Exhibit 10.1

 

EXECUTION VERSION

 

 

SUBSCRIPTION AGREEMENT

 

This SUBSCRIPTION AGREEMENT (this “Agreement”) is made as of the last date set
forth on the signature page hereof between GlyEco, Inc., a Nevada corporation
(the “Company”), and the undersigned (the “Subscriber”).

 

W I T N E S S E T H:

 

WHEREAS, the Company is conducting a private offering (the “Offering”) on a
“best efforts” basis, consisting of up to a maximum of Two Million Five Hundred
Thousand Dollars ($2,500,000) in principal amount (the “Maximum Offering
Amount”) of 10% Senior, Unsecured Promissory Notes the (“Notes”), pursuant to
Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities
Act”), and/or Rule 506 promulgated thereunder; and

 

WHEREAS, in connection with the purchase of the Notes, each Subscriber will
receive a three (3)-year warrant (the “Warrant,” and together with the Notes,
collectively, the “Securities”) to purchase such number of shares of common
stock, par value $0.0001 per share, of the Company (the “Common Stock”) equal to
25% of the principal amount of the Subscriber’s Note divided by $0.05; and

 

WHEREAS, the Subscriber desires to purchase the Securities on the terms and
conditions hereinafter set forth;

 

NOW, THEREFORE, in consideration of the premises and the mutual representations
and covenants hereinafter set forth, the parties hereto do hereby agree as
follows:

 

I.SUBSCRIPTION FOR SECURITIES AND REPRESENTATIONS BY SUBSCRIBER

 

1.1          Subject to the terms and conditions hereinafter set forth, the
Subscriber hereby subscribes for and agrees to purchase from the Company, and
the Company subject to its rights to accept or reject this subscription, agrees
to sell to the Subscriber, Notes in the principal amount set forth on the
signature page hereof. The purchase price is payable by check or wire transfer,
to be held in escrow until the conditions to closing are achieved, to Robinson
Brog Leinwand Greene Genovese & Gluck P.C., the escrow agent (the “Escrow
Agent”).

 

1.2          The Securities will be offered for sale until the earlier of (a)
the date upon which subscriptions for the Maximum Offering Amount have been
received and accepted by the Company or (b) April 30, 2018 (the “Termination
Date”), unless terminated at an earlier time by the Company, or unless extended
by the Company in its sole discretion, without notice to or consent by
prospective investors, to a date not later than May 15, 2018 (the “Final
Termination Date”).

 

1.3          The Company may hold one or more closings (each, a “Closing”) at
any time after the date hereof until the earlier of the (i) date upon which
subscriptions for the Maximum Offering Amount have been received and accepted by
the Company or (ii) the Termination Date or Final Termination Date, as
applicable. The date of a Closing shall be referred to as the “Closing Date”.
The last Closing of the Offering, occurring on or prior to the Termination Date
or Final Termination Date, as applicable, shall be referred to as the “Final
Closing”. Any subscription documents or funds received after the Final Closing
will be returned, without interest or deduction. In the event that a Closing
does not occur prior to the Termination Date or Final Termination Date, as
applicable, all amounts paid by the Subscriber shall be returned to the
Subscriber, without interest or deduction.

 

1 

 

 

EXECUTION VERSION

 

1.4          The Subscriber recognizes that the purchase of the Securities
involves a high degree of risk including, but not limited to, the following: (a)
the Company has a limited operating history and requires substantial funds in
addition to the proceeds of the Offering; (b) an investment in the Company is
highly speculative, and only investors who can afford the loss of their entire
investment should consider investing in the Company and the Securities; (c) the
Subscriber may not be able to liquidate its investment; (d) transferability of
the Securities is extremely limited; (e) in the event of a disposition, the
Subscriber could sustain the loss of its entire investment; (f) the Company has
not paid any dividends since its inception and does not anticipate paying any
dividends; and (g) the other risks associated with the Company’s business,
financial condition and the Offering.

 

1.5          At the time such Subscriber was offered the Securities, it was, and
as of the date hereof it is, and on each date on which it exercises any Warrants
it will be, an “accredited investor” as defined in Rule 501(a) under the
Securities Act, and the Subscriber is able to bear the economic risk of an
investment in the Securities.

 

1.6          The Subscriber hereby acknowledges and represents that (a) the
Subscriber has knowledge and experience in business and financial matters, prior
investment experience, including investment in securities that are non-listed,
unregistered and/or not traded on a national securities exchange or the
Subscriber has employed the services of a “purchaser representative” (as defined
in Rule 501 of Regulation D), attorney and/or accountant to read all of the
documents furnished or made available by the Company both to the Subscriber and
to all other prospective investors in the Securities to evaluate the merits and
risks of such an investment on the Subscriber’s behalf; (b) the Subscriber
recognizes the highly speculative nature of this investment; and (c) the
Subscriber is able to bear the economic risk that the Subscriber hereby assumes.

 

1.7          The Subscriber hereby acknowledges receipt and careful review of
this Agreement, the Note, the Warrant, and all exhibits thereto or incorporated
by reference therein (collectively referred to as the “Transaction Documents”)
and has had access to the Company’s Annual Report on Form 10-K and the exhibits
thereto for the year ended December 31, 2017 and the exhibits thereto (the “Form
10-K”) as publicly filed with and available at the website of the United States
Securities and Exchange Commission (the “SEC”), and has received any additional
information that the Subscriber has requested from the Company, and has been
afforded the opportunity to ask questions of and receive answers from duly
authorized officers or other representatives of the Company concerning the
Company and the terms and conditions of the Offering; provided, however that no
investigation performed by or on behalf of the Subscriber shall limit or
otherwise affect its right to rely on the representations and warranties of the
Company contained herein.

 

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EXECUTION VERSION

 

1.8         (a)          In making the decision to invest in the Securities the
Subscriber has relied solely upon the information provided by the Company in the
Transaction Documents and incorporated by reference therein, including the
information set forth in the 10-K. To the extent necessary, the Subscriber has
retained, at its own expense, and relied upon appropriate professional advice
regarding the investment, tax and legal merits and consequences of this
Agreement and the purchase of the Securities hereunder. The Subscriber disclaims
reliance on any statements made or information provided by any person or entity
in the course of Subscriber’s consideration of an investment in the Securities
other than the Transaction Documents.

 

    (b)          The Subscriber represents that (i) the Subscriber was contacted
regarding the sale of the Securities by the Company with whom the Subscriber had
a prior substantial pre-existing relationship and (ii) it did not learn of the
offering of the Securities by means of any form of general solicitation or
general advertising, and in connection therewith, the Subscriber did not (A)
receive or review any advertisement, article, notice or other communication
published in a newspaper or magazine or similar media or broadcast over
television or radio, whether closed circuit, or generally available; or (B)
attend any seminar meeting or industry investor conference whose attendees were
invited by any general solicitation or general advertising.

 

1.9          The Subscriber hereby acknowledges that the Offering has not been
reviewed by the SEC nor any state regulatory authority since the Offering is
intended to be exempt from the registration requirements of Section 5 of the
Securities Act, pursuant to Regulation D. The Subscriber understands that the
Securities have not been registered under the Securities Act or under any state
securities or “blue sky” laws and agrees not to sell, pledge, assign or
otherwise transfer or dispose of the Securities unless they are registered under
the Securities Act and under any applicable state securities or “blue sky” laws
or unless an exemption from such registration is available.

