THE SECURITIES REPRESENTED HEREBY MAY NOT BE TRANSFERRED UNLESS (I) SUCH
SECURITIES HAVE BEEN REGISTERED FOR SALE PURSUANT TO THE SECURITIES ACT OF 1933,
AS AMENDED, (II) SUCH SECURITIES MAY BE SOLD PURSUANT TO RULE 144, OR (III) THE
COMPANY HAS RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT THAT
SUCH TRANSFER MAY LAWFULLY BE MADE WITHOUT REGISTRATION UNDER THE SECURITIES ACT
OF 1933 OR QUALIFICATION UNDER APPLICABLE STATE SECURITIES LAWS.

 

THIS WARRANT SHALL BE VOID AFTER 5:00 P.M. EASTERN TIME ON FEBRUARY 2, 2015 (the
“EXPIRATION DATE”).

 

NET ELEMENT, INC.

 

WARRANT TO PURCHASE 666,667 SHARES OF

COMMON STOCK, $.001 PAR VALUE PER SHARE

 

For VALUE RECEIVED, Felix Vulis (“Warrantholder”), is entitled to purchase,
subject to the provisions of this Warrant, from Net Element, Inc., a Delaware
corporation (the “Company”), at any time not later than 5:00 P.M., Eastern Time,
on the Expiration Date (as defined above), at an exercise price per share equal
to $0.25 (the exercise price in effect being herein called the “Warrant Price”),
666,667 shares (“Warrant Shares”) of the Company’s Common Stock, $.001 par value
per share (“Common Stock”). The number of Warrant Shares purchasable upon
exercise of this Warrant and the Warrant Price shall be subject to adjustment
from time to time as described herein.

 

Section 1.          Registration. The Company shall maintain books for the
transfer and registration of the Warrant. Upon the initial issuance of this
Warrant, the Company shall issue and register the Warrant in the name of the
Warrantholder.

 

Section 2.          Transfers. As provided herein, this Warrant may be
transferred only pursuant to a registration statement filed under the Securities
Act of 1933, as amended (the “Securities Act”), or an exemption from such
registration. Subject to such restrictions, the Company shall transfer this
Warrant from time to time upon the books to be maintained by the Company for
that purpose, upon surrender thereof for transfer properly endorsed or
accompanied by appropriate instructions for transfer and such other documents as
may be reasonably required by the Company, including, if required by the
Company, an opinion of its counsel to the effect that such transfer is exempt
from the registration requirements of the Securities Act, to establish that such
transfer is being made in accordance with the terms hereof, and a new Warrant
shall be issued to the transferee and the surrendered Warrant shall be canceled
by the Company.

 

 

 

 

Section 3.          Exercise of Warrant. Subject to the provisions hereof, the
Warrantholder may exercise this Warrant in whole or in part at any time prior to
its expiration upon surrender of the Warrant, together with delivery of the duly
executed Warrant exercise form attached hereto as Appendix A (the “Exercise
Agreement”) and payment by cash, certified check or wire transfer of funds for
the aggregate Warrant Price for that number of Warrant Shares then being
purchased, to the Company during normal business hours on any business day at
the Company’s principal executive offices (or such other office or agency of the
Company as it may designate by notice to the Warrantholder). The Warrant Shares
so purchased shall be deemed to be issued to the Warrantholder or the
Warrantholder’s designee, as the record owner of such shares, as of the close of
business on the date on which this Warrant shall have been surrendered (or
evidence of loss, theft or destruction thereof and security or indemnity
satisfactory to the Company), the Warrant Price shall have been paid and the
completed Exercise Agreement shall have been delivered. Certificates for the
Warrant Shares so purchased, representing the aggregate number of shares
specified in the Exercise Agreement, shall be delivered to the Warrantholder
within a reasonable time, not exceeding five (5) business days, after this
Warrant shall have been so exercised. The certificates so delivered shall be in
such denominations as may be requested by the Warrantholder and shall be
registered in the name of the Warrantholder or such other name as shall be
designated by the Warrantholder. If this Warrant shall have been exercised only
in part, then, unless this Warrant has expired, the Company shall, at its
expense, at the time of delivery of such certificates, deliver to the
Warrantholder a new Warrant representing the number of shares with respect to
which this Warrant shall not then have been exercised. As used herein, “business
day” means a day, other than a Saturday or Sunday, on which banks in Miami,
Florida are open for the general transaction of business. Each exercise hereof
shall constitute the re-affirmation by the Warrantholder that the
representations and warranties contained in Section 4 of the Subscription
Agreement (the “Subscription Agreement”) dated December __, 2011 between the
Company and the Warrantholder are true and correct in all material respects with
respect to the Warrantholder as of the time of such exercise.

