SECURITIES PURCHASE AGREEMENT

 

 

THIS SECURITIES PURCHASE AGREEMENT, dated as of April 23, 2013 (this
“Agreement”), is entered into by and between INFINITY AUGMENTED REALITY, INC., a
Nevada corporation with headquarters located at 45 Broadway, 6th Floor, New
York, NY 10006 (the “Company”), and each individual or entity named on an
executed counterpart of the signature page hereto (each such signatory is
referred to as a “Buyer”) (each agreement with a Buyer being deemed a separate
and independent agreement between the Company and such Buyer, except that each
Buyer acknowledges and consents to the rights granted to each other Buyer [each,
an “Other Buyer”] under such agreement and the Transaction Agreements, as
defined below, referred to therein).

 

W I T N E S S E T H:

 

WHEREAS, the Company and the Buyer are executing and delivering this Agreement
in reliance upon the exemption from securities registration for offers and sales
to accredited investors afforded, inter alia, by Rule 506 under Regulation D
(“Regulation D”) as promulgated by the United States Securities and Exchange
Commission (the “SEC”) under the Securities Act of 1933, as amended (the
“Securities Act”), and/or Section 4(2) of the Securities Act; and

 

WHEREAS, the Company desires to sell and the Buyer, together with the Other
Buyers, if any, wishes to purchase from the Company, subject to and upon the
terms and conditions set forth in this Agreement and acceptance of this
Agreement by the Company, an aggregate of not less than $200,000.00 (the
“Minimum Aggregate Purchase Price”) and not more than $5,000,000.00 (the
“Maximum Aggregate Purchase Price”) in principal amount of Convertible
Debentures of the Company (the “Convertible Debenture”) which will be
convertible into shares of Common Stock, $0.00001 par value per share, of the
Company (the “Common Stock”), upon the terms and subject to the conditions of
such Convertible Debentures, together with the Warrants (as defined below)
exercisable for the purchase of shares of Common Stock;

 

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

 

1. AGREEMENT TO PURCHASE; PURCHASE PRICE.

 

a. Agreement to Purchase.

 

(i) Subject to the terms and conditions set forth in this Agreement and the
other Transaction Agreements, the undersigned hereby agrees to purchase from the
Company the principal amount of Convertible Debentures (the “Debenture”)
specified on the Buyer’s signature page of this Agreement and the Warrants (the
Debenture and the Warrants, collectively, the “Purchased Securities”) for the
purchase price equal to such principal amount set forth on the Buyer’s signature
page of this Agreement (the “Purchase Price”), which Purchase Price is not less
than $200,000.00. This is one of a series of Purchased Securities in similar
tenor being issued hereunder or in Additional Closings (as defined below) in the
aggregate principal amount of up to the Maximum Aggregate Purchase Price to the
Lead Investor (as defined below), affiliates of the Lead Investor or Accredited
Investors reasonably acceptable to the Lead Investor.

 

 

 

 

 

(ii) The Convertible Debentures shall have the terms and conditions set forth in
the Convertible Debenture annexed hereto as Annex I.

 

(iii) On the relevant Closing Date (as defined below), the Purchase Price shall
be paid by the Buyer and the Company will deliver the Closing Certificates (as
defined below), as provided in Section 1(c) hereof.

 

(iv) The purchase to be made by the Buyer from the Company and the issuance by
the Company to the Buyer of the Purchased Securities to the Buyer are sometimes
referred to herein and in the other Transaction Agreements as the purchase and
sale of the Purchased Securities, and are referred to collectively as the
“Transactions.”

 

b. Certain Definitions. As used herein, each of the following terms has the
meaning set forth below, unless the context otherwise requires:

 

“Additional Closing Date” means, if there is more than one Closing Date, the
relevant Buyer’s Closing Date after the Initial Closing Date.

 

“Additional Closing” shall mean one or more Additional Closings on such dates,
in such amounts, and to such other Buyers as may be mutually agreed to by the
Company and the Lead Investor or, if applicable, a Third Party Other Buyer.

 

“Additional Closing Notice” shall mean a notice from the Company to the Lead
Investor, substantially in the form of Annex V attached hereto, requesting that
the Lead Investor purchase Debentures hereunder on the Closing Date specified in
the Additional Closing Notice; such date shall be not less than fifteen (15)
Trading Days (excluding Jewish Holidays when the offices of the Lead Investor
are closed for business) following the date of the Additional Closing Notice.

 

“Affiliate” means, with respect to a specific Person referred to in the relevant
provision, another Person who or which controls or is controlled by or is under
common control with such specified Person.

 

“Buyer’s Closing Date” means the Closing Date applicable to the Transactions for
the relevant Buyer.

 

“By-laws” means the by-laws of the Company (howsoever denominated), as amended
to date.

 

“Certificate of Incorporation” means the certificate of incorporation, articles
of incorporation or other charter document (howsoever denominated) of the
Company, as amended to date.

 

 

 

 

 

“Closing Certificates” means the (x) the original Debenture, and (y) the
Warrant, each duly executed by the Company and issued in the name of the Buyer
on the Buyer’s Closing Date.

 

“Closing Date” means the date for the closing of the Buyer’s Transactions, which
may be the Initial Closing Date or the relevant Additional Closing Date, as the
case may be.; provided, however, that the maximum aggregate Purchase Price for
the Buyer and all Other Buyers on all Closing Dates shall not be more than the
Maximum Aggregate Purchase Price and no Closing Date shall occur later than
April 30, 2018 (the “Latest Closing Date”).

 

“Company's SEC Documents” means the Company’s periodic filings on the SEC’s
EDGAR system filed by the Company through the date which is two (2) Trading Days
prior to the relevant Buyer’s Closing Date.

 

“Conversion Shares” means any or all of (i) the shares of Common Stock issued or
issuable upon conversion of the Debenture, and (ii) the shares of Common Stock
issued or issuable in payment of accrued interest thereon, as contemplated in
the Convertible Debenture.

 

“Current Information Reports” means all reports and material required to be
filed by the Company so that the conditions, if applicable, of Rule 144 that
there is adequate current information with respect to the Company will be
satisfied.

 

“Disclosure Annex” means Annex VI to this Agreement; provided, however, that the
Disclosure Annex shall be arranged in sections corresponding to the identified
Sections of this Agreement, but the disclosure in any such section of the
Disclosure Annex shall qualify other provisions in this Agreement to the extent
that it would be readily apparent to an informed reader from a reading of such
section of the Disclosure Annex that it is also relevant to other provisions of
this Agreement.

 

“Exercise Price” means the per share exercise price of a Warrant.

 

“Expiration Date” means the close of business on the last day of the calendar
month in which the Fifth Anniversary Date occurs.

 

“Fifth Anniversary Date” means the fifth annual anniversary of the relevant
Issue Date.

 

“Holder” means the Person holding the relevant Securities at the relevant time.

 

“Indebtedness” of a Person at a particular date shall mean all obligations of
such Person which in accordance with GAAP would be classified upon a balance
sheet as liabilities (except capital stock and surplus earned or otherwise) and
in any event, without limitation by reason of enumeration, shall include all
indebtedness, debt and other similar monetary obligations of such Person whether
direct or guaranteed, and all premiums, if any, due at the required prepayment
dates of such indebtedness, and all indebtedness secured by a Lien on assets
owned by such Person, whether or not such indebtedness actually shall have been
created, assumed or incurred by such Person. Any indebtedness of such Person
resulting from the acquisition by such Person of any assets subject to any Lien
shall be deemed, for the purposes hereof, to be the equivalent of the creation,
assumption and incurring of the indebtedness secured thereby, whether or not
actually so created, assumed or incurred.

 

 

 

 

 

“Initial Closing Date” means the Closing Date or, if there is more than one
Closing Date for the transactions contemplated by this Agreement, the Closing
Date for the first of such closings; provided, however, that in all instances
the aggregate Purchase Price for all Buyers whose Transactions are closing on
the Initial Closing Date shall be for at least the Minimum Aggregate Purchase
Price.

 

“Issue Date” means, with respect each Debenture and each Warrant, the Closing
Date on which such instrument was initially issued to the Buyer.

 

“Issue Date Conversion Shares” means, with respect to the Buyer’s Closing Date,
the number of shares of Common Stock equal to (x) the Debenture issued to the
Buyer on such Buyer’s Closing Date, divided by (y) the Conversion Price (without
regard to whether or not the Debenture were convertible on such date in
accordance with their terms) in effect on such date.

 

“Last Audited Date” means August 31, 2012.

 

“Lead Investor” shall mean Credit Strategies, LLC, a Delaware limited liability
company.

 

“Material Adverse Effect” means an event or combination of events, which
individually or in the aggregate, would reasonably be expected to (x) adversely
affect the legality, validity or enforceability of the Purchased Securities or
any of the Transaction Agreements, (y) have or result in a material adverse
effect on the results of operations, assets, business, properties , prospects or
financial condition of the Company and its subsidiaries, taken as a whole, or
(z) adversely impair the Company's ability to perform fully on a timely basis
its material obligations under any of the Transaction Agreements or the
transactions contemplated thereby.

 

“New Common Stock” means shares of Common Stock and/or securities convertible
into, and/or other rights exercisable for, Common Stock, which are offered or
sold in a New Transaction.

 

“New Transactions” means, unless consented to in writing by the Lead Investor a
transaction by the Company involving (i) the issuance of Common Stock; (ii) a
security convertible or exchangeable into Common Stock; (iii) an equity or
credit line transaction in a transaction consummated after the date hereof; (iv)
the Company’s issuance of, or consent to, other Indebtedness of the Company
(excluding trade payables incurred in the ordinary course of business); (v) the
Company’s grant of or consent to liens, security interests, hypothecations, or
other charges or encumbrances (“Lien”) on any assets of the Company (excluding
purchase money security interests incurred in the ordinary course of business);
but such term does not include (a) the issuance of the Purchased Securities to
the Buyer and the Other Buyers, (b) the issuance of Common Stock upon the
exercise or conversion of options, warrants or convertible securities
outstanding on the date hereof, identified in the Disclosure Annex or in the
Company’s SEC Documents (c) the issuance of New Common Stock pursuant to an
Employee Stock Option Plan (an “ESOP”) or an Equity Incentive Plan of the
Company (in each case, howsoever denominated), (d) the issuance of New Common
Stock pursuant to a non-employee director stock option plan of the Company, (e)
the issuance of New Common Stock pursuant to a consultants’ stock option plan of
the Company, (f) the issuance of stock options or warrants to employees,
officers or directors of the Company, or (g) the issuance of Common Stock upon
the conversion or exercise of any securities options, rights or warrants
referred to in the preceding clauses (a) through (f), inclusive, of this
paragraph; provided however, that the aggregate amount of securities issued
pursuant to subparagraphs (c) (d) (e) and (f) shall not, subsequent to April 22,
2013 exceed in the aggregate 2,500,000 shares of Common Stock, options or
warrants in any calendar year.

 

 

 

 

 

Notwithstanding the foregoing, if the Company issues an Additional Closing
Notice to the Lead Investor and the Lead Investor declines or fails to provide
the amounts requested under such Additional Closing Notice within 15 Trading
Days of the Additional Closing Notice, the Company may, notwithstanding the
restrictions on a New Transaction, seek such financing or investment from a
third party upon the terms and conditions negotiated between such third party
and the Company (and any such third party [each, a “Third Party Other Buyer”].
Any transaction with a Third Party Other Buyer, shall be for the amount not
greater than set forth in the Additional Closing Notice, be subject to a Right
of First Refusal in favor of the Lead Investor, as set forth herein and must
close within 60 days of the declination or failure of the Lead Investor to
provide the amounts requested under the Additional Closing Notice.

 

“New Transaction Period” means the period commencing on the Initial Closing Date
and continuing through and including Termination Date

 

“Person” means any living person or any entity, such as, but not necessarily
limited to, a corporation, partnership or trust.

 

“Principal Trading Market” means the Over the Counter Bulletin Board or such
other market on which the Common Stock is principally traded at the relevant
time, but shall not include the “pink sheets.”

 

“Right of First Refusal” shall mean a right of first refusal in favor of the
Lead Investor as set forth in Section 4 (h).

 

“Rule 144" means, as may be in effect from time to time, (i) Rule 144
promulgated under the Securities Act or (ii) any other similar rule or
regulation of the SEC that may at any time permit Holder to sell securities of
the Company to the public without registration under the Securities Act.

 

“Securities” means the Debenture, the Warrant and the Shares.

 

“Shares” means the shares of Common Stock representing any or all of the
Conversion Shares and the Warrant Shares.

 

 

 

 

 

“State of Incorporation” means Nevada.

 

“Subsidiary” means, as of the relevant date, any subsidiary of the Company
(whether or not included in the Company's SEC Documents) whether now existing or
hereafter acquired or created.

 

“Termination Date” means March 31, 2018 or such earlier date as provided herein

 

“Trading Day” means any day during which the Principal Trading Market shall be
open for business.

 

“Transaction Agreements” means this Agreement, each issued Convertible
Debenture, each issued Warrant, and includes all ancillary documents referred to
in those agreements.

 

“Transfer Agent” means, at any time, the transfer agent for the Company’s Common
Stock.

 

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

 

“Wire Instructions” means the Purchase Price Wire Instructions as provided in
Annex IV annexed hereto.

 

c. Form of Payment; Delivery of Closing Certificates.

 

(i) The Buyer shall pay the Purchase Price by delivering immediately available
good funds in United States Dollars to the Company no later than the date prior
to the Buyer’s Closing Date.

