SEC Connect





 






Exhibit
10.1


SUBSCRIPTION
AGREEMENT


This
Subscription Agreement (this “Agreement”) is being
delivered to the purchaser identified on the signature page to this
Agreement (the “Subscriber”) in
connection with its investment in the securities of Majesco
Entertainment Company, a Delaware corporation (the
“Company”). The Company is
conducting a private placement (the “Offering”) of up
to            
(the “Maximum
Offering Amount”) of shares (the “Common Shares”) of the
Company’s common stock, par value $0.001 per share (the
“Common
Stock”) (or, at the election of any Subscriber, shares
of Series F Convertible Preferred Stock (the “Preferred Shares” and,
collectively with the Common Shares, the “Shares”), par value
$0.001 per share, which are convertible into shares of Common Stock
(the “Conversion
Shares”), with such rights and designations as set
forth in the form of Certificate of Designation of Preferences,
Rights and Limitations of Series F Convertible Preferred Stock,
attached hereto as Exhibit A, (the “Series F Certificate of
Designation”). The Shares will be sold at a purchase
price (the “Purchase
Price”) of $3.00 per share of Common Stock. For
purposes of this Agreement, the term “Securities” shall refer
to the Shares, the Preferred Shares and the Conversion
Shares.


IMPORTANT
INVESTOR NOTICES


NO
OFFERING LITERATURE OR ADVERTISEMENT IN ANY FORM MAY BE RELIED UPON
IN THE OFFERING OF THESE SECURITIES EXCEPT FOR THIS SUBSCRIPTION
AGREEMENT AND ANY SUPPLEMENTS HERETO, AND NO PERSON HAS BEEN
AUTHORIZED TO MAKE ANY REPRESENTATIONS EXCEPT THOSE CONTAINED
HEREIN.


UNTIL
SUCH TIME AS A FORM 8-K IS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION DISCLOSING THE TRANSACTIONS CONTEMPLATED HEREBY, THIS
AGREEMENT IS CONFIDENTIAL AND THE CONTENTS HEREOF MAY NOT BE
REPRODUCED, DISTRIBUTED OR DIVULGED BY OR TO ANY PERSONS OTHER THAN
THE RECIPIENT OR ITS REPRESENTATIVE, ACCOUNTANT OR LEGAL COUNSEL,
WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMPANY. EACH PERSON WHO
ACCEPTS DELIVERY OF THIS AGREEMENT, ACKNOWLEDGES AND AGREES TO THE
FOREGOING RESTRICTIONS.


THIS
AGREEMENT DOES NOT CONSTITUTE AN OFFER OR SOLICITATION OF AN OFFER
TO ANY PERSON OR IN ANY JURISDICTION WHERE SUCH OFFER OR
SOLICITATION IS UNLAWFUL OR NOT AUTHORIZED. EACH PERSON WHO ACCEPTS
DELIVERY OF THIS AGREEMENT AGREES TO RETURN IT AND ALL RELATED
DOCUMENTS IF SUCH PERSON DOES NOT PURCHASE ANY OF THE SECURITIES
DESCRIBED HEREIN.


THIS
AGREEMENT DOES NOT PURPORT TO BE ALL-INCLUSIVE OR TO CONTAIN ALL OF
THE INFORMATION THAT YOU MAY DESIRE IN EVALUATING THE COMPANY, OR
AN INVESTMENT IN THE OFFERING. THIS AGREEMENT DOES NOT CONTAIN ALL
OF THE INFORMATION THAT WOULD NORMALLY APPEAR IN A PROSPECTUS FOR
AN OFFERING REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE “SECURITIES ACT”). YOU MUST CONDUCT AND RELY ON
YOUR OWN EVALUATION OF THE COMPANY AND THE TERMS OF THE OFFERING,
INCLUDING THE MERITS AND RISKS INVOLVED, IN DECIDING WHETHER TO
INVEST IN THE OFFERING.


NEITHER
THE DELIVERY OF THIS AGREEMENT AT ANY TIME NOR ANY SALE OF
SECURITIES HEREUNDER SHALL IMPLY THAT INFORMATION CONTAINED HEREIN
IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE. THE COMPANY WILL
EXTEND TO EACH PROSPECTIVE SUBSCRIBER (AND TO ITS REPRESENTATIVE,
ACCOUNTANT OR LEGAL COUNSEL, IF ANY) THE OPPORTUNITY, PRIOR TO ITS
PURCHASE OF SHARES, TO ASK QUESTIONS OF AND RECEIVE ANSWERS FROM
THE COMPANY CONCERNING THE OFFERING AND TO OBTAIN ADDITIONAL
INFORMATION, TO THE EXTENT THE COMPANY POSSESSES THE SAME OR CAN
ACQUIRE IT WITHOUT UNREASONABLE EFFORT OR EXPENSE, IN ORDER TO
VERIFY THE ACCURACY OF THE INFORMATION SET FORTH HEREIN. ALL SUCH
ADDITIONAL INFORMATION SHALL ONLY BE PROVIDED IN WRITING AND
IDENTIFIED AS SUCH BY THE COMPANY THROUGH ITS DULY AUTHORIZED
OFFICERS AND/OR DIRECTORS ALONE; NO ORAL INFORMATION OR INFORMATION
PROVIDED BY ANY BROKER OR THIRD PARTY MAY BE RELIED
UPON.


 




 

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NO
REPRESENTATIONS, WARRANTIES OR ASSURANCES OF ANY KIND ARE MADE OR
SHOULD BE INFERRED WITH RESPECT TO THE ECONOMIC RETURN, IF ANY,
THAT MAY ACCRUE TO AN INVESTOR IN THE COMPANY.


FOR
RESIDENTS OF ALL STATES


THIS
OFFERING IS BEING MADE SOLELY TO “ACCREDITED
INVESTORS,” AS SUCH TERM IS DEFINED IN RULE 501 OF REGULATION
D UNDER THE SECURITIES ACT. THE SECURITIES HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OR THE SECURITIES LAWS OF ANY STATE AND
WILL BE OFFERED AND SOLD IN RELIANCE UPON THE EXEMPTION FROM
REGISTRATION AFFORDED BY SECTION 4(a)(2) THEREUNDER AND REGULATION
D (RULE 506) OF THE SECURITIES ACT AND CORRESPONDING PROVISIONS OF
STATE SECURITIES LAWS.


THE
SECURITIES OFFERED HEREBY ARE SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD
EXCEPT AS PERMITTED UNDER THE SECURITIES ACT AND APPLICABLE STATE
LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. SUBSCRIBERS
SHOULD BE AWARE THAT THEY WILL BE REQUIRED TO BEAR THE FINANCIAL
RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF
TIME.


THE
SECURITIES OFFERED HEREBY HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION, ANY STATE
SECURITIES COMMISSION OR ANY OTHER REGULATORY AUTHORITY, NOR HAVE
ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE MERITS
OF THIS OFFERING OR THE ACCURACY OR ADEQUACY OF THIS AGREEMENT. ANY
REPRESENTATION TO THE CONTRARY IS UNLAWFUL.


PROSPECTIVE
SUBSCRIBERS SHOULD NOT CONSTRUE THE CONTENTS OF THIS AGREEMENT AS
INVESTMENT, LEGAL, BUSINESS, OR TAX ADVICE. EACH SUBSCRIBER SHOULD
CONTACT HIS, HER OR ITS OWN ADVISORS REGARDING THE APPROPRIATENESS
OF THIS INVESTMENT AND THE TAX CONSEQUENCES THEREOF, WHICH MAY
DIFFER DEPENDING ON A SUBSCRIBER’S PARTICULAR FINANCIAL
SITUATION. IN NO EVENT SHOULD THIS AGREEMENT BE DEEMED OR
CONSIDERED TO BE TAX ADVICE PROVIDED BY THE COMPANY.


FOR
FLORIDA RESIDENTS ONLY


THE
SECURITIES REFERRED TO HEREIN WILL BE SOLD TO, AND ACQUIRED BY, THE
HOLDER IN A TRANSACTION EXEMPT UNDER § 517.061 OF THE FLORIDA
SECURITIES ACT. THE SECURITIES HAVE NOT BEEN REGISTERED UNDER SAID
ACT IN THE STATE OF FLORIDA. IN ADDITION, ALL FLORIDA RESIDENTS
SHALL HAVE THE PRIVILEGE OF VOIDING THE PURCHASE WITHIN THREE (3)
DAYS AFTER THE FIRST TENDER OF CONSIDERATION IS MADE BY SUCH
SUBSCRIBER TO THE COMPANY, AN AGENT OF THE COMPANY, OR AN ESCROW
AGENT OR WITHIN THREE DAYS AFTER THE AVAILABILITY OF THAT PRIVILEGE
IS COMMUNICATED TO SUCH SUBSCRIBER, WHICHEVER OCCURS
LATER.




 

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1.            

SUBSCRIPTION
AND PURCHASE PRICE






(a)
Subscription. Subject to the
conditions set forth in Section 2 hereof, the Subscriber hereby
subscribes for and agrees to purchase the number of Shares
indicated on the signature page hereof on the terms and conditions
described herein.


(b)
Purchase of Shares. The
Subscriber understands and acknowledges that the purchase price to
be remitted to the Company in exchange for the Shares shall be set
at $3.00 per share of Common Stock, for an aggregate purchase price
as set forth on the signature page hereof (the “Aggregate Purchase
Price”). The Subscriber’s delivery of this
Agreement to the Company shall be accompanied by payment for the
Shares subscribed for hereunder, payable in United States Dollars,
by wire transfer of immediately available funds delivered to
Sichenzia Ross Ference Kesner LLP, as escrow agent (the
“Escrow
Agent”) pursuant to the terms of the escrow agreement
(the “Escrow
Agreement”) attached hereto as Exhibit B. The
Subscriber understands and agrees that, subject to Section 2 and
applicable laws, by executing this Agreement, it is entering into a
binding agreement. The Subscriber understands and agrees that,
subject to Section 2 and applicable laws, by executing this
Agreement, it is entering into a binding agreement.



2.            

ACCEPTANCE,
OFFERING TERM AND CLOSING PROCEDURES






(a)
Acceptance. Subject to full,
faithful and punctual performance and discharge by the Company of
all of its duties, obligations and responsibilities as set forth in
this Agreement, the Series F Certificate of Designation, the
Registration Rights Agreement (as defined below), the Escrow
Agreement and any other agreement entered into between the
Subscriber and the Company relating to this subscription
(collectively, the "Transaction Documents") to be
performed or discharged on or prior to the Closing in which such
Subscriber participates, the Subscriber shall be legally bound to
purchase the Shares pursuant to the terms and conditions set forth
in this Agreement. For the avoidance of doubt, upon the occurrence
of the failure by the Company to fully, faithfully and punctually
perform and discharge any of its duties, obligations and
responsibilities as set forth in any of the Transaction Documents,
which shall have been performed or otherwise discharged prior to
the Closing (as defined below), the Subscriber may, on or prior to
the Closing, at its sole and absolute discretion, elect not to
purchase the Shares and provide instructions to the Company to
receive the full and immediate refund of the Aggregate Purchase
Price. In the event the Closing does not take place because of (i)
the election not to purchase the Shares by the Subscriber or (ii)
the failure to effectuate the Closing (as defined below) on or
prior to December 31, 2016 (unless extended in the discretion of
the Board of Directors) for any reason or no reason, this Agreement
and any other Transaction Documents shall thereafter be terminated
and have no force or effect, and the parties shall take all steps,
including the execution of instructions to the Company, to ensure
that the Aggregate Purchase Price shall promptly be returned or
caused to be returned to the Subscriber without interest thereon or
deduction therefrom.


