Exhibit 10.1


 


STANDBY EQUITY DISTRIBUTION AGREEMENT


 


THIS STANDBY EQUITY
DISTRIBUTION AGREEMENT dated as of July 8, 2014 (this “Agreement”) is made by and between YA GLOBAL MASTER
SPV LTD., a Cayman Islands exempt limited partnership (the “Investor”), and CHINA RECYCLING ENERGY CORPORATION,
a company organized under the laws of the State of Nevada (the “Company”).


 


WHEREAS, the
parties desire that, upon the terms and subject to the conditions contained herein, the Company shall issue and sell to the Investor,
from time to time as provided herein, and the Investor shall purchase from the Company up to $50,000,000 of the Company’s
Common Stock, $0.001 par value (the “Common Stock”); and


 


WHEREAS, the
Common Stock are listed for trading on the NASDAQ Global Market under the symbol “CREG;” and


 


WHEREAS, the
offer and sale of the Common Stock issuable hereunder will be made in reliance upon the provisions of Regulation D (“Regulation
D”) promulgated under the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder (the
“Securities Act”), or upon such other exemption from the registration requirements of the Securities Act as
may be available with respect to any or all of the transactions to be made hereunder.


 


NOW, THEREFORE,
the parties hereto agree as follows:


 


Article I. Certain
Definitions


 


Section 1.01         “Advance”
shall mean the portion of the Commitment Amount requested by the Company in the Advance Notice.


 


Section 1.02         “Advance
Date” shall mean the 1st Trading Day after expiration of the applicable Pricing Period for each Advance.


 


Section 1.03         “Advance
Notice” shall mean a written notice in the form of Exhibit A attached hereto to the Investor executed by an officer
of the Company and setting forth the Advance amount that the Company requests from the Investor.


 


Section 1.04         “Advance
Notice Date” shall mean each date the Company delivers (in accordance with Section 2.01(c) of this Agreement) to the
Investor an Advance Notice requiring the Investor to advance funds to the Company, subject to the terms of this Agreement.


 


Section 1.05         “Affiliate”
shall have the meaning set forth in Section 3.08.


 


Section 1.06         “Articles
of Incorporation” shall have the meaning set forth in Section 4.03.


 


Section 1.07         “Bylaws”
shall have the meaning set forth in Section 4.03.


 


Section 1.08         “Commitment
Amount” shall mean the aggregate amount of up to $50,000,000.


 




    	 



    	 



    

 


Section 1.09         “Commitment
Fee” shall have the meaning set forth in Section 13.04.


 


Section 1.10         “Commitment
Fee Shares” shall have the meaning set forth in Section 13.04.


 


Section 1.11         
“Company Indemnitees” shall have the meaning set forth in Section 5.02.


 


Section 1.12         “Commitment
Period” shall mean the period commencing on the Effective Date, and expiring upon the date of termination of this Agreement
in accordance with Section 11.02.


 


Section 1.13         “Common
Stock” shall have meaning set forth in the Recitals.


 


Section 1.14         “Condition
Satisfaction Date” shall have the meaning set forth in Section 7.01.


 


Section 1.15         “Consolidation
Event” shall have the meaning set forth in Section 6.08.


 


Section 1.16         “Daily
Value Traded” in respect of a particular day means the product obtained by multiplying the daily trading volume of the
Common Stock for that day on the Principal Market by the VWAP for such day.


 


Section 1.17         “Damages”
shall mean any loss, claim, damage, liability, costs and expenses (including, without limitation, reasonable attorney’s fees
and disbursements and costs and expenses of expert witnesses and investigation).


 


Section 1.18         “Effective
Date” shall mean the date on which the SEC first declares effective a Registration Statement registering the resale of
the Shares.


 


Section 1.19         “Environmental
Laws” shall have the meaning set forth in Section 4.08.


 


Section 1.20         “Exchange
Act” shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.


 


Section 1.21         “Indemnified
Liabilities” shall have the meaning set forth in Section 5.01.


 


Section 1.22         
“Investor Indemnitees” shall have the meaning set forth in Section 5.01.


 


Section 1.23         “Market
Price” shall mean the lowest daily VWAP of the Common Stock during the relevant Pricing Period that is greater than or
equal to the Minimum Acceptable Price.


 


Section 1.24         “Material
Adverse Effect” shall mean any condition, circumstance, or situation that may result in, or would reasonably be expected
to result in (i) a material adverse effect on the legality, validity or enforceability of this Agreement or the transactions contemplated
herein, (ii) a material adverse effect on the results of operations, assets, business or condition (financial or otherwise) of
the Company and its 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 this Agreement.


 


Section 1.25         “Bylaws”
shall have the meaning set forth in Section 4.03.


 




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Section 1.26         “Minimum
Acceptable Price” or “MAP” shall be 90% of the last closing price of the Common Stock on the Principal
Market at the time of delivery of each Advance Notice.


 


Section 1.27         “Ownership
Limitation” shall have the meaning set forth in Section 2.01(a).


 


Section 1.28         “Person”
shall mean an individual, a corporation, a partnership, an association, a trust or other entity or organization, including a government
or political subdivision or an agency or instrumentality thereof.


 


Section 1.29         “Plan
of Distribution” shall have the meaning set forth in Section 6.01(a).


 


Section 1.30         “Pricing
Period” shall mean the 5 consecutive Trading Days commencing on the Trading Day immediately following the Advance Notice
Date.


 


Section 1.31         “Pricing
Period Volume Limitation” shall have the meaning set forth in Section 2.01(d).


 


Section 1.32         “Principal
Market” shall mean the New York Stock Exchange, the NASDAQ Global Select Market, the NASDAQ Global Market, the NASDAQ
Capital Market, the OTCBB, or the NYSE Euronext, whichever is at the time the principal trading exchange or market for the Common
Stock.


 


Section 1.33         “Purchase
Price” shall mean the price per share obtained by multiplying the Market Price by 99%.


 


Section 1.34         “Registrable
Securities” shall mean (i) the Shares, and (ii) any securities issued or issuable with respect to any of the foregoing
by way of exchange, stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation
or other reorganization or otherwise. As to any particular Registrable Securities, once issued such securities shall cease to be
Registrable Securities when (a) the Registration Statement has been declared effective by the SEC and such Registrable Securities
have been disposed of pursuant to the Registration Statement, (b) such Registrable Securities have been sold under circumstances
in which all of the applicable conditions of Rule 144 (or any similar provision then in force) under the Securities Act (“Rule
144”) are met, or (c) in the opinion of counsel to the Company such Registrable Securities may permanently be sold without
registration or without any time, volume or manner limitations pursuant to Rule 144.


 


Section 1.35         “Registration
Limitation” shall have the meaning set forth in Section 2.01(a).


 


Section 1.36         “Registration
Period” shall have the meaning set forth in Section 6.01(b).


 


Section 1.37         “Registration
Statement” shall mean a registration statement on Form S-1 or Form S-3 or on such other form promulgated by the SEC for
which the Company then qualifies and which counsel for the Company shall deem appropriate, and which form shall be available for
the registration of the resale by the Investor of the Registrable Securities under the Securities Act.


 




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Section 1.38         “Regulation
D” shall have the meaning set forth in the recitals of this Agreement.


 


Section 1.39         “SEC”
shall mean the U.S. Securities and Exchange Commission.


 


Section 1.40         “SEC
Documents” shall have the meaning set forth in Section 4.05.


 


Section 1.41         “Securities
Act” shall have the meaning set forth in the recitals of this Agreement.


 


Section 1.42         “Settlement
Document” shall have the meaning set forth in Section 2.02(a).


 


Section 1.43         “Shares”
shall mean the Common Stock to be issued from time to time hereunder pursuant to Advances, and any Commitment Fee Shares. 


 


Section 1.44         
“Trading Day” shall mean any day during which the Principal Market shall be open for business.


 


Section 1.45         “VWAP”
means, for any Trading Day, the daily volume weighted average price of the Common Stock for such date on the Principal Market as
reported by Bloomberg L.P. during regular trading hours.


 


Article II. Advances


 


Section 2.01         Advances;
Mechanics. Subject to the terms and conditions of this Agreement (including, without limitation, the provisions of Article
VII hereof), the Company, at its sole and exclusive option, may issue and sell to the Investor, and the Investor shall purchase
from the Company, Common Stock on the following terms:


 


		(a)	Advance Notice. At any time during the Commitment Period the Company may require the Investor
to purchase Shares by delivering an Advance Notice to the Investor, subject to the conditions set forth in Section 7.01, and in
accordance with the following provisions;



 


		(i)	The Company shall, in its sole discretion, select the Advance Amount it desires to request in each
Advance Notice and the time it desires to deliver each Advance Notice, which amount shall not exceed $5,000,000, provided however,
the Company acknowledges and agrees that the total Advance Amount that the Company will receive in connection with each Advance
Notice may be less than the Advance Amount requested in the Advance Notice due to reductions to the Advance Amount in accordance
with the terms of this Agreement, including the Pricing Period Volume Limitation as described below.



 


		(ii)	There shall be no mandatory minimum Advances and no non-usages fee for not utilizing the Commitment
Amount or any part thereof.



 




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		(b)	Date of Delivery of Advance Notice. Advance Notices shall be delivered in accordance with
the instructions set forth on the bottom of Exhibit A. An Advance Notice shall be deemed delivered on (i) the Trading Day it is
received by the Investor if such notice is received prior to 5:00 pm Eastern Time, or (ii) the immediately succeeding Trading Day
if it is received after 5:00 pm Eastern Time on a Trading Day or at any time on a day which is not a Trading Day. No Advance Notice
may be deemed delivered on a day that is not a Trading Day.



