Monaker Group, Inc. 8-K [mkgi-8k_073117.htm]

 

 Exhibit 10.1

 

 

MONAKER GROUP, INC.

 

AND

 

THE PURCHASERS NAMED HEREIN

 

 

 

COMMON STOCK AND WARRANT PURCHASE AGREEMENT

 

 

 

July 31, 2017

 

 

 

 

MONAKER GROUP, INC.

 COMMON STOCK AND WARRANT PURCHASE AGREEMENT

 

This Common Stock and Warrant Purchase Agreement (this “Agreement”) is made as
of July 31, 2017 by and between MONAKER GROUP, INC., Nevada corporation with its
principal office at 2690 Weston Road, Suite #200, Weston, FL 33331 (the
“Company”), and those purchasers listed on the attached Exhibit A, as such
exhibit may be amended from time to time (each a “Purchaser”, and collectively,
the “Purchasers”).

 

Recitals

 

A.       The Company has authorized the sale and issuance of up to 3,000,000
shares (the “Shares”) of the common stock of the Company, $0.00001 par value per
share (the “Common Stock”), and warrants to purchase 3,000,000 shares of Common
Stock to certain investors in a private placement (the “Offering”).

 

B.       Pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended
(the “Securities Act”) and Rule 506(b) promulgated thereunder, the Company
desires to sell to the Purchasers listed on the attached Exhibit A, as such
exhibit may be amended from time to time, and such Purchasers, severally and not
jointly, desire to purchase from the Company that aggregate number of shares of
Common Stock set forth opposite such Purchaser’s name on Exhibit A, and warrants
to purchase that aggregate number of shares of Common Stock set forth opposite
such Purchaser’s name on Exhibit A on the terms and subject to the conditions
set forth in this Agreement.

 

Terms and Conditions

 

Now, therefore, in consideration of the foregoing recitals and the mutual
covenants and agreements contained herein, the parties hereto, intending to be
legally bound, do hereby agree as follows:

 

1.             Purchase of the Securities.

 

1.1          Agreement to Sell and Purchase. At the Closing (as hereinafter
defined), the Company will issue and sell to each of the Purchasers, and each
Purchaser will, severally and not jointly, purchase from the Company, the number
of Shares and warrants to purchase Common Stock of the Company (the “Warrants”
and together with the Shares, the “Securities”) set forth opposite such
Purchaser’s name on Exhibit A for an aggregate purchase price set forth opposite
such Purchaser’s name on Exhibit A (the “Purchase Price”). The Warrants shall be
in the form set forth hereto as Exhibit B.

 

1.2          Placement Agent Fee. The Purchasers acknowledge that the Company
intends to pay to Northland Securities, Inc., in its capacity as the placement
agent for the Offering (the “Placement Agent”), a fee in respect of the sale of
Securities to any Purchaser. The Company shall indemnify and hold harmless the
Purchasers from and against all fees, commissions, or other payments owing by
the Company to the Placement Agent or any other persons from or acting on behalf
of the Company hereunder.

 

1.3          Closing; Closing Date. The completion of the sale and purchase of
the Securities (the “Closing”) shall be held at 9:00 a.m. (Central Time) as soon
as practicable following the satisfaction of the conditions set forth in Section
4 (the “Closing Date”), remotely by facsimile or other electronic transmission,
at the offices of The Loev Law Firm, PC, 6300 West Loop South, Suite 280,
Bellaire, Texas 77401, or at such other time and place as the Company and
Purchasers may agree. 

 

Page 1 

 

 

1.4          Delivery of the Shares. At the Closing, subject to the terms and
conditions hereof, the Company will deliver to each Purchaser a stock
certificate or certificates and Warrant or Warrants, in such denominations and
registered in such names as such Purchaser may designate by notice to the
Company, representing the Securities, or at a Purchaser’s request and subject to
the rules and procedures of the Company’s transfer agent, a statement or other
written evidence that the Securities issuable to such Purchaser have been issued
and are held in book entry form at the Company’s transfer agent, in either case
dated as of the Closing Date (each such certificate and each such book entry
position are hereinafter referred to as a “Certificate”), against payment of the
purchase price therefor by cash in the form of wire transfer. All proceeds from
the sale of Securities hereunder shall be deposited in an escrow account set up
by the Placement Agent and maintained by Signature Bank, a Minnesota banking
corporation (the “Escrow Agent”). Such proceeds will be released by the Escrow
Agent in accordance with the applicable escrow agreement.

 

2.             Representations and Warranties of the Company. The Company hereby
represents and warrants to each Purchaser:

 

2.1          Authorization. All corporate action on the part of the Company, its
officers, directors and shareholders necessary for the authorization, execution
and delivery of this Agreement has been taken. The Company has the requisite
corporate power to enter into this Agreement and carry out and perform its
obligations under the terms of this Agreement. At the Closing, the Company will
have the requisite corporate power to issue and sell the Securities and the
Common Stock issuable upon exercise of the Warrants (the “Warrant Shares”). This
Agreement has been duly authorized, executed and delivered by the Company and,
upon due execution and delivery by the Purchasers, this Agreement will be a
valid and binding agreement of the Company, enforceable against the Company in
accordance with its terms, except as rights to indemnity hereunder may be
limited by federal or state securities laws and except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors’ rights generally or by equitable principles.

 

2.2          No Conflict with Other Instruments. The execution, delivery and
performance of this Agreement, the issuance and sale of the Securities to be
sold by the Company under this Agreement, the issuance of the Warrant Shares
upon exercise of the Warrants and the consummation of the actions contemplated
by this Agreement (which for all purposes herein shall include exercise of the
Warrants) will not (A) result in any violation of, be in conflict with, or
constitute a default under, with or without the passage of time or the giving of
notice: (i) any provision of the Company’s or its subsidiaries’ Articles of
Incorporation or Bylaws as in effect on the date hereof or at the Closing; (ii)
any provision of any judgment, arbitration ruling, decree or order to which the
Company or its subsidiaries are a party or by which they are bound; (iii) any
bond, debenture, note or other evidence of indebtedness, or any lease, contract,
mortgage, indenture, deed of trust, loan agreement, joint venture or other
agreement, instrument or commitment to which the Company or any subsidiary is a
party or by which they or their respective properties are bound; or (iv) any
statute, rule, law or governmental regulation or order applicable to the Company
or any of its subsidiaries, except, in the case of (ii), (iii) and (iv) above,
would not reasonably be expected to have a Material Adverse Effect (as
hereinafter defined); or (B) result in the creation or imposition of any lien,
encumbrance, claim, security interest or restriction whatsoever upon any of the
properties or assets of the Company or any subsidiary or any acceleration of
indebtedness pursuant to any obligation, agreement or condition contained in any
bond, debenture, note or any other evidence of indebtedness or any indenture,
mortgage, deed of trust or any other agreement or instrument to which the
Company or any subsidiary are a party or by which they are bound or to which any
of the property or assets of the Company or any subsidiary is subject. No
consent, approval, authorization or other order of, or registration,
qualification or filing with, any regulatory body, administrative agency, or
other governmental body is required for the execution and delivery of this
Agreement by the Company and the valid issuance or sale of the Securities by the
Company pursuant to this Agreement, other than such as have been made or
obtained and that remain in full force and effect, and except for the filing of
a Form D or any filings required to be made under state securities laws.

 

2.3          Articles of Incorporation; Bylaws. The Company has made available
to the Purchasers true, correct and complete copies of the Articles of
Incorporation and Bylaws of the Company, as in effect on the date hereof.

 

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2.4          Organization, Good Standing and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Nevada and has all requisite corporate power and authority to
carry on its business as now conducted. The Company and each of its subsidiaries
has full power and authority to own, operate and occupy its properties and to
conduct its business as presently conducted and is duly qualified to transact
business and is in good standing in each jurisdiction in which the failure so to
qualify would not reasonably be expected to have a material adverse effect on
its or its subsidiaries’ business, financial condition, properties, operations,
prospects or assets or its ability to perform its obligations under this
Agreement (a “Material Adverse Effect”).

 

2.5          SEC Filings. The consolidated financial statements contained in
each report, registration statement and definitive proxy statement filed by the
Company with the Securities and Exchange Commission (the “SEC,” and the
documents, the “Company SEC Documents”), as amended: (i) complied as to form in
all material respects with the published rules and regulations of the SEC
applicable thereto and were timely filed; (ii) the information contained therein
as of the respective dates thereof did not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein in light of the circumstances under
which they were made not misleading; (iii) were prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods covered, except as may be indicated in the notes to such
financial statements and (in the case of unaudited statements) as permitted by
Form 10-Q of the SEC, and except that unaudited financial statements may not
contain footnotes and are subject to year-end audit adjustments; and (iv) fairly
present the consolidated financial position of the Company and its subsidiaries
as of the respective dates thereof and the consolidated results of operations
cash flows and the changes in shareholders’ equity of the Company and its
subsidiaries for the periods covered thereby. Except as set forth in the
financial statements included in the Company SEC Documents, neither the Company
nor its subsidiaries has any liabilities, contingent or otherwise, other than
liabilities incurred in the ordinary course of business subsequent to February
28, 2017, and liabilities of the type not required under generally accepted
accounting principles to be reflected in such financial statements. Such
liabilities incurred subsequent to February 28, 2017, are not, in the aggregate,
material to the financial condition or operating results of the Company and its
subsidiaries, taken as a whole.

 

2.6          Capitalization. The authorized capital stock of the Company
consists of (i) 500,000,000 shares of Common Stock, of which (A) 11,424,047
shares were issued and outstanding as of the date of this Agreement, and (B)
6,203,867 shares were reserved for issuance upon the exercise or conversion, as
the case may be, of outstanding options, warrants or other convertible
securities as of the date of this Agreement; and (ii) 100,000,000 shares of
preferred stock, of which 1,869,611 shares of Series A 10% Cumulative
Convertible Preferred Stock were issued and outstanding, as of the date of this
Agreement, none are outstanding or reserved for issuance upon the exercise or
conversion, as the case may be, of outstanding options, warrants or other
convertible securities. All issued and outstanding shares of common stock have
been duly authorized and validly issued, are fully paid and nonassessable, have
been issued and sold in compliance with the registration requirements of federal
and state securities laws or the applicable statutes of limitation have expired,
and were not issued in violation of any preemptive rights or similar rights to
subscribe for or purchase securities. Except as set forth herein or the Company
SEC Documents, there are no (i) outstanding rights (including, without
limitation, preemptive rights), warrants or options to acquire, or instruments
convertible into or exchangeable for, any unissued shares of capital stock or
other equity interest in the Company, or any contract, commitment, agreement,
understanding or arrangement of any kind to which the Company or any subsidiary
is a party and relating to the issuance or sale of any capital stock or
convertible or exchangeable security of the Company or any subsidiary; or (ii)
obligations of the Company to purchase redeem or otherwise acquire any of its
outstanding capital stock or any interest therein or to pay any dividend or make
any other distribution in respect thereof. Except as disclosed in the Company
SEC Documents, there are no anti-dilution or price adjustment provisions,
co-sale rights, registration rights, rights of first refusal or other similar
rights contained in the terms governing any outstanding security of the Company
that will be triggered by the issuance of the Securities or the Warrant Shares.

 

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2.7          Subsidiaries. Except as set forth in the Company SEC Documents, the
Company does not presently own or control, directly or indirectly, and has no
stock or other interest as owner or principal in, any other corporation or
partnership, joint venture, association or other business venture or entity
(each a “subsidiary”). Each subsidiary is duly incorporated or organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation or organization and has all requisite power and authority to carry
on its business as now conducted. Each subsidiary is duly qualified to transact
business and is in good standing in each jurisdiction in which the failure to so
qualify would have a Material Adverse Effect, on its business or properties. All
of the outstanding capital stock or other securities of each subsidiary that is
owned by the Company, is owned directly or indirectly, free and clear of any
liens, claims, or encumbrances.

 

2.8          Valid Issuance of Securities. The Securities and the Warrant Shares
are duly authorized and, when issued, sold and delivered in accordance with the
terms hereof or the Warrants, as the case may be, will be duly and validly
authorized and issued, fully paid and nonassessable, free from all taxes, liens,
claims, encumbrances and charges with respect to the issue thereof; provided,
however, that the Securities and the Warrant Shares may be subject to
restrictions on transfer under state and/or federal securities laws or as
otherwise set forth herein. The issuance, sale and delivery of the Securities
and the Warrant Shares in accordance with the terms hereof or the Warrant, as
the case may be, will not be subject to preemptive rights of shareholders of the
Company. The Warrant Shares have been duly reserved for issuance upon exercise
of the Warrant.

 

2.9          Offering. Assuming the accuracy of the representations of the
Purchasers in Section 3.3 of this Agreement on the date hereof, on the Closing
Date and solely as this Section 2.9 relates to the issue and sale of the Warrant
Shares on the date(s) of exercise of the Warrant, the offer, issue and sale of
the Securities and issuance of the Warrant Shares upon exercise of the Warrant
(assuming no change in applicable law prior to the date the Warrant Shares are
issued), are and will be exempt from the registration and prospectus delivery
requirements of the Securities Act and have been or will be registered or
qualified (or are or will be exempt from registration and qualification) under
the registration, permit or qualification requirements of all applicable state
securities laws. Neither the Company, nor any of its affiliates, nor any person
acting on its or their behalf, has directly or indirectly made any offers or
sales of any security or solicited any offers to buy any security under
circumstances that would require registration under the Securities Act of the
issuance of the Securities to the Purchasers or the issuance of the Warrant
Shares upon exercise of the Warrants. Other than the Company SEC Documents, the
Company has not distributed and will not distribute prior to the Closing Date,
any offering material in connection with the offering and sale of the Securities
or Warrant Shares. The Company has not taken any action to sell, offer for sale
or solicit offers to buy any securities of the Company which would bring the
offer, issuance or sale of the Securities or the issuance of the Warrant Shares
upon exercise of the Warrants, within the provisions of Section 5 of the
Securities Act, unless such offer, issuance or sale was or shall be within the
exemptions of Section 4 of the Securities Act.

 

2.10        Litigation. Except as set forth in the Company SEC Documents, there
is no action, suit, proceeding nor investigation pending or, to the Company’s
knowledge, currently threatened against the Company or any of its subsidiaries
that (a) if adversely determined would reasonably be expected to have a Material
Adverse Effect or (b) would be required to be disclosed in the Company’s Annual
Report on Form 10-K under the requirements of Item 103 of Regulation S-K. The
foregoing includes, without limitation, any action, suit, proceeding or
investigation, pending or threatened, that questions the validity of this
Agreement or the right of the Company to enter into such Agreement and perform
its obligations hereunder. Neither the Company nor any subsidiary is subject to
any injunction, judgment, decree or order of any court, regulatory body,
arbitral panel, administrative agency or other government body.

 

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2.11        Governmental Consents. No consent, approval, order or authorization
of, or registration, qualification, designation, declaration or filing with, any
federal, state, local or provincial governmental authority on the part of the
Company is required in connection with the consummation of the transactions
contemplated by this Agreement, except for notices required or permitted to be
filed with certain state and federal securities commissions, which notices will
be filed on a timely basis.

 

2.12        No Brokers. Except for any fees payable to the Placement Agent, no
broker, finder or investment banker is entitled to any brokerage, finder’s or
other fee or commission in connection with the transactions contemplated by this
Agreement based on arrangements made by the Company.

 

2.13        Compliance. The Company is not in violation of its Articles of
Incorporation or Bylaws. Neither the Company nor the subsidiaries have been
advised or have reason to believe, that it is not conducting its business in
compliance with all applicable laws, rules and regulations of the jurisdictions
in which it is conducting business, including, without limitation, all
applicable local, state and federal environmental laws and regulations; except
where failure to be so in compliance would not have a Material Adverse Effect.
Each of the Company and the subsidiaries has all necessary franchises, licenses,
certificates and other authorizations from any foreign, federal, state or local
government or governmental agency, department or body that are currently
necessary for the operation of the business of the Company and they subsidiaries
as currently conducted, except where the failure to currently possess such
franchises, licenses, certificates and other authorizations would not reasonably
be expected to have a Material Adverse Effect.

