EXHIBIT 10.1



 


Exhibit 10.1


 





SECURITIES
PURCHASE AGREEMENT


 


This
Securities Purchase Agreement (this “Agreement”) is dated as of _________ __, 2014, between Vaporin, Inc., a Delaware
corporation (the “Company”), and each purchaser identified on the signature pages hereto (each, including its successors
and 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(b) 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.


 


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


 


1.1Definitions.
In addition to the terms defined elsewhere in this Agreement, for all purposes of this Agreement, 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 authorized or required by law or other governmental action
to close.


 


“Closing”
means the closing of the purchase and sale of the Securities pursuant to Section 2.1. There may be one or more Closings.


 


“Closing
Date” means the Trading 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’ obligations to pay the Subscription Amount and (ii)
the Company’s obligations to deliver the Securities, in each case, have been satisfied or waived, but in no event later
than the third Trading Day following the date hereof.


 




    	 



    	 



    


 


“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 Nason Yeager Gerson White & Lioce, P.A., 1645 Palm Beach Lakes Boulevard, West Palm Beach, FL 33401
Attn: Michael D. Harris, Esq., facsimile: (561) 686-5442


 


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


 


“Effective
Date” means the earliest of the date that (a) a registration statement covering the Shares has been declared effective
by the Commission, (b) all of the Securities have been sold pursuant to Rule 144 or may be sold 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 or (c) following the one year anniversary of the Closing Date provided that a holder of Securities
is not an Affiliate of the Company, all of the Securities may be sold pursuant to an exemption from registration under Section
4(1) of the Securities Act without volume or manner-of-sale restrictions and Company counsel has delivered to such holders a standing
written unqualified opinion that resales may then be made by such holders of the Registrable Securities pursuant to such exemption
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.


 


“Evaluation
Date” shall have the meaning ascribed to such term in Section 3.1(r).


 


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


 




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“Exempt
Issuance” means the issuance of (a) shares of Common Stock and options issued to, and shares of Common Stock issued
upon exercise of options held by consultants, officers, employees, or directors of the Company prior to and after the initial
Closing date, and shares of Common Stock issued upon exercise of warrants (which warrants have been disclosed in SEC Reports or
on Schedule 1.1), (b) securities issued upon the exercise, conversion or exchange 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 1.1, (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 equity holders 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 [for
avoidance of doubt, the acquisition of Direct Source Incorporated is a strategic transition], and securities issuable pursuant
to certain anti-dilution rights under agreements entered into prior to the date of this Agreement, provided that such agreements
have not been amended since the date of this Agreement to include or amend (to increase the number of shares issuable or the applicable
price for such issuance) any anti-dilution rights in such agreements.


 


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


 


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


 


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


 


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


 


“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.


 


“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.


 


“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 4.18(a).


 




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“Per
Share Purchase Price” equals $0.10, subject to appropriate 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.


 


“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.


 


“Pre-Notice”
shall have the meaning ascribed to such term in Section 4.18.


 


“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 4.18.


 


“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(b).


 


“Purchaser
Party” shall have the meaning ascribed to such term in Section 4.9.


 


“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.


 


“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.


 


“Rule
424” means Rule 424 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.


 


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


 


“Securities”
means the Shares.


 


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


 




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“Shares”
means the shares of Common Stock issued or issuable to each Purchaser pursuant to this Agreement.


 


“Short
Sales” means all “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).


 


“Subscription
Amount” means, as to each Purchaser, the aggregate amount to be paid for the Shares purchased hereunder 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
Financing” shall have the meaning ascribed to such term in Section 4.18.


 


“Subsequent
Financing Notice” shall have the meaning ascribed to such term in Section 2.1.


 


“Subsidiary”
means any subsidiary of the Company as set forth on Schedule 3.1(a) and shall, where applicable, also include any direct
or indirect subsidiary of the Company formed or acquired after the date hereof.


 


“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 AMEX, 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).


 


“Transaction
Documents” means this Agreement, 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 Equity Stock Transfer, with offices at 110 Green Street, Suite 403 New York, New York 10012, Fax: 347-584-3644,
and any successor transfer agent or Company.