 

(ii) (A) With respect to Initial Closing Date, the Company will deliver the
relevant Closing Certificates on the Closing Date after the Company has on
deposit cleared funds from or on behalf of one or more Buyers in an amount at
least equal to the Minimum Aggregate Purchase Price.

 

(B) If there is more than one Closing Date, then with respect to each Additional
Closing Date, the Company will deliver the relevant Closing Certificates on the
Closing Date after the Company has on deposit cleared funds equal to the
Purchase Price for the relevant Buyer and/or one or more relevant Other Buyers,
as the case may be.

 

(iii) By signing this Agreement, each of the Buyer and the Company agrees to all
of the terms and conditions of this Agreement.

 

d. Method of Payment. Payment of the Purchase Price shall be made to the Company
as provided in the Wire Instructions.

 

 

 

 

 

2. BUYER REPRESENTATIONS, WARRANTIES, ETC.; ACCESS TO INFORMATION; INDEPENDENT
INVESTIGATION. The Buyer represents and warrants to, and covenants and agrees
with, the Company, except as otherwise noted, as of the Buyer’s Closing Date, as
follows:

 

a. Without limiting Buyer's right to sell the Securities pursuant to an
effective registration statement or otherwise in compliance with the Securities
Act, the Buyer is purchasing the Securities for the Buyer’s own account for
investment only and not with a view towards the public sale or distribution
thereof and not with a view to or for sale in connection with any distribution
thereof.

 

b. The Buyer is a (i) an “accredited investor” as that term is defined in Rule
501 of the General Rules and Regulations under the Securities Act, (ii)
experienced in making investments of the kind described in this Agreement and
the other Transaction Agreements, (iii) able, by reason of the business and
financial experience of the Buyer and the Buyer’s professional advisors (who are
not affiliated with or compensated in any way by the Company or any of its
Affiliates or selling agents), to protect the Buyer’s own interests in
connection with the transactions described in this Agreement and the other
Transaction Agreements, and to evaluate the merits and risks of an investment in
the Securities, and (iv) able to afford the entire loss of its investment in the
Securities.

 

c. All subsequent offers and sales of the Securities by the Buyer shall be made
pursuant to registration of the relevant Securities under the Securities Act or
pursuant to an exemption from such registration. The Buyer acknowledges that the
Company has no obligation to register, and the Buyer has no right to demand that
the Company register, the Shares to enable the Buyer to sell any of the Shares
pursuant to an effective registration statement.

 

d. The Buyer understands and agrees that the Securities have not been registered
under the Securities Act or any applicable state securities laws, by reason of
their issuance in a transaction that does not require registration under the
Securities Act (based in part on the accuracy of the representations and
warranties of the Buyer contained herein), and that such Securities must be held
indefinitely unless a subsequent disposition is registered under the Securities
Act or any applicable state securities laws or is exempt from such registration.
The Buyer understands that the Securities are being offered and sold to the
Buyer in reliance on specific exemptions from the registration requirements of
the Securities Act and state securities laws and that the Company is relying
upon the truth and accuracy of, and the Buyer's compliance with, the
representations, warranties, agreements, acknowledgments and understandings of
the Buyer set forth herein in order to determine the availability of such
exemptions and the eligibility of the Buyer to acquire the Securities.

 

e. The Buyer and the Buyer’s advisors, if any, have been furnished with or have
been given access to all materials relating to the business, finances and
operations of the Company and materials relating to the offer and sale of the
Purchased Securities which have been requested by the Buyer, including those set
forth in the SEC Documents. The Buyer and the Buyer’s advisors, if any, have
been afforded the opportunity to ask questions of the Company and its management
and have received complete and satisfactory answers to any such inquiries.
Without limiting the generality of the foregoing, the Buyer has also had the
opportunity to obtain and to review the Company's SEC Documents.

 

 

 

 

 

f. The Buyer understands that its investment in the Securities involves a high
degree of risk.

 

g. The Buyer hereby represents that, in connection with the Buyer’s investment
or the Buyer’s decision to purchase the Securities, the Buyer has not relied on
any statement or representation of any Person, including any such statement or
representation by the Company or any of their respective controlling Persons,
officers, directors, partners, agents and employees or any of their respective
attorneys, except as specifically set forth herein.

 

h. The Buyer understands that no United States federal or state agency or any
other government or governmental agency has passed on or made any recommendation
or endorsement of the Securities or the suitability of the investment in the
Securities nor have any such authorities passed upon or endorsed the merits of
the offering of the Securities.

 

k. This Agreement and each of the other Transaction Agreements to which the
Buyer is a party, and the transactions contemplated hereby and thereby, have
been duly and validly authorized by the Buyer. This Agreement has been executed
and delivered by the Buyer, and this Agreement is, and each of the other
Transaction Agreements to which the Buyer is a party, when executed and
delivered (or deemed executed and delivered as contemplated hereby) by the
Buyer, will be valid and binding obligations of the Buyer enforceable in
accordance with their respective terms, subject as to enforceability to general
principles of equity and to bankruptcy, insolvency, moratorium and other similar
laws affecting the enforcement of creditors' rights generally.

 

l. The execution, delivery and performance of this Agreement and the
consummation by the Buyer of the transactions contemplated hereby or relating
hereto do not and will not conflict with, or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, or
give to others any rights of termination, amendment, acceleration or
cancellation of any agreement, indenture or instrument or obligation to which
the Buyer is a party or by which its properties or assets are bound, or result
in a violation of any law, rule, or regulation, or any order, judgment or decree
of any court or governmental agency applicable to such Buyer or its properties
(except for such conflicts, defaults and violations as would not, individually
or in the aggregate, have a material adverse effect on the Buyer’s ability to
fulfill its obligations under this Agreement or the other Transaction
Agreements). The Buyer is not 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 this Agreement or to purchase the Securities in accordance with the terms
hereof, provided that for purposes of the representation made in this sentence,
the Buyer is assuming and relying upon the accuracy of the relevant
representations and agreements of the Company herein.

 

 

 

 

 

m. The Buyer understands that if there is more than one Closing Date, Other
Buyers did or will have the opportunity to enter into this Agreement on the same
terms as those applicable on the Initial Closing Date (such as, but not
necessarily limited to, the Conversion Price and the interest rate of the
Debenture, and the Exercise Price specified in the Warrant; provided, however,
that the maturity date of the Debenture and the Expiration Date of the Warrant
will be determined in relation to the each respective Buyer’s Closing Date) will
apply to the Transactions of Other Buyers consummated on other Closing Dates,
whether such other Closing Dates were before or will be after the Buyer’s
Closing Date, despite the fact that certain events occurred or will occur or
other information became or will become known in the interim and despite the
fact that certain facts, such as, but not necessarily limited to, trading prices
and activity with respect to the Company or in general, and the financial
condition of the Company, may vary from those applicable to the Buyer’s Closing
Date.

 

3. COMPANY REPRESENTATIONS, ETC. The Company represents and warrants to the
Buyer as of the date hereof and, except as otherwise noted, as of the Buyer’s
Closing Date that, except as otherwise provided in the Company’s SEC Documents
or in the Disclosure Annex:

 

a. Rights of Others Affecting the Transactions. There are no preemptive rights
of any stockholder of the Company to acquire the Securities. No other party has
a currently exercisable right of first refusal which would be applicable to any
or all of the transactions contemplated by the Transaction Agreements. Except
for a Registration Statement on Form S-8, no Person has, and as of the Closing
Date, no Person shall have, any demand, “piggy-back” or other rights to cause
the Company to file any registration statement under the Securities Act relating
to any of its securities or to participate in any such registration statement.

 

b. Status. The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Incorporation and has the requisite
corporate power to own its properties and to carry on its business as now being
conducted. The Company is duly qualified as a foreign corporation to do business
and is in good standing in each jurisdiction where the nature of the business
conducted or property owned by it makes such qualification necessary, other than
those jurisdictions in which the failure to so qualify would not have or result
in a Material Adverse Effect. The Company has registered its stock and is
obligated to file reports pursuant to Section 12 or Section 15(d) of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”).

 

c. Authorized Shares.

 

(i) The capitalization of the Company (including the number of shares of each
class of stock which is authorized and the number of such shares which are
outstanding) is as indicated in the SEC Documents.

 

(ii) There are no outstanding securities which are exercisable for, exchangeable
for or convertible into shares of Common Stock or exercisable for, exchangeable
for or convertible into instruments which are convertible into shares of Common
Stock, whether such exercise, exchange or conversion is currently exercisable or
exercisable only upon some future date or the occurrence of some event in the
future.

 

 

 

 

 

(iii) All issued and outstanding shares of Common Stock have been duly
authorized and validly issued and are fully paid and non-assessable. The Company
has sufficient authorized and unissued shares of Common Stock as may be
necessary to effect the issuance of the Shares on the Closing Date, were the
Debentures fully converted and were the Warrant fully exercised on that date
(without regard to any limitations on such conversion or exercise).

 

(iv) The Shares have been duly authorized by all necessary corporate action on
the part of the Company, and, when issued on conversion of, or in payment of
dividends on, the Convertible Debentures, or upon exercise of the Warrants, in
each case in accordance with their respective applicable terms, will have been
duly and validly issued, fully paid and non-assessable and will not subject the
Holder thereof to personal liability by reason of being such Holder.

 

d. Transaction Agreements. This Agreement and each of the other Transaction
Agreements, and the transactions contemplated hereby and thereby, have been duly
and validly authorized by the Company. This Agreement has been duly executed and
delivered by the Company and this Agreement is, and each of the Debenture, the
Warrants and each of the other Transaction Agreements, when executed and
delivered by the Company (or deemed executed and delivered by the Company as
contemplated hereby), will be, valid and binding obligations of the Company
enforceable in accordance with their respective terms, subject as to
enforceability to general principles of equity and to bankruptcy, insolvency,
moratorium, and other similar laws affecting the enforcement of creditors'
rights generally.

 

e. Non-contravention. The execution and delivery of this Agreement and each of
the other Transaction Agreements by the Company, the issuance of the Securities
in accordance with the terms hereof, and the consummation by the Company of the
other transactions contemplated by this Agreement, the Debenture, the Warrants
and the other Transaction Agreements do not and will not conflict with or result
in a breach by the Company of any of the terms or provisions of, or constitute a
default under (i) the Certificate of Incorporation or By-laws, each as currently
in effect, (ii) any indenture, mortgage, deed of trust, or other material
agreement or instrument to which the Company is a party or by which it or any of
its properties or assets are bound, including any listing agreement for the
Common Stock except as herein set forth, or (iii) any existing applicable law,
rule, or regulation or any applicable decree, judgment, or order of any court,
United States federal or state regulatory body, administrative agency, or other
governmental body having jurisdiction over the Company or any of its properties
or assets, except in the case of (iii), such conflict, breach or default which
would not have or result in a Material Adverse Effect.

 

 

 

 

 

f. Securities Law Matters; Approvals.

 

(i) No authorization, approval or consent of any court, governmental body,
regulatory agency, self-regulatory organization, or stock exchange or market or
the stockholders of the Company is required to be obtained by the Company for
the issuance and sale of the Securities to the Buyer as contemplated by this
Agreement, except such authorizations, approvals and consents that have been
obtained.

 

(ii) Assuming the accuracy of the representations and warranties of the Buyer
set forth in Section 2, the offer and sale by the Company of the Purchased
Securities is exempt from (A) the registration and prospectus delivery
requirements of the Securities Act and the rules and regulations of the SEC
thereunder and (B) the registration and/or qualification provisions of all
applicable state and provincial securities and “blue sky” laws.

 

g. Filings. None of the Company’s SEC Documents contained, at the time they were
filed, any untrue statement of a material fact or omitted to state any material
fact required to be stated therein or necessary to make the statements made
therein, in light of the circumstances under which they were made, not
misleading. Since the Last Audited Date, the Company has filed all annual and
quarterly reports required to be filed by the Company with the SEC under Section
13(a) or 15(d) of the Exchange Act. The financial statements of the Company
included in the Company’s SEC Documents, as of the dates of such documents, were
true and complete in all material respects and complied with applicable
accounting requirements and the published rules and regulations of the
Commission with respect thereto, were prepared in accordance with generally
accepted accounting principles in the United States (“GAAP”) (except in the case
of unaudited statements permitted by Form 10-Q under the Exchange Act) applied
on a consistent basis during the periods involved (except as may be indicated in
the notes thereto) and fairly presented the consolidated financial position of
the Company and its Subsidiaries as of the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended (subject,
in the case of unaudited statements, to normal year-end audit adjustments that
in the aggregate are not material and to any other adjustment described
therein).

 

h. Absence of Certain Changes. Since the Last Audited Date, there has been no
Material Adverse Effect. Since the Last Audited Date, except as provided in the
Company’s SEC Documents, the Company has not (i) incurred or become subject to
any material liabilities (absolute or contingent) except liabilities incurred in
the ordinary course of business consistent with past practices; (ii) discharged
or satisfied any material lien or encumbrance or paid any material obligation or
liability (absolute or contingent), other than current liabilities paid in the
ordinary course of business consistent with past practices; (iii) declared or
made any payment or distribution of cash or other property to stockholders with
respect to its capital stock, or purchased or redeemed, or made any agreements
to purchase or redeem, any shares of its capital stock; (iv) sold, assigned or
transferred any other material tangible assets, or canceled any material debts
owed to the Company by any third party or material claims of the Company against
any third party, except in the ordinary course of business consistent with past
practices; (v) waived any rights of material value, whether or not in the
ordinary course of business, or suffered the loss of any material amount of
existing business; (vi) made any increases in employee compensation, except in
the ordinary course of business consistent with past practices; or (vii)
experienced any material problems with labor or management in connection with
the terms and conditions of their employment.

