Exhibit 10.3

 

KATALYST SECURITIES LLC

15 MAIDEN LANE, ROOM 601

NEW YORK, NY 10038

TEL: 212-587-6667

Member: FINRA & SIPC

 

PLACEMENT AGENCY AGREEMENT

 

January 25, 2016

 

Mr. Edward Gildea

Chief Executive Officer

Atrinsic, Inc.

65 Atlantic Avenue

Boston, MA 02110

 

Re:Private placement offering of up to $4 million

of Series B Preferred Stock

 

Dear Mr. Gildea:

 

This Placement Agency Agreement (“Agreement”) sets forth the terms upon which
Katalyst Securities LLC (“Katalyst”), registered broker-dealer and member of the
Financial Industry Regulatory Authority (“FINRA”) (hereinafter referred to as
the “Placement Agent”), shall be engaged by Atrinsic, Inc., a publicly traded
Delaware Corporation (hereinafter referred to as the “Company”), to act as
exclusive Placement Agent in connection with the private placement (the
“Offering”) of the securities of the Company (the “Securities”). The initial
closing of the Offering will be conditioned upon and acceptance of subscriptions
for the Minimum Amount (as defined below) and the consummation of a reverse
triangular merger (the “Merger”) by and among a subsidiary of the Company,
Protagenic Therapeutics Inc. (“PTI”), a privately held Delaware corporation, and
the Company and certain other transactions described herein, pursuant to which
PTI will become a wholly owned subsidiary of the Company, and all of the
outstanding PTI stock will be converted into shares of the Company’s Preferred
Stock (as such term is defined below).

 

1.             Appointment of Placement Agent.

 

(a)           On the basis of the written and documented representations and
warranties of the Company provided herein, and subject to the terms and
conditions set forth herein, the Placement Agent is hereby appointed as an
exclusive Placement Agent of the Company during the Offering Period (as defined
in Section 3(b) below) to assist the Company in finding qualified subscribers
for the Offering. The Placement Agent may sell the Securities through other
broker-dealers who are FINRA members (collectively, the “Sub Agents”) and may
reallow all or a portion of the Brokers’ Fees (as defined in Section 3(a) and
3(b) below) it receives to such other Sub Agents or pay a finders or consultant
fee as allowed by applicable law. On the basis of such representations and
warranties and subject to such terms and conditions, the Placement Agent hereby
accepts such appointment and agrees to perform the services hereunder diligently
and in good faith and in a professional and businesslike manner and in
compliance with applicable law and to use its reasonable best efforts to assist
the Company in finding subscribers of the Securities who qualify as “accredited
investors,” as such term is defined in Rule 501 of Regulation D. The Placement
Agent has no obligation to purchase any of the Securities or sell any
Securities. Unless sooner terminated in accordance with this Agreement, the
engagement of the Placement Agent hereunder shall continue until the later of
the Termination Date or the Final Closing (as defined below). The Offering is
currently anticipated to be the private placement of a minimum of gross proceeds
of $3,350,000 (the “Minimum Offering”) and a maximum of gross proceeds of
$4,000,000 (the “Maximum Offering”) through the sale of Series B Preferred
Stock, par value $0.000001 per share, of the Company (the “Preferred Stock”), at
the Purchase Price of $1.25 per share (the “Offering Price”). The minimum
subscription is Twenty Five Thousand Dollars ($25,000), Twenty Thousand (20,000
shares), provided, however, that subscriptions in lesser amounts may be accepted
by the Company in its sole discretion.

 

Placement Agency Agreement (PIPE)Page 1

 

 

(b)           The Placement Agent is engaged to raise a minimum of One Million
Dollars ($1,000,000) (the “Minimum Raise”) and a maximum of One Million Six
Hundred Fifty Thousand Dollars ($1,650,000) (the “Maximum Raise”) of Securities
out of the total Offering, on a reasonable best efforts basis. This Maximum
Raise may be increased at the sole discretion of the Company by an aggregate of
One Million Five Hundred Thousand Dollars ($1,500,000). The Company agrees and
acknowledges that the Placement Agent is not acting as an underwriter with
respect to the Offering and the Company shall determine the purchasers in the
Offering in its sole discretion. The Securities will be offered by the Company
to potential subscribers, which may include related parties of the Placement
Agent or the Company, commencing on February 29, 2016 (the “Initial Offering
Period”), which date may be extended by the Company through April 15, 2016 (this
additional period and the Initial Offering Period shall be referred to as the
“Offering Period”). The date on which the Offering is terminated shall be
referred to as the “Termination Date”. The closing of the Offering may be held
up to ten days after the Termination Date.

 

(c)            The Company shall only offer securities to and accept
subscriptions from or sell Securities to, persons or entities that qualify as
(or are reasonably believed to be) “accredited investors,” as such term is
defined in Rule 501 of Regulation D (“Regulation D”) as promulgated by the
United States Securities and Exchange Commission (the “SEC”) under Section
4(a)(2) of the Securities Act of 1933, as amended (the “Act”).

 

(d)           The offering of Securities will be made by the Placement Agent on
behalf of the Company solely pursuant to the Subscription Agreement and the
Exhibits to the Subscription Agreement, including, but not limited to, and to
the extent applicable, the Summary Term Sheet, Registration Rights Agreement, a
draft of the Form 8-K relating to the Merger and the business of PTI to be filed
by the Company with the Securities and Exchange Commission (the “Super 8-K”) and
the risk factors and disclosures will be available to the Placement Agent prior
to such filing, and any documents, agreements, supplements and additions thereto
(collectively, the “Subscription Documents”), which at all times will be in form
and substance reasonably acceptable to the Company and the Placement Agent and
their respective counsel and contain such legends and other information as the
Company and the Placement Agent and their respective counsel, may, from time to
time, deem necessary and desirable to be set forth therein.

 

(e)           With respect to the Offering, the Company shall provide the
Placement Agent, on terms set forth herein, the right to offer and sell all up
to the Maximum Raise of available Securities being offered during the Offering
Period (subject to prior offer and sale of some of the Securities). It is
understood that no sale shall be regarded as effective unless and until accepted
by the Company. The Company may, in its sole discretion, accept or reject, in
whole or in part, any prospective investment in the Securities or allot to any
prospective subscriber less than the number of Securities that such subscriber
desires to purchase. Purchases of Securities may be made by the Placement Agent
and its selected sub-dealers and their respective officers, directors, employees
and affiliates and by the officers, directors, employees and affiliates of the
Company and PTI (collectively, the “Affiliates”) for the Offering and such
purchases will be made by the Affiliates based solely upon the same information
that is provided to the investors in the Offering.

 

Placement Agency Agreement (PIPE)Page 2

 

 

2.            Representations, Warranties and Covenants.

 

A.            Representations, Warranties and Covenants of the Company. The
Company hereby represents and warrants to the Placement Agent that, except as
otherwise set forth in the disclosure schedule provided by the Company to the
Placement Agent on the date hereof and as updated, if necessary, by the Company
immediately prior to the closing of the transactions contemplated hereby, and
collectively attached hereto as Exhibit A (the “Company Disclosure Schedule”),
and assuming that the conditions described in Section 6 hereof are satisfied,
each of the representations and warranties contained in this Section 2 is true
in all respects as of the date hereof and will be true in all respects as of the
Closing Date and any subsequent Closing Dates (which will be deemed to be
following the closing of the Merger), as defined under Section 4(e). In addition
to the representations and warranties set forth herein, the Placement Agent
shall be entitled to rely upon the representations and warranties made or given
by the Company to any acquirer of Securities in the Offering in any agreement,
certificate, legal opinion or otherwise in connection with an Offering. For
purposes of this Section 2(A), the term Company includes all of the Company’s
subsidiaries (if any).

 

(a)          The Subscription Documents have been and/or will be prepared by the
Company, in conformity with all applicable laws, and in compliance with
Regulation D and/or Section 4(a)(2) of the Act and the requirements of all other
rules and regulations (the “Regulations”) of the SEC relating to offerings of
the type contemplated by the Offering, and the applicable securities laws and
the rules and regulations of those jurisdictions wherein the Placement Agent
notifies the Company that the Securities are to be offered and sold (including
U.S. states). The Securities will be offered and sold pursuant to the
registration exemption provided by Regulation D and/or Section 4(a)(2) of the
Act as a transaction not involving a public offering and the requirements of any
other applicable state securities laws and the respective rules and regulations
thereunder in those United States jurisdictions in which the Placement Agent
notifies the Company that the Securities are being offered for sale. None of the
Company, its affiliates, or any person acting on its or their behalf (other than
the Placement Agent, its respective affiliates or any person acting on their
behalf, in respect of which no representation is made) has taken nor will it
take any action that conflicts with the conditions and requirements of, or that
would make unavailable with respect to the Offering, the exemption(s) from
registration available pursuant to Rule 506 of Regulation D and/or Section
4(a)(2) of the Act and applicable state securities laws, or knows of any reason
why any such exemption would be otherwise unavailable to it). Neither the
Company, nor any of its affiliates, nor any person acting on its or their
behalf, has directly or indirectly made any offers or sales of any security or
solicited any offers to buy any security under circumstances that would require
registration under the Act of the issuance of the Securities or the Brokers
Warrants (as hereinafter defined). None of the Company, its predecessors or
affiliates has been subject to any order, judgment or decree of any court of
competent jurisdiction temporarily, preliminarily or permanently enjoining such
person for failing to comply with Rule 503 of Regulation D or the equivalent
state securities law requirements. The Company has not, for a period of six
months prior to the commencement of the offering of Securities, sold, offered
for sale or solicited any offer to buy any of its securities in a manner that
would be integrated with the offer and sale of the Securities pursuant to this
Agreement, would cause the exemption from registration set forth in Rule 506 of
Regulation D and state securities laws to become unavailable with respect to the
offer and sale of the Securities to this Agreement in the United States. The
Company’s common stock, par value $0.000001 per share (the “Common Stock”) is
quoted on the “Pink Sheet” maintained by OTC Markets Group Inc. (the “Principal
Market”). The Company has taken no action designed to, or likely to have the
effect of, terminating the quotation of the Common Stock on the Principal
Market. The Company, on the Closing Date, will be in compliance with all of the
then-applicable requirements for continued quotation of the Common Stock on the
Principal Market.

