Exhibit 10.1
 
 
SUBSCRIPTION AGREEMENT
 
 
This Subscription Agreement (this “Agreement”) has been executed by the
purchaser set forth on the signature page hereof (the “Purchaser”) in connection
with a registered direct public offering (the “Offering”) by Wrap Technologies,
Inc., a Delaware corporation (the “Company”).
 

R E C I T A L S
 

A. The Company is offering units to purchase (i) one (1) share of common stock,
par value $0.0001 (the “Common Stock”), and (ii) a two-year warrant to purchase
one (1) share of Common Stock (the “Warrant” and together with the Common Stock,
a “Unit”), at a purchase price of $6.00 per unit (the “Purchase Price”), for a
maximum aggregate purchase price of $12.40 million.
 

B. The Units, including the Common Stock and Warrant, subscribed for pursuant to
this Agreement are being issued under the Company’s Registration Statement on
Form S-3 (No. 333-228974) declared effective by the Securities and Exchange
Commission on February 14, 2019 (the “Registration Statement”).
 

AGREEMENT
  The Company and the Purchaser hereby agree as follows:
 
  1. Subscription.
 
(a)
Purchase and Sale of the Units.
 

(i) Subject to the terms and conditions of this Agreement, the undersigned
Purchaser agrees to purchase, and the Company agrees to sell and issue to such
Purchaser, that number of Units set forth on such Purchaser’s Omnibus Signature
Page attached hereto at the Purchase Price per Unit, for a total aggregate
Purchase Price as set forth on such Omnibus Signature Page. The minimum
subscription amount for each Purchaser in the Offering is $50,000. The Company
may accept subscriptions for less than $50,000 from any Purchaser in its sole
discretion.
 

For the purposes of this Agreement:
 

“Shares” means the shares of Common Stock issued in the Offering at the Closing
(as defined below).
 

“Warrant Shares” means the shares of Common Stock issuable upon exercise of the
Warrants.
 

“Securities” means each of the Shares, the Warrants and when issued, the Warrant
Shares.
 

(ii) This Agreement is one of a series of subscription agreements issued (and to
be issued) by the Company to purchasers of Units in connection with the Offering
with substantially the same terms and conditions set forth in this Agreement
(each, a “Subscription Agreement”, and collectively, the “Subscription
Agreements”).
 
 
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(b)
Subscription Procedure; Closing.
 
(i) Closing. The purchase and sale of the Units shall take place remotely via
the exchange of documents and signatures upon the later to occur of 10:00 A.M.
EST, on June 2, 2020, or the date the Company files with the Securities Exchange
Commission (the “SEC”) a prospectus supplement (the "Supplement") to the
Registration Statement under Rule 424(b) of the Securities Act of 1933, as
amended (the “Closing”).
 
(ii) Subscription Procedure. To complete a subscription for the Units pursuant
hereto, the Purchaser must fully comply with the subscription procedure provided
in paragraphs (A) through (C) of this Section on or before the Closing:
 
(A) Subscription Documents. At or before the Closing, the Purchaser shall
review, complete and execute the Omnibus Signature Page to this Agreement,
Investor Profile and Anti-Money Laundering Form, attached hereto following the
Omnibus Signature Page (collectively, the “Subscription Documents”), if
applicable, additional forms and questionnaires distributed to the Purchaser and
deliver the Subscription Documents and such additional forms and questionnaires
to the party indicated thereon at the address set forth under the caption “How
to subscribe for Units in the registered direct public offering of the Company”
below. Executed documents may be delivered to such party by facsimile or .pdf
sent by electronic mail (e-mail).
 

(B) Purchase Price. At or prior to the Closing, the Purchaser shall deliver to
the Company the full Purchase Price set forth on the Purchaser’s Omnibus
Signature Page attached hereto, by certified or other bank check or by wire
transfer of immediately available funds, pursuant to the instructions set forth
under the caption “How to subscribe for Units in the registered direct public
offering of the Company” below. Since there is no requirement that the Company
sell a minimum number of Units, upon acceptance by the Company of the
Purchaser’s subscription, the Purchaser agrees and acknowledges that such funds
will be immediately available for use by the Company upon Closing.
 
(C) Company Discretion. The Purchaser understands and agrees that the Company in
its sole discretion reserves the right to accept or reject this or any other
subscription for Units, in whole or in part, notwithstanding prior receipt by
the Purchaser of notice of acceptance of this subscription. The Company shall
have no obligation hereunder until the Company shall execute and deliver to the
Purchaser an executed copy of this Agreement. If this subscription is rejected
by the Company in whole pursuant to the first sentence of this Section 1(b)(C),
or the Offering is terminated, the Company shall immediately return all funds
paid by or on behalf of the Purchaser pursuant to this Agreement, without
interest or offset, and this Agreement shall thereafter be of no further force
or effect. If this subscription is rejected by the Company in part, the Company
shall immediately return all funds paid by or on behalf of the Purchaser for the
rejected portion of this subscription, without interest or offset, and this
Agreement shall continue in full force and effect to the extent this
subscription was accepted.
 
 
 
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(iii) Company’s Obligations at Closing
 
(A)  Share & Warrant Delivery. At the Closing, the Company shall issue and
deliver to the Purchaser (i) a book entry confirmation, in the name of such
Purchaser and free of all restrictive legends, representing the number of Shares
issued and sold to the Purchaser hereunder or, for Purchasers who provide the
necessary account information to the Company, the Company shall issue and
deliver such Shares in a balance account with The Depository Trust Company
through its Deposit Withdrawal Agent Commission System and (ii) a Warrant
registered in the name of the Purchaser.
 
(B) Prospectus Supplement. At or prior to Closing, the Company shall file the
Supplement with respect to the Registration Statement reflecting the sale of the
Securities.
 

2.
Advisor.
 

(a) Katalyst Securities LLC has been engaged by the Company as a financial
advisor and consultant in connection with the Offering. Throughout this
Agreement, Katalyst Securities LLC is referred to as the “Advisor.”
 
(b) As a consulting fee, the Advisor shall receive four percent (4%) of the
gross proceeds from the sale to the applicable prospective investor in the
Closing (the “Cash Fee”).
 
(c) The Company will also pay certain accountable expenses, including legal fees
not to exceed $25,000 in connection with the Offering.
 
3. Representations and Warranties of the Company. Except as disclosed in the SEC
Reports (as defined below) filed by the Company with the SEC and publicly
available on the SEC’s Electronic Data Gathering Analysis and Retrieval system,
the Company hereby represents and warrants to the Purchaser, as of the date of
the Closing, the following:
 
(a) Organization and Qualification. The Company and each of its subsidiaries is
a corporation duly organized, validly existing and in good standing under the
laws of Delaware, and has the requisite corporate power to own its properties
and to carry on its business as now being conducted. The Company and each of its
subsidiaries is duly qualified as a foreign corporation to do business and is in
good standing in every jurisdiction in which 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 have a material
adverse effect on the assets, business, financial condition, results of
operations or future prospects of the Company and its subsidiaries taken as a
whole (a “Material Adverse Effect”).
 
(b) Authorization, Enforcement, Compliance with Other Instruments. (i) the
Company has the requisite corporate power and authority to enter into and
perform its obligations under this Agreement and the Warrant (the “Transaction
Documents”) and to issue the Securities, in accordance with the terms hereof and
thereof; (ii) the execution and delivery by the Company of each of the
Transaction Documents and the consummation by it of the transactions
contemplated hereby and thereby, including, without limitation, the issuance of
the Securities, have been, or will be at the time of execution of such
Transaction Document, duly authorized by the Company’s Board of Directors, and
no further consent or authorization is, or will be at the time of execution of
such Transaction Document, required by the Company, its Board of Directors or
its stockholders; (iii) each of the Transaction Documents will be duly executed
and delivered by the Company; and (iv) the Transaction Documents when executed
will constitute the valid and binding obligations of the Company enforceable
against the Company in accordance with their 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 creditors’ rights and
remedies and, with respect to any rights to indemnity or contribution contained
in the Transaction Documents, as such rights may be limited by state or federal
laws or public policy underlying such laws.
 
