Exhibit 10.1


 


SECURITIES PURCHASE AGREEMENT


 


This Securities Purchase
Agreement (this “Agreement”) is dated as of December 23, 2015, between Reign Sapphire Corporation, a Delaware
corporation (the “Company”), and each purchaser identified on the signature pages hereto (each, including its
successors and permitted assigns, a “Purchaser” and collectively, the “Purchasers”).


 


WHEREAS, subject to
the terms and conditions set forth in this Agreement and pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended
(the “Securities Act”), and Rule 506 promulgated thereunder, the Company desires to issue and sell to each Purchaser,
and each Purchaser, severally and not jointly, desires to purchase from the Company, securities of the Company as more fully described
in this Agreement (the “Offering”).


 


NOW, THEREFORE, IN
CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the Company and each Purchaser agree as follows:


 


ARTICLE I.


DEFINITIONS


 


1.1         Definitions.
In addition to the terms defined elsewhere in this Agreement: (a) capitalized terms that are not otherwise defined herein have
the meanings given to such terms in the Notes (as defined herein), and (b) the following terms have the meanings set forth in this
Section 1.1:


 


“Acquiring
Person” shall have the meaning ascribed to such term in Section 4.7. 


 


“Action”
shall have the meaning ascribed to such term in Section 3.1(j).


 


“Affiliate”
means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common
control with a Person, as such terms are used in and construed under Rule 405 under the Securities Act.


 


“Board
of Directors” means the board of directors of the Company.


 


“Business
Day” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or
any day on which banking institutions in the State of New York are required by law or other governmental action to close.


 


“Buy-In”
shall have the meaning ascribed to such term in Section 4.1(h).


 


“Closing”
means the Initial Closing and Subsequent Closing, if any, of the purchase and sale of the Securities pursuant to Section 2.1 or
2.4.


 


“Closing
Date” means each of the Initial Closing Date and the Subsequent Closing Date, if any, and is the Business Day on which
all of the Transaction Documents have been executed and delivered by the applicable parties thereto, and all conditions precedent
to (i) the Purchasers’ obligation to pay the Subscription Amount at such Closing, and (ii) the Company’s obligations
to deliver the Securities to be issued and sold at such Closing, in each case, have been satisfied or waived, but in no event later
than the tenth Business Day following the date hereof in the case of the Initial Closing.


 




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“Commission”
means the United States Securities and Exchange Commission.


 


“Common
Stock” means the common stock of the Company, par value $0.0001 per share, and any other class of securities into which
such securities may hereafter be reclassified or changed.


 


“Common
Stock Equivalents” means any securities of the Company or the Subsidiaries which would entitle the holder thereof to
acquire at any time Common Stock, including, without limitation, any debt, preferred stock, right, option, warrant or other instrument
that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common
Stock.


 


“Company
Counsel” means, Qian & Company, 135 Main Street, 9th Floor, San Francisco, CA 94105, Attn: Alan S. Gutterman,
Esq., Fax: (415) 267-1899.


 


“Conversion
Price” shall have the meaning ascribed to such term in the Notes.


 


“Corporate
Guarantor” means Australian Sapphire Corporation, a California corporation.


 


“Corporate
Guaranty” means the form of agreement annexed hereto as Exhibit F.


 


“DGCL”
means the Delaware General Corporation Law.


 


“Disclosure
Schedules” means the Disclosure Schedules of the Company delivered concurrently herewith.


 


“Effective
Date” means the earliest of the date that (a) the Registration Statement has been declared effective by the Commission,
or (b) (i) all of the Underlying Shares have been sold pursuant to Rule 144, or (ii) may be sold by the holders thereof pursuant
to Rule 144 without the requirement for the Company to be in compliance with the current public information required under Rule
144 and without volume or manner-of-sale restrictions, and (c) Company counsel has delivered to the Transfer Agent and holders
a standing written unqualified opinion that resales may then be made by such holders of the Underlying Shares pursuant to an effective
Registration Statement or the exemption described in (b)(ii) above, which opinion shall be in form and substance reasonably acceptable
to such holders.


 


“Escrow
Agreement” means the escrow agreement to be employed in connection with the sale of the Securities, a copy of which is
annexed hereto as Exhibit C.


 


“Equity
Line of Credit” shall have the meaning ascribed to such term in Section 4.13.


 


“Event
of Default” shall have the meaning ascribed thereto in the Note.


 


“Exchange
Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.


 




    	 	2	 



     


    

  


“Exempt
Issuance” means the issuance of (a) shares of Common Stock and options to officers, directors, or employees of the Company,
prior to and after the Initial Closing Date up to the amounts and on the terms set forth on Schedule 3.1(g) consistent with
past practices, (b) securities upon the exercise or exchange of or conversion of any Securities issued hereunder (subject to adjustment
for forward and reverse stock splits and the like that occur after the date hereof) and/or other securities exercisable or exchangeable
for or convertible into shares of Common Stock issued and outstanding on the date of this Agreement, provided that such securities
and any term thereof have not been amended since the date of this Agreement to increase the number of such securities or to decrease
the issue price, exercise price, exchange price or conversion price of such securities and which securities and the principal terms
thereof are set forth on Schedule 3.1(g), and described in the SEC Reports filed not later than ten (10) days before the
Initial Closing Date, (c) securities issued pursuant to acquisitions or strategic transactions approved by a majority of the disinterested
directors of the Company, provided that any such issuance shall only be to a Person (or to the equityholders of a Person) which
is, itself or through its subsidiaries, an operating company or an owner of an asset in a business synergistic with the business
of the Company and shall be intended to provide to the Company substantial additional benefits in addition to the investment of
funds, but shall not include a transaction in which the Company is issuing securities primarily for the purpose of raising capital
or to an entity whose primary business is investing in securities, (d) securities issuable pursuant to, and in accordance with
the terms and conditions set forth in the Stock Option Plans as are consistent with past practices and approved by a majority of
the disinterested directors of the Company, not in excess of the amounts as set forth on Schedule 3.1(g), (e) securities
issued or issuable pursuant to this Agreement, the Notes or the Warrants including, without limitation, Section 4.17, or upon exercise
or conversion of any such securities, and (f) the S-1 Securities (but not for purposes of Section 5(e) of the Note, nor Section
3(e) of the Warrant).


 


“FCPA”
means the Foreign Corrupt Practices Act of 1977, as amended.


 


“Form 8-K” shall have the
meaning ascribed to such term in Section 4.6.


 


“Form S-1”
means the Company’s effective registration statement filed with the Commission under file number 333-204486, which may be
amended to (i) increase the number of shares of Common Stock offered by the Company by an additional 6,666,666 Shares, and (ii)
the offering price of the Shares included in such registration statement may be decreased from $0.50 per Share to $0.30 per Share.


 


“GAAP” shall have the meaning
ascribed to such term in Section 3.1(h).


 


“G&M”
shall mean Grushko & Mittman, P.C., with offices located at 515 Rockaway Avenue, Valley Stream, New York 11581, Fax: 212-697-3575.


 


“Guarantor
Security Agreement” means the form of agreement annexed hereto as Exhibit G.


 


“Incentive
Shares” shall have the meaning ascribed to such term in Section 2.1.


 


“Indebtedness”
shall have the meaning ascribed to such term in Section 3.1(z).


 


“Initial
Closing” shall have the meaning ascribed to such term in Section 2.1.


 


“Initial
Closing Date” shall mean the date upon which the Initial Closing occurs.


 


“Initial
Trading Day” means the third day on which the Common Stock actually trades on a Trading Market with at least two market
makers.


 




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“Intellectual
Property Rights” shall have the meaning ascribed to such term in Section 3.1(o).


 


“Legal
Opinion” shall have the meaning ascribed to such term in Section 2.2(a)(ii).


 


“Legend
Removal Date” shall have the meaning ascribed to such term in Section 4.1(c).


 


“Liens”
means a lien, charge, pledge, security interest, encumbrance, right of first refusal, preemptive right or other restriction.


 


“Listing
Default” shall have the meaning ascribed to such term in Section 4.11(c).


 


“Majority
in Interest” shall have the meaning ascribed to such term in Section 5.5.


 


“Material
Adverse Effect” shall have the meaning assigned to such term in Section 3.1(b).


 


“Material
Permits” shall have the meaning ascribed to such term in Section 3.1(m).


 


“Maximum
Rate” shall have the meaning ascribed to such term in Section 5.17.


 


“Milestone”
means the Company reporting in a timely filed Form 10-K, or Form 10-Q, or other financial statement certified as true and accurate,
by the Company’s United States certified public accountant, gross revenues in the ordinary course of business derived from
the sale of gems of not less than $500,000, determined according to GAAP for any consecutive twelve month period commencing with
the first full calendar month after the Issue Date.


 


“Money
Laundering Laws” shall have the meaning ascribed to such term in Section 3.1(gg).


 


“Notes”
means the senior secured convertible notes issuable pursuant to this Agreement, in the form of Exhibit A hereto.


 


“OFAC”
shall have the meaning ascribed to such term in Section 3.1(ii).


 


“Participation
Maximum” shall have the meaning ascribed to such term in Section 4.17(a).


 


“Permitted
Indebtedness” means (a) any liabilities for borrowed money or amounts owed not in excess of $100,000 in the aggregate
(other than trade accounts payable incurred in the ordinary course of business), (b) all guaranties, endorsements and other contingent
obligations in respect of indebtedness of others, whether or not the same are or should be reflected in the Company’s consolidated
balance sheet (or the notes thereto) not affecting more than $100,000 in the aggregate, except guaranties by endorsement of negotiable
instruments for deposit or collection or similar transactions in the ordinary course of business; and (c) the present value of
any lease payments not in excess of $100,000 due under leases required to be capitalized in accordance with GAAP.


 


“Person”
means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.


 




    	 	4	 



     


    

  


“Personal
Guarantor” means Joseph Segelman.


 


“Personal
Guaranty” means the form of agreement annexed hereto as Exhibit H.


 


“Pre-Notice”
shall have the meaning ascribed to such term in Section 4.17(b).


 


“Proceeding”
means an action, claim, suit, investigation or proceeding (including, without limitation, an informal investigation or partial
proceeding, such as a deposition), whether commenced or threatened.


 


“Pro-Rata
Portion” shall have the meaning ascribed to such term in Section 4.17(e).


 


“Public
Information Failure” shall have the meaning ascribed to such term in Section 4.3(b).


 


“Public
Information Failure Payments” shall have the meaning ascribed to such term in Section 4.3(e).


 


“Purchaser
Party” shall have the meaning ascribed to such term in Section 4.10.


 


“Registration
Expenses” shall have the meaning ascribed to such term in Section 4.27.


 


“Registration
Statement” means an effective registration statement covering the resale of all of the Underlying Shares and Incentive
Shares by each Purchaser and for which all State blue sky filings reasonably requested by each Purchaser have been made.


 


“Required
Approvals” shall have the meaning ascribed to such term in Section 3.1(e).


 


“Required
Minimum” means, as of any date, the maximum aggregate number of shares of Common Stock then issued or potentially issuable
in the future pursuant to the Transaction Documents, including any Underlying Shares issuable upon exercise in full of all Warrants
or conversion in full of all Notes, ignoring any conversion or exercise limits set forth therein, and assuming that any previously
unconverted Notes will be held until the third anniversary of the issue date of such Notes.


 


“Rule
144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted
from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose
and effect as such Rule.


 


“S-1
Securities” means the Common Stock registered in the effecting Form S-1 on the unamended terms and conditions set forth
in the Form S-1 as of the Initial Closing Date including but not limited to an offering price of $0.50 per share of Common Stock.


 


“SEC
Reports” shall have the meaning ascribed to such term in Section 3.1(h).


 


“Securities”
means the Notes, the Warrants, the Incentive Shares, and the Underlying Shares.


 


“Securities
Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.


 




    	 	5	 



     


    

  


“Security
Agreement” means the Security Agreement to be entered into by the Company in connection with the sale of the Securities,
a copy of which is annexed hereto as Exhibit E.


 


“Selling
Expenses” shall have the meaning ascribed to such term in Section 4.27.


 


“Short
Sales” means “short sales” as defined in Rule 200 of Regulation SHO under the Exchange Act (but shall not
be deemed to include the location and/or reservation of borrowable shares of Common Stock). 


 


“Stock
Option Plan” means the Company’s 2015 Equity Incentive Plan, a copy of which is included in the SEC Reports on
the unamended terms thereof, except that the number of shares of Common Stock included in such plan may be increased to 14,000,000.


 


“Subscription
Amount” means, as to each Purchaser, the aggregate amount to be paid for the Notes at the rate of $0.86956 for each $1.00
of Note Principal, Warrants at the rate of $0.0001 per Warrant, and Incentive Shares at the rate of $0.0001 per Incentive Share
purchased hereunder at each of the Initial Closing and Subsequent Closing as specified below such Purchaser’s name on the
signature page of this Agreement and next to the heading “Subscription Amount,” in United States dollars and in immediately
available funds.


 


“Subsequent
Closing” shall have the meaning ascribed to such term in Section 2.4.


 


“Subsequent
Closing Date” shall have the meaning ascribed to such term in Section 2.4.


 


“Subsequent
Closing Notice” shall have the meaning ascribed to such term in Section 2.4.


 


“Subsequent
Financing” shall have the meaning ascribed to such term in Section 4.17(a).


 


“Subsequent
Financing Notice” shall have the meaning ascribed to such term in Section 4.17(b).


 


“Subsidiary”
means with respect to any entity at any date, any direct or indirect corporation, limited or general partnership, limited liability
company, trust, estate, association, joint venture or other business entity of which (A) more than 30% of (i) the outstanding
capital stock having (in the absence of contingencies) ordinary voting power to elect a majority of the board of directors or other
managing body of such entity, (ii) in the case of a partnership or limited liability company, the interest in the capital
or profits of such partnership or limited liability company or (iii) in the case of a trust, estate, association, joint venture
or other entity, the beneficial interest in such trust, estate, association or other entity business is, at the time of determination,
owned or controlled directly or indirectly through one or more intermediaries, by such entity, or (B) is under the actual control
of the Company.


 


“Termination
Date” shall have the meaning ascribed to such term in Section 2.1.


 


“Trading
Day” means a day on which the principal Trading Market is open for trading.


 


“Trading
Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on
the date in question: the NYSE MKT, the NASDAQ Capital Market, the NASDAQ Global Market, the NASDAQ Global Select Market, the New
York Stock Exchange, the OTC Bulletin Board, the OTCQB, or the OTCQX (or any successors to any of the foregoing).


 




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“Transaction
Documents” means this Agreement, the Security Agreement, the Notes, the Warrants, the Incentive Shares, the Guarantor
Security Agreement, Personal Guaranty, Corporate Guaranty, the Escrow Agreement, all exhibits and schedules thereto and hereto
and any other documents or agreements executed in connection with the transactions contemplated hereunder.


 


“Transfer
Agent” means VStock Transfer Agents, maintaining an address at 18 Lafayette Place, Woodmere, New York 11598, and any
successor transfer agent of the Company.


 


“Underlying
Shares” means the shares of Common Stock issued and issuable upon conversion of the Notes and upon exercise of the Warrants
and issued and issuable in lieu of the cash payment of interest on the Notes in accordance with the terms of the Notes and any
other shares of Common Stock issued or issuable to a Purchaser in connection with or pursuant to the Securities or Transaction
Documents.


 


“Unlegended
Shares” shall have the meaning ascribed to such term in Section 4.1(d).