 

Placement Agency Agreement (PIPE)Page 3

 

 

(b)          The Subscription Documents, as prepared and contemplated by the
Company, will not and do not include any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. To the knowledge of the Company, none of the statements,
documents, certificates or other items made, prepared or supplied by the Company
with respect to the transactions contemplated hereby contains an untrue
statement of a material fact or omits to state a material fact necessary to make
the statements contained therein not misleading in light of the circumstances in
which they were made. There is no fact which the Company has not disclosed in
the Subscription Documents or which is not disclosed in the filings (the “SEC
Filings”, which is deemed to include the Super 8-K) that the Company makes with
the US Securities and Exchange Commission (the “SEC”) and of which the Company
is aware that materially adversely affects or that could reasonably be expected
to have a material adverse effect on the (i) assets, liabilities, results of
operations, condition (financial or otherwise), business or business prospects
of the Company, including the business prospects as a result of the Merger or
(ii) ability of the Company to perform its obligations under this Agreement and
the other Subscription Documents (the “Company Material Adverse Effect”).
Notwithstanding anything to the contrary herein, the Company makes no
representation or warranty with respect to any estimates, projections and other
forecasts and plans (including the reasonableness of the assumptions underlying
such estimates, projections and other forecasts and plans) that may have been
delivered to the Placement Agent or its respective representatives, except that
such estimates, projections and other forecasts and plans have been prepared in
good faith on the basis of assumptions stated therein, which assumptions were
believed to be reasonable at the time of such preparation. Other than the
Company’s SEC Filings, the Company has not distributed and will not distribute
prior to the Closing any offering material in connection with the offering and
sale of the Securities, unless such offering materials are provided to the
Placement Agent prior to or simultaneously with such delivery to the offerees of
the Securities.

 

(c)          The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware and is qualified and in
good standing as a foreign corporation in each jurisdiction in which the nature
of the business conducted by the Company or the property owned or leased by the
Company requires such qualification, except to the extent that the failure to be
so qualified or be in good standing would not have a Company Material Adverse
Effect. The Company has all requisite corporate power and authority to conduct
its business as presently conducted and as proposed to be conducted (as
described in the Subscription Documents and/or the SEC Filings), has all the
necessary and requisite documents and approvals from all state authorities, has
all requisite corporate power and authority to enter into and perform its
obligations under this Agreement, the Subscription Agreement substantially in
the form made part of the Subscription Documents (the “Subscription Agreement”),
the Registration Rights Agreement substantially in the form made part of the
Subscription Documents (the “Registration Rights Agreement”), and the other
agreements, if any, contemplated by the Offering (this Agreement, Subscription
Agreement, the Registration Rights Agreement and the other agreements
contemplated hereby that the Company is required to execute and deliver are
collectively referred to herein as the “Company Transaction Documents”) and
subject to necessary Board and stockholder approvals, to issue, sell and deliver
the Preferred Stock and the shares of Preferred Stock (the “Brokers Warrant
Shares”) issuable upon exercise of the Brokers Warrants (as defined below) and
to make the representations in this Agreement accurate and not misleading. Prior
to the First Closing, as defined under Section 4(e), each of the Company
Transaction Documents and the Offering will have been duly authorized. This
Agreement has been duly authorized, executed and delivered and constitutes, and
each of the other Company Transaction Documents, upon due execution and
delivery, will constitute, valid and binding obligations of the Company,
enforceable against the Company in accordance with their respective terms (i)
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
related to laws affecting creditors’ rights generally, including the effect of
statutory and other laws regarding fraudulent conveyances and preferential
transfers, and except that no representation is made herein regarding the
enforceability of the Company’s obligations to provide indemnification and
contribution remedies under the securities laws and (ii) subject to the
limitations imposed by general equitable principles (regardless of whether such
enforceability is considered in a proceeding at law or in equity).

 

Placement Agency Agreement (PIPE)Page 4

 

 

(d)          None of the execution and delivery of or performance by the Company
under this Agreement or any of the other Company Transaction Documents or the
consummation of the transactions in this Agreement or in the Subscription
Documents (including the issuance and sale of the Securities, the issuance of
the Brokers Warrants or the issuance and sale of the Brokers Warrants Shares
conflicts with or violates, or causes a default under (with our without the
passage of time or the giving of notice), or will result in the creation or
imposition of, any lien, charge or other encumbrance upon any of the assets of
the Company under any agreement, evidence of indebtedness, joint venture,
commitment or other instrument to which the Company is a party or by which the
Company or its assets may be bound, any statute, rule, law or governmental
regulation applicable to the Company, or any term of the Article of
Incorporation as in effect on the date hereof or any closing date for the
Offering (the “Articles of Incorporation”) or By-Laws as in effect on the date
hereof or any closing date for the Offering (the “By-Laws”) of the Company, or
any license, permit, judgment, decree, order, statute, rule or regulation
applicable to the Company or any of its assets, except in the case of a
conflict, violation, lien, charge or other encumbrance (except with respect to
the Company’s Articles of Incorporation or By-Laws) which would not, or could
not reasonably be expected to, have a Company Material Adverse Effect. No
consent, approval, authorization or other order of, or registration,
qualification or filing with, any regulatory body, administrative agency, or
other governmental body is required for the execution and delivery of this
Agreement by the Company and the valid issuance or sale of the Securities, the
Brokers Warrants and the Brokers Warrant Shares by the Company pursuant to this
Agreement, other than such as have been made or obtained and that remain in full
force and effect, and except for the filing of a Form D or any filings required
to be made under state securities laws, which shall be timely filed by the
Company.

 

(e)          The Company’s financial statements, together with the related
notes, if any, included in the Subscription Documents or the Company’s SEC
Filings, present fairly, in all material respects, the financial position of the
Company as of the dates specified and the results of operations for the periods
covered thereby. Such financial statements and related notes were prepared in
accordance with United States generally accepted accounting principles applied
on a consistent basis throughout the periods indicated, except that the
unaudited financial statements omit full notes, and except for normal year end
adjustments. If the financials for the Company are unaudited financial
statements, it will state such clearly on the financials. During the period of
engagement of the Company’s independent certified public accountants, there have
been no disagreements between the accounting firm and the Company on any matters
of accounting principles or practices, financial statement disclosure or
auditing scope or procedures. The Company has made and kept books and records
and accounts which are in reasonable detail and which fairly and accurately
reflect the activities of the Company in all material respects, subject only to
year-end adjustments. Except as set forth in such financial statements or
otherwise disclosed in the Company Transaction Documents, the Company’s senior
management has no knowledge of any material liabilities of any kind, whether
accrued, absolute or contingent, or otherwise, and subsequent to the date of the
Company Transaction Documents and prior to the date of the First Closing, it
shall not enter into any material transactions or commitments without promptly
thereafter notifying the Placement Agent and the purchasers in the Offering in
writing of any such material transaction or commitment. The other financial and
statistical information with respect to the Company and any pro forma
information and related notes included in the SEC Filings present fairly the
information shown therein on a basis consistent with the financial statements of
the Company included in the SEC Filings. Except as disclosed in the Subscription
Documents, the Company does not know of any facts, circumstances or conditions
which could materially adversely affect its operations, earnings or prospects
that have not been fully disclosed in the financial statements appearing in the
SEC Filings or other financial statements appearing in the SEC Filings or other
documents or information provided by the Company.

 

(f)          Immediately prior to the First Closing, the shares of Preferred
Stock and the Brokers Warrants Shares will have been duly authorized and, when
issued and delivered against payment therefor as provided in the Company
Transaction Documents, will be validly issued, fully paid and nonassessable. No
holder of any of the shares of Preferred Stock and Brokers Warrants Shares will
be subject to personal liability solely by reason of being such a holder, and
except as described in the Subscription Documents, none of the shares of the
Preferred Stock, the Brokers Warrants or the Brokers Warrants Shares will be
subject to preemptive or similar rights of any stockholder or security holder of
the Company or an adjustment under the antidilution or exercise rights of any
holders of any outstanding shares of capital stock, options, warrants or other
rights to acquire any securities of the Company. Immediately prior to the First
Closing, a sufficient number of authorized but unissued shares of Preferred
Stock underlying the Brokers Warrants will have been reserved for issuance upon
the conversion and exercise.

 

Placement Agency Agreement (PIPE)Page 5

 

 

(g)          Except as described in the Subscription Documents and/or the
Company’s SEC Filings and for the Brokers Warrants, and as of the date of each
Closing: (i) there will be no outstanding options, stock subscription
agreements, warrants or other rights permitting or requiring the Company or
others to purchase or acquire any shares of capital stock or other equity
securities of the Company or to pay any dividend or make any other distribution
in respect thereof; (ii) there will be no securities issued or outstanding which
are convertible into or exchangeable for any of the foregoing and there are no
contracts, commitments or understandings, whether or not in writing, to issue or
grant any such option, warrant, right or convertible or exchangeable security;
(iii) no Securities of the Company or other securities of the Company are
reserved for issuance for any purpose; (iv) there will be no voting trusts or
other contracts, commitments, understandings, arrangements or restrictions of
any kind with respect to the ownership, voting or transfer of shares of stock or
other securities of the Company, including, without limitation, any preemptive
rights, rights of first refusal, proxies or similar rights, and (v) no person
prior to the execution of this Agreement by the Company holds a right to require
the Company to register any securities of the Company under the Act or to
participate in any such registration. Immediately prior to the First Closing,
the issued and outstanding shares of capital stock of the Company will conform
in all material respects to all statements in relation thereto contained in the
Company Transaction Documents and the Company’s SEC Filings describe all
material terms and conditions thereof. All issuances by the Company of its
securities have been issued pursuant to either a current effective registration
statement under the 1933 Act or an exemption from registration requirements
under the Act, and were issued in accordance with any applicable Federal and
state securities laws.