 

2.14        No Material Changes. Except as disclosed in the Company SEC
Documents, since May 31, 2017, there has been no material adverse change in the
assets, liabilities, business, properties, operations, financial condition or
results of operations of the Company and its subsidiaries, taken as a whole.
Since May 31, 2017, the Company has not declared or paid any dividend or
distribution or its capital stock.

 

2.15        Contracts. Except for matters which are not reasonably likely to
have a Material Adverse Effect and those contracts that are substantially or
fully performed or expired by their terms, the contracts listed as exhibits to
or described in the Company SEC Documents that are material to the Company or
any of its subsidiaries and all amendments thereto, are in full force and effect
on the date hereof, and neither the Company nor, to the Company’ knowledge, any
other party to such contracts is in breach of or default under any of such
contracts. The Company has no contracts or agreements that would constitute a
material contract as such term is defined in Item 601(b) of Regulation S-K,
except for such contracts or agreements that are filed as exhibits to or
described in the Company SEC Documents.

 

2.16        Intellectual Property.

 

(a)       The Company has ownership or license or legal right to use all patent,
copyright, trade secret, know-how trademark, trade name customer lists, designs,
manufacturing or other processes, computer software, systems, data compilation,
research results or other proprietary rights used in the business of the Company
(collectively “Intellectual Property”), except as such failure to own, license,
use or acquire would not result in a Material Adverse Effect. All of such
patents, registered trademarks and registered copyrights have been duly
registered in, filed in or issued by the United States Patent and Trademark
Office, the United States Register of Copyrights or the corresponding offices of
other jurisdictions and have been maintained and renewed in accordance with all
applicable provisions of law and administrative regulations in the United States
and all such jurisdictions.

 

(b)       The Company believes it has taken all reasonable steps required in
accordance with sound business practice and business judgment to establish and
preserve its and its subsidiaries ownership of all material Intellectual
Property with respect to their products and technology.

 

(c)       To the knowledge of the Company, the present business, activities and
products of the Company and its subsidiaries do not infringe any intellectual
property of any other person, except where such infringement would not have a
Material Adverse Effect. No proceeding charging the Company with infringement of
any adversely held Intellectual Property has been filed.

 

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(d)       No proceedings have been instituted or pending or, to the knowledge of
the Company, threatened, which challenge the rights of the Company to the use of
the Intellectual Property. To the knowledge of the Company, the Company has the
right to use, free and clear of material claims or rights of other persons, all
of its customer lists, designs, computer software, systems, data compilations,
and other information that are required for its products or its business as
presently conducted. To the knowledge of the Company, neither the Company nor
any of its subsidiaries is making unauthorized use of any confidential
information or trade secrets of any person. To the knowledge of the Company, the
activities of any of the employees on behalf of the Company or of any of its
subsidiaries do not violate any agreements or arrangements between such
employees and third parties related to confidential information or trade secrets
of third parties or that restrict any such employee’s engagement in business
activity of any nature.

 

(e)       All material licenses or other agreements under which (i) the Company
or any subsidiary employs rights in Intellectual Property, or (ii) the Company
or any subsidiary has granted rights to others in Intellectual Property owned or
licensed by the Company or any subsidiary are in full force and effect, and
there is no default (and there exists no condition which, with the passage of
time or otherwise, would constitute a default by the Company or such subsidiary)
by the Company or any subsidiary of the Company with respect thereto.

 

2.17        Exchange Compliance. The Company’s common stock is registered
pursuant to Section 12(g) of the Securities Exchange Act of 1934 (the “Exchange
Act”) and is listed on the OTCQB (the “Principal Market”), and the Company has
taken no action designed to, or likely to have the effect of, terminating the
registration of the Common Stock under the Exchange Act or delisting the Common
Stock (including the Shares and Warrant Shares) from the Principal Market. The
Company is in compliance with all of the presently applicable requirements for
continued listing of the Common Stock on the Principal Market. The issuance of
the Securities and the Warrant Shares does not require shareholder approval
including, without limitation, pursuant to the rules and regulations of the
Principal Market.

 

2.18        [Reserved]

 

2.19        Accountants.   LBB & Associates Ltd., LLP, who expressed their
opinion with respect to the consolidated financial statements contained in the
Company’s Annual Report on Form 10-K for the year ended February 28, 2017, to be
included in, or incorporated by reference into, the Registration Statement (as
hereinafter defined) and the prospectus which forms a part thereof (the
“Prospectus”), have advised the Company that they are, and to the knowledge of
the Company they are, independent accountants as required by the Securities Act
and the rules and regulations promulgated thereunder. The Company covenants to
file its Form 10-K containing audited consolidated financial statements for the
year ended February 28, 2018 within the time period required by applicable
securities laws and further represents and warrants that it has no reason to
believe that the auditors will not be able to express an unqualified opinion
with respect to such financial statements, assuming the Closing occurs as
contemplated herein.

 

2.20        Taxes.   The Company has filed all necessary federal, state, local
and foreign income and franchise tax returns (except where the failure to file
would not have a Material Adverse Effect) and has paid or accrued all taxes
shown as due thereon, and the Company has no knowledge of a tax deficiency which
has been or might be asserted or threatened against it by any taxing
jurisdiction.

 

2.21        Insurance.   The Company maintains and will continue to maintain
insurance of the types and in the amounts that the Company reasonably believes
is adequate for its business, including, but not limited to, insurance covering
all real and personal property owned or leased by the Company against theft,
damage, destruction, acts of vandalism and all other risks customarily insured
against by similarly situated companies, all of which insurance is in full force
and effect.

 

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

 

2.23        Investment Company. The Company (including its subsidiaries) is not
an “investment company” or an “affiliated person” of, or “promoter” or
“principal underwriter” for an investment company, within the meaning of the
Investment Company Act of 1940 and will not be deemed an “investment company” as
a result of the transactions contemplated by this Agreement.

 

2.24        Related Party Transactions. To the knowledge of the Company, no
transaction has occurred between or among the Company or any of its affiliates
(including, without limitation, any of its subsidiaries), officers or directors
or any affiliate or affiliates of any such affiliate officer or director that
with the passage of time will be required to be disclosed pursuant to Section
13, 14 or 15(d) of the Exchange Act other than those transactions that have
already been so disclosed.

 

2.25       Books and Records. The books, records and accounts of the Company and
its subsidiaries accurately and fairly reflect, in reasonable detail, the
transactions in, and dispositions of, the assets of, and the operations of, the
Company and its subsidiaries.

 

2.26       Disclosure Controls and Internal Controls.

 

(a)       The Company has established and maintains disclosure controls and
procedures (as such term is defined in Rule 13a-15 under the Exchange Act),
which (i) are designed to ensure that material information relating to the
Company is made known to their Company’s principal executive officer and its
principal financial officer by others within those entities particularly during
the periods in which the periodic reports required under the Exchange Act are
being prepared; and (ii) provide for the periodic evaluation of the
effectiveness of such disclosure controls and procedures as of the end of the
period covered by the Company’s most recent annual or quarterly report filed
with the SEC.

 

(b)       The Company maintains a system of internal accounting controls with
the goal of being sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management’s general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset and liability accountability, (iii)
access to assets or incurrence of liabilities is permitted only in accordance
with management’s general or specific authorization and (iv) the recorded
accountability for assets and liabilities is compared with the existing assets
and liabilities at reasonable intervals and appropriate action is taken with
respect to any difference. The Company maintains disclosure controls and
procedures (as such term is defined in Rule 13a-14 under the Exchange Act) with
the goal of ensuring that information required to be disclosed by the Company in
the reports that it files or submits under the Exchange Act is recorded,
processed, summarized and reported, within the time periods specified in the
rules and forms of the SEC, including, without limitation, controls and
procedures designed in to ensure that information required to be disclosed by
the Company in the reports that it files or submits under the Exchange Act is
accumulated and communicated to the Company’s management, including its
principal executive officer or officers and its principal financial officer or
officers, as appropriate, to allow timely decisions regarding required
disclosure. The Company is not aware of (i) any significant deficiency in the
design or operation of internal controls which could adversely affect the
Company’s or any of its subsidiary’s ability to record, process, summarize and
report financial data or any material weaknesses in internal controls, except as
disclosed in the Company SEC Documents; or (ii) any fraud, whether or not
material, that involves management or other employees who have a significant
role in the Company’s or any of its subsidiary’s internal controls.

 

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(c)       Since the date of the most recent evaluation of such disclosure
controls and procedures, there have been no changes that have materially
affected, or are reasonably likely to materially affect, the Company’s or any of
its subsidiary’s internal control over financial reporting, including any
corrective actions with regard to significant deficiencies and material
weaknesses.

 

(d)       Except as described in the Company SEC Documents, there are no
material off-balance sheet arrangements (as defined in Item 303 of Regulation
S-K), or any other relationships with unconsolidated entities (in which the
Company or its control persons have an equity interest) that may have a material
current or future effect on the Company’s or any of its/subsidiary’s financial
condition, revenues or expenses, changes in financial condition, results of
operations, liquidity, capital expenditures or capital resources.

 

(e)       To the knowledge of the Company, neither the board of directors nor
the audit committee has been informed, nor is any director of the Company aware,
of (1) any significant deficiencies in the design or operation of the Company’s
internal controls which could adversely affect the Company’s or any subsidiary’s
ability to record, process, summarize and report financial data or any material
weakness in the Company’s or any subsidiary’s internal controls, except as
disclosed in the Company SEC Documents; or (2) any fraud, whether or not
material, that involves management or other employees of the Company or any of
its subsidiaries who have a significant role in the Company’s or any
subsidiary’s internal controls.

 

2.27        No General Solicitation. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D promulgated under the Securities Act) in connection with the offer
or sale of the Securities.

 

2.28        Application of Takeover Protections; Rights Agreement. The Company
and its board of directors have taken all necessary action, if any, in order to
render inapplicable any control share acquisition, business combination, poison
pill (including any distribution under a rights agreement) or other similar
anti-takeover provision under the Articles of Incorporation or the laws of the
jurisdiction of its formation which is or could become applicable to any
Purchaser as a result of the transactions contemplated by this Agreement,
including, without limitation, the Company’s issuance of the Securities and any
Purchaser’s ownership of the Securities. The Company has not adopted a
shareholder rights plan or similar arrangement relating to accumulations of
beneficial ownership of Common Stock or a change in control of the Company.

 

2.29        Foreign Corrupt Practices. Neither the Company nor any director,
officer, agent, employee or other person acting on behalf of the Company has, in
the course of its actions for, or on behalf of, the Company (i) used any
corporate funds for any unlawful contribution, gift, entertainment or other
unlawful expenses relating to political activity; (ii) made any direct or
indirect unlawful payment to any foreign or domestic government official or
employee from corporate funds; (iii) violated or is in violation of any
provision of the U.S. Foreign Corrupt Practices Act of 1977; or (iv) made any
unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful
payment to any foreign or domestic government official or employee.

 

2.30        Sarbanes-Oxley Act. The Company is in compliance in all material
respects with any and all applicable requirements of the Sarbanes-Oxley Act of
2002 that are effective as of the date hereof, and any and all applicable rules
and regulations promulgated by the SEC thereunder that are effective as of the
date hereof, except where such noncompliance would not have, individually or in
the aggregate, a Material Adverse Effect.

 

Page 8 

 

 

2.31        Employee Relations. The Company is not a party to any collective
bargaining agreement or employs any member of a union. The Company believes that
its relations with its employees are good. No executive officer of the Company
(as defined in Rule 501(f) of the Securities Act) has notified the Company that
such officer intends to leave the Company or otherwise terminate such officer’s
employment with the Company. To the knowledge of the Company, no executive
officer of the Company is, or is expected to be, in violation of any material
term of any employment contract, confidentiality, disclosure or proprietary
information agreement, non-competition agreement, or any other contract or
agreement or any restrictive covenant, and the continued employment of each such
executive officer does not subject the Company to any liability with respect to
any of the foregoing matters.

 

The Company is in compliance with all federal, state, local and foreign laws and
regulations respecting labor, employment and employment practices and benefits,
terms and conditions of employment and wages and hours, except where failure to
be in compliance would not, either individually or in the aggregate, reasonably
be expected to result in a Material Adverse Effect.

 

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

 

2.33       No Manipulation; Disclosure of Information. The Company has not taken
and will not take any action designed to or that might reasonably be expected to
cause or result in an unlawful manipulation of the price of the Common Stock to
facilitate the sale or resale of the Securities. The Company confirms that, to
its knowledge, with the exception of the proposed sale of Securities as
contemplated herein (as to which the Company makes not representation), neither
it nor any other person acting on its behalf has provided any of the Purchasers
or their agents or counsel with any information that constitutes or might
constitute material, non-public information. The Company understands and
confirms that the Purchasers shall be relying on the foregoing representations
in effecting transactions in securities of the Company. All disclosures provided
to the Purchasers regarding the Company, its business and the transactions
contemplated hereby, including the exhibits to this Agreement, furnished by the
Company are true and correct and do not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading.

 

2.34       Forward-Looking Information. No forward-looking statement (within the
meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act) made by the Company or any of its officers or directors contained in the
SEC Documents, or made available to the public generally since February 28,
2017, has been made or reaffirmed without a reasonable basis or has been
disclosed other than in good faith.

 

2.35       No Additional Agreements. Other than with respect to closing
mechanics, the Company has no other agreements or understandings (including,
without limitation, side letters) with any Purchaser or other person to purchase
Shares on terms more favorable to such person than as set forth herein.

 

Page 9 

 

 

2.36       No “Bad Actor” Disqualification. The Company has exercised reasonable
care, in accordance with SEC rules and guidance, and has conducted a factual
inquiry, the nature and scope of which reflect reasonable care under the
relevant facts and circumstances, to determine whether any Covered Person (as
defined below) is subject to any of the “bad actor” disqualifications described
in Rule 506(d)(1)(i) to (viii) under the Securities Act (“Disqualification
Events”). To the Company’s knowledge, after conducting such sufficiently
diligent factual inquiries, no Covered Person is subject to a Disqualification
Event, except for a Disqualification Event covered by Rule 506(d)(2) or (d)(3)
under the Securities Act. The Company has complied, to the extent applicable,
with any disclosure obligations under Rule 506(e) under the Securities Act.
“Covered Persons” are those persons specified in Rule 506(d)(1) under the
Securities Act, including the Company; any predecessor or affiliate of the
Company; any director, executive officer, other officer participating in the
offering, general partner or managing member of the Company; any beneficial
owner of 20% or more of the Company’s outstanding voting equity securities,
calculated on the basis of voting power; any promoter (as defined in Rule 405
under the Securities Act) connected with the Company in any capacity at the time
of the sale of the Shares; and any person that has been or will be paid
(directly or indirectly) remuneration for solicitation of purchasers in
connection with the sale of the Shares (a “Solicitor”), any general partner or
managing member of any Solicitor, and any director, executive officer or other
officer participating in the offering of any Solicitor or general partner or
managing member of any Solicitor.

 

2.37       Company Lock Up. The Company will not, and the Company will ensure
that the directors and officers and their affiliates will not, without the prior
written consent of all Purchasers, from the date of execution of this Agreement
and continuing to and including the date 90 days after the effective date of the
Registration Statement (the “Lock-Up Period”), (A) offer, pledge, announce the
intention to sell, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right or
warrant to purchase or otherwise transfer or dispose of, directly or indirectly,
any shares of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock or (B) enter into any swap or other agreement that
transfers, in whole or in part, any of the economic consequences of ownership of
the Common Stock, whether any such transaction described in clause (A) or (B)
above is to be settled by delivery of Common Stock or such other securities, in
cash or otherwise, however, the Company may conduct an Exempt Issuance (as
defined below) without the prior written consent of all Purchasers.

