SECURITIES
PURCHASE AGREEMENT


 


THIS
SECURITIES PURCHASE AGREEMENT (the “Agreement”), is entered into as of May 25, 2017 (the “Execution
Date”), by and among BTCS Inc., a Nevada corporation (the “Company”), and the investors listed on
the Schedule of Buyers attached hereto (individually, a “Buyer” and collectively, the “Buyers”).


 


RECITALS


 


A.
WHEREAS, the Company and each Buyer is executing and delivering this Agreement in reliance upon the exemption from securities
registration afforded by Section 4(a)(2) of the Securities Act of 1933, as amended (the “1933 Act”), and Rule
506(b) of Regulation D (“Regulation D”) as promulgated by the United States Securities and Exchange Commission
(the “SEC”) under the 1933 Act.


 


B.
WHEREAS, the Company has authorized a new series of convertible preferred stock of the Company designated as Series C Convertible
Preferred Stock (the “Series C Preferred Stock”), the terms of which are set forth in the certificate of designation
for such series of preferred stock (the “Certificate of Designations”) in the form attached hereto as Exhibit
A (together with any convertible preferred stock issued in replacement thereof in accordance with the terms thereof, the “Preferred
Shares”), which Preferred Shares shall be convertible into the Company’s common stock, par value $0.001 per share
(the “Common Stock”), in accordance with the terms of the Certificate of Designations.


 


C.
WHEREAS, each Buyer wishes to purchase, and the Company wishes to sell, upon the terms and conditions stated in this Agreement,
(i) that aggregate number of Preferred Shares set forth opposite such Buyer’s name in column (3) on the Schedule of Buyers
(which aggregate number for all Buyers shall be 79,368 Preferred Shares), (ii) Series A Warrants, in substantially the form
attached hereto as Exhibit B (the “Series A Warrants”), representing the right to acquire that number
of shares of Common Stock set forth opposite such Buyer’s name in column (4) on the Schedule of Buyers (which aggregate
number for all Buyers shall be equal 15,873,600 Series A Warrants), (iii) Additional Investment Right Warrants, in substantially
the form attached hereto as Exhibit C (the “Additional Warrants”) representing the right to acquire
that number of shares of Common Stock set forth opposite such Buyer’s name in column (5) on the Schedule of Buyers
(which aggregate number for all Buyers shall be equal 15,714,288 Additional Warrants), and (iv) Bonus Warrants (which shall only
be issued upon exercise of the Additional Warrants), in substantially the form attached hereto as Exhibit D (the “Bonus
Warrants”) representing the right, upon exercise of the Additional Warrants, to acquire that number of shares of
Common Stock set forth opposite such Buyer’s name in column (6) on the Schedule of Buyers (which aggregate number
for all Buyers shall be up to 15,714,288 Bonus Warrants). The shares of Common Stock issuable pursuant to the terms of the Preferred
Shares are referred to herein as the “Conversion Shares.” The Series A Warrants, the Additional Warrants, and
the Bonus Warrants, and any other warrants issued in connection thereunder, are referred to in this Agreement collectively as
the “Warrants.” The shares of Common Stock issuable pursuant to the terms of the Warrants are referred to in
this Agreement, collectively, as the “Warrant Shares.”


 




    	 	 	 



    	 



    

 


D.
WHEREAS, the Preferred Shares, the Warrants, the Conversion Shares and the Warrant Shares are collectively referred to herein
as the “Securities”.


 


E.
WHEREAS, contemporaneously with the execution and delivery of this Agreement, the parties hereto are executing and delivering
a Registration Rights Agreement, substantially in the form attached hereto as Exhibit E (the “Registration Rights
Agreement”), pursuant to which the Company has agreed to provide certain registration rights with respect to the Registrable
Securities (as defined in the Registration Rights Agreement), under the 1933 Act and the rules and regulations promulgated thereunder,
and applicable state securities laws.


 


NOW,
THEREFORE, in consideration of the foregoing premises, and the promises and covenants herein contained, the receipt and sufficiency
of which are hereby acknowledged by the parties hereto, the Company and each Buyer (severally and not jointly), intending to be
legally bound, hereby agree as follows:


 


AGREEMENT


 


1.
PURCHASE AND SALE OF PREFERRED SHARES AND WARRANTS.


 


(a)
Closing.


 


(i)
Preferred Shares and Warrants. Subject to the satisfaction (or waiver) of the conditions set forth in Sections 6
and 7 below, the Company agrees to issue and sell to each Buyer, and each Buyer severally, but not jointly, agrees to purchase
from the Company on the Closing Date (as defined below), (x) the number of Preferred Shares, as is set forth opposite such Buyer’s
name in column (3) on the Schedule of Buyers, and (y) Series A Warrants to acquire up to that number of Warrant Shares
as is set forth opposite such Buyer’s name in column (4) on the Schedule of Buyers, and (z) Additional Warrants to
acquire up to that number of Warrant Shares as is set forth opposite such Buyer’s name in column (5) on the Schedule
of Buyers, up to an aggregate amount of $1,111,111.00 for all Buyers (the “Closing”).


 


(ii)
Closing. The date and time of the Closing (the “Closing Date”) shall be 10:00 a.m., New York City time,
on the Execution Date (or such later date as is mutually agreed to by the Company and each Buyer) after notification of satisfaction
(or waiver) of the conditions to the Closing set forth in Sections 6 and 7 below, at the offices of Nason, Yeager,
Gerson, White & Lioce, P.A., 3001 PGA Boulevard, Suite 305, Palm Beach Gardens, FL 33410.


 


(iii)
Purchase Price. The aggregate purchase price for the Preferred Shares to be purchased by each Buyer (the “Purchase
Price”) shall be the amount set forth opposite such Buyer’s name in column (7) on the Schedule of Buyers
equal to an aggregate amount of $1,111,111.00 for all Buyers, provided that, subsequent to the initial Closing, the Company
may offer and sell up to an additional $1,200,000 of Preferred Shares and Warrants on identical terms as those contained in the
Transaction Documents to a strategic investor, Buyer, or Buyers provided that the investors participating in any such subsequent
closing shall be subject to a one year lock-up covering all purchased securities from the subsequent closing date, notwithstanding
anything in this Agreement to the contrary. Each Buyer shall pay $12.60 for each Preferred Share and related Warrants to be purchased
by such Buyer at the Closing and any subsequent closing.


 




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(iv)
Form of Payment. On the Closing Date, (A) each Buyer shall deliver to Nason, Yeager, Gerson, White & Lioce, P.A. as
escrow agent (“Escrow Agent”), its portion of the Purchase Price to the Company for the Preferred Shares and
Warrants to be issued and sold to such Buyer at the Closing (less, in the case of any Buyer the amount withheld by such Buyer
pursuant to Section 4(f)), by wire transfer of immediately available funds in accordance with the Escrow Agent’s
written wire instructions and (B) the Company shall deliver to each Buyer the Preferred Shares (allocated in such number of shares
as the Buyer shall request) and related Warrants (allocated in such number of shares as the Buyer shall request) which such Buyer
is purchasing hereunder, in each case duly executed on behalf of the Company and registered in the name of such Buyer or its designee.


 


2.
BUYER’S REPRESENTATIONS AND WARRANTIES.


 


Each
Buyer, severally and not jointly, represents and warrants with respect to only itself, as of the Execution Date and as of the
Closing Date, that:


 


(a)
Organization; Authority. Such Buyer is an entity duly organized, validly existing and in good standing under the laws of
the jurisdiction of its organization with the requisite power and authority to enter into and to consummate the transactions contemplated
by the Transaction Documents (as defined below) to which it is a party and otherwise to carry out its obligations hereunder and
thereunder.


 


(b)
No Public Sale or Distribution. Such Buyer is (i) acquiring the Preferred Shares and the Warrants, (ii) upon conversion
of the Preferred Shares will acquire the Conversion Shares and (iii) upon exercise of the Warrants (other than pursuant to a Cashless
Exercise (as defined in the Warrants)) will acquire the Warrant Shares issuable upon exercise of the Warrants, in each case, for
its own account and not with a view towards, or for resale in connection with, the public sale or distribution thereof, except
pursuant to sales registered or exempted under the 1933 Act; provided, however, that by making the representations herein, such
Buyer does not agree to hold any of the Securities for any minimum or other specific term and reserves the right to dispose of
the Securities at any time in accordance with or pursuant to a registration statement or an exemption under the 1933 Act. Such
Buyer is acquiring the Securities hereunder in the ordinary course of its business. Such Buyer does not presently have any agreement
or understanding, directly or indirectly, with any Person (as defined below) to distribute any of the Securities. For purposes
of this Agreement, “Person” means an individual, a limited liability company, a partnership, a joint venture,
a corporation, a trust, an unincorporated organization and a government or any department or agency thereof.


 


(c)
Accredited Investor Status. Such Buyer is an “accredited investor” as that term is defined in Rule 501(a) of
Regulation D.


 


(d)
Reliance on Exemptions. Such Buyer understands that the Securities are being offered and sold to it in reliance on specific
exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying
in part upon the truth and accuracy of, and such Buyer’s compliance with, the representations, warranties, agreements, acknowledgments
and understandings of such Buyer set forth herein in order to determine the availability of such exemptions and the eligibility
of such Buyer to acquire the Securities.


 




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(e)
Information. Such Buyer and its advisors, if any, have been furnished with all materials relating to the business, finances
and operations of the Company and materials relating to the offer and sale of the Securities that have been requested by such
Buyer in writing. Such Buyer and its advisors, if any, have been afforded the opportunity to ask questions of the Company. Neither
such inquiries nor any other due diligence investigations conducted by such Buyer or its advisors, if any, or its representatives
shall modify, amend or affect such Buyer’s right to rely on the Company’s representations and warranties contained
herein. Such Buyer understands that its investment in the Securities involves a high degree of risk. Such Buyer has sought such
accounting, legal and tax advice as it has considered necessary to make an informed investment decision with respect to its acquisition
of the Securities.


 


(f)
No Governmental Review. Such Buyer understands that no United States federal or state agency or any other government or
governmental agency has passed on or made any recommendation or endorsement of the Securities or the fairness or suitability of
the investment in the Securities nor have such authorities passed upon or endorsed the merits of the offering of the Securities.


 


(g)
Transfer or Resale. Such Buyer understands that: except as provided in the Registration Rights Agreement, (i) the Securities
have not been and are not being registered under the 1933 Act or any state securities laws, and may not be offered for sale, sold,
assigned or transferred unless (A) subsequently registered thereunder, or (B) sold, assigned or transferred pursuant to an exemption
therefrom. 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 and such pledge of Securities shall not be deemed to be a transfer, sale
or assignment of the Securities hereunder, and no Buyer effecting a pledge of Securities shall be required to provide the Company
with any notice thereof or otherwise make any delivery to the Company pursuant to this Agreement or any other Transaction Document
(as defined in Section 3(b)), including, without limitation, this Section 2(g).


 


(h)
Legends.


 


(i)
Such Buyer understands that the certificates or other instruments representing the Preferred Shares and the Warrants, until such
time as the resale of the Conversion Shares and the Warrant Shares have been registered under the 1933 Act, the stock certificates
representing the Conversion Shares and the Warrant Shares, except as set forth below, shall bear a restrictive legend in substantially
the following form (and a stop-transfer order may be placed against transfer of such stock certificates):


 


[NEITHER
THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE [CONVERTIBLE][EXERCISABLE]
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, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS 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.


 




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At
any time after the Execution Date, the legend set forth above shall be removed and the Company shall issue a certificate without
such legend to the holder of the Securities upon which it is stamped or, if available, issue to such holder by electronic delivery
at the applicable balance account at The Depository Trust Company (“DTC”), if (i) such Securities are registered for
resale under the 1933 Act, (ii) in connection with a sale, assignment or other transfer (other than pursuant to Rule 144), such
holder provides the Company with an opinion of counsel, in a generally acceptable form, to the effect that such sale, assignment
or transfer of the Securities may be made without registration under the applicable requirements of the 1933 Act, or (iii) the
Securities can be sold, assigned or transferred pursuant to Rule 144 or Rule 144A. The Company shall be responsible for the issuance
fees of its transfer agent, its legal counsel (with respect to legal opinions from its counsel covering all the Buyers in any
such opinion upon any sale pursuant to Rule 144) and all DTC fees associated with such issuance. For the avoidance of doubt the
Company shall not be responsible for covering the cost of legal opinions of counsel to any specific Buyer to the extent that the
Company’s counsel has provided an applicable legal opinion.


 


(i)
Validity; Enforcement. This Agreement and the other Transaction Documents to which such Buyer is a party have been duly
and validly authorized, executed and delivered on behalf of such Buyer and shall constitute the legal, valid and binding obligations
of such Buyer enforceable against such Buyer in accordance with their respective terms, except as such enforceability may be limited
by general principles of equity or to applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and other similar
laws relating to, or affecting generally, the enforcement of applicable creditors’ rights and remedies.


 


(j)
No Conflicts. The execution, delivery and performance by such Buyer of this Agreement and the other Transaction Documents
to which such Buyer is a party and the consummation by such Buyer of the transactions contemplated hereby and thereby will not
(i) result in a violation of the organizational documents of such Buyer or (ii) conflict with, or constitute a default (or an
event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to which such Buyer is a party, or (iii) result in a violation
of any law, rule, regulation, order, judgment or decree (including federal and state securities laws) applicable to such Buyer,
except in the case of clauses (ii) and (iii) above, for such conflicts, defaults, rights or violations which would not, individually
or in the aggregate, reasonably be expected to have a material adverse effect on the ability of such Buyer to perform its obligations
hereunder.


