Exhibit 10.1


 


EXECUTION COPY


 


SECURITIES PURCHASE AGREEMENT


 


SECURITIES PURCHASE
AGREEMENT (the “Agreement”), dated as of March 20, 2014, by and among The Wet Seal, Inc., a Delaware corporation,
with headquarters located at 26972 Burbank, Foothill Ranch, California 92610 (the “Company”), and the investors
listed on the Schedule of Buyers attached hereto (individually, a “Buyer” and collectively, the “Buyers”).


 


WHEREAS:


 


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


 


B.   The Company has
authorized the issuance of senior convertible notes of the Company, in substantially the form attached hereto as Exhibit A
(the “Notes”), which Notes shall be convertible into Common Stock (as defined below) (the shares of Common Stock
issuable pursuant to the terms of the Notes, including, without limitation, upon conversion, amortization and in payment of principal
and interest or otherwise, collectively, the “Conversion Shares”), in accordance with the terms of the Notes.


 


C.   Each Buyer wishes
to purchase, and the Company wishes to sell, upon the terms and conditions stated in this Agreement, (i) that aggregate principal
amount of Notes set forth opposite such Buyer’s name in column (3) on the Schedule of Buyers attached hereto (which aggregate principal
amount of Notes for all Buyers shall be $27,000,000), and (ii) Warrants, in substantially the form attached hereto as Exhibit
B (the “Warrants”), representing the right to acquire that number of shares of Common Stock set forth opposite
such Buyer’s name in column (4) on the Schedule of Buyers (as exercised, collectively, the “Warrant Shares”).


 


D.   At the Closing
(as defined below), the parties hereto will enter into a Registration Rights Agreement, substantially in the form attached hereto
as Exhibit C (the “Registration Rights Agreement”), pursuant to which the Company will agree to provide
certain registration rights with respect to the Registrable Securities (as defined in the Registration Rights Agreement) under
the 1933 Act and the rules and regulations promulgated thereunder, and applicable state securities laws.


 


E.   The Notes will
rank senior to all outstanding and future indebtedness of the Company, and its Subsidiaries (as defined below) (other than with
respect to Permitted Indebtedness (as defined in the Notes)) and will be guaranteed by all direct and indirect Subsidiaries (as
defined in Section 3(a)) of the Company, currently formed or formed in the future, as evidenced by a guarantee agreement with each
Buyer, in the form attached hereto as Exhibit D (as amended or modified from time to time in accordance with its terms,
collectively “Guarantee Agreements”), and upon the occurrence (and during the continuance) of a Proceeding (as
defined in the Notes) or Redemption Event (as defined in the Notes), any right of any holder of Notes to be paid any amounts outstanding
thereunder in cash shall be fully


 




    	 



    	 



    

 


subordinated to the debt
and liens in favor of the senior agent and lenders under the Company’ Amended and Restated Credit Agreement dated February
3, 2011 among the Company, certain subsidiaries of the Company, and Bank of America, N.A., as Administrative Agent, Collateral
Agent, LC Issuer and Swing Line Lender (as amended from time to time, the “Senior Credit Facility”.


 


F.   The Notes, the
Conversion Shares, the Warrants and the Warrant Shares collectively are referred to herein as the “Securities”.


 


AGREEMENT


 


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


 


		1.	PURCHASE AND SALE OF NOTES AND WARRANTS.



 


(a)      Purchase
of Notes and Warrants.    Subject to the satisfaction (or waiver) of the conditions set forth in Sections 6 and 7 below, the Company
shall issue and sell to each Buyer, and each Buyer severally, but not jointly, shall purchase from the Company on the Closing Date
(as defined below), (x) a Note in the original principal amount as is set forth opposite such Buyer’s name in column (3) on the
Schedule of Buyers and (y) Warrants to acquire up to that number of Warrant Shares as is set forth opposite such Buyer’s name in
column (4) on the Schedule of Buyers.


 


(b)      Closing.
  The date and time of the closing of the purchase of the Notes and the Warrants (the “Closing”) by the Buyers shall
be 10:00 a.m., New York City time, on March 26, 2014 (or such other date and time as is mutually agreed to by the Company and each
Buyer) (such date on which the Closing actually occurs, the “Closing Date”) after notification of satisfaction
(or waiver) of the conditions to the Closing set forth in Sections 6 and 7 below, at the offices of Greenberg Traurig, LLP, MetLife
Building, 200 Park Avenue, New York, NY 10166.


 


(c)      Purchase
Price.    The aggregate purchase price for the Notes and the Warrants to be purchased by each Buyer at the Closing (the “Purchase
Price”) shall be the amount set forth opposite each Buyer’s name in column (5) of the Schedule of Buyers. Each Buyer
shall pay $1,000 for each $1,000 of principal amount of Notes and related Warrants to be purchased by such Buyer at the Closing.
The Buyers and the Company agree that the Notes and the Warrants constitute an “investment unit” for purposes of Section
1273(c)(2) of the Internal Revenue Code of 1986, as amended (the “Code”). The Buyers and the Company mutually
agree that the allocation of the issue price of such investment unit between the Notes and the Warrants in accordance with Section
1273(c)(2) of the Code and Treasury Regulation Section 1.1273-2(h) shall be an aggregate amount allocated to the Warrants as agreed
among the Buyers and the Company and the balance of the Purchase Price allocated to the Notes, and neither the Buyers nor the Company
shall take any position inconsistent with such allocation in any tax return or in any judicial or administrative proceeding in
respect of taxes.


 




    	- 2 -



    	 



    

 


(d)      Form
of Payment.    On the Closing Date, (i) each Buyer shall pay its applicable purchase price to the Company for the Notes and the
Warrants to be issued and sold to such Buyer at the Closing (less, in the case of Hudson Bay Master Fund Ltd. (“Hudson
Bay”), the amounts withheld pursuant to Section 4(g)), by wire transfer of immediately available funds in accordance
with the Company’s written wire instructions and (ii) the Company shall deliver to each Buyer the Notes (allocated in the
principal amounts as such Buyer shall request) which such Buyer is then purchasing hereunder along with the Warrants (allocated
in the amounts as such Buyer shall request) which such Buyer is purchasing hereunder, in each case duly executed on behalf of the
Company and registered in the name of such Buyer or its designee.


 


2.             BUYER’S
REPRESENTATIONS AND WARRANTIES.    Each Buyer, severally and not jointly, represents and warrants with respect to only itself
that, as of the date hereof and as of the Closing Date:


 


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


 


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


 


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


 


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


 




    	- 3 -



    	 



    

 


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


 


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


 


(g)      Transfer
or Resale.    Such Buyer understands that except as provided in the Registration Rights Agreement: (i) the Securities have not
been and are not being registered under the 1933 Act or any state securities laws, and may not be offered for sale, sold, assigned
or transferred unless (A) subsequently registered thereunder, (B) such Buyer shall have delivered to the Company an opinion of
counsel, in a form reasonably acceptable to the Company, to the effect that such Securities to be sold, assigned or transferred
may be sold, assigned or transferred pursuant to an exemption from such registration, or (C) such Buyer provides the Company with
reasonable assurance that such Securities can be sold, assigned or transferred pursuant to Rule 144 or Rule 144A promulgated under
the 1933 Act (or a successor rule thereto) (collectively, “Rule 144”); (ii) any sale of the Securities made
in reliance on Rule 144 may be made only in accordance with the terms of Rule 144 and further, if Rule 144 is not applicable, any
resale of the Securities under circumstances in which the seller (or the Person) through whom the sale is made) may be deemed to
be an underwriter (as that term is defined in the 1933 Act) may require compliance with some other exemption under the 1933 Act
or the rules and regulations of the SEC promulgated thereunder; and (iii) neither the Company nor any other Person is under any
obligation to register the Securities under the 1933 Act or any state securities laws or to comply with the terms and conditions
of any exemption thereunder. Notwithstanding the foregoing, the Securities may be pledged in connection with a bona fide margin
account or other loan or financing arrangement secured by the Securities and such pledge of Securities shall not be deemed to be
a transfer, sale or assignment of the Securities hereunder, and no Buyer effecting a pledge of Securities shall be required to
provide the Company with any notice thereof or otherwise make any delivery to the Company pursuant to this Agreement or any other
Transaction Document, including, without limitation, this Section 2(g).


 


(h)      Legends.
  Such Buyer understands that the certificates or other instruments representing the Notes and the Warrants and, until such time
as the resale of the Conversion Shares and the Warrant Shares have been registered under the 1933 Act as contemplated by the Registration
Rights Agreement, the stock certificates representing the Conversion Shares and the Warrant Shares, except as set forth below,
shall bear any legend as


 




    	- 4 -



    	 



    

 


required by
the “blue sky” laws of any state and a restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of such stock certificates):


 


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


 


The legend set forth above shall be removed
and the Company shall issue a certificate without such legend to the holder of the Securities upon which it is stamped or issue
to such holder by electronic delivery at the applicable balance account at The Depository Trust Company (“DTC”),
if, unless otherwise required by state securities laws, (i) such Securities are registered for resale under the 1933 Act, (ii)
in connection with a sale, assignment or other transfer, such holder provides the Company with an opinion of counsel, in a generally
acceptable form, to the effect that such sale, assignment or transfer of the Securities may be made without registration under
the applicable requirements of the 1933 Act, or (iii) the Securities can be sold, assigned or transferred pursuant to Rule 144
or Rule 144A. The Company shall be responsible for the fees of its transfer agent and all DTC fees associated with such issuance.


 


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


 


(j)       No
Conflicts.    The execution, delivery and performance by such Buyer of this Agreement and the Registration Rights Agreement and
the consummation by such Buyer of


 




    	- 5 -



    	 



    

 


the transactions
contemplated hereby and thereby will not (i) result in a violation of the organizational documents of such Buyer, (ii) conflict
with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to
others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which such
Buyer is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including federal and
state securities laws) applicable to such Buyer, except in the case of clauses (ii) and (iii) above, for such conflicts, defaults,
rights or violations which would not, individually or in the aggregate, reasonably be expected to have a material adverse effect
on the ability of such Buyer to perform its obligations hereunder.


 


(k)      Residency.
  Such Buyer is a resident of the jurisdiction specified below its address on the Schedule of Buyers.