 

(h)          Except as described in the Subscription Documents and/or the
Company’s SEC Filings, immediately following the First Closing, the Company will
have no subsidiaries except for PTI and will not own any equity interest and
will not have made any loans or advances to or guarantees of indebtedness to any
person, corporation, partnership or other entity and will not be a party to any
joint venture. The Company’s subsidiaries are duly incorporated or organized,
validly existing and in good standing under the laws of their jurisdiction of
incorporation or organization and have all requisite power and authority to
carry on their business as now conducted. Such subsidiaries are duly qualified
to transact business and is in good standing in each jurisdiction in which the
failure to so qualify would have a material adverse effect on their respective
business or properties. All of the outstanding capital stock or other voting
securities of such subsidiaries are owned by the Company, directly or
indirectly, free and clear of any liens, claims, or encumbrances. The conduct of
business by the Company as presently and proposed to be conducted is not subject
to continuing oversight, supervision, regulation or examination by any
governmental official or body of the United States, or any other jurisdiction
wherein the Company conducts or proposes to conduct such business, except as
described in the Subscription Documents and/or the Company’s SEC Filings and
except as such regulation is applicable to US public companies and commercial
enterprises generally. The Company has obtained all material licenses, permits
and other governmental authorizations necessary to conduct its business as
presently conducted. The Company has not received any notice of any violation
of, or noncompliance with, any federal, state, local or foreign laws,
ordinances, regulations and orders (including, without limitation, those
relating to environmental protection, occupational safety and health, securities
laws, equal employment opportunity, consumer protection, credit reporting,
“truth-in-lending”, and warranties and trade practices) applicable to its
business, the violation of, or noncompliance with, would have a Company Material
Adverse Effect, and the Company knows of no facts or set of circumstances which
could give rise to such a notice.

 

(i)          Except as described in the Subscription Documents and/or the
Company’s SEC Filings, no default by the Company or, to the knowledge of the
Company, any other party, exists in the due performance under any material
agreement to which the Company is a party or to which any of its assets is
subject (collectively, the “Company Agreements”). The Company Agreements, if
any, disclosed in the Subscription Documents and/or the Company’s SEC Filings
are the only material agreements to which the Company is bound or by which its
assets are subject, are accurately described in the Subscription Documents
and/or the Company’s SEC Filings and are in full force and effect in accordance
with their respective terms, subject to any applicable bankruptcy, insolvency or
other laws affecting the rights of creditors generally and to general equitable
principles and the availability of specific performance.

 

Placement Agency Agreement (PIPE)Page 6

 

 

(j)          Subsequent to the respective dates as of which information is given
in the Subscription Documents, the Company has operated its business in the
ordinary course and, except as may otherwise be set forth in the Subscription
Documents or the Company’s SEC Filings, there has been no: (i) Company Material
Adverse Effect; (ii) material transaction otherwise than in the ordinary course
of business consistent with past practice; (iii) issuance of any securities
(debt or equity) or any rights to acquire any such securities other than
pursuant to equity incentive plans approved by its Board of Directors; (iv)
damage, loss or destruction, whether or not covered by insurance, with respect
to any material asset or property of the Company; or (v) agreement to permit any
of the foregoing.

 

(k)          Except as set forth in the Subscription Documents and/or the
Company’s SEC Filings, there are no actions, suits, claims, hearings or
proceedings pending before any court or governmental authority or, to the
knowledge of the Company, threatened, against the Company, or involving its
assets or any of its officers or directors (in their capacity as such) which,
(i) if determined adversely to the Company or such officer or director, could
reasonably be expected to have a Company Material Adverse Effect or adversely
affect the transactions contemplated by this Agreement or the Company
Transaction Documents (as defined in this Agreement) or the enforceability
hereof or (ii) would be required to be disclosed in the Company’s Annual Report
on Form 10-K under the requirements of Item 103 of Regulation S-K. The Company
is not subject to any injunction, judgment, decree or order of any court,
regulatory body, arbitral panel, administrative agency or other government body.

 

(l)          The Articles of Incorporation and By-laws of the Company are true,
correct and complete copies of the certificate of incorporation and bylaws of
the Company, as in effect on the date hereof. Any subsequent amendments to the
certificate of incorporation or bylaws will be provided promptly to the
Placement Agent and investors in the Offering. The Company is not: (i) in
violation of its Articles of Incorporation or By-Laws; (ii) in default of any
contract, indenture, mortgage, deed of trust, note, loan agreement, security
agreement, lease, alliance agreement, joint venture agreement or other
agreement, license, permit, consent, approval or instrument to which the Company
is a party or by which it is or may be bound or to which any of its assets may
be subject, the default of which could reasonably be expected to have a Company
Material Adverse Effect; (iii) in violation of any statute, rule or regulation
applicable to the Company, the violation of which would have a Company Material
Adverse Effect; or (iv) in violation of any judgment, decree or order of any
court or governmental body having jurisdiction over the Company and specifically
naming the Company, which violation or violations individually, or in the
aggregate, could reasonably be expected to have a Company Material Adverse
Effect.

 

(m)          Except as disclosed in the Subscription Documents and/or the
Company’s SEC Filings, as of the date of this Agreement, no current or former
stockholder, director, officer or employee of the Company, nor, to the knowledge
of the Company, any affiliate of any such person is presently, directly or
indirectly through his/her affiliation with any other person or entity, a party
to any loan from the Company or any other transaction (other than as an
employee) with the Company.

 

(n)          The Company is not obligated to pay, and has not obligated the
Placement Agent to pay, a finder’s or origination fee in connection with the
Offering other than to the Placement Agent under this Agreement, and hereby
agrees to indemnify the Placement Agent from any such claim made by any other
person as more fully set forth in Section 8 hereof. The Company has not offered
for sale or solicited offers to purchase the Securities except for negotiations
with the designated Placement Agent. Except as set forth in the Subscription
Documents, no other person has any right to participate in any offer, sale or
distribution of the Company’s securities to which the Placement Agent’s rights,
described herein, shall apply.

 

Placement Agency Agreement (PIPE)Page 7

 

 

(o)          Until the earlier of (i) the Termination Date or (ii) the Final
Closing (as hereinafter defined), the Company will not issue any press release,
grant any interview, or otherwise communicate with the media in any manner
whatsoever with respect to the Offering without the Placement Agent’s prior
written consent, which consent will not unreasonably be withheld or delayed, and
subject to any applicable laws and regulations.

 

(p)          No representation or warranty contained in Section 2A of this
Agreement contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements herein not misleading in the
context of such representations and warranties. The Placement Agent shall be
entitled to rely on such representations and warranties.

 

(q)          No consent, authorization or filing of or with any court or
governmental authority is required in connection with the issuance or the
consummation of the transactions contemplated herein or in the other Company
Transaction Documents, except for required filings with the SEC and the
applicable state securities commissions relating specifically to the Offering
(all of which filings will be duly made by, or on behalf of, the Company), and
those which are required to be made after the First Closing (all of which will
be duly made on a timely basis).

 

(r)          Neither the sale of the Securities by the Company nor its use of
the proceeds thereof will violate the Trading with the Enemy Act, as amended,
nor any of the foreign assets control regulations of the United States Treasury
Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling
legislation or executive order relating thereto. Without limiting the foregoing,
the Company is not (a) a person whose property or interests in property are
blocked pursuant to Section 1 of Executive Order 13224 of September 23, 2001
Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten
to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)) or (b) a person who
engages in any dealings or transactions, or be otherwise associated, with any
such person. The Company and its subsidiaries, if any, are in compliance, in all
material respects, with the USA Patriot Act of 2001 (signed into law October 26,
2001). Each of the Company, its affiliates and any of their respective officers,
directors, supervisors, managers, agents, or employees, has not violated, its
participation in the offering will not violate, and the Company has instituted
and maintains policies and procedures designed to ensure continued compliance
with, each of the following laws: (a) anti-bribery laws, including but not
limited to, any applicable law, rule, or regulation of any locality, including
but not limited to any law, rule, or regulation promulgated to implement the
OECD Convention on Combating Bribery of Foreign Public Officials in
International Business Transactions, signed December 17, 1997, including the
U.S. Foreign Corrupt Practices Act of 1977, as amended, or any other law, rule
or regulation of similar purposes and scope, (b) anti-money laundering laws,
including but not limited to, applicable federal, state, international, foreign
or other laws, regulations or government guidance regarding anti-money
laundering, including, without limitation, Title 18 US. Code section 1956 and
1957, the Bank Secrecy Act, and international anti-money laundering principles
or procedures by an intergovernmental group or organization, such as the
Financial Action Task Force on Money Laundering, of which the United States is a
member and with which designation the United States representative to the group
or organization continues to concur, all as amended, and any Executive order,
directive, or regulation pursuant to the authority of any of the foregoing, or
any orders or licenses issued thereunder or (c) laws and regulations imposing
U.S. economic sanctions measures, including, but not limited to, the
International Emergency Economic Powers Act, the United Nations Participation
Act and the Syria Accountability and Lebanese Sovereignty Act, all as amended,
and any Executive Order, directive, or regulation pursuant to the authority of
any of the foregoing, including the regulations of the United States Treasury
Department set forth under 31 CFR, Subtitle B, Chapter V, as amended, or any
orders or licenses issued thereunder. Neither the Company nor any director,
officer, agent, employee or other person acting on behalf of the Company has, in
the course of its actions for, or on behalf of, the Company (i) used any
corporate funds for any unlawful contribution, gift, entertainment or other
unlawful expenses relating to political activity; (ii) made any direct or
indirect unlawful payment to any foreign or domestic government official or
employee from corporate funds; or (iii) made any unlawful bribe, rebate, payoff,
influence payment, kickback or other unlawful payment to any foreign or domestic
government official or employee.

 

Placement Agency Agreement (PIPE)Page 8

 

 

(s)          None of Company, any of its predecessors, any affiliated issuer,
any director, executive officer, other officer of the Company participating in
the Offering, any beneficial owner of 20% or more of the Company’s outstanding
voting equity securities, calculated on the basis of voting power, nor any
promoter (as that term is defined in Rule 405 under the Securities Act)
connected with the Company in any capacity at the time of sale (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)–(viii) under
the Securities Act (a “Disqualification Event”), except for a Disqualification
Event covered by Rule 506(d)(2) or (d)(3) or has been involved in any matter
which would be a Disqualification Event except for the fact that it occurred
before September 23, 2013. The Company has exercised reasonable care to
determine whether any Issuer Covered Person is subject to a Disqualification
Event. The Company has complied, to the extent applicable, with its disclosure
obligations under Rule 506(e), and has furnished to the Placement Agent a copy
of any disclosures provided thereunder.

 

(t)          The Company is not aware of any person (other than any Issuer
Covered Person or Placement Agent Covered Person (as defined below) that has
been or will be paid (directly or indirectly) remuneration for solicitation of
purchasers in connection with the sale of any the Securities. For purposes of
this subsection Placement Agent Covered Person shall mean Katalyst Securities
Inc., or any of its directors, executive officers, general partners, managing
members or other officers participating in the Offering.

 

(u)          The Company will promptly notify the Placement Agent in writing of
(A) any Disqualification Event relating to any Issuer Covered Person and (B) any
event that would, with the passage of time, become a Disqualification Event
relating to any Issuer Covered Person. The Company will notify the Agent 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.