 


(k)
No Bad Actor Disqualification Event. Such Buyer represents, after reasonable inquiry, that none of the “Bad Actor”
disqualifying events described in Rule 506(d)(l)(i) to (viii) under the Securities Act (a “Disqualification Event”)
is applicable to such Buyer or any of its Rule 506(d) Related Parties (if any), except a Disqualification Event as to which Rule
506(d)(2)(ii) or (iii) or (d)(3) applies. “Rule 506(d) Related Party” means a person or entity that is a beneficial
owner of such Buyer’s securities for purposes of Rule 506(d).


 




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(l)
Previous Transactions. Prior to this Agreement, each Buyer has purchased or otherwise obtained securities issued by the
Company.


 


3.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY.


 


The
Company represents and warrants to each of the Buyers that, as of the Execution Date and as of the Closing Date:


 


(a)
Organization and Qualification. Each of the Company and its “Subsidiaries” (which for purposes of this
Agreement means any joint venture or any entity in which the Company, directly or indirectly, owns more than 10% of the capital
stock or holds an equivalent equity or similar interest) are entities duly organized and validly existing and in good standing
under the laws of the jurisdiction in which they are formed, and have the requisite power and authorization to own their properties
and to carry on their business as now being conducted. Each of the Company and its Subsidiaries is duly qualified as a foreign
entity to do business and is in good standing in every jurisdiction in which its ownership of property or the nature of the business
conducted by it makes such qualification necessary, except to the extent that the failure to be so qualified or be in good standing
would not reasonably be expected to have a Material Adverse Effect. As used in this Agreement, “Material Adverse Effect”
means any material adverse effect on the business, properties, assets, operations, results of operations, condition (financial
or otherwise) or prospects of the Company and its Subsidiaries, individually or taken as a whole, or on the transactions contemplated
hereby or in the other Transaction Documents or by the agreements and instruments to be entered into in connection herewith or
therewith, or on the authority or ability of the Company to perform its obligations under the Transaction Documents. As used in
this Agreement, any adverse event that does not have a long-term effect on the Company is not a Material Adverse Effect. For purposes
of this subsection, “long-term effect” means an effect lasting more than twelve (12) months. The Company has no Subsidiaries,
except as set forth on Schedule 3(a).


 


(b)
Authorization; Enforcement; Validity. The Company has the requisite corporate power and authority to enter into and perform
its obligations under this Agreement, the Certificate of Designations, the Warrants, the Registration Rights Agreement, and each
of the other agreements entered into by the parties hereto in connection with the transactions contemplated by this Agreement
(collectively, the “Transaction Documents”) and to issue the Securities in accordance with the terms hereof
and thereof. The execution and delivery of the Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby, including, without limitation, the issuance of the Preferred Shares and Warrants
and the reservation for issuance and the issuance of the Conversion Shares issuable upon conversion of the Preferred Shares and
the reservation for issuance and issuance of Warrant Shares issuable upon exercise of the Warrants have been duly authorized by
the Company’s Board of Directors and (other than the filing with the SEC of one or more Registration Statements (as defined
in the Registration Rights Agreement) in accordance with the requirements of the Registration Rights Agreement and any other filings
as may be required by any state securities agencies) no further filing, consent, or authorization is required by the Company,
its board of directors or its stockholders. This Agreement and the other Transaction Documents of even date herewith have been
duly executed and delivered by the Company, and constitute the legal, valid and binding obligations of the Company, enforceable
against the Company in accordance with their respective terms, except as such enforceability may be limited by general principles
of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting
generally, the enforcement of applicable creditors’ rights and remedies. The Certificate of Designations in the form attached
hereto as Exhibit A has been filed with the Secretary of State of the State of Nevada and is in full force and effect,
enforceable against the Company in accordance with its terms and has not been amended.


 




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(c)
Issuance of Securities. The issuance of the Preferred Shares and the Warrants have been duly authorized and upon issuance
in accordance with the terms of the Transaction Documents shall be validly issued and free from all taxes, liens and charges with
respect to the issue thereof, and the Preferred Shares shall be entitled to the rights and preferences set forth in the Certificate
of Designations. As of the Closing, the Company shall have reserved from its duly authorized capital stock not less than the sum
of 300% of the maximum number of shares of Common Stock issuable (i) upon conversion of the maximum number of Preferred Shares
(assuming for purposes hereof, that the Preferred Shares are convertible at the Conversion Price (as defined in the Certificate
of Designations) and without taking into account any limitations on the conversion of the Preferred Shares set forth in the Certificate
of Designations) and (ii) upon exercise of the Warrants (without taking into account any limitations on the exercise of the Warrants
set forth in the Warrants), in each case, determined as if issued as of the trading day immediately preceding the applicable date
of determination. Upon issuance or conversion in accordance with the Certificate of Designations or the exercise of the Warrants
and payment of the exercise price under the Warrants (including by Cashless Exercise) thereunder, the Conversion Shares and the
Warrant Shares, respectively, will be validly issued, fully paid and nonassessable and free from all preemptive or similar rights,
taxes, liens and charges with respect to the issue thereof, with the holders being entitled to all rights accorded to a holder
of Common Stock. Assuming the accuracy of each of the representations and warranties set forth in Section 2 of this Agreement,
the offer and issuance by the Company of the Securities is exempt from registration under the 1933 Act. This Section 3(c)
is subject to the same limitation described in the second to last sentence of Section 3(b).


 


(d)
No Conflicts. The execution, delivery and performance of the Transaction Documents by the Company and the consummation
by the Company of the transactions contemplated hereby and thereby (including, without limitation, the issuance of the Preferred
Shares and the Warrants, and reservation for issuance and issuance of the Conversion Shares and the Warrant Shares) will not (i)
result in a violation of any articles of incorporation, any certificate of formation, any certificate of designations or other
constituent documents of the Company or any of its Subsidiaries, any capital stock of the Company or any of its Subsidiaries or
the bylaws of the Company or any of its Subsidiaries or (ii) conflict with, or constitute a default (or an event which with notice
or lapse of time or both would become a default) in any respect under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to which the Company or any of its Subsidiaries is a party,
or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including foreign, federal and state laws
and regulations) applicable to the Company or any of its Subsidiaries or by which any property or asset of the Company or any
of its Subsidiaries is bound or affected.


 




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(e)
Consents. Neither the Company nor any of its Subsidiaries is required to obtain any consent, authorization or order of,
or make any filing or registration with, any government, court, regulatory, self-regulatory, administrative agency or commission
or other governmental agency, authority or instrumentality, domestic or foreign, of competent jurisdiction (a “Governmental
Authority”) or any other Person in order for it to execute, deliver or perform any of its obligations under or contemplated
by the Transaction Documents, in each case in accordance with the terms hereof or thereof, except for (i) the filing with the
SEC of one or more registration statements in accordance with the requirements of the Registration Rights Agreement, (ii) the
filing of the Certificate of Designations with the Secretary of State of the State of Nevada, (iii) the filing of a Form D pursuant
to Regulation D promulgated by the SEC under the 1933 Act and (iv) the filings required by applicable state “blue sky”
securities laws, rules and regulations. The Company and its Subsidiaries are unaware of any facts or circumstances that might
prevent the Company from obtaining or effecting any of the registration, application or filings pursuant to the preceding sentence.


 


(f)
Acknowledgment Regarding Buyer’s Purchase of Securities. The Company acknowledges and agrees that each Buyer is acting
solely in the capacity of an arm’s length purchaser with respect to the Transaction Documents and the transactions contemplated
hereby and thereby and that no Buyer is (i) an officer or director of the Company or any of its Subsidiaries, or (ii) an “affiliate”
(as defined in Rule 144) of the Company or any of its Subsidiaries. The Company further acknowledges that no Buyer is acting as
a financial advisor or fiduciary of the Company or any of its Subsidiaries (or in any similar capacity) with respect to the Transaction
Documents and the transactions contemplated hereby and thereby, and any advice given by a Buyer or any of its representatives
or agents in connection with the Transaction Documents and the transactions contemplated hereby and thereby is merely incidental
to such Buyer’s purchase of the Securities. The Company further represents to each Buyer that the Company’s decision
to enter into the Transaction Documents has been based solely on the independent evaluation by the Company and its representatives.


 


(g)
No General Solicitation; Placement Agent. Neither the Company, nor any of its Subsidiaries or affiliates, nor any Person
acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation
D) in connection with the offer or sale of the Securities. Neither the Company nor any of its Subsidiaries has engaged any placement
agent or other agent in connection with the sale of the Securities. In the event that a broker-dealer or other agent or advisory
is engaged by the Company subsequent to the initial Closing, the Company shall be responsible for the payment of any placement
agent’s fees, financial advisory fees, or brokers’ commissions (other than for persons engaged by any Buyer or its
investment advisor) relating to or arising out of the transactions contemplated hereby in connection with the sale of the Securities.
The Company shall pay, and hold each Buyer harmless against, any liability, loss or expense (including, without limitation, attorney’s
fees and out-of-pocket expenses) arising in connection with any such claim.


 




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(h)
No Integrated Offering. None of the Company, its Subsidiaries, any of their affiliates, and any Person acting on their
behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under
circumstances that would require registration of any of the Securities under the 1933 Act, whether through integration with prior
offerings or otherwise, or caused this offering of the Securities to require approval of stockholders of the Company for purposes
of any applicable stockholder approval provisions, including, without limitation, under the rules and regulations of any exchange
or automated quotation system on which any of the securities of the Company are listed or designated, but excluding stockholder
consents required to authorize and issue the Securities or waive any anti-dilution provisions in connection therewith. None of
the Company, its Subsidiaries, their affiliates and any Person acting on their behalf will take any action or steps referred to
in the preceding sentence that would require registration of any of the Securities under the 1933 Act or cause the offering of
the Securities to be integrated with other offerings for purposes of any such applicable stockholder approval provisions.


 


(i)
Dilutive Effect. The Company understands and acknowledges that the number of Conversion Shares issuable upon conversion
of the Preferred Shares will increase in certain circumstances. The Company further acknowledges that its obligation to issue
Conversion Shares upon conversion of the Preferred Shares in accordance with this Agreement and the Certificate of Designations,
and its obligation to issue the Warrant Shares upon exercise of the Warrants in accordance with this Agreement and the Warrants,
is, in each case, not limited by the dilutive effect that such issuance may have on the ownership interests of other stockholders
of the Company.


 


(j)
Application of Takeover Protections; Rights Agreement. The Company and its board of directors have taken all necessary
action, if any, in order to render inapplicable any control share acquisition, business combination, poison pill (including any
distribution under a rights agreement) or other similar anti-takeover provision under the Articles of Incorporation, (as defined
in Section 3(r)) any certificates of designations or the laws of the jurisdiction of its formation or incorporation which
is or could become applicable to any Buyer as a result of the transactions contemplated by this Agreement, including, without
limitation, the Company’s issuance of the Securities and any Buyer’s ownership of the Securities. The Company and
its board of directors have taken all necessary actions, if any, in order to render inapplicable any stockholder rights plan or
similar arrangement if any relating to accumulations of beneficial ownership of Common Stock or a change in control of the Company.


 




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(k)
Material Liabilities; Financial Statements. Except as set forth on Schedule 3(k), the Company has no liabilities
or obligations, absolute or contingent (individually or in the aggregate), except (i) liabilities and obligations incurred after
December 31, 2016 in the ordinary course of business that are not material and (ii) obligations under contracts made in the ordinary
course of business that would not be required to be reflected in financial statements prepared in accordance with generally accepted
accounting principles as applied in the United States, consistently applied for the periods covered thereby (“GAAP”).
The financial statements of the Company delivered to the Buyers on or prior to the Execution Date are a correct and complete copy
of the audited financial statements (including, in each case, any related notes thereto) of the Company and its Subsidiaries,
on a consolidated basis, for the fiscal years ended December 31, 2015 and 2014 and the quarter ended September 31, 2016, which
have been filed with the SEC (the “Financial Statements”), and such statements fairly present in all material
respects the financial position of the Company and its Subsidiaries, on a consolidated basis, at the respective dates thereof
and the results of its operations and cash flows for the periods indicated. The Financial Statements do not contain any 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 light of the circumstances under which they were made, not misleading, except as disclosed on Schedule
3(k).


