EXHIBIT 10.1
 
SUBSCRIPTION AGREEMENT
 
This Subscription Agreement (this “Agreement”) is being delivered to the
purchaser identified on the signature page to this Agreement (the “Subscriber”)
in connection with its investment in the securities of Majesco Entertainment
Company, a Delaware corporation (the “Company”).  The Company is conducting a
private placement (the “Offering”) of up to Five Million Fifty Thousand Dollars
($5,050,000) (the “Minimum Offering Amount”) of units (the “Units”) at a
purchase price of $1.20 per Unit (the “Purchase Price”) with each Unit
consisting of (i) one share (the “Shares”) of the Company’s common stock, par
value $0.001 per share (the “Common Stock”) (or, at the election of any
Subscriber who, as a result of the ownership of the Common Stock would hold in
excess of 4.99% of the Company’s issued and outstanding Common Stock, shares of
Series C Convertible Preferred Stock (the “Preferred Shares”), par value $0.001
per share, which are convertible into shares of Common Stock (the “Conversion
Shares”), with such rights and designations as set forth in the form of
Certificate of Designation of Preferences, Rights and Limitations of Series C
Convertible Preferred Stock, attached hereto as Exhibit A, (the “Series C
Certificate of Designation”) and (ii) a thirty-six (36) month warrant, in the
form attached hereto as Exhibit B (the “Warrant”) to purchase one share of
Common Stock (the “Warrant Shares”) at an exercise price of $1.40 per
share.  For purposes of this Agreement, the term “Securities” shall refer to the
Shares, the Preferred Shares, the Conversion Shares, the Warrants and the
Warrant Shares.
 
IMPORTANT INVESTOR NOTICES
 
NO OFFERING LITERATURE OR ADVERTISEMENT IN ANY FORM MAY BE RELIED UPON IN THE
OFFERING OF THESE SECURITIES EXCEPT FOR THIS SUBSCRIPTION AGREEMENT AND ANY
SUPPLEMENTS HERETO, AND NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY
REPRESENTATIONS EXCEPT THOSE CONTAINED HEREIN.
 
UNTIL SUCH TIME AS A FORM 8-K IS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION DISCLOSING THE TRANSACTIONS CONTEMPLATED HEREBY, THIS AGREEMENT IS
CONFIDENTIAL AND THE CONTENTS HEREOF MAY NOT BE REPRODUCED, DISTRIBUTED OR
DIVULGED BY OR TO ANY PERSONS OTHER THAN THE RECIPIENT OR ITS REPRESENTATIVE,
ACCOUNTANT OR LEGAL COUNSEL, WITHOUT THE PRIOR WRITTEN CONSENT OF THE
COMPANY.  EACH PERSON WHO ACCEPTS DELIVERY OF THIS AGREEMENT, ACKNOWLEDGES AND
AGREES TO THE FOREGOING RESTRICTIONS.
 
THIS AGREEMENT DOES NOT CONSTITUTE AN OFFER OR SOLICITATION OF AN OFFER TO ANY
PERSON OR IN ANY JURISDICTION WHERE SUCH OFFER OR SOLICITATION IS UNLAWFUL OR
NOT AUTHORIZED.  EACH PERSON WHO ACCEPTS DELIVERY OF THIS AGREEMENT AGREES TO
RETURN IT AND ALL RELATED DOCUMENTS IF SUCH PERSON DOES NOT PURCHASE ANY OF THE
SECURITIES DESCRIBED HEREIN.
 
NEITHER THE DELIVERY OF THIS AGREEMENT AT ANY TIME NOR ANY SALE OF SECURITIES
HEREUNDER SHALL IMPLY THAT INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO ITS DATE.  THE COMPANY WILL EXTEND TO EACH PROSPECTIVE
SUBSCRIBER (AND TO ITS REPRESENTATIVE, ACCOUNTANT OR LEGAL COUNSEL, IF ANY) THE
OPPORTUNITY, PRIOR TO ITS PURCHASE OF UNITS, TO ASK QUESTIONS OF AND RECEIVE
ANSWERS FROM THE COMPANY CONCERNING THE OFFERING AND TO OBTAIN ADDITIONAL
INFORMATION, TO THE EXTENT THE COMPANY POSSESSES THE SAME OR CAN ACQUIRE IT
WITHOUT UNREASONABLE EFFORT OR EXPENSE, IN ORDER TO VERIFY THE ACCURACY OF THE
INFORMATION SET FORTH HEREIN.  ALL SUCH ADDITIONAL INFORMATION SHALL ONLY BE
PROVIDED IN WRITING AND IDENTIFIED AS SUCH BY THE COMPANY THROUGH ITS DULY
AUTHORIZED OFFICERS AND/OR DIRECTORS ALONE; NO ORAL INFORMATION OR INFORMATION
PROVIDED BY ANY BROKER OR THIRD PARTY MAY BE RELIED UPON.
 
NO REPRESENTATIONS, WARRANTIES OR ASSURANCES OF ANY KIND ARE MADE OR SHOULD BE
INFERRED WITH RESPECT TO THE ECONOMIC RETURN, IF ANY, THAT MAY ACCRUE TO AN
INVESTOR IN THE COMPANY.
 

 
 

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FOR RESIDENTS OF ALL STATES
 
THIS OFFERING IS BEING MADE SOLELY TO “ACCREDITED INVESTORS,” AS SUCH TERM IS
DEFINED IN RULE 501 OF REGULATION D UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE “SECURITIES ACT”).  THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OR THE SECURITIES LAWS OF ANY STATE AND WILL BE OFFERED AND SOLD
IN RELIANCE UPON THE EXEMPTION FROM REGISTRATION AFFORDED BY SECTION 4(a)(2)
THEREUNDER AND REGULATION D (RULE 506) OF THE SECURITIES ACT AND CORRESPONDING
PROVISIONS OF STATE SECURITIES LAWS.
 
THE SECURITIES OFFERED HEREBY ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND
RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE
SECURITIES ACT AND APPLICABLE STATE LAWS, PURSUANT TO REGISTRATION OR EXEMPTION
THEREFROM.  SUBSCRIBERS SHOULD BE AWARE THAT THEY WILL BE REQUIRED TO BEAR THE
FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.
 
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC,
ANY STATE SECURITIES COMMISSION OR ANY OTHER REGULATORY AUTHORITY, NOR HAVE ANY
OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF THIS OFFERING
OR THE ACCURACY OR ADEQUACY OF THIS AGREEMENT.  ANY REPRESENTATION TO THE
CONTRARY IS UNLAWFUL.
 
PROSPECTIVE SUBSCRIBERS SHOULD NOT CONSTRUE THE CONTENTS OF THIS AGREEMENT AS
INVESTMENT, LEGAL, BUSINESS, OR TAX ADVICE.  EACH SUBSCRIBER SHOULD CONTACT HIS,
HER OR ITS OWN ADVISORS REGARDING THE APPROPRIATENESS OF THIS INVESTMENT AND THE
TAX CONSEQUENCES THEREOF, WHICH MAY DIFFER DEPENDING ON A SUBSCRIBER’S
PARTICULAR FINANCIAL SITUATION.  IN NO EVENT SHOULD THIS AGREEMENT BE DEEMED OR
CONSIDERED TO BE TAX ADVICE PROVIDED BY THE COMPANY.
 
FOR FLORIDA RESIDENTS ONLY
 
THE SECURITIES REFERRED TO HEREIN WILL BE SOLD TO, AND ACQUIRED BY, THE HOLDER
IN A TRANSACTION EXEMPT UNDER § 517.061 OF THE FLORIDA SECURITIES ACT.  THE
SECURITIES HAVE NOT BEEN REGISTERED UNDER SAID ACT IN THE STATE OF FLORIDA.  IN
ADDITION, ALL FLORIDA RESIDENTS SHALL HAVE THE PRIVILEGE OF VOIDING THE PURCHASE
WITHIN THREE (3) DAYS AFTER THE FIRST TENDER OF CONSIDERATION IS MADE BY SUCH
SUBSCRIBER TO THE COMPANY, AN AGENT OF THE COMPANY, OR AN ESCROW AGENT OR WITHIN
THREE DAYS AFTER THE AVAILABILITY OF THAT PRIVILEGE IS COMMUNICATED TO SUCH
SUBSCRIBER, WHICHEVER OCCURS LATER.
 

 

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1.           SUBSCRIPTION AND PURCHASE PRICE
 
(a)           Subscription.  Subject to the conditions set forth in Section 2
hereof, the Subscriber hereby subscribes for and agrees to purchase the number
of Units indicated on page 24 hereof on the terms and conditions described
herein.
 
(b)           Purchase of Units.  The Subscriber understands and acknowledges
that the purchase price to be remitted to the Company in exchange for the Units
shall be set at $1.20 per Unit, for an aggregate purchase price as set forth on
page 24 hereof (the “Aggregate Purchase Price”), which shall be equivalent to
$1.20 per Share, exclusive of the value of the Warrants. The Subscriber’s
delivery of this Agreement to the Company shall be accompanied by payment for
the Units subscribed for hereunder, payable in United States Dollars, by wire
transfer of immediately available funds delivered to Signature Bank, as escrow
agent (the “Escrow Agent”) pursuant to the terms of the escrow agreement (the
“Escrow Agreement”) in accordance with the wire instructions set forth on
Exhibit C attached hereto. The Subscriber understands and agrees that, subject
to Section 2 and applicable laws, by executing this Agreement, it is entering
into a binding agreement. Additionally, the Company shall deposit certificates
evidencing the Shares (and Preferred Shares) and Warrants so subscribed for with
the Company’s corporate secretary, as escrow agent for the Securities (the
“Securities Escrow Agent”).  The Subscriber understands and agrees that, subject
to Section 2 and applicable laws, by executing this Agreement, it is entering
into a binding agreement. Notwithstanding anything to the contrary herein, the
Securities shall be held by the Securities Escrow Agent and the Aggregate
Purchase Price shall be held by the Escrow Agent  in accordance with Section
5(r) herein and the terms of the Escrow Agreement.
 
2.           ACCEPTANCE, OFFERING TERM AND CLOSING PROCEDURES
 
(a)           Acceptance. Subject to full, faithful and punctual performance and
discharge by the Company of all of its duties, obligations and responsibilities
as set forth in this Agreement, the Series C Certificate of Designation, the
Warrant , the Registration Rights Agreement (as defined below), the Escrow
Agreement and any other agreement entered into between the Subscriber and the
Company relating to this subscription (collectively, the "Transaction
Documents") to be performed or discharged on or prior to the Closing in which
such Subscriber participates, the Subscriber shall be legally bound to purchase
the Units  pursuant to the terms and conditions set forth in this
Agreement.  For the avoidance of doubt, upon the occurrence of the failure by
the Company to fully, faithfully and punctually perform and discharge any of its
duties, obligations and responsibilities as set forth in any of the Transaction
Documents, which shall have been performed or otherwise discharged prior to the
Closing (as defined below), the Subscriber may, on or prior to the Closing, at
its sole and absolute discretion, elect not to purchase the Units  and provide
instructions to the Company to receive the full and immediate refund of the
Aggregate Purchase Price.  In the event the Closing does not take place because
of (i) the election not to purchase the Units  by the Subscriber or (ii) the
failure to effectuate the Initial Closing (as defined below) on or prior to
April 30, 2015 (unless extended in the discretion of the Board of Directors) for
any reason or no reason, this Agreement and any other Transaction Documents
shall thereafter be terminated and have no force or effect, and the parties
shall take all steps, including the execution of instructions to the Company, to
ensure that the Aggregate Purchase Price shall promptly be returned or caused to
be returned to the Subscriber without interest thereon or deduction therefrom.
 
(b)           Closing.  The closing of the purchase and sale of the Units
hereunder (the “Closing”) shall take place at such time and place as determined
by the Company and may take place in one of more closings.  Closings shall take
place on a Business Day promptly following the satisfaction of the conditions
set forth in Section 6 below, as determined by the Company (the “Closing Date”).
“Business Day” shall mean from the hours of 9:00 a.m. (Eastern Time) through
5:00 p.m. (Eastern Time) of a day other than a Saturday, Sunday or other day on
which commercial banks in New York, New York are authorized or required to be
closed. The Units purchased by the Subscriber will be delivered by the Company
promptly following the Final Closing Date (as defined herein) of the
Offering.  The initial closing shall be referred to as the ‘Initial Closing” and
may be held upon receipt and acceptance of subscriptions equal to at least the
Minimum Offering Amount prior to April 30, 2015. The date of the Initial Closing
is sometimes referred to as the “Initial Closing Date.”  Subsequent closings
(each a “Subsequent Closing”) will be held until the earlier to occur of: (i)
termination of the Offering by the Company, and (ii) May 15, 2015.  The Offering
may be extended up to May 29, 2015 (the “Final Closing” and such date of the
Final Closing, the “Final Closing Date”), without additional notice to
Subscribers.  Officers, directors and affiliates of the Company and the
placement agents, if any, may purchase Units in the Offering.