 


“Variable
Rate Transaction” shall have the meaning ascribed to such term in Section 4.12.


 


“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 the OTC Bulletin Board 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 of the Securities then outstanding and reasonably acceptable to the Company, the fees
and expenses of which shall be paid by the Company.


 




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ARTICLE
II.


PURCHASE
AND SALE


 


2.1Closing.
On each 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 $4,000,000 of Shares. Each Purchaser shall deliver to the Company such Purchaser’s
Subscription Amount, and the Company shall deliver to each Purchaser its respective Shares, as determined pursuant to Section
2.2(a), and the Company and each Purchaser shall deliver the other items set forth in Section 2.2 deliverable at the 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
Nason, Yeager, Gerson, White & Lioce, P.A. or such other location as the parties shall mutually agree.


 


2.2Deliveries.


 


(a)On
or prior to the 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
certificate evidencing a number of Shares of Common Stock equal to such Purchaser’s Subscription Amount divided by the Per
Share Purchase Price, registered in the name of such Purchaser


 


(iii)the
Escrow Agreement duly executed by the Company.


 


(b)On
or prior to the 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 otherwise permitted under the Escrow Agreement, to the Escrow Agent;
and


 


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


 




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2.3Closing
Conditions.


 


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


 


(i)the
accuracy in all material respects on the 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 required to be performed at or prior to the Closing Date shall have been
performed; and


 


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


 


(b)The
respective obligations of the Purchasers hereunder in connection with the Closing are subject to the following conditions being
met:


 


(i)the
accuracy in all material respects when made and on the 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 Closing Date shall have been
performed;


 


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


 


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


 


(v)from
the date hereof to the 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 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.


 




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ARTICLE
III.


 REPRESENTATIONS
AND WARRANTIES


 


3.1Representations
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 or otherwise 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:


 


(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, all other references to the Subsidiaries or any of them in the Transaction Documents shall be disregarded
except to the extent such reference speaks to a time in the past or future with respect to a Subsidiary.


 


(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,
prospects 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.


 




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(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) subject to Required Approvals, 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 or cancellation (with or without notice, lapse of time or both) of, any agreement, credit
facility, debt or other instrument (evidencing a Company or Subsidiary 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) subject to the Required Approvals, 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 clauses (ii) and (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 4.5 of this Agreement, (ii) the notice and/or application(s) to each applicable Trading
Market for the issuance and sale of the Shares and the listing of the Shares for trading thereon in the time and manner required
thereby, and (iv) 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”).


 




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(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 that maximum number of shares of Common Stock issuable pursuant
to this Agreement.


 


(g)Capitalization.
The capitalization of the Company is as set forth in Schedule 3.1(g). Except as set forth on 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 Company’s stock option plans, the issuance of shares of Common Stock
to employees pursuant to the Company’s employee stock purchase plans 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. 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, 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, except as set forth on Schedule 3.1(g).


 


(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, including pursuant to Section 13(a) or 15(d) thereof,
for the two years preceding the date hereof (or such shorter period as the Company was required by law or regulation to file such
material) (the foregoing materials, 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.


 




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(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: (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 existing Company stock option plans. 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.


 


(j)Litigation.
Except as described in the SEC Reports or as set forth on Schedule 3.1(j), 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, since December 31, 2012, 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. 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.


 




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


 


(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.


 




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


 


(o)Intellectual
Property.


 


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


 


		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, patent applications, and inventions and discoveries that may be patentable of
                                         the Company and each Subsidiary (collectively, “Patents’’);
	 	 	 
		3.	all
                                         copyrights in both published works and published 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.
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.


 




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


 


(iv)Patents.
The Company is the owner of all right, title and interest in and to each of the Patents, free and clear of all Liens and other
adverse claims. All of the issued Patents are currently in compliance with formal legal requirements (including payment of filing,
examination, and maintenance fees and proofs of working or use), are valid and enforceable, and are not subject to any maintenance
fees or taxes or actions falling due within ninety days after the Closing Date. No Patent has been or is now involved in any interference,
reissue, reexamination, or opposition proceeding. To the Company’s knowledge: (1) there is no potentially interfering patent
or patent application of any third party, and (2) no Patent is infringed or has been challenged or threatened in any way. To the
Company’s knowledge, none of the products manufactured and sold, nor any process or know-how used, by the Company infringes
or is alleged to infringe any patent or other proprietary right of any other Person.