 


(l)
Absence of Certain Changes. Since March 31, 2017, there has been no material adverse change and no material adverse development
in the business, assets, properties, operations, condition (financial or otherwise), results of operations or prospects of the
Company or its Subsidiaries. Without limiting the generality of the foregoing, neither the Company nor any of its Subsidiaries
has:


 


(i)
declared, set aside or paid any dividend or other distribution with respect to any shares of capital stock of the Company or any
of its Subsidiaries or any direct or indirect redemption, purchase or other acquisition of any such shares;


 


(ii)
sold, assigned, pledged, encumbered, transferred or other disposed of any tangible asset of the Company or any of its Subsidiaries
(other than sales or the licensing of its products to customers in the ordinary course of business consistent with past practice),
or sold, assigned, pledged, encumbered, transferred or other disposed of any Intellectual Property (other than licensing of products
of the Company or its Subsidiaries in the ordinary course of business and on a non-exclusive basis);


 


(iii)
entered into any licensing or other agreement with regard to the acquisition or disposition of any Intellectual Property (as hereinafter
defined) other than licenses in the ordinary course of business consistent with past practice or any amendment or consent with
respect to any licensing agreement filed or required to be filed with respect to any Governmental Authority;


 


(iv)
capital expenditures, individually or in the aggregate, in excess of $100,000;


 


(v)
any Lien on any property of the Company or any of its Subsidiaries except for Permitted Liens and Liens in existence on the Execution
Date that are described on Schedules 3(m) or 3(s);


 


(vi)
any payment, discharge, satisfaction or settlement of any suit, action, claim, arbitration, proceeding or obligation of the Company
or any of its Subsidiaries, except in the ordinary course of business and consistent with past practice;


 




    	10



     


    

 


(vii)
any split, combination or reclassification of any equity securities;


 


(viii)
any material loss, destruction or damage to any property of the Company or any Subsidiary, whether or not insured;


 


(ix)
any acceleration or prepayment of any Indebtedness (as defined below) for borrowed money or the refunding of any such Indebtedness;


 


(x)
any labor trouble involving the Company or any Subsidiary or any material change in their personnel or the terms and conditions
of employment;


 


(xi)
any waiver of any valuable right, whether by contract or otherwise;


 


(xii)
except as disclosed in Schedule 3(l), any loan or extension of credit to any officer or employee of the Company;


 


(xiii)
any change in the independent public accountants of the Company or its Subsidiaries or any material change in the accounting methods
or accounting practices followed by the Company or its Subsidiaries, as applicable, or any material change in depreciation or
amortization policies or rates;


 


(xiv)
any resignation or termination of any officer, key employee or group of employees of the Company or any of its Subsidiaries;


 


(xv)
any change in any compensation arrangement or agreement with any employee, officer, director or stockholder that would result
in the aggregate compensation to such Person in such year to exceed $150,000, except as disclosed on Schedule 3(l)(xv);


 


(xvi)
any material increase in the compensation of employees of the Company or its Subsidiaries (including any increase pursuant to
any written bonus, pension, profit sharing or other benefit or compensation plan, policy or arrangement or commitment), or any
increase in any such compensation or bonus payable to any officer, stockholder, director, consultant or agent of the Company or
any of its Subsidiaries having an annual salary or remuneration in excess of $100,000;


 


(xvii)
any revaluation of any of their respective assets, including, without limitation, writing down the value of capitalized inventory
or writing off notes or accounts receivable or any sale of assets other than in the ordinary course of business;


 


(xviii)
any acquisition or disposition of any material assets (or any contract or arrangement therefor), or any other material transaction
by the Company or any Subsidiary otherwise than for fair value in the ordinary course of business;


 


(xix)
written-down the value of any asset of the Company or its Subsidiaries or written-off as uncollectible of any accounts or notes
receivable or any portion thereof except in the ordinary course of business and in a magnitude consistent with historical practice;


 




    	11



     


    

 


(xx)
cancelled any debts or claims or any material amendment, termination or waiver of any rights of the Company or its Subsidiaries;
or


 


(xxi)
any agreement, whether in writing or otherwise, to take any of the actions specified in the foregoing items (i) through (xxi).


 


Neither
the Company nor any of its Subsidiaries has taken any steps to seek protection pursuant to any bankruptcy law nor does the Company
have any knowledge or reason to believe that its creditors intend to initiate involuntary bankruptcy proceedings or any actual
knowledge of any fact that would reasonably lead a creditor to do so.


 


(m)
No Undisclosed Events, Liabilities, Developments or Circumstances. Except as set forth in Schedule 3(m) hereto,
the Company and its Subsidiaries have no liabilities or obligations of any nature (whether accrued, absolute, contingent, unasserted
or otherwise and whether due or to become due) other than those liabilities or obligations that are disclosed in the Company’s
SEC filings and Financial Statements or which do not exceed, individually in excess of $30,000 and in the aggregate in excess
of $100,000. The reserves, if any, established by the Company or the lack of reserves, if applicable, are reasonable based upon
facts and circumstances known by the Company on the Execution Date and there are no loss contingencies that are required to be
accrued by the Statement of Financial Accounting Standard No. 5 of the Financial Accounting Standards Board which are not provided
for in the Financial Statements. Schedule 3(m) also sets forth those liabilities and obligations of the Company that shall
be satisfied with the proceeds of the transaction contemplated by this Agreement.


 


(n)
Conduct of Business; Regulatory Permits. Neither the Company nor any of its Subsidiaries is in violation of any term of
or in default under its Articles of Incorporation, the Certificate of Designations, any other certificate of designation, preferences
or rights of any other outstanding series of preferred stock of the Company or the Bylaws (as defined in Section 3(r))
or their organizational charter or articles of incorporation or bylaws, respectively. Neither the Company nor any of its Subsidiaries
is in violation of any judgment, decree or order or any statute, ordinance, rule or regulation (each a “Legal Requirement”)
applicable to the Company or any of its Subsidiaries, and neither the Company nor any of its Subsidiaries will conduct its business
in violation of any of the foregoing, except for possible violations which could not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect. The Company and its Subsidiaries possess all certificates, authorizations and permits
issued by the appropriate regulatory authorities necessary to conduct their respective businesses, except where the failure to
possess such certificates, authorizations or permits would not have, individually or in the aggregate, a Material Adverse Effect,
and neither the Company nor any such Subsidiary has received any notice of proceedings relating to the revocation or modification
of any such certificate, authorization or permit. There is no agreement, commitment, judgment, injunction, order or decree binding
upon the Company or any of its Subsidiaries or to which the Company or any of its Subsidiaries is a party which has or could reasonably
be expected to have the effect of prohibiting or materially impairing any business practice of the Company or any of its Subsidiaries,
any acquisition of property by the Company or any of its Subsidiaries or the conduct of business by the Company or any of its
Subsidiaries as currently conducted other than such effects, individually or in the aggregate, which have not had and could not
reasonably be expected to have a Material Adverse Effect on the Company or any of its Subsidiaries.


 




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


 


(p)
Management. During the past five year period, no current or former officer or director or, to the knowledge of the Company,
stockholder of the Company or any of its Subsidiaries has been the subject of:


 


(i)
a petition under bankruptcy laws or any other insolvency or moratorium law or has a receiver, fiscal agent or similar officer
been appointed by a court for such Person, or any partnership in which such person was a general partner at or within two years
before the time of such filing, or any corporation or business association of which such person was an executive officer at or
within two years before the time of such filing;


 


(ii)
a conviction in a criminal proceeding or a named subject of a pending criminal proceeding (excluding traffic violations that do
not relate to driving while intoxicated or driving under the influence);


 


(iii)
any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently
or temporarily enjoining any such person from, or otherwise limiting, the following activities:


 


(1)
Acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker,
leverage transaction merchant, any other person regulated by the United States Commodity Futures Trading Commission or an associated
person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated
person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in
or continuing any conduct or practice in connection with such activity;


 


(2)
Engaging in any type of business practice; or


 


(3)
Engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation
of securities laws or commodities laws;


 


(iv)
any order, judgment or decree, not subsequently reversed, suspended or vacated, of any authority barring, suspending or otherwise
limiting for more than 60 days the right of any such person to engage in any activity described in the preceding sub paragraph,
or to be associated with persons engaged in any such activity;


 




    	13



     


    

 


(v)
a finding by a court of competent jurisdiction in a civil action or by the SEC or other authority to have violated any securities
law, regulation or decree and the judgment in such civil action or finding by the SEC or any other authority has not been subsequently
reversed, suspended or vacated; or


 


(vi)
a finding by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated
any federal commodities law, and the judgment in such civil action or finding has not been subsequently reversed, suspended or
vacated.


 


(q)
Transactions With Affiliates. Except as set forth on Schedule 3(q), no current employee, director, officer or, to
the knowledge of the Company, any former employee, director or officer, any stockholder of the Company or its Subsidiaries, affiliate
of any thereof who occupied such role during the past 12 months, (i) a party to any transaction with the Company or its Subsidiaries
(including any contract, agreement or other arrangement providing for the furnishing of services by, or rental of real or personal
property from, or otherwise requiring payments to, any such director, officer or stockholder or such associate or affiliate or
relative) or (ii) the direct or indirect owner of an interest in any corporation, firm, association or business organization which
is a competitor, supplier or customer of the Company or its Subsidiaries (except for a passive investment (direct or indirect)
in less than 5% of the common stock of a company whose securities are publicly traded on or quoted), nor does any such Person
receive income from any source other than the Company or its Subsidiaries which relates to the business of the Company or its
Subsidiaries or should properly accrue to the Company or its Subsidiaries. Except as set forth on Schedule 3(q) and as
disclosed in the Company’s SEC filings, no employee, officer, stockholder or director of the Company or any of its Subsidiaries
or member of his or her immediate family is indebted to the Company or its Subsidiaries, as the case may be, nor is the Company
or any of its Subsidiaries indebted (or committed to make loans or extend or guarantee credit) to any of them, other than (i)
for payment of salary for services rendered, (ii) reimbursement for reasonable expenses incurred on behalf of the Company, and
(iii) for other standard employee benefits made generally available to all employees or executives (including stock option agreements
outstanding under any stock option plan approved by the board of directors of the Company).


 


(r)
Equity Capitalization. As of the Execution Date, the authorized capital stock of the Company consists of 975,000,000 shares
of Common Stock. The capitalization of the Company immediately prior to the Closing Date is set forth on Schedule 3(r)(A)
attached hereto and the capitalization of the Company immediately following the Closing Date is set forth on Schedule 3(r)(B)
attached hereto. All of such outstanding shares have been, or upon issuance will be, validly issued and are fully paid and
nonassessable. Except as disclosed in Schedule 3(r)(C): (i) none of the Company’s capital stock is subject to preemptive
rights or any other similar rights or any liens or encumbrances suffered or permitted by the Company; (ii) there are no outstanding
options, scrip, rights to subscribe to, or calls, exercisable or exchangeable for, any capital stock of the Company or any of
its Subsidiaries; (iii) there are no outstanding, credit agreements, credit facilities evidencing Indebtedness of the Company
or any of its Subsidiaries or by which the Company or any of its Subsidiaries is or may become bound; (iv) there are no financing
statements securing obligations in any material amounts, either singly or in the aggregate, filed in connection with the Company
or any of its Subsidiaries; (v) there are no agreements or arrangements under which the Company or any of its Subsidiaries is
obligated to register the sale of any of their securities under the 1933 Act (except pursuant to the Registration Rights Agreement);
(vi) there are no outstanding securities or instruments of the Company or any of its Subsidiaries which contain any redemption
or similar provisions, and there are no contracts, commitments, understandings or arrangements by which the Company or any of
its Subsidiaries is or may become bound to redeem a security of the Company or any of its Subsidiaries; (vii) there are no securities
or instruments containing anti-dilution or similar provisions that will be triggered by the issuance of the Securities; (viii)
the Company has not issued any stock appreciation rights or “phantom stock” or any similar rights; and (ix) the Company
and its Subsidiaries have no liabilities or obligations required to be disclosed in the Financial Statements in accordance with
GAAP but not so disclosed in the Financial Statements. The Company has furnished to the Buyers true, correct and complete copies
of the Company’s Articles of Incorporation, as amended and as in effect on the date hereof (the “Articles of Incorporation”),
and the Company’s Bylaws, as amended and as in effect on the date hereof (the “Bylaws”), and the terms
of all securities convertible into, or exercisable or exchangeable for, shares of Common Stock and the material rights of the
holders thereof in respect thereto.


 




    	14



     


    

 


(s)
Indebtedness and Other Contracts. Except for Permitted Liens and as disclosed in the Company’s Financial Statements
and SEC filings or on Schedule 3(s), 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. Schedule 3(s) provides a description
of the material terms of any such outstanding Indebtedness. 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 GAAP) (other than trade payables entered into in the ordinary course of business consistent with past practice), (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 GAAP, 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, deed of trust. lien, pledge, charge, security interest, easement, covenant, right
of way, restriction, equity or encumbrance of any nature whatsoever in or upon any property or assets (including accounts and
contract rights) with respect to any asset (a “Lien”) 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; and (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.


 




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(t)
Absence of Litigation. There is no action, suit, arbitration or other legal, administrative or other governmental investigation,
inquiry or proceeding (whether federal, state, local or foreign) pending or, to the best of the Company’s knowledge, threatened
against or affecting the Company or any of its Subsidiaries or any of their respective properties, assets, capital stock or businesses
or any of the Company’s or any of its Subsidiaries’ officers or directors. After reasonable inquiry of its employees,
the Company is not aware of any fact which might result in or form the basis for any such action, suit, arbitration, investigation,
inquiry or other proceeding. Neither the Company nor any of its Subsidiaries is subject to any order, writ, judgment, injunction,
decree, determination or award of any Governmental Authority.


 


(u)
Employee Matters; Benefit Plans.


 


(i)
The employment of each officer and employee of the Company is terminable at the will of the Company, except as disclosed on Schedule
3(u). The Company and its Subsidiaries have complied in all material respects with all applicable laws relating to wages,
hours, equal opportunity, collective bargaining, workers’ compensation insurance and the payment of social security and
other taxes. Subject to the payment of accrued and unpaid salaries the Company is not aware that any officer, key employee or
group of employees intends to terminate his, her or their employment with the Company or its Subsidiaries, as the case may be,
nor does the Company have a present intention, or know of a present intention of its Subsidiaries, to terminate the employment
of any officer, key employee or group of employees. There are no pending or, to the knowledge of the Company, threatened employment
discrimination charges or complaints against or involving the Company or its Subsidiaries before any federal, state, or local
board, department, commission or agency, or unfair labor practice charges or complaints, disputes or grievances affecting the
Company or its Subsidiaries.