 


“Variable
Priced Equity Linked Instruments” shall have the meaning ascribed to such term in Section 4.13.


 


“Variable
Rate Transaction” shall have the meaning ascribed to such term in Section 4.13.


 


“VWAP”
means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed
or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding
date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading
Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b)  if any of the NASDAQ markets or exchanges
is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on
the OTC Bulletin Board, (c) if the Common Stock is not then listed or quoted for trading on the OTC Bulletin Board and if prices
for the Common Stock are then reported on the OTCQX, OTCQB or OTC Pink Marketplace maintained by the OTC Markets Group, Inc. (or
a similar organization or agency succeeding to its functions of reporting prices), the volume weighted average price of the Common
Stock on the first such facility (or a similar organization or agency succeeding to its functions of reporting prices), or (d) in
all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith
by the Purchasers of a Majority in Interest then outstanding and reasonably acceptable to the Company, the fees and expenses of
which shall be paid by the Company.


 


“Warrants”
means, collectively, the Common Stock purchase warrants delivered to the Purchasers at each Closing in accordance with Sections
2.2(a) and 2.5(a)(iii) hereof, in the form of Exhibit B attached hereto.


 


“Warrant
Shares” means the shares of Common Stock issuable upon exercise of the Warrants.


 




    	 	7	 



     


    

  


ARTICLE II.


PURCHASE AND SALE


 


2.1         Initial
Closing. On the Initial Closing Date, upon the terms and subject to the conditions set forth herein, substantially concurrent
with the execution and delivery of this Agreement by the parties hereto, the Company agrees to sell, and the Purchasers, severally
and not jointly, agree to purchase, an aggregate of up to $862,500 principal amount of Notes, Warrants as determined pursuant to
Section 2.2(a), and Incentive Shares in the amount determined pursuant to Section 2.2(a) (“Incentive Shares”)
(such purchase and sale being the “Initial Closing”). Each Purchaser shall deliver to the Escrow Agent such
Purchaser’s Subscription Amount, and the Company shall deliver to each Purchaser its respective Note, Warrants and Incentive
Shares, and the Company and each Purchaser shall deliver the other items set forth in Section 2.2 deliverable at the Initial Closing.
Upon satisfaction of the covenants and conditions set forth in Sections 2.2 and 2.3, the Closing shall occur at the offices of
G&M or such other location as the parties shall mutually agree. Notwithstanding anything herein to the contrary, the Initial
Closing Date shall occur on or before December 31, 2015 (the “Termination Date”). If the Closing is not held
on or before the Termination Date, the Company shall cause all Transaction Documents and funds to be returned, without interest
or deduction to each of the Company or Purchaser who delivered same to the Escrow Agent.


 


2.2         Deliveries.


 


(a)          On
or prior to the Initial Closing Date, the Company shall deliver or cause to be delivered to each Purchaser the following:


 


(i)          this
Agreement duly executed by the Company;


 


(ii)         a
legal opinion of Company Counsel, substantially in the form of Exhibit D attached hereto;


 


(iii)        a
Note with a principal amount of $1.00 for each $0.86956 for each $1.00 paid by each Purchaser for such Purchaser’s Note,
registered in the name of such Purchaser;


 


(iv)        Warrants
in the form of Exhibit B registered in the name of such Purchaser to purchase up to a number of shares of Common Stock equal
to 100% of such Purchaser’s Note principal amount divided by the Conversion Price in effect on the Initial Closing Date with
a per share exercise price equal to $0.30, subject to adjustment as provided therein;


 


(v)         Incentive
Shares at the rate of 2.8986 Incentive Shares for each $1.00 of Note principal issued to such Purchaser;


 


(vi)        the
Security Agreement duly executed by the Company;


 


(vii)       the
Guarantor Security Agreement duly executed by Guarantor;


 


(viii)      the
Corporate Guaranty duly executed by Corporate Guarantor;


 


(ix)         the
Personal Guaranty executed by Joseph Segelman;


 




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(x)          the
Escrow Agreement duly executed by the Company and Escrow Agent;


 


(xi)         a
certificate of the Principal Executive Officer and Chief Executive Officer (each as defined in the Exchange Act) of the Company,
dated as of the Initial Closing Date, in which such officer shall certify that, to the best of his knowledge, the conditions set
forth in Section 2.3(b) have been fulfilled; and


 


(xii)        Secretary’s
certificate containing (i) copies of the text of the resolutions by which the corporate action on the part of the Company necessary
to approve this Agreement and the other Transaction Documents and the transactions and actions contemplated hereby and thereby,
which shall be accompanied by a certificate of the corporate secretary or assistant corporate secretary of Company dated as of
the Initial Closing Date certifying to the Purchasers that such resolutions were duly adopted and have not been amended or rescinded,
(ii) an incumbency certificate dated as of the Initial Closing Date executed on behalf of Company by its corporate secretary or
one of its assistant corporate secretaries certifying the office of each officer of Company executing this Agreement, or any other
agreement, certificate or other instrument executed pursuant hereto, and (iii) copies of (A) the Company’s Article of Incorporation
and bylaws in effect on the Initial Closing Date, and (B) the certificate evidencing the good standing of Company as of a day within
five (5) Business Days prior to the Initial Closing Date.


 


(b)          On
or prior to the Initial Closing Date, each Purchaser shall deliver or cause to be delivered to the Company the following:


 


(i)          this
Agreement duly executed by such Purchaser;


 


(ii)         such
Purchaser’s Subscription Amount by wire transfer or as otherwise permitted under the Escrow Agreement, to the Escrow Agent;


 


(iii)        the
Security Agreement duly executed by each Purchaser and the Collateral Agent (identified therein);


 


(iv)        the
Guarantor Security Agreement duly executed by Guarantor;


 


(v)         the
Corporate Guaranty duly executed by Corporate Guarantor;


 


(vi)        the
Personal Guaranty executed by Joseph Segelman; and


 


(vii)       the
Escrow Agreement duly executed by such Purchaser.


 


2.3         Closing
Conditions.


 


(a)          The
obligations of the Company hereunder to effect the Initial Closing are subject to the following conditions being met:


 


(i)          the
accuracy in all material respects (determined without regard to any materiality, Material Adverse Effect or other similar qualifiers
therein) on the Initial Closing Date of the representations and warranties of the Purchasers contained herein (unless as of a specific
date therein in which case they shall be accurate as of such date);


 




    	 	9	 



     


    

  


(ii)         all
obligations, covenants and agreements of each Purchaser required to be performed at or prior to the Initial Closing Date shall
have been performed;


 


(iii)        the
delivery by each Purchaser of the items set forth in Section 2.2(b) of this Agreement; and


 


(iv)        not
less than $750,537.50 of aggregate Subscription Amount shall have been deposited with the Escrow Agent.


 


(b)          The
respective obligations of a Purchaser hereunder to effect the Initial Closing, unless waived by such Purchaser, are subject to
the following conditions being met:


 


(i)          the
accuracy in all material respects (determined without regard to any materiality, Material Adverse Effect or other similar qualifiers
therein) on the Initial Closing Date of the representations and warranties of the Company contained herein (unless as of a specific
date therein in which case they shall be accurate as of such date);


 


(ii)         all
obligations, covenants and agreements of the Company required to be performed at or prior to the Initial Closing Date shall have
been performed;


 


(iii)        the
Company shall have received executed signature pages to this Agreement with an aggregate cash Subscription Amount of not less than
$750,537.50 prior to the Closing;


 


(iv)        the
delivery by the Company of the items set forth in Section 2.2(a) of this Agreement;


 


(v)         there
shall have been no Material Adverse Effect with respect to the Company since the date hereof; and


 


(vi)        from
the date hereof to the Initial Closing Date, trading in the Common Stock shall not have been suspended by the Commission, and,
at any time prior to the Initial Closing Date, trading in securities generally as reported by Bloomberg L.P. shall not have been
suspended or limited, or minimum prices shall not have been established on securities whose trades are reported by such service,
or on any Trading Market, nor shall a banking moratorium have been declared either by the United States or New York State authorities
nor shall there have occurred any material outbreak or escalation of hostilities or other national or international calamity of
such magnitude in its effect on, or any material adverse change in, any financial market which, in each case, in the reasonable
judgment of such Purchaser, makes it impracticable or inadvisable to purchase the Securities at the Closing.


 


2.4         Subsequent
Closings. Subject to the satisfaction of the conditions set forth in Sections 2.6(a) and 2.6(b), the Company with respect to
all, but not fewer than all of the Purchasers or each Purchaser for himself, respectively, until two years after the Initial Trading
Day, but not later than three years after the Initial Closing Date may require a Closing for up to an additional Subscription Amount
equal to the Subscription Amount paid on the Initial Closing Date on the same terms and conditions as the Initial Closing (“Subsequent
Closing”). The Subsequent Closing must take place within twenty (20) Business Days after the Company or a Purchaser,
as the case may be, has provided the other parties to this Agreement notice (“Subsequent Closing Notice”) and
a signed certificate that all of the Closing conditions required to be satisfied by such notice giving party will be satisfied
as of the Subsequent Closing.


 




    	 	10	 



     


    

  


2.5         Subsequent
Closing Deliveries.


 


(a)          On
or prior to the Subsequent Closing, the Company shall deliver or cause to be delivered to the Escrow Agent the following:


 


(i)          this
Agreement duly re-executed by the Company together with updated schedules which may not be materially adversely different than
the schedules delivered on the Initial Closing Date;


 


(ii)         a
Note in the principal amount equal to such Purchaser’s Initial Closing Note principal registered in the name of such Purchaser.
The maturity date of the Notes issued at a Subsequent Closing will be eighteen months after the Subsequent Closing Date;


 


(iii)        Warrants
registered in the name of such Purchaser to purchase up to a number of shares of Common Stock equal to 100% of such Purchaser’s
Note principal amount divided by the Conversion Price in effect on the Subsequent Closing Date with a per share exercise price
equal to $0.30, subject to adjustment as provided therein;


 


(iv)        Incentive
Shares at the rate of 2.8986 Incentive Shares for each $1.00 of Note principal issued to such Purchaser;


 


(v)         an
escrow agreement similar to the Escrow Agreement employed in connection with the Initial Closing duly executed by the Company and
Escrow Agent;


 


(vi)        a
legal opinion of Company counsel, substantially in the form of Exhibit D attached hereto;


 


(vii)       a
certificate of the Principal Executive Officer and Chief Executive Officer (each as defined in the Exchange Act) of the Company,
dated as of the Subsequent Closing Date, in which such officer shall certify that, to the best of his Knowledge, the conditions
set forth in Section 2.3(b) have been fulfilled; and


 


(viii)      Secretary’s
certificate containing (i) copies of the text of the resolutions by which the corporate action on the part of the Company necessary
to approve this Agreement and the other Transaction Documents and the transactions and actions contemplated hereby and thereby,
which shall be accompanied by a certificate of the corporate secretary or assistant corporate secretary of Company dated as of
the Subsequent Closing Date certifying to the Purchasers that such resolutions were duly adopted and have not been amended or rescinded,
(ii) an incumbency certificate dated as of the Subsequent Closing Date executed on behalf of Company by its corporate secretary
or one of its assistant corporate secretaries certifying the office of each officer of Company executing this Agreement, or any
other agreement, certificate or other instrument executed pursuant hereto, and (iii) copies of (A) the Company’s Article
of Incorporation and bylaws in effect on the Initial Closing Date, and (B) the certificate evidencing the good standing of Company
as of a day within five (5) Business Days prior to the Subsequent Closing Date.


 


(b)       On
or prior to the Subsequent Closing Date, each Purchaser shall deliver or cause to be delivered to the Escrow Agent, the following:


 




    	 	11	 



     


    

  


(i)          This
Agreement duly re-executed by such Purchaser;      


 


(ii)         the
Subsequent Closing escrow agreement duly executed by such Purchaser; and


 


(iii)    to
Escrow Agent, such Purchaser’s Subscription Amount by wire transfer to the account specified in the Subsequent Closing escrow
agreement.


 


2.6         Subsequent
Closing Conditions.


 


(a)       The
obligations of the Company hereunder in connection with the Subsequent Closing are subject to the following conditions being met:


 


(i)          the
accuracy in all material respects (determined without regard to any materiality, Material Adverse Effect or other similar qualifiers
therein) on the Subsequent Closing Date of the representations and warranties of the Purchasers contained herein (unless as of
a specific date therein in which case they shall be accurate as of such date);


 


(ii)         all
obligations, covenants and agreements of each Purchaser to be performed at or prior to the Subsequent Closing Date shall have been
performed;


 


(iii)        the
delivery by each Purchaser to the Escrow Agent of the items set forth in Section 2.5(b) of this Agreement;


 


(iv)      
the Escrow Agent shall have received Subsequent Closing Subscription Amounts from all Purchasers in good funds in the amount designated
on such Purchaser’s signed signature page to this Agreement.


 


(b)          The
respective obligations of the Purchasers hereunder in connection with the Subsequent Closing are subject to the following conditions
being met, any or all of which may be waived by a Purchaser only for such Purchaser:


 


(i)           the
accuracy in all material respects (determined without regard to any materiality, Material Adverse Effect or other similar qualifiers
therein) on the Subsequent Closing Date of the representations and warranties of the Company contained herein (unless as of a specific
date therein in which case they shall be accurate as of such date);


 


(ii)          all
obligations, covenants and agreements of the Company under this Agreement required to be performed at or prior to the Subsequent
Closing Date shall have been performed;


 


(iii)         the
delivery by the Company to the Escrow Agent of the items set forth in Section 2.5(a) of this Agreement;


 


(iv)         there
shall have been no Material Adverse Effect with respect to the Company since the date hereof;


 


(v)          the
Escrow Agent shall have received Subsequent Closing Subscription Amounts from Purchasers in good funds in the amount designated
on each such Purchaser’s signed signature page to this Agreement;


 




    	 	12	 



     


    

  


(vi)        from
the date hereof to the Subsequent Closing Date, trading in the Common Stock shall not have been suspended by the Commission or
the Company’s principal Trading Market, and, at any time prior to the Subsequent Closing Date, trading in securities generally
as reported by Bloomberg L.P. shall not have been suspended or limited, or minimum prices shall not have been established on securities
whose trades are reported by such service, or on any Trading Market, nor shall a banking moratorium have been declared either by
the United States or New York State authorities nor shall there have occurred any material outbreak or escalation of hostilities
or other national or international calamity of such magnitude in its effect on, or any material adverse change in, any financial
market which, in each case, in the reasonable judgment of such Purchaser, makes it impracticable or inadvisable to purchase the
Securities at the Closing;


 


(vii)       there
has not occurred an Event of Default nor an event which with the giving of notice or the passage of time could be or become an
Event of Default;


 


(viii)      during
the period commencing six months after the Initial Closing Date, and ending not later than ten days before the date of the Subsequent
Closing Notice, the closing bid price of the Common Stock as reported by Bloomberg L.P. for the principal Trading Market shall
have been $0.25 or greater for twenty (20) consecutive Trading Days with average daily trading volume of 300,000 shares of Common
Stock during such twenty (20) Trading Days; and


 


(ix)         the
Milestone has occurred.