 

1.10        The Subscriber understands that the Securities have not been
registered under the Securities Act by reason of a claimed exemption under the
provisions of the Securities Act that depends, in part, upon the Subscriber’s
investment intention and investment qualification. In this connection, the
Subscriber hereby represents that the Subscriber is purchasing the Securities
for the Subscriber’s own account for investment and not with a view toward the
resale or distribution to others; provided, however, that nothing contained
herein shall constitute an agreement by the Subscriber to hold the Securities
for any particular length of time and the Company acknowledges that the
Subscriber shall at all times retain the right to dispose of its property as it
may determine in its sole discretion, subject to any restrictions imposed by
applicable law. The Subscriber, if an entity, further represents that it was not
formed for the purpose of purchasing the Securities.

 

1.11        The Subscriber consents to the placement of a legend on any
certificate or other document evidencing the Securities and, when issued, the
shares of Common Stock issuable upon exercise of the Warrant (the “Warrant
Shares”) that such securities have not been registered under the Securities Act
or any state securities or “blue sky” laws and setting forth or referring to the
restrictions on transferability and sale thereof contained in this Agreement.
The Subscriber is aware that the Company will make a notation in its appropriate
records with respect to the restrictions on the transferability of such
Securities or the Warrant Shares.

 

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EXECUTION VERSION

 

1.12        The Subscriber hereby represents that the address of the Subscriber
furnished by Subscriber on the signature page hereof is the Subscriber’s
principal residence if Subscriber is an individual or its principal business
address if it is a corporation or other entity.

 

1.13        Such Subscriber understands that the Securities are “restricted
securities” and have not been registered under the Securities Act or any
applicable state securities law and is acquiring the Securities as principal for
its own account and not with a view to or for distributing or reselling such
Securities or any part thereof in violation of the Securities Act or any
applicable state securities law, has no present intention of distributing any of
such Securities in violation of the Securities Act or any applicable state
securities law and has no direct or indirect arrangement or understandings with
any other persons to distribute or regarding the distribution of such Securities
in violation of the Securities Act or any applicable state securities law.
Furthermore, such Subscriber is not purchasing the Securities as a result of any
advertisement, article, notice or other communication regarding the Securities
published in any newspaper, magazine or similar media or broadcast over
television or radio or presented at any seminar or any other general
solicitation or general advertisement.

 

1.14        The Subscriber represents that the Subscriber has full power and
authority (corporate, statutory and otherwise) to execute and deliver this
Agreement and to purchase the Securities. This Agreement constitutes the legal,
valid and binding obligation of the Subscriber, enforceable against the
Subscriber in accordance with its terms.

 

1.15        If the Subscriber is a corporation, partnership, limited liability
company, trust, employee benefit plan, individual retirement account, Keogh
Plan, or other tax-exempt entity, it is authorized and qualified to invest in
the Company and the person signing this Agreement on behalf of such entity has
been duly authorized by such entity to do so.

 

1.16        The Subscriber acknowledges that if he or she is a Registered
Representative of a Financial Industry Regulatory Authority (“FINRA”) member
firm, he or she must give such firm the notice required by the FINRA’s Rules of
Fair Practice.

 

1.17        [Intentionally Omitted].

 

1.18        The Subscriber agrees not to issue any public statement with respect
to the Subscriber’s investment or proposed investment in the Company or the
terms of any agreement or covenant between them and the Company without the
Company’s prior written consent, except such disclosures as may be required
under applicable law or under any applicable order, rule or regulation.

 

1.19        The Subscriber understands, acknowledges and agrees with the Company
that this subscription may be rejected, in whole or in part, by the Company, in
the sole and absolute discretion of the Company, at any time before any Closing
notwithstanding prior receipt by the Subscriber of notice of acceptance of the
Subscriber’s subscription.

 

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EXECUTION VERSION

 

1.20        The Subscriber acknowledges that the information contained in the
Transaction Documents or otherwise made available to the Subscriber is
confidential and non-public and agrees that all such information shall be kept
in confidence by the Subscriber and neither used by the Subscriber for the
Subscriber’s personal benefit (other than in connection with this subscription)
nor disclosed to any third party for any reason, notwithstanding that a
Subscriber’s subscription may not be accepted by the Company; provided, however,
that (a) the Subscriber may disclose such information to its affiliates and
advisors who may have a need for such information in connection with providing
advice to the Subscriber with respect to its investment in the Company so long
as such affiliates and advisors have an obligation of confidentiality, and (b)
this obligation shall not apply to any such information that (i) is part of the
public knowledge or literature and readily accessible at the date hereof, (ii)
becomes part of the public knowledge or literature and readily accessible by
publication (except as a result of a breach of this provision) or (iii) is
received from third parties without an obligation of confidentiality (except
third parties who disclose such information in violation of any confidentiality
agreements or obligations, including, without limitation, any subscription or
other similar agreement entered into with the Company).

 

1.21        The Subscriber will indemnify and hold harmless the Company and,
where applicable, its directors, officers, employees, agents, advisors,
affiliates and shareholders, and each other person, if any, who controls any of
the foregoing from and against any and all loss, liability, claim, damage and
expense whatsoever (including, but not limited to, any and all fees, costs and
expenses whatsoever reasonably incurred in investigating, preparing or defending
against any claim, lawsuit, administrative proceeding or investigation whether
commenced or threatened) (a “Loss”) arising out of or based upon any
representation or warranty of the Subscriber contained herein or in any document
furnished by the Subscriber to the Company in connection herewith being untrue
in any material respect or any breach or failure by the Subscriber to comply
with any covenant or agreement made by the Subscriber herein or therein.

 

II.REPRESENTATIONS BY AND COVENANTS OF THE COMPANY

 

The Company hereby represents and warrants to the Subscriber that:

 

2.1          Organization, Good Standing and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Nevada and has full corporate power and authority to own and use
its properties and its assets and conduct its business as currently conducted.
Each of the Company’s subsidiaries identified on Schedule 2.1 hereto (the
“Subsidiaries”) is an entity duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation with the
requisite corporate power and authority to own and use its properties and assets
and to conduct its business as currently conducted. Neither the Company nor any
of its Subsidiaries is in violation of any of the provisions of their respective
articles of incorporation, by-laws or other organizational or charter documents,
including, but not limited to the Charter Documents (as defined below). Each of
the Company and its Subsidiaries is duly qualified to conduct business and is in
good standing as a foreign corporation in each jurisdiction in which the nature
of the business conducted or property owned by it makes such qualification
necessary, except where the failure to be so qualified or in good standing, as
the case may be, would not result in a direct and/or indirect (i) material
adverse effect on the legality, validity or enforceability of any of the
Securities and/or this Agreement, (ii) material adverse effect on the results of
operations, assets, business, condition (financial and other) or prospects of
the Company and its Subsidiaries, taken as a whole, or (iii) material adverse
effect on the Company’s ability to perform in any material respect on a timely
basis its obligations under the Transaction Documents (any of (i), (ii) or
(iii), a “Material Adverse Effect”).