 


(ii)
Since the Company’s inception, to the knowledge of the Company neither the Company nor its Subsidiaries has experienced
any labor disputes, union organization attempts or work stoppage due to labor disagreements. There are no unfair labor practice
charges or complaints against the Company or its Subsidiaries pending, or to the knowledge of the Company, threatened before the
National Labor Relations Board or any comparable state agency or authority. There are no written or oral contracts, commitments,
agreements, understandings or other arrangements with any labor organization, nor work rules or practices agreed to with any labor
organization or employee association, applicable to employees of the Company or any of its Subsidiaries, nor is the Company or
its Subsidiaries a party to, or bound by, any collective bargaining or similar agreement; there is not, and since the Company’s
inception there has not been, any representation of the employees of the Company or its Subsidiaries by any labor organization
and, to the knowledge of the Company, there are no union organizing activities among the employees of the Company or its Subsidiaries,
and to the knowledge of the Company, no question concerning representation has been raised or is threatened respecting the employees
of the Company or its Subsidiaries.


 




    	16



     


    

 





(iii)
Schedule 3(u)(iii) contains a true, correct and complete list of each pension, retirement, savings, deferred compensation
and profit-sharing plan and each stock option, stock appreciation, stock purchase, performance share, bonus or other incentive
plan, severance plan, health, group insurance or other welfare plan, or other similar plan (whether written or otherwise) and
any “employee benefit plan” within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended (“ERISA”), under which the Company has any current or future obligation or liability (including
any potential, contingent or secondary liability under Title IV of ERISA) or under which any employee or former employee (or beneficiary
of any employee or former employee) of the Company has or may have any current or future right to benefits (the term “plan”
shall include any contract, agreement (including an employment or independent contractor agreement), policy or understanding,
each such plan being hereinafter referred to in this Agreement individually as a “Benefit Plan”). The Company
has delivered to each Buyer true, correct and complete copies of (i) each material Benefit Plan, including any amendments thereto,
(ii) the summary plan description, if any, for each Benefit Plan, including any summaries of material modifications made since
the most recent summary plan description, (iii) the latest annual report which has been filed with the Internal Revenue Service
(the “IRS”) for each Benefit Plan required to file an annual report, and (iv) the most recent IRS determination
letter for each Benefit Plan that is a pension plan (as defined in ERISA) intended to be qualified under Section 401(a) of the
Internal Revenue Code of 1986, as amended (the “Code”). Each Benefit Plan intended to be tax qualified under
Sections 401(a) and 501(a) of the Code is and has been determined by the IRS to be tax qualified under Sections 401(a) and 501(a)
of the Code and, since such determination, no amendment to or failure to amend any such Benefit Plan and no other event or circumstance
has occurred that could reasonably be expected to adversely affect its tax qualified status.


 


(iv)
There are no actions, claims, audits, lawsuits or arbitrations pending, or, to the knowledge of the Company, threatened, with
respect to any Benefit Plan or the assets of any Benefit Plan. Each Benefit Plan has been administered in all material respects
in accordance with its terms and with all applicable Legal Requirements (including, without limitation, the Code and ERISA).


 


(v)
Except as set forth on Schedule 3(u)(v), the consummation of the transactions contemplated by this Agreement will not (1)
entitle any employee or independent contractor of the Company or its Subsidiaries to severance pay or termination benefits, (2)
accelerate the time of payment or vesting, or increase the amount of compensation due to any current or former employee or independent
contractor of the Company or its Subsidiaries, (3) obligate the Company or any of its affiliates to pay or otherwise be liable
for any compensation, vacation days, pension contribution or other benefits to any current or former employee, consultant, agent
or independent contractor of the Company or its Subsidiaries for periods before the Closing Date, (4) require assets to be set
aside or other forms of security to be provided with respect to any liability under a Benefit Plan, or (5) result in any “parachute
payment” (within the meaning of Section 280G of the Code) under any Benefit Plan.


 




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(vi)
No Benefit Plan is subject to the provisions of Section 412 of the Code or Part 3 of Subtitle B of Title I of ERISA. No Benefit
Plan is subject to Title IV of ERISA and no Benefit Plan is a “multiemployer plan” (within the meaning of Section
3(37) of ERISA). Since inception, neither the Company, its Subsidiaries, nor any business or entity treated as a single employer
with the Company or its Subsidiaries for purposes of Title IV of ERISA contributed to or was obliged to contribute to a pension
plan that was at any time subject to Title IV of ERISA.


 


(vii)
No Benefit Plan has provided, been required to provide, provides or is required to provide, at any time in the past, present,
or future, health, medical, dental, accident, disability, death or survivor benefits to or in respect of any Person beyond one
year following termination of employment, except to the extent required under any state insurance law or under Part 6 of Subtitle
B of Title I of ERISA and under Section 4980B of the Code. No Benefit Plan covers any individual that is not an employee or advisor
of the Company or its Subsidiaries, other than spouses and dependents of employees under health and child care policies listed
in Schedule 3(u)(vii), true and complete copies of which have been made available to each Buyer.


 


Except
as otherwise permitted pursuant to employment agreements with the Company disclosed to the Buyers, each officer of the Company
is currently devoting all of such officer’s business time to the conduct of the business of the Company. Except as otherwise
permitted pursuant to employment agreements with the Company disclosed to the Buyers, the Company is not aware of any officer
or key employee of the Company or any of its Subsidiaries planning to work less than full time at the Company or its Subsidiaries
in the future.


 


(v)
Assets; Title. The Company does not hold title to, or hold a leasehold interest in, any properties or assets.


 


(w)
Intellectual Property. The Company does not own any Intellectual Property. “Intellectual Property” shall
mean all of the following: (A) trademarks and service marks, trade dress, product configurations, trade names and other indications
of origin, applications or registrations in any jurisdiction pertaining to the foregoing and all goodwill associated therewith;
(B) inventions, discoveries, improvements, ideas, know-how, formula methodology, processes, technology, software (including password
unprotected interpretive code or source code, object code, development documentation, programming tools, drawings, specifications
and data) and applications and patents in any jurisdiction pertaining to the foregoing, including re-issues, continuations, divisions,
continuations-in-part, renewals or extensions; (C) trade secrets, including confidential information and the right in any jurisdiction
to limit the use or disclosure thereof; (D) copyrights in writings, designs software, mask works or other works, applications
or registrations in any jurisdiction for the foregoing and all moral rights related thereto; (E) database rights; (F) Internet
Web sites, domain names and applications and registrations pertaining thereto and all intellectual property used in connection
with or contained in all versions of the Company’s Web sites (except for as related to “btcs.com”); (G)
rights under all agreements relating to the foregoing; (H) books and records pertaining to the foregoing; and (I) claims or causes
of action arising out of or related to past, present or future infringement or misappropriation of the foregoing.


 




    	18



     


    

 


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


 


(y)
Subsidiary Rights. The Company or one of its Subsidiaries has the unrestricted right to vote, and (subject to limitations
imposed by applicable law) to receive dividends and distributions on, all capital securities of its Subsidiaries as owned by the
Company or such Subsidiary.


 


(z)
Tax Status.


 


(i)
Except as disclosed on Schedule 3(z), the Company and its Subsidiaries have filed in the appropriate jurisdictions all
material returns, reports, information statements and other documentation required to be filed or maintained, in connection with
the calculation, determination, assessment or collection of any and all federal, state, local, foreign and other taxes, levies,
fees, imposts, duties, governmental fees and charges of whatever kind (including any interest, penalties or additions to the tax
imposed in connection therewith or with respect thereto), including, without limitation, taxes imposed on, or measured by, income,
franchise, profits, gross income or gross receipts, and also ad valorem, value added, sales, use, service, real or personal
property, capital stock, stock transfer, license, payroll, withholding, employment, social security, workers’ compensation,
unemployment compensation, utility, severance, production, excise, stamp, occupation, premium, windfall profits, environmental,
transfer and gains taxes and customs duties (each a “Tax”).


 


(ii)
Each of the Company and its Subsidiaries has paid all material Taxes and other assessments due from and payable by the Company
and its Subsidiaries on or prior to the date hereof on a timely basis except as to those set forth in Schedule 3(z)(ii).
The charges, accruals, and reserves for Taxes with respect to the Company and its Subsidiaries are adequate to cover Tax liabilities
of the Company and its Subsidiaries accruing throughout the Execution Date. Except as set forth in Schedule 3(z)(ii), each
of the Company and its Subsidiaries has complied in all material respects with all applicable Legal Requirements relating to the
payment and withholding of Taxes (including withholding and reporting requirements under Sections 1441 through 1464, 3401 through
3406, and 6041 and 6049 of the Code and similar provisions under any other applicable Legal Requirements) and, within the time
and in the manner prescribed by law, has withheld from wages, fees and other payments and paid over to the proper governmental
or regulatory authorities all amounts required. Except as set forth in Schedule 3(z)(ii), neither the Company nor any of
its Subsidiaries has received notice of assessment or proposed assessment of any Taxes claimed to be owed by it or any other Person
on its behalf. Except as set forth in Schedule 3(z)(ii), no Returns filed by or on behalf of the Company or any of its
Subsidiaries with respect to Taxes are currently being audited or examined. Except as set forth in Schedule 3(z)(ii), neither
the Company nor any of its Subsidiaries has received notice of any such audit or examination. Except as set forth in Schedule
3(z)(ii), no issue has been raised by any taxing authority with respect to the Company or any of its Subsidiaries in any audit
or examination which, by application of similar principles, could reasonably be expected to result in a proposed material adjustment
to the liability for Taxes for any period not so examined.


 




    	19



     


    

 


(iii)
Except as disclosed on Schedule 3(z)(iii), no known Liens have been filed against the Company or any of its Subsidiaries
with respect to any Taxes (other than Liens for Taxes not yet due and payable). Neither the Company nor any of its Subsidiaries
has elected pursuant to the Code to be treated as an S corporation or any comparable provision of local, state or foreign law,
or has made any other elections pursuant to the Code (other than elections that relate solely to entity classification, methods
of accounting, depreciation, or amortization) that would have a material effect on the business, properties, prospects, or financial
condition of the Company and its Subsidiaries, individually or in the aggregate.


 


(iv)
The Company has received notices and requests for information from the IRS and certain states regarding its failure to file its
Taxes. Neither the Company nor any of its Subsidiaries has been a member of an affiliated group (as defined in Section 1504(a)
of the Code) or filed or been included in a combined, consolidated or unitary income tax return other than the affiliated group
of which the Company is currently the common parent. Neither the Company nor any of its Subsidiaries is required to include in
income any adjustment pursuant to Section 481(a) of the Code by reason of a voluntary change in accounting methods initiated by
the Company or any of its Subsidiaries, and no Governmental Authority has proposed an adjustment or change in accounting method.
Neither the Company nor any of its Subsidiaries is a party to any Tax sharing or Tax indemnity agreement or any other agreement
of a similar nature that remains in effect. Neither the Company nor any of its Subsidiaries has consented to any waiver of the
statute of limitations for the assessment of any Taxes or has requested any extension of time for the payment of any Taxes. Neither
the Company nor any of its Subsidiaries has ever held a material beneficial interest in any other Person, other than those listed
in Schedule 3(z)(iv). Neither the Company nor any of its Subsidiaries is obligated to make, nor as a result of any event connected
with the transactions contemplated by this Agreement will become obligated to make, any payment that would not be deductible under
Section 280G of the Code. Neither the Company nor any Subsidiary of the Company is a “passive foreign investment company”
within the meaning of Section 1296 of the Code (a “PFIC”), and the Company does not anticipate that the Company or
any additional foreign Subsidiary will become a PFIC in the foreseeable future.


 




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(aa)
Internal Accounting and Disclosure Controls. Except as disclosed in the Company’s SEC filings, the Company and each
of its Subsidiaries maintain a system of internal accounting controls appropriate for its size.


 


(bb)
Off Balance Sheet Arrangements. There is no transaction, arrangement, or other relationship between the Company and an
unconsolidated or other off balance sheet entity that is not disclosed by the Company in its Financial Statements or that otherwise
would be reasonably likely to have a Material Adverse Effect.


 


(cc)
Investment Company Status. The Company is not, and upon consummation of the sale of the Securities will not be, an “investment
company,” a company controlled by an “investment company” or an “affiliated person” of, or “promoter”
or “principal underwriter” for, an “investment company” as such terms are defined in the Investment Company
Act of 1940, as amended.


 


(dd)
Illegal or Unauthorized Payments; Political Contributions Neither the Company or any of its Subsidiaries nor, to the best
of the Company’s knowledge (after reasonable inquiry of its officers and directors), any of the officers, directors, employees,
agents or other representatives of the Company or any of its Subsidiaries or any other business entity or enterprise with which
the Company or any Subsidiary is or has been affiliated or associated, has, directly or indirectly, made or authorized any payment,
contribution or gift of money, property, or services, whether or not in contravention of applicable law, (a) as a kickback or
bribe to any Person or (b) to any political organization, or the holder of or any aspirant to any elective or appointive public
office except for personal political contributions not involving the direct or indirect use of funds of the Company or any of
its Subsidiaries.