 

 

 

 

 

i. Full Disclosure. The SEC Documents do not contain any untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary to make the statements made therein, in light of the circumstances
under which they were made, not misleading. There is no fact known to the
Company (other than conditions known to the public generally or as disclosed in
the Company’s SEC Documents) that has not been disclosed in writing to the Buyer
that would reasonably be expected to have or result in a Material Adverse
Effect.

 

j. Absence of Litigation. There is no action, suit, proceeding, inquiry or
investigation before or by any court, public board or body pending or, to the
knowledge of the Company, threatened against or affecting the Company before or
by any governmental authority or non-governmental department, commission, board,
bureau, agency or instrumentality or any other person, wherein an unfavorable
decision, ruling or finding would have a Material Adverse Effect or which would
adversely affect the validity or enforceability of, or the authority or ability
of the Company to perform its obligations under, any of the Transaction
Agreements. The Company is not aware of any valid basis for any such claim that
(either individually or in the aggregate with all other such events and
circumstances) could reasonably be expected to have a Material Adverse Effect.
There are no outstanding or unsatisfied judgments, orders, decrees, writs,
injunctions or stipulations to which the Company is a party or by which it or
any of its properties is bound, that involve the transaction contemplated herein
or that, alone or in the aggregate, could reasonably be expect to have a
Material Adverse Effect.

 

k. No Integrated Offering. Neither the Company nor any of its Affiliates nor any
Person acting on its or their behalf has, directly or indirectly, at any time
since October 1, 2012, made any offer or sales of any security or solicited any
offers to buy any security under circumstances that would eliminate the
availability of the exemption from registration under Regulation D in connection
with the offer and sale of the Securities as contemplated hereby.

 

l. Fees to Brokers, Finders and Others. The Company has taken no action which
would give rise to any claim by any Person for brokerage commission, placement
agent or finder's fees or similar payments by Buyer relating to this Agreement
or the transactions contemplated hereby. Except for such fees arising as a
result of any agreement or arrangement entered into by the Buyer without the
knowledge of the Company (a “Buyer’s Fee”), Buyer shall have no obligation with
respect to such fees or with respect to any claims made by or on behalf of other
Persons for fees of a type contemplated in this paragraph that may be due in
connection with the transactions contemplated hereby. The Company shall
indemnify and hold harmless each of Buyer, its employees, officers, directors,
agents, and partners, and their respective Affiliates, from and against all
claims, losses, damages, costs (including the costs of preparation and
attorney's fees) and expenses suffered in respect of any such claimed or
existing fees (other than a Buyer’s Fee).

 

m. Disclosure. No event or circumstance has occurred or exists with respect to
the Company or its business, properties, prospects, operations or financial
conditions, which under applicable law, rule or regulation, requires additional
public disclosure or announcement by the Company.

 

 

 

 

 

n. Confirmation. The Company agrees that, if, to the knowledge of the Company,
any events occur or circumstances exist prior to the release of the Purchase
Price to the Company on the Buyer’s Closing Date which would make any of the
Company’s representations or warranties set forth herein materially untrue or
materially inaccurate as of such date, the Company shall immediately notify the
Buyer in writing prior to such date of such fact, specifying which
representation, warranty or covenant is affected and the reasons therefor.

 

o. No Undisclosed Liabilities or Events. The Company has no liabilities or
obligations other than those disclosed in the Transaction Agreements, or which
individually or in the aggregate, do not or would not have a Material Adverse
Effect. No event or circumstances has occurred or exists with respect to the
Company or its properties, business, operations, financial condition, or results
of operations, which, under applicable law, rule or regulation, requires public
disclosure or announcement prior to the date hereof by the Company but which has
not been so publicly announced or disclosed. Except as otherwise provided in the
Company’s SEC Documents:, there are no proposals currently under consideration
or currently anticipated to be under consideration by the Board of Directors or
the executive officers of the Company which proposal would (x) change the
certificate of incorporation or other charter document or by-laws of the
Company, each as currently in effect, with or without shareholder approval,
which change would reduce or otherwise adversely affect the rights and powers of
the shareholders of the Common Stock or (y) materially or substantially change
the business, assets or capital of the Company, including its interests in
subsidiaries.

 

p. Tax Returns. Except as set forth in the SEC Documents or the Disclosure
Annex, Company has filed all federal, state and local tax returns and other
reports they are required by law to file and has paid all taxes, assessments,
fees and other governmental charges that are due and payable. To the best of
Company’s knowledge, the provision for taxes on the books of Company are
adequate for all years not closed by applicable statutes, and for its current
fiscal year, and Company have no knowledge of any deficiency or additional
assessment in connection therewith not provided for on its books.

 

 

q. O.S.H.A. and Environmental Compliance. (i) Company has duly complied with,
and its facilities, business, assets, property, leaseholds, real property and
equipment are in compliance in all material respects with, the provisions of the
Federal Occupational Safety and Health Act, the Environmental Protection Act,
RCRA and all other applicable environmental laws; there have been no outstanding
citations, notices or orders of non-compliance issued to Company or relating to
its business, assets, property or leaseholds under any such laws, rules or
regulations.

(ii) Company has been issued all required federal, state and local licenses,
certificates or permits relating to all applicable Environmental Laws.

 

r. Licenses and Permits. Company (a) is in compliance with and (b) has procured
and is now in possession of, all material licenses or permits required by any
applicable federal, state or local law, rule or regulation for the operation of
its business in each jurisdiction wherein it is now conducting or propose to
conduct business.

 

 

 

 

 

s. Default of Indebtedness. Company is not in default in the payment of the
principal of or interest on any Indebtedness or under any instrument or
agreement under or subject to which any Indebtedness has been issued and no
event has occurred under the provisions of any such instrument or agreement
which with or without the lapse of time or the giving of notice, or both,
constitutes or would constitute an event of default thereunder.

 

t. No Default. Company is not in default in the payment or performance of any of
its contractual obligations.

 

u. No Burdensome Restrictions. Company is not a party to any contract or
agreement the performance of which could have a Material Adverse Effect. Company
has heretofore delivered to Lead Investor true and complete copies of all
material contracts to which it is a party or to which it or any of its
properties is subject. Company has not agreed or consented to cause or permit in
the future (upon the happening of a contingency or otherwise) any of its
property, whether now owned or hereafter acquired, to be subject to a Lien.

 

v. Margin Regulations. Company is not engaged, nor will it engage, principally
or as one of its important activities, in the business of extending credit for
the purpose of “purchasing” or “carrying” any “margin stock” within the
respective meanings of each of the quoted terms under Regulation U of the Board
of Governors of the Federal Reserve System as now and from time to time
hereafter in effect. No part of the proceeds of any purchase and sale of
Securities hereunder will be used for “purchasing” or “carrying” “margin stock”
as defined in Regulation U of such Board of Governors.

 

w. Business and Property of Company. Upon and after the Closing Date, Company
does not propose to engage in any business other than that engaged in by it or
any of its Subsidiaries immediately prior to and on the Closing Date.

 

x. Anti-Terrorism Laws.

 

(i) General. Neither Company nor any Affiliate of Company is in violation of any
Anti-Terrorism Law or engages in or conspires to engage in any transaction that
evades or avoids, or has the purpose of evading or avoiding, or attempts to
violate, any of the prohibitions set forth in any Anti-Terrorism Law.

 

(ii) Executive Order No. 13224. Neither Company nor any Affiliate of Company or
its respective agents acting or benefiting in any capacity in connection with
the purchase and sale of Securities or other transactions hereunder, is any of
the following (each a “Blocked Person”):

 

1. a Person that is listed in the annex to, or is otherwise subject to the
provisions of, the Executive Order No. 13224;

 

 

 

 

 

2. a Person owned or controlled by, or acting for or on behalf of, any Person
that is listed in the annex to, or is otherwise subject to the provisions of,
the Executive Order No. 13224;

 

3. a Person or entity with which any Lender is prohibited from dealing or
otherwise engaging in any transaction by any Anti-Terrorism Law;

 

4. a Person or entity that commits, threatens or conspires to commit or supports
“terrorism” as defined in the Executive Order No. 13224;

 

5. a Person or entity that is named as a “specially designated national” on the
most current list published by the U.S. Treasury Department Office of Foreign
Asset Control at its official website or any replacement website or other
replacement official publication of such list, or

 

6. a Person or entity who is affiliated or associated with a Person or entity
listed above.

 

Neither Company nor, to the knowledge of Company, any of its agents acting in
any capacity in connection with the purchase and sale of Securities or other
transactions hereunder (i) conducts any business or engages in making or
receiving any contribution of funds, goods or services to or for the benefit of
any Blocked Person, or (ii) deals in, or otherwise engages in any transaction
relating to, any property or interests in property blocked pursuant to the
Executive Order No. 13224.

 

y. Trading with the Enemy.Company has not engaged, nor does it intend to engage,
in any business or activity prohibited by the Trading with the Enemy Act.

 

 

4. CERTAIN COVENANTS AND ACKNOWLEDGEMENTS

 

a. Transfer Restrictions. The Buyer acknowledges that (1) the Securities have
not been and are not being registered under the provisions of the Securities
Act, and may not be transferred unless (A) subsequently registered thereunder,
or (B) the Buyer shall have delivered to the Company an opinion of counsel,
reasonably satisfactory in form, scope and substance to the Company, to the
effect that the Securities to be sold or transferred may be sold or transferred
pursuant to an exemption from such registration; (2) any sale of the Securities
made in reliance on Rule 144 may be made only in accordance with the terms of
said Rule and further, if said Rule is not applicable, any resale of such
Securities under circumstances in which the seller, or the Person through whom
the sale is made, may be deemed to be an underwriter, as that term is used in
the Securities Act, may require compliance with some other exemption under the
Securities Act or the rules and regulations of the SEC thereunder; and (3)
except as may be specifically provided in the Transaction Agreements, neither
the Company nor any other Person is under any obligation to register the
Securities under the Securities Act or to comply with the terms and conditions
of any exemption thereunder.

 

 

 

 

 

b. Restrictive Legend. The Buyer acknowledges and agrees that, until such time
as the relevant Shares have been registered under the Securities Act and may be
sold in accordance with an effective registration statement, or until such
Shares can otherwise be sold without restriction, whichever is earlier, the
certificates and other instruments representing any of the Securities shall bear
a restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of any such Securities):

 

THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OFFERED FOR
SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES OR
AN OPINION OF COUNSEL OR OTHER EVIDENCE ACCEPTABLE TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED.

 

c. Reporting Status. During the period from the Closing Date to and the Fifth
Anniversary Date, the Company shall

 

(i) timely file all reports required to be filed with the SEC pursuant to
Section 13 or 15(d) of the Exchange Act, and, unless such filing is publicly
available on the SEC’s EDGAR system (via the SEC’s web site at no additional
charge), to provide a copy thereof to the Buyer promptly after such filing,

 

(ii) take all reasonable action under its control to ensure that Current
Information Reports are publicly available,

 

(iii) not terminate its status as an issuer required to file reports under the
Exchange Act even if the Exchange Act or the rules and regulations thereunder
would permit such termination, and

 

(iv) take all reasonable action under its control to qualify for and maintain
the continued listing and quotation and trading of its Common Stock (including,
without limitation, all Shares) on the Principal Trading Market or a listing on
the NASDAQ Capital, Global or Global Select Markets or AMEX.

 

d. Warrants.

 

(i) The Company agrees to issue to the Buyer, and the Buyer agrees to purchase
from the Company, on the Buyer’s Closing Date a transferable warrant (the
“Warrant”) for the purchase of the number of shares, equal to one hundred
percent (100%) of the Issue Date Conversion Shares.

 

(ii) The Warrant shall have an Exercise Price of $0.50 per share (subject to
adjustment as provided in the Warrant).

 

(iii) Each Warrant, whether issued on the Initial Closing Date or on an
Additional Closing Date, shall be exercisable commencing on its Issue Date and
shall expire on the relevant Expiration Date.

 

 

 

 

 

(iv) Except as specified above, each Warrant shall be substantially in the form
annexed hereto as Annex II.

 

e. Independent Nature of Buyers' Obligations and Rights. The obligations of each
Buyer under the Transaction Agreements are several and not joint with the
obligations of any other Buyer, and no Buyer shall be responsible in any way for
the performance of the obligations of any Other Buyer under any one or more of
the Transaction Agreements. The decision of each Buyer or Other Buyer to
purchase Purchased Securities pursuant to the Transaction Agreements has been
made by such Buyer independently of any Other Buyer and independently of any
information, materials, statements or opinions as to the business, affairs,
operations, assets, properties, liabilities, results of operations, condition
(financial or otherwise) or prospects of the Company or of its subsidiaries, if
any, which may been made or given by any Other Buyer or any of their respective
officers, directors, principals, employees, agents, counsel or representatives
(collectively, including the Buyer, the “Buyer Representatives”). No Buyer
Representative shall have any liability to any Other Buyer or the Company
relating to or arising from any such information, materials, statements or
opinions, if any. Each Buyer acknowledges that no Other Buyer has acted as agent
for such Buyer in connection with making its investment hereunder and that no
Buyer will be acting as agent of such Other Buyer in connection with monitoring
its investment in the Purchased Securities or enforcing its rights under the
Transaction Agreements. Each Buyer shall be entitled to independently protect
and enforce its rights, including without limitation the rights arising out of
this Agreement or out of the other Transaction Agreements, and it shall not be
necessary for any Other Buyer to be joined as an additional party in any
proceeding for such purpose.