 


		(c)	Advance Limitations. Regardless of the Advance Amount requested by the Company in the Advance Notice,
the final amount of the Advance shall be reduced in accordance with each of the following limitations:



 


		(i)	Ownership Limitation; Commitment Amount. In no event shall the number of shares of Common
Stock issuable to the Investor pursuant to an Advance cause the aggregate number of shares of Common Stock beneficially owned (as
calculated pursuant to Section 13(d) of the Exchange Act) by the Investor and its affiliates to exceed 4.99% of the then outstanding
Common Stock (the “Ownership Limitation”). In connection with each Advance Notice delivered by the Company,
any portion of an Advance that would (i) cause the Investor to exceed the Ownership Limitation or (ii) cause the aggregate amount
of Advances to exceed the Commitment Amount shall automatically be withdrawn with no further action required by the Company, and
such Advance Notice shall be deemed automatically modified to reduce the aggregate amount of the requested Advance by an amount
equal to such withdrawn portion.



 


		(ii)	Pricing Period Volume Limitation. In connection with each Advance Notice, the “Pricing
Period Volume Limitation” shall mean the greater of (i) $500,000, and (ii) the sum of the Daily Value Traded for each Trading
Day during the Pricing Period multiplied by 20% but not more than $5,000,000. In respect of each Advance Notice delivered by the
Company, any portion of an Advance Amount that would exceed the Pricing Period Volume Limitation shall automatically be deemed
to be withdrawn with no further action required on behalf of either party.



 


		(iii)	Registration Limitation. In no event shall the aggregate number of Shares subject to an
Advance Notice cause the number of Shares purchased by the Investor pursuant to this Agreement to exceed the number of Shares registered
for resale under the Registration Statement(s) filed by the Company in respect of the transactions contemplated hereby (the “Registration
Limitation”). In connection with each Advance Notice, any portion of an Advance that would exceed the Registration Limitation
shall automatically be withdrawn with no further action required by the Company and such Advance Notice shall be deemed automatically
modified to reduce the aggregate amount of the requested Advance by an amount equal to such withdrawn portion in respect of each
Advance Notice.



 






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		(d)	Minimum Acceptable Price.



 


		(i)	With respect to each Advance Notice (A) the amount of the Advance set forth in such Advance Notice
shall automatically be reduced by 20% for each Trading Day during the Pricing Period for which the VWAP of the Common Stock is
below the MAP in effect with respect to such Advance Notice (each such day, an “Excluded Day”), and (B) for
the avoidance of doubt, each Excluded Day shall be excluded from the Pricing Period for purposes of determining the Market Price.



 


		(ii)	The number of Shares to be issued and delivered to the Investor at each Closing with respect to
an Advance Notice with an Excluded Day shall be determined based on the Advance Notice amount as reduced pursuant to Section 2.01(d)(i)
above (the “Adjusted Advance Notice”); provided however, that the Adjusted Advance Notice shall be automatically
increased by an amount equal to the number of Shares sold by the Investor on such Excluded Day (in a total amount for each Excluded
Day not to exceed 20% of the amount of the Advance set forth in the original Advance Notice) at a price per share equal to the
MAP in effect with respect to such Advance Notice (without any further discount).



 


		(e)	Notwithstanding any other provision in this Agreement, the Company and the Investor acknowledge
and agree that upon the Investor’s receipt of a valid Advance Notice the parties shall be deemed to have entered into an
unconditional contract binding on both parties for the purchase and sale of Shares pursuant to such Advance Notice in accordance
with the terms of this Agreement



 


Section 2.02         Closings.
Each Closing shall take place as soon as practicable after each Advance Date in accordance with the procedures set forth below.
In connection with each Closing the Company and the Investor shall fulfill each of its obligations as set forth below:


 


		(a)	On each Advance Date, the Investor shall deliver to the Company a written document in the form
attached hereto as Exhibit B (each a “Settlement Document”) setting forth the amount of the Advance (taking
into account any adjustments pursuant to Section 2.01), the Purchase Price, the number of shares of Common Stock to be purchased
by the Investor, and a report by Bloomberg, L.P. indicating the VWAP for each of the Trading Days during the Pricing Period, in
each case in accordance with the terms and conditions of this Agreement.



 


		(b)	Promptly after receipt of the Settlement Document with respect to each Advance (and, in any event,
not later than two Trading Days after such receipt), the Company will, or will cause its transfer agent to, electronically transfer
number of shares of Common Stock to be purchased by the Investor (as set forth in the Settlement Document) by crediting the Investor’s
account or its designee’s account at the Depository Trust Company through its Deposit Withdrawal at Custodian System or by
such other means of delivery as may be mutually agreed upon by the parties hereto (which in all cases the resale of such shares
of Common Stock shall be covered by an effective Registration Statement and may be freely transferred by the Investor), and transmit
notification to the Investor that such share transfer has been requested. Promptly upon receipt of such notification, the Investor
shall pay to the Company of the aggregate amount of the Advance (as set forth in the Closing Statement) in cash in immediately
available funds to an account designated by the Company in writing. No fractional shares shall be issued, and any fractional amounts
shall be rounded to the next higher whole number of shares. Any certificates evidencing Common Stock delivered pursuant hereto
shall be free of restrictive legends. To facilitate the transfer of the Common Stock by the Investor, the Common Stock will not
bear any restrictive legends so long as there is an effective Registration Statement covering such Common Stock.



 




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		(c)	On or prior to the Advance Date, each of the Company and the Investor shall deliver to the other
all documents, instruments and writings required to be delivered by either of them pursuant to this Agreement in order to implement
and effect the transactions contemplated herein.



 


Section 2.03         Hardship.
In the event the Investor sells shares of the Company’s Common Stock after receipt of an Advance Notice and the Company fails
to perform its obligations as mandated in Section 2.02, the Company agrees that in addition to and in no way limiting the rights
and obligations set forth in Article V hereto and in addition to any other remedy to which the Investor is entitled at law or in
equity, including, without limitation, specific performance, it will hold the Investor harmless against any loss, claim, damage,
or expense (including reasonable legal fees and expenses), as incurred, arising out of or in connection with such default by the
Company and acknowledges that irreparable damage would occur in the event of any such default. It is accordingly agreed that the
Investor shall be entitled to an injunction or injunctions to prevent such breaches of this Agreement and to specifically enforce
(subject to the Securities Act and other rules of the Principal Market), without the posting of a bond or other security, the terms
and provisions of this Agreement.


 


Article III. Representations
and Warranties of Investor


 


Investor hereby represents
and warrants to, and agrees with, the Company that the following are true and correct as of the date hereof and as of each Advance
Date:


 


Section 3.01         Organization
and Authorization. The Investor is duly organized, validly existing and in good standing under the laws of the Cayman Islands
and has all requisite power and authority to execute, deliver and perform this Agreement, including all transactions contemplated
hereby. The decision to invest and the execution and delivery of this Agreement by such Investor, the performance by the Investor
of its obligations hereunder and the consummation by the Investor of the transactions contemplated hereby have been duly authorized
and require no other proceedings on the part of the Investor. The undersigned has the right, power and authority to execute and
deliver this Agreement and all other instruments on behalf of the Investor or its shareholders. This Agreement has been duly executed
and delivered by the Investor and, assuming the execution and delivery hereof and acceptance thereof by the Company, will constitute
the legal, valid and binding obligations of the Investor, enforceable against the Investor in accordance with its terms.


 




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Section 3.02         Evaluation
of Risks. The Investor has such knowledge and experience in financial, tax and business matters as to be capable of evaluating
the merits and risks of, and bearing the economic risks entailed by, an investment in the Company and of protecting its interests
in connection with the transactions contemplated hereby. The Investor acknowledges and agrees that its investment in the Company
involves a high degree of risk.


 


Section 3.03         No
Legal, Investment or Tax Advice from the Company. The Investor acknowledges that it had the opportunity to review this Agreement
and the transactions contemplated by this Agreement with its own legal counsel and investment and tax advisors. The Investor is
relying solely on such counsel and advisors and not on any statements or representations of the Company or any of the Company’s
representatives or agents for legal, tax, investment or other advice with respect to the Investor’s acquisition of shares
of Common Stock hereunder, the transactions contemplated by this Agreement or the laws of any jurisdiction.


 


Section 3.04         Investment
Purpose. The shares of Common Stock purchased by the Investor hereunder are being purchased for its own account, for investment
purposes, and without any view or intention to distribute such shares in violation of the Securities Act or any other applicable
securities laws. The Investor agrees not to assign or in any way transfer the Investor’s rights to the securities or any
interest therein and acknowledges that the Company will not recognize any purported assignment or transfer except in accordance
with applicable Federal and state securities laws. No other Person has or will have a direct or indirect beneficial interest in
the securities. The Investor agrees not to sell, hypothecate or otherwise transfer the Investor’s shares of Common Stock
unless such shares are registered under Federal and applicable state securities laws or unless, in the opinion of counsel satisfactory
to the Company, an exemption from such registration is available.


 


Section 3.05         Accredited
Investor. The Investor is an “Accredited Investor” as that term is defined in Rule 501(a)(3) of Regulation
D.


 


Section 3.06         Information.
The Investor and its advisors (and its counsel), if any, have been furnished with all materials relating to the business, finances
and operations of the Company and information it deemed material to making an informed investment decision. The Investor and its
advisors, if any, have been afforded the opportunity to ask questions of the Company and its management and has received answers
to such questions. Neither such inquiries nor any other due diligence investigations conducted by such Investor or its advisors,
if any, or its representatives shall modify, amend or affect the Investor’s right to rely on the Company’s representations
and warranties contained in this Agreement. The Investor understands that its investment involves a high degree of risk. The Investor
has sought such accounting, legal and tax advice, as it has considered necessary to make an informed investment decision with respect
to the transactions contemplated hereby.