 


2.7         Special
Subsequent Closing Condition. The terms and conditions governing the Securities to be issued in connection with the Subsequent
Closing shall be substantially similar to the Securities issued in connection with the Initial Closing, and as described in the
Transaction Documents, mutatis mutandem, except that if the Subsequent Closing is initiated by a Purchaser, the Guarantor
Security Agreement, the Corporate Guaranty and the Personal Guaranty shall not apply to the Notes issued in connection with such
Purchaser initiated Subsequent Closing and Section 3(e) of the Warrant issued in connection with the Subsequent Closing shall be
deleted from such Warrants. Conforming changes will be made to the forms of Guarantor Security Agreement and Corporate Guaranty
necessary to effectuate the foregoing in the event of a Purchaser initiated Subsequent Closing. Neither the Company nor a Purchaser
will be permitted to require a Subsequent Closing with respect to an amount of Subsequent Closing Note Principal equal to the amount
of the Initial Closing Note Principal for which the Company has delivered an Optional Redemption Notice, except that the rights
of a Purchaser with regard to a Subsequent Closing will be fully restored in the event the Company does not timely comply with
the Company’s obligations after delivery of such Optional Redemption Notice as described in Section 6 of the Note.


 


ARTICLE III.


REPRESENTATIONS AND WARRANTIES


 


3.1         Representations
and Warranties of the Company. Except as set forth in the SEC Reports or the Disclosure Schedules, which Disclosure Schedules
shall be deemed a part hereof and shall qualify any representation made herein only to the extent of the disclosure contained in
the corresponding section of the Disclosure Schedules, the Company hereby makes the following representations and warranties to
each Purchaser:


 




    	 	13	 



     


    

  


(a)          Subsidiaries.
All of the direct and indirect subsidiaries of the Company and the Company’s ownership interests therein are set forth on
Schedule 3.1(a). The Company owns, directly or indirectly, all of the capital stock or other equity interests of each Subsidiary
free and clear of any Liens, and all of the issued and outstanding shares of capital stock of each Subsidiary are validly issued
and are fully paid, non-assessable and free of preemptive and similar rights to subscribe for or purchase securities. If the Company
has no Subsidiaries relevant to any component of this Agreement as of a relevant time, then such reference shall not be applicable
at such time.


 


(b)          Organization
and Qualification. The Company and each of the Subsidiaries is an entity duly incorporated or otherwise organized, validly
existing and in good standing under the laws of the jurisdiction of its incorporation or organization, with the requisite power
and authority to own and use its properties and assets and to carry on its business as currently conducted. Neither the Company
nor any Subsidiary is in violation nor default of any of the provisions of its respective certificate or articles of incorporation,
bylaws or other organizational or charter documents. Each of the Company and the Subsidiaries is duly qualified to conduct business
and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted
or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as
the case may be, could not have or reasonably be expected to result in: (i) a material adverse effect on the legality, validity
or enforceability of any Transaction Document, (ii) a material adverse effect on the results of operations, assets, business, or
condition (financial or otherwise) of the Company and the Subsidiaries, taken as a whole, or (iii) a material adverse effect on
the Company’s ability to perform in any material respect on a timely basis its obligations under any Transaction Document
(any of (i), (ii) or (iii), a “Material Adverse Effect”) and, no Proceeding has been instituted in any such
jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification.


 


(c)          Authorization;
Enforcement. The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated
by this Agreement and each of the other Transaction Documents and otherwise to carry out its obligations hereunder and thereunder.
The execution and delivery of this Agreement and each of the other Transaction Documents by the Company and the consummation by
it of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of the Company
and no further action is required by the Company, the Board of Directors or the Company’s stockholders in connection herewith
or therewith other than in connection with the Required Approvals. This Agreement and each other Transaction Document to which
it is a party has been (or upon delivery will have been) duly executed by the Company and, when delivered in accordance with the
terms hereof and thereof, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance
with its terms, except: (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium
and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating
to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification
and contribution provisions may be limited by applicable law.


 




    	 	14	 



     


    

  


(d)          No
Conflicts. The execution, delivery and performance by the Company of this Agreement and the other Transaction Documents, the
issuance and sale of the Securities and the consummation by it of the transactions contemplated hereby and thereby to which it
is a party do not and will not: (i) conflict with or violate any provision of the Company’s or any Subsidiary’s certificate
or articles of incorporation, bylaws or other organizational or charter documents, (ii) conflict with, or constitute a default
(or an event that with notice or lapse of time or both would become a default) under, result in the creation of any Lien upon any
of the properties or assets of the Company or any Subsidiary, or give to others any rights of termination, amendment, acceleration,
adjustment, exchange, reset, exercise or cancellation (with or without notice, lapse of time or both) of, any agreement, credit
facility, debt, equity or other instrument (evidencing Company or Subsidiary equity, debt or otherwise) or other understanding
to which the Company or any Subsidiary is a party or by which any property or asset of the Company or any Subsidiary is bound or
affected, or (iii) conflict with or result in a violation of any law, rule, regulation, order, judgment, injunction, decree or
other restriction of any court or governmental authority to which the Company or a Subsidiary is subject (including federal and
state securities laws and regulations), or by which any property or asset of the Company or a Subsidiary is bound or affected;
except in the case of each of clause (iii), such as could not have or reasonably be expected to result in a Material Adverse Effect.


 


(e)          Filings,
Consents and Approvals. The Company is not required to obtain any consent, waiver, authorization or order of, give any notice
to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other
Person in connection with the execution, delivery and performance by the Company of the Transaction Documents, other than: (i)
the filings required pursuant to Section 4.6 of this Agreement, and (ii) the filing of Form D with the Commission and such filings
as are required to be made under applicable state securities laws (collectively, the “Required Approvals”).


 


(f)           Issuance
of the Securities. The Securities are duly authorized and, when issued and paid for in accordance with the applicable Transaction
Documents, will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the Company. The
Company has reserved from its duly authorized capital stock a number of shares of Common Stock for issuance of the Underlying Shares
at least equal to the Required Minimum on the date hereof.


 


(g)          Capitalization.
The capitalization of the Company is as set forth in Schedule 3.1(g). The Company has not issued any capital stock
since its most recently filed periodic report under the Exchange Act other than pursuant to the exercise of employee stock options
under the Stock Option Plan, the issuance of shares of Common Stock to employees pursuant to the Stock Option Plan and pursuant
to the conversion and/or exercise of Common Stock Equivalents outstanding as of the date of the most recently filed periodic report
under the Exchange Act as set forth on Schedule 3.1(g). No Person has any right of first refusal, preemptive right, right
of participation, or any similar right to participate in the transactions contemplated by the Transaction Documents. Except as
disclosed on Schedule 3.1(g), there are no outstanding options, employee or incentive stock option plans, warrants, scrip
rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities, rights or obligations convertible
into or exercisable or exchangeable for, or giving any Person any right to subscribe for or acquire any shares of Common Stock,
or contracts, commitments, understandings or arrangements by which the Company or any Subsidiary is or may become bound to issue
additional shares of Common Stock or Common Stock Equivalents. Except as set forth on Schedule 3.1(g), the issuance and
sale of the Securities will not obligate the Company to issue shares of Common Stock or other securities to any Person (other than
the Purchasers) and will not result in a right of any holder of Company securities to adjust the exercise, conversion, exchange
or reset price under any of such securities. All of the outstanding shares of capital stock of the Company are duly authorized,
validly issued, fully paid and nonassessable, have been issued in material compliance with all federal and state securities laws,
and none of such outstanding shares was issued in violation of any preemptive rights or similar rights to subscribe for or purchase
securities. No further approval or authorization of any stockholder, the Board of Directors or others is required for the issuance
and sale of the Securities. There are no stockholders agreements, voting agreements or other similar agreements with respect to
the Company’s capital stock to which the Company is a party or, to the knowledge of the Company, between or among any of
the Company’s stockholders.


 




    	 	15	 



     


    

  


(h)          SEC
Reports; Financial Statements. The Company has filed all reports, schedules, forms, statements and other documents required
to be filed by the Company under the Securities Act and the Exchange Act, if any, including pursuant to Section 13(a) or 15(d)
thereof, preceding the date hereof (or such shorter period as the Company was required by law or regulation to file such material)
(the foregoing materials filed not later than ten (10) days before the date of this Agreement including the Form S-1, and including
the exhibits thereto and documents incorporated by reference therein, being collectively referred to herein as the “SEC
Reports”) on a timely basis or has received a valid extension of such time of filing and has filed any such SEC Reports
prior to the expiration of any such extension. As of their respective dates, the SEC Reports complied in all material respects
with the requirements of the Securities Act and the Exchange Act, as applicable, and none of the SEC Reports, when filed, 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. The financial statements
of the Company included in the SEC Reports comply in all material respects with applicable accounting requirements and the rules
and regulations of the Commission with respect thereto as in effect at the time of filing. Such financial statements have been
prepared in accordance with United States generally accepted accounting principles applied on a consistent basis during the periods
involved (“GAAP”), except as may be otherwise specified in such financial statements or the notes thereto and
except that unaudited financial statements may not contain all footnotes required by GAAP, and fairly present in all material respects
the financial position of the Company and its consolidated Subsidiaries as of and for the dates thereof and the results of operations
and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit
adjustments. The Company is, and has no reason to believe that it will not in the foreseeable future continue to be in compliance
with all its reporting requirements under the Securities Act and Exchange Act.


 


(i)           Material
Changes; Undisclosed Events, Liabilities or Developments. Since the date of the latest audited financial statements included
within the SEC Reports, except as specifically disclosed in a subsequent SEC Report filed prior to the date hereof or on Schedule
3.1(i): (i) there has been no event, occurrence or development that has had or that could reasonably be expected to result
in a Material Adverse Effect, (ii) the Company has not incurred any material liabilities (contingent or otherwise) other than (A)
trade payables and accrued expenses incurred in the ordinary course of business consistent with past practice and (B) liabilities
not required to be reflected in the Company’s financial statements pursuant to GAAP or disclosed in filings made with the
Commission, (iii) the Company has not altered its method of accounting, (iv) the Company has not declared or made any dividend
or distribution of cash or other property to its stockholders or purchased, redeemed or made any agreements to purchase or redeem
any shares of its capital stock and (v) the Company has not issued any equity securities to any officer, director or Affiliate
except pursuant to the existing Stock Option Plan as set forth on Schedule 3.1(i). The Company does not have pending before
the Commission any request for confidential treatment of information. Except for the issuance of the Securities contemplated by
this Agreement, or as set forth on Schedule 3.1(i), no event, liability, fact, circumstance, occurrence or development has
occurred or exists or is reasonably expected to occur or exist with respect to the Company or its Subsidiaries or their respective
businesses, properties, operations, assets or financial condition, that would be required to be disclosed by the Company under
applicable securities laws at the time this representation is made or deemed made that has not been publicly disclosed at least
two Trading Days prior to the date that this representation is made.


 




    	 	16	 



     


    

  


(j)           Litigation.
Except as set forth in the SEC Reports, there is no action, suit, inquiry, notice of violation, proceeding or investigation pending
or, to the knowledge of the Company, threatened against or affecting the Company, any Subsidiary or any of their respective properties
before or by any court, arbitrator, governmental or administrative agency or regulatory authority (federal, state, county, local
or foreign) (collectively, an “Action”) which (i) adversely affects or challenges the legality, validity or
enforceability of any of the Transaction Documents or the Securities or (ii) could, if there were an unfavorable decision, have
or reasonably be expected to result in a Material Adverse Effect. Except as set forth in the SEC Reports, neither the Company nor
any Subsidiary, nor any director or officer thereof, is or has been the subject of any Action involving a claim of violation of
or liability under federal or state securities laws or a claim of breach of fiduciary duty. Except as set forth in the SEC Reports,
there has not been, and to the knowledge of the Company, there is not pending or contemplated, any investigation by the Commission
involving the Company or any current or former director or officer of the Company. The Commission has not issued any stop order
or other order suspending the effectiveness of any registration statement filed by the Company or any Subsidiary under the Exchange
Act or the Securities Act.


 


(k)          Labor
Relations. No labor dispute exists or, to the knowledge of the Company, is imminent with respect to any of the employees of
the Company, which could reasonably be expected to result in a Material Adverse Effect. None of the Company’s or its Subsidiaries’
employees is a member of a union that relates to such employee’s relationship with the Company or such Subsidiary, and neither
the Company nor any of its Subsidiaries is a party to a collective bargaining agreement, and the Company and its Subsidiaries believe
that their relationships with their employees are good. To the knowledge of the Company, no executive officer of the Company or
any Subsidiary, is, or is now expected to be, in violation of any material term of any employment contract, confidentiality, disclosure
or proprietary information agreement or non-competition agreement, or any other contract or agreement or any restrictive covenant
in favor of any third party, 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. The Company and its Subsidiaries are in compliance
with all U.S. federal, state, local and foreign laws and regulations relating to employment and employment practices, terms and
conditions of employment and wages and hours, except where the failure to be in compliance could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.


 


(l)           Compliance.
To the Company’s knowledge, neither the Company nor any Subsidiary, except as disclosed on Schedule 3.1(l): (i) is
in default under or in violation of (and no event has occurred that has not been waived that, with notice or lapse of time or both,
would result in a default by the Company or any Subsidiary under), nor has the Company or any Subsidiary received notice of a claim
that it is in default under or that it is in violation of, any indenture, loan or credit agreement or any other agreement or instrument
to which it is a party or by which it or any of its properties is bound (whether or not such default or violation has been waived),
(ii) is in violation of any judgment, decree or order of any court, arbitrator or other governmental authority or (iii) is or has
been in violation of any statute, rule, ordinance or regulation of any governmental authority, including without limitation all
foreign, federal, state and local laws relating to taxes, environmental protection, occupational health and safety, product quality
and safety and employment and labor matters, except in each case as could not have or reasonably be expected to result in a Material
Adverse Effect.


 




    	 	17	 



     


    

  


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


 


(n)          Title
to Assets. Except as disclosed on Schedule 3.1(n), the Company and the Subsidiaries have good and marketable title in
fee simple to all real property (if any) owned by them and good and marketable title in all personal property (including domain
names) owned by them that is material to the business of the Company and the Subsidiaries, in each case free and clear of all Liens,
except for (i) Liens as do not materially affect the value of such property and do not materially interfere with the use made and
proposed to be made of such property by the Company and the Subsidiaries and (ii) Liens for the payment of federal, state or other
taxes, for which appropriate reserves have been made in accordance with GAAP and, the payment of which is neither delinquent nor
subject to penalties. Any real property and facilities held under lease by the Company and the Subsidiaries are held by them under
valid, subsisting and enforceable leases with which the Company and the Subsidiaries are in compliance.


 


(o)          Intellectual
Property. All of the Company’s and Subsidiary’s Intellectual Property Rights are described in the SEC Reports.


 


(i)          The
term “Intellectual Property Rights” means:


 


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


 


2.    all
patents and patent applications of the Company and each Subsidiary (collectively, “Patents'');


 


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


 


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


 


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


 


(ii)         Agreements.
Except as set forth in the SEC Reports, there are no outstanding and, to Company’s knowledge, no threatened disputes or disagreements
with respect to any agreements relating to any Intellectual Property Rights to which the Company is a party or by which the Company
is bound.


 




    	 	18	 



     


    

  


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


 


(iv)        Patents.
The Company owns no Patents and has no patents pending.