 


(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 Closing Date. Except as set forth in Schedule 3.1(o), 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 is the owner of all right, title, and interest in and to each of the Copyrights, free and clear of all Liens and other
adverse claims. All the Copyrights have been registered and are currently in compliance with formal requirements, are valid and
enforceable, and are not subject to any maintenance fees or taxes or actions falling due within ninety days after the date of
Closing. No Copyright is infringed or, to the Company’s knowledge, has been challenged or threatened in any way. To the
Company’s knowledge, none of the subject matter of any of the Copyrights infringes or is alleged to infringe any copyright
of any third party or is a derivative work based on the work of a third party. All works encompassed by the Copyrights have been
marked with the proper copyright notice.


 




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(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, including,
but not limited to, directors and officers insurance coverage at least equal to the aggregate Subscription Amount. Neither the
Company nor any Subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and
when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business without
a significant increase in cost.


 


(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 $150,000 other than for: (i) payment of salary or consulting fees for services rendered, (ii) reimbursement for expenses
incurred on behalf of the Company and (iii) other employee benefits, including stock option agreements under any stock option
plan of the Company.


 




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(r)Sarbanes-Oxley;
Internal Accounting Controls. The Company and the Subsidiaries are in compliance with any and all applicable requirements
of the Sarbanes-Oxley Act of 2002 that are effective as of the date hereof, and any and all applicable rules and regulations promulgated
by the Commission thereunder that are effective as of the date hereof and as of the Closing Date. 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.
The Company and the Subsidiaries have established disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) for the Company and the Subsidiaries and designed such disclosure controls and procedures to ensure that information
required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized
and reported, within the time periods specified in the Commission’s rules and forms. The Company’s certifying officers
have evaluated the effectiveness of the disclosure controls and procedures of the Company and the Subsidiaries as of the end of
the period covered by the most recently filed periodic report under the Exchange Act (such date, the “Evaluation Date”).
The Company presented in its most recently filed periodic report under the Exchange Act the conclusions of the certifying officers
about the effectiveness of the disclosure controls and procedures based on their evaluations as of the Evaluation Date. Since
the Evaluation Date, there have been no changes in the internal control over financial reporting (as such term is defined in the
Exchange Act) of the Company and its Subsidiaries that have materially affected, or is reasonably likely to materially affect,
the internal control over financial reporting of the Company and its Subsidiaries.


 


(s)Certain
Fees. Except as set forth on Schedule 3.1(s), 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)Registration
Rights. Except as set forth in the SEC Reports, 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.


 


(u)Reporting
Company/Shell Company. The Company is a publicly-held company subject to reporting obligations pursuant to Section 15(d) of
the Exchange Act. Pursuant to the provisions of the Exchange Act, except as set forth on Schedule 3.1(u), the Company has
timely filed all reports and other materials required to be filed by the Company thereunder with the SEC during the preceding
12 months. The Company is, and has no reason to believe that it will not in the foreseeable future continue to be in compliance
with all such listing and maintenance requirements.


 




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(v)Application
of Takeover Protections. The Company and the Board of Directors will have taken as of the Closing Date all necessary action,
if any, in order to render inapplicable any control share acquisition, business combination, poison pill (including any distribution
under a rights agreement) or other similar anti-takeover provision under the Company’s certificate of incorporation (or
similar charter documents) or the laws of its state of incorporation that is or could become applicable to the 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.


 


(w)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.


 


(x)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 this offering
of the Securities to be integrated with prior offerings by the Company for purposes of: (i) the Securities Act which would require
the registration of any such securities under the Securities Act, or (ii) any applicable shareholder approval provisions of any
Trading Market on which any of the securities of the Company are listed or designated. 


 




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(y)Solvency.
Based on the consolidated financial condition of the Company as of the 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 Closing Date. Schedule 3.1(y) 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 $150,000 (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 $150,000 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.