 

3.             Representations and Warranties of the Purchasers. Each Purchaser,
severally and not jointly, hereby represents and warrants to the Company as
follows:

 

3.1          Legal Power. The Purchaser has the requisite authority to enter
into this Agreement and to carry out and perform its obligations under the terms
of this Agreement. All action on the Purchaser’s part required for the lawful
execution and delivery of this Agreement have been or will be effectively taken
prior to the Closing.

 

3.2          Due Execution. This Agreement has been duly authorized, executed
and delivered by the Purchaser, and, upon due execution and delivery by the
Company, this Agreement will be a valid and binding agreement of the Purchaser,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors’ rights generally
or by equitable principles.

 

3.3          Investment Representations. In connection with the sale and
issuance of the Securities and Warrant Shares, the Purchaser, for itself and no
other Purchaser, makes the following representations:

 

(a)       Investment for Own Account. The Purchaser is acquiring the Securities
and the Warrant Shares for its own account, not as nominee or agent, and not
with a view to, or for resale in connection with, any distribution or public
offering thereof within the meaning of the Securities Act; provided, however,
that by making the representations herein, the Purchaser does not agree to hold
any of the Securities for any minimum or specific term and reserves the right to
dispose of the securities at any time in accordance with or pursuant to a
registration statement or an exemption from the registration requirements of the
Securities Act.

 

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(b)       Transfer Restrictions; Legends. The Purchaser understands that (i) the
Securities and Warrant Shares have not been registered under the Securities Act;
(ii) the Securities and Warrant Shares are being offered and sold pursuant to an
exemption from registration, based in part upon the Company’s reliance upon the
statements and representations made by the Purchasers in this Agreement, and
that the Securities and Warrant Shares must be held by the Purchaser
indefinitely, and that the Purchaser must, therefore, bear the economic risk of
such investment indefinitely, unless a subsequent disposition thereof is
registered under the Securities Act or is exempt from such registration; (iii)
each Certificate representing the Securities and Warrant Shares will be endorsed
with the following legend until the earlier of (1) in the case of the Shares and
Warrant Shares, such date as the Shares or Warrant Shares, as the case may be,
have been registered for resale by the Purchaser or (2) the date the Shares, the
Warrants or the Warrant Shares, as the case may be, are eligible for sale
without restriction or limitation under Rule 144 under the Securities Act (“
Rule 144 “):

 

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR UNDER THE SECURITIES LAWS OF
ANY STATES. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND
RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE
SECURITIES ACT AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO
REGISTRATION OR EXEMPTION THEREFROM. UNLESS SOLD PURSUANT TO EITHER AN EFFECTIVE
REGISTRATION STATEMENT OR RULE 144 UNDER THE SECURITIES ACT, THE ISSUER OF THESE
SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY
TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN
COMPLIANCE WITH THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS.

 

(iv) the Company will instruct any transfer agent not to register the transfer
of the Securities or Warrant Shares (or any portion thereof) until the
applicable date set forth in clause (iii) above unless the conditions specified
in the foregoing legends are satisfied or, if the opinion of counsel referred to
above is to the further effect that such legend is not required in order to
establish compliance with any provisions of the Securities Act or this
Agreement, or other satisfactory assurances of such nature are given to the
Company.

 

The Company acknowledges and agrees that a Purchaser may from time to time
pledge, and/or grant a security interest in some or all of the Securities
pursuant to a bona fide margin agreement in connection with a bona fide margin
account and, if required under the terms of such agreement or account, the
Purchaser may transfer pledged or secured Securities to the pledgees or secured
parties. Such a pledge or transfer shall not be subject to approval or consent
of the Company and no legal opinion of legal counsel to the pledgee, secured
party or pledgor shall be required in connection with the pledge, but such legal
opinion may be required in connection with a subsequent transfer following
default by the Purchaser transferee of the pledge. No notice shall be required
of such pledge. At the appropriate Purchaser’s expense, the Company will execute
and deliver such reasonable documentation as a pledgee or secured party of
Securities may reasonably request in connection with a pledge or transfer of the
Securities including the preparation and filing of any required prospectus
supplement under Rule 424(b)(3) of the Securities Act or other applicable
provision of the Securities Act to appropriately amend the list of Selling
Stockholders thereunder.

 

Page 11 

 

 

Certificates evidencing the Shares and Warrant Shares shall not contain any
legend (including the legend set forth in this Section): (i) following a sale of
such Securities pursuant to an effective registration statement (including the
Registration Statement) and pursuant to the prospectus delivery requirements
associated therewith, or (ii) following a sale of such Shares or Warrant Shares
pursuant to Rule 144, or (iii) while such Shares or Warrant Shares are eligible
for sale under Rule 144 and, with respect to any Purchaser’s Shares, such
Purchaser is not and has not been for three months an affiliate of the Company
(as such term is defined in Rule 144(a)(1)) and such Shares have been held for
one year or more pursuant to the requirements of Rule 144 and any other
requirements under Rule 144 have been satisfied at such time, or (iv) if such
legend is not required under applicable requirements of the Securities Act
(including judicial interpretations and pronouncements issued by the Staff of
the SEC). Following such time as restrictive legends are not required to be
placed on certificates representing Shares or Warrant Shares, the Company will,
no later than three Trading Days following the delivery by a Purchaser to the
Company or the Company’s transfer agent of a certificate representing Shares or
Warrant Shares containing a restrictive legend and such other documentation and
representations as the Company, its legal counsel or Transfer Agent may
reasonably request to confirm compliance with the preceding sentence as
applicable, deliver or cause to be delivered to such Purchaser a certificate
representing such Shares or Warrant Shares that is free from all restrictive and
other legends. The Company shall cause its counsel to issue a legal opinion to
the Company’s transfer agent promptly after the effective date of a registration
statement covering the Shares and Warrant Shares if required by the Company’s
transfer agent to effect the removal of the legend hereunder. The Company may
not make any notation on its records or give instructions to any transfer agent
of the Company that enlarge the restrictions on transfer set forth in this
Section. Certificates for Shares or Warrant Shares subject to legend removal
hereunder shall be transmitted by the transfer agent of the Company to the
Purchasers by crediting the account of the Purchaser’s prime broker with the
Depository Trust Company system.

 

Each Purchaser, severally and not jointly with the other Purchasers, agrees that
the removal of the restrictive legend from certificates representing Securities
as set forth in this Section 3.2(b) is predicated upon the Company’s reliance
that the Purchaser will sell any Securities pursuant to either the registration
requirements of the Securities Act, including any applicable prospectus delivery
requirements, or an exemption therefrom, and will not sell any securities under
the Registration Statement if the Company has made such Purchaser aware that the
registration statement, or the information therein, can no longer be relied upon
or used, notified the Purchaser of any Stop Order or provided a Suspension
Notice.

 

(c)       Financial Sophistication; Due Diligence. The Purchaser has such
knowledge and experience in financial or business matters that it is capable of
evaluating the merits and risks of the investment in connection with the
transactions contemplated in this Agreement. Such Purchaser has, in connection
with its decision to purchase the Securities, relied only upon the
representations and warranties contained herein and the information contained in
the Company SEC Documents. Further, the Purchaser has had such opportunity to
obtain additional information and to ask questions of, and receive answers from,
the Company, concerning the terms and conditions of the investment and the
business and affairs of the Company, as the Purchaser considers necessary in
order to form an investment decision.

 

(d)       Accredited Investor Status. The Purchaser is an “accredited investor”
as such term is defined in Rule 501(a) of the rules and regulations promulgated
under the Securities Act.

 

(e)       Residency. The Purchaser is organized under the laws of the state set
forth beneath such Purchaser’s name on the signature page attached hereto, and
its principal place of operations is in the state set forth beneath such
Purchaser’s name on the signature page attached hereto.

 

(f)        General Solicitation. The Purchaser is not purchasing the Securities
as a result of any advertisement, article, notice or other communication
regarding the Securities published in any newspaper, magazine or similar media
or broadcast over the television or radio or presented at any seminar or any
other general solicitation or general advertisement. Prior to the time that the
Purchaser was first contacted by the Company or the Placement Agent such
Purchaser had a pre-existing and substantial relationship with the Company or
the Placement Agent.

 

Page 12 

 

 

3.4          No Investment, Tax or Legal Advice. Each Purchaser understands that
nothing in the Company SEC Documents, this Agreement, or any other materials
presented to the Purchaser in connection with the purchase and sale of the
Securities constitutes legal, tax or investment advice. Each Purchaser has
consulted such legal, tax and investment advisors as it, in its sole discretion,
has deemed necessary or appropriate in connection with its purchase of
Securities.

 

3.5          Additional Acknowledgement. Each Purchaser acknowledges that it has
independently evaluated the merits of the transactions contemplated by this
Agreement, that it has independently determined to enter into the transactions
contemplated hereby, that it is not relying on any advice from or evaluation by
any other person. Each Purchaser acknowledges that the Placement Agent has acted
solely as placement agent for the Company in connection with the Offering of the
Securities by the Company, that the information and data provided to the
Purchaser in connection with the transaction contemplated hereby has not been
subjected to independent verification by the Placement Agent, and that the
Placement Agent has made no representation or warrant whatsoever with respect to
the accuracy or completeness of such information, data or other related
disclosure material. Each Purchaser acknowledges that it has not taken any
actions that would deem the Purchasers to be members of a “group” for purposes
of Section 13(d) of the Exchange Act.

 

3.6          Limited Ownership. The purchase of the Securities issuable to each
Purchaser at the Closing will not result in such Purchaser (individually or
together with any other person or entity with whom such Purchaser has
identified, or will have identified, itself as part of a “group” in a public
filing made with the SEC involving the Company’s securities) acquiring, or
obtaining the right to acquire, in excess of 19.999% of the outstanding shares
of Common Stock or voting power of the Company on a post-transaction basis that
assumes that the Closing shall have occurred. Such Purchaser does not presently
intend to, along or together with others, make a public filing with the SEC to
disclose that it has (or that it together with such other persons or entities
have) acquired, or obtained the right to acquire, as a result of the Closing
(when added to any other securities of the Company that it or they then own or
have the right to acquire), in excess of 19.999% of the outstanding shares of
Common Stock or the voting power of the Company on a post-transaction basis that
assumes that the Closing shall have occurred.

 

3.7          No Short Position. As of the date hereof, and as of the Closing
Date, each Purchaser acknowledges and agrees that it does not and will not
(between the date hereof and the Closing Date) engage in any short sale of the
Company’s voting stock or any other type of hedging transaction involving the
Company’s securities (including, without limitation, depositing shares of the
Company’s securities with a brokerage firm where such securities are made
available by the broker to other customers of the firm for purposes of hedging
or short selling the Company’s securities).

 

3.8          Board Representation. In connection with this Offering and pursuant
to a separate Board Representation Agreement, one Purchaser was granted the
right to designate one person to be nominated for election to the board of
directors so long as (i) that Purchaser together with its affiliates
beneficially owns at least 4.99% of the Common Stock, or (ii) the specific
Purchaser together with its affiliates beneficially owns at least 75% of the
Securities purchased in this Offering.

 

4.            Conditions to Closing.

 

4.1          Conditions to Obligations of Purchasers at Closing. Each
Purchaser’s obligation to purchase the Securities at the Closing is subject to
the fulfillment to that Purchaser’s reasonable satisfaction, on or prior to the
Closing, of all of the following conditions, any of which may be waived by the
Purchaser:

 

(a)       Representations and Warranties True; Performance of Obligations. The
representations and warranties made by the Company in Section 2 shall be true
and correct in all material respects (or, where the representation and warranty
itself is qualified by materiality, it shall be true and correct in all
respects) on the Closing Date with the same force and effect as if they had been
made on and as of said date and the Company shall have performed and complied
with all obligations and conditions herein required to be performed or complied
with by it on or prior to the Closing and a certificate duly executed by an
officer of the Company, to the effect of the foregoing, shall be delivered to
the Purchasers.

 

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(b)       Proceedings and Documents. All corporate and other proceedings in
connection with the transactions contemplated at the Closing and all documents
and instruments incident to such transactions shall be reasonably satisfactory
in substance and form to counsel to the Purchaser, and counsel to the Purchaser
shall have received all such counterpart originals or certified or other copies
of such documents as they may reasonably request. The Company shall have
delivered (or caused to have been delivered) to each Purchaser, the certificates
required by this Agreement. The Warrant Shares shall have been duly authorized
and reserved for issuance upon exercise of the Warrant.

 

(c)       Qualifications, Legal Investment. All authorizations, approvals, or
permits, if any, of any governmental authority or regulatory body of the United
States or of any state that are required in connection with the lawful sale and
issuance of the Securities and Warrant Shares shall have been duly obtained and
shall be effective on and as of the Closing. No stop order or other order
enjoining the sale of the Securities or Warrant Shares shall have been issued
and no proceedings for such purpose shall be pending or, to the knowledge of the
Company, threatened by the SEC, or any commissioner of corporations or similar
officer of any state having jurisdiction over this transaction. At the time of
the Closing, the sale and issuance of the Securities and Warrant Shares shall be
legally permitted by all laws and regulations to which Purchasers and the
Company are subject. No litigation, statute, rule, regulation, executive order,
decree, ruling or injunction will have been enacted, entered, promulgated or
endorsed by or in any court or governmental authority of competent jurisdiction
or any self-regulatory organization having authority over the matters
contemplated hereby which prohibits the consummation of any of the transactions
contemplated by this Agreement.

 

(d)       Execution of Agreements. The Company shall have executed this
Agreement and have delivered this Agreement to the Purchasers.

 

(e)       Secretary’s Certificate. The Company shall have delivered to the
Purchasers a certificate of the Secretary of the Company certifying as to the
truth and accuracy of the resolutions of the board of directors relating to the
transaction contemplated hereby (a copy of which shall be included with such
certificate).

 

(f)       Trading and Listing. Trading and listing of the Company’s common stock
on the Principal Market shall not have been suspended by the SEC or the
Principal Market.

 

(g)       Market Listing. The Company will comply with all of the requirements
of the Financial Industry Regulatory Authority, Inc. and the Principal Market
with respect to the issuance of the Securities and the Warrant Shares and will
list the Shares and the Warrant Shares on the Principal Market or NASDAQ Capital
Market (pursuant to Section 5.2 of this Agreement), no later than the earlier of
(a) the effective date of the Registration Statement (as hereinafter defined) or
(b) 120 days following the Closing Date.

 

(h)       Blue Sky. The Company shall obtain all necessary “blue sky” law
permits and qualifications, or have the availability of exemptions therefrom,
required by any state for the offer and sale of the Securities and issuance of
the Warrant Shares upon exercise of the Warrant.

 

(i)       Material Adverse Change. Since the date of this Agreement, there shall
not have occurred any event which results in a Material Adverse Effect.

 

(j)       Conversion of Series A Preferred Stock. The Company shall have
irrevocable instructions in hand to convert all issued and outstanding Series A
preferred stock to 3,739,222 shares of common stock immediately following the
Closing.

 

Page 14 

 

 

(k)       Investment by Officers and Directors. Officers and directors of the
Company and their affiliates shall have invested at least an aggregate of
$500,000 into the Company on the same terms as the Purchasers herein. The
requirement of this Section 4.1(k) excludes any previous investments by officers
or directors and their affiliates not in connection with this Offering.

 

4.2          Conditions to Obligations of the Company. The Company’s obligation
to issue and sell the Securities at the Closing is subject to the fulfillment to
the Company’s reasonable satisfaction, on or prior to the Closing of the
following conditions, any of which may be waived by the Company:

 

(a)       Representations and Warranties True. The representations and
warranties made by the Purchasers in Section 3 shall be true and correct in all
material respects on the Closing Date with the same force and effect as if they
had been made on and as of said date.

 

(b)       Performance of Obligations. The Purchasers shall have performed and
complied with all agreements and conditions herein required to be performed or
complied with by them on or before the Closing. The Purchasers shall have
delivered the Purchase Price, by wire transfer, to the account designated by the
Company for such purpose.