(b)
Closing. The closing of the
purchase and sale of the Shares hereunder (the “Closing”) shall take
place at such time and place as determined by the Company. Closings
shall take place on a Business Day promptly following the
satisfaction of the conditions set forth in Section 6 below, as
determined by the Company (the “Closing Date”).
“Business
Day” shall mean from the hours of 9:00 a.m. (Eastern
Time) through 5:00 p.m. (Eastern Time) of a day other than a
Saturday, Sunday or other day on which commercial banks in New
York, New York are authorized or required to be closed. The Shares
purchased by the Subscriber will be delivered by the Company
promptly following the Final Closing Date (as defined herein) of
the Offering. The initial closing shall be referred to as the
“Initial
Closing” and may be held upon receipt and acceptance
of subscriptions prior to December 31, 2016. The date of the
Initial Closing is sometimes referred to as the “Initial Closing Date.”
Subsequent closings (each a “Subsequent Closing”) will
be held until the earlier to occur of: (i) the date on which the
Maximum Offering Amount has been subscribed for and accepted by the
Company, and (ii) February 28, 2017. The Offering may be extended
up to March 31, 2017 (the “Final Closing” and such
date of the Final Closing, the “Final Closing Date”),
without additional notice to Subscribers. Officers, directors and
affiliates of the Company and the placement agent, if any, may
purchase Securities in the Offering


 


 




 

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(c)
Following Acceptance or
Rejection. The Subscriber acknowledges and agrees that this
Agreement and any other documents delivered in connection herewith
will be held by the Company. Prior to the Company’s
execution, in the event that this Agreement is not accepted by the
Company for whatever reason, which the Company expressly reserves
the right to do, this Agreement, the Aggregate Purchase Price
received (without interest thereon) and any other documents
delivered in connection herewith will be returned to the Subscriber
at the address of the Subscriber as set forth in this Agreement. If
this Agreement is accepted by the Company, the Company is entitled
to treat the Aggregate Purchase Price received as an interest free
loan to the Company until such time as the Subscription is
accepted.


(d)
Intentionally
Omitted.


 


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


 


(f)
Certificate as to Adjustments.
In each case of any adjustment or readjustment in (i) the Shares,
(ii) the Preferred Shares, (iii) the number of Conversion Shares
issuable upon conversion of the Preferred Shares and (iv) the
conversion price of the Preferred Shares, the Company, at its
expense, will promptly cause its Chief Financial Officer or other
appropriate designee to compute such adjustment or readjustment in
accordance with the terms hereof and of the Series F Certificate of
Designation, and prepare a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon
which such adjustment or readjustment is based. The Company will
forthwith mail a copy of each such certificate to the Subscriber.
To the extent any such certificate contains material non-public
information, the Company shall, no later than the first Business
Day after the date of delivery of such certificate to the
Subscriber, include such material non-public information in a
Current Report on Form 8-K filed with the United States Securities
and Exchange Commission (the “SEC”). From and after the
filing of such Form 8-K, the Company shall have disclosed all
material non-public information (if any) delivered to the
Subscriber by the Company or any of its Subsidiaries, or any of
their respective officers, directors, employees or agents in
connection with the transactions described in such
certificate.



3.            

THE
SUBSCRIBER’S REPRESENTATIONS, WARRANTIES AND
COVENANTS






Each
Subscriber, severally and not jointly, hereby acknowledges, agrees
with and represents, warrants and covenants to the Company, as
follows:


(a)
The Subscriber has full power and authority to enter into this
Agreement, the execution and delivery of which has been duly
authorized, if applicable, and this Agreement constitutes a valid
and legally binding obligation of the Subscriber, except as may be
limited by bankruptcy, reorganization, insolvency, moratorium and
similar laws of general application relating to or affecting the
enforcement of rights of creditors, and except as enforceability of
the obligations hereunder are subject to general principles of
equity (regardless of whether such enforceability is considered in
a proceeding in equity or law).


 




 

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(b)
The Subscriber acknowledges its understanding that the Offering and
sale of the Securities is intended to be exempt from registration
under the Securities Act, by virtue of Section 4(a)(2) of the
Securities Act and the provisions of Regulation D promulgated
thereunder (“Regulation D”). In
furtherance thereof, the Subscriber represents and warrants to the
Company and its affiliates as follows:


(i)
The Subscriber realizes that the basis for the exemption from
registration may not be available if, notwithstanding the
Subscriber’s representations contained herein, the Subscriber
is merely acquiring the Securities for a fixed or determinable
period in the future, or for a market rise, or for sale if the
market does not rise. The Subscriber does not have any such
intention.


(ii)
The Subscriber realizes that the basis for exemption would not be
available if the Offering is part of a plan or scheme to evade
registration provisions of the Securities Act or any applicable
state or federal securities laws, except sales pursuant to a
registration statement or sales that are exempted under the
Securities Act.


(iii)
The Subscriber is acquiring the Securities solely for the
Subscriber’s own beneficial account, for investment purposes,
and not with a view towards, or resale in connection with, any
distribution of the Securities.


(iv)
The Subscriber has the financial ability to bear the economic risk
of the Subscriber’s investment, has adequate means for
providing for its current needs and contingencies, and has no need
for liquidity with respect to an investment in the
Company.


(v)
The Subscriber and the Subscriber’s attorney, accountant,
purchaser representative and/or tax advisor, if any (collectively,
the “Advisors”) has such
knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of a prospective
investment in the Securities. If other than an individual, the
Subscriber also represents it has not been organized solely for the
purpose of acquiring the Securities.


(vi)
The Subscriber (together with its Advisors, if any) has received
all documents requested by the Subscriber, if any, and has
carefully reviewed them and understands the information contained
therein, prior to the execution of this Agreement.


(c)
The Subscriber is not relying on the Company or any of its
employees, agents, sub-agents or advisors with respect to the
legal, tax, economic and related considerations involved in this
investment. The Subscriber has relied on the advice of, or has
consulted with, only its Advisors. Each Advisor, if any, has
disclosed to the Subscriber in writing (a copy of which is annexed
to this Agreement) the specific details of any and all past,
present or future relationships, actual or contemplated, between
the Advisor and the Company or any affiliate or sub-agent
thereof.


(d)
The Subscriber has carefully considered the potential risks
relating to the Company and a purchase of the Securities, and fully
understands that the Securities are a speculative investment that
involves a high degree of risk of loss of the Subscriber’s
entire investment. Among other things, the Subscriber has carefully
considered each of the risks described under the heading
“Risk Factors”
and “Forward Looking
Statements” in the Company’s SEC Filings (as defined
below) and any additional disclosures in the nature of Risk Factors
described herein.


 




 

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 (e)
The Subscriber will not sell or otherwise transfer any Securities
without registration under the Securities Act or an exemption
therefrom, and fully understands and agrees that the Subscriber
must bear the economic risk of its purchase because, among other
reasons, the Securities have not been registered under the
Securities Act or under the securities laws of any state and,
therefore, cannot be resold, pledged, assigned or otherwise
disposed of unless they are subsequently registered under the
Securities Act and under the applicable securities laws of such
states, or an exemption from such registration is available. In
particular, the Subscriber is aware that the Securities are
“restricted securities,” as such term is defined in
Rule 144 promulgated under the Securities Act (“Rule 144”), and they may
not be sold pursuant to Rule 144 unless all of the conditions of
Rule 144 are met. The Subscriber also understands that the Company
is under no obligation to register the Securities on behalf of the
Subscriber or to assist the Subscriber in complying with any
exemption from registration under the Securities Act or applicable
state securities laws. The Subscriber understands that any sales or
transfers of the Securities are further restricted by state
securities laws and the provisions of this Agreement.


(f)
No oral or written representations or warranties have been made, or
information furnished, to the Subscriber or its Advisors, if any,
by the Company or any of its officers, employees, agents,
sub-agents, affiliates, advisors or subsidiaries in connection with
the Offering, other than any representations of the Company
contained herein, and in subscribing for the Shares the Subscriber
is not relying upon any representations other than those contained
herein.


(g)
The Subscriber’s overall commitment to investments that are
not readily marketable is not disproportionate to the
Subscriber’s net worth, and an investment in the Securities
will not cause such overall commitment to become
excessive.


(h)
The Subscriber understands and agrees that the certificates for the
Securities shall bear substantially the following
legend:


“[NEITHER THE
ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE
BEEN][THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN]
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED
FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A)
AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL TO
THE HOLDER (IF REQUESTED BY THE COMPANY), IN A FORM REASONABLY
ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER
SAID ACT OR (II) UNLESS SOLD OR ELIGIBLE TO BE SOLD PURSUANT TO
RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE
FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA
FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED
BY THE SECURITIES.”


 




 

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 (i)
Certificates evidencing Securities
shall not be required to contain the legend set forth in
Section 3(h) above or any other
legend (i) while a registration statement covering the resale of
such Securities is effective under the Securities Act, (ii)
following any sale of such Securities pursuant to Rule 144
(assuming the transferor is not an affiliate of the Company), (iii)
if such Securities are eligible to be sold, assigned or transferred
under Rule 144 and the Subscriber is not an affiliate of the
Company (provided that the Subscriber provides the Company with
reasonable assurances that such Securities are eligible for sale,
assignment or transfer under Rule 144 which shall not include an
opinion of the Subscriber’s counsel), (iv) in connection with
a sale, assignment or other transfer (other than under Rule 144),
provided that the Subscriber provides the Company with an opinion
of counsel, in a form generally acceptable to the Company, to the
effect that such sale, assignment or transfer of the Securities may
be made without registration under the applicable requirements of
the Securities Act or (v) if such legend is not required under
applicable requirements of the Securities Act (including, without
limitation, controlling judicial interpretations and pronouncements
issued by the SEC). If a legend is not required pursuant to the
foregoing, the Company shall no later than three (3) business days
following the delivery by the Subscriber to the Company or the
transfer agent (with notice to the Company) of a legended
certificate representing such Securities (endorsed or with stock
powers attached, signatures guaranteed, and otherwise in form
necessary to affect the reissuance and/or transfer, if applicable),
together with any other deliveries from the Subscriber as may be
required above in this Section 3(i), as directed by the Subscriber,
either: (A) provided that the Company’s transfer agent is
participating in the DTC Fast Automated Securities Transfer Program
and such Securities are Common Shares or Conversion Shares, credit
the aggregate number of shares of Common Stock to which the
Subscriber shall be entitled to the Subscriber’s or its
designee’s balance account with DTC through its
Deposit/Withdrawal at Custodian system or (B) if the
Company’s transfer agent is not participating in the DTC Fast
Automated Securities Transfer Program, issue and deliver (via
reputable overnight courier) to the Subscriber, a certificate
representing such Securities that is free from all restrictive and
other legends, registered in the name of the Subscriber or its
designee. The Company shall be responsible for any transfer agent
fees or DTC fees with respect to any issuance of Securities or the
removal of any legends with respect to any Securities in accordance
herewith.


