditions required
to be performed, satisfied or complied with by the Company at or prior to the
Closing Date. Such Buyer shall have received a certificate, duly executed by the
Stockholder and the Chief Executive Officer of the Company, dated as of the
Closing Date, to the foregoing effect and as to such other matters as may be
reasonably requested by such Buyer in the form acceptable to such Buyer.

(ix) The Company shall have delivered to such Buyer a letter from the Company’s
transfer agent certifying the number of shares of Common Stock outstanding on
the day immediately prior to the Closing.

(x) The Common Stock (A) shall be designated for quotation or listed (as
applicable) on the Principal Market and (B) shall not have been suspended, as of
the Closing Date, by the SEC or the Principal Market from trading on the
Principal Market nor shall suspension by the SEC or the Principal Market have
been threatened, as of the Closing Date, either (I) in writing by the SEC or the
Principal Market or (II) by falling below the minimum maintenance requirements
of the Principal Market.

(xi) The Company shall have obtained all governmental, regulatory or third party
consents and approvals, if any, necessary for the sale of the Securities,
including without limitation, those required by the Principal Market, if any.

(xii) No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any
court or Governmental Entity of competent jurisdiction that prohibits the
consummation of any of the transactions contemplated by the Transaction
Documents.

(xiii) Since the date of execution of this Agreement, no event or series of
events shall have occurred that reasonably would have or result in a Material
Adverse Effect.

(xiv) The Company shall have obtained approval of the Principal Market to list
or designate for quotation (as the case may be) the Common Shares and the
Warrant Shares.

(xv) Such Buyer shall have received a letter on the letterhead of the Company,
duly executed by the Chief Executive Officer of the Company, setting forth the
wire amounts of each Buyer and the wire transfer instructions of the Company and
the Stockholder (the “Flow of Funds Letter”).

 

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8. TERMINATION.

In the event that the Closing shall not have occurred with respect to a Buyer
within five (5) days of the date hereof, then such Buyer shall have the right to
terminate its obligations under this Agreement with respect to itself at any
time on or after the close of business on such date without liability of such
Buyer to any other party; provided, however, (i) the right to terminate this
Agreement under this Section 8 shall not be available to such Buyer if the
failure of the transactions contemplated by this Agreement to have been
consummated by such date is the result of such Buyer’s breach of this Agreement
and (ii) the abandonment of the sale and purchase of the Common Shares and the
Warrants shall be applicable only to such Buyer providing such written notice,
provided further that no such termination shall affect any obligation of the
Company under this Agreement to reimburse such Buyer for the expenses described
in Section 4(g) above. Nothing contained in this Section 8 shall be deemed to
release any party from any liability for any breach by such party of the terms
and provisions of this Agreement or the other Transaction Documents or to impair
the right of any party to compel specific performance by any other party of its
obligations under this Agreement or the other Transaction Documents.

9. MISCELLANEOUS.

(a) Governing Law; Jurisdiction; Jury Trial. All questions concerning the
construction, validity, enforcement and interpretation of this Agreement shall
be governed by the internal laws of the State of New York, without giving effect
to any choice of law or conflict of law provision or rule (whether of the State
of New York or any other jurisdictions) that would cause the application of the
laws of any jurisdictions other than the State of New York. The Company and the
Stockholder each hereby irrevocably submits to the exclusive jurisdiction of the
state and federal courts sitting in The City of New York, Borough of Manhattan,
for the adjudication of any dispute hereunder or in connection herewith or under
any of the other Transaction Documents or with any transaction contemplated
hereby or thereby, and hereby irrevocably waives, and agrees not to assert in
any suit, action or proceeding, any claim that it is not personally subject to
the jurisdiction of any such court, that such suit, action or proceeding is
brought in an inconvenient forum or that the venue of such suit, action or
proceeding is improper. Each party hereby irrevocably waives personal service of
process and consents to process being served in any such suit, action or
proceeding by mailing a copy thereof to such party at the address for such
notices to it under this Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve process in any
manner permitted by law. Nothing contained herein shall be deemed or operate to
preclude any Buyer from bringing suit or taking other legal action against the
Company or the Stockholder in any other jurisdiction to collect on the Company’s
or the Stockholder’s obligations to such Buyer or to enforce a judgment or other
court ruling in favor of such Buyer. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY
RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR UNDER ANY OTHER TRANSACTION DOCUMENT OR
IN

 

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CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT, ANY OTHER TRANSACTION DOCUMENT
OR ANY TRANSACTION CONTEMPLATED HEREBY OR THEREBY.

(b) 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. In the event that any signature is delivered by
facsimile transmission or by an e-mail which contains a portable document format
(.pdf) file of an executed signature page, such signature page shall create a
valid and binding obligation of the party executing (or on whose behalf such
signature is executed) with the same force and effect as if such signature page
were an original thereof.

(c) Headings; Gender. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement. Unless the context clearly indicates otherwise, each pronoun herein
shall be deemed to include the masculine, feminine, neuter, singular and plural
forms thereof. The terms “including,” “includes,” “include” and words of like
import shall be construed broadly as if followed by the words “without
limitation.” The terms “herein,” “hereunder,” “hereof” and words of like import
refer to this entire Agreement instead of just the provision in which they are
found.

(d) Severability; Maximum Payment Amounts. If any provision of this Agreement is
prohibited by law or otherwise determined to be invalid or unenforceable by a
court of competent jurisdiction, the provision that would otherwise be
prohibited, invalid or unenforceable shall be deemed amended to apply to the
broadest extent that it would be valid and enforceable, and the invalidity or
unenforceability of such provision shall not affect the validity of the
remaining provisions of this Agreement so long as this Agreement as so modified
continues to express, without material change, the original intentions of the
parties as to the subject matter hereof and the prohibited nature, invalidity or
unenforceability of the provision(s) in question does not substantially impair
the respective expectations or reciprocal obligations of the parties or the
practical realization of the benefits that would otherwise be conferred upon the
parties. The parties will endeavor in good faith negotiations to replace the
prohibited, invalid or unenforceable provision(s) with a valid provision(s), the
effect of which comes as close as possible to that of the prohibited, invalid or
unenforceable provision(s). Notwithstanding anything to the contrary contained
in this Agreement or any other Transaction Document (and without implication
that the following is required or applicable), it is the intention of the
parties that in no event shall amounts and value paid by the Stockholder, the
Company and/or any of its Subsidiaries (as the case may be), or payable to or
received by any of the Buyers, under the Transaction Documents (including
without limitation, any amounts that would be characterized as “interest” under
applicable law) exceed amounts permitted under any applicable law. Accordingly,
if any obligation to pay, payment made to any Buyer, or collection by any Buyer
pursuant the Transaction Documents is finally judicially determined to be
contrary to any such applicable law, such obligation to pay, payment or
collection shall be deemed to have been made by mutual mistake of such Buyer,
the Stockholder, the Company and its Subsidiaries and such amount shall be
deemed to have been adjusted with retroactive effect to the maximum amount or
rate of interest, as the case may be, as would not be so prohibited by the
applicable law. Such adjustment shall be effected, to the extent necessary, by
reducing or refunding, at the option of such Buyer, the amount of interest or
any other amounts which would constitute unlawful

 

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amounts required to be paid or actually paid to such Buyer under the Transaction
Documents. For greater certainty, to the extent that any interest, charges,
fees, expenses or other amounts required to be paid to or received by such Buyer
under any of the Transaction Documents or related thereto are held to be within
the meaning of “interest” or another applicable term to otherwise be violative
of applicable law, such amounts shall be pro-rated over the period of time to
which they relate.

(e) Entire Agreement; Amendments. This Agreement, the other Transaction
Documents and the schedules and exhibits attached hereto and thereto and the
instruments referenced herein and therein supersede all other prior oral or
written agreements between the Buyers, the Stockholder, the Company, its
Subsidiaries, their affiliates and Persons acting on their behalf, including,
without limitation, any transactions by any Buyer with respect to Common Stock
or the Securities, and the other matters contained herein and therein, and this
Agreement, the other Transaction Documents, the schedules and exhibits attached
hereto and thereto and the instruments referenced herein and therein contain the
entire understanding of the parties solely with respect to the matters covered
herein and therein; provided, however, nothing contained in this Agreement or
any other Transaction Document shall (or shall be deemed to) (i) have any effect
on any agreements any Buyer has entered into with, or any instruments any Buyer
has received from, the Stockholder, the Company or any of its Subsidiaries prior
to the date hereof with respect to any prior investment made by such Buyer in
the Company or (ii) waive, alter, modify or amend in any respect any obligations
of the Stockholder, Company or any of its Subsidiaries, or any rights of or
benefits to any Buyer or any other Person, in any agreement entered into prior
to the date hereof between or among the Stockholder, the Company and/or any of
its Subsidiaries and any Buyer, or any instruments any Buyer received from the
Stockholder, Company and/or any of its Subsidiaries prior to the date hereof,
and all such agreements and instruments shall continue in full force and effect.
Except as specifically set forth herein or therein, neither the Stockholder, the
Company nor any Buyer makes any representation, warranty, covenant or
undertaking with respect to such matters. For clarification purposes, the
Recitals are part of this Agreement. No provision of this Agreement may be
amended other than by an instrument in writing signed by the Stockholder, the
Company and the Required Holders (as defined below), and any amendment to any
provision of this Agreement made in conformity with the provisions of this
Section 9(e) shall be binding on all Buyers and holders of Securities, as
applicable; provided that no such amendment shall be effective to the extent
that it (A) applies to less than all of the holders of the Securities then
outstanding or (B) imposes any obligation or liability on any Buyer without such
Buyer’s prior written consent (which may be granted or withheld in such Buyer’s
sole discretion). No waiver shall be effective unless it is in writing and
signed by an authorized representative of the waiving party, provided that the
Required Holders may waive any provision of this Agreement, and any waiver of
any provision of this Agreement made in conformity with the provisions of this
Section 9(e) shall be binding on all Buyers and holders of Securities, as
applicable, provided that no such waiver shall be effective to the extent that
it (1) applies to less than all of the holders of the Securities then
outstanding (unless a party gives a waiver as to itself only) or (2) imposes any
obligation or liability on any Buyer without such Buyer’s prior written consent
(which may be granted or withheld in such Buyer’s sole discretion). Neither the
Company nor the Stockholder has, directly or indirectly, made any agreements
with any Buyers relating to the terms or conditions of the transactions
contemplated by the Transaction Documents except as set forth in the Transaction
Documents. Without limiting the foregoing, each of the Stockholder, Company and
the Stockholder confirms that,

 

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except as set forth in this Agreement, no Buyer has made any commitment or
promise or has any other obligation to provide any financing to the Stockholder,
Company, any Subsidiary or otherwise. As a material inducement for each Buyer to
enter into this Agreement, the Stockholder, the Company and each Stockholder
expressly acknowledges and agrees that (x) no due diligence or other
investigation or inquiry conducted by a Buyer, any of its advisors or any of its
representatives shall affect such Buyer’s right to rely on, or shall modify or
qualify in any manner or be an exception to any of, the Stockholder’s, the
Company’s or the Stockholder’s representations and warranties contained in this
Agreement or any other Transaction Document and (y) unless a provision of this
Agreement or any other Transaction Document is expressly preceded by the phrase
“except as disclosed in the SEC Documents,” nothing contained in any of the SEC
Documents shall affect such Buyer’s right to rely on, or shall modify or qualify
in any manner or be an exception to any of, the Stockholder’s, the Company’s or
the Stockholder’s representations and warranties contained in this Agreement or
any other Transaction Document. “Required Holders” means (I) prior to the
Closing Date, each Buyer entitled to purchase Common Shares and Warrants at the
Closing and (II) on or after the Closing Date, holders of 2/3rds of the
Registrable Securities as of such time (excluding any Registrable Securities
held by the Company or any of its Subsidiaries or the Stockholder as of such
time) issued or issuable hereunder or pursuant to the Warrants.

(f) 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 receipt, when sent by facsimile (provided confirmation of
transmission is mechanically or electronically generated and kept on file by the
sending party) or electronic mail; or (iii) one (1) Business Day after deposit
with an overnight courier service with next day delivery specified, in each
case, properly addressed to the party to receive the same. The addresses,
facsimile numbers and e-mail addresses for such communications shall be:

If to the Company:

Patriot National, Inc.

401 East Las Olas Boulevard, Suite 1650

Fort Lauderdale, Florida 33301

Facsimile: 954-333-5326

Attention: Christopher A. Pesch, Executive Vice President and General Counsel

E-Mail: cpesch@patnat.com

 

38

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With a copy (for informational purposes only) to:

Simpson Thacher & Bartlett LLP

425 Lexington Avenue

New York, New York 10017

Attn:

   Gary Horowitz    Lesley Peng

Facsimile: 212-455-2502

Email:

   ghorowitz@stblaw.com    lpeng@stblaw.com

If to the Stockholder:

                                                             

                                                             

                                                             

Telephone: (            )             -            

Facsimile: (            )             -            

Attention:                                            

E-Mail:

If to the Transfer Agent:

American Stock Transfer & Trust Company, LLC

6201 15th Avenue

Brooklyn, NY 11219

Telephone: (718) 921-8200 ext.6544

Facsimile: (718) 765-8717

Attention: Janice Santiago

E-Mail: jasantiago@amstock.com

If to a Buyer, to its address, e-mail address and facsimile number set forth on
the Schedule of Buyers, with copies to such Buyer’s representatives as set forth
on the Schedule of Buyers,

with a copy (for informational purposes only) to:

Kelley Drye & Warren LLP

101 Park Avenue

New York, NY 10178

Telephone: (212) 808-7540

Facsimile: (212) 808-7897

Attention: Michael A. Adelstein, Esq.

E-mail: madelstein@kelleydrye.com

or to such other address, e-mail address and/or facsimile number and/or to the
attention of such other Person as the recipient party has specified by written
notice given to each other party five (5) days prior to the effectiveness of
such change, provided that Kelley Drye & Warren LLP shall only be provided
copies of notices sent to the lead Buyer. Written confirmation of receipt

 

39

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(A) given by the recipient of such notice, consent, waiver or other
communication, (B) mechanically or electronically generated by the sender’s
facsimile machine or e-mail containing the time, date, recipient facsimile
number and, with respect to each facsimile transmission, an image of the first
page of such transmission or (C) provided by an overnight courier service shall
be rebuttable evidence of personal service, receipt by facsimile or receipt from
an overnight courier service in accordance with clause (i), (ii) or (iii) above,
respectively.

(g) Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of the parties and their respective successors and assigns,
including any purchasers of any of the Common Shares and Warrants (other than
purchasers of Common Shares in open market transactions). Neither the Company
nor the Stockholder shall assign this Agreement or any rights or obligations
hereunder without the prior written consent of the Required Holders, including,
without limitation, by way of a Fundamental Transaction (as defined in the
Warrants) (unless, with respect to an assignment of the Warrant, the Company is
in compliance with the applicable provisions governing Fundamental Transactions
set forth in the Warrants). A Buyer may assign some or all of its rights
hereunder in connection with any transfer of any of its Securities (other than
through a public offering) without the consent of the Company or the
Stockholder, in which event such assignee shall be deemed to be a Buyer
hereunder with respect to such assigned rights.

(h) 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, other than the Indemnitees referred to in Section 1(a).

(i) Survival. The representations, warranties, agreements and covenants shall
survive the Closing. Each Buyer shall be responsible only for its own
representations, warranties, agreements and covenants hereunder.

(j) 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 any 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.

(k) Indemnification. In consideration of each Buyer’s execution and delivery of
the Transaction Documents and acquiring the Securities thereunder and in
addition to all of the Company’s and the Stockholder’s other obligations under
the Transaction Documents, each of the Stockholder and the Company shall defend,
protect, indemnify and hold harmless each Buyer and each holder of any
Securities and all of their stockholders, partners, members, officers,
directors, employees and direct or indirect investors and any of the foregoing
Persons’ agents or other representatives (including, without limitation, those
retained in connection with the transactions contemplated by this Agreement)
(collectively, the “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
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 any

 

40

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Indemnitee as a result of, or arising out of, or relating to (i) any
misrepresentation or breach of any representation or warranty made by the
Company, the Stockholder or any Subsidiary in any of the Transaction Documents,
(ii) any breach of any covenant, agreement or obligation of the Company, the
Stockholder or any Subsidiary contained in any of the Transaction Documents or
(iii) any cause of action, suit, proceeding or claim brought or made against
such Indemnitee by a third party (including for these purposes a derivative
action brought on behalf of the Company or any Subsidiary) or which otherwise
involves such Indemnitee to the extent that such Indemnified Liabilities arise
out of or result from(A) the execution, delivery, performance or enforcement of
any of the Transaction Documents (including, without limitation the purchase of
the Securities pursuant to the Transaction Documents by the Buyers), or (B) any
transaction financed or to be financed in whole or in part, directly or
indirectly, with the proceeds of the issuance of the Securities (including,
without limitation, as a party in interest or otherwise in any action or
proceeding for injunctive or other equitable relief). For the avoidance of
doubt, with respect to any Buyer (or related Indemnitees) seeking
indemnification hereunder, clause (iii)(A) of the immediately preceding sentence
shall not apply to (X) actions or omissions of such Buyer or Indemnitee after
purchase of the Securities or (Y) any breach of any representation or warranty
or covenant of such Buyer under the Transaction Documents. To the extent that
the foregoing undertaking by the Company or the Stockholder may be unenforceable
for any reason, the Company and the Stockholder shall each make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law. Except as otherwise set
forth herein, the mechanics and procedures with respect to the rights and
obligations under this Section 9(k) shall be the same as those set forth in
Section 6 of the Registration Rights Agreement, mutatis, mutandis.

(l) The 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. No specific
representation or warranty shall limit the generality or applicability of a more
general representation or warranty. Each and every reference to share prices,
shares of Common Stock and any other numbers in this Agreement that relate to
the Common Stock shall be automatically adjusted for any stock splits, stock
dividends, stock combinations, recapitalizations or other similar transactions
that occur with respect to the Common Stock after the date of this Agreement. It
is expressly understood and agreed that for all purposes of this Agreement, and
without implication that the contrary would otherwise be true, neither
transactions nor purchases nor sales shall include the location and/or
reservation of borrowable shares of Common Stock.

(m) Remedies. Each Buyer and in the event of any permitted assignment by Buyer
of its rights and obligations hereunder, each holder of Securities, shall have
all rights and remedies set forth in the Transaction Documents and all rights
and remedies which such holders have been granted at any time under any other
agreement or contract and all of the rights which such holders have under any
law. Any Person having any rights under any provision of this Agreement shall be
entitled to enforce such rights specifically (without posting a bond or other
security), to recover damages by reason of any breach of any provision of this
Agreement (except Section 5(f)) and to exercise all other rights granted by law.
Furthermore, the Company and the Stockholder each recognize that in the event
that it or any Subsidiary fails to perform, observe, or discharge any or all of
its or such Subsidiary’s (as the case may be) obligations under the Transaction
Documents, any remedy at law would inadequate relief to the Buyers. The

 

41

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Company and the Stockholder each therefore agree that the Buyers shall be
entitled to specific performance and/or temporary, preliminary and permanent
injunctive or other equitable relief from any court of competent jurisdiction in
any such case without the necessity of proving actual damages and without
posting a bond or other security. The remedies provided in this Agreement and
the other Transaction Documents shall be cumulative and in addition to all other
remedies available under this Agreement and the other Transaction Documents, at
law or in equity (including a decree of specific performance and/or other
injunctive relief).

(n) Withdrawal Right. Notwithstanding anything to the contrary contained in (and
without limiting any similar provisions of) the Transaction Documents, whenever
any Buyer exercises a right, election, demand or option under a Transaction
Document and the Stockholder, the Company or any Subsidiary does not timely
perform its related obligations within the periods therein provided, then such
Buyer may rescind or withdraw, in its sole discretion from time to time upon
written notice to the Stockholder, the Company or such Subsidiary (as the case
may be), any relevant notice, demand or election in whole or in part without
prejudice to its future actions and rights.

(o) Payment Set Aside; Currency. To the extent that the Stockholder or the
Company makes a payment or payments to any Buyer hereunder or pursuant to any of
the other Transaction Documents or any of the Buyers enforce or exercise their
rights hereunder or thereunder, and such payment or payments or the proceeds of
such enforcement or exercise or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside, recovered from, disgorged
by or are required to be refunded, repaid or otherwise restored to the
Stockholder or the Company, a trustee, receiver or any other Person under any
law (including, without limitation, any bankruptcy law, foreign, state or
federal law, common law or equitable cause of action), then to the extent of any
such restoration the obligation or part thereof originally intended to be
satisfied shall be revived and continued in full force and effect as if such
payment had not been made or such enforcement or setoff had not occurred. Unless
otherwise expressly indicated, all dollar amounts referred to in this Agreement
and the other Transaction Documents are in United States Dollars (“U.S.
Dollars”), and all amounts owing under this Agreement and all other Transaction
Documents shall be paid in U.S. Dollars. All amounts denominated in other
currencies (if any) shall be converted into the U.S. Dollar equivalent amount in
accordance with the Exchange Rate on the date of calculation. “Exchange Rate”
means, in relation to any amount of currency to be converted into U.S. Dollars
pursuant to this Agreement, the U.S. Dollar exchange rate as published in the
Wall Street Journal on the relevant date of calculation.

 

42

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(p) Judgment Currency.

(i) If for the purpose of obtaining or enforcing judgment against the Company or
the Stockholder in connection with this Agreement or any other Transaction
Document in any court in any jurisdiction it becomes necessary to convert into
any other currency (such other currency being hereinafter in this Section 9(p)
referred to as the “Judgment Currency”) an amount due in US Dollars under this
Agreement, the conversion shall be made at the Exchange Rate prevailing on the
Trading Day immediately preceding:

(1) the date actual payment of the amount due, in the case of any proceeding in
the courts of New York or in the courts of any other jurisdiction that will give
effect to such conversion being made on such date: or

(2) the date on which the foreign court determines, in the case of any
proceeding in the courts of any other jurisdiction (the date as of which such
conversion is made pursuant to this Section 9(p)(i)(2) being hereinafter
referred to as the “Judgment Conversion Date”).

(ii) If in the case of any proceeding in the court of any jurisdiction referred
to in Section 9(p)(i)(2) above, there is a change in the Exchange Rate
prevailing between the Judgment Conversion Date and the date of actual payment
of the amount due, the applicable party shall pay such adjusted amount as may be
necessary to ensure that the amount paid in the Judgment Currency, when
converted at the Exchange Rate prevailing on the date of payment, will produce
the amount of US Dollars which could have been purchased with the amount of
Judgment Currency stipulated in the judgment or judicial order at the Exchange
Rate prevailing on the Judgment Conversion Date.

(iii) Any amount due from the Stockholder, the Company or the Stockholder under
this provision shall be due as a separate debt and shall not be affected by
judgment being obtained for any other amounts due under or in respect of this
Agreement or any other Transaction Document.

(q) Independent Nature of Buyers’ Obligations and Rights. The obligations of
each Buyer under the Transaction Documents are several and not joint with the
obligations of any other Buyer, and no Buyer shall be responsible in any way for
the performance of the obligations of any other Buyer under any Transaction
Document. Nothing contained herein or in any other Transaction Document, and no
action taken by any Buyer pursuant hereto or thereto, shall be deemed to
constitute the Buyers as, and each of the Stockholder and the Company
acknowledges that the Buyers do not so constitute, a partnership, an
association, a joint venture or any other kind of group or entity, or create a
presumption that the Buyers are in any way acting in concert or as a group or
entity, and neither the Stockholder nor the Company shall assert any such claim
with respect to such obligations or the transactions contemplated by the
Transaction Documents or any matters, and each of the Stockholder and the
Company acknowledges that the Buyers are not acting in concert or as a group,
and neither the Stockholder nor the Company shall assert any such claim, with
respect to such obligations or the transactions contemplated by the Transaction
Documents. The decision of each Buyer to purchase Securities pursuant to the
Transaction Documents has been made by such Buyer independently of any other
Buyer. Each Buyer acknowledges that no other Buyer has acted as agent for such
Buyer in connection with such Buyer making its investment hereunder and that no
other Buyer will be acting as agent of such Buyer in connection with monitoring
such Buyer’s investment in the Securities or enforcing its rights under the
Transaction Documents. The Stockholder, the Company and each Buyer confirm that
each Buyer has independently participated with the Stockholder, the Company and
its Subsidiaries in the negotiation of the transaction contemplated hereby with
the advice of its own counsel and advisors. Each Buyer shall be entitled to
independently protect and enforce its rights, including, without limitation, the
rights arising out of this Agreement or out of any other Transaction Documents,
and it shall not be necessary for any other Buyer to be joined as an

 

43

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additional party in any proceeding for such purpose. The use of a single
agreement to effectuate the purchase and sale of the Securities contemplated
hereby was solely in the control of the Company and the Stockholder, not the
action or decision of any Buyer, and was done solely for the convenience of the
Stockholder, Company and its Subsidiaries and not because it was required or
requested to do so by any Buyer. It is expressly understood and agreed that each
provision contained in this Agreement and in each other Transaction Document is
between the Stockholder, the Company, each Subsidiary and a Buyer, solely, and
not between the Stockholder, the Company, its Subsidiaries and the Buyers
collectively and not between and among the Buyers.

[signature pages follow]

 

44

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IN WITNESS WHEREOF, each Buyer, the Stockholder and the Company have caused
their respective signature page to this Agreement to be duly executed as of the
date first written above.

 

COMPANY: PATRIOT NATIONAL, INC. By:  

/s/ Christopher A. Pesch

  Name:   Christopher A. Pesch   Title:   Executive Vice President and General
Counsel

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, each Buyer, the Stockholder and the Company have caused
their respective signature page to this Agreement to be duly executed as of the
date first written above.

 

STOCKHOLDER:

/s/ Steven M. Mariano

STEVEN M. MARIANO

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, each Buyer, the Stockholder and the Company have caused
their respective signature page to this Agreement to be duly executed as of the
date first written above.

 

BUYER: CVI INVESTMENTS, INC. By:  

Heights Capital Management, Inc.

The authorized agent

By:  

/s/ Martin Kobinger

  Name:   Martin Kobinger   Title:   Investment Manager

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, each Buyer, the Stockholder and the Company have caused
their respective signature page to this Agreement to be duly executed as of the
date first written above.

 

BUYER: HUDSON BAY MASTER FUND LTD By:  

/s/ George Antonopoulos

  Name:   George Antonopoulos   Title:   Authorized Signatory

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, each Buyer, the Stockholder and the Company have caused
their respective signature page to this Agreement to be duly executed as of the
date first written above.

 

BUYER:   ALTO OPPORTUNITY MASTER FUND, SPC By:  

/s/ Daniel Kochav

  Name:   Daniel Kochav   Title:   Partner

--------------------------------------------------------------------------------

SCHEDULE OF BUYERS

 

(1)

 

(2)

  (3)     (4)     (5)     (6)     (7)     (8)    

(9)

Buyer

 

Address and Facsimile Number

  Aggregate
Number
of
Company
Common
Shares     Aggregate
Number of
Stockholder
Common
Shares     Aggregate
Number of
Series A
Warrant
Shares     Aggregate
Number of
Series B
Warrant
Shares     Company
Purchase
Price     Stockholder
Purchase
Price    

Legal Representative’s

Address and Facsimile Number

CVI Investments, Inc.

 

c/o Heights Capital Management

101 California Street, Suite 3250

San Francisco, CA 94111

Attention: Martin Kobinger,

Investment Manager

Facsimile: 415-403-6525

Telephone: 415-403-6500

E-Mail: sam.winer@sig.com

Residence: Cayman Islands

    250,000        1,125,000        937,500        950,000      $ 9,000,000     
$ 13,500,000     

Kelley Drye & Warren LLP

101 Park Avenue

New York, NY 10178

Telephone: (212) 808-7540

Facsimile: (212) 808-7897

Attention: Michael A. Adelstein, Esq.

Hudson Bay Master Fund Ltd

 

Please deliver any notices other than Pre-Notices to:

 

777 Third Avenue, 30th Floor

New York, NY 10017

Attention: Yoav Roth

Facsimile: (212) 571-1279

E-mail: investments@hudsonbaycapital.com

Residence: Cayman Islands

 

Please deliver any Pre-Notice to:

 

777 Third Ave., 30th Floor

New York, NY 10017

Facsimile: (646) 214-7946

Attention: Scott Black

General Counsel and Chief Compliance Officer

    250,000        1,125,000        937,500        950,000      $ 9,000,000     
$ 13,500,000     

Alto Opportunity Master Fund, SPC

 

c/o Tenor Capital Management,

1180 Avenue of Americas, Suite 1940

New York, NY 10036

Attention: Waqas Khatri, Ravi Patel

E-mail: wkhatri@tenorcapital.com

Residence: Cayman Islands

    166,666        250,000        208,333        100,000      $ 1,999,992      $
3,000,000         

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

TOTAL

    666,666        2,500,000        2,083,333        2,000,000      $ 19,999,992
     $ 30,000,000         

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

--------------------------------------------------------------------------------

Exhibit B-1

FORM OF SERIES A WARRANT

NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION
OF COUNSEL TO THE HOLDER (IF REQUESTED BY THE COMPANY), IN A FORM REASONABLY
ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
(II) UNLESS SOLD OR ELIGIBLE TO BE SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER
SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
ARRANGEMENT SECURED BY THE SECURITIES. THE NUMBER OF SHARES OF COMMON STOCK
ISSUABLE UPON EXERCISE OF THIS WARRANT MAY BE LESS THAN THE AMOUNTS SET FORTH ON
THE FACE HEREOF PURSUANT TO SECTION 1(a) OF THIS WARRANT.

PATRIOT NATIONAL, INC.

SERIES A WARRANT TO PURCHASE COMMON STOCK

Warrant No.:

Date of Issuance: December     , 2015 (“Issuance Date”)

Patriot National, Inc., a Delaware corporation (the “Company”), hereby certifies
that, for good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, [BUYER], the registered holder hereof or its permitted
assigns (the “Holder”), is entitled, subject to the terms set forth below, to
purchase from the Company, at the Exercise Price (as defined below) then in
effect, upon exercise of this Warrant to Purchase Common Stock (including any
Warrants to Purchase Common Stock issued in exchange, transfer or replacement
hereof, the “Warrant”), at any time or times on or after July 1, 2016 (the
“Initial Exercise Date”), but not after 11:59 p.m., New York time, on the
Expiration Date (as defined below),                     (subject to adjustment
as provided herein) fully paid and non-assessable shares of Common Stock (as
defined below) (the “Warrant Shares”, and such number of Warrant Shares, the
“Warrant Number”). Except as otherwise defined herein, capitalized terms in this
Warrant shall have the meanings set forth in Section 17. This Warrant is one of
the Warrants to Purchase Common Stock (the “SPA Warrants”) issued pursuant to
Section 1 of that certain Securities Purchase Agreement, dated as of
December 13, 2015 (the “Subscription Date”), by and among the Company, a
stockholder of the Company and the investors (the “Buyers”) referred to therein,
as amended from time to time (the “Securities Purchase Agreement”).