 
 
 
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(c) Capitalization. The authorized capital stock of the Company consists of
150,000,000 shares of Common Stock and 5,000,000 shares of preferred stock (the
“Preferred Stock”). The Company has not issued any capital stock since the date
of its most recently filed SEC Report other than upon stock option and warrant
exercises that do not, individually or in the aggregate, have a material effect
on the issued and outstanding capital stock, options and other securities. All
of the outstanding shares of Common Stock and of the capital stock of each of
the Company’s subsidiaries have been duly authorized, validly issued and are
fully paid and non-assessable. Immediately following the Closing, and except as
set forth in the SEC Reports: (i) no shares of capital stock of the Company or
any of its subsidiaries will be subject to preemptive rights or any other
similar rights or any liens or encumbrances suffered or permitted by the
Company; (ii) there will be no outstanding options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of 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 shares of capital stock of the Company or any of its
subsidiaries; (iii) there will be no outstanding debt securities of the Company
or any of its subsidiaries; (iv), there will be 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 Securities Act; (v) there will be no
securities or instruments of the Company or any of its subsidiaries containing
anti-dilution or similar provisions, including the right to adjust the exercise,
exchange or reset price under such securities, that will be triggered by the
issuance of the Securities as described in this Agreement; and (vi) no co-sale
right, right of first refusal or other similar right will exist with respect to
the Securities or the issuance and sale thereof.
 
(d) Issuance of Securities. The Securities that are being issued to the
Purchaser hereunder, when issued, sold and delivered in accordance with the
terms and for the consideration set forth in this Agreement, will be duly and
validly issued, fully paid and non- assessable, and free of restrictions on
transfer and other liens and encumbrances. The Company has reserved a sufficient
number of duly authorized shares of Common Stock to issue all of the Securities.
At the Closing, the Shares and the shares of Common Stock issuable upon
conversion of the Warrant (shall have been listed for trading on the Nasdaq
Stock Market (the “Trading Market”).
 
(e) Registration Statement. The Company’s Registration Statement was declared
effective by the Commission on February 14, 2019. The Registration Statement is
effective on the date hereof and the Company has not received notice that the
Commission has issued or intends to issue a stop order with respect to the
Registration Statement or that the Commission otherwise has suspended or
withdrawn the effectiveness of the Registration Statement, either temporarily or
permanently, or intends or has threatened in writing to do so. The Registration
Statement (including the information or documents incorporated by reference
therein), as of the time it was declared effective, and any amendments or
supplements thereto, each as of the time of filing, did not contain any untrue
statement of material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading. The
issuance of the Securities to the Purchasers is registered by the Registration
Statement.
 
(f) No Restrictions. Any book entry confirmations and certificates evidencing
the Shares, Warrants and the Warrant Shares, as the case may be, shall not
contain any vesting conditions or restrictive legend. The Shares and Warrant
Shares shall be transmitted at the cost of the Company by the transfer agent to
the Purchaser by crediting the account of the Purchaser’s prime broker with the
Depository Trust Company System as directed by such Purchaser.
 
(g) No Violation. The issuance and sale of the Securities hereunder does not
conflict with or violate any rules or regulations of the Trading Market.
 
 
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(h) No Conflicts. The execution, delivery and performance of each of the
Transaction Documents by the Company, and the consummation by the Company of the
transactions contemplated hereby and thereby including issuance and sale of the
Securities in accordance with this Agreement will not (i) result in a violation
of the Certificate of Incorporation or the Bylaws (or equivalent constitutive
document) of the Company or any of its subsidiaries or (ii) violate or conflict
with, or result in a breach of any provision of, 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 subsidiary is a party, except for those which would not reasonably be
expected to have a Material Adverse Effect, or (iii) result in a violation of
any law, rule, regulation, order, judgment or decree (including U.S. federal and
state securities laws and regulations) applicable to the Company or any
subsidiary or by which any property or asset of the Company or any subsidiary is
bound or affected, except for those which would not reasonably be expected to
have a Material Adverse Effect. Neither the Company nor any subsidiary is in
violation of or in default under, any provision of its Certificate of
Incorporation or Bylaws. Neither the Company nor any subsidiary is in violation
of any term of or in default under any contract, agreement, mortgage,
indebtedness, indenture, instrument, judgment, decree or order or any statute,
rule or regulation applicable to the Company or any subsidiary, which violation
or breach has had or would reasonably be expected to have a Material Adverse
Effect. Except as specifically contemplated by this Agreement and as required
under the Securities Act and any applicable state securities laws, neither the
Company nor any of its subsidiaries is required to obtain any consent,
authorization or order of, or make any filing or registration with, any court or
governmental agency in order for it to execute, deliver or perform any of its
obligations under or contemplated by this Agreement or the other Transaction
Documents in accordance with the terms hereof or thereof. Neither the execution
and delivery by the Company of the Transaction Documents, nor the consummation
by the Company of the transactions contemplated hereby or thereby, will require
any notice, consent or waiver under any contract or instrument to which the
Company or any subsidiary is a party or by which the Company or any subsidiary
is bound or to which any of their assets is subject, except for any notice,
consent or waiver the absence of which would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect. All
consents, authorizations, orders, filings and registrations which the Company or
any of its subsidiaries is required to obtain pursuant to the preceding two
sentences have been or will be obtained or effected on or prior to the Closing.
 
(i) Absence of Litigation. There is no action, suit, claim, inquiry, notice of
violation, proceeding (including any partial proceeding such as a deposition) or
investigation before or by any court, public board, governmental or
administrative agency, self-regulatory organization, arbitrator, regulatory
authority, stock market, stock exchange or trading facility (an “Action”) now
pending or, to the knowledge of the Company, threatened against or affecting the
Company or any of its subsidiaries or any of their respective officers or
directors, which would be reasonably likely to (i) adversely affect the validity
or enforceability of, or the authority or ability of the Company to perform its
obligations under, this Agreement or any of the other Transaction Documents, or
(ii) except as specifically disclosed in the SEC Reports, have a Material
Adverse Effect. For the purpose of this Agreement, the knowledge of the Company
means the knowledge of the officers of the Company (both actual or constructive
knowledge that they would have had upon reasonable inquiry of the personnel of
the Company responsible for the applicable subject matter). Neither the Company
nor any of its subsidiaries is subject to any judgment, decree, or order which
has had, or would reasonably be expected to have a Material Adverse Effect.
 
(j) No General Solicitation. Neither the Company, nor any of its Affiliates,
nor, to the knowledge of the Company, any person acting on its or their behalf,
has engaged in any form of general solicitation or general advertising (within
the meaning of Regulation D) in connection with the offer or sale of the
Securities. “Affiliate” means, with respect to any person, any other person
that, directly or indirectly through one or more intermediaries, controls, is
controlled by or is under common control with such person, as such terms are
used in and construed under Rule 144 under the Securities Act (“Rule 144”). With
respect to a Purchaser, any investment fund or managed account that is managed
on a discretionary basis by the same investment manager as such Purchaser will
be deemed to be an Affiliate of such Purchaser.
 
 
 
 
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(k) Employee Relations. Neither Company nor any subsidiary is involved in any
labor dispute nor, to the knowledge of the Company, is any such dispute
threatened. Neither the Company nor any subsidiary is party to any collective
bargaining agreement. The Company’s and/or its subsidiaries’ employees are not
members of any union, and the Company believes that its and its subsidiaries’
relationship with their respective employees is good.
 