 
 

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(c)           Following Acceptance or Rejection.  The Subscriber acknowledges
and agrees that this Agreement and any other documents delivered in connection
herewith will be held by the Company. Prior to the Company’s execution, in the
event that this Agreement is not accepted by the Company for whatever reason,
which the Company expressly reserves the right to do, this Agreement, the
Aggregate Purchase Price received (without interest thereon) and any other
documents delivered in connection herewith will be returned to the Subscriber at
the address of the Subscriber as set forth in this Agreement. If this Agreement
is accepted by the Company, the Company is entitled to treat the Aggregate
Purchase Price received as an interest free loan to the Company until such time
as the Subscription is accepted.
 
(d)           Favored Nations Provision.  For as long as any Subscriber holds
any Securities, other than in connection with (i) the issuance of shares of
Common Stock or options to purchase Common Stock issued to directors, officers,
employees or consultants of the Company pursuant to any Approved Stock Plan,
provided that the exercise price of any such options is not lowered after
issuance by subsequent amendment thereof, none of such options are amended
subsequent to issuance to increase the number of shares issuable thereunder and
none of the terms or conditions of any such options are subsequent to issuance
otherwise materially changed in any manner that adversely affects any of the
Subscribers; (ii) the issuance of shares of Common Stock issued upon the
conversion or exercise of Convertible Securities or contractual agreements
(other than options to purchase Common Stock or other equity incentive awards
issued pursuant to an Approved Stock Plan that are covered by clause (i) above)
issued prior to the date hereof, provided that the conversion price of any such
Convertible Securities (other than options to purchase Common Stock issued
pursuant to an Approved Stock Plan that are covered by clause (i) above) is not
lowered by subsequent amendment, none of such Convertible Securities (other than
standard options to purchase Common Stock issued pursuant to an Approved Stock
Plan that are covered by clause (i) above) are subsequently amended to increase
the number of shares issuable thereunder and none of the terms or conditions of
any such Convertible Securities (other than options to purchase Common Stock
issued pursuant to an Approved Stock Plan that are covered by clause (i) above)
are otherwise materially changed in any manner that adversely affects any of the
Subscribers; (iii) the shares of Common Stock issuable upon conversion of the
Preferred Shares or the Warrants; and (iv) the issuances set forth on Schedule
2(d) (collectively, the foregoing (i) through (iv) are “Excepted Issuances”), if
at any time the Company shall  issue any Common Stock or securities convertible
into or exercisable for shares of Common Stock (or modify any of the foregoing
which may be outstanding) to any person or entity at a price per share or
conversion or exercise price per share which shall be less than $1.20 per share,
being the per share price of the Shares and Preferred Shares hereunder
(disregarding any value attributable to the Warrants) or as in effect at such
time, without consent of the Lead Investor (as defined herein) (the “Lower Price
Issuance”) and other than with regard to Excepted Issuances, then the Company
shall issue the Subscriber such number of additional shares of Common Stock to
reflect such lower price for the Shares such that the Subscriber shall hold such
number of Shares, in total, had Subscriber paid a per Unit price equal to the
Lower Price Issuance (with any fractional Shares rounded up to the nearest whole
number).  Common Stock issued or issuable by the Company for no consideration or
for consideration that cannot be determined at the time of issue will be deemed
issuable or to have been issued for $0.001 per share of Common Stock. 
Notwithstanding the foregoing, any Subscriber who elected to receive Units
consisting of Preferred Shares and Warrants shall not receive additional
Preferred Shares and all “Favored Nations” rights of the Preferred Shares shall
be governed by the Series C Certificate of Designation.  Notwithstanding
anything herein or in any other agreement to the contrary, the Company shall
only be required to make a single adjustment with respect to any individual
Lower Price Issuance, regardless of the existence of multiple basis
therefore.    For purposes of this Section 2(d), “Approved Stock Plan” shall
mean any employee benefit plan which has been approved by the board of directors
of the Company on or prior to the date hereof pursuant to which shares of Common
Stock and standard options to purchase Common Stock may be issued to any
employee, officer or director for services provided to the Company in their
capacity as such (including, without limitation, any adjustments to the number
of shares reserved for issuance thereunder as a result of the operation of any
evergreen provisions), “Convertible Securities” shall mean any stock or other
security (other than Options) that is at any time and under any circumstances,
directly or indirectly, convertible into, exercisable or exchangeable for, or
which otherwise entitles the holder thereof to acquire, any shares of Common
Stock, and “Options” shall mean any rights, warrants or options to subscribe for
or purchase shares of Common Stock or Convertible Securities.

 
 

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(e)           Extraordinary Events Regarding Common Stock.  In the event that
the Company shall (a) issue additional shares of Common Stock as a dividend or
other distribution on outstanding Common Stock, (b) subdivide its outstanding
shares of Common Stock, or (c) combine its outstanding shares of the Common
Stock into a smaller number of shares of Common Stock, then, in each such event,
the Purchase Price shall, simultaneously with the happening of such event, be
adjusted by multiplying the then Purchase Price by a fraction, the numerator of
which shall be the number of shares of Common Stock outstanding immediately
prior to such event and the denominator of which shall be the number of shares
of Common Stock outstanding immediately after such event, and the product so
obtained shall thereafter be the Purchase Price then in effect. The Purchase
Price, as so adjusted, shall be readjusted in the same manner upon the happening
of any successive event or events described herein. The number of Units that the
Subscriber shall thereafter be entitled to receive (including number of shares
of Conversion Shares or Warrant Shares the Subscriber may thereafter be entitled
to receive upon conversion of the Preferred Shares or exercise of the Warrants,
as the case may be) shall be adjusted to a number determined by multiplying the
number of shares of Common Stock that would otherwise (but for the provisions of
this Section) be issuable on such conversion or exercise by a fraction of which
(a) the numerator is the Purchase Price that would otherwise (but for the
provisions of this Section) be in effect, and (b) the denominator is the
Purchase Price then in effect.

(f)           Certificate as to Adjustments.  In each case of any adjustment or
readjustment in (i) the Shares, (ii) the Preferred Shares, (iii) the number of
Conversion Shares issuable upon conversion of the Preferred Shares (iii) the
number of Warrant Shares issuable upon the exercise of the Warrants, (iv) the
exercise price of the Warrants and/or (v) the conversion price of the Preferred
Shares, the Company, at its expense, will promptly cause its Chief Financial
Officer or other appropriate designee to compute such adjustment or readjustment
in accordance with the terms hereof and of the Series C Certificate of
Designation or the Warrant, as applicable, and prepare a certificate setting
forth such adjustment or readjustment and showing in detail the facts upon which
such adjustment or readjustment is based. The Company will forthwith mail a copy
of each such certificate to the Subscriber. To the extent any such certificate
contains material non-public information, the Company shall, no later than the
first Business Day after the date of delivery of such certificate to the
Subscriber, include such material non-public information in a Current Report on
Form 8-K filed with the United States Securities and Exchange Commission (the
“SEC”).  From and after the filing of such Form 8-K, the Company shall have
disclosed all material non-public information (if any) delivered to the
Subscriber by the Company or any of its Subsidiaries, or any of their respective
officers, directors, employees or agents in connection with the transactions
described in such certificate.
 
3.           THE SUBSCRIBER’S REPRESENTATIONS, WARRANTIES AND COVENANTS
 
Each Subscriber, severally and not jointly, hereby acknowledges, agrees with and
represents, warrants and covenants to the Company, as follows:
 
(a)           The Subscriber has full power and authority to enter into this
Agreement, the execution and delivery of which has been duly authorized, if
applicable, and this Agreement constitutes a valid and legally binding
obligation of the Subscriber, except as may be limited by bankruptcy,
reorganization, insolvency, moratorium and similar laws of general application
relating to or affecting the enforcement of rights of creditors, and except as
enforceability of the obligations hereunder are subject to general principles of
equity (regardless of whether such enforceability is considered in a proceeding
in equity or law).
 
(b)           The Subscriber acknowledges its understanding that the Offering
and sale of the Securities is intended to be exempt from registration under the
Securities Act, by virtue of Section 4(a)(2) of the Securities Act and the
provisions of Regulation D promulgated thereunder (“Regulation D”).  In
furtherance thereof, the Subscriber represents and warrants to the Company and
its affiliates as follows:
 
(i)           The Subscriber realizes that the basis for the exemption from
registration may not be available if, notwithstanding the Subscriber’s
representations contained herein, the Subscriber is merely acquiring the
Securities for a fixed or determinable period in the future, or for a market
rise, or for sale if the market does not rise. The Subscriber does not have any
such intention.
 

 
 

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(ii)           The Subscriber realizes that the basis for exemption would not be
available if the Offering is part of a plan or scheme to evade registration
provisions of the Securities Act or any applicable state or federal securities
laws, except sales pursuant to a registration statement or sales that are
exempted under the Securities Act.
 
(iii)           The Subscriber is acquiring the Securities solely for the
Subscriber’s own beneficial account, for investment purposes, and not with a
view towards, or resale in connection with, any distribution of the Securities.
 
(iv)           The Subscriber has the financial ability to bear the economic
risk of the Subscriber’s investment, has adequate means for providing for its
current needs and contingencies, and has no need for liquidity with respect to
an investment in the Company.
 
(v)           The Subscriber and the Subscriber’s attorney, accountant,
purchaser representative and/or tax advisor, if any (collectively, the
“Advisors”) has such knowledge and experience in financial and business matters
as to be capable of evaluating the merits and risks of a prospective investment
in the Securities. If other than an individual, the Subscriber also represents
it has not been organized solely for the purpose of acquiring the Securities.
 
(vi)           The Subscriber (together with its Advisors, if any) has received
all documents requested by the Subscriber, if any, and has carefully reviewed
them and understands the information contained therein, prior to the execution
of this Agreement.
 
(c)           The Subscriber is not relying on the Company or any of its
employees, agents, sub-agents or advisors with respect to the legal, tax,
economic and related considerations involved in this investment. The Subscriber
has relied on the advice of, or has consulted with, only its Advisors. Each
Advisor, if any, has disclosed to the Subscriber in writing (a copy of which is
annexed to this Agreement) the specific details of any and all past, present or
future relationships, actual or contemplated, between the Advisor and the
Company or any affiliate or sub-agent thereof.
 
(d)           The Subscriber has carefully considered the potential risks
relating to the Company and a purchase of the Securities, and fully understands
that the Securities are a speculative investment that involves a high degree of
risk of loss of the Subscriber’s entire investment. Among other things, the
Subscriber has carefully considered each of the risks described under the
heading “Risk Factors” and “Forward Looking Statements” in the Company’s SEC
Filings (as defined below) and any additional disclosures in the nature of Risk
Factors described herein.
 
 (e)           The Subscriber will not sell or otherwise transfer any Securities
without registration under the Securities Act or an exemption therefrom, and
fully understands and agrees that the Subscriber must bear the economic risk of
its purchase because, among other reasons, the Securities have not been
registered under the Securities Act or under the securities laws of any state
and, therefore, cannot be resold, pledged, assigned or otherwise disposed of
unless they are subsequently registered under the Securities Act and under the
applicable securities laws of such states, or an exemption from such
registration is available.  In particular, the Subscriber is aware that the
Securities are “restricted securities,” as such term is defined in Rule 144
promulgated under the Securities Act (“Rule 144”), and they may not be sold
pursuant to Rule 144 unless all of the conditions of Rule 144 are met. The
Subscriber also understands that the Company is under no obligation to register
the Securities on behalf of the Subscriber or to assist the Subscriber in
complying with any exemption from registration under the Securities Act or
applicable state securities laws. The Subscriber understands that any sales or
transfers of the Securities are further restricted by state securities laws and
the provisions of this Agreement.
 
(f)           No oral or written representations or warranties have been made,
or information furnished, to the Subscriber or its Advisors, if any, by the
Company or any of its officers, employees, agents, sub-agents, affiliates,
advisors or subsidiaries in connection with the Offering, other than any
representations of the Company contained herein, and in subscribing for the
Units the Subscriber is not relying upon any representations other than those
contained herein.
 

 
 

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(g)           The Subscriber’s overall commitment to investments that are not
readily marketable is not disproportionate to the Subscriber’s net worth, and an
investment in the Securities will not cause such overall commitment to become
excessive.
 
(h)           The Subscriber understands and agrees that the certificates for
the Securities shall bear substantially the following legend:
 
“[NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE
BEEN][THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN] REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED
(I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL TO
THE HOLDER (IF REQUESTED BY THE COMPANY), IN A FORM REASONABLY ACCEPTABLE TO THE
COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD OR
ELIGIBLE TO BE SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID
ACT.  NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION
WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED
BY THE SECURITIES.”
 