 

(c)       Qualifications, Legal Investment. All authorizations, approvals, or
permits, if any, of any governmental authority or regulatory body of the United
States or of any state that are required in connection with the lawful sale and
issuance of the Securities and Warrant Shares shall have been duly obtained and
shall be effective on and as of the Closing. No stop order or other order
enjoining the sale of the Securities or Warrant Shares shall have been issued
and no proceedings for such purpose shall be pending or, to the knowledge of the
Company, threatened by the SEC, or any commissioner of corporations or similar
officer of any state having jurisdiction over this transaction. At the time of
the Closing, the sale and issuance of the Securities and the Warrant Shares
shall be legally permitted by all laws and regulations to which the Purchasers
and the Company are subject. No litigation, statute, rule, regulation, executive
order, decree, ruling or injunction will have been enacted, entered, promulgated
or endorsed by or in any court or governmental authority of competent
jurisdiction or any self-regulatory organization having authority over the
matters contemplated hereby which prohibits the consummation of any of the
transactions contemplated by this Agreement.

 

(d)       Execution of Agreements. The Purchasers shall have executed this
Agreement and delivered this Agreement to the Company.

 

5.            Additional Covenants.

 

5.1          Reporting Status. With a view to making available to the Purchasers
the benefits of certain rules and regulations of the SEC which may permit the
sale of the Shares and Warrant Shares to the public without registration, the
Company agrees to use its reasonable efforts to file with the SEC, in a timely
manner all reports and other documents required of the Company under the
Exchange Act. The Company will otherwise take such further action as a Purchaser
may reasonably request, all to the extent required from time to time to enable
such Purchaser to sell the Shares and Warrant Shares without registration under
the Securities Act or any successor rule or regulation adopted by the SEC.

 

5.2          Listing. So long as a Purchaser owns any of the Securities or
Warrant Shares, the Company will use its reasonable efforts to maintain the
automated quotation of its Common Stock, including the Shares and Warrant
Shares, on the Principal Market or an alternative listing on the NASDAQ Capital
Market, NYSE MKT or the New York Stock Exchange and will comply in all material
respects with the Company’s reporting, filing and other obligations under the
bylaws or rules of the Financial Industry Regulatory Authority, Inc. and such
exchanges, if applicable. The Company agrees to apply for listing of its Common
Stock, including the Shares and Warrant Shares, on the NASDAQ Capital Market
within 60 days of Closing and as soon as reasonably practicable thereafter, but
in no event later than 120 days following Closing, such Common Stock must be
listed on the NASDAQ Capital Market. If such Common Stock, has not been listed
on the NASDAQ Capital Market within 120 days of Closing, the Company shall pay
each Purchaser, as partial liquidated damages for such delay, Late
Registration/Listing Warrants in accordance with Section 6.1(a).

 

Page 15 

 

 

5.3          Adjustments in Share Numbers and Prices.

 

(a)       In the event of any stock split, subdivision, dividend or distribution
payable in shares of Common Stock (or other securities or rights convertible
into, or entitling the holder thereof to receive directly or indirectly shares
of Common Stock), combination or other similar recapitalization or event
occurring after the date hereof, each reference in this Agreement or the
Warrants to a number of shares or price per share shall be amended appropriately
to account for such event.

 

(b)       As to each Purchaser, from the Closing Date until the 12 month
anniversary of the Closing Date, if the Company or any subsidiary thereof shall
issue or agree to issue any (i) Common Stock or (ii) any securities of the
Company or the subsidiary that would entitle the holder thereof to acquire at
any time Common Stock, except in connection with the conversion of the Series A
Preferred Stock, but including without limitation, any debt, preferred stock,
rights, options, warrants or other instrument that is at any time directly or
indirectly convertible into or exchangeable for, or otherwise entitles the
holder thereof to receive, Common Stock (“Common Stock Equivalents” and
collectively “Additional Shares”), except for the Exempt Issuances, entitling
any person or entity to acquire shares of Common Stock at an effective price per
share less than $2.00, within three Trading Days of the date thereof the Company
shall issue to such Purchaser that number of additional shares of Common Stock
(the “Anti-Dilution Shares”) equal to (a) the aggregate Purchase Price paid by
such Purchaser at the Closing divided by the New Adjusted Purchase Price, less
(b) the Shares previously issued to such Purchaser pursuant to this Agreement.
For purposes of this Agreement, New Adjusted Purchase Price = Adjusted Purchase
Price x (A + B) ¸ (A + C). For purposes of the foregoing formula, the following
definitions shall apply: (I) Adjusted Purchase Price shall initially mean $2.00,
subject to adjustment as provided herein; (II) New Adjusted Purchase Price means
the Adjusted Purchase Price in effect immediately after such issue of Additional
Shares; (III) “A” means the number of shares of Common Stock outstanding and
deemed outstanding immediately prior to such issue of Additional Shares
(treating for this purpose as outstanding all shares of Common Stock issuable
upon exercise of options and convertible securities as outstanding immediately
prior to such issue); (IV) “B” means the number of shares of Common Stock that
would have been issued if such Additional Shares had been issued at a price per
share equal to the Adjusted Purchase Price (determined by dividing the aggregate
consideration received by the Company in respect of such issue by the Adjusted
Purchase Price); and (V) “C” means the number of such Additional Shares issued
in such transaction.

 

Page 16 

 

 

The sale of Common Stock Equivalents shall be deemed to have occurred at the
time of the issuance of the Common Stock Equivalents and the purchase price
covered thereby shall also include the actual exercise or conversion price
thereof at the time of the issuance, without any further adjustments to the
exercise price upon the conversion or exercise of any Common Stock Equivalents.
If shares are issued for a consideration other than cash, the per share selling
price shall be the fair value of such consideration as determined in good faith
by the board of directors of the Company. The Company may not refuse to issue a
Purchaser additional shares of Common Stock hereunder based on any claim that
such Purchaser or any one associated or affiliated with such Purchaser has been
engaged in any violation of law, agreement or for any other reason, unless, an
injunction from a court, on notice, restraining and or enjoining an issuance
hereunder shall have been sought and obtained and the Company posts a surety
bond for the benefit of such Purchaser in the amount of 150% of the market value
of such Shares (based on the closing price of the Common Stock on the exchange
or quotation system on which the Common Stock is listed or traded on the date of
the event giving rise to the Company’s obligation hereunder), which is subject
to the injunction, which bond shall remain in effect until the completion of
litigation of the dispute and the proceeds of which shall be payable to the
Purchaser to the extent it obtains judgment. Nothing herein shall limit a
Purchaser’s right to pursue actual damages for the Company’s failure to deliver
shares hereunder and such Purchaser shall have the right to pursue all remedies
available to it at law or in equity including, without limitation, a decree of
specific performance and/or injunctive relief. On the date of closing of any
transaction pursuant to which securities are issued for a purchase price less
than the Adjusted Purchase Price then in effect, the Company shall give the
Purchasers written notice thereof. Notwithstanding anything to the contrary
herein, this section shall not apply to an Exempt Issuance. “Exempt Issuance”
means the issuance of (a) shares of Common Stock or options to employees,
consultants, officers or directors of the Company pursuant to any stock or
option plan duly adopted by a majority of the non-employee members of the board
of directors of the Company or a majority of the members of a committee of
non-employee directors established for such purpose, (b) securities upon the
exercise of or conversion of any convertible securities, options or warrants
issued and outstanding on the date of this Agreement, provided that such
securities have not been amended since the date of this Agreement to increase
the number of such securities or to decrease the exercise or conversion price of
any such securities, and (c) securities issued pursuant to acquisitions or
strategic transactions, provided any such issuance shall only be to a person
which is, itself or through its subsidiaries, an operating company in which the
Company receives benefits in addition to the investment of funds, but shall not
include a transaction in which the Company is issuing securities primarily for
the purpose of raising capital or to an entity whose primary business is
investing in securities. “Trading Day” means a day on which the Common Stock is
traded on a securities market, automated quotation system or stock exchange
(including the over-the-counter bulletin board market).

 

In the event of any adjustment under this Section 5.3, the Company shall
promptly amend the Registration Statement or file a new Registration Statement
pursuant to the provisions of Section 6 to register the Anti-Dilution Shares. In
no event shall the Company issue Anti-Dilution Shares to a Purchaser under
Section 5.3 if such issuance shall result in the Purchasers acquiring, or
obtaining the right to acquire, in excess of 19.999% of the outstanding shares
of Common Stock or voting power of the Company on a post-transaction basis that
assumes that the closing of the Additional Shares shall have occurred.

 

Notwithstanding anything to the contrary contained herein, the number of
additional shares of Common Stock that may be issued to a Purchaser pursuant to
this Section 5.3 shall not at any one time exceed a number that, when added to
the total number of shares of Common Stock deemed beneficially owned by the
Purchaser (other than by virtue of the ownership of securities or rights to
acquire securities (including the Warrants) that have limitations on such
Purchaser’s right to convert, exercise or purchase similar to the limitation set
forth herein (the “Excluded Shares”)), together with all shares of Common Stock
deemed beneficially owned at such time (other than by virtue of ownership of
Excluded Shares) by persons whose beneficial ownership of Common Stock would be
aggregated with the beneficial ownership of the Purchaser for purposes of
determining whether a group exists or for purposes of determining the
Purchaser’s beneficial ownership, in either such case for purposes of Section
13(d) of the Exchange Act and Regulation 13D-G thereunder, would result in
beneficial ownership by such Purchaser or such group of more than 9.9% of the
shares of the Company’s Common Stock (the “Restricted Ownership Percentage”),
computed in accordance with Regulation 13D-G. The Purchaser shall have the right
at any time and from time to time to reduce its Restricted Ownership Percentage
immediately upon notice to the Company in the event and only to the extent that
Section 16 of the Exchange Act or the rules promulgated thereunder (or any
successor statute or rules) is changed to reduce the beneficial ownership
percentage threshold thereunder from 10%. If the Purchaser would otherwise be
unable by reason of the Restricted Ownership Percentage to acquire the full
amount of securities which the Purchaser would otherwise be entitled to acquire
in a particular transaction pursuant to this Section 5.3 then the Purchaser’s
right to acquire such securities shall be deferred and if thereafter, at any
time or from time to time the Purchaser could acquire all or any part of such
securities without exceeding its Restricted Ownership Percentage, then the
Purchaser shall be entitled to acquire such securities at such time or from time
to time. The Purchaser will provide notice to the Company when it becomes able
to acquire all or any part of such securities and the Company shall issue the
Purchaser such securities on the date that is three business days after the
Purchaser gives such notice.

 

Page 17 

 

 

5.4          Confidential Information. Each Purchaser covenants that it will
maintain in confidence the receipt and content of any Suspension Notice (as
defined herein) under Section 6.2 until such information (a) becomes generally
publicly available other than through a violation of this provision by the
Purchaser or its agents or (b) is required to be disclosed in legal proceedings
(such as by deposition, interrogatory, request for documents, subpoena, civil
investigation demand, filing with any governmental authority or similar
process); provided, however, that before making any disclosure in reliance on
this Section 5.4(b), the Purchaser will give the Company at least 15 days prior
written notice (or such shorter period as required by law) specifying the
circumstances giving rise thereto and the Purchaser will furnish only that
portion of the non-public information which is legally required and will
exercise its best efforts to ensure that confidential treatment will be accorded
any non-public information so furnished; provided, further, that notwithstanding
each Purchaser’s agreement to keep such information confidential, each Purchaser
makes no such acknowledgement that any such information is material, non-public
information.

 

5.5          Non-Public Information. The Company covenants and agrees that
neither it nor any other person acting on its behalf will provide any Purchaser
or its agents or counsel with any information that the Company believes
constitutes material non-public information, unless prior thereto such Purchaser
shall have executed a written agreement regarding the confidentiality and use of
such information. The Company understands and confirms that each Purchaser shall
be relying on the foregoing representations in effecting transactions in
securities of the Company.

 

6.             Registration Rights.

 

6.1          Registration Procedures and Expenses.

 

(a)       The Company shall prepare and file with the SEC, as promptly as
reasonably practicable following Closing, but in no event later than 45 days
following Closing, a registration statement on Form S-1 (or Form S-3, if
available)(or any successor to Form S-1/S-3), covering the resale of the
Registrable Securities (as defined below) (the “Registration Statement”) and as
soon as reasonably practicable thereafter but in no event later than 120 days
following Closing, to effect such registration and any related qualification or
compliance with respect to all Registrable Securities held by the Purchasers.
For purposes of this Agreement, the term “Registrable Securities” shall mean (i)
the Shares and Warrant Shares; and (ii) any Common Stock of the Company issued
as (or issuable upon the conversion or exercise of any warrant, right or other
security which is issued as) a dividend or other distribution with respect to,
or in exchange for or in replacement of, any Shares or Warrant Shares. If the
Registration Statement has not been declared effective by the SEC on or before
the date that is 120 days after Closing (the “Required Effective Date”), the
Company shall, on the business day immediately following the Required Effective
Date and for each day thereafter, provide each Purchaser, as partial liquidated
damages for such delay (together, the “Late Registration/Listing Warrants”),
with additional Warrants equal to each Purchaser’s pro rata share of 1% of the
Warrants in the Offering. In addition, the Company shall, on the business day
immediately following the required day for listing of the shares on the NASDAQ
Capital Market under Section 5.2 and for each day thereafter, in the event such
required listing has not occurred, provide each Purchaser, as partial liquidated
damages for such delay Late Registration/Listing Warrants equal to each
Purchaser’s pro rata share of 1% of the Warrants in the Offering. Late
Registration/Listing Warrants will be provided to each Purchaser by the Company
within five business days after the earlier of (i) when the Late Registration
Warrant accrued or (ii) the effective date of the Registration Statement or the
listing of the shares on the NASDAQ Capital Market, as applicable. The Company
will provide all Late Registration/Listing Warrants in the form set forth hereto
as Exhibit B. The Late Registration/Listing Warrants cease accruing at the
earlier of (a) the Registration Statement being declared effective and the
listing of the shares on the NASDAQ Capital Market and (b) 100 days. Therefore,
in no case is the Company required to issue Late Registration/Listing Warrants
in excess of 200% of the Warrants issued in the Offering. “Business day” means
any day except Saturday, Sunday and any day that is a federal legal holiday in
the United States.