--------------------------------------------------------------------------------

1. EXERCISE OF WARRANT.

(a) Mechanics of Exercise. Subject to the terms and conditions hereof
(including, without limitation, the limitations set forth in Section 1(f)), this
Warrant may be exercised by the Holder on any day on or after the Initial
Exercise Date (an “Exercise Date”), in whole or in part, by delivery (whether
via facsimile or otherwise) of a written notice, in the form attached hereto as
Exhibit A (the “Exercise Notice”), of the Holder’s election to exercise this
Warrant. Within one (1) Trading Day following an exercise of this Warrant as
aforesaid, the Holder shall deliver payment to the Company of an amount equal to
the Exercise Price in effect on the date of such exercise multiplied by the
number of Warrant Shares as to which this Warrant was so exercised (the
“Aggregate Exercise Price”) in cash or via wire transfer of immediately
available funds if the Holder did not notify the Company in such Exercise Notice
that such exercise was made pursuant to a Cashless Exercise (as defined in
Section 1(d)). The Holder shall not be required to deliver the original of this
Warrant in order to effect an exercise hereunder. Execution and delivery of an
Exercise Notice with respect to less than all of the Warrant Shares shall have
the same effect as cancellation of the original of this Warrant and issuance of
a new Warrant evidencing the right to purchase the remaining number of Warrant
Shares. Execution and delivery of an Exercise Notice for all of the
then-remaining Warrant Shares shall have the same effect as cancellation of the
original of this Warrant after delivery of the Warrant Shares in accordance with
the terms hereof. On or before the first (1st) Trading Day following the date on
which the Company has received an Exercise Notice, the Company shall transmit by
facsimile or electronic mail an acknowledgment of confirmation of receipt of
such Exercise Notice, in the form attached hereto as Exhibit B, to the Holder
and the Company’s transfer agent (the “Transfer Agent”), which confirmation
shall constitute an instruction to the Transfer Agent to process such Exercise
Notice in accordance with the terms herein. On or before the third (3rd) Trading
Day following the date on which the Company has received such Exercise Notice
(or such earlier date as required pursuant to the 1934 Act or other applicable
law, rule or regulation for the settlement of a trade of such Warrant Shares
initiated on the applicable Exercise Date), the Company shall (X) provided that
the Transfer Agent is participating in The Depository Trust Company (“DTC”) Fast
Automated Securities Transfer Program and the Warrant Shares are eligible to be
resold pursuant to an effective registration statement or, if a Cashless
Exercise, the Warrant Shares are eligible to be resold by the Holder pursuant to
Rule 144 (such Warrant Shares, the “Unrestricted Warrant Shares”), upon the
request of the Holder, credit such aggregate number of shares of Common Stock to
which the Holder is entitled pursuant to such exercise to the Holder’s or its
designee’s balance account with DTC through its Deposit/Withdrawal at Custodian
system, or (Y) if the Transfer Agent is not participating in the DTC Fast
Automated Securities Transfer Program or the applicable Warrant Shares are not
Unrestricted Warrant Shares, upon the request of the Holder, issue and deliver
(via reputable overnight courier) to the address as specified in the Exercise
Notice, a certificate, registered in the name of the Holder or its designee, for
the number of shares of Common Stock to which the Holder shall be entitled
pursuant to such exercise. Upon delivery of an Exercise Notice, the Holder shall
be deemed for all corporate purposes to have become the holder of record of the
Warrant Shares with respect to which this Warrant has been exercised,
irrespective of the date such Warrant Shares are credited to the Holder’s DTC
account or the date of delivery of the certificates evidencing such Warrant
Shares (as the case may be). If this Warrant is submitted in connection with any
exercise pursuant to this Section 1(a) and the number of Warrant Shares

 

2

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represented by this Warrant submitted for exercise is greater than the number of
Warrant Shares being acquired upon an exercise and upon surrender of this
Warrant to the Company by the Holder, then, at the request of the Holder, the
Company shall no later than three (3) Business Days after any exercise and at
its own expense, issue and deliver to the Holder (or its designee) a new Warrant
(in accordance with Section 7(d)) representing the right to purchase the number
of Warrant Shares purchasable immediately prior to such exercise under this
Warrant, less the number of Warrant Shares with respect to which this Warrant is
exercised. No fractional shares of Common Stock are to be issued upon the
exercise of this Warrant, but rather the number of shares of Common Stock to be
issued shall be rounded up to the nearest whole number. The Company shall pay
any and all transfer, stamp, issuance and similar taxes, costs and expenses
(including, without limitation, fees and expenses of the Transfer Agent) that
may be payable with respect to the issuance and delivery of Warrant Shares upon
exercise of this Warrant. Notwithstanding the foregoing, except in the case
where an exercise of this Warrant is validly made pursuant to a Cashless
Exercise), the Company’s failure to deliver Warrant Shares to the Holder on or
prior to the later of ((i) three (3) Trading Days after receipt of the
applicable Exercise Notice (or such earlier date as required pursuant to the
1934 Act or other applicable law, rule or regulation for the settlement of a
trade of such Warrant Shares initiated on the applicable Exercise Date) and
(ii) one (1) Trading Day after the Company’s receipt of the Aggregate Exercise
Price (or valid notice of a Cashless Exercise (such later date, the “Share
Delivery Deadline”) shall not be deemed to be a breach of this Warrant. From the
Issuance Date through and including the Expiration Date, the Company shall
maintain a transfer agent that participates in the DTC’s Fast Automated
Securities Transfer Program.

(b) Exercise Price. For purposes of this Warrant, “Exercise Price” means, as of
any given Exercise Date, the lesser of (x) the Fixed Exercise Price and (y) the
Variable Exercise Price in effect as of such Exercise Date, subject to
adjustment as provided herein.

(c) Company’s Failure to Timely Deliver Securities. If the Company shall fail,
for any reason or for no reason, on or prior to the Share Delivery Deadline,
either (I) if the Transfer Agent is not participating in the DTC Fast Automated
Securities Transfer Program or the applicable Warrant Shares are not
Unrestricted Warrant Shares, to issue and deliver to the Holder (or its
designee) a certificate for the number of Warrant Shares to which the Holder is
entitled and register such Warrant Shares on the Company’s share register or, if
the Transfer Agent is participating in the DTC Fast Automated Securities
Transfer Program, to credit the balance account of the Holder or the Holder’s
designee with DTC for such number of Warrant Shares to which the Holder is
entitled upon the Holder’s exercise of this Warrant (as the case may be) or (II)
if a Registration Statement covering the resale of the Warrant Shares that are
the subject of the Exercise Notice (the “Unavailable Warrant Shares”) is not
available for the resale of such Unavailable Warrant Shares and the Company
fails to, as required pursuant to the Registration Rights Agreement, (x) so
notify the Holder and (y) deliver the Warrant Shares electronically without any
restrictive legend by crediting such aggregate number of Warrant Shares to which
the Holder is entitled pursuant to such exercise to the Holder’s or its
designee’s balance account with DTC through its Deposit/Withdrawal At Custodian
system (the event described in the immediately foregoing clause (II) is
hereinafter referred as a “Notice Failure” and together with the event described
in clause (I) above, a “Delivery Failure”), and if on or after such Share
Delivery Deadline the Holder purchases (in an

 

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open market transaction or otherwise) shares of Common Stock to deliver in
satisfaction of a sale by the Holder of all or any portion of the number of
shares of Common Stock issuable upon such exercise that the Holder anticipated
receiving from the Company (a “Buy-In”), then, in addition to all other remedies
available to the Holder, the Company shall, within three (3) Business Days after
the Holder’s request and in the Holder’s discretion, either (i) pay cash to the
Holder in an amount equal to the Holder’s total purchase price (including
brokerage commissions and other out-of-pocket expenses, if any) for the shares
of Common Stock so purchased (including, without limitation, by any other Person
in respect, or on behalf, of the Holder) (the “Buy-In Price”), at which point
the Company’s obligation to so issue and deliver such certificate (and to issue
such shares of Common Stock) or credit the balance account of such Holder or
such Holder’s designee, as applicable, with DTC for the number of Warrant Shares
to which the Holder is entitled upon the Holder’s exercise hereunder (as the
case may be) (and to issue such Warrant Shares) shall terminate, or
(ii) promptly honor its obligation to so issue and deliver to the Holder a
certificate or certificates representing such Warrant Shares or credit the
balance account of such Holder or such Holder’s designee, as applicable, with
DTC for the number of Warrant Shares to which the Holder is entitled upon the
Holder’s exercise hereunder (as the case may be) and pay cash to the Holder in
an amount equal to the excess (if any) of the Buy-In Price over the product of
(A) such number of Warrant Shares multiplied by (B) the lowest Closing Sale
Price of the Common Stock on any Trading Day during the period commencing on the
date of the applicable Exercise Notice and ending on the date of such issuance
and payment under this clause (ii) (the “Buy-In Payment Amount”). Nothing shall
limit the Holder’s right to pursue any other remedies available to it hereunder,
at law or in equity, including, without limitation, a decree of specific
performance and/or injunctive relief with respect to the Company’s failure to
timely deliver certificates representing shares of Common Stock (or to
electronically deliver such shares of Common Stock) upon the exercise of this
Warrant as required pursuant to the terms hereof.

(d) Cashless Exercise. Notwithstanding anything contained herein to the contrary
(other than Section 1(f) below), if at the time of exercise hereof a
Registration Statement (as defined in the Registration Rights Agreement (as
defined in the Securities Purchase Agreement)) is not effective (or the
prospectus contained therein is not available for use) for the resale by the
Holder of all of the Warrant Shares, then the Holder may, in its sole
discretion, exercise this Warrant in whole or in part and, in lieu of making the
cash payment otherwise contemplated to be made to the Company upon such exercise
in payment of the Aggregate Exercise Price, elect instead to receive upon such
exercise the “Net Number” of Warrant Shares determined according to the
following formula (a “Cashless Exercise”):

 

   Net Number =  

(A x B) - (A x C)

      D  

For purposes of the foregoing formula:

A= the total number of shares with respect to which this Warrant is then being
exercised.

B = the quotient of (x) the sum of the VWAP of the Common Stock of each of the
ten (10) Trading Days ending at the close of business on the Principal Market
immediately prior to the time of exercise as set forth in the applicable
Exercise Notice, divided by (y) ten (10).

 

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C = the Exercise Price then in effect for the applicable Warrant Shares at the
time of such exercise.

D = the VWAP of the Common Stock at the close of business on the Principal
Market on the date of the delivery of the applicable Exercise Notice.

For purposes of Rule 144(d) promulgated under the 1933 Act, as in effect on the
Subscription Date, it is intended that the Warrant Shares issued in a Cashless
Exercise shall be deemed to have been acquired by the Holder, and the holding
period for the Warrant Shares shall be deemed to have commenced, on the date
this Warrant was originally issued pursuant to the Securities Purchase
Agreement.

(e) Disputes. In the case of a dispute as to the determination of the Exercise
Price or the arithmetic calculation of the number of Warrant Shares to be issued
pursuant to the terms hereof, the Company shall promptly issue to the Holder the
number of Warrant Shares that are not disputed and resolve such dispute in
accordance with Section 13.

(f) Limitations on Exercises.

(i) Limitations on Beneficial Ownership. The Company shall not effect the
exercise of any portion of this Warrant, and the Holder shall not have the right
to exercise any portion of this Warrant, pursuant to the terms and conditions of
this Warrant and any such exercise shall be null and void and treated as if
never made, to the extent that after giving effect to such exercise, the Holder
together with the other Attribution Parties collectively would beneficially own
in excess of 4.99% (the “Maximum Percentage”) of the shares of Common Stock
outstanding immediately after giving effect to such exercise. For purposes of
the foregoing sentence, the aggregate number of shares of Common Stock
beneficially owned by the Holder and the other Attribution Parties shall include
the number of shares of Common Stock held by the Holder and all other
Attribution Parties plus the number of shares of Common Stock issuable upon
exercise of this Warrant with respect to which the determination of such
sentence is being made, but shall exclude shares of Common Stock which would be
issuable upon (A) exercise of the remaining, unexercised portion of this Warrant
beneficially owned by the Holder or any of the other Attribution Parties and
(B) exercise or conversion of the unexercised or unconverted portion of any
other securities of the Company (including, without limitation, any convertible
notes or convertible preferred stock or warrants, including other SPA Warrants)
beneficially owned by the Holder or any other Attribution Party subject to a
limitation on conversion or exercise analogous to the limitation contained in
this Section 1(f)(i). For purposes of this Section 1(f)(i), beneficial ownership
shall be calculated in accordance with Section 13(d) of the 1934 Act. For
purposes of determining the number of outstanding shares of Common Stock the
Holder may acquire upon the exercise of this Warrant without exceeding the
Maximum Percentage, the Holder may rely on the number of outstanding shares of
Common Stock as reflected in (x) the Company’s most recent Annual Report on Form
10-K, Quarterly Report on Form 10-Q,

 

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Current Report on Form 8-K or other public filing with the SEC, as the case may
be, (y) a more recent public announcement by the Company or (z) any other
written notice by the Company or the Transfer Agent, if any, setting forth the
number of shares of Common Stock outstanding (the “Reported Outstanding Share
Number”). If the Company receives an Exercise Notice from the Holder at a time
when the actual number of outstanding shares of Common Stock is less than the
Reported Outstanding Share Number, the Company shall (i) notify the Holder in
writing of the number of shares of Common Stock then outstanding and, to the
extent that such Exercise Notice would otherwise cause the Holder’s beneficial
ownership, as determined pursuant to this Section 1(f)(i), to exceed the Maximum
Percentage, the Holder must notify the Company of a reduced number of Warrant
Shares to be acquired pursuant to such Exercise Notice (the number of shares by
which such purchase is reduced, the “Reduction Shares”) and (ii) as soon as
reasonably practicable, the Company shall return to the Holder any exercise
price paid by the Holder for the Reduction Shares. For any reason at any time,
upon the written or oral request of the Holder, the Company shall within one
(1) Business Day confirm orally and in writing or by electronic mail to the
Holder the number of shares of Common Stock then outstanding. In any case, the
number of outstanding shares of Common Stock shall be determined after giving
effect to the conversion or exercise of securities of the Company, including
this Warrant, by the Holder and any other Attribution Party since the date as of
which the Reported Outstanding Share Number was reported. In the event that the
issuance of shares of Common Stock to the Holder upon exercise of this Warrant
results in the Holder and the other Attribution Parties being deemed to
beneficially own, in the aggregate, more than the Maximum Percentage of the
number of outstanding shares of Common Stock (as determined under Section 13(d)
of the 1934 Act), the number of shares so issued by which the Holder’s and the
other Attribution Parties’ aggregate beneficial ownership exceeds the Maximum
Percentage (the “Excess Shares”) shall be deemed null and void and shall be
cancelled ab initio, and the Holder shall not have the power to vote or to
transfer the Excess Shares. As soon as reasonably practicable after the issuance
of the Excess Shares has been deemed null and void, the Company shall return to
the Holder the exercise price paid by the Holder for the Excess Shares. Upon
delivery of a written notice to the Company, the Holder may from time to time
increase (with such increase not effective until the sixty-first (61st) day
after delivery of such notice) or decrease the Maximum Percentage to any other
percentage not in excess of 9.99% as specified in such notice; provided that
(i) any such increase in the Maximum Percentage will not be effective until the
sixty-first (61st) day after such notice is delivered to the Company and
(ii) any such increase or decrease will apply only to the Holder and the other
Attribution Parties and not to any other holder of SPA Warrants that is not an
Attribution Party of the Holder. For purposes of clarity, the shares of Common
Stock issuable pursuant to the terms of this Warrant in excess of the Maximum
Percentage shall not be deemed to be beneficially owned by the Holder for any
purpose including for purposes of Section 13(d) or Rule 16a-1(a)(1) of the 1934
Act. No prior inability to exercise this Warrant pursuant to this paragraph
shall have any effect on the applicability of the provisions of this paragraph
with respect to any subsequent determination of exercisability. The provisions
of this paragraph shall be construed and implemented in a manner otherwise than
in strict conformity with the terms of this Section 1(f)(i) to the extent
necessary to correct this paragraph or any portion of this

 

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paragraph which may be defective or inconsistent with the intended beneficial
ownership limitation contained in this Section 1(f)(i) or to make changes or
supplements necessary or desirable to properly give effect to such limitation.
The limitation contained in this paragraph may not be waived and shall apply to
a successor holder of this Warrant.

(ii) Principal Market Regulation. The Company shall not issue any shares of
Common Stock upon the exercise of this Warrant if the issuance of such shares of
Common Stock (taken together with the issuance of the Company Common Shares (as
defined in the Securities Purchase Agreement) and the Warrant Shares issuable
upon the exercise of the SPA Warrants) would exceed the aggregate number of
shares of Common Stock which the Company may issue upon exercise or conversion
(as the case may be) of the SPA Warrants without breaching the Company’s
obligations under the rules or regulations of the Principal Market (the number
of shares which may be issued without violating such rules and regulations, the
“Exchange Cap”), except that such limitation shall not apply in the event that
the Company (A) obtains the approval of its stockholders as required by the
applicable rules of the Principal Market for issuances of shares of Common Stock
in excess of such amount (and in the case of a written consent in lieu of a
stockholders meeting, after the Company has sent an information statement under
the 1934 Act and the waiting period under the 1934 Act for the consent to be
effective has expired) or (B) obtains a written opinion from outside counsel to
the Company that such approval is not required, which opinion shall be
reasonably satisfactory to the Holder or (C) obtains a waiver from the Principal
Market of the applicable rules of such Principal Market for the issuance of
shares of Common Stock in excess of such amount. While such limitation applies,
no Buyer shall be issued in the aggregate, upon exercise of any of the SPA
Warrants, shares of Common Stock in an amount greater than the product of
(i) the Exchange Cap as of the Issuance Date multiplied by (ii) the quotient of
(1) aggregate number of Company Common Shares issued to such Buyer pursuant to
the Securities Purchase Agreement on the Closing Date (as defined in the
Securities Purchase Agreement) divided by (2) aggregate number of Company Common
Shares issued to the Buyers pursuant to the Securities Purchase Agreement on the
Closing Date (with respect to each Buyer, the “Exchange Cap Allocation”). In the
event that any Buyer shall sell or otherwise transfer any of such Buyer’s SPA
Warrants, the transferee shall be allocated a pro rata portion of such Buyer’s
Exchange Cap Allocation with respect to such portion of such SPA Warrants so
transferred, and the restrictions of the prior sentence shall apply to such
transferee with respect to the portion of the Exchange Cap Allocation so
allocated to such transferee. Upon exercise in full of a holder’s SPA
Warrants, the difference (if any) between such holder’s Exchange Cap Allocation
and the number of shares of Common Stock actually issued to such holder upon
such holder’s exercise in full of such SPA Warrants shall be allocated to the
respective Exchange Cap Allocations of the remaining holders of SPA Warrants on
a pro rata basis in proportion to the shares of Common Stock underlying the SPA
Warrants then held by each such holder. At any time after the Adjustment Time,
in the event that the Company is prohibited from issuing any shares of Common
Stock pursuant to this Section 1(f)(ii) (the “Exchange Cap Shares”), in lieu of
issuing and delivering such Exchange Cap Shares to the Holder, the Company shall
pay cash to the Holder in exchange for the cancellation of such portion of this
Warrant exercisable into such Exchange Cap Shares at a price equal to the sum of
(x) the product

 

7

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of (A) such number of Exchange Cap Shares and (B) the greatest Closing Sale
Price of the Common Stock on any Trading Day during the period commencing on the
date the Holder delivers the applicable Exercise Notice with respect to such
Exchange Cap Shares to the Company and ending on the date immediately preceding
the date of such payment under this Section 1(f)(ii) and (y) to the extent the
Holder purchases (in an open market transaction or otherwise) shares of Common
Stock to deliver in satisfaction of a sale by the Holder of Exchange Cap Shares,
any Buy-In Payment Amount, brokerage commissions and other out-of-pocket
expenses, if any, of the Holder incurred in connection therewith.

(g) Reservation of Shares.

(i) Required Reserve Amount. So long as this Warrant remains outstanding, the
Company shall at all times keep reserved for issuance under this Warrant a
number of shares of Common Stock at least equal to the maximum number of shares
of Common Stock as shall be necessary to satisfy the Company’s obligation to
issue shares of Common Stock under the SPA Warrants then outstanding (without
regard to any limitations on exercise) (the “Required Reserve Amount”); provided
that at no time shall the number of shares of Common Stock reserved pursuant to
this Section 1(g)(i) be reduced other than proportionally in connection with any
exercise or redemption of SPA Warrants or such other event covered by
Section 2(a) below. The Required Reserve Amount (including, without limitation,
each increase in the number of shares so reserved) shall be allocated pro rata
among the holders of the SPA Warrants based on number of shares of Common Stock
issuable upon exercise of Series A SPA Warrants held by each holder on the
Closing Date (without regard to any limitations on exercise) or increase in the
number of reserved shares, as the case may be (the “Authorized Share
Allocation”). In the event that a holder shall sell or otherwise transfer any of
such holder’s SPA Warrants, each transferee shall be allocated a pro rata
portion of such holder’s Authorized Share Allocation. Any shares of Common Stock
reserved and allocated to any Person which ceases to hold any SPA Warrants shall
be allocated to the remaining holders of SPA Warrants, pro rata based on the
number of shares of Common Stock issuable upon exercise of the SPA Warrants then
held by such holders (without regard to any limitations on exercise).

(ii) Insufficient Authorized Shares. If, notwithstanding Section 1(g)(i) above,
and not in limitation thereof, at any time while any of the SPA Warrants remain
outstanding, the Company does not have a sufficient number of authorized and
unreserved shares of Common Stock to satisfy its obligation to reserve the
Required Reserve Amount (an “Authorized Share Failure”), then the Company shall
immediately take all action necessary to increase the Company’s authorized
shares of Common Stock to an amount sufficient to allow the Company to reserve
the Required Reserve Amount for all the SPA Warrants then outstanding. Without
limiting the generality of the foregoing sentence, as soon as practicable after
the date of the occurrence of an Authorized Share Failure, but in no event later
than sixty (60) days after the occurrence of such Authorized Share Failure, the
Company shall hold a meeting of its stockholders for the approval of an increase
in the number of authorized shares of Common Stock. In

 

8

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connection with such meeting, the Company shall provide each stockholder with a
proxy statement and shall use its best efforts to solicit its stockholders’
approval of such increase in authorized shares of Common Stock and to cause its
board of directors to recommend to the stockholders that they approve such
proposal. In the event that the Company is prohibited from issuing shares of
Common Stock upon an exercise of this Warrant due to the failure by the Company
to have sufficient shares of Common Stock available out of the authorized but
unissued shares of Common Stock (such unavailable number of shares of Common
Stock, the “Authorization Failure Shares”), in lieu of delivering such
Authorization Failure Shares to the Holder, the Company shall pay cash in
exchange for the cancellation of such portion of this Warrant exercisable into
such Authorized Failure Shares at a price equal to the sum of (i) the product of
(x) such number of Authorization Failure Shares and (y) the greatest Closing
Sale Price of the Common Stock on any Trading Day during the period commencing
on the date the Holder delivers the applicable Exercise Notice with respect to
such Authorization Failure Shares to the Company and ending on the date of such
issuance and payment under this Section 1(f)(i); and (ii) to the extent the
Holder purchases (in an open market transaction or otherwise) shares of Common
Stock to deliver in satisfaction of a sale by the Holder of Authorization
Failure Shares, any Buy-In Payment Amount, brokerage commissions and other
out-of-pocket expenses, if any, of the Holder incurred in connection therewith.
Nothing contained in this Section 1(g)(ii) shall limit any obligations of the
Company under any provision of the Securities Purchase Agreement.

2. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES. The Exercise Price
and number of Warrant Shares issuable upon exercise of this Warrant are subject
to adjustment from time to time as set forth in this Section 2.

(a) Stock Dividends and Splits. Without limiting any provision of Section 3 or
Section 4, if the Company, at any time on or after the Subscription Date,
(i) pays a stock dividend on one or more classes of its then outstanding shares
of Common Stock or otherwise makes a distribution on any class of capital stock
that is payable in shares of Common Stock, (ii) subdivides (by any stock split,
stock dividend, recapitalization or otherwise) one or more classes of its then
outstanding shares of Common Stock into a larger number of shares or
(iii) combines (by combination, reverse stock split or otherwise) one or more
classes of its then outstanding shares of Common Stock into a smaller number of
shares, then in each such case the Exercise Price shall be multiplied by a
fraction of which the numerator shall be the number of shares of Common Stock
outstanding immediately before such event and of which the denominator shall be
the number of shares of Common Stock outstanding immediately after such event.
Any adjustment made pursuant to clause (i) of this paragraph shall become
effective immediately after the record date for the determination of
stockholders entitled to receive such dividend or distribution, and any
adjustment pursuant to clause (ii) or (iii) of this paragraph shall become
effective immediately after the effective date of such subdivision or
combination. If any event requiring an adjustment under this paragraph occurs
during the period that an Exercise Price is calculated hereunder, then the
calculation of such Exercise Price shall be adjusted appropriately to reflect
such event.

 

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(b) Number of Warrant Shares. Simultaneously with any adjustment to the Exercise
Price pursuant to this Section 2, the number of Warrant Shares that may be
purchased upon exercise of this Warrant shall be increased or decreased
proportionately, so that after such adjustment the aggregate Exercise Price
payable hereunder for the adjusted number of Warrant Shares shall be the same as
the aggregate Exercise Price in effect immediately prior to such adjustment
(without regard to any limitations on exercise contained herein).

(c) Calculations. All calculations under this Section 2 shall be made by
rounding to the nearest cent or the nearest 1/100th of a share, as applicable.
The number of shares of Common Stock outstanding at any given time shall not
include shares owned or held by or for the account of the Company, and the
disposition of any such shares shall be considered an issuance or sale of Common
Stock.

(d) Voluntary Adjustment By Company. The Company may at any time during the term
of this Warrant, with the prior written consent of the Required Holders (as
defined in the Securities Purchase Agreement), reduce the then current Exercise
Price to any amount and for any period of time deemed appropriate by the board
of directors of the Company.

3. RIGHTS UPON DISTRIBUTION OF ASSETS. In addition to any adjustments pursuant
to Section 2 above, if the Company shall declare or make any dividend or other
distribution of its assets (or rights to acquire its assets) to holders of
shares of Common Stock, by way of return of capital or otherwise (including,
without limitation, any distribution of cash, stock or other securities,
property, options, evidence of indebtedness or any other assets by way of a
dividend, spin off, reclassification, corporate rearrangement, scheme of
arrangement or other similar transaction) (a “Distribution”), at any time after
the issuance of this Warrant, then, in each such case, the Holder shall be
entitled to participate in such Distribution to the same extent that the Holder
would have participated therein if the Holder had held the number of shares of
Common Stock acquirable upon complete exercise of this Warrant (without regard
to any limitations or restrictions on exercise of this Warrant, including
without limitation, the Maximum Percentage) immediately before the date on which
a record is taken for such Distribution, or, if no such record is taken, the
date as of which the record holders of shares of Common Stock are to be
determined for the participation in such Distribution (provided, however, that
to the extent that the Holder’s right to participate in any such Distribution
would result in the Holder and the other Attribution Parties exceeding the
Maximum Percentage, then the Holder shall not be entitled to participate in such
Distribution to the extent of the Maximum Percentage (and shall not be entitled
to beneficial ownership of such shares of Common Stock as a result of such
Distribution (and beneficial ownership) to the extent of any such excess) and
the portion of such Distribution shall be held in abeyance for the benefit of
the Holder until such time or times, if ever, as its right thereto would not
result in the Holder and the other Attribution Parties exceeding the Maximum
Percentage, at which time or times the Holder shall be granted such Distribution
(and any Distributions declared or made on such initial Distribution or on any
subsequent Distribution held similarly in abeyance) to the same extent as if
there had been no such limitation).

4. PURCHASE RIGHTS; FUNDAMENTAL TRANSACTIONS.

(a) Purchase Rights. In addition to any adjustments pursuant to Section 2 above,
if at any time the Company grants, issues or sells any Options, Convertible
Securities or rights to

 

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purchase stock, warrants, securities or other property pro rata to the record
holders of any class of Common Stock (the “Purchase Rights”), then the Holder
will be entitled to acquire, upon the terms applicable to such Purchase Rights,
the aggregate Purchase Rights which the Holder could have acquired if the Holder
had held the number of shares of Common Stock acquirable upon complete exercise
of this Warrant (without regard to any limitations or restrictions on exercise
of this Warrant, including without limitation, the Maximum Percentage)
immediately before the date on which a record is taken for the grant, issuance
or sale of such Purchase Rights, or, if no such record is taken, the date as of
which the record holders of shares of Common Stock are to be determined for the
grant, issuance or sale of such Purchase Rights (provided, however, that to the
extent that the Holder’s right to participate in any such Purchase Right would
result in the Holder and the other Attribution Parties exceeding the Maximum
Percentage, then the Holder shall not be entitled to participate in such
Purchase Right to the extent of the Maximum Percentage (and shall not be
entitled to beneficial ownership of such shares of Common Stock as a result of
such Purchase Right (and beneficial ownership) to the extent of any such excess)
and such Purchase Right to such extent shall be held in abeyance for the benefit
of the Holder until such time or times, if ever, as its right thereto would not
result in the Holder and the other Attribution Parties exceeding the Maximum
Percentage, at which time or times the Holder shall be granted such right (and
any Purchase Right granted, issued or sold on such initial Purchase Right or on
any subsequent Purchase Right held similarly in abeyance) to the same extent as
if there had been no such limitation).