 


(v)         Trademarks.
The Company is the owner of all right, title, and interest in and to each of the Marks, free and clear of all Liens and other adverse
claims. All Marks that have been registered with the United States Patent and Trademark Office are currently in compliance with
all formal legal requirements (including the timely post-registration filing of affidavits of use and incontestability and renewal
applications), are valid and enforceable, and are not subject to any maintenance fees or taxes or actions falling due within ninety
days after the Initial Closing Date. No Mark has been or is now involved in any opposition, invalidation, or cancellation and,
to the Company’s knowledge, no such action is threatened with respect to any of the Marks. To the Company’s knowledge:
(1) there is no potentially interfering trademark or trademark application of any third party, and (2) no Mark is infringed or
has been challenged or threatened in any way. To the Company’s knowledge, none of the Marks used by the Company infringes
or is alleged to infringe any trade name, trademark, or service mark of any third party.


 


(vi)        Copyrights.
The Company owns no Copyrights.


 


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


 


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


 




    	 	19	 



     


    

  


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


 


(r)           Sarbanes-Oxley;
Internal Accounting Controls. Except as set forth on Schedule 3.1(r), the Company and the Subsidiaries are in material
compliance with any and all applicable requirements of the Sarbanes-Oxley Act of 2002 that are effective as of the date
hereof and applicable to the Company, and any and all applicable rules and regulations promulgated by the Commission thereunder
that are effective as of the date hereof and as of each Closing Date. Except as set forth on Schedule 3.1(r), the Company
and the Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that: (i) transactions
are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability, (iii) access to assets
is permitted only in accordance with management’s general or specific authorization, and (iv) the recorded accountability
for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.


 


(s)          Certain
Fees. No brokerage, finder’s fees, commissions or due diligence fees are or will be payable by the Company or any Subsidiary
to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to
the transactions contemplated by the Transaction Documents. The Purchasers shall have no obligation with respect to any such fees
or with respect to any claims made by or on behalf of other Persons for fees of a type contemplated in this Section 3.1(s) that
may be due in connection with the transactions contemplated by the Transaction Documents.


 


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


 


(u)          Registration
Rights. No Person has any right to cause the Company or any Subsidiary to effect the registration under the Securities Act
of any securities of the Company or any Subsidiary, except for the Purchasers and as set forth in the Form S-1.


 


(v)          Reporting
Company/Shell Company. The Company is an “emerging growth company” as defined in the JOBS Act of 2012 and a publicly
reporting company subject to reporting obligations pursuant to Sections 12(b) and 13 of the Exchange Act. Pursuant to the provisions
of the Exchange Act, the Company has timely filed all reports and other materials required to be filed by the Company thereunder
with the Commission during the preceding twelve months. The Company has no reason to believe that it will not in the year following
the Initial Closing Date continue to be in compliance with all listing and reporting requirements applicable to the Company as
of the Initial Closing Date. As of each Closing Date, the Company is not a “shell company” (as defined in Rule 405
of the Securities Act) and has never been a “shell company”.


 




    	 	20	 



     


    

  


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


 


(x)          Disclosure.
Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents, the Company
confirms that neither it nor any other Person acting on its behalf has provided any of the Purchasers or their agents or counsel
with any information that it believes constitutes or might constitute material, non-public information. The Company understands
and confirms that the Purchasers will rely on the foregoing representation in effecting transactions in securities of the Company.
All of the disclosure furnished by or on behalf of the Company to the Purchasers regarding the Company and its Subsidiaries, their
respective businesses and the transactions contemplated hereby, including the Disclosure Schedules to this Agreement, when taken
together as a whole, is true and correct and does not contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading.
The press releases disseminated by the Company during the twelve months preceding the date of this Agreement taken as a whole do
not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under which they were made and when made, not misleading.
The Company acknowledges and agrees that no Purchaser makes or has made any representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in Section 3.2 hereof.


 


(y)          No
Integrated Offering. Assuming the accuracy of the Purchasers’ representations and warranties set forth in Section 3.2,
neither the Company, nor any of its Affiliates, nor any Person acting on its or their behalf has, directly or indirectly, made
any offers or sales of any security or solicited any offers to buy any security, under circumstances that would cause the Offering
of the Securities to be integrated with prior offerings by the Company for purposes of: (i) the Securities Act which would require
the registration of any such securities under the Securities Act, or (ii) any applicable shareholder approval provisions of any
Trading Market on which any of the securities of the Company are listed or designated. Neither the Company nor any Subsidiary is
in default with respect to any Indebtedness.


 




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(z)          Solvency.
Based on the consolidated financial condition of the Company as of each Closing Date, and the Company’s good faith estimate
of the fair market value of its assets, after giving effect to the receipt by the Company of the proceeds from the sale of the
Securities hereunder: (i) the fair saleable value of the Company’s assets exceeds the amount that will be required to be
paid on or in respect of the Company’s existing debts and other liabilities (including known contingent liabilities) as they
mature, (ii) the Company’s assets do not constitute unreasonably small capital to carry on its business as now conducted
and as proposed to be conducted including its capital needs taking into account the particular capital requirements of the business
conducted by the Company, consolidated and projected capital requirements and capital availability thereof, and (iii) the current
cash flow of the Company, together with the proceeds the Company would receive, were it to liquidate all of its assets, after taking
into account all anticipated uses of the cash, would be sufficient to pay all amounts on or in respect of its liabilities when
such amounts are required to be paid. The Company does not intend to incur debts beyond its ability to pay such debts as they mature
(taking into account the timing and amounts of cash to be payable on or in respect of its debt). The Company has no knowledge of
any facts or circumstances which lead it to believe that it will file for reorganization or liquidation under the bankruptcy or
reorganization laws of any jurisdiction within one year from the Initial Closing Date. Schedule 3.1(z) sets forth as of
the date hereof all outstanding secured and unsecured Indebtedness of the Company or any Subsidiary, or for which the Company or
any Subsidiary has commitments. For the purposes of this Agreement, “Indebtedness” means (x) any liabilities
for borrowed money or amounts owed in excess of $50,000 in the aggregate (other than trade accounts payable incurred in the ordinary
course of business), (y) all guaranties, endorsements and other contingent obligations in respect of indebtedness of others, whether
or not the same are or should be reflected in the Company’s consolidated balance sheet (or the notes thereto), except guaranties
by endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business;
and (z) the present value of any lease payments in excess of $50,000 due under leases required to be capitalized in accordance
with GAAP. Neither the Company nor any Subsidiary is in default with respect to any Indebtedness.


 


(aa)        Tax
Status. Except for matters that would not, individually or in the aggregate, have or reasonably be expected to result in a
Material Adverse Effect, the Company and its Subsidiaries each (i) has made or filed all United States federal, state and local
income and all foreign income and franchise 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 and (iii) has set aside on its books provision reasonably adequate for the payment of
all material 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 or
of any Subsidiary know of no basis for any such claim.


 


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


 


(cc)        Accountants
and Lawyers. The Company’s accounting firm is set forth on Schedule 3.1(cc) of the Disclosure Schedules. To the
knowledge and belief of the Company, such accounting firm: (i) is a registered public accounting firm as required by the Exchange
Act and (ii) shall express its opinion with respect to the financial statements to be included in the Company’s Annual Report
for the fiscal year ending December 31, 2015. There are no disagreements of any kind presently existing, or reasonably anticipated
by the Company to arise, between the Company and the accountants and lawyers formerly or presently employed by the Company and
the Company is current with respect to any fees owed to its accountants and lawyers which could affect the Company’s ability
to perform any of its obligations under any of the Transaction Documents.


 




    	 	22	 



     


    

  


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


 


(ee)         Acknowledgment
Regarding Purchaser’s Trading Activity.  Anything
in this Agreement or elsewhere herein to the contrary notwithstanding (except for Section 4.16 hereof), it is understood and acknowledged
by the Company that: (i) none of the Purchasers has been asked by the Company to agree, nor has any Purchaser agreed, to desist
from purchasing or selling, long and/or short, securities of the Company, or “derivative” securities based on securities
issued by the Company or to hold the Securities for any specified term, (ii) past or future open market or other transactions
by any Purchaser, specifically including, without limitation, Short Sales or “derivative” transactions, before or
after the closing of this or future private placement transactions, may negatively impact the market price of the Company’s
publicly-traded securities, (iii) any Purchaser, and counter-parties in “derivative” transactions to which any such
Purchaser is a party, directly or indirectly, may presently have a “short” position in the Common Stock and (iv) each
Purchaser shall not be deemed to have any affiliation with or control over any arm’s length counter-party in any “derivative”
transaction. The Company further understands and acknowledges that (y) one or more Purchasers may engage
in hedging activities at various times during the period that the Securities are outstanding, including, without limitation, during
the periods that the value of the Underlying Shares deliverable with respect to Securities are being determined, and (z) such
hedging activities (if any) could reduce the value of the existing stockholders' equity interests in the Company at and after
the time that the hedging activities are being conducted.  The Company acknowledges that such aforementioned hedging activities
do not constitute a breach of any of the Transaction Documents.


 


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


 


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


 




    	 	23	 



     


    

  


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


 


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


 


(jj)          Private
Placement. Assuming the accuracy of the Purchasers’ representations and warranties set forth in Section 3.2, no registration
under the Securities Act is required for the offer and sale of the Securities by the Company to the Purchasers as contemplated
hereby. The issuance and sale of the Securities hereunder does not contravene the rules and regulations of the Trading Market.


 


(kk)        No
General Solicitation. Neither the Company nor any person acting on behalf of the Company has offered or sold any of the Securities
by any form of general solicitation or general advertising. The Company has offered the Securities for sale only to the Purchasers
and certain other “accredited investors” within the meaning of Rule 501 under the Securities Act.


 


(ll)        Indebtedness
and Seniority. As of the date hereof, all Indebtedness and Liens of the Company and the principal terms thereof are set forth
on Schedule 3.1(ll). Except as set forth on Schedule 3.1(ll), as of each Closing Date, no Indebtedness or other equity
of the Company is or will be senior to the Notes in right of payment, whether with respect to interest or upon liquidation or dissolution,
or otherwise, other than indebtedness secured by purchase money security interests (which is senior only as to underlying assets
covered thereby) and capital lease obligations (which is senior only as to the property covered thereby).


 


(mm)    FDA. 
The Company has no applications pending before the jurisdiction of the U.S. Food and Drug Administration (“FDA”).


 


(nn)     No
Disqualification Events. With respect to the Securities to be offered and sold hereunder in reliance on Rule 506 under the
Securities Act, 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 Securities 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 Securities Act (a “Disqualification Event”), except for a
Disqualification Event covered by Rule 506(d)(2) or (d)(3). The Company has exercised reasonable care to determine whether any
Issuer Covered Person is subject to a Disqualification Event. The Company has complied, to the extent applicable, with its disclosure
obligations under Rule 506(e), and has furnished to the Purchasers a copy of any disclosures provided thereunder.


 




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(oo)     Manufacturing
Regulatory Matters. The Company and its Subsidiaries have complied in all material respects with all statutes and regulations
related to the research, manufacture and sale of its products to the extent applicable to the Company’s and its Subsidiaries’
activities. Items manufactured or under investigation by the Company and its Subsidiaries comply with all applicable manufacturing
practices regulations and other requirements established by government regulators in the jurisdictions in which the Company or
its Subsidiaries manufacture their products. Except as disclosed in the SEC Reports, the Company is not and its Subsidiaries are
not the subject of any investigation by any competent authority with respect to the development, testing, manufacturing and distribution
of their products, nor has any investigation, prosecution, or other enforcement action been threatened by any regulatory agency.
Except as disclosed in the SEC Reports, neither the Company nor any of its Subsidiaries has received from any regulatory agency
any letter or other document asserting that the Company or any Subsidiary has violated any statute or regulation enforced by that
agency with respect to the development, testing, manufacturing and distribution of their products. To the Company’s knowledge,
research conducted by or for the Company and its Subsidiaries has complied in all material respects with all applicable legal requirements.


 


(pp)       Other
Covered Persons. The Company is not aware of any person that has been or will be paid (directly or indirectly) remuneration
for solicitation of purchasers in connection with the sale of any Regulation D Securities.


 


(qq)       No
Outstanding Variable Priced Equity Linked Instruments. As of each Closing Date, the Company will not have outstanding nor issuable
any Variable Priced Equity Linked Instruments, nor any debt or equity with anti-dilution, ratchet or reset rights.


 


(rr)         Survival.
The foregoing representations and warranties shall survive the Closings.


 


3.2         Representations
and Warranties of the Purchasers. Each Purchaser, for itself and for no other Purchaser, hereby represents and warrants as
of the date hereof and as of each Closing Date to the Company as follows (unless as of a specific date therein):


 


(a)          Organization;
Authority. Such Purchaser is either an individual or an entity duly incorporated or formed, validly existing and in good standing
under the laws of the jurisdiction of its incorporation or formation with full right, corporate, partnership, limited liability
company or similar power and authority to enter into and to consummate the transactions contemplated by the Transaction Documents
and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of the Transaction Documents and
performance by such Purchaser of the transactions contemplated by the Transaction Documents have been duly authorized by all necessary
corporate, partnership, limited liability company or similar action, as applicable, on the part of such Purchaser. Each Transaction
Document to which it is a party has been duly executed by such Purchaser, and when delivered by such Purchaser in accordance with
the terms hereof, will constitute the valid and legally binding obligation of such Purchaser, enforceable against it in accordance
with its terms, except: (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium
and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating
to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification
and contribution provisions may be limited by applicable law.


 




    	 	25	 



     


    

  


(b)          Understandings
or Arrangements. Such Purchaser understands that the Securities are “restricted securities” and have not been registered
under the Securities Act or any applicable state securities law and is acquiring the Securities as principal for its own account
and not with a view to or for distributing or reselling such Securities or any part thereof in violation of the Securities Act
or any applicable state securities law, has no present intention of distributing any of such Securities in violation of the Securities
Act or any applicable state securities law and has no direct or indirect arrangement or understandings with any other persons to
distribute or regarding the distribution of such Securities in violation of the Securities Act or any applicable state securities
law (this representation and warranty not limiting such Purchaser’s right to sell the Securities pursuant to any registration
statement or otherwise in compliance with applicable federal and state securities laws). Such Purchaser is acquiring the Securities
hereunder in the ordinary course of its business.


 


(c)          Purchaser
Status. At the time such Purchaser was offered the Securities, it was, and as of the date hereof it is, and on each date on
which it exercises any Warrants or converts any Notes it will be either: (i) an “accredited investor” as defined in
Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities Act or (ii) a “qualified institutional buyer”
as defined in Rule 144A(a) under the Securities Act. Such Purchaser is not required to be registered as a broker-dealer under Section
15 of the Exchange Act. Such Purchaser has the authority and is duly and legally qualified to purchase and own the Securities.
Such Purchaser is able to bear the risk of such investment for an indefinite period and to afford a complete loss thereof. Such
Purchaser has provided the information in the Accredited Investor Questionnaire attached hereto as Exhibit I (the “Investor
Questionnaire”). The information set forth on the signature pages hereto and the Investor Questionnaire regarding such
Purchaser is true and complete in all respects. Except as disclosed in the Investor Questionnaire, such Purchaser has had no position,
office or other material relationship within the past three years with the Company or Persons (as defined below) known to such
Purchaser to be affiliates of the Company, and is not a member of the Financial Industry Regulatory Authority or an “associated
person” (as such term is defined under the FINRA Membership and Registration Rules Section 1011).


 


(d)          Experience
of Such Purchaser. Such Purchaser, 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 Purchaser 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.