 

Section 4.          Compliance with the Securities Act of 1933. Except as
provided in the Subscription Agreement, the Company may cause the legend set
forth on the first page of this Warrant to be set forth on each Warrant or
similar legend on any security issued or issuable upon exercise of this Warrant,
unless counsel for the Company is of the opinion as to any such security that
such legend is unnecessary.

 

Section 5.          Payment of Taxes. The Company will pay any documentary stamp
taxes attributable to the initial issuance of Warrant Shares issuable upon the
exercise of the Warrant; provided, however, that the Company shall not be
required to pay any tax or taxes which may be payable in respect of any transfer
involved in the issuance or delivery of any certificates for Warrant Shares in a
name other than that of the Warrantholder in respect of which such shares are
issued, and in such case, the Company shall not be required to issue or deliver
any certificate for Warrant Shares or any Warrant until the person requesting
the same has paid to the Company the amount of such tax or has established to
the Company’s reasonable satisfaction that such tax has been paid. The
Warrantholder shall be responsible for income taxes due under federal, state or
other law, if any such tax is due.

 

 

Section 6.          Mutilated or Missing Warrants. In case this Warrant shall be
mutilated, lost, stolen, or destroyed, the Company shall issue in exchange and
substitution of and upon cancellation of the mutilated Warrant, or in lieu of
and substitution for the Warrant lost, stolen or destroyed, a new Warrant of
like tenor and for the purchase of a like number of Warrant Shares, but only
upon receipt of evidence reasonably satisfactory to the Company of such loss,
theft or destruction of the Warrant, and with respect to a lost, stolen or
destroyed Warrant, reasonable indemnity or bond with respect thereto, if
requested by the Company.

 

- 2 -

 

 

Section 7.          Reservation of Common Stock. The Company hereby represents
and warrants that there have been reserved, and the Company shall at all
applicable times keep reserved until issued (if necessary) as contemplated by
this Section 7, out of the authorized and unissued shares of Common Stock,
sufficient shares to provide for the exercise of the rights of purchase
represented by this Warrant. The Company agrees that all Warrant Shares issued
upon due exercise of the Warrant shall be, at the time of delivery of the
certificates for such Warrant Shares, duly authorized, validly issued, fully
paid and non-assessable shares of Common Stock of the Company.

 

Section 8.          Adjustments. Subject and pursuant to the provisions of this
Section 8, unless waived in a particular case by the Warrantholder, the Warrant
Price and number of Warrant Shares subject to this Warrant shall be subject to
adjustment from time to time as set forth hereinafter.

 

(a)          If the Company shall, at any time or from time to time while this
Warrant is outstanding, pay a dividend or make a distribution on its Common
Stock in shares of Common Stock, subdivide its outstanding shares of Common
Stock into a greater number of shares or combine its outstanding shares of
Common Stock into a smaller number of shares or issue by reclassification of its
outstanding shares of Common Stock any shares of its capital stock (including
any such reclassification in connection with a consolidation or merger in which
the Company is the continuing corporation), then the number of Warrant Shares
purchasable upon exercise of the Warrant and the Warrant Price in effect
immediately prior to the date upon which such change shall become effective,
shall be adjusted by the Company so that the Warrantholder thereafter exercising
the Warrant shall be entitled to receive the number of shares of Common Stock or
other capital stock which the Warrantholder would have received if the Warrant
had been exercised immediately prior to such event upon payment of a Warrant
Price that has been adjusted to reflect a fair allocation of the economics of
such event to the Warrantholder. Such adjustments shall be made successively
whenever any event listed above shall occur.

