Exhibit 10.1

 

SECURITIES PURCHASE AGREEMENT

 

This SECURITIES PURCHASE AGREEMENT (the “Agreement”), dated as of November 17,
2016, is by and among Neurotrope, Inc., a Nevada corporation (the “Company”),
and each of the investors listed on the Schedule of Buyers attached hereto
(individually, a “Buyer” and collectively, the “Buyers”).

 

RECITALS

 

A.           Each Buyer wishes to purchase, and the Company wishes to sell, upon
the terms and conditions stated in this Agreement, (i) the aggregate number of
shares of Common Stock set forth opposite such Buyer’s name in column (3) on the
Schedule of Buyers (which shall collectively be referred to herein as the
“Common Shares”) and (ii) a Series F warrant to initially acquire at an exercise
price of $0.40 per share up to the aggregate number of shares of Common Stock
set forth opposite such Buyer’s name in column (4) on the Schedule of Buyers, in
the form attached hereto (individually, a “Warrant” and, collectively, the
“Warrants”) (as exercised, collectively, the “Warrant Shares”).

 

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

 

C.           Capitalized terms used herein shall have the meanings set forth in
the Schedule of Definitions or as otherwise defined herein.

 

D.           The parties hereto each understand that this Securities Purchase
Agreement and the purchase and sale contemplated hereby is unconditional and
binding on all parties hereto.

 

AGREEMENT

 

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

 

1.PURCHASE AND SALE OF COMMON SHARES AND WARRANTS.

 

(a)          Purchase of Common Shares and Warrants. Subject to the satisfaction
(or waiver) of the conditions set forth in Section 6 below, the Company shall
issue and sell to each Buyer, and each Buyer severally, but not jointly, shall
purchase from the Company on each Closing Date (as defined below), (i) the
number of Common Shares as is set forth opposite such Buyer’s name in column (3)
on the Schedule of Buyers and (ii) Warrants to initially acquire up to the
aggregate number of Warrant Shares as is set forth opposite such Buyer’s name in
column (4) on the Schedule of Buyers. Each Buyer buying Common Shares and
Warrants at the Initial Closing or the Final Closing, if such Buyer so chooses,
shall deliver on or before the Initial Closing or Final Closing, as applicable
the Purchase Price in full to Delaware Trust Company (the “Escrow Agent”) by
check to the address listed below or via wire transfer of immediately available
funds pursuant to the wire instructions below. Each Buyer understands that the
applicable Purchase Price (defined below) will be held in escrow until the
applicable Closing on the sale of the Common Shares and Warrants has occurred,
and that such amount will be returned to such Buyer, without interest, if (i) a
minimum of $8,000,000 of Common Shares and Warrants are not sold by the Company
to the Buyers on or before November 30, 2016, or (ii) a court of competent
jurisdiction issues a final and non-appealable judgment, order, decree or award
ordering the escrow agent to deliver the Purchase Price.

 

 

 

 

Address for Payment by Check: 

Attention:

Reference:

MUST INCLUDE BUYER’S NAME

 

Wire Instructions:

Account Name:

Account Number:

Reference:

MUST INCLUDE BUYER’S NAME

 

(b)          Purchase Price. The aggregate purchase price for the Common Shares
and related Warrants to be purchased by each Buyer (the “Purchase Price”) shall
be the amount set forth opposite such Buyer’s name in column (5) on the Schedule
of Buyers which shall be equal to the amount of $0.20 per Common Share and
related Warrants.

 

(c)Closing.

 

(i)The initial closing (the “Closing”) of the purchase of the Common Shares and
Warrants by the Buyers shall occur at the offices of Mintz, Levin, Cohn, Ferris,
Glovsky and Popeo, P.C. (“Mintz”), 666 Third Avenue, New York, NY 10017 or such
other location as agreed to by the Company. The date and time of the Initial
Closing (the “Initial Closing Date”) shall be 10:00 a.m., New York time, on the
first (1st) Business Day on which the closing conditions set forth in Section 6
below are satisfied or waived (or such later date as is mutually agreed to by
the Company and each Buyer) provided that such date shall not be later than the
third (3rd) Trading Day after the date hereof, but in any event no later than
5:00 pm, New York time, on November 22, 2016. A minimum of $8,000,000 of Common
Shares and Warrants must be sold at the Initial Closing. In the event there is
more than one closing as described in Section 1(c)(ii) below, the term “Closing”
shall apply to each such closing unless otherwise specified and the term
“Closing Date” shall apply to each such closing date unless otherwise specified.
As used in this Agreement, “Business Day” means any day other than a Saturday,
Sunday or other day on which commercial banks in New York, New York are
authorized or required by law to remain closed.

 

(ii)After the Initial Closing, the Company may sell, in one additional Closing
(the “Final Closing”) on the same terms and conditions as those contained in
this Agreement, additional Common Shares and Warrants (collectively, the
“Additional Securities”), to one or more Buyers (each, an “Additional Buyer,”
and, collectively, the “Additional Buyers”) provided that each Additional Buyer
shall become a party to the Transaction Documents by executing and delivering
either an applicable adoption agreement, a counterpart signature page or omnibus
signature page to each of the Transaction Documents. The Schedule of Buyers
attached hereto shall be updated to reflect the names and addresses of the
Additional Buyers and the number of Additional Securities purchased at the Final
Closing.

 

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(d)          Form of Payment; Deliveries. On or before the Initial Closing Date
or the date of the Final Closing, as applicable, each Buyer purchasing Common
Shares and Warrants at such Closing shall pay its respective Purchase Price to
the Company or by delivering its Purchase Price to the Escrow Agent pursuant to
Section 1(a). On each applicable Closing Date, (i) the Escrow Agent shall
deliver on behalf of each Buyer acquiring Common Shares and the related Warrants
at the applicable Closing the respective Purchase Price to the Company for the
Common Shares and related Warrants to be issued and sold to such Buyer at the
Closing pursuant to Section 1(a) above. On each Closing Date, the Company shall
cause Philadelphia Stock Transfer, Inc. (together with any subsequent transfer
agent, the “Transfer Agent”) to deliver stock certificates representing such
aggregate number of Common Shares that such Buyer is purchasing at such Closing
as is set forth opposite such Buyer’s name in column (3) on the Schedule of
Buyers. Within five business days of the applicable Closing Date, the Company
shall deliver, or cause to be delivered warrant certificates, in the form
attached hereto as Exhibit A, pursuant to which such Buyer shall have the right
to initially acquire up to the number of Warrant Shares as is set forth opposite
such Buyer’s name in column (4) on the Schedule of Buyers.

 

2.BUYER’S REPRESENTATIONS AND WARRANTIES.

 

Each Buyer, severally and not jointly, represents and warrants to the Company
with respect to only itself that:

 

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

 

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

 

(c)          No Conflicts. The execution, delivery and performance by such Buyer
of this Agreement and the consummation by such Buyer of the transactions
contemplated hereby will not (i) result in a violation of the organizational
documents of such Buyer, (ii) conflict with, or constitute a default (or an
event which with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which such Buyer is a
party, or (iii) result in a violation of any law, rule, regulation, order,
judgment or decree (including federal and state securities laws) applicable to
such Buyer, except in the case of clauses (ii) and (iii) above, for such
conflicts, defaults, rights or violations which would not, individually or in
the aggregate, reasonably be expected to have a material adverse effect on the
ability of such Buyer to perform its obligations hereunder.

 

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(d)          Certain Trading Activities. Other than with respect to the
transactions contemplated herein, neither such Buyer nor, to Buyer’s Knowledge
(as defined below), any Affiliate of such Buyer which (x) had Knowledge of the
transactions contemplated hereby, (y) has or shares discretion relating to such
Buyer’s investments or trading or information concerning such Buyer’s
investments, including in respect of the Securities, and (z) is subject to such
Buyer’s review or input concerning such Affiliate’s investments or trading
(collectively, “Trading Affiliates”) has not directly or indirectly, nor has any
Person (as such term is defined in Section 3(r)) acting on behalf of or pursuant
to any understanding with such Buyer or, to Buyer’s Knowledge, Trading
Affiliate, engaged in any transactions in the securities of the Company
(including, without limitation, any Short Sales (as defined below) involving the
Company’s securities) during the period commencing as of the time that such
Buyer was first contacted by the Company or any other Person regarding this
investment in the Company and ending immediately prior to the execution of this
Agreement by such Buyer (it being understood and agreed that for all purposes of
this Agreement, and without implication that the contrary would otherwise be
true, neither transactions nor purchases nor sales shall include the location
and/or reservation of borrowable shares of Common Stock). “Short Sales” means
all “short sales” as defined in Rule 200 promulgated under Regulation SHO under
the Securities Exchange Act of 1934, as amended (the “1934 Act”). As used in
this Agreement, “Knowledge” or “Knowingly” means with respect to any Person,
what such Person actually knows or reasonably should know, and, in the case of a
corporation or other entity, what its executive officers actually know or
reasonably should know.

 

(e)          Transfer or Resale. Such Buyer understands that except as provided
in the Registration Rights Agreement entered into among the Company and the
Buyers as of the date hereof, the (“Registration Rights Agreement”), this
Agreement and Section 4(e) hereof: (i) the Securities have not been and are not
being registered under the 1933 Act or any state securities laws, and may not be
offered for sale, sold, assigned or transferred unless (A) subsequently
registered thereunder, or (B) such Buyer shall have delivered to the Company (if
requested by the Company) an opinion of counsel to such Buyer, in substance
which shall be reasonably acceptable to the Company, to the effect that such
Securities to be sold, assigned or transferred may be sold, assigned or
transferred pursuant to an exemption from such registration; (ii) any sale of
the Securities made in reliance on Rule 144 or Rule 144A promulgated under the
1933 Act (or a successor rule thereto) (collectively, “Rule 144”) may be made
only in accordance with the terms of Rule 144, and further, if Rule 144 is not
applicable, any resale of the Securities under circumstances in which the seller
(or the Person (as defined below) through whom the sale is made) may be deemed
to be an underwriter (as that term is defined in the 1933 Act) may require
compliance with some other exemption under the 1933 Act or the rules and
regulations of the SEC promulgated thereunder; and (iii) neither the Company nor
any other Person is under any obligation to register the Securities under the
1933 Act or any state securities laws or to comply with the terms and conditions
of any exemption thereunder.

 

(f)          Own Account. Such Buyer understands that (i) the Securities are
“restricted securities” and that the offer and sale of the Securities have not
been registered under the 1933 Act or any applicable state securities law and
(ii) the Securities must be held indefinitely unless a subsequent disposition
thereof is registered under the Securities Act or is exempt from such
registration. Such Buyer 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 1933 Act or any applicable state
securities law, has no present intention of distributing any of such Securities
in violation of the 1933 Act or any applicable state securities law and has no
direct or indirect arrangement or understanding with any other Persons regarding
the distribution of such Securities (this representation and warranty not
limiting such Buyer’s right to sell the Securities pursuant to the Registration
Statement (as defined in the Registration Rights Agreement) or otherwise in
compliance with applicable federal and state securities laws) in violation of
the 1933 Act or any applicable state securities law. Such Buyer is acquiring the
Securities hereunder in the ordinary course of its business.

 

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(g)          Buyer Status. At the time such Buyer was offered the Securities, it
was, and at the date hereof it is, and on each date on which it exercises any
Warrants it: (i) will be either (A) an “accredited investor” as defined in Rule
501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the 1933 Act or (B) a
“qualified institutional buyer” as defined in Rule 144A(a) under the 1933 Act or
(ii) is not a “U.S. Person” (as defined in Regulation S promulgated under the
1933 Act). If such Buyer is not a U.S. Person, such Buyer further represents and
warrants that (1) such Buyer has not subscribed for the Units for the account of
any Person who is a U.S. Person, (2) the offer and sale of the Units to such
Buyer constitute an “Offshore Transaction” (as defined in Rule 902 promulgated
under the 1933 Act), and (3) such Buyer will not resell the Securities, other
than in accordance with this Agreement, the Transaction Documents, the
provisions of Regulation S promulgated under the 1933 Act (Rules 901 through
905), pursuant to registration under the 1933 Act or pursuant to any other
available exemption from registration. Such Buyer further agrees that it will
not take any action that could have an adverse effect on the availability of the
exemption from registration provided, in the case of a Buyer covered by clause
(i) above, by Regulation D promulgated under the 1933 Act or, in the case of a
Buyer covered by clause (ii) above, by Regulation S promulgated under the 1933
Act, with respect to the offer and sale of the Units. Such Buyer is not required
to be registered as a broker-dealer under Section 15 of the 1934 Act, or a
member of the Financial Industry Regulatory Authority, Inc. or an entity engaged
in the business of being a broker dealer. Such Buyer is not affiliated with any
broker dealer registered under Section 15(a) of the 1934 Act, or a member of the
Financial Industry Regulatory Authority, Inc. or an entity engaged in the
business of being a broker dealer.

 

(h)          Experience of Such Buyer. Such Buyer, either alone or together with
its representatives, has such knowledge, sophistication and experience in
business and financial matters so as to be capable of evaluating the merits and
risks of the prospective investment in the Securities and has so evaluated the
merits and risks of such investment. Such Buyer is able to bear the economic
risk of an investment in the Securities and is able to afford a complete loss of
such investment. Such Buyer understands that nothing in the Agreement or any
other materials presented to the Buyer in connection with the purchase and sale
of the Securities constitutes legal, tax or investment advice. Such Buyer
acknowledges that it must rely on legal, tax and investment advisors of its own
choosing in connection with its purchase of the Securities.

 

(i)          General Solicitation. Such Buyer 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, disseminated over the Internet or
presented at any seminar or, to such Buyer's knowledge, any other general
solicitation or general advertisement.

 

(j)          Independent Investigation. Such Buyer, in acquiring the Securities,
has relied solely upon an independent investigation made by such Buyer and his
or her representatives, if any. Prior to the date hereof, such Buyer has been
given the opportunity to ask questions of, and receive answers from,
representatives of the Company and the Subsidiary regarding the Company’s and
the Subsidiary’s management, finances, and business. Such Buyer also has access
to or has received the SEC Documents and has carefully reviewed the SEC
Documents, including the risk factor disclosure contained therein relating to
the high degree of risk involved in investing in the Company’s securities, and
is knowledgeable about the affairs of the Company and the Subsidiary. Such Buyer
further acknowledges the additional risks associated with the transactions
contemplated by this Agreement as set forth on the Schedule of Additional Risk
Factors attached hereto. Neither such inquiries nor any other diligence
investigation conducted by such Buyer or any of its advisors or representatives
shall modify, amend or effect such Buyer’s right to rely upon the Company’s
representations and warranties and covenants contained herein or in the
Transaction Documents. As used in this Agreement, “SEC Documents” means all
reports, schedules, forms, statements and other documents, including the
exhibits thereto and documents incorporated by reference therein, filed by the
Company pursuant to the 1933 Act and the 1934 Act, including pursuant to Section
13(a) or 15(d) thereof, since August 23, 2013.

 

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(k)          No Government Recommendation or Approval. Such Buyer understands
that no United States federal or state agency, or similar agency of any other
country, has reviewed, approved, passed upon, or made any recommendation or
endorsement of the Company or the purchase of the Securities or the fairness or
suitability of the investment in the Securities nor have such authorities passed
upon or endorsed the merits of the offering of the Securities.