 


(e)          Information
on Company. Such Purchaser has been furnished with or has had access to the EDGAR Website of the Commission to the Company’s
filings made with the Commission through the tenth business day preceding the Initial Closing Date in which such Purchaser purchases
Securities hereunder, including the Form S-1.  Purchasers are not deemed to have any knowledge of any information not
included in the Reports unless such information is delivered in the manner described in the next sentence.  In addition,
such Purchaser may have received in writing from the Company such other information concerning its operations, financial condition
and other matters as such Purchaser has requested, identified thereon as OTHER WRITTEN INFORMATION (such other information is collectively,
the “Other Written Information”), and considered all factors such Purchaser deems material in deciding on the
advisability of investing in the Securities.  Such Purchaser was afforded (i) the opportunity to ask such questions as
such Purchaser deemed necessary of, and to receive answers from, representatives of the Company concerning the merits and risks
of acquiring the Securities; (ii) the right of access to information about the Company and its financial condition, results of
operations, business, properties, management and prospects sufficient to enable such Purchaser to evaluate the Securities; and
(iii) the opportunity to obtain such additional information that the Company possesses or can acquire without unreasonable effort
or expense that is necessary to make an informed investment decision with respect to acquiring the Securities.


 




    	 	26	 



     


    

  


(f)           Compliance
with Securities Act; Reliance on Exemptions. Such Purchaser understands and agrees that the Securities have not been registered
under the 1933 Act or any applicable state securities laws, by reason of their issuance in a transaction that does not require
registration under the 1933 Act, and that such Securities must be held indefinitely unless a subsequent disposition is registered
under the 1933 Act or any applicable state securities laws or is exempt from such registration. Such Purchaser understands and
agrees that the Securities are being offered and sold to such Purchaser in reliance on specific exemptions from the registration
requirements of United States federal and state securities laws and regulations and that the Company is relying in part upon the
truth and accuracy of, and such Purchaser’s compliance with, the representations, warranties, agreements, acknowledgments
and understandings of such Purchaser set forth herein in order to determine the availability of such exemptions and the eligibility
of such Purchaser to acquire the Securities.


 


(g)          Communication
of Offer. Such Purchaser is not purchasing the Securities as a result of any “general solicitation” or “general
advertising,” as such terms are defined in Regulation D, which includes, but is not limited to, any advertisement, article,
notice or other communication regarding the Securities published in any newspaper, magazine or similar media or on the internet
or broadcast over television, radio or the internet or presented at any seminar or any other general solicitation or general advertisement.


 


(h)          No
Governmental Review. Such Purchaser understands that no United States federal or state agency or any other governmental or
state agency has passed on or made recommendations or endorsement of the Securities or the suitability of the investment in the
Securities nor have such authorities passed upon or endorsed the merits of the Offering.


 


(i)           No
Conflicts. The execution, delivery and performance of this Agreement and performance under the other Transaction Documents
and the consummation by such Purchaser of the transactions contemplated hereby and thereby or relating hereto or thereto do not
and will not (i) result in a violation of such Purchaser’s charter documents, bylaws or other organizational documents, if
applicable, (ii) conflict with nor constitute a default (or an event which with notice or lapse of time or both would become a
default) under any agreement to which such Purchaser is a party, nor (iii) result in a violation of any law, rule, or regulation,
or any order, judgment or decree of any court or governmental agency applicable to such Purchaser or its properties (except for
such conflicts, defaults and violations as would not, individually or in the aggregate, have a material adverse effect on such
Purchaser). Such Purchaser is not required to obtain any consent, authorization or order of, or make any filing or registration
with, any court or governmental agency in order for it to execute, deliver or perform any of its obligations under this Agreement
or perform under the other Transaction Documents nor to purchase the Securities in accordance with the terms hereof, provided that
for purposes of the representation made in this sentence, such Purchaser is assuming and relying upon the accuracy of the relevant
representations and agreements of the Company herein.


 




    	 	27	 



     


    

  


(j)           Pre-Existing
Relationships. The Purchaser represents and warrants that: (i) the Purchaser was contacted regarding the sale of the Securities
by the Company (or an authorized agent or representative thereof) with whom the Purchaser had a prior substantial pre-existing
relationship, the Purchaser is not investing in the Offering in connection with or as a result of any registration statement on
Form S-1, filed with the Commission by the Company   and (ii) no Securities were offered or sold to it by means of any
form of general solicitation or general advertising, and in connection therewith, the Purchaser did not (A) receive or review any
advertisement, article, notice or other communication published in a newspaper or magazine or similar media or broadcast over television
or radio, whether closed circuit, or generally available; or (B) attend any seminar meeting or industry investor conference whose
attendees were invited by any general solicitation or general advertising; or (C) observe any website or filing of the Company
with the Commission in which any offering of securities by the Company was described and as a result learned of any offering of
securities by the Company.


 


(k)          Survival.
The foregoing representations and warranties shall survive the Closings.


 


The Company acknowledges and agrees that
the representations contained in Section 3.2 shall not modify, amend or affect such Purchaser’s right to rely on the Company’s
representations and warranties contained in this Agreement or any representations and warranties contained in any other Transaction
Document or any other document or instrument executed and/or delivered in connection with this Agreement or the consummation of
the transaction contemplated hereby.


 


ARTICLE IV.


OTHER AGREEMENTS OF THE PARTIES


 


4.1         Transfer
Restrictions.


 


(a)          Disposition
of Securities. The Securities may only be disposed of in compliance with state and federal securities laws. In connection with
any transfer of Securities other than pursuant to an effective registration statement or Rule 144, to the Company or to an Affiliate
of a Purchaser or in connection with a pledge as contemplated in Section 4.1(b), the Company may require the transferor thereof
to provide to the Company, at the Company’s expense, an opinion of counsel selected by the transferor and reasonably acceptable
to the Company, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such
transfer does not require registration of such transferred Securities under the Securities Act. As a condition of transfer, any
such transferee shall agree in writing to be bound by the terms of this Agreement and shall have the rights and obligations of
a Purchaser under this Agreement and the other Transaction Documents.


 


(b)          Legend.
The Purchasers agree to the imprinting, so long as is required by this Section 4.1, of a legend on any of the Securities in the
following form:


 


[NEITHER]
THIS SECURITY [NOR THE SECURITIES INTO WHICH THIS SECURITY IS [EXERCISABLE] [CONVERTIBLE]] HAS [NOT] BEEN REGISTERED WITH THE SECURITIES
AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT
TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY
A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.
THIS SECURITY [AND THE SECURITIES ISSUABLE UPON [EXERCISE] [CONVERSION] OF THIS SECURITY] MAY BE PLEDGED IN CONNECTION WITH A BONA
FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR”
AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH SECURITIES.


 




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(c)          Pledge.
The Company acknowledges and agrees that a Purchaser may from time to time pledge pursuant to a bona fide margin agreement with
a registered broker-dealer or grant a security interest in some or all of the Securities to a financial institution that is an
“accredited investor” as defined in Rule 501(a) under the Securities Act and who agrees to be bound by the provisions
of this Agreement and, if required under the terms of such arrangement, such Purchaser may transfer pledge or secure Securities
to the pledgees or secured parties. Such a pledge or transfer would not be subject to approval of the Company and no legal opinion
of legal counsel of the pledgee, secured party or pledgor shall be required in connection therewith. Further, no notice shall be
required of such pledge. At the appropriate Purchaser’s expense, the Company will execute and deliver such reasonable documentation
as a pledgee or secured party of Securities may reasonably request in connection with a pledge or transfer of the Securities.


 


(d)          Legend
Removal. Certificates evidencing the Incentive Shares and Underlying Shares shall not contain any legend (“Unlegended
Shares”) (including the legend set forth in Section 4.1(b) hereof): (i) while a registration statement (including the
Registration Statement) covering the resale of such security is effective under the Securities Act, (ii) following any sale of
such Incentive Shares and Underlying Shares pursuant to Rule 144, (iii) if such Incentive Shares and Underlying Shares are eligible
for sale under Rule 144, without the requirement for the Company to be in compliance with the current public information required
under Rule 144 as to such Incentive Shares and Underlying Shares and without volume or manner-of-sale restrictions or (iv) if such
legend is not required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements
issued by the staff of the Commission). The Company shall cause its counsel to issue a legal opinion to the Transfer Agent promptly
after the Effective Date if required by the Transfer Agent to effect the removal of the legend hereunder. If all or any Notes are
converted or any portion of a Warrant is exercised at a time when there is an effective registration statement to cover the resale
of the Underlying Shares, or if such Incentive Shares and Underlying Shares may be sold under Rule 144 or if such legend is not
otherwise required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued
by the staff of the Commission) then such Incentive Shares and Underlying Shares shall be issued free of all legends. The Company
agrees that following such time as such legend is no longer required under this Section 4.1(c), it will, no later than five Trading
Days following the delivery by a Purchaser to the Company or the Transfer Agent of a certificate representing Incentive Shares
and Underlying Shares, as applicable, issued with a restrictive legend (such fifth Trading Day, the “Legend Removal Date”),
deliver or cause to be delivered to such Purchaser a certificate representing such shares that is free from all restrictive and
other legends (however, the Corporation shall use reasonable best efforts to deliver such shares within three (3) Trading Days).
The Company may not make any notation on its records or give instructions to the Transfer Agent that enlarge the restrictions on
transfer set forth in this Section 4. Certificates for Incentive Shares and Underlying Shares subject to legend removal hereunder
shall be transmitted by the Transfer Agent to the Purchaser by crediting the account of the Purchaser’s prime broker with
the Depository Trust Company System as directed by such Purchaser.


 




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(e)          Legend
Removal Default. In addition to such Purchaser’s other available remedies, the Company shall pay to a Purchaser, in cash,
as partial liquidated damages and not as a penalty, for each $1,000 of Underlying Shares (based on the highest of the actual purchase
price or VWAP of the Common Stock on the date such Securities are submitted to the Transfer Agent or an imputed value of $0.30
per Incentive Share or Underlying Share) delivered for removal of the restrictive legend and subject to Section 4.1(c), $10 per
Trading Day for each Trading Day after the Legend Removal Date (increasing to $20 per Trading Day after the fifth Trading Day)
until such certificate is delivered without a legend. Nothing herein shall limit such Purchaser’s right to pursue actual
damages for the Company’s failure to deliver certificates representing any Securities as required by the Transaction Documents,
and such Purchaser shall have the right to pursue all remedies available to it at law or in equity including, without limitation,
a decree of specific performance and/or injunctive relief.         


 


(f)           DWAC.
In lieu of delivering physical certificates representing the Unlegended Shares, upon request of a Purchaser, so long as the certificates
therefor do not bear a legend and the Purchaser is not obligated to return such certificate for the placement of a legend thereon,
the Company shall cause its transfer agent to electronically transmit the Unlegended Shares by crediting the account of Purchaser’s
prime broker with the Depository Trust Company through its Deposit Withdrawal At Custodian system, provided that the Company’s
Common Stock is DTC eligible and the Company’s transfer agent participates in the Deposit Withdrawal at Custodian system.
Such delivery must be made on or before the Legend Removal Date.


 


(g)          Injunction.
In the event a Purchaser shall request delivery of Unlegended Shares as described in this Section 4.1 and the Company is required
to deliver such Unlegended Shares, the Company may not refuse to deliver Unlegended Shares based on any claim that such Purchaser
or anyone associated or affiliated with such Purchaser has not complied with Purchaser’s obligations under the Transaction
Documents, or for any other reason, unless, an injunction or temporary restraining order from a court, on notice, restraining and
or enjoining delivery of such Unlegended Shares shall have been sought and obtained by the Company and the Company has posted a
surety bond for the benefit of such Purchaser in the amount of the greatest of (i) 120% of the amount of the aggregate purchase
price of the Incentive Shares and Underlying Shares to be subject to the injunction or temporary restraining order, (ii) the VWAP
of the Common Stock on the trading day before the issue date of the injunction multiplied by the number of Unlegended Shares to
be subject to the injunction, or (iii) an imputed value of $0.30 per Incentive Share or Underlying Share which bond shall remain
in effect until the completion of arbitration/litigation of the dispute and the proceeds of which shall be payable to such Purchaser
to the extent Purchaser obtains judgment in Purchaser’s favor.


 


(h)          Buy-In.
In addition to any other rights available to Purchaser, if the Company fails to deliver to a Purchaser Unlegended Shares as required
pursuant to this Agreement and after the Legend Removal Date the Purchaser, or a broker on the Purchaser’s behalf, purchases
(in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by such Purchaser of the
shares of Common Stock which the Purchaser was entitled to receive in unlegended form from the Company (a “Buy-In”),
then the Company shall promptly pay in cash to the Purchaser (in addition to any remedies available to or elected by the Purchaser)
the amount, if any, by which (A) the Purchaser’s total purchase price (including brokerage commissions, if any) for the shares
of Common Stock so purchased exceeds (B) the greater of (i) the aggregate purchase price of the shares of Common Stock delivered
to the Company for reissuance as Unlegended Shares, or (ii) an imputed value of $0.30 per Incentive Share or Underlying Share together
with interest thereon at a rate of 15% per annum accruing until such amount and any accrued interest thereon is paid in full (which
amount shall be paid as liquidated damages and not as a penalty). For example, if a Purchaser purchases shares of Common Stock
having a total purchase price of $11,000 to cover a Buy-In with respect to $10,000 of purchase price of Shares delivered to the
Company for reissuance as Unlegended Shares, the Company shall be required to pay the Purchaser $1,000, plus interest, if any.
The Purchaser shall provide the Company written notice indicating the amounts payable to the Purchaser in respect of the Buy-In.


 




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(i)           Plan
of Distribution. Each Purchaser, severally and not jointly with the other Purchasers, agrees with the Company that such Purchaser
will sell any Securities pursuant to either the registration requirements of the Securities Act, including any applicable prospectus
delivery requirements, or an exemption therefrom, and that if Securities are sold pursuant to a registration statement, they will
be sold in compliance with the plan of distribution set forth therein, and acknowledges that the removal of the restrictive legend
from certificates representing Securities as set forth in this Section 4.1 is predicated upon the Company’s reliance upon
this understanding.


 


4.2         Acknowledgment
of Dilution. The Company acknowledges that the issuance of the Securities may result in dilution of the outstanding shares
of Common Stock, which dilution may be substantial under certain market conditions. The Company further acknowledges that its obligations
under the Transaction Documents, including, without limitation, its obligation to issue the Underlying Shares pursuant to the Transaction
Documents, are unconditional and absolute and not subject to any right of set off, counterclaim, delay or reduction, regardless
of the effect of any such dilution or any claim the Company may have against any Purchaser and regardless of the dilutive effect
that such issuance may have on the ownership of the other stockholders of the Company.


 


4.3         Furnishing
of Information; Public Information.


 


(a)          Until
the earliest of the time that (i) no Purchaser owns Securities or (ii) the Warrants have expired, the Company covenants to file
all periodic reports with the Commission pursuant to Section 15(d) of the Exchange Act and under Section 12(b) or 12(g) of the
1934 Act, and to timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to the Exchange Act and file such reports even if the Company
is not then subject to the reporting requirements of the Exchange Act.


 


(b)          Within
thirty (30) days after the Initial Closing Date, the Company will file a Form 8-A with the Commission for the purpose of having
the Common Stock registered pursuant to Section 12(g) of the Exchange Act and effectuate such registration not later than ninety
(90) days after the Initial Closing Date.