(l) Intellectual Property Rights. The Company and its subsidiaries own, possess,
and have all right, title, and interest in and to, free and clear of all liens
and encumbrances, or (if disclosed to be licensed by the Company in the SEC
Reports) have the valid and enforceable right to use pursuant to a license,
sublicense, agreement or permission, all Intellectual Property disclosed to be
owned, licensed or used by the Company or its subsidiaries in the SEC Reports,
except such failure(s) to own, possess or have such rights as would not
reasonably be expected to, individually or in the aggregate, result in a
Material Adverse Effect, and to the Company’s knowledge, there are no unreleased
liens or security interests which have been filed, or which the Company has
received notice of, against any of the patents owned by the Company.
Furthermore, (A) to the Company’s knowledge, there is no infringement,
misappropriation or violation by third parties of any such Intellectual
Property, except as such infringement, misappropriation or violation would not
result in a Material Adverse Effect; (B) to the Company’s knowledge, there is no
pending or threatened, Action by others challenging the Company’s or any of its
subsidiaries’ rights in or to any such Intellectual Property, and to the
Company’s knowledge, there are no facts which would form a reasonable basis for
any such Action; (C) to the Company’s knowledge, the Intellectual Property owned
by the Company and its subsidiaries, and the Intellectual Property licensed to
the Company and its subsidiaries, has not been adjudged invalid or
unenforceable, in whole or in part, and there is no pending or, to the Company’s
knowledge, threatened Action by others challenging the validity, enforceability
or scope of any such Intellectual Property, and, to the Company’s knowledge,
there are no facts which would form a reasonable basis for any such Action; (D)
to the Company’s knowledge, there is no pending or threatened Action by others
that the Company or any of its subsidiaries infringes, misappropriates or
otherwise violates any Intellectual Property or other proprietary rights of
others, neither the Company nor any of its subsidiaries has received any written
notice of such Action, and, to the Company’s knowledge, there are no other facts
which would form a reasonable basis for any such Action, except in each case for
any Action as would not be reasonably expected to have a Material Adverse
Effect; and (E) to the Company’s knowledge, no employee of the Company or any of
its subsidiaries is in violation of any term of any employment contract, patent
disclosure agreement, invention assignment agreement, non-competition agreement,
non-solicitation agreement, nondisclosure agreement or any restrictive covenant
to or with a former employer where the basis of such violation relates to such
employee’s employment with the Company or any of its subsidiaries or actions
undertaken by the employee while employed with the Company or any of its
subsidiaries, except such violation as would not reasonably be expected to have
a Material Adverse Effect. Except as would not reasonably be expected to have a
Material Adverse Effect, (1) to the Company’s knowledge, the Company and its
subsidiaries have disclosed to the U.S. Patent and Trademark Office (USPTO) all
information known to the Company to be relevant to the patentability of its
inventions in accordance with 37 C.F.R. Section 1.56, and (2) to the Company’s
knowledge, neither the Company nor any of its subsidiaries made any
misrepresentation or concealed any information from the USPTO in any of the
patents or patent applications owned or licensed to the Company, or in
connection with the prosecution thereof, in violation of 37 C.F.R. Section 1.56.
Except as would not reasonably be expected to have a Material Adverse Effect and
to the Company’s knowledge, (x) there are no facts that are reasonably likely to
provide a basis for a finding that the Company or any of its subsidiaries does
not have clear title to the patents or patent applications owned or licensed to
the Company or other proprietary information rights as being owned by the
Company or any of its subsidiaries, (y) no valid issued U.S. patent would be
infringed by the activities of the Company or any of its subsidiaries relating
to products currently or proposed to be manufactured, used or sold by the
Company or any of its subsidiaries and (z) there are no facts with respect to
any issued patent owned that would cause any claim of any such patent not to be
valid and enforceable with applicable regulations. “Intellectual Property” shall
mean all patents, patent applications, trade and service marks, trade and
service mark registrations, trade names, copyrights, licenses, inventions, trade
secrets, domain names, technology and know- how.
 
 
 
 
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(m)
Environmental Laws.
 

(i) The Company and each subsidiary has complied with all applicable
Environmental Laws (as defined below), except for violations of Environmental
Laws that, individually or in the aggregate, have not had and would not
reasonably be expected to have a Material Adverse Effect. There is no pending
or, to the knowledge of the Company, threatened civil or criminal litigation,
notice of violation, formal administrative proceeding, or investigation, inquiry
or information request, relating to any Environmental Law involving the Company
or any subsidiary, except for litigation, notices of violations, formal
administrative proceedings or investigations, inquiries or information requests
that, individually or in the aggregate, have not had and would not reasonably be
expected to have a Material Adverse Effect. For purposes of this Agreement,
“Environmental Law” means any national, state, provincial or local law, statute,
rule or regulation or the common law relating to the environment or occupational
health and safety, including without limitation any statute, regulation,
administrative decision or order pertaining to (i) treatment, storage, disposal,
generation and transportation of industrial, toxic or hazardous materials or
substances or solid or hazardous waste; (ii) air, water and noise pollution;
(iii) groundwater and soil contamination; the release or threatened release into
the environment of industrial, toxic or hazardous materials or substances, or
solid or hazardous waste, including without limitation emissions, discharges,
injections, spills, escapes or dumping of pollutants, contaminants or chemicals;
(iv) the protection of wild life, marine life and wetlands, including without
limitation all endangered and threatened species; (v) storage tanks, vessels,
containers, abandoned or discarded barrels, and other closed receptacles; (vi)
health and safety of employees and other persons; and (vii)manufacturing,
processing, using, distributing, treating, storing, disposing, transporting or
handling of materials regulated under any law as pollutants, contaminants, toxic
or hazardous materials or substances or oil or petroleum products or solid or
hazardous waste. As used above, the terms “release” and “environment” shall have
the meaning set forth in the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended.
 

(ii) To the knowledge of the Company there is no material environmental
liability with respect to any solid or hazardous waste transporter or treatment,
storage or disposal facility that has been used by the Company or any
subsidiary.
 
(n) Authorizations; Regulatory Compliance. The Company and each of its
subsidiaries holds, and is operating in compliance with, all authorizations,
licenses, permits, approvals, clearances, registrations, exemptions, consents,
certificates and orders of any governmental authority and supplements and
amendments thereto (collectively, “Authorizations”) required for the conduct of
its business as currently conducted in all applicable jurisdictions and all such
Authorizations are valid and in full force and effect, except for Authorizations
the absence of which would not reasonably be expected to have a Material Adverse
Effect. Neither the Company nor any of its subsidiaries is in material violation
of any terms of any such Authorizations, except, in each case, such as would not
reasonably be expected to have a Material Adverse Effect; and neither the
Company nor any of its subsidiaries has received written notice of any
revocation or modification of any such Authorization, or written notice that
such revocation or modification is being considered, except to the extent that
any such revocation or modification would not be reasonably expected to have a
Material Adverse Effect. The Company and each of its subsidiaries is in
compliance with all applicable federal, state, local and foreign laws,
regulations, orders and decrees, including such laws and regulations applicable
to the manufacture, distribution, import and export of regulated products and
component parts and ingredients, except as would not reasonably be expected to
have a Material Adverse Effect. Neither the Company nor any of its subsidiaries
is a party to any corporate integrity agreement, deferred prosecution agreement,
monitoring agreement, consent decree, settlement order, or similar agreements,
or has any reporting obligations pursuant to any such agreement, plan or
correction or other remedial measure entered into with any any other federal,
state, local or foreign governmental or regulatory authority (each a
“Governmental Authority”)..
 
 
 
 
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(o) Title. Neither the Company nor any of its subsidiaries owns any real
property. Each of the Company and its subsidiaries has good and marketable title
to all of its personal property and assets, free and clear of any restriction,
mortgage, deed of trust, pledge, lien, security interest or other charge, claim
or encumbrance which would have a Material Adverse Effect. With respect to
properties and assets it leases, each of the Company and its subsidiaries is in
compliance with such leases and holds a valid leasehold interest free of any
liens, claims or encumbrances which would have a Material Adverse Effect.
 
(p) Tax Status. The Company and each subsidiary has made and filed (taking into
account any valid extensions) all federal and state income and all other tax
returns, reports and declarations required by any jurisdiction to which it is
subject and (unless and only to the extent that the Company or such subsidiary
has set aside on its books provisions reasonably adequate for the payment of all
unpaid and unreported taxes) has paid all taxes and other governmental
assessments and charges that are material in amount, shown or determined to be
due on such returns, reports and declarations, except those being contested in
good faith and has set aside on its books provision reasonably adequate for the
payment of all taxes for periods subsequent to the periods to which such
returns, reports or declarations apply. To the knowledge of the Company, there
are no unpaid taxes in any material amount claimed to be due from the Company or
any subsidiary by the taxing authority of any jurisdiction, and the officers of
the Company know of no basis for any such claim.
 
(q) Certain Transactions. Except as set forth in the SEC Reports, none of the
officers or directors of the Company and, to the Company’s knowledge, none of
the employees of the Company is presently a party to any transaction with the
Company or any subsidiary (other than for services as employees, officers and
directors), that would be required to be disclosed pursuant to Item 404 of
Regulation S-K promulgated under the Securities Act.
 