 


Section 3.07         No
General Solicitation. Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf, has engaged
in any form of general solicitation or general advertising (within the meaning of Regulation D) in connection with the offer or
sale of the Common Stock offered hereby.


 




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Section 3.08         Not
an Affiliate. The Investor is not an officer, director or a person that directly, or indirectly through one or more intermediaries,
controls or is controlled by, or is under common control with the Company or any “affiliate” of the Company
(as that term is defined in Rule 405 promulgated under the Securities Act).


 


Section
3.09         Trading Activities.
The Investor’s trading activities with respect to the Common Stock shall be in compliance with all applicable federal and
state securities laws, rules and regulations and the rules and regulations of the Principal Market on which the Common Stock is
listed or traded. Neither the Investor nor its affiliates has any open short position in the Common Stock, the Investor
agrees that it shall not, and that it will cause its affiliates not to, engage in any short sales of the Common Stock; provided
that the Company acknowledges and agrees that upon receipt of an Advance Notice the Investor has the right to sell the shares
to be issued to the Investor pursuant to the Advance Notice prior to receiving such
shares. 


 


Article IV. Representations
and Warranties of the Company


 


Except as stated below,
on the disclosure schedules attached hereto or in the SEC Documents, the Company hereby represents and warrants to, the Investor
that the following are true and correct as of the date hereof and as of each Advance Date (other than representations and warranties
which address matters only as of a certain date, which shall be true and correct as written as of such certain date):


 


Section 4.01         Organization
and Qualification. The Company is duly organized, validly existing and in good standing under the laws of the State of Nevada
and has all requisite corporate power to own its properties and to carry on its business as now being conducted. Each of the Company
and its subsidiaries is duly qualified to do business and is in good standing (to the extent applicable) in every jurisdiction
in which the nature of the business conducted by it makes such qualification necessary, except to the extent that the failure to
be so qualified or be in good standing would not have a Material Adverse Effect.


 


Section 4.02         Authorization,
Enforcement, Compliance with Other Instruments. (i) The Company has the requisite corporate power and authority to enter into
and perform this Agreement and any related agreements, in accordance with the terms hereof and thereof, (ii) the execution and
delivery of this Agreement and any related agreements by the Company and the consummation by it of the transactions contemplated
hereby and thereby, have been duly authorized by the Company’s Board of Directors and no further consent or authorization
is required by the Company, its Board of Directors or its shareholders, (iii) this Agreement and any related agreements have
been duly executed and delivered by the Company, (iv) this Agreement and assuming the execution and delivery thereof and acceptance
by the Investor, any related agreements, constitute the valid and binding obligations of the Company enforceable against the Company
in accordance with their terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy,
insolvency, reorganization, fraudulent transfer, moratorium, liquidation or similar laws from time to time relating to, or affecting
generally, the enforcement of creditors’ rights and remedies.


 




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Section 4.03         Capitalization.
The registered share capital of the Company as of the date hereof consists of 200,000,000 Common Stock, of which 60,946,182 Common
Stock are issued and outstanding. All of such outstanding shares have been validly issued and are fully paid and nonassessable.
Except as disclosed in the SEC Documents, none of the Common Stock are subject to preemptive rights or any other similar rights
or any liens or encumbrances suffered or permitted by the Company. Except as disclosed in the SEC Documents, as of the date hereof,
(i) there are no outstanding options, warrants, rights to subscribe to, calls or commitments of any character whatsoever relating
to, or securities or rights convertible into, any shares of Common Stock or any of its contracts, commitments, understandings or
arrangements by which the Company is or may become bound to issue additional shares of Common Stock or options, warrants, scrip,
rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into,
any Common Stock, (ii) there are no outstanding debt securities (iii) there are no outstanding registration statements and
(iv) there are no agreements or arrangements under which the Company is obligated to register the sale of any of its securities
under the Securities Act. There are no securities or instruments containing anti-dilution or similar provisions that will be triggered
by this Agreement or the consummation of the transactions described herein. The Company has furnished or made available to the
Investor true and correct copies of the Company’s Articles of Incorporation, as amended and as in effect on the date hereof
(the “Articles of Incorporation”), and the Company’s Bylaws, as in effect on the date hereof (the “Bylaws”).


 


Section 4.04         No
Conflict. The execution, delivery and, subject to the satisfaction of the Closing procedures set forth in Section 2.02 hereof,
performance of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby will not
(i) result in a violation of the Articles of Incorporation or Bylaws or (ii) conflict with or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to which the Company or any of its subsidiaries is a party,
or result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws and
regulations and the rules and regulations of the Principal Market on which the Common Stock are quoted) applicable to the Company
or any of its subsidiaries or by which any material property or asset of the Company is bound or affected and which would cause
a Material Adverse Effect. Except as disclosed in the SEC Documents, neither the Company nor its subsidiaries is in violation of
any term of or in default under its Articles of Incorporation or Bylaws or other applicable organizational documents, or, to the
Company’s knowledge, any material contract, agreement, mortgage, indebtedness, indenture, instrument, judgment, decree or
order or any statute, rule or regulation applicable to the Company or its subsidiaries that would cause a Material Adverse Effect.
To the Company’s knowledge, the business of the Company and its subsidiaries is not being conducted in violation of any material
law, ordinance or regulation of any governmental entity, except as would not cause a Material Adverse Effect. Except as specifically
contemplated by this Agreement and as required under the Securities Act and any applicable securities laws, and as required by
the rules of the Principal Market, the Company 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
or contemplated by this Agreement in accordance with the terms hereof except as such consent, authorization or order has been obtained
as of the date hereof. The Company and its subsidiaries are not aware of any fact or circumstance which is reasonably expected
to give rise to any of the foregoing.


 




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Section 4.05         SEC
Documents; Financial Statements. The Company has filed all reports, schedules, forms, statements and other documents required
to be filed by it with the SEC pursuant to Section 15(d) of the Exchange Act 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) (all of the foregoing filed within the two
years preceding the date hereof or amended after the date hereof and all exhibits included therein and financial statements and
schedules thereto and documents incorporated by reference therein, and all registration statements filed by the Company under the
Securities Act, being hereinafter referred to as the “SEC Documents”). The Company has made available to the
Investor through the SEC’s website at http://www.sec.gov, true and complete copies of the SEC Documents. As of their respective
dates, the SEC Documents complied in all material respects with the requirements of the Exchange Act or the Securities Act, as
applicable, and the rules and regulations of the SEC promulgated thereunder applicable to the SEC Documents, and none of the SEC
Documents, at the time they were filed with the SEC, contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under
which they were made, not misleading. As of their respective dates, the financial statements of the Company included in the SEC
Documents complied as to form in all material respects with applicable accounting requirements and the published rules and regulations
of the SEC with respect thereto. Such financial statements have been prepared in accordance with generally accepted accounting
principles, consistently applied, during the periods involved (except (i) as may be otherwise indicated in such financial statements
or the notes thereto, or (ii) in the case of unaudited interim statements, to the extent they may exclude footnotes or may be condensed
or summary statements) and fairly present in all material respects the financial position of the Company as of respective the dates
thereof and the results of its operations and cash flows for the periods then ended (subject, in the case of unaudited statements,
to normal year-end audit adjustments).


 


Section 4.06         Intellectual
Property Rights. The Company and its subsidiaries own or possess adequate rights or licenses to use all material trademarks,
trade names, service marks, service mark registrations, service names, patents, patent rights, copyrights, inventions, licenses,
approvals, governmental authorizations, trade secrets and rights necessary to conduct their respective businesses as now conducted,
except as would not cause a Material Adverse Effect. The Company and its subsidiaries do not have any knowledge of any infringement
by the Company or its subsidiaries of trademark, trade name rights, patents, patent rights, copyrights, inventions, licenses, service
names, service marks, service mark registrations, or trade secrets, except as would not cause a Material Adverse Effect. To the
knowledge of the Company, there is no claim, action or proceeding being made or brought against, or to the Company’s knowledge,
being threatened against the Company or its subsidiaries regarding trademark, trade name, patents, patent rights, invention, copyright,
license, service names, service marks, service mark registrations, trade secret or other infringement; and, except as would not
cause a Material Adverse Effect, the Company is not aware of any facts or circumstances which might give rise to any of the foregoing.


 


Section 4.07         Employee
Relations. Neither the Company nor any of its subsidiaries is involved in any labor dispute nor, to the knowledge of the Company
or any of its subsidiaries, is any such dispute threatened, in each case which is reasonably likely to cause a Material Adverse
Effect.


 




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Section 4.08         Environmental
Laws. The Company and its subsidiaries (i) are in compliance in all material respects with any and all applicable material
foreign, federal, state and local laws and regulations relating to the protection of human health and safety, the environment or
hazardous or toxic substances or wastes, pollutants or contaminants (“Environmental Laws”), (ii) have received
all material permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective
businesses and (iii) are in compliance with all terms and conditions of any such permit, license or approval.


 


Section 4.09         Title.
Except as set forth in the SEC Documents or except as would not cause a Material Adverse Effect, the Company has good and marketable
title to its properties and material assets owned by it, free and clear of any pledge, lien, security interest, encumbrance, claim
or equitable interest other than such as are not material to the business of the Company. Any real property and facilities held
under lease by the Company and its subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions
as are not material and do not interfere with the use made and proposed to be made of such property and buildings by the Company
and its subsidiaries.


 


Section 4.10         Insurance.
The Company and each of its subsidiaries are insured by insurers of recognized financial responsibility against such losses and
risks and in such amounts as management of the Company believes to be prudent and customary in the businesses in which the Company
and its subsidiaries are engaged. The Company has no reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue
its business at a cost that would not have a Material Adverse Effect.