 


(c)          At
any time commencing on the Initial Closing Date and ending at such time that all of the Securities may be sold without the requirement
for the Company to be in compliance with Rule 144(c)(1) and otherwise without restriction or limitation pursuant to Rule 144, if
the Company shall fail for any reason to satisfy the current public information requirement under Rule 144(c) (a “Public
Information Failure”) then, in addition to such Purchaser’s other available remedies, the Company shall pay to a Purchaser,
in cash, as partial liquidated damages and not as a penalty, by reason of any such delay in or reduction of its ability to sell
the Securities, an amount in cash equal to two percent (2.0%) of the aggregate principal amount of Notes and accrued interest thereon
and purchase price of Warrant Shares held by such Purchaser on the day of a Public Information Failure and on every thirtieth (30th)
day (pro-rated for periods totaling less than thirty days) thereafter until the earlier of (a) the date such Public Information
Failure is cured and (b) such time that such public information is no longer required for the Purchasers to transfer the Incentive
Shares and Underlying Shares pursuant to Rule 144. The payments to which a Purchaser shall be entitled pursuant to this Section
4.3(b) are referred to herein as “Public Information Failure Payments.” Public Information Failure Payments
shall be paid on the earlier of (i) the last day of the calendar month during which such Public Information Failure Payments are
incurred and (ii) the third (3rd) Business Day after the event or failure giving rise to the Public Information Failure Payments
is cured. In the event the Company fails to make Public Information Failure Payments in a timely manner, such Public Information
Failure Payments shall bear interest at the rate of 1.5% per month (prorated for partial months) until paid in full. Nothing herein
shall limit such Purchaser’s right to pursue actual damages for the Public Information Failure, and such Purchaser shall
have the right to pursue all remedies available to it at law or in equity including, without limitation, a decree of specific performance
and/or injunctive relief.


 




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4.4           Integration.
The Company shall not sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined
in Section 2 of the Securities Act) that would be integrated with the offer or sale of the Securities in a manner that would require
the registration under the Securities Act of the sale of the Securities or that would be integrated with the offer or sale of the
Securities for purposes of the rules and regulations of any Trading Market such that it would require shareholder approval prior
to the closing of such other transaction or to effectuate such other transaction unless shareholder approval is obtained before
the earlier of the closing of such subsequent transaction or effectuation of such other transaction.


 


4.5           Conversion
and Exercise Procedures. Each of the form of Notice of Exercise included in the Warrants and the form of Notice of Conversion
included in the Notes set forth the totality of the procedures required of the Purchasers in order to exercise the Warrants or
convert the Notes. No additional legal opinion, other information or instructions shall be required of the Purchasers to exercise
their Warrants or convert their Notes. The Company shall honor exercises of the Warrants and conversions of the Notes and shall
deliver Underlying Shares in accordance with the terms, conditions and time periods set forth in the Transaction Documents.


 


4.6           Securities
Laws Disclosure; Publicity. The Company shall, by 9:30 a.m. (New York City time) on the first Trading Day following each Closing
Date, file a Current Report on Form 8-K including the Transaction Documents as exhibits thereto with the Commission (“Form
8-K”). A copy of the Form 8-K is annexed hereto as Exhibit J. Such Exhibit J will be identical to the Form
8-K which will be filed with the Commission except for the omission of signatures thereto by the Company and auditors providing
the financial statements. From and after the filing of the Form 8-K, the Company represents to the Purchasers that it shall have
publicly disclosed all material, non-public information delivered to any of the Purchasers by the Company or any of its Subsidiaries,
or any of their respective officers, directors, employees or agents in connection with the transactions contemplated by the Transaction
Documents. The Company and each Purchaser shall consult with each other in issuing any press releases with respect to the transactions
contemplated hereby, and neither the Company nor any Purchaser shall issue any press release nor otherwise make any such public
statement without the prior consent of the Company, with respect to any press release of any Purchaser, or without the prior consent
of each Purchaser, with respect to any press release of the Company, which consent shall not unreasonably be withheld or delayed,
except if such disclosure is required by law, in which case the disclosing party shall promptly provide the other party with prior
notice of such public statement or communication. Notwithstanding the foregoing, the Company shall not publicly disclose the name
of any Purchaser, or include the name of any Purchaser in any filing with the Commission or any regulatory agency or Trading Market
unless the name of such Purchaser is already included in the body of the Transaction Documents, without the prior written consent
of such Purchaser, except: (a) as required by federal securities law in connection with the filing of final Transaction Documents
with the Commission and (b) to the extent such disclosure is required by law or Trading Market regulations, in which case the Company
shall provide the Purchasers with prior notice of such disclosure permitted under this clause (b). The Company may file a Form
10-Q or Form S-1/A amendment to the Form S-1 in lieu of the Form 8-K provided such filing contains the content required to be included
in the Form 8-K and the Form 10-Q or Form S-1/A is filed not later than one (1) Trading Day after the Form 8-K would otherwise
have been filed.


 




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4.7           Shareholder
Rights Plan. No claim will be made or enforced by the Company or, with the consent of the Company, any other Person, that any
Purchaser is an “Acquiring Person” under any control share acquisition, business combination, poison pill (including
any distribution under a rights agreement) or similar anti-takeover plan or arrangement in effect or hereafter adopted by the Company,
or that any Purchaser could be deemed to trigger the provisions of any such plan or arrangement, by virtue of receiving Securities
under the Transaction Documents or under any other agreement between the Company and the Purchasers.


 


4.8           Non-Public
Information. Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents,
the Company covenants and agrees that neither it, nor any other Person acting on its behalf, will provide any Purchaser or its
agents or counsel with any information that the Company believes constitutes material non-public information, unless prior thereto
such Purchaser shall have entered into a written agreement with the Company regarding the confidentiality and use of such information.
The Company understands and confirms that each Purchaser shall be relying on the foregoing covenant in effecting transactions in
securities of the Company.


 


4.9           Use
of Proceeds. The Company shall use the net proceeds from the sale of the Offering hereunder substantially for the purposes
set forth on Schedule 4.9 hereto and shall not use such proceeds: (a) for the satisfaction of any portion of the Company’s
debt except as disclosed on Schedule 4.9 (other than payment of trade payables in the ordinary course of the Company’s
business and consistent with prior practices), (b) for the redemption of any Common Stock or Common Stock Equivalents, (c) for
the settlement of any outstanding litigation or (d) in violation of FCPA or OFAC regulations.


 


4.10         Indemnification
of Purchasers. Subject to the provisions of this Section 4.10, the Company will indemnify and hold each Purchaser and its directors,
officers, shareholders, members, partners, employees and agents (and any other Persons with a functionally equivalent role of a
Person holding such titles notwithstanding a lack of such title or any other title), each Person who controls such Purchaser (within
the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, shareholders,
agents, members, partners or employees (and any other Persons with a functionally equivalent role of a Person holding such titles
notwithstanding a lack of such title or any other title) of such controlling persons (each, a “Purchaser Party”)
harmless from any and all losses, liabilities, obligations, claims, contingencies, damages, costs and expenses, including all judgments,
amounts paid in settlements, court costs and reasonable attorneys’ fees and costs of investigation that any such Purchaser
Party may suffer or incur as a result of or relating to (a) any breach of any of the representations, warranties, covenants or
agreements made by the Company in this Agreement or in the other Transaction Documents or (b) any action instituted against Purchaser
Parties in any capacity, or any of them or their respective Affiliates, by any stockholder of the Company who is not an Affiliate
of such Purchaser Party, with respect to any of the transactions contemplated by the Transaction Documents (unless such action
is based upon a breach of such Purchaser Party’s representations, warranties or covenants under the Transaction Documents
or any agreements or understandings such Purchaser Party may have with any such stockholder or any violations by such Purchaser
Party of state or federal securities laws or any conduct by such Purchaser Party which constitutes fraud, gross negligence, willful
misconduct or malfeasance). If any action shall be brought against any Purchaser Party in respect of which indemnity may be sought
pursuant to this Agreement, such Purchaser Party shall promptly notify the Company in writing, and the Company shall have the right
to assume the defense thereof with counsel of its own choosing reasonably acceptable to the Purchaser Party. Any Purchaser Party
shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of such Purchaser Party except to the extent that (i) the employment thereof has been specifically
authorized by the Company in writing, (ii) the Company has failed after a reasonable period of time to assume such defense and
to employ counsel or (iii) in such action there is, in the reasonable opinion of counsel, a material conflict on any material issue
between the position of the Company and the position of such Purchaser Party, in which case the Company shall be responsible for
the reasonable fees and expenses of no more than one such separate counsel. The Company will not be liable to any Purchaser Party
under this Agreement (y) for any settlement by a Purchaser Party effected without the Company’s prior written consent, which
shall not be unreasonably withheld or delayed; or (z) to the extent, but only to the extent that a loss, claim, damage or liability
is attributable to any Purchaser Party’s breach of its material representations, warranties or covenants under the Transaction
Documents. The indemnification required by this Section 4.10 shall be made by periodic payments of the amount thereof during the
course of the investigation or defense, as and when bills are received or are incurred. The indemnity agreements contained herein
shall be in addition to any cause of action or similar right of any Purchaser Party against the Company or others and any liabilities
the Company may be subject to pursuant to law.


 




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4.11         Reservation
and Listing of Securities.


 


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


 


(b)          If,
on any date, the number of authorized but unissued (and otherwise unreserved) shares of Common Stock is less than the Required
Minimum on such date, then the Board of Directors shall amend the Company’s certificate or articles of incorporation to increase
the number of authorized but unissued shares of Common Stock to at least the Required Minimum at such time, as soon as possible
and in any event not later than the 60th day after such date.


 


(c)          The
Company shall prior to each Closing, if applicable: (i) in the time and manner required by the principal Trading Market, prepare
and file with such Trading Market an additional shares listing application covering a number of shares of Common Stock at least
equal to the Required Minimum on the date of such application, (ii) take all steps necessary to cause such shares of Common Stock
to be approved for listing or quotation on such Trading Market as soon as possible thereafter, (iii) provide to the Purchasers
evidence of such listing or quotation and (iv) maintain the listing or quotation of such Common Stock on any date at least equal
to the Required Minimum on such date on such Trading Market or another Trading Market. The Company will take all action necessary
to continue the listing or quotation and trading of its Common Stock on a Trading Market until the later of (i) at least five years
after the last Closing Date, and (ii) for so long as the Notes or Warrants are outstanding, and will comply in all respects with
the Company’s reporting, filing and other obligations under the bylaws or rules of the Trading Market at least until five
years after the last Closing Date and for so long as the Notes and Warrants are outstanding. In the event the aforedescribed listing
is not continuously maintained for five years after the last Closing Date and for so long as Notes or Warrants are outstanding
(a “Listing Default”), then in addition to any other rights the Purchasers may have hereunder or under applicable
law, on the first day of a Listing Default and on each monthly anniversary of each such Listing Default date (if the applicable
Listing Default shall not have been cured by such date) until the applicable Listing Default is cured, the Company shall pay to
each Purchaser an amount in cash, as partial liquidated damages and not as a penalty, equal to 2% of the aggregate outstanding
Note principal and accrued interest, conversion price of Conversion Shares and purchase price of Warrant Shares held by such Purchaser
or which may be acquired upon exercise of Warrants on the day of a Listing Default and on every thirtieth day (pro-rated for periods
less than thirty days) thereafter until the date such Listing Default is cured. If the Company fails to pay any liquidated damages
pursuant to this Section in a timely manner, the Company will pay interest thereon at a rate of 1.5% per month (pro-rated for partial
months) to the Purchaser.


 




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4.12         Form
D; Blue Sky Filings. The Company agrees to timely file a Form D with respect to the Securities as required under Regulation
D and to provide a copy thereof, promptly upon request of any Purchaser. The Company shall 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 Purchasers
at a Closing under applicable securities or “Blue Sky” laws of the states of the United States, and shall provide evidence
of such actions promptly upon request of any Purchaser.


 


4.13         Subsequent
Equity Sales. From the date hereof until such time as the Notes are no longer outstanding, the Company will not, without the
consent of a Majority in Interest, enter into any Equity Line of Credit or similar agreement, issue or agree to issue floating
or Variable Priced Equity Linked Instruments nor any of the foregoing or equity with price reset rights (subject to adjustment
for stock splits, distributions, dividends, recapitalizations and the like) (collectively, a “Variable Rate Transaction”).   For
purposes hereof, “Equity Line of Credit” shall include any transaction involving a written agreement between
the Company and an investor or underwriter whereby the Company has the right to “put” its securities to the investor
or underwriter over an agreed period of time and at an agreed price or price formula, and “Variable Priced Equity Linked
Instruments” shall include: (A) any debt or equity securities which are convertible into, exercisable or exchangeable
for, or carry the right to receive additional shares of Common Stock or Common Stock Equivalents or any of the foregoing at a price
that can be reduced either (1) at any conversion, exercise or exchange rate or other price that is based upon and/or varies with
the trading prices of or quotations for Common Stock at any time after the initial issuance of such debt or equity security, or
(2) with a fixed conversion, exercise or exchange price that is subject to being reset at some future date at any time after the
initial issuance of such debt or equity security due to a change in the market price of the Company’s Common Stock since
date of initial issuance, or upon the issuance of any debt, equity or Common Stock Equivalent, and (B) any amortizing convertible
security which amortizes prior to its maturity date, where the Company is required or has the option to (or any investor in such
transaction has the option to require the Company to) make such amortization payments in shares of Common Stock which are valued
at a price that is based upon and/or varies with the trading prices of or quotations for Common Stock at any time after the initial
issuance of such debt or equity security (whether or not such payments in stock are subject to certain equity conditions).  For
purposes of determining the total consideration for a convertible instrument (including a right to purchase equity of the Company)
issued, subject to an original issue or similar discount or which principal amount is directly or indirectly increased after issuance,
the consideration will be deemed to be the actual net cash amount received by the Company in consideration of the original issuance
of such convertible instrument. For so long as the Notes are outstanding, the Company will not, without the consent of a Majority
in Interest, issue any Common Stock or Common Stock Equivalents to officers, directors, and employees of the Company unless such
issuance is an Exempt Issuance pursuant to items (a) or (d) of the definition of Exempt Issuance or in the amounts and on the terms
set forth on Schedule 4.13. For so long as the Notes are outstanding, the Company will not amend the terms of any securities
or Common Stock Equivalents or of any agreement outstanding or in effect as of the date of this Agreement pursuant to which same
were or may be acquired nor amend the terms of the S-1 Securities, nor issue any Common Stock or Common Stock Equivalents, without
the consent of a Majority in Interest, if such issuance or the result of such amendment would be at an effective price per share
of Common Stock less than the higher of the Conversion Price or Warrant Exercise Price in effect at the time of such issuance or
amendment. The restrictions and limitations in this Section 4.13 shall apply whether or not a Purchaser exercises its rights pursuant
to Section 4.17.


 




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4.14         Equal
Treatment of Purchasers. No consideration (including any modification of any Transaction Document) shall be offered or paid
to any Person to amend or consent to a waiver or modification of any provision of any of this Agreement unless the same consideration
is also offered on a ratable basis to all of the parties to this Agreement. For clarification purposes, this provision constitutes
a separate right granted to each Purchaser by the Company and negotiated separately by each Purchaser, and is intended for the
Company to treat the Purchasers as a class and shall not in any way be construed as the Purchasers acting in concert or as a group
with respect to the purchase, disposition or voting of Securities or otherwise. 


 


4.15         Capital
Changes. Until the one year anniversary of the last Closing Date, the Company shall not undertake a reverse or forward stock
split or reclassification of the Common Stock without 10 days prior written notice to the Purchasers except the Company may increase
the authorized shares of Common Stock from 100,000,000 Shares to 150,000,000 Shares.