 

(v)         The authorized capital stock of the Company as of the First Closing
will be set forth in the Company’s SEC Filings. As of the First Closing, the
Company’s issued and outstanding capital stock will be set forth in the
Company’s SEC Filings. All issued and outstanding shares of capital stock have
been duly authorized and validly issued, are fully paid and nonassessable, were
not issued in violation of any preemptive rights or similar rights to subscribe
for or purchase securities, and, except as disclosed in the Company’s SEC
Filings, have been issued and sold in compliance with the registration
requirements of federal and state securities laws or the applicable statutes of
limitation have expired. Except as set forth in the Company’s SEC Filings, there
are no (i) outstanding rights (including, without limitation, preemptive
rights), warrants or options to acquire, or instruments convertible into or
exchangeable for, any unissued shares of capital stock or other equity interest
in the Company, or any contract, commitment, agreement, understanding or
arrangement of any kind to which the Company or its subsidiaries is a party and
relating to the issuance or sale of any capital stock or convertible or
exchangeable security of the Company; or (ii) obligations of the Company to
purchase redeem or otherwise acquire any of its outstanding capital stock or any
interest therein or to pay any dividend or make any other distribution in
respect thereof.

 

Placement Agency Agreement (PIPE)Page 9

 

 

(w)          The Company has ownership or license or legal right to use all
patents, copyrights, trade secrets, know-how, trademarks, trade names, customer
lists, designs, manufacturing or other processes, computer software, systems,
data compilation, research results or other proprietary rights used in the
business of the Company or its subsidiaries (collectively “Intellectual
Property”). All of such patents, registered trademarks and registered copyrights
have been duly registered in, filed in or issued by the United States Patent and
Trademark Office, the United States Register of Copyrights or the corresponding
offices of other jurisdictions and have been maintained and renewed in
accordance with all applicable provisions of law and administrative regulations
in the United States and all such jurisdictions. The Company believes it has
taken all reasonable steps required in accordance with sound business practice
and business judgment to establish and preserve its and its subsidiaries’
ownership of all material Intellectual Property with respect to their products
and technology. To the knowledge of the Company, there is no infringement of the
Intellectual Property by any third party. To the knowledge of the Company, the
present business, activities and products of the Company and its subsidiaries do
not infringe any intellectual property of any other person. There is no
proceeding charging the Company or its subsidiaries with infringement of any
adversely held Intellectual Property has been filed and the Company is unaware
of any facts which are reasonably likely to form a basis for any such
proceeding. There are no proceedings have been instituted or pending or, to the
knowledge of the Company, threatened, which challenge the rights of the Company
or its subsidiaries to the use of the Intellectual Property. The Intellectual
Property owned by the Company and its subsidiaries, and to the knowledge of the
Company, the Intellectual Property licensed to the Company and its subsidiaries,
has not been adjudged invalid or unenforceable, in whole or in part. There is no
pending or, to the knowledge of the Company, threatened proceeding by others
challenging the validity or scope of any such Intellectual Property, and the
Company is unaware of any facts which are reasonably likely to form a basis for
any such claim. Each of the Company and its subsidiaries has the right to use,
free and clear of material claims or rights of other persons, all of its
customer lists, designs, computer software, systems, data compilations, and
other information that are required for its products or its business as
presently conducted. Neither the Company nor its subsidiaries is making
unauthorized use of any confidential information or trade secrets of any person.
The activities of any of the employees on behalf of the Company or of its
subsidiaries do not violate any agreements or arrangements between such
employees and third parties that are related to confidential information or
trade secrets of third parties or that restrict any such employee’s engagement
in business activity of any nature. Each former and current employee or
consultant of the Company or its subsidiaries is a party to a written contract
with the Company or its subsidiaries that assigns to the Company or its
subsidiaries, or has received an employee handbook that requires an employee to
assign, all rights to all inventions, improvements, discoveries and information
relating to the Company or its subsidiaries, except for any failure to so do as
would not reasonably be expected to result in a Material Adverse Effect. All
licenses or other agreements under which (i) the Company or its subsidiaries
employs rights in Intellectual Property, or (ii) the Company or its subsidiaries
has granted rights to others in Intellectual Property owned or licensed by the
Company or its subsidiaries are in full force and effect, and there is no
default (and there exists no condition which, with the passage of time or
otherwise, would constitute a default by the Company or such subsidiary) by the
Company or its subsidiaries with respect thereto.

 

(x)          The Company has filed all necessary federal, state, local and
foreign income and franchise tax returns and have paid or accrued all taxes
shown as due thereon, and except as set out in the SEC Documents, the Company
has no knowledge of a tax deficiency which has been or might be asserted or
threatened against it by any taxing jurisdiction, other than any deficiency
which the Company is contesting in good faith and with respect to which adequate
reserves for payment have been established.

 

(y)          The Company maintains and will continue to maintain insurance of
the types and in the amounts that the Company reasonably believes are adequate
for its business, including, but not limited to, insurance covering all real and
personal property owned or leased by the Company against theft, damage,
destruction, acts of vandalism and all other risks customarily insured against
by similarly situated companies, all of which insurance is in full force and
effect.

 

(z)          On each Closing Date, all stock transfer or other taxes (other than
income taxes) that are required to be paid in connection with the sale and
transfer of the Securities and the Brokers Warrants will be, or will have been,
fully paid or provided for by the Company and the Company will have complied
with all laws imposing such taxes.

 

(aa)         The Company (including its subsidiaries) is not an “investment
company” or an “affiliated person” of, or “promoter” or “principal underwriter”
for an investment company, within the meaning of the Investment Company Act of
1940 and will not be deemed an “investment company” as a result of the
transactions contemplated by the Offering.

 

Placement Agency Agreement (PIPE)Page 10

 

 

(bb)         The books, records and accounts of the Company accurately and
fairly reflect, in reasonable detail, the transactions in, and dispositions of,
the assets of, and the operations of, the Company.

 

(cc)         The Company’s statements contained in its most recent Quarterly
Report on Form 10-Q for the period ended September 30, 2015 regarding its (i)
disclosure controls and procedures (as such term is defined in Rule 13a-15 under
the Securities Exchange Act of 1934 (the “Exchange Act”) and (ii) internal
accounting controls were and continue to be accurate. The Company is not aware
of any fraud, whether or not material, that involves management or other
employees who have a significant role in the Company’s or its subsidiaries’
internal controls. Since September 30, 2015, there have been no changes that
have materially affected, or are reasonably likely to materially affect, the
Company’s or its subsidiaries’ internal control over financial reporting,
including any corrective actions with regard to significant deficiencies and
material weaknesses. There are no material off-balance sheet arrangements (as
defined in Item 303 of Regulation S-K), or any other relationships with
unconsolidated entities (in which the Company or its control persons have an
equity interest) that may have a material current or future effect on the
Company’s or its subsidiaries’ financial condition, revenues or expenses,
changes in financial condition, results of operations, liquidity, capital
expenditures or capital resources.

 

(dd)         Neither the Company, nor any of its affiliates, nor any person
acting on its or their behalf, has engaged or will engage in any form of general
solicitation or general advertising (within the meaning of Regulation D
promulgated under the Securities Act) in connection with the offer or sale of
the Securities or the Brokers Warrants.

 

(ee)         The Company is in compliance in all material respects with any and
all applicable requirements of the Sarbanes-Oxley Act of 2002 that are effective
as of the date hereof, and any and all applicable rules and regulations
promulgated by the SEC thereunder that are effective as of the date hereof.

 

(ff)         The Company is not a party to any collective bargaining agreement
or employs any member of a union. The Company believes that its relations with
its employees are good. No executive officer of the Company, to the knowledge of
the Company, is, or is now expected to be, in violation of any material term of
any employment contract, confidentiality, disclosure or proprietary information
agreement, non-competition agreement, or any other contract or agreement or any
restrictive covenant, and the continued employment of each such executive
officer does not subject the Company to any liability with respect to any of the
foregoing matters. The Company and its subsidiaries are in compliance with all
federal, state, local and foreign laws and regulations respecting labor,
employment and employment practices and benefits, terms and conditions of
employment and wages and hours, except where failure to be in compliance would
not, either individually or in the aggregate, reasonably be expected to result
in a Company Material Adverse Effect.

 

(gg)         None of the Company, its subsidiaries or any executive officer of
the Company (as defined in Rule 501(f) of Regulation D under the Securities Act)
has taken and will not take any action designed to or that might reasonably be
expected to cause or result in an unlawful manipulation of the price of the
Common Stock to facilitate the sale or resale of the Securities, the Brokers
Warrants or the Brokers Warrant Shares. The Company confirms that, to its
knowledge, with the exception of the proposed sale of Securities, neither it nor
any other person acting on its behalf has provided any of the potential
investors or their agent or counsel with any information that constitutes or
might constitute material, non-public information. The Company understands and
confirms that the potential investors shall be relying on the foregoing
representations in effecting transactions in securities of the Company.

 

Placement Agency Agreement (PIPE)Page 11

 

 

(hh)         The Company and its board of directors have taken all necessary
action, if any, in order to render inapplicable any control share acquisition,
business combination, poison pill (including any distribution under a rights
agreement) or other similar anti-takeover provision under the Company’s
certificate of incorporation or the laws of the jurisdiction of its formation
which is or could become applicable to any potential investor as a result of the
transactions contemplated by the Offering, including, without limitation, the
Company’s issuance of the Securities and any potential investor’s ownership of
the Securities. The Company has not adopted a stockholder rights plan or similar
arrangement relating to accumulations of beneficial ownership of its capital
stock or a change in control of the Company.

 

(ii)         The Company acknowledges that the Placement Agent, its sub agents,
legal counsel to the Company and/or their respective affiliates, principals,
representatives or employees may now or hereafter own shares of the Company.

 

B.            Representations, Warranties and Covenants of Katalyst. Katalyst
hereby represents and warrants to the Company that the following representations
and warranties are true and correct as of the date of this Agreement:

 

(a)          Katalyst represents that neither it, nor to its knowledge any of
its Sub- Agents or any of its or their respective directors, executive officers,
general partners, managing members or other officers participating in the
Offering (each, a “Katalyst Covered Person” and, together, “Katalyst Covered
Persons”), is subject to any of the “Bad Actor” disqualifications described in
Rule 506(d)(1)(i) to (viii) under the Securities Act (a “Disqualification
Event”) or has been involved in any matter which would be a Disqualification
Event except for the fact that it occurred before September 23, 2013.