 


(l)       Certain
Trading Activities.    Such Buyer has not directly or indirectly, nor has any Person acting on behalf of or pursuant to any understanding
with such Buyer, engaged in any transactions in the securities of the Company (including, without limitation, any Short Sales (as
defined below) involving the Company’s securities) during the period commencing as of the time that such Buyer was first
contacted regarding the specific investment in the Company contemplated by this Agreement and ending immediately prior to the execution
of this Agreement by such Buyer (it being understood and agreed that for all purposes of this Agreement, and, without implication
that the contrary would otherwise be true, that neither transactions nor purchases nor sales shall include the location and/or
reservation of borrowable shares of Common Stock). “Short Sales” means all “short sales” as defined in
Rule 200 promulgated under Regulation SHO under the Securities Exchange Act of 1934, as amended (the “1934 Act”).


 


(m)     Experience
of Such Buyer.    Such Buyer, 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 prospective investment in the Securities,
and has so evaluated the merits and risks of such investment. Such Buyer 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.


 


		3.	REPRESENTATIONS AND WARRANTIES OF THE COMPANY.



 


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


 


(a)      Organization
and Qualification.    Each of the Company and its Subsidiaries (as defined below) are entities duly organized and validly existing
and in good standing under the laws of the jurisdiction in which they are formed, and have the requisite power and authorization
to own their properties and to carry on their business as now being conducted. Each of the Company and its Subsidiaries is duly
qualified as a foreign entity to do business and is in good standing in every jurisdiction in which its ownership of property or
the nature of the business conducted by it makes such qualification necessary, except to the extent that the failure to be so qualified
or be in good standing would not reasonably be expected to have a Material Adverse Effect. As used in this Agreement, “Material
Adverse Effect” means any material


 




    	- 6 -



    	 



    

 


adverse effect
on (i) the business, properties, assets, operations, results of operations, condition (financial or otherwise) or prospects of
the Company and its Subsidiaries, taken as a whole, (ii) on the transactions contemplated hereby or in the other Transaction Documents
or by the agreements and instruments to be entered into in connection herewith or therewith, or (iii) on the authority or ability
of the Company to perform its obligations under the Transaction Documents. The Company has no Subsidiaries except as set forth
on Schedule 3(a). “Subsidiaries” means any Person in which the Company, directly or indirectly, (x) owns
any of the outstanding capital stock or holds any equity or similar interest of such Person or (y) controls or operates all or
any part of the business, operations or administration of such Person, and each of the foregoing, is individually referred to herein
as a “Subsidiary.”


 


(b)      Authorization;
Enforcement; Validity.    The Company has the requisite corporate power and authority to enter into and perform its obligations
under this Agreement, the Notes, the Warrants, the Registration Rights Agreement, the Lock-up Agreements (as defined in Section7(x)),
the Transfer Agent Instructions (as defined in Section 5(b)), and each of the other agreements entered into by the parties hereto
in connection with the transactions contemplated by this Agreement (collectively, the “Transaction Documents”)
and to issue the Securities in accordance with the terms hereof and thereof, subject to the limitations on the issuance thereof
pursuant to the terms of the Notes. The execution and delivery of the Transaction Documents by the Company and the consummation
by the Company of the transactions contemplated hereby and thereby, (including, without limitation, the issuance of the Notes and
the Warrants, and the reservation for issuance and the issuance of the Conversion Shares and the reservation for issuance and issuance
of Warrant Shares issuable upon exercise of the Warrants) have been duly authorized by the Company’s Board of Directors and (other
than the filing with the SEC of one or more Registration Statements (as defined in the Registration Rights Agreement) in accordance
with the requirements of the Registration Rights Agreement, the 8-K Filing (as defined below), a Form D with the SEC and any other
filings as may be required by the Principal Market (as defined below) and state securities agencies (collectively, the “Required
Approvals”) no further filing, consent, or authorization is required by the Company, its Board of Directors or its stockholders,
which has not been obtained. This Agreement has been, and the other Transaction Documents to which it is a party will be prior
to the Closing, duly executed and delivered by the Company, and each constitutes, or when executed will constitute, the legal,
valid and binding obligations of the Company, enforceable against the Company in accordance with their respective terms, except
as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally, the enforcement of applicable creditors’ rights and remedies and
except as rights to indemnification and to contribution may be limited by federal or state securities law and public policy, and
the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and
to the discretion of the court before which any proceeding therefor may be brought. Each of the Subsidiaries party to the Guaranty
Agreements have the requisite power and authority to enter into and perform its obligations under such Guaranty Ageements. The
execution and delivery by the Subsidiaries of the Guarantee Agreements and the consummation by such Subsidiaries of the transactions
contemplated thereby have been duly authorized by such Subsidiaries’ respective boards of directors (or other applicable governing
body) and (other than filings as may be required by state securities agencies) no further filing, consent, or authorization is
required by such Subsidiaries, their respective boards of directors


 




    	- 7 -



    	 



    

 


(or other applicable
governing body) or stockholders (or other applicable owners of equity of such Subsidiaries). Prior to the Closing, the Guarantee
Agreements will have been duly executed and delivered by such Subsidiaries, and will constitute the legal, valid and binding obligations
of such Subsidiaries, enforceable against them in accordance with their respective terms, except as such enforceability may be
limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar
laws relating to, or affecting generally, the enforcement of applicable creditors’ rights and remedies and except as rights to
indemnification and to contribution may be limited by federal or state securities law and public policy, and the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the
court before which any proceeding therefor may be brought.


 


(c)      Issuance
of Securities.    The issuance of the Notes and the Warrants are duly authorized and, upon issuance, shall be validly issued and
free from all taxes, liens and charges with respect to the issue thereof. As of the Closing, a number of shares of Common Stock
shall have been duly authorized and reserved for issuance which equals or exceeds (the “Required Reserved Amount)
the sum of (i) 135% of the maximum number of Conversion Shares issued and issuable pursuant to the Notes based on the Conversion
Price (as defined in the Notes) (without taking into account any limitations on the issuance thereof pursuant to the terms of the
Notes) and (ii) 100% of the maximum number of Warrant Shares issued and issuable pursuant to the Warrants, each as of the Trading
Day (as defined in the Warrants) immediately preceding the applicable date of determination (without taking into account any limitations
on the exercise of the Warrants set forth in the Warrants). Upon conversion of the Notes in accordance with the Notes (subject
to the limitations on issuances contained in the Notes) or exercise of the Warrants in accordance with the Warrants, as the case
may be, the Conversion Shares and the Warrant Shares, respectively, when issued, will be validly issued, fully paid and nonassessable
and free from all preemptive or similar rights, taxes, liens and charges with respect to the issue thereof, with the holders being
entitled to all rights accorded to a holder of Common Stock. Subject to the accuracy of each of the representations and warranties
of the Buyers set forth in Section 2 of this Agreement, the offer and issuance by the Company of the Securities is exempt from
registration under the 1933 Act. “Common Stock” means (i) the Company’s shares of Class A common stock,
par value $0.10 per share, and (ii) any capital stock into which such common stock shall have been changed or any share capital
resulting from a reclassification of such common stock.


 


(d)      No
Conflicts.    The execution, delivery and performance of the Transaction Documents by the Company and any of its Subsidiaries
parties to any of the Transaction Documents and the consummation by the Company and any of its Subsidiaries of the transactions
contemplated hereby and thereby (including, without limitation, the issuance of the Notes and the Warrants and reservation for
issuance and issuance of the Conversion Shares and the Warrant Shares) will not (i) result in a violation of the Certificate of
Incorporation (as defined in Section (3(r)) or ByLaws (as defined in Section (3(r)), any memorandum of association, certificate
of incorporation, certificate of formation, bylaws, any certificate of designations or other constituent documents of the Company
or any of its Subsidiaries, any capital stock of the Company or any of its Subsidiaries or the articles of association or bylaws
of the Company or any of its Subsidiaries or (ii) conflict with, or constitute a default (or an event which with notice or lapse
of time or both would become a default) in any respect under,


 




    	- 8 -



    	 



    

 


or give to
others any rights of termination, amendment, acceleration or cancellation of, any material agreement, indenture or instrument to
which the Company or any of its Subsidiaries is a party, or (iii) subject to the Required Approvals, result in a violation of any
law, rule, regulation, order, judgment or decree (including foreign, federal and state securities laws and regulations and the
rules and regulations of The NASDAQ Global Select Market (the “Principal Market”) and including all applicable
foreign, federal and state laws, rules and regulations) applicable to the Company or any of its Subsidiaries or by which any property
or asset of the Company or any of its Subsidiaries is bound or affected except, in the case of clause (ii) or (iii) above, to the
extent such violations that would not reasonably be expected to have a Material Adverse Effect.


 


(e)      Consents.
  Neither the Company nor any of its Subsidiaries is required to obtain any consent, authorization or order of, or make any filing
or registration with, any court, governmental agency or any regulatory or self-regulatory agency or any other Person in order for
it to execute, deliver or perform any of its obligations under or contemplated by the Transaction Documents, in each case in accordance
with the terms hereof or thereof (other than the Required Approvals) and consents which have been obtained. All consents, authorizations,
orders, filings and registrations which the Company or any of its Subsidiaries is required to obtain at or prior to the Closing
pursuant to the preceding sentence have been obtained or effected, and the Company and its Subsidiaries are unaware of any facts
or circumstances that might prevent the Company or any of its Subsidiaries from obtaining or effecting any of the registration,
application or filings pursuant to the preceding sentence. The Company is not in violation of the listing requirements of the Principal
Market and has no knowledge of any facts that would reasonably lead to delisting or suspension of the Common Stock in the foreseeable
future. The issuance by the Company of the Securities shall not have the effect of delisting or suspending the Common Stock from
the Principal Market.


 


(f)       Acknowledgment
Regarding Buyer’s Purchase of Securities.    The Company acknowledges and agrees that each Buyer is acting solely in the capacity
of an arm’s length purchaser with respect to the Transaction Documents and the transactions contemplated hereby and thereby and
that no Buyer is (i) an officer or director of the Company or any of its Subsidiaries, (ii) an “affiliate” of the Company
or any of its Subsidiaries (as defined in Rule 144) or (iii) to the knowledge of the Company, a “beneficial owner”
of more than 10% of the shares of Common Stock (as defined for purposes of Rule 13d-3 of the Securities Exchange Act of 1934, as
amended (the “1934 Act”)). The Company further acknowledges that no Buyer is acting as a financial advisor or
fiduciary of the Company or any of its Subsidiaries (or in any similar capacity) with respect to the Transaction Documents and
the transactions contemplated hereby and thereby, and any advice given by a Buyer or any of its representatives or agents in connection
with the Transaction Documents and the transactions contemplated hereby and thereby is merely incidental to such Buyer’s purchase
of the Securities. The Company further represents to each Buyer that the Company’s decision to enter into the Transaction Documents
has been based solely on the independent evaluation by the Company and its representatives.