 

Page 18 

 

 

(b)       The Company shall use its best efforts to:

 

(i)         prepare and file with the SEC such amendments and supplements to the
Registration Statement and the Prospectus used in connection therewith as may be
necessary or advisable to keep the Registration Statement current and effective
for the Shares and Warrant Shares (collectively, “Common Shares”) held by a
Purchaser for a period ending on the earlier of (i) the second anniversary of
the Closing Date, (ii) the date on which all Common Shares may be sold pursuant
to Rule 144 under the Securities Act or any successor rule (“Rule 144”) or (iii)
such time as all Common Shares have been sold pursuant to a registration
statement or Rule 144 (the “Effectiveness Period”). At such time the Company is
no longer required to keep the Registration Statement current and effective for
the Common Shares held by a Purchaser (the “Registration Statement Termination
Date”), that Purchaser will no longer accrue any additional liquidated damages
payments pursuant to Sections 6.1(a) or 6.2(c); however, the Company shall still
be obligated to make all payments under Sections 6.1(a) or 6.2(c) that were not
made prior to the Registration Statement Termination Date for that Purchaser.
The Company shall notify each Purchaser promptly upon the Registration Statement
and each post-effective amendment thereto, being declared effective by the SEC
and advise each Purchaser that the form of Prospectus contained in the
Registration Statement or post-effective amendment thereto, as the case may be,
at the time of effectiveness meets the requirements of Section 10(a) of the
Securities Act or that it intends to file a Prospectus pursuant to Rule 424(b)
under the Securities Act that meets the requirements of Section 10(a) of the
Securities Act;

 

(ii)        furnish to the Purchaser with respect to the Common Shares
registered under the Registration Statement such number of copies of the
Registration Statement and the Prospectus (including supplemental prospectuses)
filed with the SEC in conformance with the requirements of the Securities Act
and other such documents as the Purchaser may reasonably request, in order to
facilitate the public sale or other disposition of all or any of the Common
Shares by the Purchaser;

 

(iii)       make any necessary blue sky filings;

 

(iv)       pay the expenses incurred by the Company and the Purchasers in
complying with Section 6, including, all registration and filing fees, FINRA
fees, exchange listing fees, printing expenses, fees and disbursements of
counsel for the Company, blue sky fees and expenses and the expense of any
special audits incident to or required by any such registration (but excluding
attorneys’ fees of any Purchaser and any and all underwriting discounts and
selling commissions applicable to the sale of Registrable Securities by the
Purchasers);

 

(v)        advise the Purchasers, promptly after it shall receive notice or
obtain knowledge of the issuance of any stop order by the SEC delaying or
suspending the effectiveness of the Registration Statement or of the initiation
of any proceeding for that purpose (collectively, a “Stop Order”); and it will
promptly use its commercially reasonable best efforts to prevent the issuance of
any Stop Order or to obtain its withdrawal at the earliest possible moment if
such Stop Order should be issued; and

 

Page 19 

 

 

(vi)       with a view to making available to the Purchaser the benefits of Rule
144 and any other rule or regulation of the SEC that may at any time permit the
Purchaser to sell Common Shares to the public without registration, the Company
covenants and agrees to use its commercially reasonable best efforts to: (i)
make and keep public information available, as those terms are understood and
defined in Rule 144, until the earlier of (A) such date as all of the Common
Shares qualify to be resold immediately pursuant to Rule 144 or any other rule
of similar effect or (B) such date as all of the Common Shares shall have been
resold pursuant to Rule 144 (and may be further resold without restriction);
(ii) file with the SEC in a timely manner all reports and other documents
required of the Company under the Securities Act and under the Exchange Act; and
(iii) furnish to the Purchaser upon request, as long as the Purchaser owns any
Common Shares, (A) a written statement by the Company as to whether it has
complied with the reporting requirements of the Securities Act and the Exchange
Act, (B) if not available on the SEC EDGAR system, a copy of the Company’s most
recent Annual Report on Form 10-K or Quarterly Report on Form 10-Q, and (C) such
other information as may be reasonably requested in order to avail the Purchaser
of any rule or regulation of the SEC that permits the selling of any such Common
Shares without registration.

 

The Company understands that the Purchasers disclaim being an underwriter, but
acknowledges that a determination by the SEC that a Purchaser is deemed an
underwriter shall not relieve the Company of any obligations it has hereunder.

 

6.2         Transfer of Shares After Registration; Suspension.

 

(a)       Except in the event that Section 6.2(b) applies, the Company shall:
(i) if deemed necessary or advisable by the Company, prepare and file from time
to time with the SEC a post-effective amendment to the Registration Statement or
a supplement to the related Prospectus or a supplement or amendment to any
document incorporated therein by reference or file any other required document
so that such Registration Statement will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, and so that, as
thereafter delivered to purchasers of the Common Shares being sold thereunder,
such Prospectus will not contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading; (ii) provide the Purchasers copies, or access to copies, of any
documents filed pursuant to Section 6.2(a)(i); and (iii) upon request, inform
each Purchaser who so requests that the Company has complied with its
obligations in Section 6.2(b)(i) (or that, if the Company has filed a
post-effective amendment to the Registration Statement which has not yet been
declared effective, the Company will notify the Purchaser to that effect, will
use its commercially reasonable best efforts to secure the effectiveness of such
post-effective amendment as promptly as possible and will promptly notify the
Purchaser pursuant to Section 6.2(b)(i) when the amendment has become
effective).

 

(b)       Subject to Section 6.2(c), in the event: (i) of any request by the SEC
or any other federal or state governmental authority during the period of
effectiveness of the Registration Statement for amendments or supplements to the
Registration Statement or related Prospectus or for additional information; (ii)
of the issuance by the SEC or any other federal or state governmental authority
of any stop order suspending the effectiveness of the Registration Statement or
the initiation of any proceedings for that purpose; (iii) of the receipt by the
Company of any notification with respect to the suspension of the qualification
or exemption from qualification of any of the Common Shares for sale in any
jurisdiction or the initiation of any proceeding for such purpose; or (iv) of
any event or circumstance which necessitates the making of any changes in the
Registration Statement or Prospectus, or any document incorporated or deemed to
be incorporated therein by reference, so that, in the case of the Registration
Statement, it will not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading, and that in the case of the Prospectus, it
will not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; then the Company shall promptly deliver a certificate in writing to
the Purchasers (the “Suspension Notice”) to the effect of the foregoing and,
upon receipt of such Suspension Notice, the Purchasers will refrain from selling
any Common Shares pursuant to the Registration Statement (a “Suspension”) until
the Purchasers are advised in writing by the Company that the current Prospectus
may be used, and have received copies from the Company of any additional or
supplemental filings that are incorporated or deemed incorporated by reference
in any such Prospectus. In the event of any Suspension, the Company will use its
reasonable best efforts to cause the use of the Prospectus so suspended to be
resumed as soon as reasonably practicable after delivery of a Suspension Notice
to the Purchasers. In addition to and without limiting any other remedies
(including, without limitation, at law or at equity) available to the Company
and the Purchaser, the Company and the Purchasers shall be entitled to specific
performance in the event that the other party fails to comply with the
provisions of this Section 6.2(b).

 

Page 20 

 

 

(c)       Notwithstanding the foregoing paragraphs of this Section 6.2, the
Company shall use its commercially reasonable best efforts to ensure that (i) a
Suspension shall not exceed 30 days individually, (ii) Suspensions covering no
more than 45 days, in the aggregate, shall occur during any twelve month period
and (iii) each Suspension shall be separated by a period of at least 30 days
from a prior Suspension (each Suspension that satisfies the foregoing criteria
being referred to herein as a “Qualifying Suspension”). In the event that there
occurs a Suspension (or part thereof) that does not constitute a Qualifying
Suspension, the Company shall pay to the Purchaser, on the 30th day following
the first day of such Suspension (or the first day of such part), and on each
30th day thereafter, an amount equal to 1% of the Purchase Price paid for the
Securities purchased by the Purchaser and not previously sold by the Purchaser
with such payments to be prorated on a daily basis during each 30 day period (in
the event of any sales of the Purchaser’s securities during such period) and
will be paid to the Purchaser by wire transfer or check within five business
days after the end of each 30 day period following. The maximum amounts due
under this Section 6.2(c) shall be 6% of the Purchase Price paid for the
Securities purchased by the Purchaser and not previously sold by the Purchaser.

 

(d)       If a Suspension is not then in effect, the Purchasers may sell Common
Shares under the Registration Statement, provided that they comply with any
applicable prospectus delivery requirements. Upon receipt of a request therefor,
the Company will provide an adequate number of current Prospectuses to a
Purchaser and to any other parties reasonably requiring such Prospectuses.

 

(e)       The Company agrees that it shall, immediately subsequent to the
Registration Statement being declared effective, deliver to its transfer agent
an opinion letter of counsel, opining that at any time the Registration
Statement is effective, the transfer agent may issue, in connection with the
sale of the Common Shares, certificates representing such Common Shares without
restrictive legend, provided the Common Shares are to be sold pursuant to the
prospectus contained in the Registration Statement. Upon receipt of such
opinion, the Company shall cause the transfer agent to confirm, for the benefit
of the Purchasers, that no further opinion of counsel is required at the time of
transfer in order to issue such Common Shares without restrictive legend.

 

The Company shall cause its transfer agent to issue a certificate without any
restrictive legend to a purchaser of any Common Shares from the Purchasers, if
no Suspension is in effect at the time of sale, and (a) the sale of such Common
Shares is registered under the Registration Statement (including registration
pursuant to Rule 415 under the Securities Act); (b) the holder has provided the
Company with an opinion of counsel, in form, substance and scope customary for
opinions of counsel in comparable transactions, to the effect that a public sale
or transfer of such Common Shares may be made without registration under the
Securities Act; or (c) such Common Shares are sold in compliance with Rule 144
under the Securities Act. In addition, the Company shall remove the restrictive
legend from any Common Shares held by the Purchasers following the expiration of
the holding period required by Rule 144 under the Securities Act (or any
successor rule).

 

6.3         Indemnification. For the purpose of this Section 6.3:

 

(a)       the term “Selling Shareholder” shall mean a Purchaser, its executive
officers and directors and each person, if any, who controls that Purchaser
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act;

 

Page 21 

 

 

(b)          the term “Registration Statement” shall include any final
Prospectus, exhibit, supplement or amendment included in or relating to, and any
document incorporated by reference in, the Registration Statement (or deemed to
be a part thereof) referred to in Section 6.1; and

 

(c)          the term “untrue statement” shall mean any untrue statement or
alleged untrue statement of a material fact, or any omission or alleged omission
to state in the Registration Statement a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.

 

(d)          The Company agrees to indemnify and hold harmless each Selling
Shareholder from and against any losses, claims, damages or liabilities to which
such Selling Shareholder may become subject (under the Securities Act or
otherwise) insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of, or are based upon (i) any untrue
statement of a material fact contained in the Registration Statement, (ii) any
inaccuracy in the representations and warranties of the Company contained in
this Agreement or the failure of the Company to perform its obligations
hereunder or (iii) any failure by the Company to fulfill any undertaking
included in the Registration Statement, and the Company will reimburse such
Selling Shareholder for any reasonable legal expense or other actual accountable
out of pocket expenses reasonably incurred in investigating, defending or
preparing to defend any such action, proceeding or claim; provided, however,
that the Company shall not be liable in any such case to the extent that such
loss, claim, damage or liability arises out of, or is based upon, an untrue
statement made in such Registration Statement in reliance upon and in conformity
with written information furnished to the Company by or on behalf of such
Selling Shareholder specifically for use in preparation of the Registration
Statement or the failure of such Selling Shareholder to comply with its
covenants and agreements contained herein or any statement or omission in any
Prospectus that is corrected in any subsequent Prospectus that was delivered to
the Selling Shareholder prior to the pertinent sale or sales by the Selling
Shareholder.

 

(e)          Each Purchaser severally (as to itself), and not jointly, agrees to
indemnify and hold harmless the Company (and each person, if any, who controls
the Company within the meaning of Section 15 of the Securities Act, each officer
of the Company who signs the Registration Statement and each director of the
Company) from and against any losses, claims, damages or liabilities to which
the Company (or any such officer, director or controlling person) may become
subject (under the Securities Act or otherwise), insofar as such losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) arise out
of, or are based upon, (i) any failure by that Purchaser to comply with the
covenants and agreements contained herein or (ii) any untrue statement of a
material fact contained in the Registration Statement if, and only if, such
untrue statement was made in reliance upon and in conformity with written
information furnished by or on behalf of that Purchaser specifically for use in
preparation of the Registration Statement, and that Purchaser will reimburse the
Company (or such officer, director or controlling person, as the case may be),
for any reasonable legal expense or other reasonable actual accountable
out-of-pocket expenses reasonably incurred in investigating, defending or
preparing to defend any such action, proceeding or claim. The obligation to
indemnify shall be limited to the net amount of the proceeds received by the
Purchaser from the sale of the Common Shares pursuant to the Registration
Statement.

 

Page 22

 

 

 

(f)           Promptly after receipt by any indemnified person of a notice of a
claim or the beginning of any action in respect of which indemnity is to be
sought against an indemnifying person pursuant to this Section 6.3, such
indemnified person shall notify the indemnifying person in writing of such claim
or of the commencement of such action, but the omission to so notify the
indemnifying party will not relieve it from any liability which it may have to
any indemnified party under this Section 6.3 (except to the extent that such
omission materially and adversely affects the indemnifying party’s ability to
defend such action) or from any liability otherwise than under this Section 6.3.
Subject to the provisions hereinafter stated, in case any such action shall be
brought against an indemnified person, the indemnifying person shall be entitled
to participate therein, and, to the extent that it shall elect by written notice
delivered to the indemnified party promptly after receiving the aforesaid notice
from such indemnified party, shall be entitled to assume the defense thereof,
with counsel reasonably satisfactory to such indemnified person. After notice
from the indemnifying person to such indemnified person of its election to
assume the defense thereof (unless it has failed to assume the defense thereof
and appoint counsel reasonably satisfactory to the indemnified party), such
indemnifying person shall not be liable to such indemnified person for any legal
expenses subsequently incurred by such indemnified person in connection with the
defense thereof; provided, however, that if there exists or shall exist a
conflict of interest that would make it inappropriate, in the reasonable opinion
of counsel to the indemnified person, for the same counsel to represent both the
indemnified person and such indemnifying person or any affiliate or associate
thereof, the indemnified person shall be entitled to retain its own counsel (who
shall not be the same as the opining counsel) at the expense of such
indemnifying person; provided, however, that no indemnifying person shall be
responsible for the fees and expenses of more than one separate counsel
(together with appropriate local counsel) for all indemnified parties. In no
event shall any indemnifying person be liable in respect of any amounts paid in
settlement of any action unless the indemnifying person shall have approved the
terms of such settlement; provided that such consent shall not be unreasonably
withheld. No indemnifying person shall, without the prior written consent of the
indemnified person, effect any settlement of any pending or threatened
proceeding in respect of which any indemnified person is or could reasonably
have been a party and indemnification could have been sought hereunder by such
indemnified person, unless such settlement includes an unconditional release of
such indemnified person from all liability on claims that are the subject matter
of such proceeding.

 

(g)          If the indemnification provided for in this Section 6.3 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (d) or (e) above in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to therein,
then each indemnifying party shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (or actions in respect thereof) in such proportion as is appropriate
to reflect the relative fault of the Company on the one hand and the liable
Purchaser on the other in connection with the statements or omissions or other
matters which resulted in such losses, claims, damages or liabilities (or
actions in respect thereof), as well as any other relevant equitable
considerations. The relative fault shall be determined by reference to, among
other things, in the case of an untrue statement, whether the untrue statement
relates to information supplied by the Company on the one hand or the liable
Purchaser on the other and the parties’ relative intent, knowledge, access to
information and opportunity to correct or prevent such untrue statement. The
Company and the Purchasers agree that it would not be just and equitable if
contribution pursuant to this subsection (g) were determined by pro rata
allocation (even if the Purchasers were treated as one entity for such purpose)
or by any other method of allocation which does not take into account the
equitable considerations referred to above in this subsection (g). The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages or liabilities (or actions in respect thereof) referred to above in this
subsection (g) shall be deemed to include any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or defending
any such action or claim. Notwithstanding the provisions of this subsection (g),
no Purchasers shall be required to contribute any amount in excess of the amount
by which the net amount received by that Purchaser from the sale of the Common
Shares to which such loss relates exceeds the amount of any damages which that
Purchaser has otherwise been required to pay to the Company by reason of such
untrue statement. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Purchasers’ obligations in this subsection to contribute
are several in proportion to their sales of Common Shares to which such loss
relates and not joint.

 

Page 23

 

  

(h)          The parties to this Agreement hereby acknowledge that they are
sophisticated business persons who were represented by counsel during the
negotiations regarding the provisions hereof including, without limitation, the
provisions of this Section 6.3, and are fully informed regarding said
provisions. They further acknowledge that the provisions of this Section 6.3
fairly allocate the risks in light of the ability of the parties to investigate
the Company and its business in order to assure that adequate disclosure is made
in the Registration Statement as required by the Securities Act and the Exchange
Act.

 

(i)           The obligations of the Company and of the Purchasers under this
Section 6.3 shall survive completion of any offering of Registrable Securities
in such Registration Statement for a period of two years from the effective date
of the Registration Statement. No indemnifying party, in the defense of any such
claim or litigation, shall, except with the consent of each indemnified party,
consent to entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such indemnified party of a release from all liability in respect to such
claim or litigation.