 


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


 


(ff)
Books and Records. To the Company’s knowledge, the books of account, ledgers, order books, records and documents
of the Company and its Subsidiaries accurately and completely reflect all information relating to the respective businesses of
the Company and its Subsidiaries, the nature, acquisition, maintenance, location and collection of each of their respective assets,
and the nature of all transactions giving rise to material obligations or accounts receivable of the Company or its Subsidiaries,
as the case may be, except where the failure to so reflect such information would not have a Material Adverse Effect. To the Company’s
knowledge, the minute books of the Company and its Subsidiaries contain accurate records of all meetings and accurately reflect
all other actions taken by the stockholders, boards of directors and all committees of the boards of directors, and other governing
Persons of the Company and its Subsidiaries, respectively.


 


(gg)
Money Laundering. The Company and its Subsidiaries are in compliance with, and have not previously violated, the USA PATRIOT
ACT of 2001 (the “PATRIOT Act”) and all other applicable U.S. and non-U.S. anti-money laundering laws and regulations,
including, but not limited to, the laws, regulations and Executive Orders and sanctions programs administered by the U.S. Office
of Foreign Assets Control (“OFAC”), including, but not limited, to (i) Executive Order 13224 of September 23,
2001 entitled, “Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism”
(66 Fed. Reg. 49079 (2001)); and (ii) any regulations contained in 31 CFR, Subtitle B, Chapter V (collectively, the “Anti-Money
Laundering/OFAC Laws”).


 




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(hh)
Acknowledgement Regarding Buyers’ Trading Activity. It is understood and acknowledged by the Company (a) (i) that
except as set forth in Section 4(r), none of the Buyers have been asked by the Company or its Subsidiaries to agree, nor
has any Buyer agreed with the Company or its Subsidiaries, 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; and (ii) that each Buyer 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 one or
more Buyers may engage in hedging and/or trading activities at various times during the period that the Securities are outstanding,
including, without limitation, during the periods that the value of the Conversion Shares and/or the Warrant Shares are being
determined and (b) such hedging and/or trading activities, if any, can reduce the value of the existing stockholders’ equity
interest in the Company both at and after the time the hedging and/or trading activities are being conducted. The Company acknowledges
that such aforementioned hedging and/or trading activities do not constitute a breach of any of the Transaction Documents.


 


(ii)
U.S. Real Property Holding Corporation. The Company is not, has never been, and so long as any Securities remain outstanding,
shall not become, a U.S. real property holding corporation within the meaning of Section 897 of the Internal Revenue Code of 1986,
as amended, and the Company shall so certify upon any Buyer’s request.


 


(jj)
Bank Holding Company Act. Neither the Company nor any of its Subsidiaries is subject to the Bank Holding Company Act of
1956, as amended (the “BHCA”) and to regulation by the Board of Governors of the Federal Reserve System (the
“Federal Reserve”). Neither the Company nor any of its Subsidiaries or affiliates owns or controls, directly
or indirectly, five percent (5%) or more of the outstanding shares of any class of voting securities or twenty-five percent (25%)
or more of the total equity of a bank or any entity that is subject to the BHCA and to regulation by the Federal Reserve. Neither
the Company nor any of its Subsidiaries or affiliates exercises a controlling influence over the management or policies of a bank
or any entity that is subject to the BHCA and to regulation by the Federal Reserve.


 


(kk)
Shell Company Status. The Company is not an issuer identified in Rule 144(i)(1)(i) of the 1933 Act as of the Execution
Date, however the Company is an issuer identified in Rule 144(i)(1)(ii) of the 1933 Act. More than one year has lapsed since the
Company filed its “Form 10” information as prescribed by Rule 144(i)(2) of the 1933 Act.


 


(ll)
No Disqualification Events. With respect to Securities to be offered and sold hereunder in reliance on Rule 506 under the
1933 Act (“Regulation D Securities”), none of the Company, any of its predecessors, any affiliated issuer,
any director, executive officer, other officer of the Company participating in the offering hereunder, 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 1933 Act) connected with the Company in any capacity at the time of sale (each,
an “Issuer Covered Person” and, together, “Issuer Covered Persons”) is subject to any 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. The Company has complied, to the extent applicable,
with its disclosure obligations under Rule 506(e), and has furnished to the Buyers a copy of any disclosures provided thereunder.


 




    	22



     


    

 





(mm)
Other Covered Persons. The Company is not aware of any Person (other than any Issuer Covered Person) that has been or will
be paid (directly or indirectly) remuneration for solicitation of Buyers or potential purchasers in connection with the sale of
any Regulation D Securities.


 


(nn)
Disclosure. The Company understands and confirms that each of the Buyers will rely on the foregoing representations in
effecting transactions in securities of the Company. No statement made by the Company in this Agreement, any other Transaction
Document or the Exhibits and Schedules attached hereto or in any certificate or schedule furnished or to be furnished
by or on behalf of the Company to the Investors or any of their representatives in connection with the transactions contemplated
hereby contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements
contained herein or therein not misleading. The due diligence materials previously provided by or on behalf of the Company to
each Buyer (the “Due Diligence Materials”), have been prepared in a good faith effort by the Company to describe
the Company’s present and proposed products, and projected growth and the Company and do not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the statements therein not misleading, except that with
respect to assumptions, projections and expressions of opinion or predictions contained in the Due Diligence Materials, the Company
represents only that such assumptions, projections, expressions of opinion and predictions were made in good faith and that the
Company believes there is a reasonable basis therefor. The Due Diligence Materials contain all material agreements of the Company
and its Subsidiaries and no material agreements of the Company or its Subsidiaries exist other than those provided in the Due
Diligence Materials. The Company acknowledges and agrees that no Buyer participated in the preparation of, or has any responsibility
for, the content of any Due Diligence Materials.


 


4.
COVENANTS.


 


(a)
Best Efforts. Each party shall use its best efforts timely to satisfy each of the covenants below and the conditions to
be satisfied by it as provided in Sections 6 and 7 of this Agreement.


 


(b)
Use of Proceeds. The Company will use the proceeds from the sale of the Securities to fund the Company’s working
capital. Further, the Company will use the proceeds from the sale of the Securities to satisfy in full and pay off those certain
liabilities and obligations set forth on Schedule 3(m) attached hereto. Except as set forth on Schedule 4(b), the
Company shall not use such proceeds, at any time, to repay indebtedness, to lend money, to give credit, or to advance funds to
any of its officers, directors, employees, or affiliates.


 




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(c)
Reporting Status. Until the date on which a Buyer or any transferee or assignee thereof to whom a Buyer assigns its rights
as a holder of Securities under this Agreement and/or the Certificate of Designations (each an “Investor“,
and collectively, the “Investors“) shall have sold all of the Conversion Shares and none of the Preferred Shares
is outstanding (the “Reporting Period“), the Company shall timely file all reports required to be filed with
the SEC pursuant to the Securities Exchange Act of 1934, as amended (the “1934 Act“), and the Company shall
not terminate its status as an issuer required to file reports under the 1934 Act even if the 1934 Act or the rules and regulations
thereunder would no longer require or otherwise permit such termination, and the Company shall take all actions necessary to permit
it to, and thereafter to maintain its eligibility to, register the Warrant Shares for resale by the Buyers on Form S-1. The Company
has failed to file its 2016 Form 10-K with the SEC and anticipates it will be unable to timely file its Form 10-Q for the period
ending March 31, 2017 (collectively the “Delinquent Filings“). The provisions set forth in this Section
4(c) shall not apply to the Delinquent Filings.


 


(d)
Financial Information. As long as any Securities remain outstanding, the Company agrees to send the following to each Investor
during the Reporting Period (i) unless the following are filed with the SEC through EDGAR and are available to the public through
the EDGAR system, within one (1) Business Day after the filing thereof with the SEC, a copy of its Annual Reports on Form 10-K
and Quarterly Reports on Form 10-Q, any Current Reports on Form 8-K (or any analogous reports under the 1934 Act) and any registration
statements (other than on Form S-8) or amendments filed pursuant to the 1933 Act, (ii) on the same day as the release thereof,
e-mailed copies of all press releases issued by the Company or any of its Subsidiaries, and (iii) copies of any notices and other
information made available or given to the stockholders of the Company generally, contemporaneously with the making available
or giving thereof to the stockholders. As used herein, “Business Day“ means any day other than Saturday, Sunday
or other day on which commercial banks in the City of New York are authorized or required by law to remain closed.


 


(e)
Listing. The Company shall maintain the listing or quotation of the Common Stock on the OTCPink, OTCQB, OTCQX or other
securities market (any, a “Principal Market“), and neither the Company nor any of its Subsidiaries shall take
any action which would be reasonably expected to result in the delisting or suspension of the Common Stock on the Principal Market.
The Company shall pay all fees and expenses in connection with satisfying its obligations under this Section 4(e).


 


(f)
Fees. Subject to Section 8 below, at the Closing, the Company shall reimburse Cavalry Fund I LP (“Cavalry“)
or its designee(s) for all costs and expenses incurred in connection with the transactions contemplated by the Transaction Documents
(including all legal fees and disbursements in connection therewith, documentation and implementation of the transactions contemplated
by the Transaction Documents and due diligence in connection therewith), which amount may be withheld by such Buyer from its Purchase
Price at the Closing to the extent not previously reimbursed by the Company. Notwithstanding the foregoing, in no event will the
costs and expenses of Cavalry reimbursed by the Company pursuant to this Section 4(f) exceed $25,000.00 with respect to
the Closing without the prior approval of the Company. The Company shall be responsible for the payment of any placement agent’s
fees, financial advisory fees, or broker’s commissions relating to or arising out of the transactions contemplated hereby
but only to the extent that the Company has agreed with any such party to pay such fees. The Company shall pay, and hold each
Buyer harmless against, any liability, loss or expense (including, without limitation, reasonable attorney’s fees and out-of-pocket
expenses) arising in connection with any claim relating to any such payment. Except as otherwise set forth in the Transaction
Documents, each party to this Agreement shall bear its own expenses in connection with the sale of the Securities to the Buyers.


 




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(g)
Pledge of Securities. The Company acknowledges and agrees that the Securities may be pledged by an Investor in connection
with a bona fide margin agreement or other loan or financing arrangement that is secured by the Securities. The pledge of Securities
shall not be deemed to be a transfer, sale or assignment of the Securities hereunder, and no Investor effecting a pledge of Securities
shall be required to provide the Company with any notice thereof or otherwise make any delivery to the Company pursuant to this
Agreement or any other Transaction Document, including, without limitation, Section 2(g) hereof; provided that an Investor
and its pledgee shall be required to comply with the provisions of Section 2(g) hereof in order to effect a sale, transfer
or assignment of Securities to such pledgee. The Company hereby agrees to execute and deliver such documentation as a pledgee
of the Securities may reasonably request in connection with a pledge of the Securities to such pledgee by an Investor.


 


(h)
Disclosure of Transactions and Other Material Information. On or before 9:30 a.m., New York time, on the first (1st) Business
Day after the Closing Date, the Company shall file a Current Report on Form 8-K describing all the material terms of the transactions
contemplated by the Transaction Documents in the form required by the 1934 Act and attaching all the material Transaction Documents
(including, without limitation, this Agreement and the forms of Warrant and Registration Rights Agreement all (together, the “8-K
Filing“). From and after the filing of the 8-K Filing, the Company shall have disclosed all material, non-public information
(if any) provided to any of the Buyers by the Company or any of its Subsidiaries or any of their respective officers, directors,
employees or agents in connection with the transactions contemplated by the Transaction Documents. 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, any of its Subsidiaries or any of their respective officers, directors,
affiliates, employees or agents, on the one hand, and any of the Buyers or any of their affiliates, on the other hand, shall terminate.
The Company shall not, and shall cause each of its Subsidiaries and its and each of their respective officers, directors, employees
and agents, not to, provide any Buyer with any material, nonpublic information regarding the Company or any of its Subsidiaries
from and after the Execution Date without the express prior written consent of such Buyer. If a Buyer has, or believes it has,
received any such material, nonpublic information regarding the Company or any of its Subsidiaries, it may provide the Company
with written notice thereof. The Company shall, within two (2) Trading Days of receipt of such notice, make public disclosure
of such material, nonpublic information. In the event of a breach of the foregoing covenant by the Company, any of its Subsidiaries,
or any of its or their respective officers, directors, employees and agents, in addition to any other remedy provided herein or
in the Transaction Documents, a Buyer shall have the right to make a public disclosure, in the form of a press release, public
advertisement or otherwise, of such material, nonpublic information without the prior approval by the Company, its Subsidiaries,
or any of its or their respective officers, directors, employees or agents. No Buyer shall have any liability to the Company,
its Subsidiaries, or any of its or their respective officers, directors, employees, stockholders or agents for any such disclosure.
To the extent that the Company delivers any material, non-public information to a Buyer without such Buyer’s consent, the
Company hereby covenants and agrees that such Buyer shall not have any duty of confidentiality with respect to, or a duty not
to trade on the basis of, such material, non-public information. Subject to the foregoing, neither the Company, its Subsidiaries
nor any Buyer shall issue any press releases or any other public statements with respect to the transactions contemplated hereby;
provided, however, that the Company shall be entitled, without the prior approval of any Buyer, to make any press release or other
public disclosure with respect to such transactions as is required by applicable law and regulations, provided that each Buyer
shall be consulted by the Company in connection with any such press release or other public disclosure prior to its release. Without
the prior written consent of any applicable Buyer, neither the Company nor any of its Subsidiaries or affiliates shall disclose
the name of such Buyer in any filing, announcement, release or otherwise, except as the Company has been advised by its counsel
as may be required by law including the Rules of the SEC or in response to written comments of the Staff of the SEC. Notwithstanding
the foregoing, in no event will the Company have an obligation to disclose any information which a Buyer receives from a member
of the Company’s Board of Directors that is an affiliate of such Buyer.