 


Section 4.11         Regulatory
Permits. Except as would not cause a Material Adverse Effect, the Company and its subsidiaries possess all material certificates,
authorizations and permits issued by the appropriate federal, state or foreign regulatory authorities necessary to conduct their
respective businesses, and neither the Company nor any such subsidiary has received any notice of proceedings relating to the revocation
or modification of any such certificate, authorization or permit.


 


Section 4.12         Internal
Accounting Controls. The Company and each of its subsidiaries maintain a system of internal accounting controls sufficient
to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations,
(ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset 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.


 


Section 4.13         Absence
of Litigation. Except as set forth in the SEC Documents, there is no action, suit, proceeding, inquiry or investigation before
or by any court, public board, government agency, self-regulatory organization or body pending against or affecting the Company,
the Common Stock or any of the Company’s subsidiaries, wherein an unfavorable decision, ruling or finding would have a Material
Adverse Effect.


 




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Section 4.14         Subsidiaries.
Except as disclosed in the SEC Documents, the Company does not presently own or control, directly or indirectly, any interest in
any other corporation, partnership, association or other business entity.


 


Section 4.15         Tax
Status. Except as disclosed in the SEC Documents, the Company and each of its subsidiaries has made or filed all federal and
state income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject to be filed
as of the date hereof and (unless and only to the extent that the Company and each of its subsidiaries has set aside on its books
provisions reasonably adequate for the payment of all unpaid and unreported taxes) has paid all taxes and other governmental assessments
and charges that are material in amount, shown or determined to be due on such returns, reports and declarations, except those
being contested in good faith and has set aside on its books provision reasonably adequate for the payment of all taxes for periods
subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes in any material amount
claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company know of no basis for any such claim.


 


Section 4.16         Certain
Transactions. Except as set forth in the SEC Documents (or as not required to be disclosed pursuant to applicable law) none
of the officers or directors of the Company is presently a party to any transaction with the Company (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, or otherwise requiring payments to or from any officer
or director, or to the knowledge of the Company, any corporation, partnership, trust or other entity in which any officer or director
has a substantial interest or is an officer, director, trustee or partner.


 


Section 4.17         Fees
and Rights of First Refusal. The Company is not obligated to offer the Common Stock offered hereunder on a right of first refusal
basis or otherwise to any third parties including, but not limited to, current or former shareholders of the Company, underwriters,
brokers, agents or other third parties.


 


Section 4.18         Use
of Proceeds. The Company shall use the net proceeds from this offering for working capital and other general corporate purposes.


 


Section 4.19         Dilution.
The Company is aware and acknowledges that issuance of shares of the Common Stock could cause dilution to existing shareholders
and could significantly increase the outstanding number of shares of Common Stock.


 


Section 4.20         Acknowledgment
Regarding Investor’s Purchase of Shares. The Company acknowledges and agrees that the Investor is acting solely in the
capacity of an arm’s length investor with respect to this Agreement and the transactions contemplated hereunder. The Company
further acknowledges that the Investor is not acting as a financial advisor or fiduciary of the Company (or in any similar capacity)
with respect to this Agreement and the transactions contemplated hereunder and any advice given by the Investor or any of its representatives
or agents in connection with this Agreement and the transactions contemplated hereunder is merely incidental to the Investor’s
purchase of the Shares hereunder. The Company is aware and acknowledges that it may not be able to request Advances under this
Agreement if the Registration Statement is not declared effective or if any issuances of Common Stock pursuant to any Advances
would violate any rules of the Principal Market. The Company further is aware and acknowledges that any fees paid or shares issued
pursuant to Section 13.04 hereunder shall be earned on the date hereof and are not refundable or returnable under any circumstances.


 




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Article V. Indemnification


 


The Investor and the
Company represent to the other the following with respect to itself:


 


Section 5.01         Indemnification
by the Company. In consideration of the Investor’s execution and delivery of this Agreement, and in addition to all of
the Company’s other obligations under this Agreement, the Company shall defend, protect, indemnify and hold harmless the
Investor, and all of its officers, directors, partners, employees and agents (including, without limitation, those retained in
connection with the transactions contemplated by this Agreement) and each person who controls the Investor within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act (collectively, the “Investor Indemnitees”)
from and against any and all actions, causes of action, suits, claims, losses, costs, penalties, fees, liabilities and damages,
and reasonable expenses in connection therewith (irrespective of whether any such Investor Indemnitee is a party to the action
for which indemnification hereunder is sought), and including reasonable attorneys’ fees and disbursements (the “Indemnified
Liabilities”), incurred by the Investor Indemnitees or any of them as a result of, or arising out of, or relating to
(a) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement for the registration
of the Shares as originally filed or in any amendment thereof, or in any related prospectus, or in any amendment thereof or supplement
thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading; provided, however, that the Company will not
be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon any such
untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance upon and in conformity with
written information furnished to the Company by or on behalf of the Investor specifically for inclusion therein; (b) any material
misrepresentation or breach of any material representation or material warranty made by the Company in this Agreement or any other
certificate, instrument or document contemplated hereby or thereby; (c) any material breach of any material covenant, material
agreement or material obligation of the Company contained in this Agreement or any other certificate, instrument or document contemplated
hereby or thereby; and (d) any cause of action, suit or claim brought or made against such Investor Indemnitee not arising out
of any action or inaction of an Investor Indemnitee, and arising out of or resulting from the execution, delivery, performance
or enforcement of this Agreement or any other instrument, document or agreement executed pursuant hereto by any of the Investor
Indemnitees. To the extent that the foregoing undertaking by the Company may be unenforceable for any reason, the Company shall
make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities, which is permissible under
applicable law.


 




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Section 5.02         Indemnification
by the Investor. In consideration of the Company’s execution and delivery of this Agreement, and in addition to all of
the Investor’s other obligations under this Agreement, the Investor shall defend, protect, indemnify and hold harmless the
Company and all of its officers, directors, shareholders, employees and agents (including, without limitation, those retained in
connection with the transactions contemplated by this Agreement) (collectively, the “Company Indemnitees”) from
and against any and all Indemnified Liabilities incurred by the Company Indemnitees or any of them as a result of, or arising out
of, or relating to (a) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement
for the registration of the Shares as originally filed or in any amendment thereof, or in any related prospectus, or in any amendment
thereof or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not misleading; provided, however, that
the Investor will only be liable for written information relating to the Investor furnished to the Company by or on behalf of the
Investor specifically for inclusion in the documents referred to in the foregoing indemnity, and will not be liable in any such
case to the extent that any such loss, claim, damage or liability arises out of or is based upon any such untrue statement or alleged
untrue statement or omission or alleged omission made therein in reliance upon and in conformity with written information furnished
to the Investor by or on behalf of the Company specifically for inclusion therein; (b) any misrepresentation or breach of any representation
or warranty made by the Investor in this Agreement or any instrument or document contemplated hereby or thereby executed by the
Investor; (c) any breach of any covenant, agreement or obligation of the Investor(s) contained in this Agreement or any other certificate,
instrument or document contemplated hereby or thereby executed by the Investor; or (d) any cause of action, suit or claim brought
or made against such Company Indemnitee not arising out of any action or inaction of a Company Indemnitee and arising out of or
resulting from the execution, delivery, performance or enforcement of this Agreement or any other instrument, document or agreement
executed pursuant hereto by any of the Company Indemnitees. To the extent that the foregoing undertaking by the Investor may be
unenforceable for any reason, the Investor shall make the maximum contribution to the payment and satisfaction of each of the Indemnified
Liabilities, which is permissible under applicable law.


 


Section 5.03         Notice
of Claim. Promptly after receipt by an Investor Indemnitee or Company Indemnitee of notice of the commencement of any action
or proceeding (including any governmental action or proceeding) involving an Indemnified Liability, such Investor Indemnitee or
Company Indemnitee, as applicable, shall, if a claim for an Indemnified Liability in respect thereof is to be made against any
indemnifying party under this Article V, deliver to the indemnifying party a written notice of the commencement thereof; but the
failure to so notify the indemnifying party will not relieve it of liability under this Article V except to the extent the indemnifying
party is prejudiced by such failure. The indemnifying party shall have the right to participate in, and, to the extent the indemnifying
party so desires, jointly with any other indemnifying party similarly noticed, to assume control of the defense thereof with counsel
mutually satisfactory to the indemnifying party and the Investor Indemnitee or Company Indemnitee, as the case may be; provided,
however, that an Investor Indemnitee or Company Indemnitee shall have the right to retain its own counsel with the reasonable fees
and expenses of not more than one counsel for such Investor Indemnitee or Company Indemnitee to be paid by the indemnifying party,
if, in the reasonable opinion of counsel retained by the indemnifying party, the representation by such counsel of the Investor
Indemnitee or Company Indemnitee and the indemnifying party would be inappropriate due to actual or potential differing interests
between such Investor Indemnitee or Company Indemnitee and any other party represented by such counsel in such proceeding. The
Investor Indemnitee or Company Indemnitee shall cooperate fully with the indemnifying party in connection with any negotiation
or defense of any such action or claim by the indemnifying party and shall furnish to the indemnifying party all information reasonably
available to the Investor Indemnitee or Company Indemnitee which relates to such action or claim. The indemnifying party shall
keep the Investor Indemnitee or Company Indemnitee fully apprised at all times as to the status of the defense or any settlement
negotiations with respect thereto. No indemnifying party shall be liable for any settlement of any action, claim or proceeding
effected without its prior written consent, provided, however, that the indemnifying party shall not unreasonably withhold, delay
or condition its consent. No indemnifying party shall, without the prior written consent of the Investor Indemnitee or Company
Indemnitee, consent to entry of any judgment or enter into any settlement or other compromise which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such Investor Indemnitee or Company Indemnitee of a release from all liability
in respect to such claim or litigation. Following indemnification as provided for hereunder, the indemnifying party shall be subrogated
to all rights of the Investor Indemnitee or Company Indemnitee with respect to all third parties, firms or corporations relating
to the matter for which indemnification has been made. The indemnification required by this Article V shall be made by periodic
payments of the amount thereof during the course of the investigation or defense, as and when bills are received.