 

6.4         Termination of Conditions and Obligations. The conditions precedent
imposed by Section 3 or this Section 6 upon the transferability of the Common
Shares shall cease and terminate as to any particular number of the Common
Shares when such Common Shares shall have been effectively registered under the
Securities Act and sold or otherwise disposed of in accordance with the intended
method of disposition set forth in the Registration Statement covering such
Common Shares or at such time as an opinion of counsel satisfactory to the
Company shall have been rendered to the effect that such conditions are not
necessary in order to comply with the Securities Act. The Company shall request
an opinion of counsel promptly upon receipt of a request therefor from
Purchaser.

 

6.5          Information Available. So long as the Registration Statement is
effective covering the resale of Common Shares owned by a Purchaser, the Company
will furnish (or, to the extent such information is available electronically
through the Company’s filings with the SEC, the Company will make available via
the SEC’s EDGAR system or any successor thereto) to each Purchaser:

 

(a)          as soon as practicable after it is available, one copy of (i) its
Annual Report to Shareholders (which Annual Report shall contain financial
statements audited in accordance with generally accepted accounting principles
by a national firm of certified public accountants) and (ii) if not included in
substance in the Annual Report to Shareholders, its Annual Report on Form 10-K
(the foregoing, in each case, excluding exhibits);

 

(b)          upon the request of the Purchaser, all exhibits excluded by the
parenthetical to subparagraph (a)(ii) of this Section 6.5 as filed with the SEC
and all other information that is made available to shareholders; and

 

(c)          upon the reasonable request of the Purchaser, an adequate number of
copies of the Prospectuses to supply to any other party requiring such
Prospectuses; and the Company, upon the reasonable request of a Purchaser, will
meet with each Purchaser or a representative thereof at the Company’s
headquarters during the Company’s normal business hours to discuss all
information relevant for disclosure in the Registration Statement covering the
Common Shares and will otherwise reasonably cooperate with the Purchasers
conducting an investigation for the purpose of reducing or eliminating the
Purchasers’ exposure to liability under the Securities Act, including the
reasonable production of information at the Company’s headquarters; provided,
that the Company shall not be required to disclose any confidential information
to or meet at its headquarters with a Purchaser until and unless that Purchaser
shall have entered into a confidentiality agreement in form and substance
reasonably satisfactory to the Company with the Company with respect thereto.

 

Page 24

 

  

6.6          Public Statements; Limitation on Information. The Company agrees to
disclose on a Current Report on Form 8-K the existence of the Offering and the
material terms, thereof, including pricing, within two business days after it
specifies the Closing Date in accordance with Section 1.3. Such Current Report
on Form 8-K shall include a form of this Agreement (and all exhibits and
schedules thereto) as an exhibit thereto. The Company will not issue any public
statement, press release or any other public disclosure listing a Purchaser as
one of the purchasers of the Common Shares without that Purchaser’s prior
written consent, except as may be required by applicable law or rules of any
exchange on which the Company’s securities are listed. The Company shall not
provide, and shall cause each of its subsidiaries and the respective officers,
directors, employees and agents of the Company and each of its subsidiaries not
to provide, the Purchasers with any material nonpublic information regarding the
Company or any subsidiary from and after the date the Company files, or is
required by this Section to file, the Current Report on Form 8-K with the SEC
without the prior express written consent of the Purchaser.

 

6.7         Limits on Additional Issuances. The Company will not, for a period
of six months following the Closing Date offer for sale or sell any securities
unless, in the opinion of the Company’s counsel, such offer or sale does not
jeopardize the availability of exemptions from the registration and
qualification requirements under applicable securities laws with respect to the
Offering. Except for the issuance of stock options under the Company’s stock
option plans, the issuance of common stock upon exercise of outstanding options
and warrants, the issuance of common stock purchase warrants, and the offering
contemplated hereby, the Company has not engaged in any offering of equity
securities during the six months prior to the date of this Agreement which the
Company believes would be integrated with the Offering. The foregoing provisions
shall not prevent the Company from filing a “shelf” registration statement
pursuant to Rule 415 under the Securities Act, but the foregoing provisions
shall apply to any sale of securities thereunder.

 

6.8         Form D and State Securities Filings. The Company will file with the
SEC a Notice of Sale of Securities on Form D with respect to the Securities, as
required under Regulation D under the Securities Act, no later than 15 days
after the Closing Date. The Company will promptly and timely file all documents
and pay all filing fees required by any states’ securities laws in connection
with the sale of Securities.

 

6.9         Assignment of Registration Rights. The rights to cause the Company
to register Registrable Securities pursuant to this Section 6 may be assigned by
a Purchaser to a party that acquires, other than pursuant to the Registration
Statement or Rule 144, any of the Shares and Warrant Shares originally issued or
issuable to such Purchaser pursuant to this Agreement and the Warrants (or any
Common Stock issued as (or issuable upon the conversion or exercise of any
warrant, right or other security which is issued as) a dividend or other
distribution with respect to, or in exchange for or in replacement of, any such
Shares or Warrant Shares), or to any affiliate of a Purchaser that acquires any
Registrable Securities. Any such permitted assignee shall have all the rights of
such Purchaser under this Section 6 with respect to the Registrable Securities
transferred during the Effectiveness Period.

 

6.10       Selling Shareholder Questionnaire. Each Purchaser agrees to furnish
to the Company a completed questionnaire in the form attached to this Agreement
as Exhibit C (a “Selling Holder Questionnaire”). The Company shall not be
required to include the Registrable Securities of a Purchaser in a Registration
Statement and shall not be required to pay any liquidated or other damages
hereunder to any such Purchaser who fails to furnish to the Company a fully
completed Selling Holder Questionnaire at least three business days prior to the
filing of the Registration Statement.

 

7.            Miscellaneous.

 

7.1          Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without regard to the choice
of law provisions thereof, and the federal laws of the United States.

 

7.2          Successors and Assigns. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors, and administrators of the
parties hereto.

 

Page 25

 

 

7.3          Entire Agreement. This Agreement and the exhibits hereto, and the
other documents delivered pursuant hereto, constitute the full and entire
understanding and agreement among the parties with regard to the subjects hereof
and no party shall be liable or bound to any other party in any manner by any
representations, warranties, covenants, or agreements except as specifically set
forth herein or therein. Nothing in this Agreement, express or implied, is
intended to confer upon any party, other than the parties hereto and their
respective successors and assigns, any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
herein.

 

7.4          Severability. In the event any provision of this Agreement shall be
invalid, illegal, or unenforceable, it shall to the extent practicable, be
modified so as to make it valid, legal and enforceable and to retain as nearly
as practicable the intent of the parties, and the validity, legality, and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.

 

7.5          Amendment and Waiver. Except as otherwise provided herein, any term
of this Agreement may be amended and the observance of any term of this
Agreement may be waived (either generally or in a particular instance, either
retroactively or prospectively, and either for a specified period of time or
indefinitely), with the written consent of the Company and each Purchaser. Any
amendment or waiver effected in accordance with this Section 7.5 shall be
binding upon any holder of any Securities purchased under this Agreement
(including securities into which such Securities have been converted), each
future holder of all such securities, and the Company.

 

7.6          Fees and Expenses. Except as otherwise set forth herein, the
Company and the Purchasers shall bear their own expenses and legal fees incurred
on their behalf with respect to this Agreement and the transactions contemplated
hereby. Each party hereby agrees to indemnify and to hold harmless of and from
any liability the other party for any commission or compensation in the nature
of a finder’s fee to any broker or other person or firm (and the costs and
expenses of defending against such liability or asserted liability) for which
such indemnifying party or any of its employees or representatives are
responsible.

 

7.7          Notices. All notices, requests, consents and other communications
hereunder shall be in writing, shall be delivered (A) if within the United
States, by first-class registered or certified airmail, or nationally recognized
overnight express courier, postage prepaid, or by facsimile, or (B) if from
outside the United States, by International Federal Express (or comparable
service) or facsimile, and shall be deemed given (i) if delivered by first-class
registered or certified mail domestic, upon the business day received, (ii) if
delivered by nationally recognized overnight carrier, one business day after
timely delivery to such carrier, (iii) if delivered by International Federal
Express (or comparable service), two business days after so mailed, (iv) if
delivered by facsimile, upon electric confirmation of receipt and shall be
addressed as follows, or to such other address or addresses as may have been
furnished in writing by a party to another party pursuant to this paragraph:

  

Page 26

 

 

if to the Company, to:

 

William Kerby

Monaker Group, Inc.

2690 Weston Road,

Suite 200

Weston, Florida 33331

 

with a copy to:

 

David M. Loev, Esq.

The Love Law Firm, PC

 6300 West Loop South, Suite 280

Bellaire, Texas 77401

 

if to the Purchaser, at its address on the signature page to this Agreement.

 

7.8          Survival of Representations, Warranties and Agreements.
Notwithstanding any investigation made by any party to this Agreement or by the
Placement Agent, all covenants, agreements, representations and warranties made
by the Company and the Purchaser herein shall survive the execution of this
Agreement, the delivery to the Purchaser of the Securities being purchased and
the payment therefor, and a party’s reliance on such representations and
warranties shall not be affected by any investigation made by such party or any
information developed thereby.

 

7.9          Counterparts. This Agreement may be executed by facsimile signature
and in any number of counterparts, each of which shall be deemed an original,
but all of which together shall constitute one instrument.

 

7.10        Independent Nature of Purchasers’ Obligations and Rights. The
obligations of each Purchaser under this Agreement are several and not joint
with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under this Agreement. Nothing contained herein, and no action taken by
any Purchaser pursuant hereto, shall be deemed to constitute the Purchasers as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Purchasers are in any way acting in concert or as
a group with respect to such obligations or the transactions contemplated by
this Agreement. Each Purchaser confirms that it has independently participated
in the negotiation of the transaction contemplated hereby with the advice of its
own counsel and advisors. Each Purchaser shall be entitled to independently
protect and enforce its rights, including, without limitation, the rights
arising out of this Agreement, and it shall not be necessary for any other
Purchaser to be joined as an additional party in any proceeding for such
purpose.

 

[The Remainder of this Page is Blank]

 

Page 27

 

 

In witness whereof, the foregoing Common Stock and Warrant Purchase Agreement is
hereby executed as of the date first above written.

       

Monaker Group, Inc. 

        By:     Name:     William Kerby   Title:     Chairman and Chief
Executive Officer

 

 

 

 

In witness whereof, the foregoing Common Stock and Warrant Purchase Agreement is
hereby executed as of the date first above written.

 

  Name of Investor

      By:       Name:     Title:      

 

  Investment Amount:  

  Tax Identification No.:  

  State of Organization:  

  State of Principal Place of Operations:  

 

  Address for Notice:  

           

  Attention:  

  Telephone:  

  Facsimile:  

 

  Delivery Instructions (if different from above):                        
Attention:  

  Telephone:  

  Facsimile:  

 

 

 

 

EXHIBIT A

 

SCHEDULE OF PURCHASERS

 

Purchaser

Common

Shares

Aggregate
Purchase Price

Warrant

Shares

State of
Organization State of Principal
Place of Operations Pacific Grove Master Fund LP 875,000 $1,750,000 875,000
Cayman Islands Cayman Islands Dane Capital Fund LP 75,000 $150,000 75,000 DE NY
Matthew Hayden 62,500 $125,000 62,500 — CA The Stadlin Trust 50,000 $100,000
50,000 CA CA Joseph Adam Wolf Revocable Trust 50,000 $100,000 50,000 CA CA
Weintraub Capital Management, LP 25,000 $50,000 25,000 CA CA Brian Herman 15,000
$30,000 15,000 — FL Kingsbrook Opportunities GP LLC 25,000 $50,000 25,000 Cayman
Islands Cayman Islands Intracoastal Capital, LLC 37,500 $75,000 37,500 DE IL
Donald P Monaco Insurance Trust 87,500 $175,000 87,500 IL IL Charcoal
Investments Ltd. 87,500 $175,000 87,500 United Kingdom United Kingdom William E.
LaMacchia 50,000 $100,000 50,000 — WI William Kerby 25,000 $50,000 25,000 — FL
Pasquale LaVecchia 5,000 $10,000 5,000 — CT Robert Post 12,500 $25,000 12,500 —
FL Stephen Romsdahl 25,000 $50,000 25,000 — MN Paul E. DeBoer 25,000 $50,000
25,000 — SD

 

 

Page A-1 

 

 

 

EXHIBIT B

 

FORM OF WARRANT

 

NEITHER THE SECURITIES REPRESENTED HEREBY NOR THE SECURITIES ISSUABLE UPON
EXERCISE OF THESE SECURITIES HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE “SECURITIES ACT”), OR UNDER THE SECURITIES LAWS OF ANY
STATES. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND
RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE
SECURITIES ACT AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO
REGISTRATION OR EXEMPTION THEREFROM. UNLESS SOLD PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT, THE ISSUER OF THESE SECURITIES MAY
REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER
TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE
SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS.

 

Monaker Group, Inc. 

WARRANT

 

Warrant No. ___

  Original Issue Date:   July 31, 2017

 

Monaker Group, Inc., a Nevada corporation (the “Company”), hereby certifies
that, for value received, [______________________] or its registered assigns
(the “Holder”), is entitled to purchase from the Company up to a total of
[____________] shares of Common Stock (each such share, a “Warrant Share” and
all such shares, the “Warrant Shares”), at any time and from time to time from
and after the Original Issue Date and through and including July 30, 2022 (the
“Expiration Date”), and subject to the following terms and conditions:

 

1.       Definitions. As used in this Warrant, the following terms shall have
the respective definitions set forth in this Section 1. Capitalized terms that
are used and not defined in this Warrant that are defined in the Purchase
Agreement (as defined below) shall have the respective definitions set forth in
the Purchase Agreement.

 

“Closing Price” means, for any date of determination, the price determined by
the first of the following clauses that applies: (i) if the Common Stock is then
listed or quoted on a Trading Market (other than the OTCQB), the closing price
per share of the Common Stock for such date (or the nearest preceding date) on
such market; (ii) if prices for the Common Stock are then quoted on the OTCQB,
the closing bid price per share of the Common Stock for such date (or the
nearest preceding date) so quoted; (iii) if prices for the Common Stock are then
reported in the “Pink Sheets” published by the National Quotation Bureau
Incorporated (or a similar organization or agency succeeding to its functions of
reporting prices), the most recent bid price per share of the Common Stock so
reported; or (iv) in all other cases, the fair market value of a share of Common
Stock as determined by an independent qualified appraiser selected in good faith
and paid for by the Company.

 

“Common Stock” means the common stock of the Company, par value $0.00001 per
share, and any securities into which such common stock may hereafter be
reclassified.

 

Page B-1 

 

  

“Exercise Price” means $2.10, subject to adjustment in accordance with Section
9.

 

“Fundamental Transaction” means any of the following: (i) the Company effects
any merger or consolidation of the Company with or into another person, (ii) the
Company effects any sale of all or substantially all of its assets in one or a
series of related transactions, (iii) any tender offer or exchange offer
(whether by the Company or another person) is completed pursuant to which
holders of Common Stock are permitted to tender or exchange their shares for
other securities, cash or property, or (iv) the Company effects any
reclassification of the Common Stock or any compulsory share exchange pursuant
to which the Common Stock is effectively converted into or exchanged for other
securities, cash or property.

 

“Original Issue Date” means the Original Issue Date first set forth on the first
page of this Warrant or its predecessor instrument.

 

“Purchase Agreement” means the Common Stock and Warrant Purchase Agreement,
dated July 31, 2017, to which the Company and the original Holder are parties.

 

“Trading Day” means (i) a day on which the Common Stock is traded on a Trading
Market (other than the OTCQB), or (ii) if the Common Stock is not listed on a
Trading Market (other than the OTCQB), a day on which the Common Stock is traded
in the over-the-counter market, as reported by the OTCQB, or (iii) if the Common
Stock is not quoted on any Trading Market, a day on which the Common Stock is
quoted in the over-the-counter market as reported by the National Quotation
Bureau Incorporated (or any similar organization or agency succeeding to its
functions of reporting prices); provided, that in the event that the Common
Stock is not listed or quoted as set forth in clauses (i), (ii) and (iii)
hereof, then Trading Day shall mean a Business Day.