 




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(i)
Additional Preferred Shares; Variable Securities. Except as provided for herein, so long as Cavalry beneficially owns at
least ten percent (10%) of the Preferred Shares issued pursuant to this Agreement, the Company will not issue any Preferred Shares
other than to the Buyers as contemplated hereby and the Company shall not issue any other securities that would cause a breach
or default under the Certificate of Designations or the Warrants. From the Execution Date until the earlier of: (i) the 2 year
anniversary thereof, and (ii) when Cavalry beneficially owns less than ten percent (10%) of the Preferred Shares issued pursuant
to this Agreement, the Company shall not, in any manner, issue or sell any rights, warrants or options to subscribe for or purchase
Common Stock or directly or indirectly convertible into or exchangeable or exercisable for Common Stock at a price which varies
with the market price of the Common Stock.


 


(j)
Corporate Existence. So long as any Buyer beneficially owns any Securities the Company shall maintain its corporate existence.
So long as any Buyer beneficially owns at least ten percent (10%) of the Preferred Shares issued pursuant to this Agreement, the
Company shall not (i) be party to any merger, business combination, or consolidation with or into another Person unless, prior
to such transaction, such other Person’s financial statements have been audited by an accounting firm registered with the
Public Company Accounting Oversight Board and prepared in accordance with U.S. GAAP, and unless the Independent Director has approved
such transaction (ii) directly or indirectly, effect any sale, lease, license, assignment, transfer, conveyance or other disposition
of all or substantially all of its assets in one or a series of related transactions, or (iii) directly or indirectly, in one
or more related transactions effect any reclassification, reorganization or recapitalization of the Common Stock or any compulsory
share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property.


 


(k)
[Reserved].


 




    	26



     


    

 


(l)
Conduct of Business. The business of the Company and its Subsidiaries shall not be conducted in violation of any law, ordinance
or regulation of any governmental entity, except where such violations would not result, either individually or in the aggregate,
in a Material Adverse Effect. The Company and its Subsidiaries shall at all times be in compliance with the Foreign Corrupt Practices
Act; the PATRIOT Act, and all other applicable U.S. and non-U.S. anti-money laundering laws and regulations; and the laws, regulations
and Executive Orders and sanctions programs administered by the OFAC, including, without limitation, the “Anti-Money Laundering/OFAC
Laws“.


 


(m)
Public Information. At any time during the period commencing on the Execution Date and ending two years from the Execution
Date, if (A) a registration statement is not available for the resale of all of the Securities, may be sold without restriction
or limitation pursuant to Rule 144 and without the requirement to be in compliance with Rule 144(c)(1) , if the Company shall
(i) fail for any reason to satisfy the requirements of Rule 144(c)(1), including, without limitation, the failure to satisfy the
current public information requirement under Rule 144(c) or (ii) if the Company becomes an issuer described in Rule 144(i)(1)(i),
and the Company shall fail to satisfy any condition set forth in Rule 144(i)(2), and (B) any such failure continues for more than
fifteen (15) Trading Days (a “Public Information Failure“) then, as partial relief for the damages to any holder of
Securities by reason of any such delay in or reduction of its ability to sell the Securities (which remedy shall not be exclusive
of any other remedies available at law or in equity), the Company shall pay to each such holder an amount in cash equal to one
percent (1.0%) of the aggregate Purchase Price of such holder’s Preferred Shares (less all Preferred Shares converted to
Common Stock) on the day of a Public Information Failure and on every thirtieth day (pro-rated for periods totaling less than
thirty days) thereafter until the earlier of (i) the date such Public Information Failure is cured and (ii) such time that such
public information is no longer required pursuant to Rule 144. The payments to which a holder shall be entitled pursuant to this
Section 4(m) are referred to herein as “Public Information Failure Payments.“ Public Information Failure Payments
shall be paid on the earlier of (I) the last day of the calendar month during which such Public Information Failure Payments are
incurred and (II) the third Business Day after the event or failure giving rise to the Public Information Failure Payments is
cured. In the event the Company fails to make Public Information Failure Payments in a timely manner, such Public Information
Failure Payments shall bear interest at the rate of 1% per month (prorated for partial months) until paid in full.


 


(n)
Additional Issuances of Securities.


 


(i)
For purposes of this Section 4(n), the following definitions shall apply.


 


(1)
“Common Stock Equivalents“ means, collectively, Options and Convertible Securities.


 


(2)
“Convertible Securities“ means any stock, warrant or securities (other than Options) convertible into or exercisable
or exchangeable for shares of Common Stock.


 




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(3)
“Excluded Securities“ means (i) shares of Common Stock, shares of Preferred Stock, restricted stock units or
Options to purchase Common Stock (and the underlying Common Stock of each where applicable), issued to directors, officers or
employees of the Company; (ii) shares of Common Stock issued upon the conversion or exercise of Convertible Securities issued
prior to the Closing Date, provided that the conversion price of any such Convertible Securities is not lowered from the conversion
price in effect as of the Closing Date or is amended to increase the number of shares issuable thereunder and none of the terms
or conditions of any such Convertible Securities are otherwise materially changed in any manner that adversely affects any of
the Buyers; (iii) the shares of Common Stock issuable upon conversion of the Preferred Shares or otherwise pursuant to the terms
of this Certificate of Designations; provided, that the terms of the Certificate of Designations are not amended, modified or
changed on or after the Closing Date (other than antidilution adjustments pursuant to the terms thereof in effect as of the Closing
Date), (iv) the shares of Common Stock issuable upon exercise of the Warrants required to be issued under this Agreement which
shall include Warrants where the exercise price is lowered; (v) securities issued to any Placement Agent or other registered broker-dealers
as reasonable commissions or fees in connection with any financing transactions, (vi) securities issued pursuant to a merger,
acquisition or similar transaction; provided that (A) the primary purpose of such issuance is not to raise capital, (B) the purchaser
or acquirer of such securities in such issuance solely consists of either (1) the actual participants in such transactions, (2)
the actual owners of such assets or securities acquired in such merger, acquisition or similar transaction, (3) the shareholders,
partners or members of the foregoing Persons and (4) Persons whose primary business does not consist of in investing in securities,
and (C) the number or amount (as the case may be) of such shares of Common Stock issued to such Person by the Company shall not
be disproportionate to such Person’s actual participation in such strategic licensing or development transactions or ownership
of such assets or securities to be acquired by the Company (as applicable), (vii) a strategic transaction approved by a majority
of the disinterested directors of the Company, provided that (A) any such issuance shall only be to a person which is, itself
or through its subsidiaries, an operating company in a business synergistic with the business of the Company and in which the
Company receives benefits in addition to the investment of funds, (B) the primary purpose of such issuance is not to raise capital,
(C) the purchaser or acquirer of such securities in such issuance solely consists of either (1) the actual participants in such
strategic transactions, (2) the actual owners of such strategic assets or securities acquired in such merger or acquisition, (3)
the shareholders, partners or members of the foregoing Persons and (4) Persons whose primary business does not consist of in investing
in securities, and (D) the number or amount (as the case may be) of such shares of Common Stock issued to such Person by the Company
shall not be disproportionate to such Person’s actual participation in such strategic licensing or development transactions
or ownership of such strategic assets or securities to be acquired by the Company (as applicable), (viii) equity lines of credit
entered into by and between the Company and third parties approved by Cavalry, which approval shall not be unreasonably withheld,
(ix) those specific contemplated issuances identified on Schedule 4(n)(iii), (x) securities issued to any independent
contractor to the Company who provides services to the Company, (xi) securities issued to any creditor to the Company to settle
liabilities, or (xii;) securities issued in connection with the purchase of assets to further the Company’s business. Provided,
however that any issuances pursuant to (x), (xi), and (xii) of this paragraph shall require the written approval of Cavalry to
be deemed an Excluded Security. For avoidance of doubt, any Common Stock issued upon exercise, exchange or conversion of any securities
which are Excluded Securities shall be deemed to be Excluded Securities.


 




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(4)
“Options“ means any rights, warrants or options to subscribe for or purchase Common Stock or Convertible Securities.


 


(5)
“Subsequent Placement“ means any direct or indirect offer, sale, grant of any Option to purchase, or other
disposition of (or announcement of any offer, sale, grant or any Option to purchase or other disposition of) any of the Company’s
or its Subsidiaries’ equity, debt or equity equivalent securities, including without limitation any debt, preferred stock
or other instrument or security that is, at any time during its life and under any circumstances, convertible into or exchangeable
or exercisable for Common Stock or Common Stock Equivalents. A Subsequent Placement shall not include any additional closings
of the offering contemplated by this Agreement, an underwritten offering, or the Company entering into an equity line of credit
as provided in this Agreement.


 


(ii)
Except as provided for herein, from the Closing Date until the date that is 24 months thereafter, the Company will not, directly
or indirectly, effect any Subsequent Placement unless the Company shall have first complied with this Section 4(n)(ii).


 


(1)
The Company shall deliver to each holder of Preferred Shares (each a “Preferred Holder“, and collectively,
the “Preferred Holders“) an irrevocable written notice (the “Offer Notice“) of any proposed
or intended issuance or sale or exchange (the “Offer“) of the securities being offered (the “Offered
Securities“) in a Subsequent Placement, which Offer Notice shall (w) identify and describe the Offered Securities, (x)
describe the price and other terms upon which they are to be issued, sold or exchanged, and the number or amount of the Offered
Securities to be issued, sold or exchanged, (y) identify the persons or entities (if known) to which or with which the Offered
Securities are to be offered, issued, sold or exchanged and (z) offer to issue and sell to or exchange with each Preferred Holder
its pro rata portion (based on such Buyer’s pro rata portion of the aggregate stated value of Preferred Shares issued on
the Closing Date) of at least fifty-five percent (55%) of the Offered Securities (the “Basic Amount“). With
respect to each Preferred Holder that elects to purchase its Basic Amount, such Preferred Holder may also indicate it will purchase
or acquire any additional portion of the Offered Securities attributable to the Basic Amounts of other Preferred Holders should
the other Preferred Holders subscribe for less than their Basic Amounts (the “Undersubscription Amount“), which
process shall be repeated once until the Preferred Holders shall have an opportunity to subscribe for any remaining Undersubscription
Amount.


 


(2)
To accept an Offer, in whole or in part, such Preferred Holder must deliver a written notice to the Company prior to the end of
the fifth (5th) Business Day after such Preferred Holder’s receipt of the Offer Notice (the “Offer Period“),
setting forth the portion of such Preferred Holder’s Basic Amount that such Preferred Holder elects to purchase and, if
such Preferred Holder shall elect to purchase all of its Basic Amount, the Undersubscription Amount, if any, that such Preferred
Holder elects to purchase (in either case, the “Notice of Acceptance“). If the Basic Amounts subscribed for
by all Preferred Holders are less than the total of all of the Basic Amounts, then each Preferred Holder who has set forth an
Undersubscription Amount in its Notice of Acceptance shall be entitled to purchase, in addition to the Basic Amounts subscribed
for, the Undersubscription Amount it has subscribed for; provided, however, that if the Undersubscription Amounts subscribed for
exceed the difference between the total of all the Basic Amounts and the Basic Amounts subscribed for (the “Available Undersubscription
Amount“), each Preferred Holder who has subscribed for any Undersubscription Amount shall be entitled to purchase only that
portion of the Available Undersubscription Amount as the Basic Amount of such Preferred Holder bears to the total Basic Amounts
of all Preferred Holders that have subscribed for Undersubscription Amounts, subject to rounding by the Company to the extent
its deems reasonably necessary. Notwithstanding anything to the contrary contained herein, if the Company desires to modify or
amend the terms and conditions of the Offer prior to the expiration of the Offer Period, the Company may deliver to the Preferred
Holders a new Offer Notice and the Offer Period shall expire on the fifth (5th) Business Day after such Preferred Holder’s
receipt of such new Offer Notice.


 




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(3)
The Company shall have twenty (20) Business Days from the expiration of the Offer Period above to offer, issue, sell or exchange
all or any part of such Offered Securities as to which a Notice of Acceptance has not been given by the Preferred Holders (the
“Refused Securities“) pursuant to a definitive agreement (the “Subsequent Placement Agreement“)
but only to the offerees described in the Offer Notice (if so described therein) and only upon terms and conditions (including,
without limitation, unit prices and interest rates) that are not more favorable to the acquiring Person or Persons or less favorable
to the Company than those set forth in the Offer Notice and (ii) to publicly announce (a) the execution of such Subsequent Placement
Agreement, and (b) either (x) the consummation of the transactions contemplated by such Subsequent Placement Agreement or (y)
the termination of such Subsequent Placement Agreement, which shall be filed with the SEC on a Current Report on Form 8-K with
such Subsequent Placement Agreement and any documents contemplated therein filed as exhibits thereto.