 (i)           Certificates evidencing Securities shall not be required to
contain the legend set forth in Section 3(h) above or any other legend (i) while
a registration statement covering the resale of such Securities is effective
under the Securities Act, (ii) following any sale of such Securities pursuant to
Rule 144 (assuming the transferor is not an affiliate of the Company), (iii) if
such Securities are eligible to be sold, assigned or transferred under Rule 144
and the Subscriber is not an affiliate of the Company (provided that the
Subscriber provides the Company with reasonable assurances that such Securities
are eligible for sale, assignment or transfer under Rule 144 which shall not
include an opinion of the Subscriber’s counsel), (iv) in connection with a sale,
assignment or other transfer (other than under Rule 144), provided that the
Subscriber provides the Company with an opinion of counsel (at the expense of
the Company), in a  form generally acceptable to the Company, to the effect that
such sale, assignment or transfer of the Securities may be made without
registration under the applicable requirements of the Securities Act or (v) if
such legend is not required under applicable requirements of the Securities Act
(including, without limitation, controlling judicial interpretations and
pronouncements issued by the SEC).  If a legend is not required pursuant to the
foregoing, the Company shall no later than three (3) business days following the
delivery by the Subscriber to the Company or the transfer agent (with notice to
the Company) of a legended certificate representing such Securities (endorsed or
with stock powers attached, signatures guaranteed, and otherwise in form
necessary to affect the reissuance and/or transfer, if applicable), together
with any other deliveries from the Subscriber as may be required above in this
Section 3(i), as directed by the Subscriber, either:  (A) provided that the
Company’s transfer agent is participating in the DTC Fast Automated Securities
Transfer Program and such Securities are shares of Shares, Conversion Shares or
Warrant Shares, credit the aggregate number of shares of Common Stock to which
the Subscriber shall be entitled to the Subscriber’s or its designee’s balance
account with DTC through its Deposit/Withdrawal at Custodian system or (B) if
the Company’s transfer agent is not participating in the DTC Fast Automated
Securities Transfer Program, issue and deliver (via reputable overnight courier)
to the Subscriber, a certificate representing such Securities that is free from
all restrictive and other legends, registered in the name of the Subscriber or
its designee.  The Company shall be responsible for any transfer agent fees or
DTC fees with respect to any issuance of Securities or the removal of any
legends with respect to any Securities in accordance herewith.
 
(j)           Neither the SEC nor any state securities commission has approved
the Securities or passed upon or endorsed the merits of the Offering. There is
no government or other insurance covering any of the Securities.
 
(k)           The Subscriber and its Advisors, if any, have had a reasonable
opportunity to ask questions of and receive answers from a person or persons
acting on behalf of the Company concerning the Offering and the business,
financial condition, results of operations and prospects of the Company, and all
such questions have been answered to the full satisfaction of the Subscriber and
its Advisors, if any.
 

 
 

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 (l)        (i)           In making the decision to invest in the Securities the
Subscriber has relied solely upon the information provided by the Company in the
Transaction Documents.  To the extent necessary, the Subscriber has retained, at
its own expense, and relied upon appropriate professional advice regarding the
investment, tax and legal merits and consequences of this Agreement and the
purchase of the Securities hereunder.  The Subscriber disclaims reliance on any
statements made or information provided by any person or entity in the course of
Subscriber’s consideration of an investment in the Securities other than the
Transaction Documents.
 
(ii)           The Subscriber represents and warrants that: (i) the Subscriber
was contacted regarding the sale of the Securities by the Company (or an
authorized agent or representative thereof) with whom the Subscriber had a prior
substantial pre-existing relationship  and (ii) no Securities were offered or
sold to it by means of any form of general solicitation or general advertising,
and in connection therewith, the Subscriber did not (A) receive or review any
advertisement, article, notice or other communication published in a newspaper
or magazine or similar media or broadcast over television or radio, whether
closed circuit, or generally available; or (B) attend any seminar meeting or
industry investor conference whose attendees were invited by any general
solicitation or general advertising; or (C) observe any website or filing of the
Company with the SEC in which any offering of securities by the Company was
described and as a result learned of any offering of securities by the Company.
 
(m)           The Subscriber has taken no action that would give rise to any
claim by any person for brokerage commissions, finders’ fees or the like
relating to this Agreement or the transactions contemplated hereby.
 
(n)           The Subscriber is not relying on the Company or any of its
employees, agents, or advisors with respect to the legal, tax, economic and
related considerations of an investment in the Securities, and the Subscriber
has relied on the advice of, or has consulted with, only its own Advisors.
 
(o)           The Subscriber acknowledges that any estimates or forward-looking
statements or projections furnished by the Company to the Subscriber were
prepared by the management of the Company in good faith, but that the attainment
of any such projections, estimates or forward-looking statements cannot be
guaranteed by the Company or its management and should not be relied upon.
 
(p)           No oral or written representations have been made, or oral or
written information furnished, to the Subscriber or its Advisors, if any, in
connection with the Offering that are in any way inconsistent with the
information contained herein.
 
(q)           (For ERISA plans only) The fiduciary of the ERISA plan (the
“Plan”) represents that such fiduciary has been informed of and understands the
Company’s investment objectives, policies and strategies, and that the decision
to invest “plan assets” (as such term is defined in ERISA) in the Company is
consistent with the provisions of ERISA that require diversification of plan
assets and impose other fiduciary responsibilities. The Subscriber or Plan
fiduciary (i) is responsible for the decision to invest in the Company; (ii) is
independent of the Company and any of its affiliates; (iii) is qualified to make
such investment decision; and (iv) in making such decision, the Subscriber or
Plan fiduciary has not relied primarily on any advice or recommendation of the
Company or any of its affiliates.
 
(r)           This Agreement is not enforceable by the Subscriber unless it has
been accepted by the Company, and the Subscriber acknowledges and agrees that
the Company reserves the right to reject any subscription for any reason.
 
(s)           The Subscriber is an “Accredited Investor” as defined in Rule
501(a) under the Securities Act. In general, an “Accredited Investor” is deemed
to be an institution with assets in excess of $5,000,000 or individuals with a
net worth in excess of $1,000,000 (excluding such person’s residence) or annual
income exceeding $200,000 or $300,000 jointly with his or her spouse.
 
(t)           The Subscriber, either alone or together with its representatives,
has such knowledge, sophistication and experience in business and financial
matters so as to be capable of evaluating the merits and risks of the Offering,
and has so evaluated the merits and risks of such investment. The Subscriber has
not authorized any person or entity to act as its Purchaser Representative (as
that term is defined in Regulation D of the General Rules and Regulations under
the Securities Act) in connection with the Offering. The Subscriber is able to
bear the economic risk of an investment in the Securities and, at the present
time, is able to afford a complete loss of such investment.
 

 
 

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4.           THE COMPANY’S REPRESENTATIONS, WARRANTIES AND COVENANTS
 
The Company hereby acknowledges, agrees with and represents, warrants and
covenants to each Subscriber as of the date hereof and as of the Closing Date,
except as set forth in the disclosure schedule attached hereto (the “Company
Disclosure Schedule”, which Company Disclosure Schedules shall be deemed a part
hereof and shall qualify any representation made herein only to the extent of
the disclosure contained in the corresponding section of the Disclosure
Schedules, as follows:
 
(a) Organization and Qualification.  The Company is a corporation duly
organized, validly existing and in good standing under the laws of its state of
incorporation.  The Company is duly qualified to do business, and is in good
standing in the states required due to (a) the ownership or lease of real or
personal property for use in the operation of the Company's business or (b) the
nature of the business conducted by the Company, except where the failure to so
qualify would not, individually or in the aggregate, have a Material Adverse
Effect.  The Company has all requisite power, right and authority to own,
operate and lease its properties and assets, to carry on its business as now
conducted, to execute, deliver and perform its obligations under this Agreement
and the other Transaction Documents to which it is a party, and to carry out the
transactions contemplated hereby and thereby, subject to the Required
Approvals.  All actions on the part of the Company and its officers and
directors necessary for the authorization, execution, delivery and performance
of this Agreement and the other Transaction Documents, the consummation of the
transactions contemplated hereby and thereby, and the performance of all of the
Company's obligations under this Agreement and the other Transaction Documents
have been taken or will be taken prior to the Closing.  This Agreement has been,
and the other Transaction Documents to which the Company is a party on the
Closing will be, duly executed and delivered by the Company, and this Agreement
is, and each of the other Transaction Documents to which it is a party on the
Closing will be, a legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except as may be
limited by bankruptcy, reorganization, insolvency, moratorium and similar laws
of general application relating to or affecting the enforcement of rights of
creditors, and except as enforceability of the obligations hereunder are subject
to general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or law).
 
(b)           Issuance of Securities.  The Securities to be issued to the
Subscriber pursuant to this Agreement and the applicable Transaction Documents,
when issued and delivered in accordance with the terms of this Agreement and the
applicable Transaction Documents, will be duly and validly issued and will be
fully paid and non-assessable and the Warrant Shares and the Conversion Shares,
when issued and delivered in accordance with Warrant and the Series C
Certificate of Designation, as applicable, and assuming proper payment (with
respect to the Warrant Shares) and exercise in accordance with the provisions of
such documents, will be duly and validly issued and will be fully paid and
non-assessable.
 
(c)           Authorization; Enforcement.  Except as set forth in Schedule 4(c),
the execution, delivery and performance of this Agreement and the other
Transaction Documents by the Company, and the consummation of the transactions
contemplated hereby and thereby, will not (a) constitute a violation (with or
without the giving of notice or lapse of time, or both) of any provision of any
law or any judgment, decree, order, regulation or rule of any court, agency or
other governmental authority applicable to the Company, (b) except as set forth
in Section 4(d) below, require any consent, approval or authorization of, or
declaration, filing or registration with, any person, (c) result in a default
(with or without the giving of notice or lapse of time, or both) under,
acceleration or termination of, or the creation in any party of the right to
accelerate, terminate, modify or cancel, any agreement, lease, note or other
restriction, encumbrance, obligation or liability to which the Company is a
party or by which it is bound or to which any assets of the Company are subject,
(d) result in the creation of any lien or encumbrance upon the assets of the
Company, or upon any shares of Common Stock, preferred stock or other securities
of the Company, (e) conflict with or result in a breach of or constitute a
default under any provision of the certificate of incorporation or bylaws of the
Company, or (f) invalidate or adversely affect any permit, license,
authorization or status used in the conduct of the business of the Company.
 
(d)           Filings, Consents and Approvals.  The Company is not required to
obtain any consent, waiver, authorization or order of, give any notice to, or
make any filing or registration with, any court or other federal, state, local
or other governmental authority or other Person in connection with the
execution, delivery and performance by the Company of the Transaction Documents,
other than: (i) approval of the issuance of the securities by The NASDAQ Capital
Market (“NASDAQ Approval”), (ii) approval of the Company’s stockholders of the
Offering, which has been obtained prior to the date hereof, (iii) the filing of
Form D with the SEC and such filings as are required to be made under applicable
state securities laws or (iv) as set forth on Schedule 4(d) (collectively, the
“Required Approvals”).
 

 
 

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(e)           SEC Filings. The Company is subject to, and in full compliance
with, the reporting requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”). The Company has made
available to each Subscriber through the EDGAR system true and complete copies
of the Company’s filings for the prior two full fiscal years plus any interim
period (collectively, the “SEC Filings”), and all such SEC Filings are
incorporated herein by reference.  The SEC Filings, when they were filed with
the SEC (or, if any amendment with respect to any such document was filed, when
such amendment was filed), complied in all material respects with the applicable
requirements of the Exchange Act and the rules and regulations thereunder and
did not, as of such date, contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading. All reports and statements required to be filed by
the Company under the Exchange Act have been filed, together with all exhibits
required to be filed therewith. The Company and each of its direct and indirect
subsidiaries, if any (collectively, the “Subsidiaries”), are engaged in all
material respects only in the business described in the SEC Filings, and the SEC
Filings contain a complete and accurate description in all material respects of
the business of the Company and the Subsidiaries.
 
(f)           No Financial Advisor.  The Company acknowledges and agrees that
each Subscriber is acting solely in the capacity of an arm’s length purchaser
with respect to the Securities and the transactions contemplated hereby. The
Company further acknowledges that Subscriber is not acting as a financial
advisor or fiduciary of the Company (or in any similar capacity) with respect to
this Agreement and the transactions contemplated hereby and any advice given by
any Subscriber or any of its representatives or agents in connection with this
Agreement and the transactions contemplated hereby is merely incidental to such
Subscriber’s purchase of the Securities. The Company further represents to each
Subscriber that the Company’s decision to enter into this Agreement has been
based solely on the independent evaluation of the transactions contemplated
hereby by the Company and its representatives.
 