 

f. Computation of Dates in Transaction Agreements. The Company and the Buyer
agree that, anything herein or in any other Transaction Agreement to the
contrary notwithstanding, all references in this Agreement or in any other
Transaction Agreement to a date determined (howsoever denominated) in relation
to the “Closing Date,” shall be deemed to refer to the date so determined in
relation to the Buyer’s Closing Date. In furtherance of the foregoing, and not
in limitation thereof, each Warrant shall have an Expiration Date based on the
relevant Buyer’s Closing Date.

 

g. New Transactions. Except as provided in the final paragraph of the definition
of “New Transactions” or in subparagraph (h) infra, the Company covenants and
agrees that, during the New Transaction Period it will not, without the prior
written consent of the Lead Investor in each instance, enter into any New
Transaction.

 

h. Right of First Refusal. If the Company proposes to enter into a New
Transaction with a Third Party Other Buyer, on terms and conditions materially
at variance with terms contained in the Transaction Agreements, it must deliver
a Proposed Transaction Notice to the Lead Investor not later than eight (8)
Trading Days prior to the consummation of such transaction. Such Proposed
Transaction Notice shall contain the material terms and conditions (including
price and form of consideration) of the Proposed Transaction and the identity of
the Prospective Third Party Other Buyer. The Lead Investor shall have the right
to purchase the securities proposed to be sold in the New Transaction on the
terms and conditions set forth in the Proposed Transaction Notice. To exercise
its Right of First Refusal under this Section 4 (h) the Lead Investor must
deliver to the Company, a Notice within seven (7) Trading Days after delivery of
the Proposed Transfer Notice. Failure of the Lead Investor to timely deliver
such notice shall be deemed a waiver of such Right of First Refusal with respect
to such Additional Closing Notice.

 

 

 

 

 

i. Termination. (i) The Company may terminate the rights of the Lead Investor to
provide future financing or to withhold any consent to the participation of any
other party to the terms of this Agreement or to the Company’s right to enter
into a New Transaction as contemplated under this Agreement if the Lead Investor
declines or fails to provide financing pursuant to Additional Closing Notices
from the Company on any four (4) occasions during any calendar year, provided
however that, solely for the purposes of this subparagraph, each such Additional
Closing Notice shall have been given not earlier than the later of (i) 30 days
from the date of the prior Additional Closing Notice or (ii) the consummation of
a transaction with a Third Party Other Buyer .

 

(ii) No such termination shall affect any other rights or obligations arising
under Transaction Agreements executed prior to such date.

 

5. TRANSFER AGENT INSTRUCTIONS.

 

a. The Company warrants that, with respect to the Securities, other than the
stop transfer instructions to give effect to Section 4(a) hereof, it will give
the Transfer Agent no instructions inconsistent with instructions to issue
Common Stock from time to time upon conversion of the Purchased Shares or the
exercise of the Warrants, if any, as may be applicable from time to time, in
such amounts as specified from time to time by the Company to the Transfer
Agent, bearing the restrictive legend specified in Section 4(b) of this
Agreement prior to registration of the Shares under the Securities Act,
registered in the name of the Buyer or its nominee and in such denominations to
be specified by the Holder in connection therewith. Except as so provided, the
Shares shall otherwise be freely transferable on the books and records of the
Company as and to the extent provided in this Agreement and the other
Transaction Agreements. Nothing in this Section shall affect in any way the
Buyer's obligations and agreement to comply with all applicable securities laws
upon resale of the Securities. If the Buyer provides the Company with an opinion
of counsel reasonably satisfactory to the Company that registration of a resale
by the Buyer of any of the Securities in accordance with clause (1)(B) of
Section 4(a) of this Agreement is not required under the Securities Act or, the
Company shall (except as provided in clause (2) of Section 4(a) of this
Agreement) permit the transfer of the Securities, as may be applicable, promptly
instruct the Transfer Agent to issue one or more certificates for Common Stock
without legend in such name and in such denominations as specified by the Buyer.

 

 

 

 

6. CLOSING DATE.

 

a. Each Closing Date shall occur on the date which is the first Trading Day
after each of the conditions contemplated by Sections 7 and 8 hereof shall have
either been satisfied or been waived by the party in whose favor such conditions
run.

 

b. The closing of the Transactions shall occur on the relevant Closing Date at
the offices of counsel to the Company.

 

7. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.

 

The Buyer understands that the Company's obligation to sell the Purchased
Securities to the Buyer pursuant to this Agreement on the Buyer’s Closing Date
is conditioned upon:

 

a. The execution and delivery of this Agreement, and, where indicated, the other
Transaction Agreements by the Buyer on or before such Closing Date;

 

b. The delivery by the Buyer by such Closing Date of good funds as payment in
full of an amount equal to the Purchase Price in accordance with this Agreement;
provided that, (i) for the Initial Closing Date, the aggregate purchase price of
the Buyer and any Other Buyers as of such date shall be at least equal to the
Minimum Aggregate Purchase Price and (ii) for any subsequent Additional Closing
Date, the minimum aggregate Purchase Price for the Buyer and/or any Other Buyers
purchasing Purchased Securities hereunder on such date shall be at least equal
to $200,000.00 (or, if the difference between the Maximum Aggregate Purchase
Price and the total of the Purchase Price of the Buyer and all Other Buyers
prior to such date is a lower amount, the amount of such difference); and,
provided, further, that at no time shall the aggregate Purchase Prices of the
Buyer and all Other Buyers exceed the Maximum Aggregate Purchase Price.

 

c. On the Initial Closing Date, the delivery of a Certificate substantially in
the form annexed hereto as Exhibit VII-A, and on each other Closing Date, the
delivery of a Certificate substantially in the form annexed hereto as Exhibit
VII-B.

 

d. The accuracy on such Closing Date of the representations and warranties of
the Buyer contained in this Agreement, each as if made on such date, and the
performance by the Buyer on or before such date of all covenants and agreements
of the Buyer required to be performed on or before such date; and

 

e. There shall not be in effect any law, rule or regulation prohibiting or
restricting the transactions contemplated hereby, or requiring any consent or
approval which shall not have been obtained.

 

8. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.

 

The Company understands that the Buyer's obligation to purchase the Purchased
Securities on the Buyer’s Closing Date is conditioned upon:

 

 

 

 

 

a. The execution and delivery of this Agreement and the other Transaction
Agreements by the Company on or before such Closing Date;

 

b. The delivery by the Company of the Closing Certificates in accordance with
this Agreement;

 

c. The accuracy in all material respects on such Closing Date of the
representations and warranties of the Company contained in this Agreement, each
as if made on such date and the performance by the Company on or before such
date of all covenants and agreements of the Company required to be performed on
or before such date; and

 

d. There shall not be in effect any law, rule or regulation prohibiting or
restricting the transactions contemplated hereby, or requiring any consent or
approval which shall not have been obtained.

 

9. NOTICES. Any notice required or permitted hereunder shall be given in writing
(unless otherwise specified herein) and shall be deemed effectively given on the
earliest of

 

(a) the date delivered, if delivered by personal delivery as against written
receipt therefor or by confirmed facsimile transmission,

 

(b) the fifth Trading Day after deposit, postage prepaid, in the United States
Postal Service by registered or certified mail, or

 

(c) the third Trading Day after mailing by domestic or international express
courier, with delivery costs and fees prepaid,

 

in each case, addressed to each of the other parties thereunto entitled at the
addresses provided in Annex III attached hereto (or at such other addresses as
such party may designate by ten (10) days’ advance written notice similarly
given to each of the other parties hereto).

 

10. GOVERNING LAW.

 

a. This Agreement shall be governed by and interpreted in accordance with the
laws of the State of New York for contracts to be wholly performed in such state
and without giving effect to the principles thereof regarding the conflict of
laws. Each of the parties consents to the exclusive jurisdiction of the federal
courts whose districts encompass any part of the County of New York or the state
courts of the State of New York sitting in the County of New York in connection
with any dispute arising under this Agreement or any of the other Transaction
Agreements and hereby waives, to the maximum extent permitted by law, any
objection, including any objection based on forum non conveniens, to the
bringing of any such proceeding in such jurisdictions or to any claim that such
venue of the suit, action or proceeding is improper.

 

 

 

 

 

b. JURY TRIAL WAIVER. The Company and the Buyer hereby waive a trial by jury in
any action, proceeding or counterclaim brought by either of the Parties hereto
against the other in respect of any matter arising out or in connection with the
Transaction Agreements.

 

11. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The Company's and the Buyer's
representations and warranties herein shall survive for a period of three (3)
years from the date of the execution and delivery of this Agreement by such
Buyer and the payment of the Purchase Price, and shall inure to the benefit of
the Buyer and the Company and their respective successors and assigns.

 

12. MISCELLANEOUS.

 

a. Failure of any party to exercise any right or remedy under this Agreement or
otherwise, or delay by a party in exercising such right or remedy, shall not
operate as a waiver thereof.

 

b. This Agreement shall inure to the benefit of and be binding upon the
successors and assigns of each of the parties hereto.

 

c. This Agreement may be amended only by an instrument in writing signed by the
party to be charged with enforcement thereof.

 

d. All pronouns and any variations thereof refer to the masculine, feminine or
neuter, singular or plural, as the context may require.

 

e. This Agreement may be signed in one or more counterparts, each of which shall
be deemed an original.

 

f. A facsimile or other electronic transmission of this signed Agreement shall
be legal and binding on all parties hereto.

 

g. The headings of this Agreement are for convenience of reference and shall not
form part of, or affect the interpretation of, this Agreement.

 

h. If any provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement or the validity or
enforceability of this Agreement in any other jurisdiction.

 

i. All dollar amounts referred to or contemplated by this Agreement or any other
Transaction Agreement shall be deemed to refer to US Dollars, unless otherwise
explicitly stated to the contrary.

 

j. This Agreement supersedes all prior agreements and understandings among the
parties hereto with respect to the subject matter hereof.

 

 

 

 

[SECURITIES PURCHASE AGREEMENT SIGNATURE PAGE]

 

IN WITNESS WHEREOF, with respect to the number of Purchased Shares and Purchase
Price specified below, each of the undersigned represents that the foregoing
statements made by it above are true and correct and that it has caused this
Agreement to be duly executed on its behalf (if an entity, by one of its
officers thereunto duly authorized) as of the date first above written.

 

PURCHASE PRICE: $200,000.00

 

[Note: Minimum Purchase Price is $200,000.00]

 

BUYER:

 

Address               (Printed Name of Buyer)                 By:   Telecopier
No.   (Signature of Authorized Person)                     Delaware (Printed
Name and Title)   Jurisdiction of Incorporation
or Organization            

 

If the above Notice Address is not the Residence (for individual Buyer) or
Principal Place of Business (for Buyer which is not an individual), such
Residence or Principal Place of Business is:

 

_____________________________

 

_____________________________

 

_____________________________

 

COMPANY:

 

INFINITY AUGMENTED REALITY, INC.

 

By: __________________________

 

Title: _________________________

 

 

 

 

CONSENTED TO:

CREDIT STRATEGIES, LLC

 

 

By: __________________________

 

Title: __________________________

 

 

 

 

 

ANNEX I FORM OF CONVERTIBLE DEBENTURE     ANNEX II FORM OF WARRANT     ANNEX III
ADDRESSES     ANNEX IV PURCHASE PRICE WIRE INSTRUCTIONS     ANNEX V FORM OF
ADDITIONAL CLOSING NOTICE     ANNEX VI DISCLOSURE ANNEX     ANNEX VII-A Form of
Closing Certificate     ANNEX VII-B Form of Additional Closing Certificate

 

 

 

 

ANNEX I

TO

SECURITIES PURCHASE AGREEMENT

<PROTOTYPE FOR EACH ISSUANCE>

 

 

FORM OF DEBENTURE

 

THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OFFERED FOR
SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES OR
AN OPINION OF COUNSEL OR OTHER EVIDENCE ACCEPTABLE TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED.

 

No. A-13– 1 US $__________2

 

INFINITY AUGMENTED REALITY, INC.

 

1.20% CONVERTIBLE DEBENTURE SERIES A-13

DUE _______, 20__3

 

FOR VALUE RECEIVED, INFINITY AUGMENTED REALITY, INC., a corporation organized
and existing under the laws of the State of Nevada (the “Company”), promises to
pay to ___________________, the registered holder hereof (the “Holder”), the
principal sum of _____________________ and 00/100 Dollars (US $_______)4 on
______, 20__5 (the “Maturity Date”) and to pay interest on the principal sum
outstanding from time to time in arrears at the rate of One and 20/100 per cent
(1.20%) per annum, accruing from ______________, 201_,6 the date of initial
issuance of this Debenture (the “Issue Date”), on the date (each, an “Interest
Payment Date”) which is the earlier of (i) the next Conversion Date (as defined
below), (ii) March 31 and September 30 of each calendar year (a “Scheduled
Interest Payment Date”), or (iii) the Maturity Date, as the case may be.
Interest shall accrue monthly (pro-rated on a daily basis for any period longer
or shorter than a month) from the later of the Issue Date or the previous
Interest Payment Date and shall be payable, subject to the other provisions of
this Debenture, in cash or in Common Stock, as provided in and subject to the
provisions of Section 4(D) hereof. If not paid in full on an Interest Payment
Date, interest shall be fully cumulative and shall accrue on a daily basis,
based on a 365-day year, monthly or until paid, whichever is earlier.