(b) Fundamental Transactions. The Company shall not enter into or be party to a
Fundamental Transaction unless the Successor Entity (if the Successor Entity is
not the Company) assumes in writing all of the obligations of the Company under
this Warrant and the other Transaction Documents (as defined in the Securities
Purchase Agreement) in accordance with the provisions of this Section 4(b)
pursuant to written agreements in form and substance satisfactory to the Holder
and approved by the Holder prior to such Fundamental Transaction, including
agreements to deliver to the Holder in exchange for this Warrant a security of
such Successor Entity evidenced by a written instrument substantially similar in
form and substance to this Warrant, including, without limitation, which is
exercisable for a corresponding number of shares of capital stock equivalent to
the shares of Common Stock acquirable and receivable upon exercise of this
Warrant (without regard to any limitations on the exercise of this Warrant)
prior to such Fundamental Transaction, and with an exercise price which applies
the exercise price hereunder to such shares of capital stock (but taking into
account the relative value of the shares of Common Stock pursuant to such
Fundamental Transaction and the value of such shares of capital stock, such
adjustments to the number of shares of capital stock and such exercise price
being for the purpose of protecting the economic value of this Warrant
immediately prior to the consummation of such Fundamental Transaction). Upon the
consummation of each Fundamental Transaction, the Successor Entity (if the
Successor Entity is not the Company) shall succeed to, and be substituted for
(so that from and after the date of the applicable Fundamental Transaction, the
provisions of this Warrant and the other Transaction Documents referring to the
“Company” shall refer instead to the Successor Entity), and may exercise every
right and power of the Company and shall assume all of the obligations of the
Company under this Warrant and the other Transaction Documents with the same
effect as if such Successor Entity had been named as the Company herein. Upon
consummation of each Fundamental Transaction, the Successor Entity (if the
Successor Entity is not the Company) shall deliver to the Holder

 

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confirmation that there shall be issued upon exercise of this Warrant at any
time after the consummation of the applicable Fundamental Transaction, in lieu
of the shares of Common Stock (or other securities, cash, assets or other
property (except such items still issuable under Sections 3 and 4(a) above,
which shall continue to be receivable thereafter)) issuable upon the exercise of
this Warrant prior to the applicable Fundamental Transaction, such shares of
publicly traded common stock (or its equivalent) of the Successor Entity
(including its Parent Entity) which the Holder would have been entitled to
receive upon the happening of the applicable Fundamental Transaction had this
Warrant been exercised immediately prior to the applicable Fundamental
Transaction (without regard to any limitations on the exercise of this Warrant),
as adjusted in accordance with the provisions of this Warrant. Notwithstanding
the foregoing, and without limiting Section 1(f) hereof, the Holder may elect,
at its sole option, by delivery of written notice to the Company to waive this
Section 4(b) to permit the Fundamental Transaction without the assumption of
this Warrant. In addition to and not in substitution for any other rights
hereunder, prior to the consummation of each Fundamental Transaction pursuant to
which holders of shares of Common Stock are entitled to receive securities or
other assets with respect to or in exchange for shares of Common Stock (a
“Corporate Event”), the Company shall make appropriate provision to insure that
the Holder will upon the closing of such Fundamental Transaction have the right
to receive upon an exercise of this Warrant at any time after the consummation
of the applicable Fundamental Transaction but prior to the Expiration Date, in
lieu of the shares of the Common Stock (or other securities, cash, assets or
other property (except such items still issuable under Sections 3 and 4(a)
above, which shall continue to be receivable thereafter)) issuable upon the
exercise of the Warrant prior to such Fundamental Transaction, such shares of
stock, securities, cash, assets or any other property whatsoever (including
warrants or other purchase or subscription rights) which the Holder would have
been entitled to receive upon the happening of the applicable Fundamental
Transaction had this Warrant been exercised immediately prior to the applicable
Fundamental Transaction (without regard to any limitations on the exercise of
this Warrant). Provision made pursuant to the preceding sentence shall be in a
form and substance reasonably satisfactory to the Holder. Notwithstanding the
foregoing, upon any Going Private Transaction, each Holder will receive at the
consummation thereof the greater of (x) the Black-Scholes Value and (y) the
consideration it would have received had it exercised this Warrant and received
Common Stock in full (without regard to any limitations on exercise set forth
herein) immediately prior to such consummation.

 

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(c) Black Scholes Value. Notwithstanding the foregoing and the provisions of
Section 4(b) above, at the request of the Holder delivered at any time
commencing on the earliest to occur of (x) the public disclosure of any Change
of Control, (y) the consummation of any Change of Control and (z) the Holder
first becoming aware of any Change of Control through the date that is sixty
(60) days after the public disclosure of the consummation of such Change of
Control by the Company pursuant to a Current Report on Form 8-K filed with the
SEC, the Company or the Successor Entity (as the case may be) shall purchase
this Warrant from the Holder on the date of such request by paying to the Holder
cash in an amount equal to the Black Scholes Value. Payment of such amounts
shall be made by the Company (or at the Company’s direction) to the Holder on or
prior to the later of (x) the second (2nd) Trading Day after the date of such
request and (y) the date of consummation of such Change of Control.
Notwithstanding the foregoing, payments made under this Section 4(c) shall not
be duplicative of payments made under Section 4(b) above.

(d) Application. The provisions of this Section 4 shall apply similarly and
equally to successive Fundamental Transactions and Corporate Events and shall be
applied as if this Warrant (and any such subsequent warrants) were fully
exercisable and without regard to any limitations on the exercise of this
Warrant (provided that the Holder shall continue to be entitled to the benefit
of the Maximum Percentage, applied however with respect to shares of capital
stock registered under the 1934 Act and thereafter receivable upon exercise of
this Warrant (or any such other warrant)).

5. NONCIRCUMVENTION. The Company hereby covenants and agrees that the Company
will not, by amendment of its Certificate of Incorporation (as defined in the
Securities Purchase Agreement), Bylaws (as defined in the Securities Purchase
Agreement) or through any reorganization, transfer of assets, consolidation,
merger, scheme of arrangement, dissolution, issuance or sale of securities, or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Warrant, and will at all times in good faith carry
out all the provisions of this Warrant and take all action as may be required to
protect the rights of the Holder. Without limiting the generality of the
foregoing, the Company (a) shall not increase the par value of any shares of
Common Stock receivable upon the exercise of this Warrant above the Exercise
Price then in effect, and (b) shall take all such actions as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid
and non-assessable shares of Common Stock upon the exercise of this Warrant.

6. WARRANT HOLDER NOT DEEMED A STOCKHOLDER. Except as otherwise specifically
provided herein, the Holder, solely in its capacity as a holder of this Warrant,
shall not be entitled to vote or receive dividends or be deemed the holder of
share capital of the Company for any purpose, nor shall anything contained in
this Warrant be construed to confer upon the Holder, solely in its capacity as
the Holder of this Warrant, any of the rights of a stockholder of the Company or
any right to vote, give or withhold consent to any corporate action (whether any
reorganization, issue of stock, reclassification of stock, consolidation,
merger, conveyance or otherwise), receive notice of meetings, receive dividends
or subscription rights, or otherwise, prior to the issuance to the Holder of the
Warrant Shares which it is then entitled to receive upon the due exercise of
this Warrant. In addition, nothing contained in this Warrant shall be construed
as imposing any liabilities on the Holder to purchase any securities (upon
exercise of this Warrant or otherwise) or as a stockholder of the Company,
whether such liabilities are asserted by the Company or by creditors of the
Company. Notwithstanding this

 

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Section 6, the Company shall provide the Holder with copies of the same notices
and other information given to the stockholders of the Company generally,
contemporaneously with the giving thereof to the stockholders.

7. REISSUANCE OF WARRANTS.

(a) Transfer of Warrant. If this Warrant is to be transferred, the Holder shall
surrender this Warrant to the Company, whereupon the Company will forthwith
issue and deliver upon the order of the Holder a new Warrant (in accordance with
Section 7(d)), registered as the Holder may request, representing the right to
purchase the number of Warrant Shares being transferred by the Holder and, if
less than the total number of Warrant Shares then underlying this Warrant is
being transferred, a new Warrant (in accordance with Section 7(d)) to the Holder
representing the right to purchase the number of Warrant Shares not being
transferred.

(b) Lost, Stolen or Mutilated Warrant. Upon receipt by the Company of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of this Warrant (as to which a written certification and the
indemnification contemplated below shall suffice as such evidence), and, in the
case of loss, theft or destruction, of any indemnification undertaking by the
Holder to the Company in customary and reasonable form and, in the case of
mutilation, upon surrender and cancellation of this Warrant, the Company shall
execute and deliver to the Holder a new Warrant (in accordance with
Section 7(d)) representing the right to purchase the Warrant Shares then
underlying this Warrant.

(c) Exchangeable for Multiple Warrants. This Warrant is exchangeable, upon the
surrender hereof by the Holder at the principal office of the Company, for a new
Warrant or Warrants (in accordance with Section 7(d)) representing in the
aggregate the right to purchase the number of Warrant Shares then underlying
this Warrant, and each such new Warrant will represent the right to purchase
such portion of such Warrant Shares as is designated by the Holder at the time
of such surrender; provided, however, no warrants for fractional shares of
Common Stock shall be given.

(d) Issuance of New Warrants. Whenever the Company is required to issue a new
Warrant pursuant to the terms of this Warrant, such new Warrant (i) shall be of
like tenor with this Warrant, (ii) shall represent, as indicated on the face of
such new Warrant, the right to purchase the Warrant Shares then underlying this
Warrant (or in the case of a new Warrant being issued pursuant to Section 7(a)
or Section 7(c), the Warrant Shares designated by the Holder which, when added
to the number of shares of Common Stock underlying the other new Warrants issued
in connection with such issuance, does not exceed the number of Warrant Shares
then underlying this Warrant), (iii) shall have an issuance date, as indicated
on the face of such new Warrant which is the same as the Issuance Date, and
(iv) shall have the same rights and conditions as this Warrant.

8. NOTICES. Whenever notice is required to be given under this Warrant, unless
otherwise provided herein, such notice shall be given in accordance with
Section 9(f) of the Securities Purchase Agreement. Without limiting the
generality of the foregoing, the Company will give written notice to the Holder
(i) immediately upon each adjustment of the Exercise Price and the number of
Warrant Shares, setting forth in reasonable detail, and certifying, the
calculation of

 

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such adjustment(s), (ii) at least fifteen (15) days prior to the date on which
the Company closes its books or takes a record (A) with respect to any dividend
or distribution upon the shares of Common Stock or (B) for determining rights to
vote with respect to any Fundamental Transaction, dissolution or liquidation,
provided in each case that such information shall be made known to the public
prior to or in conjunction with such notice being provided to the Holder, and
(iii) at least ten (10) Trading Days prior to the consummation of any
Fundamental Transaction or Going Private Transaction. The Company shall provide
the Holder with prompt written notice of all other actions taken pursuant to
this Warrant (other than the issuance of shares of Common Stock upon exercise in
accordance with the terms hereof), including in reasonable detail a description
of such action and the reason therefor. To the extent that any notice provided
hereunder constitutes, or contains, material, non-public information regarding
the Company or any of its Subsidiaries, the Company shall simultaneously file
such notice with the SEC (as defined in the Securities Purchase Agreement)
pursuant to a Current Report on Form 8-K. If the Company or any of its
Subsidiaries provides material non-public information to the Holder that is not
simultaneously filed in a Current Report on Form 8-K and the Holder has not
agreed to receive such material non-public information, the Company hereby
covenants and agrees that the Holder shall not have any duty of confidentiality
to the Company, any of its Subsidiaries or any of their respective officers,
directors, employees, affiliates or agents with respect to, or a duty to any of
the foregoing not to trade on the basis of, such material non-public
information. It is expressly understood and agreed that the time of execution
specified by the Holder in each Exercise Notice shall be definitive and may not
be disputed or challenged by the Company.

9. AMENDMENT AND WAIVER. Except as otherwise provided herein, the provisions of
this Warrant (other than Section 1(f)) may be amended and the Company may take
any action herein prohibited, or omit to perform any act herein required to be
performed by it, only if the Company has obtained the written consent of the
Holder. No waiver shall be effective unless it is in writing and signed by an
authorized representative of the waiving party.

10. SEVERABILITY. If any provision of this Warrant is prohibited by law or
otherwise determined to be invalid or unenforceable by a court of competent
jurisdiction, the provision that would otherwise be prohibited, invalid or
unenforceable shall be deemed amended to apply to the broadest extent that it
would be valid and enforceable, and the invalidity or unenforceability of such
provision shall not affect the validity of the remaining provisions of this
Warrant so long as this Warrant as so modified continues to express, without
material change, the original intentions of the parties as to the subject matter
hereof and the prohibited nature, invalidity or unenforceability of the
provision(s) in question does not substantially impair the respective
expectations or reciprocal obligations of the parties or the practical
realization of the benefits that would otherwise be conferred upon the parties.
The parties will endeavor in good faith negotiations to replace the prohibited,
invalid or unenforceable provision(s) with a valid provision(s), the effect of
which comes as close as possible to that of the prohibited, invalid or
unenforceable provision(s).

11. GOVERNING LAW. This Warrant shall be governed by and construed and enforced
in accordance with, and all questions concerning the construction, validity,
interpretation and performance of this Warrant shall be governed by, the
internal laws of the State of New York, without giving effect to any choice of
law or conflict of law provision or rule (whether of the

 

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State of New York or any other jurisdictions) that would cause the application
of the laws of any jurisdictions other than the State of New York. The Company
and the Holder hereby irrevocably waive personal service of process and consents
to process being served in any such suit, action or proceeding by mailing a copy
thereof to the Company or the Holder at the address set forth in Section 9(f) of
the Securities Purchase Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof. The Company and the
Holder hereby irrevocably submit to the exclusive jurisdiction of the state and
federal courts sitting in The City of New York, Borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waive, and agree not to assert in any suit, action or proceeding, any claim that
it is not personally subject to the jurisdiction of any such court, that such
suit, action or proceeding is brought in an inconvenient forum or that the venue
of such suit, action or proceeding is improper. Nothing contained herein shall
be deemed to limit in any way any right to serve process in any manner permitted
by law. THE COMPANY AND THE HOLDER HEREBY IRREVOCABLY WAIVE ANY RIGHT THAT THE
COMPANY OR THE HOLDER MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR
THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT
OF THIS WARRANT OR ANY TRANSACTION CONTEMPLATED HEREBY.

12. CONSTRUCTION; HEADINGS. This Warrant shall be deemed to be jointly drafted
by the Company and the Holder and shall not be construed against any Person as
the drafter hereof. The headings of this Warrant are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Warrant. Terms used in this Warrant but defined in the other Transaction
Documents shall have the meanings ascribed to such terms on the Closing Date (as
defined in the Securities Purchase Agreement) in such other Transaction
Documents unless otherwise consented to in writing by the Holder.

13. DISPUTE RESOLUTION.

(a) Submission to Dispute Resolution.

(i) In the case of a dispute relating to the Exercise Price, the Closing Sale
Price, Black Scholes Value or fair market value or the arithmetic calculation of
the number of Warrant Shares (as the case may be) (including, without
limitation, a dispute relating to the determination of any of the foregoing),
the Company or the Holder (as the case may be) shall submit the dispute to the
other party via facsimile (A) if by the Company, within five (5) Business Days
after the occurrence of the circumstances giving rise to such dispute or (B) if
by the Holder, at any time after the Holder learned of the circumstances giving
rise to such dispute. If the Holder and the Company are unable to promptly
resolve such dispute relating to such Exercise Price, such Closing Sale Price,
such Black Scholes Value or such fair market value or such arithmetic
calculation of the number of Warrant Shares (as the case may be), at any time
after the second (2nd) Business Day following such initial notice by the Company
or the Holder (as the case may be) of such dispute to the Company or the Holder
(as the case may be), then the Holder may, at its sole option, select an
independent, reputable investment bank to resolve such dispute.

 

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(ii) The Holder and the Company shall each deliver to such investment bank (A) a
copy of the initial dispute submission so delivered in accordance with the first
sentence of this Section 13 and (B) written documentation supporting its
position with respect to such dispute, in each case, no later than 5:00 p.m.
(New York time) by the fifth (5th) Business Day immediately following the date
on which the Holder selected such investment bank (the “Dispute Submission
Deadline”) (the documents referred to in the immediately preceding clauses
(A) and (B) are collectively referred to herein as the “Required Dispute
Documentation”) (it being understood and agreed that if either the Holder or the
Company fails to so deliver all of the Required Dispute Documentation by the
Dispute Submission Deadline, then the party who fails to so submit all of the
Required Dispute Documentation shall no longer be entitled to (and hereby waives
its right to) deliver or submit any written documentation or other support to
such investment bank with respect to such dispute and such investment bank shall
resolve such dispute based solely on the Required Dispute Documentation that was
delivered to such investment bank prior to the Dispute Submission Deadline).
Unless otherwise agreed to in writing by both the Company and the Holder or
otherwise requested by such investment bank, neither the Company nor the Holder
shall be entitled to deliver or submit any written documentation or other
support to such investment bank in connection with such dispute (other than the
Required Dispute Documentation).

(iii) The Company and the Holder shall cause such investment bank to determine
the resolution of such dispute and notify the Company and the Holder of such
resolution no later than ten (10) Business Days immediately following the
Dispute Submission Deadline. The fees and expenses of such investment bank shall
be borne solely by the Company, and such investment bank’s resolution of such
dispute shall be final and binding upon all parties absent manifest error.

(b) Miscellaneous. The Company expressly acknowledges and agrees that (i) this
Section 13 constitutes an agreement to arbitrate between the Company and the
Holder (and constitutes an arbitration agreement) under the rules then in effect
under § 7501, et seq. of the New York Civil Practice Law and Rules (“CPLR”) and
that the Holder is authorized to apply for an order to compel arbitration
pursuant to CPLR § 7503(a) in order to compel compliance with this Section 13,
(ii) the terms of this Warrant and each other applicable Transaction Document
shall serve as the basis for the selected investment bank’s resolution of the
applicable dispute, such investment bank shall be entitled (and is hereby
expressly authorized) to make all findings, determinations and the like that
such investment bank determines are required to be made by such investment bank
in connection with its resolution of such dispute and in resolving such dispute
such investment bank shall apply such findings, determinations and the like to
the terms of this Warrant and any other applicable Transaction Documents and
(iv) nothing in this Section 13 shall limit the Holder from obtaining any
injunctive relief or other equitable remedies (including, without limitation,
with respect to any matters described in this Section 13).

14. REMEDIES, CHARACTERIZATION, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE
RELIEF. The remedies provided in this Warrant shall be cumulative and in
addition to all other remedies available under this Warrant and the other
Transaction Documents, at law or in equity (including a decree of specific
performance and/or other injunctive relief), and

 

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nothing herein shall limit the right of the Holder to pursue damages for any
failure by the Company to comply with the terms of this Warrant. The Company
covenants to the Holder that there shall be no characterization concerning this
instrument other than as expressly provided herein. Amounts set forth or
provided for herein with respect to payments, exercises and the like (and the
computation thereof) shall be the amounts to be received by the Holder and shall
not, except as expressly provided herein, be subject to any other obligation of
the Company (or the performance thereof). The Company acknowledges that a breach
by it of its obligations hereunder will cause irreparable harm to the Holder and
that the remedy at law for any such breach may be inadequate. The Company
therefore agrees that, in the event of any such breach or threatened breach, the
holder of this Warrant shall be entitled, in addition to all other available
remedies, to an injunction restraining any breach, without the necessity of
showing economic loss and without any bond or other security being required. The
Company shall provide all information and documentation to the Holder that is
requested by the Holder to enable the Holder to confirm the Company’s compliance
with the terms and conditions of this Warrant (including, without limitation,
compliance with Section 2 hereof). The issuance of shares and certificates for
shares as contemplated hereby upon the exercise of this Warrant shall be made
without charge to the Holder or such shares for any issuance tax or other costs
in respect thereof, provided that the Company shall not be required to pay any
tax which may be payable in respect of any transfer involved in the issuance and
delivery of any certificate in a name other than the Holder or its agent on its
behalf.

15. PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS. If (a) this Warrant is
placed in the hands of an attorney for collection or enforcement or is collected
or enforced through any legal proceeding or the holder otherwise takes action to
collect amounts due under this Warrant or to enforce the provisions of this
Warrant or (b) there occurs any bankruptcy, reorganization, receivership of the
company or other proceedings affecting company creditors’ rights and involving a
claim under this Warrant, then the Company shall pay the costs incurred by the
Holder for such collection, enforcement or action or in connection with such
bankruptcy, reorganization, receivership or other proceeding, including, without
limitation, attorneys’ fees and disbursements.

16. TRANSFER. This Warrant may be offered for sale, sold, transferred or
assigned without the consent of the Company, except as may otherwise be required
by Section 2(g) of the Securities Purchase Agreement.

17. CERTAIN DEFINITIONS. For purposes of this Warrant, the following terms shall
have the following meanings:

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

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

(c) [Intentionally Omitted]

(d) [Intentionally Omitted]

 

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(e) [Intentionally Omitted]

(f) “Affiliate” means, with respect to any Person, any other Person that
directly or indirectly controls, is controlled by, or is under common control
with, such Person, it being understood for purposes of this definition that
“control” of a Person means the power directly or indirectly either to vote 10%
or more of the stock having ordinary voting power for the election of directors
of such Person or direct or cause the direction of the management and policies
of such Person whether by contract or otherwise.

(g) “Attribution Parties” means, collectively, the following Persons and
entities: (i) any investment vehicle, including, any funds, feeder funds or
managed accounts, currently, or from time to time after the Issuance Date,
directly or indirectly managed or advised by the Holder’s investment manager or
any of its Affiliates or principals, (ii) any direct or indirect Affiliates of
the Holder or any of the foregoing, (iii) any Person acting or who could be
deemed to be acting as a Group together with the Holder or any of the foregoing
and (iv) any other Persons whose beneficial ownership of the Company’s Common
Stock would or could be aggregated with the Holder’s and the other Attribution
Parties for purposes of Section 13(d) of the 1934 Act. For clarity, the purpose
of the foregoing is to subject collectively the Holder and all other Attribution
Parties to the Maximum Percentage.

(h) [Intentionally Omitted]

(i) “Black Scholes Value” means the value of the unexercised portion of this
Warrant remaining on the date of the Holder’s request pursuant to Section 4(c),
which value is calculated using the Black Scholes Option Pricing Model obtained
from the “OV” function on Bloomberg utilizing (i) an underlying price per share
equal to the greater of (1) the highest Closing Sale Price of the Common Stock
during the period beginning on the Trading Day immediately preceding the
announcement of the applicable Change of Control (or the consummation of the
applicable Change of Control, if earlier) and ending on the Trading Day of the
Holder’s request pursuant to Section 4(c) and (2) the sum of the price per share
being offered in cash in the applicable Change of Control (if any) plus the
value of the non-cash consideration being offered in the applicable Change of
Control (if any), (ii) a strike price equal to the Exercise Price in effect on
the date of the Holder’s request pursuant to Section 4(c), (iii) a risk-free
interest rate corresponding to the U.S. Treasury rate for a period equal to the
greater of (1) the remaining term of this Warrant as of the date of the Holder’s
request pursuant to Section 4(c) and (2) the remaining term of this Warrant as
of the date of consummation of the applicable Change of Control or as of the
date of the Holder’s request pursuant to Section 4(c) if such request is prior
to the date of the consummation of the applicable Change of Control, (iv) a zero
cost of borrow and (v) an expected volatility equal to the greater of [TBD]% and
the 30 day volatility obtained from the “HVT” function on Bloomberg (determined
utilizing a 365 day annualization factor) as of the Trading Day immediately
following the earliest to occur of (A) the public disclosure of the applicable
Change of Control, (B) the consummation of the applicable Change of Control and
(C) the date on which the Holder first became aware of the applicable Change of
Control.

(j) “Bloomberg” means Bloomberg, L.P.

 

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(k) “Business Day” means any day other than Saturday, Sunday or other day on
which commercial banks in The City of New York are authorized or required by law
to remain closed.

(l) “Change of Control” means (x) any Fundamental Transaction other than (i) any
merger of the Company or any of its, direct or indirect, wholly-owned
Subsidiaries with or into any of the foregoing Persons, (ii) any reorganization,
recapitalization or reclassification of the shares of Common Stock in which
holders of the Company’s voting power immediately prior to such reorganization,
recapitalization or reclassification continue after such reorganization,
recapitalization or reclassification to hold publicly traded securities and,
directly or indirectly, are, in all material respects, the holders of the voting
power of the surviving entity (or entities with the authority or voting power to
elect the members of the board of directors (or their equivalent if other than a
corporation) of such entity or entities) after such reorganization,
recapitalization or reclassification, or (iii) pursuant to a migratory merger
effected solely for the purpose of changing the jurisdiction of incorporation of
the Company or any of its Subsidiaries or (y) the occurrence of any going
private transaction of the Company or any other event which results in the
Common Stock of the Company to cease to be registered under the 1934 Act;
provided, that solely with respect to clause (x) above, a Change of Control
shall not be deemed to have occurred if the Stockholder (as defined in the
Securities Purchase Agreement) and its Affiliates as of the Issuance Date (or
any bona fide trust or estate planning vehicle for the benefit of the
stockholder or his immediate family) beneficially owns or acquires 50% or more
of the outstanding shares of Common Stock or 50% or more of the aggregate
ordinary voting power represented by issued and outstanding Common Stock.

(m) “Closing Sale Price” means, for any security as of any date, the last
closing trade price for such security on the Principal Market, as reported by
Bloomberg, or, if the Principal Market begins to operate on an extended hours
basis and does not designate the closing trade price, then the last trade price
of such security prior to 4:00:00 p.m., New York time, as reported by Bloomberg,
or, if the Principal Market is not the principal securities exchange or trading
market for such security, the last trade price of such security on the principal
securities exchange or trading market where such security is listed or traded as
reported by Bloomberg, or if the foregoing does not apply, the last trade price
of such security in the over-the-counter market on the electronic bulletin board
for such security as reported by Bloomberg, or, if no last trade price is
reported for such security by Bloomberg, the average of the ask prices of any
market makers for such security as reported in the “pink sheets” by OTC Markets
Group Inc. (formerly Pink Sheets LLC). If the Closing Sale Price cannot be
calculated for a security on a particular date on any of the foregoing bases,
the Closing Sale Price of such security on such date shall be the fair market
value as mutually determined by the Company and the Holder. If the Company and
the Holder are unable to agree upon the fair market value of such security, then
such dispute shall be resolved in accordance with the procedures in Section 13.
All such determinations shall be appropriately adjusted for any stock dividend,
stock split, stock combination or other similar transaction during such period.

(n) “Common Stock” means (i) the Company’s shares of common stock, $0.001 par
value per share, and (ii) any capital stock into which such common stock shall
have been changed or any share capital resulting from a reclassification of such
common stock.

 

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(o) “Convertible Securities” means any stock or other security (other than
Options) that is at any time and under any circumstances, directly or
indirectly, convertible into, exercisable or exchangeable for, or which
otherwise entitles the holder thereof to acquire, any shares of Common Stock.

(p) “Eligible Market” means The New York Stock Exchange, the NYSE MKT, the
Nasdaq Global Select Market, the Nasdaq Global Market, the OTCQB or the
Principal Market.

(q) “Expiration Date” means the date that is June 30, 2018 or, if such date
falls on a day other than a Trading Day or on which trading does not take place
on the Principal Market (a “Holiday”), the next date that is not a Holiday.

(r) “Fixed Exercise Price” means $15.00 subject to adjustment as provided
herein.

(s) “Fundamental Transaction” means (A) that the Company shall, directly or
indirectly, including through subsidiaries, Affiliates or otherwise, in one or
more related transactions, (i) consolidate or merge with or into (whether or not
the Company is the surviving corporation) another Subject Entity, or (ii) sell,
assign, transfer, convey or otherwise dispose of all or substantially all of the
properties or assets of the Company and its subsidiaries to one or more Subject
Entities, or (iii) make, or allow one or more Subject Entities to make, or allow
the Company to be subject to or have its Common Stock be subject to or party to
one or more Subject Entities making, a purchase, tender or exchange offer that
is accepted by the holders of at least either (x) 50% of the outstanding shares
of Common Stock, (y) 50% of the outstanding shares of Common Stock calculated as
if any shares of Common Stock held by all Subject Entities making or party to,
or Affiliated with any Subject Entities making or party to, such purchase,
tender or exchange offer were not outstanding; or (z) such number of shares of
Common Stock such that all Subject Entities making or party to, or Affiliated
with any Subject Entity making or party to, such purchase, tender or exchange
offer, become collectively the beneficial owners (as defined in Rule 13d-3 under
the 1934 Act) of at least 50% of the outstanding shares of Common Stock, or
(iv) consummate a stock or share purchase agreement or other business
combination (including, without limitation, a reorganization, recapitalization,
spin-off or scheme of arrangement) with one or more Subject Entities whereby all
such Subject Entities, individually or in the aggregate, acquire, either (x) at
least 50% of the outstanding shares of Common Stock, (y) at least 50% of the
outstanding shares of Common Stock calculated as if any shares of Common Stock
held by all the Subject Entities making or party to, or Affiliated with any
Subject Entity making or party to, such stock purchase agreement or other
business combination were not outstanding; or (z) such number of shares of
Common Stock such that the Subject Entities become collectively the beneficial
owners (as defined in Rule 13d-3 under the 1934 Act) of at least 50% of the
outstanding shares of Common Stock, or (v) reorganize, recapitalize or
reclassify its Common Stock, (B) that the Company shall, directly or indirectly,
including through subsidiaries, Affiliates or otherwise, in one or more related
transactions, allow any Subject Entity individually or the Subject Entities in
the aggregate to be or become the “beneficial owner” (as defined in Rule 13d-3
under the 1934 Act), directly or indirectly, whether through acquisition,
purchase, assignment, conveyance, tender, tender offer, exchange, reduction in
outstanding shares of Common Stock, merger, consolidation, business combination,
reorganization, recapitalization, spin-off, scheme of arrangement,
reorganization, recapitalization or reclassification or otherwise in any manner
whatsoever, of either (x) at least

 

21

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50% of the aggregate ordinary voting power represented by issued and outstanding
Common Stock, (y) at least 50% of the aggregate ordinary voting power
represented by issued and outstanding Common Stock not held by all such Subject
Entities as of the date of this Warrant calculated as if any shares of Common
Stock held by all such Subject Entities were not outstanding, or (z) a
percentage of the aggregate ordinary voting power represented by issued and
outstanding shares of Common Stock or other equity securities of the Company
sufficient to allow such Subject Entities to effect a statutory short form
merger or other transaction requiring other shareholders of the Company to
surrender their shares of Common Stock without approval of the shareholders of
the Company or (C) directly or indirectly, including through subsidiaries,
Affiliates or otherwise, in one or more related transactions, the issuance of or
the entering into any other instrument or transaction structured in a manner to
circumvent, or that circumvents, the intent of this definition in which case
this definition shall be construed and implemented in a manner otherwise than in
strict conformity with the terms of this definition to the extent necessary to
correct this definition or any portion of this definition which may be defective
or inconsistent with the intended treatment of such instrument or transaction.

(t) “Going Private Transaction” means a transaction in which the Company merges
or consolidates with another Subject Entity that does not have a class of common
equity registered pursuant to the 1934 Act and the holders of Common Stock
receive cash in lieu of their shares.

(u) “Group” means a “group” as that term is used in Section 13(d) of the 1934
Act and as defined in Rule 13d-5 thereunder.