 

(l)          No Intent to Effect a Change of Control. Such Buyer has no present
intent to effect a “change of control” of the Company as such term is understood
under the rules promulgated pursuant to Section 13(d) of the 1934 Act.

 

(m)          No Conflicts. The execution, delivery and performance by such Buyer
of this Agreement and the consummation by such Buyer of the transactions
contemplated hereby will not (i) result in a violation of the organizational
documents of such Buyer or (ii) conflict with, or constitute a default (or an
event which with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which such Buyer is a
party, or (iii) result in a violation of any law, rule, regulation, order,
judgment or decree (including federal and state securities laws) applicable to
such Buyer, except in the case of clauses (ii) and (iii) above, for such that
are not material and do not otherwise affect the ability of such Buyer to
consummate the transactions contemplated hereby.

 

(n)          Section 13(d)(3) of 1934 Act. The several Buyers shall not
constitute a “group” within the meaning of Section 13(d)(3) of the 1934 Act and
the rules and regulations promulgated thereunder.

 

(o)          Former Shell Company. Such Buyer acknowledges and understands that
the Company was formerly a “shell company” as defined in Rule 12b-2 under the
1934 Act.

 

3.REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

 

Except as set forth under the corresponding section of the disclosure schedules
delivered to each Buyer concurrently herewith (the “Disclosure Schedules”),
which Disclosure Schedules shall be deemed a part hereof, and except as
otherwise described in the SEC Documents (excluding Sections 3(q) and 3(ii),
where such exceptions shall only apply when expressly stated therein) or in the
Disclosure Schedules, the Company represents and warrants to each of the Buyers
that:

 

(a)          Organization and Qualification. The Company and each of its
Subsidiaries are entities duly organized and validly existing and in good
standing under the laws of the jurisdiction in which they are formed, and have
the requisite power and authorization to own their properties and to carry on
their business as now being conducted and as presently proposed to be conducted.
Each of the Company and each of its Subsidiaries is duly qualified as a foreign
entity to do business and is in good standing in every jurisdiction in which its
ownership of property or the nature of the business conducted by it makes such
qualification necessary, except to the extent that the failure to be so
qualified or be in good standing would not, individually or in the aggregate,
have a Material Adverse Effect. As used in this Agreement, “Material Adverse
Effect” means any material adverse effect on (i) the business, properties,
assets, liabilities, operations (including results thereof), condition
(financial or otherwise) or prospects of the Company or any Subsidiary,
individually or taken as a whole, (ii) the transactions contemplated hereby or
in any of the other Transaction Documents or (iii) the authority or ability of
the Company to perform any of its obligations under any of the Transaction
Documents. “Subsidiaries” means any Person in which the Company, directly or
indirectly, (I) owns a majority of the outstanding capital stock or equity or
similar interest of such Person or (II) controls or operates all or any part of
the business, operations or administration of such Person, and each of the
foregoing is individually referred to herein as a “Subsidiary.”

 

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(b)          Authorization; Enforcement; Validity. The Company has the requisite
power and authority to enter into and perform its obligations under this
Agreement and the other Transaction Documents and to issue the Securities in
accordance with the terms hereof and thereof. The execution and delivery of this
Agreement and the other Transaction Documents by the Company and the
consummation by the Company of the transactions contemplated hereby and thereby
(including, without limitation, the issuance of the Common Shares, the issuance
of the Warrants and the reservation for issuance and issuance of the Warrant
Shares issuable upon exercise of the Warrants) have been duly authorized by the
Company’s board of directors and (other than the filing with United States
Securities and Exchange Commission (the “SEC”) of one or more Registration
Statements (as defined the Registration Rights Agreement), a Current Report on
Form 8-K and a Form D and any other filings as may be required by any state
securities agencies) no further filing, consent or authorization is required by
the Company, its board of directors or its stockholders or other governing body
in connection therewith. This Agreement has been, and the other Transaction
Documents will be prior to the Initial Closing, duly executed and delivered by
the Company, and each constitutes the legal, valid and binding obligations of
the Company, enforceable against the Company in accordance with its respective
terms, except as such enforceability may be limited by general principles of
equity or applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally, the enforcement
of applicable creditors’ rights and remedies and except as rights to
indemnification and to contribution may be limited by federal or state
securities law. “Transaction Documents” means, collectively, this Agreement, the
Registration Rights Agreement the Warrants, the Irrevocable Transfer Agent
Instructions and each of the other agreements and instruments entered into or
delivered by any of the parties hereto in connection with the transactions
contemplated hereby and thereby, as may be amended from time to time.

 

(c)          Issuance of Securities. The issuance of the Common Shares and the
Warrants are duly authorized and, upon issuance in accordance with the terms of
the Transaction Documents, will be validly issued, fully paid and non-assessable
and free from all preemptive or similar rights, taxes, liens, charges and other
encumbrances with respect to the issue thereof. As of the Initial Closing, the
Company shall have reserved from its duly authorized capital stock the maximum
number of shares of Common Stock issuable upon exercise of the Warrants (without
taking into account any limitations on the exercise of the Warrants set forth
therein). The issuance of the Warrant Shares is duly authorized, and upon
exercise in accordance with the Warrants, the Warrant Shares, when issued, will
be validly issued, fully paid and non-assessable and free from all preemptive or
similar rights, taxes, liens, charges and other encumbrances with respect to the
issue thereof, with the holders being entitled to all rights accorded to a
holder of Common Stock. Subject to the accuracy of the representations and
warranties of the Buyers in this Agreement, the offer and issuance by the
Company of the Securities is exempt from registration under the 1933 Act. The
Company (i) has not distributed any offering material in connection with the
offering and sale of any of the Securities and (ii) until no Buyer holds any of
the Securities, shall not distribute any offering material in connection with
the offering and sale of any of the Securities to, or by, any of the Buyers, in
each case, other than the Registration Statement(s) (or the prospectuses
contained therein).

 

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(d)          No Conflicts. Except as set forth on Section 3(d) of the Disclosure
Schedule, the execution, delivery and performance of the Transaction Documents
by the Company and the consummation by the Company of the transactions
contemplated hereby and thereby (including, without limitation, the issuance of
the Common Shares, the Warrants and Warrant Shares and the reservation for
issuance of the Warrant Shares) will not (i) result in a violation of the
Certificate of Incorporation (as defined below) (including, without limitation,
any certificates of designation contained therein) or other organizational
documents of the Company or any of its Subsidiaries, any capital stock of the
Company (including the Series B Convertible Preferred Stock), or Bylaws (as
defined below), (ii) result in the adjustment of the exercise, conversion or
exchange price and/or ratio in respect of any securities of the Company or any
of its Subsidiaries, (iii) result in any such securities exercisable,
convertible or exchangeable for a greater number of underlying securities, or
require the approval or the receipt of waivers from any holders of any
instrument or class of securities or counterparties to any agreement or
understanding to which the Company or any Subsidiary is a party, (iv) conflict
with, or constitute a default (or an event which with notice or lapse of time or
both would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which the Company or any of its Subsidiaries is a party, or (v)
result in a violation of any law, rule, regulation, order, judgment or decree
(including, without limitation, federal and state and foreign securities laws
and regulations and the rules and regulations of the Principal Market (the
“Principal Market” being the Eligible Market that is the principal securities
exchange market for the Common Stock)) applicable to the Company or any of its
Subsidiaries or by which any property or asset of the Company or any of its
Subsidiaries is bound or affected.

 

(e)          Consents. Except as set forth on Section 3(e) of the Disclosure
Schedule, the Company is not required to obtain any consent from, authorization
or order of, or make any filing which has not already been obtained or made
(including, without limitation as to the quotation on the Principal Market of
the Common Shares and the Warrant Shares upon issuance) or registration with
(other than the filing with the SEC of the Registration Statement, a Form D, a
Current Report on Form 8-K, and any other filings as may be required by any
state securities agencies), any court, governmental agency or any regulatory or
self-regulatory agency or any other Person in order for it to execute, deliver
or perform any of its obligations under or contemplated by the Transaction
Documents, in each case, in accordance with the terms hereof or thereof. All
consents, authorizations, orders, filings and registrations which the Company is
required to obtain at or prior to the Initial Closing will have been obtained or
effected on or prior to the Initial Closing Date, and neither the Company nor
any of its Subsidiaries are aware of any facts or circumstances which might
prevent the Company from obtaining or effecting any of the registration,
application or filings contemplated by the Transaction Documents. The Company is
Knowingly not in violation of the requirements of the Principal Market or
foreign, federal, state or local securities laws, and has no Knowledge of any
facts or circumstances which could reasonably lead to such violation or
suspension of the Common Stock in the foreseeable future. No statute, rule,
regulation, executive order, decree, ruling or injunction has been enacted,
entered, promulgated or endorsed by any court or governmental authority of
competent jurisdiction that prohibits the consummation of any of any of the
transactions contemplated by the Transaction Documents, and no actions, suits or
proceedings are pending or threatened by any Person that seeks to enjoin,
prohibit or otherwise adversely affect any of the transactions contemplated by
the Transaction Documents.

 

(f)          Acknowledgment Regarding Buyer’s Purchase of Securities. Except as
set forth on Section 3(f) of the Disclosure Schedule, the Company acknowledges
and agrees that each Buyer is acting solely in the capacity of an arm’s length
purchaser with respect to the Transaction Documents and the transactions
contemplated hereby and thereby and that no Buyer is (i) an officer or director
of the Company or any of its Subsidiaries or (ii) an “affiliate” (as defined in
Rule 144 promulgated under the 1933 Act (or a successor rule thereto)
(collectively, “Rule 144”)) of the Company (an “Affiliate”) or any of its
Subsidiaries. Except as set forth on Section 3(f) of the Disclosure Schedule,
the Company further acknowledges that no Buyer is acting as a financial advisor
or fiduciary of the Company or any of its Subsidiaries (or in any similar
capacity) with respect to the Transaction Documents and the transactions
contemplated hereby and thereby, and any advice given by a Buyer or any of its
representatives or agents in connection with the Transaction Documents and the
transactions contemplated hereby and thereby is merely incidental to such
Buyer’s purchase of the Securities. The Company further represents to each Buyer
that the Company’s decision to enter into the Transaction Documents has been
based solely on the independent evaluation by the Company and its
representatives. The Company is no longer an issuer identified in Rule
144(i)(1)(i) and at least one year has passed since the Company filed the “Form
10 information” with the SEC to be filed pursuant to Rule 144(i)(2) when the
Company last ceased being an issuer identified in, or subject to, Rule 144(i).

 

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(g)          Placement Agent’s Fees. The Company shall be responsible for the
payment of any placement agent’s fees, financial advisory fees, or brokers’
commissions (other than for Persons engaged by any Buyer or its investment
advisor) relating to or arising out of the transactions contemplated hereby, as
outlined on Section 3(g) of the Disclosure Schedule.

 

(h)          No Integrated Offering. Neither the Company, its Subsidiaries or
any of their Affiliates, nor any Person acting on their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would cause this offering of the
Securities to require approval of stockholders of the Company under any
applicable stockholder approval provisions, including, without limitation, under
the rules and regulations of any exchange or automated quotation system on which
any of the securities of the Company are listed or designated for quotation. No
registration of the offer, sale or transfer of any of the Securities is
required, except for registration contemplated hereby pursuant to the
Registration Rights Agreement.

 

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

 

(j)           SEC Reports; Financial Statements. During the two years prior to
the date hereof, the Company has timely filed all reports, schedules, forms,
statements and other documents required to be filed by it with the SEC pursuant
to the reporting requirements of the 1934 Act (all of the foregoing filed prior
to the date hereof and all exhibits included therein and financial statements,
notes and schedules thereto and documents incorporated by reference therein
being hereinafter referred to as the “SEC Reports”). As of their respective
dates, the SEC Reports complied in all material respects with the requirements
of the 1934 Act and the rules and regulations of the SEC promulgated thereunder
applicable to the SEC Reports, and none of the SEC Reports, at the time they
were filed with the SEC, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading. As of their respective dates, the
financial statements of the Company included in the SEC Reports complied in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto as in effect as of the
time of filing. Such financial statements have been prepared in accordance with
generally accepted accounting principles, consistently applied, during the
periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto, or (ii) in the case of unaudited interim
statements, to the extent they may exclude footnotes or may be condensed or
summary statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments which will not be
material, either individually or in the aggregate). No other information
provided by or on behalf of the Company to any Buyer which is not included in
the SEC Reports contains any untrue statement of a material fact or omits to
state any material fact necessary, in order to make the statements therein not
misleading, in light of the circumstances under which they are or were made.

 

- 9 -

 

  

(k)          Absence of Certain Changes. Since the date of the Company’s most
recent audited financial statements contained in a Form 10-K, except as
disclosed in Section 3(k) of the Disclosure Schedule and the SEC Documents filed
subsequent thereto, there has been no material adverse change and no material
adverse development in the business, assets, liabilities, properties, operations
or financial condition of the Company. Since the date of the Company’s most
recent audited financial statements contained in a Form 10-K, except as
disclosed in Section 3(k) of the Disclosure Schedule and the SEC Documents filed
subsequent thereto, neither the Company nor any of its Subsidiaries has (i)
declared or paid any dividends, (ii) sold any assets, individually or in the
aggregate, outside of the ordinary course of business or (iii) made any material
capital expenditures, individually or in the aggregate. Neither the Company nor
any of its Subsidiaries has taken any steps to seek protection pursuant to any
law or statute relating to bankruptcy, insolvency, reorganization, receivership,
liquidation or winding up, nor does the Company or any Subsidiary have any
Knowledge or reason to believe that any of their respective creditors intend to
initiate involuntary bankruptcy proceedings or any actual Knowledge of any fact
which would reasonably lead a creditor to do so. Except as provided in the SEC
Reports, the Company and its Subsidiaries, individually and on a consolidated
basis, are not as of the date hereof, and after giving effect to the
transactions contemplated hereby to occur at the Initial Closing will not be,
Insolvent (as defined below). For purposes of this Section, “Insolvent” means,
(I) with respect to the Company and its Subsidiaries, on a consolidated basis,
(i) the present fair saleable value of the Company’s and its Subsidiaries’
assets is less than the amount required to pay the Company’s and its
Subsidiaries’ total Indebtedness (as defined below), (ii) the Company and its
Subsidiaries are unable to pay their debts and liabilities, subordinated,
contingent or otherwise, as such debts and liabilities become absolute and
matured or (iii) the Company and its Subsidiaries intend to incur or believe
that they will incur debts that would be beyond their ability to pay as such
debts mature; and (II) with respect to the Company and each Subsidiary,
individually, (i) the present fair saleable value of the Company’s or such
Subsidiary’s (as the case may be) assets is less than the amount required to pay
its respective total Indebtedness, (ii) the Company or such Subsidiary (as the
case may be) is unable to pay its respective debts and liabilities,
subordinated, contingent or otherwise, as such debts and liabilities become
absolute and matured or (iii) the Company or such Subsidiary (as the case may
be) intends to incur or believes that it will incur debts that would be beyond
its respective ability to pay as such debts mature. Neither the Company nor any
of its Subsidiaries has engaged in any business or in any transaction, and is
not about to engage in any business or in any transaction, for which the
Company’s or such Subsidiary’s remaining assets constitute unreasonably small
capital.