 

 

 

 

 

This Debenture is being issued pursuant to the terms of the Securities Purchase
Agreement, dated as of April 23, 2013 (the “Securities Purchase Agreement”), to
which the Company and the Holder (or the Holder’s predecessor in interest) are
parties. Capitalized terms not otherwise defined herein shall have the meanings
ascribed to them in the Securities Purchase Agreement.

 

This Debenture is subject to the following additional provisions:

 

1. The Debentures will initially be issued in denominations determined by the
Company, but are exchangeable for an equal aggregate principal amount of
Debentures of different denominations, as requested by the Holder surrendering
the same. No service charge will be made for such registration or transfer or
exchange. Debentures issued as replacement of or in exchange of this Debenture
(including by reason of the provisions of Section 19) will have the same number
as provided above with an additional identifying unique letter.

 

2. The Company shall be entitled to withhold from all payments of principal of,
and interest on, this Debenture any amounts required to be withheld under the
applicable provisions of the United States income tax laws or other applicable
laws at the time of such payments, and Holder shall execute and deliver all
required documentation in connection therewith.

 

3. This Debenture has been issued subject to investment representations of the
original purchaser hereof and may be transferred or exchanged only in compliance
with the Securities Act of 1933, as amended (the "Act"), and other applicable
state and foreign securities laws and the terms of the Securities Purchase
Agreement. In the event of any proposed transfer of this Debenture, the Company
may require, prior to issuance of a new Debenture in the name of such other
person, that it receive reasonable transfer documentation that is sufficient to
evidence that such proposed transfer complies with the Act and other applicable
state and foreign securities laws and the terms of the Securities Purchase
Agreement. Prior to due presentment for transfer of this Debenture, the Company
and any agent of the Company may treat the person in whose name this Debenture
is duly registered on the Company's Debenture Register as the owner hereof for
the purpose of receiving payment as herein provided and for all other purposes,
whether or not this Debenture be overdue, and neither the Company nor any such
agent shall be affected by notice to the contrary.

 

4. A. (i) At any time on or after the Issue Date and prior to the time this
Debenture is paid in full in accordance with its terms (including, without
limitation, after the occurrence of an Event of Default, as defined below, or,
if the Debenture is not fully paid or converted after the Maturity Date), the
Holder of this Debenture is entitled, at its option, subject to the following
provisions of this Section 4, to convert this Debenture at any time into shares
of Common Stock, $0.00001 par value ("Common Stock"), of the Company at the
Conversion Price (as defined below). Any such conversion is referred to as a
“Voluntary Conversion.”

 

(ii) On the Maturity Date the Company shall pay the principal and accrued
interest (through the actual date of payment) of any portion of this Debenture
which is then outstanding.

 

 

 

 

 

(iii) For purposes of this Debenture, the following terms shall have the
meanings indicated below:

 

“Conversion Price” means $0.25 (which amount is subject to adjustment as
provided in Section 10 herein).

 

“Conversion Date” means the date on which the Holder faxes or otherwise delivers
a Notice of Conversion (as defined below) to the Company so that it is received
by the Company on or before such specified date.

 

“Conversion Shares” has the meaning ascribed to in Section 4(F) hereof.

 

“Event of Default” has the meaning ascribed to it in Section 15 hereof.

 

“Lead Investor” means (i) the Lead Investor identified in the Securities
Purchase Agreement, provided that such identified Lead Investor or at least one
of such Lead Investor’s Affiliates is then holding an outstanding Debenture, or
(ii) if, and only if, neither such Lead Investor nor any one of the Lead
Investor’s Affiliates is then holding an outstanding Debenture, the Holder.

 

B. A Voluntary Conversion shall be effectuated by the Holder by faxing a notice
of conversion (“Notice of Conversion”) to the Company as provided in this
paragraph. The Notice of Conversion shall be executed by the Holder of this
Debenture and shall evidence such Holder's intention to convert this Debenture
or a specified portion hereof in the form annexed hereto as Exhibit A. Delivery
of the Notice of Conversion shall be accepted by the Company by hand, mail or
courier delivery at the address specified in said Exhibit A or at the facsimile
number specified in said Exhibit A (each of such address or facsimile number may
be changed by notice given to the Holder in the manner provided in the
Securities Purchase Agreement).

 

C. Notwithstanding any other provision hereof or of any of the other Transaction
Agreements, in no event (except (i) as specifically provided herein as an
exception to this provision, or (ii) while there is outstanding a tender offer
for any or all of the shares of the Company’s Common Stock) shall the Holder be
entitled to convert any portion of this Debenture, or shall the Company have the
obligation to convert such Debenture or, subject to the provisions of
Section4(D), the right to issue shares currently in payment of interest on a
Scheduled Interest Payment Date, to the extent that, after such conversion or
issuance of stock in payment of interest, the sum of (1) the number of shares of
Common Stock beneficially owned by the Holder and its affiliates (other than
shares of Common Stock which may be deemed beneficially owned through the
ownership of the unconverted portion of the Debentures or other convertible
securities or of the unexercised portion of warrants or other rights to purchase
Common Stock), and (2) the number of shares of Common Stock issuable upon the
conversion of the Debentures with respect to which the determination of this
proviso is being made, would result in beneficial ownership by the Holder and
its affiliates of more than 9.99% of the outstanding shares of Common Stock
(after taking into account the shares to be issued to the Holder upon such
conversion). For purposes of the proviso to the immediately preceding sentence,
beneficial ownership shall be determined in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended, except as otherwise provided in
clause (1) of such sentence. Nothing herein shall preclude the Holder from
disposing of a sufficient number of other shares of Common Stock beneficially
owned by the Holder so as to thereafter permit the continued conversion of this
Debenture.

 

 

 

 

 

D. (i) Interest on the principal amount of this Debenture payable on an Interest
Payment Date shall be due and payable, at the option of the Company, in its sole
discretion, in cash or in shares of Common Stock on the Interest Payment Date.

 

(ii) If the interest payable hereunder is to be paid in cash, the Company shall
make such payment on the Interest Payment Date.

 

(iii) If interest is to be paid in Common Stock, the number of shares of Common
Stock to be received shall be determined by dividing the dollar amount of the
interest by the Conversion Price in effect on the relevant Interest Payment Date
(the “Total Interest Shares”), and, subject to the following provisions of this
Section 4(D), the Company shall issue such shares on the Interest Payment Date
(or, in connection with interest payable in connection with a conversion of this
Debenture, simultaneously with the issuance of the Conversion Shares for the
principal of this Debenture then being converted).

 

(iv) At any time at least five (5) Trading Days before a Scheduled Interest
Payment Date or in a Conversion Notice, the Holder may give the Company a
written notice (an “Interest Shares Limit Notice”) specifying the limit as to
the number of shares which may be issued to the Holder on the relevant Interest
Payment Date in order to comply with the provisions of Section 4(C) hereof (the
“Interest Shares Limit”).

 

(v) The provisions of Section 4(C) shall apply to the payment of interest in
Common Stock on each Interest Payment Date. If the Company elects to pay the
accrued interest on such Interest Payment Date in Common Stock, but the Total
Interest Shares exceed the Interest Shares Limit (such excess, the “Excess
Interest Shares”), the Company shall issue the Interest Shares Limit to the
Holder as provided in clause (iii) above, and the issuance of the Excess
Interest Shares shall be deferred (without the accrual of any further interest
on the equivalent interest amount and without the requirement for the Company to
pay such deferred interest in cash) until a date which is ten (10) Trading Days
after the Holder gives the Company written notice (an “Available Interest Shares
Notice”) that some or all of the Excess Interest Shares can then be issued to
the Holder in a manner consistent with the provisions of Section 4(C) (the
number of shares specified in the Available Interest Shares Notice, the
“Available Interest Shares”). The Available Interest Shares Notice shall include
a computation supporting the Holder’s statement that the issuance of the
Available Interest Shares is consistent with the provisions of Section 4(C). If
the Holder gives an Available Interest Shares Notice, the Company shall issue to
the Holder the Available Interest Shares on or before such tenth Trading Day,
which issuance shall be deemed the payment of the deferred accrued interest in
an amount equal to the number of Available Interest Shares issued multiplied by
the Conversion Price in effect on the original Interest Payment Date (as such
number of shares may be adjusted for certain capital transactions, such as
forward or reverse stock splits or stock dividends). The issuance of any
remaining Excess Interest Shares shall continue to be deferred until the Holder
gives the Company another Available Interest Shares Notice. Nothing in this
provision shall affect (x) the accrual of interest on the unpaid principal of
this Debenture with respect to periods after the relevant Interest Payment Date
in accordance with the other provisions of this Debenture or (y) the provisions
regarding the payment of interest on the unpaid principal of this Debenture on
subsequent Interest Payment Dates in accordance with the other provisions of
this Debenture and of this Section 4(D) (v).

 

 

 

 

 

E. Anything in the other provisions of this Debenture or any of the other
Transaction Agreements to the contrary notwithstanding, the Company shall not
have the right to prepay any or all of the outstanding principal of this
Debenture, without the prior written consent of the Holder in each instance
(which consent may be withheld for any reason or no reason, in the sole
discretion of the Holder).

 

F. (i) The following provisions apply to the issuances of Common Stock in
payment of the amounts due under this Debenture, whether as principal or
interest, as provided in the preceding provisions of this Section 4.

 

(ii) No fractional shares of Common Stock or scrip representing fractions of
shares will be issued on conversion, but the number of shares issuable shall be
rounded to the nearest whole share.

 

(iii) All shares issuable with respect to a Conversion Date or an Interest
Payment Date shall be deemed “Conversion Shares” for all purposes of this
Debenture and the other Transaction Agreements. Certificates representing the
relevant Conversion Shares (“Conversion Certificates”) will be delivered to the
Holder at the address specified in the relevant Notice of Conversion (and if
none, the Holder’s the Holder’s address for notices as contemplated by the
Securities Purchase Agreement, which address the Holder may change from time to
time in the manner provided therein), via express courier, by electronic
transfer or otherwise after the relevant Conversion Date. The Holder shall be
deemed to be the holder of the shares issuable to it in accordance with the
relevant provisions of this Debenture on the Conversion Date or Interest Payment
Date, as the case may be.

 

G. Except as may specified in a specific provision of this Debenture, any
payments under this Debenture shall be applied in the following order of
priority: (i) first to accrued but unpaid interest on this Debenture; and (ii)
then, to principal of this Debenture.

 

H. The Company hereby agrees that, at all times while any principal of this
Debenture is outstanding, there shall be reserved for issuance upon conversion
of the then outstanding principal of this Debenture, a number of shares of its
Common Stock equal to the shares which would be issuable on conversion of such
outstanding principal. For the purposes of such calculations, the Company should
assume that the outstanding principal of this Debenture was exercisable in full
at any time, without regard to any restrictions which might limit the Holder’s
right to convert all or any portion of this Debenture held by the Holder.

 

 

 

 

 

5. Subject to the terms of the Securities Purchase Agreement, no provision of
this Debenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of, and interest on, this
Debenture at the time, place, and rate, and in the coin or currency or where
contemplated herein in shares of its Common Stock, as applicable, as herein
prescribed. This Debenture and all other Debentures now or hereafter issued of
similar terms are direct obligations of the Company.

 

6. No recourse shall be had for the payment of the principal of, or the interest
on, this Debenture, or for any claim based hereon, or otherwise in respect
hereof against any incorporator, shareholder, officer or director, as such,
past, present or future, of the Company or any successor corporation, whether by
virtue of any constitution, statute or rule of law, or by the enforcement of any
assessment or penalty or otherwise, all such liability being, by the acceptance
hereof and as part of the consideration for the issue hereof, expressly waived
and released.

 

7. All payments contemplated hereby to be made “in cash” shall be made in
immediately available good funds of United States of America currency by wire
transfer to an account designated in writing by the Holder to the Company (which
account may be changed by notice similarly given). All payments of cash and each
delivery of shares of Common Stock issuable to the Holder as contemplated hereby
shall be made to the Holder at the address last appearing on the Debenture
Register of the Company as designated in writing by the Holder from time to
time; except that the Holder can designate, by notice to the Company, a
different delivery address for any one or more specific payments or deliveries.

 

8. If, for as long as this Debenture remains outstanding, the Company enters
into a merger (other than where the Company is the surviving entity) or
consolidation with another corporation or other entity or a sale or transfer of
all or substantially all of the assets of the Company to another person
(collectively, a "Sale"), the Company will require, in the agreements reflecting
such transaction, that the surviving entity expressly assume the obligations of
the Company hereunder. Notwithstanding the foregoing, if the Company enters into
a Sale and the holders of the Common Stock are entitled to receive stock,
securities or property in respect of or in exchange for Common Stock, then as a
condition of such Sale, the Company and any such successor, purchaser or
transferee will agree that the Debenture may thereafter be converted on the
terms and subject to the conditions set forth above into the kind and amount of
stock, securities or property receivable upon such merger, consolidation, sale
or transfer by a holder of the number of shares of Common Stock into which this
Debenture might have been converted immediately before such merger,
consolidation, sale or transfer, subject to adjustments which shall be as nearly
equivalent as may be practicable. In the event of any such proposed Sale, (i)
the Holder hereof shall have the right to convert by delivering a Notice of
Conversion to the Company within fifteen (15) days of receipt of notice of such
Sale from the Company. This provision is an exception to the provisions of
Section 4(C) hereof.