 


(z)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.


 


(aa)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.


 




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(bb)Accountants.
The Company’s accounting firm is set forth on Schedule 3.1(bb) 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, 2013.


 


(cc)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.


 


(dd)Acknowledgment
Regarding Purchaser’s Trading Activity. Anything in this Agreement or elsewhere herein to the contrary notwithstanding
(except for Sections 3.2(e) and 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 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, provided that such
activities do not breach the Investors’ representations made in Section 3.2 of this Agreement.


 




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(ee)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.


 


(ff)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.


 


(gg)Stock
Option Plans. Each stock option granted by the Company under the Company’s stock option plan was granted (i) in accordance
with the terms of the Company’s 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 Company’s 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. 


 


(hh)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”).


 


(ii)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.


 


(jj)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.


 




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(kk)Use
of Proceeds. The Company shall use the net proceeds after payment of any commissions to broker-dealers for acquisition of
inventory, working capital and general corporate purposes. The Company is engaged in negotiations to acquire a competitor and
may use some of the proceeds as part of the purchase price and to invest in the competitor. No assurances can be made that the
acquisition will be consummated.


 


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


 


3.2Representations
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 the 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.


 


(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
a 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.


 




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(c)Purchaser
Status. At the time such Purchaser was offered the Securities, it was, and as of the date hereof it is, (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 A (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 during the period from the date that is two years preceding the date hereof through the tenth
business day preceding the Closing Date in which such Purchaser purchases Securities hereunder, including but not limited to the
Risk Factor section of the Company’s Annual Report on Form 10-K filed with the Commission on March 28, 2012 (hereinafter
referred to collectively as the “Reports”). 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.


 




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(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. Such Purchaser is acquiring the Shares for investment and not with a view to distribution.


 


(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 of the Securities.


 


(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.


 




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(j)Certain
Transactions and Confidentiality. Other than consummating the transactions contemplated hereunder, such Purchaser has not
directly or indirectly, nor has any Person acting on behalf of or pursuant to any understanding with such Purchaser, executed
any purchases or sales, including Short Sales, of the securities of the Company during the period commencing as of the time that
such Purchaser first received a term sheet (written or oral) from the Company or any other Person representing the Company setting
forth the material terms of the transactions contemplated hereunder and ending immediately prior to the execution hereof. 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 representation 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. Other than to other Persons party to this Agreement, such Purchaser has maintained the
confidentiality of all disclosures made to it in connection with this transaction (including the existence and terms of this transaction).
Notwithstanding the foregoing, for avoidance of doubt, nothing contained herein shall constitute a representation or warranty,
or preclude any actions, with respect to the identification of the availability of, or securing of, available shares to borrow
in order to effect Short Sales or similar transactions in the future.


 


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


 


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


 


4.1Transfer
Restrictions.


 


(a)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
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.


 




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(b)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.


 


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, including,
if the Securities are subject to registration pursuant, the preparation and filing of any required prospectus supplement under
Rule 424(b)(3) under the Securities Act or other applicable provision of the Securities Act to appropriately amend the list of
selling stockholders thereunder.


 




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(c)Certificates
evidencing the Shares shall not contain any legend (including the legend set forth in Section 4.1(b) hereof): (i) while a registration
statement covering the resale of such security is effective under the Securities Act, (ii) following any sale of such Shares pursuant
to Rule 144, (iii) if such 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 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 portion of the Shares are included in an effective registration statement to cover the resale of such Shares, or
if such 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 Shares shall be re-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 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. 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.


 


(d)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 Shares (based on the VWAP of the Common Stock on the date such Securities are
submitted to the Transfer Agent) 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 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.


 


4.2Acknowledgment
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 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.


 




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4.3Furnishing
of Information; Public Information.


 


(a)
Until no Purchaser owns any Securities, the Company covenants to maintain the registration of the Common Stock under Section 12(b)
or 12(g) of the Exchange 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 even if the Company
is not then subject to the reporting requirements of the Exchange Act.


 


(b)
At any time commencing on the 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 Subscription Amount of such Purchaser’s Securities
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 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.