(g)           Indemnification.  The Company will indemnify and hold harmless
each Subscriber and, where applicable, its directors, officers, employees,
agents, advisors and shareholders (each, an “Indemnitee”, from and against any
and all loss, liability, claim, damage and expense whatsoever (including, but
not  limited to, any and all fees, costs and expenses whatsoever reasonably
incurred in investigating, preparing or defending against any claim, lawsuit,
administrative proceeding or investigation whether commenced or threatened) (the
“Indemnified Liabilities”), incurred by any Indemnitee as a result of, or
arising out of, or relating to (i) any misrepresentation or breach of any
representation or warranty made by the Company or any Subsidiary in any of the
Transaction Documents, (ii) any breach of any covenant, agreement or obligation
of the Company or any Subsidiary contained in any of the Transaction Documents
or (iii) any cause of action, suit, proceeding or claim brought or made against
such Indemnitee by a third party (including for these purposes a derivative
action brought on behalf of the Company or any Subsidiary) or which otherwise
involves such Indemnitee that arises out of or results from (A) the execution,
delivery, performance or enforcement of any of the Transaction Documents, (B)
any transaction financed or to be financed in whole or in part, directly or
indirectly, with the proceeds of the issuance of the Securities, or (C) the
status of such Subscriber or holder of the Securities either as an investor in
the Company pursuant to the transactions contemplated by the Transaction
Documents or as a party to this Agreement (including, without limitation, as a
party in interest or otherwise in any action or proceeding for injunctive or
other equitable relief).   To the extent that the foregoing undertaking by the
Company may be unenforceable for any reason, the Company shall make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law.
 
(h)           Capitalization and Additional Issuances.  The capitalization of
the Company is as set forth in Schedule 4 (h). Except as set forth in Schedule 4
(h), the Company has not issued any capital stock since its most recently filed
periodic report under the Exchange Act.  No Person has any right of first
refusal, preemptive right, right of participation, or any similar right to
participate in the transactions contemplated by the Transaction
Documents.  Except as disclosed on Schedule 4 (h), there are no outstanding
options, warrants, scrip rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities, rights or obligations
convertible into or exercisable or exchangeable for, or giving any Person any
right to subscribe for or acquire any shares of Common Stock, or contracts,
commitments, understandings or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of Common Stock or
Common Stock equivalents. Except as set forth on Schedule 4 (h), the issuance
and sale of the Securities will not obligate the Company to issue shares of
Common Stock or other securities to any Person (other than the Subscribers) and
will not result in a right of any holder of Company securities to adjust the
exercise, conversion, exchange or reset price under any of such securities. All
of the outstanding shares of capital stock of the Company are duly authorized,
validly issued, fully paid and nonassessable, have been issued in material
compliance with all federal and state securities laws, and none of such
outstanding shares was issued in violation of any preemptive rights or similar
rights to subscribe for or purchase securities.  Except for NASDAQ Approval, no
further approval or authorization of any stockholder, the Board of Directors or
others is required for the issuance and sale of the Securities.  There are no
stockholders agreements, voting agreements or other similar agreements with
respect to the Company’s capital stock to which the Company is a party or, to
the knowledge of the Company, between or among any of the Company’s stockholders
.
 

 
 

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(i)           Private Placements.  Assuming the accuracy of each Subscriber’s
representations and warranties set forth in Section 3, no registration under the
Securities Act is required for the offer and sale of the Securities by the
Company to the Subscribers as contemplated hereby.

(j)           Investment Company.  The Company is not, and is not an affiliate
of, and immediately after receipt of payment for the Units will not be or be an
affiliate of, an “investment company” within the meaning of the Investment
Company Act of 1940, as amended.  The Company shall conduct its business in a
manner so that it will not become subject to the Investment Company Act.
 
(k)           Reporting Company/Shell Company Status.  The Company is a
publicly-held company subject to reporting obligations pursuant to Sections
12(g) and 13 of the Exchange Act.  Pursuant to the provisions of the Exchange
Act, the Company has timely filed all reports and other materials required to be
filed by the Company thereunder with the SEC during the preceding twelve
months.  The Company, as of the Closing Date, is not a “shell company”, as that
term is employed in Rule 144 under the Securities Act.  Except as set forth on
Schedule 4(k), the Company is in full compliance with the continued listing
standards of The NASDAQ Capital Market, and has no reason to believe that it
will not in the foreseeable future continue to be in compliance with all such
listing and maintenance requirements.
 
(l)           Litigation.  Except as set forth on Schedule 4 (l), there is no
action, suit, proceeding, inquiry or investigation before or by the Trading
Market, any court, public board, other Governmental Entity, self-regulatory
organization or body pending or, to the knowledge of the Company, threatened
against or affecting the Company or any of its Subsidiaries, the Common Stock or
any of the Company’s or its Subsidiaries’ officers or directors which is outside
of the ordinary course of business or individually or in the aggregate material
to the Company or any of its Subsidiaries.  No director, officer or employee of
the Company or any of its Subsidiaries has willfully violated 18 U.S.C. §1519 or
engaged in spoliation in reasonable anticipation of litigation.  Without
limitation of the foregoing, there has not been, and to the knowledge of the
Company, there is not pending or contemplated, any investigation by the SEC
involving the Company, any of its Subsidiaries or any current or former director
or officer of the Company or any of its Subsidiaries.  The SEC has not issued
any stop order or other order suspending the effectiveness of any registration
statement filed by the Company under the Securities Act or the Exchange
Act.  “Governmental Entity” means any nation, state, county, city, town,
village, district, or other political jurisdiction of any nature, federal,
state, local, municipal, foreign, or other government, governmental or
quasi-governmental authority of any nature (including any governmental agency,
branch, department, official, or entity and any court or other tribunal),
multi-national organization or body; or body exercising, or entitled to
exercise, any administrative, executive, judicial, legislative, police,
regulatory, or taxing authority or power of any nature or instrumentality of any
of the foregoing, including any entity or enterprise owned or controlled by a
government or a public international organization or any of the
foregoing.  “Trading Market” means any of the following markets or exchanges on
which the Common Stock is listed or quoted for trading on the date in question:
the NYSE MKT, The NASDAQ Capital Market, The NASDAQ Global Market, The NASDAQ
Global Select Market, the New York Stock Exchange, OTCQB, OTCQX or the OTC
Bulletin Board (or any successors to any of the foregoing).

(m)           Employee Relations.  Neither the Company nor any of its
Subsidiaries is a party to any collective bargaining agreement or employs any
member of a union.  The Company believes that its and its Subsidiaries’
relations with their respective employees are good.  The Company and its
Subsidiaries are in compliance with all federal, state, local and foreign laws
and regulations respecting labor, employment and employment practices and
benefits, terms and conditions of employment and wages and hours, except as
disclosed in Schedule 4(m) or where failure to be in compliance would not,
either individually or in the aggregate, reasonably be expected to result in a
Material Adverse Effect.  “Material Adverse Effect” means any material adverse
effect on (i) the business, properties, assets, liabilities, operations
(including results thereof), condition (financial or otherwise) or prospects of
the Company or any Subsidiary, individually or taken as a whole, (ii) the
transactions contemplated hereby or in any of the other Transaction Documents or
(iii) the authority or ability of the Company or any of its Subsidiaries to
perform any of their respective obligations under any of the Transaction
Documents. 
 
(n)           Tax Status.  The Company and each of its Subsidiaries (i) has
timely made or filed all foreign, federal and state income and all other tax
returns, reports and declarations required by any jurisdiction to which it is
subject, (ii) has timely paid all taxes and other governmental assessments and
charges that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and (iii) has set aside on its books provision reasonably adequate for the
payment of all taxes for periods subsequent to the periods to which such
returns, reports or declarations apply.  There are no unpaid taxes in any
material amount claimed to be due by the taxing authority of any jurisdiction,
and the officers of the Company and its Subsidiaries know of no basis for any
such claim.  The Company is not operated in such a manner as to qualify as a
passive foreign investment company, as defined in Section 1297 of the U.S.
Internal Revenue Code of 1986, as amended.
 

 
 

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(o)           Indebtedness and Other Contracts.  Except as set forth on Schedule
4(o) annexed hereto, neither the Company nor any of its Subsidiaries, (i) has
any outstanding Indebtedness (as defined below), (ii) is a party to any
contract, agreement or instrument, the violation of which, or default under
which, by the other party(ies) to such contract, agreement or instrument could
reasonably be expected to result in a Material Adverse Effect, (iii) is in
violation of any term of, or in default under, any contract, agreement or
instrument relating to any Indebtedness, except where such violations and
defaults would not result, individually or in the aggregate, in a Material
Adverse Effect, or (iv) is a party to any contract, agreement or instrument
relating to any Indebtedness, the performance of which, in the judgment of the
Company’s officers, has or is expected to have a Material Adverse Effect.  For
purposes of this Agreement:  (x) “Indebtedness” of any Person means, without
duplication (A) all indebtedness for borrowed money, (B) all obligations issued,
undertaken or assumed as the deferred purchase price of property or services
(including, without limitation, “capital leases” in accordance with generally
accepted accounting principles) (other than trade payables entered into in the
ordinary course of business), (C) all reimbursement or payment obligations with
respect to letters of credit, surety bonds and other similar instruments, (D)
all obligations evidenced by notes, bonds, debentures or similar instruments,
including obligations so evidenced incurred in connection with the acquisition
of property, assets or businesses, (E) all indebtedness created or arising under
any conditional sale or other title retention agreement, or incurred as
financing, in either case with respect to any property or assets acquired with
the proceeds of such indebtedness (even though the rights and remedies of the
seller or bank under such agreement in the event of default are limited to
repossession or sale of such property), (F) all monetary obligations under any
leasing or similar arrangement which, in connection with generally accepted
accounting principles, consistently applied for the periods covered thereby, is
classified as a capital lease, (G) all indebtedness referred to in clauses (A)
through (F) above secured by (or for which the holder of such Indebtedness has
an existing right, contingent or otherwise, to be secured by) any mortgage,
claim, lien, tax, right of first refusal, pledge, charge, security interest or
other encumbrance upon or in any property or assets (including accounts and
contract rights) owned by any Person, even though the Person which owns such
assets or property has not assumed or become liable for the payment of such
indebtedness, and (H) all Contingent Obligations in respect of indebtedness or
obligations of others of the kinds referred to in clauses (A) through (G) above;
(y) “Contingent Obligation” means, as to any Person, any direct or indirect
liability, contingent or otherwise, of that Person with respect to any
indebtedness, lease, dividend or other obligation of another Person if the
primary purpose or intent of the Person incurring such liability, or the primary
effect thereof, is to provide assurance to the obligee of such liability that
such liability will be paid or discharged, or that any agreements relating
thereto will be complied with, or that the holders of such liability will be
protected (in whole or in part) against loss with respect thereto; and (z)
“Person” means an individual, a limited liability company, a partnership, a
joint venture, a corporation, a trust, an unincorporated organization, any other
entity and any Governmental Entity or any department or agency thereof.
 
(p)           No Undisclosed Events, Liabilities, Developments or
Circumstances.  Since the date of the latest audited financial statements
included within the SEC Filings, except as specifically disclosed in a
subsequent SEC Filing: (i) there has been no event, occurrence or development
that has had or that could reasonably be expected to result in a Material
Adverse Effect, (ii) the Company has not incurred any material liabilities
(contingent or otherwise) other than (A) trade payables and accrued expenses
incurred in the ordinary course of business consistent with past practice and
(B) liabilities not required to be reflected in the Company’s financial
statements pursuant to GAAP or disclosed in filings made with the SEC, (iii) the
Company has not altered its method of accounting, (iv) the Company has not
declared or made any dividend or distribution of cash or other property to its
stockholders or purchased, redeemed or made any agreements to purchase or redeem
any shares of its capital stock and (v) except as set forth on Schedule 4(h),
the Company has not issued any equity securities to any officer, director or
Affiliate. The Company does not have pending before the SEC any request for
confidential treatment of information.  Except for the issuance of the
Securities contemplated by this Agreement or as set forth on Schedule 4 (p), no
event, liability, fact, circumstance, occurrence or development has occurred or
exists or is reasonably expected to occur or exist with respect to the Company
or its Subsidiaries or their respective businesses, properties, operations,
assets or financial condition, that would be required to be disclosed by the
Company under applicable securities laws at the time this representation is made
or deemed made that has not been publicly disclosed at least two Trading Days
prior to the date that this representation is made.
 
(q)           No Additional Agreements.  Neither the Company nor any of its
Subsidiaries has any agreement or understanding with any Subscriber with respect
to the transactions contemplated by the Transaction Documents other than
pursuant to documents substantially identical to the Transaction Documents.
 

 
 

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(r)           No Disqualification Events
 
.  To the Company’s knowledge, none of the Company, any of its predecessors, any
affiliated issuer, any director, executive officer, other officer of the Company
participating in the offering contemplated hereby, any beneficial owner of 20%
or more of the Company's outstanding voting equity securities, calculated on the
basis of voting power, nor any promoter (as that term is defined in Rule 405
under the Securities Act) connected with the Company in any capacity at the time
of sale (each, an “Issuer Covered Person”) is subject to any of the "Bad Actor"
disqualifications described in Rule 506(d)(1)(i) to (viii) under the Securities
Act (a “Disqualification Event”), except for a Disqualification Event covered by
Rule 506(d)(2) or (d)(3). The Company has exercised reasonable care to determine
whether any Issuer Covered Person is subject to a Disqualification Event.
 
(s)           General Solicitation
 
.  None of the Company, any of its affiliates (as defined in Rule 501(b) under
the Securities Act) or any person acting on behalf of the Company or such
affiliate will solicit any offer to buy or offer or sell the Securities by means
of any form of general solicitation or general advertising within the meaning of
Regulation D, including:  (i) any advertisement, article, notice or other
communication published in any newspaper, magazine or similar medium or
broadcast over television or radio; and (ii) any seminar or meeting whose
attendees have been invited by any general solicitation or general advertising.
 