 




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Section 5.04         Contribution.
In the event that the indemnity provided in Section 5.01 or Section 5.02 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, the Company and the Investor severally agree to contribute to the aggregate losses, claims, damages
and liabilities (including legal or other expenses reasonably incurred in connection with investigating or defending the same)
(collectively “Losses”) to which the Company or the Investor may be subject in such proportion as is appropriate
to reflect the relative benefits received by the Company on the one hand and by the Investor on the other from transactions contemplated
by this Agreement. If the allocation provided by the immediately preceding sentence is unavailable for any reason, the Company
and the Investor severally shall contribute in such proportion as is appropriate to reflect not only such relative benefits but
also the relative fault of the Company on the one hand and of the Investor on the other in connection with the statements or omissions
which resulted in such Losses as well as any other relevant equitable considerations. Benefits received by the Company shall be
deemed to be equal to the total proceeds from the offering (net of all discounts and commissions but before deducting expenses)
received by it, and benefits received by the Investor shall be deemed to be equal to the total discounts received by the Investor.
Relative fault shall be determined by reference to, among other things, whether any untrue or any alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact relates to information provided by the Company on the
one hand or the Investor on the other, the intent of the parties and their relative knowledge, access to information and opportunity
to correct or prevent such untrue statement or omission. The Company and the Investor agree that it would not be just and equitable
if contribution were determined by pro rata allocation or any other method of allocation which does not take account of the equitable
considerations referred to above. The aggregate amount of losses, liabilities, claims, damages and expenses incurred by an indemnified
party and referred to above in this Article V shall be deemed to include any legal or other expenses reasonably incurred by such
indemnified party in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental
agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue or alleged untrue statement or omission
or alleged omission. Notwithstanding the provisions of this Section 5.04, the Investor shall not be required to contribute any
amount in excess of the amount by which the Purchase Price for Shares actually purchased pursuant to this Agreement exceeds the
amount of any damages which the Investor has otherwise been required to pay by reason of such untrue or alleged untrue statement
or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.
For purposes of this Article V, each person who controls the Investor within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act and each director, officer, employee and agent of the Investor shall have the same rights
to contribution as the Investor, and each person who controls the Company within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act, each officer of the Company who shall have signed the Registration Statement and each
director of the Company shall have the same rights to contribution as the Company, subject in each case to the applicable terms
and conditions of this Section 5.04.


 




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Section
5.05         Remedies. The remedies provided
for in this Article V are not exclusive and shall not limit any right or remedies which may otherwise be available to any indemnified
person at law or in equity. The obligations of the parties to indemnify or make contribution
under this Article V shall survive expiration or termination of this Agreement for a period of three years.


 


Section 5.06         Limitation
of liability. Notwithstanding the foregoing, no party shall be entitled to recover from the other party for indirect, incidental
or consequential damages.


 


Article VI.

Covenants of the Company


 


Section 6.01         Registration
Statement.


 


		(a)	Filing of a Registration Statement. The Company
shall prepare and file with the SEC a Registration Statement, or multiple Registration Statements for the resale by the Investor
of the Registrable Securities. The Company shall use its best efforts to file such initial Registration Statements within 60 days
of the date hereof. The Company shall not have the ability to request any Advances until the effectiveness of a Registration Statement.
Each Registration Statement shall contain the “Plan of Distribution” section in substantially the form attached
hereto as Exhibit D.



 


		(b)	Maintaining a Registration Statement. The Company
shall maintain the effectiveness of any Registration Statement that has been declared effective at all times during the Commitment
Period (the “Registration Period”). Each Registration Statement (including any amendments or supplements thereto
and prospectuses contained therein) shall not contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein, or necessary to make the statements therein, in light of the circumstances in which they were made,
not misleading.



 




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		(c)	Filing Procedures. Not less than three business
days prior to the filing of a Registration Statement and not less than one business day prior to the filing of any related amendments
and supplements to all Registration Statements (except for any amendments or supplements caused by the filing of any annual reports
on Form 10-K, quarterly reports on Form 10-Q or current periodic reports on Form 8-K), the Company shall furnish to the Investor
copies of all such documents proposed to be filed, which documents (other than those incorporated or deemed to be incorporated
by reference) will be subject to the reasonable and prompt review of the Investor. The Investor shall furnish comments on a Registration
Statement and any related amendment and supplement to a Registration Statement to the Company within 24 hours of the receipt thereof.



 


		(d)	Delivery of Final Documents. The Company shall
furnish to the Investor without charge, (i) at least one copy of each Registration Statement as declared effective by the SEC
and any amendment(s) thereto, including financial statements and schedules, all documents incorporated therein by reference, all
exhibits and each preliminary prospectus, (ii) at the request of the Investor, 10 copies of the final prospectus included in such
Registration Statement and all amendments and supplements thereto (or such other number of copies as the Investor may reasonably
request) and (iii) such other documents as the Investor may reasonably request from time to time in order to facilitate the disposition
of the Registrable Securities owned by the Investor pursuant to a Registration Statement.



 


		(e)	Amendments and Other Filings. The Company shall
(i) prepare and file with the SEC such amendments (including post-effective amendments) and supplements to a Registration
Statement and the related prospectus used in connection with such Registration Statement, which prospectus is to be filed pursuant
to Rule 424 promulgated under the Securities Act, as may be necessary to keep such Registration Statement effective at all times
during the Registration Period, and prepare and file with the SEC such additional Registration Statements in order to register
for resale under the Securities Act all of the Registrable Securities; (ii) cause the related prospectus to be amended or supplemented
by any required prospectus supplement (subject to the terms of this Agreement), and as so supplemented or amended to be filed
pursuant to Rule 424; (iii) provide the Investor copies of all correspondence from and to the SEC relating to a Registration Statement
(provided that the Company may excise any information contained therein which would constitute material non-public information,
and (iv) comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securities of the
Company covered by such Registration Statement until such time as all of such Registrable Securities shall have been disposed
of in accordance with the intended methods of disposition by the seller or sellers thereof as set forth in such Registration Statement.
In the case of amendments and supplements to a Registration Statement which are required to be filed pursuant to this Agreement
(including pursuant to this Section 6.01(e) ) by reason of the Company’s filing a report on Form 10-K, or Form 8-K or any
analogous report under the Exchange Act, the Company shall incorporate such report by reference into the Registration Statement,
if applicable, or shall file such amendments or supplements with the SEC either on the day on which the Exchange Act report is
filed which created the requirement for the Company to amend or supplement the Registration Statement, if feasible, or otherwise
promptly thereafter.



 




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		(f)	Blue-Sky. The Company shall use its commercially
reasonable efforts to, if applicable, (i) register and qualify the Registrable Securities covered by a Registration Statement
under such other securities or “blue sky” laws of such jurisdictions in the United States as the Investor reasonably
requests, (ii) prepare and file in those jurisdictions, such amendments (including post-effective amendments) and supplements
to such registrations and qualifications as may be necessary to maintain the effectiveness thereof during the Registration Period,
(iii) take such other actions as may be necessary to maintain such registrations and qualifications in effect at all times during
the Registration Period, and (iv) take all other actions reasonably necessary or advisable to qualify the Registrable Securities
for sale in such jurisdictions; provided, however, that the Company shall not be required in connection therewith or as a condition
thereto to (w) make any change to its Articles of Incorporation or Bylaws, (x) qualify to do business in any jurisdiction where
it would not otherwise be required to qualify but for this Section 6.01(f), (y) subject itself to general taxation in any such
jurisdiction, or (z) file a general consent to service of process in any such jurisdiction. The Company shall promptly notify
the Investor of the receipt by the Company of any notification with respect to the suspension of the registration or qualification
of any of the Registrable Securities for sale under the securities or “blue sky” laws of any jurisdiction in the United
States or its receipt of actual notice of the initiation or threat of any proceeding for such purpose.



 


Section 6.02         Listing
of Common Stock. The Company shall use its commercially reasonable efforts to maintain the Common Stock’s authorization
for quotation on the Principal Market and shall notify the Investor promptly if the Common Stock shall cease to be authorized for
quotation on the Principal Market.


 


Section 6.03         Opinion
of Counsel. The Company shall deliver to the Investor an opinion from counsel to the Company in the form attached hereto as
Exhibit C.


 


Section 6.04         Exchange
Act Registration. The Company will file in a timely manner all reports and other documents required of it as a reporting company
under the Exchange Act and will not take any action or file any document (whether or not permitted by Exchange Act or the rules
thereunder) to terminate or suspend its reporting and filing obligations under the Exchange Act.


 


Section 6.05         Transfer
Agent Instructions. Upon effectiveness of the Registration Statement the Company shall deliver instructions and a legal opinion
to its transfer agent to issue Common Stock to the Investor free of restrictive legends on or before each Advance Date.


 


Section 6.06         Corporate
Existence. The Company will take all steps necessary to preserve and continue the corporate existence of the Company during
the Commitment Period.