 


(g)      No
General Solicitation; Placement Agent’s Fees.    Neither the Company, nor any of its Subsidiaries or affiliates, nor any Person
acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation
D) in connection with the offer or sale of the Securities. The Company shall be responsible for the


 




    	- 9 -



    	 



    

 


payment of
any placement agent’s fees, financial advisory fees, or brokers’ commissions (other than for persons engaged by any Buyer or its
investment advisor) relating to or arising out of the transactions contemplated hereby, including, without limitation, placement
agent fees payable to Cowen and Company, as placement agent (the “Placement Agent”) in connection with the sale
of the Securities. The Company shall pay, and hold each Buyer harmless against, any liability, loss or expense (including, without
limitation, attorney’s fees and out-of-pocket expenses) arising in connection with any such claim. The Company acknowledges that
it has engaged the Placement Agent in connection with the sale of the Securities. Other than the Placement Agent, neither the Company
nor any of its Subsidiaries has engaged any placement agent or other agent in connection with the sale of the Securities.


 


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


 


(i)       Dilutive
Effect.    The Company understands and acknowledges that the number of Conversion Shares issuable pursuant to terms of the Notes
will increase in certain circumstances. The Company further acknowledges that its obligation to issue Conversion Shares pursuant
to the terms of the Notes in accordance with this Agreement and the Notes is absolute and unconditional (subject to any limitations
on issuance as set forth in the Notes) regardless of the dilutive effect that such issuance may have on the ownership interests
of other stockholders of the Company.


 


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


 


(k)      SEC
Documents; Financial Statements.    During the two (2) years prior to the date hereof, the Company has timely filed all reports,
schedules, forms, statements and other documents required to be filed by it with the SEC pursuant to the reporting requirements
of the


 




    	- 10 -



    	 



    

 


1934 Act (all
of the foregoing filed prior to the date hereof, and all exhibits included therein and financial statements, notes and schedules
thereto and documents incorporated by reference therein being hereinafter referred to as the “SEC Documents”).
The Company has delivered to the Buyers or their respective representatives true, correct and complete copies of the SEC Documents
not available on the EDGAR system. As of their respective filing dates, the SEC Documents complied in all material respects with
the requirements of the 1934 Act and the rules and regulations of the SEC promulgated thereunder applicable to the SEC Documents,
and none of the SEC Documents, at the time they were filed with the SEC, contained any untrue statement of a material fact or omitted
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. As of their respective filing dates, the financial statements of the
Company included in the SEC Documents complied as to form in all material respects with applicable accounting requirements and
the published rules and regulations of the SEC with respect thereto. Such financial statements have been prepared in accordance
with generally accepted accounting principles, consistently applied, during the periods involved (except (i) as may be otherwise
indicated in such financial statements or the notes thereto, or (ii) in the case of unaudited interim statements, to the extent
they may exclude footnotes or may be condensed or summary statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of its operations and cash flows for the periods then ended (subject,
in the case of unaudited statements, to normal year-end audit adjustments). No other information provided by or on behalf of the
Company to the Buyers which is not included in the SEC Documents, including, without limitation, information referred to in Section
2(e) of this Agreement or in the disclosure schedules to this Agreement, contains any untrue statement of a material fact or omits
to state any material fact necessary in order to make the statements therein, in the light of the circumstance under which they
are or were made, not misleading (it being recognized that financial projections or forecasts by or on behalf of the Company are
not to be viewed as facts and that the actual results during the period or periods covered by any such financial projections or
forecasts may differ from the projected or forecasted results). The Company is not currently contemplating to amend or restate
any of the financial statements (including without limitation, any notes or any letter of the independent accountants of the Company
with respect thereto) included in the SEC Documents (the “Financial Statements”), nor is the Company currently
aware of facts or circumstances which would require the Company to amend or restate any of the Financial Statements, in each case,
in order for any of the Financials Statements to be in compliance with GAAP and the rules and regulations of the SEC. The Company
has not been informed by its independent accountants that they recommend that the Company amend or restate any of the Financial
Statements or that there is any need for the Company to amend or restate any of the Financial Statements.


 


(l)       Absence
of Certain Changes.    Since February 2, 2013 and except as disclosed in the SEC Documents filed subsequent to such date, the
8-K Filing or in the Company’s investor presentation a copy of which has been furnished to the Buyers (the “Investor
Presentation”), there has been no material adverse change and no material adverse development in the business, assets,
properties, operations, condition (financial or otherwise), results of operations or prospects of the Company or its Subsidiaries.
Except as disclosed in Schedule 3(l), since February 2, 2013, neither the Company nor any of its Subsidiaries has (i) declared
or paid any dividends, (ii) sold any assets, individually or in the aggregate, in excess of $100,000 outside of the ordinary course
of business or (iii) had capital expenditures,


 




    	- 11 -



    	 



    

 


individually
or in the aggregate, outside the ordinary course of business. Neither the Company nor any of its Subsidiaries has taken any steps
to seek protection pursuant to any bankruptcy law nor does the Company have any knowledge or reason to believe that its creditors
intend to initiate involuntary bankruptcy proceedings or any actual knowledge of any fact that would reasonably lead a creditor
to do so. The Company and its Subsidiaries, individually and on a consolidated basis, are not as of the date hereof, and after
giving effect to the transactions contemplated hereby to occur at the Closing, will not be Insolvent (as defined below). For purposes
of this Section 3(l), “Insolvent” means, with respect to any Person, (i) the present fair saleable value of
such Person’s assets is less than the amount required to pay such Person’s total Indebtedness (as defined in Section 3(s)), (ii)
such Person is unable to pay its debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become
absolute and matured, (iii) such Person intends to incur or believes that it will incur debts that would be beyond its ability
to pay as such debts mature. Neither the Company nor any of its Subsidiaries has engaged in any business or in any transaction,
and is not about to engage in any business or in any transaction, for which the Company’s or such Subsidiary’s remaining
assets constitute unreasonably small capital.


 


(m)     No
Undisclosed Events, Liabilities, Developments or Circumstances.    Except as disclosed in the SEC Documents and the Investor Presentation,
no event, liability, development or circumstance has occurred or exists, or is currently contemplated to exist or occur with respect
to the Company, its Subsidiaries or their respective businesses, properties, liabilities, prospects, operations (including results
thereof) or condition (financial or otherwise), that (i) is required to be disclosed by the Company under applicable securities
laws on a registration statement on Form S-1 filed with the SEC relating to an issuance and sale by the Company of its Common Stock
and which has not been publicly announced, (ii) could reasonably be expected to have a material adverse effect on any Buyer’s
investment hereunder or (iii) could have a Material Adverse Effect.


 


(n)      Conduct
of Business; Regulatory Permits.    Neither the Company nor any of its Subsidiaries is in violation of any term of or in default
under any certificate of designations of any outstanding series of preferred stock of the Company (if any), its Certificate of
Incorporation or Bylaws or their organizational charter or memorandum of association or certificate of incorporation or articles
of association or bylaws, respectively. Neither the Company nor any of its Subsidiaries is in violation of any judgment, decree
or order or any statute, ordinance, rule or regulation applicable to the Company or any of its Subsidiaries, except for possible
violations which could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Without
limiting the generality of the foregoing, the Company is not in violation in any material respect of any of the rules, regulations
or requirements of the Principal Market and has no knowledge of any facts or circumstances that would reasonably lead to delisting
or suspension of the Common Stock by the Principal Market in the foreseeable future. During the two (2) years prior to the date
hereof, the Common Stock has been designated for quotation on the Principal Market. During the two (2) years prior to the date
hereof, (i) trading in the Common Stock has not been suspended by the SEC or the Principal Market and (ii) the Company has received
no communication, written or oral, from the SEC or the Principal Market regarding the suspension or delisting of the Common Stock
from the Principal Market. The Company and its Subsidiaries possess all certificates, authorizations and permits issued by the
appropriate federal, state or foreign regulatory authorities necessary to


 




    	- 12 -



    	 



    

 


conduct their
respective businesses, except where the failure to possess such certificates, authorizations or permits would not have, individually
or in the aggregate, a Material Adverse Effect, and neither the Company nor any such Subsidiary has received any notice of proceedings
relating to the revocation or modification of any such certificate, authorization or permit.


 


(o)      Foreign
Corrupt Practices.    Neither the Company, the Company’s Subsidiaries nor, to the knowledge of the Company, any director,
officer, agent, employee, nor any other person acting for or on behalf of the Company or any of its Subsidiaries (individually
and collectively, a “Company Affiliate”) have violated the U.S. Foreign Corrupt Practices Act (the “FCPA”)
or any other applicable anti-bribery or anti-corruption laws, nor has any Company Affiliate offered, paid, promised to pay, or
authorized the payment of any money, or offered, given, promised to give, or authorized the giving of anything of value, to any
officer, employee or any other person acting in an official capacity for any Governmental Entity to any political party or official
thereof or to any candidate for political office (individually and collectively, a “Government Official”) or
to any person under circumstances where such Company Affiliate knew or was aware of a high probability that all or a portion of
such money or thing of value would be offered, given or promised, directly or indirectly, to any Governmental Official, for the
purpose of:


 


(i)        (A)
influencing any act or decision of such Government Official in his/her official capacity, (B) inducing such Government Official
to do or omit to do any act in violation of his/her lawful duty, (C) securing any improper advantage, or (D) inducing such Government
Official to influence or affect any act or decision of any Governmental Entity, or


 


(ii)       assisting
the Company or its Subsidiaries in obtaining or retaining business for or with, or directing business to, the Company or its Subsidiaries.


 


(p)      Sarbanes-Oxley
Act.    The Company is in compliance with any and all applicable requirements of the Sarbanes-Oxley Act of 2002, as amended, that
are effective as of the date hereof, and any and all applicable rules and regulations promulgated by the SEC thereunder that are
effective as of the date hereof.


 


(q)      Transactions
With Affiliates.    Except as disclosed in the SEC Documents, none of the officers, directors or employees of the Company or any
of its Subsidiaries is presently a party to any transaction with the Company or any of its Subsidiaries (other than for ordinary
course services as employees, officers or 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, or otherwise requiring payments
to or from any such officer, director or employee or, to the knowledge of the Company or any of its Subsidiaries, any corporation,
partnership, trust or other entity in which any such officer, director, or employee has a substantial interest or is an officer,
director, trustee or partner.