(j)
Neither the SEC nor any state securities commission has approved
the Securities or passed upon or endorsed the merits of the
Offering. There is no government or other insurance covering any of
the Securities.


(k)
The Subscriber and its Advisors, if any, have had a reasonable
opportunity to ask questions of and receive answers from a person
or persons acting on behalf of the Company concerning the Offering
and the business, financial condition, results of operations and
prospects of the Company, and all such questions have been answered
to the full satisfaction of the Subscriber and its Advisors, if
any.


(l)    
(i) In making
the decision to invest in the Securities the Subscriber has relied
solely upon the information provided by the Company in the
Transaction Documents. To the extent necessary, the Subscriber has
retained, at its own expense, and relied upon appropriate
professional advice regarding the investment, tax and legal merits
and consequences of this Agreement and the purchase of the
Securities hereunder. The Subscriber disclaims reliance on any
statements made or information provided by any person or entity in
the course of Subscriber’s consideration of an investment in
the Securities other than the Transaction
Documents.  


        
(ii) The
Subscriber represents and warrants that: (i) the Subscriber was
contacted regarding the sale of the Securities by the Company (or
an authorized agent or representative thereof) with whom the
Subscriber had a prior substantial pre-existing relationship and
(ii) no Securities were offered or sold to it by means of any form
of general solicitation or general advertising, and in connection
therewith, the Subscriber did not (A) receive or review any
advertisement, article, notice or other communication published in
a newspaper or magazine or similar media or broadcast over
television or radio, whether closed circuit, or generally
available; or (B) attend any seminar meeting or industry investor
conference whose attendees were invited by any general solicitation
or general advertising; or (C) observe any website or filing of the
Company with the SEC in which any offering of securities by the
Company was described and as a result learned of any offering of
securities by the Company.


 




 

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(m)
The Subscriber has taken no action that would give rise to any
claim by any person for brokerage commissions, finders’ fees
or the like relating to this Agreement or the transactions
contemplated hereby.


(n)
The Subscriber is not relying on the Company or any of its
employees, agents, or advisors with respect to the legal, tax,
economic and related considerations of an investment in the
Securities, and the Subscriber has relied on the advice of, or has
consulted with, only its own Advisors.


(o)
The Subscriber acknowledges that any estimates or forward-looking
statements or projections furnished by the Company to the
Subscriber were prepared by the management of the Company in good
faith, but that the attainment of any such projections, estimates
or forward-looking statements cannot be guaranteed by the Company
or its management and should not be relied upon.


(p)
No oral or written representations have been made, or oral or
written information furnished, to the Subscriber or its Advisors,
if any, in connection with the Offering that are in any way
inconsistent with the information contained herein.


(q)
(For ERISA plans only) The fiduciary of the ERISA plan (the
“Plan”) represents that such fiduciary has been
informed of and understands the Company’s investment
objectives, policies and strategies, and that the decision to
invest “plan assets” (as such term is defined in ERISA)
in the Company is consistent with the provisions of ERISA that
require diversification of plan assets and impose other fiduciary
responsibilities. The Subscriber or Plan fiduciary (i) is
responsible for the decision to invest in the Company; (ii) is
independent of the Company and any of its affiliates; (iii) is
qualified to make such investment decision; and (iv) in making such
decision, the Subscriber or Plan fiduciary has not relied primarily
on any advice or recommendation of the Company or any of its
affiliates.


(r)
This Agreement is not enforceable by the Subscriber unless it has
been accepted by the Company, and the Subscriber acknowledges and
agrees that the Company reserves the right to reject any
subscription for any reason.


(s)
The Subscriber is an “Accredited Investor” as defined
in Rule 501(a) under the Securities Act. In general, an
“Accredited Investor” is deemed to be an institution
with assets in excess of $5,000,000 or individuals with a net worth
in excess of $1,000,000 (excluding such person’s residence)
or annual income exceeding $200,000 or $300,000 jointly with his or
her spouse.


(t)
The Subscriber, either alone or together with its representatives,
has such knowledge, sophistication and experience in business and
financial matters so as to be capable of evaluating the merits and
risks of the Offering, and has so evaluated the merits and risks of
such investment. The Subscriber has not authorized any person or
entity to act as its Purchaser Representative (as that term is
defined in Regulation D of the General Rules and Regulations under
the Securities Act) in connection with the Offering. The Subscriber
is able to bear the economic risk of an investment in the
Securities and, at the present time, is able to afford a complete
loss of such investment.



4.            

THE
COMPANY’S REPRESENTATIONS, WARRANTIES AND
COVENANTS






The
Company hereby acknowledges, agrees with and represents, warrants
and covenants to each Subscriber as of the date hereof and as of
the Closing Date, except as otherwise qualified by the SEC Filings,
as follows:


 




 

-8-








 






 


(a)
Organization and Qualification.
The Company is a corporation duly organized, validly existing and
in good standing under the laws of its state of incorporation. The
Company is duly qualified to do business, and is in good standing
in the states required due to (a) the ownership or lease of real or
personal property for use in the operation of the Company's
business or (b) the nature of the business conducted by the
Company, except where the failure to so qualify would not,
individually or in the aggregate, have a Material Adverse Effect.
The Company has all requisite power, right and authority to own,
operate and lease its properties and assets, to carry on its
business as now conducted, to execute, deliver and perform its
obligations under this Agreement and the other Transaction
Documents to which it is a party, and to carry out the transactions
contemplated hereby and thereby, subject to the Required Approvals.
All actions on the part of the Company and its officers and
directors necessary for the authorization, execution, delivery and
performance of this Agreement and the other Transaction Documents,
the consummation of the transactions contemplated hereby and
thereby, and the performance of all of the Company's obligations
under this Agreement and the other Transaction Documents have been
taken or will be taken prior to the Closing. This Agreement has
been, and the other Transaction Documents to which the Company is a
party on the Closing will be, duly executed and delivered by the
Company, and this Agreement is, and each of the other Transaction
Documents to which it is a party on the Closing will be, a legal,
valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms, except as may be limited
by bankruptcy, reorganization, insolvency, moratorium and similar
laws of general application relating to or affecting the
enforcement of rights of creditors, and except as enforceability of
the obligations hereunder are subject to general principles of
equity (regardless of whether such enforceability is considered in
a proceeding in equity or law).


(b)
Issuance of Securities. The
Securities to be issued to the Subscriber pursuant to this
Agreement and the applicable Transaction Documents, when issued and
delivered in accordance with the terms of this Agreement and the
applicable Transaction Documents, will be duly and validly issued
and will be fully paid and non-assessable and the Conversion
Shares, when issued and delivered in accordance with the Series F
Certificate of Designation, will be duly and validly issued and
will be fully paid and non-assessable.


(c)
Authorization; Enforcement. The
execution, delivery and performance of this Agreement and the other
Transaction Documents by the Company, and the consummation of the
transactions contemplated hereby and thereby, will not (a)
constitute a violation (with or without the giving of notice or
lapse of time, or both) of any provision of any law or any
judgment, decree, order, regulation or rule of any court, agency or
other governmental authority applicable to the Company, (b) require
any consent, approval or authorization of, or declaration, filing
or registration with, any person, (c) result in a default (with or
without the giving of notice or lapse of time, or both) under,
acceleration or termination of, or the creation in any party of the
right to accelerate, terminate, modify or cancel, any agreement,
lease, note or other restriction, encumbrance, obligation or
liability to which the Company is a party or by which it is bound
or to which any assets of the Company are subject, (d) result in
the creation of any lien or encumbrance upon the assets of the
Company, or upon any shares of Common Stock, preferred stock or
other securities of the Company, (e) conflict with or result in a
breach of or constitute a default under any provision of the
articles of incorporation or bylaws of the Company, or (f)
invalidate or adversely affect any permit, license, authorization
or status used in the conduct of the business of the
Company.


(d)
Filings, Consents and Approvals
The Company is not required to obtain any consent, waiver,
authorization or order of, give any notice to, or make any filing
or registration with, any court or other federal, state, local or
other governmental authority or other Person in connection with the
execution, delivery and performance by the Company of the
Transaction Documents, other than: (i) approval
(“NASDAQ
Approval”) of the issuance and listing of the
securities by and on The NASDAQ Stock Market LLC
(“NASDAQ”), (ii) approval
of the Company’s stockholders of the Offering, which, if
required by NASDAQ, has been obtained prior to the date hereof or
(iii) the filing of Form D with the SEC and such filings as are
required to be made under applicable state securities laws
(collectively, the “Required
Approvals”).


 




 

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(e)
SEC Filings. The Company is
subject to, and in full compliance with, the reporting requirements
of Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”). The
Company has made available to each Subscriber through the EDGAR
system true and complete copies of the Company’s filings for
the prior two full fiscal years plus any interim period
(collectively, the “SEC Filings”), and all
such SEC Filings are incorporated herein by reference. The SEC
Filings, when they were filed with the SEC (or, if any amendment
with respect to any such document was filed, when such amendment
was filed), complied in all material respects with the applicable
requirements of the Exchange Act and the rules and regulations
thereunder and did not, as of such date, contain an untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which
they were made, not misleading. All reports and statements required
to be filed by the Company under the Exchange Act have been filed,
together with all exhibits required to be filed therewith. The
Company and each of its direct and indirect subsidiaries, if any
(collectively, the “Subsidiaries”), are
engaged in all material respects only in the business described in
the SEC Filings, and the SEC Filings contain a complete and
accurate description in all material respects of the business of
the Company and the Subsidiaries.


(f)
No Financial Advisor. The
Company acknowledges and agrees that each Subscriber is acting
solely in the capacity of an arm’s length purchaser with
respect to the Securities and the transactions contemplated hereby.
The Company further acknowledges that Subscriber is not acting as a
financial advisor or fiduciary of the Company (or in any similar
capacity) with respect to this Agreement and the transactions
contemplated hereby and any advice given by any Subscriber or any
of its representatives or agents in connection with this Agreement
and the transactions contemplated hereby is merely incidental to
such Subscriber’s purchase of the Securities. The Company
further represents to each Subscriber that the Company’s
decision to enter into this Agreement has been based solely on the
independent evaluation of the transactions contemplated hereby by
the Company and its representatives.