 

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EXECUTION VERSION

 

2.2          Capitalization and Voting Rights. The authorized, issued and
outstanding capital stock of the Company is as set forth in Schedule 2.2 hereto
and all issued and outstanding shares of capital stock of the Company are
validly issued, fully paid and nonassessable. Except as set forth in Schedule
2.2 hereto, (i) there are no outstanding securities of the Company or any of its
Subsidiaries which contain any preemptive, redemption or similar provisions, nor
is any holder of securities of the Company or any Subsidiary entitled to
preemptive or similar rights arising out of any agreement or understanding with
the Company or any Subsidiary by virtue of any of the Transaction Documents, and
there are no contracts, commitments, understandings or arrangements by which the
Company or any of its Subsidiaries is or may become bound to redeem a security
of the Company or any of its Subsidiaries; (ii) neither the Company nor any
Subsidiary has any stock appreciation rights or “phantom stock” plans or
agreements or any similar plan or agreement; and (iii) except as set forth in
Schedule 2.2 there are no outstanding options, warrants, agreements, convertible
securities, preemptive rights or other rights to subscribe for or to purchase or
acquire, any shares of capital stock of the Company or any Subsidiary or
contracts, commitments, understandings, or arrangements by which the Company or
any Subsidiary is or may become bound to issue any shares of capital stock of
the Company or any Subsidiary, or securities or rights convertible or
exchangeable into shares of capital stock of the Company or any Subsidiary.
Except as set forth in Schedule 2.2 and as otherwise required by law, there are
no restrictions upon the voting or transfer of any of the shares of capital
stock of the Company pursuant to the Company’s Charter Documents (as defined
below) or other governing documents or any agreement or other instruments to
which the Company is a party or by which the Company is bound. All of the issued
and outstanding shares of capital stock of the Company are validly issued, fully
paid and nonassessable and the shares of capital stock of the Subsidiaries are
owned by the Company, free and clear of any mortgages, pledges, liens, claims,
charges, encumbrances or other restrictions (collectively, “Encumbrances”). All
of such outstanding capital stock has been issued in compliance with applicable
federal and state securities laws. The issuance and sale of the Securities and,
upon issuance, the Warrant Shares, as contemplated hereby will not obligate the
Company to issue shares of Common Stock or other securities to any other person
(other than the Subscriber) and, except as set forth in Schedule 2.2, will not
result in the adjustment of the exercise, conversion, exchange or reset price of
any outstanding security. The Company does not have outstanding stockholder
purchase rights or “poison pill” or any similar arrangement in effect giving any
person the right to purchase any equity interest in the Company upon the
occurrence of certain events.

 

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EXECUTION VERSION

 

2.3          Authorization; Enforceability. The Company has all corporate right,
power and authority to enter into, execute and deliver this Agreement and each
other agreement, document, instrument and certificate to be executed by the
Company in connection with the consummation of the transactions contemplated
hereby, including, but not limited to, the Transaction Documents, and to perform
fully its obligations hereunder and thereunder. All corporate action on the part
of the Company, its directors and stockholders necessary to authorize the (a)
execution, delivery and performance of this Agreement and the other Transaction
Documents by the Company and (b) the sale, issuance and delivery of the
Securities and the Warrant Shares contemplated hereby has been taken. This
Agreement and the other Transaction Documents have been duly executed and
delivered by the Company and each constitutes a legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its respective terms, subject to laws of general application relating to
bankruptcy, insolvency and the relief of debtors and rules of law governing
specific performance, injunctive relief or other equitable remedies, and to
limitations of public policy. The Securities are duly authorized and, when
issued and paid for in accordance with the applicable Transaction Documents,
will be duly and validly issued, fully paid and free and clear of all
Encumbrances other than restrictions on transfer provided for in the Transaction
Documents. The Warrant Shares, when issued and paid for in accordance with the
terms of the Transaction Documents, will be validly issued, fully paid and
nonassessable and free and clear of all Encumbrances imposed by the Company
other than restrictions on transfer provided for in the Transaction Documents.
The Company has reserved a sufficient number of Warrant Shares for issuance upon
the exercise of the Warrants. Except as set forth on Schedule 2.3 hereto, the
issuance and sale of the Securities and Warrant Shares contemplated hereby will
not give rise to any preemptive rights or rights of first refusal on behalf of
any person other than the Subscribers.

 

2.4          No Conflict; Governmental Consents.

 

    (a)          The execution and delivery by the Company of this Agreement and
the other Transaction Documents, the issuance and sale of the Securities and
Warrant Shares and the consummation of the other transactions contemplated
hereby or thereby do not and will not (i) result in the violation of any law,
statute, rule, regulation, order, writ, injunction, judgment or decree of any
court or governmental authority to or by which the Company is bound including
without limitation all foreign, federal, state and local laws applicable to its
business and all such laws that affect the environment, except in each case as
could not have or reasonably be expected to result in a Material Adverse Effect,
(ii) conflict with or violate any provision of the Company’s Articles of
Incorporation, as amended, or the Company’s Bylaws, as amended (collectively,
the “Charter Documents”), and (iii) conflict with, or result in a material
breach or violation of, any of the terms or provisions of, or constitute (with
or without due notice or lapse of time or both) a default or give to others any
rights of termination, amendment, acceleration or cancellation (with or without
due notice, lapse of time or both) under any agreement, credit facility, lease,
loan agreement, mortgage, security agreement, trust indenture or other agreement
or instrument to which the Company or any Subsidiary is a party or by which any
of them is bound or to which any of their respective properties or assets is
subject, nor result in the creation or imposition of any Encumbrances upon any
of the properties or assets of the Company or any Subsidiary.

 

    (b)          No approval by the holders of Common Stock, or other equity
securities of the Company is required to be obtained by the Company in
connection with the authorization, execution, delivery and performance of this
Agreement and the other Transaction Documents or in connection with the
authorization, issuance and sale of the Securities and the Warrant Shares,
except as has been previously obtained.

 

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EXECUTION VERSION

 

   (c)          No consent, approval, authorization or other order of any
governmental authority or any other person is required to be obtained by the
Company in connection with the authorization, execution, delivery and
performance of this Agreement and the other Transaction Documents or in
connection with the authorization, issuance and sale of the Securities and the
Warrant Shares, except such post-sale filings as may be required to be made with
the SEC, FINRA and with any state or foreign blue sky or securities regulatory
authority, all of which shall be made when required.

 

2.5          Consents of Third Parties. No vote, approval or consent of any
holder of capital stock of the Company or any other third parties is required or
necessary to be obtained by the Company in connection with the authorization,
execution, deliver and performance of this Agreement and the other Transaction
Documents or in connection with the authorization, issuance and sale of the
Securities and the Warrant Shares, except as previously obtained.

 

2.6          SEC Reports; Financial Statements. The Company has filed all
reports, schedules, forms, statements and other documents required to be filed
by the Company under the Securities Act and the Securities Exchange Act of 1934,
as amended (the “Exchange Act”), including pursuant to Section 13(a) or 15(d)
thereof, for the one (1) year preceding the date hereof (or such shorter period
as the Company was required by law or regulation to file such material) (the
foregoing materials, including the exhibits thereto and documents incorporated
by reference therein, being collectively referred to herein as the “SEC
Reports”) on a timely basis or has received a valid extension of such time of
filing and has filed any such SEC Reports prior to the expiration of any such
extension. As of their respective dates, the SEC Reports complied in all
material respects with the requirements of the Exchange Act and the rules and
regulations of the SEC promulgated thereunder, and none of the SEC Reports, when
filed, contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The financial statements of the Company included in the SEC
Reports comply in all material respects with applicable accounting requirements
and the rules and regulations of the SEC with respect thereto as in effect at
the time of filing. Such financial statements have been prepared in accordance
with United States generally accepted accounting principles (“GAAP”) applied on
a consistent basis during the periods involved, except as may be otherwise
specified in such financial statements or the footnotes thereto, and fairly
present in all material respects the financial position of the Company and its
consolidated Subsidiaries as of and for the dates thereof and the results of
operations and cash flows for the periods then ended, subject, in the case of
unaudited statements, to normal, immaterial, year-end audit adjustments.