(r) Rights of First Refusal. The Company is not obligated to offer the
securities offered hereunder on a right of first refusal basis or otherwise to
any third parties including, but not limited to, current or former stockholders
of the Company, underwriters, brokers, agents or other third parties.
 
(s) Insurance. The Company and its subsidiaries have insurance policies of the
type and in amounts customarily carried by organizations conducting businesses
or owning assets similar to those of the Company and its subsidiaries. There is
no material claim pending under any such policy as to which coverage has been
questioned, denied or disputed by the underwriter of such policy.
 
(t) SEC Reports. The Company has filed all reports, schedules, forms, statements
and other documents required to be filed by the Company under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”) for the two (2) years
preceding the date hereof (or such shorter period since the Company was first
required by law or regulation to file such material) (the foregoing materials,
including the exhibits thereto and documents incorporated by reference therein,
being collectively referred to herein as the “SEC Reports”) on a timely basis or
has received a valid extension of such time of filing and has filed any such SEC
Reports prior to the expiration of any such extension, except where the failure
to file on a timely basis would not have or reasonably be expected to result in
a Material Adverse Effect. The SEC Reports at the time they were filed, or to
the extent corrected by a subsequent restatement, complied, in all material
respects with the Securities Act or the Exchange Act, as applicable, and the
applicable rules and regulations of the SEC thereunder. There are no contracts,
agreements or other documents that are required to be described in the SEC
Reports and/or to be filed as exhibits thereto that are not described, in all
material respects, and/or filed as required. There has not been any material
change or amendment to, or any waiver of any material right under, any such
contract or agreement that has not been described in and/or filed as an exhibit
to the SEC Reports.
 
 
 
 
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(u) Financial Statements. The financial statements of the Company included in
the SEC Reports comply in all material respects with applicable accounting
requirements and the rules and regulations of the SEC with respect thereto as in
effect at the time of filing. Such financial statements have been prepared in
accordance with GAAP applied on a consistent basis during the periods involved,
except as may be otherwise specified in such financial statements or the notes
thereto and except that unaudited financial statements may not contain all
footnotes required by GAAP, and fairly present in all material respects the
financial position of the Company and its consolidated subsidiaries taken as a
whole as of and for the dates thereof and the results of operations and cash
flows for the periods then ended, subject, in the case of unaudited statements,
to normal, year-end audit adjustments.
 
 (v) Material Changes. Since the date of the latest audited financial statements
included within the SEC Reports, except as specifically disclosed in a
subsequent SEC Report filed prior to the date hereof, (i) there have been no
events, occurrences or developments that have had or would reasonably be
expected to have a Material Adverse Effect with respect to the Company, (ii)
there have not been any changes in the authorized capital, assets, financial
condition, business or operations of the Company from that reflected in the
financial statements contained within the SEC Reports except changes in the
ordinary course of business which have not been, either individually or in the
aggregate, materially adverse to the business, properties, financial condition,
results of operations or future prospects of the Company, (iii) neither the
Company nor any subsidiary has incurred any material liabilities (contingent or
otherwise) other than (A) trade payables, accrued expenses and other liabilities
incurred in the ordinary course of business consistent with past practice and
(B) liabilities not required to be reflected in the financial statements of the
Company, pursuant to GAAP or to be disclosed in the SEC Reports, (iv) neither
the Company nor any subsidiary has materially altered its method of accounting
or the manner in which it keeps its accounting books and records, and (v)
neither the Company nor any subsidiary has declared or made any dividend or
distribution of cash or other property to its stockholders or purchased,
redeemed or made any agreements to purchase or redeem any shares of its capital
stock (other than in connection with repurchases of unvested stock issued to
employees of the Company).
 
(w) Disclosure Controls. The Company has established and maintains disclosure
controls and procedures (as defined in Rules 13a-14 and 15d-15 under the
Exchange Act) and such controls and procedures are effective in ensuring that
material information relating to the Company, including its subsidiaries, is
made known to the principal executive officer and the principal financial
officer.
 

(x) Sarbanes-Oxley. The Company is in compliance in all material respects with
all of the provisions of the Sarbanes-Oxley Act of 2002 which are applicable to
it as of the Closing.
 

(y) Off-Balance Sheet Arrangements. There is no transaction, arrangement, or
other relationship between the Company or any subsidiary and an unconsolidated
or other off-balance sheet entity that is required to be disclosed by the
Company in its SEC Reports (including, for purposes hereof, any that are
required to be disclosed in a Form 10) and is not so disclosed or that otherwise
would have a Material Adverse Effect.
 

(z) Foreign Corrupt Practices. Neither the Company and its subsidiaries, nor to
the Company’s knowledge, any agent or other person acting on behalf of the
Company or its subsidiaries, has: (i) directly or indirectly, used any funds for
unlawful contributions, gifts, entertainment or other unlawful expenses related
to foreign or domestic political activity, (ii) made any unlawful payment to
foreign or domestic government officials or employees or to any foreign or
domestic political parties or campaigns from corporate funds, (iii) failed to
disclose fully any contribution made by the Company (or made by any person
acting on its behalf of which the Company is aware) which is in violation of law
or (iv) violated in any material respect any provision of the Foreign Corrupt
Practices Act of 1977, as amended.
 
 
 
 
-10-

 
 
(aa) Brokers’ Fees. Neither of the Company nor any of its subsidiaries has any
liability or obligation to pay any fees or commissions to any broker, finder or
agent with respect to the transactions contemplated by this Agreement, except
for the payment of fees to the Advisor as described in Section 2 above.
 

(bb) Disclosure Materials. The SEC Reports taken as a whole do not contain an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
 

(cc) Investment Company. The Company is not required to be registered as, and is
not an Affiliate of, and immediately following the Closing will not be required
to register as, an “investment company” within the meaning of the Investment
Company Act of 1940, as amended.
 

(aa) Reliance. The Company acknowledges that the Purchaser is relying on the
representations and warranties (as modified by the disclosures in the SEC
Reports made by the Company hereunder and that such representations and
warranties (as modified by the disclosures in the SEC Reports) are a material
inducement to the Purchaser purchasing the Securities.
 

(bb) Use of Proceeds. The Company presently intends to use the net proceeds from
the Offering to fund (i) product development and manufacturing, (ii) sales and
marketing and (iii) working capital and other general corporate purposes;
provided, that the Company may pay Advisor fees of four percent (4%) of the
proceeds of the Offering.
 

(cc) Bad Actor Disqualification. No “bad actor” disqualifying event described in
Rule 506(d)(1)(i)-(viii) of the Securities Act (a “Disqualification Event”) is
applicable to the Company or, to the Company’s knowledge, any Company Covered
Person, except for a Disqualification Event as to which Rule 506(d)(2)(ii–iv) or
(d)(3), is applicable. “Company Covered Person” means, with respect to the
Company as an “issuer” for purposes of Rule 506 promulgated under the Securities
Act, any person listed in the first paragraph of Rule 506(d)(1).
 

4. Representations, Warranties and Agreements of the Purchaser. The Purchaser
represents and warrants to the Company, as of the date hereof and as of the date
of the Closing the following:
 

(a) The Purchaser has the knowledge and experience in financial and business
matters necessary to evaluate the merits and risks of its prospective investment
in the Company, and has carefully reviewed and understands the risks of, and
other considerations relating to, the purchase of Securities and the tax
consequences of the investment, and has the ability to bear the economic risks
of the investment. The Purchaser can afford the loss of his, her or its entire
investment.
 
 
 
 
 
 
-11-

 
 
 
(b) The Purchaser (i) if a natural person, represents that he or she is the
greater of (A) 21 years of age or (B) the age of legal majority in his or her
jurisdiction of residence, and has full power and authority to execute and
deliver this Agreement and all other related agreements or certificates and to
carry out the provisions hereof and thereof; (ii) if a corporation, partnership,
limited liability company, association, joint stock company, trust,
unincorporated organization or other entity, represents that such entity was not
formed for the specific purpose of acquiring the Securities, such entity is duly
organized, validly existing and in good standing under the laws of the state or
jurisdiction of its organization, the consummation of the transactions
contemplated hereby is authorized by, and will not result in a violation of
state law or its charter or other organizational documents, such entity has full
power and authority to execute and deliver this Agreement and all other related
agreements or certificates and to carry out the provisions hereof and thereof
and to purchase and hold the Securities, the execution and delivery of this
Agreement has been duly authorized by all necessary action, this Agreement has
been duly executed and delivered on behalf of such entity and is a legal, valid
and binding obligation of such entity; or (iii) if executing this Agreement in a
representative or fiduciary capacity, represents that he, she or it has full
power and authority to execute and deliver this Agreement in such capacity and
on behalf of the subscribing individual, ward, partnership, trust, estate,
corporation, or limited liability company or partnership, or other entity for
whom the Purchaser is executing this Agreement, and such individual,
partnership, ward, trust, estate, corporation, or limited liability company or
partnership, or other entity has full right and power to perform pursuant to
this Agreement and make an investment in the Company, and represents that this
Agreement constitutes a legal, valid and binding obligation of such entity. The
execution and delivery of this Agreement will not violate or be in conflict with
any order, judgment, injunction, agreement or controlling document to which the
Purchaser is a party or by which it is bound.
 