(t)           Compliance.  To the Company’s knowledge, neither the Company nor
any Subsidiary: (i) is in default under or in violation of (and no event has
occurred that has not been waived that, with notice or lapse of time or both,
would result in a default by the Company or any Subsidiary under), nor has the
Company or any Subsidiary received notice of a claim that it is in default under
or that it is in violation of, any indenture, loan or credit agreement or any
other agreement or instrument to which it is a party or by which it or any of
its properties is bound (whether or not such default or violation has been
waived), (ii) is in violation of any judgment, decree or order of any court,
arbitrator or other governmental authority or (iii) is or has been in violation
of any statute, rule, ordinance or regulation of any governmental authority,
including without limitation all foreign, federal, state and local laws relating
to taxes, environmental protection, occupational health and safety, product
quality and safety and employment and labor matters, except in each case as
could not have or reasonably be expected to result in a Material Adverse Effect.
 
(u)        Regulatory Permits.  The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their
respective businesses as described in the SEC Filings, except where the failure
to possess such permits could not reasonably be expected to result in a Material
Adverse Effect (“Material Permits”), and neither the Company nor any Subsidiary
has received any notice of proceedings relating to the revocation or
modification of any Material Permit.
 
(v)             Title to Assets.  The Company and the Subsidiaries have good and
marketable title in fee simple to all real property (if any) owned by them and
good and marketable title in all personal property owned by them that is
material to the business of the Company and the Subsidiaries, in each case free
and clear of all liens, except for (i) liens as do not materially affect the
value of such property and do not materially interfere with the use made and
proposed to be made of such property by the Company and the Subsidiaries and
(ii) liens for the payment of federal, state or other taxes, for which
appropriate reserves have been made in accordance with GAAP and, the payment of
which is neither delinquent nor subject to penalties.  Any real property and
facilities held under lease by the Company and the Subsidiaries are held by them
under valid, subsisting and enforceable leases with which the Company and the
Subsidiaries are in compliance.
 
(w)   Intellectual Property.
 
   1.           The term “Intellectual Property Rights” includes:
 
(a)           the name of the Company and each Subsidiary, all fictional
business names, trading names, registered and unregistered trademarks, service
marks, and applications of the Company and each Subsidiary (collectively,
“Marks'');
 
(b)           all patents, patent applications, and inventions and discoveries
that may be patentable of the Company and each Subsidiary  (collectively,
“Patents'');
 
(c)           all copyrights in both published works and published works of the
Company and each Subsidiary (collectively, “Copyrights”);
 

 
 

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(d)           all rights in mask works of the Company and each Subsidiary
(collectively, “Rights in Mask Works''); and
 
(e)           all know-how, trade secrets, confidential information, customer
lists, software, technical information, data, process technology, plans,
drawings, and blue prints (collectively, “Trade Secrets''); owned, used, or
licensed by the Company and each Subsidiary as licensee or licensor.
 
2.           Know-How Necessary for the Business.  The Intellectual Property
Rights are all those necessary for the operation of the Company’s businesses as
it is currently conducted or as represented, in writing, to the Subscriber to be
conducted. The Company is the owner of all right, title, and interest in and to
each of the Intellectual Property Rights, free and clear of all liens, security
interests, charges, encumbrances, equities, and other adverse claims, and has
the right to use all of the Intellectual Property Rights.  To the Company’s
knowledge, no employee of the Company has entered into any contract that
restricts or limits in any way the scope or type of work in which the employee
may be engaged or requires the employee to transfer, assign, or disclose
information concerning his work to anyone other than of the Company.
 
3.           Patents. The Company is the owner of all right, title and interest
in and to each of the Patents, free and clear of all liens and other adverse
claims, purchase price payments, or license agreements now or hereafter
existing).
 
4.           Trademarks. The Company is the owner of all right, title, and
interest in and to each of the Marks, free and clear of all liens and other
adverse claims.  All Marks that have been registered with the United States
Patent and Trademark Office are currently in compliance with all formal legal
requirements (including the timely post-registration filing of affidavits of use
and incontestability and renewal applications), are valid and enforceable, and
are not subject to any maintenance fees or taxes or actions falling due within
ninety days after the Closing Date.
 
5.           Copyrights. The Company is the owner of all right, title, and
interest in and to each of the Copyrights, free and clear of all liens and other
adverse claims.  All the Copyrights have been registered and are currently in
compliance with formal requirements, are valid and enforceable, and are not
subject to any maintenance fees or taxes or actions falling due within ninety
days after the date of the Closing
 
6.           Trade Secrets. With respect to each Trade Secret, the documentation
relating to such Trade Secret is current, accurate, and sufficient in detail and
content to identify and explain it and to allow its full and proper use without
reliance on the knowledge or memory of any individual. The Company has taken all
reasonable precautions to protect the secrecy, confidentiality, and value of its
Trade Secrets.  The Company has good title and an absolute (but not necessarily
exclusive) right to use the Trade Secrets. The Trade Secrets are not part of the
public knowledge or literature, and, to the Company’s knowledge, have not been
used, divulged, or appropriated either for the benefit of any Person (other the
Company) or to the detriment of the Company. No Trade Secret is subject to any
adverse claim or has been challenged or threatened in any way.
 
(x)           Stock Option Plans. Since commencement of trading of the Company’s
Common Stock on The NASDAQ Capital Market, each stock option granted by the
Company under the stock option plan was granted (i) in accordance with the terms
of such stock option plan and (ii) with an exercise price at least equal to the
fair market value of the Common Stock on the date such stock option would be
considered granted under GAAP and applicable law. No stock option granted under
any stock option plan has been backdated.  The Company has not knowingly
granted, and there is no and has been no Company policy or practice to knowingly
grant, stock options prior to, or otherwise knowingly coordinate the grant of
stock options with, the release or other public announcement of material
information regarding the Company or its Subsidiaries or their financial results
or prospects.
 
(y)           Office of Foreign Assets Control.  Neither the Company nor any
Subsidiary nor, to the Company's knowledge, any director, officer, agent,
employee or affiliate of the Company is currently subject to any U.S. sanctions
administered by the Office of Foreign Assets Control of the U.S. Treasury
Department (“OFAC”).
 
(z)           Listing and Maintenance Requirements.   The Common Stock is quoted
on the NASDAQ Capital Market under the symbol COOL.  Except as set forth on
Schedule 4(z), the Company has not, in the twenty-four (24) months preceding the
date hereof, received notice from any Trading Market on which the Common Stock
is or has been listed or quoted to the effect that the Company is not in
compliance with the listing or maintenance requirements of such Trading Market.
 

 
 

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(aa)           Regulation M Compliance.  The Company has not, and to its
knowledge no one acting on its behalf has, (i) taken, directly or indirectly,
any action designed to cause or to result in the stabilization or manipulation
of the price of any security of the Company to facilitate the sale or resale of
any of the Securities, (ii) sold, bid for, purchased, or paid any compensation
for soliciting purchases of, any of the Securities, or (iii) paid or agreed to
pay to any Person any compensation for soliciting another to purchase any other
securities of the Company.
 
(bb)           Money Laundering.  The operations of the Company and its
Subsidiaries are and have been conducted at all times in compliance in all
material respects with applicable financial record-keeping and reporting
requirements of the Currency and Foreign Transactions Reporting Act of 1970, as
amended, applicable money laundering statutes and applicable rules and
regulations thereunder (collectively, the “Money Laundering Laws”), and no
action, suit or proceeding by or before any court or governmental agency,
authority or body or any arbitrator involving the Company or any Subsidiary with
respect to the Money Laundering Laws is pending or, to the knowledge of the
Company or any Subsidiary, threatened
 
(cc)           Acknowledgment Regarding Subscriber’s Trading Activity.  Anything
in this Agreement or elsewhere herein to the contrary notwithstanding, it is
understood and acknowledged by the Company that: (i) none of the Subscribers has
been asked by the Company to agree, nor has any Subscriber agreed, to desist
from purchasing or selling, long and/or short, securities of the Company, or
“derivative” securities based on securities issued by the Company or to hold the
Securities for any specified term, (ii) past or future open market or other
transactions by any Subscriber, specifically including, without limitation,
Short Sales or “derivative” transactions, before or after the closing of this or
future private placement transactions, may negatively impact the market price of
the Company’s publicly-traded securities, (iii) any Subscriber, and
counter-parties in “derivative” transactions to which any such Subscriber is a
party, directly or indirectly, may presently have a “short” position in the
Common Stock and (iv) each Subscriber shall not be deemed to have any
affiliation with or control over any arm’s length counter-party in any
“derivative” transaction.  The Company further understands and acknowledges that
(y) one or more Subscribers may engage in hedging activities at various times
during the period that the Securities are outstanding, including, without
limitation, during the periods that the value of the Underlying Shares
deliverable with respect to Securities are being determined, and (z) such
hedging activities (if any) could reduce the value of the existing stockholders'
equity interests in the Company at and after the time that the hedging
activities are being conducted.  The Company acknowledges that such
aforementioned hedging activities do not constitute a breach of any of the
Transaction Documents.  There are no disagreements of any kind presently
existing, or reasonably anticipated by the Company to arise, between the Company
and the accountants and lawyers formerly or presently employed by the Company
and the Company is current with respect to any fees owed to its accountants and
lawyers which could affect the Company’s ability to perform any of its
obligations under any of the Transaction Documents.
 
(dd)           Acknowledgment Regarding Subscribers’ Purchase of
Securities.  The Company acknowledges and agrees that each of the Subscribers is
acting solely in the capacity of an arm’s length Subscriber with respect to the
Transaction Documents and the transactions contemplated thereby.  The Company
further acknowledges that no Subscriber is acting as a financial advisor or
fiduciary of the Company (or in any similar capacity) with respect to the
Transaction Documents and the transactions contemplated thereby and any advice
given by any Subscriber or any of their respective representatives or agents in
connection with the Transaction Documents and the transactions contemplated
thereby is merely incidental to the Subscribers’ purchase of the
Securities.  The Company further represents to each Subscriber that the
Company’s decision to enter into this Agreement and the other Transaction
Documents has been based solely on the independent evaluation of the
transactions contemplated hereby by the Company and its representatives.
 
(ee)           No Integrated Offering. Assuming the accuracy of the Subscribers’
representations and warranties set forth in Section 3, 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 cause this
offering of the Securities to be integrated with prior offerings by the Company
for purposes of: (i) the Securities Act which would require the registration of
any such securities under the Securities Act, or (ii) any applicable shareholder
approval provisions of any Trading Market on which any of the securities of the
Company are listed or designated.
 
(ff)           Application of Takeover Protections.  The Company and the Board
of Directors will have taken as of the Closing Date 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 Company’s certificate of
incorporation (or similar charter documents) or the laws of its state of
incorporation that is or could become applicable to the Subscribers as a result
of the Subscribers and the Company fulfilling their obligations or exercising
their rights under the Transaction Documents, including without limitation as a
result of the Company’s issuance of the Securities and the Subscribers’
ownership of the Securities.
 

 
 

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(gg)           Registration Rights.  Other than as set forth on Schedule 4(gg),
no Person other than the Subscribers herein has any right to cause the Company
or any Subsidiary to effect the registration under the Securities Act of any
securities of the Company or any Subsidiary.
 
(hh)           Certain Fees.  Except as disclosed on Schedule 4(hh), no
brokerage, finder’s fees, commissions or due diligence fees are or will be
payable by the Company or any Subsidiary to any broker, financial advisor or
consultant, finder, placement agent, investment banker, bank or other Person
with respect to the transactions contemplated by the Transaction Documents.  The
Subscribers shall have no obligation with respect to any such fees or with
respect to any claims made by or on behalf of other Persons for fees of a type
contemplated in this Section 4(hh) that may be due in connection with the
transactions contemplated by the Transaction Documents.
 
(ii)           Sarbanes-Oxley; Internal Accounting Controls.  The Company and
the Subsidiaries are in material compliance 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
Commission thereunder that are effective as of the date hereof and as of the
Closing Date.  Except as set forth on Schedule 4(ii), the Company and the
Subsidiaries maintain a system of internal accounting controls 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 GAAP and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management’s general or specific
authorization, and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences. Except as disclosed in the SEC Filings, the Company
and the Subsidiaries have established disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and the
Subsidiaries and designed such disclosure controls and procedures to ensure that
information required to be disclosed by the Company in the reports it files or
submits under the Exchange Act is recorded, processed, summarized and reported,
within the time periods specified in the Commission’s rules and forms.  The
Company’s certifying officers have evaluated the effectiveness of the disclosure
controls and procedures of the Company and the Subsidiaries as of the end of the
period covered by the most recently filed periodic report under the Exchange Act
(such date, the “Evaluation Date”).  The Company presented in its most recently
filed periodic report under the Exchange Act the conclusions of the certifying
officers about the effectiveness of the disclosure controls and procedures based
on their evaluations as of the Evaluation Date.  Since the Evaluation Date,
there have been no changes in the internal control over financial reporting (as
such term is defined in the Exchange Act) of the Company and its Subsidiaries
that have materially affected, or is reasonably likely to materially affect,
the  internal control over financial reporting of the Company and its
Subsidiaries.
 