 

(b)          Katalyst will notify the Company promptly in writing of any
Disqualification Event relating to any Katalyst Covered Person not previously
disclosed to the Company in accordance with the prior section.

 

3.             Placement Agent Compensation.

 

(a)           In connection with the Offering, the Company will pay a cash fee
(the “Broker Cash Fee”) to the Placement Agent at each Closing equal to 10% of
each Closing’s gross proceeds from any sale of Securities in the Offering to
investors introduced to the Company by the Placement Agent during the Term. The
Placement Agent shall not be entitled to receive a Broker Cash Fee for gross
proceeds raised in the Offering from other investors, including, but not limited
to, institutional investors, investors included on the PTI investor list
attached hereto as Exhibit 1 (which list may be updated in writing from time to
time during the Term with additional investors), investors converting debt into
equity, unless negotiated by the Placement Agent and the Company and in writing.
The Broker Cash Fee shall be paid to the Placement Agent in cash by wire
transfer from the escrow account established for the Offering, and as a
condition to closing, simultaneous with the distribution of funds to the
Company.

 

(b)           Also, at each Closing, the Company will deliver to the Placement
(or its designees), warrants exercisable for a period of five (5) years in the
form of Attachment I to purchase shares of the Company’s Preferred Stock equal,
in the aggregate, to 10% of the number of shares of Preferred Stock sold in the
Offering to the investors introduced to the Company by the Placement Agent,
which warrants shall have an exercise price equal to $1.25 per share of
Preferred Stock (“Brokers Warrants”). The Placement Agent shall not be entitled
to receive the Broker Warrants for gross proceeds raised in the Offering from
other investors, including, but not limited to, institutional investors,
investors included on the PTI investor list attached hereto (which list may be
updated in writing from time to time during the Term with additional investors),
investors converting debt into equity, unless negotiated by the Placement Agent
and the Company and put in writing. To the extent permitted by applicable laws,
all warrants shall permit unencumbered transfer to the Placement Agent’s
employees and affiliates and the warrants may be issued directly to the
Placement Agent’s employees and affiliates at the Placement Agent’s request. The
Broker Cash Fee and the Broker Warrants are sometimes referred to collectively
as the “Brokers Fees”).

 

(c)           To the extent there is more than one Closing, payment of the
proportional amount of the Broker Cash Fees will be made out of the gross
proceeds from any sale of Securities sold at each Closing and the Company will
issue to the Placement Agent the corresponding number of Brokers Warrants. All
cash compensation and warrants under this Agreement shall be paid directly by
the Company to and in the name provided to the Company by the Placement Agent.

 

Placement Agency Agreement (PIPE)Page 12

 

 

4.             Subscription and Closing Procedures.

 

(a)           The Company shall cause to be delivered to the Placement Agent
copies of the Subscription Documents and has consented, and hereby consents, to
the use of such copies for the purposes permitted by the Act and applicable
securities laws and in accordance with the terms and conditions of this
Agreement, and hereby authorizes the Placement Agent and its agents and
employees to use the Subscription Documents in connection with the sale of the
Securities until the earlier of (i) the Termination Date or (ii) the Final
Closing, and no person or entity is or will be authorized to give any
information or make any representations other than those contained in the
Subscription Documents or to use any offering materials other than those
contained in the Subscription Documents in connection with the sale of the
Securities, unless the Company first provides the Placement Agent with
notification of such information, representations or offering materials.

 

(b)           The Company shall make available to the Placement Agent and its
representatives such information, including, but not limited to, financial
information, and other information regarding the Company (the “Information”), as
may be reasonably requested in making a reasonable investigation of the Company
and its affairs. The Company shall provide access to the officers, directors,
employees, independent accountants, legal counsel and other advisors and
consultants of the Company as shall be reasonably requested by the Placement
Agent. The Company recognizes and agrees that the Placement Agent (i) will use
and rely primarily on the Information and generally available information from
recognized public sources in performing the services contemplated by this
Agreement without independently verifying the Information or such other
information, (ii) does not assume responsibility for the accuracy of the
Information or such other information, and (iii) will not make an appraisal of
any assets or liabilities owned or controlled by the Company or its market
competitors.

 

(c)           Each prospective purchaser will be required to complete and
execute the Subscription Documents, Anti-Money Laundering Form, Accredited
Investor Certification and other documents which will be forwarded or delivered
to the Placement Agent at the Placement Agent’s offices at the address set forth
in Section 12 hereof or to an address identified in the Subscription Documents.

 

(d)           Simultaneously with the delivery to the Placement Agent of the
Subscription Documents, the subscriber’s check or other good funds will be
forwarded directly by the subscriber to the escrow agent and deposited into a
non interest bearing escrow account (the “Escrow Account”) established for such
purpose (the “Escrow Agent”). All such funds for subscriptions will be held in
the Escrow Account pursuant to the terms of an escrow agreement among the
Company, the Placement Agent and the Escrow Agent. The Company will pay all fees
related to the establishment and maintenance of the Escrow Account. Subject to
the receipt of subscriptions for the amount for Closing, the Company will either
accept or reject, for any or no reason, the Subscription Documents in a timely
fashion and at each Closing will countersign the Subscription Documents and
provide duplicate copies of such documents to the Placement Agent for
distribution to the subscribers. The Company will give notice to the Placement
Agent of its acceptance of each subscription. The Company, or the Placement
Agent on the Company’s behalf, will promptly return to subscribers incomplete,
improperly completed, improperly executed and rejected subscriptions and give
written notice thereof to the Placement Agent upon such return.

 

Placement Agency Agreement (PIPE)Page 13

 

 

(e)           If subscriptions for at least the Minimum Offering Amount for
Closing have been accepted prior to the Termination Date, the funds therefor
have been collected by the Escrow Agent and all of the conditions set forth
elsewhere in this Agreement are fulfilled, a closing shall be held promptly with
respect to the Securities sold (the “First Closing”). Thereafter, the remaining
Securities will continue to be offered and sold until the earlier of the
Termination Date or the date that additional subscription amounts up to the
Maximum Offering amount have been collected by the Escrow Agent. Additional
Closings (each a “Closing”, collectively “Closings”) may from time to time be
conducted at times mutually agreed to between the Company and the Placement
Agent with respect to additional Securities sold, with the final closing (“Final
Closing”) to occur within 10 days after the earlier of the Termination Date and
the date on which the Maximum Amount has been subscribed for. Delivery of
payment for the accepted subscriptions for the Securities from the funds held in
the Escrow Account will be made at each Closing at the Placement Agent’s office
against delivery of the Securities by the Company at the address set forth in
Section 12 hereof (or at such other place as may be mutually agreed upon between
the Company and the Placement Agent), net of amounts agreed upon by the parties
herein, including, the Blue Sky counsel as of such Closing. The Preferred Stock
will be issued and registered electronically with the stock transfer agent after
each Closing. Upon conversion of the Preferred Stock, executed certificates for
the Common Stock will be forwarded to the subscriber directly by the stock
transfer agent within ten (10) days following the conversion of the Preferred
Stock. Executed certificates for the Brokers Warrants will be issued in such
authorized denominations and registered in such names as the Placement Agent may
request on or before the date of each Closing (“Closing Date”). At each Closing,
the Company will (i) deliver irrevocable issuance instruction to its stock
transfer agent for the electronic registration of the Preferred Stock being
sold, and (ii) issue and deliver the applicable Brokers Warrants.

 

(f)            If Subscription Documents for the Minimum Offering Amount for
Closing have not been received and accepted by the Company on or before the
Termination Date for any reason, the Offering will be terminated, no Securities
will be sold, and the Escrow Agent will, at the request of the Placement Agent,
cause all monies received from subscribers for the Securities to be promptly
returned to such subscribers without interest, penalty, expense or deduction.

 

5.             Further Covenants. The Company hereby covenants and agrees that:

 

(a)           Except upon prior written notice to the Placement Agent, the
Company shall not, at any time prior to the Final Closing, knowingly take any
action which would cause any of the representations and warranties made by it in
this Agreement not to be complete and correct in all material respects on and as
of the date of each Closing with the same force and effect as if such
representations and warranties had been made on and as of each such date (except
to the extent any representation or warranty relates to an earlier date).

 

(b)           If, at any time prior to the Final Closing, any event shall occur
that causes a Company Material Adverse Effect which as a result it becomes
necessary to amend or supplement the Subscription Documents so that the
representations and warranties herein remain true and correct in all material
respects, or in case it shall be necessary to amend or supplement the
Subscription Documents to comply with Regulation D or any other applicable
securities laws or regulations, the Company will promptly notify the Placement
Agent and shall, at its sole cost, prepare and furnish to the Placement Agent
copies of appropriate amendments and/or supplements in such quantities as the
Placement Agent may reasonably request. The Company will not at any time before
the Final Closing prepare or use any amendment or supplement to the Subscription
Documents of which the Placement Agent will not previously have been advised and
furnished with a copy, or which is not in compliance in all material respects
with the Act and other applicable securities laws. As soon as the Company is
advised thereof, the Company will advise the Placement Agent and its counsel,
and confirm the advice in writing, of any order preventing or suspending the use
of the Subscription Documents, or the suspension of any exemption for such
qualification or registration thereof for offering in any jurisdiction, or of
the institution or threatened institution of any proceedings for any of such
purposes, and the Company will use their best efforts to prevent the issuance of
any such order and, if issued, to obtain as soon as reasonably possible the
lifting thereof.

 

Placement Agency Agreement (PIPE)Page 14

 

 

(c)           The Company shall comply with the Act, the Exchange Act, the rules
and regulations thereunder, all applicable state securities laws and the rules
and regulations thereunder in the states in which the Company’s Blue Sky counsel
has advised the Placement Agent and/or the Company that the Securities are
qualified or registered for sale or exempt from such qualification or
registration, so as to permit the continuance of the sales of the Securities,
and will file or cause to be filed with the SEC, and shall promptly thereafter
forward or cause to be forwarded to the Placement Agent, any and all reports on
Form D as are required. The Company will pay the attorney’s fee and out of
pocket expenses related to the filings for registrations of sale or exemption
from such qualifications with any state securities commissions and any other
regulatory agencies. Such fees will be paid at the time of invoicing, or at the
time of Closing, if known, and if not yet invoiced, funds will remain in escrow
to cover the estimated invoice. The Company will pay the invoice or authorize
release of the funds from escrow within five (5) days of receipt of invoice.