(c) The Purchaser has received, reviewed and understood the information about
the Company, including the SEC Reports, and has had an opportunity to discuss
the Company’s business, management and financial affairs with the Company’s
management. The Purchaser understands that such discussions, as well as the SEC
Reports, were intended to describe the aspects of the Company’s business and
prospects and the Offering which the Company believes to be material, but were
not necessarily a thorough or exhaustive description, and except as expressly
set forth in this Agreement, the Company makes no representation or warranty
with respect to the completeness of such information and makes no representation
or warranty of any kind with respect to any information provided by any entity
other than the Company. Some of such information may include projections as to
the future performance of the Company, which projections may not be realized,
may be based on assumptions which may not be correct and may be subject to
numerous factors beyond the Company’s control. The Purchaser acknowledges that
he, she or it is not relying upon any person or entity, other than the Company
and its officers and directors, in making its investment or decision to invest
in the Company. Additionally, the Purchaser understands and represents that he,
she or it is purchasing the Securities notwithstanding the fact that the Company
may disclose in the future certain material information the Purchaser has not
received, including (without limitation) financial statements of the Company for
the current or prior fiscal periods, and any subsequent period financial
statements that will be filed with the SEC. Each Purchaser has sought such
accounting, legal and tax advice as the Purchaser has considered necessary to
make an informed investment decision with respect to his, her or its acquisition
of the Securities.
 

(d) The Purchaser acknowledges that neither the Company nor the Advisor is
acting as a financial advisor or fiduciary of the Purchaser (or in any similar
capacity) with respect to the Transaction Documents and the transactions
contemplated hereby and thereby, and no investment advice has been given by the
Company, the Advisor or any of their respective representatives or agents in
connection with the Transaction Documents and the transactions contemplated
hereby and thereby. The Purchaser further represents to the Company that the
Purchaser’s decision to enter into the Transaction Documents has been based
solely on the independent evaluation by the Purchaser and the Purchaser’s
representatives.
 
 
 
 
-12-

 
 
(e) As of the Closing, all actions on the part of Purchaser, and its officers,
directors and partners, if applicable, necessary for the authorization,
execution and delivery of this Agreement and the performance of all obligations
of the Purchaser hereunder and thereunder shall have been taken, and this
Agreement, assuming due execution by the parties hereto and thereto, constitute
valid and legally binding obligations of the Purchaser, enforceable in
accordance with their respective terms, subject to: (i) judicial principles
limiting the availability of specific performance, injunctive relief, and other
equitable remedies and (ii) bankruptcy, insolvency, reorganization, moratorium
or other similar laws now or hereafter in effect generally relating to or
affecting creditors’ rights.
 

(f) Purchaser represents that neither it nor, to its knowledge, any person or
entity controlling, controlled by or under common control with it, nor any
person having a beneficial interest in the Purchaser, nor any person on whose
behalf the Purchaser is acting: (i) is a person listed in the Annex to Executive
Order No. 13224 (2001) issued by the President of the United States (Executive
Order Blocking Property and Prohibiting Transactions with Persons Who Commit,
Threaten to Commit, or Support Terrorism); (ii) is named on the List of
Specially Designated Nationals and Blocked Persons maintained by the U.S. Office
of Foreign Assets Control; (iii) is a non-U.S. shell bank or is providing
banking services indirectly to a non-U.S. shell bank; (iv) is a senior non-U.S.
political figure or an immediate family member or close associate of such
figure; or (v) is otherwise prohibited from investing in the Company pursuant to
applicable U.S. anti-money laundering, anti-terrorist and asset control laws,
regulations, rules or orders (categories (i) through (v), each a “Prohibited
Purchaser”). The Purchaser agrees to provide the Company, promptly upon request,
all information that the Company reasonably deems necessary or appropriate to
comply with applicable U.S. anti- money laundering, anti-terrorist and asset
control laws, regulations, rules and orders. The Purchaser consents to the
disclosure to U.S. regulators and law enforcement authorities by the Company and
its Affiliates and agents of such information about the Purchaser as the Company
reasonably deems necessary or appropriate to comply with applicable U.S.
anti-money laundering, anti-terrorist and asset control laws, regulations, rules
and orders. If the Purchaser is a financial institution that is subject to the
USA Patriot Act, the Purchaser represents that it has met all of its obligations
under the USA Patriot Act. The Purchaser acknowledges that if, following its
investment in the Company, the Company reasonably believes that the Purchaser is
a Prohibited Purchaser or is otherwise engaged in suspicious activity or refuses
to promptly provide information that the Company requests, the Company has the
right or may be obligated to prohibit additional investments, segregate the
assets constituting the investment in accordance with applicable regulations or
immediately require the Purchaser to transfer the Securities. The Purchaser
further acknowledges that neither the Purchaser nor any of the Purchaser’s
Affiliates or agents will have any claim against the Company for any form of
damages as a result of any of the foregoing actions.
 

(g) If the Purchaser is Affiliated with a non-U.S. banking institution (a
“Foreign Bank”), or if the Purchaser receives deposits from, makes payments on
behalf of, or handles other financial transactions related to a Foreign Bank,
the Purchaser represents and warrants to the Company that: (1) the Foreign Bank
has a fixed address, other than solely an electronic address, in a country in
which the Foreign Bank is authorized to conduct banking activities; (2) the
Foreign Bank maintains operating records related to its banking activities; (3)
the Foreign Bank is subject to inspection by the banking authority that licensed
the Foreign Bank to conduct banking activities; and (4) the Foreign Bank does
not provide banking services to any other Foreign Bank that does not have a
physical presence in any country and that is not a regulated Affiliate.
 

(h) The Purchaser or its duly authorized representative realizes that because of
the inherently speculative nature of businesses of the kind conducted and
contemplated by the Company, the Company’s financial results may be expected to
fluctuate from month to month and from period to period and will, generally,
involve a high degree of financial and market risk that could result in
substantial or, at times, even total losses for investors in securities of the
Company. The Purchaser has carefully read the risk factors and other information
(including the financial statements of the Company) included in the SEC Reports.
The Purchaser has carefully considered such risk factors before deciding to
invest in the Securities.
 
 
 
 
-13-

 
 
(i) The Purchaser has adequate means of providing for its current and
anticipated financial needs and contingencies, is able to bear the economic risk
for an indefinite period of time and has no need for liquidity of the investment
in the Securities and could afford complete loss of such investment.
 

(j) The Purchaser is not subscribing for Securities as a result of or subsequent
to any advertisement, article, notice or other communication, published in any
newspaper, magazine or similar media or broadcast over television, radio, or the
internet, or presented at any seminar or meeting, or any solicitation of a
subscription by a person not previously known to the Purchaser in connection
with investments in securities generally.
 

(k) The Purchaser acknowledges that no U.S. federal or state agency or any other
government or governmental agency has passed upon the Securities or made any
finding or determination as to the fairness, suitability or wisdom of any
investments therein.
 