 


(4)
In the event the Company shall propose to sell less than all the Refused Securities (any such sale to be in the manner and on
the terms specified in Section 4(n)(ii)(3) above), then each Preferred Holder may, at its sole option and in its sole discretion,
reduce the number or amount of the Offered Securities specified in its Notice of Acceptance to an amount that shall be not less
than the number or amount of the Offered Securities that such Preferred Holder elected to purchase pursuant to Section 4(n)(ii)(2)
above multiplied by a fraction, (i) the numerator of which shall be the number or amount of Offered Securities the Company
actually proposes to issue, sell or exchange (including Offered Securities to be issued or sold to Preferred Holders pursuant
to Section 4(n)(ii)(3) above prior to such reduction) and (ii) the denominator of which shall be the original amount of
the Offered Securities. In the event that any Preferred Holder so elects to reduce the number or amount of Offered Securities
specified in its Notice of Acceptance, the Company may not issue, sell or exchange more than the reduced number or amount of the
Offered Securities unless and until such securities have again been offered to the Preferred Holders in accordance with Section
4(n)(ii)(1) above.


 


(5)
Upon the closing of the issuance, sale or exchange of all or less than all of the Refused Securities, the Preferred Holders shall
acquire from the Company, and the Company shall issue to the Preferred Holders, the number or amount of Offered Securities specified
in the Notices of Acceptance, as reduced pursuant to Section 4(n)(ii)(3) above if the Preferred Holders have so elected,
upon the terms and conditions specified in the Offer. The purchase by the Preferred Holders of any Offered Securities is subject
in all cases to the preparation, execution and delivery by the Company and the Preferred Holders of a purchase agreement relating
to such Offered Securities reasonably satisfactory in form and substance to the Preferred Holders and their respective counsel.


 




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(6)
The Company and the Preferred Holders agree that if any Preferred Holder elects to participate in the Offer, neither the Subsequent
Placement Agreement with respect to such Offer nor any other transaction documents related thereto (collectively, the “Subsequent
Placement Documents“) shall include any term or provisions whereby any Preferred Holder shall be required to agree to
any restrictions in trading as to any securities of the Company owned by such Preferred Holder prior to such Subsequent Placement,
other than restrictions on transfer imposed under federal and state securities laws.


 


(iii)
Notwithstanding anything to the contrary in this Section 4(n) and unless otherwise agreed to by the Preferred Holders,
the Company shall either confirm in writing to the Preferred Holders that the transaction with respect to the Subsequent Placement
has been abandoned or shall publicly disclose its intention to issue the Offered Securities, in either case in such a manner such
that the Preferred Holders will not be in possession of material non-public information, by the fifteenth (15th) Business
Day following delivery of the Offer Notice. If by the fifteenth (15th) Business Day following delivery of the Offer
Notice no public disclosure regarding a transaction with respect to the Offered Securities has been made, and no notice regarding
the abandonment of such transaction has been received by the Preferred Holders, such transaction shall be deemed to have been
abandoned and the Preferred Holders shall not be deemed to be in possession of any material, non-public information with respect
to the Company.


 


(iv)
Any Preferred Holder who does not participate in a Subsequent Placement for their pro-rata Basic Amount shall have no further
rights to participate in offerings pursuant to Section 4(n).


 


(v)
The restrictions contained in subsection (ii) of this Section 4(n) shall not apply in connection with the issuance
of any Excluded Securities.


 


(o)
Taxes. The Company will pay, and save and hold the Buyers harmless from any and all liabilities (including interest and
penalties) with respect to, or resulting from any delay or failure in paying, stamp and other taxes (other than income taxes),
if any, which may be payable or determined to be payable on the execution and delivery or acquisition of the Preferred Shares,
Warrants, Conversion Shares or Warrant Shares.


 


(p)
D&O Insurance. The Company shall obtain such director’s and officer’s insurance in such form, with such
carrier and in such amounts as reasonably acceptable to the holders of a majority of the Preferred Shares (the “D&O
Insurance“) within forty five (45) days of the Closing Date. Thereafter, for so long as any Preferred Shares remain
outstanding, the Company shall maintain the D&O Insurance.


 


(q)
Books and Records. The Company will keep proper books of record and account, in which full and correct entries shall be
made of all financial transactions and the assets and business of the Company and its Subsidiaries in accordance with GAAP.


 




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(r)
Notice of Disqualification Events. The Company will notify the Buyers in writing, prior to the Closing Date of (i) any
Disqualification Event relating to any Issuer Covered Person and (ii) any event that would, with the passage of time, become a
Disqualification Event relating to any Issuer Covered Person.


 


(s)
[Reserved].


 


(t)
New Debt. For a period of one year from the Execution Date, neither the Company nor any Subsidiary shall enter into any
agreement creating indebtedness for the Company or any Subsidiary, including but not limited to entering into (i) any mortgage,
credit agreement or other facility, indenture agreement, factoring agreement or other instrument, under which there may be issued,
or by which there may be secured or evidenced, any indebtedness for borrowed money or money due that involves, either individually
or in aggregate with other such agreements, obligations greater than $75,000.00, and (ii) any equipment lease, agreement evidencing
purchase money security interests, or other similar transaction in the ordinary course of business that involves, either individually
or in aggregate with other such agreements, obligations greater than $100,000.00, in either case without the prior written consent
of the Required Holders.


 


(u)
Distributions. While the Preferred Shares remain outstanding, the Company shall not make any distributions of cash or property
on equity, without the prior written consent of the Required Holders. Notwithstanding the foregoing, the Company may effect stock
dividends and stock splits as provided by law.


 


(v)
DTC Eligibility. For so long as any Securities are outstanding, the Company will employ as the transfer agent for the Common
Stock a participant in the Depository Trust Company Automated Securities Transfer Program and cause the Common Stock to be transferable
pursuant to such program.


 


(w)
Independent Board Member. Within thirty (30) calendar days after the Execution Date, the Company shall have taken all appropriate
and required actions to appoint an independent director, mutually agreeable to the Company and Cavalry, to serve as a member of
the Company’s board of directors (the “Independent Director“). In the event the Independent Director
leaves such position for any reason, the Company shall identify and appoint a replacement Independent Director who is acceptable
to Cavalry, including but not limited to with respect to such appointee’s “independence“ as defined under applicable
NASDAQ rules. In the event any mutually agreeable candidates are unwilling to accept the Independ Director position it shall not
constitute a breach of any covenants of this Agreement or any other Transaction Document.


 


(x)
Closing Documents. On or prior to thirty (30) calendar days after the Closing Date, the Company agrees to deliver, or cause
to be delivered, to each Buyer and K&L Gates, LLP a complete closing set of the executed Transaction Documents, Securities
and any other documents required to be delivered to any party pursuant to Section 7 hereof or otherwise.


 




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5.
REGISTER.


 


The
Company shall maintain at its principal executive offices (or such other office or agency of the Company as it may designate by
notice to each holder of Securities), a register for the Preferred Shares in which the Company shall record the name and address
of the Person in whose name the Preferred Shares have been issued (including the name and address of each transferee), the number
of Preferred Shares held by such Person and the number of Conversion Shares issuable upon conversion of the Preferred Shares held
by such Person. The Company shall keep the register open and available at all times during business hours for inspection of any
Buyer or its legal representatives.


 


6.
CONDITIONS TO THE COMPANY’S OBLIGATION TO SELL.


 


The
obligation of the Company hereunder to issue and sell the Preferred Shares and the related Warrants to each Buyer at the Closing
is subject to the satisfaction, at or before the Closing Date, of each of the following conditions, provided that these conditions
are for the Company’s sole benefit and may be waived by the Company at any time in its sole discretion by providing each
Buyer with prior written notice thereof:


 


(i)
Such Buyer shall have executed each of the Transaction Documents to which it is a party and delivered the same to the Company.


 


(ii)
Such Buyer shall have delivered to the Escrow Agent the Purchase Price (less, in the case of any Buyer, the amount withheld by
such Buyer pursuant to Section 4(f)) for the Preferred Shares being purchased by such Buyer at the Closing by wire transfer
of immediately available funds pursuant to the wire instructions provided by the Escrow Agent.


 


(iii)
The representations and warranties of such Buyer shall be true and correct as of the date when made and as of the Closing Date
as though made at that time (except for representations and warranties that speak as of a specific date, which shall be true and
correct as of such specified date), and such Buyer shall have performed, satisfied and complied with the covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied with by such Buyer at or prior to the Closing
Date.


 


7.
CONDITIONS TO EACH BUYER’S OBLIGATION TO PURCHASE.


 


The
obligation of each Buyer hereunder to purchase the Preferred Shares and the related Warrants at the Closing is subject to the
satisfaction, at or before the Closing Date, of each of the following conditions, provided that these conditions are for each
Buyer’s sole benefit and may be waived by such Buyer at any time in its sole discretion by providing the Company with prior
written notice thereof:


 


(i)
The Company shall have duly executed and delivered to such Buyer each of the Transaction Documents and the stock certificates
representing the Preferred Shares and the Warrants (allocated in such numbers as such Buyer shall request in writing at least
two (2) Business Days prior to the Closing Date) being purchased by such Buyer at the Closing pursuant to this Agreement.


 




    	33



     


    

 


(ii)
The Company shall have delivered to such Buyer a certificate evidencing the formation and good standing of the Company and each
of its Subsidiaries in each such entity’s jurisdiction of formation issued by the Secretary of State (or equivalent) of
such jurisdiction of formation as of a date within ten (10) days of the Closing Date.


 


(iii)
The Company shall have delivered to such Buyer a certified copy of the Articles of Incorporation as certified by the Secretary
of State of the State of Nevada within ten (10) days of the Closing Date.


 


(iv)
The Company shall have delivered to such Buyer a certificate, executed by the Secretary of the Company and dated as of the Closing
Date, as to (i) the resolutions consistent with Section 3(b) as adopted by the Company’s board of directors in a
form reasonably acceptable to such Buyer, (ii) the Articles of Incorporation and (iii) the Bylaws, each as in effect at the Closing,
in the form attached hereto as Exhibit F.


 


(v)
The representations and warranties of the Company shall be true and correct as of the date when made and as of the Closing Date
as though made at that time (except for representations and warranties that speak as of a specific date, which shall be true and
correct as of such specified date) and the Company shall have performed, satisfied and complied in all respects with the covenants,
agreements and conditions required by the Transaction Documents to be performed, satisfied or complied with by the Company at
or prior to the Closing Date. Such Buyer shall have received a certificate, executed by the Chief Executive Officer of the Company,
dated as of the Closing Date, to the foregoing effect and as to such other matters as may be reasonably requested by such Buyer
in the form attached hereto as Exhibit G.


 


(vi)
The Company shall have obtained all governmental, regulatory or third party consents and approvals, if any, necessary for the
sale of the Securities.


 


(vii)
The Certificate of Designations in the form attached hereto as Exhibit A shall have been filed with the Secretary of State
of the State of Nevada and shall be in full force and effect, enforceable against the Company in accordance with its terms and
shall not have been amended.


 


(viii)
The Company shall have delivered to such Buyer such other documents relating to the transactions contemplated by this Agreement
as such Buyer or its counsel may reasonably request.


 


8.
TERMINATION.


 


In
the event that the Closing shall not have occurred with respect to a Buyer on or before ten (10) Business Days from the Execution
Date due to the Company’s or such Buyer’s failure to satisfy the conditions set forth in Sections 6 and 7
above (and the nonbreaching party’s failure to waive such unsatisfied condition(s)), the nonbreaching party shall have
the option to terminate this Agreement with respect to such breaching party at the close of business on such date by delivering
a written notice to that effect to each other party to this Agreement and without liability of any party to any other party; provided,
however, that if this Agreement is terminated pursuant to this Section 8, the Company shall remain obligated to reimburse Cavalry
for the expenses described in Section 4(f) above.


 




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9.
MISCELLANEOUS.


 


(a)
Governing Law; Jurisdiction; Jury Trial. All questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by the internal laws of the State of New York, without giving effect to any choice of law
or conflict of law provision or rule (whether of the State of New York or any other jurisdictions) that would cause the application
of the laws of any jurisdictions other than the State of New York. Each party hereby irrevocably submits to the exclusive jurisdiction
of the state and federal courts sitting in The City of New York, Borough of Manhattan, for the adjudication of any dispute hereunder
or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and
agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any
such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or
proceeding is improper. Each party hereby irrevocably waives personal service of process and consents to process being served
in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such notices to it under this
Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY
WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION
WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.


 


(b)
Counterparts. This Agreement may be executed in two or more identical counterparts, all of which shall be considered one
and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other
party; provided that an e-mail signature shall be considered due execution and shall be binding upon the signatory thereto with
the same force and effect as if the signature were an original, not an e-mail signature.


 


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


 


(d)
Severability. If any provision of this Agreement is prohibited by law or otherwise determined to be invalid or unenforceable
by a court of competent jurisdiction, the provision that would otherwise be prohibited, invalid or unenforceable shall be deemed
amended to apply to the broadest extent that it would be valid and enforceable, and the invalidity or unenforceability of such
provision shall not affect the validity of the remaining provisions of this Agreement so long as this Agreement as so modified
continues to express, without material change, the original intentions of the parties as to the subject matter hereof and the
prohibited nature, invalidity or unenforceability of the provision(s) in question does not substantially impair the respective
expectations or reciprocal obligations of the parties or the practical realization of the benefits that would otherwise be conferred
upon the parties. The parties will endeavor in good faith negotiations to replace the prohibited, invalid or unenforceable provision(s)
with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceable
provision(s).