 

- 3 -

 

(b)          If any capital reorganization, reclassification of the capital
stock of the Company, consolidation or merger of the Company with another
corporation in which the Company is not the survivor, or sale, transfer or other
disposition of all or substantially all of the Company’s assets to another
corporation shall be effected, then, as a condition of such reorganization,
reclassification, consolidation, merger, sale, transfer or other disposition,
lawful and adequate provision shall be made whereby the Warrantholder shall
thereafter have the right to purchase and receive upon the basis and upon the
terms and conditions herein specified and in lieu of the Warrant Shares
immediately theretofore issuable upon exercise of the Warrant, such shares of
stock, securities or assets as would have been issuable or payable with respect
to or in exchange for a number of Warrant Shares equal to the number of Warrant
Shares immediately theretofore issuable upon exercise of the Warrant, had such
reorganization, reclassification, consolidation, merger, sale, transfer or other
disposition not taken place, and in any such case appropriate provision shall be
made with respect to the rights and interests of the Warrantholder to the end
that the provisions hereof (including, without limitation, provision for
adjustment of the Warrant Price) shall thereafter be applicable, as nearly
equivalent as may be practicable in relation to any shares of stock, securities
or assets thereafter deliverable upon the exercise hereof. The Company shall not
effect any such consolidation, merger, sale, transfer or other disposition
unless prior to or simultaneously with the consummation thereof the successor
corporation (if other than the Company) resulting from such consolidation or
merger, or the corporation purchasing or otherwise acquiring such assets or
other appropriate corporation or entity shall assume the obligation to deliver
to the Warrantholder, at the last address of the Warrantholder appearing on the
books of the Company, such shares of stock, securities or assets as, in
accordance with the foregoing provisions, the Warrantholder may be entitled to
purchase, and the other obligations under this Warrant. The provisions of this
paragraph (b) shall similarly apply to successive reorganizations,
reclassifications, consolidations, mergers, sales, transfers or other
dispositions.

 

(c)          In case the Company shall fix a payment date for the making of a
distribution to all holders of Common Stock (including any such distribution
made in connection with a consolidation or merger in which the Company is the
continuing corporation) of evidences of indebtedness or assets (other than cash
dividends or cash distributions payable out of consolidated earnings or earned
surplus or dividends or distributions referred to in Section 8(a)), or
subscription rights or warrants, the Warrant Price to be in effect after such
payment date shall be determined by multiplying the Warrant Price in effect
immediately prior to such payment date by a fraction, the numerator of which
shall be the total number of shares of Common Stock outstanding multiplied by
the Market Price (as defined below) per share of Common Stock immediately prior
to such payment date, less the fair market value (as determined by the Company’s
Board of Directors in good faith) of said assets or evidences of indebtedness so
distributed, or of such subscription rights or warrants, and the denominator of
which shall be the total number of shares of Common Stock outstanding multiplied
by such Market Price per share of Common Stock immediately prior to such payment
date. “Market Price” as of a particular date (the “Valuation Date”) shall mean
the following: (a) if the Common Stock is then listed on a national securities
exchange, the closing sale price of one share of Common Stock on such exchange
on the last trading day prior to the Valuation Date; (b) if the Common Stock is
then quoted on an over-the-counter market or other exchange or association, the
closing sale price of one share of Common Stock on such market or such other
exchange or association on the last trading day prior to the Valuation Date or,
if no such closing sale price is available, the average of the high bid and the
low asked price quoted thereon on the last trading day prior to the Valuation
Date; or (c) if the Common Stock is not then listed on a national securities
exchange or quoted on an over-the-counter market or other exchange or
association, the fair market value of one share of Common Stock as of the
Valuation Date, shall be determined in good faith by the Board of Directors of
the Company and the Warrantholder. If the Common Stock is not then listed on a
national securities exchange, an over-the-counter market or other exchange or
association, the Board of Directors of the Company shall respond promptly, in
writing, to an inquiry by the Warrantholder prior to the exercise hereunder as
to the fair market value of a share of Common Stock as determined by the Board
of Directors of the Company. In the event that the Board of Directors of the
Company and the Warrantholder are unable to agree upon the fair market value in
respect of subpart (c) hereof, the Company and the Warrantholder shall jointly
select an appraiser, who is experienced in such matters. The decision of such
appraiser shall be final and conclusive, and the cost of such appraiser shall be
borne equally by the Company and the Warrantholder. Such adjustment shall be
made successively whenever such a payment date is fixed.