(v) “Market Price” means with respect to a particular date of determination, the
lower of (i) the VWAP of the Common Stock on the Trading Day immediately prior
to the applicable date of determination and (ii) the price which shall be
computed as the quotient of (I) the sum of the VWAP of the Common Stock of each
Trading Day during the ten (10) consecutive Trading Day period ending and
including the Trading Day immediately prior to the applicable date of
determination, divided by (II) ten (10). All such determinations to be
appropriately adjusted for any stock split, stock dividend, stock combination or
other similar transaction during any such measuring period.

(w) [Intentionally Omitted]

(x) “Options” means any rights, warrants or options to subscribe for or purchase
shares of Common Stock or Convertible Securities.

(y) “Parent Entity” of a Person means an entity that, directly or indirectly,
controls the applicable Person and whose common stock or equivalent equity
security is quoted or listed on an Eligible Market, or, if there is more than
one such Person or Parent Entity, the Person or Parent Entity with the largest
public market capitalization as of the date of consummation of the Fundamental
Transaction.

(z) “Person” means an individual, a limited liability company, a partnership, a
joint venture, a corporation, a trust, an unincorporated organization, any other
entity or a government or any department or agency thereof.

 

22

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(aa) “Principal Market” means The New York Stock Exchange.

(bb) “Registration Rights Agreement” means that certain registration rights
agreement, dated as of the Closing Date, by and among the Company and the Buyers
relating to, among other things, the registration of the resale of the Common
Stock sold to the Buyers pursuant to the Securities Purchase Agreement and
issuable upon exercise of the SPA Warrants, as may be amended from time to time.

(cc) “SEC” means the United States Securities and Exchange Commission or the
successor thereto.

(dd) “Subject Entity” means any Person, Persons or Group or any Affiliate or
associate of any such Person, Persons or Group.

(ee) “Successor Entity” means the Person (or, if so elected by the Holder, the
Parent Entity) formed by, resulting from or surviving any Fundamental
Transaction or the Person (or, if so elected by the Holder, the Parent Entity)
with which such Fundamental Transaction shall have been entered into.

(ff) “Trading Day” means, as applicable, (x) with respect to all price or
trading volume determinations relating to the Common Stock, any day on which the
Common Stock is traded on the Principal Market, or, if the Principal Market is
not the principal trading market for the Common Stock, then on the principal
securities exchange or securities market on which the Common Stock is then
traded, provided that “Trading Day” shall not include any day on which the
Common Stock is scheduled to trade on such exchange or market for less than 4.5
hours or any day that the Common Stock is suspended from trading during the
final hour of trading on such exchange or market (or if such exchange or market
does not designate in advance the closing time of trading on such exchange or
market, then during the hour ending at 4:00:00 p.m., New York time) unless such
day is otherwise designated as a Trading Day in writing by the Holder or
(y) with respect to all determinations other than price or trading volume
determinations relating to the Common Stock, any day on which The New York Stock
Exchange (or any successor thereto) is open for trading of securities.

(gg) “Variable Exercise Price” means, as of any Exercise Date, 85% of the Market
Price on such Exercise Date (subject to adjustment for stock splits, stock
dividends, stock combinations, recapitalizations or similar events occurring on
such Exercise Date).

(hh) “VWAP” means, for any security as of any date, the dollar volume-weighted
average price for such security on the Principal Market (or, if the Principal
Market is not the principal trading market for such security, then on the
principal securities exchange or securities market on which such security is
then traded) during the period beginning at 9:30:01 a.m., New York time, and
ending at 4:00:00 p.m., New York time, as reported by Bloomberg through its “HP”
function (set to weighted average) or, if the foregoing does not apply, the
dollar volume-weighted average price of such security in the over-the-counter
market on the electronic bulletin board for such security during the period
beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York
time, as reported by Bloomberg, or, if no dollar volume-weighted average price
is reported for such security by Bloomberg for such hours, the average of the

 

23

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highest closing bid price and the lowest closing ask price of any of the market
makers for such security as reported in the “pink sheets” by OTC Markets Group
Inc. (formerly Pink Sheets LLC). If the VWAP cannot be calculated for such
security on such date on any of the foregoing bases, the VWAP of such security
on such date shall be the fair market value as mutually determined by the
Company and the Holder. If the Company and the Holder are unable to agree upon
the fair market value of such security, then such dispute shall be resolved in
accordance with the procedures in Section 13. All such determinations shall be
appropriately adjusted for any stock dividend, stock split, stock combination,
recapitalization or other similar transaction during such period.

[signature page follows]

 

24

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IN WITNESS WHEREOF, the Company has caused this Warrant to Purchase Common Stock
to be duly executed as of the Issuance Date set out above.

 

PATRIOT NATIONAL, INC. By:  

 

  Name:   Title:

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EXHIBIT A

EXERCISE NOTICE

TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS

WARRANT TO PURCHASE COMMON STOCK

PATRIOT NATIONAL, INC.

The undersigned holder hereby elects to exercise the Warrant to Purchase Common
Stock No.              (the “Warrant”) of Patriot National, Inc., a Delaware
corporation (the “Company”) as specified below. Capitalized terms used herein
and not otherwise defined shall have the respective meanings set forth in the
Warrant.

1. Form of Exercise Price. The Holder intends that payment of the Aggregate
Exercise Price shall be made as:

 

  ¨ a “Cash Exercise” with respect to                      Warrant Shares;
and/or

 

  ¨ a “Cashless Exercise” with respect to                      Warrant Shares.

In the event that the Holder has elected a Cashless Exercise with respect to
some or all of the Warrant Shares to be issued pursuant hereto, the Holder
hereby represents and warrants that this Exercise Notice was executed by the
Holder at              [a.m.][p.m.] on the date set forth below.

2. Payment of Exercise Price. In the event that the Holder has elected a Cash
Exercise with respect to some or all of the Warrant Shares to be issued pursuant
hereto, the Holder shall pay the Aggregate Exercise Price in the sum of
$         to the Company in accordance with the terms of the Warrant.

3. Maximum Percentage Representation. This Exercise Notice shall constitute a
representation by the Holder that after giving effect to the exercise provided
for in this Exercise Notice, such Holder (together with the other Attribution
Parties) will not have beneficial ownership (together with the other Attribution
Parties) of a number of shares of Common Stock which exceeds the Maximum
Percentage (as defined in the Warrant) of the total outstanding shares of Common
Stock of the Company as determined pursuant to the provisions of Section 1(f)(i)
of the Warrant.

4. Delivery of Warrant Shares. The Company shall deliver to Holder, or its
designee or agent as specified below,                  shares of Common Stock in
accordance with the terms of the Warrant. Delivery shall be made to Holder, or
for its benefit, as follows:

¨ Check here if requesting delivery as a certificate to the following name and
to the following address:

 

Issue to:   

 

  

 

  

 

  

 

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¨ Check here if requesting delivery by Deposit/Withdrawal at Custodian as
follows:

 

DTC Participant:  

 

DTC Number:  

 

Account Number:  

 

 

Date:                    ,        

 

Name of Registered Holder By:  

 

  Name:     Title:  

  Tax ID:  

 

  Facsimile:  

 

  E-mail Address:  

 

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EXHIBIT B

ACKNOWLEDGMENT

The Company hereby acknowledges this Exercise Notice and hereby directs
                     to issue the above indicated number of shares of Common
Stock in accordance with the Transfer Agent Instructions dated             ,
201    , from the Company and acknowledged and agreed to by
                    .

 

PATRIOT NATIONAL, INC. By:  

 

  Name:   Title:

--------------------------------------------------------------------------------

Exhibit B-2

FORM OF SERIES B WARRANT

NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION
OF COUNSEL TO THE HOLDER (IF REQUESTED BY THE COMPANY), IN A FORM REASONABLY
ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
(II) UNLESS SOLD OR ELIGIBLE TO BE SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER
SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
ARRANGEMENT SECURED BY THE SECURITIES. THE NUMBER OF SHARES OF COMMON STOCK
ISSUABLE UPON EXERCISE OF THIS WARRANT MAY BE LESS THAN THE AMOUNTS SET FORTH ON
THE FACE HEREOF PURSUANT TO SECTION 1(a) OF THIS WARRANT.

PATRIOT NATIONAL, INC.

SERIES B WARRANT TO PURCHASE COMMON STOCK

Warrant No.:

Date of Issuance: December     , 2015 (“Issuance Date”)

Patriot National, Inc., a Delaware corporation (the “Company”), hereby certifies
that, for good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, [BUYER], the registered holder hereof or its permitted
assigns (the “Holder”), is entitled, subject to the terms set forth below, to
purchase from the Company, at the Exercise Price (as defined below) then in
effect, upon exercise of this Warrant to Purchase Common Stock (including any
Warrants to Purchase Common Stock issued in exchange, transfer or replacement
hereof, the “Warrant”), at any time or times on or after the Issuance Date (the
“Initial Exercise Date”), but not after 11:59 p.m., New York time, on the
Expiration Date (as defined below),                      (subject to adjustment
as provided herein) fully paid and non-assessable shares of Common Stock (as
defined below) (the “Warrant Shares”, and such number of Warrant Shares, the
“Warrant Number”). Except as otherwise defined herein, capitalized terms in this
Warrant shall have the meanings set forth in Section 17. This Warrant is one of
the Warrants to Purchase Common Stock (the “SPA Warrants”) issued pursuant to
Section 1 of that certain Securities Purchase Agreement, dated as of
December 13, 2015 (the “Subscription Date”), by and among the Company, a
stockholder of the Company and the investors (the “Buyers”) referred to therein,
as amended from time to time (the “Securities Purchase Agreement”).

--------------------------------------------------------------------------------

The Aggregate Exercise Price (as defined below) of this Warrant, except for a
nominal exercise price of $0.01 (as adjusted for stock splits, stock dividends,
recapitalizations or similar events) (the “Nominal Remaining Exercise Price”)
per Warrant Share, was pre-funded to the Company on or prior to the initial
Issuance Date and, consequently, no additional consideration (other than the
Nominal Remaining Exercise Price per Warrant Share) shall be required to be paid
by the Holder to any Person to effect any exercise of this Warrant. The Holder
shall not be entitled to the return or refund of all, or any portion, of such
pre-paid Aggregate Exercise Price under any circumstance or for any reason
whatsoever, including in the event this Warrant shall not have been exercised
prior to the Expiration Date.

1. EXERCISE OF WARRANT.

(a) Mechanics of Exercise. Subject to the terms and conditions hereof
(including, without limitation, the limitations set forth in Section 1(f)), this
Warrant may be exercised by the Holder on any day on or after the Initial
Exercise Date (an “Exercise Date”), in whole or in part, by delivery (whether
via facsimile or otherwise) of a written notice, in the form attached hereto as
Exhibit A (the “Exercise Notice”), of the Holder’s election to exercise this
Warrant. Within one (1) Trading Day following an exercise of this Warrant as
aforesaid, the Holder shall deliver payment to the Company of an amount equal to
the Exercise Price in effect on the date of such exercise multiplied by the
number of Warrant Shares as to which this Warrant was so exercised (the
“Aggregate Exercise Price”) in cash or via wire transfer of immediately
available funds if the Holder did not notify the Company in such Exercise Notice
that such exercise was made pursuant to a Cashless Exercise (as defined in
Section 1(d)). The Holder shall not be required to deliver the original of this
Warrant in order to effect an exercise hereunder. Execution and delivery of an
Exercise Notice with respect to less than all of the Warrant Shares shall have
the same effect as cancellation of the original of this Warrant and issuance of
a new Warrant evidencing the right to purchase the remaining number of Warrant
Shares. Execution and delivery of an Exercise Notice for all of the
then-remaining Warrant Shares shall have the same effect as cancellation of the
original of this Warrant after delivery of the Warrant Shares in accordance with
the terms hereof. On or before the first (1st) Trading Day following the date on
which the Company has received an Exercise Notice, the Company shall transmit by
facsimile or electronic mail an acknowledgment of confirmation of receipt of
such Exercise Notice, in the form attached hereto as Exhibit B, to the Holder
and the Company’s transfer agent (the “Transfer Agent”), which confirmation
shall constitute an instruction to the Transfer Agent to process such Exercise
Notice in accordance with the terms herein. On or before the third (3rd) Trading
Day following the date on which the Company has received such Exercise Notice
(or such earlier date as required pursuant to the 1934 Act or other applicable
law, rule or regulation for the settlement of a trade of such Warrant Shares
initiated on the applicable Exercise Date), the Company shall (X) provided that
the Transfer Agent is participating in The Depository Trust Company (“DTC”) Fast
Automated Securities Transfer Program and the Warrant Shares are eligible to be
resold pursuant to an effective registration statement or, if a Cashless
Exercise, the Warrant Shares are eligible to be resold by the Holder pursuant to
Rule 144 (such Warrant Shares, the “Unrestricted Warrant Shares”), upon the
request of the Holder, credit such aggregate number of shares of Common Stock to
which the Holder is entitled pursuant to such exercise to the Holder’s or its
designee’s balance account with DTC through its

 

2

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Deposit/Withdrawal at Custodian system, or (Y) if the Transfer Agent is not
participating in the DTC Fast Automated Securities Transfer Program or the
applicable Warrant Shares are not Unrestricted Warrant Shares, upon the request
of the Holder, issue and deliver (via reputable overnight courier) to the
address as specified in the Exercise Notice, a certificate, registered in the
name of the Holder or its designee, for the number of shares of Common Stock to
which the Holder shall be entitled pursuant to such exercise. Upon delivery of
an Exercise Notice, the Holder shall be deemed for all corporate purposes to
have become the holder of record of the Warrant Shares with respect to which
this Warrant has been exercised, irrespective of the date such Warrant Shares
are credited to the Holder’s DTC account or the date of delivery of the
certificates evidencing such Warrant Shares (as the case may be). If this
Warrant is submitted in connection with any exercise pursuant to this
Section 1(a) and the number of Warrant Shares represented by this Warrant
submitted for exercise is greater than the number of Warrant Shares being
acquired upon an exercise and upon surrender of this Warrant to the Company by
the Holder, then, at the request of the Holder, the Company shall no later than
three (3) Business Days after any exercise and at its own expense, issue and
deliver to the Holder (or its designee) a new Warrant (in accordance with
Section 7(d)) representing the right to purchase the number of Warrant Shares
purchasable immediately prior to such exercise under this Warrant, less the
number of Warrant Shares with respect to which this Warrant is exercised. No
fractional shares of Common Stock are to be issued upon the exercise of this
Warrant, but rather the number of shares of Common Stock to be issued shall be
rounded up to the nearest whole number. The Company shall pay any and all
transfer, stamp, issuance and similar taxes, costs and expenses (including,
without limitation, fees and expenses of the Transfer Agent) that may be payable
with respect to the issuance and delivery of Warrant Shares upon exercise of
this Warrant. Notwithstanding the foregoing, except in the case where an
exercise of this Warrant is validly made pursuant to a Cashless Exercise), the
Company’s failure to deliver Warrant Shares to the Holder on or prior to the
later of ((i) three (3) Trading Days after receipt of the applicable Exercise
Notice (or such earlier date as required pursuant to the 1934 Act or other
applicable law, rule or regulation for the settlement of a trade of such Warrant
Shares initiated on the applicable Exercise Date) and (ii) one (1) Trading Day
after the Company’s receipt of the Aggregate Exercise Price (or valid notice of
a Cashless Exercise (such later date, the “Share Delivery Deadline”) shall not
be deemed to be a breach of this Warrant. From the Issuance Date through and
including the Expiration Date, the Company shall maintain a transfer agent that
participates in the DTC’s Fast Automated Securities Transfer Program.
Notwithstanding any provision of this Warrant to the contrary, no more than the
Maximum Eligibility Number of Warrant Shares shall be exercisable hereunder.

(b) Exercise Price. For purposes of this Warrant, “Exercise Price” means
$[        ], subject to adjustment as provided herein.

(c) Company’s Failure to Timely Deliver Securities. If the Company shall fail,
for any reason or for no reason, on or prior to the Share Delivery Deadline,
either (I) if the Transfer Agent is not participating in the DTC Fast Automated
Securities Transfer Program or the applicable Warrant Shares are not
Unrestricted Warrant Shares, to issue and deliver to the Holder (or its
designee) a certificate for the number of Warrant Shares to which the Holder is
entitled and register such Warrant Shares on the Company’s share register or, if
the Transfer Agent is participating in the DTC Fast Automated Securities
Transfer Program, to credit the balance

 

3

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account of the Holder or the Holder’s designee with DTC for such number of
Warrant Shares to which the Holder is entitled upon the Holder’s exercise of
this Warrant (as the case may be) or (II) if a Registration Statement covering
the resale of the Warrant Shares that are the subject of the Exercise Notice
(the “Unavailable Warrant Shares”) is not available for the resale of such
Unavailable Warrant Shares and the Company fails to, as required pursuant to the
Registration Rights Agreement, (x) so notify the Holder and (y) deliver the
Warrant Shares electronically without any restrictive legend by crediting such
aggregate number of Warrant Shares to which the Holder is entitled pursuant to
such exercise to the Holder’s or its designee’s balance account with DTC through
its Deposit/Withdrawal At Custodian system (the event described in the
immediately foregoing clause (II) is hereinafter referred as a “Notice Failure”
and together with the event described in clause (I) above, a “Delivery
Failure”), and if on or after such Share Delivery Deadline the Holder purchases
(in an open market transaction or otherwise) shares of Common Stock to deliver
in satisfaction of a sale by the Holder of all or any portion of the number of
shares of Common Stock issuable upon such exercise that the Holder anticipated
receiving from the Company (a “Buy-In”), then, in addition to all other remedies
available to the Holder, the Company shall, within three (3) Business Days after
the Holder’s request and in the Holder’s discretion, either (i) pay cash to the
Holder in an amount equal to the Holder’s total purchase price (including
brokerage commissions and other out-of-pocket expenses, if any) for the shares
of Common Stock so purchased (including, without limitation, by any other Person
in respect, or on behalf, of the Holder) (the “Buy-In Price”), at which point
the Company’s obligation to so issue and deliver such certificate (and to issue
such shares of Common Stock) or credit the balance account of such Holder or
such Holder’s designee, as applicable, with DTC for the number of Warrant Shares
to which the Holder is entitled upon the Holder’s exercise hereunder (as the
case may be) (and to issue such Warrant Shares) shall terminate, or
(ii) promptly honor its obligation to so issue and deliver to the Holder a
certificate or certificates representing such Warrant Shares or credit the
balance account of such Holder or such Holder’s designee, as applicable, with
DTC for the number of Warrant Shares to which the Holder is entitled upon the
Holder’s exercise hereunder (as the case may be) and pay cash to the Holder in
an amount equal to the excess (if any) of the Buy-In Price over the product of
(A) such number of Warrant Shares multiplied by (B) the lowest Closing Sale
Price of the Common Stock on any Trading Day during the period commencing on the
date of the applicable Exercise Notice and ending on the date of such issuance
and payment under this clause (ii) (the “Buy-In Payment Amount”). Nothing shall
limit the Holder’s right to pursue any other remedies available to it hereunder,
at law or in equity, including, without limitation, a decree of specific
performance and/or injunctive relief with respect to the Company’s failure to
timely deliver certificates representing shares of Common Stock (or to
electronically deliver such shares of Common Stock) upon the exercise of this
Warrant as required pursuant to the terms hereof.

(d) Cashless Exercise. Notwithstanding anything contained herein to the contrary
(other than Section 1(f) below), if at the time of exercise hereof a
Registration Statement (as defined in the Registration Rights Agreement (as
defined in the Securities Purchase Agreement)) is not effective (or the
prospectus contained therein is not available for use) for the resale by the
Holder of all of the Warrant Shares, then the Holder may, in its sole
discretion, exercise this Warrant in whole or in part and, in lieu of making the
cash payment otherwise contemplated to be made to the Company upon such exercise
in payment of the Aggregate Exercise Price, elect instead to receive upon such
exercise the “Net Number” of Warrant Shares determined according to the
following formula (a “Cashless Exercise”):

 

Net Number   =  

(A x B) - (A x C)

      D  

For purposes of the foregoing formula:

A= the total number of shares with respect to which this Warrant is then being
exercised.

 

4

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B = the quotient of (x) the sum of the VWAP of the Common Stock of each of the
ten (10) Trading Days ending at the close of business on the Principal Market
immediately prior to the time of exercise as set forth in the applicable
Exercise Notice, divided by (y) ten (10).

C = the Nominal Remaining Exercise Price.

D = the VWAP of the Common Stock at the close of business on the Principal
Market on the date of the delivery of the applicable Exercise Notice.

For purposes of Rule 144(d) promulgated under the 1933 Act, as in effect on the
Subscription Date, it is intended that the Warrant Shares issued in a Cashless
Exercise shall be deemed to have been acquired by the Holder, and the holding
period for the Warrant Shares shall be deemed to have commenced, on the date
this Warrant was originally issued pursuant to the Securities Purchase
Agreement.

(e) Disputes. In the case of a dispute as to the determination of the Exercise
Price or the arithmetic calculation of the number of Warrant Shares to be issued
pursuant to the terms hereof, the Company shall promptly issue to the Holder the
number of Warrant Shares that are not disputed and resolve such dispute in
accordance with Section 13.

(f) Limitations on Exercises.

(i) Limitations on Beneficial Ownership. The Company shall not effect the
exercise of any portion of this Warrant, and the Holder shall not have the right
to exercise any portion of this Warrant, pursuant to the terms and conditions of
this Warrant and any such exercise shall be null and void and treated as if
never made, to the extent that after giving effect to such exercise, the Holder
together with the other Attribution Parties collectively would beneficially own
in excess of 4.99% (the “Maximum Percentage”) of the shares of Common Stock
outstanding immediately after giving effect to such exercise. For purposes of
the foregoing sentence, the aggregate number of shares of Common Stock
beneficially owned by the Holder and the other Attribution Parties shall include
the number of shares of Common Stock held by the Holder and all other
Attribution Parties plus the number of shares of Common Stock issuable upon
exercise of this Warrant with respect to which the determination of such
sentence is being made, but shall exclude shares of Common Stock which would be
issuable upon (A) exercise of the

 

5

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remaining, unexercised portion of this Warrant beneficially owned by the Holder
or any of the other Attribution Parties and (B) exercise or conversion of the
unexercised or unconverted portion of any other securities of the Company
(including, without limitation, any convertible notes or convertible preferred
stock or warrants, including other SPA Warrants) beneficially owned by the
Holder or any other Attribution Party subject to a limitation on conversion or
exercise analogous to the limitation contained in this Section 1(f)(i). For
purposes of this Section 1(f)(i), beneficial ownership shall be calculated in
accordance with Section 13(d) of the 1934 Act. For purposes of determining the
number of outstanding shares of Common Stock the Holder may acquire upon the
exercise of this Warrant without exceeding the Maximum Percentage, the Holder
may rely on the number of outstanding shares of Common Stock as reflected in
(x) the Company’s most recent Annual Report on Form 10-K, Quarterly Report on
Form 10-Q, Current Report on Form 8-K or other public filing with the SEC, as
the case may be, (y) a more recent public announcement by the Company or (z) any
other written notice by the Company or the Transfer Agent, if any, setting forth
the number of shares of Common Stock outstanding (the “Reported Outstanding
Share Number”). If the Company receives an Exercise Notice from the Holder at a
time when the actual number of outstanding shares of Common Stock is less than
the Reported Outstanding Share Number, the Company shall (i) notify the Holder
in writing of the number of shares of Common Stock then outstanding and, to the
extent that such Exercise Notice would otherwise cause the Holder’s beneficial
ownership, as determined pursuant to this Section 1(f)(i), to exceed the Maximum
Percentage, the Holder must notify the Company of a reduced number of Warrant
Shares to be acquired pursuant to such Exercise Notice (the number of shares by
which such purchase is reduced, the “Reduction Shares”) and (ii) as soon as
reasonably practicable, the Company shall return to the Holder any exercise
price paid by the Holder for the Reduction Shares. For any reason at any time,
upon the written or oral request of the Holder, the Company shall within one
(1) Business Day confirm orally and in writing or by electronic mail to the
Holder the number of shares of Common Stock then outstanding. In any case, the
number of outstanding shares of Common Stock shall be determined after giving
effect to the conversion or exercise of securities of the Company, including
this Warrant, by the Holder and any other Attribution Party since the date as of
which the Reported Outstanding Share Number was reported. In the event that the
issuance of shares of Common Stock to the Holder upon exercise of this Warrant
results in the Holder and the other Attribution Parties being deemed to
beneficially own, in the aggregate, more than the Maximum Percentage of the
number of outstanding shares of Common Stock (as determined under Section 13(d)
of the 1934 Act), the number of shares so issued by which the Holder’s and the
other Attribution Parties’ aggregate beneficial ownership exceeds the Maximum
Percentage (the “Excess Shares”) shall be deemed null and void and shall be
cancelled ab initio, and the Holder shall not have the power to vote or to
transfer the Excess Shares. As soon as reasonably practicable after the issuance
of the Excess Shares has been deemed null and void, the Company shall return to
the Holder the exercise price paid by the Holder for the Excess Shares. Upon
delivery of a written notice to the Company, the Holder may from time to time
increase (with such increase not effective until the sixty-first (61st) day
after delivery of such notice) or decrease the Maximum Percentage to any other
percentage not in excess of 9.99% as specified in such notice; provided that
(i) any such increase in the

 

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Maximum Percentage will not be effective until the sixty-first (61st) day after
such notice is delivered to the Company and (ii) any such increase or decrease
will apply only to the Holder and the other Attribution Parties and not to any
other holder of SPA Warrants that is not an Attribution Party of the Holder. For
purposes of clarity, the shares of Common Stock issuable pursuant to the terms
of this Warrant in excess of the Maximum Percentage shall not be deemed to be
beneficially owned by the Holder for any purpose including for purposes of
Section 13(d) or Rule 16a-1(a)(1) of the 1934 Act. No prior inability to
exercise this Warrant pursuant to this paragraph shall have any effect on the
applicability of the provisions of this paragraph with respect to any subsequent
determination of exercisability. The provisions of this paragraph shall be
construed and implemented in a manner otherwise than in strict conformity with
the terms of this Section 1(f)(i) to the extent necessary to correct this
paragraph or any portion of this paragraph which may be defective or
inconsistent with the intended beneficial ownership limitation contained in this
Section 1(f)(i) or to make changes or supplements necessary or desirable to
properly give effect to such limitation. The limitation contained in this
paragraph may not be waived and shall apply to a successor holder of this
Warrant.

(ii) Principal Market Regulation. The Company shall not issue any shares of
Common Stock upon the exercise of this Warrant if the issuance of such shares of
Common Stock (taken together with the issuance of the Company Common Shares (as
defined in the Securities Purchase Agreement) and the Warrant Shares issuable
upon the exercise of the SPA Warrants) would exceed the aggregate number of
shares of Common Stock which the Company may issue upon exercise or conversion
(as the case may be) of the SPA Warrants without breaching the Company’s
obligations under the rules or regulations of the Principal Market (the number
of shares which may be issued without violating such rules and regulations, the
“Exchange Cap”), except that such limitation shall not apply in the event that
the Company (A) obtains the approval of its stockholders as required by the
applicable rules of the Principal Market for issuances of shares of Common Stock
in excess of such amount (and in the case of a written consent in lieu of a
stockholders meeting, after the Company has sent an information statement under
the 1934 Act and the waiting period under the 1934 Act for the consent to be
effective has expired) or (B) obtains a written opinion from outside counsel to
the Company that such approval is not required, which opinion shall be
reasonably satisfactory to the Holder or (C) obtains a waiver from the Principal
Market of the applicable rules of such Principal Market for the issuance of
shares of Common Stock in excess of such amount. While such limitation applies,
no Buyer shall be issued in the aggregate, upon exercise of any of the SPA
Warrants, shares of Common Stock in an amount greater than the product of
(i) the Exchange Cap as of the Issuance Date multiplied by (ii) the quotient of
(1) aggregate number of Company Common Shares issued to such Buyer pursuant to
the Securities Purchase Agreement on the Closing Date (as defined in the
Securities Purchase Agreement) divided by (2) aggregate number of Company Common
Shares issued to the Buyers pursuant to the Securities Purchase Agreement on the
Closing Date (with respect to each Buyer, the “Exchange Cap Allocation”). In the
event that any Buyer shall sell or otherwise transfer any of such Buyer’s SPA
Warrants, the transferee shall be allocated a pro rata portion of such Buyer’s
Exchange Cap Allocation with respect to such portion of such SPA Warrants so
transferred, and the restrictions of the prior sentence shall apply to

 

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such transferee with respect to the portion of the Exchange Cap Allocation so
allocated to such transferee. Upon exercise in full of a holder’s SPA
Warrants, the difference (if any) between such holder’s Exchange Cap Allocation
and the number of shares of Common Stock actually issued to such holder upon
such holder’s exercise in full of such SPA Warrants shall be allocated to the
respective Exchange Cap Allocations of the remaining holders of SPA Warrants on
a pro rata basis in proportion to the shares of Common Stock underlying the SPA
Warrants then held by each such holder. At any time after the Adjustment Time,
in the event that the Company is prohibited from issuing any shares of Common
Stock pursuant to this Section 1(f)(ii) (the “Exchange Cap Shares”), in lieu of
issuing and delivering such Exchange Cap Shares to the Holder, the Company shall
pay cash to the Holder in exchange for the cancellation of such portion of this
Warrant exercisable into such Exchange Cap Shares at a price equal to the sum of
(x) the product of (A) such number of Exchange Cap Shares and (B) the greatest
Closing Sale Price of the Common Stock on any Trading Day during the period
commencing on the date the Holder delivers the applicable Exercise Notice with
respect to such Exchange Cap Shares to the Company and ending on the date
immediately preceding the date of such payment under this Section 1(f)(ii) and
(y) to the extent the Holder purchases (in an open market transaction or
otherwise) shares of Common Stock to deliver in satisfaction of a sale by the
Holder of Exchange Cap Shares, any Buy-In Payment Amount, brokerage commissions
and other out-of-pocket expenses, if any, of the Holder incurred in connection
therewith.

(g) Reservation of Shares.

(i) Required Reserve Amount. So long as this Warrant remains outstanding, the
Company shall at all times keep reserved for issuance under this Warrant a
number of shares of Common Stock at least equal to the maximum number of shares
of Common Stock as shall be necessary to satisfy the Company’s obligation to
issue shares of Common Stock under the SPA Warrants then outstanding (without
regard to any limitations on exercise and assuming an Adjustment Time as of such
time of determination) (the “Required Reserve Amount”); provided that at no time
shall the number of shares of Common Stock reserved pursuant to this
Section 1(g)(i) be reduced other than proportionally in connection with any
exercise or redemption of SPA Warrants or such other event covered by
Section 2(a) below. The Required Reserve Amount (including, without limitation,
each increase in the number of shares so reserved) shall be allocated pro rata
among the holders of the SPA Warrants based on number of shares of Common Stock
issuable upon exercise of Series A SPA Warrants held by each holder on the
Closing Date (without regard to any limitations on exercise) or increase in the
number of reserved shares, as the case may be (the “Authorized Share
Allocation”). In the event that a holder shall sell or otherwise transfer any of
such holder’s SPA Warrants, each transferee shall be allocated a pro rata
portion of such holder’s Authorized Share Allocation. Any shares of Common Stock
reserved and allocated to any Person which ceases to hold any SPA Warrants shall
be allocated to the remaining holders of SPA Warrants, pro rata based on the
number of shares of Common Stock issuable upon exercise of the SPA Warrants then
held by such holders (without regard to any limitations on exercise).