 

(l)          No Undisclosed Events, Liabilities, Developments or Circumstances.
Since the date of the Company’s most recent audited financial statements
contained in a Form 10-K, except as disclosed in Section 3(l) of the Disclosure
Schedule and the SEC Documents filed subsequent thereto, no event, liability,
development or circumstance has occurred or exists, or is reasonably expected to
exist or occur with respect to the Company, any of its Subsidiaries or their
respective business, properties, liabilities, operations or financial condition
that (i) is required to be disclosed by the Company under applicable securities
laws on a registration statement filed with the SEC relating to an issuance and
sale by the Company of its Common Stock and which has not been publicly
announced, or (ii) could reasonably be expected to have a Material Adverse
Effect.

 

- 10 -

 

  

(m)          Conduct of Business; Regulatory Permits. Neither the Company nor
any of its Subsidiaries is in violation of any term of or in default under its
Certificate of Incorporation, any certificate of designation, preferences or
rights of any other outstanding series of preferred stock of the Company or any
of its Subsidiaries or Bylaws or their organizational charter, certificate of
formation or certificate of incorporation or bylaws, respectively. Neither the
Company nor any of its Subsidiaries is in violation of any judgment, decree or
order or any statute, ordinance, rule or regulation applicable to the Company or
any of its Subsidiaries, and neither the Company nor any of its Subsidiaries
will conduct its business in violation of any of the foregoing, except in all
cases for possible violations which would not, individually or in the aggregate,
have a Material Adverse Effect. Without limiting the generality of the
foregoing, to the Company’s Knowledge, the Company is not in violation of any of
the rules, regulations or requirements of the Principal Market and has no
Knowledge of any facts or circumstances that could reasonably lead to suspension
of the Common Stock by the Principal Market in the foreseeable future and the
Company is in compliance with all requirements in order to maintain quotation on
the Principal Market. Since October 2, 2013, (i) the Common Stock has been
designated for quotation on the Principal Market, (ii) trading in the Common
Stock has not been suspended by the SEC or the Principal Market and (iii) the
Company has received no communication, written or oral, from the SEC or the
Principal Market regarding or relating to the suspension of the Common Stock
from the Principal Market. The Company and each of its Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate regulatory
authorities necessary to conduct their respective businesses, except where the
failure to possess such certificates, authorizations or permits would not have,
individually or in the aggregate, a Material Adverse Effect, and neither the
Company nor any such Subsidiary has received any notice of proceedings relating
to the revocation or modification of any such certificate, authorization or
permit.

 

(n)          Foreign Corrupt Practices; Certain Other Unlawful Matters. Neither
the Company nor any of its Subsidiaries, nor to the Knowledge of the Company,
any director, officer, agent, employee or other Person acting on behalf of the
Company or any of its Subsidiaries has, in the course of its actions for, or on
behalf of, the Company or any of its Subsidiaries (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; (iii) violated or is in violation of any provision of the U.S.
Foreign Corrupt Practices Act of 1977, as amended (or rules or regulations or
interpretations thereunder); or (iv) made any unlawful bribe, rebate, payoff,
influence payment, kickback or other unlawful payment to any foreign or domestic
government official or employee or otherwise. The Company and its Subsidiaries
are in compliance with, and have not previously violated, the USA Patriot Act of
2001 and all other applicable U.S. and non-U.S. anti-money laundering laws and
regulations, including, without limitation, the laws, regulations and Executive
Orders and sanctions programs administered by the U.S. Office of Foreign Assets
Control, including, without limitation, (i) Executive Order 13224 of September
23, 2001 entitled, “Blocking Property and Prohibiting Transactions With Persons
Who Commit, Threaten to Commit, or Support Terrorism” (66 Fed. Reg. 49079
(2001)); and (ii) any regulations contained in 31 CFR, Subtitle B, Chapter V.

 

(o)          Sarbanes-Oxley Act. The Company and each Subsidiary is in
compliance with all applicable requirements of the Sarbanes-Oxley Act of 2002,
and all applicable rules and regulations promulgated by the SEC thereunder.

 

(p)          Transactions With Affiliates. Except as disclosed in Section 3(p)
of the Disclosure Schedule and the SEC Documents, none of the officers,
directors or employees or Affiliates of the Company or any of its Subsidiaries
is presently a party to any transaction with the Company or any of its
Subsidiaries (other than for ordinary course services as employees, officers or
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 such
officer, director or employee or, to the Knowledge of the Company or any of its
Subsidiaries, any corporation, partnership, trust or other Person in which any
such officer, director or employee or Affiliate has a substantial interest or is
an employee, officer, director, trustee or partner.

 

- 11 -

 

  

(q)Equity Capitalization. The authorized capital stock of the Company consists
of

 

(i)            as of November 17, 2016 and excluding the Securities, 400,000,000
shares of Common Stock, of which 49,847,167 shares are issued and outstanding,

 

(ii)           as of November 17, 2016 and excluding the Securities, 50,000,000
shares of preferred stock, of which 24,325,000 shares have been designated as
Series A Convertible Preferred Stock, of which no shares are issued and
outstanding shares and 333,333 shares have been designated as Series B
Convertible Preferred Stock, of which 255,927.4 shares are issued and
outstanding and shall be converted into an aggregate of 26,425,973 shares of
Common Stock following the entry into of this Agreement and immediately prior to
the Initial Closing, and

 

(iii)          as of November 17, 2016 and excluding the Securities, other
securities convertible or exercisable into a total of 93,292,9719 shares of
Common Stock, consisting of 83,360,437 shares of Common Stock underlying
warrants and 9,932,534 shares of Common Stock underlying options.

 

On or prior to the date hereof, the Company shall have filed an Amendment to its
Certificate of Designations for the Series B Convertible Preferred Stock
relating to the forced conversion of the Series B Convertible Preferred Stock
following the entry into of this Agreement and immediately prior to the Initial
Closing. The Company intends to effect a reverse stock split of its Common Stock
(the “Reverse Stock Split”) within thirty (30) days following the Final Closing.

 

No shares of Common Stock are held in treasury. All of such outstanding shares
are duly authorized and have been, or upon issuance will be, validly issued and
are fully paid and non-assessable.

 

As of November 17, 2016, excluding the Securities, 15,111,454 shares of the
Company’s issued and outstanding Common Stock on the date hereof are owned by
Persons who are “Affiliates” of the Company or any of its Subsidiaries. For
purposes of this paragraph, “Affiliate shall be as defined in Rule 405 of the
1933 Act and calculated based on the assumption that officers, directors and
holders of at least 10% of the Company’s issued and outstanding Common Stock
(and only such persons) are “Affiliates” without conceding that any such Persons
are “Affiliates” for purposes of federal securities laws.

 

Except as set forth in Section 3(q) of the Disclosure Schedule, none of the
Company’s or any Subsidiary’s capital stock is subject to preemptive rights or
any other similar rights or any liens or encumbrances suffered or permitted by
the Company or any Subsidiary. Except as set out in this Agreement, as of
November 17, 2016, there are no outstanding options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, or exercisable or exchangeable for, any
capital stock of the Company or any of its Subsidiaries, or contracts,
commitments, understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to issue additional capital stock of the
Company or any of its Subsidiaries or options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, or exercisable or exchangeable for, any
capital stock of the Company or any of its Subsidiaries. Except as set forth in
Section 3(q) of the Disclosure Schedule and the SEC Reports, (A) there are no
outstanding debt securities, notes, credit agreements, credit facilities or
other agreements, documents or instruments evidencing Indebtedness of the
Company or any of its Subsidiaries or by which the Company or any of its
Subsidiaries is or may become bound; (B) there are no financing statements
securing obligations in any amounts filed in connection with the Company or any
of its Subsidiaries; (C) there are no agreements or arrangements under which the
Company or any of its Subsidiaries is obligated to register the sale of any of
their securities under the 1933 Act (except pursuant to the Transaction
Documents); (D) there are no outstanding securities or instruments of the
Company or any of its Subsidiaries which contain any redemption or similar
provisions, 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; (E) there
are no securities or instruments containing anti-dilution or similar provisions
that will be triggered by the issuance of the Securities; (F) neither the
Company nor any Subsidiary has any stock appreciation rights or “phantom stock”
plans or agreements or any similar plan or agreement; and (G) neither the
Company nor any of its Subsidiaries has any liabilities or obligations required
to be disclosed in the SEC Reports which are not so disclosed in the SEC
Documents, other than those incurred in the ordinary course of the Company’s or
its Subsidiaries’ respective businesses and which, individually or in the
aggregate, do not or would not have a Material Adverse Effect. The SEC Documents
contain true, correct and complete copies of the Company’s Certificate of
Incorporation, as amended and as in effect on the date hereof (the “Certificate
of Incorporation”), and the Company’s bylaws, as amended and as in effect on the
date hereof (the “Bylaws”), and the terms of all securities convertible into, or
exercisable or exchangeable for, shares of Common Stock and the material rights
of the holders thereof in respect thereto. For the sake of clarity, the number
of shares provided in this Section 3(q) with respect to November 17, 2016 are
provided as of the close of business on such date, and such numbers are prior to
giving effect to the conversion as contemplated above.

 

- 12 -

 

  

(r)          Indebtedness and Other Contracts. Except as provided in Section
3(r) of the Disclosure Schedule and the SEC Reports, neither the Company nor any
of its Subsidiaries (i) has any outstanding Indebtedness, (ii) is a party to any
contract, agreement or instrument, the violation of which, or default under
which, by the other party or parties to such contract, agreement or instrument
could reasonably be expected to result in a Material Adverse Effect, (iii) is in
violation of any term of, or in default under, any contract, agreement or
instrument relating to any Indebtedness, except where such violations and
defaults would not result, individually or in the aggregate, in a Material
Adverse Effect, or (iv) is a party to any contract, agreement or instrument
relating to any Indebtedness, the performance of which, in the judgment of the
Company’s officers, has or is expected to have a Material Adverse Effect since
the date of the Company’s most recent audited financial statements contained in
a Form 10-K. For purposes of this Agreement: (x) “Indebtedness” of any Person
means, without duplication (A) all indebtedness for borrowed money, (B) all
obligations issued, undertaken or assumed as the deferred purchase price of
property or services (including, without limitation, “capital leases” in
accordance with generally accepted accounting principles) (other than trade
payables entered into in the ordinary course of business), (C) all reimbursement
or payment obligations with respect to letters of credit, surety bonds and other
similar instruments, (D) all obligations evidenced by notes, bonds, debentures
or similar instruments, including obligations so evidenced incurred in
connection with the acquisition of property, assets or businesses, (E) all
indebtedness created or arising under any conditional sale or other title
retention agreement, or incurred as financing, in either case with respect to
any property or assets acquired with the proceeds of such indebtedness (even
though the rights and remedies of the seller or bank under such agreement in the
event of default are limited to repossession or sale of such property), (F) all
monetary obligations under any leasing or similar arrangement which, in
connection with generally accepted accounting principles, consistently applied
for the periods covered thereby, is classified as a capital lease, (G) all
indebtedness referred to in clauses (A) through (F) above secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any mortgage, lien, pledge, charge, security
interest or other encumbrance upon or in any property or assets (including
accounts and contract rights) owned by any Person, even though the Person which
owns such assets or property has not assumed or become liable for the payment of
such indebtedness, and (H) all Contingent Obligations in respect of indebtedness
or obligations of others of the kinds referred to in clauses (A) through (G)
above; (y) “Contingent Obligation” means, as to any Person, any direct or
indirect liability, contingent or otherwise, of that Person with respect to any
indebtedness, lease, dividend or other obligation of another Person if the
primary purpose or intent of the Person incurring such liability, or the primary
effect thereof, is to provide assurance to the obligee of such liability that
such liability will be paid or discharged, or that any agreements relating
thereto will be complied with, or that the holders of such liability will be
protected (in whole or in part) against loss with respect thereto; and (z)
“Person” means an individual, a limited liability company, a partnership, a
joint venture, a corporation, a trust, an unincorporated organization, any other
entity and a government or any department or agency thereof.

 

- 13 -

 

  

(s)          Absence of Litigation. There is no action, suit, proceeding,
inquiry or investigation before or by any court, public board, government
agency, self-regulatory organization or body pending or, to the Knowledge of the
Company, threatened against or affecting the Company or any of its Subsidiaries,
the Common Stock or any of the Company’s or its Subsidiaries’ officers or
directors which is outside of the ordinary course of business or individually or
in the aggregate material to the Company or any of its Subsidiaries. There has
not been, and to the Knowledge of the Company, there is not pending or
contemplated, any investigation by the SEC involving the Company, any of its
Subsidiaries or any current or former director or officer of the Company or any
of its Subsidiaries. The SEC has not issued any stop order or other order
suspending the effectiveness of the Registration Statement.

 

(t)          Insurance. The Company and each of its Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as management of the Company believes to be prudent and
customary in the businesses in which the Company and its Subsidiaries are
engaged. Neither the Company nor any such Subsidiary has been refused any
insurance coverage sought or applied for, and neither the Company nor any such
Subsidiary has any reason to believe that it will be unable to renew its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not have a Material Adverse Effect.

 

(u)          Employee Relations. Neither the Company nor any of its Subsidiaries
is a party to any collective bargaining agreement or employs any member of a
union. No executive officer (as defined in Rule 501(f) promulgated under the
1933 Act) or other key employee of the Company or any of its Subsidiaries has
notified the Company or any such Subsidiary that such officer intends to leave
the Company or any such Subsidiary or otherwise terminate such officer’s
employment with the Company or any such Subsidiary. No executive officer or
other key employee of the Company or any of its Subsidiaries is, or is now
expected by the Company to be, in connection with employment by the Company, 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 or other key employee (as the case may
be) does not subject the Company or any of its Subsidiaries to any liability
with respect to any of the foregoing matters. The Company and its Subsidiaries
are in compliance with all 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 Material Adverse Effect.

 

(v)         Title. The Company and its Subsidiaries have good and marketable
title in fee simple to all real property, and have good and marketable title to
all personal property, owned by them which is material to the business of the
Company and its Subsidiaries, in each case, free and clear of all liens,
encumbrances and defects except such as do not materially affect the value of
such property and do not interfere with the use made and proposed to be made of
such property by the Company and any of its Subsidiaries. Any real property and
facilities held under lease by the Company or any of its Subsidiaries are held
by them under valid, subsisting and enforceable leases with such exceptions as
are not material and do not interfere with the use made and proposed to be made
of such property and buildings by the Company or any of its Subsidiaries.

 

- 14 -

 

  

(w)          Intellectual Property Rights. The Company and its Subsidiaries own
or possess adequate rights or licenses to use all trademarks, trade names,
service marks, service mark registrations, service names, patents, patent
rights, copyrights, original works, inventions, licenses, approvals,
governmental authorizations, trade secrets and other intellectual property
rights and all applications and registrations therefor (“Intellectual Property
Rights”) necessary to conduct their respective businesses as now conducted. The
Company has no Knowledge of any infringement by the Company or any of its
Subsidiaries of intellectual property rights of others. Neither the Company nor
its Subsidiary has any Knowledge of any claim, action or proceeding being made
or brought it or being threatened, against the Company or any of its
Subsidiaries regarding their Intellectual Property Rights. Neither the Company
nor its Subsidiary has any Knowledge of any facts or circumstances which might
give rise to any of the foregoing infringements or claims, actions or
proceedings. The Company and each of its Subsidiaries have taken reasonable
security measures to protect the secrecy, confidentiality and value of all of
their Intellectual Property Rights.