 

“Trading Market” means whichever of the New York Stock Exchange, the NYSE MKT,
the NASDAQ Global Select Market, the NASDAQ Global Market, the NASDAQ Capital
Market, or the OTCQB on which the Common Stock is listed or quoted for trading
on the date in question.

 

2.       Registration of Warrant. The Company shall register this Warrant upon
records to be maintained by the Company for that purpose (the “Warrant
Register”), in the name of the record Holder hereof from time to time. The
Company may deem and treat the registered Holder of this Warrant as the absolute
owner hereof for the purpose of any exercise hereof or any distribution to the
Holder, and for all other purposes, absent actual notice to the contrary.

 

3.       Registration of Transfers. The Company shall register the transfer of
any portion of this Warrant in the Warrant Register, upon surrender of this
Warrant, with the Form of Assignment attached hereto duly completed and signed,
to the Company at its address specified herein. Upon any such registration or
transfer, a new Warrant to purchase Common Stock, in substantially the form of
this Warrant (any such new Warrant, a “New Warrant”), evidencing the portion of
this Warrant so transferred shall be issued to the transferee and a New Warrant
evidencing the remaining portion of this Warrant not so transferred, if any,
shall be issued to the transferring Holder. The acceptance of the New Warrant by
the transferee thereof shall be deemed the acceptance by such transferee of all
of the rights and obligations of a holder of a Warrant.

 

4.       Exercise and Duration of Warrants. This Warrant shall be exercisable by
the registered Holder in whole at any time and in part from time to time from
the Original Issue Date through and including the Expiration Date. At 5:30 p.m.,
Eastern Time on the Expiration Date, the portion of this Warrant not exercised
prior thereto shall be and become void and of no value. The Company may not call
or redeem any portion of this Warrant without the prior written consent of the
affected Holder.

 

Page B-2 

 

 

5.       Delivery of Warrant Shares.

 

(a)      To effect exercises hereunder, the Holder shall not be required to
physically surrender this Warrant unless the aggregate Warrant Shares
represented by this Warrant are being exercised. Upon delivery of the Exercise
Notice (in the form attached hereto) to the Company (with the attached Warrant
Shares Exercise Log) at its address for notice set forth herein and upon payment
of the Exercise Price multiplied by the number of Warrant Shares that the Holder
intends to purchase hereunder and, the Company shall promptly (but in no event
later than three Trading Days after the Date of Exercise (as defined herein))
issue and deliver to the Holder, a certificate for the Warrant Shares issuable
upon such exercise, which, unless otherwise required by the Purchase Agreement,
shall be free of restrictive legends. The Company shall, upon request of the
Holder and subsequent to the date on which a registration statement covering the
resale of the Warrant Shares has been declared effective by the Securities and
Exchange Commission, use its reasonable best efforts to deliver Warrant Shares
hereunder electronically through the Depository Trust Corporation or another
established clearing corporation performing similar functions, if available,
provided, that, the Company may, but will not be required to change its transfer
agent if its current transfer agent cannot deliver Warrant Shares electronically
through the Depository Trust Corporation. A “Date of Exercise” means the date on
which the Holder shall have delivered to the Company: (i) the Exercise Notice
(with the Warrant Exercise Log attached to it), appropriately completed and duly
signed and (ii) if such Holder is not utilizing the cashless exercise provisions
set forth in this Warrant, payment of the Exercise Price for the number of
Warrant Shares so indicated by the Holder to be purchased.

 

(b)       If by the third Trading Day after a Date of Exercise the Company fails
to deliver the required number of Warrant Shares in the manner required pursuant
to Section 5(a), then the Holder will have the right to rescind such exercise.

 

(c)       If by the third Trading Day after a Date of Exercise the Company fails
to deliver the required number of Warrant Shares in the manner required pursuant
to Section 5(a), and if after such third Trading Day and prior to the receipt of
such Warrant Shares, the Holder purchases (in an open market transaction or
otherwise) shares of Common Stock to deliver in satisfaction of a sale by the
Holder of the Warrant Shares which the Holder anticipated receiving upon such
exercise (a “Buy-In”), then the Company shall (1) pay in cash to the Holder the
amount by which (x) the Holder’s total purchase price (including brokerage
commissions, if any) for the shares of Common Stock so purchased exceeds (y) the
amount obtained by multiplying (A) the number of Warrant Shares that the Company
was required to deliver to the Holder in connection with the exercise at issue
by (B) the closing bid price of the Common Stock at the time of the obligation
giving rise to such purchase obligation and (2) at the option of the Holder,
either reinstate the portion of the Warrant and equivalent number of Warrant
Shares for which such exercise was not honored or deliver to the Holder the
number of shares of Common Stock that would have been issued had the Company
timely complied with its exercise and delivery obligations hereunder. The Holder
shall provide the Company written notice indicating the amounts payable to the
Holder in respect of the Buy-In.

 

(d)       The Company’s obligations to issue and deliver Warrant Shares in
accordance with the terms hereof are absolute and unconditional, irrespective of
any action or inaction by the Holder to enforce the same, any waiver or consent
with respect to any provision hereof, the recovery of any judgment against any
person or any action to enforce the same, or any setoff, counterclaim,
recoupment, limitation or termination, or any breach or alleged breach by the
Holder or any other person of any obligation to the Company or any violation or
alleged violation of law by the Holder or any other person, and irrespective of
any other circumstance which might otherwise limit such obligation of the
Company to the Holder in connection with the issuance of Warrant Shares. Nothing
herein shall limit a Holder’s right to pursue any other remedies available to it
hereunder, at law or in equity including, without limitation, a decree of
specific performance and/or injunctive relief with respect to the Company’s
failure to timely deliver certificates representing Warrant Shares upon exercise
of the Warrant as required pursuant to the terms hereof.

 

Page B-3 

 

 

6.       Charges, Taxes and Expenses. Issuance and delivery of Warrant Shares
upon exercise of this Warrant shall be made without charge to the Holder for any
issue or transfer tax, withholding tax, transfer agent fee or other incidental
tax or expense in respect of the issuance of such certificates, all of which
taxes and expenses shall be paid by the Company; provided, however, that the
Company shall not be required to pay any tax which may be payable in respect of
any transfer involved in the registration of any certificates for Warrant Shares
or Warrants in a name other than that of the Holder. The Holder shall be
responsible for all other tax liability that may arise as a result of holding or
transferring this Warrant or receiving Warrant Shares upon exercise hereof.

 

7.       Replacement of Warrant. If this Warrant is mutilated, lost, stolen or
destroyed, the Company shall issue or cause to be issued in exchange and
substitution for and upon cancellation hereof, or in lieu of and substitution
for this Warrant, a New Warrant, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction and customary and
reasonable indemnity (which shall not include a surety bond), if requested.
Applicants for a New Warrant under such circumstances shall also comply with
such other reasonable regulations and procedures and pay such other reasonable
third-party costs as the Company may prescribe. If a New Warrant is requested as
a result of a mutilation of this Warrant, then the Holder shall deliver such
mutilated Warrant to the Company as a condition precedent to the Company’s
obligation to issue the New Warrant.

 

8.       Reservation of Warrant Shares. The Company covenants that it will at
all times reserve and keep available out of the aggregate of its authorized but
unissued and otherwise unreserved Common Stock, solely for the purpose of
enabling it to issue Warrant Shares upon exercise of this Warrant as herein
provided, the number of Warrant Shares which are then issuable and deliverable
upon the exercise of this entire Warrant, free from preemptive rights or any
other contingent purchase rights of Persons other than the Holder (taking into
account the adjustments and restrictions of Section 9). The Company covenants
that all Warrant Shares so issuable and deliverable shall, upon issuance and the
payment of the applicable Exercise Price in accordance with the terms hereof, be
duly and validly authorized, issued and fully paid and nonassessable.

 

9.       Certain Adjustments. The Exercise Price and number of Warrant Shares
issuable upon exercise of this Warrant are subject to adjustment from time to
time as set forth in this Section 9.

 

(a)       Stock Dividends and Splits. If the Company, at any time while this
Warrant is outstanding, (i) pays a stock dividend on its Common Stock or
otherwise makes a distribution on any class of capital stock that is payable in
shares of Common Stock, (ii) subdivides outstanding shares of Common Stock into
a larger number of shares, or (iii) combines outstanding shares of Common Stock
into a smaller number of shares, then in each such case the Exercise Price shall
be adjusted to equal the product obtained by multiplying the then-current
Exercise Price by a fraction of which the numerator shall be the number of
shares of Common Stock outstanding immediately before such event and of which
the denominator shall be the number of shares of Common Stock outstanding
immediately after such event. Any adjustment made pursuant to clause (i) of this
paragraph shall become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or distribution,
and any adjustment pursuant to clause (ii) or (iii) of this paragraph shall
become effective immediately after the effective date of such subdivision or
combination.

 

Page B-4 

 

 

(b)       Fundamental Transactions. If, at any time while this Warrant is
outstanding there is a Fundamental Transaction, then the Holder shall have the
right thereafter to receive, upon exercise of this Warrant, the same amount and
kind of securities, cash or property as it would have been entitled to receive
upon the occurrence of such Fundamental Transaction if it had been, immediately
prior to such Fundamental Transaction, the holder of the number of Warrant
Shares then issuable upon exercise in full of this Warrant (the “Alternate
Consideration”). For purposes of any such exercise, the determination of the
Exercise Price shall be appropriately adjusted to apply to such Alternate
Consideration based on the amount of Alternate Consideration issuable in respect
of one share of Common Stock in such Fundamental Transaction, and the Company
shall apportion the Exercise Price among the Alternate Consideration in a
reasonable manner reflecting the relative value of any different components of
the Alternate Consideration. If holders of Common Stock are given any choice as
to the securities, cash or property to be received in a Fundamental Transaction,
then the Holder shall be given the same choice as to the Alternate Consideration
it receives upon any exercise of this Warrant following such Fundamental
Transaction. At the Holder’s option and request, any successor to the Company or
surviving entity in such Fundamental Transaction shall, either (1) issue to the
Holder a new warrant substantially in the form of this Warrant and consistent
with the foregoing provisions and evidencing the Holder’s right to purchase the
Alternate Consideration for the aggregate Exercise Price upon exercise thereof,
or (2) purchase the Warrant from the Holder for a purchase price, payable in
cash within five Trading Days after such request (or, if later, on the effective
date of the Fundamental Transaction), equal to the Black Scholes value of the
remaining unexercised portion of this Warrant on the date of such request. The
terms of any agreement pursuant to which a Fundamental Transaction is effected
shall include terms requiring any such successor or surviving entity to comply
with the provisions of this paragraph (b) and insuring that the Warrant (or any
such replacement security) will be similarly adjusted upon any subsequent
transaction analogous to a Fundamental Transaction.

 

(c)       Price Antidilution. If within twelve months from the Original Issue
Date the Company shall issue any (i) Common Stock (except in connection with the
conversion of the Series A Preferred Stock) or (ii) any securities of the
Company or the subsidiary that would entitle the holder thereof to acquire at
any time Common Stock, including without limitation, any debt, preferred stock,
rights, options, warrants or other instrument that is at any time convertible
into or exchangeable for, or otherwise entitles the holder thereof to receive,
Common Stock (“Common Stock Equivalents” and collectively “Additional Shares”),
entitling any person or entity to acquire shares of Common Stock at an effective
price per share less than the Exercise Price then in effect, except for the
Exempt Issuances (as defined in the Purchase Agreement), the Exercise Price
shall be amended to equal the then current Exercise Price x (A + B) ¸ (A + C).
For purposes of the foregoing formula, the following definitions shall apply:
(I) “A” means the number of shares of Common Stock outstanding and deemed
outstanding immediately prior to such issue of Additional Shares (treating for
this purpose as outstanding all shares of Common Stock issuable upon exercise of
options and convertible securities as outstanding immediately prior to such
issue); (II) “B” means the number of shares of Common Stock that would have been
issued if such Additional Shares had been issued at a price per share equal to
the then current Exercise Price (determined by dividing the aggregate
consideration received by the Company in respect of such issue by the then
current Exercise Price); and (III) “C” means the number of such Additional
Shares issued in such transaction.

 

The sale of Common Stock Equivalents shall be deemed to have occurred at the
time of the issuance of the Common Stock Equivalents and the purchase price
covered thereby shall also include the actual exercise or conversion price
thereof at the time of the issuance, without any further adjustments to the
exercise price upon the conversion or exercise of any Common Stock Equivalents.
 If shares are issued for a consideration other than cash, the per share selling
price shall be the fair value of such consideration as determined in good faith
by the board of directors of the Company. Notwithstanding anything to the
contrary herein, this section shall not apply to an Exempt Issuance (as defined
in the Purchase Agreement).

 

In the event of any adjustment under this Section 9(c), the Company shall
promptly amend the Registration Statement or file a new Registration Statement
pursuant to the provisions of Section 6 of the Purchase Agreement to register
the additional Warrant Shares issuable upon exercise of this Warrant. In no
event shall the number of Warrant Shares increase if such increase shall result
in the Purchasers acquiring, or obtaining the right to acquire, in excess of
19.999% of the outstanding shares of Common Stock or voting power of the Company
on a post-transaction basis that assumes that the closing of the Additional
Shares shall have occurred.

 

Page B-5 

 

 

(d)       [Reserved]

 

(e)       Calculations. All calculations under this Section 9 shall be made to
the nearest cent or the nearest 1/100th of a share, as applicable. The number of
shares of Common Stock outstanding at any given time shall not include shares
owned or held by or for the account of the Company, and the disposition of any
such shares shall be considered an issue or sale of Common Stock.

 

(f)       Notice of Adjustments. Upon the occurrence of each adjustment pursuant
to this Section 9, the Company at its expense will promptly compute such
adjustment in accordance with the terms of this Warrant and prepare a
certificate setting forth such adjustment, including a statement of the adjusted
Exercise Price and adjusted number or type of Warrant Shares or other securities
issuable upon exercise of this Warrant (as applicable), describing the
transactions giving rise to such adjustments and showing in detail the facts
upon which such adjustment is based. Upon written request, the Company will
promptly deliver a copy of each such certificate to the Holder and to the
Company’s Transfer Agent.

 

10.        Payment of Exercise Price. The Holder may pay the Exercise Price in
one of the following manners:

 

(a)       Cash Exercise. The Holder may deliver immediately available funds; or

 

(b)       Cashless Exercise. If the Company does not have an effective
Registration Statement covering the resale of the Registrable Securities within
180 days after Closing or anytime thereafter, then the Holder may notify the
Company in an Exercise Notice of its election to utilize cashless exercise, in
which event the Company shall issue to the Holder the number of Warrant Shares
determined as follows:

 

X = Y [(A-B)/A]  

 

where:  

 

X = the number of Warrant Shares to be issued to the Holder.  

 

Y = the number of Warrant Shares with respect to which this Warrant is being
exercised.  

 

A = the average of the Closing Prices for the five Trading Days immediately
prior to (but not including) the Exercise Date.  

 

B = the Exercise Price.  

 

For purposes of Rule 144 promulgated under the Securities Act, it is intended,
understood and acknowledged that the Warrant Shares issued in a cashless
exercise transaction shall be deemed to have been acquired by the Holder, and
the holding period for the Warrant Shares shall be deemed to have commenced, on
the date this Warrant was originally issued.

 

11.       No Fractional Shares. No fractional shares of Warrant Shares will be
issued in connection with any exercise of this Warrant. In lieu of any
fractional shares which would, otherwise be issuable, the Company may (a) pay
cash equal to the product of such fraction multiplied by the Closing Price of
one Warrant Share on the date of exercise; or (b) round up the amount of any
fractional share to the next highest whole number of shares.