 




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Section 6.07         Notice
of Certain Events Affecting Registration; Suspension of Right to Make an Advance. The Company will immediately notify the Investor,
and confirm in writing, upon its becoming aware of the occurrence of any of the following events in respect of a Registration Statement
or related prospectus relating to an offering of Registrable Securities: (i) receipt of any request for additional information
by the SEC or any other Federal or state governmental authority during the period of effectiveness of the Registration Statement
for amendments or supplements to the Registration Statement or related prospectus; (ii) the issuance by the SEC or any other Federal
or state governmental authority of any stop order suspending the effectiveness of the Registration Statement or the initiation
of any proceedings for that purpose; (iii) receipt of any notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any jurisdiction or the initiation or threatening of any proceeding
for such purpose; (iv) the happening of any event that makes any statement made in the Registration Statement or related prospectus
of any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires
the making of any changes in the Registration Statement, related prospectus or documents so that, in the case of the Registration
Statement, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, and that in the case of the related prospectus, it will not
contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they were made, not misleading, or of the necessity
to amend the Registration Statement or supplement a related prospectus to comply with the Securities Act or any other law; and
(v) the Company’s reasonable determination that a post-effective amendment to the Registration Statement would be appropriate
(other than, in the case of this clause (v), for routine post-effective amendments required in order to maintain the effectiveness
of a Registration Statement filed on Form S-1); and the Company will promptly make available to the Investor any such supplement
or amendment to the related prospectus. The Company shall not deliver to the Investor any Advance Notice, and the Investor shall
not sell any Shares pursuant to a Registration Statement, during the continuation of any of the foregoing events (each of the events
described in the immediately preceding clauses (i) through (v), inclusive, a “Material Outside Event”).


 


Section 6.08         Consolidation;
Merger. If an Advance Notice has been delivered to the Investor, then the Company shall not effect any merger or consolidation
of the Company with or into, or a transfer of all or substantially all the assets of the Company to another entity before the transaction
contemplated in such Advance Notice has been closed in accordance with Section 2.02 hereof.


 


Section 6.09         Issuance
of the Company’s Common Stock. The sale of the Common Stock hereunder shall be made in accordance with the provisions
and requirements of Regulation D and any applicable state securities law.


 


Section 6.10         Market
Activities.         The Company will not, directly or indirectly, take
any action designed to cause or result in, or that constitutes or might reasonably be expected to constitute, the stabilization
or manipulation of the price of any security of the Company under Regulation M of the Exchange Act.


 


Section 6.11         Opinion
of Counsel Concerning Resales. Provided that the Investor’s resale of Common Stock received pursuant to this Agreement
may be freely sold by the Investor either pursuant to an effective Registration Statement, in accordance with Rule 144, or otherwise,
the Company shall obtain for the Investor, at the Company’s expense, any and all opinions of counsel which may be required
by the Company’s transfer agent to issue such shares free of restrictive legends, or to remove legends from such shares.


 




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Section 6.12Expenses.
The Company, whether or not the transactions contemplated hereunder are consummated or this Agreement is terminated, will pay all
expenses incident to the performance of its obligations hereunder, including but not limited to (i) the preparation, printing and
filing of the Registration Statement and each amendment and supplement thereto, of each prospectus and of each amendment and supplement
thereto; (ii) the preparation, issuance and delivery of any Shares issued pursuant to this Agreement, (iii) all fees and disbursements
of the Company’s counsel, accountants and other advisors, (iv) the qualification of the Shares under securities laws in accordance
with the provisions of this Agreement, including filing fees in connection therewith, (v) the printing and delivery of copies of
any prospectus and any amendments or supplements thereto, (vi) the fees and expenses incurred in connection with the listing or
qualification of the Shares for trading on the Principal Market, or (vii) filing fees of the SEC and the Principal Market.


 


Section 6.13Sales.
Without the written consent of the Investor, the Company will not, directly or indirectly, offer to sell, sell, contract to sell,
grant any option to sell or otherwise dispose of any Common Stock (other than the Shares offered pursuant to the provisions of
this Agreement) or securities convertible into or exchangeable for Common Stock, warrants or any rights to purchase or acquire,
Common Stock during the period beginning on the 5th Trading Day immediately prior to an Advance Notice Date and ending on the 5th
Trading Day immediately following the corresponding Advance Date.


 


Section 6.14Current
Report. Promptly after the date hereof (and prior to the Company delivering an Advance Notice to the Investor hereunder), the
Company shall file with the SEC a current report on Form 8-K or such other appropriate form as determined by counsel to the Company,
relating to the transactions contemplated by this Agreement and shall provide the Investor with a reasonable opportunity to review
such report prior to its filing.


 


Section 6.15Black-out
Periods. Notwithstanding any other provision of this Agreement, the Company shall not deliver an Advance Notice during any
Company black-out periods or during any other period in which the Company is, or could be deemed to be, in possession of material
non-public information.


 


Section 6.16Comfort
Letters. At the request of the Investor the Company will cause its independent accountants to furnish to the Investor, at the
Investor’s request, a letter in form and substance reasonably satisfactory to the Investor, containing statements and information
of the type ordinarily included in accountants’ “comfort letters” to underwriters with respect to the financial
statements of the Company promptly after (i) the date the Registration Statement or any prospectus shall be amended or supplemented
(other than (1) in connection with the filing of a prospectus supplement that contains solely information relating to the number
of shares sold by the Investor pursuant to the Registration Statement (2) in connection with the filing of any report or other
document under Section 13, 14 or 15(d) of the Exchange Act (other than a filing of a Form 8-K which contains financial statements),
or (3) by a prospectus supplement relating to the offering of other securities (including, without limitation, other Common
Stock)) and (ii) the date of filing or amending each Annual Report on Form 10-K for a period in which an Advance was delivered
pursuant to this Agreement and which are incorporated by reference in the Registration Statement.


 




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Article VII.

Conditions for Advance and Conditions to Closing


 


Section 7.01Conditions
Precedent to the Right of the Company to Deliver an Advance Notice. The right of the Company to deliver an Advance Notice and
the obligations of the Investor hereunder with respect to an Advance is subject to the satisfaction by the Company, on each Advance
Notice Date and Advance Date (a “Condition Satisfaction Date”), of each of the following conditions:


 


		(a)	Accuracy of the Company’s Representations and Warranties. The representations and
warranties of the Company shall be true and correct in all material respects.



 


		(b)	Registration of the Common Stock with the SEC. There is an effective Registration Statement
pursuant to which the Investor is permitted to utilize the prospectus thereunder to resell all of the Common Stock issuable pursuant
to such Advance Notice. The Company shall have filed with the SEC in a timely manner all reports, notices and other documents required
of a “reporting company” under the Exchange Act and applicable SEC regulations during the twelve-month period immediately
preceding the applicable Condition Satisfaction Date.



 


		(c)	Authority. The Company shall have obtained all permits and qualifications required by any
applicable state for the offer and sale of the Common Stock, or shall have the availability of exemptions therefrom. The sale and
issuance of the Common Stock shall be legally permitted by all laws and regulations to which the Company is subject.



 


		(d)	No Material Outside Event. No Material Outside Event shall have occurred and be continuing.



 


		(e)	Performance by the Company. The Company shall have performed, satisfied and complied in
all material respects with all covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied
with by the Company at or prior to each Condition Satisfaction Date.



 


		(f)	No Injunction. No statute, rule, regulation, executive order, decree, ruling or injunction
shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction that
prohibits or directly and adversely affects any of the transactions contemplated by this Agreement, and no proceeding shall have
been commenced that may have a Material Adverse Effect.



 


		(g)	No Suspension of Trading in or Delisting of Common Stock. The Common Stock is quoted trading
on a Principal Market and all of the shares issuable pursuant to such Advance Notice will be listed or quoted for trading on such
Principal Market and the Company believes, in good faith, that trading of the Common Stock on a Principal Market will continue
uninterrupted for the foreseeable future. The issuance of Common Stock with respect to the applicable Advance Notice will not violate
the shareholder approval requirements of the Principal Market. The Company shall not have received any notice threatening the continued
quotation of the Common Stock on the Principal Market.



 




    	- 22 -



    	 



    

  


		(h)	Authorized. There shall be a sufficient number of authorized but unissued and otherwise
unreserved Common Stock for the issuance of all of the shares issuable pursuant to such Advance Notice.



 


		(i)	Executed Advance Notice. The Investor shall have received the Advance Notice executed by
an officer of the Company and the representations contained in such Advance Notice shall be true and correct as of the applicable
Condition Satisfaction Date.



 


		(j)	Comfort Letters. If requested by the Investor, the Company’s independent accounts
shall have furnished to the Investor any letters requested pursuant to Section 6.17 addressed to the Investor containing statements
and information of the type ordinarily included in accountants’ “comfort letters” to underwriters with respect
to the financial statements of the Company.



 


		(k)	Consecutive Advance Notices. Except with respect to the first Advance Notice, the Company
shall have delivered all Shares relating to all prior Advances.



 


Article VIII.

Non-Disclosure of Non-Public Information


 


The Company covenants
and agrees that it shall refrain from disclosing, and shall cause its officers, directors, employees and agents to refrain from
disclosing, any material non-public information (as determined under the Securities Act, the Exchange Act, or the rules and regulations
of the SEC) to the Investor without also disseminating such information to the public, unless prior to disclosure of such information
the Company identifies such information as being material non-public information and provides the Investor with the opportunity
to accept or refuse to accept such material non-public information for review. In no event shall the Investor have a duty of confidentially,
or be deemed to have agreed to maintain information in confidence, with respect to (i) any information disclosed in violation of
this provision or (ii) the delivery of any Advance Notices.


 


Article IX.

Non Exclusive Agreement


 


Notwithstanding anything
contained herein, this Agreement and the rights awarded to the Investor hereunder are non-exclusive, and, subject to the provisions
in Section 6.13, the Company may, at any time throughout the term of this Agreement and thereafter, issue and allot, or undertake
to issue and allot, any shares and/or securities and/or convertible notes, bonds, debentures, options to acquire shares or other
securities and/or other facilities which may be converted into or replaced by Common Stock or other securities of the Company,
and to extend, renew and/or recycle any bonds and/or debentures, and/or grant any rights with respect to its existing and/or future
share capital.