(jj)           Transactions With Affiliates and Employees.  Except as set forth
on Schedule 4(jj), none of the officers or directors of the Company or any
Subsidiary and, to the knowledge of the Company, none of the employees of the
Company or any Subsidiary is presently a party to any transaction with the
Company or any Subsidiary (other than for services as employees, officers and
directors), including any contract, agreement or other arrangement providing for
the furnishing of services to or by, providing for rental of real or personal
property to or from, providing for the borrowing of money from or lending of
money to or otherwise requiring payments to or from any officer, director or
such employee or, to the knowledge of the Company, any entity in which any
officer, director, or any such employee has a substantial interest or is an
officer, director, trustee, stockholder, member or partner, in each case in
excess of $50,000 other than for: (i) payment of salary or consulting fees for
services rendered, (ii) reimbursement for expenses incurred on behalf of the
Company and (iii) other employee benefits, including stock option agreements
under any stock option plan of the Company except as disclosed on Schedule
4(jj).
 
(kk)           Insurance.  The Company and the Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as are prudent and customary in the businesses in which the
Company and the Subsidiaries are engaged, including, but not limited to,
directors and officers insurance coverage at least equal to the aggregate
Subscription Amount.  Neither the Company nor any Subsidiary has any reason to
believe that it will not be able to renew its existing insurance coverage as and
when such coverage expires or to obtain similar coverage from similar insurers
as may be necessary to continue its business without a significant increase in
cost.
 

 
 

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(ll)            Disclosure.
 
The Company confirms that neither it nor any other Person acting on its behalf
has provided any of the Subscribers or their agents or counsel with any
information that constitutes or could reasonably be expected to constitute
material, non-public information regarding the Company or any of its
Subsidiaries, other than the existence of the transactions contemplated by this
Agreement and the other Transaction Documents. The Company understands and
confirms that each of the Subscribers will rely on the foregoing representations
in effecting transactions in securities of the Company. All disclosure provided
to the Subscribers regarding the Company and its Subsidiaries, their businesses
and the transactions contemplated hereby, including the schedules to this
Agreement, furnished by or on behalf of the Company or any of its Subsidiaries
is true and correct and does not contain any untrue statement of a material fact
or omit to state any material fact necessary in order to make the statements
made therein, in the light of the circumstances under which they were made, not
misleading.  No event or circumstance has occurred or information exists with
respect to the Company or any of its Subsidiaries or its or their business,
properties, liabilities, prospects, operations (including results thereof) or
conditions (financial or otherwise), which, under applicable law, rule or
regulation, requires public disclosure at or before the date hereof or
announcement by the Company but which has not been so publicly disclosed. The
Company acknowledges and agrees that no Subscriber makes or has made any
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in Section 3.

(mm)           Survival.  The foregoing representations and warranties shall
survive the Closing.
 
5.           OTHER AGREEMENTS OF THE PARTIES
 
(a)           Furnishing of Information.  As long as any Subscriber owns
Securities, the Company covenants to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to the
Exchange Act.  As long as any Subscriber owns Securities, if the Company is not
required to file reports pursuant to the Exchange Act, it will prepare and
furnish to the Subscribers and make publicly available in accordance with Rule
144(c) under the Securities Act such information as is required for the
Subscribers to sell the Securities under Rule 144.  The Company further
covenants that it will take such further action as any holder of Securities may
reasonably request, at the sole cost and expense of the Company including
transfer agent and legal opinion fees and expenses, all to the extent required
from time to time to enable such person to sell such Securities without
registration under the Securities Act within the limitation of the exemptions
proved by Rule 144 under the Securities Act.
 
(b)           Shareholder Rights Plan.  No claim will be made or enforced by the
Company or, to the knowledge of the Company, any other person that any
Subscriber is an “Acquiring Person” under any shareholder rights plan or similar
plan or arrangement in effect or hereafter adopted by the Company, or that any
Subscriber could be deemed to trigger the provisions of any such plan or
arrangement, by virtue of receiving Securities under the Transaction Documents
or under any other agreement between the Company and the Subscribers.
 
(c)           Securities Laws Disclosure; Publicity.  The Company shall by 8:30
a.m. (New York City time) (a) on the first Business Day after this Agreement has
been executed, file a Current Report on Form 8-K with the SEC (the “8-K
Filing”), including the Transaction Documents as exhibits thereto.  From and
after the issuance of the 8-K Filing, the Company shall have publicly disclosed
all material, non-public information delivered to any of the Subscribers by the
Company or any of its Subsidiaries, or any of their respective officers,
directors, employees or agents.  The Company and each Subscriber shall consult
with each other in issuing any press releases with respect to the transactions
contemplated hereby, and no Subscriber shall issue any such press release or
otherwise make any such public statement without the prior consent of the
Company, which consent shall not unreasonably be withheld.  Notwithstanding the
foregoing, the Company shall not publicly disclose the name of any Subscriber,
or include the name of any Subscriber in any filing with the SEC or any
regulatory agency, without the prior written consent of such Subscriber, except
to the extent such disclosure is required by law or in connection with the
Registration Rights Agreement, in which case the Company shall provide the
Subscribers with prior notice of such disclosure.  The Company understands that
any such disclosure shall cause irreparable harm and each Subscriber shall be
entitled to injunctive relief and liquidated damages in connection therewith.
 

 
 

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(d)           Integration.  The Company shall not, and shall use its best
efforts to ensure that no affiliate of the Company shall, after the date hereof,
sell, offer for sale or solicit offers to buy or otherwise negotiate in respect
of any security that would be integrated with the offer or sale of the Units in
a manner that would require the registration under the Securities Act of the
sale of the Units to the Subscribers.
 
(e)           Reservation of Securities.
 
(i)           The Company shall maintain a reserve from its duly authorized
shares of Common Stock for issuance pursuant to the Transaction Documents in
such amount as may then be required to fulfill its obligations in full under the
Transaction Documents, but not less than 125% of the maximum number of shares of
Common Stock issuable pursuant to the Transaction Documents (the “Required
Minimum”).
 
(ii)           If, on any date, the number of authorized but unissued (and
otherwise unreserved) shares of Common Stock is less than the Required Minimum
on such date, then the Board of Directors shall approve the amendment of the
Company’s Charter to increase the number of authorized but unissued shares of
Common Stock to at least the Required Minimum and submit such amendment to the
Company’s stockholders for approval, as soon as possible and in any event not
later than the 60th day after such date.
 
(iii)                      The Company shall, if applicable: (i) in the time and
manner required by The NASDAQ Capital Market or such other principal market on
which the Company’s Common Stock is then primarily traded (the “Principal
Market”), prepare and file with such Principal Market an additional shares
listing application covering a number of shares of Common Stock at least equal
to the Required Minimum on the date of such application, (ii) take all steps
necessary to cause such shares of Common Stock to be approved for listing or
quotation on such Principal Market as soon as possible thereafter, (iii) provide
to the Subscribers evidence of such listing or quotation and (iv) maintain the
listing or quotation of such Common Stock on any date at least equal to the
Required Minimum on such date on such Principal Market or another Principal
Market.  The Company will then take all commercially reasonable action necessary
to continue the listing or quotation and trading of its Common Stock on a
Principal Market for as long as any Subscriber holds Securities, and will comply
in all material respects with the Company’s reporting, filing and other
obligations under the bylaws or rules of the Principal Market at least until
five years after the Closing Date.  In the event the aforedescribed listing is
not continuously maintained for five years after the Closing Date (a “Listing
Default”), then in addition to any other rights the Subscribers may have
hereunder or under applicable law, on the first day of a Listing Default and on
each monthly anniversary of each such Listing Default date (if the applicable
Listing Default shall not have been cured by such date) until the applicable
Listing Default is cured, the Company shall pay to each Subscriber an amount in
cash, as partial liquidated damages and not as a penalty, equal to 1% of (x)
aggregate Subscription Amount of Shares or Conversion Shares calculated on an
“as converted” basis, as the case may be, held by such Subscriber on the date of
a Listing Default and (y) the aggregate purchase price of Warrant Shares held by
such Subscriber on the day of a Listing Default and on every thirtieth day
(pro-rated for periods less than thirty days) thereafter with respect to Shares
(or “as converted” Conversion Shares”) and Warrant Shares held as of each such
date until the date such Listing Default is cured or Subscriber no longer holds
any Shares, Preferred Shares, Conversion Shares or Warrant Shares.  If the
Company fails to pay any liquidated damages pursuant to this Section in a timely
manner, the Company will pay interest thereon at a rate of 1.5% per month
(pro-rated for partial months) to the Subscriber, up to a maximum of sixteen
(16%) percent for such interest and liquidated damages amounts, collectively.
 
(f)           Use of Proceeds.  The Company anticipates using the gross proceeds
from the Offering as set forth on Exhibit D or as otherwise agreed to be the
lead investor set forth on Exhibit E, attached hereto (the “Lead Investor”.
 
(g)            Non-Public Information.  Except with respect to the material
terms and conditions of the transactions contemplated by the Transaction
Documents, the Company covenants and agrees that neither it, nor any other
Person acting on its behalf will provide any Subscriber or its agents or counsel
with any information that the Company believes constitutes or could constitute
material non-public information, and each Subscriber agrees, and shall direct
its agents and counsel not to, request any material non-public information from
the Company or any Person acting on its behalf, unless prior thereto such
Subscriber shall have executed a written agreement with the Company regarding
the willingness to accept receipt of such material non-public information and
acknowledges the confidentiality and use of such information and the Company’s
covenant to file a further SEC filing or report and the period in which such
information shall remain confidential or be required to not be disclosed.  The
Company understands and confirms that each Subscriber shall be relying on the
foregoing covenant in effecting transactions in securities of the Company. In
addition, effective upon the filing of the 8-K Filing, the Company acknowledges
and agrees that any and all confidentiality or similar obligations under any
agreement, whether written or oral, between the Company and any of its
Subsidiaries or any of their respective officers, directors, affiliates,
employees or agents, on the one hand, and the Subscriber or any of its
affiliates on the other hand, shall terminate.
 

 
 

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(h)           Limitations on Issuances and Financings.  For as long as the Lead
Investor holds Securities, except with respect to Excepted Issuances, the
Company shall not issue any Common Stock or securities convertible into or
exercisable for shares of Common Stock (or modify any of the foregoing which may
be outstanding) to any person or entity or incur any financing debt, without the
express written consent of the Lead Investor.
 
(i)           Capital Changes.  Until the one year anniversary of the Final
Closing Date, the Company shall not undertake a reverse or forward stock split
or reclassification of the Common Stock without 10 days prior written notice to
the Subscribers, unless such reverse split is made in conjunction with the
listing of the Common Stock on a national securities exchange or maintaining
compliance with such listing.
 
(j)           DTC Program.  From the Closing Date until such time as no
Subscriber holds any of the Securities (such date, the “Release Date”), the
Company shall use its best efforts to employ as the transfer agent for the
Shares, the Conversion Shares and Warrant Shares a participant in the Depository
Trust Company Automated Securities Transfer Program (FAST) and cause the Common
Stock to be transferable pursuant to such program.
 
(k)           Subsequent Equity Sales.   For the period beginning on the Closing
Date and ending on  twenty-four (24) month anniversary of the Final Closing
Date,  the Company will not, without the consent of Subscribers holding a
majority of the then issued and outstanding Shares and Preferred Shares  on the
date of such consent (including the Lead Investor):(A) enter into any Equity
Line of Credit or similar agreement, nor issue nor agree to issue any common
stock, Common Stock Equivalents, floating or Variable Priced Equity Linked
Instruments nor any of the foregoing or equity with price reset rights (subject
to adjustment for stock splits, distributions, dividends, recapitalizations and
the like) (collectively, the “Variable Rate Transaction”).   For purposes
hereof, “Equity Line of Credit” shall include any transaction involving a
written agreement between the Company and an investor or underwriter whereby the
Company has the right to “put” its securities to the investor or underwriter
over an agreed period of time and at an agreed price or price formula, and
“Variable Priced Equity Linked Instruments” shall include: (A) any debt or
equity securities which are convertible into, exercisable or exchangeable for,
or carry the right to receive additional shares of Common Stock either (1) at
any conversion, exercise or exchange rate or other price that is based upon
and/or varies with the trading prices of or quotations for Common Stock at any
time after the initial issuance of such debt or equity security, or (2) with a
fixed conversion, exercise or exchange price that is subject to being reset at
some future date at any time after the initial issuance of such debt or equity
security due to a change in the market price of the Company’s Common Stock since
date of initial issuance, and (B) any amortizing convertible security which
amortizes prior to its maturity date, where the Company is required or has the
option to (or any investor in such transaction has the option to require the
Company to) make such amortization payments in shares of Common Stock which are
valued at a price that is based upon and/or varies with the trading prices of or
quotations for Common Stock at any time after the initial issuance of such debt
or equity security (whether or not such payments in stock are subject to certain
equity conditions) and (C) issue any equity or equity-linked convertible
securities with an exercise or conversion price lower than $1.20 per share.  For
purposes of determining the total consideration for a convertible instrument
(including a right to purchase equity of the Company) issued, subject to an
original issue or similar discount or which principal amount is directly or
indirectly increased after issuance, the consideration will be deemed to be the
actual cash amount received by the Company in consideration of the original
issuance of such convertible instrument. “Common Stock Equivalents” means any
securities of the Company or the Subsidiaries which would entitle the holder
thereof to acquire at any time Common Stock, including, without limitation, any
debt, preferred stock, right, option, warrant or other instrument that is at any
time convertible into or exercisable or exchangeable for, or otherwise entitles
the holder thereof to receive, Common Stock.
 