 

(x)          Environmental Laws. To the best of the Company’s Knowledge, for all
activities which the Company is specifically and directly involved in, the
Company and its Subsidiaries (i) are in compliance with all Environmental Laws
(as defined below), (ii) have received all permits, licenses or other approvals
required of them under applicable Environmental Laws to conduct their respective
businesses and (iii) are in compliance with all terms and conditions of any such
permit, license or approval where, in each of the foregoing clauses (i), (ii)
and (iii), the failure to so comply could be reasonably expected to have,
individually or in the aggregate, a Material Adverse Effect. The term
“Environmental Laws” means all federal, state, local or foreign laws of the
applicable jurisdictions to which the Company is subject relating to pollution
or protection of human health or the environment (including, without limitation,
ambient air, surface water, groundwater, land surface or subsurface strata),
including, without limitation, laws relating to emissions, discharges, releases
or threatened releases of chemicals, pollutants, contaminants, or toxic or
hazardous substances or wastes (collectively, “Hazardous Materials”) into the
environment, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous Materials,
as well as all authorizations, codes, decrees, demands or demand letters,
injunctions, judgments, licenses, notices or notice letters, orders, permits,
plans or regulations issued, entered, promulgated or approved thereunder.

 

(y)          Subsidiary Rights. The Company or one of its Subsidiaries has the
unrestricted right to vote, and (subject to limitations imposed by applicable
law) to receive dividends and distributions on, all capital securities of its
Subsidiaries as owned by the Company or such Subsidiary.

 

(z)          Tax Status. The Company and each of its Subsidiaries (i) has timely
paid all taxes and other governmental assessments and charges that are material
in amount, shown or determined to be due, except those being contested in good
faith and (ii) has set aside on its books provision reasonably adequate for the
payment of all taxes for periods subsequent to the periods to which returns,
reports or declarations were due. To the Company’s Knowledge, there are no
unpaid taxes in any material amount claimed to be due by the taxing authority of
any jurisdiction, and the officers of the Company and its Subsidiaries know of
no basis for any such claim. The Company is not operated in such a manner as to
qualify as a passive foreign investment company, as defined in Section 1297 of
the U.S. Internal Revenue Code of 1986, as amended.

 

- 15 -

 

  

(aa)         Internal Accounting and Disclosure Controls. Except as otherwise
provided in the SEC Reports, the Company and each of its Subsidiaries maintains
internal control over financial reporting (as such term is defined in Rule
13a-15(f) under the 1934 Act) that is effective to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted
accounting principles, including that (i) transactions are executed in
accordance with management’s general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain asset and liability accountability, (iii) access to assets or
incurrence of liabilities is permitted only in accordance with management’s
general or specific authorization and (iv) the recorded accountability for
assets and liabilities is compared with the existing assets and liabilities at
reasonable intervals and appropriate action is taken with respect to any
difference. Except as otherwise provided in the SEC Reports, the Company
maintains disclosure controls and procedures (as such term is defined in Rule
13a-15(e) under the 1934 Act) that are effective in ensuring that information
required to be disclosed by the Company in the reports that it files or submits
under the 1934 Act is recorded, processed, summarized and reported, within the
time periods specified in the rules and forms of the SEC, including, without
limitation, controls and procedures designed to ensure that information required
to be disclosed by the Company in the reports that it files or submits under the
1934 Act is accumulated and communicated to the Company’s management, including
its principal executive officer or officers and its principal financial officer
or officers, as appropriate, to allow timely decisions regarding required
disclosure. Since the date of the Company’s most recent audited financial
statements contained in a Form 10-K, neither the Company nor any of its
Subsidiaries has received any notice or correspondence from any accountant or
other Person relating to any potential material weakness or significant
deficiency in any part of the internal controls over financial reporting of the
Company or any of its Subsidiaries.

 

(bb)        Off Balance Sheet Arrangements. There is no transaction,
arrangement, or other relationship between the Company or any of its
Subsidiaries and an unconsolidated or other off balance sheet entity that is
required to be disclosed by the Company in its 1934 Act filings and is not so
disclosed or that otherwise could be reasonably likely to have a Material
Adverse Effect.

 

(cc)         Investment Company Status. The Company is not, and upon
consummation of the sale of the Securities will not be, an “investment company,”
an Affiliate of an “investment company,” a company controlled by an “investment
company” or an “affiliated person” of, or “promoter” or “principal underwriter”
for, an “investment company” as such terms are defined in the Investment Company
Act of 1940, as amended.

 

(dd)        Acknowledgement Regarding Buyers’ Trading Activity. Except for the
certain Buyers set forth on Section 3(dd) of the Disclosure Schedule and Section
4(f) of the Disclosure Schedule which have entered into a confidential
disclosure agreement with the Company that prohibits trading in the Company’s
securities until certain material, non-public information received is publicly
announced, it is understood and acknowledged by the Company that (i) following
the public disclosure of the transactions contemplated by the Transaction
Documents, in accordance with the terms thereof, none of the Buyers have been
asked by the Company or any of its Subsidiaries to agree, nor has any Buyer
agreed with the Company or any of its Subsidiaries, to desist from effecting any
transactions in or with respect to (including, without limitation, purchasing or
selling, long and/or short) any securities of the Company, or “derivative”
securities based on securities issued by the Company or to hold the Securities
for any specified term; (ii) any Buyer, and counterparties in “derivative”
transactions to which any such Buyer is a party, directly or indirectly,
presently may have a “short” position in the Common Stock which was established
prior to such Buyer’s Knowledge of the transactions contemplated by the
Transaction Documents; and (iii) each Buyer shall not be deemed to have any
affiliation with or control over any arm’s length counterparty in any
“derivative” transaction. The Company further understands and acknowledges that
following the public disclosure of the transactions contemplated by the
Transaction Documents pursuant to the Press Release (as defined below), one or
more Buyers may engage in hedging and/or trading activities at various times
during the period that the Securities are outstanding, including, without
limitation, during the periods that the value and/or number of the Warrant
Shares deliverable with respect to the Securities are being determined and (b)
such hedging and/or trading activities, if any, can reduce the value of the
existing stockholders’ equity interest in the Company both at and after the time
the hedging and/or trading activities are being conducted. The Company
acknowledges that such aforementioned hedging and/or trading activities do not
constitute a breach of this Agreement or any other Transaction Document or any
of the documents executed in connection herewith or therewith.

 

- 16 -

 

  

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

 

(ff)         U.S. Real Property Holding Corporation. Neither the Company nor any
of its Subsidiaries is, or has ever been, and so long as any of the Securities
are held by any of the Buyers, shall become, a U.S. real property holding
corporation within the meaning of Section 897 of the Internal Revenue Code of
1986, as amended, and the Company and each Subsidiary shall so certify upon any
Buyer’s request.

 

(gg)         Transfer Taxes. On each Closing Date, all stock transfer or other
taxes (other than income or similar taxes) which are required to be paid in
connection with the issuance and sale of the Securities to be sold to each Buyer
hereunder will be, or will have been, fully paid or provided for by the Company,
and all laws imposing such taxes will be or will have been complied with.

 

(hh)         Bank Holding Company Act. Neither the Company nor any of its
Subsidiaries is subject to the Bank Holding Company Act of 1956, as amended (the
“BHCA”) or to regulation by the Board of Governors of the Federal Reserve System
(the “Federal Reserve”). Neither the Company nor, to its Knowledge, any of its
Subsidiaries or Affiliates owns or controls, directly or indirectly, five
percent (5%) or more of the outstanding shares of any class of voting securities
or twenty-five percent (25%) or more of the total equity of a bank or any equity
that is subject to the BHCA or to regulation by the Federal Reserve. Neither the
Company nor, to its Knowledge, any of its Subsidiaries or Affiliates exercises a
controlling influence over the management or policies of a bank or any entity
that is subject to the BHCA or to regulation by the Federal Reserve.

 

(ii)         Registration Rights. No holder of securities of the Company has
rights to the registration of any securities of the Company because of the
issuance of the Securities hereunder that could expose the Company to material
liability or any Buyer to any liability or that could impair the Company’s
ability to consummate the issuance and sale of the Securities in the manner, and
at the times, contemplated hereby, which rights have not been waived by the
holder thereof as of the date hereof.

 

(jj)         Public Utility Holding Act. Neither the Company nor any of its
Subsidiaries is a “holding company,” or an “Affiliate” of a “holding company,”
as such terms are defined in the Public Utility Holding Act of 2005.

 

(kk)         Federal Power Act. Neither the Company nor any of its Subsidiaries
is subject to regulation as a “public utility” under the Federal Power Act, as
amended.

 

- 17 -

 

  

(ll)         Disclosure. Except for the certain Buyers set forth on Section 4(f)
of the Disclosure Schedule which have entered into a confidential disclosure
agreement with the Company that prohibits trading in the Company’s securities
until certain material, non-public information received is publicly announced,
the Company confirms that neither it nor any other Person acting on its behalf
has provided any of the Buyers or their agents or counsel with any information
that constitutes or could reasonably be expected to constitute material,
non-public information concerning the Company or any of its Subsidiaries, other
than with respect to the transactions contemplated by this Agreement and the
other Transaction Documents and other information contained in the 8-K Filing.
The Company understands and confirms that each of the Buyers will rely on the
foregoing representations in effecting transactions in securities of the
Company. All written disclosure provided to the Buyers regarding the Company and
its Subsidiaries, their businesses and the transactions contemplated hereby,
including the schedules to this Agreement, furnished by or on behalf of the
Company or any of its Subsidiaries is true and correct in all material respects
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 the
light of the circumstances under which they were made, not misleading. Each
press release issued by the Company or any of its Subsidiaries during the twelve
(12) months preceding the date of this Agreement did not at the time of release
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they are made, not
misleading. No event or circumstance has occurred or information exists with
respect to the Company or any of its Subsidiaries or its or their business,
properties, liabilities, prospects, operations (including results thereof) or
conditions (financial or otherwise), which, under applicable law, rule or
regulation, requires public disclosure at or before the date hereof or
announcement by the Company but which has not been so publicly disclosed. The
Company acknowledges and agrees that no Buyer makes or has made any
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in Section 2.

 

(mm)         Consent of Holders of Series B Convertible Preferred Stock.
Pursuant to the Certificate of Designations, Preferences and Rights of Series B
Convertible Preferred Stock including Section 6 thereof, the Company has
obtained the written consent of the holders of a majority of the Series B
Convertible Preferred Stock, Iroquois Master Fund Ltd. and Hudson Bay Master
Fund LTD (or their respective affiliates) approving (i) the mandatory conversion
of all shares of the Series B Preferred Stock, with the mandatory conversion
time being immediately prior to the Initial Closing and (ii) the authorization
and issuance of the Common Shares and the related Warrants. The conversion price
for the Series B Preferred Stock shall be $0.58 pursuant to the Company’s
Certificate of Designations, Preferences and Rights of Series B Convertible
Preferred Stock, as amended.

 

4.COVENANTS.

 

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

 

(b)          Financial Information. If any of the following are filed with the
SEC, the Company agrees to send the following to each Buyer during the Reporting
Period, unless the following are filed with the SEC through EDGAR and are
available to the public through the EDGAR system, and unless any, or any portion
of, the following has been redacted pursuant to a confidential treatment request
or a determination of confidentiality has been made by the SEC (in which event
the following in the form filed with the SEC shall be sent), within one (1)
Business Day after the filing thereof with the SEC, (i) a copy of its Annual
Reports on Form 10-K and Quarterly Reports on Form 10-Q, any interim reports or
any consolidated balance sheets, income statements, stockholders’ equity
statements and/or cash flow statements for any period other than annual, any
Current Reports on Form 8-K and any registration statements (other than on Form
S-8) or amendments filed pursuant to the 1933 Act, (ii) on the same day as the
release thereof, facsimile copies of all press releases issued by the Company or
any of its Subsidiaries and (iii) copies of any notices and other information
made available or given to the stockholders of the Company generally,
contemporaneously with the making available or giving thereof to the
stockholders.

 

- 18 -

 

  

(c)          Quotation/Listing. The Company’s Common Stock is currently
designated for quotation on the OTCQB marketplace of the OTC Markets Group, Inc.
The Company shall maintain the Common Stock’s designation for quotation (as the
case may be) on the OTCQX marketplace of the OTC Markets Group, Inc., the OTCQB
marketplace of the OTC Markets Group, Inc., The New York Stock Exchange, the
NYSE MKT, the Nasdaq Global Market, the Nasdaq Capital Market or the Nasdaq
Global Select Market (each, an “Eligible Market”). Neither the Company nor any
of its Subsidiaries shall take any action which could be reasonably expected to
result in the delisting or suspension of the Common Stock on an Eligible Market
(other than in connection with listing on a different Eligible Market). The
Company shall pay all fees and expenses in connection with satisfying its
obligations under this Section. The Company intends to apply for listing of its
Common Stock on the NASDAQ Capital Market or NYSE MKT following the Final
Closing.

 

(d)          Fees. The Company shall reimburse Empery Asset Master, LTD
(“Empery”) or its designee(s) for all costs and expenses incurred by it or its
affiliates in connection with the transactions contemplated by the Transaction
Documents (including, without limitation, all legal fees and disbursements in
connection therewith, structuring, documentation and implementation of the
transactions contemplated by the Transaction Documents and due diligence and
regulatory filings in connection therewith) in a non-accountable amount equal to
$20,000, which amount shall be withheld by Empery from its Purchase Price at the
Initial Closing or Final Closing, as applicable. The Company shall be
responsible for the payment of any placement agent’s fees, financial advisory
fees, broker’s commissions (other than for Persons engaged by any Buyer), escrow
agent fees, transfer agent fees or legal fees incurred by the Company relating
to or arising out of the transactions contemplated hereby (including, without
limitation, any fees payable to the placement agent, Katalyst Securities LLC and
GP Nurmenkari Inc. (collectively referred to as the “Placement Agents”)). The
Company shall pay, and hold each Buyer harmless against, any liability, loss or
expense (including, without limitation, reasonable attorneys’ fees and
out-of-pocket expenses) arising in connection with any claim relating to any
such payment. Except as otherwise set forth in the Transaction Documents, each
party to this Agreement shall bear its own expenses in connection with the sale
of the Securities to the Buyers.

 

(e)          Pledge of Securities. Notwithstanding anything to the contrary
contained in this Agreement, the Company acknowledges and agrees that the
Securities may be pledged by a Buyer in connection with a bona fide margin
agreement or other loan or financing arrangement that is secured by the
Securities. The pledge of Securities shall not be deemed to be a transfer, sale
or assignment of the Securities hereunder, and no Buyer effecting a pledge of
Securities shall be required to provide the Company with any notice thereof or
otherwise make any delivery to the Company pursuant to this Agreement or any
other Transaction Document. The Company hereby agrees to execute and deliver
such documentation as a pledgee of the Securities may reasonably request in
connection with a pledge of the Securities to such pledgee by a Buyer.