 


4.4Integration.
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 unless shareholder approval is obtained before the closing of such subsequent transaction.


 




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4.5Securities
Laws Disclosure; Publicity. If required by applicable law, the Company shall, by 9:00 a.m. (New York City time) on the Trading
Day immediately following the date hereof, issue a press release disclosing the material terms of the transactions contemplated
hereby, and shall file a Current Report on Form 8-K including the Transaction Documents as exhibits thereto within one Business
Day of the date hereof. From and after the issuance of such press release and 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 other press
releases with respect to the transactions contemplated hereby, and neither the Company nor any Purchaser shall issue any such
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).


 


4.6Shareholder
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.


 


4.7Non-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.


 


4.8Use
of Proceeds. Except as set forth on Schedule 4.8 attached hereto, the Company shall use the net proceeds from the sale
of the Securities hereunder for working capital purposes and shall not use such proceeds: (a) for the satisfaction of any portion
of the Company’s debt (other than payment of trade payables in the ordinary course of the Company’s business and 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.


 




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4.9Indemnification
of Purchasers. Subject to the provisions of this Section 4.9, 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 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. The indemnification required by this Section 4.9 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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4.10Reservation
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.


 


(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 use commercially reasonable efforts to 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, 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.


 


4.11Form
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 the 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.


 


4.12Subsequent
Equity Sales. From the date hereof until the date that is the 12 month anniversary of the Closing Date, the Company will not,
without the consent of the Purchasers, enter into any Equity Line of Credit or similar agreement, nor issue nor agree to issue
any common stock, floating or Variable Priced Equity Linked Instruments nor any of the foregoing or equity with price reset rights
(subject to adjustment for stock splits, distributions, dividends, recapitalizations and the like) (collectively, the “Variable
Rate Restrictions”). For purposes hereof, “Equity Line of Credit” shall include any transaction involving
a written agreement between the Company and an investor or underwriter whereby the Company has the right to “put”
its securities to the investor or underwriter over an agreed period of time and at an agreed price or price formula, and “Variable
Priced Equity Linked Instruments” shall include: (A) any debt or equity securities which are convertible into, exercisable
or exchangeable for, or carry the right to receive additional shares of Common Stock either (1) at any conversion, exercise or
exchange rate or other price that is based upon and/or varies with the trading prices of or quotations for Common Stock at any
time after the initial issuance of such debt or equity security, or (2) with a fixed conversion, exercise or exchange price that
is subject to being reset at some future date at any time after the initial issuance of such debt or equity security due to a
change in the market price of the Company’s Common Stock since date of initial issuance, and (B) any amortizing convertible
security which amortizes prior to its maturity date, where the Company is required or has the option to (or any investor in such
transaction has the option to require the Company to) make such amortization payments in shares of Common Stock which are valued
at a price that is based upon and/or varies with the trading prices of or quotations for Common Stock at any time after the initial
issuance of such debt or equity security (whether or not such payments in stock are subject to certain equity conditions). For
purposes of determining the total consideration for a convertible instrument (including a right to purchase equity of the Company)
issued, subject to an original issue or similar discount or which principal amount is directly or indirectly increased after issuance,
the consideration will be deemed to be the actual cash amount received by the Company in consideration of the original issuance
of such convertible instrument.


 




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4.13Equal
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 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. 


 


4.14Most
Favored Nation Provision. From the date hereof until the earlier of (i) the time set forth in Section 4.17 or (ii) such time
as no Purchaser holds any of the Securities purchased under this Agreement, in the event that the Company issues or sells any
Common Stock or Common Stock Equivalents, if a Purchaser then holding Securities purchased under this Agreement 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 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 4.14 shall not apply with respect to
an Exempt Issuance, and shall only apply as to price terms in respect of any rights offering. The Company shall provide each Purchaser
with notice of any such issuance or sale in the manner for disclosure of Subsequent Financings set forth in Section 4.18.