 




    	- 23 -



    	 



    

  


Article X.

Choice of Law/Jurisdiction


 


This Agreement shall
be governed by and interpreted in accordance with the laws of the State of New York without regard to the principles of conflict
of laws. The parties further agree that any action between them shall be heard in New York County, New York, and expressly consent
to the jurisdiction and venue of the Supreme Court of New York, sitting in New York County, New York and the United States District
Court of the Southern District of New York, sitting in New York, New York, for the adjudication of any civil action asserted pursuant
to this paragraph.


 


Article XI. Assignment;
Termination


 


Section 11.01Assignment.
Neither this Agreement nor any rights of the parties hereto may be assigned to any other Person.


 


Section 11.02Termination.


 


		(a)	Unless earlier terminated as provided hereunder, this Agreement shall terminate automatically on
the earliest of (i) the first day of the month next following the 24-month anniversary of the Effective Date, (ii) the first
day of the month next following the 36-month anniversary of the date hereof or (ii) the date on which the Investor shall have made
payment of Advances pursuant to this Agreement in the aggregate amount of the Commitment Amount.



 


		(b)	The Company may terminate this Agreement effective upon fifteen Trading Days’ prior written
notice to the Investor; provided that (i) there are no outstanding Advance Notices, the shares of Common Stock under which have
yet to be issued, and (ii) the Company has paid all amounts owed to the Investor pursuant to this Agreement. This Agreement may
be terminated at any time by the mutual written consent of the parties, effective as of the date of such mutual written consent
unless otherwise provided in such written consent. In the event of any termination of this Agreement by the Company hereunder,
so long as the Investor owns any Common Stock issued hereunder, unless all of such Common Stock may be resold by the Investor without
registration and without any time, volume or manner limitations pursuant to Rule 144, the Company shall not suspend or withdraw
the Registration Statement or otherwise cause the Registration Statement to become ineffective, or voluntarily delist the Common
Stock from the Principal Market.



 


		(c)	Nothing in this Section 11.02 shall be deemed to release the Company or the Investor from any liability
for any breach under this Agreement, or to impair the rights of the Company and the Investor to compel specific performance by
the other party of its obligations under this Agreement. The indemnification provisions contained in Article V shall survive termination
hereunder.



 




    	- 24 -



    	 



    

  


Article XII. Notices


 


Any notices, consents,
waivers, or other communications required or permitted to be given under the terms of this Agreement must be in writing and will
be deemed to have been delivered (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile or e-mail
if sent on a business day, or, if not sent on a business day, on the immediately following business day, provided a copy is mailed
by U.S. certified mail, return receipt requested or overnight carrier; (iii) 7 days after being sent by U.S. or Israeli certified
mail, return receipt requested, or (iv) 1 day after deposit with a nationally recognized overnight delivery service, in each case
properly addressed to the party to receive the same. The addresses and facsimile numbers for such communications, except for Advance
Notices which shall be delivered in accordance with hereof, shall be:


 


	If to the Company, to:	China Recycling Energy Corporation
	 	12/F, Tower A
	 	Chang An International building
	 	No. 88 Mam Guan Zheng Jie
	 	Xi’an City, Shaanxi Province, China
	 	Telephone:	+86-29-8769-1097
	 	Email: 	chongscd@gmail.com
	 	 
	With a copy to (which shall not	McKenna Long & Aldridge LLP
	Constitute notice or delivery of	303 Peachtree Street
	process) to:	Atlanta, GA 30308
	 	Attention:  Thomas Wardell
	 	Telephone:	(404) 527-4990
	 	Email:	twardell@mckennalong.com
	 	 
	If to the Investor(s):	YA Global Master SPV Ltd.
	 	1012 Springfield Avenue
	 	Mountainside, NJ 07092
	 	Attention:	Mark Angelo
	 	 	Portfolio Manager
	 	Telephone:	(201) 985-8300
	 	Email:mangelo@yorkvilleadvisors.com


 




    	- 25 -



    	 



    

  


	With a Copy (which shall not	 
	Constitute notice or delivery of	 
	process) to:	David Gonzalez, Esq.
	 	1012 Springfield Avenue
	 	Mountainside, NJ 07092
	 	Telephone:	(201) 985-8300
	 	Email: 	legal@yorkvilleadvisors.com


 


Either may change its information contained
in this Article XII by delivering notice to the other party as set forth herein.


 


Article XIII. Miscellaneous


 


Section 13.01Counterparts.
This Agreement may be executed in two or more identical counterparts, all of which shall be considered one and the same agreement
and shall become effective when counterparts have been signed by each party and delivered to the other party. Facsimile or other
electronically scanned and delivered signatures, including by e-mail attachment, shall be deemed originals for all purposes of
this Agreement.


 


Section 13.02Entire
Agreement; Amendments. This Agreement supersedes all other prior oral or written agreements between the Investor, the Company,
their respective affiliates and persons acting on their behalf with respect to the matters discussed herein, and this Agreement,
and the instruments referenced herein contain the entire understanding of the parties with respect to the matters covered herein
and therein and, except as specifically set forth herein or therein, neither the Company nor the Investor makes any representation,
warranty, covenant or undertaking with respect to such matters. No provision of this Agreement may be waived or amended other than
by an instrument in writing signed by the party to be charged with enforcement.


 


Section 13.03Reporting
Entity for the Common Stock. The reporting entity relied upon for the determination of the trading price or trading volume
of the Common Stock on any given Trading Day for the purposes of this Agreement shall be Bloomberg, L.P. or any successor thereto.
The written mutual consent of the Investor and the Company shall be required to employ any other reporting entity.


 


Section 13.04Structuring
and Due Diligence Fee. Each of the parties shall pay its own fees and expenses (including the fees of any attorneys, accountants,
appraisers or others engaged by such party) in connection with this Agreement and the transactions contemplated hereby, except
that the Company shall pay to the Investor a structuring and due diligence fee of $12,000, of which $6,000 has been paid and the
remaining $6,000 shall be paid within 5 Trading Days of the date hereof.


 




    	- 26 -



    	 



    

  


Section 13.05Commitment
Fee. The Company shall pay a commitment fee in the amount of $375,000 (the “Commitment Fee”) to YA Global
II SPV LLC (the “Investor’s Designee”), which shall be paid within 10 days of the Effective Date. The
Company shall pay the Commitment Fee in cash.


 


Section 13.06Brokerage.
Each of the parties hereto represents that it has had no dealings in connection with this transaction with any finder or broker
who will demand payment of any fee or commission from the other party. The Company on the one hand, and the Investor, on the other
hand, agree to indemnify the other against and hold the other harmless from any and all liabilities to any person claiming brokerage
commissions or finder’s fees on account of services purported to have been rendered on behalf of the indemnifying party in
connection with this Agreement or the transactions contemplated hereby.


 


[REMAINDER OF PAGE
INTENTIONALLY LEFT BLANK]


 




    	- 27 -



    	 



    

  


IN WITNESS WHEREOF,
the parties hereto have caused this Standby Equity Distribution Agreement to be executed by the undersigned, thereunto duly authorized,
as of the date first set forth above.


 


	 	COMPANY:
	 	China Recycling Energy Corporation
	 	 
	 	By:	 
	 	Name:
	 	Title:



 


	 	INVESTOR:
	 	YA Global Master SPV Ltd.
	 	 
	 	By:	Yorkville Advisors Global, LP
	 	Its:	Investment Manager


 


	 	By:       Yorkville Advisors Global, LLC
	 	Its:       General Partner
	 	 
	 	By:	 
	 	Name:
	 	Title:


 




    	- 28 -



    	 



    

  


EXHIBIT A

ADVANCE NOTICE


 


CHINA RECYCLING ENERGY CORPORATION


 


Dated: ______________


 


The undersigned, _______________________
hereby certifies, with respect to the sale of Common Stock of China Recycling Energy Corporation (the “Company”)
issuable in connection with this Advance Notice, delivered pursuant to that certain Standby Equity Distribution Agreement, dated
as of _______, 2014 (the “Agreement”), as follows:


 


1.      The undersigned
is the duly elected ______________ of the Company.


 


2.      There are no
fundamental changes to the information set forth in the Registration Statement which would require the Company to file a post-effective
amendment to the Registration Statement.


 


3.     The Company
has performed in all material respects all covenants and agreements to be performed by the Company and has complied in all material
respects with all obligations and conditions contained in this Agreement on or prior to the Advance Notice Date, and shall continue
to perform in all material respects all covenants and agreements to be performed by the Company through the applicable Advance
Date. All conditions to the delivery of this Advance Notice are satisfied as of the date hereof.


 


4.       The undersigned
hereby represents, warrants and covenants that it has made all filings (“SEC Filings”) required to be made by
it pursuant to applicable securities laws (including, without limitation, all filings required under the Securities Exchange Act
of 1934). All SEC Filings have been reviewed and approved for release by the Company’s attorneys and, if containing financial
information, the Company’s independent certified public accountants. None of the SEC Filings contain any untrue statement
of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading.


 


5.      The Advance requested
is _____________________.


 


6.      The Minimum Acceptable
Price with respect to this Advance Notice is _________ (85% of the last closing price of the Common Stock on the Principal Market
at the time of delivery of this Advance Notice.


 


7.      4.99% of the
outstanding Common Stock of the Company as of the date hereof is ___________.


 


The undersigned has
executed this Advance Notice as of the date first set forth above.


 


	 	CHINA RECYCLING ENERGY CORPORATION
	 	 
	 	By:	 


 


Please deliver this Advance Notice by email with a follow up
phone call to:


Email: Trading@yorkvilleadvisors.com


Attention: Trading Department and Compliance Officer


Confirmation Telephone Number: (201) 985-8300.