 


(r)       Equity
Capitalization.    As of the date hereof, the authorized capital stock of the Company consists of (i) 300,000,000 shares of Common
Stock, of which as of the date hereof, 84,733,748 shares are issued, 84,661,917 shares are outstanding, and 4,271,234 shares are
available for issuance pursuant to the Company’s equity and incentive plans, and (ii)


 




    	- 13 -



    	 



    

 


10,000,000
shares of Class B common stock, par value $0.10 per share, none of which are issued and outstanding as of the date hereof. All
of such outstanding shares have been, or upon issuance will be, validly issued and are fully paid and nonassessable. Except as
disclosed in: (i) Schedule 3(r)(i), none of the Company’s capital stock is subject to preemptive rights or any other similar
rights or any liens or encumbrances suffered or permitted by the Company; (ii) Schedule 3(r)(ii), there are no outstanding
options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or
rights convertible into, or exercisable or exchangeable for, any shares of capital stock of the Company or any of its Subsidiaries,
or contracts, commitments, understandings or arrangements by which the Company or any of its Subsidiaries is or may become bound
to issue additional shares of capital stock of the Company or any of its Subsidiaries or options, warrants, scrip, rights to subscribe
to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, or exercisable or exchangeable
for, any shares of capital stock of the Company or any of its Subsidiaries other than equity awards (including to employees and
directors); (iii) Schedule 3(r)(iii), there are no outstanding debt securities, notes, credit agreements, credit facilities
or other agreements, documents or instruments evidencing Indebtedness of the Company or any of its Subsidiaries or by which the
Company or any of its Subsidiaries is or may become bound; (iv) Schedule 3(r)(iv), there are no financing statements securing
obligations in any material amounts, either singly or in the aggregate, filed in connection with the Company or any of its Subsidiaries;
(v) Schedule 3(r)(v), there are no agreements or arrangements under which the Company or any of its Subsidiaries is obligated
to register the sale of any of their securities under the 1933 Act (except pursuant to the Registration Rights Agreement); (vi)
Schedule 3(r)(vi), there are no outstanding securities or instruments of the Company or any of its Subsidiaries which contain
any redemption or similar provisions, and there are no contracts, commitments, understandings or arrangements by which the Company
or any of its Subsidiaries is or may become bound to redeem a security of the Company or any of its Subsidiaries; (vii) Schedule
3(r)(vii), there are no securities or instruments containing anti-dilution or similar provisions that will be triggered by
the issuance of the Securities; (viii) Schedule 3(r)(viii), the Company does not have any stock appreciation rights or “phantom
stock” plans or agreements or any similar plan or agreement; and (ix) Schedule 3(r)(ix), the Company and its Subsidiaries
have no liabilities or obligations required to be disclosed in the SEC Documents but not so disclosed in the SEC Documents, other
than those incurred in the ordinary course of the Company’s or any of its Subsidiary’s’ respective businesses and which, individually
or in the aggregate, do not or would not reasonably be expected to have a Material Adverse Effect. The Company has furnished or
made available to the Buyers true, correct and complete copies of the Company’s Certificate of Incorporation, as amended and as
in effect on the date hereof (the “Certificate of Incorporation”), and the Company’s ByLaws, as amended and
as in effect on the date hereof (the “ByLaws”), and the terms of all securities convertible into, or exercisable
or exchangeable for shares of Common Stock and the material rights of the holders thereof in respect thereto.


 


(s)      Indebtedness
and Other Contracts.    Neither the Company nor any of its Subsidiaries (i) except as disclosed in the SEC Documents or in Schedule
3(s)(i), has any outstanding Indebtedness (as defined below), (ii) except as disclosed in Schedule 3(s)(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) except as disclosed in Schedule
3(s)(iii), is in


 




    	- 14 -



    	 



    

 


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) except as disclosed in Schedule
3(s)(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 United States generally accepted accounting principles (other than trade payables entered into in the ordinary course of business
consistent with past practice), (C) all reimbursement or payment obligations with respect to letters of credit, surety bonds and
other similar instruments, (D) all obligations evidenced by notes, bonds, debentures or similar instruments, including obligations
so evidenced incurred in connection with the acquisition of property, assets or businesses, (E) all indebtedness created or arising
under any conditional sale or other title retention agreement, or incurred as financing, in either case with respect to any property
or assets acquired with the proceeds of such indebtedness (even though the rights and remedies of the seller or bank under such
agreement in the event of default are limited to repossession or sale of such property), (F) all monetary obligations under any
leasing or similar arrangement which, in connection with United States 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, lien, 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; and (y) “Contingent Obligation” means, as to any Person,
any direct or indirect liability, contingent or otherwise, of that Person with respect to any Indebtedness, lease, dividend or
other obligation of another Person if the primary purpose or intent of the Person incurring such liability, or the primary effect
thereof, is to provide assurance to the obligee of such liability that such liability will be paid or discharged, or that any agreements
relating thereto will be complied with, or that the holders of such liability will be protected (in whole or in part) against loss
with respect thereto.


 


(t)       Litigation.    Except as set disclosed in the SEC Documents, there is no action, suit, proceeding, inquiry or investigation before or by the Principal
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 would reasonably be expected to have a Material Adverse Effect. 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


 




    	- 15 -



    	 



    

 


has not issued
any stop order or other order suspending the effectiveness of any registration statement filed by the Company under the 1933 Act
or the 1934 Act.


 


(u)        Insurance.    The Company and each of its Subsidiaries are insured by insurers of recognized financial responsibility against such losses and
risks and in such amounts as management of the Company believes to be prudent and customary in the businesses in which the Company
and its Subsidiaries are engaged. Neither the Company nor any such Subsidiary has been refused any insurance coverage sought or
applied for and neither the Company nor any such 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 at a cost that would not have a Material Adverse Effect.


 


(v)        Employee
Relations.


 


(i)        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
and its Subsidiaries believe that their relations with their employees are good. No executive officer of the Company or any of
its Subsidiaries (as defined in Rule 501(f) of the 1933 Act) has notified the Company or any such Subsidiary that such officer
intends to leave the Company or any such Subsidiary or otherwise terminate such officer’s employment with the Company or any such
Subsidiary. No executive officer of the Company or any of its Subsidiaries, to the knowledge of the Company or any of its Subsidiaries,
is, or is now expected to be, in violation of any material term of any employment contract, confidentiality, disclosure or proprietary
information agreement, non-competition agreement, or any other contract or agreement or any restrictive covenant, and the continued
employment of each such executive officer does not subject the Company or any of its Subsidiaries to any liability with respect
to any of the foregoing matters.


 


(ii)       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.


 


(w)       Title.    The Company and its Subsidiaries have good and marketable title in fee simple to all real property and good and marketable title
to all personal property owned by them which is material to the business of the Company and its Subsidiaries, in each case free
and clear of all liens, encumbrances and defects, except for Permitted Liens (as defined in the Notes). Any real property and facilities
held under lease by the Company and any of its Subsidiaries are held by them under valid, subsisting and enforceable leases with
such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and buildings
by the Company and its Subsidiaries.


 


(x)        Intellectual
Property Rights.    The Company and its Subsidiaries own or possess adequate rights or licenses to use all trademarks, trade names,
service marks, service mark registrations, service names, patents, patent rights, copyrights, original works, inventions, licenses,
approvals, governmental authorizations, trade secrets and other intellectual property


 




    	- 16 -



    	 



    

 


rights and
all applications and registrations therefor (“Intellectual Property Rights”) necessary to conduct their respective
businesses as now conducted and as presently proposed to be conducted. Except as disclosed in Schedule 3(x), none of the
Company’s or its Subsidiaries’ Intellectual Property Rights have expired, terminated or been abandoned, or are expected
to expire, terminate or be abandoned, within three years from the date of this Agreement. The Company has no knowledge of any infringement
by the Company or any of its Subsidiaries of Intellectual Property Rights of others. There is no claim, action or proceeding pending,
or to the knowledge of the Company or any of its Subsidiaries, being threatened, against the Company or any of its Subsidiaries
regarding their Intellectual Property Rights. The Company is not aware of any facts or circumstances which might give rise to any
of the foregoing infringements or claims, actions or proceedings. The Company and each of its Subsidiaries have taken reasonable
security measures to protect the secrecy, confidentiality and value of all of their Intellectual Property Rights.


 


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


 


(z)      Subsidiary
Rights.    Except as set forth on Schedule 3(z), the Company or one of its Subsidiaries has the unrestricted right to vote, and
(subject to limitations imposed by applicable law) to receive dividends and distributions on, all capital securities of its Subsidiaries
as owned by the Company or such Subsidiary.


 


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


 


(bb)   Tax
Status.    The Company and each of its Subsidiaries (i) has made or filed all U.S. federal, state and foreign income and all other
material tax returns, reports and declarations required by any jurisdiction to which it is subject, (ii) has 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


 




    	- 17 -



    	 



    

 


(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 know of no basis for any such claim.


 


(cc)    Internal
Accounting and Disclosure Controls.    The Company and each of its 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 generally
accepted accounting principles and to maintain asset and liability accountability, (iii) access to assets or incurrence of liabilities
is permitted only in accordance with management’s general or specific authorization and (iv) the recorded accountability for assets
and liabilities is compared with the existing assets and liabilities at reasonable intervals and appropriate action is taken with
respect to any difference. The Company maintains disclosure controls and procedures (as such term is defined in Rule 13a-15 under
the 1934 Act) that are effective in ensuring that information required to be disclosed by the Company in the reports that it files
or submits under the 1934 Act is recorded, processed, summarized and reported, within the time periods specified in the rules and
forms of the SEC, including, without limitation, controls and procedures designed to ensure that information required to be disclosed
by the Company in the reports that it files or submits under the 1934 Act is accumulated and communicated to the Company’s management,
including its principal executive officer or officers and its principal financial officer or officers, as appropriate, to allow
timely decisions regarding required disclosure. During the twelve months prior to the date hereof neither the Company nor any of
its Subsidiaries has received any notice or correspondence from any accountant relating to any material weakness in any part of
the system of internal accounting controls of the Company or any of its Subsidiaries.


 


(dd)   Off
Balance Sheet Arrangements.    Except as set forth in the SEC Documents, there is no transaction, arrangement, or other relationship
between the Company and an unconsolidated or other off balance sheet entity that is required to be disclosed by the Company in
its 1934 Act filings and is not so disclosed or that otherwise would be reasonably likely to have a Material Adverse Effect.


 


(ee)    Ranking
of Notes.    Except as set forth in Schedule 3(ee), no Indebtedness of the Company or any of its Subsidiaries is senior
to or ranks pari passu with the Notes in right of payment, whether with respect of payment of redemptions, interest, damages
or upon liquidation or dissolution or otherwise.