 

2.7          Licenses. Except as otherwise set forth on Schedule 2.7, the
Company and its Subsidiaries have sufficient licenses, permits and other
governmental authorizations currently required for the conduct of their
respective businesses or ownership of properties and are in all material
respects in compliance therewith.

 

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EXECUTION VERSION

 

2.8          Litigation. Except as set forth on Schedule 2.8, the Company knows
of no pending or threatened legal or governmental proceedings against the
Company or any Subsidiary which could materially adversely affect the business,
property, financial condition or operations of the Company and its Subsidiaries,
taken as a whole, or which materially and adversely questions the validity of
this Agreement or the other Transaction Documents or the right of the Company to
enter into this Agreement and the other Transaction Documents, or to perform its
obligations hereunder and thereunder. Neither the Company nor any Subsidiary is
a party or subject to the provisions of any order, writ, injunction, judgment or
decree of any court or government agency or instrumentality which could
materially adversely affect the business, property, financial condition or
operations of the Company and its Subsidiaries taken as a whole. There is no
action, suit, proceeding or investigation by the Company or any Subsidiary
currently pending in any court or before any arbitrator or that the Company or
any Subsidiary intends to initiate. Neither the Company nor any Subsidiary, nor
any director or officer thereof, is, or since December 31, 2017 has been, the
subject of any action involving a claim of violation of or liability under
federal or state securities laws or a claim of breach of fiduciary duty. There
has not been, and to the Company’s knowledge, there is not pending or
contemplated, any investigation by the SEC involving the Company or any current
or former director or officer of the Company.

 

2.9          Compliance. Except as set forth on Schedule 2.9, neither the
Company nor any Subsidiary: (i) is in default under or in violation of (and no
event has occurred that has not been waived that, with notice or lapse of time
or both, would result in a default by the Company or any Subsidiary under), nor
has the Company or any Subsidiary received notice of a claim that it is in
default under or that it is in violation of, any indenture, loan or credit
agreement or any other agreement or instrument to which it is a party or by
which it or any of its properties is bound (whether or not such default or
violation has been waived), (ii) is in violation of any judgment, decree or
order of any court, arbitrator or other governmental authority or (iii) is or
has been in violation of any statute, rule, ordinance or regulation of any
governmental authority, including without limitation all foreign, federal, state
and local laws relating to taxes, environmental protection, occupational health
and safety, product quality and safety and employment and labor matters, except
in each case as could not have or reasonably be expected to result in a Material
Adverse Effect.

 

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

 

2.11        Disclosure. The information set forth in the Transaction Documents
as of the date hereof and as of the date of each Closing contains no untrue
statement of a material fact nor omits to state a material fact necessary in
order to make the statements contained therein, in light of the circumstances
under which they were made, not misleading.

 

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EXECUTION VERSION

 

2.12        Investment Company. The Company is not an “investment company”
within the meaning of such term under the Investment Company Act of 1940, as
amended, and the rules and regulations of the SEC thereunder.

 

2.13        Brokers. Neither the Company nor any of the Company’s officers,
directors, employees or stockholders has employed or engaged any broker or
finder in connection with the transactions contemplated by this Agreement and no
fee or other compensation is or will be due and owing to any broker, finder,
underwriter, placement agent or similar person in connection with the
transactions contemplated by this Agreement. The Company is not party to any
agreement, arrangement or understanding whereby any person has an exclusive
right to raise funds and/or place or purchase any debt or equity securities for
or on behalf of the Company.

 

2.14        Intellectual Property; Employees.

 

    (a)          The Company owns or possesses sufficient legal rights to all
patents, trademarks, service marks, trade names, copyrights, trade secrets,
licenses, information and other proprietary rights and processes necessary for
its business as now conducted and as presently proposed to be conducted, without
any known infringement of the rights of others as set forth on Schedule 2.14 and
which the failure to so have could have a Material Adverse Effect (collectively,
the “Intellectual Property Rights”). Except as disclosed on Schedule 2.14 or the
SEC Reports, there are no material outstanding options, licenses or agreements
of any kind relating to the Intellectual Property Rights, nor is the Company
bound by or a party to any material options, licenses or agreements of any kind
with respect to the patents, trademarks, service marks, trade names, copyrights,
trade secrets, licenses, information and other proprietary rights and processes
of any other person or entity other than such licenses or agreements arising
from the purchase of “off the shelf” or standard products. The Company has not
received any written communications alleging that the Company has violated or,
by conducting its business as presently proposed to be conducted, would violate
any Intellectual Property Rights of any other person or entity. The Company and
its Subsidiaries have taken reasonable security measures to protect the secrecy,
confidentiality and value of all of their intellectual properties, except where
failure to do so could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.

 

    (b)          Except as set forth on Schedule 2.14, the Company is not aware
that any of its employees is obligated under any contract (including licenses,
covenants or commitments of any nature) or other agreement, or subject to any
judgment, decree or order of any court or administrative agency, that would
interfere with their duties to the Company or that would conflict with the
Company’s business as presently conducted.

 

    (c)          Neither the execution nor delivery of this Agreement, nor the
carrying on of the Company’s business by the employees of the Company, nor the
conduct of the Company’s business as presently conducted, will, to the Company’s
knowledge, conflict with or result in a breach of the terms, conditions or
provisions of, or constitute a default under, any contract, covenant or
instrument under which any employee is now obligated.

 

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EXECUTION VERSION

 

    (d)          To the Company’s knowledge, no employee of the Company, nor any
consultant with whom the Company has contracted, is in violation of any term of
any employment contract, proprietary information agreement or any other
agreement and to the Company’s knowledge the continued employment by the Company
of its present employees, and the performance of the Company’s contracts with
its independent contractors, will not result in any such violation. The Company
has not received any written notice alleging that any such violation has
occurred. Except as set forth on Schedule 2.14, no employee of the Company has
been granted the right to continued employment by the Company or to any
compensation following termination of employment with the Company except for any
of the same which would not have a Material Adverse Effect on the business of
the Company. The Company is not aware that any officer, key employee or group of
employees intends to terminate his, her or their employment with the Company,
nor does the Company have a present intention to terminate the employment of any
officer, key employee or group of employees.

 

2.15        Title to Properties and Assets; Liens, Etc. Except as set forth on
Schedule 2.15, the Company has good and marketable title to its properties and
assets, including the properties and assets reflected in the most recent balance
sheet included in the Company’s financial statements, and good title to its
leasehold estates, in each case subject to no Encumbrances, other than (a) those
resulting from taxes which have not yet become delinquent; and (b) Encumbrances
which do not materially detract from the value of the property subject thereto
or materially impair the operations of the Company; and (c) those that have
otherwise arisen in the ordinary course of business, none of which are material.
Except as set forth on Schedule 2.15, the Company is in compliance with all
material terms of each lease to which it is a party or is otherwise bound.

 

2.16        Obligations to Related Parties. Except as set forth on Schedule
2.16, there are no obligations of the Company to officers, directors,
stockholders, or employees of the Company other than (a) for payment of salary
or other compensation for services rendered, (b) reimbursement for reasonable
expenses incurred on behalf of the Company and (c) for other standard employee
benefits made generally available to all employees (including stock option
agreements outstanding under any stock option plan approved by the Board of
Directors of the Company). Except as set forth on Schedule 2.16, none of the
officers or directors of the Company and, to the Company’s knowledge, none of
the employees of the Company is presently a party to any transaction with the
Company or any Subsidiary (other than as holders of stock options and/or
warrants, and for services as employees, officers and directors), including any
contract, agreement or other arrangement providing for the furnishing of
services to or by, providing for rental of real or personal property to or from,
or otherwise requiring payments to or from any officer, director or such
employee or, to the Company’s knowledge, any entity in which any officer,
director, or any such employee has a substantial interest or is an officer,
director, trustee or partner.