 

9. If, at any time while any portion of this Debenture remains outstanding, the
Company spins off or otherwise divests itself of a part of its business or
operations or disposes of all or of a part of its assets in a transaction (the
“Spin Off”) in which the Company, in addition to or in lieu of any other
compensation received and retained by the Company for such business, operations
or assets, causes securities of another entity (the “Spin Off Securities”) to be
issued to security holders of the Company, the Company shall cause (i) to be
reserved Spin Off Securities equal to the number thereof which would have been
issued to the Holder had all of the Outstanding Debentures (as defined below)
been converted as of the close of business on the Trading Day immediately before
the Record Date (as defined below), as determined without regard to the
provisions of Section 4(C) hereof (the “Reserved Spin Off Shares”), and (ii) to
be issued to the Holder on the conversion of all or any of the Outstanding
Debentures, such amount of the Reserved Spin Off Shares equal to (x) the
Reserved Spin Off Shares multiplied by (y) a fraction, of which (I) the
numerator is the principal amount of the Outstanding Debentures then being
converted, and (II) the denominator is the principal amount of the Outstanding
Debentures. The term “Outstanding Debentures” means this Debenture to the extent
outstanding on the record date (the “Record Date”) for determining the amount
and number of Spin Off Securities to be issued to security holders of the
Company.

 

 

 

 

 

10. If, at any time while any portion of this Debenture remains outstanding, the
Company effectuates a stock split or reverse stock split of its Common Stock or
issues a dividend on its Common Stock consisting of shares of Common Stock, the
prices used in determining the Conversion Price from dates prior to such action
and any other fixed amounts calculated as contemplated hereby shall be equitably
adjusted to reflect such action.

 

11. The Holder of the Debenture, by acceptance hereof, agrees that this
Debenture is being acquired for investment and that such Holder will not offer,
sell or otherwise dispose of this Debenture or the shares of Common Stock
issuable upon conversion thereof except under circumstances which will not
result in a violation of the Act or any applicable state Blue Sky or foreign
laws or similar laws relating to the sale of securities.

 

12. This Debenture shall be governed by and construed in accordance with the
laws of the State of New York for contracts to be wholly performed in such state
and without giving effect to the principles thereof regarding the conflict of
laws. Each of the parties consents to the exclusive jurisdiction of the federal
courts whose districts encompass any part of the County of New York or the state
courts of the State of New York sitting in the County of New York in connection
with any dispute arising under this Debenture and hereby waives, to the maximum
extent permitted by law, any objection, including any objection based on forum
non coveniens, to the bringing of any such proceeding in such jurisdictions. To
the extent determined by such court, the Company shall reimburse the Holder for
any reasonable legal fees and disbursements incurred by the Holder in
enforcement of or protection of any of its rights under any of this Debenture.

 

13. JURY TRIAL WAIVER. Each of the Company and the Holder hereby waives a trial
by jury in any action, proceeding or counterclaim brought by either of the
Parties hereto against the other in respect of any matter arising out of or in
connection with this Debenture.

 

14. A. (i) The term “Change in Control” means (a) any transaction following the
date hereof by which any person, group or entity (other than a director, former
director or officer of the Company as of the date hereof, the Lead Investor or
any of their Affiliates) shall beneficially own more than 50% of the Voting
Rights (as defined below) of the Company; provided, however, that any Voting
Rights acquired from the Lead Investor or any of its Affiliates shall be
excluded from the calculation of Voting Rights, or (b) any merger, consolidation
or sale of substantially all of the property or assets of the Company with or to
an entity that was not under the control of the Company prior to and, if
relevant, after such merger, consolidation or sale.

 

 

 

 

 

(ii) The term “Voting Rights” means (a) the right to vote, by ownership of
securities, by contract or otherwise, for directors of the Company or (b) the
right, by contract, to direct or cause the direction of the management of the
Company (other than by reason of being the holder of the Company’s securities).

 

B. If, at any time while this Debenture is outstanding, there is a Change in
Control, the Holder will have the right at any time thereafter, by written
notice to the Company (the “Change in Control Demand Notice”), to (i) convert
any or all of the then outstanding Debenture pursuant to the provisions of
Section 4 hereof (except that such conversion shall be an exception to the
provisions of Section 4(C) hereof), or, (ii) to the extent the Holder does not
convert any portion of the Debenture, demand payment in full of the outstanding
principal of this Debenture together with all accrued but unpaid interest
thereon. If the Holder demands any such payment, the Company will be obligated
to pay such amount (with interest calculated through the actual date of payment)
by the date which is three (3) Trading Days after the Company’s receipt of the
Change in Control Demand Notice.

 

15. A. The term "Event of Default" means the occurrence of any one or more of
the following events:

 

(i) The Company shall default in the payment of principal or interest on this
Debenture or any other amount due hereunder when due; or

 

(ii) Any of the representations or warranties made by the Company herein or in
the Securities Purchase Agreement in connection with the execution and delivery
of this Debenture or the Securities Purchase Agreement shall be false or
misleading in any material respect at the time made; or

 

(iii) Subject to the terms of the Securities Purchase Agreement, the Company
fails to authorize or to cause its Transfer Agent to issue shares of Common
Stock upon exercise by the Holder of the conversion rights of the Holder in
accordance with the terms of this Debenture, and such failure shall continue
uncured for a period of five (5) Trading Days; or

 

(iv) The Company shall fail to perform or observe, in any material respect, (a)
any other covenant, term, provision, condition, agreement or obligation of any
Debenture (other than a failure to pay money) or (b) any other covenant, term,
provision, condition, agreement or obligation of the Company under the
Securities Purchase Agreement (each failure contemplated by this clause (iv), a
“Failure”) and such Failure, if capable of being cured, shall continue uncured
for a period of ten (10) days after the earlier of (x) the Holder’s receipt of
written notice from the Company of such failure or (y) the Company’s receipt of
written notice from the Holder of such failure; or

 

 

 

 

 

(v) The Company shall enter into a New Transaction during the New Transaction
Period without the consent of the Lead Investor; or

 

(vi) The Company shall (x) admit in writing its inability to pay its debts
generally as they mature; (y) make an assignment for the benefit of creditors or
commence proceedings for its dissolution; or (z) apply for or consent to the
appointment of a trustee, liquidator or receiver for its or for a substantial
part of its property or business; or

 

(vii) A trustee, liquidator or receiver shall be appointed for the Company or
for a substantial part of its property or business without its consent and shall
not be discharged within sixty (60) days after such appointment; or

 

(viii) Any governmental agency or any court of competent jurisdiction at the
instance of any governmental agency shall assume custody or control of the whole
or any substantial portion of the properties or assets of the Company and shall
not be dismissed within sixty (60) days thereafter; or

 

(ix) Any money judgment in excess of One Hundred Thousand ($100,000) Dollars in
the aggregate shall be entered or filed against the Company or any writ or
warrant of attachment, or similar process shall be entered or filed against the
Company or any of its properties or other assets and shall remain unpaid,
unvacated, unbonded or unstayed for a period of thirty (30) days or in any event
no later than five (5) days prior to the date of any proposed sale thereunder;
or

 

(x) Bankruptcy, reorganization, insolvency or liquidation proceedings or other
proceedings for relief under any bankruptcy law or any law for the relief of
debtors shall be instituted by or against the Company and, if instituted against
the Company, shall not be dismissed within sixty (60) days after such
institution or the Company shall by any action or answer approve of, consent to,
or acquiesce in any such proceedings or admit the material allegations of, or
default in answering a petition filed in any such proceeding.

 

B. Notwithstanding the terms set forth in the first paragraph of this Debenture,
if an Event of Default shall have occurred and is continuing, then, unless and
until such Event of Default shall have been cured or waived in writing by the
Lead Investor (which waiver shall not be deemed to be a waiver of any subsequent
default),

 

 

 

 

 

(i) the unpaid amount of this Debenture, computed as of such date, will bear
interest at the rate (the “Default Rate”) equal to five percent (5.0%) per annum
from the date of the Event of Default to until and including the date actually
paid; and

 

(ii) at the option of the Lead Investor at any time thereafter, the Lead
Investor may, (a) by written notice to the Company, declare the entire unpaid
principal balance of this Debenture, together with all interest accrued hereon,
plus all fees and expenses, due and payable, and thereupon, the same shall be
accelerated and so due and payable, without presentment, demand, protest, or
other notice, all of which are hereby expressly unconditionally and irrevocably
waived by the Company; provided, however, that upon the occurrence of an Event
of Default described in Sections 15(A)(vi), (vii), (viii) and (x), the
outstanding principal balance and accrued interest hereunder, shall be
immediately and automatically due and payable, and/or (b) exercise or otherwise
enforce any one or more of the Holder’s rights, powers, privileges, remedies and
interests under this Debenture or other Transaction Agreements or applicable
law.

 

C. The provisions of Section 4(G) shall apply to any payments made by or on
behalf of the Company following the occurrence of an Event of Default and the
application of the relevant foregoing provisions of this Section 15.

 

16. No course of delay on the part of the Holder shall operate as a waiver
thereof or otherwise prejudice the right of the Holder. No remedy conferred
hereby shall be exclusive of any other remedy referred to herein or now or
hereafter available at law, in equity, by statute or otherwise.

 

17. Nothing contained in this Debenture shall be construed as conferring upon
the Holder the right to vote or to receive dividends or to consent or receive
notice as a shareholder in respect of any meeting of shareholders or any rights
whatsoever as a shareholder of the Company, unless and to the extent converted
in accordance with the terms hereof.

 

18. Any notice required or permitted hereunder shall be given in manner provided
in the Section headed “NOTICES” in the Securities Purchase Agreement, the terms
of which are incorporated herein by reference.

 

19. Upon receipt by the Company of evidence satisfactory to it of the loss,
theft, destruction or mutilation of this Debenture, and (in the case of loss,
theft or destruction) receipt of reasonably satisfactory indemnification, and
(in the case of mutilation) upon surrender and cancellation of this Debenture,
the Company will execute and deliver a new Debenture of like tenor and date and
any such lost, stolen, destroyed or mutilated Debenture shall thereupon become
void.

 

 

 

 

 

 

[Balance of page intentionally left blank]

 

 

 

 

 

 

 

20. In the event for any reason, any payment by or act of the Company or the
Holder shall result in payment of interest which would exceed the limit
authorized by or be in violation of the law of the jurisdiction applicable to
this Debenture, then ipso facto the obligation of the Company to pay interest or
perform such act or requirement shall be reduced to the limit authorized under
such law, so that in no event shall the Company be obligated to pay any such
interest, perform any such act or be bound by any requirement which would result
in the payment of interest in excess of the limit so authorized. In the event
any payment by or act of the Company shall result in the extraction of a rate of
interest in excess of a sum which is lawfully collectible as interest, then such
amount (to the extent of such excess not returned to the Company) shall, without
further agreement or notice between or by the Company or the Holder, be deemed
applied to the payment of principal, if any, hereunder immediately upon receipt
of such excess funds by the Holder, with the same force and effect as though the
Company had specifically designated such sums to be so applied to principal and
the Holder had agreed to accept such sums as an interest-free prepayment of this
Debenture. If any part of such excess remains after the principal has been paid
in full, whether by the provisions of the preceding sentences of this Section or
otherwise, such excess shall be deemed to be an interest-free loan from the
Company to the Holder, which loan shall be payable immediately upon demand by
the Company. The provisions of this Section shall control every other provision
of this Debenture.

 

 

IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed
by an officer thereunto duly authorized.

 

Dated: _________________, 201__

 

 

  INFINITY AUGMENTED REALITY, INC.       By:        (Print Name)       (Title)

 

 

 

  

EXHIBIT A

 

INFINITY AUGMENTED REALITY, INC.

 

NOTICE OF CONVERSION

OF

1.20% CONVERTIBLE DEBENTURE SERIES A-13 DUE __________, 20__

 

(To be Executed by the Registered Holder in Order to Convert the Debenture)

 

TO: INFINITY AUGMENTED REALITY, INC.   VIA FAX:  (212) 201-4071   45 Broadway,
6th Floor       New York, NY 10006       Attn: Chief Executive Officer    

 

 

FROM: _________________________________________________________ (“Holder”)

 

DATE: _______________________________________________ (the “Conversion Date”)

 

RE:Conversion of $_________________ principal amount (the “Converted Debenture”)
of the 1.20% Convertible Debenture Series A-13 Due __________, 20___, No.
A-13-__ (the “Debenture”) of INFINITY AUGMENTED REALITY, INC. (the “Company”)
into ______________________ shares (the “Principal Conversion Shares”) of Common
Stock (defined below)

 

 

The captioned Holder hereby gives notice to the Company, pursuant to the
Debenture of INFINITY AUGMENTED REALITY, INC. that the Holder elects to convert
the Converted Debenture into fully paid and non-assessable shares of Common
Stock, $0.00001 par value (the “Common Stock”), of the Company as of the
Conversion Date specified above. Said conversion shall be based on the
Conversion Price of:

 

___ $0.25

 

___ pursuant to the provisions of Section 10 of the Debenture, $___.___

 

 

 

 

As contemplated by the Debenture, the Company should also pay all accrued but
unpaid interest on the Converted Debenture to the Holder. Such interest can be
paid, in the discretion of the Company, either in shares of the Company’s stock
or in cash.

 

– If the Company elects to pay such interest in shares, such payment should be
for ______________ shares of Common Stock (“Interest Conversion Shares”),
representing such interest amount converted at the Conversion Price specified
above. Such Interest Conversion Shares should be delivered together with the
Principal Conversion Shares.