 

- 19 -

 

  

(f)          Disclosure of Transactions and Other Material Information. The
Company shall, on or before 9:30 a.m., New York time, on the first Business Day
following the date hereof, issue a press release (the “Press Release”)
reasonably acceptable to each of the Large Investors (as defined below)
disclosing all the material terms of the transactions contemplated by the
Transaction Documents. In addition, the Company shall, on or before 9:30 a.m.,
New York time, on the first Business Day following the date of the Final
Closing, issue a press release reasonably acceptable to each of the Large
Investors disclosing the Final Closing. On or before 5:30 p.m., New York time,
on or before the fourth Business Day following the date hereof, the Company
shall file a Current Report on Form 8-K describing all the material terms of the
transactions contemplated by the Transaction Documents in the form required by
the 1934 Act and attaching all the material Transaction Documents (including,
without limitation, this Agreement (and all schedules to this Agreement) and the
form of Warrants) (including all attachments, the “8-K Filing”). From and after
the issuance of the Press Release and the 8-K Filing, the Company shall have
disclosed all material, non-public information (if any) delivered to any of the
Buyers (excluding those set out in Schedule 4(f)) by the Company or any of its
Subsidiaries, or any of their respective officers, directors, employees or
agents. In addition, effective after the issuance of the Press Release and the
8-K Filing, the Company acknowledges and agrees that any and all confidentiality
or similar obligations under any agreement, whether written or oral, between the
Company, any of its Subsidiaries or any of their respective officers, directors,
affiliates, employees or agents, on the one hand, and any of the Buyers or any
of their affiliates (other than the Buyers set out in Schedule 4(f) and any
Buyers that have executed a confidentiality agreement with the Company), on the
other hand, shall terminate. In addition, each of the Buyers set out in Schedule
4(f) acknowledges and agrees that any and all confidentiality or similar
obligations under any agreement, whether written or oral, between the Company,
any of its Subsidiaries or any of their respective officers, directors,
affiliates, employees or agents, on the one hand, and such Buyer set out in
Schedule 4(f) or any of their affiliates, on the other hand, shall continue
before and after the issuance of the Press Release, pursuant to the terms of
such agreement. The Company shall not, and the Company shall not Knowingly allow
any of its Subsidiaries and each of its and their respective officers,
directors, employees and agents, to, provide any Buyer with any material,
non-public information regarding the Company or any of its Subsidiaries from and
after the date hereof without the express prior written consent of such Buyer.
If a Buyer has, or believes it has, received any such material, nonpublic
information regarding the Company or any of its Subsidiaries from the Company,
any of its Subsidiaries or any of their respective officers, directors,
affiliates, employees or agents, it may provide the Company with written notice
thereof. The Company shall, within two (2) Trading Days of receipt of such
notice, make public disclosure of such material, nonpublic information. In the
event of a breach of any of the foregoing covenants by the Company, any of its
Subsidiaries, or any of its or their respective officers, directors, employees
and agents (as determined in the reasonable good faith judgment of such Buyer),
in addition to any other remedy provided herein or in the Transaction Documents,
such Buyer shall have the right to make a public disclosure, in the form of a
press release, public advertisement or otherwise, of such material, non-public
information without the prior approval by the Company, any of its Subsidiaries,
or any of its or their respective officers, directors, employees or agents. No
Buyer shall have any liability to the Company, any of its Subsidiaries, or any
of its or their respective officers, directors, employees, stockholders or
agents, for any such disclosure. To the extent that the Company delivers any
material, non-public information to a Buyer without such Buyer's consent, the
Company hereby covenants and agrees that such Buyer shall not have any duty of
confidentiality to the Company, any of its Subsidiaries or any of their
respective officers, directors, employees, affiliates or agents with respect to,
or a duty not to trade on the basis of, such material, non-public information.
Subject to the foregoing, neither the Company, its Subsidiaries nor any Buyer
shall issue any press releases or any other public statements with respect to
the transactions contemplated hereby without the prior approval of legal
counsel; provided, however, the Company shall be entitled, without the prior
approval of any Buyer, to make any press release or other public disclosure with
respect to such transactions (i) in substantial conformity with the Press
Release and the 8-K Filing, or any other filing approved in accordance herewith,
and (ii) in the opinion of the Company’s legal counsel, as is required by
applicable law and regulations, or the applicable Eligible Market on which the
Company’s common stock is listed or designated. Unless required by applicable
law, without the prior written consent of the applicable Buyer, the Company
shall not (and shall not Knowingly allow any of its Subsidiaries and Affiliates
to) disclose the name of such Buyer in any filing (other than in the Transaction
Documents filed as exhibits to the 8-K Filing), announcement, release or
otherwise. Except as provided in the following sentence, notwithstanding
anything contained in this Agreement to the contrary and without implication
that the contrary would otherwise be true, the Company expressly acknowledges
and agrees that no Buyer has had, and no Buyer shall have (unless agreed to by a
particular Buyer before or after the date hereof in a written agreement executed
by the Company and such particular Buyer), any duty of confidentiality with
respect to, or a duty not to trade on the basis of, any material, non-public
information regarding the Company or any of its Subsidiaries. Notwithstanding
anything herein to the contrary except where otherwise set out, the term “Buyer”
or “Buyers” in this Section 4(f) shall exclude the Placement Agent and any
officer, director or employee of the Placement Agent or the Company, or of any
of their Subsidiaries.

 

- 20 -

 

  

(g)          Additional Issuance of Securities. Except as contemplated by the
Transaction Documents, the Company agrees that for the period commencing on the
date hereof and ending on the date immediately following the ninetieth (90th)
day after the date hereof (the “Restricted Period”), unless otherwise consented
to in writing by each of the Large Investors (as defined below), neither the
Company nor any of its Subsidiaries shall directly or indirectly issue, offer,
sell, grant any option or right to purchase, or otherwise dispose of (or
announce any issuance, offer, sale, grant of any option or right to purchase or
other disposition of) any Common Stock or any security or any debt or other
instrument convertible or exchangeable or exercisable into Common Stock or which
constitutes (or would constitute but for lack of a fixed exercise or conversion
or similar price or if it were not solely cash settled) a “derivative security”
(as defined under the rules and regulations under Section 16 of the 1934 Act) or
otherwise an equity-linked or related security (including, without limitation,
any “equity security” (as that term is defined under Rule 405 promulgated under
the 1933 Act) or which does or would otherwise constitute any Option or
Convertible Security (as defined in the Warrants) (any such issuance, offer,
sale, grant, disposition or announcement (whether occurring during the
Restricted Period or at any time thereafter) is referred to as a “Subsequent
Placement”). Notwithstanding the foregoing, the immediately preceding sentence
in this Section shall not apply in respect of the issuance of

 

(A)     shares of Common Stock or standard options to purchase Common Stock or
other standard equity linked securities (e.g., stock appreciation rights) to
directors, officers, employees or consultants of the Company in their capacity
as such pursuant to an Approved Share Plan (as defined below); provided that (1)
all such issuances that are exercisable or vest during the Restricted Period
(taking into account the shares of Common Stock issuable upon exercise of such
options and equity linked securities that are exercisable or vest during the
Restricted Period, but not including shares issuable pursuant to Options or
Convertible Securities outstanding as of the date hereof) and are issued after
the date hereof pursuant to this clause (A) do not, in the aggregate, exceed
more than the number of shares equal to 6% of the Company’s total outstanding
shares of Common Stock following the Final Closing (as adjusted for any stock
split, stock dividend, recapitalization, stock combination, reverse stock split
or similar transaction) of Common Stock or standard options to purchase Common
Stock or other standard equity linked securities (e.g., stock appreciation
rights) to directors, officers or employees; (2) the exercise price of any such
options is not lowered, none of such options are amended to increase the number
of shares issuable thereunder and none of the terms or conditions of any such
options are otherwise materially changed in any manner that adversely affects
any of the Buyers and (3) the issuance price of Common Stock or the exercise
price of any such options is not lower than the higher of (i) $0.20 (as adjusted
for any stock split, stock dividend, recapitalization, stock combination,
reverse stock split or similar transaction) or (ii) the closing price of the
Company’s Common Stock on the Principal Market on the date of grant of such
Common Stock or option;

 

(B)     shares of Common Stock issued upon the conversion or exercise of Options
or Convertible Securities issued prior to the date hereof to the extent issued
pursuant to their terms as of the date hereof;

 

(C)      the Common Shares and the Warrants to the extent issued pursuant to the
terms contemplated hereby;

 

(D)     the Warrant Shares to the extent issued pursuant to the terms set forth
in the Warrants contemplated by this Agreement as of the date hereof;

 

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(E)      issuances of equity to a seller, or in the case of a merger, the
shareholders of the target company in such merger, or the officers or employees
thereof, in each case in connection with a bona fide merger, business
combination transaction or acquisition of stock or assets outside of the
ordinary course;

 

(F)      a stock split or other subdivision or combination, or a stock dividend
made to all holders of any Company equity on a pro rata basis; or

 

(G)      issuances of Common Stock or Convertible Securities in connection with
strategic partnerships, joint ventures, licensing, acquisition of assets or
technology, or similar arrangements approved by a majority of the disinterested
directors of the Company, provided that any such issuance shall only be to a
Person (or to the equity holders of a Person) which is, itself or through its
subsidiaries, an operating company or an owner of an asset in a business
synergistic with the business of the Company and shall provide to the Company
additional benefits in addition to the investment of funds, but shall not
include a transaction in which the Company is issuing securities primarily for
the purpose of raising capital or to an entity whose primary business is
investing in securities (each of the foregoing in clauses (A) through (G),
collectively the “Excluded Securities”).

 

As used herein, “Large Investor” means any Buyer that is an institutional
investor and such Buyer’s Purchase Price (together with such Buyer's
institutional affiliates), when added to its (together with its institutional
affiliates) purchase price paid in the Company’s November 2015 financing, equals
or exceeds $1,000,000. “Approved Share Plan” means any employee benefit plan
which has been approved by the board of directors of the Company prior to or
subsequent to the date hereof pursuant to which shares of Common Stock and
equity securities may be issued to any employee, officer, director or consultant
for services provided to the Company in their capacity as such. “Convertible
Securities” means any capital stock or other security of the Company or any of
its Subsidiaries that is at any time and under any circumstances directly or
indirectly convertible into, exercisable or exchangeable for, or which otherwise
entitles the holder thereof to acquire, any capital stock or other security of
the Company (including, without limitation, Common Stock) or any of its
Subsidiaries.

 

(h)          Reservation of Shares. So long as any of the Warrants remain
outstanding, the Company shall take all action necessary to at all times have
authorized, and reserved for the purpose of issuance, the maximum number of
shares of Common Stock issuable upon (i) exercise of all of the Warrants
(without regard to any limitations on the exercise of the Warrants set forth
therein).

 

(i)          Conduct of Business. So long as any of the Warrants remain
outstanding, the business of the Company and its Subsidiaries shall not be
conducted in violation of any law, ordinance or regulation of any governmental
entity in any jurisdiction to which the Company is subject, except where such
violations would not result, either individually or in the aggregate, in a
Material Adverse Effect.

 

(j)          Variable Rate Transaction. During the two year period commencing on
the date of the Final Closing, the Company and each Subsidiary shall be
prohibited from effecting, or entering into an agreement to effect, any
Subsequent Placement involving a Variable Rate Transaction. “Variable Rate
Transaction” means a transaction in which the Company or any Subsidiary (i)
issues or sells any Convertible Securities either (A) at a conversion, exercise
or exchange rate or other price that is based upon and/or varies with the
trading prices of, or quotations for, the shares of Common Stock at any time
after the initial issuance of such Convertible Securities, or (B) with a
conversion, exercise or exchange price that is subject to being reset at some
future date after the initial issuance of such Convertible Securities or upon
the occurrence of specified or contingent events directly or indirectly related
to the business of the Company or the market for the Common Stock, other than
pursuant to a customary “weighted average” anti-dilution provision or (ii)
enters into any agreement (including, without limitation, an equity line of
credit) whereby the Company or any Subsidiary may sell securities at a future
determined price (other than standard and customary “preemptive” or
“participation” rights). Each Buyer shall be entitled to obtain injunctive
relief against the Company and its Subsidiaries to preclude any such issuance,
which remedy shall be in addition to any right to collect damages.

 

- 22 -

 

  

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

 

(l)          Participation Right. From the date hereof through the six month
anniversary of the Initial Closing Date, neither the Company nor any of its
Subsidiaries shall, directly or indirectly, effect any Subsequent Placement
unless the Company shall have first complied with this Section. The Company
acknowledges and agrees that the right set forth in this Section is a right
granted by the Company, separately, to each Buyer.

 

(i)           At least five (5) Trading Days prior to any proposed or intended
Subsequent Placement, the Company shall deliver to each Buyer a written notice
as to whether such Buyer wants to receive material, non-public information about
the Company (each such notice, a “Pre-Notice”). Upon the written request of a
Buyer to receive such material, non-public information within three (3) Trading
Days after the Company’s delivery to such Buyer of such Pre-Notice, and only
upon a written request by such Buyer, the Company shall promptly, but no later
than one (1) Trading Day after such request, deliver to such Buyer an
irrevocable written notice (the “Offer Notice”) of any proposed or intended
issuance or sale or exchange (the “Offer”) of the securities being offered (the
“Offered Securities”) in a Subsequent Placement, which Offer Notice shall (w)
identify and describe the Offered Securities, (x) describe the price and other
terms upon which they are to be issued, sold or exchanged, and the number or
amount of the Offered Securities to be issued, sold or exchanged, (y) identify
the Persons (if known) to which or with which the Offered Securities are to be
offered, issued, sold or exchanged and (z) offer to issue and sell to or
exchange with such Buyers in accordance with the terms of the Offer up to an
aggregate of 100% of the Offered Securities, provided that the number of Offered
Securities which each such Buyer shall have the right to subscribe for under
this Section shall be (a) based on such Buyer’s pro rata portion of the Common
Stock purchased hereunder by all Buyers (the “Basic Amount”), and (b) with
respect to each Buyer that elects to purchase its Basic Amount, any additional
portion of the Offered Securities attributable to the Basic Amounts of other
Buyers as such Buyer shall indicate it will purchase or acquire should the other
Buyers subscribe for less than their Basic Amounts (the “Undersubscription
Amount”).

 

- 23 -

 

  

(ii)          To accept an Offer, in whole or in part, such Buyer must deliver a
written notice to the Company prior to the end of the fifth (5th) Business Day
after such Buyer’s receipt of the Offer Notice (the “Offer Period”), setting
forth the portion of such Buyer’s Basic Amount that such Buyer elects to
purchase and, if such Buyer shall elect to purchase all of its Basic Amount, the
Undersubscription Amount, if any, that such Buyer elects to purchase (in either
case, the “Notice of Acceptance”). If the Basic Amounts subscribed for by all
Buyers are less than the total of all of the Basic Amounts, then such Buyer who
has set forth an Undersubscription Amount in its Notice of Acceptance shall be
entitled to purchase, in addition to the Basic Amounts subscribed for, the
Undersubscription Amount it has subscribed for; provided, however, if the
Undersubscription Amounts subscribed for exceed the difference between the total
of all the Basic Amounts and the Basic Amounts subscribed for (the “Available
Undersubscription Amount”), such Buyer who has subscribed for any
Undersubscription Amount shall be entitled to purchase only that portion of the
Available Undersubscription Amount as the Basic Amount of such Buyer bears to
the total Basic Amounts of all Buyers that have subscribed for Undersubscription
Amounts (but in no event shall it be greater than such Buyer’s specified
Undersubscription Amount), subject to rounding by the Company to the extent it
deems reasonably necessary. Notwithstanding the foregoing, if the Company
desires to modify or amend the terms and conditions of the Offer prior to the
expiration of the Offer Period, the Company may deliver to each Buyer a new
Offer Notice and the Offer Period shall expire on the fifth (5th) Business Day
after such Buyer’s receipt of such new Offer Notice.