 


4.15Certain
Transactions and Confidentiality. Each Purchaser, severally and not jointly with the other Purchasers, covenants that neither
it, nor any Affiliate acting on its behalf or pursuant to any understanding with it 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 the initial press release
as described in Section 4.5. 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 the initial press release
as described in Section 4.5, 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 the initial press
release as described in Section 4.5, (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 the initial press release as described in Section 4.5 and (iii) no
Purchaser shall have any duty of confidentiality to the Company or its Subsidiaries after the issuance of the initial press release
as described in Section 4.5. 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.


 




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4.16Capital
Changes. Until the two year anniversary of the Closing Date, the Company shall not undertake a reverse or forward stock split
or reclassification of the Common Stock without 20 days prior written notice to the Purchasers, unless such reverse split is made
in conjunction with the listing of the Common Stock on a national securities exchange.


 


4.17Per
Share Price Protection.


 


(a)From
the date hereof until the one year anniversary of the Closing Date, if and whenever the Company or any Subsidiary, directly or
indirectly, issues or sells (whether through a Subsequent Financing or otherwise) any shares of Common Stock or Common Stock Equivalents
(including the issuance or sale of shares of Common Stock or Common Stock Equivalents owned or held by or for the account of the
Company) for a consideration per share that is less than the Per Share Purchase Price (adjusted for stock splits, combinations,
dividends and the like and for adjustments under this Section 4.17 occurring after the Closing Date) (such lesser price is referred
to herein as the “Discounted Per Share Purchase Price”) (the foregoing a “Dilutive Issuance”), then immediately
after such Dilutive Issuance, the Company shall issue to each Purchaser, without the payment of additional consideration, in connection
with such Dilutive Issuance, a number of additional shares of Common Stock equal to the product of (i) the fraction obtained by
dividing (A) the sum of the number of Initial Shares (as defined below) and Additional Shares (as defined below) then held by
such Purchaser on the date of the Dilutive Issuance by (B) the sum of the number of Initial Shares issued to such Purchaser on
the Closing Date and all Additional Shares previously reserved for issuance to such Purchaser after the Closing Date, multiplied
by (ii) the difference between (A) the aggregate number of shares of Common Stock that would have been issued to such Purchaser
at the Closing if the Subscription Amount was divided by the Discounted Per Share Purchase Price minus (B) the aggregate number
of shares of Common Stock equal to the sum of the Initial Shares, plus, to the extent there has been a previous reservation of
Additional Shares to such Purchaser, the number of Additional Shares previously reserved for issuance to such Purchaser. For purposes
of this Section 4.17, (I) “Additional Shares” means, with respect to the applicable Purchaser, shares of Common Stock
issued to such Purchaser pursuant to this Section 4.17 (adjusted for stock splits, combinations, dividends and the like occurring
after the Closing Date); and (II) “Initial Shares” means, with respect to the applicable Purchaser, the number of
shares of Common Stock issued to such Purchaser on the Closing Date (adjusted for stock splits, combinations, dividends and the
like occurring after the Closing Date). Notwithstanding the foregoing, this Section 4.17 shall not apply in respect of an Exempt
Issuance. No adjustment shall be made hereunder which would require the Purchaser to surrender any shares to the Company.


 




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(b)
In implementation of the foregoing, to the extent that an issuance of Additional Shares would result in a Purchaser or any
of its affiliates beneficially owning in excess of 4.9% (the “Maximum Percentage”) of the Common Stock, then the Company
shall initially issue only such number of Additional Shares that would result in such Purchaser (together with such Purchaser’s
affiliates) beneficially owning the Maximum Percentage of the Common Stock, and, except as otherwise provided below, no other
Additional Shares shall be issuable under this Section 4.17. After such initial issuance, and until all Additional Shares which
otherwise would have been issued under this Section 4.17 have been issued, from time to time the Company will issue such number
of such unissued Additional Shares so that such Purchaser (together such Purchaser’s affiliates) will beneficially own only
the Maximum Percentage of the Common Stock. Such Purchaser shall make written representations and warranties to the Company regarding
its (together with its affiliates’) beneficial ownership to effectuate the foregoing. The provisions of this paragraph shall
be implemented in a manner otherwise than in strict conformity with the terms this paragraph to correct this paragraph (or any
portion hereof) which may be defective or inconsistent with the intended Maximum Percentage beneficial ownership limitation herein
contained or to make changes or supplements necessary or desirable to properly give effect to such Maximum Percentage limitation.
The limitations contained in this paragraph shall apply to assignees of such Purchaser hereunder. The holders of Common Stock
of the Company shall be third party beneficiaries of this paragraph and the Company may not waive this paragraph without the consent
of holders of a majority of its Common Stock. For the purposes of this paragraph, beneficial ownership and all determinations
and calculations (including, without limitation, with respect to calculations of percentage ownership) shall be determined in
accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder.