(g)
Indemnification. The Company
will indemnify and hold harmless each Subscriber and, where
applicable, its directors, officers, employees, agents, advisors
and shareholders (each, an “Indemnitee”, from and
against any and all loss, liability, claim, damage and expense
whatsoever (including, but not limited to, any and all fees, costs
and expenses whatsoever reasonably incurred in investigating,
preparing or defending against any claim, lawsuit, administrative
proceeding or investigation whether commenced or threatened) (the
“Indemnified
Liabilities”), incurred by any Indemnitee as a result
of, or arising out of, or relating to (i) any misrepresentation or
breach of any representation or warranty made by the Company or any
Subsidiary in any of the Transaction Documents, (ii) any breach of
any covenant, agreement or obligation of the Company or any
Subsidiary contained in any of the Transaction Documents or (iii)
any cause of action, suit, proceeding or claim brought or made
against such Indemnitee by a third party (including for these
purposes a derivative action brought on behalf of the Company or
any Subsidiary) or which otherwise involves such Indemnitee that
arises out of or results from (A) the execution, delivery,
performance or enforcement of any of the Transaction Documents, (B)
any transaction financed or to be financed in whole or in part,
directly or indirectly, with the proceeds of the issuance of the
Securities, or (C) the status of such Subscriber or holder of the
Securities either as an investor in the Company pursuant to the
transactions contemplated by the Transaction Documents or as a
party to this Agreement (including, without limitation, as a party
in interest or otherwise in any action or proceeding for injunctive
or other equitable relief). To the extent that the foregoing
undertaking by the Company may be unenforceable for any reason, the
Company shall make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities which is
permissible under applicable law.


 




 

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(h)
Capitalization and Additional
Issuances. The capitalization of the Company is as set forth
in the SEC Filings.
The Company has not issued any capital stock since its most recently filed periodic report under the
Exchange Act. Except as set forth in the SEC Filings ,no
Person has any right of first refusal, preemptive right, right of
participation, or any similar right to participate in the
transactions contemplated by the Transaction Documents. Except as
disclosed in the SEC Filings, there are no outstanding options,
warrants, scrip rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities, rights or
obligations convertible into or exercisable or exchangeable for, or
giving any Person any right to subscribe for or acquire any shares
of Common Stock, or contracts, commitments, understandings or
arrangements by which the Company or any Subsidiary is or may
become bound to issue additional shares of Common Stock or Common
Stock equivalents. Except as set forth in the SEC Filings, the
issuance and sale of the Securities will not obligate the Company
to issue shares of Common Stock or other securities to any Person
(other than the Subscribers) and will not result in a right of any
holder of Company securities to adjust the exercise, conversion,
exchange or reset price under any of such securities. All of the
outstanding shares of capital stock of the Company are duly
authorized, validly issued, fully paid and nonassessable, have been
issued in material compliance with all federal and state securities
laws, and none of such outstanding shares was issued in violation
of any preemptive rights or similar rights to subscribe for or
purchase securities. No further approval or authorization of any
stockholder, the Board of Directors or others is required for the
issuance and sale of the Securities. Except for NASDAQ Approval, no
further approval or authorization of any stockholder, the Board of
Directors or others is required for the issuance and sale of the
Securities. Except as disclosed in the SEC Filings, there are no
stockholders agreements, voting agreements or other similar
agreements with respect to the Company’s capital stock to
which the Company is a party or, to the knowledge of the Company,
between or among any of the Company’s
stockholders.


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


(j)
Investment
Company. The Company is not,
and is not an affiliate of, and immediately after receipt of
payment for the Shares will not be or be an affiliate of, an
“investment company” within the meaning of the
Investment Company Act of 1940, as amended. The Company shall
conduct its business in a manner so that it will not become subject
to the Investment Company Act.


(k)
Reporting
Company/Shell
Company Status. The Company is a publicly-held company
subject to reporting obligations pursuant to Sections 12(g) and 13
of the Exchange Act. Pursuant to the provisions of the Exchange
Act, the Company has timely filed all reports and other materials
required to be filed by the Company thereunder with the SEC during
the preceding twelve months. The Company, as of the Closing Date,
is not, and has never been, a “shell company”, as that
term is employed in Rule 144 under the Securities Act. The Company
is in full compliance with the continued listing requirements of
NASDAQ and has no reason to believe that it will not in the
foreseeable future continue to be in compliance with all such
listing and maintenance requirements.


(l)
Litigation. Except as set forth
in the SEC Filings, there is no action, suit, proceeding, inquiry
or investigation before or by the Trading Market, any court, public
board, other Governmental Entity, self-regulatory organization or
body pending or, to the knowledge of the Company, threatened
against or affecting the Company or any of its Subsidiaries, the
Common Stock or any of the Company’s or its
Subsidiaries’ officers or directors which is outside of the
ordinary course of business or individually or in the aggregate
material to the Company or any of its Subsidiaries.  No
director, officer or employee of the Company or any of its
Subsidiaries has willfully violated 18 U.S.C. §1519 or engaged
in spoliation in reasonable anticipation of litigation. 
Without limitation of the foregoing, there has not been, and to the
knowledge of the Company, there is not pending or contemplated, any
investigation by the SEC involving the Company, any of its
Subsidiaries or any current or former director or officer of the
Company or any of its Subsidiaries.  The SEC has not issued
any stop order or other order suspending the effectiveness of any
registration statement filed by the Company under the Securities
Act or the Exchange Act. “Governmental Entity”
means any nation, state, county, city, town, village, district, or
other political jurisdiction of any nature, federal, state, local,
municipal, foreign, or other government, governmental or
quasi-governmental authority of any nature (including any
governmental agency, branch, department, official, or entity and
any court or other tribunal), multi-national organization or body;
or body exercising, or entitled to exercise, any administrative,
executive, judicial, legislative, police, regulatory, or taxing
authority or power of any nature or instrumentality of any of the
foregoing,


 




 

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including
any entity or enterprise owned or controlled by a government or a
public international organization or any of the foregoing.
“Trading
Market” means any of the following markets or
exchanges on which the Common Stock is listed or quoted for trading
on the date in question: the New York Stock Exchange, the NYSE MKT,
The NASDAQ Capital Market, The NASDAQ Global Market, The NASDAQ
Global Select Market, OTCQX, OTCQB, or the OTC Bulletin Board (or
any successors to any of the foregoing).


 





(m)
Employee Relations. Neither the
Company nor any of its Subsidiaries is a party to any collective
bargaining agreement or employs any member of a union.  The
Company believes that its and its Subsidiaries’ relations
with their respective employees are good.  The Company and its
Subsidiaries are in compliance with all federal, state, local and
foreign laws and regulations respecting labor, employment and
employment practices and benefits, terms and conditions of
employment and wages and hours, except where failure to be in
compliance would not, either individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect.
“Material Adverse
Effect” means any material adverse effect on (i) the
business, properties, assets, liabilities, operations (including
results thereof), condition (financial or otherwise) or prospects
of the Company or any Subsidiary, individually or taken as a whole,
(ii) the transactions contemplated hereby or in any of the other
Transaction Documents or (iii) the authority or ability of the
Company or any of its Subsidiaries to perform any of their
respective obligations under any of the Transaction
Documents. 


 


(n)
Tax Status. The Company and
each of its Subsidiaries (i) has timely made or filed all foreign,
federal and state income and all other tax returns, reports and
declarations required by any jurisdiction to which it is subject,
(ii) has timely paid all taxes and other governmental assessments
and charges that are material in amount, shown or determined to be
due on such returns, reports and declarations, except those being
contested in good faith and (iii) has set aside on its books
provision reasonably adequate for the payment of all taxes for
periods subsequent to the periods to which such returns, reports or
declarations apply.  There are no unpaid taxes in any material
amount claimed to be due by the taxing authority of any
jurisdiction, and the officers of the Company and its Subsidiaries
know of no basis for any such claim.  The Company is not
operated in such a manner as to qualify as a passive foreign
investment company, as defined in Section 1297 of the U.S. Internal
Revenue Code of 1986, as amended.


(o)
Indebtedness and Other
Contracts. Except as set forth in the SEC Filings, neither
the Company nor any of its Subsidiaries, (i) has any outstanding
Indebtedness (as defined below), (ii) is a party to any contract,
agreement or instrument, the violation of which, or default under
which, by the other party(ies) to such contract, agreement or
instrument could reasonably be expected to result in a Material
Adverse Effect, (iii) is in violation of any term of, or in default
under, any contract, agreement or instrument relating to any
Indebtedness, except where such violations and defaults would not
result, individually or in the aggregate, in a Material Adverse
Effect, or (iv) is a party to any contract, agreement or instrument
relating to any Indebtedness, the performance of which, in the
judgment of the Company’s officers, has or is expected to
have a Material Adverse Effect.  For purposes of this
Agreement:  (x) “Indebtedness” of any
Person means, without duplication (A) all indebtedness for borrowed
money, (B) all obligations issued, undertaken or assumed as the
deferred purchase price of property or services (including, without
limitation, “capital leases” in accordance with
generally accepted accounting principles) obligations with respect
to letters of credit, surety bonds and other similar instruments,
(D) all obligations evidenced by notes, bonds, debentures or
similar instruments, including obligations so evidenced incurred in
connection with the acquisition of property, assets or businesses,
(E) all indebtedness created or arising under any conditional sale
or other title retention agreement, or incurred as financing, in
either case with respect to any property or assets acquired with
the proceeds of such indebtedness (even though the rights and
remedies of the seller or bank under such agreement in the event of
default are limited to repossession or sale of such property), (F)
all monetary obligations under any leasing or similar arrangement
which, in connection with generally accepted accounting principles,
consistently applied for the periods covered thereby, is classified
as a capital lease, (G) all indebtedness referred to in clauses (A)
through (F) above secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be
secured by) any mortgage, claim, lien, tax, right of first refusal,
pledge, charge, security interest or other encumbrance upon or in
any property or assets (including accounts and contract rights)
owned by any Person, even though the Person which owns such assets
or property has not assumed or become liable for the payment of
such indebtedness, and (H) all Contingent Obligations in respect of
indebtedness or obligations of others of the kinds referred to in
clauses (A) through (G) above; (y) “Contingent Obligation”
means, as to any Person, any direct or indirect liability,
contingent or otherwise, of that Person with respect to any
indebtedness, lease, dividend or other




 

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obligation of
another Person if the primary purpose or intent of the Person
incurring such liability, or the primary effect thereof, is to
provide assurance to the obligee of such liability that such
liability will be paid or discharged, or that any agreements
relating thereto will be complied with, or that the holders of such
liability will be protected (in whole or in part) against loss with
respect thereto; and (z) “Person” means an
individual, a limited liability company, a partnership, a joint
venture, a corporation, a trust, an unincorporated organization,
any other entity and any Governmental Entity or any department or
agency thereof.