 

(iii)         The Company shall have ten (10) days from the expiration of the
Offer Period above (i) to offer, issue, sell or exchange all or any part of such
Offered Securities as to which a Notice of Acceptance has not been given by a
Buyer (the “Refused Securities”) pursuant to a definitive agreement(s) (the
“Subsequent Placement Agreement”), but only to the offerees described in the
Offer Notice (if so described therein) and only upon terms and conditions
(including, without limitation, unit prices and interest rates) that are not
more favorable to the acquiring Person or Persons or less favorable to the
Company than those set forth in the Offer Notice and (ii) to publicly announce
(a) the execution of such Subsequent Placement Agreement, and (b) either (x) the
consummation of the transactions contemplated by such Subsequent Placement
Agreement or (y) the termination of such Subsequent Placement Agreement, which
shall be filed with the SEC on a Current Report on Form 8-K with such Subsequent
Placement Agreement and any documents contemplated therein filed as exhibits
thereto.

 

(iv)         In the event the Company shall propose to sell less than all the
Refused Securities (any such sale to be in the manner and on the terms specified
in Section 4(l)(iii) above), then such Buyer may, at its sole option and in its
sole discretion, reduce the number or amount of the Offered Securities specified
in its Notice of Acceptance to an amount that shall be not less than the number
or amount of the Offered Securities that such Buyer elected to purchase pursuant
to Section 4(n)(iii) above multiplied by a fraction, (i) the numerator of which
shall be the number or amount of Offered Securities the Company actually
proposes to issue, sell or exchange (including Offered Securities to be issued
or sold to Buyers pursuant to this Section prior to such reduction) and (ii) the
denominator of which shall be the original amount of the Offered Securities. In
the event that any Buyer so elects to reduce the number or amount of Offered
Securities specified in its Notice of Acceptance, the Company may not issue,
sell or exchange more than the reduced number or amount of the Offered
Securities unless and until such securities have again been offered to the
Buyers in accordance with Section 4(n)(i) above.

 

(v)          Upon the closing of the issuance, sale or exchange of all or less
than all of the Refused Securities, such Buyer shall acquire from the Company,
and the Company shall issue to such Buyer, the number or amount of Offered
Securities specified in its Notice of Acceptance. The purchase by such Buyer of
any Offered Securities is subject in all cases to the preparation, execution and
delivery by the Company and such Buyer of a separate purchase agreement relating
to such Offered Securities reasonably satisfactory in form and substance to such
Buyer and its counsel.

 

(vi)         Any Offered Securities not acquired by a Buyer or other Persons in
accordance with this Section may not be issued, sold or exchanged until they are
again offered to such Buyer under the procedures specified in this Agreement.

 

- 24 -

 

  

(vii)        The Company and each Buyer agree that if any Buyer elects to
participate in the Offer, neither the Subsequent Placement Agreement with
respect to such Offer nor any other transaction documents related thereto
(collectively, the “Subsequent Placement Documents”) shall include any term or
provision whereby such Buyer shall be required to agree to any restrictions on
trading as to any securities of the Company or be required to consent to any
amendment to or termination of, or grant any waiver or release or the like under
or in connection with, any agreement previously entered into with the Company or
any instrument received from the Company.

 

(viii)       Notwithstanding anything to the contrary in this Section and unless
otherwise agreed to by such Buyer, the Company shall either confirm in writing
to such Buyer that the transaction with respect to the Subsequent Placement has
been abandoned or shall publicly disclose its intention to issue the Offered
Securities, in either case, in such a manner such that such Buyer will not be in
possession of any material, non-public information, by the fifth (5th) Business
Day following delivery of the Offer Notice. If by such fifth (5th) Business Day,
no public disclosure regarding a transaction with respect to the Offered
Securities has been made, and no notice regarding the abandonment of such
transaction has been received by such Buyer, such transaction shall be deemed to
have been abandoned and such Buyer shall not be in possession of any material,
non-public information with respect to the Company or any of its Subsidiaries
and any and all confidentiality or similar obligations under any agreement,
whether written or oral, between the Company, any of its Subsidiaries or any of
their respective officers, directors, affiliates, employees or agents, on the
one hand, and such Buyer or any of its affiliates, on the other hand, shall
terminate. Should the Company decide to pursue such transaction with respect to
the Offered Securities, the Company shall provide such Buyer with another Offer
Notice in accordance with, and subject to, the terms of this Section and such
Buyer will again have the right of participation set forth in this Section. The
Company shall not be permitted to deliver more than one Offer Notice to such
Buyer in any sixty (60) day period, except as expressly contemplated by the last
sentence of Section 4(n)(ii).

 

(ix)         The restrictions contained in this Section shall not apply in
connection with the issuance of any Excluded Securities. The Company shall not
circumvent the provisions of this Section by providing terms or conditions to
one Buyer that are not provided to all Buyers.

 

(m)         Use of Proceeds. The Company shall use the proceeds from the sale of
the Securities solely for working capital, sales and marketing and research and
development, but not for (i) the repayment of any outstanding indebtedness of
the Company or any of its Subsidiaries or (ii) the redemption or repurchase of
any of its or its Subsidiaries’ equity securities.

 

(n)          Closing Documents. On or prior to twenty (20) calendar days after
the Initial Closing Date, the Company agrees to deliver, or cause to be
delivered, to each of the Large Investors a complete closing set of the executed
Transaction Documents, Securities and any other documents required to be
delivered to any party pursuant to Section 6 hereof or otherwise.

 

(o)          Form D and Blue Sky. The Company agrees to file a Form D with
respect to the Securities as required under Regulation D. The Company shall, on
or before each Closing Date, take such action as the Company shall reasonably
determine is necessary in order to obtain an exemption for, or to, qualify the
Securities for sale to the Buyers at each Closing pursuant to this Agreement
under applicable securities or “Blue Sky” laws of the states of the United
States (or to obtain an exemption from such qualification), on or prior to each
Closing Date. The Company shall make all filings and reports relating to the
offer and sale of the Securities required under applicable securities or “Blue
Sky” laws of the states of the United States following each Closing Date at the
expense of the Company.

 

- 25 -

 

  

(p)          Additional Registration Statements. Except as disclosed in Section
4(r) of the Disclosure Schedule, until the Applicable Date (as defined below)
and at any time thereafter while any Registration Statement is not effective or
the prospectus contained therein is not available for use, the Company shall not
file a registration statement under the 1933 Act relating to securities that are
not the Registrable Securities (as defined in the Registration Rights
Agreement). “Applicable Date” means the first date on which the resale by the
Buyers of all Registrable Securities is covered by one or more effective
Registration Statements (and each prospectus contained therein is available for
use on such date).

 

(q)          Conversion of the Series B Convertible Preferred Stock. The Company
will take all steps necessary to ensure that all outstanding shares of Series B
Convertible Preferred Stock shall convert into shares of the Company’s common
stock on or prior to the Initial Closing Date.

 

(r)          Reduction in Exercise Price of Warrants. Following the Initial
Closing, the Company shall reduce the exercise price of (i) the Series A
Warrants and Series C Warrants issued contemporaneously with the issuance of the
Series B Preferred Stock to $0.01 per share and (ii) the Series E Warrants
issued contemporaneously with the issuance of the Series B Preferred Stock to
$1.00 per share, in each case subject to adjustment as provided in such
Warrants.

 

(s)          NASDAQ Listing. Following the effective date of the Reverse Stock
Split, the Company shall apply for listing of its Common Stock on The NASDAQ
Capital Market.

 

(t)          FAST Compliance. The Company covenants and agrees to maintain a
transfer agent that is a participant in the FAST program so long as any Warrants
remain outstanding.

 

5.REGISTER; TRANSFER AGENT INSTRUCTIONS; LEGEND.

 

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

 

- 26 -

 

  

(b)          Transfer Agent Instructions. The Company shall issue irrevocable
instructions to its Transfer Agent and any subsequent Transfer Agent in
substantially the form attached hereto as Exhibit B (the “Irrevocable Transfer
Agent Instructions”) to issue certificates or credit shares to the applicable
balance accounts at Depository Trust Company (DTC) (as applicable), registered
in the name of each Buyer or its respective nominee(s), for the Warrant Shares
in such amounts as specified from time to time by each Buyer to the Company (not
to exceed the amount held by such Buyer at such time) upon the exercise of the
Warrants. Except as provided in this Agreement, the Company represents and
warrants that no instruction other than the Irrevocable Transfer Agent
Instructions referred to in this Section, and stop transfer instructions to give
effect to Section (e) hereof, will be given by the Company to its Transfer Agent
with respect to the Securities, and that the Securities shall otherwise be
freely transferable on the books and records of the Company, as applicable, to
the extent provided in this Agreement and the other Transaction Documents. If a
Buyer effects a sale, assignment or transfer of the Securities in accordance
with this Agreement, the Company shall permit the transfer and shall promptly
instruct its transfer agent to issue one or more certificates or credit shares
to the applicable balance accounts at DTC (as applicable) in such name and in
such denominations as specified by such Buyer to effect such sale, transfer or
assignment. In the event that such sale, assignment or transfer involves Common
Shares or Warrant Shares sold, assigned or transferred pursuant to an effective
registration statement or in compliance with Rule 144, the Transfer Agent shall
issue such shares to such Buyer, assignee or transferee (as the case may be)
without any restrictive legend in accordance with Section 5(d) below. The
Company acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to a Buyer. Accordingly, the Company acknowledges that the
remedy at law for a breach of its obligations under this Section may be
inadequate and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Section, that a Buyer shall be entitled, in
addition to all other available remedies, to an order and/or injunction
restraining any breach and requiring immediate issuance and transfer, without
the necessity of showing economic loss and without any bond or other security
being required. The Company shall cause its counsel to issue the legal opinion
referred to in the Irrevocable Transfer Agent Instructions to the Company’s
Transfer Agent on each Effective Date (as defined in the Registration Rights
Agreement). Any fees (with respect to the Transfer Agent, counsel to the Company
or otherwise, but excluding fees incurred by a Buyer in connection with this
Section 5) associated with the issuance of such opinion or the removal of any
legends on any of the Securities shall be borne by the Company.

  

(c)          Legends . Each Buyer understands that the Securities have been
issued (or will be issued in the case of the Warrant Shares) pursuant to an
exemption from registration or qualification under the 1933 Act and applicable
state securities laws, and except as set forth below, the Securities shall bear
any legend as required by the “blue sky” laws of any state and a restrictive
legend in substantially the following form (and a stop-transfer order may be
placed against transfer of such stock certificates):

 

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

 

- 27 -

 

  

(d)          Removal of Legends. Certificates evidencing Securities shall not be
required to contain the legend set forth in Section 5(c) above or any other
legend (i) if such Securities are registered for resale under the 1933 Act, (ii)
following any sale of such Securities pursuant to Rule 144 (assuming the
transferor is not an affiliate of the Company), (iii) in connection with a sale,
assignment or other transfer (other than under Rule 144), provided that such
Buyer provides the Company with an opinion of counsel to such Buyer, in a
generally acceptable substance, to the effect that such sale, assignment or
transfer of the Securities may be made without registration under the applicable
requirements of the 1933 Act or (iv) if such legend is not required under
applicable requirements of the 1933 Act (including, without limitation,
controlling judicial interpretations and pronouncements issued by the SEC). If a
legend is not required pursuant to the foregoing, the Company shall no later
than two (2) Trading Days following the delivery by a Buyer to the Company or
the Transfer Agent (with notice to the Company) of a legended certificate
representing such Securities (endorsed or with stock powers attached, signatures
guaranteed, and otherwise in form necessary to affect the reissuance and/or
transfer, if applicable), together with any other deliveries from such Buyer as
may be required above in this Section and the Form of Notice attached as Exhibit
B to the Registration Rights Agreement, as directed by such Buyer, either: (A)
provided that the Company’s Transfer Agent is participating in the DTC Fast
Automated Securities Transfer Program and such Securities are Common Shares or
Warrant Shares, credit the aggregate number of shares of Common Stock to which
such Buyer shall be entitled to such Buyer’s or its designee’s balance account
with DTC through its Deposit/Withdrawal at Custodian system or (B) if the
Company’s Transfer Agent is not participating in the DTC Fast Automated
Securities Transfer Program, issue and deliver (via reputable overnight courier)
to such Buyer, a certificate representing such Securities that is free from all
restrictive and other legends, registered in the name of such Buyer or its
designee (the date by which such credit is so required to be made to the balance
account of such Buyer’s or such Buyer’s nominee with DTC or such certificate is
required to be delivered to such Buyer pursuant to the foregoing is referred to
herein as the “Required Delivery Date”). The Company shall be responsible for
the fees of its transfer agent and all DTC fees associated with such issuance.
Notwithstanding anything to the contrary contained herein, no Buyer shall be
required to deliver any seller or broker representation letters to the Company,
the Company's transfer agent or any other party in connection with legend
removal contemplated by clause (i) in the first sentence of this paragraph.

 

(e)          Failure to Timely Deliver; Buy-In. If the Company fails to (i)
issue and deliver (or cause to be delivered) to a Buyer by the Required Delivery
Date a certificate representing the Securities so delivered to the Company by
such Buyer that is free from all restrictive and other legends or (ii) following
registration on a Registration Statement, credit the balance account of such
Buyer’s or such Buyer’s nominee with DTC for such number of Securities so
delivered to the Company, then, in addition to all other remedies available to
such Buyer, the Company shall pay in cash to such Buyer on each day after the
Required Delivery Date that the issuance or credit of such shares is not timely
effected an amount equal to 1% of the Exercise Price (as defined in the
applicable Warrant) attributable to the Securities that the issuance or credit
of such was not timely effected. In addition to the foregoing, if the Company
fails to so properly deliver such unlegended certificates or so properly credit
the balance account of such Buyer’s or such Buyer’s nominee with DTC by the
Required Delivery Date, and if on or after the Required Delivery Date such Buyer
purchases (in an open market transaction or otherwise) shares of Common Stock to
deliver in satisfaction of a sale by such Buyer of shares of Common Stock that
such Buyer anticipated receiving from the Company without any restrictive
legend, then, in addition to all other remedies available to such Buyer, the
Company shall, within two (2) Trading Days after such Buyer’s request and in
such Buyer’s sole discretion, either (i) pay cash to such Buyer in an amount
equal to such Buyer’s total purchase price (including brokerage commissions, if
any) for the shares of Common Stock so purchased (the “Buy-In Price”), at which
point the Company’s obligation to deliver such certificate or credit such
Buyer’s balance account shall terminate and such shares shall be cancelled, or
(ii) promptly honor its obligation to deliver to such Buyer a certificate or
certificates or credit such Buyer’s DTC account representing such number of
shares of Common Stock that would have been issued if the Company timely
complied with its obligations hereunder and pay cash to such Buyer in an amount
equal to the excess (if any) of the Buy-In Price over the product of (A) such
number of shares of Warrant Shares (as the case may be) that the Company was
required to deliver to such Buyer by the Required Delivery Date times (B) the
Closing Sale Price (as defined in the Warrants) of the Common Stock on the
Trading Day immediately preceding the Required Delivery Date.