 


4.16         Certain
Transactions and Confidentiality. Each Purchaser, severally and not jointly with the other Purchasers, covenants that neither
it, nor any Affiliate acting on such Purchaser’s behalf or pursuant to any understanding with such Purchaser will execute
any purchases or sales, including Short Sales, of any of the Company’s securities during the period commencing with the execution
of this Agreement and ending at such time that the transactions contemplated by this Agreement are first publicly announced pursuant
to a press release or Form 8-K as described in Section 4.6.  Each Purchaser, severally and not jointly with the other Purchasers,
covenants that until such time as the transactions contemplated by this Agreement are publicly disclosed by the Company pursuant
to a press release or Form 8-K as described in Section 4.6, such Purchaser will maintain the confidentiality of the existence and
terms of this transaction and the information included in the Transaction Documents and the Disclosure Schedules. Notwithstanding
the foregoing, and notwithstanding anything contained in this Agreement to the contrary, the Company expressly acknowledges and
agrees that (i) no Purchaser makes any representation, warranty or covenant hereby that it will not engage in effecting transactions
in any securities of the Company after the time that the transactions contemplated by this Agreement are first publicly announced
pursuant to a press release or Form 8-K as described in Section 4.6, (ii) no Purchaser shall be restricted or prohibited from effecting
any transactions in any securities of the Company in accordance with applicable securities laws from and after the time that the
transactions contemplated by this Agreement are first publicly announced pursuant to a press release or Form 8-K, and (iii) no
Purchaser shall have any duty of confidentiality to the Company or its Subsidiaries after the filing of the Form 8-K.  Notwithstanding
the foregoing, in the case of a Purchaser that is a multi-managed investment vehicle whereby separate portfolio managers manage
separate portions of such Purchaser’s assets and the portfolio managers have no direct knowledge of the investment decisions
made by the portfolio managers managing other portions of such Purchaser’s assets, the covenant set forth above shall only
apply with respect to the portion of assets managed by the portfolio manager that made the investment decision to purchase the
Securities covered by this Agreement.


 


4.17         Participation
in Future Financing.


 


(a)          Until
one year after the Initial Trading Date of a Registration Statement which registers all then outstanding or issuable Underlying
Shares (including Underlying Shares issuable in connection with a Subsequent Closing, if any), upon any proposed issuance by the
Company or any of its Subsidiaries of Common Stock, Common Stock Equivalents for cash consideration, Indebtedness or a combination
thereof, other than (i) a rights offering to all holders of Common Stock (which may include extending such rights offering to holders
of Notes), (ii) an Exempt Issuance, or (iii) provided the provisions of Section 4.13 of this Agreement have been complied with
by the Company, the Common Stock issuable pursuant to the Form S-1, (a “Subsequent Financing”), the Purchasers
shall have the right to participate in up to an amount of the Subsequent Financing equal to 100% of the Subsequent Financing (the
“Participation Maximum”) pro rata to each other in proportion to their Subscription Amounts on the same terms,
conditions and price provided for in the Subsequent Financing, unless the Subsequent Financing is an underwritten public offering,
in which case the Company shall notify each Purchaser of such public offering when it is lawful for the Company to do so, but no
Purchaser shall be entitled to purchase any particular amount of such public offering without the approval of the lead underwriter
of such underwritten public offering.


 




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(b)          At
least fifteen (15) Trading Days prior to the closing of the Subsequent Financing, the Company shall deliver to each Purchaser a
written notice of its intention to effect a Subsequent Financing (“Pre-Notice”), which Pre-Notice shall ask
such Purchaser if it wants to review the details of such financing (such additional notice, a “Subsequent Financing Notice”).
Upon the request of a Purchaser, and only upon a request by such Purchaser, for a Subsequent Financing Notice, the Company shall
promptly, but no later than one (1) Trading Day after such request, deliver a Subsequent Financing Notice to such Purchaser. The
requesting Purchaser shall be deemed to have acknowledged that the Subsequent Financing Notice may contain material non-public
information. The Subsequent Financing Notice shall describe in reasonable detail the proposed terms of such Subsequent Financing,
the amount of proceeds intended to be raised thereunder and the Person or Persons through or with whom such Subsequent Financing
is proposed to be effected and shall include a term sheet or similar document relating thereto as an attachment.


 


(c)          Any
Purchaser desiring to participate in such Subsequent Financing must provide written notice to the Company by not later than 5:30
p.m. (New York City time) on the fifteenth (15th) Trading Day after all of the Purchasers have received the Pre-Notice
that the Purchaser is willing to participate in the Subsequent Financing, the amount of such Purchaser’s participation, and
representing and warranting that such Purchaser has such funds ready, willing, and available for investment on the terms set forth
in the Subsequent Financing Notice. If the Company receives no such notice from a Purchaser as of such fifteenth (15th)
Trading Day, such Purchaser shall be deemed to have notified the Company that it does not elect to participate.


 


(d)          If
by 5:30 p.m. (New York City time) on the fifteenth (15th ) Trading Day after all of the Purchasers have received the
Pre-Notice, notifications by the Purchasers of their willingness to participate in the Subsequent Financing (or to cause their
designees to participate) is, in the aggregate, less than the total amount of the Subsequent Financing, then the Company may affect
the remaining portion of such Subsequent Financing on the terms and with the Persons set forth in the Subsequent Financing Notice.


 


(e)          If
by 5:30 p.m. (New York City time) on the fifteenth (15th) Trading Day after all of the Purchasers have received the
Pre-Notice, the Company receives responses to a Subsequent Financing Notice from Purchasers seeking to purchase more than the aggregate
amount of the Participation Maximum, each such Purchaser shall have the right to purchase its Pro Rata Portion (as defined below)
of the Participation Maximum.  “Pro Rata Portion” means the ratio of (x) the principal amount of Notes
purchased hereunder by a Purchaser participating under this Section 4.17 and (y) the sum of the aggregate principal amounts of
Notes purchased hereunder by all Purchasers participating under this Section 4.17.


 


(f)          The
Company must provide the Purchasers with a second Subsequent Financing Notice, and the Purchasers will again have the right of
participation set forth above in this Section 4.18, if the Subsequent Financing subject to the initial Subsequent Financing Notice
is not consummated for any reason on the terms set forth in such Subsequent Financing Notice within thirty (30) Trading Days after
the date of the initial Subsequent Financing Notice.


 




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(g)          The
Company and each Purchaser agree that if any Purchaser elects to participate in the Subsequent Financing, the transaction documents
related to the Subsequent Financing shall not include any term or provision whereby such Purchaser shall be required to agree
to any restrictions on trading as to any of the Securities purchased hereunder (for avoidance of doubt, the securities purchased
in the Subsequent Financing shall not be considered securities purchased hereunder) or be required to consent to any amendment
to or termination of, or grant any waiver, release or the like under or in connection with, this Agreement, without the prior
written consent of such Purchaser.


 


(h)          Notwithstanding
anything to the contrary in this Section 4.17 and unless otherwise agreed to by such Purchaser, the Company shall either confirm
in writing to such Purchaser that the transaction with respect to the Subsequent Financing has been abandoned or shall publicly
disclose its intention to issue the securities in the Subsequent Financing, in either case in such a manner such that such Purchaser
will not be in possession of any material, non-public information, by the seventeenth (17th) Business Day following
delivery of the Subsequent Financing Notice. If by such seventeenth (17th) Business Day, no public disclosure regarding
a transaction with respect to the Subsequent Financing has been made, and no notice regarding the abandonment of such transaction
has been received by such Purchaser, such transaction shall be deemed to have been abandoned and such Purchaser shall not be deemed
to be in possession of any material, non-public information with respect to the Company or any of its Subsidiaries.


 


4.18         Purchaser’s
Exercise Limitations. The Company shall not effect any exercise of the rights granted in Sections 2.4, 4.17 and 4.23 of this
Agreement, and a Purchaser shall not have the right to exercise any portion of such rights granted in Sections 2.4, 4.17 and 4.23
to the extent that after giving effect to such exercise, the Purchaser (together with the Purchaser’s Affiliates, and any
other Persons acting as a group together with the Purchaser or any of the Purchaser’s Affiliates), would beneficially own
in excess of the Beneficial Ownership Limitation (as defined in the Note), applied in the manner set forth in the Note. In such
event the right by Purchaser to benefit from such rights or receive shares in excess of the Beneficial Ownership Limitation shall
be held in abeyance until such times as such excess shares shall not exceed the Beneficial Ownership Limitation.


 


4.19         Maintenance
of Property/Insurance. The Company shall keep all of its property, which is necessary or useful to the conduct of its business,
in good working order and condition, ordinary wear and tear excepted and insured by insurers of recognized financial responsibility
against such losses and risks and in such amounts as are prudent and customary for the businesses of the Company and Subsidiary.
From and after the Initial Trading Day and for so long as any Securities are held by a Purchaser, the Company will maintain directors
and officers insurance coverage at least equal to the aggregate Subscription Amount.


 


4.20         Preservation
of Corporate Existence. The Company and each Subsidiary shall preserve and maintain its corporate existence, rights, privileges
and franchises in the jurisdiction of its incorporation, and qualify and remain qualified, as a foreign corporation in each jurisdiction
in which such qualification is necessary in view of its business or operations and where the failure to qualify or remain qualified
might reasonably have a Material Adverse Effect upon the financial condition, business or operations of the Company taken as a
whole.


 


4.21         DTC
Program. At all times that Notes or Warrants are outstanding, the Company shall employ as the transfer agent for its Common
Stock and Underlying Shares a participant in the Depository Trust Company Automated Securities Transfer Program and cause the Common
Stock and Underlying Shares to be transferable pursuant to such program.


 




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4.22        Reimbursement.
If any Purchaser becomes involved in any capacity in any Proceeding by or against any Person who is a stockholder of the Company
(except as a result of sales, pledges, margin sales and similar transactions by such Purchaser to or with any current stockholder),
solely as a result of such Purchaser’s acquisition of the Securities under this Agreement, the Company will reimburse such
Purchaser for its reasonable legal and other expenses (including the cost of any investigation preparation and travel in connection
therewith) incurred in connection therewith, as such expenses are incurred. The reimbursement obligations of the Company under
this paragraph shall be in addition to any liability which the Company may otherwise have, shall extend upon the same terms and
conditions to any Affiliates of the Purchasers who are actually named in such action, proceeding or investigation, and partners,
directors, agents, employees and controlling persons (if any), as the case may be, of the Purchasers and any such Affiliate, and
shall be binding upon and inure to the benefit of any successors, assigns, heirs and personal representatives of the Company, the
Purchasers and any such Affiliate and any such Person. The Company also agrees that neither the Purchasers nor any such Affiliates,
partners, directors, agents, employees or controlling persons shall have any liability to the Company or any Person asserting claims
on behalf of or in right of the Company solely as a result of acquiring the Securities under this Agreement.


 


4.23        Most
Favored Nation Provision. From the date hereof and for so long as a Purchaser holds any Securities, in the event that the Company
issues or sells any Common Stock or Common Stock Equivalents, if a Purchaser then holding outstanding Securities reasonably believes
that any of the terms and conditions appurtenant to such issuance or sale are more favorable to such investors than are the terms
and conditions granted to the Purchasers hereunder, upon notice to the Company by such Purchaser within five (5) Trading Days after
disclosure of such issuance or sale, the Company shall amend the terms of this transaction as to such Purchaser only so as to give
such Purchaser the benefit of such more favorable terms or conditions. This Section 4.23 shall not apply with respect to an Exempt
Issuance. The Company shall provide each Purchaser with notice of any such issuance or sale not later than ten (10) Trading Days
before such issuance or sale.


 


4.24        Indebtedness.
For so long as any Securities is outstanding, the Company will not incur any Indebtedness other than Permitted Indebtedness, without
the consent of the Majority in Interest.


 


4.25        Notice
of Disqualification Events. The Company will notify the Purchasers in writing, prior to each 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 not otherwise disclosed herein or in the SEC Reports.


 


4.26        Amendment
to Registration Statement.


 


(a)          The
Company will file a Form S-1/A within thirty (30) days after the Initial Closing Date amending the Form S-1 to reflect the Offering
and any other events necessary to be disclosed therein for the Form S-1 to be current and the prospectus therein to be employed
in connection with the sale and resale of the securities therein registered. The Company will diligently pursue obtaining the effectiveness
of such amended Form S-1.


 


(b)          Purchasers
and their respective counsels shall be given a reasonable opportunity to review and comment upon the Form S-1 prior to the filing
thereof with the Commission, and shall provide any comments thereon as soon as reasonably practicable. The Company will promptly
notify Purchasers upon communication from the Commission that the Commission has declared effective the Form S-1/A.


 




    	 	39	 



     


    

  


4.27        Piggy-Back
Registrations. If at any time after the Closing Date there is not an effective registration statement registering all of the
issued Incentive Shares and Underlying Shares and the Company determines to prepare and file with the Commission a registration
statement relating to an offering for its own account or the account of others under the Securities Act of any of its equity securities,
but excluding the Form S-1, Forms S-4 or S-8 and similar forms which do not permit such registration, then the Company shall send
to each holder of any of the issued Securities written notice of such determination and, if within fifteen calendar days after
receipt of such notice, any such holder shall so request in writing, the Company shall include in such registration statement all
or any part of the Underlying Shares, and Warrant Shares such holder requests to be registered and which inclusion of such Underlying
Shares and Warrant Shares will be subject to customary underwriter cutbacks applicable to all holders of registration rights and
minimum cutbacks in accordance with guidance provided by the Securities and Exchange Commission (including, but not limited to,
Rule 415). The obligations of the Company under this Section may be waived by any holder of any of the Securities entitled to registration
rights under this Section 4.27. The holders whose Underlying Shares and Warrant Shares are included or required to be included
in such registration statement are granted the same rights, benefits, liquidated or other damages and indemnification granted to
other holders of securities included in such registration statement. In no event shall the liability of any holder of Securities
or permitted successor in connection with any Underlying Shares and Warrant Shares included in any such registration statement
be greater in amount than the dollar amount of the net proceeds actually received by such Purchaser upon the sale of the Incentive
Shares and Underlying Shares sold pursuant to such registration or such lesser amount in proportion to all other holders of Securities
included in such registration statement. All expenses incurred by the Company in complying with Section 4.27, including, without
limitation, all registration and filing fees, printing expenses (if required), fees and disbursements of counsel and independent
public accountants for the Company, fees and expenses (including reasonable counsel fees) incurred in connection with complying
with state securities or “blue sky” laws, fees of the FINRA, transfer taxes, and fees of transfer agents and registrars,
are called “Registration Expenses.” All underwriting discounts and selling commissions applicable to the sale
of Registrable Securities are called "Selling Expenses." The Company will pay all Registration Expenses in connection
with the registration statement under Section 4.27. Selling Expenses in connection with each registration statement under Section
4.27 shall be borne by the holder and will be apportioned among such holders in proportion to the number of Shares included therein
for a holder relative to all the securities included therein for all selling holders, or as all holders may agree. It shall be
a condition precedent to the obligations of the Company to complete the registration pursuant to this Agreement with respect to
the Incentive Shares and Underlying Shares of a particular Purchaser that such Purchaser shall furnish to the Company in writing
such information and representation letters, including a completed form of a securityholder questionnaire, with respect to itself
and the proposed distribution by it as the Company may reasonably request to assure compliance with federal and applicable state
securities laws.


 


4.28        Initial
Trading Day. It shall be an Event of Default if the Initial Trading Day does not occur on or before one year after the Initial
Closing Date.