(p)
No Undisclosed Events, Liabilities,
Developments or Circumstances. Since the date of the latest
audited financial statements included within the SEC Filings,
except as specifically disclosed in a subsequent SEC Filing: (i)
there has been no event, occurrence or development that has had or
that could reasonably be expected to result in a Material Adverse
Effect, (ii) the Company has not incurred any material liabilities
(contingent or otherwise) other than (A) trade payables and accrued
expenses incurred in the ordinary course of business consistent
with past practice and (B) liabilities not required to be reflected
in the Company’s financial statements pursuant to GAAP or
disclosed in filings made with the SEC, (iii) the Company has not
altered its method of accounting, (iv) the Company has not declared
or made any dividend or distribution of cash or other property to
its stockholders or purchased, redeemed or made any agreements to
purchase or redeem any shares of its capital stock and (v) except
as set forth in the SEC Filings, Company has not issued any equity
securities to any officer, director or Affiliate. The Company does
not have pending before the SEC any request for confidential
treatment of information. Except for the issuance of the Securities
contemplated by this Agreement or as set forth in the SEC Filings,
no event, liability, fact, circumstance, occurrence or development
has occurred or exists or is reasonably expected to occur or exist
with respect to the Company or its Subsidiaries or their respective
businesses, properties, operations, assets or financial condition,
that would be required to be disclosed by the Company under
applicable securities laws at the time this representation is made
or deemed made that has not been publicly disclosed at least two
Trading Days prior to the date that this representation is
made.


(q)
No
Additional Agreements. Neither
the Company nor any of its Subsidiaries has any agreement or
understanding with any Subscriber with respect to the transactions
contemplated by the Transaction Documents other than pursuant to
documents substantially identical to the Transaction
Documents.


(r)
No Disqualification
Events. To the Company’s knowledge, none of the
Company, any of its predecessors, any affiliated issuer, any
director, executive officer, other officer of the Company
participating in the offering contemplated hereby, any beneficial
owner of 20% or more of the Company's outstanding voting equity
securities, calculated on the basis of voting power, nor any
promoter (as that term is defined in Rule 405 under the Securities
Act) connected with the Company in any capacity at the time of sale
(each, an “Issuer
Covered Person”) is subject to any of the "Bad Actor"
disqualifications described in Rule 506(d)(1)(i) to (viii) under
the Securities Act (a “Disqualification Event”),
except for a Disqualification Event covered by Rule 506(d)(2) or
(d)(3). The Company has exercised reasonable care to determine
whether any Issuer Covered Person is subject to a Disqualification
Event.


(s)
General Solicitation . None of the
Company, any of its affiliates (as defined in Rule 501(b) under the
Securities Act) or any person acting on behalf of the Company or
such affiliate will solicit any offer to buy or offer or sell the
Securities by means of any form of general solicitation or general
advertising within the meaning of Regulation D, including: (i)
any advertisement, article, notice or other communication published
in any newspaper, magazine or similar medium or broadcast over
television or radio; and (ii) any seminar or meeting whose
attendees have been invited by any general solicitation or general
advertising.


(t)
Compliance. To the
Company’s knowledge, neither the Company nor any Subsidiary:
(i) is in default under or in violation of (and no event has
occurred that has not been waived that, with notice or lapse of
time or both, would result in a default by the Company or any
Subsidiary under), nor has the Company or any Subsidiary received
notice of a claim that it is in default under or that it is in
violation of, any indenture, loan or credit agreement or any other
agreement or instrument to which it is a party or by which it or
any of its properties is bound (whether or not such default or
violation has been waived), (ii) is in violation of any judgment,
decree or order of any court, arbitrator or other governmental
authority or (iii) is or has been in violation of any statute,
rule, ordinance or regulation of any governmental authority,
including without limitation all foreign, federal, state and local
laws relating to taxes, environmental protection, occupational
health and safety, product quality and safety and employment and
labor matters, except in each case as could not have or reasonably
be expected to result in a Material Adverse Effect.


 




 

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(u)
Regulatory Permits. The Company
and the Subsidiaries possess all certificates, authorizations and
permits issued by the appropriate federal, state, local or foreign
regulatory authorities necessary to conduct their respective
businesses as described in the SEC Filings, except where the
failure to possess such permits could not reasonably be expected to
result in a Material Adverse Effect (“Material Permits”), and
neither the Company nor any Subsidiary has received any notice of
proceedings relating to the revocation or modification of any
Material Permit.


(v)
Title to Assets. The Company
and the Subsidiaries have good and marketable title in fee simple
to all real property (if any) owned by them and good and marketable
title in all personal property owned by them that is material to
the business of the Company and the Subsidiaries, in each case free
and clear of all liens, except for (i) liens as do not materially
affect the value of such property and do not materially interfere
with the use made and proposed to be made of such property by the
Company and the Subsidiaries and (ii) liens for the payment of
federal, state or other taxes, for which appropriate reserves have
been made in accordance with GAAP and, the payment of which is
neither delinquent nor subject to penalties. Any real property and
facilities held under lease by the Company and the Subsidiaries are
held by them under valid, subsisting and enforceable leases with
which the Company and the Subsidiaries are in
compliance.


(w)
Intellectual
Property.


1.           The
term “Intellectual
Property Rights” includes:


(a)
the name of the Company and each Subsidiary, all fictional business
names, trading names, registered and unregistered trademarks,
service marks, and applications of the Company and each Subsidiary
(collectively, “Marks'');


(b)
all patents, patent applications, and inventions and discoveries
that may be patentable of the Company and each Subsidiary
(collectively, “Patents'');


(c)
all copyrights in both published works and published works of the
Company and each Subsidiary (collectively, “Copyrights”);


(d)
all rights in mask works of the Company and each Subsidiary
(collectively, “Rights in Mask Works'');
and


(e)
all know-how, trade secrets, confidential information, customer
lists, software, technical information, data, process technology,
plans, drawings, and blue prints (collectively, “Trade Secrets''); owned, used,
or licensed by the Company and each Subsidiary as licensee or
licensor.


2.           Know-How
Necessary for the Business. The Intellectual Property Rights
are all those necessary for the operation of the Company’s
businesses as it is currently conducted or as represented, in
writing, to the Subscriber to be conducted. The Company is the
owner of all right, title, and interest in and to each of the
Intellectual Property Rights, free and clear of all liens, security
interests, charges, encumbrances, equities, and other adverse
claims, and has the right to use all of the Intellectual Property
Rights. To the Company’s knowledge, no employee of the
Company has entered into any contract that restricts or limits in
any way the scope or type of work in which the employee may be
engaged or requires the employee to transfer, assign, or disclose
information concerning his work to anyone other than of the
Company.


3.      
     Patents. The Company is the
owner of all right, title and interest in and to each of the
Patents, free and clear of all liens and other adverse claims,
purchase price payments, or license agreements now or hereafter
existing).


4.           Trademarks.
The Company is the owner of all right, title, and interest in and
to each of the Marks, free and clear of all liens and other adverse
claims. All Marks that have been registered with the United States
Patent and Trademark Office are currently in compliance with all
formal legal requirements (including the timely post-registration
filing of affidavits of use and incontestability and renewal
applications), are valid and enforceable, and are not subject to
any maintenance fees or taxes or actions falling due within ninety
days after the Closing Date.


 




 

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5.           Copyrights.
The Company is the owner of all right, title, and interest in and
to each of the Copyrights, free and clear of all liens and other
adverse claims. All the Copyrights have been registered and are
currently in compliance with formal requirements, are valid and
enforceable, and are not subject to any maintenance fees or taxes
or actions falling due within ninety days after the date of the
Closing


6.           Trade
Secrets. With respect to each Trade Secret, the
documentation relating to such Trade Secret is current, accurate,
and sufficient in detail and content to identify and explain it and
to allow its full and proper use without reliance on the knowledge
or memory of any individual. The Company has taken all reasonable
precautions to protect the secrecy, confidentiality, and value of
its Trade Secrets. The Company has good title and an absolute right
to use the Trade Secrets. The Trade Secrets are not part of the
public knowledge or literature, and, to the Company’s
knowledge, have not been used, divulged, or appropriated either for
the benefit of any Person (other the Company) or to the detriment
of the Company. No Trade Secret is subject to any adverse claim or
has been challenged or threatened in any way.


(x)
Stock Option Plans. Each stock
option granted by the Company under the stock option plan was
granted (i) in accordance with the terms of such stock option plan
and (ii) with an exercise price at least equal to the fair market
value of the Common Stock on the date such stock option would be
considered granted under GAAP and applicable law. No stock option
granted under any stock option plan has been backdated. The Company
has not knowingly granted, and there is no and has been no Company
policy or practice to knowingly grant, stock options prior to, or
otherwise knowingly coordinate the grant of stock options with, the
release or other public announcement of material information
regarding the Company or its Subsidiaries or their financial
results or prospects.


(y)
Office of Foreign Assets
Control. Neither the Company nor any Subsidiary nor, to the
Company's knowledge, any director, officer, agent, employee or
affiliate of the Company is currently subject to any U.S. sanctions
administered by the Office of Foreign Assets Control of the U.S.
Treasury Department (“OFAC”).


(z)
Listing
and Maintenance Requirements.  The Common Stock is quoted The NASDAQ
Capital Market under the symbol “COOL”. The Company has
not, except as disclosed in the SEC Filings, in the twenty-four
(24) months preceding the date hereof, received notice from any
Trading Market on which the Common Stock is or has been listed or
quoted to the effect that the Company is not in compliance with the
listing or maintenance requirements of such Trading
Market.


(aa)
Regulation M Compliance. 
The Company has not, and to its knowledge no one acting on its
behalf has, (i) taken, directly or indirectly, any action designed
to cause or to result in the stabilization or manipulation of the
price of any security of the Company to facilitate the sale or
resale of any of the Securities, (ii) sold, bid for, purchased, or
paid any compensation for soliciting purchases of, any of the
Securities, or (iii) paid or agreed to pay to any Person any
compensation for soliciting another to purchase any other
securities of the Company.


(bb)
Money Laundering. The
operations of the Company and its Subsidiaries are and have been
conducted at all times in compliance in all material respects with
applicable financial record-keeping and reporting requirements of
the Currency and Foreign Transactions Reporting Act of 1970, as
amended, applicable money laundering statutes and applicable rules
and regulations thereunder (collectively, the “Money Laundering Laws”),
and no action, suit or proceeding by or before any court or
governmental agency, authority or body or any arbitrator involving
the Company or any Subsidiary with respect to the Money Laundering
Laws is pending or, to the knowledge of the Company or any
Subsidiary, threatened


 




 

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(cc)
Acknowledgment
Regarding Subscriber’s Trading Activity. Anything in this Agreement or elsewhere herein
to the contrary notwithstanding, it is understood and acknowledged
by the Company that: (i) none of the Subscribers has been asked by
the Company to agree, nor has any Subscriber agreed, to desist from
purchasing or selling, long and/or short, securities of the
Company, or “derivative” securities based on securities
issued by the Company or to hold the Securities for any specified
term, (ii) past or future open market or other transactions by any
Subscriber, specifically including, without limitation, Short Sales
or “derivative” transactions, before or after the
closing of this or future private placement transactions, may
negatively impact the market price of the Company’s
publicly-traded securities, (iii) any Subscriber, and
counter-parties in “derivative” transactions to which
any such Subscriber is a party, directly or indirectly, may
presently have a “short” position in the Common Stock
and (iv) each Subscriber shall not be deemed to have any
affiliation with or control over any arm’s length
counter-party in any “derivative” transaction.
The Company further understands and acknowledges that (y) one or
more Subscribers may engage in hedging activities at various times
during the period that the Securities are outstanding, including,
without limitation, during the periods that the value of the Common
Shares or Conversion Shares deliverable with respect to Securities
are being determined, and (z) such hedging activities (if any)
could reduce the value of the existing stockholders' equity
interests in the Company at and after the time that the hedging
activities are being conducted.  The Company acknowledges that
such aforementioned hedging activities do not constitute a breach
of any of the Transaction Documents. There are no disagreements of any kind presently
existing, or reasonably anticipated by the Company to arise,
between the Company and the accountants and lawyers formerly or
presently employed by the Company and the Company is current with
respect to any fees owed to its accountants and lawyers
which could affect the
Company’s ability to perform any of its obligations under any
of the Transaction Documents.