 

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(ii) Insufficient Authorized Shares. If, notwithstanding Section 1(g)(i) above,
and not in limitation thereof, at any time while any of the SPA Warrants remain
outstanding, the Company does not have a sufficient number of authorized and
unreserved shares of Common Stock to satisfy its obligation to reserve the
Required Reserve Amount (an “Authorized Share Failure”), then the Company shall
immediately take all action necessary to increase the Company’s authorized
shares of Common Stock to an amount sufficient to allow the Company to reserve
the Required Reserve Amount for all the SPA Warrants then outstanding. Without
limiting the generality of the foregoing sentence, as soon as practicable after
the date of the occurrence of an Authorized Share Failure, but in no event later
than sixty (60) days after the occurrence of such Authorized Share Failure, the
Company shall hold a meeting of its stockholders for the approval of an increase
in the number of authorized shares of Common Stock. In connection with such
meeting, the Company shall provide each stockholder with a proxy statement and
shall use its best efforts to solicit its stockholders’ approval of such
increase in authorized shares of Common Stock and to cause its board of
directors to recommend to the stockholders that they approve such proposal. In
the event that the Company is prohibited from issuing shares of Common Stock
upon an exercise of this Warrant due to the failure by the Company to have
sufficient shares of Common Stock available out of the authorized but unissued
shares of Common Stock (such unavailable number of shares of Common Stock, the
“Authorization Failure Shares”), in lieu of delivering such Authorization
Failure Shares to the Holder, the Company shall pay cash in exchange for the
cancellation of such portion of this Warrant exercisable into such Authorized
Failure Shares at a price equal to the sum of (i) the product of (x) such number
of Authorization Failure Shares and (y) the greatest Closing Sale Price of the
Common Stock on any Trading Day during the period commencing on the date the
Holder delivers the applicable Exercise Notice with respect to such
Authorization Failure Shares to the Company and ending on the date of such
issuance and payment under this Section 1(f)(i); and (ii) to the extent the
Holder purchases (in an open market transaction or otherwise) shares of Common
Stock to deliver in satisfaction of a sale by the Holder of Authorization
Failure Shares, any Buy-In Payment Amount, brokerage commissions and other
out-of-pocket expenses, if any, of the Holder incurred in connection therewith.
Nothing contained in this Section 1(g)(ii) shall limit any obligations of the
Company under any provision of the Securities Purchase Agreement.

2. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES. The Exercise Price
and number of Warrant Shares issuable upon exercise of this Warrant are subject
to adjustment from time to time as set forth in this Section 2.

(a) Stock Dividends and Splits. Without limiting any provision of Section 3 or
Section 4, if the Company, at any time on or after the Subscription Date,
(i) pays a stock dividend on one or more classes of its then outstanding shares
of Common Stock or otherwise makes a distribution on any class of capital stock
that is payable in shares of Common Stock, (ii) subdivides (by any stock split,
stock dividend, recapitalization or otherwise) one or more classes of its then
outstanding shares of Common Stock into a larger number of shares or
(iii) combines (by combination, reverse stock split or otherwise) one or more
classes of its then outstanding shares of Common Stock into a smaller number of
shares, then in each such case the Exercise

 

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Price shall be multiplied by a fraction of which the numerator shall be the
number of shares of Common Stock outstanding immediately before such event and
of which the denominator shall be the number of shares of Common Stock
outstanding immediately after such event. Any adjustment made pursuant to clause
(i) of this paragraph shall become effective immediately after the record date
for the determination of stockholders entitled to receive such dividend or
distribution, and any adjustment pursuant to clause (ii) or (iii) of this
paragraph shall become effective immediately after the effective date of such
subdivision or combination. If any event requiring an adjustment under this
paragraph occurs during the period that an Exercise Price is calculated
hereunder, then the calculation of such Exercise Price shall be adjusted
appropriately to reflect such event. Notwithstanding the foregoing, in no event
shall the Exercise Price be less than the Nominal Remaining Exercise Price.

(b) Number of Warrant Shares. Simultaneously with any adjustment to the Exercise
Price pursuant to this Section 2, the number of Warrant Shares that may be
purchased upon exercise of this Warrant shall be increased or decreased
proportionately, so that after such adjustment the aggregate Exercise Price
payable hereunder for the adjusted number of Warrant Shares shall be the same as
the aggregate Exercise Price in effect immediately prior to such adjustment
(without regard to any limitations on exercise contained herein). At the
Adjustment Time (without giving effect to any Exercise Notices delivered to the
Company on or prior to the Adjustment Time), the number of Warrant Shares that
may be purchased upon exercise of this Warrant shall be increased or decreased
as necessary, so that as of the Adjustment Time the number of Warrant Shares
that may be purchased upon exercise of this Warrant shall equal the sum of the
Base Share Amount and the Adjustment Share Amount.

(c) Calculations. All calculations under this Section 2 shall be made by
rounding to the nearest cent or the nearest 1/100th of a share, as applicable.
The number of shares of Common Stock outstanding at any given time shall not
include shares owned or held by or for the account of the Company, and the
disposition of any such shares shall be considered an issuance or sale of Common
Stock.

(d) Voluntary Adjustment By Company. The Company may at any time during the term
of this Warrant, with the prior written consent of the Required Holders (as
defined in the Securities Purchase Agreement), reduce the then current Exercise
Price to any amount and for any period of time deemed appropriate by the board
of directors of the Company.

3. RIGHTS UPON DISTRIBUTION OF ASSETS. In addition to any adjustments pursuant
to Section 2 above, if the Company shall declare or make any dividend or other
distribution of its assets (or rights to acquire its assets) to holders of
shares of Common Stock, by way of return of capital or otherwise (including,
without limitation, any distribution of cash, stock or other securities,
property, options, evidence of indebtedness or any other assets by way of a
dividend, spin off, reclassification, corporate rearrangement, scheme of
arrangement or other similar transaction) (a “Distribution”), at any time after
the issuance of this Warrant, then, in each such case, the Holder shall be
entitled to participate in such Distribution to the same extent that the Holder
would have participated therein if the Holder had held the number of shares of
Common Stock acquirable upon complete exercise of this Warrant (without regard
to any limitations or restrictions on exercise of this Warrant, including
without limitation, the Maximum Percentage) immediately before the date on which
a record is taken for such Distribution, or, if no such

 

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record is taken, the date as of which the record holders of shares of Common
Stock are to be determined for the participation in such Distribution (provided,
however, that to the extent that the Holder’s right to participate in any such
Distribution would result in the Holder and the other Attribution Parties
exceeding the Maximum Percentage, then the Holder shall not be entitled to
participate in such Distribution to the extent of the Maximum Percentage (and
shall not be entitled to beneficial ownership of such shares of Common Stock as
a result of such Distribution (and beneficial ownership) to the extent of any
such excess) and the portion of such Distribution shall be held in abeyance for
the benefit of the Holder until such time or times, if ever, as its right
thereto would not result in the Holder and the other Attribution Parties
exceeding the Maximum Percentage, at which time or times the Holder shall be
granted such Distribution (and any Distributions declared or made on such
initial Distribution or on any subsequent Distribution held similarly in
abeyance) to the same extent as if there had been no such limitation).

4. PURCHASE RIGHTS; FUNDAMENTAL TRANSACTIONS.

(a) Purchase Rights. In addition to any adjustments pursuant to Section 2 above,
if at any time the Company grants, issues or sells any Options, Convertible
Securities or rights to purchase stock, warrants, securities or other property
pro rata to the record holders of any class of Common Stock (the “Purchase
Rights”), then the Holder will be entitled to acquire, upon the terms applicable
to such Purchase Rights, the aggregate Purchase Rights which the Holder could
have acquired if the Holder had held the number of shares of Common Stock
acquirable upon complete exercise of this Warrant (without regard to any
limitations or restrictions on exercise of this Warrant, including without
limitation, the Maximum Percentage) immediately before the date on which a
record is taken for the grant, issuance or sale of such Purchase Rights, or, if
no such record is taken, the date as of which the record holders of shares of
Common Stock are to be determined for the grant, issuance or sale of such
Purchase Rights (provided, however, that to the extent that the Holder’s right
to participate in any such Purchase Right would result in the Holder and the
other Attribution Parties exceeding the Maximum Percentage, then the Holder
shall not be entitled to participate in such Purchase Right to the extent of the
Maximum Percentage (and shall not be entitled to beneficial ownership of such
shares of Common Stock as a result of such Purchase Right (and beneficial
ownership) to the extent of any such excess) and such Purchase Right to such
extent shall be held in abeyance for the benefit of the Holder until such time
or times, if ever, as its right thereto would not result in the Holder and the
other Attribution Parties exceeding the Maximum Percentage, at which time or
times the Holder shall be granted such right (and any Purchase Right granted,
issued or sold on such initial Purchase Right or on any subsequent Purchase
Right held similarly in abeyance) to the same extent as if there had been no
such limitation).

(b) Fundamental Transactions. The Company shall not enter into or be party to a
Fundamental Transaction unless the Successor Entity (if the Successor Entity is
not the Company) assumes in writing all of the obligations of the Company under
this Warrant and the other Transaction Documents (as defined in the Securities
Purchase Agreement) in accordance with the provisions of this Section 4(b)
pursuant to written agreements in form and substance satisfactory to the Holder
and approved by the Holder prior to such Fundamental Transaction, including
agreements to deliver to the Holder in exchange for this Warrant a security of
such Successor Entity evidenced by a written instrument substantially similar in
form and substance to

 

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this Warrant, including, without limitation, which is exercisable for a
corresponding number of shares of capital stock equivalent to the shares of
Common Stock acquirable and receivable upon exercise of this Warrant (without
regard to any limitations on the exercise of this Warrant) prior to such
Fundamental Transaction, and with an exercise price which applies the exercise
price hereunder to such shares of capital stock (but taking into account the
relative value of the shares of Common Stock pursuant to such Fundamental
Transaction and the value of such shares of capital stock, such adjustments to
the number of shares of capital stock and such exercise price being for the
purpose of protecting the economic value of this Warrant immediately prior to
the consummation of such Fundamental Transaction). Upon the consummation of each
Fundamental Transaction, the Successor Entity (if the Successor Entity is not
the Company) shall succeed to, and be substituted for (so that from and after
the date of the applicable Fundamental Transaction, the provisions of this
Warrant and the other Transaction Documents referring to the “Company” shall
refer instead to the Successor Entity), and may exercise every right and power
of the Company and shall assume all of the obligations of the Company under this
Warrant and the other Transaction Documents with the same effect as if such
Successor Entity had been named as the Company herein. Upon consummation of each
Fundamental Transaction, the Successor Entity (if the Successor Entity is not
the Company) shall deliver to the Holder confirmation that there shall be issued
upon exercise of this Warrant at any time after the consummation of the
applicable Fundamental Transaction, in lieu of the shares of Common Stock (or
other securities, cash, assets or other property (except such items still
issuable under Sections 3 and 4(a) above, which shall continue to be receivable
thereafter)) issuable upon the exercise of this Warrant prior to the applicable
Fundamental Transaction, such shares of publicly traded common stock (or its
equivalent) of the Successor Entity (including its Parent Entity) which the
Holder would have been entitled to receive upon the happening of the applicable
Fundamental Transaction had this Warrant been exercised immediately prior to the
applicable Fundamental Transaction (without regard to any limitations on the
exercise of this Warrant), as adjusted in accordance with the provisions of this
Warrant. Notwithstanding the foregoing, and without limiting Section 1(f)
hereof, the Holder may elect, at its sole option, by delivery of written notice
to the Company to waive this Section 4(b) to permit the Fundamental Transaction
without the assumption of this Warrant. In addition to and not in substitution
for any other rights hereunder, prior to the consummation of each Fundamental
Transaction pursuant to which holders of shares of Common Stock are entitled to
receive securities or other assets with respect to or in exchange for shares of
Common Stock (a “Corporate Event”), the Company shall make appropriate provision
to insure that the Holder will upon the closing of such Fundamental Transaction
have the right to receive upon an exercise of this Warrant at any time after the
consummation of the applicable Fundamental Transaction but prior to the
Expiration Date, in lieu of the shares of the Common Stock (or other securities,
cash, assets or other property (except such items still issuable under
Sections 3 and 4(a) above, which shall continue to be receivable thereafter))
issuable upon the exercise of the Warrant prior to such Fundamental Transaction,
such shares of stock, securities, cash, assets or any other property whatsoever
(including warrants or other purchase or subscription rights) which the Holder
would have been entitled to receive upon the happening of the applicable
Fundamental Transaction had this Warrant been exercised immediately prior to the
applicable Fundamental Transaction (without regard to any limitations on the
exercise of this Warrant). Provision made pursuant to the preceding sentence
shall be in a form and substance reasonably satisfactory to the Holder.
Notwithstanding the foregoing, upon any Going Private Transaction, each Holder
will receive at the consummation thereof the greater

 

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of (x) the Black-Scholes Value and (y) the consideration it would have received
had it exercised this Warrant and received Common Stock in full (without regard
to any limitations on exercise set forth herein) immediately prior to such
consummation.

(c) Black Scholes Value. Notwithstanding the foregoing and the provisions of
Section 4(b) above, at the request of the Holder delivered at any time
commencing on the earliest to occur of (x) the public disclosure of any Change
of Control, (y) the consummation of any Change of Control and (z) the Holder
first becoming aware of any Change of Control through the date that is sixty
(60) days after the public disclosure of the consummation of such Change of
Control by the Company pursuant to a Current Report on Form 8-K filed with the
SEC, the Company or the Successor Entity (as the case may be) shall purchase
this Warrant from the Holder on the date of such request by paying to the Holder
cash in an amount equal to the Black Scholes Value. Payment of such amounts
shall be made by the Company (or at the Company’s direction) to the Holder on or
prior to the later of (x) the second (2nd) Trading Day after the date of such
request and (y) the date of consummation of such Change of Control.
Notwithstanding the foregoing, payments made under this Section 4(c) shall not
be duplicative of payments made under Section 4(b) above.

(d) Application. The provisions of this Section 4 shall apply similarly and
equally to successive Fundamental Transactions and Corporate Events and shall be
applied as if this Warrant (and any such subsequent warrants) were fully
exercisable and without regard to any limitations on the exercise of this
Warrant (provided that the Holder shall continue to be entitled to the benefit
of the Maximum Percentage, applied however with respect to shares of capital
stock registered under the 1934 Act and thereafter receivable upon exercise of
this Warrant (or any such other warrant)).

5. NONCIRCUMVENTION. The Company hereby covenants and agrees that the Company
will not, by amendment of its Certificate of Incorporation (as defined in the
Securities Purchase Agreement), Bylaws (as defined in the Securities Purchase
Agreement) or through any reorganization, transfer of assets, consolidation,
merger, scheme of arrangement, dissolution, issuance or sale of securities, or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Warrant, and will at all times in good faith carry
out all the provisions of this Warrant and take all action as may be required to
protect the rights of the Holder. Without limiting the generality of the
foregoing, the Company (a) shall not increase the par value of any shares of
Common Stock receivable upon the exercise of this Warrant above the Exercise
Price then in effect, and (b) shall take all such actions as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid
and non-assessable shares of Common Stock upon the exercise of this Warrant.

6. WARRANT HOLDER NOT DEEMED A STOCKHOLDER. Except as otherwise specifically
provided herein, the Holder, solely in its capacity as a holder of this Warrant,
shall not be entitled to vote or receive dividends or be deemed the holder of
share capital of the Company for any purpose, nor shall anything contained in
this Warrant be construed to confer upon the Holder, solely in its capacity as
the Holder of this Warrant, any of the rights of a stockholder of the Company or
any right to vote, give or withhold consent to any corporate action (whether any
reorganization, issue of stock, reclassification of stock, consolidation,
merger, conveyance or otherwise), receive notice of meetings, receive dividends
or subscription rights, or otherwise, prior to the issuance to the Holder of the
Warrant Shares which it is then entitled to receive upon the due exercise of
this Warrant. In addition, nothing contained in this

 

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Warrant shall be construed as imposing any liabilities on the Holder to purchase
any securities (upon exercise of this Warrant or otherwise) or as a stockholder
of the Company, whether such liabilities are asserted by the Company or by
creditors of the Company. Notwithstanding this Section 6, the Company shall
provide the Holder with copies of the same notices and other information given
to the stockholders of the Company generally, contemporaneously with the giving
thereof to the stockholders.

7. REISSUANCE OF WARRANTS.

(a) Transfer of Warrant. If this Warrant is to be transferred, the Holder shall
surrender this Warrant to the Company, whereupon the Company will forthwith
issue and deliver upon the order of the Holder a new Warrant (in accordance with
Section 7(d)), registered as the Holder may request, representing the right to
purchase the number of Warrant Shares being transferred by the Holder and, if
less than the total number of Warrant Shares then underlying this Warrant is
being transferred, a new Warrant (in accordance with Section 7(d)) to the Holder
representing the right to purchase the number of Warrant Shares not being
transferred.

(b) Lost, Stolen or Mutilated Warrant. Upon receipt by the Company of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of this Warrant (as to which a written certification and the
indemnification contemplated below shall suffice as such evidence), and, in the
case of loss, theft or destruction, of any indemnification undertaking by the
Holder to the Company in customary and reasonable form and, in the case of
mutilation, upon surrender and cancellation of this Warrant, the Company shall
execute and deliver to the Holder a new Warrant (in accordance with
Section 7(d)) representing the right to purchase the Warrant Shares then
underlying this Warrant.

(c) Exchangeable for Multiple Warrants. This Warrant is exchangeable, upon the
surrender hereof by the Holder at the principal office of the Company, for a new
Warrant or Warrants (in accordance with Section 7(d)) representing in the
aggregate the right to purchase the number of Warrant Shares then underlying
this Warrant, and each such new Warrant will represent the right to purchase
such portion of such Warrant Shares as is designated by the Holder at the time
of such surrender; provided, however, no warrants for fractional shares of
Common Stock shall be given.

(d) Issuance of New Warrants. Whenever the Company is required to issue a new
Warrant pursuant to the terms of this Warrant, such new Warrant (i) shall be of
like tenor with this Warrant, (ii) shall represent, as indicated on the face of
such new Warrant, the right to purchase the Warrant Shares then underlying this
Warrant (or in the case of a new Warrant being issued pursuant to Section 7(a)
or Section 7(c), the Warrant Shares designated by the Holder which, when added
to the number of shares of Common Stock underlying the other new Warrants issued
in connection with such issuance, does not exceed the number of Warrant Shares
then underlying this Warrant), (iii) shall have an issuance date, as indicated
on the face of such new Warrant which is the same as the Issuance Date, and
(iv) shall have the same rights and conditions as this Warrant.

8. NOTICES. Whenever notice is required to be given under this Warrant, unless
otherwise provided herein, such notice shall be given in accordance with
Section 9(f) of the Securities

 

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Purchase Agreement. Without limiting the generality of the foregoing, the
Company will give written notice to the Holder (i) immediately upon each
adjustment of the Exercise Price and the number of Warrant Shares, setting forth
in reasonable detail, and certifying, the calculation of such adjustment(s),
(ii) at least fifteen (15) days prior to the date on which the Company closes
its books or takes a record (A) with respect to any dividend or distribution
upon the shares of Common Stock or (B) for determining rights to vote with
respect to any Fundamental Transaction, dissolution or liquidation, provided in
each case that such information shall be made known to the public prior to or in
conjunction with such notice being provided to the Holder, and (iii) at least
ten (10) Trading Days prior to the consummation of any Fundamental Transaction
or Going Private Transaction. The Company shall provide the Holder with prompt
written notice of all other actions taken pursuant to this Warrant (other than
the issuance of shares of Common Stock upon exercise in accordance with the
terms hereof), including in reasonable detail a description of such action and
the reason therefor. To the extent that any notice provided hereunder
constitutes, or contains, material, non-public information regarding the Company
or any of its Subsidiaries, the Company shall simultaneously file such notice
with the SEC (as defined in the Securities Purchase Agreement) pursuant to a
Current Report on Form 8-K. If the Company or any of its Subsidiaries provides
material non-public information to the Holder that is not simultaneously filed
in a Current Report on Form 8-K and the Holder has not agreed to receive such
material non-public information, the Company hereby covenants and agrees that
the Holder shall not have any duty of confidentiality to the Company, any of its
Subsidiaries or any of their respective officers, directors, employees,
affiliates or agents with respect to, or a duty to any of the foregoing not to
trade on the basis of, such material non-public information. It is expressly
understood and agreed that the time of execution specified by the Holder in each
Exercise Notice shall be definitive and may not be disputed or challenged by the
Company.

9. AMENDMENT AND WAIVER. Except as otherwise provided herein, the provisions of
this Warrant (other than Section 1(f)) may be amended and the Company may take
any action herein prohibited, or omit to perform any act herein required to be
performed by it, only if the Company has obtained the written consent of the
Holder. No waiver shall be effective unless it is in writing and signed by an
authorized representative of the waiving party.

10. SEVERABILITY. If any provision of this Warrant is prohibited by law or
otherwise determined to be invalid or unenforceable by a court of competent
jurisdiction, the provision that would otherwise be prohibited, invalid or
unenforceable shall be deemed amended to apply to the broadest extent that it
would be valid and enforceable, and the invalidity or unenforceability of such
provision shall not affect the validity of the remaining provisions of this
Warrant so long as this Warrant as so modified continues to express, without
material change, the original intentions of the parties as to the subject matter
hereof and the prohibited nature, invalidity or unenforceability of the
provision(s) in question does not substantially impair the respective
expectations or reciprocal obligations of the parties or the practical
realization of the benefits that would otherwise be conferred upon the parties.
The parties will endeavor in good faith negotiations to replace the prohibited,
invalid or unenforceable provision(s) with a valid provision(s), the effect of
which comes as close as possible to that of the prohibited, invalid or
unenforceable provision(s).

 

15

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11. GOVERNING LAW. This Warrant shall be governed by and construed and enforced
in accordance with, and all questions concerning the construction, validity,
interpretation and performance of this Warrant shall be governed by, the
internal laws of the State of New York, without giving effect to any choice of
law or conflict of law provision or rule (whether of the State of New York or
any other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of New York. The Company and the Holder
hereby irrevocably waive personal service of process and consents to process
being served in any such suit, action or proceeding by mailing a copy thereof to
the Company or the Holder at the address set forth in Section 9(f) of the
Securities Purchase Agreement and agrees that such service shall constitute good
and sufficient service of process and notice thereof. The Company and the Holder
hereby irrevocably submit to the exclusive jurisdiction of the state and federal
courts sitting in The City of New York, Borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waive, and agree not to assert in any suit, action or proceeding, any claim that
it is not personally subject to the jurisdiction of any such court, that such
suit, action or proceeding is brought in an inconvenient forum or that the venue
of such suit, action or proceeding is improper. Nothing contained herein shall
be deemed to limit in any way any right to serve process in any manner permitted
by law. THE COMPANY AND THE HOLDER HEREBY IRREVOCABLY WAIVE ANY RIGHT THAT THE
COMPANY OR THE HOLDER MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR
THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT
OF THIS WARRANT OR ANY TRANSACTION CONTEMPLATED HEREBY.

12. CONSTRUCTION; HEADINGS. This Warrant shall be deemed to be jointly drafted
by the Company and the Holder and shall not be construed against any Person as
the drafter hereof. The headings of this Warrant are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Warrant. Terms used in this Warrant but defined in the other Transaction
Documents shall have the meanings ascribed to such terms on the Closing Date (as
defined in the Securities Purchase Agreement) in such other Transaction
Documents unless otherwise consented to in writing by the Holder.

13. DISPUTE RESOLUTION.

(a) Submission to Dispute Resolution.

(i) In the case of a dispute relating to the Exercise Price, the Closing Sale
Price, Black Scholes Value or fair market value or the arithmetic calculation of
the number of Warrant Shares (as the case may be) (including, without
limitation, a dispute relating to the determination of any of the foregoing),
the Company or the Holder (as the case may be) shall submit the dispute to the
other party via facsimile (A) if by the Company, within five (5) Business Days
after the occurrence of the circumstances giving rise to such dispute or (B) if
by the Holder, at any time after the Holder learned of the circumstances giving
rise to such dispute. If the Holder and the Company are unable to promptly
resolve such dispute relating to such Exercise Price, such Closing Sale Price,
such Black Scholes Value or such fair market value or such arithmetic
calculation of the number of Warrant Shares (as the case may be), at any time
after the second (2nd)

 

16

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Business Day following such initial notice by the Company or the Holder (as the
case may be) of such dispute to the Company or the Holder (as the case may be),
then the Holder may, at its sole option, select an independent, reputable
investment bank to resolve such dispute.

(ii) The Holder and the Company shall each deliver to such investment bank (A) a
copy of the initial dispute submission so delivered in accordance with the first
sentence of this Section 13 and (B) written documentation supporting its
position with respect to such dispute, in each case, no later than 5:00 p.m.
(New York time) by the fifth (5th) Business Day immediately following the date
on which the Holder selected such investment bank (the “Dispute Submission
Deadline”) (the documents referred to in the immediately preceding clauses
(A) and (B) are collectively referred to herein as the “Required Dispute
Documentation”) (it being understood and agreed that if either the Holder or the
Company fails to so deliver all of the Required Dispute Documentation by the
Dispute Submission Deadline, then the party who fails to so submit all of the
Required Dispute Documentation shall no longer be entitled to (and hereby waives
its right to) deliver or submit any written documentation or other support to
such investment bank with respect to such dispute and such investment bank shall
resolve such dispute based solely on the Required Dispute Documentation that was
delivered to such investment bank prior to the Dispute Submission Deadline).
Unless otherwise agreed to in writing by both the Company and the Holder or
otherwise requested by such investment bank, neither the Company nor the Holder
shall be entitled to deliver or submit any written documentation or other
support to such investment bank in connection with such dispute (other than the
Required Dispute Documentation).

(iii) The Company and the Holder shall cause such investment bank to determine
the resolution of such dispute and notify the Company and the Holder of such
resolution no later than ten (10) Business Days immediately following the
Dispute Submission Deadline. The fees and expenses of such investment bank shall
be borne solely by the Company, and such investment bank’s resolution of such
dispute shall be final and binding upon all parties absent manifest error.

(b) Miscellaneous. The Company expressly acknowledges and agrees that (i) this
Section 13 constitutes an agreement to arbitrate between the Company and the
Holder (and constitutes an arbitration agreement) under the rules then in effect
under § 7501, et seq. of the New York Civil Practice Law and Rules (“CPLR”) and
that the Holder is authorized to apply for an order to compel arbitration
pursuant to CPLR § 7503(a) in order to compel compliance with this Section 13,
(ii) the terms of this Warrant and each other applicable Transaction Document
shall serve as the basis for the selected investment bank’s resolution of the
applicable dispute, such investment bank shall be entitled (and is hereby
expressly authorized) to make all findings, determinations and the like that
such investment bank determines are required to be made by such investment bank
in connection with its resolution of such dispute and in resolving such dispute
such investment bank shall apply such findings, determinations and the like to
the terms of this Warrant and any other applicable Transaction Documents and
(iv) nothing in this Section 13 shall limit the Holder from obtaining any
injunctive relief or other equitable remedies (including, without limitation,
with respect to any matters described in this Section 13).

 

17

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14. REMEDIES, CHARACTERIZATION, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE
RELIEF. The remedies provided in this Warrant shall be cumulative and in
addition to all other remedies available under this Warrant and the other
Transaction Documents, at law or in equity (including a decree of specific
performance and/or other injunctive relief), and nothing herein shall limit the
right of the Holder to pursue damages for any failure by the Company to comply
with the terms of this Warrant. The Company covenants to the Holder that there
shall be no characterization concerning this instrument other than as expressly
provided herein. Amounts set forth or provided for herein with respect to
payments, exercises and the like (and the computation thereof) shall be the
amounts to be received by the Holder and shall not, except as expressly provided
herein, be subject to any other obligation of the Company (or the performance
thereof). The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the Holder and that the remedy at law
for any such breach may be inadequate. The Company therefore agrees that, in the
event of any such breach or threatened breach, the holder of this Warrant shall
be entitled, in addition to all other available remedies, to an injunction
restraining any breach, without the necessity of showing economic loss and
without any bond or other security being required. The Company shall provide all
information and documentation to the Holder that is requested by the Holder to
enable the Holder to confirm the Company’s compliance with the terms and
conditions of this Warrant (including, without limitation, compliance with
Section 2 hereof). The issuance of shares and certificates for shares as
contemplated hereby upon the exercise of this Warrant shall be made without
charge to the Holder or such shares for any issuance tax or other costs in
respect thereof, provided that the Company shall not be required to pay any tax
which may be payable in respect of any transfer involved in the issuance and
delivery of any certificate in a name other than the Holder or its agent on its
behalf.

15. PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS. If (a) this Warrant is
placed in the hands of an attorney for collection or enforcement or is collected
or enforced through any legal proceeding or the holder otherwise takes action to
collect amounts due under this Warrant or to enforce the provisions of this
Warrant or (b) there occurs any bankruptcy, reorganization, receivership of the
company or other proceedings affecting company creditors’ rights and involving a
claim under this Warrant, then the Company shall pay the costs incurred by the
Holder for such collection, enforcement or action or in connection with such
bankruptcy, reorganization, receivership or other proceeding, including, without
limitation, attorneys’ fees and disbursements.

16. TRANSFER. This Warrant may be offered for sale, sold, transferred or
assigned without the consent of the Company, except as may otherwise be required
by Section 2(g) of the Securities Purchase Agreement.

17. CERTAIN DEFINITIONS. For purposes of this Warrant, the following terms shall
have the following meanings:

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

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

 

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(c) “Adjustment” shall have the meaning as set forth in the definition of
“Maximum Eligibility Number” below.

(d) “Adjustment Share Amount” equals the greater of (I) zero and (II) the
difference of (i) the quotient of (x) the Purchase Price (as defined in the
Securities Purchase Agreement) of the Holder divided by (y) the lowest Market
Price during the period commencing six (6) Trading Days following the Issuance
Date through and including the Adjustment Time, less (ii) the number of Common
Shares previously issued to the Holder.