 

2.17        Material Changes. Except as set forth on Schedule 2.17, since the
date of the latest audited financial statements included within the SEC Reports
(i) there has been no event, occurrence or development that has had or that
could reasonably be expected to result in a Material Adverse Effect, (ii) the
Company has not incurred any liabilities (contingent or otherwise) other than
(A) trade payables, accrued expenses and other liabilities incurred in the
ordinary course of business consistent with past practice and (B) liabilities
not required to be reflected in the Company’s financial statements pursuant to
GAAP or required to be disclosed in filings made with the SEC, (iii) the Company
has not altered its method of accounting or the identity of its auditors, (iv)
the Company has not declared or made any dividend or distribution of cash or
other property to its stockholders or purchased, redeemed or made any agreements
to purchase or redeem any shares of its capital stock, and (v) the Company has
not issued any equity securities to any officer, director or affiliate, except
pursuant to existing Company stock option plans. The Company does not have
pending before the SEC any request for confidential treatment of information.

 

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2.18        Sarbanes-Oxley. The Company is in compliance with all effective
requirements of the Sarbanes-Oxley Act of 2002, as amended, and the rules and
regulations thereunder, that are applicable to it, except where such
noncompliance could not have or reasonably be expected to result in a Material
Adverse Effect.

 

2.19        No General Solicitation. None of the Company, its Subsidiaries, any
of their affiliates, and any person acting on their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D under the Securities Act) in connection with the offer or sale of
the Securities.

 

2.20        No Integrated Offering. Assuming the accuracy of the Subscriber
representations and warranties set forth in Section I hereunder, none of the
Company, its Subsidiaries, any of their affiliates, and any person acting on
their behalf has, directly or indirectly, made any offers or sales of any
security or solicited any offers to buy any security, under circumstances that
would require registration of any of the Securities under the Securities Act or
that is likely to cause this offering of the Securities to be integrated with
prior offerings by the Company for purposes of the Securities Act or any
applicable stockholder approval provisions, including without limitation, under
the rules and regulations of any exchange or automated quotation system on which
any of the securities of the Company are listed or designated. None of the
Company, its Subsidiaries, their affiliates and any person acting on their
behalf has taken any action or steps referred to in the preceding sentence that
would require registration of any of the Securities under the Securities Act or
cause the offering of the Securities to be integrated with other offerings.

 

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

 

2.22        Taxes. Each of the Company and its Subsidiaries has filed all U.S.
federal, state, local and foreign tax returns which are required to be filed by
each of them and all such returns are true and correct in all material respects.
The Company and each Subsidiary has paid all taxes whether or not shown on such
returns or pursuant to any assessments received by any of them or by which any
of them are obligated to withhold from amounts owing to any employee, creditor
or third party. The Company and each Subsidiary has properly accrued all taxes
required to be accrued and/or paid, except where the failure to accrue would not
have a Material Adverse Effect. To the knowledge of the Company, none of the tax
returns of the Company nor any of its Subsidiaries is currently being audited by
any state, local or federal authorities. Neither the Company nor any Subsidiary
has waived any statute of limitations with respect to taxes or agreed to any
extension of time with respect to any tax assessment or deficiency. The Company
has set aside on its books adequate provision for the payment of any unpaid
taxes.

 

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EXECUTION VERSION

 

2.23        Registration Rights. Except as set forth on Schedule 2.23, no person
has any right to cause the Company to effect the registration under the
Securities Act of any securities of the Company.

 

2.24        Listing and Maintenance Requirements. The Common Stock is registered
pursuant to Section 12(b) or 12(g) of the Exchange Act, and the Company has
taken no action designed to, or which to its knowledge is likely to have the
effect of, terminating the registration of the Common Stock under the Exchange
Act nor has the Company received any notification that the SEC is contemplating
terminating such registration. The Company has not, in the one (1) year
preceding the date hereof, received notice from any trading market on which the
Common Stock is or has been listed or quoted to the effect that the Company is
not in compliance with the listing or maintenance requirements of such trading
market. The Company is, and has no reason to believe that it will not in the
foreseeable future continue to be, in compliance with all such listing and
maintenance requirements

 

2.25        Disclosure. All disclosure furnished by or on behalf of the Company
to the Subscriber in the Transaction Documents regarding the Company, its
business and the transactions contemplated hereby, including the Disclosure
Schedules to this Agreement (the “Disclosure Schedules”, is true and correct and
does not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein, in light
of the circumstances under which they were made, not misleading.

 

2.26        Seniority. Except as set forth on Schedule 2.26 hereto, no
indebtedness or other claim against the Company is senior to the Notes in right
of payment, whether with respect to interest or upon liquidation or dissolution,
or otherwise, other than indebtedness secured by purchase money security
interests (which is senior only as to underlying assets covered thereby) and
capital lease obligations (which is senior only as to the property covered
thereby).

 

2.27        Private Placement. Assuming the accuracy of the Subscribers’
representations and warranties set forth in Section I, no registration under the
Securities Act is required for the offer and sale of the Securities by the
Company to the Subscriber as contemplated hereby.

 

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EXECUTION VERSION

 

III.TERMS OF SUBSCRIPTION

 

3.1          The minimum purchase that may be made by any prospective investor
shall be Fifty Thousand Dollars ($50,000) in principal amount of Notes (the
“Minimum Investment Amount”). Subscriptions for investment below the Minimum
Investment Amount may be accepted at the sole discretion of the Company. The
Company reserves the right to accept or reject any subscription made hereby, in
whole or in part, in its sole discretion. The Company’s agreement with each
Subscriber is a separate agreement and the sale of the Securities to each
Subscriber is a separate sale.

 

3.2          All funds shall be deposited in the account identified in Section
1.1 hereof.

 

3.3          Certificates representing the Notes and the Warrants purchased by
the Subscriber pursuant to this Agreement will be prepared for delivery to the
Subscriber as soon as practicable (but in no event more than five (5) Trading
Days (as defined below) following the Closing at which such purchase takes
place. The Subscriber hereby authorizes and directs the Company to deliver the
certificates representing the Notes and the Warrants purchased by the Subscriber
pursuant to this Agreement to the person or entity indicated on the signature
page hereto. “Trading Day” means a day on which the principal Trading Market is
open for trading. “Trading Market” means any of the following markets or
exchanges on which the Common Stock is listed or quoted for trading on the date
in question: the NYSE MKT; the Nasdaq Capital Market; the Nasdaq Global Market;
the Nasdaq Global Select Market; the New York Stock Exchange; the OTCQX, OTCQB,
OTCBB or OTC Pink Sheets; or any successors to any of the foregoing.

 

3.4          In the event that after the date hereof any new Subscribers (the
“New “Subscribers”) offer different terms with respect to the Notes and Warrants
(the “New Terms”), and each Subscriber on the date hereof deems such New Terms
more favorable, then the Company agrees that all Notes or Warrants issued prior
to the subscription by the New Subscribers shall be amended and modified to
reflect such New Terms. The Company and all Subscribers agree and acknowledge
that any Notes issued pursuant to this Agreement shall rank pari passu with all
other Notes now or hereafter issued under the terms set forth herein.