(dd)
Acknowledgment Regarding
Subscribers’ Purchase of Securities. The Company
acknowledges and agrees that each of the Subscribers is acting
solely in the capacity of an arm’s length Subscriber with
respect to the Transaction Documents and the transactions
contemplated thereby. The Company further acknowledges that no
Subscriber is acting as a financial advisor or fiduciary of the
Company (or in any similar capacity) with respect to the
Transaction Documents and the transactions contemplated thereby and
any advice given by any Subscriber or any of their respective
representatives or agents in connection with the Transaction
Documents and the transactions contemplated thereby is merely
incidental to the Subscribers’ purchase of the Securities.
The Company further represents to each Subscriber that the
Company’s decision to enter into this Agreement and the other
Transaction Documents has been based solely on the independent
evaluation of the transactions contemplated hereby by the Company
and its representatives.


(ee)
No Integrated Offering.
Assuming the accuracy of the Subscribers’ representations and
warranties set forth in Section 3, neither the Company, nor any of
its Affiliates, nor any Person acting on its or their behalf has,
directly or indirectly, made any offers or sales of any security or
solicited any offers to buy any security, under circumstances that
would cause this offering of the Securities to be integrated with
prior offerings by the Company for purposes of: (i) the Securities
Act which would require the registration of any such securities
under the Securities Act, or (ii) any applicable shareholder
approval provisions of any Trading Market on which any of the
securities of the Company are listed or designated.


(ff)
Application of Takeover
Protections. The Company and the Board of Directors will
have taken as of the Closing Date all necessary action, if any, in
order to render inapplicable any control share acquisition,
business combination, poison pill (including any distribution under
a rights agreement) or other similar anti-takeover provision under
the Company’s certificate of incorporation (or similar
charter documents) or the laws of its state of incorporation that
is or could become applicable to the Subscribers as a result of the
Subscribers and the Company fulfilling their obligations or
exercising their rights under the Transaction Documents, including
without limitation as a result of the Company’s issuance of
the Securities and the Subscribers’ ownership of the
Securities.


(gg)
Registration Rights. No Person
other than the Subscribers herein has any right to cause the
Company or any Subsidiary to effect the registration under the
Securities Act of any securities of the Company or any
Subsidiary.


 




 

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(hh)
Certain Fees. No brokerage,
finder’s fees, commissions or due diligence fees are or will
be payable by the Company or any Subsidiary to any broker,
financial advisor or consultant, finder, placement agent,
investment banker, bank or other Person with respect to the
transactions contemplated by the Transaction Documents. The
Subscribers shall have no obligation with respect to any such fees
or with respect to any claims made by or on behalf of other Persons
for fees of a type contemplated in this Section 4(hh) that may be
due in connection with the transactions contemplated by the
Transaction Documents.


(ii)
Sarbanes-Oxley; Internal Accounting
Controls. Except as set forth in the SEC Filings, the
Company and the Subsidiaries are in material compliance with any
and all applicable requirements of the Sarbanes-Oxley Act of 2002
that are effective as of the date hereof, and any and all
applicable rules and regulations promulgated by the Commission
thereunder that are effective as of the date hereof and as of the
Closing Date. Except as set forth in the Company and the Subsidiaries maintain a system of
internal accounting controls sufficient to provide reasonable
assurance that: (i) transactions are executed in accordance with
management’s general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of
financial statements in conformity with GAAP and to maintain asset
accountability, (iii) access to assets is permitted only in
accordance with management’s general or specific
authorization, and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences. Except
as set forth in the SEC Filings, the Company and the Subsidiaries
have established disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and the
Subsidiaries and designed such disclosure controls and procedures
to ensure that information required to be disclosed by the Company
in the reports it files or submits under the Exchange Act is
recorded, processed, summarized and reported, within the time
periods specified in the Commission’s rules and forms. The
Company’s certifying officers have evaluated the
effectiveness of the disclosure controls and procedures of the
Company and the Subsidiaries as of the end of the period covered by
the most recently filed periodic report under the Exchange Act
(such date, the “Evaluation
Date”). The Company
presented in its most recently filed periodic report under the
Exchange Act the conclusions of the certifying officers about the
effectiveness of the disclosure controls and procedures based on
their evaluations as of the Evaluation Date. Since the Evaluation
Date, there have been no changes in the internal control over
financial reporting (as such term is defined in the Exchange Act)
of the Company and its Subsidiaries that have materially affected,
or is reasonably likely to materially affect, the internal control
over financial reporting of the Company and its
Subsidiaries.


(jj)
Transactions With Affiliates and
Employees. Except as set forth in the SEC Filings, none of
the officers or directors of the Company or any Subsidiary and, to
the knowledge of the Company, none of the employees of the Company
or any Subsidiary is presently a party to any transaction with the
Company or any Subsidiary (other than for services as employees,
officers and directors), including any contract, agreement or other
arrangement providing for the furnishing of services to or by,
providing for rental of real or personal property to or from,
providing for the borrowing of money from or lending of money to or
otherwise requiring payments to or from any officer, director or
such employee or, to the knowledge of the Company, any entity in
which any officer, director, or any such employee has a substantial
interest or is an officer, director, trustee, stockholder, member
or partner, in each case in excess of $50,000 other than for: (i)
payment of salary or consulting fees for services rendered, (ii)
reimbursement for expenses incurred on behalf of the Company and
(iii) other employee benefits, including stock option agreements
under any stock option plan of the Company.


(kk)
Insurance. The Company and the
Subsidiaries are insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as
are prudent and customary in the businesses in which the Company
and the Subsidiaries are engaged, including, but not limited to,
directors and officers insurance coverage at least equal to the
Aggregate Purchase Price. Neither the Company nor any Subsidiary
has any reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to
obtain similar coverage from similar insurers as may be necessary
to continue its business without a significant increase in
cost.


 




 

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


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


(nn)
U.S. Real Property Holding
Corporation. The Company is not and has never been 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 Subscriber’s request.


(oo)
Bank Holding Company Act.
Neither the Company nor any of its Subsidiaries or affiliates 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 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.


(pp)
Notice of Disqualification
Events. The Company will notify the Subscriber 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.


(qq)
Survival. The foregoing
representations and warranties shall survive the
Closing.


 




 

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5.           OTHER
AGREEMENTS OF THE PARTIES

(a)
Furnishing
of Information. As long as any
Subscriber owns Securities, the Company covenants
to timely file (or obtain extensions
in respect thereof and file within the applicable grace period) all
reports required to be filed by the Company after the date hereof
pursuant to the Exchange Act. As long as any Subscriber owns
Securities, if the Company is not required to file reports pursuant
to the Exchange Act, it will prepare and furnish to the Subscribers and make
publicly available in accordance with Rule 144(c) under the
Securities Act such information as is required for the Subscribers
to sell the Securities under Rule 144. The Company further
covenants that it will take such
further action as any holder of Securities may reasonably request,
at the sole cost and expense of the Company including transfer
agent and legal opinion fees and expenses, all to the extent
required from time to time to enable such person to sell such
Securities without registration under the Securities Act within the
limitation of the exemptions proved by Rule 144 under the
Securities Act.

(b)
Shareholder Rights
Plan. No claim will be made or
enforced by the Company or, to the knowledge of the Company, any
other person that any Subscriber is an “Acquiring
Person” under any shareholder rights plan or similar plan or
arrangement in effect or hereafter adopted by the Company, or that
any Subscriber could be deemed to trigger the provisions of any
such plan or arrangement, by virtue of receiving Securities under
the Transaction Documents or under any other agreement between the
Company and the Subscribers.

(c)
Securities
Laws Disclosure; Publicity. The Company shall by 8:30 a.m. (New York
City time) (a) on the first Business Day after this Agreement has
been executed, issue a press release disclosing the material terms
of the transactions contemplated hereby and (b) within four (4)
Business Days after this Agreement has been executed, file a
Current Report on Form 8-K with the SEC (the “8-K Filing”). From and
after the issuance of such press release and the filing of the 8-K
Filing, the Company shall have publicly disclosed all material,
non-public information delivered to any of the Subscribers by the
Company or any of its Subsidiaries, or any of their respective
officers, directors, employees or agents. The Company and each Subscriber shall consult with
each other in issuing any press releases with respect to the
transactions contemplated hereby, and no Subscriber shall issue any
such press release or otherwise make any such public statement
without the prior consent of the Company, which consent shall not
unreasonably be withheld. Notwithstanding the foregoing, the
Company shall not publicly disclose the name of any Subscriber, or
include the name of any Subscriber in any filing with the SEC or
any regulatory agency, without the prior written consent of such
Subscriber, except to the extent such disclosure is required by
law in which case the Company shall provide the Subscribers
with prior notice of such disclosure or if such disclosure is
pursuant to the Registration Rights set forth in Section 7 herein
and the Registration Rights Agreement.
The Company understands that any such disclosure shall cause
irreparable harm and each Subscriber shall be entitled to
injunctive relief and liquidated damages in connection
therewith.

(d)
Integration.
The Company shall not, and shall use its best efforts to ensure
that no affiliate of the Company shall, after the date hereof,
sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security that would be integrated with
the offer or sale of the Shares in a manner that would require the
registration under the Securities Act of the sale of the Shares to
the Subscribers.

(e)
Reservation of
Securities.


(i) The
Company shall maintain a reserve from its duly authorized shares of
Common Stock for issuance pursuant to the Transaction Documents in
such amount as may then be required to fulfill its obligations in
full under the Transaction Documents, but not less than 100% of the
maximum number of shares of Common Stock issuable pursuant to the
Transaction Documents (the “Required
Minimum”).


 




 

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(ii)
If, on any date, the number of authorized but unissued (and
otherwise unreserved) shares of Common Stock is less than the
Required Minimum on such date, then the Board of Directors shall
approve the amendment of the Company’s Charter to increase
the number of authorized but unissued shares of Common Stock to at
least the Required Minimum and submit such amendment to the
Company’s stockholders for approval, as soon as possible and
in any event not later than the 90th day after such
date.