(e) “Adjustment Time” means 9:00 AM, New York city time, on the tenth
(10) Trading Day after the earlier to occur of (x) the later of (A) the initial
Effective Date (as defined in the Registration Rights Agreement) and (B) the
date of the filing with the SEC by the Company of its Annual Report on Form 10-K
for the fiscal period ended December 31, 2015 and (y) such date whereafter all
Registrable Securities (assuming the cashless exercise of any SPA Warrants)
shall be eligible for sale without restriction under Rule 144 (as defined in the
Securities Purchase Agreement).

(f) “Affiliate” means, with respect to any Person, any other Person that
directly or indirectly controls, is controlled by, or is under common control
with, such Person, it being understood for purposes of this definition that
“control” of a Person means the power directly or indirectly either to vote 10%
or more of the stock having ordinary voting power for the election of directors
of such Person or direct or cause the direction of the management and policies
of such Person whether by contract or otherwise.

(g) “Attribution Parties” means, collectively, the following Persons and
entities: (i) any investment vehicle, including, any funds, feeder funds or
managed accounts, currently, or from time to time after the Issuance Date,
directly or indirectly managed or advised by the Holder’s investment manager or
any of its Affiliates or principals, (ii) any direct or indirect Affiliates of
the Holder or any of the foregoing, (iii) any Person acting or who could be
deemed to be acting as a Group together with the Holder or any of the foregoing
and (iv) any other Persons whose beneficial ownership of the Company’s Common
Stock would or could be aggregated with the Holder’s and the other Attribution
Parties for purposes of Section 13(d) of the 1934 Act. For clarity, the purpose
of the foregoing is to subject collectively the Holder and all other Attribution
Parties to the Maximum Percentage.

(h) “Base Share Amount” shall have the meaning as set forth in the definition of
“Maximum Eligibility Number” below.

(i) “Black Scholes Value” means the value of the unexercised portion of this
Warrant remaining on the date of the Holder’s request pursuant to Section 4(c),
which value is calculated using the Black Scholes Option Pricing Model obtained
from the “OV” function on Bloomberg utilizing (i) an underlying price per share
equal to the greater of (1) the highest Closing Sale Price of the Common Stock
during the period beginning on the Trading Day immediately preceding the
announcement of the applicable Change of Control (or the consummation of the
applicable Change of Control, if earlier) and ending on the Trading Day of the
Holder’s request pursuant to Section 4(c) and (2) the sum of the price per share
being offered in cash in the applicable Change of Control (if any) plus the
value of the non-cash consideration

 

19

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being offered in the applicable Change of Control (if any), (ii) a strike price
equal to the Exercise Price in effect on the date of the Holder’s request
pursuant to Section 4(c), (iii) a risk-free interest rate corresponding to the
U.S. Treasury rate for a period equal to the greater of (1) the remaining term
of this Warrant as of the date of the Holder’s request pursuant to Section 4(c)
and (2) the remaining term of this Warrant as of the date of consummation of the
applicable Change of Control or as of the date of the Holder’s request pursuant
to Section 4(c) if such request is prior to the date of the consummation of the
applicable Change of Control, (iv) a zero cost of borrow and (v) an expected
volatility equal to the greater of [TBD]% and the 30 day volatility obtained
from the “HVT” function on Bloomberg (determined utilizing a 365 day
annualization factor) as of the Trading Day immediately following the earliest
to occur of (A) the public disclosure of the applicable Change of Control,
(B) the consummation of the applicable Change of Control and (C) the date on
which the Holder first became aware of the applicable Change of Control.

(j) “Bloomberg” means Bloomberg, L.P.

(k) “Business Day” means any day other than Saturday, Sunday or other day on
which commercial banks in The City of New York are authorized or required by law
to remain closed.

(l) “Change of Control” means (x) any Fundamental Transaction other than (i) any
merger of the Company or any of its, direct or indirect, wholly-owned
Subsidiaries with or into any of the foregoing Persons, (ii) any reorganization,
recapitalization or reclassification of the shares of Common Stock in which
holders of the Company’s voting power immediately prior to such reorganization,
recapitalization or reclassification continue after such reorganization,
recapitalization or reclassification to hold publicly traded securities and,
directly or indirectly, are, in all material respects, the holders of the voting
power of the surviving entity (or entities with the authority or voting power to
elect the members of the board of directors (or their equivalent if other than a
corporation) of such entity or entities) after such reorganization,
recapitalization or reclassification, or (iii) pursuant to a migratory merger
effected solely for the purpose of changing the jurisdiction of incorporation of
the Company or any of its Subsidiaries or (y) the occurrence of any going
private transaction of the Company or any other event which results in the
Common Stock of the Company to cease to be registered under the 1934 Act;
provided, that solely with respect to clause (x) above, a Change of Control
shall not be deemed to have occurred if the Stockholder (as defined in the
Securities Purchase Agreement) and its Affiliates as of the Issuance Date (or
any bona fide trust or estate planning vehicle for the benefit of the
stockholder or his immediate family) beneficially owns or acquires 50% or more
of the outstanding shares of Common Stock or 50% or more of the aggregate
ordinary voting power represented by issued and outstanding Common Stock.

(m) “Closing Sale Price” means, for any security as of any date, the last
closing trade price for such security on the Principal Market, as reported by
Bloomberg, or, if the Principal Market begins to operate on an extended hours
basis and does not designate the closing trade price, then the last trade price
of such security prior to 4:00:00 p.m., New York time, as reported by Bloomberg,
or, if the Principal Market is not the principal securities exchange or trading
market for such security, the last trade price of such security on the principal
securities exchange or trading market where such security is listed or traded as
reported by Bloomberg, or if the

 

20

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foregoing does not apply, the last trade price of such security in the
over-the-counter market on the electronic bulletin board for such security as
reported by Bloomberg, or, if no last trade price is reported for such security
by Bloomberg, the average of the ask prices of any market makers for such
security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly
Pink Sheets LLC). If the Closing Sale Price cannot be calculated for a security
on a particular date on any of the foregoing bases, the Closing Sale Price of
such security on such date shall be the fair market value as mutually determined
by the Company and the Holder. If the Company and the Holder are unable to agree
upon the fair market value of such security, then such dispute shall be resolved
in accordance with the procedures in Section 13. All such determinations shall
be appropriately adjusted for any stock dividend, stock split, stock combination
or other similar transaction during such period.

(n) “Common Stock” means (i) the Company’s shares of common stock, $0.001 par
value per share, and (ii) any capital stock into which such common stock shall
have been changed or any share capital resulting from a reclassification of such
common stock.

(o) “Convertible Securities” means any stock or other security (other than
Options) that is at any time and under any circumstances, directly or
indirectly, convertible into, exercisable or exchangeable for, or which
otherwise entitles the holder thereof to acquire, any shares of Common Stock.

(p) “Eligible Market” means The New York Stock Exchange, the NYSE MKT, the
Nasdaq Global Select Market, the Nasdaq Global Market, the OTCQB or the
Principal Market.

(q) “Expiration Date” means the date that is June 30, 2018 or, if such date
falls on a day other than a Trading Day or on which trading does not take place
on the Principal Market (a “Holiday”), the next date that is not a Holiday.

(r) [Intentionally Omitted]

(s) “Fundamental Transaction” means (A) that the Company shall, directly or
indirectly, including through subsidiaries, Affiliates or otherwise, in one or
more related transactions, (i) consolidate or merge with or into (whether or not
the Company is the surviving corporation) another Subject Entity, or (ii) sell,
assign, transfer, convey or otherwise dispose of all or substantially all of the
properties or assets of the Company and its subsidiaries to one or more Subject
Entities, or (iii) make, or allow one or more Subject Entities to make, or allow
the Company to be subject to or have its Common Stock be subject to or party to
one or more Subject Entities making, a purchase, tender or exchange offer that
is accepted by the holders of at least either (x) 50% of the outstanding shares
of Common Stock, (y) 50% of the outstanding shares of Common Stock calculated as
if any shares of Common Stock held by all Subject Entities making or party to,
or Affiliated with any Subject Entities making or party to, such purchase,
tender or exchange offer were not outstanding; or (z) such number of shares of
Common Stock such that all Subject Entities making or party to, or Affiliated
with any Subject Entity making or party to, such purchase, tender or exchange
offer, become collectively the beneficial owners (as defined in Rule 13d-3 under
the 1934 Act) of at least 50% of the outstanding shares of Common Stock, or
(iv) consummate a stock or share purchase agreement or other business
combination (including, without limitation, a reorganization, recapitalization,

 

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spin-off or scheme of arrangement) with one or more Subject Entities whereby all
such Subject Entities, individually or in the aggregate, acquire, either (x) at
least 50% of the outstanding shares of Common Stock, (y) at least 50% of the
outstanding shares of Common Stock calculated as if any shares of Common Stock
held by all the Subject Entities making or party to, or Affiliated with any
Subject Entity making or party to, such stock purchase agreement or other
business combination were not outstanding; or (z) such number of shares of
Common Stock such that the Subject Entities become collectively the beneficial
owners (as defined in Rule 13d-3 under the 1934 Act) of at least 50% of the
outstanding shares of Common Stock, or (v) reorganize, recapitalize or
reclassify its Common Stock, (B) that the Company shall, directly or indirectly,
including through subsidiaries, Affiliates or otherwise, in one or more related
transactions, allow any Subject Entity individually or the Subject Entities in
the aggregate to be or become the “beneficial owner” (as defined in Rule 13d-3
under the 1934 Act), directly or indirectly, whether through acquisition,
purchase, assignment, conveyance, tender, tender offer, exchange, reduction in
outstanding shares of Common Stock, merger, consolidation, business combination,
reorganization, recapitalization, spin-off, scheme of arrangement,
reorganization, recapitalization or reclassification or otherwise in any manner
whatsoever, of either (x) at least 50% of the aggregate ordinary voting power
represented by issued and outstanding Common Stock, (y) at least 50% of the
aggregate ordinary voting power represented by issued and outstanding Common
Stock not held by all such Subject Entities as of the date of this Warrant
calculated as if any shares of Common Stock held by all such Subject Entities
were not outstanding, or (z) a percentage of the aggregate ordinary voting power
represented by issued and outstanding shares of Common Stock or other equity
securities of the Company sufficient to allow such Subject Entities to effect a
statutory short form merger or other transaction requiring other shareholders of
the Company to surrender their shares of Common Stock without approval of the
shareholders of the Company or (C) directly or indirectly, including through
subsidiaries, Affiliates or otherwise, in one or more related transactions, the
issuance of or the entering into any other instrument or transaction structured
in a manner to circumvent, or that circumvents, the intent of this definition in
which case this definition shall be construed and implemented in a manner
otherwise than in strict conformity with the terms of this definition to the
extent necessary to correct this definition or any portion of this definition
which may be defective or inconsistent with the intended treatment of such
instrument or transaction.

(t) “Going Private Transaction” means a transaction in which the Company merges
or consolidates with another Subject Entity that does not have a class of common
equity registered pursuant to the 1934 Act and the holders of Common Stock
receive cash in lieu of their shares.

(u) “Group” means a “group” as that term is used in Section 13(d) of the 1934
Act and as defined in Rule 13d-5 thereunder.

(v) “Market Price” means with respect to a particular date of determination, the
price which shall be computed as the quotient of (I) the sum of the VWAP of the
Common Stock of each Trading Day during the ten (10) consecutive Trading Day
period ending and including the Trading Day immediately prior to the applicable
date of determination, divided by (II) ten (10). All such determinations to be
appropriately adjusted for any stock split, stock dividend, stock combination or
other similar transaction during any such measuring period.

 

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(w) “Maximum Eligibility Number” means initially [        ] (the “Base Share
Amount”) and shall be increased (such increase, an “Adjustment”) at the
Adjustment Time by such number of shares of Common Stock equal to the Adjustment
Share Amount.

(x) “Options” means any rights, warrants or options to subscribe for or purchase
shares of Common Stock or Convertible Securities.

(y) “Parent Entity” of a Person means an entity that, directly or indirectly,
controls the applicable Person and whose common stock or equivalent equity
security is quoted or listed on an Eligible Market, or, if there is more than
one such Person or Parent Entity, the Person or Parent Entity with the largest
public market capitalization as of the date of consummation of the Fundamental
Transaction.

(z) “Person” means an individual, a limited liability company, a partnership, a
joint venture, a corporation, a trust, an unincorporated organization, any other
entity or a government or any department or agency thereof.

(aa) “Principal Market” means The New York Stock Exchange.

(bb) “Registration Rights Agreement” means that certain registration rights
agreement, dated as of the Closing Date, by and among the Company and the Buyers
relating to, among other things, the registration of the resale of the Common
Stock sold to the Buyers pursuant to the Securities Purchase Agreement and
issuable upon exercise of the SPA Warrants, as may be amended from time to time.

(cc) “SEC” means the United States Securities and Exchange Commission or the
successor thereto.

(dd) “Subject Entity” means any Person, Persons or Group or any Affiliate or
associate of any such Person, Persons or Group.

(ee) “Successor Entity” means the Person (or, if so elected by the Holder, the
Parent Entity) formed by, resulting from or surviving any Fundamental
Transaction or the Person (or, if so elected by the Holder, the Parent Entity)
with which such Fundamental Transaction shall have been entered into.

(ff) “Trading Day” means, as applicable, (x) with respect to all price or
trading volume determinations relating to the Common Stock, any day on which the
Common Stock is traded on the Principal Market, or, if the Principal Market is
not the principal trading market for the Common Stock, then on the principal
securities exchange or securities market on which the Common Stock is then
traded, provided that “Trading Day” shall not include any day on which the
Common Stock is scheduled to trade on such exchange or market for less than 4.5
hours or any day that the Common Stock is suspended from trading during the
final hour of trading on such exchange or market (or if such exchange or market
does not designate in advance the closing time of trading on such exchange or
market, then during the hour ending at 4:00:00 p.m., New York time) unless such
day is otherwise designated as a Trading Day in writing by the Holder or
(y) with respect to all determinations other than price or trading volume
determinations relating to the Common Stock, any day on which The New York Stock
Exchange (or any successor thereto) is open for trading of securities.

 

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(gg) [Intentionally Omitted]

(hh) “VWAP” means, for any security as of any date, the dollar volume-weighted
average price for such security on the Principal Market (or, if the Principal
Market is not the principal trading market for such security, then on the
principal securities exchange or securities market on which such security is
then traded) during the period beginning at 9:30:01 a.m., New York time, and
ending at 4:00:00 p.m., New York time, as reported by Bloomberg through its “HP”
function (set to weighted average) or, if the foregoing does not apply, the
dollar volume-weighted average price of such security in the over-the-counter
market on the electronic bulletin board for such security during the period
beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York
time, as reported by Bloomberg, or, if no dollar volume-weighted average price
is reported for such security by Bloomberg for such hours, the average of the
highest closing bid price and the lowest closing ask price of any of the market
makers for such security as reported in the “pink sheets” by OTC Markets Group
Inc. (formerly Pink Sheets LLC). If the VWAP cannot be calculated for such
security on such date on any of the foregoing bases, the VWAP of such security
on such date shall be the fair market value as mutually determined by the
Company and the Holder. If the Company and the Holder are unable to agree upon
the fair market value of such security, then such dispute shall be resolved in
accordance with the procedures in Section 13. All such determinations shall be
appropriately adjusted for any stock dividend, stock split, stock combination,
recapitalization or other similar transaction during such period.

[signature page follows]

 

24

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IN WITNESS WHEREOF, the Company has caused this Warrant to Purchase Common Stock
to be duly executed as of the Issuance Date set out above.

 

PATRIOT NATIONAL, INC. By:  

 

  Name:   Title:

--------------------------------------------------------------------------------

EXHIBIT A

EXERCISE NOTICE

TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS

WARRANT TO PURCHASE COMMON STOCK

PATRIOT NATIONAL, INC.

The undersigned holder hereby elects to exercise the Warrant to Purchase Common
Stock No.             (the “Warrant”) of Patriot National, Inc., a Delaware
corporation (the “Company”) as specified below. Capitalized terms used herein
and not otherwise defined shall have the respective meanings set forth in the
Warrant.

1. Form of Exercise Price. The Holder intends that payment of the Aggregate
Exercise Price shall be made as:

 

  ¨ a “Cash Exercise” with respect to                      Warrant Shares;
and/or

 

  ¨ a “Cashless Exercise” with respect to                      Warrant Shares.

In the event that the Holder has elected a Cashless Exercise with respect to
some or all of the Warrant Shares to be issued pursuant hereto, the Holder
hereby represents and warrants that this Exercise Notice was executed by the
Holder at             [a.m.][p.m.] on the date set forth below.

2. Payment of Exercise Price. In the event that the Holder has elected a Cash
Exercise with respect to some or all of the Warrant Shares to be issued pursuant
hereto, the Holder shall pay the Aggregate Exercise Price in the sum of
$         to the Company in accordance with the terms of the Warrant.

3. Maximum Percentage Representation. This Exercise Notice shall constitute a
representation by the Holder that after giving effect to the exercise provided
for in this Exercise Notice, such Holder (together with the other Attribution
Parties) will not have beneficial ownership (together with the other Attribution
Parties) of a number of shares of Common Stock which exceeds the Maximum
Percentage (as defined in the Warrant) of the total outstanding shares of Common
Stock of the Company as determined pursuant to the provisions of Section 1(f)(i)
of the Warrant.

4. Delivery of Warrant Shares. The Company shall deliver to Holder, or its
designee or agent as specified below,                  shares of Common Stock in
accordance with the terms of the Warrant. Delivery shall be made to Holder, or
for its benefit, as follows:

¨ Check here if requesting delivery as a certificate to the following name and
to the following address:

 

Issue to:  

 

 

 

 

 

 

 

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¨ Check here if requesting delivery by Deposit/Withdrawal at Custodian as
follows:

 

DTC Participant:  

 

DTC Number:  

 

Account Number:  

 

 

Date:                    ,    

 

Name of Registered Holder By:  

 

  Name:     Title:  

  Tax ID:  

 

  Facsimile:  

 

  E-mail Address:  

 

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EXHIBIT B

ACKNOWLEDGMENT

The Company hereby acknowledges this Exercise Notice and hereby directs
                     to issue the above indicated number of shares of Common
Stock in accordance with the Transfer Agent Instructions dated             ,
201    , from the Company and acknowledged and agreed to by
                    .

 

PATRIOT NATIONAL, INC. By:  

 

  Name:   Title:

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Exhibit C

REGISTRATION RIGHTS AGREEMENT

This REGISTRATION RIGHTS AGREEMENT (this “Agreement”), dated as
of [            ], 2015, is by and among Patriot National, Inc., a Delaware
corporation with offices located at 401 East Las Olas Boulevard, Suite 1650,
Fort Lauderdale, Florida 33301 (the “Company”), and the undersigned buyers
(each, a “Buyer,” and collectively, the “Buyers”).

RECITALS

A. In connection with the Securities Purchase Agreement by and among the parties
hereto, dated as of December 13, 2015 (the “Securities Purchase Agreement”), the
Company has agreed, upon the terms and subject to the conditions of the
Securities Purchase Agreement, to issue and sell to each Buyer (i) the Company
Common Shares (as defined in the Securities Purchase Agreement) and (ii) the
Warrants (as defined in the Securities Purchase Agreement) which will be
exercisable to purchase Warrant Shares (as defined in the Securities Purchase
Agreement) in accordance with the terms of the Warrants and a stockholder of the
Company has agreed to sell to each Buyer the Stockholder Common Shares (as
defined in the Securities Purchase Agreement).

B. To induce the Buyers to consummate the transactions contemplated by the
Securities Purchase Agreement, the Company has agreed to provide certain
registration rights under the Securities Act of 1933, as amended, and the rules
and regulations thereunder, or any similar successor statute (collectively, the
“1933 Act”), and applicable state securities laws.

AGREEMENT

NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and each of the Buyers
hereby agree as follows:

1. Definitions.

Capitalized terms used herein and not otherwise defined herein shall have the
respective meanings set forth in the Securities Purchase Agreement. As used in
this Agreement, the following terms shall have the following meanings:

(a) “Closing Date” shall have the meaning set forth in the Securities Purchase
Agreement.

(b) “Common Shares” shall have the meaning set forth in the Securities Purchase
Agreement.

(c) “Effective Date” means the date that the applicable Registration Statement
has been declared effective by the SEC.

(d) “Effectiveness Deadline” means (i) with respect to the initial Registration
Statement required to be filed pursuant to Section 2.(a), January 31, 2016 and
(ii) with respect to any additional Registration Statements that may be required
to be filed by the Company pursuant

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to this Agreement, the earlier of the (A) 60th calendar day following the date
on which the Company was required to file such additional Registration Statement
and (B) 5th Business Day after the date the Company is notified (orally or in
writing, whichever is earlier) by the SEC that such Registration Statement will
not be reviewed or will not be subject to further review.

(e) “Filing Deadline” means (i) with respect to the initial Registration
Statement required to be filed pursuant to Section 2.(a), the 15th Business Day
after the Closing Date and (ii) with respect to any additional Registration
Statements that may be required to be filed by the Company pursuant to this
Agreement, the date on which the Company was required to file such additional
Registration Statement pursuant to the terms of this Agreement.

(f) “Investor” means a Buyer or any transferee or assignee of any Registrable
Securities or Warrants, as applicable, to whom a Buyer assigns its rights under
this Agreement and who agrees to become bound by the provisions of this
Agreement in accordance with Section 9 and any transferee or assignee thereof to
whom a transferee or assignee of any Registrable Securities or Warrants, as
applicable, assigns its rights under this Agreement and who agrees to become
bound by the provisions of this Agreement in accordance with Section 9.

(g) “Person” means an individual, a limited liability company, a partnership, a
joint venture, a corporation, a trust, an unincorporated organization or a
government or any department or agency thereof.

(h) “register,” “registered,” and “registration” refer to a registration
effected by preparing and filing one or more Registration Statements in
compliance with the 1933 Act and pursuant to Rule 415 and the declaration of
effectiveness of such Registration Statement(s) by the SEC.

(i) “Registrable Securities” means (i) the Common Shares, (ii) the Warrant
Shares and (iii) any capital stock of the Company issued or issuable with
respect to the Common Shares, the Warrant Shares or the Warrants, including,
without limitation, (1) as a result of any stock split, stock dividend,
recapitalization, exchange or similar event or otherwise and (2) shares of
capital stock of the Company into which the shares of Common Stock (as defined
in the Warrants) are converted or exchanged and shares of capital stock of a
Successor Entity (as defined in the Warrants) into which the shares of Common
Stock are converted or exchanged, in each case, without regard to any
limitations on exercise of the Warrants.

(j) “Registration Statement” means a registration statement or registration
statements of the Company filed under the 1933 Act covering Registrable
Securities.

(k) “Required Holders” means, as of any given time, the holders of 2/3rds of the
Registrable Securities as of such time (excluding any Registrable Securities
held by the Company or any of its Subsidiaries as of such time).

(l) “Required Registration Amount” means the sum of (i) the number of Common
Shares issued or resold, as applicable, pursuant to the Securities Purchase
Agreement; (ii) the maximum number of Warrant Shares issued and issuable
pursuant to the Series A Warrants (as defined in the Securities Purchase
Agreement; and (iii) 150% of the maximum number of Warrant Shares issued and
issuable pursuant to the Warrants immediately preceding the

 

2

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applicable date of determination, in each case, without taking into account any
limitations on the exercise of the Warrants set forth therein and, with respect
to any given Registration Statement, (x) assuming an exercise in full of such
related Warrants as of the time immediately prior to the time of filing of such
Registration Statement and (y) with respect to the related Series B Warrants (as
defined in the Securities Purchase Agreement) assuming an Adjustment Time (as
defined in the Series B Warrants) immediately prior to such date of
determination), all subject to adjustment as provided in Section 2.(d) and/or
Section 2.(f).

(m) “Rule 144” means Rule 144 promulgated by the SEC under the 1933 Act, as such
rule may be amended from time to time, or any other similar or successor rule or
regulation of the SEC that may at any time permit the Investors to sell
securities of the Company to the public without registration.

(n) “Rule 415” means Rule 415 promulgated by the SEC under the 1933 Act, as such
rule may be amended from time to time, or any other similar or successor rule or
regulation of the SEC providing for offering securities on a continuous or
delayed basis.

(o) “SEC” means the United States Securities and Exchange Commission or any
successor thereto.

2. Registration.

(a) Mandatory Registration. The Company shall prepare and, no later than the
Filing Deadline, file with the SEC an initial Registration Statement on Form S-1
covering the resale of all of the Registrable Securities, provided that such
initial Registration Statement shall register for resale at least the number of
shares of Common Stock equal to the Required Registration Amount as of the date
such Registration Statement is initially filed with the SEC;. Such initial
Registration Statement, and each other Registration Statement required to be
filed pursuant to the terms of this Agreement, shall contain (except if
otherwise directed by the Required Holders or unless required by the SEC) the
“Selling Stockholders” and “Plan of Distribution” sections in substantially the
form attached hereto as Exhibit B. The Company shall use its best efforts to
have such initial Registration Statement, and each other Registration Statement
required to be filed pursuant to the terms of this Agreement, declared effective
by the SEC no later than the applicable Effectiveness Deadline for such
Registration Statement.

(b) Legal Counsel. Subject to Section 5 hereof, Kelley Drye & Warren LLP,
counsel solely to the lead investor (“Legal Counsel”) shall review and oversee
any registration, solely on behalf of the lead investor, pursuant to this
Section 2.

(c) Ineligibility to Use Form S-3. The Company shall undertake to register the
resale of the Registrable Securities on Form S-3 as soon as such form is
available to it (being no earlier than November 1, 2016), provided that the
Company shall maintain the effectiveness of all Registration Statements then in
effect until such time as a Registration Statement on Form S-3 covering the
resale of all the Registrable Securities has been declared effective by the SEC
and the prospectus contained therein is available for use.

(d) Sufficient Number of Shares Registered. In the event the number of shares
available under any Registration Statement is insufficient to cover all of the
Registrable

 

3

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Securities required to be covered by such Registration Statement or an
Investor’s allocated portion of the Registrable Securities pursuant to
Section 2.(g), the Company shall amend such Registration Statement (if
permissible), or file with the SEC a new Registration Statement (on the short
form available therefor, if applicable), or both, so as to cover at least the
Required Registration Amount as of the Trading Day immediately preceding the
date of the filing of such amendment or new Registration Statement, in each
case, no later than fifteen (15) days after the necessity therefor arises (but
taking account of any Staff position with respect to the date on which the Staff
will permit such amendment to the Registration Statement and/or such new
Registration Statement (as the case may be) to be filed with the SEC). The
Company shall use its best efforts to cause such amendment to such Registration
Statement and/or such new Registration Statement (as the case may be) to become
effective no event later than the applicable Effectiveness Deadline for such
Registration Statement. For purposes of the foregoing provision, the number of
shares available under a Registration Statement shall be deemed “insufficient to
cover all of the Registrable Securities” if at any time during the Registration
Period (as defined below) the number of shares of Common Stock available for
resale under the applicable Registration Statement is less than the product
determined by multiplying (i) the Required Registration Amount as of such time
by (ii) 0.90. The calculation set forth in the foregoing sentence shall be made
without regard to any limitations on exercise of the Warrants (and such
calculation shall assume that the Warrants are then fully exercisable for shares
of Common Stock at the then-prevailing applicable Exercise Price).

(e) Effect of Failure to File and Obtain and Maintain Effectiveness of any
Registration Statement. If (i) a Registration Statement covering the resale of
all of the Registrable Securities required to be covered thereby (disregarding
any reduction pursuant to Section 2.(f)) and required to be filed by the Company
pursuant to this Agreement is (A) not filed with the SEC on or before the Filing
Deadline for such Registration Statement (a “Filing Failure”) or (B) not
declared effective by the SEC on or before the Effectiveness Deadline for such
Registration Statement (an “Effectiveness Failure”) (it being understood that if
on the Business Day immediately following the Effective Date for such
Registration Statement the Company shall not have filed a “final” prospectus for
such Registration Statement with the SEC under Rule 424(b) in accordance with
Section 3.(b) (whether or not such a prospectus is technically required by such
rule), the Company shall be deemed to not have satisfied this clause (i)(B) and
such event shall be deemed to be an Effectiveness Failure), (ii) other than
during an Allowable Grace Period (as defined below), on any day after the
Effective Date of a Registration Statement sales of all of the Registrable
Securities required to be included on such Registration Statement (disregarding
any reduction pursuant to Section 2.(f)) cannot be made pursuant to such
Registration Statement (including, without limitation, because of a failure to
keep such Registration Statement effective, a failure to disclose such
information as is necessary for sales to be made pursuant to such Registration
Statement, a suspension or delisting of (or a failure to timely list) the shares
of Common Stock on the Principal Market (as defined in the Securities Purchase
Agreement), or a failure to register a sufficient number of shares of Common
Stock or by reason of a stop order) or the prospectus contained therein is not
available for use for any reason (a “Maintenance Failure”), or (iii) if a
Registration Statement is not effective for any reason or the prospectus
contained therein is not available for use for any reason, and either (x) the
Company fails for any reason to satisfy the requirements of Rule 144(c)(1),
including, without limitation, the failure to satisfy the current public
information requirement under Rule 144(c) or (y) the Company has ever been an
issuer described in Rule 144(i)(1)(i) or becomes

 

4

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such an issuer in the future, and the Company shall fail to satisfy any
condition set forth in Rule 144(i)(2) (a “Current Public Information Failure”)
as a result of which any of the Investors are unable to sell Registrable
Securities without restriction under Rule 144 (including, without limitation,
volume restrictions), then, as partial relief for the damages to any holder by
reason of any such delay in, or reduction of, its ability to sell the underlying
shares of Common Stock (which remedy shall not be exclusive of any other
remedies available at law or in equity), the Company shall pay to each holder of
Registrable Securities relating to such Registration Statement an amount in cash
equal to one percent (1%) of the aggregate Purchase Price (as such term is
defined in the Securities Purchase Agreement): (1) on the date of such Filing
Failure, Effectiveness Failure, Maintenance Failure or Current Public
Information Failure, as applicable, and (2) on every thirty (30) day anniversary
of (I) a Filing Failure until such Filing Failure is cured; (II) an
Effectiveness Failure until such Effectiveness Failure is cured; (III) a
Maintenance Failure until such Maintenance Failure is cured; and (IV) a Current
Public Information Failure until the earlier of (i) the date such Current Public
Information Failure is cured and (ii) such time that such public information is
no longer required pursuant to Rule 144 (in each case, pro rated for periods
totaling less than thirty (30) days). The payments to which a holder of
Registrable Securities shall be entitled pursuant to this Section 2.(e) are
referred to herein as “Registration Delay Payments.” Following the initial
Registration Delay Payment for any particular event or failure (which shall be
paid on the date of such event or failure, as set forth above), without limiting
the foregoing, if an event or failure giving rise to the Registration Delay
Payments is cured prior to any thirty (30) day anniversary of such event or
failure, then such Registration Delay Payment shall be made on the third
(3rd) Business Day after such cure. In the event the Company fails to make
Registration Delay Payments in a timely manner in accordance with the foregoing,
such Registration Delay Payments shall bear interest at the rate of one percent
(1%) per month (prorated for partial months) until paid in full. Notwithstanding
the foregoing, (i) no Registration Delay Payments shall be owed to an Investor
(other than with respect to a Maintenance Failure resulting from a suspension or
delisting of (or a failure to timely list) the shares of Common Stock on the
Principal Market) with respect to any period during which all of such Investor’s
Registrable Securities may be sold by such Investor without restriction under
Rule 144 (including, without limitation, volume restrictions) and without the
need for current public information required by Rule 144(c)(1) (or Rule
144(i)(2), if applicable) or (ii) no Registration Delay Payments shall be owed
to an Investor to the extent such Investor shall have received Registation Delay
Payments in excess of 10% of the aggregate Purchase Price of such Investor. For
the avoidance of doubt, no more than one Registration Delay Payment shall be
payable by the Company at any given time, notwithstanding that more than one
failure giving rise to a Registration Delay Payment shall have occurred and is
continuing (e.g., an Effectiveness Failure and a Current Public Information
Failure continuing simultaneously); provided, that, Registration Delay Payments
shall continue in accordance with this Section 2.(e) until all failures giving
rise to such payments are cured.