 

[Holder should check one of the following two boxes and, if relevant, fill in
the blank.]

 

__ The Holder confirms that the Company’s issuance of all of the Interest
Conversion Shares will be consistent with the provisions of Section 4(C).

 

___ The Holder hereby gives written notice to the Company* that the maximum
number of Interest Conversion Shares which may be issued to the Holder at this
time is _____________ shares, which shares are the Interest Shares Limit
referred to in Section 4(D) of the Debenture.. Reference is made to Section 4(D)
of the Debenture regarding the issuance of the Excess Interest Shares.

 

*THIS NOTICE IS AN INTEREST SHARES LIMIT NOTICE REFERRED TO IN SECTION 4(D) OF
THE DEBENTURE.

 

 

 

[Balance of page intentionally left blank]

 

 

 

 

– If the Company elects to pay such interest in cash, such payment should be
paid as provided in the Debenture by wire transfer as follows:7

 

___________________________________

 

___________________________________

 

___________________________________

 

Based on the relevant Conversion Prices, the number of Principal Conversion
Shares plus any Interest Conversion Shares (collectively, “Conversion Shares”)
indicated above should be issued in the following name(s):

 

            Name and Record Address   Conversion Shares                        
                 

 

It is the intention of the Holder to comply with the provisions of Section 4(C)
of the Debenture regarding certain limits on the Holder's right to convert
thereunder. The Holder believes and represents to the Company that this
conversion complies with the provisions of said Section 4(C). Nonetheless, to
the extent that, pursuant to the conversion effected hereby, the Holder would
have more shares than permitted under said Section, this notice should be
amended and revised, ab initio, to refer to the conversion which would result in
the issuance of shares consistent with such provision. Any conversion above such
amount is hereby deemed void and revoked.

 

As contemplated by the Debenture, this Notice of Conversion is being sent by
facsimile to the telecopier number and officer indicated above.

 

If this Notice of Conversion represents the full conversion of the outstanding
balance of the Converted Debenture, the Holder either (1) has previously
surrendered the Converted Debenture to the Company or (2) will surrender (or
cause to be surrendered) the Converted Debenture to the Company at the address
indicated above by express courier within five (5) Trading Days after delivery
or facsimile transmission of this Notice of Conversion.

 

 

--------------------------------------------------------------------------------

1Insert unique Debenture number for each Debenture in a series.

2Amount of Buyer’s loan amount for relevant Closing Date.

3Insert date which is fifth annual anniversary of the relevant Closing Date.

4See fn 2.

5See fn 3.

6Insert the relevant Closing Date.

7Information should include the following:

 

All Wires:

(1) Bank Name

(2) Bank Address (including street, city, state)

(3) ABA or Wire Routing No.

(4) Account Name

(5) Account Number

 

If Wire is going to International (Non-US) Bank, all of the above plus:

(6) SWIFT Number

 

 

 

 

 

The certificates representing the Conversion Shares should be transmitted by the
Company to the Holder

 

___ via express courier, or

 

___ by electronic transfer

 

to:

 

_____________________________________

_____________________________________

_____________________________________

 

_____________________________________

(Print name of Holder)

 

By: __________________________________

(Signature of Authorized Person)

 

______________________________________

(Printed Name and Title)

 

 

 

 

 

 

ANNEX II

TO

SECURITIES PURCHASE AGREEMENT

<PROTOTYPE FOR EACH ISSUANCE>

 

 

FORM OF WARRANT

 

THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OFFERED FOR
SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES OR
AN OPINION OF COUNSEL OR OTHER EVIDENCE ACCEPTABLE TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED.

 

No. A-13- 8

 

INFINITY AUGMENTED REALITY, INC.

 

COMMON STOCK PURCHASE WARRANT

CLASS A-13

 

1. Issuance and Certain Definitions.

 

1.1 Issuance. In consideration of good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged by INFINITY AUGMENTED REALITY,
INC., a Nevada corporation (the “Company”), _____________________________ or
registered assigns (the “Holder”) is hereby granted the right to purchase at any
time, on or after the Issue Date (as defined below) until 5:00 P.M., New York
City time, on ______________, 20__9 (the “Expiration Date”), _________________
Thousand __________ (____________)10 fully paid and nonassessable shares of the
Company’s Common Stock, $0.00001 par value per share (the “Common Stock”), at an
initial exercise price per share (the “Exercise Price”) of $0.50 per share,
subject to further adjustment as set forth herein. This Warrant is being issued
pursuant to the terms of that certain Securities Purchase Agreement, dated as of
April 23, 2013 (the “Securities Purchase Agreement”), to which the Company and
Holder (or Holder’s predecessor in interest) are parties. Capitalized terms not
otherwise defined herein shall have the meanings ascribed to them in the
Securities Purchase Agreement. This Warrant was originally issued to the Holder
or the Holder’s predecessor in interest on _____________, 201_11 (the “Issue
Date”) simultaneously with the issuance by the Company to the Holder of a
Convertible Debenture Series A-13 No. A-13-_12 in the original principal amount
of $_________.13 Warrants issued as replacement of or in exchange of this
Warrant will have the same number as provided above with an additional
identifying unique letter.

 

 

--------------------------------------------------------------------------------

8Insert unique sequential number for each Warrant. This should match the
sequential number of the corresponding Debenture issued to the Holder on the
Issue Date (“Relevant Debenture”).

9Insert date which is the last calendar day of the month in which the fifth
anniversary of the Issue Date occurs.

10Insert number equal to 100% of the number shares which would be issued if the
Relevant Debenture were converted in full on the Issue Date (without regard to
any limitations on conversion that might be applicable on that date). This
should be equal to 4 times the principal of the Relevant Debenture.

 

 

 

 

 

 

1.2 Certain Definitions. . As used herein, each of the following terms has the
meaning set forth below, unless the context otherwise requires:

 

“Sale Price” means the 4:00 P.M. closing sale price of the Common Stock on the
Principal Trading Market on the relevant Trading Day(s), as reported by the
Reporting Service for the relevant date.

 

“Reporting Service” means Bloomberg LP or if that service is not then reporting
the relevant information regarding the Common Stock, a comparable reporting
service of national reputation selected by the Lead Investor and reasonably
acceptable to the Company.

 

“Change in Control” means (a) any transaction following the date hereof by which
any person, group or entity (other than a director, former director or officer
of the Company as of the date hereof, the Lead Investor or any of their
Affiliates) shall beneficially own more than 50% of the Voting Rights of the
Company; provided, however, that any Voting Rights acquired from the Lead
Investor or any of its Affiliates shall be excluded from the calculation of
Voting Rights, or (b) any merger, consolidation or sale of substantially all of
the property or assets of the Company with or to an entity that was not under
the control of the Company prior to and, if relevant, after such merger,
consolidation or sale.

 

“Voting Rights” means (a) the right to vote, by ownership of securities, by
contract or otherwise, for directors of the Company or (b) the right, by
contract, to direct or cause the direction of the management of the Company
(other than by reason of being the holder of the Company’s securities).

 

2. Exercise of Warrants.

 

2.1 General.

 

(a) This Warrant is exercisable in whole or in part at any time and from time to
time commencing on the Issue Date. Such exercise shall be effectuated by
submitting to the Company (either by delivery to the Company or by facsimile
transmission as provided in Section 7 hereof) a completed and duly executed
Notice of Exercise (substantially in the form attached to this Warrant
Certificate) as provided in the Notice of Exercise (or revised by notice given
by the Company as contemplated by the Section headed “NOTICES” in the Securities
Purchase Agreement). The date such Notice of Exercise is faxed to the Company
shall be the “Exercise Date,” provided that, if such exercise represents the
full exercise of the outstanding balance of the Warrant, the Holder of this
Warrant tenders to the Company this Warrant Certificate (or an affidavit of lost
warrant certificate in form reasonably satisfactory to the Company) within five
(5) Trading Days thereafter. The Notice of Exercise shall be executed by the
Holder of this Warrant and shall indicate (i) the number of shares then being
purchased pursuant to such exercise (the “Exercise Shares”) and (ii) whether the
exercise is a cashless exercise.

 

--------------------------------------------------------------------------------

11Insert the Closing Date.

12Insert same sequential number as in fn 1.

13Insert principal amount of Relevant Debenture as of the Closing Date.

 

 

 

 

 

(b) If the Notice of Exercise form elects a “cashless” exercise, the Holder
shall thereby be entitled to receive a number of shares of Common Stock equal to
(w) the excess of the Current Market Value (as defined below) over the total
cash exercise price for all of the Exercise Shares, divided by (x) the Market
Price of the Common Stock (as defined below). For the purposes of this Warrant,
the terms (y) “Current Market Value” shall mean an amount equal to the Market
Price of the Common Stock, multiplied by the Exercise Shares, and (z) “Market
Price of the Common Stock” shall mean the average Sale Price of the Common Stock
for the three (3) Trading Days ending on the Trading Day immediately prior to
the Exercise Date.

 

(c) If the Holder provides on the Notice of Exercise form that the Holder has
elected a “cash” exercise, the Exercise Price per share of Common Stock for the
shares then being exercised shall be payable, at the election of the Holder, in
cash or by certified or official bank check or by wire transfer in accordance
with instructions provided by the Company at the request of the Holder.

 

(d) Upon the appropriate payment, if any, of the Exercise Price for the shares
of Common Stock purchased, together with the surrender of this Warrant
Certificate (if required), the Holder shall be entitled to receive a certificate
or certificates for the shares of Common Stock so purchased. The Company shall
deliver such certificates representing the Warrant Shares to the Holder at the
address specified in the relevant Notice of Exercise (and if none, the Holder’s
the Holder’s address for notices as contemplated by the Securities Purchase
Agreement, which address the Holder may change from time to time in the manner
provided therein), via express courier, by electronic transfer or otherwise
after (i) with respect to a “cashless exercise,” the Exercise Date, or, (ii)
with respect to a “cash” exercise, the later of the Exercise Date or the date
the payment of the Exercise Price for the relevant Warrant Shares is received by
the Company. The Holder shall be deemed to be the holder of the shares issuable
to it in accordance with the provisions of this Section 2.1 on the Exercise
Date, or, in the case of a “cash” exercise, the later of the Exercise Date or
the date the payment of the Exercise Price for the relevant Warrant Shares is
received by the Company.

 

2.2 Limitation on Exercise. Notwithstanding the provisions of this Warrant, the
Securities Purchase Agreement or any of the other Transaction Agreements, in no
event (except (i) as specifically provided in this Warrant as an exception to
this provision, (ii) during the forty-five (45) day period prior to the
Expiration Date, (iii) if, within thirty (30) days prior to the Holder’s
submission of a Conversion Notice, the Holder received a written notice from the
Company regarding the occurrence of Change of Control, or (iv) while there is
outstanding a tender offer for any or all of the shares of the Company’s Common
Stock) shall the Holder be entitled to exercise this Warrant, or shall the
Company have the obligation to issue shares upon such exercise of all or any
portion of this Warrant to the extent that, after such exercise the sum of (1)
the number of shares of Common Stock beneficially owned by the Holder and its
affiliates (other than shares of Common Stock which may be deemed beneficially
owned through the ownership of the unexercised portion of the Warrants or other
rights to purchase Common Stock or through the ownership of the unconverted
portion of convertible securities), and (2) the number of shares of Common Stock
issuable upon the exercise of the Warrants with respect to which the
determination of this proviso is being made, would result in beneficial
ownership by the Holder and its affiliates of more than 9.99% of the outstanding
shares of Common Stock (after taking into account the shares to be issued to the
Holder upon such exercise). For purposes of the proviso to the immediately
preceding sentence, beneficial ownership shall be determined in accordance with
Section 13(d) of the Securities Exchange Act of 1934, as amended (the “1934
Act”), except as otherwise provided in clause (1) of such sentence. Nothing
herein shall preclude the Holder from disposing of a sufficient number of other
shares of Common Stock beneficially owned by the Holder so as to thereafter
permit the continued exercise of this Warrant.

 

 

 

 

 

3. Reservation of Shares. The Company hereby agrees that, at all times during
the term of this Warrant, there shall be reserved for issuance upon exercise of
this Warrant, a number of shares of its Common Stock equal to the then
unexercised and unexpired portion of this Warrant. For the purposes of such
calculations, the Company should assume that the outstanding portion of this
Warrant was exercisable in full at any time, without regard to any restrictions
which might limit the Holder’s right to exercise all or any portion of this
Warrant held by the Holder.

 

4. Mutilation or Loss of Warrant. Upon receipt by the Company of evidence
satisfactory to it of the loss, theft, destruction or mutilation of this
Warrant, and (in the case of loss, theft or destruction) receipt of reasonably
satisfactory indemnification, and (in the case of mutilation) upon surrender and
cancellation of this Warrant, the Company will execute and deliver a new Warrant
of like tenor and date and any such lost, stolen, destroyed or mutilated Warrant
shall thereupon become void.

 

 

5. Protection Against Dilution and Other Adjustments.

 

5.1 Capital Adjustments. In case of any stock split or reverse stock split,
stock dividend, reclassification of the Common Stock, recapitalization, merger
or consolidation (where the Company is not the surviving entity), the provisions
of this Section 5 shall be applied as if such capital adjustment event had
occurred immediately prior to the date of this Warrant and the original Exercise
Price had been fairly allocated to the stock resulting from such capital
adjustment; and in other respects the provisions of this Section shall be
applied in a fair, equitable and reasonable manner so as to give effect, as
nearly as may be, to the purposes hereof. A rights offering to stockholders
shall be deemed a stock dividend to the extent of the bargain purchase element
of the rights. The Company will not effect any consolidation or merger, unless
prior to the consummation thereof, the successor or acquiring entity (if other
than the Company) and, if an entity different from the successor or acquiring
entity, the entity whose capital stock or assets the holders of the Common Stock
of the Company are entitled to receive as a result of such consolidation or
merger assumes by written instrument the obligations under this Warrant
(including under this Section 5) and the obligations to deliver to the holder of
this Warrant such shares of stock, securities or assets as, in accordance with
the foregoing provisions, the holder may be entitled to acquire.