 

IV.CONDITIONS TO OBLIGATIONS OF THE SUBSCRIBER

 

4.1          The Subscriber’s obligation to purchase the Securities at the
Closing at which such purchase is to be consummated is subject to the
fulfillment on or prior to such Closing of the following conditions, which
conditions may be waived at the option of each Subscriber to the extent
permitted by law:

 

     (a)          Representations and Warranties; Covenants. The representations
and warranties made by the Company in Section 2 hereof shall be true and correct
in all material respects when made and on the Closing Date (unless such
representation or warranty expressly speaks as of an earlier date, in which case
such representation or warranty shall be true and correct as of such earlier
date); provided, however, that notwithstanding the foregoing, the Company shall
only be required to update the Disclosure Schedules by the delivery to the
Subscribers by the Company of an amended Disclosure Schedule with respect to any
information that is of a material nature as of such proposed Closing Date. All
covenants, agreements and conditions contained in this Agreement to be performed
by the Company on or prior to the date of such Closing shall have been performed
or complied with in all material respects.

 

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EXECUTION VERSION

 

    (b)          No Legal Order Pending. There shall not then be in effect any
legal or other order enjoining or restraining the transactions contemplated by
this Agreement.

 

    (c)          No Law Prohibiting or Restricting Such Sale. There shall not be
in effect any law, rule or regulation prohibiting or restricting such sale or
requiring any consent or approval of any person, which shall not have been
obtained, to issue the Securities (except as otherwise provided in this
Agreement).

 

    (d)          Required Consents. The Company shall have obtained any and all
consents, permits, approvals, registrations and waivers necessary or appropriate
for consummation of the purchase and sale of the Securities and the consummation
of the other transactions contemplated by the Transaction Documents, all of
which shall be in full force and effect.

 

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

 

    (f)          No Suspensions of Trading in Common Stock; Listing. Trading in
the Common Stock shall not have been suspended by the SEC or any Trading Market
(except for any suspensions of trading of not more than one (1) Trading Day
solely to permit dissemination of material information regarding the Company) at
any time since the date of execution of this Agreement, and the Common Stock
shall have been at all times since such date listed for trading on a Trading
Market.

 

    (g)          Disclosure Schedules. The Company shall have delivered to the
Subscriber a copy of its Disclosure Schedules (or amended Disclosure Schedules)
qualifying any of the representations and warranties contained in Section 2 as
of the applicable Closing.

 

V.COVENANTS OF THE COMPANY

 

5.1          Transfer Restrictions.

 

    (a)          The Securities may only be disposed of in compliance with state
and federal securities laws. In connection with any transfer of Securities other
than pursuant to an effective registration statement or Rule 144 promulgated
under the Securities Act, to the Company or to an affiliate of a Subscriber or
in connection with, the Company may require the transferor thereof to provide to
the Company an opinion of counsel selected by the transferor and reasonably
acceptable to the Company, the form and substance of which opinion shall be
reasonably satisfactory to the Company, to the effect that such transfer does
not require registration of such transferred Securities under the Securities
Act. As a condition of transfer, any such transferee shall agree in writing to
be bound by the terms of this Agreement and shall have the rights of a
Subscriber under this Agreement.

 

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EXECUTION VERSION

 

    (b)          The Subscriber agrees to the imprinting, so long as is required
by this Section 5.1, of a legend on any of the Securities and the Warrant
Shares, in the following form:

 

[NEITHER] THIS SECURITY [NOR THE SECURITIES INTO WHICH THIS SECURITY IS
EXERCISABLE] HAS [NOT] BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO
THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
ACCEPTABLE TO THE COMPANY. THIS SECURITY [AND THE SECURITIES ISSUABLE UPON
EXERCISE OF THIS SECURITY] MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.

 

    (c)          Certificates evidencing the Warrant Shares shall not contain
any legend (including the legend set forth in Section 5.1(b) hereof): (i) while
a registration statement covering the resale of such security is effective under
the Securities Act, or (ii) following any sale of such Warrant Shares pursuant
to Rule 144, or (iii) [reserved] or (iv) if such legend is not required under
applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the staff of the SEC). The Company
shall cause its counsel, at the Company’s expense, to issue a legal opinion to
the Company’s transfer agent promptly (but in no event later than the requisite
share delivery date set forth in the Warrants) if required by the Company’s
transfer agent to effect the removal of the legend hereunder.

 

5.2          Listing of Securities. The Company agrees it will take all action
reasonably necessary to continue the listing and trading of its Common Stock on
a Trading Market and will comply in all material respects with the Company’s
reporting, filing and other obligations under the bylaws or rules of the Trading
Market. The Company shall take all steps necessary to cause the Warrant Shares
to be approved for listing and actually listed on the Company’s Trading Market.

 

5.3          Reservation of Shares. The Company shall at all times while the
Warrants are outstanding maintain a reserve from its duly authorized shares of
Common Stock of a number of shares of Common Stock sufficient to allow for the
issuance of the Warrant Shares.

 

5.4          Replacement of Securities. If any certificate or instrument
evidencing any Securities or the Warrant Shares is mutilated, lost, stolen or
destroyed, the Company shall issue or cause to be issued in exchange and
substitution for and upon cancellation thereof, or in lieu of and substitution
therefor, a new certificate or instrument, but only upon receipt of evidence
reasonably satisfactory to the Company of such loss, theft or destruction and
customary and reasonable indemnity, if requested. The applicants for a new
certificate or instrument under such circumstances shall also pay any reasonable
third-party costs associated with the issuance of such replacement securities.
If a replacement certificate or instrument evidencing any securities is
requested due to a mutilation thereof, the Company may require delivery of such
mutilated certificate or instrument as a condition precedent to any issuance of
a replacement.

 

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EXECUTION VERSION

 

5.5          Furnishing of Information. Until the time that no Subscriber owns
Securities, the Company covenants to maintain the registration of the Common
Stock under Section 12(b) or 12(g) of the Exchange Act and to timely file (or
obtain extensions in respect thereof and file within the applicable grace
period) all reports required to be filed by the Company after the date hereof
pursuant to the Exchange Act. As long as Subscriber owns Securities, if the
Company is not required to file reports pursuant to the Exchange Act, it will
prepare and furnish to Subscriber and make publicly available in accordance with
Rule 144(c) such information as is required for the Subscribers to sell the
Securities under Rule 144. The Company further covenants that it will take such
further action as any holder of Securities may reasonably request, to the extent
required from time to time to enable such person to sell such Securities without
registration under the Securities Act within the requirements of the exemption
provided by Rule 144.

 

5.6          Securities Laws; Publicity. Unless otherwise required by applicable
law, the Company shall, by 8:30 a.m. (New York City time) on the second Trading
Day immediately following the first and Final Closing hereunder, issue a Current
Report on Form 8-K disclosing the material terms of the transactions
contemplated hereby and including the Transaction Documents as exhibits thereto
to the extent required by law. The Company shall not publicly disclose the name
of the Subscriber, or include the name of any Subscriber in any filing with the
SEC or any regulatory agency or Trading Market, without the prior written
consent of the Subscriber, except: (a) as required by federal securities law in
connection with the filing of final Transaction Documents (including signature
pages thereto) with the SEC; and (b) to the extent such disclosure is required
by law, in which case the Company shall provide the Subscriber with prior notice
of such disclosure permitted under this clause (b).