(f) Offering. Notwithstanding anything to the contrary contained in this
Agreement, in the event the staff of the SEC (the “Staff”) or the SEC seeks to
characterize any offering pursuant to a Registration Statement filed pursuant to
this Agreement as constituting an offering of securities by, or on behalf of,
the Company, or in any other manner, such that the Staff or the SEC do
not permit such Registration Statement to become effective and used for resales
in a manner that does not constitute such an offering and that permits the
continuous resale at the market by the Investors participating therein (or as
otherwise may be acceptable to each Investor)

 

5

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without being named therein as an “underwriter,” then the Company shall reduce
the number of shares to be included in such Registration Statement by all
Investors until such time as the Staff and the SEC shall so permit such
Registration Statement to become effective as aforesaid. In making such
reduction, the Company shall reduce the number of shares to be included by all
Investors on a pro rata basis (based upon the number of Registrable Securities
otherwise required to be included for each Investor) unless the inclusion of
shares by a particular Investor or a particular set of Investors are resulting
in the Staff or the SEC’s “by or on behalf of the Company” offering position, in
which event the shares held by such Investor or set of Investors shall be the
only shares subject to reduction (and if by a set of Investors on a pro rata
basis by such Investors or on such other basis as would result in the exclusion
of the least number of shares by all such Investors); provided, that, with
respect to such pro rata portion allocated to any Investor, such Investor may
elect the allocation of such pro rata portion among the Registrable Securities
of such Investor. In addition, in the event that the Staff or the SEC requires
any Investor seeking to sell securities under a Registration Statement filed
pursuant to this Agreement to be specifically identified as an “underwriter” in
order to permit such Registration Statement to become effective, and such
Investor does not consent to being so named as an underwriter in such
Registration Statement, then, in each such case, the Company shall reduce the
total number of Registrable Securities to be registered on behalf
of such Investor, until such time as the Staff or the SEC does not require such
identification or until such Investor accepts such identification and the manner
thereof. Any reduction pursuant to this paragraph will first reduce all
Registrable Securities other than those issued or resold, as applicable,
pursuant to the Securities Purchase Agreement. In the event of any reduction in
Registrable Securities pursuant to this paragraph, an affected Investor shall
have the right to require, upon delivery of a written request to the Company
signed by such Investor, the Company to file a registration statement within
twenty (20) days of such request (subject to any restrictions imposed by Rule
415 or required by the Staff or the SEC) for resale by such Investor in a manner
acceptable to such Investor, and the Company shall following such request cause
to be and keep effective such registration statement in the same manner as
otherwise contemplated in this Agreement for registration statements hereunder,
in each case until such time as: (i) all Registrable Securities held by such
Investor have been registered and sold pursuant to an effective Registration
Statement in a manner acceptable to such Investor or (ii) all Registrable
Securities may be resold by such Investor without restriction (including,
without limitation, volume limitations) pursuant to Rule 144 (taking account of
any Staff position with respect to “affiliate” status) and without the need for
current public information required by Rule 144(c)(1) (or Rule 144(i)(2), if
applicable) or (iii) such Investor agrees to be named as an underwriter in any
such Registration Statement in a manner acceptable to such Investor as to all
Registrable Securities held by such Investor and that have not theretofore been
included in a Registration Statement under this Agreement (it being understood
that the special demand right under this sentence may be exercised by an
Investor multiple times and with respect to limited amounts of Registrable
Securities in order to permit the resale thereof by such Investor as
contemplated above).

(g) Piggyback Registrations. Without limiting any obligation of the Company
hereunder or under the Securities Purchase Agreement, if there is not an
effective Registration Statement covering all of the Registrable Securities or
the prospectus contained therein is not available for use and the Company shall
determine to prepare and file with the SEC a registration statement relating to
an offering for its own account or the account of others under the 1933 Act of
any of its equity securities (other than on Form S-4 or Form S-8 (each as
promulgated under

 

6

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the 1933 Act) or their then equivalents relating to equity securities to be
issued solely in connection with any acquisition of any entity or business or
equity securities issuable in connection with the Company’s stock option or
other employee benefit plans), then the Company shall deliver to each Investor a
written notice of such determination and, if within fifteen (15) days after the
date of the delivery of such notice, any such Investor shall so request in
writing, the Company shall include in such registration statement all or any
part of such Registrable Securities such Investor requests to be registered;
provided, however, the Company shall not be required to register any Registrable
Securities pursuant to this Section 2.(g) that are eligible for resale pursuant
to Rule 144 without restriction (including, without limitation, volume
restrictions) and without the need for current public information required by
Rule 144(c)(1) (or Rule 144(i)(2), if applicable) or that are the subject of a
then-effective Registration Statement.

(h) Allocation of Registrable Securities. The initial number of Registrable
Securities included in any Registration Statement and any increase in the number
of Registrable Securities included therein shall be allocated pro rata among the
Investors based on the number of Registrable Securities held by each Investor at
the time such Registration Statement covering such initial number of Registrable
Securities or increase thereof is declared effective by the SEC. In the event
that an Investor sells or otherwise transfers any of such Investor’s Registrable
Securities, each transferee or assignee (as the case may be) that becomes an
Investor shall be allocated a pro rata portion of the then-remaining number of
Registrable Securities included in such Registration Statement for such
transferor or assignee (as the case may be). Any shares of Common Stock included
in a Registration Statement and which remain allocated to any Person which
ceases to hold any Registrable Securities covered by such Registration Statement
shall be allocated to the remaining Investors, pro rata based on the number of
Registrable Securities then held by such Investors which are covered by such
Registration Statement.

(i) No Inclusion of Other Securities. The Company shall in no event include any
securities other than Registrable Securities on any Registration Statement filed
in accordance herewith without the prior written consent of the Required
Holders.

3. Related Obligations.

The Company shall use its best efforts to effect the registration of the
Registrable Securities in accordance with the intended method of disposition
thereof, and, pursuant thereto, the Company shall have the following
obligations:

(a) The Company shall promptly prepare and file with the SEC a Registration
Statement with respect to all the Registrable Securities (but in no event later
than the applicable Filing Deadline) and use its best efforts to cause such
Registration Statement to become effective no later than the Effectiveness
Deadline. Subject to Allowable Grace Periods, the Company shall keep each
Registration Statement effective (and the prospectus contained therein available
for use) pursuant to Rule 415 for resales by the Investors on a delayed or
continuous basis at then-prevailing market prices (and not fixed prices) at all
times until the earlier of (i) the date as of which all of the Investors may
sell all of the Registrable Securities required to be covered by such
Registration Statement (disregarding any reduction pursuant to Section 2.(f))
without restriction pursuant to Rule 144 (including, without limitation, volume
restrictions) and without the need for current public information required by
Rule 144(c)(1) (or Rule 144(i)(2), if

 

7

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applicable), (ii) the date on which the Investors shall have sold all of the
Registrable Securities covered by such Registration Statement, or
(iii) March 31, 2019 (the “Registration Period”). Notwithstanding anything to
the contrary contained in this Agreement, the Company shall ensure that, when
filed and at all times while effective, each Registration Statement (including,
without limitation, all amendments and supplements thereto) and the prospectus
(including, without limitation, all amendments and supplements thereto) used in
connection with such Registration Statement (1) shall not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein, or necessary to make the statements therein (in the case of
prospectuses, in the light of the circumstances in which they were made) not
misleading and (2) will disclose (whether directly or through incorporation by
reference to other SEC filings to the extent permitted) all material information
regarding the Company and its securities.

(b) Subject to Section 3.(r) of this Agreement, the Company shall prepare and
file with the SEC such amendments (including, without limitation, post-effective
amendments) and supplements to each Registration Statement and the prospectus
used in connection with each such Registration Statement, which prospectus is to
be filed pursuant to Rule 424 promulgated under the 1933 Act, as may be
necessary to keep each such Registration Statement effective at all times during
the Registration Period for such Registration Statement, and, during such
period, comply with the provisions of the 1933 Act with respect to the
disposition of all Registrable Securities of the Company required to be covered
by such Registration Statement until such time as all of such Registrable
Securities shall have been disposed of in accordance with the intended methods
of disposition by the seller or sellers thereof as set forth in such
Registration Statement; provided, however, by 8:30 a.m. (New York time) on the
Business Day immediately following each Effective Date, the Company shall file
with the SEC in accordance with Rule 424(b) under the 1933 Act the final
prospectus to be used in connection with sales pursuant to the applicable
Registration Statement (whether or not such a prospectus is technically required
by such rule).

(c) The Company shall permit Legal Counsel and legal counsel for each other
Investor to review and comment upon (i) each Registration Statement at least
five (5) Business Days prior to its filing with the SEC and (ii) all amendments
and supplements to each Registration Statement (including, without limitation,
the prospectus contained therein) (except for Annual Reports on Form 10-K,
Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and any similar or
successor reports) within a reasonable number of days prior to their filing with
the SEC. The Company shall not submit a request for acceleration of the
effectiveness of a Registration Statement or any amendment or supplement thereto
or to any prospectus contained therein without the prior consent of Legal
Counsel, which consent shall not be unreasonably withheld. The Company shall
promptly furnish to Legal Counsel and legal counsel for each other Investor,
without charge, (i) copies of any correspondence from the SEC or the Staff to
the Company or its representatives relating to each Registration Statement,
provided that such correspondence shall not contain any material, non-public
information regarding the Company or any of its Subsidiaries (as defined in the
Securities Purchase Agreement), (ii) after the same is prepared and filed with
the SEC, one (1) copy of each Registration Statement and any amendment(s) and
supplement(s) thereto, including, without limitation, financial statements and
schedules, all documents incorporated therein by reference, if requested by an
Investor, and all exhibits and (iii) upon the effectiveness of each Registration
Statement, one (1) copy of the prospectus included in such Registration
Statement and all amendments and supplements thereto. The Company shall
reasonably cooperate with Legal Counsel and legal counsel for each other
Investor in performing the Company’s obligations pursuant to this Section 3.

 

8

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(d) The Company shall promptly furnish to each Investor whose Registrable
Securities are included in any Registration Statement, without charge, (i) after
the same is prepared and filed with the SEC, at least one (1) copy of each
Registration Statement and any amendment(s) and supplement(s) thereto,
including, without limitation, financial statements and schedules, all documents
incorporated therein by reference, if requested by an Investor, all exhibits and
each preliminary prospectus, (ii) upon the effectiveness of each Registration
Statement, an electronic copy of the prospectus included in such Registration
Statement and all amendments and supplements thereto (or such other number of
copies as such Investor may reasonably request from time to time) and (iii) such
other documents, including, without limitation, copies of any preliminary or
final prospectus, as such Investor may reasonably request from time to time in
order to facilitate the disposition of the Registrable Securities owned by such
Investor.

(e) The Company shall use its best efforts to register and qualify, unless an
exemption from registration and qualification applies, the resale by Investors
of the Registrable Securities covered by a Registration Statement under such
other securities or “blue sky” laws of all applicable jurisdictions in the
United States; provided, however, the Company shall not be required in
connection therewith or as a condition thereto to (x) qualify to do business in
any jurisdiction where it would not otherwise be required to qualify but for
this Section 3.(e), (y) subject itself to general taxation in any such
jurisdiction, or (z) file a general consent to service of process in any such
jurisdiction. The Company shall promptly notify Legal Counsel, legal counsel for
each other Investor and each Investor who holds Registrable Securities of the
receipt by the Company of any notification with respect to the suspension of the
registration or qualification of any of the Registrable Securities for sale
under the securities or “blue sky” laws of any jurisdiction in the United States
or its receipt of actual notice of the initiation or threatening of any
proceeding for such purpose.

(f) The Company shall notify Legal Counsel, legal counsel for each other
Investor and each Investor in writing of the happening of any event, as promptly
as practicable after becoming aware of such event, as a result of which the
prospectus included in a Registration Statement, as then in effect, may include
an untrue statement of a material fact or omission to state a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading
(provided that in no event shall such notice contain any material, non-public
information regarding the Company or any of its Subsidiaries), and, subject to
Section 3.(r), promptly prepare a supplement or amendment to such Registration
Statement and such prospectus contained therein to correct such untrue statement
or omission and deliver an electronic copy of such supplement or amendment to
Legal Counsel, legal counsel for each other Investor and each Investor (or such
other number of copies as Legal Counsel, legal counsel for each other Investor
or such Investor may reasonably request). The Company shall also promptly notify
Legal Counsel, legal counsel for each other Investor and each Investor in
writing (i) when a prospectus or any prospectus supplement or post-effective
amendment has been filed, when a Registration Statement or any post-effective
amendment has become effective (notification of such effectiveness shall be
delivered to Legal Counsel, legal counsel for each other Investor and each
Investor by facsimile or e-mail on the

 

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same day of such effectiveness and by overnight mail), and when the Company
receives written notice from the SEC that a Registration Statement or any
post-effective amendment will be reviewed by the SEC, (ii) of any request by the
SEC for amendments or supplements to a Registration Statement or related
prospectus or related information, (iii) of the Company’s reasonable
determination that a post-effective amendment to a Registration Statement would
be appropriate; and (iv) of the receipt of any request by the SEC or any other
federal or state governmental authority for any additional information relating
to the Registration Statement or any amendment or supplement thereto or any
related prospectus.

(g) The Company shall (i) use its best efforts to prevent the issuance of any
stop order or other suspension of effectiveness of each Registration Statement
or the use of any prospectus contained therein, or the suspension of the
qualification, or the loss of an exemption from qualification, of any of the
Registrable Securities for sale in any jurisdiction and, if such an order or
suspension is issued, to obtain the withdrawal of such order or suspension at
the earliest possible moment and (ii) notify Legal Counsel, legal counsel for
each other Investor and each Investor who holds Registrable Securities of the
issuance of such order and the resolution thereof or its receipt of actual
notice of the initiation or threat of any proceeding for such purpose.

(h) [Reserved]

(i) If any Investor may be required under applicable securities law to be
described in any Registration Statement as an underwriter and such Investor
consents to so being named an underwriter, upon the written request of such
Investor, the Company shall make available for inspection by (i) such Investor,
(ii) legal counsel for such Investor and (iii) one (1) firm of accountants or
other agents retained by such Investor (collectively, the “Inspectors”), all
pertinent financial and other records, and pertinent corporate documents and
properties of the Company (collectively, the “Records”), as shall be reasonably
deemed necessary by each Inspector, and cause the Company’s officers, directors
and employees to supply all information which any Inspector may reasonably
request; provided, however, each Inspector shall agree in writing to hold in
strict confidence and not to make any disclosure (except to such Investor) or
use of any Record or other information which the Company’s board of directors
determines in good faith to be confidential, and of which determination the
Inspectors are so notified, unless (1) the disclosure of such Records is
necessary to avoid or correct a misstatement or omission in any Registration
Statement or is otherwise required under the 1933 Act, (2) the release of such
Records is ordered pursuant to a final, non-appealable subpoena or order from a
court or government body of competent jurisdiction, or (3) the information in
such Records has been made generally available to the public other than by
disclosure in violation of this Agreement or any other Transaction Document (as
defined in the Securities Purchase Agreement). Such Investor agrees that it
shall, upon learning that disclosure of such Records is sought in or by a court
or governmental body of competent jurisdiction or through other means, give
prompt notice to the Company and allow the Company, at its expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, the Records deemed confidential. Nothing herein (or in any other
confidentiality agreement between the Company and such Investor, if any) shall
be deemed to limit any Investor’s ability to sell Registrable Securities in a
manner which is otherwise consistent with applicable laws and regulations.

 

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(j) The Company shall hold in confidence and not make any disclosure of
information concerning an Investor provided to the Company unless (i) disclosure
of such information is necessary to comply with federal or state securities
laws, (ii) the disclosure of such information is necessary to avoid or correct a
misstatement or omission in any Registration Statement or is otherwise required
to be disclosed in such Registration Statement pursuant to the 1933 Act,
(iii) the release of such information is ordered pursuant to a subpoena or other
final, non-appealable order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally available to the
public other than by disclosure in violation of this Agreement or any other
Transaction Document. The Company agrees that it shall, upon learning that
disclosure of such information concerning an Investor is sought in or by a court
or governmental body of competent jurisdiction or through other means, give
prompt written notice to such Investor and allow such Investor, at such
Investor’s expense, to undertake appropriate action to prevent disclosure of, or
to obtain a protective order for, such information.

(k) Without limiting any obligation of the Company under the Securities Purchase
Agreement, the Company shall use its best efforts either to (i) cause all of the
Registrable Securities covered by each Registration Statement to be listed on
each securities exchange on which securities of the same class or series issued
by the Company are then listed, if any, if the listing of such Registrable
Securities is then permitted under the rules of such exchange, (ii) secure
designation and quotation of all of the Registrable Securities covered by each
Registration Statement on a Eligible Market (as defined in the Securities
Purchase Agreement), or (iii) if, despite the Company’s best efforts to satisfy
the preceding clauses (i) or (ii) the Company is unsuccessful in satisfying the
preceding clauses (i) or (ii), without limiting the generality of the foregoing,
to use its best efforts to arrange for at least two market makers to register
with the Financial Industry Regulatory Authority (“FINRA”) as such with respect
to such Registrable Securities. In addition, the Company shall cooperate with
each Investor and any broker or dealer through which any such Investor proposes
to sell its Registrable Securities in effecting a filing with FINRA pursuant to
FINRA Rule 5110 as requested by such Investor. The Company shall pay all fees
and expenses in connection with satisfying its obligations under this
Section 3.(k).

(l) The Company shall cooperate with the Investors who hold Registrable
Securities being offered and, to the extent applicable, facilitate the timely
preparation and delivery of certificates (not bearing any restrictive legend)
representing the Registrable Securities to be offered pursuant to a Registration
Statement and enable such certificates to be in such denominations or amounts
(as the case may be) as the Investors may reasonably request from time to time
and registered in such names as the Investors may request.

(m) If requested by an Investor, the Company shall as soon as practicable after
receipt of notice from such Investor and subject to Section 3.(r) hereof,
(i) incorporate in a prospectus supplement or post-effective amendment such
information as an Investor reasonably requests to be included therein relating
to the sale and distribution of Registrable Securities, including, without
limitation, information with respect to the number of Registrable Securities
being offered or sold, the purchase price being paid therefor and any other
terms of the offering of the Registrable Securities to be sold in such offering;
(ii) make all required filings of such prospectus supplement or post-effective
amendment after being notified of the matters to be incorporated in such
prospectus supplement or post-effective amendment; and (iii) supplement or make
amendments to any Registration Statement or prospectus contained therein if
reasonably requested by an Investor holding any Registrable Securities.

 

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(n) The Company shall use its best efforts to cause the Registrable Securities
covered by a Registration Statement to be registered with or approved by such
other governmental agencies or authorities as may be necessary to consummate the
disposition of such Registrable Securities.

(o) The Company shall make generally available to its security holders as soon
as practical, but not later than ninety (90) days after the close of the period
covered thereby, an earnings statement (in form complying with, and in the
manner provided by, the provisions of Rule 158 under the 1933 Act) covering a
twelve-month period beginning not later than the first day of the Company’s
fiscal quarter next following the applicable Effective Date of each Registration
Statement.

(p) The Company shall otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC in connection with any registration
hereunder.

(q) Within one (1) Business Day after a Registration Statement which covers
Registrable Securities is declared effective by the SEC, the Company shall
deliver, and shall cause legal counsel for the Company to deliver, to the
transfer agent for such Registrable Securities (with copies to the Investors
whose Registrable Securities are included in such Registration Statement)
confirmation that such Registration Statement has been declared effective by the
SEC in the form attached hereto as Exhibit A.

(r) Notwithstanding anything to the contrary herein (but subject to the last
sentence of this Section 3.(r)), at any time after the Effective Date of a
particular Registration Statement, the Company may delay the disclosure of
material, non-public information concerning the Company or any of its
Subsidiaries the disclosure of which at the time is not, in the good faith
opinion of the board of directors of the Company, in the best interest of the
Company and, in the opinion of counsel to the Company, otherwise required (a
“Grace Period”), provided that the Company shall promptly notify the Investors
in writing of the (i) existence of material, non-public information giving rise
to a Grace Period (provided that in each such notice the Company shall not
disclose the content of such material, non-public information to any of the
Investors) and the date on which such Grace Period will begin and (ii) date on
which such Grace Period ends, provided further that (I) no Grace Period shall
exceed forty-five (45) consecutive days and during any three hundred sixty five
(365) day period all such Grace Periods shall not exceed an aggregate of one
hundred (100) days, (II) the first day of any Grace Period must be at least
five (5) Trading Days after the last day of any prior Grace Period and (III) no
Grace Period may exist during the fifteen (15) Trading Day period immediately
following the Effective Date of such Registration Statement (each, an “Allowable
Grace Period”). For purposes of determining the length of a Grace Period above,
such Grace Period shall begin on and include the date the Investors receive the
notice referred to in clause (i) above and shall end on and include the later of
the date the Investors receive the notice referred to in clause (ii) above and
the date referred to in such notice. The provisions of Section 3.(b) hereof
shall not be applicable during the period of any Allowable Grace Period. Upon
expiration of each Grace Period, the Company shall again be bound by the first
sentence of Section 3.(f) with respect to the information giving rise thereto

 

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unless such material, non-public information is no longer applicable.
Notwithstanding anything to the contrary contained in this Section 3.(r), the
Company shall cause its transfer agent to deliver unlegended shares of Common
Stock to a transferee of an Investor in accordance with the terms of the
Securities Purchase Agreement in connection with any sale of Registrable
Securities with respect to which such Investor has entered into a contract for
sale, and delivered a copy of the prospectus included as part of the particular
Registration Statement to the extent applicable, prior to such Investor’s
receipt of the notice of a Grace Period and for which the Investor has not yet
settled.

(s) The Company shall take all other reasonable actions necessary to expedite
and facilitate disposition by each Investors of its Registrable Securities
pursuant to each Registration Statement.

(t) Neither the Company nor any Subsidiary or affiliate thereof shall identify
any Investor as an underwriter in any public disclosure or filing with the SEC,
the Principal Market or any Eligible Market and any Buyer being deemed an
underwriter by the SEC shall not relieve the Company of any obligations it has
under this Agreement or any other Transaction Document; provided, however, that
the foregoing shall not prohibit the Company from including the disclosure found
in the “Plan of Distribution” section attached hereto as Exhibit B in the
Registration Statement. Notwithstanding anything herein to the contrary, if an
Investor is required by the SEC to be named as an underwriter in a Registration
Statement and such Investor elects not to be named as an underwriter (or the
Company is required by the SEC to reduce the number of Registrable Securities
included in such Registration Statement to remove such requirement by the SEC,
if applicable or, otherwise), the Company shall not be required to include such
Investor’s Registrable Securities in such Registration Statement hereunder and
no Registration Delay Payments shall accrue with respect to such Investor’s
Registrable Securities.

(u) Neither the Company nor any of its Subsidiaries has entered, as of the date
hereof, nor shall the Company or any of its Subsidiaries, on or after the date
of this Agreement, enter into any agreement with respect to its securities, that
would have the effect of impairing the rights granted to the Buyers in this
Agreement or otherwise conflicts with the provisions hereof.

4. Obligations of the Investors.

(a) At least five (5) Business Days prior to the first anticipated filing date
of each Registration Statement, the Company shall notify each Investor in
writing of the information the Company requires from each such Investor with
respect to such Registration Statement. It shall be a condition precedent to the
obligations of the Company to complete the registration pursuant to this
Agreement with respect to the Registrable Securities of a particular Investor
that such Investor shall furnish to the Company such information regarding
itself, the Registrable Securities held by it and the intended method of
disposition of the Registrable Securities held by it, as shall be reasonably
required to effect and maintain the effectiveness of the registration of such
Registrable Securities and shall execute such documents in connection with such
registration as the Company may reasonably request.

(b) Each Investor, by such Investor’s acceptance of the Registrable Securities,
agrees to cooperate with the Company as reasonably requested by the Company in
connection with the

 

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preparation and filing of each Registration Statement hereunder, unless such
Investor has notified the Company in writing of such Investor’s election to
exclude all of such Investor’s Registrable Securities from such Registration
Statement.

(c) Each Investor agrees that, upon receipt of any notice from the Company of
the happening of any event of the kind described in Section 3.(g) or the first
sentence of 3.(f), such Investor will immediately discontinue disposition of
Registrable Securities pursuant to any Registration Statement(s) covering such
Registrable Securities until such Investor’s receipt of the copies of the
supplemented or amended prospectus contemplated by Section 3.(b) or the first
sentence of Section 3.(f) or receipt of notice that no supplement or amendment
is required. Notwithstanding anything to the contrary in this Section 4.(c), the
Company shall cause its transfer agent to deliver unlegended shares of Common
Stock to a transferee of an Investor in accordance with the terms of the
Securities Purchase Agreement in connection with any sale of Registrable
Securities with respect to which such Investor has entered into a contract for
sale prior to the Investor’s receipt of a notice from the Company of the
happening of any event of the kind described in Section 3.(g) or the first
sentence of Section 3.(f) and for which such Investor has not yet settled.

(d) Each Investor covenants and agrees that it will comply with the prospectus
delivery requirements of the 1933 Act as applicable to it in connection with
sales of Registrable Securities pursuant to a Registration Statement.

5. Expenses of Registration.

All reasonable expenses, other than underwriting discounts and commissions,
incurred in connection with registrations, filings or qualifications pursuant to
Sections 2 and 3, including, without limitation, all registration, listing and
qualifications fees, printers and accounting fees, FINRA filing fees (if any)
and fees and disbursements of counsel for the Company shall be paid by the
Company. The Company shall reimburse Legal Counsel for its fees and
disbursements in connection with registration, filing or qualification pursuant
to Sections 2 and 3 of this Agreement which amount shall be limited to $10,000.

6. Indemnification.

(a) To the fullest extent permitted by law, the Company will, and hereby does,
indemnify, hold harmless and defend each Investor and each of its directors,
officers, shareholders, members, partners, employees, agents, advisors,
representatives (and any other Persons with a functionally equivalent role of a
Person holding such titles notwithstanding the lack of such title or any other
title) and each Person, if any, who controls such Investor within the meaning of
the 1933 Act or the Securities Exchange Act of 1934, as amended (the “1934
Act”), and each of the directors, officers, shareholders, members, partners,
employees, agents, advisors, representatives (and any other Persons with a
functionally equivalent role of a Person holding such titles notwithstanding the
lack of such title or any other title) of such controlling Persons (each, an
“Indemnified Person”), against any losses, obligations, claims, damages,
liabilities, contingencies, judgments, fines, penalties, charges, costs
(including, without limitation, court costs, reasonable attorneys’ fees and
costs of defense and investigation), amounts paid in settlement or expenses,
joint or several, (collectively, “Claims”) incurred in investigating,

 

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preparing or defending any action, claim, suit, inquiry, proceeding,
investigation or appeal taken from the foregoing by or before any court or
governmental, administrative or other regulatory agency, body or the SEC,
whether pending or threatened, whether or not an Indemnified Person is or may be
a party thereto (“Indemnified Damages”), to which any of them may become subject
insofar as such Claims (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon: (i) any untrue
statement or alleged untrue statement of a material fact in a Registration
Statement or any post-effective amendment thereto or in any filing made in
connection with the qualification of the offering under the securities or other
“blue sky” laws of any jurisdiction in which Registrable Securities are offered
(“Blue Sky Filing”), or the omission or alleged omission to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading, (ii) any untrue statement or alleged untrue statement of a
material fact contained in any preliminary prospectus if used prior to the
effective date of such Registration Statement, or contained in the final
prospectus (as amended or supplemented, if the Company files any amendment
thereof or supplement thereto with the SEC) or the omission or alleged omission
to state therein any material fact necessary to make the statements made
therein, in light of the circumstances under which the statements therein were
made, not misleading or (iii) any violation or alleged violation by the Company
of the 1933 Act, the 1934 Act, any other law, including, without limitation, any
state securities law, or any rule or regulation thereunder relating to the offer
or sale of the Registrable Securities pursuant to a Registration Statement (the
matters in the foregoing clauses (i) through (iii) being, collectively,
“Violations”). Subject to Section 6.(c), the Company shall reimburse the
Indemnified Persons, promptly as such expenses are incurred and are due and
payable, for any legal fees or other reasonable expenses incurred by them in
connection with investigating or defending any such Claim. Notwithstanding
anything to the contrary contained herein, the indemnification agreement
contained in this Section 6.(a): (i) shall not apply to a Claim by an
Indemnified Person arising out of or based upon a Violation which occurs in
reliance upon and in conformity with information furnished in writing to the
Company by such Indemnified Person for such Indemnified Person expressly for use
in connection with the preparation of such Registration Statement or any such
amendment thereof or supplement thereto and (ii) shall not be available to a
particular Investor to the extent such Claim is based on a failure of such
Investor to deliver or to cause to be delivered the prospectus made available by
the Company (to the extent applicable), including, without limitation, a
corrected prospectus, if such prospectus or corrected prospectus was timely made
available by the Company pursuant to Section 3.(d) and then only if, and to the
extent that, following the receipt of the corrected prospectus no grounds for
such Claim would have existed; and (iii) shall not apply to amounts paid in
settlement of any Claim if such settlement is effected without the prior written
consent of the Company, which consent shall not be unreasonably withheld or
delayed. Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Indemnified Person and shall survive
the transfer of any of the Registrable Securities by any of the Investors
pursuant to Section 9.