 


(c)If
shares of Common Stock or Common Stock Equivalents are issued for a consideration other than cash, the per share price shall be
the fair value of such consideration as determined in good faith by the Board of Directors of the Company. For the purposes of
this Section 4.17, the “price per share for which one share of Common Stock is issuable upon the conversion, exercise or
exchange of any Common Stock Equivalents” shall be equal to the sum of the lowest amounts of consideration (if any) received
or receivable by the Company with respect to one share of Common Stock upon the issuance or sale of such Common Stock Equivalents
and upon conversion, exercise or exchange of such Common Stock Equivalents. The Company may not refuse to issue to a Purchaser
Additional Shares hereunder based on any claim that such Purchaser or any one associated or affiliated with such Purchaser has
been engaged in any violation of law, agreement or for any other reason, unless, an injunction from a court, on notice, restraining
and or enjoining an issuance hereunder shall have been sought and obtained. Nothing herein shall limit a Purchaser’s right
to pursue actual damages for the Company’s failure to deliver Additional Shares hereunder, 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. On the date of closing of any transaction pursuant to which securities are issued for a Discounted Per
Share Purchase Price, the Company shall give each of the Purchasers written notice thereof. The Company acknowledges and agrees
that the right set forth in this Section 4.17 is a right granted by the Company, separately, to each Purchaser.


 




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(d)
The Additional Shares may only be disposed of in compliance with state and federal securities laws. In connection with any
transfer of Additional Shares 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 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 Additional Shares 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.


 


(e)The
Purchasers agree to the imprinting, so long as is required by this Section 4.17, of a legend on any of the Additional Shares in
the form set forth in Section 4.1(b) hereof.


 


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 Additional Shares 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 pledged or secured Additional
Shares 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 Additional Shares may reasonably request in connection with a pledge or transfer
of the Additional Shares.


 


(f)Certificates
evidencing the Additional Shares shall not contain any legend (including the legend set forth in Section 4.1(b) hereof), (i) while
a registration statement covering the resale of such security is effective under the Securities Act, (ii) following any sale of
such Additional Shares pursuant to Rule 144, (iii) if such Additional 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 Additional
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). If such Additional
Shares may be sold under Rule 144 and the Company is then in compliance with the current public information required under Rule
144, or if the Additional Shares may be sold 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 Additional Shares 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 Additional Shares shall be issued free of all legends. The Company agrees that at such time as such legend
is no longer required under this Section 4.17(f), it will, no later than three Trading Days following the delivery by a Purchaser
to the Company or the Transfer Agent of a certificate representing Additional Shares, as the case may be, issued with a restrictive
legend (such third 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. 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 Additional 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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(g)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 Additional Shares (based on the VWAP of the Common Stock on the date such Securities
are submitted to the Transfer Agent) delivered for removal of the restrictive legend and subject to Section 4.17(f), $10 per Trading
Day (increasing to $20 per Trading Day five (5) Trading Days after such damages have begun to accrue) for each Trading Day after
the Legend Removal Date 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.


 


(h)Each
Purchaser, severally and not jointly with the other Purchasers, agrees with the Company that such Purchaser will sell any Additional
Shares pursuant to either the registration requirements of the Securities Act, including any applicable prospectus delivery requirements,
or an exemption therefrom, and that if Additional Shares 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 Additional Shares as set forth in this Section 4.17 is predicated upon the Company’s reliance upon this understanding.


 


4.18Participation
in Future Financing.