(iii)
The Company shall, if applicable: (i) in the time and manner
required by The NASDAQ Capital Market or such other principal
market on which the Company’s Common Stock is then primarily
traded (the “Principal Market”),
prepare and file with such Principal Market an additional shares
listing application covering a number of shares of Common Stock at
least equal to the Required Minimum on the date of such
application, (ii) take all steps necessary to cause such shares of
Common Stock to be approved for listing or quotation on such
Principal Market as soon as possible thereafter, (iii) provide to
the Subscribers evidence of such listing or quotation and (iv)
maintain the listing or quotation of such Common Stock on any date
at least equal to the Required Minimum on such date on such
Principal Market or another Principal Market. The Company will then take all commercially
reasonable action necessary to continue the listing or quotation
and trading of its Common Stock on a Principal Market for as long
as any Subscriber holds Securities, and will comply in all material
respects with the Company’s reporting, filing and other
obligations under the bylaws or rules of the Principal Market at
least until five years after the Closing Date. In the event
the aforedescribed listing is not continuously maintained for five
years after the Closing Date (a “Listing Default”), then
in addition to any other rights the Subscribers may have hereunder
or under applicable law, on the first day of a Listing Default and
on each monthly anniversary of each such Listing Default date (if
the applicable Listing Default shall not have been cured by such
date) until the applicable Listing Default is cured, the Company
shall pay to each Subscriber an amount in cash, as partial
liquidated damages and not as a penalty, equal to 1% of (x)
Aggregate Purchase Price of Shares or Conversion Shares calculated
on an “as converted” basis, as the case may be, held by
such Subscriber on the date of a Listing Default and (y) the
aggregate purchase price of Shares held by such Subscriber on the
day of a Listing Default and on every thirtieth day (pro-rated for
periods less than thirty days) thereafter with respect to Shares
(or “as converted” Conversion Shares) held as of each
such date until the date such Listing Default is cured or
Subscriber no longer holds any Shares, Preferred Shares or
Conversion Shares. If the Company fails to pay any liquidated
damages pursuant to this Section in a timely manner, the Company
will pay interest thereon at a rate of 1.5% per month (pro-rated
for partial months) to the Subscriber, up to a maximum of sixteen
(16%) percent for such interest and liquidated damages amounts,
collectively.

(f)
Use of
Proceeds. The Company
anticipates using the gross proceeds from the Offering as set forth
on Exhibit
C.


(g)
Non-Public Information. Except
with respect to the material terms and conditions of the
transactions contemplated by the Transaction Documents, the Company
covenants and agrees that neither it, nor any other Person acting
on its behalf will provide any Subscriber or its agents or counsel
with any information that the Company believes constitutes or could
constitute material non-public information, and each Subscriber
agrees, and shall direct its agents and counsel not to, request any
material non-public information from the Company or any Person
acting on its behalf, unless prior thereto such Subscriber shall
have executed a written agreement with the Company regarding the
willingness to accept receipt of such material non-public
information and acknowledges the confidentiality and use of such
information and the Company’s covenant to file a further SEC
filing or report and the period in which such information shall
remain confidential or be required to not be disclosed. The Company
understands and confirms that each Subscriber shall be relying on
the foregoing covenant in effecting transactions in securities of
the Company. In addition, effective upon the filing of the 8-K
Filing, the Company acknowledges and agrees that any and all
confidentiality or similar obligations under any agreement, whether
written or oral, between the Company and any of its Subsidiaries or
any of their respective officers, directors, affiliates, employees
or agents, on the one hand, and the Subscriber or any of its
affiliates on the other hand, shall terminate.


(h)
Capital Changes.
Until the one year anniversary of the Closing Date, the Company
shall not undertake a reverse or forward stock split or
reclassification of the Common Stock without 10 days prior written
notice to the Subscribers, unless such reverse split is made in
conjunction with the listing of the Common Stock on a national
securities exchange or maintaining compliance with such
listing.


 




 

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(i)
DTC
Program. From the Closing Date
until such time as no Subscriber holds any of the Securities (such
date, the “Release
Date”), the Company shall
use its best efforts to employ as the transfer agent for the Common
Shares and the Conversion Shares a participant in the Depository
Trust Company Automated Securities Transfer Program (FAST) and
cause the Common Stock to be transferable pursuant to such
program.


 (j)
Form D and Blue
Sky. The Company
shall file a Form D with respect to the Securities as required
under Regulation D and to provide a copy thereof to each Subscriber
promptly after such filing. The availability of the filed Form D on
EDGAR shall satisfy the foregoing delivery requirement. The Company
shall, on or before the Closing Date, take such action as the
Company shall reasonably determine is necessary in order to obtain
an exemption for, or to, qualify the Securities for sale to the
Subscribers at the Closing pursuant to this Agreement under
applicable securities or “Blue Sky” laws of the states
of the United States (or to obtain an exemption from such
qualification), and shall provide evidence of any such action so
taken to the Subscribers on or prior to the Closing Date. Without
limiting any other obligation of the Company under this Agreement,
the Company shall timely make all filings and reports relating to
the offer and sale of the Securities required under all applicable
securities laws (including, without limitation, all applicable
federal securities laws and all applicable “Blue Sky”
laws), and the Company shall comply with all applicable federal,
foreign, state and local laws, statutes, rules, regulations and the
like relating to the offering and sale of the Securities to the
Subscribers.


 (k)
Restriction on Redemption and Cash
Dividends. From the date hereof through the Release Date,
the Company shall not, directly or indirectly, redeem, or declare
or pay any cash dividend or distribution on, any securities of the
Company without the prior express written consent of the
Subscribers holding a majority of the then outstanding
Shares.


(l)
Corporate
Existence. From the date hereof through the Release Date,
the Company shall not be party to any Fundamental Transaction (as
defined in the Series F Certificate of Designation) unless the
Company is in compliance with the applicable provisions governing
Fundamental Transactions set forth in the Series F Certificate of
Designation.


(m)
Conversion
Procedures. Each of the form of Notice of Conversion
included in the Series F Certificate of Designation set forth the
totality of the procedures required of the Subscribers in order to
convert the Preferred Shares. No legal opinion, other information
or instructions shall be required of the Subscribers to convert
their Preferred Shares (other than customary 144 representation
letters if such Preferred Shares are to be sold in reliance upon
the exemption provided by to Rule 144). The Company shall honor
conversions of the Preferred Shares and shall deliver the
Conversion Shares in accordance with the terms, conditions and time
periods set forth in the Series F Certificate of
Designation.


(n)
Closing Documents.
On or prior to fourteen (14) calendar days after the Closing Date,
the Company agrees to deliver, or cause to be delivered, to each
Subscriber executed copies of the Transaction Documents and other
document required to be delivered to any party pursuant to this
Agreement.


(o)
Fees. The Company
shall be responsible for the payment of any placement agent’s
fees, financial advisory fees, transfer agent fees, DTC fees or
broker’s commissions (other than for Persons engaged by any
Subscriber) relating to or arising out of the transactions
contemplated hereby. The Company (subject to the foregoing
qualification) shall pay, and hold each Subscriber harmless
against, any liability, loss or expense (including, without
limitation, reasonable attorneys’ fees and out-of-pocket
expenses) arising in connection with any claim relating to any such
payment. For the avoidance of doubt, the Company will not be
responsible for the costs associated with any legal opinions
required to be rendered to the Company’s transfer agent in
connection with the lifting of any legends on the
Securities.





 




 

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6.           CONDITIONS
TO ACCEPTANCE OF SUBSCRIPTION


(a) The
Closing of the sale of the Shares is conditioned upon satisfaction
of the following conditions precedent on or before the Closing
Date:


(i)
As of the Closing, no legal action, suit or proceeding shall be
pending against the Company that seeks to restrain or prohibit the
transactions contemplated by this Agreement.


(ii)
The representations and warranties of the Company and the
Subscribers contained in this Agreement shall have been true and
correct in all material respects on the date of this Agreement
(except whether such representations are qualified by material or
material adverse effect, which shall be true and correct in all
respects) and shall be true and correct as of the Closing as if
made on the Closing Date and the Company shall have performed,
satisfied and complied in all respects with the covenants,
agreements and conditions required to be performed, satisfied or
complied with by the Company in connection with the consummation of
the transactions contemplated by the Transaction Documents at or
prior to the Closing Date.


(iii)
The Company shall deliver to the Subscribers a file stamped copy of
the filed Series F Certificate of Designation, filed with the
Secretary of State of the State of Delaware, which shall not have
been amended, waived, modified or revoked by the
Company.


(iv)
The Company shall have submitted to NASDAQ, a “Listing of
Additional Shares” application (the “LAS”) for the listing of
the Shares and Conversion Shares thereon and NASDAQ shall have
completed its review of the LAS without comment.



7.            

REGISTRATION RIGHTS.
    The Company shall file a
“resale” registration statement with the SEC covering
100% of the Shares and the Conversion Shares issued or issuable to
the Subscriber, so that such shares of Common Stock will be
registered under the Securities Act. The description of
registration rights is qualified in its entirety by reference to
Registration Rights Agreement annexed hereto as Exhibit D (the
“Registration Rights
Agreement”).







8. 

MISCELLANEOUS
PROVISIONS






(a)
All parties hereto have been represented by counsel, and no
inference shall be drawn in favor of or against any party by virtue
of the fact that such party’s counsel was or was not the
principal draftsman of this Agreement.


(b)
Each of the parties hereto shall be responsible to pay the costs
and expenses of its own legal counsel in connection with the
preparation and review of this Agreement and related
documentation.


(c)
Neither this Agreement, nor any provisions hereof, shall be waived,
modified, discharged or terminated except by an instrument in
writing signed by the party against whom any waiver, modification,
discharge or termination is sought.


(d)
The representations, warranties and agreement of each Subscriber
and the Company made in this Agreement shall survive the execution
and delivery of this Agreement and the delivery of the
Securities.


(e)
Any party may send any notice, request, demand, claim or other
communication hereunder to the Subscriber at the address set forth
on the signature page of this Agreement or to the Company at its
primary office (including personal delivery, expedited courier,
messenger service, fax, ordinary mail or electronic mail), but no
such notice, request, demand, claim or other communication will be
deemed to have been duly given unless and until it actually is
received by the intended recipient. Any party may change the
address to which notices, requests, demands, claims and other
communications hereunder are to be delivered by giving the other
parties written notice in the manner herein set forth.


 




 

-22-








 






 


(f)
Except as otherwise provided herein, this Agreement shall be
binding upon, and inure to the benefit of, the parties to this
Agreement and their heirs, executors, administrators, successors,
legal representatives and assigns. If any Subscriber is more than
one person or entity, the obligation of any Subscriber shall be
joint and several and the agreements, representations, warranties
and acknowledgments contained herein shall be deemed to be made by,
and be binding upon, each such person or entity and its heirs,
executors, administrators, successors, legal representatives and
assigns. This Agreement sets forth the entire agreement and
understanding between the parties as to the subject matter hereof
and merges and supersedes all prior discussions, agreements and
understandings of any and every nature among them.