 

 

 

 

 

5.2 Adjustment for Spin Off. If, for any reason, prior to the exercise of this
Warrant in full, the Company spins off or otherwise divests itself of a part of
its business or operations or disposes all or of a part of its assets in a
transaction (the “Spin Off”) in which the Company does not receive compensation
for such business, operations or assets, but causes securities of another entity
(the “Spin Off Securities”) to be issued to security holders of the Company,
then the Company shall cause (i) to be reserved Spin Off Securities equal to the
number of shares issuable to the Holder had all of the Outstanding Warrants (as
defined below) been exercised as of the close of business on the Trading Day
immediately before the Record Date (as defined below), as determined without
regard to the provisions of Section 2.2 hereof (the “Reserved Spin Off Shares”).
and (ii) to be issued to the Holder on the exercise of all or any of the
Outstanding Warrants, such amount of the Reserved Spin Off Shares equal to (x)
the Reserved Spin Off Shares, multiplied by (y) a fraction, of which (I) the
numerator is the amount of the Outstanding Warrants then being exercised, and
(II) the denominator is the amount of the Outstanding Warrants. The term
“Outstanding Warrants” means this Warrant to the extent unexercised and
unexpired on the record date (the “Record Date”) for determining the amount and
number of Spin Off Securities to be issued to security holders of the Company.

 

6. Rights of the Holder. The Holder shall not, by virtue hereof, be entitled to
any rights of a stockholder in the Company, either at law or equity, and the
rights of the Holder are limited to those expressed in this Warrant and are not
enforceable against the Company except to the extent set forth herein.

 

7. Transfer to Comply with the Securities Act. This Warrant has not been
registered under the Securities Act of 1933, as amended, (the “1933 Act”) and
has been issued to the Holder for investment and not with a view to the
distribution of either the Warrant or the Warrant Shares. Neither this Warrant
nor any of the Warrant Shares or any other security issued or issuable upon
exercise of this Warrant may be sold, transferred, pledged or hypothecated in
the absence of an effective registration statement under the 1933 Act relating
to such security or an opinion of counsel satisfactory to the Company that
registration is not required under the 1933 Act. Each certificate for the
Warrant, the Warrant Shares and any other security issued or issuable upon
exercise of this Warrant shall contain a legend on the face thereof, in form and
substance satisfactory to counsel for the Company, setting forth the
restrictions on transfer contained in this Section.

 

 

 

 

 

8. Notices. Any notice required or permitted hereunder shall be given in manner
provided in the Section headed “NOTICES” in the Securities Purchase Agreement,
the terms of which are incorporated herein by reference.

 

9. Supplements and Amendments; Whole Agreement. This Warrant may be amended or
supplemented only by an instrument in writing signed by the parties hereto. This
Warrant contains the full understanding of the parties hereto with respect to
the subject matter hereof and thereof and there are no representations,
warranties, agreements or understandings other than expressly contained herein
and therein.

 

10. Governing Law. This Warrant shall be deemed to be a contract made under the
laws of the State of New York for contracts to be wholly performed in such state
and without giving effect to the principles thereof regarding the conflict of
laws. Each of the parties consents to the jurisdiction of the federal courts
whose districts encompass any part of the County of New York or the state courts
of the State of New York sitting in the County of New York in connection with
any dispute arising under this Warrant and hereby waives, to the maximum extent
permitted by law, any objection, including any objection based on forum non
conveniens, to the bringing of any such proceeding in such jurisdictions. To the
extent determined by such court, the Company shall reimburse the Holder for any
reasonable legal fees and disbursements incurred by the Holder in enforcement of
or protection of any of its rights under any of the Transaction Agreements.

 

11. JURY TRIAL WAIVER. The Company and the Holder hereby waive a trial by jury
in any action, proceeding or counterclaim brought by either of the Parties
hereto against the other in respect of any matter arising out or in connection
with this Warrant.

 

12. Remedies. The Company stipulates that the remedies at law of the Holder of
this Warrant in the event of any default or threatened default by the Company in
the performance of or compliance with any of the terms of this Warrant are not
and will not be adequate and that, to the fullest extent permitted by law, such
terms may be specifically enforced by a decree for the specific performance of
any agreement contained herein or by an injunction against a violation of any of
the terms hereof or otherwise.

 

13. Counterparts. This Warrant may be executed in any number of counterparts and
each of such counterparts shall for all purposes be deemed to be an original,
and all such counterparts shall together constitute but one and the same
instrument.

 

 

[Balance of page intentionally left blank]

 

 

 

 

 

14. Descriptive Headings. Descriptive headings of the several Sections of this
Warrant are inserted for convenience only and shall not control or affect the
meaning or construction of any of the provisions hereof.

 

IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed
by an officer thereunto duly authorized.

 

Dated: _________________, 201__

 

 

  INFINITY AUGMENTED REALITY, INC.       By:        (Print Name)       (Title)

 

 

 

 

 

 

NOTICE OF EXERCISE OF WARRANT

 

 

TO: INFINITY AUGMENTED REALITY, INC.   VIA FAX:  (212) 201-4071   45 Broadway,
6th Floor       New York, NY 10006       Attn: Chief Executive Officer    

 

The undersigned hereby irrevocably elects to exercise the right, represented by
the Common Stock Purchase Warrant Class A-13, No. A-13-___, dated as of
_____________________, 20___, to purchase ___________ shares (the “Exercise
Shares”) of the Common Stock, $0.00001 par value (“Common Stock”), of INFINITY
AUGMENTED REALITY, INC. and tenders herewith payment in accordance with Section
2 of said Common Stock Purchase Warrant, as follows:

 

___ CASH: $ = (Exercise Price x Exercise Shares)

 

Payment is being made by:

 

9  enclosed check

9  wire transfer

9 other

___ CASHLESS EXERCISE:

 

Net number of Warrant Shares to be issued to Holder: _________*

 

* based on: Current Market Value - (Exercise Price x Exercise Shares)

Market Price of Common Stock

where:

Market Price of Common Stock [“MP”] = $_______________

Current Market Value [MP x Exercise Shares] = $_______________

 

It is the intention of the Holder to comply with the provisions of Section 2.2
of the Warrant regarding certain limits on the Holder's right to exercise
thereunder. The Holder believes and represents to the Company that this exercise
complies with the provisions of said Section 2.2. Nonetheless, to the extent
that, pursuant to the exercise effected hereby, the Holder would have more
shares than permitted under said Section, this notice should be amended and
revised, ab initio, to refer to the exercise which would result in the issuance
of shares consistent with such provision. Any exercise above such amount is
hereby deemed void and revoked.

 

As contemplated by the Warrant, this Notice of Exercise is being sent by
facsimile to the telecopier number and officer indicated above.

 

 

 

 

 

If this Notice of Exercise represents the full exercise of the outstanding
balance of the Warrant, the Holder either (1) has previously surrendered the
Warrant to the Company or (2) will surrender (or cause to be surrendered) the
Warrant to the Company at the address indicated above by express courier within
five (5) Trading Days after delivery or facsimile transmission of this Notice of
Exercise.

 

The certificates representing the Warrant Shares should be transmitted by the
Company to the Holder

 

___ via express courier, or

 

___ by electronic transfer

 

after receipt of this Notice of Exercise (by facsimile transmission or
otherwise) or, if relevant, the receipt of the cash purchase price for the
Exercise Shares, whichever is later, to:

 

_____________________________________

_____________________________________

_____________________________________

 

 

 

Dated: ______________________

 

 

____________________________

[Name of Holder]

 

By: _________________________

 

 

 

 

 

ANNEX III

TO

SECURITIES PURCHASE AGREEMENT

 

 

ADDRESSES

 

COMPANY: At the address set forth at the head of the Securities Purchase
Agreement.   Attn: President and Chief Executive Officer   Telephone No.: (212)
201-4070   Telecopier No.: (212) 201-4071   e-mail: aoratz@infinityar.com  
e-mail: jyifat@infinityar.com     with a copy to:       Krieger & Prager llp  
Attn: Samuel Krieger, Esq.   39 Broadway   Suite 920   New York, NY 10006  
Telephone No.: (212) 363-2900   Telecopier No.  (212) 363-2999         BUYER: At
the address set forth on the Buyer’s signature page of the Securities Purchase
Agreement.

 

 

 

 

ANNEX IV

TO

SECURITIES PURCHASE AGREEMENT

 

 

PURCHASE PRICE WIRE INSTRUCTIONS

 

BANK OF AMERICA

New York, New York

 

ABA- 026009593

 

F/A/O Infinity Augmented Reality, Inc.

 

Account Number - 483034658634

 

 

 

 

ANNEX V

TO

SECURITIES PURCHASE AGREEMENT

 

 

ADDITIONAL CLOSING NOTICE

 

INFINITY AUGMENTED REALITY, INC.

45 BROADWAY, 6TH FLOOR

NEW YORK, NEW YORK 10006

 

 

___________, ___, 2013

 

 

CREDIT STRATEGIES LLC

 

 

Ladies and Gentlemen:

 

Reference is made to the Securities Purchase Agreement, initially dated as of
April 23, 2013 (as extended, renewed, amended, restated or otherwise modified
from time to time, the “Purchase Agreement”), among INFINITY AUGMENTED REALITY,
INC., a Nevada corporation (the “Company”), and CREDIT STRATEGIES, LLC as Lead
Investor (“Lead Investor”). Capitalized terms used herein but not defined herein
have the meanings assigned to such terms in the Purchase Agreement.

 

The Company hereby requests that, subject to the satisfaction of the conditions
set forth in Article 7 and 8 of the Purchase Agreement, Lead Investor, or its
designee, purchase under the Purchase Agreement on ________, 201_, Debentures in
the aggregate amount of $________ (the “Advance”).

 

Company hereby certifies, in accordance with the Purchase Agreement, that (i) no
Default or Event of Default has occurred or is continuing on the date of the
Advance, or would exist after giving effect to the Advance, and (ii) each of the
representations and warranties of the Company contained in any certificate,
document or financial or other statement furnished at any time under or in
connection with the Purchase Agreement, the Transaction Documents or any related
agreement are true and correct in all respects on and as of the date hereof and
on and as of the date of the Advance (except to the extent any such
representation or warranty expressly relates only to an earlier and/or specified
date, in which case such representation and warranty shall have been true and
correct in all respects on and as of such date.

 

Lead Investor is irrevocably authorized and directed to disburse the proceeds of
the Advance in accordance with the wiring instructions shown on Schedule A
attached hereto and made a part hereof.

 

 

  Very truly yours,       INFINITY AUGMENTED REALITY, INC.       By:      Name:
Title:

 

 

 

 

 

SCHEDULE A

 

WIRING INSTRUCTIONS

 

Recipient(s) Amount Wiring Instructions           $_________

Name of Bank:

Account Name:

Account No.:

ABA Routing No.

Reference:

    $_________

Name of Bank:

Account Name:

Account No.:

ABA Routing No.

Reference:

    $_________

Name of Bank:

Account Name:

Account No.:

ABA Routing No.

Reference:

    $_________

Name of Bank:

Account Name:

Account No.:

ABA Routing No.

Reference:

    $_________

Name of Bank:

Account Name:

Account No.:

ABA Routing No.

Reference:

 

 

 

 

 

 

 

 

 

ANNEX VI

TO

SECURITIES PURCHASE AGREEMENT

 

DISCLOSURE ANNEX

 

 

 

 

 

NONE

 

 

 

 

 

 

ANNEX VII-A

TO

SECURITIES PURCHASE AGREEMENT

 

 

 

 

 

FORM OF CLOSING CERTIFICATE

 

BEING PROVIDED UNDER SEPARATE COVER

 

 

 

 

ANNEX VII-B

TO

SECURITIES PURCHASE AGREEMENT

 

 

 

 

FORM OF ADDITIONAL CLOSING CERTIFICATE

CERTIFICATE OF CHIEF EXECUTIVE OFFICER

 

OF

 

INFINITY AUGMENTED REALTY, INC.

 

 

 

The undersigned, the Chief Executive Officer of Infinity Augmented Reality, Inc.
hereby certifies that:

1. The representations and warranties of , set forth in a certain Securities
Purchase Agreement (the "Agreement"), dated the ____ day of ____________, 201_,
by and among Infinity Augmented Reality, Inc. (the “Company”), and ___________
_________________ (“Investor”) (and in any other agreements, documents or
instruments delivered by the Company to Investor contemporaneously therewith)
are each true and correct in all material respects on and as of the date hereof
with the same effect as if made on and as of the date hereof.

2. The Company has performed and complied with all the agreements, obligations,
and conditions required by the Agreement (and any other agreements, documents or
instruments delivered by the Company to Investor contemporaneously therewith) to
be performed and complied with by the Company, on or before the date hereof.

 

IN WITNESS WHEREOF, the undersigned has hereunto affixed his hand as of the ___
day of ____________, 201_.

 

 

  INFINITY AUGMENTED REALITY, INC.       By:      Chief Executive Officer