 


(ff)     Eligibility
for Registration.    The Company is eligible to register the Conversion Shares and the Warrant Shares for resale by the Buyers
using Form S-3 promulgated under the 1933 Act.


 


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


 




    	- 18 -



    	 



    

 


(hh)   Manipulation
of Price.    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, or that could reasonably be expected to cause or 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) other than the Placement
Agent, sold, bid for, purchased, or paid any compensation for soliciting purchases of, any of the Securities, or (iii) other than
the Placement Agent, paid or agreed to pay to any person any compensation for soliciting another to purchase any other securities
of the Company.


 


(ii)     Acknowledgement
Regarding Buyers’ Trading Activity.    The Company acknowledges and agrees that following the public disclosure of the Investor
Presentation and the information that will be filed and/or furnished in the Form 8-K (i) none of the Buyers has been asked to agree,
nor has any Buyer 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) any Buyer, and counter-parties
in “derivative” transactions to which any such Buyer is a party, directly or indirectly, presently may have a “short”
position in the Common Stock, and (iii) each Buyer shall not be deemed to have any affiliation with or control over any arm’s length
counter-party in any “derivative” transaction. The Company further understands and acknowledges that following the
public disclosure of the Investor Presentation and the information that will be filed and/or furnished in the Form 8-K one or more
Buyers may engage in hedging and/or trading activities at various times during the period that the Securities are outstanding,
including, without limitation, during the periods that the value of the Conversion Shares and/or the Warrant Shares are being determined
and (b) such hedging and/or trading activities, if any, can reduce the value of the existing stockholders’ equity interest in the
Company both at and after the time the hedging and/or trading activities are being conducted. The Company acknowledges that such
aforementioned hedging and/or trading activities do not constitute a breach of this Agreement, the Notes, the Warrants or any of
the documents executed in connection herewith.


 


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


 


(kk)    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 (25%)
or more of the total equity of a bank or any entity that is subject to the BHCA and to regulation by the Federal Reserve. Neither
the Company nor any of its Subsidiaries or affiliates exercises a controlling influence over the management or policies of a bank
or any entity that is subject to the BHCA and to regulation by the Federal Reserve.


 


(ll)      Illegal
or Unauthorized Payments; Political Contributions.    Neither the Company nor any of its Subsidiaries nor, to the best of the
Company’s knowledge (after


 




    	- 19 -



    	 



    

 


reasonable
inquiry of its officers and directors), any of the officers, directors, employees, agents or other representatives of the Company
or any of its Subsidiaries or any other business entity or enterprise with which the Company or any Subsidiary is or has been affiliated
or associated, has, directly or indirectly, made or authorized any payment, contribution or gift of money, property, or services,
whether or not in contravention of applicable law, (i) as a kickback or bribe to any Person or (ii) to any political organization,
or the holder of or any aspirant to any elective or appointive public office except for personal political contributions not involving
the direct or indirect use of funds of the Company or any of its Subsidiaries.


 


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


 


(nn)   Management.    Except as disclosed in the SEC Documents, during the past five year period, no current or, to the knowledge of the Company, former
officer or director has been the subject of:


 


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


 


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


 


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


 


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


 


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


 




    	- 20 -



    	 



    

 


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


 


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


 


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


 


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


 


(oo)    No
Additional Agreements.    Neither the Company nor any of its Subsidiaries has any agreement or understanding with any Buyer with
respect to the transactions contemplated by the Transaction Documents or the Guarantee Agreements other than as specified in the
Transaction Documents and the Guarantee Agreements.


 


(pp)    Disclosure.    The Company confirms that neither it nor any other Person acting on its behalf has provided any of the Buyers or their agents or
counsel with any information that constitutes or could reasonably be expected to constitute material, non-public information concerning
the Company or any of its Subsidiaries, other than the existence of the transactions contemplated by this Agreement and the other
Transaction Documents and other than the Investor Presentation and the information that will be filed and/or furnished in the Form
8-K. The Company understands and confirms that each of the Buyers will rely on the foregoing representations in effecting transactions
in securities of the Company. All disclosure provided to the Buyers 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 in all material respects 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. Each press release issued by the Company or any of its Subsidiaries during the twelve (12)
months preceding the date of this Agreement did not at the time of release contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the
circumstances under which they are 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. All financial projections
and forecasts that have been prepared


 




    	- 21 -



    	 



    

 


by or on behalf
of the Company or any of its Subsidiaries and made available to you have been prepared in good faith based upon reasonable assumptions
and represented, at the time each such financial projection or forecast was delivered to each Buyer, the Company’s best estimate
of future financial performance (it being recognized that such financial projections or forecasts are not to be viewed as facts
and that the actual results during the period or periods covered by any such financial projections or forecasts may differ from
the projected or forecasted results). The Company acknowledges and agrees that no Buyer makes or has made any representations or
warranties with respect to the transactions contemplated hereby other than those specifically set forth in Section 2.


 


(qq)     Shell
Company Status.    The Company is not, and has never been, an issuer identified in Rule 144(i)(1) of the 1933 Act.


 


(rr)
Stock Option Plans.    Each stock option granted by the Company was granted (i) in accordance with the
terms of the applicable stock option plan of the Company and (ii) except as set forth in Schedule 3(rr), since January 1,
2012, 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 the Company’s stock option plan has been
backdated. The Company has not knowingly granted, and there is no and has been no policy or practice of the Company 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.


 


(ss)
No Disagreements with Accountants and Lawyers.    There are no material 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. In
addition, on or prior to the date hereof, the Company had discussions with its accountants about its financial statements
previously filed with the SEC. Based on those discussions, the Company has no reason to believe that it will need to restate
any such financial statements or any part thereof.


 


(tt) No
Disqualification Events.    With respect to Securities to be offered and sold hereunder in reliance on Rule
506(b) under the 1933 Act (“Regulation D Securities”), none of the Company, any of its predecessors, any
affiliated issuer, any director, executive officer, other officer of the Company participating in the offering hereunder, any
beneficial owner of 20% or more of the Company’s outstanding voting equity securities, calculated on the basis of voting
power, nor any promoter (as that term is defined in Rule 405 under the 1933 Act) connected with the Company in any capacity
at the time of sale (each, an “Issuer Covered Person” and, together, “Issuer Covered
Persons”) is subject to any of the “Bad Actor” disqualifications described in Rule 506(d)(1)(i) to
(viii) under the 1933 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. The Company has complied, to the extent applicable, with its disclosure obligations


 




    	- 22 -



    	 



    

 


under Rule
506(e), and has furnished to the Buyers a copy of any disclosures provided thereunder.


 


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


 


4.    COVENANTS.


 


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


 


(b)      Form
D and Blue Sky.    The Company agrees to file a Form D with respect to the Securities as required under Regulation D and to provide
a copy thereof to each Buyer promptly after such filing. The Company shall, on or promptly after 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 Buyers 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 Buyers on or promptly after the Closing Date. The Company shall make all filings and reports relating to the offer and sale
of the Securities required under applicable securities or “Blue Sky” laws of the states of the United States following
the Closing Date.


 


(c)      Reporting
Status.    Until the date on which the Investors (as defined in the Registration Rights Agreement) shall have sold all of the
Conversion Shares and Warrant Shares and none of the Notes or Warrants are outstanding (the “Reporting Period”),
the Company shall use its reasonable best efforts to timely file all reports required to be filed with the SEC pursuant to the
1934 Act, and the Company shall not terminate its status as an issuer required to file reports under the 1934 Act even if the 1934
Act or the rules and regulations thereunder would no longer require or otherwise permit such termination, and the Company shall
take all actions necessary to maintain its eligibility to register the Conversion Shares and Warrant Shares for resale by the Investors
on Form S-3.


 


(d)      Use
of Proceeds.    The Company will use the proceeds from the sale of the Securities for general corporate purposes, but not, directly
or indirectly, for (i) the satisfaction of any indebtedness of the Company or any of its Subsidiaries (other than payment of trade
payables incurred after the date hereof in the ordinary course of business of the Company and its Subsidiaries and consistent with
prior practices), (ii) the redemption or repurchase of any securities of the Company or any of its Subsidiaries, or (iii) the settlement
of any outstanding litigation.


 


(e)      Financial
Information.    The Company agrees to send the following to each Investor during the Reporting Period (i) unless the following
are filed with the SEC through EDGAR and are available to the public through the EDGAR system, within one (1) Business Day after
the filing thereof with the SEC, a copy of its Annual Reports on Form 10-K, any


 




    	- 23 -



    	 



    

 


Quarterly Reports
on Form 10-Q, any Current Reports on Form 8-K (or any analogous reports under the 1934 Act) and any registration statements (other
than on Form S-8) or amendments filed pursuant to the 1933 Act, and (ii) copies of any notices and other information made available
or given to the stockholders of the Company generally, contemporaneously with the making available or giving thereof to the stockholders.
As used herein, “Business Day” means any day other than Saturday, Sunday or other day on which commercial banks
in The City of New York are authorized or required by law to remain closed.


 


(f)       Listing.    The Company shall promptly secure the listing of all of the Registrable Securities (as defined in the Registration Rights Agreement)
upon each national securities exchange and automated quotation system, if any, upon which the Common Stock is then listed (subject
to official notice of issuance) and shall maintain such listing of all Registrable Securities from time to time issuable under
the terms of the Transaction Documents. The Company shall use reasonable best efforts to maintain the authorization for quotation
of the Common Stock on the Principal Market or any other Eligible Market (as defined in the Warrants). Neither the Company nor
any of its Subsidiaries shall take any action which would be reasonably expected to result in the delisting or suspension of the
Common Stock on the Principal Market. The Company shall pay all fees and expenses in connection with satisfying its obligations
under this Section 4(f).


 


(g)      Fees.    The Company shall reimburse Hudson Bay (a Buyer) or its designee(s) (in addition to any other expense amounts paid to any Buyer
or its counsel prior to the date of this Agreement) for all reasonably documented costs and expenses incurred in connection with
the transactions contemplated by the Transaction Documents (including all reasonable legal fees and disbursements in connection
therewith, documentation and implementation of the transactions contemplated by the Transaction Documents and due diligence in
connection therewith), which amount may be withheld by such Buyer from its purchase price for any Notes purchased at the Closing
to the extent not previously reimbursed by the Company. Each Buyer agrees to provide the Company with copies of documentation reasonably
requested supporting such fees the Company is required to reimburse under this Section 4(g). The Company shall be responsible for
the payment of any placement agent’s fees, DTC fees, financial advisory fees, or broker’s commissions (other than for Persons engaged
by any Buyer) relating to or arising out of the transactions contemplated hereby, including, without limitation, any fees or commissions
payable to the Placement Agent. The Company shall pay, and hold each Buyer harmless against, any liability, loss or expense (including,
without limitation, reasonable attorney’s fees and out-of-pocket expenses) arising in connection with any claim relating to any
such payment. Except as otherwise set forth in the Transaction Documents, each party to this Agreement shall bear its own expenses
in connection with the sale of the Securities to the Buyers.