- 4 -

 

 

 

(d)          An adjustment to the Warrant Price shall become effective
immediately after the payment date in the case of each dividend or distribution
and immediately after the effective date of each other event which requires an
adjustment.

 

(e)          In the event that, as a result of an adjustment made pursuant to
this Section 8, the Warrantholder shall become entitled to receive any shares of
capital stock of the Company other than shares of Common Stock, the number of
such other shares so receivable upon exercise of this Warrant shall be subject
thereafter to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the Warrant Shares
contained in this Warrant.

 

Section 9.          Fractional Interest. The Company shall not be required to
issue fractions of Warrant Shares upon the exercise of this Warrant. If any
fractional share of Common Stock would, except for the provisions of the first
sentence of this Section 9, be deliverable upon such exercise, the Company, in
lieu of delivering such fractional share, shall pay to the exercising
Warrantholder an amount in cash equal to the Market Price of such fractional
share of Common Stock on the date of exercise.

 

Section 10.         Benefits. Nothing in this Warrant shall be construed to give
any person, firm or corporation (other than the Company and the Warrantholder)
any legal or equitable right, remedy or claim, it being agreed that this Warrant
shall be for the sole and exclusive benefit of the Company and the
Warrantholder.

 

Section 11.         Notices to Warrantholder. Upon the happening of any event
requiring an adjustment of the Warrant Price, the Company shall promptly give
written notice thereof to the Warrantholder at the address appearing in the
records of the Company, stating the adjusted Warrant Price and the adjusted
number of Warrant Shares resulting from such event and setting forth in
reasonable detail the method of calculation and the facts upon which such
calculation is based. Failure to give such notice to the Warrantholder or any
defect therein shall not affect the legality or validity of the subject
adjustment.

 

Section 12.         Notices. Unless otherwise provided, any notice required or
permitted under this Warrant shall be given in writing and shall be deemed
effectively given as hereinafter described (a) if given by personal delivery,
then such notice shall be deemed given upon such delivery, (b) if given by
facsimile or other means of electronic transmission, then such notice shall be
deemed given upon receipt of an automated confirmation of complete transmittal,
(c) if given by mail, then such notice shall be deemed given upon the earlier of
(i) receipt of such notice by the recipient or (ii) three days after such notice
is deposited in first class mail, postage prepaid, and (d) if given by an
internationally recognized overnight air courier, then such notice shall be
deemed given one business day after delivery to such carrier. All notices shall
be addressed as follows: if to the Warrantholder, at its address as set forth in
the Company’s books and records and, if to the Company, at the address as
follows, or at such other address as the Warrantholder or the Company may
designate by ten days’ advance written notice to the other:

- 5 -

 

 

 

If to the Company:

 

Net Element, Inc.

1450 S. Miami Avenue

Miami, Florida 33130

Attn: Chief Financial Officer

Facsimile: 305) 358-7876

 

Section 13.         Intentionally Omitted.

 

Section 14.          Successors. All the covenants and provisions hereof by or
for the benefit of the Warrantholder shall bind and inure to the benefit of its
respective successors and assigns hereunder.