 

5.7          Form D; Blue Sky Filings. The Company agrees to timely file a Form
D with respect to the Securities as required under Regulation D promulgated
under the Securities Act and to provide a copy thereof, promptly upon request of
the Subscriber. The Company shall take such action as the Company shall
reasonably determine is necessary in order to obtain an exemption for, or to
qualify the Securities for, sale to the Subscriber at the Closing under
applicable securities or “Blue Sky” laws of the states of the United States, and
shall provide evidence of such actions promptly upon request of any Subscriber.

 

5.8          Equal Treatment of Subscribers. No consideration (including any
modification of any Transaction Document) shall be offered or paid to any person
to amend or consent to a waiver or modification of any provision of any of the
Transaction Documents unless the same consideration is also offered to all of
the parties to the Transaction Documents.

 

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EXECUTION VERSION

 

5.9          Indemnification.

 

(a)          The Company agrees to indemnify and hold harmless the Subscriber,
its affiliates and their respective officers, directors, employees, agents and
controlling persons (collectively, the “Indemnified Parties”) from and against
any and all loss, liability, damage or deficiency suffered or incurred by any
Indemnified Party by reason of any misrepresentation or breach of warranty by
the Company or, after any applicable notice and/or cure periods, nonfulfillment
of any covenant or agreement to be performed or complied with by the Company
under this Agreement and the other Transaction Documents. The Company will
promptly reimburse the Indemnified Parties for all expenses (including
reasonable fees and expenses of legal counsel) as incurred in connection with
the investigation of, preparation for or defense of any pending or threatened
claim related to or arising in any manner out of any of the foregoing, or any
action or proceeding arising therefrom (collectively, “Proceedings”), whether or
not such Indemnified Party is a formal party to any such Proceeding.

 

(b)          If for any reason (other than a final non-appealable judgment
finding any Indemnified Party liable for losses, claims, damages, liabilities or
expenses for its fraud, gross negligence or willful misconduct) the foregoing
indemnity is unavailable to an Indemnified Party or insufficient to hold an
Indemnified Party harmless, then the Company shall contribute to the amount paid
or payable by an Indemnified Party as a result of such loss, claim, damage,
liability or expense in such proportion as is appropriate to reflect not only
the relative benefits received by the Company on the one hand and the
Indemnified Party on the other, but also the relative fault by the Company and
the Indemnified Party, as well as any relevant equitable considerations.

 

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

 

5.11          Use of Proceeds. The Company shall use the net proceeds from the
sale of the Securities hereunder as set forth on Schedule 5.11 hereto.

 

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EXECUTION VERSION

 

VI.MISCELLANEOUS

 

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

 

if to the Company, to it at:

 

Glyeco, Inc.

230 Gill Way

Rock Hill, SC 29730

Attn: Ian Rhodes, Chief Executive Officer

Tel: (866) 960-1539

Fax:

Email: irhodes@glyeco.com

 

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

 

Robinson Brog Leinwand Greene Genovese & Gluck P.C.

875 Third Avenue, 9th Floor

New York, NY 10022
Attn: David E. Danovitch, Esq.

Tel: (212) 603-6391

Fax: (212) 956-2164

Email: ded@robinsonbrog.com

 

if to the Subscriber, to the Subscriber’s address indicated on the signature
page of this Agreement.

 

if to the Escrow Agent, to it at:

 

Robinson Brog Leinwand Greene Genovese & Gluck P.C.

875 Third Avenue, 9th Floor

New York, NY 10022

Attn: David E. Danovitch, Esq. 

Tel: (212) 603-6391 

Fax: (212) 956-2164 

Email: ded@robinsonbrog.com

 

6.2          Except as otherwise provided herein, this Agreement shall not be
changed, modified or amended except by a writing signed by the parties to be
charged, and this Agreement may not be discharged except by performance in
accordance with its terms or by a writing signed by the party to be charged. No
waiver of any default with respect to any provision, condition or requirement of
this Agreement shall be deemed to be a continuing waiver in the future or a
waiver of any subsequent default or a waiver of any other provision, condition
or requirement hereof, nor shall any delay or omission of any party to exercise
any right hereunder in any manner impair the exercise of any such right.

 

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EXECUTION VERSION

 

6.3          This Agreement shall be binding upon and inure to the benefit of
the parties hereto and to their respective heirs, legal representatives,
successors and assigns. The Company may not assign this Agreement or any rights
or obligations hereunder without the prior written consent of Subscriber (other
than by merger). Subscriber may assign any or all of its rights under this
Agreement to any person to whom Subscriber assigns or transfers any Securities,
provided that such transferee agrees in writing to be bound, with respect to the
transferred Securities, by the provisions of the Transaction Documents.

 

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

 

6.5          Upon the execution and delivery of this Agreement by the Subscriber
and the Company, this Agreement shall become a binding obligation of the
Subscriber with respect to the purchase of Securities as herein provided,
subject, however, to the right hereby reserved by the Company to enter into the
same agreements with other Subscribers and to reject any subscription, in whole
or in part, provided the Company returns to Subscriber any funds paid by
Subscriber with respect to such rejected subscription or portion thereof,
without interest or deduction.

 

6.6          All questions concerning the construction, validity, enforcement
and interpretation of the Transaction Documents shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York, without regard to the principles of conflicts of law thereof. Each party
agrees that all legal proceedings concerning the interpretations, enforcement
and defense of the transactions contemplated by this Agreement and any other
Transaction Documents (whether brought against a party hereto or its respective
affiliates, directors, officers, shareholders, employees or agents) shall be
commenced exclusively in the state and federal courts sitting in the City of New
York. Each party hereby irrevocably submits to the exclusive jurisdiction of the
state and federal courts sitting in the City of New York, borough of Manhattan
for the adjudication of any dispute hereunder or in connection herewith or with
any transaction contemplated hereby or discussed herein (including with respect
to the enforcement of any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper or is an inconvenient venue for such
proceeding.

 

6.7          In order to discourage frivolous claims the parties agree that
unless a claimant in any proceeding arising out of this Agreement succeeds in
establishing his claim and recovering a judgment against another party
(regardless of whether such claimant succeeds against one of the other parties
to the action), then the other party shall be entitled to recover from such
claimant all of its/their reasonable legal costs and expenses relating to such
proceeding and/or incurred in preparation therefor.

 

20 

 

 

EXECUTION VERSION

 

6.8          The holding of any provision of this Agreement to be invalid or
unenforceable by a court of competent jurisdiction shall not affect any other
provision of this Agreement, which shall remain in full force and effect. If any
provision of this Agreement shall be declared by a court of competent
jurisdiction to be invalid, illegal or incapable of being enforced in whole or
in part, such provision shall be interpreted so as to remain enforceable to the
maximum extent permissible consistent with applicable law and the remaining
conditions and provisions or portions thereof shall nevertheless remain in full
force and effect and enforceable to the extent they are valid, legal and
enforceable, and no provisions shall be deemed dependent upon any other covenant
or provision unless so expressed herein.

 

6.9          It is agreed that a waiver by either party of a breach of any
provision of this Agreement shall not operate, or be construed, as a waiver of
any subsequent breach by that same party.

 

6.10        The Company agrees to execute and deliver all such further
documents, agreements and instruments and take such other and further action as
may be necessary or appropriate to carry out the purposes and intent of this
Agreement.

 

6.11        This Agreement may be executed in two or more counterparts each of
which shall be deemed an original, but all of which shall together constitute
one and the same instrument. In the event that any signature is delivered by
facsimile transmission or by e-mail delivery of a “.pdf” format data file, such
signature shall create a valid and binding obligation of the party executing (or
on whose behalf such signature is executed) with the same force and effect as if
such facsimile or “.pdf” signature page were an original thereof.