 


(h)      Pledge
of Securities.    The Company acknowledges and agrees that the Securities may be pledged by an Investor in connection with a bona
fide margin agreement or other loan or financing arrangement that is secured by the Securities. The pledge of Securities shall
not be deemed to be a transfer, sale or assignment of the Securities hereunder, and no Investor effecting a pledge of Securities
shall be required to provide the Company with any notice thereof or otherwise make any delivery to the Company pursuant to this
Agreement or any other Transaction Document, including, without limitation, Section 2(f) hereof; provided


 




    	- 24 -



    	 



    

 


that an Investor
and its pledgee shall be required to comply with the provisions of Section 2(g) hereof in order to effect a sale, transfer or assignment
of Securities to such pledgee. The Company hereby agrees to execute and deliver such documentation as a pledgee of the Securities
may reasonably request in connection with a pledge of the Securities to such pledgee by an Investor.


 


(i)       Disclosure
of Transactions and Other Material Information.    On or before 8:30 a.m., New York City time, on the first Business Day after
this Agreement has been executed, the Company shall issue a press release (or press releases) reasonably acceptable to the Buyers
and file one or more Current Reports on Form 8-K including with respect to the earnings of the Company, the Investor Presentation
and describing the material terms of the transactions contemplated by the Transaction Documents in the form required by the 1934
Act and attaching the material Transaction Documents (including, without limitation, this Agreement, the form of Note, the form
of the Warrant, the form of Lock-Up Agreement, the form of Guarantee Agreement and the form of Registration Rights Agreement as
exhibits to such filing (collectively, the “8-K Filing”). From and after the filing of the 8-K Filing with the
SEC, no Buyer shall be in possession of any material, nonpublic information received from the Company, any of its Subsidiaries
or any of their respective officers, directors, employees or agents, that is not disclosed in the 8-K Filing. In addition, effective
upon the filing of the 8-K Filing, the Company acknowledges and agrees that any and all confidentiality or similar obligations
under any agreement, whether written or oral, between the Company, any of its Subsidiaries or any of their respective officers,
directors, affiliates, employees or agents, on the one hand, and any of the Buyers or any of their affiliates, on the other hand,
shall terminate. The Company shall not, and shall cause each of its Subsidiaries and its and each of their respective officers,
directors, employees and agents, not to, provide any Buyer with any material, nonpublic information regarding the Company or any
of its Subsidiaries from and after the filing of the 8-K Filing with the SEC without the express prior written consent of such
Buyer. To the extent that the Company delivers any material, non-public information to a Buyer without such Buyer’s consent Buyer
(or, if such consent is conditioned upon the release of such material, nonpublic information at a specific date, after such specific
date), the Company hereby covenants and agrees that such Buyer shall not have any duty of confidentiality with respect to, or a
duty not to trade on the basis of, such material, non-public information. Subject to the foregoing, neither the Company, its Subsidiaries
nor any Buyer shall issue any press releases or any other public statements with respect to the transactions contemplated hereby;
provided, however, that the Company shall be entitled, without the prior approval of any Buyer, to make any press release or other
public disclosure with respect to such transactions (i) in substantial conformity with the 8-K Filing and contemporaneously therewith
and (ii) as is required by applicable law and regulations (provided that in the case of clause (i) each Buyer shall be consulted
by the Company in connection with any such press release or other public disclosure prior to its release). Except for the 8-K Filing,
the Registration Statement required to be filed pursuant to the Registration Rights Agreement or as otherwise required by law,
without the prior written consent of any applicable Buyer, neither the Company nor any of its Subsidiaries or affiliates shall
disclose the name of such Buyer in any filing, announcement, release or otherwise.


 


(j)       Additional
Notes; Variable Securities.    So long as any Buyer beneficially owns any Notes, the Company will not issue any Notes other than
to the Buyers as


 




    	- 25 -



    	 



    

 


contemplated
hereby and the Company shall not issue any other securities that would cause a breach or default under the Notes. For so long as
any Notes or Warrants remain outstanding, the Company shall not, in any manner, issue or sell any rights, warrants or options to
subscribe for or purchase Common Stock or directly or indirectly convertible into or exchangeable or exercisable for Common Stock
at a price which varies or may vary with the market price of the Common Stock, including by way of one or more reset(s) to any
fixed price unless the conversion, exchange or exercise price of any such security cannot be less than the then applicable Conversion
Price (as defined in the Notes) with respect to the Common Stock into which any Note is convertible or the then applicable Exercise
Price (as defined in the Warrants) with respect to the Common Stock into which any Warrant is exercisable.


 


(k)      Corporate
Existence.    So long as any Buyer beneficially owns any Securities, the Company shall (i) maintain its corporate existence and
(ii) not be party to any Fundamental Transaction (as defined in the Notes) unless the Company is in compliance with the applicable
provisions governing Fundamental Transactions set forth in the Notes and the Warrants.


 


(l)       Reservation
of Shares.    So long as any Notes or Warrants remain outstanding, the Company shall take all action necessary to at all times
have authorized, and reserved for the purpose of issuance, no less than the Required Reserved Amount. If at any time the number
of shares of Common Stock authorized and reserved for issuance is not sufficient to meet the Required Reserved Amount, the Company
will promptly take all corporate action necessary to authorize and reserve a sufficient number of shares, including, without limitation,
calling a special meeting of stockholders to authorize additional shares to meet the Company’s obligations under Section 3(c),
in the case of an insufficient number of authorized shares, obtain stockholder approval of an increase in such authorized number
of shares, and voting the management shares of the Company in favor of an increase in the authorized shares of the Company to ensure
that the number of authorized shares is sufficient to meet the Required Reserved Amount.


 


(m)     Conduct
of Business.    The business of the Company and its Subsidiaries shall not be conducted in violation of any law, ordinance or
regulation of any governmental entity, except where such violations would not result, either individually or in the aggregate,
in a Material Adverse Effect.


 


(n)      Additional
Issuances of Securities.


 


(i)       [Intentionally
Omitted]


 


(ii)      From
the date hereof until the earlier of (x) the time of the registration of all of the Registrable Securities (as defined in the Registration
Rights Agreement) pursuant to and in accordance with the Registration Rights Agreement or (y) such time as all of the Registrable
Securities, if a registration statement is not available for the resale of all of the Registrable Securities, may be sold without
restriction or limitation pursuant to Rule 144 and without the requirement to be in compliance with Rule 144(c)(1), the Company
shall not, directly or indirectly, file any registration statement with the SEC, or file any amendment or supplement thereto with
respect to any person, or grant any registration


 




    	- 26 -



    	 



    

 


rights to
any Person that can be exercised prior to the earlier of such time as set forth above, other than pursuant to the Registration
Rights Agreement and any registration statement for the issuance of securities pursuant to an employee benefit plan or securities
award, as registered on Form S-8.


 


(iii)      From
the date hereof until ninetieth (90th) day after the Closing Date, the Company will not, (i) directly or indirectly,
enter into any transaction or series of transactions that constitutes a Dilutive Issuance (as defined in the Warrants) or (ii)
be party to any solicitations, negotiations or discussions with regard to the foregoing.


 


(iv)      The
restrictions contained in subsection (iii) of this Section 4(n) shall not apply in connection with the issuance of any Excluded
Securities (as defined in the Warrants).


 


(o)       Lock-Up.    The Company shall not amend, modify, waive or terminate any provision of any of the Lock-Up Agreements except to extend the term
of the lock-up period and shall enforce the provisions of each Lock-Up Agreement in accordance with its terms. If any officer or
director that is a party to a Lock-Up Agreement breaches any provision of a Lock-Up Agreement, the Company shall promptly use its
reasonable best efforts to seek specific performance of the terms of such Lock-Up Agreement.


 


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


 


(q)  Passive
Foreign Investment Company.    The Company shall conduct its business, and shall cause its Subsidiaries to conduct their respective
businesses, in such a manner as will ensure that the Company will not be deemed to constitute a passive foreign investment company
within the meaning of Section 1297 of the Code.


 


(r)  Stock
Splits.    Until the Notes are no longer outstanding, the Company shall not effect any stock combination, reverse stock split
or other similar transaction (or make any public announcement or disclosure with respect to any of the foregoing) without the prior
written consent of the Required Holders (as defined below), provided, however, that no consent of the Required Holders shall
be required for a reverse stock split of the Common Stock that the Board of Directors of the Company, in the good faith exercise
of its business judgment, determines to be necessary or advisable to list or continue listing the Common Stock on the Principal
Market or another trading market.


 


(s)  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 Buyer and Greenberg Traurig LLP executed copies of the Transaction Documents, Securities and any other documents
required to be delivered to any party pursuant to Section 7 hereof or otherwise.


 


(t)  Subsidiary
Guarantee.    For so long as any Notes remain outstanding, upon any entity becoming a Subsidiary of the Company, the Company shall
promptly cause each


 




    	- 27 -



    	 



    

 


such Subsidiary
to become party to each Guarantee Agreement by executing a joinder to each Guarantee Agreement reasonably satisfactory in form
and substance to the Required Holders.