(l) Other than consummating the transactions contemplated hereunder, the
Purchaser has not directly or indirectly, nor has any individual or entity
acting on behalf of or pursuant to any understanding with such Purchaser,
executed any purchases or sales, including Short Sales (as defined below), of
the securities of the Company during the period commencing as of the time that
such Purchaser first received a term sheet (written or oral) from the Company or
any other individual or entity representing the Company setting forth the
material terms of the transactions contemplated hereunder and ending immediately
prior to the execution hereof. Notwithstanding the foregoing, in the case of a
Purchaser that is a multi-managed investment vehicle whereby separate portfolio
managers manage separate portions of such Purchaser’s assets and the portfolio
managers have no direct knowledge of the investment decisions made by the
portfolio managers managing other portions of such Purchaser’s assets, the
representation set forth above shall only apply with respect to the portion of
assets managed by the portfolio manager that made the investment decision to
purchase the Securities covered by this Agreement. Other than to other
individuals or entities party to this Agreement, such Purchaser has maintained
the confidentiality of all disclosures made to it in connection with this
transaction (including the existence and terms of this transaction).
Notwithstanding the foregoing, for avoidance of doubt, nothing contained herein
shall constitute a representation or warranty, or preclude any actions, with
respect to the identification of the availability of, or securing of, available
shares to borrow in order to effect Short Sales or similar transactions in the
future. For purposes of this Agreement, “Short Sales” means all “short sales” as
defined in Rule 200 of Regulation SHO under the Exchange Act (but shall not be
deemed to include the location and/or reservation of borrowable shares of Common
Stock).
 

(m) The Purchaser is aware that the anti-manipulation rules of Regulation M
under the Exchange Act may apply to sales of the Securities and other activities
with respect to the Securities by the Purchaser.
 

(n) All of the information concerning the Purchaser set forth herein, and any
other information furnished by the Purchaser in writing to the Company or a
Advisor for use in connection with the transactions contemplated by this
Agreement, is true and correct in all material respects as of the date of this
Agreement, and, if there should be any material change in such information prior
to the Purchaser’s purchase of the Securities, the Purchaser will promptly
furnish revised or corrected information to the Company.
 

(o) The Purchaser has reviewed with its own tax advisors the U.S. federal,
state, local and foreign tax consequences of this investment and the
transactions contemplated by the Transaction Documents. With respect to such
matters, such Purchaser relies solely on such advisors and not on any statements
or representations of the Company or any of its agents, written or oral. The
Purchaser understands that it (and not the Company) shall be responsible for its
own tax liability that may arise as a result of this investment or the
transactions contemplated by the Transaction Documents.
 
 
 
 
-14-

 
 
(p) If the Purchaser is not a United States person (as defined by Section
7701(a)(30) of the Internal Revenue Code of 1986, as amended), the Purchaser
hereby represents that it has satisfied itself as to the full observance of the
laws of its jurisdiction in connection with any invitation to subscribe for the
Securities or any use of this Agreement, including (a) the legal requirements
within its jurisdiction for the purchase of the Securities;
 
(dd) any foreign exchange restrictions applicable to such purchase; (c) any
governmental or other consents that may need to be obtained; and (d) the income
tax and other tax consequences, if any, that may be relevant to the purchase,
holding, redemption, sale or transfer of the Securities. The Purchaser’s
subscription and payment for and continued beneficial ownership of the
Securities will not violate any applicable securities or other laws of the
Purchaser’s jurisdiction.
 

(q) (For ERISA plans only) If the Purchaser is a fiduciary of the Employee
Retirement Income Security Act of 1974 (“ERISA”) plan (the “Plan”), the
Purchaser represents that (i) such fiduciary has been informed of and
understands the Company’s investment objectives, policies and strategies, and
that the decision to invest “plan assets” (as such term is defined in ERISA) in
the Company is consistent with the provisions of ERISA that require
diversification of plan assets and impose other fiduciary responsibilities; and
(ii) the Purchaser fiduciary or Plan (a) is responsible for the decision to
invest in the Company; (b) is independent of the Company or any of its
Affiliates; (c) is qualified to make such investment decision; and (d) in making
such decision, the Purchaser fiduciary or Plan has not relied primarily on any
advice or recommendation of the Company or any of its Affiliates.
 

(r) Neither the Purchaser nor, to the Purchaser’s knowledge, any of its
directors, executive officers, other officers that may serve as a director or
officer of any company in which it invests, general partners or managing members
is subject to any Disqualification Events, except for Disqualification Events
covered by Rule 506(d)(2)(ii) or (iii) under the Securities Act, and disclosed
in writing in reasonable detail to the Company.
 
(s) If the Purchaser is an individual, then the Purchaser resides in the state
or province identified in the address of the Purchaser set forth on such
Purchaser’s Omnibus Signature Page to this Agreement; if the Purchaser is a
partnership, corporation, limited liability company or other entity, then the
office or offices of the Purchaser in which its principal place of business is
identified in the address or addresses of the Purchaser set forth on such
Purchaser’s Omnibus Signature Page to this Agreement.
 

5. Conditions to Company’s Obligations. The Company’s obligation to complete the
sale and issuance of the Units and deliver the Shares and Warrants to the
Purchaser, individually, at the Closing shall be subject to the following
conditions to the extent not waived by the Company:
 

(a) Receipt of Payment. The Company shall have received payment, by certified or
other bank check or by wire transfer of immediately available funds, in the full
amount of the Purchase Price for the number of Units being purchased by such
Purchaser at the Closing.
 

(b) Representations and Warranties. The representations and warranties made by
the Purchaser in Section 4 hereof shall be true and correct in all material
respects (except to the extent any such representation and warranty is qualified
by materiality or reference to Material Adverse Effect, in which case, such
representation and warranty shall be true and correct in all respects as so
qualified) when made, and shall be true and correct in all material respects
(except to the extent any such representation and warranty is qualified by
materiality or reference to Material Adverse Effect, in which case, such
representation and warranty shall be true and correct in all respects as so
qualified) on the Closing date, with the same force and effect as if they had
been made on and as of said date.
 
 
 
-15-

 
 

(c) Performance. The Purchaser shall have performed in all material respects all
obligations and covenants herein required to be performed by it on or prior to
the Closing.
 

(d) Receipt of Executed Documents. Each Purchaser participating in the Closing
shall have executed and delivered to the Company the Omnibus Signature Page.
 

(e) Supplement. The Supplement to the Registration Statement shall be on file
with the SEC.
 

6. Conditions to Purchasers’ Obligations. The Purchaser’s obligation to accept
delivery of the Shares and Warrants and to pay for the Units at the Closing
shall be subject to the following conditions to the extent not waived by the
holders of at least a majority of the Units issued to the Purchaser and the
other purchasers pursuant to the other Subscription Agreements of like tenor
used in the Offering (the “Held Shares”) to be purchased at the Closing:
 

(a) Representations and Warranties. The representations and warranties made by
the Company in Section 3 hereof (as modified by the disclosures in the SEC
Reports) shall be true and correct in all material respects (except to the
extent any such representation and warranty is qualified by materiality or
reference to Material Adverse Effect, in which case, such representation and
warranty shall be true and correct in all respects as so qualified) as of, and
as if made on, the date of the Closing, except to the extent any such
representation or warranty expressly speaks as of an earlier date, in which case
such representation or warranty shall be true and in all material respects
correct as of such earlier date (except in each case to the extent any such
representation and warranty is qualified by materiality or reference to Material
Adverse Effect, in which case, such representation and warranty shall be true
and correct in all respects as so qualified).
  
(b) Performance. The Company shall have performed in all material respects all
obligations and covenants herein which are required to be performed by it on or
prior to the date of the Closing.
 
(c) Receipt of Executed Transaction Documents. The Company shall have executed
and delivered to the Purchaser the executed Subscription Agreement.
 
 (d) Certificate. In connection with the Closing only, the Chief Executive
Officer of the Company shall execute and deliver to the Purchaser a certificate
addressed to the purchasers under the Subscription Agreements participating in
the Closing to the effect that the representations and warranties of the Company
in Section 1.1(d) hereof (as modified by the disclosures in the SEC Reports)
shall be true and correct in all material respects (except to the extent any
such representation and warranty is qualified by materiality or reference to
Material Adverse Effect, in which case, such representation and warranty shall
be true and correct in all respects as so qualified) as of, and as if made on,
the date of the Closing.
 

(e) Registration Statement. The Registration Statement shall be effective on the
Closing Date as to all Securities, not subject to any threatened or actual stop
order and will not on the Closing Date contain any untrue statement of material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading.
 
(f) Good Standing. The Company and each of its subsidiaries is a corporation or
other business entity duly organized, validly existing, and in good standing
under the laws of the jurisdiction of its formation.
 