 

6.12        Nothing in this Agreement shall create or be deemed to create any
rights in any person or entity not a party to this Agreement.

 

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

 

[Signature pages follows]

 

21 

 

 

EXECUTION VERSION

 

To Subscribe for Notes and Warrants in the Private Offering of

 

GLYECO, INC.

 

1.Date and Fill in the principal amount of 10% Senior, Unsecured Promissory
Notes (the “Notes”) and accompanying three (3)-year warrants to purchase common
stock (the “Warrants”) being subscribed for and Complete and Sign the Signature
Page attached to this Subscription Agreement.

 

2.Initial the Accredited Investor Certification attached to this Subscription
Agreement.

 

3.Complete and Sign the Signature Page attached to this Subscription Agreement.
NOTICE: Please note that by executing the attached Subscription Agreement, you
will be deemed to have agreed to the terms of the Notes and Warrants, which have
been furnished to you.

 

4.Complete and Return the attached Investor Questionnaire.

 

5.Send all signed original documents to: GlyEco, Inc. at 230 Gill Way, Rock
Hill, SC 29730, Attention: Ian Rhodes, Chief Executive Officer.

 

6.

Please make your subscription payment by check payable to the order of
“___________________” or by wire transfer to:

 

Bank: _________________

Address: _________________

Account No.:_________________

ABA No.: _________________

Account Name: _________________

 

Reference: [Investor Name]

 

22

 

 

GLYECO, INC.

SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT

 

Principal Amount of the Note: $_____________

 

Purchase Price of the Note: $________________

 

Warrants to Purchase __________________ Shares of Common Stock (NOTE: To be
completed by the Subscriber)

 

Date (NOTE: To be completed by the Subscriber): __________________, 2018

 

 

If the Subscriber is an INDIVIDUAL, and if purchased as JOINT TENANTS, as
TENANTS IN COMMON, or as COMMUNITY PROPERTY:

      

 

Print Name(s)Social Security Number(s)  

      

 

Print Name(s)Social Security Number(s)  

      

 

Signature of SubscriberSignature of Co-Subscriber (if applicable):  

 

 Address:

      

      Date        

 

    

If the Subscriber is a PARTNERSHIP, CORPORATION, LIMITED LIABILITY COMPANY or
TRUST:

            Federal Taxpayer   Name of Partnership,   Identification Number 
 Corporation, Limited       Liability Company or Trust     

 

By:          Name:   State of Organization     Title:     

 

  Address:                

  Date    

 

[Company’s signature page follows]

 

 

 

EXECUTION VERSION

 

AGREED AND ACCEPTED:

 

GLYECO, INC.

 

By:        Name: Date:       Title:     

 

 

 

EXECUTION VERSION

  

SCHEDULE 5.11

 

Use of Proceeds

 

Working capital and general corporate purposes.

 

 

 

 

EXECUTION VERSION

 

FORM OF ACCREDITED INVESTOR CERTIFICATION

 

GLYECO, INC.

 

For Individual Investors Only

 

(All individual investors must INITIAL where appropriate. Where there are joint
investors both parties must INITIAL): 

    Initial _______ I certify that I have a “net worth” of at least $1 million
either individually or through aggregating my individual holdings and those in
which I have a joint, community property or other similar shared ownership
interest with my spouse.  For purposes of calculating net worth under this
paragraph, (i) the primary residence shall not be included as an asset, (ii) to
the extent that the indebtedness that is secured by the primary residence is in
excess of the fair market value of the primary residence, the excess amount
shall be included as a liability, and (iii) if the amount of outstanding
indebtedness that is secured by the primary residence exceeds the amount
outstanding sixty (60) days prior to the execution of this Subscription
Agreement, other than as a result of the acquisition of the primary residence,
the amount of such excess shall be included as a liability.     Initial _______
I certify that I have had an annual gross income for the past two years of at
least $200,000 (or $300,000 jointly with my spouse) and expect my income (or
joint income, as appropriate) to reach the same level in the current year.    
For Non-Individual Investors   (all Non-Individual Investors must INITIAL where
appropriate):     Initial _______ The undersigned certifies that it is a
partnership, corporation, limited liability company or business trust that is
100% owned by persons who meet either of the criteria for Individual Investors,
above.     Initial _______ The undersigned certifies that it is a partnership,
corporation, limited liability company or business trust that has total assets
of at least $5 million and was not formed for the purpose of investing in
Company.     Initial _______ The undersigned certifies that it is an employee
benefit plan whose investment decision is made by a plan fiduciary (as defined
in ERISA §3(21)) that is a bank, savings and loan association, insurance company
or registered investment adviser.     Initial _______ The undersigned certifies
that it is an employee benefit plan whose total assets exceed $5,000,000 as of
the date of the Subscription Agreement.

 

 

 

 

EXECUTION VERSION

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

 

 

 

 

EXECUTION VERSION

 

GLYECO, INC. 

Investor Questionnaire 

(Must be completed by Subscriber)

 

Section A - Individual Subscriber Information

 

EXACT Subscriber Name(s) in which securities are to be issued:

 

________________________________________________________________________________________________________________

 

Individual executing Profile or Trustee:

 

________________________________________________________________________________________________________________

 

Social Security Numbers / Federal I.D. Number:

 

________________________________________________________________________________________________________________

 

Date of Birth: _________________ Marital Status: _________________

 

Joint Party Date of Birth:_________________

 

Investment Experience (Years): ___________

 

Annual Income: _________________

 

Liquid Net Worth:_____________

 

Net Worth: ________________

 

Home Street Address:

 

________________________________________________________________________________________________________________

 

Home City, State & Zip Code:

 

________________________________________________________________________________________________________________

 

Home Phone: ________________________ Home Fax: _____________________

 

Home Email: _______________________________

 

Employer:

 

________________________________________________________________________________________________________________

 

Employer Street Address:

 

________________________________________________________________________________________________________________

 

Employer City, State & Zip Code:

 

________________________________________________________________________________________________________________

 

Bus. Phone: __________________________ Bus. Fax: _______________________

 

Bus. Email: ________________________________

 

Type of Business:

 

________________________________________________________________________________________________________________

 

Please check if you are a FINRA member or affiliate of a FINRA member firm:
_______

 

 

 

 

EXECUTION VERSION

 

Section B – Entity Subscriber Information

 

EXACT Subscriber Name(s) in which securities are to be issued:

 

________________________________________________________________________________________________________________

 

Authorized Individual executing Profile or Trustee:

 

________________________________________________________________________________________________________________

 

Social Security Numbers / Federal I.D. Number:

 

________________________________________________________________________________________________________________

 

Investment Experience (Years): ___________

 

Annual Income: _______________

 

Net Worth: ________________

 

Was the Trust formed for the specific purpose of purchasing the Notes?

 

☐ Yes ☐ No

 

Principal Purpose (Trust)______________________________________

 

Type of Business: ________________________________________________________

 

Street Address:

 

________________________________________________________________________________________________________________

 

City, State & Zip Code:

 

________________________________________________________________________________________________________________

 

Phone: ________________________ Fax: ________________________

 

Email: __________________________

 

 

 

 

EXECUTION VERSION

 

Section C – Form of Payment – Check or Wire Transfer

 

____

Check payable to “_____________________”

 

____Wire transfer from my account according to the section entitled “To
subscribe for the Notes and Warrants in the private offering of GLYECO, INC.”

 

Subscriber Signature(s) _______________________________________

Date_______________

 

Joint Subscriber Signature (if applicable): ________________________

Date_______________