 

12.       Notices. Any and all notices or other communications or deliveries
hereunder (including, without limitation, any Exercise Notice) shall be in
writing and shall be deemed given and effective if provided pursuant to the
Purchase Agreement. In case any time: (1) the Company shall declare any cash
dividend on its common stock; (2) the Company shall pay any dividend payable in
stock upon its common stock or make any distribution to the holders of its
common stock; (3) the Company shall offer for subscription pro rata to the
holders of its common stock any additional shares of stock of any class or other
rights; (4) there shall be any capital reorganization, or reclassification of
the common stock of the Company, or consolidation or merger of the Company with,
or sale of all or substantially all of its assets to, another corporation; or
(5) there shall be a voluntary or involuntary dissolution, liquidation or
winding up of the Company; then, in any one or more of said cases, the Company
shall give prompt written notice to the Holder. Such notice shall also specify
the date as of which the holders of capital stock of record shall participate in
such dividend, distribution or subscription rights, or shall be entitled to
exchange their capital stock for securities or other property deliverable upon
such reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding up, or conversion or redemption, as the case may be. Such
written notice shall be given at least 20 days prior to the action in question
and not less than 20 days prior to the record date or the date on which the
Company’s transfer books are closed in respect thereto.

 

Page B-6 

 

 

13.       Registration Rights. The Holder shall be entitled to the registration
rights set forth in Section 6 of the Purchase Agreement.

 

14.       Miscellaneous.

 

(a)       This Warrant shall be binding on and inure to the benefit of the
parties hereto and their respective successors and assigns. Subject to the
preceding sentence, nothing in this Warrant shall be construed to give to any
Person other than the Company and the Holder any legal or equitable right,
remedy or cause of action under this Warrant. This Warrant may be amended only
in writing signed by the Company and the Holder and their successors and
assigns.

 

(b)       All questions concerning the construction, validity, enforcement and
interpretation of this Warrant shall be governed by and construed and enforced
in accordance with the internal laws of the State of New York, without regard to
the principles of conflicts of law thereof.

 

(c)       The headings herein are for convenience only, do not constitute a part
of this Warrant and shall not be deemed to limit or affect any of the provisions
hereof.

 

(d)       In case any one or more of the provisions of this Warrant shall be
invalid or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Warrant shall not in any way be affected
or impaired thereby and the parties will attempt in good faith to agree upon a
valid and enforceable provision which shall be a commercially reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Warrant.

 

(e)       Prior to exercise of this Warrant, the Holder hereof shall not, by
reason of by being a Holder, be entitled to any rights of a stockholder with
respect to the Warrant Shares

 

[Remainder of page intentionally left blank, signature page follows]

 

Page B-7 

 

 

In witness whereof, the Company has caused this Warrant to be duly executed by
its authorized officer as of the date first indicated above.

 

  Monaker Group, Inc.         By:     Name: William Kerby   Title: Chairman and
Chief Executive Officer

 

 

 

 

FORM OF EXERCISE NOTICE

 

The undersigned Holder hereby irrevocably elects to purchase
                     shares of Common Stock pursuant to the attached Warrant.
Capitalized terms used herein and not otherwise defined have the respective
meanings set forth in the Warrant.

 

(1) The undersigned Holder hereby exercises its right to purchase
                     Warrant Shares pursuant to the Warrant.

 

(2) The Holder intends that payment of the Exercise Price shall be made as
(check one):

 

                     “Cash Exercise” under Section 10

 

                              “Cashless Exercise” under Section 10

 

(3) If the holder has elected a Cash Exercise, the holder shall pay the sum of
$____________ to the Company in accordance with the terms of the Warrant.

 

(4) Pursuant to this Exercise Notice, the Company shall deliver to the holder
                     Warrant Shares in accordance with the terms of the Warrant.

 

Dated ______________ __, _____ Name of Holder:         (Print)               By:
    Its:     (Signature must conform in all respects to name of holder as
specified on the face of the Warrant)

 

 

 

 

Warrant Shares Exercise Log

 

Date

Number of Warrant

Shares Available

to be Exercised

Number of Warrant

Shares Exercised

Number of Warrant

Shares Remaining

to be Exercised

       

 

 

 

 

FORM OF ASSIGNMENT

 

[To be completed and signed only upon transfer of Warrant]

 

FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
                             the right represented by the attached Warrant to
purchase                  shares of Common Stock to which such Warrant relates
and appoints                              attorney to transfer said right on the
books of the Company with full power of substitution in the premises.

 

Dated: __________ __, _______         (Signature must conform in all respects to
name of holder as specified on the face of the Warrant)

 

  Address of Transferee                 Attest:      

 

 

 

 

 

EXHIBIT C

 

SELLING SHAREHOLDER QUESTIONNAIRE

 

MONAKER GROUP, INC.

 

Questionnaire for Selling Shareholder

 

This questionnaire is necessary to obtain information to be used by Monaker
Group, Inc. (the “Company”) to complete a Registration Statement (the
“Registration Statement”) covering the resale of certain shares of Company
Common Stock currently outstanding and/or of certain shares of Company Common
Stock to be issued upon exercise of currently outstanding warrants to purchase
Company Common Stock. Please complete and return this questionnaire to The Loev
Law Firm, PC, the Company’s legal counsel, to the attention of David M. Loev
either by mail to 6300 West Loop South, Suite 280, Bellaire, Texas 77401, by
email at dloev@loevlaw.com, or by fax to (713) 524-4122. Please return the
questionnaire by ___________, 2017 or sooner, if possible. Call David M. Loev at
(713) 524-4110 with questions.

 

FAILURE TO RETURN THE QUESTIONNAIRE MAY RESULT IN THE EXCLUSION OF YOUR NAME AND
SHARES FROM THE REGISTRATION STATEMENT.

 

Please answer all questions. If the answer to any question is “None” or “Not
Applicable,” please so state.

 

If there is any question about which you have any doubt, please set forth the
relevant facts in your answer.

 

1.Please correct your name and/or address if not correct below

 

  Name:    

 

  Address:        

 

 

*See Appendix A for definitions

  

 Page C-1

 

 

2.Please state the total number of currently outstanding shares of Company
Common Stock that you beneficially own* and the form of ownership and the date
that you acquired such stock. Include shares registered in your name
individually or jointly with others and shares held in the name of a bank,
broker, nominee, depository or in “street name” for your account. (DO NOT list
options and warrants. See Question #3).

 

3.Please list any outstanding options and warrants to purchase Company Common
Stock that you beneficially own*, including (i) the number of shares of Company
Common Stock to be issued upon the exercise of such option or warrant, (ii) the
date such option or warrant is exercisable, (iii) the expiration date and (iv)
the exercise price per share of EACH such option and warrant.

 

Number of Shares
Covered by Option or
Warrant

Date Exercisable

Exercise Price

Expiration Date                                                

 

4.Please list the number of shares of Common Stock listed under Question #2
above that you wish to include in the Registration Statement.

 

 

*See Appendix A for definitions

  

 Page C-2

 

 

5.Please list the number of shares of Common Stock underlying warrants listed
under Question #3 above that, upon exercise of such warrants, you wish to
include in the Registration Statement.

 

6.If you are a limited liability company or limited partnership, please name the
managing member or general partner and each person controlling such managing
member or general partner.

 

7.If you are an entity, please identify the natural person(s) who exercise sole
or shared voting power* and/or sole or shared investment power* with regard to
the shares listed under Question #2 and Question #3.

 

8.Please advise whether you are a registered broker-dealer or an affiliate*
thereof. If you are an affiliate of a registered broker-dealer, please explain
the nature of the affiliation and disclose whether you acquired the shares in
the ordinary course of business and whether at the time of the acquisition you
had any plans or proposals, directly or with any other person, to distribute the
shares listed under Question #2 and Question #3.

 

9.List below the nature of any position, office or other material relationship
that you have, or have had within the past three years, with the Company or any
of its predecessors or affiliates*.

 

 

*See Appendix A for definitions

 

 Page C-3

 

 

10.If you expressly wish to disclaim any beneficial ownership* of any shares
listed under Question #2 for any reason in the Registration Statement, indicate
below the shares and circumstances for disclaiming such beneficial ownership*.

 

11.With respect to the shares that you wish to include in the Registration
Statement, please list any party that has or may have secured a lien, security
interest or any other claim relating to such shares, and please give a full
description of such claims.

 

12.Please review Appendix B “Plan of Distribution.” Please identify and describe
any method of distribution, other than described in Appendix B, that you plan on
using to sell your shares of the Company’s Common Stock. By signing below you
agree to distribute your shares of the Company’s Common Stock as described in
Appendix B and this Item 12 and to notify the Company of any plan to distribute
the Company’s Common Stock that is not described in Appendix B or herein under
Item 12.

 

The undersigned, a Selling Shareholder of the Company, hereby furnishes the
foregoing information for use by the Company in connection with the preparation
of the Registration Statement. The undersigned will notify [________], at the
address specified above, in writing immediately of any changes in the foregoing
answers that should be made as a result of any developments occurring prior to
the time that all the shares of Common Stock of the Company are sold pursuant to
the Registration Statement referred to above. Otherwise, the Company is to
understand that the above information continues to be, to the best of the
undersigned’s knowledge, information and belief, complete and correct.

 

Dated: ___________ __, 20___      

 

  By:       Name:     Its:    

 

 

*See Appendix A for definitions 

  

 Page C-4

 

 

APPENDIX A
To Exhibit C

 

Certain Terms Used in Questionnaire

 

AFFILIATE

 

An “affiliate” of a company is a person that directly, or indirectly through one
or more intermediaries, controls or is controlled by, or is under common control
with, such company.

 

BENEFICIAL OWNERSHIP

 

A person “beneficially owns” a security if such person, directly or indirectly,
has or shares voting power or investment power of such security, whether through
a contract, arrangement, understanding, relationship or otherwise. A person is
also the beneficial owner of a security if he has the right to acquire
beneficial ownership at any time within 60 days through the exercise of any
option, warrant or right, or the power to revoke a trust, discretionary account
or similar arrangement.

 

INVESTMENT POWER

 

“Investment power” includes the power to dispose, or to direct the disposition
of, a security.

 

VOTING POWER

 

“Voting power” includes the power to vote, or to direct the voting of, a
security.

 

 Page C-5

 

 

APPENDIX B

To Exhibit C

 

PLAN OF DISTRIBUTION

 

We are registering for resale by the selling shareholders and certain
transferees a total of _________ shares of Common Stock, of which _______ shares
are issued and outstanding and up to ______shares are issuable upon exercise of
warrants. We will not receive any of the proceeds from the sale by the selling
shareholders of the shares of common stock, although we may receive up to $_____
upon the exercise of all of the warrants by the selling shareholders. We will
bear all fees and expenses incident to our obligation to register the shares of
Common Stock. If the shares of Common Stock are sold through broker-dealers or
agents, the selling shareholder will be responsible for any compensation to such
broker-dealers or agents.

 

The selling shareholders may pledge or grant a security interest in some or all
of the shares of Common Stock owned by them and, if they default in the
performance of their secured obligations, the pledgees or secured parties may
offer and sell the shares of Common Stock from time to tie pursuant to this
prospectus.

 

The selling shareholders also may transfer and donate the shares of Common Stock
in other circumstances in which case the transferees, donees, pledgees or other
successors in interest will be the selling beneficial owners for purposes of
this prospectus.

 

The selling shareholders will sell their shares of Common Stock subject to the
following:

 

●all of a portion of the shares of Common Stock beneficially owned by the
selling shareholders or their perspective pledgees, donees, transferees or
successors in interest, may be sold on the OTCQB, any national securities
exchange or quotation service on which the shares of our Common Stock may be
listed or quoted at the time of sale, in the over-the counter market, in
privately negotiated transactions, through the writing of options, whether such
options are listed on an options exchange or otherwise, short sales or in a
combination of such transactions;

 

●each sale may be made at market price prevailing at the time of such sale, at
negotiated prices, at fixed prices or at carrying prices determined at the time
of sale;

 

●some or all of the shares of Common Stock may be sold through one or more
broker-dealers or agents and may involve crosses, block transactions or hedging
transactions. The selling shareholders may enter into hedging transactions with
broker-dealers or agents, which may in turn engage in short sales of the Common
Stock in the course of hedging in positions they assume. The selling
shareholders may also sell shares of Common Stock short and deliver shares of
Common Stock to close out short positions or loan or pledge shares of Common
Stock to broker-dealers or agents that in turn may sell such shares; and

 

●in connection with such sales through one or more broker-dealers or agents,
such broker-dealers or agents may receive compensation in the form of discounts,
concessions or commissions from the selling shareholders and may receive
commissions from the purchasers of the shares of Common Stock for whom they act
as broker-dealer or agent or to whom they sell as principal (which discounts,
concessions or commissions as to particular broker-dealers or agents may be in
excess of those customary in the types of transaction involved). Any
broker-dealer or agent participating in any such sale may be deemed to be an
“underwriter” within the meaning of the Securities Act and will be required to
deliver a copy of this prospectus to any person who purchases any share of
Common Stock from or through such broker-dealer or agent. We have been advised
that, as of the date hereof, none of the selling shareholders have made any
arrangements with any broker-dealer or agent for the sale of their shares of
common stock.

 

 Page C-6

 

 

The selling shareholder and any broker-dealer participating in the distribution
of the shares of Common Stock may be deemed to be “underwriters” within the
meaning of the Securities Act, and any profits realized by the selling
shareholders and any commissions paid, or any discounts or concessions allowed
to any such broker-dealer may be deemed to be underwriting commissions or
discounts under the Securities Act. In addition, any shares of Common Stock
covered by this prospectus which qualify for sale pursuant to Rule 144 may be
sold under Rule 144 rather than pursuant to this prospectus. A selling
shareholder may also transfer, devise or gift the shares of Common Stock by
other means not covered in this prospectus in which case the transferee, devisee
or giftee will be the selling shareholder under this prospectus.

 

If required at the time a particular offering of the shares of Common Stock is
made, a prospectus supplement or, if appropriate, a post-effective amendment to
the shelf registration statements of which this prospectus is a part, will be
distributed which will set forth the aggregate amount of shares of Common Stock
being offered and the terms of the offering, including the name or names of any
broker-deals or agents, any discounts, commissions or concessions allowed or
reallowed or paid to broker-dealers.

 

Under the securities laws of some states, the shares of Common Stock may be sold
in such states only through registered or licensed brokers or dealers. In
addition, in some states the shares of Common Stock may not be sold unless such
shares have been registered or qualified for sale in such state or an exemption
from registration or qualification is available and is complied with. There can
be no assurance that any selling shareholder will sell any or all of the shares
of Common Stock registered pursuant to the shelf registration statement, of
which this prospectus forms a part.

 

The selling shareholders and any other person participating in such distribution
will be subject to applicable provisions of the Exchange Act and the rules and
regulations thereunder, including, without limitation, Regulation M of the
Exchange Act, which may limit the timing of purchases and sales of any of the
shares of Common Stock by the selling shareholders and any other participating
person. Regulation M may also restrict the ability of any person engaged in the
distribution of the shares of Common Stock to engage in market-making activities
with respect to the shares of Common Stock. All of the foregoing may affect the
marketability of the shares of Common Stock and the ability of any person or
entity to engage in market-making activities with respect to the shares of
Common Stock.

 

We will bear all expenses of the registration of the shares of Common Stock
including, without limitation, Securities and Exchange Commission filing fees
and expenses of compliance with the state securities of “blue sky” laws. The
selling shareholders will pay all underwriting discounts and selling commissions
and expenses, brokerage fees and transfer taxes, as well as the fees and
disbursements of counsel to and experts for the selling shareholders, if any. We
will indemnify the selling shareholders against liabilities, including some
liabilities under the Securities Act, in accordance with the registration rights
agreement or the selling shareholder will be entitled to contribution. We will
be indemnified by the selling shareholders against civil liabilities, including
liabilities under the Securities Act that may arise from any written information
furnished to us by the selling shareholders for use in this prospectus, in
accordance with the related securities purchase agreement or will be entitled to
contribution. Once sold under this shelf registration statement, of which this
prospectus forms a part, the shares of Common Stock will be freely tradable in
the hands of persons other than our affiliates.

 

 Page C-7