 




    	35



     


    

 


(e)
Entire Agreement; Amendments. This Agreement and the other Transaction Documents supersede all other prior oral or written
agreements between the Buyers, the Company, their affiliates and Persons acting on their behalf with respect to the matters discussed
herein, and this Agreement, the other Transaction Documents and the instruments referenced herein and therein contain the entire
understanding of the parties with respect to the matters covered herein and therein and, except as specifically set forth herein
or therein, neither the Company nor any Buyer makes any representation, warranty, covenant or undertaking with respect to such
matters. Provisions of this Agreement may be amended and the observance thereof may be waived (either generally or in a particular
instance and either retroactively or prospectively), only with the written consent of the Company and either (i) the holders of
at least a majority of the Preferred Shares outstanding as of the applicable date of determination which must include Cavalry
as long as Cavalry (or any of its Affiliates) owns at least five percent (5%) of the Preferred Shares issued pursuant to this
Agreement, or (ii) Cavalry as long as Cavalry (or any of its Affiliates) owns at least five percent (5%) of the Preferred Shares
issued pursuant to this Agreement (the “Required Holders“); provided that any such amendment or waiver that complies
with the foregoing but that disproportionately, materially and adversely affects the rights and obligations of any Buyer relative
to the comparable rights and obligations of the other Buyers shall require the prior written consent of such adversely affected
Buyer. Any amendment or waiver effected in accordance with this Section 9(e) shall be binding upon each Buyer and holder of Securities
and the Company. No such amendment shall be effective to the extent that it applies to less than all of the Buyers or holders
of Securities. No consideration shall be offered or paid to any Person to amend or consent to a waiver or modification of any
provision of any of the Transaction Documents unless the same consideration (other than the reimbursement of legal fees) also
is offered to all of the parties to the Transaction Documents, holders of Preferred Shares or holders of Warrants, as the case
may be. The Company has not, directly or indirectly, made any agreements with any Buyers relating to the terms or conditions of
the transactions contemplated by the Transaction Documents except as set forth in the Transaction Documents. Without limiting
the foregoing, the Company confirms that, except as set forth in this Agreement, no Buyer has made any commitment or promise or
has any other obligation to provide any financing to the Company or otherwise.


 


(f)
Notices. Any notices, consents, waivers or other communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered: (i) upon receipt, when delivered personally; (ii) upon
receipt, when sent by e-mail (provided confirmation of transmission is electronically generated and kept on file by the sending
party); or (iii) one (1) Business Day after deposit with an overnight courier service, in each case properly addressed to the
party to receive the same. The addresses and email addresses for such communications shall be:


 


If
to the Company:


 


BTCS
Inc.


9466
Georgia Avenue #124


Silver
Spring, MD


Telephone:
(202) 430-6576


Email:
ir@btcs.com


Attention:
Charles W. Allen


 




    	36



     


    

 


With
a copy (for informational purposes only) to:


 


Nason,
Yeager, Gerson, White & Lioce, P.A.


3001
PGA Boulevard


Suite
305


Palm
Beach Gardens, FL 33410


Telephone:
561.471.3507


Email:
mharris@nasonyeager.com


Attention:
Michael D. Harris, Esq.


 


If
to a Buyer, to its address and email address set forth on the Schedule of Buyers, with copies to such Buyer’s representatives
as set forth on the Schedule of Buyers,


 


With
a copy (for informational purposes only) to:


 


K&L
Gates LLP


200
S. Biscayne Boulevard, Suite 3900


Miami,
FL 33131


Telephone:
305.539.3300


E-mail:
clayton.parker@klgates.com


Attention:
Clayton E. Parker, Esq.


 


or
to such other address and/or email address and/or to the attention of such other Person as the recipient party has specified by
written notice given to each other party five (5) days prior to the effectiveness of such change. Written confirmation of receipt
(A) given by the recipient of such notice, consent, waiver or other communication, (B) mechanically or electronically generated
by the sender’s email containing the time, date, recipient e-mail and an image of the first page of such transmission or
(C) provided by an overnight courier service shall be rebuttable evidence of personal service, receipt by e-mail or receipt from
an overnight courier service in accordance with clause (i), (ii) or (iii) above, respectively.


 


(g)
Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their respective
successors and assigns, including any purchasers of the Preferred Shares or the Warrants. The Company shall not assign this Agreement
or any rights or obligations hereunder without the prior written consent of the Required Holders, except by operation of law.
A Buyer may assign some or all of its rights hereunder without the consent of the Company, in which event such assignee shall
be deemed to be a Buyer hereunder with respect to such assigned rights.


 


(h)
No Third Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective permitted
successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, except that
each Indemnitee shall have the right to enforce the obligations of the Company with respect to Section 9(k).


 




    	37



     


    

 


(i)
Survival. Unless this Agreement is terminated under Section 8, the representations, warranties, agreements and covenants
hereunder shall survive the Closing and the delivery, conversion and/or exercise of the Securities, as applicable. Each Buyer
shall be responsible only for its own representations, warranties, agreements and covenants hereunder.


 


(j)
Further Assurances. Each party shall do and perform, or cause to be done and performed, all such further acts and things,
and shall execute and deliver all such other agreements, certificates, instruments and documents, as any other party may reasonably
request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions
contemplated hereby.


 


(k)
Indemnification.


 


(i)
In consideration of each Buyer’s execution and delivery of the Transaction Documents and acquiring the Securities thereunder
and in addition to all of the Company’s other obligations under the Transaction Documents, the Company shall defend, protect,
indemnify and hold harmless each Buyer and each other holder of the Securities and all of their stockholders, partners, members,
officers, directors, employees and direct or indirect investors and any of the foregoing Persons’ agents or other representatives
(including, without limitation, those retained in connection with the transactions contemplated by this Agreement) (collectively,
the “Indemnitees“) from and against any and all actions, causes of action, suits, claims, losses, costs, penalties,
fees, liabilities and damages, and expenses in connection therewith (irrespective of whether any such Indemnitee is a party to
the action for which indemnification hereunder is sought), and including reasonable attorneys’ fees and disbursements (the
“Indemnified Liabilities“), incurred by any Indemnitee as a result of, or arising out of, or relating to (a)
any misrepresentation or breach of any representation or warranty made by the Company in the Transaction Documents or any other
certificate, instrument or document contemplated hereby or thereby, (b) any breach of any covenant, agreement or obligation of
the Company contained in the Transaction Documents or any other certificate, instrument or document contemplated hereby or thereby
or (c) any cause of action, suit 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) and arising out of or resulting from (i) the execution, delivery, performance
or enforcement of the Transaction Documents or any other certificate, instrument or document contemplated hereby or thereby, (ii)
any transaction financed or to be financed in whole or in part, directly or indirectly, with the proceeds of the issuance of the
Securities, (iii) any disclosure made by such Buyer pursuant to Section 4(h), or (iv) the status of such Buyer or holder
of the Securities as an investor in the Company pursuant to the transactions contemplated by the Transaction Documents. 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 that is permissible under applicable law.


 




    	38



     


    

 


(ii)
Promptly after receipt by an Indemnitee under this Section 9(k) of notice of the commencement of any action or proceeding
(including any governmental action or proceeding) involving an Indemnified Liability, such Indemnitee shall, if a claim for indemnification
in respect thereof is to be made against any indemnifying party under this Section 9(k), deliver to the indemnifying party
a written notice of the commencement thereof, and the indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume control of the defense
thereof with counsel mutually satisfactory to the indemnifying party and the Indemnitee; provided, however, that an Indemnitee
shall have the right to retain its own counsel with the fees and expenses of not more than one counsel for such Indemnitee to
be paid by the indemnifying party, if, in the reasonable opinion of counsel selected to defend the Indemnitee, the representation
by such counsel of the Indemnitee and the indemnifying party would be inappropriate due to actual or potential differing interests
between such Indemnitee and any other party represented by such counsel in such proceeding. Legal counsel referred to in the immediately
preceding sentence shall be selected by the Investors holding at least a majority of the Purchased Shares. The Indemnitee shall
cooperate fully with the indemnifying party in connection with any negotiation or defense of any such action or Indemnified Liabilities
by the indemnifying party and shall furnish to the indemnifying party all information reasonably available to the Indemnitee that
relates to such action or Indemnified Liabilities. The indemnifying party shall keep the Indemnitee fully apprised at all times
as to the status of the defense or any settlement negotiations with respect thereto. No indemnifying party shall be liable for
any settlement of any action, claim or proceeding effected without its prior written consent, provided, however, that the indemnifying
party shall not unreasonably withhold, delay or condition its consent. No indemnifying party shall, without the prior written
consent of the Indemnitee, which consent shall not be unreasonably withheld conditioned or delayed, consent to entry of any judgment
or enter into any settlement or other compromise which does not include as an unconditional term thereof the giving by the claimant
or plaintiff to such Indemnitee of a release from all liability in respect to such Indemnified Liabilities or litigation. Following
indemnification as provided for hereunder, the indemnifying party shall be subrogated to all rights of the Indemnitee with respect
to all third parties, firms or corporations relating to the matter for which indemnification has been made. No Indemnitee shall
enter into any settlement of any action or proceeding subject to this Section 9(k) without the prior written consent of the indemnifying
party. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such
action shall not relieve such indemnifying party of any liability to the Indemnitee under this Section 9(k), except to
the extent that the indemnifying party is prejudiced in its ability to defend such action.


 


(iii)
The indemnification required by this Section 9(k) shall be made by periodic payments of the amount thereof during the course
of the investigation or defense, as and when bills are received or Indemnified Liabilities are incurred.


 


(iv)
The indemnity agreements contained herein shall be in addition to (x) any cause of action or similar right of the Indemnitee against
the indemnifying party or others, and (y) any liabilities the indemnifying party may be subject to pursuant to the law.


 


(l)
No Strict Construction. The language used in this Agreement will be deemed to be the language chosen by the parties to
express their mutual intent, and no rules of strict construction will be applied against any party.


 




    	39



     


    

 


(m)
Remedies. Each Buyer and each holder of the Securities shall have all rights and remedies set forth in the Transaction
Documents and all rights and remedies which such holders have been granted at any time under any other agreement or contract and
all of the rights which such holders have under any law. Any Person having any rights under any provision of this Agreement shall
be entitled to enforce such rights specifically to recover damages by reason of any breach of any provision of this Agreement
and to exercise all other rights granted by law. Furthermore, the Company recognizes that in the event that it fails to perform,
observe, or discharge any or all of its obligations under the Transaction Documents, any remedy at law may prove to be inadequate
relief to the Buyers. The Company therefore agrees that the Buyers shall be entitled to seek temporary and permanent injunctive
relief in any such case without the necessity of proving actual damages.


 


(n)
Rescission and Withdrawal Right. Notwithstanding anything to the contrary contained in (and without limiting any similar
provisions of) the Transaction Documents, whenever any Buyer exercises a right, election, demand or option under a Transaction
Document and the Company does not timely perform its related obligations within the periods therein provided, then such Buyer
may rescind or withdraw, in its sole discretion from time to time upon written notice to the Company, any relevant notice, demand
or election in whole or in part without prejudice to its future actions and rights.


 


(o)
Payment Set Aside. To the extent that the Company makes a payment or payments to the Buyers hereunder or pursuant to any
of the other Transaction Documents or the Buyers enforce or exercise their rights hereunder or thereunder, and such payment or
payments or the proceeds of such enforcement or exercise or any part thereof are subsequently invalidated, declared to be fraudulent
or preferential, set aside, recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the Company,
a trustee, receiver or any other Person under any law (including, without limitation, any bankruptcy law, foreign, state or federal
law, common law or equitable cause of action), then to the extent of any such restoration the obligation or part thereof originally
intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such
enforcement or setoff had not occurred.


 


(p)
Reproduction of Documents. This Agreement and all documents relating thereto, including, without limitation, (a) consents,
waivers and modifications which may hereafter be executed, (b) documents received by the Buyers on the Closing Date (except for
certificates evidencing the Preferred Shares themselves), and (c) financial statements, certificates and other information previously
or hereafter furnished to the Buyers, may be reproduced by any Buyer by any photographic, photostatic, microfilm, micro-card,
miniature photographic or other similar process and any Buyer may destroy any original document so reproduced. All parties hereto
agree and stipulate that any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative
proceeding (whether or not the original is in existence and whether or not such reproduction was made by a Buyer in the regular
course of business) and that any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible
in evidence.


 




    	40



     


    

 


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


 


**
Signature Page Follows **


 




    	41



     


    

 


IN
WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to this Securities Purchase Agreement
to be duly executed as of the Execution Date.


 


	 	COMPANY:
	 	
	 	BTCS
    INC.
	 	 	 
	 	By:
     	 
	 	Name:	Charles
    W. Allen
	 	Title:	Chief
    Executive Officer


 




    	 



     


    

 


IN
WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to this Securities Purchase Agreement
to be duly executed as of the Execution Date.


 


	 	BUYERS:

        

	 	 
	 	Cavalry Fund I LP
	 	By: Cavalry Fund I Management LLC
	 	Its: General Partner
	 	 	 
	 	By:	 
	 	Name:	 
	 	Title:	 


 




    	 



     


    

 


IN
WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to this Securities Purchase Agreement
to be duly executed as of the Execution Date.


 


	 	BUYERS:
	 	 	 
	 	[OTHER BUYERS]
	 	 	 
	 	By:	 
	 	Name:	 
	 	Title:	 


 




    	 



     


    

 


EXHIBITS


 


	Exhibit
    A	Form
    of Certificate of Designations
	Exhibit
    B	Form
    of Warrant
	Exhibit
    C	Form
    of Additional Warrant
	Exhibit
    D	Form
    of Bonus Warrant
	Exhibit
    E	Form
    of Registration Rights Agreement
	Exhibit
    F	Form
    of Secretary’s Certificate
	Exhibit
    G	Form
    of Officer’s Certificate