(b) In connection with any Registration Statement in which an Investor is
participating, such Investor agrees to severally and not jointly indemnify, hold
harmless and defend, to the same extent and in the same manner as is set forth
in Section 6.(a), the Company, each of its directors, each of its officers who
signs the Registration Statement and each Person, if any, who controls the
Company within the meaning of the 1933 Act or the 1934 Act (each, an
“Indemnified Party”), against any Claim or Indemnified Damages to which any of
them may

 

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become subject, under the 1933 Act, the 1934 Act or otherwise, insofar as such
Claim or Indemnified Damages arise out of or are based upon any Violation, in
each case, to the extent, and only to the extent, that such Violation occurs in
reliance upon and in conformity with written information furnished to the
Company by such Investor expressly for use in connection with such Registration
Statement; and, subject to Section 6.(c) and the below provisos in this
Section 6.(b), such Investor will reimburse an Indemnified Party any legal or
other expenses reasonably incurred by such Indemnified Party in connection with
investigating or defending any such Claim; provided, however, the indemnity
agreement contained in this Section 6.(b) and the agreement with respect to
contribution contained in Section 7 shall not apply to amounts paid in
settlement of any Claim if such settlement is effected without the prior written
consent of such Investor, which consent shall not be unreasonably withheld or
delayed, provided further that such Investor shall be liable under this
Section 6.(b) for only that amount of a Claim or Indemnified Damages as does not
exceed the net proceeds to such Investor as a result of the applicable sale of
Registrable Securities pursuant to such Registration Statement. Such indemnity
shall remain in full force and effect regardless of any investigation made by or
on behalf of such Indemnified Party and shall survive the transfer of any of the
Registrable Securities by any of the Investors pursuant to Section 9.

(c) Promptly after receipt by an Indemnified Person or Indemnified Party (as the
case may be) under this Section 6 of notice of the commencement of any action or
proceeding (including, without limitation, any governmental action or
proceeding) involving a Claim, such Indemnified Person or Indemnified Party (as
the case may be) shall, if a Claim in respect thereof is to be made against any
indemnifying party under this Section 6, deliver to the indemnifying party a
written notice of the commencement thereof, and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
control of the defense thereof with counsel mutually satisfactory to the
indemnifying party and the Indemnified Person or the Indemnified Party (as the
case may be); provided, however, an Indemnified Person or Indemnified Party (as
the case may be) shall have the right to retain its own counsel with the fees
and expenses of such counsel to be paid by the indemnifying party if: (i) the
indemnifying party has agreed in writing to pay such fees and expenses; (ii) the
indemnifying party shall have failed promptly to assume the defense of such
Claim and to employ counsel reasonably satisfactory to such Indemnified Person
or Indemnified Party (as the case may be) in any such Claim; or (iii) the named
parties to any such Claim (including, without limitation, any impleaded parties)
include both such Indemnified Person or Indemnified Party (as the case may be)
and the indemnifying party, and such Indemnified Person or such Indemnified
Party (as the case may be) shall have been advised by counsel that a conflict of
interest is likely to exist if the same counsel were to represent such
Indemnified Person or such Indemnified Party and the indemnifying party (in
which case, if such Indemnified Person or such Indemnified Party (as the case
may be) notifies the indemnifying party in writing that it elects to employ
separate counsel at the expense of the indemnifying party, then the indemnifying
party shall not have the right to assume the defense thereof and such counsel
shall be at the expense of the Indemnifying Party, provided further that in the
case of clause (iii) above the indemnifying party shall not be responsible for
the reasonable fees and expenses of more than one (1) separate legal counsel for
such Indemnified Person or Indemnified Party (as the case may be). The
Indemnified Party or Indemnified Person (as the case may be) shall reasonably
cooperate with the indemnifying party in connection with any negotiation or
defense of any such action or Claim by the indemnifying party and shall furnish
to the

 

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indemnifying party all information reasonably available to the Indemnified Party
or Indemnified Person (as the case may be) which relates to such action or
Claim. The indemnifying party shall keep the Indemnified Party or Indemnified
Person (as the case may be) reasonably apprised at all times as to the status of
the defense or any settlement negotiations with respect thereto. No indemnifying
party shall be liable for any settlement of any action, claim or proceeding
effected without its prior written consent; provided, however, the indemnifying
party shall not unreasonably withhold, delay or condition its consent. No
indemnifying party shall, without the prior written consent of the Indemnified
Party or Indemnified Person (as the case may be), consent to entry of any
judgment or enter into any settlement or other compromise which does not include
as an unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party or Indemnified Person (as the case may be) of a release from
all liability in respect to such Claim or litigation, and such settlement shall
not include any admission as to fault on the part of the Indemnified Party.
Following indemnification as provided for hereunder, the indemnifying party
shall be subrogated to all rights of the Indemnified Party or Indemnified Person
(as the case may be) with respect to all third parties, firms or corporations
relating to the matter for which indemnification has been made. The failure to
deliver written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall not relieve such indemnifying party of any
liability to the Indemnified Person or Indemnified Party (as the case may be)
under this Section 6, except to the extent that the indemnifying party is
materially and adversely prejudiced in its ability to defend such action.

(d) The indemnification required by this Section 6 shall be made by periodic
payments of the amount thereof during the course of the investigation or
defense, as and when bills are received or Indemnified Damages are incurred.

(e) The indemnity and contribution agreements contained herein shall be in
addition to (i) any cause of action or similar right of the Indemnified Party or
Indemnified Person against the indemnifying party or others, and (ii) any
liabilities the indemnifying party may be subject to pursuant to the law.

7. Contribution.

To the extent any indemnification by an indemnifying party is prohibited or
limited by law, the indemnifying party agrees to make the maximum contribution
with respect to any amounts for which it would otherwise be liable under
Section 6 to the fullest extent permitted by law; provided, however: (i) no
contribution shall be made under circumstances where the maker would not have
been liable for indemnification under the fault standards set forth in Section 6
of this Agreement, (ii) no Person involved in the sale of Registrable Securities
which Person is guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the 1933 Act) in connection with such sale shall be entitled to
contribution from any Person involved in such sale of Registrable Securities who
was not guilty of fraudulent misrepresentation; and (iii) contribution by any
seller of Registrable Securities shall be limited in amount to the amount of net
proceeds received by such seller from the applicable sale of such Registrable
Securities pursuant to such Registration Statement. Notwithstanding the
provisions of this Section 7, no Investor shall be required to contribute, in
the aggregate, any amount in excess of the amount by which the net proceeds
actually received by such Investor from the applicable sale of the Registrable
Securities subject to the Claim exceeds the amount of any damages that such

 

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Investor has otherwise been required to pay, or would otherwise be required to
pay under Section 6.(b), by reason of such untrue or alleged untrue statement or
omission or alleged omission.

8. Reports Under the 1934 Act.

With a view to making available to the Investors the benefits of Rule 144, so
long as the Investors hold any Registrable Securities, the Company agrees to:

(a) make and keep public information available, as those terms are understood
and defined in Rule 144;

(b) file with the SEC in a timely manner all reports and other documents
required of the Company under the 1933 Act and the 1934 Act so long as the
Company remains subject to such requirements (it being understood and agreed
that nothing herein shall limit any obligations of the Company under the
Securities Purchase Agreement) and the filing of such reports and other
documents is required for the applicable provisions of Rule 144; and

(c) furnish to each Investor so long as such Investor owns Registrable
Securities, promptly upon request, (i) a written statement by the Company, if
true, that it has complied with the reporting, submission and posting
requirements of Rule 144 and the 1934 Act, (ii) a copy of the most recent annual
or quarterly report of the Company and such other reports and documents so filed
by the Company with the SEC if such reports are not publicly available via
EDGAR, and (iii) such other information as may be reasonably requested to permit
the Investors to sell such securities pursuant to Rule 144 without registration.

9. Assignment of Registration Rights.

All or any portion of the rights under this Agreement shall be automatically
assignable by each Investor to any transferee or assignee (as the case may be)
of all or any portion of such Investor’s Registrable Securities or Warrants if:
(i) such Investor agrees in writing with such transferee or assignee (as the
case may be) to assign all or any portion of such rights, and a copy of such
agreement is furnished to the Company within a reasonable time after such
transfer or assignment (as the case may be); (ii) the Company is, within a
reasonable time after such transfer or assignment (as the case may be),
furnished with written notice of (a) the name and address of such transferee or
assignee (as the case may be), and (b) the securities with respect to which such
registration rights are being transferred or assigned (as the case may be);
(iii) immediately following such transfer or assignment (as the case may be) the
further disposition of such securities by such transferee or assignee (as the
case may be) is restricted under the 1933 Act or applicable state securities
laws if so required; (iv) at or before the time the Company receives the written
notice contemplated by clause (ii) of this sentence such transferee or assignee
(as the case may be) agrees in writing with the Company to be bound by all of
the provisions contained herein; (v) the transfer of the related Registrable
Securities shall have been made in accordance with the applicable requirements
of the Securities Purchase Agreement and the Warrants (as the case may be); and
(vi) such transfer or assignment (as the case may be) shall have been conducted
in accordance with all applicable federal and state securities laws.

 

18

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10. Amendment of Registration Rights.

Provisions of this Agreement may be amended only with the written consent of the
Company and the Required Holders. Any amendment effected in accordance with this
Section 10 shall be binding upon each Investor and the Company, provided that no
such amendment shall be effective to the extent that it (1) applies to less than
all of the holders of Registrable Securities or (2) imposes any obligation or
liability on any Investor without such Investor’s prior written consent (which
may be granted or withheld in such Investor’s sole discretion). No waiver shall
be effective unless it is in writing and signed by an authorized representative
of the waiving party.

11. Miscellaneous.

(a) Solely for purposes of this Agreement, a Person is deemed to be a holder of
Registrable Securities whenever such Person owns, or is deemed to own, of record
such Registrable Securities. If the Company receives conflicting instructions,
notices or elections from two or more Persons with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from such record owner of such Registrable
Securities.

(b) 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 receipt, when sent by facsimile (provided confirmation of transmission
is mechanically or electronically generated and kept on file by the sending
party); (iii) with respect to Section 3.(c), by electronic mail (provided
confirmation of transmission is electronically generated and kept on file by the
sending party); or (iv) one (1) Business Day after deposit with a nationally
recognized overnight delivery service with next day delivery specified, 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:

Patriot National, Inc.

401 East Las Olas Boulevard, Suite 1650

Fort Lauderdale, Florida 33301

Facsimile: 954-333-5326

Attention: Christopher A. Pesch, Executive Vice President and General Counsel

E-Mail: cpesch@patnat.com

 

19

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With a copy (for informational purposes only) to:

Simpson Thacher & Bartlett LLP

425 Lexington Avenue

New York, New York 10017

Attn:   Gary Horowitz   Lesley Peng Facsimile: 212-455-2502 Email:  
ghorowitz@stblaw.com   lpeng@stblaw.com

If to the Transfer Agent:

American Stock Transfer & Trust Company, LLC

6201 15th Avenue

Brooklyn, New York 11219

Telephone: (718) 921-8200 ext. 6544

Facsimile: (718) 765-8717

Attention: Janice Santiago

If to Legal Counsel:

Kelley Drye & Warren LLP

101 Park Avenue

New York, NY 10178

Telephone: (212) 808-7540

Facsimile: (212) 808-7897

Attention: Michael A. Adelstein, Esq.

E-mail: madelstein@kelleydrye.com

If to a Buyer, to its address and facsimile number set forth on the Schedule of
Buyers attached to the Securities Purchase Agreement, with copies to such
Buyer’s representatives as set forth on the Schedule of Buyers, or to such other
address and/or facsimile number and/or to the attention of such other Person as
the recipient party has specified by written notice given to each other party
five (5) days prior to the effectiveness of such change, provided that Kelley
Drye & Warren LLP shall only be provided notices sent to the lead investor.
Written confirmation of receipt (A) given by the recipient of such notice,
consent, waiver or other communication, (B) mechanically or electronically
generated by the sender’s facsimile machine or electronic mail transmission
containing the time, date, recipient facsimile number or electronic mail address
and an image of the first page of such transmission or (C) provided by a courier
or overnight courier service shall be rebuttable evidence of personal service,
receipt by facsimile or receipt from a nationally recognized overnight delivery
service in accordance with clause (i), (ii) or (iii) above, respectively.

(c) Failure of any party to exercise any right or remedy under this Agreement or
otherwise, or delay by a party in exercising such right or remedy, shall not
operate as a waiver thereof. The Company and each Investor acknowledge and agree
that irreparable damage would

 

20

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occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that each party hereto shall be entitled to an injunction
or injunctions to prevent or cure breaches of the provisions of this Agreement
by any other party hereto and to enforce specifically the terms and provisions
hereof (without the necessity of showing economic loss and without any bond or
other security being required), this being in addition to any other remedy to
which any party may be entitled by law or equity.

(d) All questions concerning the construction, validity, enforcement and
interpretation of this Agreement shall be governed by the internal laws of the
State of New York, without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of New York or any other jurisdictions)
that would cause the application of the laws of any jurisdictions other than the
State of New York. Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in The City of New York,
Borough of Manhattan, for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein, and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is brought
in an inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it under
this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION
CONTEMPLATED HEREBY.

(e) If any provision of this Agreement is prohibited by law or otherwise
determined to be invalid or unenforceable by a court of competent jurisdiction,
the provision that would otherwise be prohibited, invalid or unenforceable shall
be deemed amended to apply to the broadest extent that it would be valid and
enforceable, and the invalidity or unenforceability of such provision shall not
affect the validity of the remaining provisions of this Agreement so long as
this Agreement as so modified continues to express, without material change, the
original intentions of the parties as to the subject matter hereof and the
prohibited nature, invalidity or unenforceability of the provision(s) in
question does not substantially impair the respective expectations or reciprocal
obligations of the parties or the practical realization of the benefits that
would otherwise be conferred upon the parties. The parties will endeavor in good
faith negotiations to replace the prohibited, invalid or unenforceable
provision(s) with a valid provision(s), the effect of which comes as close as
possible to that of the prohibited, invalid or unenforceable provision(s).

(f) This Agreement, the other Transaction Documents, the schedules and exhibits
attached hereto and thereto and the instruments referenced herein and therein
constitute the entire agreement among the parties hereto and thereto solely with
respect to the subject matter hereof and thereof. There are no restrictions,
promises, warranties or undertakings, other than those set

 

21

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forth or referred to herein and therein. This Agreement, the other Transaction
Documents, the schedules and exhibits attached hereto and thereto and the
instruments referenced herein and therein supersede all prior agreements and
understandings among the parties hereto solely with respect to the subject
matter hereof and thereof; provided, however, nothing contained in this
Agreement or any other Transaction Document shall (or shall be deemed to)
(i) have any effect on any agreements any Investor has entered into with the
Company or any of its Subsidiaries prior to the date hereof with respect to any
prior investment made by such Investor in the Company, (ii) waive, alter, modify
or amend in any respect any obligations of the Company or any of its
Subsidiaries or any rights of or benefits to any Investor or any other Person in
any agreement entered into prior to the date hereof between or among the Company
and/or any of its Subsidiaries and any Investor and all such agreements shall
continue in full force and effect or (iii) limit any obligations of the Company
under any of the other Transaction Documents.

(g) Subject to compliance with Section 9 (if applicable), this Agreement shall
inure to the benefit of and be binding upon the permitted successors and assigns
of each of the parties hereto. This Agreement is not for the benefit of, nor may
any provision hereof be enforced by, any Person, other than the parties hereto,
their respective permitted successors and assigns and the Persons referred to in
Sections 6 and 7 hereof.

(h) The headings in this Agreement are for convenience of reference only and
shall not limit or otherwise affect the meaning hereof. Unless the context
clearly indicates otherwise, each pronoun herein shall be deemed to include the
masculine, feminine, neuter, singular and plural forms thereof. The terms
“including,” “includes,” “include” and words of like import shall be construed
broadly as if followed by the words “without limitation.” The terms “herein,”
“hereunder,” “hereof” and words of like import refer to this entire Agreement
instead of just the provision in which they are found.

(i) 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. In the event that any signature is delivered by facsimile transmission or
by an e-mail which contains a portable document format (.pdf) file of an
executed signature page, such signature page shall create a valid and binding
obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such signature page were an
original thereof.

(j) 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 any 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.

(k) 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. Notwithstanding anything to the
contrary set forth in Section 10, terms used in this Agreement but defined in
the other Transaction Documents shall have the meanings ascribed to such terms
on the Closing Date in such other Transaction Documents unless otherwise
consented to in writing by each Investor.

 

22

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(l) All consents and other determinations required to be made by the Investors
pursuant to this Agreement shall be made, unless otherwise specified in this
Agreement, by the Required Holders, determined as if all of the outstanding
Warrants then held by Investors have been exercised for Registrable Securities
without regard to any limitations on exercise of the Warrants.

(m) 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.

(n) The obligations of each Investor under this Agreement and the other
Transaction Documents are several and not joint with the obligations of any
other Investor, and no Investor shall be responsible in any way for the
performance of the obligations of any other Investor under this Agreement or any
other Transaction Document. Nothing contained herein or in any other Transaction
Document, and no action taken by any Investor pursuant hereto or thereto, shall
be deemed to constitute the Investors as, and the Company acknowledges that the
Investors do not so constitute, a partnership, an association, a joint venture
or any other kind of group or entity, or create a presumption that the Investors
are in any way acting in concert or as a group or entity with respect to such
obligations or the transactions contemplated by the Transaction Documents or any
matters, and the Company acknowledges that the Investors are not acting in
concert or as a group, and the Company shall not assert any such claim, with
respect to such obligations or the transactions contemplated by this Agreement
or any of the other the Transaction Documents. Each Investor shall be entitled
to independently protect and enforce its rights, including, without limitation,
the rights arising out of this Agreement or out of any other Transaction
Documents, and it shall not be necessary for any other Investor to be joined as
an additional party in any proceeding for such purpose. The use of a single
agreement with respect to the obligations of the Company contained herein was
solely in the control of the Company, not the action or decision of any
Investor, and was done solely for the convenience of the Company and not because
it was required or requested to do so by any Investor. It is expressly
understood and agreed that each provision contained in this Agreement and in
each other Transaction Document is between the Company and an Investor, solely,
and not between the Company and the Investors collectively and not between and
among Investors.

[signature page follows]

 

23

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IN WITNESS WHEREOF, each Buyer and the Company have caused their respective
signature page to this Registration Rights Agreement to be duly executed as of
the date first written above.

 

COMPANY: PATRIOT NATIONAL, INC. By:  

 

  Name:     Title:  

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IN WITNESS WHEREOF, each Buyer and the Company have caused their respective
signature page to this Registration Rights Agreement to be duly executed as of
the date first written above.

 

BUYERS: CVI INVESTMENTS, INC. By:  

 

  Name:     Title:  

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IN WITNESS WHEREOF, each Buyer and the Company have caused their respective
signature page to this Registration Rights Agreement to be duly executed as of
the date first written above.

 

HUDSON BAY MASTER FUND LTD By:  

 

  Name:     Title:  

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, each Buyer and the Company have caused their respective
signature page to this Registration Rights Agreement to be duly executed as of
the date first written above.

 

ALTO OPPORTUNITY MASTER FUND, SPC By:  

 

  Name:     Title:  

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EXHIBIT A

FORM OF NOTICE OF EFFECTIVENESS

OF REGISTRATION STATEMENT

 

 

 

 

 

 

  Attention:  

 

 

 

  Re: Patriot National, Inc.

Ladies and Gentlemen:

[We are][I am] counsel to Patriot National, Inc., a Delaware corporation (the
“Company”), and have represented the Company in connection with that certain
Securities Purchase Agreement (the “Securities Purchase Agreement”) entered into
by and among the Company, a stockholder of the Company and the buyers named
therein (collectively, the “Holders”) pursuant to which the Company issued (and
such stockholder resold) to the Holders certain shares (the “Common Shares”) of
common stock, $[        ] par value, of the Company (the “Common Stock”), and
warrants exercisable for shares of Common Stock (the “Warrants”). Pursuant to
the Securities Purchase Agreement, the Company also has entered into a
Registration Rights Agreement with the Holders (the “Registration Rights
Agreement”) pursuant to which the Company agreed, among other things, to
register the Registrable Securities (as defined in the Registration Rights
Agreement), including the Common Shares and the shares of Common Stock issuable
upon exercise of the Warrants, under the Securities Act of 1933, as amended (the
“1933 Act”). In connection with the Company’s obligations under the Registration
Rights Agreement, on             , 20    , the Company filed a Registration
Statement on Form [S-1][S-3] (File No. 333-            ) (the “Registration
Statement”) with the Securities and Exchange Commission (the “SEC”) relating to
the Registrable Securities which names each of the Holders as a selling
stockholder thereunder.

In connection with the foregoing, [we][I] advise you that a member of the SEC’s
staff has advised [us][me] by telephone or by EDGAR filing that the SEC has
entered an order declaring the Registration Statement effective under the 1933
Act at [ENTER TIME OF EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and
[we][I] have no knowledge, after telephonic inquiry of a member of the SEC’s
staff, that any stop order suspending its effectiveness has been issued or that
any proceedings for that purpose are pending before, or threatened by, the SEC
and the Registrable Securities are available for resale under the 1933 Act
pursuant to the Registration Statement.

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This letter shall serve as our standing notice to you that the Common Shares and
the shares of Common Stock underlying the Warrants are freely transferable by
the Holders pursuant to the Registration Statement. You need not require further
letters from us to effect any future legend-free issuance or reissuance of such
shares of Common Stock to the Holders as contemplated by the Company’s
Irrevocable Transfer Agent Instructions dated             , 20    .

 

Very truly yours, [ISSUER’S COUNSEL] By:  

 

 

CC:   CVI Investments, Inc.   Hudson Bay Master Fund Ltd   Alto Opportunity
Master Fund, SPC

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EXHIBIT B

SELLING STOCKHOLDERS

The shares of common stock being offered by the selling stockholders are those
previously issued to the selling stockholders and those issuable to the selling
stockholders upon exercise of the warrants. For additional information regarding
the issuance of common stock and the warrants, see “Private Placement of Common
Shares and Warrants” above. We are registering the shares of common stock in
order to permit the selling stockholders to offer the shares for resale from
time to time. Except for the ownership of the common stock and the warrants
issued pursuant to the Securities Purchase Agreement, the selling stockholders
have not had any material relationship with us within the past three years.

The table below lists the selling stockholders and other information regarding
the beneficial ownership (as determined under Section 13(d) of the Securities
Exchange Act of 1934, as amended, and the rules and regulations thereunder) of
the shares of common stock held by each of the selling stockholders. The second
column lists the number of shares of common stock beneficially owned by the
selling stockholders, based on their respective ownership of shares of common
stock and warrants, as of             , 201    , assuming exercise of the
warrants held by each such selling stockholder on that date but taking account
of any limitations on exercise set forth therein.

The third column lists the shares of common stock being offered by this
prospectus by the selling stockholders and does not take in account any
limitations on exercise of the warrants set forth therein.

In accordance with the terms of a registration rights agreement with the holders
of the common stock and the warrants, this prospectus generally covers the
resale of the sum of (i) the number of shares of common stock issued or resold
in connection with the Securities Purchase Agreement (ii) the maximum number of
shares of common stock issuable upon exercise of the Series A Warrants and
(iii) 150% of the maximum number of shares of common stock issuable upon
exercise of the Series B Warrants, in each case, determined as if the
outstanding warrants were exercised in full (without regard to any limitations
on exercise contained therein) as of the trading day immediately preceding the
date this registration statement was initially filed with the SEC. Because the
exercise price of the warrants may be adjusted, the number of shares that will
actually be issued may be more or less than the number of shares being offered
by this prospectus. The fourth column assumes the sale of all of the shares
offered by the selling stockholders pursuant to this prospectus.

Under the terms of the warrants, a selling stockholder may not exercise the
warrants to the extent (but only to the extent) such selling stockholder or any
of its affiliates would beneficially own a number of shares of our common stock
which would exceed 4.99%. The number of shares in the second column reflects
these limitations. The selling stockholders may sell all, some or none of their
shares in this offering. See “Plan of Distribution.”

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Name of Selling Stockholder

  Number of Shares of
Common Stock Owned
Prior to Offering   Maximum Number of Shares
of Common Stock to be Sold
Pursuant to this Prospectus   Number of Shares of
Common Stock of
Owned After Offering

CVI Investments, Inc. (1)

     

Hudson Bay Master Fund Ltd (2)

     

Alto Opportunity Master Fund, SPC (3)

     

 

(1) [                    ]

(2) [                    ]

(3) [                    ]

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PLAN OF DISTRIBUTION

We are registering the shares of common stock previously issued and the shares
of common stock issuable upon exercise of the warrants to permit the resale of
these shares of common stock by the holders of the common stock and warrants
from time to time after the date of this prospectus. We will not receive any of
the proceeds from the sale by the selling stockholders of the shares of common
stock. We will bear all fees and expenses incident to our obligation to register
the shares of common stock.

The selling stockholders may sell all or a portion of the shares of common stock
held by them and offered hereby from time to time directly or through one or
more underwriters, broker-dealers or agents. If the shares of common stock are
sold through underwriters or broker-dealers, the selling stockholders will be
responsible for underwriting discounts or commissions or agent’s commissions.
The shares of common stock may be sold in one or more transactions at fixed
prices, at prevailing market prices at the time of the sale, at varying prices
determined at the time of sale or at negotiated prices. These sales may be
effected in transactions, which may involve crosses or block transactions,
pursuant to one or more of the following methods:

 

  •   on any national securities exchange or quotation service on which the
securities may be listed or quoted at the time of sale;

 

  •   in the over-the-counter market;

 

  •   in transactions otherwise than on these exchanges or systems or in the
over-the-counter market;

 

  •   through the writing or settlement of options, whether such options are
listed on an options exchange or otherwise;

 

  •   ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;

 

  •   block trades in which the broker-dealer will attempt to sell the shares as
agent but may position and resell a portion of the block as principal to
facilitate the transaction;

 

  •   purchases by a broker-dealer as principal and resale by the broker-dealer
for its account;

 

  •   an exchange distribution in accordance with the rules of the applicable
exchange;

 

  •   privately negotiated transactions;

 

  •   short sales made after the date the Registration Statement is declared
effective by the SEC;

 

  •   broker-dealers may agree with a selling security holder to sell a
specified number of such shares at a stipulated price per share;

 

  •   a combination of any such methods of sale; and

 

  •   any other method permitted pursuant to applicable law.

--------------------------------------------------------------------------------

The selling stockholders may also sell shares of common stock under Rule 144
promulgated under the Securities Act of 1933, as amended, if available, rather
than under this prospectus. In addition, the selling stockholders may transfer
the shares of common stock by other means not described in this prospectus. If
the selling stockholders effect such transactions by selling shares of common
stock to or through underwriters, broker-dealers or agents, such underwriters,
broker-dealers or agents may receive commissions in the form of discounts,
concessions or commissions from the selling stockholders or commissions from
purchasers of the shares of common stock for whom they may act as agent or to
whom they may sell as principal (which discounts, concessions or commissions as
to particular underwriters, broker-dealers or agents may be in excess of those
customary in the types of transactions involved). In connection with sales of
the shares of common stock or otherwise, the selling stockholders may enter into
hedging transactions with broker-dealers, which may in turn engage in short
sales of the shares of common stock in the course of hedging in positions they
assume. The selling stockholders may also sell shares of common stock short and
deliver shares of common stock covered by this prospectus to close out short
positions and to return borrowed shares in connection with such short sales. The
selling stockholders may also loan or pledge shares of common stock to
broker-dealers that in turn may sell such shares.

The selling stockholders may pledge or grant a security interest in some or all
of the warrants or shares of common stock owned by them and, if they default in
the performance of their secured obligations, the pledgees or secured parties
may offer and sell the shares of common stock from time to time pursuant to this
prospectus or any amendment to this prospectus under Rule 424(b)(3) or other
applicable provision of the Securities Act amending, if necessary, the list of
selling stockholders to include the pledgee, transferee or other successors in
interest as selling stockholders under this prospectus. The selling stockholders
also may transfer and donate the shares of common stock in other circumstances
in which case the transferees, donees, pledgees or other successors in interest
will be the selling beneficial owners for purposes of this prospectus.

To the extent required by the Securities Act and the rules and regulations
thereunder, the selling stockholders and any broker-dealer participating in the
distribution of the shares of common stock may be deemed to be “underwriters”
within the meaning of the Securities Act, and any commission paid, or any
discounts or concessions allowed to, any such broker-dealer may be deemed to be
underwriting commissions or discounts under the Securities Act. At the time a
particular offering of the shares of common stock is made, a prospectus
supplement, if required, will be distributed, which will set forth the aggregate
amount of shares of common stock being offered and the terms of the offering,
including the name or names of any broker-dealers or agents, any discounts,
commissions and other terms constituting compensation from the selling
stockholders and any discounts, commissions or concessions allowed or re-allowed
or paid to broker-dealers.

Under the securities laws of some states, the shares of common stock may be sold
in such states only through registered or licensed brokers or dealers. In
addition, in some states the

--------------------------------------------------------------------------------

shares of common stock may not be sold unless such shares have been registered
or qualified for sale in such state or an exemption from registration or
qualification is available and is complied with.

There can be no assurance that any selling stockholder will sell any or all of
the shares of common stock registered pursuant to the registration statement, of
which this prospectus forms a part.

The selling stockholders and any other person participating in such distribution
will be subject to applicable provisions of the Securities Exchange Act of 1934,
as amended, and the rules and regulations thereunder, including, without
limitation, to the extent applicable, Regulation M of the Exchange Act, which
may limit the timing of purchases and sales of any of the shares of common stock
by the selling stockholders and any other participating person. To the extent
applicable, Regulation M may also restrict the ability of any person engaged in
the distribution of the shares of common stock to engage in market-making
activities with respect to the shares of common stock. All of the foregoing may
affect the marketability of the shares of common stock and the ability of any
person or entity to engage in market-making activities with respect to the
shares of common stock.

We will pay all expenses of the registration of the shares of common stock
pursuant to the registration rights agreement, estimated to be $[        ] in
total, including, without limitation, Securities and Exchange Commission filing
fees and expenses of compliance with state securities or “blue sky” laws;
provided, however, that we have agreed to reimburse legal expenses of the
selling stockholders only up to $10,000 and provided further that a selling
stockholder will pay all underwriting discounts and selling commissions, if any.
We will indemnify the selling stockholders against liabilities, including some
liabilities under the Securities Act in accordance with the registration rights
agreements or the selling stockholders will be entitled to contribution. We may
be indemnified by the selling stockholders against civil liabilities, including
liabilities under the Securities Act that may arise from any written information
furnished to us by the selling stockholder specifically for use in this
prospectus, in accordance with the related registration rights agreements or we
may be entitled to contribution.

Once sold under the registration statement, of which this prospectus forms a
part, the shares of common stock will be freely tradable in the hands of persons
other than our affiliates.