 


		5.	REGISTER; TRANSFER AGENT INSTRUCTIONS.



 


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


 


(b)      Transfer
Agent Instructions.    The Company shall, subject to the limitation contained in the Notes, issue irrevocable instructions to
its transfer agent, and any subsequent transfer agent, in the form of Exhibit E attached hereto (the “Transfer
Agent Instructions”) to issue certificates or credit shares to the applicable balance accounts at DTC, registered in
the name of each Buyer or its respective nominee(s), for the Conversion Shares and the Warrant Shares issued at the Closing or
upon conversion of the Notes or exercise of the Warrants in such amounts as specified from time to time by each Buyer to the Company
upon conversion of the Notes or exercise of the Warrants. The Company warrants that no instruction other than the Transfer Agent
Instructions referred to in this Section 5(b), and stop transfer instructions to give effect to Section 2(g) hereof, will be given
by the Company to its transfer agent, and that the Securities shall otherwise be freely transferable on the books and records of
the Company as and to the extent provided in this Agreement and the other Transaction Documents. If a Buyer effects a sale, assignment
or transfer of the Securities in accordance with Section 2(g), the Company shall permit the transfer and shall promptly instruct
its transfer agent to issue one or more certificates or credit shares to the applicable balance accounts at DTC in such name and
in such denominations as specified by such Buyer to effect such sale, transfer or assignment. In the event that such sale, assignment
or transfer involves the Conversion Shares or the Warrant Shares sold, assigned or transferred pursuant to an effective registration
statement or pursuant to Rule 144, the transfer agent shall issue such Securities to the Buyer, assignee or transferee, as the
case may be, without any restrictive legend. The Company acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to a Buyer. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under
this Section 5(b) will be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions
of this Section 5(b), that a Buyer shall be entitled, in addition to all other available remedies, to an order and/or injunction
restraining any breach and requiring immediate issuance and transfer, without the necessity of showing economic loss and without
any bond or other security being required. The Company shall cause its counsel to issue the legal opinion referred to in the Transfer
Agent Instructions to the Company’s transfer agent on each Effective Date (as defined in the Registration Rights Agreement).
Any fees (with respect to the transfer agent, counsel to the Company or otherwise) associated with the issuance of such opinion
or the removal of any legends on any of the Securities shall be borne by the Company.


 




    	- 28 -



    	 



    

 


(c)  Failure
to Timely Delivery; Buy-In.    If the Company fails to (i) issue and deliver (or cause to be delivered) to a Buyer by the Required
Delivery Date a certificate representing the Securities so delivered to the Company by such Buyer that is free from all restrictive
and other legends or (ii) credit the balance account of such Buyer’s or such Buyer’s nominee with DTC for such number
of Conversion Shares or Warrant Shares so delivered to the Company, and if on or after the Required Delivery Date such Buyer purchases
(in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by such Buyer of all or
any portion of the number of shares of Common Stock, or a sale of a number of shares of Common Stock equal to all or any portion
of the number of shares of Common Stock that such Buyer anticipated receiving from the Company without any restrictive legend,
then, in addition to all other remedies available to such Buyer, the Company shall, within three (3) Trading Days after such Buyer’s
request and in such Buyer’s sole discretion, either (A) pay cash to such Buyer in an amount equal to such Buyer’s total
purchase price (including brokerage commissions and other out-of-pocket expenses, if any) for the shares of Common Stock so purchased
(including brokerage commissions and other out-of-pocket expenses, if any) (the “Buy-In Price”), at which point
the Company’s obligation to so deliver such certificate or credit such Buyer’s balance account shall terminate and
such shares shall be cancelled, or (B) promptly honor its obligation to so deliver to such Buyer a certificate or certificates
or credit such Buyer’s DTC account representing such number of shares of Common Stock that would have been so delivered if
the Company timely complied with its obligations hereunder and pay cash to such Buyer in an amount equal to the excess (if any)
of the Buy-In Price over the product of (I) such number of shares of Conversion Shares that the Company was required to deliver
to such Buyer by the Required Delivery Date multiplied by (II) the lowest Closing Sale Price (as defined in the Notes) of the Common
Stock on any Trading Day during the period commencing on the date of the delivery by such Buyer to the Company of the applicable
Conversion Shares or Warrant Shares (as the case may be) and ending on the date of such delivery and payment under this clause
(B).


 


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



 


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


 


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


 


(ii)      Such
Buyer shall have delivered the purchase price contemplated by Section 1(c) hereof (less, in the case of Hudson Bay, the amounts
withheld pursuant to Section 4(g)) for the Notes and the related Warrants being purchased by such Buyer at the Closing pursuant
to Section 1(d) hereof by wire transfer of immediately available funds pursuant to the wire instructions provided by the Company.


 


(iii)     The
representations and warranties of such Buyer shall be true and correct as of the date when made and in all material respects (except
for such


 




    	- 29 -



    	 



    

 


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


 


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



 


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


 


(i)         The
Company and each of its Subsidiaries shall have duly executed and delivered to such Buyer each of the following documents to which
it is a party: (A) each of the Transaction Documents, (B) the Notes (allocated in such principal amounts as such Buyer shall request),
being purchased by such Buyer at the Closing pursuant to this Agreement and (C) the related Warrants (allocated in such amounts
as such Buyer shall request) being purchased by such Buyer at the Closing pursuant to this Agreement.


 


(ii)        Such
Buyer shall have received the opinion of Fulbright & Jaworski LLP, the Company’s outside counsel, dated as of the Closing Date,
in substantially the form of Exhibit F attached hereto.


 


(iii)        The
Company shall have delivered to such Buyer a copy of the Transfer Agent Instructions, in the form of Exhibit E attached
hereto, which instructions shall have been delivered to and acknowledged in writing by the Company’s transfer agent.


 


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


 


(v)         The
Company shall have delivered to such Buyer a certificate evidencing the Company’s and each of its Subsidiaries’ qualification as
a foreign corporation and good standing issued by the Secretary of State (or comparable office) of each jurisdiction in which the
Company and its Subsidiaries conduct business, as of a date within ten (10) days of the Closing Date.


 


(vi)       The
Company shall have delivered to such Buyer a certified copy of the Certificate of Incorporation of the Company and each of its
Subsidiaries as certified by the Secretary of State (or comparable office) of the jurisdiction of formation of the Company and
each of its Subsidiaries within ten (10) days of the Closing Date.


 


(vii)      The
Company shall have delivered to such Buyer a certificate, executed by the Secretary of the Company and dated as of the Closing
Date, as to (i) the


 




    	- 30 -



    	 



    

 


resolutions
consistent with Section 3(b) as adopted by the Company’s and each of its Subsidiaries’ Board of Directors in a form reasonably
acceptable to such Buyer, (ii) the Certificate of Incorporation of the Company and each of its Subsidiaries and (iii) the Bylaws
of the Company and each of its Subsidiaries, each as in effect at the Closing, in the form attached hereto as Exhibit G.


 


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


 


(ix)        The
Company shall have delivered to such Buyer a letter from the Company’s transfer agent certifying the number of shares of Common
Stock outstanding as of a date within five (5) days of the Closing Date.


 


(x)         The
Company shall have delivered to each Buyer a lock-up agreement in the form attached hereto as Exhibit I executed and delivered
by each of the Persons listed on Schedule 7(x) (collectively, the “Lock Up Agreements”).


 


(xi)        The Common Stock (I) shall be designated for quotation or listed on the Principal Market and (II) shall not have been suspended,
as of the Closing Date, by the SEC or the Principal Market from trading on the Principal Market nor shall suspension by the SEC
or the Principal Market have been threatened, as of the Closing Date, either (A) in writing by the SEC or the Principal Market
or (B) by falling below the minimum listing maintenance requirements of the Principal Market.


 


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


 


(xiii)      Each
of the Company’s Subsidiaries shall have executed and delivered to such Buyer the Guarantee Agreement.


 


(xiv)      No
statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or other governmental entity of competent jurisdiction that prohibits the consummation of any of the transactions
contemplated by the Transaction Documents.


 




    	- 31 -



    	 



    

 


(xv)       Since
the date of execution of this Agreement, no event or series of events shall have occurred that reasonably would have or result
in a Material Adverse Effect.


 


(xvi)      Such
Buyer shall have received a letter on the letterhead of the Company, duly executed by an officer of the Company, setting forth
the wire transfer instructions of the Company


 


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


 


8.             TERMINATION.    In the event that the Closing shall not have occurred with respect to a Buyer on or before five (5) Business Days from the date
hereof due to the Company’s or such Buyer’s failure to satisfy the conditions set forth in Sections 6 and 7 above (and the nonbreaching
party’s failure to waive such unsatisfied condition(s)), the nonbreaching party shall have the option to terminate this Agreement
with respect to such breaching party at the close of business on such date by delivering a written notice to that effect to each
other party to this Agreement and without liability of any party to any other party; provided, however, that if this
Agreement is terminated pursuant to this Section 8, the Company shall remain obligated to reimburse Hudson Bay or its designee(s),
as applicable, for the expenses described in Section 4(g) above. Nothing contained in this Section 8 shall be deemed to release
any party from any liability for any breach by such party of the terms and provisions of this Agreement or the other Transaction
Documents or to impair the right of any party to compel specific performance by any other party of its obligations under this Agreement
or the other Transaction Documents.


 


9.             MISCELLANEOUS.


 


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


 




    	- 32 -



    	 



    

 


CONNECTION
WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.


 


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


 


(c)      Headings.    The headings of this Agreement are for convenience of reference and shall not form part of, or affect the interpretation of, this
Agreement. Unless the context clearly indicates otherwise, each pronoun herein shall be deemed to include the masculine, feminine,
neuter, singular and plural forms thereof. The terms “including,” “includes,” “include” and
words of like import shall be construed broadly as if followed by the words “without limitation.” The terms “herein,”
“hereunder,” “hereof” and words of like import refer to this entire Agreement instead of just the provision
in which they are found.


 


(d)      Severability;
Maximum Payment Amounts.    If any provision of this Agreement is prohibited by law or otherwise determined to be invalid or unenforceable
by a court of competent jurisdiction, the provision that would otherwise be prohibited, invalid or unenforceable shall be deemed
amended to apply to the broadest extent that it would be valid and enforceable, and the invalidity or unenforceability of such
provision shall not affect the validity of the remaining provisions of this Agreement so long as this Agreement as so modified
continues to express, without material change, the original intentions of the parties as to the subject matter hereof and the prohibited
nature, invalidity or unenforceability of the provision(s) in question does not substantially impair the respective expectations
or reciprocal obligations of the parties or the practical realization of the benefits that would otherwise be conferred upon the
parties. The parties will endeavor in good faith negotiations to replace the prohibited, invalid or unenforceable provision(s)
with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceable provision(s).
Notwithstanding anything to the contrary contained in this Agreement, the Guarantee Agreements or any other Transaction Document
(and without implication that the following is required or applicable), it is the intention of the parties that in no event shall
amounts and value paid by the Company and/or its Subsidiaries (as the case may be), or payable to or received by any of the Buyers,
under the Guarantee Agreements or the Transaction Documents (including without limitation, any amounts that would be characterized
as “interest” under applicable law) exceed amounts permitted under any applicable law. Accordingly, if any obligation
to pay, payment made to any Buyer, or collection by any Buyer pursuant the Transaction Documents or Guarantee Agreements is finally
judicially determined to be contrary to any such applicable law, such obligation to pay, payment or collection shall be deemed
to have been made by mutual mistake of such Buyer, the Company and its Subsidiaries and such amount shall be deemed to have been
adjusted with retroactive effect to the maximum amount or rate of interest, as the case may be, as would not be so prohibited by
the applicable law.