(g) Judgments. No judgment, writ, order, injunction, award or decree of or by
any court, or judge, justice or magistrate, including any bankruptcy court or
judge, or any order of or by any Governmental Authority, shall have been issued,
and no action or proceeding shall have been instituted by any Governmental
Authority, enjoining or preventing the consummation of the transactions
contemplated hereby.
 
 
 
 
-16-

 
 
7.
Indemnification.
  

(a) The Company agrees to indemnify and hold harmless the Purchaser, and its
directors, officers, stockholders, members, partners, employees and agents (and
any other persons with a functionally equivalent role of a person holding such
titles notwithstanding a lack of such title or any other title), each person who
controls such Purchaser (within the meaning of Section 15 of the Securities Act
and Section 20 of the Exchange Act), and the directors, officers, stockholders,
agents, members, partners or employees (and any other persons with a
functionally equivalent role of a person holding such titles notwithstanding a
lack of such title or any other title) of such controlling person (collectively,
the “Purchaser Indemnitees”), from and against all losses, liabilities, claims,
damages, costs, fees and expenses whatsoever (including, but not limited to, any
and all expenses incurred in investigating, preparing or defending against any
litigation commenced or threatened) based upon or arising out of the Company’s
breach of any representation, warranty or covenant contained herein; provided,
however, that the Company will not be liable in any such case to the extent and
only to the extent that any such loss, liability, claim, damage, cost, fee or
expense arises out of or is based upon the inaccuracy of any representations
made by such indemnified party in this Agreement, or the failure of such
indemnified party to comply with the covenants and agreements contained herein.
The liability of the Company under this paragraph shall not exceed the total
Purchase Price paid by the Purchaser hereunder, except in the case of fraud.
 
Promptly after receipt by an indemnified party under this Section 7 of notice of
the commencement of any Action, such indemnified party will, if a claim in
respect thereof is to be made against the indemnifying party under this Section
7, notify the indemnifying party in writing of the commencement thereof; but the
omission so to notify the indemnifying party will not relieve it from any
liability which it may have to any indemnified party otherwise than under this
Section 7 except to the extent the indemnified party is actually prejudiced by
such omission. In case any such Action is brought against any indemnified party,
and it notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein, and to the extent
that it may elect by written notice delivered to the indemnified party promptly
after receiving the aforesaid notice from such indemnified party, to assume the
defense thereof, with counsel satisfactory to such indemnified party; provided,
however, if the defendants in any such Action include both the indemnified party
and the indemnifying party and either (i) the indemnifying party or parties and
the indemnified party or parties mutually agree or (ii) representation of both
the indemnifying party or parties and the indemnified party or parties by the
same counsel is inappropriate under applicable standards of professional conduct
due to actual or potential differing interests between them, the indemnified
party or parties shall have the right to select separate counsel to assume such
legal defenses and to otherwise participate in the defense of such Action on
behalf of such indemnified party or parties. Upon receipt of notice from the
indemnifying party to such indemnified party of its election so to assume the
defense of such Action and approval by the indemnified party of counsel, the
indemnifying party will not be liable to such indemnified party under this
Section 7 for any reasonable legal or other expenses subsequently incurred by
such indemnified party in connection with the defense thereof unless (i) the
indemnified party shall have employed counsel in connection with the assumption
of legal defenses in accordance with the proviso to the next preceding sentence
(it being understood, however, that the indemnifying party shall not be liable
for the expenses of more than one separate counsel in such circumstance), (ii)
the indemnifying party shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a reasonable time
after notice of commencement of the Action or (iii) the indemnifying party has
authorized the employment of counsel for the indemnified party at the expense of
the indemnifying party. No indemnifying party shall (i) without the prior
written consent of the indemnified parties (which consent shall not be
unreasonably withheld), settle or compromise or consent to the entry of any
judgment with respect to any pending or threatened Action in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified parties are actual or potential parties to such Action) unless such
settlement, compromise or consent requires only the payment of money damages,
does not subject the indemnified party to any continuing obligation or require
any admission of criminal or civil responsibility, and includes an unconditional
release of each indemnified party from all liability arising out of such Action,
or (ii) be liable for any settlement of any such Action effected without its
written consent (which consent shall not be unreasonably withheld), but if
settled with its written consent or if there be a final judgment of the
plaintiff in any such Action, the indemnifying party agrees to indemnify and
hold harmless any indemnified party from and against any loss or liability by
reason of such settlement or judgment.
 
 
 
 
-17-

 
 
(b) Purchaser acknowledges on behalf of itself and each Purchaser Indemnitee
that, other than for actions seeking specific performance of the obligations
under this Agreement or in the case of fraud, the sole and exclusive remedy of
the Purchaser and the Purchaser Indemnitee with respect to any and all claims
relating to this Agreement shall be pursuant to the indemnification provisions
set forth in this Section 7.
 
8. Revocability; Binding Effect. The subscription hereunder may be revoked prior
to the Closing thereon, provided that written notice of revocation is sent and
is received by the Company or the Advisor at least one Business Day prior to the
Closing on such subscription. The Purchaser hereby acknowledges and agrees that
this Agreement shall survive the death or disability of the Purchaser and shall
be binding upon and inure to the benefit of the parties and their heirs,
executors, administrators, successors, legal representatives and permitted
assigns. If the Purchaser is more than one person, the obligations of the
Purchaser hereunder shall be joint and several and the agreements,
representations, warranties and acknowledgments herein shall be deemed to be
made by and be binding upon each such person and such person’s heirs, executors,
administrators, successors, legal representatives and permitted assigns. For the
purposes of this Agreement, “Business Day” means a day, other than a Saturday or
Sunday, on which banks in New York City are open for the general transaction of
business. Notwithstanding the foregoing revocation provisions, in no case may a
Purchaser revoke its purchase of Securities after the Purchaser’s funds have
been closed upon.
 

9.
Miscellaneous.
  

(a) Modification. This Agreement shall not be amended, modified or waived except
by an instrument in writing signed by the Company and the holders of at least a
majority of the then Held Shares (as defined above). Any amendment, modification
or waiver effected in accordance with this Section 9(a) shall be binding upon
the Purchaser and each transferee of the Securities, each future holder of all
such Securities, and the Company.
 

(b) Third-Party Beneficiary. This Agreement is intended for the benefit of the
parties hereto and their respective successors and permitted assigns and is not
for the benefit of, nor may any provision hereof be enforced by, any other
Person, except as otherwise set forth in Section 7(a) and this Section 9(c).
 

(c) Notices. Any notice, consents, waivers or other communication required or
permitted to be given hereunder shall be in writing and will be deemed to have
been delivered: (i) upon receipt, when personally delivered; (ii) upon receipt
when sent by certified mail, return receipt requested, postage prepaid; (iii)
upon receipt, when sent by facsimile (provided confirmation of transmission is
mechanically or electronically generated and kept on file by the sending party);
(iv) when sent, if 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); or (v) one
(1) Business Day after deposit with an overnight courier service with next day
delivery specified, in each case, properly addressed to the party to receive the
same. The addresses, facsimile numbers and email addresses for such
communications shall be:
 

(i) if to the Company, at
 

Wrap Technologies, Inc.
1817 W 4th Street
Tempe, Arizona 85281
Attention: David Norris, Chief Executive Officer Email:
david@wraptechnologies.com
 
with copies (which shall not constitute notice) to:
 
Disclosure Law Group, a Professional Corporation
655 West Broadway, Suite 870
San Diego, CA 92101
Attention: Daniel W. Rumsey Facsimile: 619-330-2101
Email: drumsey@disclosurelawgroup.com
 
 
 
 
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(ii) if to the Purchaser, at the address set forth on the Omnibus Signature Page
hereof (or, in either case, to such other address as the party shall have
furnished in writing in accordance with the provisions of this Section). Any
notice or other communication given by certified mail shall be deemed given at
the time of certification thereof, except for a notice changing a party’s
address which shall be deemed given at the time of receipt thereof.
 

(d) Assignability. This Agreement and the rights, interests and obligations
hereunder are not transferable or assignable by the Purchaser, and the transfer
or assignment of the Securities shall be made only in accordance with all
applicable laws.
 

(e) Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without reference to the
principles thereof relating to the conflict of laws.
 