 

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

 

(a)          The obligation of each Buyer hereunder to purchase its applicable
Common Shares and the related Warrants at each Closing is subject to the
satisfaction, at or before each Closing Date and in respect of each Closing Date
(except as otherwise provided herein), of each of the following conditions,
provided that these conditions are for each Buyer’s sole benefit and may be
waived by such Buyer at any time in its sole discretion by providing the Company
with prior written notice thereof:

 

- 28 -

 

  

(i)           The Company shall have duly executed and delivered to such Buyer
each of the Transaction Documents to which it is a party.

 

(ii)          The Company shall provide to Barbara Glenns, Esq., for and on
behalf of the Placement Agents (“Ms. Glenns”) and any Buyer who so requests
beforehand, satisfactory evidence from the Secretary of State of its
jurisdiction of formation that the Company has been formed and is in good
standing and shall deliver to such Buyer a certificate evidencing the formation
and good standing of the Company in its jurisdiction of formation issued by the
Secretary of State (or comparable office) of such jurisdiction of formation as
of a date within ten (10) days of the Initial Closing Date.

 

(iii)         The Company shall have delivered to Ms. Glenns and any Buyer who
so requests beforehand, a copy of a certificate evidencing the Company’s
qualification as a foreign corporation and good standing issued by the Secretary
of State (or comparable office) of each jurisdiction in which the Company is
qualified to conduct business at the Initial Closing.

 

(iv)         The Company shall have delivered to Ms. Glenns and any Buyer who so
requests beforehand, a copy of a certified copy of the true and correct
Certificate of Incorporation as of the date hereof and shall deliver a certified
copy from the Nevada Secretary of State within ten (10) days of the Initial
Closing Date.

 

(v)         The Company shall have delivered to Ms. Glenns and any Buyer who so
requests beforehand, a copy of a certificate, in the form reasonably acceptable
to such Buyer, executed by the Secretary of the Company and dated as of the
Initial Closing Date, as to (i) the resolutions consistent with Section 3(b) as
adopted by the Company’s board of directors in a form reasonably acceptable to
such Buyer, (ii) Certificate of Incorporation, and (iii) the Bylaws of the
Company, in each case, as in effect at the Initial Closing.

 

(vi)         Each and every representation and warranty of the Company shall be
true and correct in all material respects as of the date when made and as of the
respective Closing Date as though originally made at that time (except that (1)
representations and warranties that speak as of a specific date shall be true
and correct in all material respects as of such date and (2) representations and
warranties that are qualified by material, Material Adverse Effect or other
similar materiality qualifiers shall be true and correct in all respects) and
the Company shall have performed, satisfied and complied in all material
respects with the covenants, agreements and conditions required to be performed,
satisfied or complied with by the Company at or prior to the respective Closing
Date, including, without limitation the issuance of all Securities prior to the
date of such Closing as required by the Transaction Documents and the Company
has a sufficient number of duly authorized shares of Common Stock reserved for
issuance as may be required to fulfill its obligations pursuant to the
Transaction Documents. Such Buyer shall have received a certificate, executed by
the Secretary of the Company, dated as of the Initial Closing Date, to the
foregoing effect and as to such other matters as may be reasonably requested by
such Buyer in the form reasonably acceptable to such Buyer.

  

(vii)        The Company shall have delivered to Ms. Glenns and any Buyer who so
requests beforehand, a report from the Company’s Transfer Agent identifying the
number of shares of Common Stock outstanding on the Trading Day immediately
prior to the Initial Closing.

 

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

 

- 29 -

 

 

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

 

(x)          No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction that prohibits the
consummation of any of the transactions contemplated by the Transaction
Documents, and no actions, suits or proceedings shall be in progress or pending
by any Person that seeks to enjoin, prohibit or otherwise adversely affect any
of the transactions contemplated by the Transaction Documents.

 

(xi)         Since the date of execution of this Agreement, no event or series
of events shall have occurred that reasonably would have or result in a Material
Adverse Effect and the Company has not filed for nor is it subject to any
bankruptcy, insolvency, reorganization or liquidation proceedings or other
proceedings for relief under any bankruptcy law or any law for the relief of
debtors instituted by or against the Company.

 

(xii)        The Company shall have delivered to Ms. Glenns, such other
documents, instruments or certificates relating to the transactions contemplated
by this Agreement reasonably required to consummate the transactions
contemplated hereby.

 

(xiii)       Such Buyer shall have received the opinion of Mintz, Levin, Cohn,
Ferris, Glovsky and Popeo, P.C., the Company’s counsel, dated as of Initial
Closing Date, in the form previously agreed to by the Company and Ms. Glenns.

 

(xiv)      A copy of the Irrevocable Transfer Agent Instructions, in the form
previously agreed upon by the Company, the Transfer Agent and Ms. Glenns, and
which have been delivered to and acknowledged in writing by the Company and
Transfer Agent shall be delivered to Ms. Glenns and any Buyer who so requests
beforehand.

 

7.TERMINATION.

 

In the event that the Initial Closing shall not have occurred with respect to a
Buyer within three (3) Trading Days after the date hereof, then such Buyer shall
have the right to terminate its obligations under this Agreement with respect to
itself at any time on or after the close of business on such date without
liability of such Buyer to any other party; provided, however, (i) the right to
terminate its obligations under this Agreement pursuant to this Section shall
not be available to such Buyer if the failure of the transactions contemplated
by this Agreement to have been consummated by such date is the result of such
Buyer’s breach of this Agreement and (ii) the abandonment of the sale and
purchase of the Common Shares and the Warrants shall be applicable only to such
Buyer providing such written notice, provided further that no such termination
shall affect any obligation of the Company under this Agreement to reimburse
such Buyer for the expenses described in Section 4(d) above. Notwithstanding
anything to the contrary above, nothing contained in this Section shall be
deemed to release any party from any liability for any breach by such party of
the terms and provisions of this Agreement or the other Transaction Documents or
to impair the right of any party to compel specific performance by any other
party of its obligations under this Agreement or the other Transaction
Documents.

 

- 30 -

 

  

8.MISCELLANEOUS.

 

(a)          Governing Law; Jurisdiction; Jury Trial. All questions concerning
the construction, validity, enforcement and interpretation of this Agreement
shall be governed by the internal laws of the State of New York. Each party
hereby irrevocably submits to the exclusive jurisdiction of the state and
federal courts sitting in New York County, New York, for the adjudication of any
dispute hereunder or in connection herewith or with any transaction contemplated
hereby or discussed herein, and hereby irrevocably waives, and agrees not to
assert in any suit, action or proceeding, any claim that it is not personally
subject to the jurisdiction of any such court, that such suit, action or
proceeding is brought in an inconvenient forum or that the venue of such suit,
action or proceeding is improper. Each party hereby irrevocably waives personal
service of process and consents to process being served in any such suit, action
or proceeding by mailing a copy thereof to such party at the address for such
notices to it under this Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Nothing contained
herein shall (i) limit or be deemed to limit in any way any right to serve
process in any manner permitted by law or (ii) operate, or be deemed to operate,
to preclude any Buyer from bringing suit or taking other legal action against
the Company in any other jurisdiction to collect on the Company’s obligations to
such Buyer or to enforce a judgment or other court ruling in favor of such Buyer
or (iii) limit, or be deemed to limit, any provision of the Warrants which is
contrary to the above. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY
HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY
DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY
TRANSACTION CONTEMPLATED HEREBY.

 

(b)          Counterparts. This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party. In the event that any signature is
delivered by facsimile transmission or by an e-mail which contains a portable
document format (.pdf) file of an executed signature page, such signature page
shall create a valid and binding obligation of the party executing (or on whose
behalf such signature is executed) with the same force and effect as if such
signature page were an original thereof.

 

(c)          Headings; Gender; Certain Meanings. The headings of this Agreement
are for convenience of reference and shall not form part of, or affect the
interpretation of, this being deemed to include the masculine, feminine, neuter,
singular and plural forms thereof. The terms “including,” “includes,” “include”
and words of like import shall be construed broadly as if followed by the words
“without limitation.” The terms “herein,” “hereunder,” “hereof” and words of
like import refer to this entire Agreement instead of just the provision in
which they are found. When used herein, the words “law,” “rule,” “regulation”
and the like means all applicable laws, rules and regulations, domestic or
foreign, state, provincial, local or self-regulatory, including without
limitation as to all applicable laws, rules and regulations of or related to the
United States, applicable states, the SEC, and the Principal Market.

 

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

 

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(e)          Entire Agreement; Amendments. Except with regards to any
confidentiality or non-disclosure agreement entered into between the Buyers, the
Company, their Affiliates and Persons acting on their behalf in connection with
the transactions contemplated hereunder, this Agreement, the other Transaction
Documents and the schedules and exhibits attached hereto and thereto and the
instruments referenced herein and therein supersede all other prior oral or
written agreements between the Buyers, the Company, their Affiliates and Persons
acting on their behalf solely with respect to the matters contained herein and
therein, and this Agreement, the other Transaction Documents, the schedules and
exhibits attached hereto and thereto and the instruments referenced herein and
therein contain the entire understanding of the parties solely with respect to
the matters covered herein and therein; provided, however, nothing contained in
this Agreement or any other Transaction Document shall (or shall be deemed to),
(i) have any effect on any agreements any Buyer has entered into with the
Company or any of its Subsidiaries prior to the date hereof with respect to any
prior investment made by such Buyer in the Company or (ii) waive, alter, modify
or amend in any respect any obligations of the Company or any of its
Subsidiaries, or any rights of or benefits to any Buyer or any other Person, in
any agreement entered into prior to the date hereof between or among the Company
and/or any of its Subsidiaries and any Buyer and all such agreements shall
continue in full force and effect. Except as specifically set forth herein or
therein, neither the Company nor any Buyer makes any representation, warranty,
covenant or undertaking with respect to such matters. For clarification
purposes, the Recitals are part of this Agreement. No provision of this
Agreement may be waived, modified, supplemented or amended except in a written
instrument signed, in the case of an amendment, by (i) the Company, (ii) the
Buyers, including the Large Investors, who own at least 50% of the outstanding
Common Shares, and (iii) as long as it is a holder of Securities, each of the
Large Investors (or, if a Large Investor no longer holds Securities because it
has transferred such shares to an “affiliate” (as defined in Rule 405
promulgated under the U.S. Securities Act of 1933, as amended), such affiliate),
and in the case of a waiver, by the party against whom enforcement of any such
waived provision is sought; provided, that if any amendment, modification or
waiver disproportionately and adversely impacts a Buyer, the consent of such
Buyer shall also be required. No waiver shall be effective unless it is in
writing and signed by an authorized representative of the waiving party. Any
amendment or waiver effected in accordance with this Section shall be binding
upon each Buyer. No such amendment shall be effective to the extent that it
applies to less than all of the Buyers. No consideration 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 also
is offered to all of the parties to the Transaction Documents, all holders of
Common Shares or all holders of the Warrants (as the case may be). Except as
provided in Schedule 3(f) of the Disclosure Schedule, the Company has not,
directly or indirectly, made any agreements with any Buyers relating to the
terms or conditions of the transactions contemplated by the Transaction
Documents except as set forth in the Transaction Documents. Without limiting the
foregoing, the Company confirms that, except as set forth in this Agreement, no
Buyer has made any commitment or promise or has any other obligation to provide
any financing to the Company, any Subsidiary or otherwise. As a material
inducement for each Buyer to enter into this Agreement, the Company expressly
acknowledges and agrees that (i) no due diligence investigation conducted by a
Buyer or its advisors, if any, or its representatives shall affect such Buyer’s
right to rely on, or modify or qualify any of, the Company’s representations and
warranties contained in this Agreement or any other Transaction Document, and
(ii) unless a provision of this Agreement or any other Transaction Document is
expressly preceded by “except as disclosed in the SEC Reports” or “except as
disclosed in the SEC Documents” (or similar language), nothing contained in any
of the SEC Reports or SEC Documents (as applicable) shall affect such Buyer’s
right to rely on, or modify or qualify any of, the Company’s representations and
warranties contained in this Agreement or any other Transaction Document.

 

- 32 -

 

  

(f)          Notices. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered: (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); (iii) when sent, if sent by e-mail (provided
that such sent e-mail is kept on file (whether electronically or otherwise) by
the sending party and the sending party does not receive an automatically
generated message from the recipient’s e-mail server that such e-mail could not
be delivered to such recipient); and (iv) one (1) Business Day after deposit
with an overnight courier service with next day delivery specified, in each
case, properly addressed to the party to receive the same. The addresses and
facsimile numbers and email addresses for such communications shall be:

 

If to the Company:

 

Neurotrope, Inc.

205 East 42nd Street, 20th Floor

New York, NY 10017

Telephone:

Facsimile:

Email:

Attention:

 

With a copy (for informational purposes only) to:

 

Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.

666 Third Avenue

New York, New York 10017

Telephone:

Facsimile:

Email:

Attention:

 

If to the Transfer Agent:

 

Philadelphia Stock Transfer, Inc.

2320 Haverford Rd.

Suite 230

Ardmore, PA 19003

Telephone:

Facsimile:

Email:

Attention:

 

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

 

- 33 -

 

 

or to such other address and/or facsimile number and/or to the attention of such
other Person as the recipient party has specified by written notice given to
each other party five (5) days prior to the effectiveness of such change.
Written confirmation of receipt (A) given by the recipient of such notice,
consent, waiver or other communication, (B) mechanically or electronically
generated by the sender’s facsimile machine containing the time, date, recipient
facsimile number and an image of the first page of such transmission or (C)
provided by an overnight courier service shall be rebuttable evidence of
personal service, receipt by facsimile or receipt from an overnight courier
service in accordance with clause (i), (ii) or (iii) above, respectively. A copy
of the e-mail transmission containing the time, date and recipient e-mail
address shall be rebuttable evidence of receipt by e-mail in accordance with
clause (iii) above.

 

(g)          Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and assigns,
including, as contemplated below, any assignee of any of the Securities. The
Company shall not assign this Agreement or any rights or obligations hereunder
without the prior written consent of each of the Buyers. A Buyer may assign some
or all of its rights hereunder in connection with any transfer of any of its
Securities without the consent of the Company, in which event such assignee
shall be deemed to be a Buyer hereunder with respect to such assigned rights.

 

(h)          No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, other than the Buyer Indemnitees referred to in Section
8(k).

 

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

 

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

 

- 34 -

 

  

(k)Indemnification.