 


(e)      Entire
Agreement; Amendments.    This Agreement and the other Transaction Documents supersede all other prior oral or written agreements
between the


 




    	- 33 -



    	 



    

 


Buyers, the
Company, their affiliates and Persons acting on their behalf with respect to the matters discussed herein, and this Agreement,
the other Transaction Documents and the instruments referenced herein and therein contain the entire understanding of the parties
with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither the Company
nor any Buyer makes any representation, warranty, covenant or undertaking with respect to such matters. Provisions of this Agreement
may be amended and the observance thereof may be waived (either generally or in a particular instance and either retroactively
or prospectively), only with the written consent of the Company and the holders of at least a majority of the aggregate number
of Registrable Securities issued or issuable under the Notes and Warrants and shall include Hudson Bay so long as Hudson Bay or
any of its affiliates holds any Registrable Securities (the “Required Holders”). Any amendment or waiver effected
in accordance with this Section 9(e) shall be binding upon each Buyer and holder of Securities and the Company. No such amendment
shall be effective to the extent that it applies to less than all of the Buyers or holders of Securities. No consideration shall
be offered or paid to any Person to amend or consent to a waiver or modification of any provision of any of the Transaction Documents
unless the same consideration (other than the reimbursement of legal fees) also is offered to all of the parties to the Transaction
Documents, holders of Notes or holders of the Warrants, as the case may be. The Company has not, directly or indirectly, made any
agreements with any Buyers relating to the terms or conditions of the transactions contemplated by the Transaction Documents except
as set forth in the Transaction Documents. Without limiting the foregoing, the Company confirms that, except as set forth in this
Agreement, no Buyer has made any commitment or promise or has any other obligation to provide any financing to the Company or otherwise.
As a material inducement for each Buyer to enter into this Agreement, the Company expressly acknowledges and agrees that (x) no
due diligence or other investigation or inquiry conducted by a Buyer, any of its advisors or any of its representatives shall affect
such Buyer’s right to rely on, or shall modify or qualify in any manner or be an exception to any of, the Company’s
representations and warranties contained in this Agreement or any other Transaction Document and (y) unless a provision of this
Agreement or any other Transaction Document is expressly preceded by the phrase “except as disclosed in the SEC Documents,”
nothing contained in any of the SEC Documents shall affect such Buyer’s right to rely on, or shall modify or qualify in any
manner or be an exception to any of, the Company’s representations and warranties contained in this Agreement or any other
Transaction Document.


 


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


 


  If to the Company:


 


 The Wet Seal, Inc.


 26972 Burbank


 




    	- 34 -



    	 



    

 





	 	Foothill Ranch, CA 92610
	 	Telephone:	(949) 699-3919
	 	Facsimile:	(949) 699-4825
	 	Attention:	Chief Financial Officer


 


  With a copy (for informational purposes only) to:


 











	 	Norton Rose Fulbright
	 	666 Fifth Avenue
	 	New York, NY 10103
	 	Telephone:	(212) 318-3206
	 	Facsimile:	(212) 318-3400
	 	Attention:	Mara H. Rogers, Esq.
	 	E-mail:	mara.rogers@nortonrosefulbright.com


 


  If to the Transfer Agent:


 











	 	American Stock Transfer & Trust Company, LLC.
	 	6201 15th Avenue
	 	Brooklyn, NY 11219
	 	Telephone:	(800) 937-5449
	 	Facsimile:	(718) 921-8355
	 	Attention:	Vito Cirone
	 	E-mail:	vcirone@amstock.com


 


If to a Buyer, to its address, facsimile
number and e-mail address set forth on the Schedule of Buyers, with copies to such Buyer’s representatives as set forth on the
Schedule of Buyers,


 


  with a copy (for informational purposes only) to:


 


Greenberg Traurig, LLP


MetLife Building


200 Park Avenue


New York, NY 10166


Telephone: (212) 801-9200


Facsimile: (212) 805-9222


Attention: Michael A. Adelstein, Esq.


 


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


 




    	- 35 -



    	 



    

 


facsimile or receipt from an overnight
courier service in accordance with clause (i), (ii) or (iii) above, respectively.


 


(g)      Successors
and Assigns.    This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and
assigns, including any purchasers of the Notes or the Warrants. The Company shall not assign this Agreement or any rights or obligations
hereunder without the prior written consent of the Required Holders, including by way of a Fundamental Transaction (unless the
Company is in compliance with the applicable provisions governing Fundamental Transactions set forth in the Notes and the Warrants).
A Buyer may assign some or all of its rights hereunder in connection with any transfer of any of its Securities without the consent
of the Company, in which event such assignee shall be deemed to be a Buyer hereunder with respect to such assigned rights.


 


(h)      Third
Party Beneficiaries.    This Agreement is intended for the benefit of the parties hereto and their respective permitted successors
and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, except that each Indemnitee
shall have the right to enforce the obligations of the Company with respect to Section 9(k). The Placement Agent shall be third
party beneficiaries with respect to the representations and warranties of the Buyers and the Company in Sections 2 and 3 hereof.


 


(i)       Survival.    The representations, warranties, agreements and covenants shall survive the Closing. Each Buyer shall be responsible only for its
own representations, warranties, agreements and covenants hereunder.


 


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


 


(k)      Indemnification.    In consideration of each Buyer’s execution and delivery of the Transaction Documents and acquiring the Securities thereunder and
in addition to all of the Company’s other obligations under the Transaction Documents, the Company shall defend, protect, indemnify
and hold harmless each Buyer and each other holder of the Securities and all of their stockholders, partners, members, officers,
directors, employees and direct or indirect investors and any of the foregoing Persons’ agents or other representatives (including,
without limitation, those retained in connection with the transactions contemplated by this Agreement) (collectively, the “Indemnitees”)
from and against any and all actions, causes of action, suits, claims, losses, costs, penalties, fees, liabilities and damages,
and expenses in connection therewith (irrespective of whether any such Indemnitee is a party to the action for which indemnification
hereunder is sought), and including reasonable attorneys’ fees and disbursements (the “Indemnified Liabilities”),
incurred by any Indemnitee as a result of, or arising out of, or relating to (a) any misrepresentation or breach of any representation
or warranty made by the Company in the Transaction Documents or any other certificate, instrument or document contemplated hereby
or thereby, (b) any breach of any covenant, agreement or obligation of the Company contained in the Transaction Documents or any
other certificate, instrument or document contemplated hereby or thereby or (c) any cause of action,


 




    	- 36 -



    	 



    

 


suit or claim
brought or made against such Indemnitee by a third party (including for these purposes a derivative action brought on behalf of
the Company) and arising out of or resulting from (i) the execution, delivery, performance or enforcement of the Transaction Documents
or any other certificate, instrument or document contemplated hereby or thereby, (ii) any transaction financed or to be financed
in whole or in part, directly or indirectly, with the proceeds of the issuance of the Securities, (iii) any disclosure made by
such Buyer pursuant to Section 4(i), or (iv) the status of such Buyer or holder of the Securities as an investor in the Company
pursuant to the transactions contemplated by the Transaction Documents. To the extent that the foregoing undertaking by the Company
may be unenforceable for any reason, the Company shall make the maximum contribution to the payment and satisfaction of each of
the Indemnified Liabilities that is permissible under applicable law. Except as otherwise set forth herein, the mechanics and procedures
with respect to the rights and obligations under this Section 9(k) shall be the same as those set forth in Section 6 of the Registration
Rights Agreement.


 


(l)       No
Strict Construction.    The language used in this Agreement will be deemed to be the language chosen by the parties to express
their mutual intent, and no rules of strict construction will be applied against any party. No specific representation or warranty
shall limit the generality or applicability of a more general representation or warranty. Each and every reference to share prices,
shares of Common Stock and any other numbers in this Agreement that relate to the Common Stock shall be automatically adjusted
for any stock splits, stock dividends, stock combinations, recapitalizations or other similar transactions that occur with respect
to the Common Stock after the date of this Agreement. Notwithstanding any references to “Buyers” herein, Hudson Bay
and the Company acknowledge and agree that as of the date hereof, Hudson Bay is the only Buyer that is a party hereto.


 


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


 


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


 




    	- 37 -



    	 



    

 


from time to
time upon written notice to the Company, any relevant notice, demand or election in whole or in part without prejudice to its future
actions and rights.


 


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


 


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


 


[Signature Page Follows]


 




    	- 38 -



    	 



    

 


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


 


	 	 	COMPANY:
	 	 	 
	 	 	THE WET SEAL, INC.
	 	 	 	 
	 	 	By:	/s/ Steven H. Benrubi
	 	 	 	Name: Steven H. Benrubi
	 	 	 	Title: Chief Financial Officer


 


[Signature Page to Securities Purchase
Agreement]


 




    	 



    	 



    

 


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


 


	 	 	BUYERS:
	 	 	 
	 	 	HUDSON BAY MASTER FUND LTD. 
	 	 	 
	 	 	By: Hudson Bay Capital Management LP, as its
	 	 	Investment Manager
	 	 	 	 
	 	 	By:	/s/ George Antonopoulos
	 	 	 	Name:  George Antonopoulos
	 	 	 	Title:  Authorized Signatory


 


[Signature Page to Securities Purchase
Agreement]


 




    	 



    	 



    

 


SCHEDULE OF BUYERS


 


	(1)	 	(2)	 	(3)	 	 	(4)	 	 	(5)	 	 	(6)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Buyer
	 	Address and
 Facsimile Number
	 	Aggregate
 Principal
 Amount of Notes
	 	 	Number of 
 Warrant Shares
	 	 	Purchase Price
	 	 	Legal Representative’s Address
 and Facsimile Number

	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Hudson Bay Master Fund Ltd.	 	777 Third Avenue, 30th Floor
 New York, NY 10017
 Attention: Yoav Roth
 George Antonopolous
 Facsimile:  646-214-7946
 Telephone: 212-571-1244
 E-mail: investments@hudsonbaycapital.com
 operations@hudsonbaycapital.com
	 	$	27,000,000	 	 	 	8,804,348	 	 	$	27,000,000	 	 	Greenberg Traurig, LLP
 MetLife Building
 200 Park Avenue
 New York, NY 10166
 Telephone: (212) 801-9200
 Facsimile: (212) 805-9222
 Attention: Michael A. Adelstein, Esq.