(l)           Form D and Blue Sky.
 
  The Company shall file a Form D with respect to the Securities as required
under Regulation D and to provide a copy thereof to each Subscriber promptly
after such filing.  The availability of the filed Form D on EDGAR shall satisfy
the foregoing delivery requirement.  The Company shall, on or before the Closing
Date, take such action as the Company shall reasonably determine is necessary in
order to obtain an exemption for, or to, qualify the Securities for sale to the
Subscribers at the Closing pursuant to this Agreement under applicable
securities or “Blue Sky” laws of the states of the United States (or to obtain
an exemption from such qualification), and shall provide evidence of any such
action so taken to the Subscribers on or prior to the Closing Date.  Without
limiting any other obligation of the Company under this Agreement, the Company
shall timely make all filings and reports relating to the offer and sale of the
Securities required under all applicable securities laws (including, without
limitation, all applicable federal securities laws and all applicable “Blue Sky”
laws), and the Company shall comply with all applicable federal, foreign, state
and local laws, statutes, rules, regulations and the like relating to the
offering and sale of the Securities to the Subscribers.
 

 
 

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(m)            Restriction on Redemption and Cash Dividends. From the date
hereof through the Release Date, the Company shall not, directly or indirectly,
redeem, or declare or pay any cash dividend or distribution on, any securities
of the Company without the prior express written consent of the Subscribers.
 
(n)     Corporate Existence. From the date hereof through the Release Date, the
Company shall not be party to any Fundamental Transaction (as defined in the
Series C Certificate of Designation) unless the Company is in compliance with
the applicable provisions governing Fundamental Transactions set forth in the
Series C Certificate of Designation.
 
(o)   Conversion Procedures.  Each of the form of Notice of Conversion included
in the Series C Certificate of Designation set forth the totality of the
procedures required of the Subscribers in order to convert the Preferred
Shares.  No legal opinion, other information or instructions shall be required
of the Subscribers to convert their Preferred Shares (other than customary 144
representation letters if such Preferred Shares are to be sold in reliance upon
the exemption provided by to Rule 144).  The Company shall honor conversions of
the Preferred Shares and shall deliver the Conversion Shares in accordance with
the terms, conditions and time periods set forth in the Series C Certificate of
Designation.
 
(p)   Closing Documents.  On or prior to fourteen (14) calendar days after each
Closing Date, the Company agrees to deliver, or cause to be delivered, to each
Subscriber and Sichenzia Ross Friedman Ference LLP executed copies of the
Transaction Documents, Securities and other document required to be delivered to
any party pursuant to this Agreement.
 
(q)   Fees.  The Company shall reimburse Sichenzia Ross Friedman Ference LLP, as
counsel to Lead Investor, in a non-accountable amount equal to $15,000, which
amount shall be paid by the Escrow Agent in connection with the Initial
Closing.   The Company shall be responsible for the payment of any placement
agent’s fees, financial advisory fees, transfer agent fees, the costs associated
with any legal opinions required to be rendered to the Company’s transfer agent
in connection with the lifting of any legends on the Securities, DTC fees or
broker’s commissions (other than for Persons engaged by any Subscriber) relating
to or arising out of the transactions contemplated hereby. The Company (subject
to the foregoing qualification) shall pay, and hold each Subscriber harmless
against, any liability, loss or expense (including, without limitation,
reasonable attorneys’ fees and out-of-pocket expenses) arising in connection
with any claim relating to any such payment.  The Company shall also pay all
legal fees of the Lead Investor in connection with any documentation, corporate
actions or other actions of the Company reviewed or prepared by counsel to the
Lead Investor on its behalf.
 
(r)           Escrow Release.  The Aggregate Purchase Price shall be held by the
Escrow Agent and shall be released as follows:
 
(i)      On each Closing Date: Twenty (20%) percent of the Aggregate Purchase
Price to be closed upon shall be released by the Escrow Agent and Twenty (20%)
percent of such corresponding Units shall be released by the Securities Escrow
Agent on a pro rata basis based on the Subscriber’s subscription amount, in
accordance with the written instructions of the Company and the Lead Investor
provided that the Lead Investor and the Company certify that all conditions and
obligations of the Company for such release set forth herein have been satisfied
(the releases of 20% of the Aggregate Purchase Price, the “Initial Escrow
Releases”).
 
(ii)      Subsequent to the Initial Escrow Releases, in one or multiple tranches
(each, a “Subsequent Escrow Release”), all or part of the remaining eighty (80%)
of cash Aggregate Purchase Price shall be released by the Escrow Agent and the
corresponding percentage of Units shall be released by the Securities Escrow
Agent on a pro rata basis based on the Subscriber’s subscription amount, in
accordance with the written instructions of the Company and the Lead Investor
provided that the Lead Investor and the Company  certify that the below
conditions and obligations of the Company for such release set forth below have
been satisfied (the “Release Conditions”):
 
 
(A)
The Lead Investor has approved the Subsequent Escrow Release in writing; or

 

 
 

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(B)
The Company has executed definitive binding documents for a Qualified
Transaction and the Qualified Transaction shall close contemporaneously with the
Subsequent Escrow Release following approval of the Company’s stockholders as
required by NASDAQ, which Qualified Transaction requires the filing by the
Company of a Current Report on Form 8-K with the inclusion of audited financial
statements of the target. For purposes hereof, a “Qualified Transaction” shall
mean one or more acquisitions by the Company of any business, assets, stock,
licenses, interests or properties (including, without limitation, intellectual
property rights) approved by the stockholders of the Company or any acquisition
involving assets, shares of capital stock, any purchase, merger, consolidation,
recapitalization, or reorganization or involving any licensing, royalties,
sharing arrangement or otherwise, which value of such Qualified Transaction is
in excess of $25,000,000 for the Company’s interest therein.  For purposes
hereof, the value of a Qualified Transaction shall take into account all cash,
stock, present value of all royalties, settlement amounts, future payments,
license fees received or owed, and all other consideration associated with such
acquisition of any kind whatsoever.

 
(s)           Special Meeting of Stockholders.  Within ten (10) days from the
Closing Date, the Company shall filed a preliminary proxy statement for a
special meeting of its stockholders, which such meeting shall be held within
thirty (30) days of the Closing Date, in order to submit to its stockholders a
proposal to approve the issuance of in excess of Five Million (5,000,000) shares
of Common Stock in this Offering.
 
6.           CONDITIONS TO ACCEPTANCE OF SUBSCRIPTION
 
(a) The Closing of the sale of the Units is conditioned upon satisfaction of the
following conditions precedent on or before the Closing Date:
 
(i)           As of the Closing, no legal action, suit or proceeding shall be
pending against the Company that seeks to restrain or prohibit the transactions
contemplated by this Agreement.
 
(ii)           The representations and warranties of the Company and the
Subscribers contained in this Agreement shall have been true and correct in all
material respects on the date of this Agreement (except whether such
representations are qualified by material or material adverse effect, which
shall be true and correct in all respects) and shall be true and correct as of
the Closing as if made on the Closing Date and the Company shall have performed,
satisfied and complied in all respects with the covenants, agreements and
conditions required to be performed, satisfied or complied with by the Company
in connection with the consummation of the transactions contemplated by the
Transaction Documents at or prior to the Closing Date and the Company shall
deliver a certificate, executed by its Chief Executive Officer, dated as of the
Closing Date, certifying that the foregoing is true.
 
(iii)           The Company shall deliver to the Subscribers, a certificate from
the Company, signed by its Secretary or Assistant Secretary, including
incumbency specimen signatures of any signatory of any Transaction Document of
the Company and certifying that the attached copies of the Company’s Certificate
of Incorporation, as amended and Bylaws, as amended, and resolutions of the
Board of Directors of the Company approving this the Offering, are all true,
complete and correct and remain in full force and effect.
 
(iv)           The Company shall deliver to the Subscribers an opinion of its
legal counsel substantially in the form attached hereto as Exhibit F.
 
(v)           The Company shall deliver to the Subscribers a file stamped copy
of the filed Series C Certificate of Designation, filed with the Secretary of
State of the State of Delaware, which shall not have been amended, waived,
modified or revoked by the Company.
 
(vi)           The Company shall have submitted to The NASDAQ Capital Market, a
“Listing of dditional Shares” application (the “LAS”) for the listing of the
Shares, the Conversion Shares and the Warrant Shares thereon and NASDAQ shall
have completed its review of the LAS without comment.
 

 
 

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

 

7.           REGISTRATION RIGHTS.      The Company shall file a “resale”
registration statement with the SEC covering the Shares and the Conversion
Shares purchased by the Subscriber, so that such shares of Common Stock will be
registered under the Securities Act. The Company will maintain the effectiveness
of the “resale” registration statement from the effective date of the
registration statement until all Registrable Securities (as defined in the
Registration Rights Agreement) covered by such registration statement have been
sold, or may be sold without the requirement to be in compliance with Rule
144(c)(1) and otherwise without restriction or limitation pursuant to Rule
144.  The Company will use its reasonable best efforts to have such “resale”
registration statement filed by the Filing Date (as defined in the Registration
Rights Agreement) and declared effective by the SEC as soon as possible and, in
any event, by the Effectiveness Date (as defined in the Registration Rights
Agreement), unless extended by Subscribers holding at least 60% of the
Registrable Securities outstanding on such date (including the Lead Investor).
 
The Company is obligated to pay to the Subscribers a fee of 1% per month of the
investors’ investment, payable in cash, up to a maximum of twelve (12%) percent,
on the Filing Date and the Effectiveness Date if the registration obligations
set forth herein have not been met, and pro- rata for each month, or partial
month, in excess of the Filing Date and/or the  Effectiveness Date that the
registration statement has not been declared effective; provided, however, that
the Company shall not be obligated to pay any such liquidated damages if the
Company is unable to fulfill its registration obligations as a result of rules,
regulations, positions or releases issued or actions taken by the SEC pursuant
to its authority with respect to “Rule 415”, provided the Company registers at
such time the maximum number of shares of Common Stock permissible upon
consultation with the staff of the SEC.
 
The description of registration rights is qualified in its entirety by reference
to Registration Rights Agreement annexed hereto as Exhibit G (the “Registration
Rights Agreement”).
 
8.
MISCELLANEOUS PROVISIONS

 
(a)           All parties hereto have been represented by counsel, and no
inference shall be drawn in favor of or against any party by virtue of the fact
that such party’s counsel was or was not the principal draftsman of this
Agreement.
 
(b)           Each of the parties hereto shall be responsible to pay the costs
and expenses of its own legal counsel in connection with the preparation and
review of this Agreement and related documentation.
 
(c)           Neither this Agreement, nor any provisions hereof, shall be
waived, modified, discharged or terminated except by an instrument in writing
signed by the party against whom any waiver, modification, discharge or
termination is sought.
 
(d)           The representations, warranties and agreement of each Subscriber
and the Company made in this Agreement shall survive the execution and delivery
of this Agreement and the delivery of the Securities.
 
(e)           Any party may send any notice, request, demand, claim or other
communication hereunder to the Subscriber at the address set forth on the
signature page of this Agreement or to the Company at its primary office
(including personal delivery, expedited courier, messenger service, fax,
ordinary mail or electronic mail), but no such notice, request, demand, claim or
other communication will be deemed to have been duly given unless and until it
actually is received by the intended recipient. Any party may change the address
to which notices, requests, demands, claims and other communications hereunder
are to be delivered by giving the other parties written notice in the manner
herein set forth.
 
(f)           Except as otherwise provided herein, this Agreement shall be
binding upon, and inure to the benefit of, the parties to this Agreement and
their heirs, executors, administrators, successors, legal representatives and
assigns.  If any Subscriber is more than one person or entity, the obligation of
any Subscriber shall be joint and several and the agreements, representations,
warranties and acknowledgments contained herein shall be deemed to be made by,
and be binding upon, each such person or entity and its heirs, executors,
administrators, successors, legal representatives and assigns. This Agreement
sets forth the entire agreement and understanding between the parties as to the
subject matter hereof and merges and supersedes all prior discussions,
agreements and understandings of any and every nature among them.
 