 


(a)From
the date hereof until the date that is the 12 month anniversary of the Closing Date, 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 or (ii) an Exempt Issuance, (a “Subsequent Financing”),
each Purchaser 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”) 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 offer each Purchaser
the right to participate in 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.


 




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(b)At
least five (5) 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 fifth (5th) 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 fifth (5th) 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 fifth (5th) 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 fifth (5th) 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 Subscription Amount of shares of Common
Stock purchased hereunder by a Purchaser participating under this Section 4.18 and (y) the sum of the aggregate Subscription Amounts
of Securities purchased hereunder by all Purchasers participating under this Section 4.18.


 




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(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.


 


(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 4.18 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 tenth (10th) Business Day following delivery of the
Subsequent Financing Notice. If by such tenth (10th) 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.


 


4.19Registration
Rights.The Purchaser shall have piggyback registration rights as provided in a Registration Right Agreement attached hereto
as Exhibit B.


 




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ARTICLE
V.


MISCELLANEOUS


 


5.1Termination.
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 Closing
has not been consummated on or before April 7, 2014; provided, however, that such termination will not affect the
right of any party to sue for any breach by any other party (or parties).


 


5.2Fees
and Expenses. Except as expressly set forth in the Transaction Documents and on Schedule 3.1(s), 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 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.


 


5.3Entire
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.


 


5.4Notices.
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: Vaporin, Inc. facsimile number (305) 576-9298 (ii)
if to the Purchasers, to: the addresses and fax numbers indicated on the signature pages hereto.


 


5.5Amendments;
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 component of the
affected Securities then outstanding or, in the case of a waiver, by the party against whom enforcement of any such waived provision
is sought. 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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5.6Headings.
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.


 


5.7Successors
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). 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.”


 


5.8No
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 4.9.


 


5.9Governing
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 4.9, 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.


 


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


 




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5.11Execution.
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.


 


5.12Severability.
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.


 


5.13Rescission
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 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.


 


5.14Replacement
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.


 


5.15Remedies.
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.


 


5.16Payment
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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5.17Usury.
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.


 


5.18Independent
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. 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.


 




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5.19Liquidated
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.


 


5.20Saturdays,
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.


 


5.21Construction.
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.


 


5.22WAIVER
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. 


 


FLORIDA
LAW PROVIDES THAT WHEN SALES ARE MADE TO FIVE OR MORE PERSONS IN FLORIDA, ANY SALE MADE IN FLORIDA IS VOIDABLE BY THE PURCHASER
WITHIN THREE DAYS AFTER THE FIRST TENDER OF CONSIDERATION IS MADE BY SUCH PURCHASER TO THE COMPANY, AN AGENT OF THE COMPANY OR
AN ESCROW AGENT OR WITHIN THREE DAYS AFTER THE AVAILABILITY OF THAT PRIVILEGE IS COMMUNICATED TO SUCH PURCHASER, WHICHEVER OCCURS
LATER. THIS SALE IS BEING MADE IN FLORIDA. PAYMENTS FOR TERMINATED SUBSCRIPTIONS VOIDED BY PURCHASERS AS PROVIDED FOR IN THIS
PARAGRAPH WILL BE PROMPTLY REFUNDED WITHOUT INTEREST. NOTICE SHOULD BE GIVEN TO THE COMPANY TO THE ATTENTION OF SCOT FROHMAN AT
THE ADDRESS SET FORTH ON THE SIGNATURE PAGE BELOW.


 


(Signature
Pages Follow)


 




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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.


 


	Vaporin, Inc.	Address
    for Notice:
	 	 
	 	4400 Biscayne Blvd., Suite 850
	 	Miami, Florida 33137


 


	By:	 	 
	Name:	Scott Frohman	 
	Title:	Chief Executive Officer	 
	 	 	 
	With a copy to (which shall not constitute notice):	 


 


[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGE FOR PURCHASER FOLLOWS]


 




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[PURCHASER
SIGNATURE PAGE TO 

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: ______________________________________________________________


 


Address
for Notice to Purchaser:


 


 


 


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


 


 


 


Subscription
Amount: _____________


 


EIN
Number: _______________________


 






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