 


4.29        Collateral.
Annexed hereto as Exhibit K is an accurate appraisal of certain Collateral (as defined in the Security Agreement and Corporate
Security Agreement) of the Company and the Corporate Guarantor as of the dates thereon stated and the physical locations of such
Collateral. Until the later of three (3) years after the Initial Closing Date and for so long as any Notes remain outstanding,
the Company will provide within ten (10) days after each six (6) month period after the Initial Closing Date at its sole cost and
expense, to each Purchaser and the Collateral Agent serving as such under the Security Agreement and Corporate Security Agreement,
an appraisal report certified by Gemological Laboratory Services of all of the gemstone Collateral and a statement as to the physical
location of such Collateral, in form and substance reasonably acceptable to Purchasers.


 


4.30        Duration
of Undertakings. Unless otherwise stated in this Article IV, all of the Company’s undertakings, obligations and responsibilities
set forth in Article IV of this Agreement shall remain in effect for so long as any Securities remain outstanding.


 




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ARTICLE V.


MISCELLANEOUS


 


5.1           Termination. 
This Agreement may be terminated by any Purchaser, as to such Purchaser’s obligations hereunder only and without any effect
whatsoever on the obligations between the Company and the other Purchasers, by written notice to the other parties, if the Initial
Closing has not been consummated on or before December 31, 2015; provided, however, that such termination will not
affect the right of any party to sue for any breach by any other party (or parties).


 


5.2           Fees
and Expenses. At the Initial Closing, the Company has agreed to pay G&M for the legal fees in connection with the Initial
Closing of some, but not all, of the Purchasers in the amount of [REQUIRES COMPLETION]
(of which $5,000 has been paid). Except as expressly set forth in the Transaction Documents, each party shall pay the fees and
expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident
to the negotiation, preparation, execution, delivery and performance of this Agreement. The Company shall reimburse Purchasers
for all expenses incurred in connection with UCC, lien, judgment, tax and similar searches conducted in connection with the Offering.
The Company shall pay all Transfer Agent fees (including, without limitation, any fees required for same-day processing of any
instruction letter delivered by the Company and any conversion or exercise notice delivered by a Purchaser), stamp taxes and other
taxes and duties levied in connection with the delivery of any Securities to the Purchasers.


 


5.3           Entire
Agreement. The Transaction Documents, together with the exhibits and schedules thereto, contain the entire understanding of
the parties with respect to the subject matter hereof and thereof and supersede all prior agreements and understandings, oral or
written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules.


 


5.4           Notices.
All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing
and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return
receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted
by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified
most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed
effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine,
at the address or number designated below (if delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered other than on a business day during normal business
hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service,
fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be: (i) if to the Company, to: Reign Sapphire Corporation, 9465 Wilshire Boulevard, Beverly Hills, CA
90212, Attn: Joseph Segelman, President and CEO, fax: (323) 704-3255, with a copy by fax only to: Qian & Company, 135 Main
Street, 9th Floor, San Francisco, CA 94105, Attn: Alan S. Gutterman, Esq., Fax: (415) 267-1899, and (ii) if to the Purchasers,
to: the addresses and fax numbers indicated on the signature pages hereto, with an additional copy by fax only to (which shall
not constitute notice): Grushko & Mittman, P.C., 515 Rockaway Avenue, Valley Stream, New York 11581, fax: (212) 697-3575.


 


5.5           Amendments;
Waivers. No provision of this Agreement may be waived, modified, supplemented or amended except in a written instrument signed,
in the case of an amendment, by the Company and the Purchasers holding at least a majority in interest of the Securities then outstanding
(the “Majority in Interest”), or, in the case of a waiver, by the party against whom enforcement of any such
waived provision is sought. Whenever the term “consent of the Purchasers” or a similar term is employed herein, it
shall mean the consent of a Majority in Interest. No waiver of any default with respect to any provision, condition or requirement
of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of
any other provision, condition or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder
in any manner impair the exercise of any such right.


 




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


 


5.7           Successors
and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted
assigns. The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of
each Purchaser (other than by merger). Following a Closing, any Purchaser may assign any or all of its rights under this Agreement
to any Person to whom such Purchaser assigns or transfers any Securities, provided that such transferee agrees in writing to be
bound, with respect to the transferred Securities, by the provisions of the Transaction Documents that apply to the “Purchasers.”


 


5.8           No
Third-Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective successors
and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, except as otherwise
set forth in Section 4.10.


 


5.9           Governing
Law. All questions concerning the construction, validity, enforcement and interpretation of the Transaction Documents shall
be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the
principles of conflicts of law thereof. Each party agrees that all legal proceedings concerning the interpretations, enforcement
and defense of the transactions contemplated by this Agreement and any other Transaction Documents (whether brought against a party
hereto or its respective affiliates, directors, officers, shareholders, partners, members, employees or agents) shall be commenced
exclusively in the state and federal courts sitting in the City 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 (including with respect
to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any action,
suit or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or
proceeding is improper or is an inconvenient venue for such proceeding. 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 via registered or
certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for 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 other manner permitted by law. If either
party shall commence an action or proceeding to enforce any provisions of the Transaction Documents, then, in addition to the obligations
of the Company under Section 4.10, the prevailing party in such action, suit or proceeding shall be reimbursed by the other party
for its reasonable attorneys’ fees and other costs and expenses incurred with the investigation, preparation and prosecution
of such action or proceeding.


 


5.10         Survival.
The representations and warranties contained herein shall survive the Closings and the delivery of the Securities.


 


5.11         Execution.
This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each party and delivered to each other party, it being
understood that the parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission
or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the
party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf”
signature page were an original thereof.


 




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5.12         Severability.
If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal,
void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full
force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially
reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated
by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that
they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.


 


5.13         Rescission
and Withdrawal Right. Notwithstanding anything to the contrary contained in (and without limiting any similar provisions of)
any of the other Transaction Documents, whenever any Purchaser 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 Purchaser
may, at any time prior to the Company’s performance of such obligations, rescind or withdraw, in its sole discretion from
time to time upon written notice to the Company, any relevant notice, demand or election in whole or in part without prejudice
to its future actions and rights; provided, however, that in the case of a rescission of a conversion of a Note or
exercise of a Warrant, the applicable Purchaser shall be required to return any shares of Common Stock subject to any such rescinded
conversion or exercise notice concurrently with the return to such Purchaser of the aggregate exercise price paid to the Company
for such shares and the restoration of such Purchaser’s right to acquire such shares pursuant to such Purchaser’s Warrant
(including, issuance of a replacement warrant certificate evidencing such restored right).


 


5.14         Replacement
of Securities. If any certificate or instrument evidencing any Securities is mutilated, lost, stolen or destroyed, the Company
shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof (in the case of mutilation), or
in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory
to the Company of such loss, theft or destruction. The applicant for a new certificate or instrument under such circumstances shall
also pay any reasonable third-party costs (including customary indemnity) associated with the issuance of such replacement Securities.


 


5.15         Remedies.
In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, each of
the Purchasers and the Company will be entitled to specific performance under the Transaction Documents. The parties agree that
monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations contained in the
Transaction Documents and hereby agree to waive and not to assert in any action for specific performance of any such obligation
the defense that a remedy at law would be adequate.


 


5.16         Payment
Set Aside. To the extent that the Company makes a payment or payments to any Purchaser pursuant to any Transaction Document
or a Purchaser enforces or exercises its rights 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, 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.


 




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5.17         Usury.
To the extent it may lawfully do so, the Company hereby agrees not to insist upon or plead or in any manner whatsoever claim, and
will resist any and all efforts to be compelled to take the benefit or advantage of, usury laws wherever enacted, now or at any
time hereafter in force, in connection with any claim, action or proceeding that may be brought by any Purchaser in order to enforce
any right or remedy under any Transaction Document. Notwithstanding any provision to the contrary contained in any Transaction
Document, it is expressly agreed and provided that the total liability of the Company under the Transaction Documents for payments
in the nature of interest shall not exceed the maximum lawful rate authorized under applicable law (the “Maximum Rate”),
and, without limiting the foregoing, in no event shall any rate of interest or default interest, or both of them, when aggregated
with any other sums in the nature of interest that the Company may be obligated to pay under the Transaction Documents exceed such
Maximum Rate. It is agreed that if the maximum contract rate of interest allowed by law and applicable to the Transaction Documents
is increased or decreased by statute or any official governmental action subsequent to the date hereof, the new maximum contract
rate of interest allowed by law will be the Maximum Rate applicable to the Transaction Documents from the Closing Date thereof
forward, unless such application is precluded by applicable law. If under any circumstances whatsoever, interest in excess of the
Maximum Rate is paid by the Company to any Purchaser with respect to indebtedness evidenced by the Transaction Documents, such
excess shall be applied by such Purchaser to the unpaid principal balance of any such indebtedness or be refunded to the Company,
the manner of handling such excess to be at such Purchaser’s election.


 


5.18         Independent
Nature of Purchasers’ Obligations and Rights. The obligations of each Purchaser under any Transaction Document are several
and not joint with the obligations of any other Purchaser, and no Purchaser shall be responsible in any way for the performance
or non-performance of the obligations of any other Purchaser under any Transaction Document. Nothing contained herein or in any
other Transaction Document, and no action taken by any Purchaser pursuant hereto or thereto, shall be deemed to constitute the
Purchasers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Purchasers
are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction
Documents. Each Purchaser shall be entitled to independently protect and enforce its rights, including, without limitation, the
rights arising out of this Agreement or out of the other Transaction Documents, and it shall not be necessary for any other Purchaser
to be joined as an additional party in any proceeding for such purpose. Each Purchaser has been represented by its own separate
legal counsel in its review and negotiation of the Transaction Documents. For reasons of administrative convenience only, each
Purchaser and its respective counsel have chosen to communicate with the Company through G&M. The Company has elected to provide
all Purchasers with the same terms and Transaction Documents for the convenience of the Company and not because it was required
or requested to do so by any of the Purchasers. It is expressly understood and agreed that each provision contained in this Agreement
and in each other Transaction Document is between the Company and a Purchaser, solely, and not between the Company and the Purchasers
collectively and not between and among the Purchasers. In the event circumstances do not enable or allow the Company to fulfill
its obligation in full to all Purchasers, then the Company shall fulfill its obligations to multiple Purchasers having the same
rights, pro rata to each such affected Purchaser’s Subscription Amount actually delivered to the Company.


 


5.19         Liquidated
Damages. The Company’s obligations to pay any partial liquidated damages or other amounts owing under the Transaction
Documents is a continuing obligation of the Company and shall not terminate until all unpaid partial liquidated damages and other
amounts have been paid notwithstanding the fact that the instrument or security pursuant to which such partial liquidated damages
or other amounts are due and payable shall have been canceled.


 




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5.20         Saturdays,
Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or
granted herein shall not be a Business Day, then such action may be taken or such right may be exercised on the next succeeding
Business Day.


 


5.21         Construction.
The parties agree that each of them and/or their respective counsel have reviewed and had an opportunity to revise the Transaction
Documents and, therefore, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting
party shall not be employed in the interpretation of the Transaction Documents or any amendments thereto. In addition, each and
every reference to share prices and shares of Common Stock in any Transaction Document shall be subject to adjustment for reverse
and forward stock splits, stock dividends, stock combinations and other similar transactions of the Common Stock that occur after
the date of this Agreement.


 


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


 


5.23         Equitable
Adjustment. Trading volume amounts, price/volume amounts, the amount of Warrants, the amount of Incentive Shares, Note Conversion
Prices, Warrant Exercise Prices and similar figures in the Transaction Documents shall be equitably adjusted (but without duplication)
to offset the effect of stock splits, similar events and as otherwise described in this Agreement, Note and Warrants.


 


(Signature Pages Follow)


 




    	 	45	 



     


    

  


IN WITNESS WHEREOF,
the parties hereto have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories
as of the date first indicated above.


 


 


	REIGN SAPPHIRE CORPORATION	 
	 	 
	 	Address for Notice:
	 	 
	 	9465 Wilshire Boulevard
	 	Beverly Hills, CA 90212
	 	Fax: (323) 704-3255
	By:	 	 
	 	Name: Joseph Segelman	 
	 	Title: President and Chief Executive Officer	 
	 	 	 
	With a copy to (which shall not constitute notice):	 
	 	 
	Qian & Company	 
	135 Main Street, 9th Floor	 
	San Francisco, CA 94105	 
	Attn: Alan S. Gutterman, Esq.	 
	Fax: (415) 267-1899	 
	 	 


 


[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK


SIGNATURE PAGE FOR PURCHASER FOLLOWS]


 




    	 	46	 



     


    

  


[PURCHASER
SIGNATURE PAGE TO REIGN SAPPHIRE CORPORATION


SECURITIES
PURCHASE AGREEMENT]


 


IN WITNESS WHEREOF,
the undersigned have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as
of the date first indicated above.


 


Name of Purchaser: ________________________________________________________


 


Signature of Authorized Signatory of
Purchaser: __________________________________


 


Name of Authorized Signatory: ____________________________________________________


 


Title of Authorized Signatory: _____________________________________________________


 


Email Address of Authorized Signatory:
_____________________________________________


 


Facsimile Number of Authorized Signatory: __________________________________________


 


State of Residence of Purchaser: _________________________________________________


 


Address for Notice to Purchaser:


 


Address for Delivery of Securities to Purchaser (if not same
as address for notice):


 


 


 


	Initial Closing Subscription Amount: US$________________	 	 
	Initial Closing Note principal amount: ___________________	 	(Subscription Amount allocated to Notes: US$_____________
	Initial Closing Warrants: ___________________	 	(Subscription Amount allocated to Warrants: US$_____________
	Initial Closing Incentive Shares: ___________________	 	(Subscription Amount allocated to Incentive Shares: US$_____________
	
        Maximum Subsequent Closing Subscription

        Amount: US$ _______________________________
	 	 
	Maximum Subsequent Closing Note principal: US$___________________	 	(Subsequent Closing Subscription Amount allocated to Notes: US$_____________
	Maximum Subsequent Closing Warrants: ________________________	 	(Subsequent Closing Subscription Amount allocated to Warrants: US$_____________
	Maximum Subsequent Closing Incentive Shares: _______________	 	(Subsequent Closing Subscription Amount allocated to Incentive Shares: US$_____________


 


EIN Number, if applicable, will be provided under separate cover:
________________________


 


Date: ___________________________


 


[SIGNATURE PAGES CONTINUE]


 




    	 	47	 



     


    

  


EXHIBITS AND SCHEDULES


 


	Exhibit A	Form of Note
	Exhibit B	Form of Warrant
	Exhibit C	Escrow Agreement
	Exhibit D	Form of Legal Opinion
	Exhibit E	Form of Security Agreement
	Exhibit F	Form of Corporate Guaranty
	Exhibit G	Form of Guarantor Security Agreement
	Exhibit H	Form of Personal Guaranty
	Exhibit I	Form of Investor Questionnaire and Rule 506 Bad Actor Disqualification Questionnaire
	Exhibit J	Form of Form 8-K
	Exhibit K	Appraisal of Collateral


 


Schedule 3.1(a)


Schedule 3.1(g)


Schedule 3.1(i)


Schedule 3.1(l)


Schedule 3.1(n)


Schedule 3.1(r)


Schedule 3.1(z)


Schedule 3.1(cc)


Schedule 3.1(ll)


Schedule 4.9


Schedule 4.13


 




    	 	48