 
 

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

 

(g)           This Agreement is not transferable or assignable by the Company.
 
(h)           The Company hereby represents and warrants as of the date hereof
and as of any Closing Date that none of the terms offered to any Person with
respect to any offer, sale or subscription of Securities (each a "Subscription
Document"), is or will be more favorable to such Person than those of the
Subscriber and this Agreement shall be, without any further action by the
Subscriber or the Company, deemed amended and modified in an economically and
legally equivalent manner such that the Subscriber shall receive the benefit of
the more favorable terms contained in such Subscription
Document.  Notwithstanding the foregoing, the Company agrees, at its expense, to
take such other actions (such as entering into amendments to the Transaction
Documents) as the Subscriber may reasonably request to further effectuate the
foregoing.
 
(i)           The obligations of each Subscriber under any Transaction Document
are several and not joint with the obligations of any other Subscriber, and no
Subscriber shall be responsible in any way for the performance or
non-performance of the obligations of any other Subscriber under any Transaction
Document.  Nothing contained herein or in any other Transaction Document, and no
action taken by any Subscriber pursuant hereto or thereto, shall be deemed to
constitute the Subscribers as a partnership, an association, a joint venture or
any other kind of entity, or create a presumption that the Subscribers are in
any way acting in concert or as a group with respect to such obligations or the
transactions contemplated by the Transaction Documents.  Each Subscriber shall
be entitled to independently protect and enforce its rights, including, without
limitation, the rights arising out of this Agreement or out of the other
Transaction Documents, and it shall not be necessary for any other Subscriber to
be joined as an additional party in any proceeding for such purpose.  Each
Subscriber has been represented by its own separate legal counsel in its review
and negotiation of the Transaction Documents.  The Company has elected to
provide all Subscribers with the same terms and Transaction Documents for the
convenience of the Company and not because it was required or requested to do so
by any of the Subscribers.  It is expressly understood and agreed that each
provision contained in this Agreement and in each other Transaction Document is
between the Company and a Subscriber, solely, and not between the Company and
the Subscribers collectively and not between and among the Subscribers.  The
Company acknowledges that any actions of Subscribers now, and in the future, in
which (A) any review or approval is sought by the Company, including, without
limitation, review, approval or acceptance of any reportable event required to
be reported in any SEC filing or report by the Company; or (B) any amendment,
waiver, right of first refusal, participation right, acquisition or financing,
including any acquisition or financing is proposed, introduced, offered or
arranged by any one or more Subscribers or their affiliates or sought by the
Company, shall not be claimed by the Company or any person seeking to assert
such a claim on behalf of the Company, to constitute the forming of any “Group”
as such term is defined under Section 13(d) or Section 16 of the Exchange Act,
nor shall any activity permit the Company or any third party holder of
securities of the Company to assert any claim that any beneficial ownership
limitations or conversion limitations of the Series A Certificate of Designation
or Warrants have been exceeded and such Subscriber, alone or in conjunction with
others, constitutes a “Group” for purposes of the Exchange Act as a result
thereof.
 
(j)           Except as otherwise provided herein, this Agreement shall not be
changed, modified or amended and no right hereunder shall be waived, except in
writing signed by both (a) the Company and (b) Subscribers holding at least 60%
of the Units sold in the Offering outstanding on the date of determination
(including the Lead Investor).  The Company shall be prohibited from offering
any additional consideration to any Subscriber in this Offering (or such
original Subscriber’s transferee) for the purposes of inducing such person to
change, modify, waive or amend any term of this Agreement or any other
Transaction Document without making the same offer on a pro-rata basis to all
other Subscribers (and those transferees) in this Offering allocable to the
securities acquired by such transferee(s).
 
(k)           This Agreement shall be governed by and construed in accordance
with the laws of the State of New York, without giving effect to conflicts of
law principles.
 
(l)           The Company and each Subscriber hereby agree that any dispute that
may arise between them arising out of or in connection with this Agreement shall
be adjudicated before a court located in the City of New York, Borough of
Manhattan, and they hereby submit to the exclusive jurisdiction of the federal
and state courts of the State of New York located in the City of New York,
Borough of Manhattan with respect to any action or legal proceeding commenced by
any party, and irrevocably waive any objection they now or hereafter may have
respecting the venue of any such action or proceeding brought in such a court or
respecting the fact that such court is an inconvenient forum, relating to or
arising out of this Agreement or any acts or omissions relating to the sale of
the securities hereunder, and consent to the service of process in any such
action or legal proceeding by means of registered or certified mail, return
receipt requested, postage prepaid, in care of the address set forth herein or
such other address as either party shall furnish in writing to the other.
 

 
 

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(m)           WAIVER OF JURY TRIAL.  IN ANY ACTION, SUIT, OR PROCEEDING IN ANY
JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE PARTIES EACH
KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW,
HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY WAIVES FOREVER
TRIAL BY JURY.
 
(n)           This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
 
[Signature Pages Follow]
 

 
 

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ALL SUBSCRIBERS MUST COMPLETE THIS PAGE

IN WITNESS WHEREOF, the Subscriber has executed this Agreement on the ____ day
of _____, 2015.
 

 
x  $1.20  for per Unit      =
 
Units subscribed for
 
      Aggregate Purchase Price

Election to Purchase Preferred Shares: ________ (check here)
 
Manner in which Title is to be held (Please Check One):
 
1.
___
Individual
7.
___
Trust/Estate/Pension or Profit sharing Plan
Date Opened:______________
2.
___
Joint Tenants with Right of Survivorship
8.
___
As a Custodian for
________________________________
Under the Uniform Gift to Minors Act of the State of
________________________________
3.
___
Community Property
9.
___
Married with Separate Property
4.
___
Tenants in Common
10.
___
Keogh
5.
___
Corporation/Partnership/ Limited Liability Company
11.
___
Tenants by the Entirety
6.
___
IRA
     

ALTERNATIVE DISTRIBUTION INFORMATION
 
To direct distribution to a party other than the registered owner, complete the
information below. YOU MUST COMPLETE THIS SECTION IF THIS IS AN IRA INVESTMENT.
 
Name of Firm (Bank, Brokerage, Custodian):
 
Account Name:
 
Account Number:
 
Representative Name:
 
Representative Phone Number:
 
Address:
 
City, State, Zip:
 

 
 

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IF MORE THAN ONE SUBSCRIBER, EACH SUBSCRIBER MUST SIGN.
INDIVIDUAL SUBSCRIBERS MUST COMPLETE THIS PAGE 25.
SUBSCRIBERS WHICH ARE ENTITIES MUST COMPLETE PAGE 26.
 
EXECUTION BY NATURAL PERSONS
 
_____________________________________________________________________________
Exact Name in Which Title is to be Held
_________________________________
Name (Please Print)
 
_________________________________
Name of Additional Purchaser
_________________________________
Residence: Number and Street
 
_________________________________
Address of Additional Purchaser
_________________________________
City, State and Zip Code
 
_________________________________
City, State and Zip Code
_________________________________
Social Security Number
 
_________________________________
Social Security Number
_________________________________
Telephone Number
 
_________________________________
Telephone Number
_________________________________
Fax Number (if available)
 
________________________________
Fax Number (if available)
_________________________________
E-Mail (if available)
 
________________________________
E-Mail (if available)
__________________________________
(Signature)
 
 
 
________________________________
(Signature of Additional Purchaser)
ACCEPTED this ___ day of _________ 2015, on behalf of the Company.
 
 
By:_________________________________
Name:
          Title:
   

[SIGNATURE PAGE FOR SUBSCRIPTION AGREEMENT]

 
 

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EXECUTION BY SUBSCRIBER WHICH IS AN ENTITY
(Corporation, Partnership, LLC, Trust, Etc.)
 

_____________________________________________________________________________
Name of Entity (Please Print)
Date of Incorporation or Organization:
State of Principal Office:
Federal Taxpayer Identification Number:
____________________________________________
Office Address
 
____________________________________________
City, State and Zip Code
 
____________________________________________
Telephone Number
 
____________________________________________
Fax Number (if available)
 
____________________________________________
E-Mail (if available)
 
 
By: _________________________________
Name:
Title:
[seal]
Attest: _________________________________
(If Entity is a Corporation)
_________________________________
_________________________________
Address
   
ACCEPTED this ____ day of __________ 2015 , on behalf of the Company.
 
 
 
By: _________________________________
Name:
Title:

 

[SIGNATURE PAGE FOR SUBSCRIPTION AGREEMENT]
 

 
 

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INVESTOR QUESTIONNAIRE
 
Instructions:  Check all boxes below which correctly describe you.
 
o
You are (i) a bank, as defined in Section 3(a)(2) of the Securities Act of 1933,
as amended (the “Securities Act”), (ii) a savings and loan association or other
institution, as defined in Section 3(a)(5)(A) of the Securities Act, whether
acting in an individual or fiduciary capacity, (iii) a broker or dealer
registered pursuant to Section 15 of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), (iv) an insurance company as defined in Section
2(13) of the Securities Act, (v) an investment company registered under the
Investment Company Act of 1940, as amended (the “Investment Company Act”), (vi)
a business development company as defined in Section 2(a)(48) of the Investment
Company Act, (vii) a Small Business Investment Company licensed by the U.S.
Small Business Administration under Section 301 (c) or (d) of the Small Business
Investment Act of 1958, as amended, (viii) a plan established and maintained by
a state, its political subdivisions, or an agency or instrumentality of a state
or its political subdivisions, for the benefit of its employees and you have
total assets in excess of $5,000,000, or (ix) an employee benefit plan within
the meaning of the Employee Retirement Income Security Act of 1974, as amended
(“ERISA”) and (1) the decision that you shall subscribe for and purchase shares
of common stock or preferred stock, is made by a plan fiduciary, as defined in
Section 3(21) of ERISA, which is either a bank, savings and loan association,
insurance company, or registered investment adviser, or (2) you have total
assets in excess of $5,000,000 and the decision that you shall subscribe for and
purchase the Units is made solely by persons or entities that are accredited
investors, as defined in Rule 501 of Regulation D promulgated under the
Securities Act (“Regulation D”) or (3) you are a self-directed plan and the
decision that you shall subscribe for and purchase the Securities is made solely
by persons or entities that are accredited investors.

 
o
You are a private business development company as defined in Section 202(a)(22)
of the Investment Advisers Act of 1940, as amended.

 
o
You are an organization described in Section 501(c)(3) of the Internal Revenue
Code of 1986, as amended (the “Code”), a corporation, Massachusetts or similar
business trust or a partnership, in each case not formed for the specific
purpose of making an investment in the Securities  and its underlying securities
in excess of $5,000,000.

 
o
You are a director or executive officer of the Company.

 
o
You are a natural person whose individual net worth, or joint net worth with
your spouse, exceeds $1,000,000 (excluding residence) at the time of your
subscription for and purchase of the Securities.

 
o
You are a natural person who had an individual income in excess of $200,000 in
each of the two most recent years or joint income with your spouse in excess of
$300,000 in each of the two most recent years, and who has a reasonable
expectation of reaching the same income level in the current year.

 
o
You are a trust, with total assets in excess of $5,000,000, not formed for the
specific purpose of acquiring the Securities and whose subscription for and
purchase of the Securities is directed by a sophisticated person as described in
Rule 506(b)(2)(ii) of Regulation D.

 
o
You are an entity in which all of the equity owners are persons or entities
described in one of the preceding paragraphs.

 
 
 

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Check all boxes below which correctly describe you.
 
With respect to this investment in the Securities, your:
 
Investment Objectives:                               p Aggressive
Growth                         p Speculation
 
Risk Tolerance:                                            o Low
Risk                                            o Moderate
Risk                                 p High Risk
 
Are you associated with a FINRA Member
Firm?                                                                                      o Yes                       o No
 
 
Your initials (purchaser and co-purchaser, if applicable) are required for each
item below:

 
____   ____ 
I/We understand that this investment is not guaranteed.

 
____   ____ 
I/We are aware that this investment is not liquid.

 
____   ____ 
I/We are sophisticated in financial and business affairs and are able to
evaluate the risks and merits of an investment in this offering.

 
____   ____ 
I/We confirm that this investment is considered “high risk.” (This type of
investment is considered high risk due to the inherent risks including lack of
liquidity and lack of diversification.  Success or

 
 
failure of private placements such as this is dependent on the corporate issuer
of these securities and is outside the control of the investors. While potential
loss is limited to the amount invested, such loss is possible.)

 
The Subscriber hereby represents and warrants that all of its answers to this
Investor Questionnaire are true as of the date of its execution of the
Subscription Agreement pursuant to which it purchased the Securities.
 
 
 
___________________________________
Name of Purchaser  [please print]
___________________________________
Signature of Purchaser (Entities please
provide signature of Purchaser’s duly
authorized signatory.)
___________________________________
Name of Signatory (Entities only)
___________________________________
Title of Signatory (Entities only)
 
 
___________________________________
Name of Co-Purchaser  [please print]
___________________________________
Signature of Co-Purchaser

 

 

 
[SIGNATURE PAGE FOR INVESTOR QUESTIONNAIRE]