 

(i)          In consideration of each Buyer’s execution and delivery of the
Transaction Documents and acquiring the Securities thereunder and in addition to
all of the Company’s other obligations under the Transaction Documents but
subject to the provisions of this Section 8(k), the Company shall defend,
protect, indemnify and hold harmless each Buyer and all of his, her or its
partners, members, officers, directors, employees and direct or indirect
investors and any of the foregoing Persons’ agents or other representatives
(including, without limitation, those retained in connection with the
transactions contemplated by this Agreement) (collectively, the “Indemnitees”)
from and against any and all actions, causes of action, suits, claims, losses,
costs, penalties, fees, liabilities and damages, and expenses in connection
therewith (irrespective of whether any such Indemnitee is a party to the action
for which indemnification hereunder is sought), and including reasonable
attorneys’ fees and disbursements (the “Indemnified Liabilities”), incurred by
any Indemnitee as a result of, or arising out of, or relating to (a) any
material misrepresentation or material breach of any representation or warranty
made by the Company in any of the Transaction Documents, (b) any material breach
of any covenant, agreement or obligation of the Company contained in any of the
Transaction Documents, (c) any cause of action, suit or claim brought or made
against such Indemnitee by a third party (including for these purposes a
derivative action brought on behalf of the Company) and arising out of or
resulting from (i) the execution, delivery, performance or enforcement of any of
the Transaction Documents, (ii) any transaction financed or to be financed in
whole or in part, directly or indirectly, with the proceeds of the issuance of
the Securities, (iii) any disclosure properly made by such Buyer pursuant to
Section 4(h), or (iv) the status of such Buyer as an investor in the Company
pursuant to the transactions contemplated by the Transaction Documents. To the
extent that the foregoing undertaking by the Company may be unenforceable for
any reason, the Company shall make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities which is permissible under
applicable law. Notwithstanding anything to the contrary in this Agreement, the
Company will not be liable to any Indemnitee under this Agreement (x) to the
extent, but only to the extent that a loss, claim, damage or liability is
attributable to any Indemnitee’s material breach of any of the representations,
warranties, covenants or agreements made by such Indemnitee in this Agreement or
in the other Transaction Documents; (y) for any Indemnified Liabilities arising
after the date that none of the Shares or Warrants are outstanding with respect
to such Indemnitee.

 

(ii)         Promptly after receipt by an Indemnitee under this Section of
notice of the commencement of any action or proceeding (including any
governmental action or proceeding) involving an Indemnified Liability, such
Indemnitee shall, if a claim in respect thereof is to be made against the
Company under this Section, promptly deliver to the Company a written notice of
the commencement thereof, and the Company shall have the right to participate
in, and, to the extent the Company so desires, to assume control of the defense
thereof with counsel mutually satisfactory to the Company and the Indemnitee;
provided, however, that an Indemnitee shall have the right to retain its own
counsel with the reasonable fees and expenses of such counsel to be paid by the
Company if: (i) the Company has agreed in writing to pay such fees and expenses;
(ii) the Company shall have failed promptly to assume the defense of such
Indemnified Liability and to employ counsel reasonably satisfactory to such
Indemnitee in any such Indemnified Liability; or (iii) the named parties to any
such Indemnified Liability (including any impleaded parties) include both such
Indemnitee and the Company, and such Indemnitee shall have been advised by
counsel that a conflict of interest is likely to exist if the same counsel were
to represent such Indemnitee and the Company (in which case, if such Indemnitee
notifies the Company in writing that it elects to employ separate counsel at the
expense of the Company, then the Company shall not have the right to assume the
defense thereof and such counsel shall be at the expense of the Company),
provided further, that in the case of clause (iii) above the Company shall not
be responsible for the reasonable fees and expenses of more than one (1)
separate legal counsel for such Indemnitee. The Indemnitee shall reasonably
cooperate with the Company in connection with any negotiation or defense of any
such action or Indemnified Liability by the Company and shall furnish to the
Company all information reasonably available to the Indemnitee which relates to
such action or Indemnified Liability. The Company shall keep the Indemnitee
reasonably apprised at all times as to the status of the defense or any
settlement negotiations with respect thereto. The Company shall not be liable
for any settlement of any action, claim or proceeding effected without its prior
written consent, provided, however, that the Company shall not unreasonably
withhold, delay or condition its consent. The Company shall not, without the
prior written consent of the Indemnitee, such consent not to be unreasonably
withheld, conditioned or delayed, consent to entry of any judgment or enter into
any settlement or other compromise which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such Indemnitee of a
release from all liability in respect to such Indemnified Liability or
litigation, and such settlement shall not include any admission as to fault on
the part of the Indemnitee. Following indemnification as provided for hereunder,
the Company shall be subrogated to all rights of the Indemnitee with respect to
all third parties, firms or corporations relating to the matter for which
indemnification has been made. The failure to deliver written notice to the
Company within a reasonable time of the commencement of any such action shall
not relieve the Company of any liability to the Indemnitee under this Section,
except to the extent that the Company is materially and adversely prejudiced in
its ability to defend such action.

 

(iii)        The indemnification required by this Section shall be made by
periodic payments of the amount thereof during the course of the investigation
or defense, within a reasonable amount of time after bills are received or
Indemnified Liabilities are incurred.

 

- 35 -

 

  

(iv)        The indemnity agreement contained herein shall be in addition to (A)
any cause of action or similar right of the Indemnitee against the Company or
others, and (B) any liabilities the Company may be subject to pursuant to the
law.

 

(l)          Construction. The language used in this Agreement will be deemed to
be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party. No specific
representation or warranty shall limit the generality or applicability of a more
general representation or warranty. Each and every reference to share prices,
shares of Common Stock and any other numbers in this Agreement that relate to
the Common Stock shall be automatically adjusted for stock splits, stock
combinations and other similar transactions that occur with respect to the
Common Stock after the date of this Agreement.

 

(m)          Remedies. Each Buyer and each holder of any Securities shall have
all rights and remedies set forth in the Transaction Documents and all rights
and remedies which such holders have been granted at any time under any other
agreement or contract and all of the rights which such holders have under any
law. Any Person having any rights under any provision of this Agreement shall be
entitled to enforce such rights specifically (without posting a bond or other
security), to recover damages by reason of any breach of any provision of this
Agreement and to exercise all other rights granted by law. Furthermore, the
Company recognizes that in the event that it fails to perform, observe, or
discharge any or all of its obligations under the Transaction Documents, any
remedy at law may prove to be inadequate relief to the Buyers. The Company
therefore agrees that the Buyers shall be entitled to seek specific performance
and/or temporary, preliminary and permanent injunctive or other equitable relief
from any court of competent jurisdiction in any such case without the necessity
of proving actual damages and without posting a bond or other security.

 

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

 

- 36 -

 

  

(o)          Independent Nature of Buyers’ Obligations and Rights. The
obligations of each Buyer under the Transaction Documents are several and not
joint with the obligations of any other Buyer, and no Buyer shall be responsible
in any way for the performance of the obligations of any other Buyer under any
Transaction Document. Nothing contained herein or in any other Transaction
Document, and no action taken by any Buyer pursuant hereto or thereto, shall be
deemed to constitute the Buyers as, and the Company acknowledges that the Buyers
do not so constitute, a partnership, an association, a joint venture or any
other kind of group or entity, or create a presumption that the Buyers are in
any way acting in concert or as a group or entity with respect to such
obligations or the transactions contemplated by the Transaction Documents or any
matters, and the Company acknowledges that the Buyers are not acting in concert
or as a group, and the Company shall not assert any such claim, with respect to
such obligations or the transactions contemplated by the Transaction Documents.
The decision of each Buyer to purchase Securities pursuant to the Transaction
Documents has been made by such Buyer independently of any other Buyer. Each
Buyer acknowledges that no other Buyer has acted as agent for such Buyer in
connection with such Buyer making its investment hereunder and that no other
Buyer will be acting as agent of such Buyer in connection with monitoring such
Buyer’s investment in the Securities or enforcing its rights under the
Transaction Documents. The Company and each Buyer confirms that each Buyer has
independently participated with the Company in the negotiation of the
transaction contemplated hereby with the advice of its own counsel and advisors.
Each Buyer shall be entitled to independently protect and enforce its rights,
including, without limitation, the rights arising out of this Agreement or out
of any other Transaction Documents, and it shall not be necessary for any other
Buyer to be joined as an additional party in any proceeding for such purpose.
The use of a single agreement to effectuate the purchase and sale of the
Securities contemplated hereby was solely in the control of the Company, not the
action or decision of any Buyer, and was done solely for the convenience of the
Company and not because it was required or requested to do so by any Buyer. It
is expressly understood and agreed that each provision contained in this
Agreement and in each other Transaction Document is between the Company and a
Buyer, solely, and not between the Company and the Buyers collectively and not
between and among the Buyers.

 

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

 

(q)          Potential Conflicts. The Placement Agents, their subagents,
employees, legal counsel and/or their respective Affiliates, principals,
representatives or employees may now or hereafter own shares of the Company.

 

(r)          DTC Accounts. Notwithstanding anything to the contrary in this
Agreement, the Company shall not be obligated herein to credit any restricted
securities, including any Warrant Shares if so restricted, to the Buyer’s DTC
account, and any obligation hereunder to credit shares to a Buyer’s DTC account
shall only apply to unrestricted securities.

 

(s)          Disclosure. Upon delivery by the Company of any notice in
accordance with the terms of the Transaction Documents, unless (i) the Company
has in good faith determined that the matters relating to such notice do not
constitute material, nonpublic information relating to the Company or its
Subsidiaries or (ii) with respect to all Buyers receiving such notice, the
Company and each such Buyer are parties to a confidentiality agreement covering
the information in such notice, the Company shall within two (2) Business Days
after any such receipt or delivery publicly disclose such material, nonpublic
information on a Current Report on Form 8-K or otherwise. In the event that the
Company believes that a notice contains material, nonpublic information relating
to the Company or its Subsidiaries, the Company so shall indicate to such Holder
contemporaneously with delivery of such notice, and in the absence of any such
indication, the Holder shall be allowed to presume that all matters relating to
such notice do not constitute material, nonpublic information relating to the
Company or its Subsidiaries.

  

[signature page follows]

 

- 37 -

 

 

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

 

  COMPANY:       NEUROTROPE, INC.       By: /s/ Robert Weinstein     Name:
Robert Weinstein     Title:  Chief Financial Officer, Executive Vice President,
Secretary and Treasurer

 

[SEE “NEUROTROPE, INC. OMNIBUS SIGNATURE PAGE TO

SECURITIES PURCHASE AGREEMENT AND

REGISTRATION RIGHTS AGREEMENT”

FOR SIGNATURE PAGES FOR BUYERS.]

 

 

 

 

SCHEDULE OF DEFINITIONS

 

As used in the Agreement, the following terms shall have the meanings set forth
below:

 

a)“1933 Act” means the Securities Act of 1933, as amended.

 

b)“Registrable Securities” shall have the meaning as defined in the Registration
Rights Agreement.

 

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

 

d)“Transfer Agent” shall mean the transfer agent of the Company from
time-to-time.

 

As used in the Agreement, the following terms shall have the meaning set forth
in the corresponding Section below:

 

Term   Section 1934 Act   2(d) 8-K filing   4(f) Additional Buyer   1(c)(ii)
Additional Securities   1(c)(ii) Affiliate   3(f) Applicable Date   4(r)
Approved Share Plan   4(g) Available Undersubscription Amount   4(l)(ii) Basic
Amount   4(l)(i) BHCA   3(hh) Business Day   1(c)(i) Buy-In Price   5(e) Bylaws
  3(q) Certificate of Incorporation   3(q) Closing   1(c)(i) Contingent
Obligation   3(r) Convertible Securities   4(g) Disclosure Schedules   3
Eligible Market   4(c) Environmental Laws   3(x) Escrow Agent   1(a) Exchange
Rate   8(p) Excluded Securities   4(g)(vii) Federal Reserve   3(hh) Fundamental
Transaction   4(k) Hazardous Materials   3(x)

 

 

 

 

Indebtedness   3(r) Indemnified Liabilities   8(k) Indemnitees   8(k) Initial
Closing Date   1(c)(i) Initial Closing   1(c)(i) Insolvent   3(k) Intellectual
Property Rights   3(w) Irrevocable Transfer Agent Instructions   5(b) Knowledge
and Knowingly   2(d) Large Investor   4(g) Material Adverse Effect   3(a) Ms.
Glenns   6(a)(ii) Notice of Acceptance   4(l)(ii) Offer Notice   4(l)(i) Offer
Period   4(l)(ii) Offer   4(l)(i) Offered Securities   4(l)(i) Person   3(r)
Placement Agent   4(d) Pre-Notice   4(l)(i) Press Release   4(f) Principal
Market   3(d) Purchase Price   1(b) Refused Securities   4(l)(iii) Registration
Rights Agreement   2(e) Reporting Period   4(a) Required Delivery Date   5(d)
Restricted Period   4(g) Rule 144   2(e) SEC Documents   2(j) SEC Reports   3(j)
SEC   3(b) Securities   Recitals Short Sales   2(d) Subsequent Placement
Agreement   4(l)(iii) Subsequent Placement Documents   4(l)(vii) Subsequent
Placement   4(g) Subsidiaries   3(a) Trading Affiliates   2(d) Transaction
Documents   3(b) U.S. Dollars   8(p) U.S. Person   2(g) Undersubscription Amount
  4(l)(i) Unit(s)   1(b) Variable Rate Transaction   4(j) Warrant Shares  
Recitals Warrants   Recitals

 

 

 

 

SCHEDULE OF ADDITIONAL RISK FACTORS

 

·Buyers may lose all of their investment. An investment in the Securities is
subject to investment risk, including the possible loss of the entire amount
that the Buyers invest.

·Shares of Common Stock may be sold in the market following the offering, which
may depress the market price for the Common Stock (including shares issued upon
the exercise of options and warrants and those shares of Common Stock issued
upon conversion of the Company’s outstanding shares of Series B Convertible
Preferred Stock).

·Except as otherwise set forth in the Warrants, Buyers of the Warrants will have
no rights as a common stockholder until they acquire the Company’s Common Stock.

·The Company has broad discretion in the use of the proceeds pursuant to this
Agreement and, despite the Company’s efforts, the Company may use the proceeds
in a manner that does not improve its operating results or increase the value of
your investment.

·The Company’s reverse stock split to be effected following Closing may have the
effect of depressing the market price of the Company’s Common Stock.

·There can be no assurance that the Company’s Common Stock will be listed on The
NASDAQ Capital Market, the NYSE MKT or any other national securities exchange.

·As of June 30, 2016, we had federal net operating loss carryforwards of
$26,725,315, which begin to expire in fiscal 2016.  Under Section 382 of the
Internal Revenue Code of 1986, as amended, or the Code, changes in our ownership
may limit the amount of our net operating loss carryforwards that could be
utilized annually to offset our future taxable income, if any. This limitation
would generally apply in the event of a cumulative change in ownership of our
company of more than 50% within a three-year period. Any such limitation may
significantly reduce our ability to utilize our net operating loss carryforwards
and tax credit carryforwards before they expire. Any such limitation, whether as
the result of future offerings, prior private placements, sales of our common
stock by our existing stockholders or additional sales of our common stock by us
in the future (through the exercise of outstanding Warrants, or otherwise),
could have a material adverse effect on our results of operations in future
years. We have not completed a study to assess whether an ownership change for
purposes of Section 382 has occurred, or whether there have been multiple
ownership changes since our inception, due to the significant costs and
complexities associated with such study.