 




    	 



    	 



    

  


EXHIBIT B


FORM OF SETTLEMENT
DOCUMENT


 


VIA EMAIL


 


China Recycling Energy Corporation


Attn: 


Email:


 


	  	Below please find the settlement information with respect to the Advance Notice dated:	 
	  	 	 
	  1.  	(a) Amount of Advance Notice:	 $
	 	 
	(b) Amount of Advance Notice (after taking into account any adjustments pursuant to Section 2.01):	 $
	 	 	 
	  2.  	Market Price:	 $ 
	 	 	 
	  3.  	Purchase Price (Market Price X  99%) per share:	 $ 
	 	 	 
	  4.  	Number of Shares due to Investor:	 


 


Please issue the number
of Shares due to the Investor to the account of the Investor as follows:


 


Investor’s
DTC participant #:


 


ACCOUNT NAME: 


ACCOUNT NUMBER:


ADDRESS:


CITY:


COUNTRY:


Contact person:


Number and/or email:



 


	 	Sincerely,
	 	 
	 	YA GLOBAL MASTER SPV, LTD.


 


Approved By China Recycling Energy Corporation:


 


	 	 
	Name: 	 


 




    	 



    	 



    

  


EXHIBIT C


 


FORM OF OPINION


 


1.          The
Company is a corporation validly existing and in good standing under the laws of the State of Nevada, with corporate power and
authority to own, lease and operate its properties and to conduct its business as described in the Company’s public filings,
including reports filed or furnished by the Company under the Securities Exchange Act of 1934, as amended, (the “Exchange
Act”), and the rules and regulations of the Commission thereunder (the “Public Filings”) and to enter
into and perform its obligations under the Standby Equity Distribution Agreement.


 


2.          The
Company has the requisite corporate power and authority to enter into and perform its obligations under the Standby Equity Distribution
Agreement and to issue the shares of Common Stock in accordance with its terms. The execution and delivery of the Standby Equity
Distribution Agreement by the Company and the consummation by it of the transactions contemplated thereby have been duly authorized
by all necessary corporate action, and no further consent or authorization of the Company or its Board of Directors or stockholders
is required. The Standby Equity Distribution Agreement has been duly executed and delivered.


 


3.          The
shares of Common Stock issuable under the Standby Equity Distribution Agreement are duly authorized and, upon issuance in accordance
with the terms of the Standby Equity Distribution Agreement against payment therefore in accordance with the terms thereof, will
be duly and validly issued, fully paid and nonassessable, free of any liens, encumbrances and preemptive or similar rights, in
each case arising under the Company’s Articles of Incorporation or By-laws or, to my knowledge, in any agreement filed by
the Company as an exhibit to the Company’s Public Filings (other than inchoate liens existing as a result of statute and
restrictions on transfer arising under applicable securities laws).


 


4.          The
execution, delivery and performance of the Standby Equity Distribution Agreement by the Company and the consummation by the Company
of the transactions contemplated thereby (other than performance by the Company of its obligations under the indemnification sections
of such agreements, which are not subject to this opinion) will not (i) result in a violation of the Company’s Articles
of Incorporation or Bylaws; (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both
would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement
or indenture filed by the Company as an exhibit to the Company's Public Filings; or (iii) to my knowledge, result in a violation
of any federal or Nevada law, rule or regulation, order, judgment or decree applicable to the Company or by which any property
or asset of the Company is bound or affected.


 


5.          To
my knowledge and other then as set forth in the Public Filings, there are no legal or governmental proceedings pending to which
the Company is a party or of which any property or assets of the Company is subject which is required to be disclosed in any Public
Filings.




 




    	 



    	 



    

  


EXHIBIT D


 


PLAN OF DISTRIBUTION


 


The Selling Stockholder
and any of its pledgees, assignees and successors-in-interest may, from time to time, sell any or all of their Common Stock on
the NASDAQ stock market or any other stock exchange, market or trading facility on which the shares are traded or in private transactions.
These sales may be at fixed or negotiated prices. The Selling Stockholder may use any one or more of the following methods when
selling shares:


 


		·	ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;



 


		·	block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the
block as principal to facilitate the transaction;



 


		·	purchases by a broker-dealer as principal and resale by the broker-dealer for its account;



 


		·	an exchange distribution in accordance with the rules of the applicable exchange;



 


		·	privately negotiated transactions;



 


		·	broker-dealers may agree with the Selling Stockholder to sell a specified number of such shares at a stipulated price per share;



 


		·	through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise;



 


		·	a combination of any such methods of sale; or



 


		·	any other method permitted pursuant to applicable law.



 


The Selling Stockholder
may also sell shares under Rule 144 under the Securities Act of 1933, as amended (the “Securities Act”), if
available, rather than under this prospectus.


 


The Selling Stockholder
is an “underwriter” within the meaning of Section 2(a)(11) of the Securities Act.


 


Broker-dealers engaged
by the Selling Stockholder may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions
or discounts from the Selling Stockholder (or, if any broker-dealer acts as agent for the purchaser of shares, from the purchaser)
in amounts to be negotiated, but, except as set forth in a supplement to this Prospectus, in the case of an agency transaction
not in excess of a customary brokerage commission in compliance with NASDR Rule 2440; and in the case of a principal transaction
a markup or markdown in compliance with NASDR IM-2440.


 




    	 



    	 



    

  


In connection with
the sale of the Common Stock or interests therein, the Selling Stockholder may enter into hedging transactions with broker-dealers
or other financial institutions, which may in turn engage in short sales of the Common Stock in the course of hedging the positions
they assume. The Selling Stockholder may also enter into option or other transactions with broker-dealers or other financial institutions
or the creation of one or more derivative securities which require the delivery to such broker-dealer or other financial institution
of shares offered by this prospectus, which shares such broker-dealer or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such transaction).


 


The Selling Stockholder
is an, and any broker-dealers or agents that are involved in selling the shares may be deemed to be, “underwriters”
within the meaning of the Securities Act in connection with such sales. In such event, any commissions received by such broker-dealers
or agents and any profit on the resale of the shares purchased by them may be deemed to be underwriting commissions or discounts
under the Securities Act. The Selling Stockholder has informed the Company that it does not have any written or oral agreement
or understanding, directly or indirectly, with any person to distribute the Common Stock. In no event shall any broker-dealer receive
fees, commissions and markups which, in the aggregate, would exceed eight percent (8%).


 


Because the Selling
Stockholder is an “underwriter” within the meaning of the Securities Act, it is subject to the prospectus delivery
requirements of the Securities Act including Rule 172 thereunder. In addition, any securities covered by this prospectus which
qualify for sale pursuant to Rule 144 under the Securities Act may be sold under Rule 144 rather than under this prospectus. There
is no underwriter (other than the Selling Stockholder) or coordinating broker acting in connection with the proposed sale of the
resale shares by the Selling Stockholder.


 


We have agreed to keep
this prospectus effective until the earlier of (i) the date on which the shares may be resold by the Selling Stockholders without
registration and without regard to any volume limitations by reason of Rule 144 under the Securities Act or any other rule of similar
effect or (ii) all of the shares have been sold pursuant to this prospectus or Rule 144 under the Securities Act or any other rule
of similar effect. The resale shares will be sold only through registered or licensed brokers or dealers if required under applicable
state securities laws. In addition, in certain states, the resale shares may not be sold unless they have been registered or qualified
for sale in the applicable state or an exemption from the registration or qualification requirement is available and is complied
with.


 


Expenses, Indemnification


 


We will not receive
any of the proceeds from the sale of the Common Stock sold by the Selling Stockholder and will bear all expenses related to the
registration of this offering, but will not pay for any commissions, fees or discounts, if any, relating to the sale of the Common
Stock sold by the Selling Stockholder. We have agreed to indemnify the Selling Stockholder against certain losses, claims, damages
and liabilities, including liabilities under the Securities Act.


 




    	 



    	 



    

  


Supplements


 


In the event of a material
change in the plan of distribution disclosed in this prospectus, the Selling Stockholder will not be able to effect transactions
in the shares pursuant to this prospectus until such time as a post-effective amendment to the registration statement is filed
with, and declared effective by, the SEC.


 


Regulation M


 


We have informed the
Selling Stockholder that it is required to comply with Regulation M promulgated under the Securities Exchange Act of 1934 with
respect to any purchase or sale of our Common Stock. In general, Rule 102 under Regulation M prohibits any person connected with
a distribution of our Common Stock from directly or indirectly bidding for, or purchasing for any account in which it has a beneficial
interest, any of the shares or any right to purchase the shares, for a period of one business day before and after completion of
its participation in the distribution.


 


During any distribution
period, Regulation M prohibits the Selling Stockholder and any other persons engaged in the distribution from engaging in any stabilizing
bid or purchasing our Common Stock except for the purpose of preventing or retarding a decline in the open market price of the
Common Stock. None of these persons may affect any stabilizing transaction to facilitate any offering at the market.


 


We have also advised
the Selling Stockholders that they should be aware that the anti-manipulation provisions of Regulation M under the Exchange Act
will apply to purchases and sales of Common Stock by the Selling Stockholder, and that there are restrictions on market-making
activities by persons engaged in the distribution of the shares. Under Regulation M, the Selling Stockholder or its agents may
not bid for, purchase, or attempt to induce any person to bid for or purchase, shares of our Common Stock while the Selling Stockholder
is distributing shares covered by this prospectus. Regulation M may prohibit the Selling Stockholder from covering short sales
by purchasing shares while the distribution is taking place, despite any contractual rights to do so under the Agreement. We have
advised the Selling Stockholders that they should consult with their own legal counsel to ensure compliance with Regulation M.