(g)
This Agreement is not transferable or assignable by the
Company.


(h)
The Company hereby represents and warrants as of the date hereof
and as of any Closing Date that none of the terms offered to any
Person with respect to any offer, sale or subscription of
Securities (each a "Subscription Document"), is or
will be more favorable to such Person than those of the Subscriber
and this Agreement shall be, without any further action by the
Subscriber or the Company, deemed amended and modified in an
economically and legally equivalent manner such that the Subscriber
shall receive the benefit of the more favorable terms contained in
such Subscription Document. Notwithstanding the foregoing, the
Company agrees, at its expense, to take such other actions (such as
entering into amendments to the Transaction Documents) as the
Subscriber may reasonably request to further effectuate the
foregoing.


(i)
The obligations of each Subscriber under any Transaction Document
are several and not joint with the obligations of any other
Subscriber, and no Subscriber shall be responsible in any way for
the performance or non-performance of the obligations of any other
Subscriber under any Transaction Document. Nothing contained herein
or in any other Transaction Document, and no action taken by any
Subscriber pursuant hereto or thereto, shall be deemed to
constitute the Subscribers as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption
that the Subscribers are in any way acting in concert or as a group
with respect to such obligations or the transactions contemplated
by the Transaction Documents. Each Subscriber shall be entitled to
independently protect and enforce its rights, including, without
limitation, the rights arising out of this Agreement or out of the
other Transaction Documents, and it shall not be necessary for any
other Subscriber to be joined as an additional party in any
proceeding for such purpose. Each Subscriber has been represented
by its own separate legal counsel in its review and negotiation of
the Transaction Documents. The Company has elected to provide all
Subscribers with the same terms and Transaction Documents for the
convenience of the Company and not because it was required or
requested to do so by any of the Subscribers. It is expressly
understood and agreed that each provision contained in this
Agreement and in each other Transaction Document is between the
Company and a Subscriber, solely, and not between the Company and
the Subscribers collectively and not between and among the
Subscribers. The Company acknowledges that any actions of
Subscribers now, and in the future, in which (A) any review or
approval is sought by the Company, including, without limitation,
review, approval or acceptance of any reportable event required to
be reported in any SEC filing or report by the Company; or (B) any
amendment, waiver, right of first refusal, participation right,
acquisition or financing, including any acquisition or financing is
proposed, introduced, offered or arranged by any one or more
Subscribers or their affiliates or sought by the Company, shall not
be claimed by the Company or any person seeking to assert such a
claim on behalf of the Company, to constitute the forming of any
“Group” as such term is defined under Section 13(d) or
Section 16 of the Exchange Act, nor shall any activity permit the
Company or any third party holder of securities of the Company to
assert any claim that any beneficial ownership limitations or
conversion limitations of the Series F Certificate of Designation
have been exceeded and such Subscriber, alone or in conjunction
with others, constitutes a “Group” for purposes of the
Exchange Act as a result thereof.


(j)
Except as otherwise provided herein, this Agreement shall not be
changed, modified or amended and no right hereunder shall be
waived, except in writing signed by both (a) the Company and (b)
Subscribers holding at least 60% of the Shares sold in the Offering
outstanding on the date of determination. The Company shall be
prohibited from offering any additional consideration to any
Subscriber in this Offering (or such original Subscriber’s
transferee) for the purposes of inducing such person to change,
modify, waive or amend any term of this Agreement or any other
Transaction Document without making the same offer on a pro-rata
basis to all other Subscribers (and those transferees) in this
Offering allocable to the securities acquired by such
transferee(s).


 




 

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(k)
This Agreement shall be governed by and construed in accordance
with the laws of the State of New York, without giving effect to
conflicts of law principles.


(l)
The Company and each Subscriber hereby agree that any dispute that
may arise between them arising out of or in connection with this
Agreement shall be adjudicated before a court located in the City
of New York, Borough of Manhattan, and they hereby submit to the
exclusive jurisdiction of the federal and state courts of the State
of New York located in the City of New York, Borough of Manhattan
with respect to any action or legal proceeding commenced by any
party, and irrevocably waive any objection they now or hereafter
may have respecting the venue of any such action or proceeding
brought in such a court or respecting the fact that such court is
an inconvenient forum, relating to or arising out of this Agreement
or any acts or omissions relating to the sale of the securities
hereunder, and consent to the service of process in any such action
or legal proceeding by means of registered or certified mail,
return receipt requested, postage prepaid, in care of the address
set forth herein or such other address as either party shall
furnish in writing to the other.


(m)
WAIVER OF JURY TRIAL. IN ANY ACTION, SUIT, OR
PROCEEDING IN ANY JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY
OTHER PARTY, THE PARTIES EACH KNOWINGLY AND INTENTIONALLY, TO THE
GREATEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY,
UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY WAIVES FOREVER TRIAL BY
JURY.


(n)
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall
constitute one and the same instrument.


(o)
Legal Representation. Each
party hereto acknowledges that it has been represented by
independent legal counsel in the preparation of the Agreement and
each party waives any conflicts of interest and other allegations
that it has not been represented by its own counsel


[Signature Pages
Follow]




 

-24-








 







ALL SUBSCRIBERS MUST COMPLETE THIS PAGE


 


IN
WITNESS WHEREOF, the Subscriber has executed this Agreement on the
____ day of _____, 2016.


 


	
 

	

x $3.00
for per share of Common Stock =

	
 


	

Shares
subscribed for

	
 

	

      Aggregate
Purchase Price







 


Election to
Purchase Preferred Shares: ________ (check here)


Manner
in which Title is to be held (Please Check One):


	

1.

	

___

	

Individual

	

7.

	

___

	

Trust/Estate/Pension
or Profit sharing Plan


Date
Opened:______________


	

2.

	

___

	

Joint
Tenants with Right of Survivorship

	

8.

	

___

	

As a
Custodian for


________________________________


Under
the Uniform Gift to Minors Act of the State of


________________________________


	

3.

	

___

	

Community
Property

	

9.

	

___

	

Married
with Separate Property


	

4.

	

___

	

Tenants
in Common

	

10.

	

___

	

Keogh


	

5.

	

___

	

Corporation/Partnership/
Limited Liability Company

	

11.

	

___

	

Tenants
by the Entirety


 


	

6.

	

___

	

IRA

	
 

	
 

	
 







 


ALTERNATIVE
DISTRIBUTION INFORMATION


To
direct distribution to a party other than the registered owner,
complete the information below. YOU MUST COMPLETE THIS SECTION IF
THIS IS AN IRA INVESTMENT.


Name of
Firm (Bank, Brokerage, Custodian):


Account
Name:


Account
Number:


Representative
Name:


Representative
Phone Number:


Address:


City,
State, Zip:


 




 

-25-








 






 


IF MORE
THAN ONE SUBSCRIBER, EACH SUBSCRIBER MUST SIGN.


INDIVIDUAL
SUBSCRIBERS MUST COMPLETE THIS PAGE.


SUBSCRIBERS WHICH
ARE ENTITIES MUST COMPLETE THE FOLLOWING PAGE.



EXECUTION BY NATURAL PERSONS


	

_____________________________________________________________________________


Exact
Name in Which Title is to be Held


 


	

_________________________________


Name
(Please Print)


 

	
 

	

_________________________________


Name of
Additional Purchaser


	

_________________________________


Residence:
Number and Street


 

	
 

	

_________________________________


Address
of Additional Purchaser


	

_________________________________


City,
State and Zip Code


 

	
 

	

_________________________________


City,
State and Zip Code


	

_________________________________


Social
Security Number


 

	
 

	

_________________________________


Social
Security Number


	

_________________________________


Telephone
Number


 

	
 

	

_________________________________


Telephone
Number


	

_________________________________


Fax
Number (if available)


 

	
 

	

________________________________


Fax
Number (if available)


	

_________________________________


E-Mail
(if available)


 

	
 

	

________________________________


E-Mail
(if available)


	

__________________________________


(Signature)


 


 

	
 

	

________________________________


(Signature
of Additional Purchaser)


	

ACCEPTED
this ___ day of _________ 2016, on behalf of the
Company.


	
 

	

 


By: _________________________________


Name:
Title:


	
 

	
 







 


 


 


 



[SIGNATURE PAGE FOR SUBSCRIPTION AGREEMENT]


 




 

-26-








 










 



EXECUTION BY SUBSCRIBER WHICH IS AN ENTITY


(Corporation,
Partnership, LLC, Trust, Etc.)


 


	

_____________________________________________________________________________


Name of
Entity (Please Print)


	

Date of
Incorporation or Organization:


 


	

State
of Principal Office:


 


	

Federal
Taxpayer Identification Number:


 


____________________________________________


Office
Address


 


____________________________________________


City,
State and Zip Code


 


____________________________________________


Telephone
Number


 


____________________________________________


Fax
Number (if available)


 


____________________________________________


E-Mail
(if available)


 


	
 

	

By:
_________________________________


      
Name:


      
Title:


	

[seal]


 


Attest:
_________________________________


(If
Entity is a Corporation)


 

	

 


_________________________________


 


_________________________________


Address


	
 

	
 


	

ACCEPTED this ____
day of __________ 2016 , on behalf of the Company.


	
 

	

 


 


By:
_________________________________Name: Title:







 



[SIGNATURE PAGE FOR SUBSCRIPTION AGREEMENT]


 




 

-27-








 






 


INVESTOR
QUESTIONNAIRE



Instructions: Check all boxes below which correctly describe
you.



☐ 

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







☐ 

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







☐ 

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







☐ 

You are a director
or executive officer of the Company.







☐ 

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







☐ 

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







☐ 

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







☐ 

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






 




 

-28-








 











Check all boxes below which correctly describe you.


With
respect to this investment in the Securities, your:


Investment
Objectives:                               
  Aggressive
Growth              
  Speculation


Risk
Tolerance:                                            ☐ Low
Risk                             
☐ Moderate
Risk                          
☐High Risk

Are you associated
with a FINRA Member
Firm?                  
☐ Yes        
☐ No




Your initials (purchaser and co-purchaser, if applicable) are
required for each item below:



____  
____  

I/We understand
that this investment is not guaranteed.







____  
____  

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







____  
____  

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







____  
____  

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






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


The
Subscriber hereby represents and warrants that all of its answers
to this Investor Questionnaire are true as of the date of its
execution of the Subscription Agreement pursuant to which it
purchased the Securities.


	

___________________________________


Name of
Purchaser [please print]


 


___________________________________


Signature
of Purchaser (Entities please


provide
signature of Purchaser’s duly


authorized
signatory.)


 


___________________________________


Name of
Signatory (Entities only)


 


___________________________________


Title
of Signatory (Entities only)

	

___________________________________


Name of
Co-Purchaser [please print]


 


___________________________________


Signature
of Co-Purchaser







 



[SIGNATURE PAGE FOR INVESTOR QUESTIONNAIRE]




 

-29-