 

(d)           The Company, at its own cost and expense, shall use best efforts
to qualify the Securities for sale under the securities laws of such
jurisdictions in the United States as may be mutually agreed to by the Company
and the Placement Agent, and the Company will make or cause to be made such
applications and furnish information as may be required for such purposes,
provided that the Company will not be required to qualify as a foreign
corporation in any jurisdiction or execute a general consent to service of
process. The Company will, from time to time, prepare and file such statements
and reports as are or may be required to continue such qualifications in effect
for so long a period as the Placement Agent may reasonably request with respect
to the Offering.

 

(e)           The Company shall place a legend on the certificates representing
the shares of the Preferred Stock and the Brokers Warrants that the securities
evidenced thereby have not been registered under the Act or applicable state
securities laws, setting forth or referring to the applicable restrictions on
transferability and sale of such securities under the Act and applicable state
laws.

 

(f)           The Company shall apply the net proceeds from the sale of the
Securities for the purposes set forth in the Subscription Documents. Except as
set forth in the Subscription Documents, the Company shall not use any of the
net proceeds of the Offering to repay indebtedness to officers (other than
accrued salaries incurred in the ordinary course of business), directors or
stockholders of the Company without the prior written consent of the Placement
Agent.

 

(g)           During the Offering Period, the Company shall afford each
prospective purchaser of Securities the opportunity to ask questions of and
receive answers from an officer of the Company concerning the terms and
conditions of the Offering and the opportunity to obtain such other additional
information necessary to verify the accuracy of the Subscription Documents to
the extent the Company possesses such information or can acquire it without
unreasonable expense.

 

(h)           Except with the prior written consent of the Placement Agent, the
Company shall not, at any time prior to the earlier of the Final Closing or the
Termination Date, except as contemplated by the Subscription Documents (i)
engage in or commit to engage in any transaction other than the Merger outside
the ordinary course of business as described in the Subscription Documents, (ii)
issue, agree to issue or set aside for issuance any securities (debt or equity)
or any rights to acquire any such securities, (iii) incur, outside the ordinary
course of business, any material indebtedness, (iv) dispose of any material
assets, (v) make any material acquisition or (vi) change its business or
operations in any material respect.

 

Placement Agency Agreement (PIPE)Page 15

 

 

(i)            Whether or not the transactions contemplated hereby are
consummated, or this Agreement is terminated, the Company shall pay all
reasonable expenses incurred in connection with the preparation and printing of
all necessary offering documents and instruments related to the Offering and the
issuance of the Preferred Stock and the Brokers Warrants and will also pay for
the Company’s expenses for accounting fees, legal fees, printing costs, and
other costs involved with the Offering. The Company will provide at its own
expense such quantities of the Subscription Documents and other documents and
instruments relating to the Offering as the Placement Agent may reasonably
request. The Company will pay at its own expense in connection with the
creation, authorization, issuance, transfer and delivery of the Securities,
including, without limitation, fees and expenses of any transfer agent or
registrar; the fees and expenses of the Escrow Agent; all fees and expenses of
legal, accounting and other advisers to the Company; the registration or
qualification of the Securities for offer and sale under the securities or Blue
Sky laws of such jurisdictions, payable within five (5) days of being invoiced.
The Company will pay all such amounts, unless previously paid, at the First
Closing, or, if there is no Closing, within ten (10) days after written request
therefor following the Termination Date. In addition to any fees payable to the
Placement Agent hereunder, contingent upon the occurrence of the First Closing,
the Company hereby agrees to pay from the escrow proceeds at the First Closing,
the Placement Agent’s legal counsel fees and legal out of pocket expenses in the
amount of Fifteen Thousand Dollars ($15,000). For the avoidance of doubt, any
expenses in excess of such $15,000 (other than expenses covered by Sections 8
and 9 of this Agreement) shall be solely the responsibility of the Placement
Agent. Without limiting the generality of the foregoing, the Placement Agent
will be responsible for its own out-of-pocket expenses in performing the
services described herein unless agreed in writing to be paid by the Company or
PTI. This reimbursement obligation is in addition to the reimbursement of fees
and expenses relating to attendance by the Placement Agent at proceedings or to
indemnification and contribution as contemplated elsewhere in this agreement. In
the event either Placement Agent’s personnel must attend or participate in
judicial or other proceedings to which we are not a party relating to the
subject matter of this agreement, the Company shall pay such Placement Agent an
additional per diem payment, per person, at our customary rates, together with
reimbursement of all out-of-pocket expenses and disbursements, including
reasonable attorneys’ fees and disbursements incurred by it in respect of its
preparation for and participation in such proceedings.

 

(j)            On each Closing Date, the Company permits the Placement Agent to
rely on any representations and warranties made by the Company to the investors
and will cause its counsel to permit the Placement Agent to rely upon any
opinion furnished to the investors in the Private Placement.

 

(k)            The Company will comply with all of its obligations and covenants
set forth in its agreements with the investors in the Offering. If not filed on
EDGAR, the Company will promptly deliver to the Placement Agent and their
counsel copies of any and all filings with the SEC and each amendment or
supplement thereto, as well as all prospectuses and free writing prospectuses,
prior to the closing of the Offering and six months thereafter. The Placement
Agent is authorized on behalf of the Company to use and distribute copies of any
Subscription Documents, including Company’s SEC Filings in connection with the
sale of the Securities as, and to the extent, permitted by federal and
applicable state securities laws. The Company acknowledges and agrees that the
Placement Agent will be relying, without assuming responsibility for independent
verification, on the accuracy and completeness of all financial and other
information that is and will be furnished to them by the Company and the Company
will be liable for any material misstatements or omissions contained therein.

 

6.            Conditions of Placement Agent’s Obligations. The obligations of
the Placement Agent hereunder to affect a Closing are subject to the
fulfillment, at or before each Closing, of the following additional conditions:

 

(a)           Each of the representations and warranties made by the Company
(which shall take into account that the Merger has been consummated such that
all representations and warranties referring to the Company shall relate to the
Company and its subsidiaries following completion of the Merger) shall be true
and correct on each Closing Date.

 

(b)           The Company shall have performed and complied in all material
respects with all agreements, covenants and conditions required to be performed,
and complied with by it at or before the Closing.

 

(c)           The Subscription Documents do not, and as of the date of any
amendment or supplement thereto will not, include any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.

 

Placement Agency Agreement (PIPE)Page 16

 

 

(d)           No order suspending the use of the Subscription Documents or
enjoining the Offering or sale of the Securities shall have been issued, and no
proceedings for that purpose or a similar purpose shall have been initiated or
pending, or, to the best of the Company’s knowledge, be contemplated or
threatened.

 

(e)           No holder of any of the Securities from the Offering will be
subject to personal liability solely by reason of being such a holder, and
except as described in the Subscription Documents, none of the Company’s shares
of Preferred Stock and Brokers Warrant Shares will be subject to preemptive or
similar rights of any stockholder or security holder of the Company, or an
adjustment under the antidilution or exercise rights of any holders of any
outstanding shares of capital stock, membership units, options, warrants or
other rights to acquire any securities of the Company.

 

(f)            There shall have been no material adverse change nor development
involving a prospective change in the financial condition, operations or
projects of the Company, except where such change would not have a Company
Material Adverse Effect on the business activities, financial or otherwise,
results of operations or prospects of the Company, taken individually or in the
aggregate.

 

(g)           The Placement Agent shall have received a certificate of the Chief
Executive Officer of the Company, dated as of the Closing Date, certifying, as
to the fulfillment of the conditions set forth in subparagraphs (a), (b), (c),
(d), (e) and (f) above.

 

(h)           The Company shall have delivered to the Placement Agent: (i) a
good standing certificate dated as of a date within 10 days prior to the date of
the First Closing from the secretary of state of its jurisdiction of
incorporation and (ii) resolutions of the Company’s Board of Directors approving
this Agreement and the transactions and agreements contemplated by this
Agreement, and the Subscription Documents, all as certified by the Chief
Executive Officer of the Company.

 

(i)            At each Closing, the Company shall have (i) paid to the Placement
Agent the Broker Cash Fee in respect of all Securities sold at such Closing,
(ii) executed and delivered to the Placement Agent the Brokers Warrants in
respect of all Securities sold at such Closing, and (iii) paid all fees, costs
and expenses as set forth in Section 5 hereof.

 

(j)            There shall have been delivered to the Placement Agent a signed
opinion of counsel to the Company dated as of the Closing Date.

 

(k)            Prior to the closing of the Offering, the Company shall have
engaged American Stock Transfer as its transfer agent for purposes of handling
the transfers of its capital stock and other securities

 

(l)            All proceedings taken at or prior to the Closing in connection
with the authorization, issuance and sale of the Preferred Stock and the Brokers
Warrants will be reasonably satisfactory in form and substance to the Placement
Agent and its counsel, and such counsel shall have been furnished with all such
documents, certificates and opinions as it may reasonably request upon
reasonable prior notice in connection with the transactions contemplated hereby.

 

(m)          The Company agrees and understands that this Agreement in no way
constitutes a guarantee that the Offering will be successful. The Company
acknowledges that the Company is ultimately responsible for the successful
completion of a transaction.

 

7.             Conditions of the Company’s Obligations. The obligations of the
Company hereunder are subject to the satisfaction of each of the following
conditions:

 

(a)           The satisfaction or waiver of all conditions to Closing as set
forth herein.

 

(b)           As of each Closing, each of the representations and warranties
made by Placement Agent herein being true and correct as of the Closing Date for
such Closing.

 

(c)           At each Closing, the Company shall have received the proceeds from
the sale of the Securities that are part of such Closing less applicable Broker
Fees and other deductions contemplated by this Agreement.

 

Placement Agency Agreement (PIPE)Page 17

 

 

(d)          At each Closing, the Company shall have received a copy of
Subscription Documents signed by investors delivered by the Placement Agent.

 

7A.          Mutual Condition. The obligations of the Placement Agent and the
Company hereunder are subject to the execution by each investor of a
Subscription Agreement in form and substance acceptable to the Placement Agent
and the Company and deposit by such investor with the escrow agent of all funds
required to be so deposited by such investor.