(f) Arbitration. All disputes arising out of or in connection with this
Agreement shall be submitted to the International Court of Arbitration of the
International Chamber of Commerce and shall be finally settled under the Rules
of Arbitration of the International Chamber of Commerce by one or more
arbitrators appointed in accordance with the said Rules. The place of
arbitration shall be New York, New York.
  
(g) Use of Pronouns. All pronouns and any variations thereof used herein shall
be deemed to refer to the masculine, feminine, neuter, singular or plural as the
identity of the person or persons referred to may require.
 

(h) Securities Law Disclosure; Publicity. The Company shall on the date this
Agreement is executed (but in no event later than 8:30am EST on the one (1)
Trading Day following the execution date hereof issue a press release reasonably
acceptable to the Purchasers disclosing definitive agreements have been executed
and all material terms of the transactions contemplated hereby. The Company
shall file a press release within one (1) Trading Day of the Closing and file a
Current Report on Form 8-K with the Commission (the “8-K Filing”) describing the
terms of the transactions contemplated by this Agreement and including as
exhibits to such 8-K Filing this Agreement, in the form required by the Exchange
Act. The Company shall not publicly disclose the name of any Purchaser or an
Affiliate of any Purchaser, or include the name of any Purchaser or an Affiliate
of any Purchaser in any press release or filing with the SEC or any regulatory
agency or principal trading market, without the prior written consent of such
Purchaser, except (i) as required by federal securities law in connection with
(A) any registration statement contemplated by the Registration Rights Agreement
and (B) the filing of final Transaction Documents with the SEC or (ii) to the
extent such disclosure is required by law, request of the staff of the SEC or of
any regulatory agency or principal trading market regulations, in which case the
Company shall provide the Purchasers with prior written notice of such
disclosure permitted under this sub-clause (ii). From and after the issuance by
the Company of a press release and/Current Report on Form 8-K describing the
transactions contemplated by the Subscription Agreements (the “Public
Disclosure”), no Purchaser shall be in possession of any material, non-public
information received from the Company or any of its respective officers,
directors, employees or agents that is not disclosed in the Public Disclosure
unless a Purchaser shall have executed a written agreement regarding the
confidentiality and use of such information. Each Purchaser, severally and not
jointly with the other Purchasers, covenants that until such time as the
transactions contemplated by this Agreement are publicly disclosed by the
Company as described in this Section 9, such Purchaser will maintain the
confidentiality of all disclosures made to it in connection with such
transactions (including the existence and terms of such transactions).
 
 
 
 
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(i) Non-Public Information. Except for information (including the terms of this
Agreement and the transactions contemplated hereby) disclosed and that will be
disclosed in the SEC Reports, the Company shall not and shall cause each of its
officers, directors, employees and agents, not to, provide any Purchaser with
any material, non-public information regarding the Company without the express
written consent of such Purchaser.
 

(j) This Agreement, together with all exhibits, schedules and attachments hereto
and thereto and any confidentiality agreement between the Purchaser and the
Company, constitute the entire agreement between the Purchaser and the Company
with respect to the Offering and supersede all prior oral or written agreements
and understandings, if any, relating to the subject matter hereof. The terms and
provisions of this Agreement may be waived, or consent for the departure
therefrom granted, only by a written document executed by the party entitled to
the benefits of such terms or provisions.
 

(k) If the Securities are certificated and any certificate or instrument
evidencing any Securities is mutilated, lost, stolen or destroyed, the Company
shall issue or cause to be issued in exchange and substitution for and upon
cancellation thereof, or in lieu of and substitution therefor, a new certificate
or instrument, but only upon receipt of evidence reasonably satisfactory to the
Company and the Company’s transfer agent of such loss, theft or destruction and
the execution by the holder thereof of a customary lost certificate affidavit of
that fact and an agreement to indemnify and hold harmless the Company and the
Company’s transfer agent for any losses in connection therewith, or, if required
by the transfer agent in connection with Shares, a bond in such form and amount
as is required by the transfer agent. The applicants for a new certificate or
instrument under such circumstances shall also pay any reasonable third-party
costs associated with the issuance of such replacement Securities. If a
replacement certificate or instrument evidencing any Securities is requested due
to a mutilation thereof, the Company may require delivery of such mutilated
certificate or instrument as a condition precedent to any issuance of a
replacement.
 

(l) Each of the parties hereto shall pay its own fees and expenses (including
the fees of any attorneys, accountants, appraisers or others engaged by such
party) in connection with this Agreement and the transactions contemplated
hereby, whether or not the transactions contemplated hereby are consummated,
except that the Company shall up to $25,000 for the Advisor’s legal expenses, as
set forth in Section 2(c).
 

(m) This Agreement may be executed in one or more original or facsimile or by an
e-mail which contains a portable document format (.pdf) file of an executed
signature page counterpart, each of which shall be deemed an original, but all
of which shall together constitute one and the same instrument and which shall
be enforceable against the parties actually executing such counterparts. The
exchange of copies of this Agreement and of signature pages by facsimile
transmission or in .pdf format shall constitute effective execution and delivery
of this Agreement as to the parties and may be used in lieu of the original
Agreement for all purposes. Signatures of the parties transmitted by facsimile
or by e- mail of a document in pdf format shall be deemed to be their original
signatures for all purposes.
 

(n) Each provision of this Agreement shall be considered separable and, if for
any reason any provision or provisions hereof are determined to be invalid or
contrary to applicable law, such invalidity or illegality shall not impair the
operation of or affect the remaining portions of this Agreement.
 
(o) Paragraph titles are for descriptive purposes only and shall not control or
alter the meaning of this Agreement as set forth in the text.
 

(p) The Purchaser understands and acknowledges that there may be multiple
Subsequent Closings for the Offering.
 
 
 
 
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(q) The Purchaser hereby agrees to furnish the Company such other information as
the Company may request prior to the Closing with respect to its subscription
hereunder.
 

(r) The representations and warranties of the Company and each Purchaser
contained in or made pursuant to this Agreement shall survive the execution and
delivery of this Agreement for a period of one (1) year from the date of the
Closing and shall in no way be affected by any investigation or knowledge of the
subject matter thereof made by or on behalf of the Purchasers or the Company.
 

(s) Omnibus Signature Page. This Agreement is intended to be read and construed
in conjunction with the Registration Rights Agreement. Accordingly, pursuant to
the terms and conditions of this Agreement and the Registration Rights
Agreement, it is hereby agreed that the execution by the Purchaser of this
Agreement, in the place set forth on the Omnibus Signature Page below, shall
constitute agreement to be bound by the terms and conditions hereof and the
terms and conditions of the Registration Rights Agreement, with the same effect
as if each of such separate but related agreements were separately signed.
 

(t) Public Disclosure. Neither the Purchaser nor any officer, manager, director,
member, partner, stockholder, employee, Affiliate, Affiliated person or entity
of the Purchaser shall make or issue any press releases or otherwise make any
public statements or make any disclosures to any third person or entity with
respect to the transactions contemplated herein and will not make or issue any
press releases or otherwise make any public statements of any nature whatsoever
with respect to the Company without the Company’s express prior approval (which
may be withheld in the Company’s sole discretion), except to the extent such
disclosure is required by law, request of the staff of the SEC or of any
regulatory agency or principal trading market regulations.
 

(u) Potential Conflicts. The Advisors, their sub-agents, legal counsel to the
Company, or the Advisor and/or their respective Affiliates, principals,
representatives or employees may now or hereafter own shares of the Company.
 

(v) Independent Nature of Each Purchaser’s Obligations and Rights. For avoidance
of doubt, the obligations of the Purchaser under this Agreement are several and
not joint with the obligations of any other purchaser under any other
Subscription Agreement, and the Purchaser shall not be responsible in any way
for the performance of the obligations of any other purchaser under any other
Subscription Agreement. Nothing contained herein and no action taken by the
Purchaser shall be deemed to constitute the Purchaser as a partnership, an
association, a joint venture, or any other kind of entity, or create a
presumption that the purchasers Subscription Agreements are in any way acting in
concert or as a group with respect to such obligations or the transactions
contemplated by this Agreement and any other Subscription Agreements. The
Purchaser shall be entitled to independently protect and enforce its rights,
including without limitation the rights arising out of this Agreement, and it
shall not be necessary for any other purchaser under any other Subscription
Agreement to be joined as an additional party in any proceeding for such
purpose.
 
 
 
[Signature page follows.]
 
 
 
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