 

Section 15.         Governing Law; Consent to Jurisdiction; Waiver of Jury
Trial. This Warrant shall be governed by, and construed in accordance with, the
internal laws of the State of Delaware, without reference to the choice of law
provisions thereof. The Company and, by accepting this Warrant, the
Warrantholder, each irrevocably submits to the exclusive jurisdiction of the
courts of the State of Florida located in Miami-Dade County and federal courts
located in Miami-Dade County, Florida for the purpose of any suit, action,
proceeding or judgment relating to or arising out of this Warrant and the
transactions contemplated hereby. Service of process in connection with any such
suit, action or proceeding may be served on each party hereto anywhere in the
world by the same methods as are specified for the giving of notices under this
Warrant. The Company and, by accepting this Warrant, the Warrantholder, each
irrevocably consents to the jurisdiction of any such court in any such suit,
action or proceeding and to the laying of venue in such court. The Company and,
by accepting this Warrant, the Warrantholder, each irrevocably waives any
objection to the laying of venue of any such suit, action or proceeding brought
in such courts and irrevocably waives any claim that any such suit, action or
proceeding brought in any such court has been brought in an inconvenient forum.
EACH OF THE COMPANY AND, BY ITS ACCEPTANCE HEREOF, THE WARRANTHOLDER HEREBY
WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY LITIGATION WITH RESPECT TO
THIS WARRANT AND REPRESENTS THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO
THIS WAIVER.

 

Section 16.         No Rights as Stockholder. Prior to the exercise of this
Warrant, the Warrantholder shall not have or exercise any rights as a
stockholder of the Company by virtue of his ownership of this Warrant.

 

Section 17.         Amendment; Waiver. Any term of this Warrant may be amended
or waived upon the written consent of the Company and the holder of this
Warrant.

 

Section 18.         Section Headings. The section headings in this Warrant are
for the convenience of the Company and the Warrantholder and in no way alter,
modify, amend, limit or restrict the provisions hereof.

 

- 6 -

 

 

IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed, as
of the 2nd day of February, 2012.

 

  NET ELEMENT, INC.       By:     Name: Jonathan New   Title: Chief Financial
Officer

 

- 7 -

 

 

APPENDIX A

NET ELEMENT, INC.

WARRANT EXERCISE FORM

 

To Net Element, Inc.:

 

The undersigned hereby irrevocably elects to exercise the right of purchase
represented by the within Warrant (“Warrant”) for, and to purchase thereunder by
the payment of the Warrant Price and surrender of the Warrant, _______________
shares of Common Stock (“Warrant Shares”) provided for therein, and requests
that certificates for the Warrant Shares be issued as follows:

 

        Name                 Address           Federal Tax ID or Social Security
No.  

 

and delivered by (certified mail to the above address, or (electronically, if
available (provide DWAC Instructions: ___________________), or (other (specify):
____________________________________________________________________________),
and, if the number of Warrant Shares shall not be all the Warrant Shares
purchasable upon exercise of the Warrant, that a new Warrant for the balance of
the Warrant Shares purchasable upon exercise of this Warrant be registered in
the name of the undersigned Warrantholder or the undersigned’s Assignee as below
indicated and delivered to the address stated below.

 

By signing below, the undersigned hereby re-affirms that the representations and
warranties contained in Section 4 of the Subscription Agreement (the
“Subscription Agreement”) dated December __, 2011 between the Company and the
Warrantholder are true and correct in all material respects with respect to the
Warrantholder as of the time this exercise.

 

Dated: ___________________, ____

 

Note: The signature must correspond with the name of the Warrantholder as
written on the first page of the Warrant in every particular, without alteration
or enlargement or any change whatever, unless the Warrant has been assigned.

 

  Warrant Signature:           Name (please print):                        
Address           Federal Identification or     Social Security No.

 

 

 

  

ASSIGNMENT FORM

 

(To assign the foregoing warrant, execute
this form and supply required information.
Do not use this form to exercise the warrant.)

 

FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are
hereby assigned to

 

_______________________________________________ whose address is

 

_______________________________________________________________.

 

_______________________________________________________________

 

    Dated:  ______________, _______         Holder's Signature:
_____________________________         Holder's Address:
_____________________________           _____________________________

 

Signature Guaranteed: ___________________________________________

 

NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatsoever, and must be guaranteed by a bank or trust company. Officers
of corporations and those acting in a fiduciary or other representative capacity
should file proper evidence of authority to assign the foregoing Warrant.