 

8.             Indemnification.

 

(a)          The Company will: (i) indemnify and hold harmless the Placement
Agent, and its agents and their respective officers, directors, employees,
agents, selected dealers and each person, if any, who controls the Placement
Agent within the meaning of the Act and such agents (each a “Placement Agent
Indemnitee” or a “Placement Agent Party”) against, and pay or reimburse each
Placement Agent Indemnitee for, any and all losses, claims, damages, liabilities
or expenses whatsoever (or actions or proceedings or investigations in respect
thereof (collectively, “Proceedings”), joint or several (which will, for all
purposes of this Agreement, include, but not be limited to, all reasonable costs
of defense and investigation and all reasonable attorneys’ fees, including
appeals), to which any Placement Agent Indemnitee may become subject (a) under
the Act or otherwise, in connection with the offer and sale of the Securities
and (b) as a result of the breach of any representation, warranty or covenant
made by the Company herein or the failure of the Company to perform its
obligations under the Agreement, regardless of whether such losses, claims,
damages, liabilities or expenses shall result from any claim by any Indemnitee
or by any third party; and (ii) reimburse each Placement Agent Indemnitee for
any legal or other expenses reasonably incurred in connection with investigating
or defending against any such loss, claim, action, proceeding or investigation;
provided, however, that the Company will not be liable in any such case to the
extent that any such claim, damage or liability is finally judicially determined
to have resulted primarily from (A) an untrue statement or alleged untrue
statement of a material fact made in the Subscription Documents, or an omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, made solely
in reliance upon and in conformity with written information furnished to the
Company by the Placement Agent specifically for use in the Subscription
Documents, (B) any violations by the Placement Agent of the Act, state
securities laws or any rules or regulations of FINRA, which does not result from
a violation thereof by the Company or any of its respective affiliates or (C)
the Placement Agent’s willful misconduct or gross negligence. In addition to the
foregoing agreement to indemnify and reimburse, the Company will indemnify and
hold harmless each Placement Agent Indemnitee against any and all losses,
claims, damages, liabilities or expenses whatsoever (or actions or proceedings
or investigations in respect thereof), joint or several (which shall, for all
purposes of this Agreement, include, but not be limited to, all reasonable costs
of defense and investigation and all reasonable attorneys’ fees, including
appeals) to which any Placement Agent Indemnitee may become subject insofar as
such costs, expenses, losses, claims, damages or liabilities arise out of or are
based upon the claim of any person or entity that he or it is entitled to
broker’s or finder’s fees from any Placement Agent Indemnitee in connection with
the Offering as a result of the Company obligating itself or any Indemnitee to
pay such a fee, other than fees due to the Placement Agent, its dealers,
sub-agents or finders. The foregoing indemnity agreements will be in addition to
any liability the Company may otherwise have. The Placement Agent Indemnitees
are intended third party beneficiaries of this provision.

 

Placement Agency Agreement (PIPE)Page 18

 

 

(b)            The Placement Agent will: (i) indemnify and hold harmless the
Company, and its agents and their respective officers, directors, employees,
agents, selected dealers and each person, if any, who controls the Company
within the meaning of the Act and such agents (each a “Company Indemnitee” or a
“Company Party”) against, and pay or reimburse each Company Indemnitee for, any
and all losses, claims, damages, liabilities or expenses whatsoever (or
Proceedings, joint or several (which will, for all purposes of this Agreement,
include, but not be limited to, all reasonable costs of defense and
investigation and all reasonable attorneys’ fees, including appeals), to which
any Company Indemnitee may become subject (a) under the Act or otherwise, in
connection with the offer and sale of the Securities and (b) which results from
(x) any untrue statement or alleged untrue statement of any material fact
contained in the Subscription Documents made in reliance upon and in conformity
with information contained in the Subscription Documents relating to the
Placement Agent, or an omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, in either case, if made or omitted in reliance upon and in
conformity with written information furnished to the Company by the Placement
Agent, specifically for use in the preparation thereof or (y) any violations by
the Placement Agent of the Act or state securities laws which does not result
from a violation thereof by the Company Indemnitees or any of their respective
affiliates, and (ii) reimburse each Company Indemnitee for any legal or other
expenses reasonably incurred in connection with investigating or defending
against any such loss, claim, action, proceeding or investigation; provided,
however, in no event (except in the event of gross negligence or willful
misconduct by the Placement Agent to the extent and only to the extent if found
in a final judgment by a court of competent jurisdiction) shall the Placement
Agent’s indemnification obligation hereunder exceed the amount of Broker Cash
Fees actually received by the Placement Agent.

 

(c)            Promptly after receipt by an indemnified party under this Section
8 of notice of the commencement of any action, claim, proceeding or
investigation (the “Action”), such indemnified party, if a claim in respect
thereof is to be made against the indemnifying party under this Section 8, will
notify the indemnifying party of the commencement thereof, but the omission to
so notify the indemnifying party will not relieve it from any liability that it
may have to any indemnified party under this Section 8 unless the indemnifying
party has been substantially prejudiced by such omission. The indemnifying party
will be entitled to participate in and, to the extent that it may wish, jointly
with any other indemnifying party, to assume the defense thereof subject to the
provisions herein stated, with counsel reasonably satisfactory to such
indemnified party. The indemnified party will have the right to employ separate
counsel in any such Action and to participate in the defense thereof, but the
fees and expenses of such counsel will not be at the expense of the indemnifying
party if the indemnifying party has assumed the defense of the Action with
counsel reasonably satisfactory to the indemnified party, provided, however,
that if the indemnified party shall be requested by the indemnifying party to
participate in the defense thereof or shall have concluded in good faith and
specifically notified the indemnifying party either that there may be specific
defenses available to it that are different from or additional to those
available to the indemnifying party or that such Action involves or could have a
material adverse effect upon it with respect to matters beyond the scope of the
indemnity agreements contained in this Agreement, then the counsel representing
it, to the extent made necessary by such defenses, shall have the right to
direct such defenses of such Action on its behalf and in such case the
reasonable fees and expenses of such counsel in connection with any such
participation or defenses shall be paid by the indemnifying party. No settlement
of any Action against an indemnified party will be made without the consent of
the indemnifying party and the indemnified party, which consent shall not be
unreasonably withheld or delayed in light of all factors of importance to such
party, and no indemnifying party shall be liable to indemnify any person for any
settlement of any such claim effected without such indemnifying party’s consent.
Notwithstanding the immediately preceding sentence, if at any time an
indemnified party requests the indemnifying party to reimburse the indemnified
party for legal or other expenses in connection with investigating, responding
to or defending any Proceedings as contemplated by this indemnity agreement, the
indemnifying party will be liable for any settlement of any Proceedings effected
without its written consent if (i) the proposed settlement is entered into more
than 30 days after receipt by the indemnifying party of the request for
reimbursement, (ii) the indemnifying party has not reimbursed the indemnified
party within 30 days of such request for reimbursement, (iii) the indemnified
party delivered written notice to the indemnifying party of its intention to
settle and the failure to pay within such 30 day period, and (iv) the
indemnifying party does not, within 15 days of receipt of the notice of the
intention to settle and failure to pay, reimburse the indemnified party for such
legal or other expenses and object to the indemnified party’s seeking to settle
such Proceedings.

 

Placement Agency Agreement (PIPE)Page 19

 

 

9.             Contribution. To provide for just and equitable contribution, if:
(i) an indemnified party makes a claim for indemnification pursuant to Section 8
hereof and it is finally determined, by a judgment, order or decree not subject
to further appeal that such claims for indemnification may not be enforced, even
though this Agreement expressly provides for indemnification in such case; or
(ii) any indemnified or indemnifying party seeks contribution under the Act, the
Exchange Act, or otherwise, then each indemnifying party shall contribute to
such amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company on the one hand and the Placement Agent on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or expenses (or actions in respect thereof), as
well as any other relevant equitable considerations. The relative benefits
received by the Company on the one hand and the Placement Agent on the other
shall be deemed to be in the same proportion as the total net proceeds from the
Offering (before deducting expenses) received by the Company bear to the total
Brokers’ Fees received by the Placement Agent. The relative fault, in the case
of an untrue statement, alleged untrue statement, omission or alleged omission
will be determined by, among other things, whether such statement, alleged
statement, omission or alleged omission relates to information supplied by the
Company or by the Placement Agent, and the parties’ relative intent, knowledge,
access to information and opportunity to correct or prevent such statement,
alleged statement, omission or alleged omission. The Company and the Placement
Agent agree that it would be unjust and inequitable if the respective
obligations of the Company and the Placement Agent for contribution were
determined by pro rata allocation of the aggregate losses, liabilities, claims,
damages and expenses or by any other method or allocation that does not reflect
the equitable considerations referred to in this Section 9. No person guilty of
a fraudulent misrepresentation (within the meaning of Section 10(f) of the Act)
will be entitled to contribution from any person who is not guilty of such
fraudulent misrepresentation. For purposes of this Section 9, each person, if
any, who controls the Placement Agent within the meaning of the Act will have
the same rights to contribution as the Placement Agent, and each person, if any,
who controls the Company within the meaning of the Act will have the same rights
to contribution as the Company, subject in each case to the provisions of this
Section 9. Anything in this Section 9 to the contrary notwithstanding, no party
will be liable for contribution with respect to the settlement of any claim or
action effected without its written consent. This Section 9 is intended to
supersede, to the extent permitted by law, any right to contribution under the
Act, the Exchange Act or otherwise available.

 

10.           Termination.

 

(a)           The Offering may be terminated by the Placement Agent at any time
prior to the expiration of the Offering Period in the event that: (i) any of the
representations, warranties or covenants of the Company contained herein or in
the Subscription Documents shall prove to have been false or misleading in any
material respect when actually made; (ii) the Company shall have failed to
perform any of its material obligations hereunder or under any other Company
Transaction Document or any other transaction document; (iii) there shall occur
any event, within the control of the Company that is reasonably likely to
materially and adversely affect the transactions contemplated hereunder or the
ability of the Company to perform hereunder; or (iv) the Placement Agent
determines that it is reasonably likely that any of the conditions to Closing to
be fulfilled by the Company set forth herein will not, or cannot, be satisfied.

 

(b)           This Offering may be terminated by the Company at any time prior
to the Termination Date in the event that (i) the Placement Agent shall have
failed to perform any of its material obligations hereunder or (ii) on account
of the Placement Agent’s fraud, illegal or willful misconduct or gross
negligence. In the event of any termination by the Company, the Placement Agent
shall be entitled to receive, on the Termination Date, all unpaid Broker Fees
earned or accrued through the Termination Date and reimbursement of all expenses
as provided for in this Agreement, but shall be entitled to no other amounts
whatsoever except as may be due under any indemnity or contribution obligation
for provided herein, at law or otherwise. On such Termination Date, the Company
shall pay all such unpaid costs and expenses incurred by the Placement Agent in
connection with the Offering, Placement Agent counsel fee provided above and all
unpaid Blue Sky Fees and other expenses set forth in Section 5(i) hereof.

 

Placement Agency Agreement (PIPE)Page 20

 

 

(c)           This Offering may be terminated upon mutual agreement of the
Company and the Placement Agent at any time prior to the expiration of the
Offering Period.

 

(d)           Except as otherwise provided above, before any termination by the
Placement Agent under Section 10(a) or by the Company under Section 10(b) shall
become effective, the terminating party shall give ten (10) day prior written
notice to the other party of its intention to terminate the Offering (the
“Termination Notice”). The Termination Notice shall specify the grounds for the
proposed termination. If the specified grounds for termination, or their
resulting adverse effect on the transactions contemplated hereby, are curable,
then the other party shall have five (5) days from the Termination Notice within
which to remove such grounds or to eliminate all of their material adverse
effects on the transactions contemplated hereby; otherwise, the Offering shall
terminate.

 

(e)           Upon any termination pursuant to this Section 10, the Placement
Agent and the Company will instruct the Escrow Agent to cause all monies
received with respect to the subscriptions for Securities not accepted by the
Company to be promptly returned to such subscribers without interest, penalty or
deduction.

 

11.          Survival.

 

(a)           The obligations of the parties to pay any costs and expenses
hereunder and to provide indemnification and contribution as provided herein
shall survive any termination hereunder. In addition, the provisions of Sections
3, and 8 through 22 shall survive the sale of the Securities or any termination
of the Offering hereunder.

 

(b)           The respective indemnities, covenants, representations, warranties
and other statements of the Company and the Placement Agent set forth in or made
pursuant to this Agreement will remain in full force and effect, regardless of
any investigation made by or on behalf of, and regardless of any access to
information by the Company or the Placement Agent, or any of their officers or
directors or any controlling person thereof, and will survive the sale of the
Securities or any termination of the Offering hereunder.

 

12.          Notices. All notice and other communications hereunder will be in
writing and shall be deemed effectively given to a party by (a) personal
delivery; (b) upon deposit with the United States Post Office, by certified
mail, return receipt requested, first-class mail, postage prepaid; (c) delivered
by hand or by messenger or overnight courier, addressee signature required, to
the addresses below or at such other address and/or to such other persons as
shall have been furnished by the parties:

 

If to the Company (on or prior to   the First Closing): Atrinsic, Inc.   Mr.
Edward Gildea   65 Atlantic Avenue   Boston, MA 02110     With a copy to:
Sanders Ortoli Vaughn-Flam Rosentadt (which shall not constitute notice) 501
Madison Avenue, 14th Floor   New York, NY 10022   Attention:  Tim Dockery, Esq.
    If to the Company (subsequent to   the First Closing): Atrinsic, Inc.   Mr.
Robert Ziroyan   149 Fifth Avenue, Suite 500   New York, NY 10010

 

Placement Agency Agreement (PIPE)Page 21

 

 

With a copy to: Meister Seelig & Fein LLP (which shall not constitute notice)
125 Park Avenue, 7th Floor   New York, NY 10017   Attention:  Kenneth S.
Goodwin, Esq.     If to Katalyst Securities LLC. Katalyst Securities LLC   15
Maiden Lane, Room 601   New York, NY 10038   Attention:  Paul Ehrenstein  
President     With a copy to: Barbara J. Glenns, Esq. (which shall not
constitute notice) Law Office of Barbara J. Glenns, Esq.   30 Waterside Plaza,
Suite 25G   New York, NY 10010

 

13.          Governing Law, Jurisdiction. This Agreement shall be deemed to have
been made and delivered in New York City and shall be governed as to validity,
interpretation, construction, effect and in all other respects by the internal
laws of the State of New York without regard to principles of conflicts of law
thereof.

 

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

 

Placement Agency Agreement (PIPE)Page 22

 

 

14.          Miscellaneous.

 

(a)           No provision of this Agreement may be changed or terminated except
by a writing signed by the party or parties to be charged therewith. Unless
expressly so provided, no party to this Agreement will be liable for the
performance of any other party’s obligations hereunder. Either party hereto may
waive compliance by the other with any of the terms, provisions and conditions
set forth herein; provided, however, that any such waiver shall be in writing
specifically setting forth those provisions waived thereby. No such waiver shall
be deemed to constitute or imply waiver of any other term, provision or
condition of this Agreement. Neither party may assign its rights or obligations
under this Agreement to any other person or entity without the prior written
consent of the other party.

 

(b)           Each party shall, without payment of any additional consideration
by any other party, at any time on or after the date of any Closings, take such
further action and execute such other and further documents and instruments as
the other party may reasonably request in order to provide the other party with
the benefits of this Agreement.

 

(c)           The Parties to this Agreement each hereby confirm that they will
cooperate with each other to the extent that it may become necessary to enter
into any revisions or amendments to this Agreement, in the future to conform to
any federal or state regulations as long as such revisions or amendments do not
materially alter the obligations or benefits of either party under this
Agreement.

 

15.          Entire Agreement; Severability. This Agreement together with any
other agreement referred to herein supersedes all prior understandings and
written or oral agreements between the parties with respect to the Offering and
the subject matter hereof. If any portion of this Agreement shall be held
invalid or unenforceable, then so far as is reasonable and possible (i) the
remainder of this Agreement shall be considered valid and enforceable and (ii)
effect shall be given to the intent manifested by the portion held invalid or
unenforceable.

 

16.          Counterparts. This Agreement may be executed in multiple
counterparts, each of which may be executed by less than all of the parties and
shall be deemed to be an original instrument which shall be enforceable against
the parties actually executing such counterparts and all of which together shall
constitute one and the same instrument. The exchange of copies of this Agreement
and of signature pages by facsimile transmission or in pdf format shall
constitute effective execution and delivery of this Agreement as to the parties
and may be used in lieu of the original Agreement for all purposes. Signatures
of the parties transmitted by facsimile or in pdf format shall be deemed to be
their original signatures for all purposes.

 

17.          Announcement of Offering. The Placement Agent and its counsel and
advisors may, subsequent to the Final Closing of any Offering, make public their
involvement with the Company, including use of the Company’s trademarks and
logos. The Placement Agent’s counsel and advisors are intended third party
beneficiaries of this Section.

 

18.          Advice to the Board. The Company acknowledges that any advice given
by the Placement Agent to the Company is solely for benefit and use of the
Company’s board of directors and officers, who will make all decisions regarding
whether and how to pursue any opportunity or transaction, including any
potential Offering. The Company’s board of directors and management may consider
such advice, but will also base their decisions on the advice of legal, tax and
other business advisors and other factors which they consider appropriate.
Accordingly, as an independent contractor, the Placement Agent will not assume
the responsibilities of a fiduciary to the Company or its stockholders in
connection with the performance of the services. Any advice provided may not be
used, reproduced, disseminated, quoted or referred to without prior written
consent of the providing party. The Placement Agent does not provide accounting,
tax or legal advice. The Company is a sophisticated business enterprise that has
retained the Placement Agent for the limited purposes set forth in this
Agreement. The parties acknowledge and agree that their respective rights and
obligations are contractual in nature. Each party disclaims an intention to
impose fiduciary obligations on the other by virtue of the engagement
contemplated by this Agreement.

 

Placement Agency Agreement (PIPE)Page 23

 

 

19.          Other Investment Banking Services. The Company acknowledges that
the Placement Agent and their affiliates are securities firms engaged in
securities trading and brokerage activities and providing investment banking and
financial advisory services. In the ordinary course of business, the Placement
Agent and their affiliates may at any time hold long or short positions, and may
trade or otherwise effect transactions, for their own account or the accounts of
customers, in the Company’s debt or equity securities, its affiliates or other
entities that may be involved in the transactions contemplated by this
Agreement. In addition, the Placement Agent and their affiliates may from time
to time perform various investment banking and financial advisory services for
other clients and customers who may have conflicting interests with respect to
the Company or the Offering. The Company also acknowledges that the Placement
Agent and their affiliates have no obligation to use in connection with this
engagement or to furnish the Company, confidential information obtained from
other companies. Furthermore, the Company acknowledges the Placement Agent may
have fiduciary or other relationships whereby their or their affiliates may
exercise voting power over securities of various persons, which securities may
from time to time include securities of the Company or others with interests in
respect of any Offering. The Company acknowledges that the Placement Agent or
such affiliates may exercise such powers and otherwise perform our functions in
connection with such fiduciary or other relationships without regard to the
Placement Agent’s relationship to the Company hereunder.

 

20.          Successors. This Agreement shall inure to the benefit of and be
binding upon the successors of the Placement Agent and of the Company (including
any party that acquires the Company or all or substantially all of its assets or
merges with the Company). Nothing expressed or mentioned in this Agreement is
intended or shall be construed to give any person or corporation, other than the
parties hereto and parties expressly referred to herein, any legal or equitable
right, remedy or claim under or in respect to this Agreement or any provision
hereof. The term “successors” shall not include any purchaser of the Securities
merely by reason of such purchase. No subrogee of a benefited party shall be
entitled to any benefits hereunder. Each party hereto disclaims any an intention
to impose any fiduciary obligation on any other party by virtue of the
arrangements contemplated by this Agreement.

 

[Signatures on following page.]

 

Placement Agency Agreement (PIPE)Page 24

 

 

If the foregoing is in accordance with your understanding of the agreement among
the Company and the Placement Agent, kindly sign and return this Agreement,
whereupon it will become a binding agreement as provided herein, between the
Company and the Placement Agent in accordance with its terms.

 

This Agreement contains a predispute arbitration provision in paragraph 13.

 

  ATRINSIC INC.         By:  /s/ Edward Gildea     Edward Gildea     Chief
Executive Officer         KATALYST SECURITIES LLC         By: /s/ Michael A.
Silverman     Michael A. Silverman     Managing Director

 

Placement Agency Agreement (PIPE)Signature Page

 

 

EXHIBIT 1

 

1. Brandt Mandia 2. Greg Pappas 3. Danny Vaccaro 4. Donald Vaccaro 5. Joe Perri
6. Peter Ungaro 7. LMB Tech Investments LLC 8. Dasa Sada LLC 9. Michael Collado
10. Michael Fiumefreddo 11. Robert Granito 12. Stephanie Midgley 13. Carmine
Desantis 14. Iroquois Capital Management, LLC and related entities 15. Hudson
Bay Master Fund Ltd and related entities